<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
<TABLE>
<C> <S> <C> <C>
DELAWARE CANANDAIGUA WINE 16-0716709 2084
COMPANY, INC.
AND ITS SUBSIDIARY
GUARANTORS
NEW YORK BATAVIA WINE CELLARS, 16-1222994 2084
INC.
DELAWARE BISCEGLIA BROTHERS WINE 94-2248544 2087
CO.
CALIFORNIA CALIFORNIA PRODUCTS 94-0360780 2084
COMPANY
NEW YORK GUILD WINERIES & 16-1401046 2084
DISTILLERIES, INC.
SOUTH CAROLINA TENNER BROTHERS, INC. 57-0474561 2084
NEW YORK WIDMER'S WINE CELLARS, 16-1184188 2084
INC.
DELAWARE BARTON INCORPORATED 36-3500366 2085
DELAWARE BARTON BRANDS, LTD. 36-3185921 2085
MARYLAND BARTON BEERS, LTD. 36-2855879 5181
CONNECTICUT BARTON BRANDS OF 06-1048198 5181
CALIFORNIA, INC.
GEORGIA BARTON BRANDS OF 58-1215938 5181
GEORGIA, INC.
NEW YORK BARTON DISTILLERS IMPORT 13-1794441 5182
CORP.
DELAWARE BARTON FINANCIAL 51-0311795 6153
CORPORATION
WISCONSIN STEVENS POINT BEVERAGE 39-0638900 2082
CO.
NEW YORK MONARCH WINE COMPANY, 36-3547524 5181
LIMITED PARTNERSHIP
ILLINOIS BARTON MANAGEMENT, INC. 36-3539106 5181
NEW YORK VINTNERS INTERNATIONAL 16-1443663 2084
COMPANY, INC.
NEW YORK CANANDAIGUA WEST, INC. 16-1462887 2084
GEORGIA THE VIKING DISTILLERY, 58-2183528 5181
INC.
(State or other jurisdiction (Exact name of (I.R.S. Employer (Primary Standard
of incorporation or organization) registrant Identification No.) Industrial Classification
as specified in its Code Number)
charter)
</TABLE>
116 BUFFALO STREET
CANANDAIGUA, NEW YORK 14424
(716) 394-7900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OR
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
ROBERT SANDS
VICE PRESIDENT AND GENERAL COUNSEL
CANANDAIGUA WINE COMPANY, INC.
116 BUFFALO STREET
CANANDAIGUA, NEW YORK 14424
(716) 394-7900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
Copies to:
BERNARD S. KRAMER
MCDERMOTT, WILL & EMERY
227 WEST MONROE STREET
CHICAGO, ILLINOIS 60606-5096
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
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, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE PRICE(1) FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 3/4% Series C Senior
Subordinate Notes......... $65,000,000 $948.75 $61,668,750 $18,688
- --------------------------------------------------------------------------------
Guarantees of the 8 3/4%
Series C Senior
Subordinated Notes........ (2) (2) (2) None
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the amount of the
registration fee.
(2) No separate consideration will be received for the Guarantees. Pursuant to
Rule 457(n) under the Securities Act of 1933, no separate fee is payable
for the Guarantees.
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL HAVE FILED 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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION
DECEMBER 11, 1996
CANANDAIGUA WINE COMPANY, INC.
OFFER TO EXCHANGE UP TO $65,000,000 AGGREGATE
PRINCIPAL AMOUNT OF ITS 8 3/4% SERIES C SENIOR
SUBORDINATED NOTES DUE 2003 FOR ANY AND ALL OF
ITS OUTSTANDING 8 3/4% SERIES B SENIOR
SUBORDINATED NOTES DUE 2003.
[LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS
EXTENDED.
Canandaigua Wine Company, Inc. (the "Company") hereby offers, upon the terms
and conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange up to
$65,000,000 aggregate principal amount of 8 3/4% Series C Senior Subordinated
Notes due 2003 of the Company (the "Exchange Notes") for any and all of the
issued and outstanding 8 3/4% Series B Senior Subordinated Notes due 2003 of
the Company (the "Old Notes," and together with the Exchange Notes, the
"Notes") from the holders thereof. As of the date of this Prospectus, there is
$65,000,000 aggregate principal amount of the Old Notes outstanding. The terms
of the Exchange Notes are identical in all material respects to the Old Notes,
except that the Exchange Notes have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and therefore will not bear legends
restricting their transfer and will not contain provisions providing for
payment of liquidated damages under certain circumstances relating to the
Registration Rights Agreement (as defined herein), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offer.
Interest on the Exchange Notes will be payable semi-annually on June 15 and
December 15 of each year, commencing on June 15, 1997. The Exchange Notes will
mature on December 15, 2003. Except as described below, the Company may not
redeem the Exchange Notes prior to December 15, 1998. On or after such date,
the Company may redeem the Exchange Notes, in whole or in part, at the
redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. In addition, upon the occurrence of a Change
of Control (as defined), each holder of Exchange Notes will have the right to
require the Company to make an offer to repurchase all or a portion of such
holder's Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
See "Description of Notes." The terms of the Notes are substantially identical
to those of the Company's 8 3/4% Senior Subordinated Notes due 2003, which were
issued in a registered offering on December 27, 1993 and of which $130.0
million aggregate principal amount is outstanding (the "Original Notes").
The Exchange Notes will be unsecured obligations of the Company and will be
subordinated to all existing and future Senior Indebtedness (as defined) of the
Company. The Exchange Notes are guaranteed, jointly and severally, on a senior
subordinated basis (the "Guarantees") by substantially all of the Company's
subsidiaries (the "Guarantors"). The Guarantees will be unsecured obligations
of the Guarantors and will be subordinated to all existing and future Senior
Guarantor Indebtedness (as defined). The Exchange Notes will rank pari passu
with any existing or future senior subordinated indebtedness of the Company and
senior to all other subordinated indebtedness of the Company. The Indenture (as
defined) permits the Company to incur additional indebtedness, including Senior
Indebtedness under the Credit Facility (as defined), subject to certain
limitations. As of August 31, 1996, on a pro forma basis, after giving effect
to the sale of the Old Notes to the Initial Purchasers (as defined) on October
29, 1996 (the "Old Notes Offering") and the application of the net proceeds
therefrom, the aggregate amount of the Company's outstanding Senior
Indebtedness would have been $220.4 million, the aggregate amount of the
Company's outstanding Pari Passu Indebtedness (as defined) would have been
$130.0 million, and the aggregate amount of outstanding Senior Guarantor
Indebtedness would have been $219.4 million (including $218.8 million of
outstanding indebtedness representing guarantees of Senior Indebtedness.)
Revolving Loans (as defined) repaid from the net proceeds of the Old Notes
Offering may be re-borrowed from time to time. See "Use of Proceeds" and
"Description of Notes--Ranking."
The Old Notes were not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The Exchange Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement (as defined). Based on interpretations by the staff of the Securities
and Exchange Commission (the "SEC") set forth in no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than a holder that
is an "affiliate" of the Company with the meaning of Rule 405 promulgated under
the Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business, such holder has
no arrangement with any person to participate in the distribution of such
Exchange Notes, and neither such holder nor any such person is engaging in or
intends to engage in a distribution of such Exchange Notes. Notwithstanding the
foregoing, each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resales of Exchange Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company and the Guarantors have
agreed that, for a period of 180 days after the Expiration Date, they will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
<PAGE>
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the Exchange Notes. The Company does not
currently intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the Exchange Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all of the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined). The Exchange Offer is
subject to certain customary conditions.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ,1996
1-1
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, consolidated financial
statements and notes thereto included elsewhere in this Prospectus or
incorporated herein by reference. Unless the context indicates otherwise, the
term "Company" refers to Canandaigua Wine Company, Inc. and its subsidiaries,
all references to "net sales" refer to gross revenues less excise taxes and
returns and allowances to conform with the Company's method of classification;
all references to the Company's fiscal year shall refer to August 31 of the
indicated year except that references to fiscal 1997 shall refer to the
Company's fiscal year ending February 28, 1997; and all references to the
"Transition Period" shall refer to the six month transition period ended
February 29, 1996. Market share and industry data disclosed in this Prospectus
have been obtained from the following industry publications: Wines & Vines; The
Gomberg-Fredrikson Report; Jobson's Liquor Handbook; Jobson's Wine Handbook;
Nielsen Wine Scan; Jobson's Beer Handbook; Adams/Jobson's Handbook Advance; The
U.S. Wine Market: Impact Databank Review and Forecast; The U.S. Beer Market:
Impact Databank Review and Forecast; Beer Marketer's Insights; Beer Industry
Update; U.S. Department of the Treasury Statistical Releases; and the Maxwell
Consumer Report. The Company has not independently verified this data.
References to market share data are based on unit volume. Certain statements
contained in this Prospectus which are not historical facts are forward-looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements. See "Risk
Factors--Forward-Looking Statements" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Cautionary Statements Related
to Projected Results."
THE COMPANY
The Company is a leading producer and marketer of branded beverage alcohol
products, with over 125 national and regional brands which are distributed by
over 1,200 wholesalers throughout the United States and in selected
international markets. The Company is the second largest supplier of wines, the
third largest importer of beers and the fourth largest supplier of distilled
spirits in the United States. The Company's beverage alcohol brands are
marketed in five general categories: table wines, sparkling wines, dessert
wines, imported beer and distilled spirits, and include the following principal
brands:
. Table Wines: Almaden, Inglenook, Paul Masson, Taylor California Cellars,
Cribari, Manischewitz, Taylor, Marcus James, Deer Valley and Dunnewood
. Sparkling Wines: Cook's, J. Roget, Great Western and Taylor
. Dessert Wines: Richards Wild Irish Rose, Cisco and Taylor
. Imported Beer: Corona, Modelo Especial, St. Pauli Girl and Tsingtao
. Distilled Spirits: Barton, Fleischmann's, Mr. Boston, Montezuma,
Canadian LTD, Ten High, Inver House and Monte Alban
Based on available industry data, the Company believes that, during calendar
year 1995, it had a 22% share of the market for domestic wines, a 12% share of
the imported beer market and its distilled spirits brands had an 8% share of
the distilled spirits market in the United States. Within the market for
domestic wines, the Company believes it had a 28% share of the non-varietal
table wine market, a 12% share of the varietal table wine market, a 42% share
of the dessert wine market and a 29% share of the sparkling wine market. Many
of the Company's brands are leaders in their respective categories in the
United States, including Corona, the second largest selling imported beer
brand; Inglenook and Almaden, the fifth and sixth largest selling wine brands,
respectively; Richards Wild Irish Rose, the largest selling dessert wine brand;
Cook's champagne, the second largest selling sparkling wine brand;
Fleischmann's, the fourth largest blended whiskey and fourth largest
domestically bottled gin; Montezuma, the second largest selling tequila brand;
and Monte Alban, the largest selling mezcal brand.
2
<PAGE>
The Company has diversified its product portfolio through a series of
strategic acquisitions that have resulted in an increase in the Company's net
sales from $176.6 million in fiscal 1991 to $1.1 billion for the twelve months
ended August 31, 1996, representing a compound annual growth rate of 43.9%.
During this same period, EBITDA (earnings before interest, taxes, depreciation
and amortization) has increased at a compound annual growth rate of 35.6% from
$20.7 million in fiscal 1991 to an aggregate of $95.1 million for the two six
month periods constituting the twelve months ended August 31, 1996. EBITDA for
the six month transition period ended February 29, 1996 (the "Transition
Period") and the six months ended August 31, 1996 (the "Six Months 1997")
includes approximately $14.3 million of items which the Company believes are
nonrecurring in nature, in part due to the Company's change in fiscal year.
Through its acquisitions, the Company has developed strong market positions in
the growing beverage alcohol product categories of varietal table wine and
imported beer. The Company ranks second and third in the varietal table wine
and imported beer categories, respectively. From 1992 through 1995, industry
shipments of varietal table wine and imported beer have each grown 35%. During
this period, the Company has strengthened its relationship with wholesalers,
expanded its distribution and enhanced its production capabilities as well as
acquired additional management, operational, marketing and research and
development expertise.
In October 1991, the Company acquired Cook's, Cribari, Dunnewood and other
brands and related facilities and assets (the "Guild Acquisition") from Guild
Wineries and Distillers ("Guild"). The Company acquired Barton Incorporated
("Barton") in June 1993 (the "Barton Acquisition"), further diversifying into
the imported beer and distilled spirits categories. In October 1993, the
Company acquired the Paul Masson, Taylor California Cellars and other brands,
and related facilities and assets of Vintners International Company, Inc.
("Vintners") (the "Vintners Acquisition"). In August 1994, the Company acquired
the Almaden, Inglenook and other brands, a grape juice concentrate business and
related facilities and assets (the "Almaden/Inglenook Product Lines") from
Heublein, Inc. ("Heublein") (the "Almaden/Inglenook Acquisition"). In September
1995, the Company acquired the Skol, Mr. Boston, Canadian LTD, Glenmore, Old
Thompson, Kentucky Tavern, and di Amore distilled spirits brands; the rights to
the Fleischmann's and Chi-Chi's distilled spirits brands under long term
license agreements; the U.S. rights to the Inver House, Schenley and El Toro
distilled spirits brands; and related facilities and assets from United
Distillers Glenmore, Inc. and certain of its North American affiliates
(collectively, "UDG") (collectively, the "UDG Acquisition," and together with
the Barton Acquisition, the Vintners Acquisition and the Almaden/Inglenook
Acquisition, the "Acquisitions"). See "Business--Recent Acquisitions."
CURRENT OPERATING ENVIRONMENT
The Company's growth through acquisitions over the past five years has
substantially expanded its portfolio of brands and has enabled it to become a
major participant in additional product categories of the beverage alcohol
business. This expansion has positioned the Company to benefit from faster
growing categories with over one-third of the Company's sales generated from
the growth categories of imported beer and varietal wines. However, recent
operating results have been negatively impacted by two factors: increases in
grape prices and certain costs and operating inefficiencies relating to the
consolidation of certain West Coast winery operations in connection with the
acquisitions.
3
<PAGE>
While the consolidation of certain wine operations has produced significant
overall synergies, some of the planned efficiencies have not materialized and
unanticipated costs have occurred. The Company believes that the unanticipated
production costs resulted from its rapid growth over the last three years,
combined with the lack of integrated production control systems and the
complexity of production at its newly consolidated Mission Bell Winery.
Additionally, as the Company has increased its wine and grape juice
concentrate business, it believes that it has become the second largest
purchaser of grapes for wine and concentrate in California. The Company's
profits are significantly influenced by grape price changes. Costs for grapes
have escalated dramatically over the last two grape harvests (fall 1995 and
fall 1996). Based on constant tonnage purchased, the Company's overall cost of
grapes increased 18.9% in the 1996 harvest.
In order to address these matters, the Company is taking a number of specific
steps to improve sales and margins, minimize unexpected costs related to
inefficiencies and realize opportunities for efficiencies afforded by the
Company's consolidation of its West Coast wine operations and its economies of
scale as a $1.1 billion participant in the beverage alcohol industry. Such
steps include the following:
. The Company has launched a comprehensive reengineering effort in its wine
division (the "Reengineering Effort"). The Reengineering Effort is
intended to increase the efficiency of all of the Company's operating
processes, create smaller, more manageable business units and create
greater management accountability for its wine business.
. In connection with the Reengineering Effort, the Company is implementing
a new accounting and management information system to upgrade the type
and level of information the Company can generate, and to enable it to
manage its business more precisely.
. The Company has created a number of special task forces specifically to
address various issues related to inefficiencies at its West Coast wine
operations, and has relocated, in some cases temporarily and in others
permanently, personnel with particular expertise necessary to address
these matters. All aspects of the Company's wine and grape juice
concentrate production, material requirements planning functions,
warehousing logistics and bottling operations at the Company's Mission
Bell Winery in California are being reviewed and changed as necessary to
create greater efficiencies.
. The Company has instituted several price increases on its varietal and
non-varietal table wines in response to increased grape costs from the
1995 grape harvest. In general, it is both industry and Company practice
to make selling price adjustments around the time the wine produced with
the higher cost grapes is actually sold, which generally occurs in the
calendar year following the grape harvest. Over the last year the
industry and the Company have increased their selling prices. In the case
of the Company, these selling price increases, on an annualized basis,
have more than offset the increased costs associated with the fall 1995
harvest.
. The Company is in the process of recruiting new management in several key
positions and has previously hired a new President of its wine division
with extensive experience in the U.S. beverage industry, a new Vice
President and Controller of the wine division and an experienced manager
for its Mission Bell Winery. It is expected that the filling of these
positions has given, and will continue to give, the Company significantly
increased management depth and experience.
4
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to manage its existing portfolio of brands
and businesses in order to maximize profit and return on investment, and
reposition its portfolio of brands to benefit from growth trends in the
beverage alcohol industry. To achieve the foregoing, the Company intends to:
(i) adjust the price/volume relationships of certain brands; (ii) develop new
brands and introduce line extensions; (iii) expand geographic distribution; and
(iv) acquire businesses that meet its strategic and financial objectives.
THE PRIOR OFFERING
On December 27, 1993, the Company issued $130.0 million in aggregate
principal amount of Original Notes pursuant to an indenture (the "Original
Indenture"), among the Company, substantially all of its Subsidiaries and The
Chase Manhattan Bank (successor by merger to Chemical Bank), as trustee. The
Original Notes are fully and unconditionally guaranteed on a joint and several
basis by substantially all of the Company's subsidiaries.
----------------
The Company is a Delaware corporation organized in 1972 as the successor to a
business founded in 1945 by Marvin Sands, Chairman of the Board of the Company.
The Company's executive offices are located at 116 Buffalo Street, Canandaigua,
New York 14424, and its telephone number is (716) 394-7900.
5
<PAGE>
THE EXCHANGE OFFER
Registration Rights Agreement .... The Old Notes were sold by the Company on
October 29, 1996 to Chase Securities Inc.
and CS First Boston Corporation (the
"Initial Purchasers"), who placed the Old
Notes with institutional investors. In
connection therewith, the Company and the
Initial Purchasers executed and delivered
for the benefit of the holders of the Old
Notes an exchange and registration rights
agreement (the "Registration Rights
Agreement") providing, among other things,
for the Exchange Offer.
The Exchange Offer................ Exchange Notes are being offered in
exchange for a like principal amount of Old
Notes. As of the date hereof, $65,000,000
aggregate principal amount of Old Notes are
outstanding. The Company will issue the
Exchange Notes promptly following the
Expiration Date. See "Risk Factors--
Consequences of Failure to Exchange."
Expiration Date................... 5:00 p.m., New York City time, on ,
1996, unless the Exchange Offer is extended
as provided herein, in which case the term
"Expiration Date" means the latest date and
time to which the Exchange Offer is
extended.
Interest.......................... Interest on the Exchange Notes will be
payable semi-annually on June 15 and
December 15 of each year, commencing on
June 15, 1997. The Exchange Notes will
mature on December 15, 2003.
Conditions to the Exchange Offer.. The Exchange Offer is subject to certain
customary conditions, which may be waived
by the Company. The Company reserves the
right to amend, terminate or extend the
Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any
such condition. See "The Exchange Offer--
Conditions."
Procedures for Tendering Old Each holder of Old Notes wishing to accept
Notes............................ the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter
of Transmittal, or such facsimile, together
with the Old Notes and any other required
documentation to the exchange agent (the
"Exchange Agent") at the address set forth
herein. By executing the Letter of
Transmittal, each holder of Old Notes will
represent to the Company, among other
things, that (i) the Exchange Notes
acquired pursuant to the Exchange
6
<PAGE>
Offer by the holder and any beneficial
owners of Old Notes are being obtained in
the ordinary course of business of the
person receiving such Exchange Notes, (ii)
neither the holder nor such beneficial
owner has an arrangement with any person to
participate in the distribution of such
Exchange Notes, (iii) neither the holder
nor such beneficial owner nor any such
other person is engaging in or intends to
engage in a distribution of such Exchange
Notes and (iv) neither the holder nor such
beneficial owner is an "affiliate," as
defined under Rule 405 promulgated under
the Securities Act, of the Company. Each
broker-dealer that receives Exchange Notes
for its own account in exchange for Old
Notes, where such Old Notes were acquired
by such broker-dealer as a result of
market-making activities or other trading
activities (other than Old Notes acquired
directly from the Company), may participate
in the Exchange Offer but may be deemed an
"underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter
of Transmittal that it will deliver a
prospectus in connection with any resale of
such Exchange Notes. The Letter of
Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it
is an "underwriter" within the meaning of
the Securities Act. See '"The Exchange
Offer--Procedures for Tendering" and '"Plan
of Distribution."
Special Procedures for Beneficial Any beneficial owner whose Old Notes are
Owners........................... registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender should
contact such registered holder promptly and
instruct such registered holder to tender
on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such
beneficial owner must, prior to completing
and executing the Letter of Transmittal and
delivering his Old Notes, either make
appropriate arrangements to register
ownership of the Old Notes in such
beneficial owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of
registered ownership may take considerable
time. See "The Exchange Offer--Procedures
for Tendering."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal
or any other documents required
7
<PAGE>
by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date
must tender their Old Notes according to
the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights.................
Tenders may be withdrawn as provided herein
at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes............. The Company will accept for exchange any
and all Old Notes which are properly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Exchange Agent.................... Harris Trust and Savings Bank is serving as
Exchange Agent in connection with the
Exchange Offer. See "The Exchange Offer--
Exchange Agent."
Use of Proceeds...................
There will be no cash proceeds to the
Company from the exchange pursuant to the
Exchange Offer.
Federal Income Tax Consequences... The exchange of Old Notes for Exchange
Notes will not be a taxable exchange for
Federal income tax purposes. See "Certain
Federal Income Tax Considerations."
Consequences of Failure to
Exchange......................... Holders of Old Notes who do not exchange
their Old Notes for Exchange Notes pursuant
to the Exchange Offer will continue to be
subject to the restrictions on transfer of
such Old Notes as set forth in the legend
thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from,
or in transactions not subject to, the
registration requirements of the Securities
Act and applicable state securities laws.
In general, Old Notes may not be offered or
sold unless registered under the Securities
Act, except pursuant to an exemption from,
or in a transaction not subject to, the
Securities Act and applicable state
securities laws.
8
<PAGE>
SUMMARY DESCRIPTION OF THE NOTES
The Exchange Offer applies to $65,000,000 aggregate principal amount of Old
Notes. The terms of the Exchange Notes are identical in all material respects
to the Old Notes, except that the Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and will not contain certain provisions providing for payment of liquidated
damages under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Old Notes and, except as set forth in the immediately preceding
sentence, will be entitled to the benefits of the Indenture, under which both
the Old Notes were, and the Exchange Notes will be, issued. See "Description of
Notes."
Issuer............................ Canandaigua Wine Company, Inc.
Securities Offered for Exchange... $65,000,000 aggregate principal amount of 8
3/4% Series C Senior Subordinated Notes due
2003.
Maturity.......................... December 15, 2003.
Interest Payment Dates............ June 15 and December 15 of each year,
commencing on June 15, 1997.
Optional Redemption............... Except as described below, the Company may
not redeem the Exchange Notes prior to
December 15, 1998. On or after such date,
the Company may redeem the Exchange Notes,
in whole or in part, at the redemption
prices set forth herein, together with
accrued and unpaid interest, if any, to the
date of redemption.
Change of Control................. Upon the occurrence of a Change of Control,
each holder of Notes will have the right to
require the Company to purchase all or a
portion of such holder's Notes at a
purchase price in cash equal to 101% of the
principal amount thereof, together with
accrued and unpaid interest, if any, to the
date of purchase. In the event of a Change
of Control, the Company is prohibited under
the Credit Facility from purchasing the
Exchange Notes and all amounts outstanding
under the Credit Facility become due and
payable. In addition, the repurchase of the
Exchange Notes upon the occurrence of a
Change of Control (or otherwise) will be
prohibited by the Original Indenture unless
the Company has sufficient ability at such
time to make "Restricted Payments"
thereunder. See "Description of Notes--
Certain Covenants--Purchase of Notes Upon a
Change of Control." There can be no
assurance that in the event of a Change of
Control the Company will be able to obtain
the necessary consents from the lenders
under its Credit Facility or,
9
<PAGE>
if necessary, the holders of the Original
Notes, to make any purchases requested by
the holders of the Exchange Notes or that
the Company will have available funds
sufficient to make any purchases requested
by the holders of the Exchange Notes.
Neither the Company's Board of Directors
nor the trustee under the Indenture is
permitted to waive the right of the holders
of the Exchange Notes to require the
Company to purchase the holders' Exchange
Notes upon a Change of Control.
Subsidiary Guarantees............. The Exchange Notes will be guaranteed,
jointly and severally, on a senior
subordinated basis by substantially all
existing direct and indirect subsidiaries
of the Company. As of August 31, 1996, on a
pro forma basis, after giving effect to the
sale of the Old Notes and the application
of the net proceeds therefrom, the
aggregate amount of outstanding Senior
Guarantor Indebtedness would have been
$219.4 million (including $218.8 million of
outstanding indebtedness representing
guarantees of Senior Indebtedness).
Ranking........................... The Exchange Notes will be unsecured
subordinated obligations of the Company
and, as such, will be subordinated to all
existing and future Senior Indebtedness of
the Company. The Notes will rank pari passu
with all existing and future senior
subordinated indebtedness of the Company,
including the Original Notes. As of August
31, 1996, on a pro forma basis, after
giving effect to the sale of the Old Notes
and the application of the net proceeds
therefrom, the aggregate amount of
outstanding Senior Indebtedness of the
Company would have been $220.4 million and
the aggregate amount of outstanding Pari
Passu Indebtedness would have been $130.0
million. Revolving Loans repaid from the
net proceeds of the Old Notes Offering may
be re-borrowed from time to time. See "Use
of Proceeds" and "Description of Notes--
Ranking."
Restrictive Covenants............. The Indenture relating to the Exchange
Notes contains certain covenants,
including, but not limited to, covenants
with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation
on restricted payments; (iii) limitation on
transactions with affiliates; (iv)
limitation on senior subordinated
indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii)
limitation on issuances of guarantees of
and
10
<PAGE>
pledges for indebtedness; (viii)
restriction on transfer of assets; (ix)
limitation on subsidiary capital stock; (x)
limitation on dividends and other payment
restrictions affecting subsidiaries; and
(xi) restrictions on consolidations,
mergers and the sale of assets. See
"Description of Notes--Certain Covenants."
Absence of a Public Market
for the Notes..................... The Exchange Notes generally will be freely
transferable (subject to the restrictions
discussed elsewhere herein) but will be new
securities for which initially there will
not be a market. Accordingly, there can be
no assurance as to the development or
liquidity of any market for the Exchange
Notes. The Company does not intend to apply
for listing of the Exchange Notes on any
national securities exchange or for
quotation through the National Association
of Securities Dealers Automated Quotation
System. See "Risk Factors--Lack of Public
Market; Restrictions on Transferability."
Certain Tax Consequences..........
Because the Old Notes were issued with
original issue discount ("OID"), the
Exchange Notes will also be deemed to have
been issued with OID. As a result, for
Federal income tax purposes, holders may be
required to include amounts in income prior
to the receipt of cash attributable
thereto. See "Certain Federal Income Tax
Consequences."
Risk Factors...................... Prior to tendering Old Notes in the
Exchange Offer, holders of Old Notes should
carefully consider all of the information
set forth in this Prospectus and, in
particular, should evaluate the specific
factors set forth under "Risk Factors"
beginning on page 13 for risks involved
with an investment in the Notes. Certain
statements contained in this Prospectus
which are not historical facts are forward-
looking statements that involve risks and
uncertainties that could cause actual
results to differ materially from those in
the forward-looking statements. See "Risk
Factors--Forward Looking Statements" and
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations--Cautionary Statements Related
to Projected Results."
For additional information concerning the
Exchange Notes, see "Description of Notes."
11
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, SIX MONTHS ENDED AUGUST 31,
------------------------------------------------- ------------------ ------------------
FEB. 28, FEB. 29,
1991 1992(A) 1993(B) 1994(C)(D) 1995(E) 1995 1996 1995 1996
-------- -------- -------- ---------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $176,559 $245,243 $306,308 $629,584 $906,544 $454,485 $535,024 $452,059 $555,711
Gross profit........... 45,495 70,557 91,377 182,373 252,733 126,791 138,816 125,942 142,742
Selling, general and
administrative
expenses............... (30,184) (46,491) (59,983) (121,388) (159,196) (79,925) (112,411) (79,271) (102,870)
Nonrecurring
restructuring expenses. -- -- -- (24,005) (2,238) (685) (2,404) (1,553) --
Operating income........ 15,311 24,066 31,394 36,980 91,299 46,181 24,001 45,118 39,872
Interest expense, net... (3,631) (6,182) (6,126) (18,056) (24,601) (13,141) (17,298) (11,460) (16,803)
Income before provision
for income taxes....... 11,680 17,884 25,268 18,924 66,698 33,040 6,703 33,658 23,069
Net income.............. $ 7,710 $ 11,356 $ 15,604 $ 11,733 $ 41,020 $ 20,320 $ 3,322 $ 20,700 $ 13,442
OTHER DATA:
Gross profit margin(f).. 25.8% 28.8% 29.8% 29.0% 27.9% 27.9% 25.9% 27.9% 25.7%
EBITDA(g)............... $ 20,737 $ 31,141 $ 40,069 $ 50,795 $112,011 $ 58,832 $ 37,959(h)(i) $ 53,179 $ 57,166(i)
EBITDA margin(j)........ 11.7% 12.7% 13.1% 8.1% 12.4% 12.9% 7.1% 11.8% 10.3%
Depreciation and
amortization........... $ 5,426 $ 7,075 $ 8,675 $ 13,815 $ 20,712 $ 12,651 $ 13,958 $ 8,061 $ 17,294
Capital expenditures.... $ 2,844 $ 4,713 $ 6,949 $ 7,853 $ 37,121 $ 11,342 $ 16,077 $ 25,779 $ 21,795
PRO FORMA DATA(K):
Cash interest expense,
net.................... $ 18,157 $ 17,672
Ratio of EBITDA to cash
interest expense, net.. 2.1x 3.2x
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
AS OF AUGUST 31, FEBRUARY 29, AUGUST 31, 1996
---------------------------------------------- ------------ ----------------------
AS
1991 1992(a) 1993(b) 1994(c)(d) 1995(e) 1996 ACTUAL ADJUSTED(k)
-------- -------- -------- ---------- -------- ------------ ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $147,207 $217,835 $355,182 $826,562 $785,921 $1,054,580 $1,038,191 $1,040,291
Indebtedness (including
current maturities).... 63,134 62,174 129,131 339,123 227,992 479,713 409,970 412,070
Stockholders' equity.... 51,975 95,549 126,104 204,193 351,882 356,506 365,171 365,171
</TABLE>
- -------
(a) The Company acquired Guild on October 1, 1991, and accounted for this
acquisition utilizing the purchase method of accounting. Guild's results of
operations have been included in the Company's results of operations since
October 1, 1991.
(b) The Company acquired Barton on June 29, 1993, and accounted for the
acquisition utilizing the purchase method of accounting. Barton's results
of operations have been included in the Company's results of operations
since June 29, 1993.
(c) The Company acquired substantially all of the assets and businesses of
Vintners on October 15, 1993, and accounted for the acquisition utilizing
the purchase method of accounting. Vintners' results of operations have
been included in the Company's results of operations since October 15,
1993.
(d) The Company acquired substantially all of the assets and business
associated with the Almaden/Inglenook Product Lines from Heublein on August
5, 1994, utilizing the purchase method of accounting. The Almaden/Inglenook
Product Lines have been included in the Company's results of operations
since August 5, 1994.
(e) The Company acquired certain assets of UDG on September 1, 1995, and
accounted for the acquisition utilizing the purchase method of accounting.
UDG's results of operations have been included in the Company's results of
operations since September 1, 1995.
(f) Represents gross profit as a percentage of net sales.
(g) EBITDA for the six months ended February 29, 1996 represents operating
income plus depreciation of property, plant and equipment and amortization
of intangible assets. EBITDA is presented here as a measure of the
Company's debt service ability. EBITDA should not be construed as an
alternative to operating income or net cash flow from operating activities
and should not be construed as an indication of operating performance or as
a measure of liquidity.
(h) EBITDA for the six months ended February 29, 1996 includes approximately
$14,300 of charges that the Company believes are nonrecurring in nature due
in part to the Company's change in fiscal year, including $3,000 of LIFO
expense also included in footnote (i) below.
(i) The LIFO adjustments for the six months ended February 29, 1996 and the six
months ended August 31, 1996 were $6,927 and $13,750, respectively.
(j) Represents EBITDA as a percentage of net sales.
(k) The pro forma and as adjusted data assume that the Old Notes Offering and
the application of the net proceeds therefrom occurred at the beginning of
the indicated periods or as of the specified date. The pro forma and as
adjusted data assume that Revolving Loan amounts repaid are not re-
borrowed. Such amounts may be re-borrowed from time to time. See "Use of
Proceeds." The pro forma data do not purport to represent what the
Company's financial position or results of operations actually would have
been if the Old Notes Offering in fact had occurred at the beginning of the
indicated periods or as of the specified date, or purport to project the
Company's results of operations or financial position for any future period
or at any future date.
12
<PAGE>
RISK FACTORS
The Exchange Notes offered hereby involve a high degree of risk. In addition
to the other information in this Prospectus, the following factors should be
considered carefully by holders of Old Notes prior to making a decision to
tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 promulgated 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
holder's business, such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes and neither such holder
nor any such other person is engaging in or intends to engage in a
distribution of such Exchange Notes. Notwithstanding the foregoing, each
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of Exchange Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities (other than Old Notes acquired
directly from the Company.) The Company has agreed that, for a period of 180
days from the date of this Prospectus, it will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, holders of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by
such Letter of Transmittal, to the Exchange Agent at the address set forth
below under "The Exchange Offer--Exchange Agent" on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with a Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
pursuant to the procedure for book-entry transfer described herein, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
holder must comply with the guaranteed delivery procedures described herein.
See "The Exchange Offer."
INDEBTEDNESS; RESTRICTIVE COVENANTS
The Company has incurred substantial indebtedness to finance the
Acquisitions. As of August 31, 1996, on a pro forma basis, after giving effect
to the sale of the Old Notes and the application of the net proceeds
therefrom, the Company would have had $412.1 million of indebtedness
outstanding,
13
<PAGE>
which amount does not include $164.9 million of Revolving Loans available to
be drawn under the Credit Facility. Revolving Loans repaid from the net
proceeds of the Old Notes Offering may be re-borrowed from time to time. See
"Use of Proceeds." The Company's ability to satisfy its financial obligations
under the Exchange Notes and under its other indebtedness outstanding from
time to time will depend upon its future operating performance, which is
subject to prevailing economic conditions, levels of interest rates and
financial, business and other factors, many of which are beyond the Company's
control. Although the Company believes that cash flow from operations and cash
provided by its financing activities will provide adequate resources to
satisfy its working capital, liquidity and anticipated capital expenditure
requirements for at least the next four fiscal quarters and to complete the
Stock Repurchase Program, there is no assurance that this will be the case.
The Company's current and future debt service obligations could have
important consequences to holders of the Exchange Notes, including the
following: (i) the Company's ability to obtain financing for future working
capital needs or acquisitions, or other purposes, may be limited; (ii) a
significant portion of the Company's cash flow from operations will be
dedicated to the payment of principal and interest on its indebtedness,
thereby reducing funds available for operations; and (iii) the Company may be
more vulnerable to adverse economic conditions than less leveraged competitors
and, thus, may be limited in its ability to withstand competitive pressures.
The Credit Facility, the Original Indenture and the Indenture contain
restrictive covenants including, among others, those restricting additional
liens, incurrence of additional indebtedness, the sale of assets, the payment
of dividends, transactions with affiliates, the making of investments and
certain other fundamental changes. The Credit Facility also contains
restrictions on capital expenditures and certain financial ratio tests
including current assets to current liabilities, maximum indebtedness to
tangible net worth, minimum interest and fixed charges coverages and minimum
levels of tangible net worth. These restrictions could limit the Company's
ability to conduct its business. A failure to comply with the obligations
contained in the Credit Facility, the Original Indenture or the Indenture
could result in an event of default under such agreements, which could permit
acceleration of the related debt and acceleration of debt under other
agreements that may contain cross-acceleration or cross-default provisions.
SUBORDINATION OF THE NOTES AND THE GUARANTEES; ASSET ENCUMBRANCES
The payment of principal of, premium, if any, and interest on the Exchange
Notes will be subordinated, to the extent set forth in the Indenture, to the
prior payment in full of existing and future Senior Indebtedness of the
Company, which includes the indebtedness under the Credit Facility. Therefore,
in the event of the liquidation, dissolution, reorganization, or any similar
proceeding regarding the Company, the assets of the Company will be available
to pay obligations on the Exchange Notes only after the Senior Indebtedness
has been paid in full, and there may not be sufficient assets to pay amounts
due on all or any of the Exchange Notes. In addition, the Company may not pay
principal of, premium, if any, interest on or any other amounts owing in
respect of the Exchange Notes, make any deposit pursuant to defeasance
provisions or purchase, redeem or otherwise retire the Exchange Notes, if any
Designated Senior Indebtedness (as defined) is not paid when due or any other
default on Designated Senior Indebtedness occurs and the maturity of such
indebtedness is accelerated in accordance with its terms unless, in either
case, such default has been cured or waived, any such acceleration has been
rescinded or such indebtedness has been repaid in full. Moreover, under
certain circumstances, if any nonpayment default exists with respect to
Designated Senior Indebtedness, the Company may not make any payments on the
Exchange Notes for a specified period of time, unless such default is cured or
waived or such indebtedness has been repaid in full. As of August 31, 1996, on
a pro forma basis, after giving effect to the sale of the Old Notes and the
application of the net proceeds therefrom, the aggregate amount of outstanding
Senior Indebtedness that ranked senior in right of payment to the Exchange
Notes would have been $220.4 million, and the aggregate amount of outstanding
Pari Passu Indebtedness would have been $130.0
14
<PAGE>
million. See "Description of Notes--Subordination." Revolving Loans repaid
from the net proceeds of the Old Notes Offering may be re-borrowed from time
to time. See "Use of Proceeds."
The Guarantees will be subordinated in right of payment to the guarantees by
the Guarantors of the Company's obligations under the Credit Facility and will
be subordinated in the future to all future guarantees by the Guarantors of
Senior Indebtedness of the Company and any other Senior Guarantor
Indebtedness. As of August 31, 1996, on a pro forma basis, after giving effect
to the sale of the Old Notes and the application of the net proceeds
therefrom, the aggregate amount of outstanding Senior Guarantor Indebtedness
that ranked senior in right of payment to the Guarantees would have been
$219.4 million (including $218.8 million of outstanding indebtedness
representing guarantees of Senior Indebtedness).
The Exchange Notes will not be secured by any of the Company's assets. The
obligations of the Company under the Credit Facility, however, are secured by
a first priority security interest in a majority of the Company's assets. If
the Company becomes insolvent or is liquidated, or if payment under the Credit
Facility is accelerated, the lenders under the Credit Facility would be
entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to instruments governing such indebtedness.
Accordingly, such lenders will have a prior claim on such of the Company's
assets. In any such event, because the Exchange Notes will not be secured by
any of the Company's assets, it is possible that there would be no assets
remaining from which claims of the holders of the Exchange Notes could be
satisfied or, if any such assets remained, such assets might be insufficient
to satisfy such claims fully. See "Capitalization," "Management's Discussions
and Analysis of Financial Condition and Results of Operations--Financial
Liquidity and Capital Resources," "Description of Notes" and Notes to the
Consolidated Financial Statements.
HOLDING COMPANY STRUCTURE; SUBSIDIARY GUARANTEES
The Exchange Notes are obligations of the Company. As of August 31, 1996,
81.8% of the tangible assets of the Company were held by its subsidiaries.
Therefore, the Company's ability to make interest and principal payments when
due to holders of the Exchange Notes is dependent, in part, upon the
operations of its subsidiaries.
The Company's obligations under the Exchange Notes will be guaranteed,
jointly and severally, on a senior subordinated basis by the Guarantors. To
the extent any Guarantee were to be avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Exchange Notes would cease
to have any claim in respect of such Guarantor and would be creditors solely
of the Company and any Guarantor whose Guarantee was not avoided or held
unenforceable. In such event, the claims of the holders of the Exchange Notes
against the issuer of an invalid Guarantee would be subject to the prior
payment of all liabilities of such Guarantor. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Exchange Notes relating to any voided
Guarantee.
Based upon financial and other information currently available to it, the
Company believes that the Exchange Notes and the Guarantees are being incurred
for proper purposes and in good faith and that, after giving effect to the
issuance of the Notes or its Guarantee, as the case may be, the Company and
each Guarantor is solvent, has sufficient capital for carrying on its business
and will be able to pay its debts as they mature. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Financial
Liquidity and Capital Resources," "Description of Credit Facility" and
"Description of Notes."
CHANGE OF CONTROL OFFER
If a Change of Control shall occur at any time, then each holder of the
Exchange Notes shall have the right to require that the Company purchase such
holder's Notes for cash in an amount equal to
15
<PAGE>
101% of the principal amount of such Exchange Notes plus accrued and unpaid
interest, if any, to the date of purchase pursuant to procedures set forth in
the Indenture. In the event of a Change of Control, the Company is prohibited
under the Credit Facility from purchasing the Exchange Notes until either all
amounts outstanding under the Credit Facility are paid in full or the Company
obtains the necessary consents from the lenders under the Credit Facility to
make any purchases requested by the holders of the Exchange Notes. In
addition, the repurchase of the Exchange Notes upon the occurrence of a Change
of Control (or otherwise) will be prohibited by the Original Indenture unless
the Company has sufficient ability at such time to make "Restricted Payments"
thereunder. There can be no assurance that, in the event of a Change of
Control, the Company will be able to obtain the necessary consents from the
lenders under the Credit Facility or, if necessary, the holders of the
Original Notes to make any purchases requested by the holders of the Exchange
Notes or that the Company will have available funds sufficient to make any
such purchases. The failure of the Company upon a Change of Control to offer
to purchase the Notes or to consummate the purchases requested by the holders
of the Exchange Notes will constitute an Event of Default under the Indenture.
Such Event of Default would permit acceleration of indebtedness under the
Credit Facility and would also permit acceleration of indebtedness under other
debt agreements that contain cross-acceleration or cross-default provisions.
Moreover, all amounts outstanding under the Credit Facility become due and
payable upon a Change of Control and it is an event of default under the
Credit Facility upon the occurrence of certain change of control events. See
"Description of Credit Facility," "Description of Notes--Events of Default,
and--Certain Covenants--Purchase of Notes Upon a Change of Control."
COMPETITION
The Company is in a highly competitive environment and its dollar sales and
unit volume could be negatively affected by its inability to maintain or
increase prices, changes in geographic or product mix, a general decline in
beverage alcohol consumption or the decision of its wholesale customers,
retailers or consumers to purchase competitive products instead of the
Company's products. Wholesaler, retailer and consumer purchasing decisions are
influenced by, among other things, the perceived absolute or relative overall
value of the Company's products, including their quality or pricing, compared
to competitive products. Unit volume and dollar sales could also be affected
by pricing, purchasing, financing, operational, advertising or promotional
decisions made by wholesalers and retailers which could affect their supply,
or consumer demand for, the Company's products.
GENERAL DECLINE IN CONSUMPTION OF BEVERAGE ALCOHOL PRODUCTS
The beverage alcohol industry in the United States consists of the
production, importation, marketing and distribution of beer, wine and
distilled spirits products. From 1978 through 1995 the overall per capita
consumption of beverage alcohol products by adults (ages 21 and over) has
declined, with annual beer consumption declining 14%, from 36.3 to 31.3
gallons per capita, annual wine consumption declining 40%, from 3.0 to 1.8
gallons per capita, and annual distilled spirits consumption declining 58%,
from 3.1 to 1.3 gallons per capita. These declines have been caused by a
variety of factors including: increased concerns about the health consequences
of consuming beverage alcohol products and about drinking and driving; a trend
toward a healthier diet including lighter, lower calorie beverages such as
diet soft drinks, juices and sparkling water products; the increased activity
of anti-alcohol consumer groups; an increase in the minimum drinking age from
18 to 21 in all states; and increased Federal and state excise taxes.
EXCISE TAXES AND GOVERNMENT REGULATIONS
The Federal government and individual states impose excise taxes on beverage
alcohol products in varying amounts which have been subject to change.
Increases in excise taxes on beverage alcohol products, if enacted, could
materially and adversely affect the Company's financial condition or results
of operations. In addition, the beverage alcohol products industry is subject
to extensive regulation by
16
<PAGE>
state and Federal agencies. The Federal Bureau of Alcohol, Tobacco and
Firearms and the various state liquor authorities regulate such matters as
licensing requirements, trade and pricing practices, permitted and required
labelling, advertising and relations with wholesalers and retailers. In recent
years, Federal and state regulators have required warning labels and signage.
There can be no assurance that new or revised regulations or increased
licensing fees and requirements will not have a material adverse effect on the
Company's financial condition or results of operations. See "Business--
Government Regulation."
DIFFICULTY IN INTEGRATING ACQUISITIONS
To successfully implement its acquisition strategy, the Company must not
only negotiate, finance and consummate such acquisitions, but also integrate
the acquired businesses into its operations. The Company has experienced
difficulties in the past year in achieving operating efficiencies from the
consolidation of certain of its West Coast wine operations. There can be no
assurance that the Company will be able to integrate any existing or future
acquisitions successfully into its operations and achieve cost savings from
such integration.
DEPENDENCE ON DISTRIBUTION CHANNELS
The Company sells its products principally to wholesalers for resale to
retail outlets including grocery stores, package liquor stores, club and
discount stores and restaurants. The replacement or poor performance of the
Company's major wholesalers or the Company's inability to collect accounts
receivable from its major wholesalers could materially and adversely affect
the Company's results of operations and financial condition. Distribution
channels for beverage alcohol products have been characterized in recent years
by rapid change, including consolidations of certain wholesalers. Wholesalers
and retailers of the Company's products offer products which compete directly
with the Company's products for retail shelf space and consumer purchases.
Accordingly, there is a risk that these wholesalers or retailers may give
higher priority to products of the Company's competitors. There can be no
assurance that the Company's wholesalers and retailers will continue to
purchase the Company's products or provide the Company's products with
adequate levels of promotional support. See "Business--Marketing and
Distribution."
RENEWAL OF IMPORTED BEER DISTRIBUTION AGREEMENTS
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products
which are subject to renewal from time to time. The Company's agreement to
distribute Corona and its other Mexican beer brands expires in December 2006
and, subject to compliance with certain performance criteria and other terms
of the agreement, will be automatically renewed for additional terms of five
years. The Company's agreement for the importation of St. Pauli Girl expires
in 1998 and, subject to compliance with certain performance criteria, may be
extended by the Company until 2003. The Company's Tsingtao agreement expires
in December 1999 and, subject to compliance with certain performance criteria
and other terms of the agreement, will be automatically renewed until December
2002. Prior to their expiration, these agreements may be terminated if the
Company fails to meet certain performance criteria or, in the case of the
Mexican beer brands, the supplier does not consent to certain key management
changes, which consent may not be unreasonably withheld. The Company believes
it is currently in compliance with its imported beer distribution agreements
to import Mexican beer. Although there can be no assurance that its beer
distribution agreements will be renewed, given the Company's long-term
relationships with its suppliers, the Company expects that such agreements
will be renewed prior to their expiration and does not believe that any of
these agreements will be terminated.
DEPENDENCE ON RAW MATERIALS
The Company's business is heavily dependent upon raw materials, such as
grapes, grape juice concentrate and packaging materials. The Company could
experience raw material supply, production or shipment difficulties which
could adversely affect its ability to supply goods to its customers. The
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Company is also directly affected by increases in the cost of such raw
materials. Grape prices increased significantly during the 1995 harvest and
the Company has experienced higher than anticipated costs related to the
purchase of grapes from the 1996 fall harvest. By August 31, 1996, the Company
was able to increase prices, on an annualized basis, to offset the increased
costs associated with the 1995 harvest. If the Company is unable to recover
the increased costs associated with the 1996 harvest in the form of selling
price increases or operational efficiencies, the Company's results of
operations in its fiscal year ended February 28, 1998 associated with the 1996
harvest could be negatively affected.
REENGINEERING EFFORT
The Company's wine division is currently undergoing a Reengineering Effort.
In connection with the Reengineering Effort, the Company is in the process of
recruiting new management in several key positions. There can be no assurance
that the Reengineering Effort will generate positive results or offset the
costs related thereto. See "Summary--Current Operating Environment."
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus which are not historical
facts are forward-looking statements that involve risks and uncertainties that
could cause actual results to differ materially from those set forth in the
forward-looking statements. Any estimated results for the Company's fiscal
year ended February 28, 1997 ("Fiscal 1997") should not be construed in any
manner as a guarantee that such results will in fact occur. These forward-
looking statements are based on assumptions which the Company believes are
reasonable. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Projected 1997 Results." However, there can be no
assurance that any forward-looking statement will be realized or that actual
results will not be significantly higher or lower than set forth in such
forward-looking statement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Cautionary Statements Related
to Projected Results."
DEPENDENCE UPON MANAGEMENT
The Company's success depends in part on a few key management employees.
These key management employees are Marvin Sands, the Chairman of the Board,
Richard Sands, the President and Chief Executive Officer, Robert Sands,
Executive Vice President and General Counsel, and Ellis Goodman, Executive
Vice President of the Company and the Chief Executive Officer of Barton. If,
for any reason, such key personnel do not continue to be active in the
Company's management, operations could be adversely affected.
CONTROL BY SANDS FAMILY
The Company's capital stock consists of Class A Common Stock and Class B
Common Stock. Holders of Class A Common Stock are entitled to one vote per
share and are entitled, as a class, to elect one-fourth of the members of the
Board of Directors. Holders of Class B Common Stock are entitled to 10 votes
per share and are entitled, as a class, to elect the remaining directors. As
of December 6, 1996, the family of Marvin Sands, the founder and Chairman of
the Board of the Company, beneficially owned approximately 12% of the
outstanding shares of Class A Common Stock (exclusive of shares of Class A
Common Stock issuable pursuant to the conversion feature of the Class B Common
Stock owned by the Sands family) and approximately 85% of the outstanding
shares of Class B Common Stock. On all matters other than the election of
directors, the Sands family has the ability to vote approximately 62% of the
votes entitled to be cast by holders of the Company's capital stock, voting as
a single class. Consequently, the Sands family effectively has control of the
Company and would generally have sufficient voting power to determine the
outcome of any corporate transaction or other matter submitted to the
stockholders for approval.
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LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Exchange Notes will constitute a new issue of securities with no
established trading market. Although the Initial Purchasers have informed the
Company that they currently intend to make a market in the Exchange Notes,
they are not obligated to do so and any such market making may be discontinued
at any time without notice. The Company does not intend to apply for listing
of the Exchange Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Accordingly, no assurance can be given as to the continued development or
liquidity of the trading market for the Exchange Notes, or, in the case of
non-tendering holders of Old Notes, the trading market for the Old Notes
following the Exchange Offer.
The liquidity of, and trading market for, the Old Notes or the Exchange
Notes also may be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects
for, the Company.
ORIGINAL ISSUE DISCOUNT
The Old Notes were issued with OID (i.e., the difference between the "stated
redemption price at maturity" of the Notes and the issue price of the Notes).
For Federal income tax purposes, the issue price of the Exchange Notes will
equal the issue price of the Old Notes. Thus, OID will accrue from the issue
date of the Exchange Notes (which is deemed to be October 29, 1996) and will
be includable as interest income periodically in a holder's gross income for
United States federal income tax purposes in advance of receipt of the cash
payments to which the income is attributable. See "Certain Federal Income Tax
Considerations--Taxation of the Notes--Original Issue Discount." Similar
results may apply under state tax laws. If a bankruptcy case were commenced by
or against the Company under the United States Bankruptcy Code after the
issuance of the Exchange Notes, the claim of a holder of the Exchange Notes
with respect to the principal amount thereof may be limited to an amount equal
to the sum of (i) the initial offering price and (ii) that portion of the
original issue discount that is not deemed to constitute "unmatured interest"
for purposes of the United States Bankruptcy Code. Any original issue discount
that was not amortized as of any such bankruptcy filing would constitute
"unmatured interest."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on October 29, 1996 to the Initial
Purchasers, who placed the Old Notes with institutional investors. In
connection therewith, the Company and the Initial Purchasers entered into the
Registration Rights Agreement, pursuant to which the Company agreed, for the
benefit of the Holders of the Old Notes, that the Company would, at its sole
cost, (i) within 45 days following the original issuance of the Old Notes,
file with the SEC the Registration Statement (of which this Prospectus is a
part) under the Securities Act with respect to an issue of a series of new
notes of the Company identical in all material respects to the series of Old
Notes (except that such new notes would not contain terms with respect to
transfer restrictions) and (ii) cause such Registration Statement to be
declared effective under the Securities Act within 105 days following the
original issuance of the Old Notes. Upon the effectiveness of the Registration
Statement, the Company will offer, pursuant to this Prospectus, to the Holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of Exchange Notes, to be issued without a restrictive legend
and which may, generally, be reoffered and resold by the holder without
restrictions or limitations under the Securities Act. The term "Holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the SEC with respect to whether the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may
be offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the SEC 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 Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 promulgated 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 holder's business, such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any other such person is engaging
in or intends to engage in a distribution of such Exchange Notes. Since the
SEC has not considered the Exchange Offer in the context of a no-action
letter, there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer. Any Holder who is an
affiliate of the Company or who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes cannot rely on such
interpretations by the staff of the SEC and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution." The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company and the Guarantors have agreed that, for a
period of 180 days after the Expiration Date, they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
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In the event that any change in law or applicable interpretations of the
staff of the SEC do not permit the Company to effect the Exchange Offer or do
not permit any holder of Old Notes (including the Initial Purchasers), to
participate in the Exchange Offer, the Company will file with the SEC a shelf
registration statement (the "Shelf Registration Statement") to cover resales
of Transfer Restricted Securities by such holders who satisfy certain
conditions relating to the provision of information in connection with the
Shelf Registration Statement. As used herein, the term "Transfer Restricted
Securities" means each Old Note until (i) the date on which such Old Note has
been exchanged for a freely transferable Exchange Note in the Exchange Offer,
(ii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iii) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule
144(k) under the Securities Act.
Pursuant to the Registration Rights Agreement, the Company agreed to
commence the Exchange Offer (unless such Exchange Offer would not be permitted
by SEC policy) and to use its best efforts to consummate the Exchange Offer as
promptly as practicable, but in any event prior to 135 days after the Issue
Date. If applicable, the Company agreed to use its best efforts to keep the
Shelf Registration Statement effective for a period of three years after the
Issue Date (as defined herein). If (i) the Exchange Offer Registration
Statement or, as the case may be, the Shelf Registration Statement, is not
declared effective within 105 days after the Issue Date, (ii) the Exchange
Offer is not consummated on or prior to 135 days after the Issue Date, or
(iii) the Shelf Registration Statement is filed and declared effective within
105 days after the Issue Date but shall thereafter cease to be effective (at
any time that the Company is obligated to maintain the effectiveness thereof)
without being succeeded within 30 days by an additional Registration Statement
filed and declared effective (each such event referred to in clauses (i)
through (iii), a "Registration Default"), the Company will pay liquidated
damages to each holder of Transfer Restricted Securities, during the period of
such Registration Default, in an amount equal to $0.192 per week per $1,000
principal amount of the Old Notes constituting Transfer Restricted Securities
held by such holder until the applicable Registration Statement is filed or
declared effective, the Exchange Offer is consummated or the Shelf
Registration Statement again becomes effective, as the case may be. All
accrued liquidated damages shall be paid to holders in the same manner as
interest payments on the Old Notes on semiannual payment dates which
correspond to interest payment dates for the Old Notes. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
Holders of the Old Notes will be required to make certain representations to
the Company (as described above) in order to participate in the Exchange Offer
and will be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have their Old Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding paragraphs. A holder who sells
Old Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales
and will be bound by the provisions of the Registration Rights Agreement which
are applicable to such a holder (including certain indemnification
obligations).
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement and such Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for the Old Notes could be adversely affected.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the Exchange
Notes have been registered under the Securities Act and therefore will not
bear legends restricting their transfer and will not contain certain
provisions providing for payment of liquidated damages under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture under which the Old Notes were, and the Exchange
Notes will be, issued.
As of the date of this Prospectus, $65,000,000 aggregate principal amount of
the Old Notes are outstanding. The Company has fixed the close of business on
, 199 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will be sent. As of such date, there were registered Holders
of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' righters
under the Delaware General Corporation Law (the "DGCL") or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the SEC promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 199 , unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration
date.
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The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer, by giving oral notice (confirmed in writing)
or written notice of such delay, extension or termination to the Exchange
Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by a public announcement thereof. If the Exchange
Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of
a prospectus supplement that will be distributed to the registered Holders,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to ten-business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcements, other than by making a timely
release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein and
in the Letter of Transmittal. This Prospectus, together with the Letter of
Transmittal, will first be sent on or about , 1996, to all Holders of Old
Notes known to the Company and the Exchange Agent.
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, including any other required documents,
to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal or (ii)
a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
of such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
Holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Old Notes, Letter of Transmittal and other
required documents must be received by the Exchange Agent at the address set
forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder and delivery will be deemed made only when actually received by the
Exchange Agent. Instead of delivery by mail, it is recommended that Holders
use an overnight or hand delivery service. If such delivery is by mail, it is
recommended that registered mail, return receipt requested, be used and proper
insurance be obtained. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
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beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power form the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old 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 promulgated under the Exchange Act (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes 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,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify Holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that the Company determines are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that (i) the Exchange Notes acquired by the Holder and any beneficial owners
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, (ii) neither
the Holder nor such beneficial owner has an arrangement with any person to
participate in the distribution of such Exchange Notes, (iii) neither the
Holder nor such beneficial owner nor any such other person is engaging in or
intends to engage in a distribution of such Exchange Notes and (iv) neither
the Holder nor any such other person is an "affiliate," as defined
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under Rule 405 promulgated under the Securities Act, of the Company. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities (other than Old
Notes acquired directly from the Company), may participate in the Exchange
Offer but may be deemed an "underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter of Transmittal that it will deliver
a prospectus in connection with any resale of such Exchange Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "Plan of Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date may effect a tender if:
a) the tender is made 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 (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate
number(s) of such Old Notes and the principal amount of Old 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 Old Notes, or a Book-
Entry Confirmation, 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 Old
Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, 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.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
be signed by the Holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes into the name of the persons withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If certificates for Old Notes have been
delivered or otherwise identified to the Exchange Agent, then, prior to the
release of such certificates, the withdrawing Holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice
of withdrawal must specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, which determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the Old Notes
so withdrawn are validly retendered. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without
cost to such Holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility for the Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the SEC; or
b) any action or proceeding is instituted or threatened in any court or by
any governmental agency that might materially impair the ability of the
Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with
respect to the Company; or
c) any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering Holders (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's
26
<PAGE>
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer provisions described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility), (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of Holders to withdraw
such Old Notes (see "--Withdrawal of Tenders"), or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such five- to
ten-business-day period.
EXCHANGE AGENT
Harris Trust & Savings Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, request for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Mail or Hand/Overnight By Facsimile:
Delivery: (212) 701-7636
Harris Trust & Savings Bank
c/o Harris Trust Company of Confirm by Telephone:
New York (212) 701-7624
77 Water Street, 4th Floor
New York, NY 10005
Attn: Reorganization
Department
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting fees and legal fees, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (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.
27
<PAGE>
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value less accrued original issue discount, as reflected
in the Company's accounting records on the date of the exchange. Accordingly,
no gain or loss for accounting purposes will be recognized as a result of
consummation of the Exchange Offer. The expenses of the Exchange Offer and the
unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the Exchange Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the Old Notes Offering were approximately $59.6 million (after
deduction of discounts to the Initial Purchasers and other expenses). Such net
proceeds were used to repay amounts outstanding under the Credit Facility,
including $50.0 million under the Revolving Loans and $9.6 million to repay
and permanently reduce the Term Loans. Revolving Loans repaid from the net
proceeds of the Old Notes Offering may be re-borrowed from time to time. The
Company will continue to use the Revolving Loans to support its working
capital requirements including purchases related to the 1996 grape harvest. In
addition, the Company intends to use the Revolving Loans to complete the Stock
Repurchase Program (as defined). As of November 22, 1996, the Company had
repurchased 785,200 shares of Class A Common Stock at an aggregate cost of
$20.7 million under the Stock Repurchase Program. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The interest rate for the Term Loans and the Revolving Loans currently is
the sum of LIBOR plus 1.0% and/or the prime rate. The weighted average
interest rate on borrowings under the Credit Facility as of August 31, 1996
was 6.6%. Both the Term Loans and the Revolving Loans expire in 2001. The
portion of the Term Loans and Revolving Loans repaid from the net proceeds of
the Old Notes Offering were incurred to finance working capital requirements.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Financial Liquidity and Capital Resources," "Description of
Credit Facility" and "Plan of Distribution."
28
<PAGE>
CAPITALIZATION
The following table sets forth the historical short-term debt and
capitalization of the Company as of August 31, 1996 and the capitalization of
the Company as adjusted to give effect to the sale of the Old Notes and the
application of the net proceeds therefrom, as if it occurred on August 31,
1996. This table should be read in conjunction with the historical
consolidated financial statements and the related Notes appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1996
----------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of Term Loans...................... $ 40,000 $ 40,000
Revolving Loans(a).................................... 62,000 12,000
Current maturities of other long-term debt and
other short-term debt................................ 766 766
-------- --------
Total short-term debt................................. $102,766 $ 52,766
======== ========
Long-term debt:
Term Loans............................................ $176,000 $166,431
Other................................................. 1,204 1,204
8 3/4% Senior Subordinated Notes due 2003............. 130,000 130,000
8 3/4% Series B Senior Subordinated Notes due 2003.... -- 61,669
-------- --------
Total long-term debt (excluding current maturities)... 307,204 359,304
-------- --------
Stockholders' equity:
Class A Common Stock, $.01 par value--
60,000,000 authorized shares; 17,458,582 shares
issued............................................... 174 174
Class B Common Stock, $.01 par value--
20,000,000 authorized shares; 3,956,183 shares
issued............................................... 40 40
Additional paid-in capital............................ 221,728 221,728
Retained earnings..................................... 156,042 156,042
Less--Treasury stock
Class A Common Stock, 1,320,446 shares, at cost....... (10,606) (10,606)
Class B Common Stock, 625,725 shares, at cost......... (2,207) (2,207)
-------- --------
Total stockholders' equity.............................. 365,171 365,171
-------- --------
Total capitalization.................................... $672,375 $724,475
======== ========
</TABLE>
- --------
(a) Net proceeds from the Old Notes Offering were used to repay amounts
outstanding under the Credit Facility, including $50,000 under the
Revolving Loans. Revolving Loans repaid from the net proceeds of the Old
Notes Offering may be re-borrowed from time to time. See "Use of
Proceeds." Under the terms of the Company's Credit Facility, for 30
consecutive days at any time during the fiscal quarters ending on May 31
and August 31 of each fiscal year, the aggregate outstanding principal
amount of the Revolving Loans combined with all drawn and undrawn
Revolving Letters of Credit (as defined) cannot exceed $60,000, plus the
amount expended by the Company related to certain capital expenditures at
any time during Fiscal 1997 up to $17,500. The Credit Facility expires in
June 2001. As of August 31, 1996, there were outstanding Revolving Loans
of $62,000 and $114,900 available to be drawn in Revolving Loans. See
"Description of Credit Facility."
29
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical consolidated financial and other data
should be read in conjunction with the consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein. The summary selected
financial information for each of the five fiscal years ended August 31, 1995
and the six month period ended February 29, 1996 is derived from the Company's
consolidated financial statements for such fiscal years, which financial
statements have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports thereon. The summary financial
information for the six month periods ended February 28, 1995 and August 31,
1995 and 1996 and as of August 31, 1996 has been derived from the unaudited
financial statements, which, in the opinion of management, include all
adjustments necessary for a fair presentation of the results of operations for
such periods. The financial information for the six months ended February 29,
1996 and August 31, 1995 and 1996 is not necessarily indicative of the results
of operation for a full fiscal year. The pro forma and as adjusted data do not
purport to represent what the Company's financial position or results of
operations actually would have been if the Old Notes Offering in fact had
occurred at the beginning of the indicated periods or as of the specified
date, or purport to project the Company's results of operations or financial
position for any future period or at any future date.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, SIX MONTHS ENDED AUGUST 31,
------------------------------------------------- ------------------ ------------------
FEB. 28, FEB. 29,
1991 1992(a) 1993(b) 1994(c)(d) 1995(e) 1995 1996 1995 1996
-------- -------- -------- ---------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........... $176,559 $245,243 $306,308 $629,584 $906,544 $454,485 $535,024 $452,059 $555,711
Cost of product
sold............... (131,064) (174,686) (214,931) (447,211) (653,811) (327,694) (396,208) (326,117) (412,969)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit....... 45,495 70,557 91,377 182,373 252,733 126,791 138,816 125,942 142,742
Selling, general and
administrative
expenses........... (30,184) (46,491) (59,983) (121,388) (159,196) (79,925) (112,411) (79,271) (102,870)
Nonrecurring
restructuring
expenses........... -- -- -- (24,005) (2,238) (685) (2,404) (1,553) --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income.... 15,311 24,066 31,394 36,980 91,299 46,181 24,001 45,118 39,872
Interest expense,
net................ (3,631) (6,182) (6,126) (18,056) (24,601) (13,141) (17,298) (11,460) (16,803)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before
provision for
income taxes....... 11,680 17,884 25,268 18,924 66,698 33,040 6,703 33,658 23,069
Provision for
federal and state
income taxes....... (3,970) (6,528) (9,664) (7,191) (25,678) (12,720) (3,381) (12,958) (9,627)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income.......... $ 7,710 $ 11,356 $ 15,604 $ 11,733 $ 41,020 $ 20,320 $ 3,322 $ 20,700 $ 13,442
======== ======== ======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Gross profit
margin(f).......... 25.8% 28.8% 29.8% 29.0% 27.9% 27.9% 25.9% 27.9% 25.7%
EBITDA(g)........... $ 20,737 $ 31,141 $ 40,069 $ 50,795 $112,011 $ 58,832 $ 37,959(h)(i) $ 53,179 $ 57,166(i)
EBITDA margin(j).... 11.7% 12.7% 13.1% 8.1% 12.4% 12.9% 7.1% 11.8% 10.3%
Depreciation and
amortization....... $ 5,426 $ 7,075 $ 8,675 $ 13,815 $ 20,712 $ 12,651 $ 13,958 $ 8,061 $ 17,294
Capital
expenditures....... $ 2,844 $ 4,713 $ 6,949 $ 7,853 $ 37,121 $ 11,342 $ 16,077 $ 25,779 $ 21,795
Ratio of earnings to
fixed charges(k)... 3.3x 3.4x 4.4x 2.0x 3.5x 3.3x 1.4x 3.7x 2.3x
PRO FORMA DATA(L):
Cash interest
expense, net....... $ 18,157 $ 17,672
Ratio of EBITDA to
cash interest
expense, net....... 2.1x 3.2x
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
AS OF AUGUST 31, FEBRUARY 29, AUGUST 31, 1996
---------------------------------------------- ------------ ----------------------
AS
1991 1992(a) 1993(b) 1994(c)(d) 1995(e) 1996 ACTUAL ADJUSTED(l)
-------- -------- -------- ---------- -------- ------------ ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............ $147,207 $217,835 $355,182 $826,562 $785,921 $1,054,580 $1,038,191 $1,040,291
Indebtedness (including
current maturities).... 63,134 62,174 129,131 339,123 227,992 479,713 409,970 412,070
Stockholders' equity.... 51,975 95,549 126,104 204,193 351,882 356,506 365,171 365,171
</TABLE>
See accompanying Notes to Selected Historical Financial Data
30
<PAGE>
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) The Company acquired Guild on October 1, 1991, and accounted for this
acquisition utilizing the purchase method of accounting. Guild's results
of operations have been included in the Company's results of operations
since October 1, 1991.
(b) The Company acquired Barton on June 29, 1993, and accounted for the
acquisition utilizing the purchase method of accounting. Barton's results
of operations have been included in the Company's results of operations
since June 29, 1993.
(c) The Company acquired substantially all of the assets and businesses of
Vintners on October 15, 1993, and accounted for the acquisition utilizing
the purchase method of accounting. Vintners' results of operations have
been included in the Company's results of operations since October 15,
1993.
(d) The Company acquired substantially all of the assets and business
associated with the Almaden/Inglenook Product Lines from Heublein on
August 5, 1994, utilizing the purchase method of accounting. The
Almaden/Inglenook Product Lines have been included in the Company's
results of operations since August 5, 1994.
(e) The Company acquired certain assets of UDG on September 1, 1995, and
accounted for the acquisition utilizing the purchase method of accounting.
UDG's results of operations have been included in the Company's results of
operations since September 1, 1995.
(f) Represents gross profit as a percentage of net sales.
(g) EBITDA represents operating income plus depreciation of property, plant
and equipment and amortization of intangible assets. EBITDA is presented
here as a measure of the Company's debt service ability. EBITDA should not
be construed as an alternative to operating income or net cash flow from
operating activities and should not be construed as an indication of
operating performance or as a measure of liquidity.
(h) EBITDA for the six months ended February 29, 1996 includes approximately
$14,300 of charges that the Company believes are nonrecurring in nature
due in part to the Company's change in fiscal year, including $3,000 of
LIFO expense also included in footnote (i) below.
(i) The LIFO adjustment for the six months ended February 28, 1996 and the six
months ended August 31, 1996 were $6,927 and $13,750, respectively.
(j) Represents EBITDA as a percentage of net sales.
(k) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represents income before provision for income taxes plus fixed
charges. "Fixed charges" consist of interest expense, including
amortization of debt issuance costs, and the portion of rental expense
which management believes is representative of the interest component of
lease expense.
(l) The pro forma and as adjusted data assume that the Old Notes Offering and
the application of the net proceeds therefrom occurred at the beginning of
the indicated periods. The pro forma and as adjusted data assume that
Revolving Loan amounts repaid are not re-borrowed. Such amounts may be re-
borrowed from time to time. See "Use of Proceeds."
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information contained herein includes certain forward-looking
statements. The Company desires to take advantage of the "safe harbor" which
is afforded such statements under the Private Securities Litigation Reform Act
of 1995 when they are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those in the forward-looking statements. See "Cautionary
Statements Related to Projected Results."
GENERAL
On January 11, 1996, the Company changed its fiscal year end from the twelve
month period ending August 31 to the twelve month period ending the last day
of February. The Company believes that this change creates a better planning
and financial reporting cycle by allowing the Company to take into account new
costs from the fall grape harvest, other inventory costs, summer sales of
imported beer products and holiday shipments of wines and spirits products in
its fiscal planning and reporting process. The accompanying financial
statements for the Transition Period are based on the newly adopted fiscal
year. Accordingly, the reported results for the Transition Period reflect the
effect of, among other matters, seasonal factors related primarily to the
timing of advertising and promotion expenditures and inventory levels during
the six months ended February 29, 1996.
The Company's results of operations over recent years have been
significantly impacted by acquisitions. The Company acquired the outstanding
capital stock of Barton on June 29, 1993, the assets of Vintners on October
15, 1993, the Almaden/Inglenook Product Lines on August 5, 1994 and certain
assets from UDG on September 1, 1995. See "Business--Recent Acquisitions." The
Company financed the UDG Acquisition through an amendment to its then-existing
bank credit facility, primarily through an increase in the term loan facility
under that credit facility. See "--Financial Liquidity and Capital Resources."
The cost of grapes, a major component of the Company's raw materials for its
winemaking, increased significantly for the 1995 and 1996 harvests.The Company
uses the last-in, first-out ("LIFO") method of valuing its inventories. The
increased grape costs associated with the fall 1996 grape harvest therefore
increased the Company's costs of goods sold for Fiscal 1997. As a result,
gross profit margins for the Company's wine business were adversely affected
during Fiscal 1997.
PROJECTED FISCAL 1997 RESULTS
On September 5, 1996, the Company reduced its estimated net income per share
for Fiscal 1997 to a new range of $1.10 to $1.40. For financial analysis
purposes only, the Company estimates that EBITDA for Fiscal 1997 will be in
the range of $102.5 million to $117.5 million. EBITDA should not be construed
as an alternative to operating income or net cash flow from operating
activities and should not be construed as an indication of operating
performance or as a measure of liquidity. The Company revised its estimated
net income per share for Fiscal 1997 as a result of below expectation
performance of the Company's wine division, offset in part by better than
expected performance of the Company's beer and spirits division. The Company
believes its wine division performance will be negatively impacted by (i)
increased cost of product sold relating to increased grape costs from the 1996
harvest which the Company does not expect to offset through selling price
increases in Fiscal 1997; (ii) inefficiencies in its wine division operations;
and (iii) decreased unit volume of its branded wine products. These projected
results are based on certain assumptions, including the following: (i) the
Company's unit volume sales of branded wine products will continue to decrease
at approximately the same rate as they decreased during the Six Months 1997;
(ii) increases in the Company's costs will not result in a LIFO adjustment
materially in excess of the current estimate of $27.5 million for Fiscal 1997;
(iii) the Company will continue to experience wine production operating
inefficiencies,
32
<PAGE>
although at lower levels as compared to the Six Months 1997; (iv) the
Company's beer and spirits division will continue to experience strong growth;
(v) the Company will not materially change its selling prices, on an overall
basis, as compared to current levels at the end of the Six Months 1997; and
(vi) the Company's promotional levels will continue at comparable rates to the
Six Months 1997. See "--Cautionary Statements Related to Projected Results."
The projected results set forth above have not been examined by Arthur
Andersen LLP, the Company's independent public accountants, and such
accountants assume no responsibility for such projected results.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of income expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED AUGUST 31, SIX MONTHS ENDED AUGUST 31,
---------------------- ------------------------- ------------------
FEBRUARY 28, FEBRUARY 29,
1994 1995 1995 1996 1995 1996
---------- ---------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of product sold.... 71.0 72.1 72.1 74.1 72.1 74.3
---------- ---------- ----- ----- -------- --------
Gross profit.......... 29.0 27.9 27.9 25.9 27.9 25.7
Selling, general and
administrative
expenses............... 19.3 17.6 17.6 21.0 17.6 18.6
Nonrecurring 3.8 0.2 0.1 0.4 0.3 0.0
restructuring expenses. ---------- ---------- ----- ----- -------- --------
Operating income........ 5.9 10.1 10.2 4.5 10.0 7.1
Interest expense, net... 2.9 2.7 2.9 3.2 2.5 3.0
---------- ---------- ----- ----- -------- --------
Income before
provision for
income taxes....... 3.0 7.4 7.3 1.3 7.5 4.1
Provision for federal 1.1 2.9 2.8 0.7 2.9 1.7
and state income taxes. ---------- ---------- ----- ----- -------- --------
Net income............ 1.9% 4.5% 4.5% 0.6% 4.6% 2.4%
========== ========== ===== ===== ======== ========
</TABLE>
SIX MONTHS ENDED AUGUST 31, 1996, COMPARED TO SIX MONTHS ENDED AUGUST 31, 1995
Net Sales
Net sales for the Six Months 1997 increased to $555.7 million from $452.1
million for the six months ended August 31, 1995 ("August 1995 Six Months"),
an increase of $103.6 million, or approximately 22.9%. This increase resulted
primarily from (i) the inclusion of $49.0 million of net sales of products and
services from the UDG Acquisition; (ii) $39.3 million of additional imported
beer sales, primarily Mexican beers; (iii) $9.2 million of increased net sales
of branded wine products resulting from selling price increases implemented
between October 1995 and May 1996; and (iv) $6.1 million of higher sales of
grape juice concentrate and other nonbranded products.
For purposes of computing the net sales and unit volume comparative data for
the table below and for the remainder of the discussion of net sales, sales of
products acquired in the UDG Acquisition have been included in the entire
period for the August 1995 Six Months, which was prior to the UDG Acquisition.
33
<PAGE>
The table below sets forth the net sales (in thousands of dollars) and unit
volumes (in thousands of cases) for the branded beverage alcohol products,
branded wine products, each category of branded wine product, beer and spirits
brands sold by the Company for the Six Months 1997 and the August 1995 Six
Months:
SIX MONTHS ENDED AUGUST 31, 1996, COMPARED TO SIX MONTHS ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
NET SALES UNIT VOLUME
---------------------------------- ----------------------------------
SIX MONTHS AUGUST 1995 SIX MONTHS AUGUST 1995
1997 SIX MONTHS % INC/(DEC) 1997 SIX MONTHS % INC/(DEC)
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Branded Beverage Alcohol
Products(1)............ $493,939 $443,435 11.4% 30,697 28,075 9.3%
Branded Wine Products... 240,404 231,180 4.0 12,867 13,450 (4.3)
Non-varietal Table
Wines................ 104,549 105,394 (0.8) 6,463 6,878 (6.0)
Varietal Table Wines.. 77,025 64,630 19.2 3,195 3,029 5.5
Dessert Wines......... 32,744 34,984 (6.4) 2,055 2,338 (12.1)
Sparkling Wines....... 26,086 26,172 (0.3) 1,154 1,205 (4.2)
Beer.................... 163,314 124,028 31.7 13,072 10,028 30.4
Spirits................. 90,222 87,583 3.0 4,759 4,575 4.0
</TABLE>
- --------
(1) The sum of net sales and unit volume amounts from the categories may not
equal total Branded Beverage Alcohol Products because miscellaneous items
affecting net sales and unit volume may be included in total Branded
Beverage Alcohol Products but not reflected in the category information.
Net sales and unit volume of the Company's branded beverage alcohol products
for the Six Months 1997 increased 11.4% and 9.3%, respectively, as compared to
the August 1995 Six Months. The net sales increases resulted from higher
imported beer sales, price increases on most of the Company's branded wine
products, particularly varietal table wine brands, and increased sales of the
Company's spirits brands. Unit volume increases were led by substantial growth
in the Company's imported beer brands and increases in its varietal table wine
and spirits brands, partially offset by declines in unit volume of non-
varietal table wines, dessert wines and sparkling wines.
Net sales of the Company's branded wine products increased $9.2 million, or
4.0%, for the Six Months 1997 as compared to the August 1995 Six Months due to
the Company's selling price increases, despite unit volume declines of 4.3%.
The Company believes that the unit volume decrease resulted from the Company's
selling price increases, as well as industry trends related to certain
categories and the timing of shipments of some sparkling and dessert wine
products in the August 1995 Six Months.
Net sales and unit volume of the Company's non-varietal table wine products
declined by 0.8% and 6.0%, respectively, for the Six Months 1997 as compared
to the August 1995 Six Months. The Company believes that the decline in unit
volume reflects the impact of the Company's selling price increases and other
competitive pressures.
Net sales and unit volume of the Company's varietal table wine brands
increased by 19.2% and 5.5%, respectively. Net sales increased at a greater
rate than unit volume due to price increases instituted during the Transition
Period and the three months ended May 31, 1996. Net sales and unit volume of
the Company's varietal wine products such as chardonnay, cabernet sauvignon
and merlot, which represent more than half of the Company's varietal wine
volume, increased substantially in the Six Months 1997. While white zinfandel
unit volume declined in the Six Months 1997, net sales for white zinfandel
increased modestly.
Net sales and unit volume of the Company's dessert wine products decreased
by 6.4% and 12.1%, respectively, during the Six Months 1997. The Company
believes that, although the decline in
34
<PAGE>
unit volume was somewhat mitigated by selling price increases, these results
reflect the continuing trend of consumer preferences away from the dessert
wine category, as well as the timing of shipments in the August 1995 Six
Months relative to the subsequent periods.
Net sales and unit volume of the Company's sparkling wine brands declined
0.3% and 4.2%, respectively, during the Six Months 1997 as compared to the
August 1995 Six Months. The Company believes that the decline in unit volume
is consistent with industry trends and is also partially related to the timing
of sparkling wine shipments in the August 1995 Six Months relative to
subsequent periods.
Net sales and unit volume of the Company's beer brands increased 31.7% and
30.4%, respectively, during the Six Months 1997. Net sales and volume
increases were largely due to the Company's Mexican beer brands, particularly
Corona, Modelo Especial and Pacifico, which continued strong growth trends.
The Company believes that the growth in its Mexican beers is related to the
growth of the Hispanic population in the Company's distribution areas, the
continued popularity of imported beers in general and the narrowing price gap
between imported beers and domestic beers. The Company does not believe that
the high growth rate in its imported beer business will be sustainable.
Net sales and unit volume of the Company's distilled spirits brands
increased by 3.0% and 4.0%, respectively, in the Six Months 1997 as compared
to the August 1995 Six Months. Excluding the impact of the UDG Acquisition,
spirits net sales and unit volume increased by 7.2% and 2.2%, respectively,
during the Six Months 1997, reflecting strong brandy sales and increases in
tequila and liqueurs and the introduction of a number of new products. Net
sales and unit volume of the brands acquired in the UDG Acquisition decreased
by 1.7% and increased by 6.4%, respectively, in the Six Months 1997,
reflecting the impact of downward selling price adjustments for these brands
to be more in line with the pricing strategy of the rest of the Company's
spirits portfolio.
Gross Profit
The Company's gross profit increased to $142.7 million in the Six Months
1997 from $125.9 million in the August 1995 Six Months, an increase of $16.8
million, or 13.3%. This change in gross profit resulted primarily from (i)
approximately $20.5 million of gross profit from sales generated from the
business acquired from UDG; (ii) approximately $12.4 million of additional
gross profit from increases in beer sales; (iii) approximately $10.0 million
of lower gross profit primarily due to increased costs of products sold,
particularly higher grape costs in the fall 1996 harvest, and additional costs
resulting from inefficiencies in the production of wine and grape juice
concentrate, particularly at the Company's newly consolidated West Coast
operations, partially offset by additional net sales resulting primarily from
selling price increases of the Company's branded wine and grape juice
concentrate products and a partial reduction of certain grape contract loss
reserves established in connection with the Vintners' Acquisition (which
reduction corresponds to the increase in grape costs relative to the contract
pricing and the termination of certain unfavorable contracts); and (iv)
approximately $6.1 million of lower gross profits due to lower volume of
branded wine products and decreased sales of other nonbranded products. The
Company's increased production costs stemmed from low bulk conversion rates
and bottling inefficiencies. The Company also experienced high imported
concentrate and bulk freight costs. The Company has instituted a series of
steps to address these matters, including the Reengineering Effort. See
"Summary--Current Operating Environment."
Gross profit as a percentage of net sales was 25.7% for the Six Months 1997
as compared to 27.9% in the August 1995 Six Months. The decline in the gross
profit margin was largely due to higher costs, particularly grape costs, of
wine and grape juice concentrate products, partially offset by increased
selling prices on most of the Company's branded wine and grape juice
concentrate products. The Company has experienced significant increases in its
cost of grapes in both the 1995 and the 1996 harvests. The Company believes
that these increases in grape costs were due to an imbalance in supply and
demand in the varieties which the Company purchases. However, selling price
increases in effect during the Six Months 1997, on an annualized basis, more
than offset higher costs from the fall 1995 harvest.
35
<PAGE>
For comparison purposes to companies using the first-in, first-out method of
accounting for inventory valuation ("FIFO") only, the Company's Six Months
1997 results reflect a reduction in gross profit of approximately $13.8
million due to the Company's LIFO method of accounting for inventory
valuation, based on the Company's current estimate of a $27.5 million LIFO
adjustment for Fiscal 1997. The Company previously estimated that gross profit
for Fiscal 1997 would be negatively impacted as a result of LIFO by $23.5
million. The LIFO estimate for Fiscal 1997 will be revised, as appropriate,
through the end of the fiscal year. The Company's August 1995 Six Months gross
profit reflected an addition of approximately $3.1 million due to LIFO.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Six Months 1997 were
$102.9 million, an increase of $23.6 million as compared to the August 1995
Six Months. Of this amount, $10.5 million related to the UDG Acquisition; $7.5
million was due to increased personnel and other related expenses to expand
the Company's management capabilities; and $5.6 million was due to additional
selling, advertising and promotion expenses associated with increased unit
volume exclusive of sales related to the UDG Acquisition.
Interest Expense, Net
Net interest expense totalled $16.8 million in the Six Months 1997, an
increase of $5.3 million as compared to the August 1995 Six Months, primarily
due to additional interest expense from the UDG Acquisition financing.
Provision for Federal and State Income Taxes
The Company's effective tax rate for the Six Months 1997 increased to 41.7%
from 38.5% for the August 1995 Six Months due to a higher effective tax rate
in California caused by statutory limitations on the Company's ability to
utilize certain deductions.
Net Income
As a result of the foregoing, net income for the Six Months 1997 was $13.4
million, a decrease of $7.3 million as compared to the August 1995 Six Months.
For financial analysis purposes only, the Company's EBITDA for the Six Months
1997 was $70.9 million using the FIFO method and $57.2 million using the LIFO
method. EBITDA should not be construed as an alternative to operating income
or net cash flow from operating activities and should not be construed as an
indication of operating performance or as a measure of liquidity.
SIX MONTH TRANSITION PERIOD ENDED FEBRUARY 29, 1996, COMPARED TO
SIX MONTHS ENDED FEBRUARY 28, 1995
Net Sales
Net sales for the Transition Period increased to $535.0 million from $454.5
million for the six months ended February 28, 1995 (the "February 1995 Six
Months"), an increase of $80.5 million, or 17.7%. In addition to the sales of
products and services from the UDG Acquisition, the Company had additional net
sales of $23.6 million from its imported beer brands and $14.1 million from
its varietal wine products, partially offset by lower sales of bulk wine, non-
varietal wine, contract bottling services, grape juice concentrate and dessert
wine.
For purposes of computing the net sales and unit volume comparative data
below, sales of products acquired in the UDG Acquisition have been included in
the Company's results for the entire Transition Period and the entire February
1995 Six Months, which was prior to the UDG Acquisition.
36
<PAGE>
The following table sets forth the net sales (in thousands of dollars) and
unit volumes (in thousands of cases) for the branded beverage alcohol
products, branded wine products, each category of branded wine product, beer
and spirits brands sold by the Company for the Transition Period and the
February 1995 Six Months:
SIX MONTHS ENDED FEBRUARY 29, 1996, COMPARED TO SIX MONTHS ENDED FEBRUARY 28,
1995
<TABLE>
<CAPTION>
NET SALES UNIT VOLUME
----------------------------------- -----------------------------------
TRANSITION FEBRUARY 1995 % INCREASE TRANSITION FEBRUARY 1995 % INCREASE
PERIOD SIX MONTHS (DECREASE) PERIOD SIX MONTHS (DECREASE)
---------- ------------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Branded Beverage Alcohol
Products (1)........... $474,450 $443,204 7.1% 28,748 26,786 7.3%
Branded Wine Products... 268,782 255,881 5.0 14,783 14,537 1.7
Non-varietal wines.... 116,128 117,805 (1.4) 7,325 7,699 (4.9)
Varietal wines........ 78,182 64,049 22.1 3,637 2,971 22.4
Dessert wines......... 32,640 33,435 (2.4) 2,033 2,137 (4.9)
Sparkling wines....... 41,831 40,592 3.1 1,788 1,731 3.3
Beer.................... 115,757 92,131 25.6 9,316 7,444 25.1
Spirits................. 91,219 96,547 (5.5) 4,648 4,793 (3.0)
</TABLE>
- --------
(1) The sum of the net sales and unit volume amounts from the individual
categories do not equal total Branded Beverage Alcohol Products because
miscellaneous items reducing net sales and adding to unit volume are
included in total Branded Beverage Alcohol Products but are not reflected
in the category information.
Net sales and unit volume of the Company's branded beverage alcohol products
for the Transition Period increased 7.1% and 7.3%, respectively, as compared
to the February 1995 Six Months. These increases were principally due to
increased net sales and unit volume of the Company's imported beer brands and
varietal table wine brands.
Net sales of the Company's branded wine products increased by $12.9 million,
or 5.0%, for the Transition Period as compared to the February 1995 Six
Months. Unit volume of the Company's branded wine products increased by
approximately 246,000 cases, or 1.7%. Of the $12.9 million increase in net
sales, (i) $8.6 million was due to higher average selling prices per case due
to a combination of price increases implemented by the Company between October
1995 and January 1996 and a change in the product mix in favor of higher-
priced categories; and (ii) $4.3 million was due to increased shipments of the
Company's varietal table wines and sparkling wines, partially offset by lower
shipments of non-varietal table wines and dessert wines. The Company believes
that the increase in unit volume was partially due to the fulfillment of a
backlog of orders at the end of fiscal 1995 caused by production and shipping
delays associated with the consolidation of certain of its California wineries
(the "Restructuring Plan"). The backlog of unfilled orders from August 1995
was substantially eliminated in the first three months of the Transition
Period.
Net sales and unit volume of the Company's non-varietal table wine brands
for the Transition Period decreased by 1.4% and 4.9%, respectively, as
compared to the February 1995 Six Months. The decline in net sales was less
than the decline in unit volume as a result of the selling price increases
implemented by the Company. The Company believes that the volume decline is
consistent with a general change in consumer preferences from non-varietal
table wines to varietal table wines and may also reflect the impact of the
Company's price increases.
Net sales and unit volume of the Company's varietal table wine brands for
the Transition Period increased 22.1% and 22.4%, respectively, as compared to
the February 1995 Six Months. With the price increases implemented in the
Transition Period, the phasing out of introductory pricing on varietal
37
<PAGE>
wine line extensions, and changes in mix, the average price per case of
varietal wine has virtually returned to the level the Company experienced in
the February 1995 Six Months. In addition, the Company initiated a second
round of price increases on most of its varietal wine brands which were
implemented over the first three months of Fiscal 1997.
Net sales and unit volume of the Company's sparkling wine brands increased
by 3.1% and 3.3%, respectively, in the Transition Period as compared to the
February 1995 Six Months. While these results were better than the industry
growth rate in the category during this period, they reflect comparisons to
lower sales for the Company in the February 1995 Six Months relative to the
industry.
Net sales and unit volume of the Company's dessert wine brands decreased by
2.4% and 4.9%, respectively, in the Transition Period as compared to the
February 1995 Six Months, reflecting the continuing decline in the consumption
of beverage dessert wines, partially offset by increases in the sale of
traditional dessert wines such as ports and sherries.
Net sales and unit volume of the Company's beer brands for the Transition
Period increased by 25.6% and 25.1%, respectively, as compared to the February
1995 Six Months. These increases were principally driven by growth in the
Company's Mexican beer brands.
Net sales and unit volume of the Company's distilled spirits brands declined
by 5.5% and 3.0%, respectively, in the Transition Period as compared to the
February 1995 Six Months. Excluding the impact of the UDG Acquisition, net
sales and unit volume of the Company's distilled spirits brands grew by 6.2%
and 5.0%, respectively, in the Transition Period, led by higher brandy,
tequila, liqueur and rum sales, partially offset by lower whiskey, gin and
vodka sales. Unit sales of the brands acquired in the UDG Acquisition were
11.5% lower than in the February 1995 Six Months, accounting for lower overall
spirits sales. During the period from 1993 to 1995, the brands acquired in the
UDG Acquisition declined in excess of industry rates. The Company believes
that these declines resulted from noncompetitive retail pricing and
promotional activities.
Gross Profit
Gross profit for the Transition Period was $138.8 million, an increase of
$12.0 million, as compared to gross profit of $126.8 million for the February
1995 Six Months. This increase in gross profit resulted from $18.5 million of
additional gross profit from sales generated from the business acquired from
UDG and $1.0 million from ongoing operations, which was offset in part by $7.5
million of (i) overtime, freight and other expenses and restructuring charges
related to production and shipping delays associated with the relocation of
West Coast bottling operations to the Company's Mission Bell winery, employee
bonuses and certain nonrecurring expenses; and (ii) as a result of the change
in the Company's fiscal year end, increased cost of product sold due to the
different amount and composition of inventory levels at the end of February
versus the end of August, the Company's former fiscal year end. The $1.0
million increase in gross profit from ongoing operations resulted from a $7.3
million increase in gross profit, primarily due to increased sales and gross
margins from the Company's imported beer business, partially offset by $6.3
million of lower gross profits in the Company's wine and grape juice
concentrate businesses, which was due primarily to higher grape costs which
were only partially recovered by selling price increases in the Transition
Period.
Gross profit as a percentage of net sales declined from 27.9% to 25.9% in
the Transition Period. This decline was due primarily to the impact of higher
grape and other costs in the Transition Period, partially offset by the higher
gross profit sales of brands acquired from UDG and improved gross profit as a
percentage of net sales in the Company's imported beer business. The gross
profit percentage was positively impacted by the UDG Acquisition, as gross
profit as a percentage of net sales on the business acquired from UDG was
34.7%.
38
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses totalled $112.4 million for the
Transition Period, an increase of $32.5 million as compared to the February
1995 Six Months. Exclusive of $11.1 million of nonrecurring costs including,
as a result of the change in the Company's fiscal year end, the recognition of
higher than normal advertising and promotion expenses in the Transition Period
due to the seasonality of these expenses and employee bonuses and other
nonrecurring costs and $8.3 million related to the UDG Acquisition, selling,
general and administrative expenses increased by $13.1 million, or 16.3%, as
compared to the February 1995 Six Months. Advertising and promotion increases
of $6.7 million were related primarily to the Almaden/Inglenook Product Lines
which were acquired in August 1994 and which the Company did not advertise or
promote at a full level in the first several months after their acquisition.
The Company also incurred increased advertising and promotion expenses related
to the increased sales of its imported beers. Selling expenses increased by
$5.4 million primarily as a result of the Almaden/Inglenook Product Line
acquisitions, with the Transition Period including a full complement of sales
and marketing personnel to service the brands that were not in place for the
entire period in the February 1995 Six Months. The Transition Period also
included additional sales personnel in the Company's spirits and imported beer
divisions. Other general and administrative expenses increased by $1.0
million.
Excluding the nonrecurring costs referred to above and the UDG Acquisition,
selling, general and administrative expenses as a percent of net sales
increased to 19.3% from 17.6% in the February 1995 Six Months due to the
inclusion of a full complement of advertising, promotion and selling expense
related to the Almaden/Inglenook Product Lines.
Nonrecurring Restructuring Expenses
The Company incurred net restructuring charges of $2.4 million in the
Transition Period, as compared to restructuring charges of $0.7 million in the
February 1995 Six Months. The restructuring expenses in the Transition Period
represent $3.1 million of incremental, nonrecurring expenses such as overtime
and freight expense related to production and shipment delays associated with
the Restructuring Plan, offset by a net reduction of $0.7 million in accrued
liabilities associated with the Restructuring Plan to take into account lower
than expected expenses for severance and facility holding and closure costs.
See the Notes to the Company's Consolidated Financial Statements included
herein.
Interest Expense, Net
Net interest expense increased $4.2 million to $17.3 million in the
Transition Period as compared to the February 1995 Six Months. The increase
resulted from additional interest expense associated with the borrowings
related to the UDG Acquisition, amounting to $5.1 million, and increased
working capital requirements due primarily to higher grape costs and the UDG
Acquisition, partially offset by net reductions in the Company's Term Loans
and Revolving Loans using proceeds of the Company's November 18, 1994 public
equity offering.
Provision for Federal and State Income Taxes
The Company's effective tax rate for the Transition Period increased to
50.4% from 38.5% for the February 1995 Six Months due to a higher effective
tax rate in California caused by statutory limitations on the Company's
ability to utilize certain deductions.
Net Income
As a result of the foregoing, net income for the Transition Period was $3.3
million, a decrease of $17.0 million as compared to the February 1995 Six
Months.
39
<PAGE>
FISCAL YEAR ENDED AUGUST 31, 1995, COMPARED TO FISCAL YEAR ENDED AUGUST 31,
1994
Net Sales
Net sales for the 1995 fiscal year increased to $906.5 million from $629.6
million for the fiscal year ended August 31, 1994, an increase of $276.9
million, or approximately 44.0%. This increase resulted from the inclusion of
(i) $234.7 million of net sales of products acquired in the Almaden/Inglenook
Acquisition; (ii) an overall increase of $25.8 million in net sales of Company
products, excluding the impact of the net sales of products that were acquired
during fiscal 1994; and (iii) an additional $16.4 million of net sales of
Vintners' products resulting from inclusion of these products in the Company's
portfolio for the entire first quarter of fiscal 1995 versus only six weeks in
the first quarter of fiscal 1994. Excluding the impact of the additional six
weeks of net sales of Vintners' products during the first quarter of fiscal
1995 and all of the net sales resulting from the Almaden/Inglenook Acquisition
during the 1995 fiscal year, the Company's net sales increased 4.1% as
compared to the fiscal year ended August 31, 1994. This was principally due to
increased net sales of imported beer brands and varietal table wines.
For purposes of computing the net sales and unit volume comparative data
below, sales of products acquired in the Vintners and Almaden/Inglenook
Acquisitions have been included in the entire period for the fiscal year ended
August 31, 1995 and the entire fiscal year ended August 31, 1994, part of
which was prior to the Vintners Acquisition and the Almaden/Inglenook
Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volumes (in thousands of cases) for the branded beverage alcohol
products, branded wine products, each category of branded wine products, beer
and spirits brands sold by the Company for the 1995 and 1994 fiscal years:
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
<TABLE>
<CAPTION>
NET SALES UNIT VOLUME
---------------------------- ------------------------
% INCREASE % INCREASE
1995 1994 (DECREASE) 1995 1994 (DECREASE)
-------- -------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Branded Beverage Alcohol
Products (1)........... $795,290 $750,180 6.0% 50,547 47,688 6.0%
Branded Wine Products... 487,101 486,838 0.1 28,019 28,657 (2.2)
Non-varietal wines.... 223,391 234,541 (4.8) 14,577 15,594 (6.5)
Varietal wines........ 128,679 106,559 20.8 6,032 4,943 22.0
Dessert wines......... 68,094 71,320 (4.5) 4,474 4,794 (6.7)
Sparkling wines....... 66,937 74,418 (10.1) 2,936 3,326 (11.7)
Beer.................... 216,159 173,883 24.3 17,471 14,100 23.9
Spirits (2)............. 92,400 88,549 4.3 5,041 4,847 4.0
</TABLE>
- --------
(1) The sum of the net sales and unit volume amounts from the categories do
not equal total Branded Beverage Alcohol Products because miscellaneous
items affecting net sales and unit volume are included in total Branded
Beverage Alcohol Products but are not reflected in the category
information.
(2) The Spirits category includes for both years presented case goods sales of
a number of brandy products under brands acquired in the Vintners and
Almaden/Inglenook Acquisitions.
Net sales and unit volume of the Company's branded beverage alcohol products
for the fiscal year ended August 31, 1995, each increased 6% as compared to
the fiscal year ended August 31, 1994. This increase was principally due to
increased net sales and unit volume of the Company's imported beer brands and
varietal table wine brands.
40
<PAGE>
Net sales and unit volume of the Company's branded wine products for fiscal
1995 increased 0.1% and decreased 2.2%, respectively, as compared to fiscal
1994. These results were primarily due to lower non-varietal table wine,
sparkling wine and dessert wine sales offset by improved varietal wine sales.
The Company's results were also negatively affected by a backlog in fulfilling
orders at the end of fiscal 1995 due to production and shipment delays
associated with the relocation of West Coast bottling operations to the
Company's Mission Bell winery under the Restructuring Plan. The backlog was
substantially eliminated in the first three months of the Transition Period.
The Company also increased prices on selected branded wine products during the
Transition Period in response to increased grape costs associated with the
1995 harvest and to phase out introductory pricing on recently introduced line
extensions of varietal wine products.
Net sales and unit volume of the Company's non-varietal table wine brands
for fiscal 1995 declined 4.8% and 6.5%, respectively, as compared to fiscal
1994. The Company believes these declines are consistent with a general
decline in the consumption of non-varietal table wine products reflecting
changing consumer preferences toward varietal table wines.
Net sales and unit volume of the Company's varietal table wine brands for
fiscal 1995 increased 20.8% and 22.0%, respectively, as compared to fiscal
1994. These increases reflect the continuation of the Company's strategy to
expand distribution into new markets and increase penetration of existing
markets primarily through line extensions and promotional activities. As part
of this strategy, the Company also offered certain new and existing products
at highly competitive prices.
Net sales and unit volume of the Company's dessert wine brands for fiscal
1995 decreased 4.5% and 6.7%, respectively, as compared to fiscal 1994. The
Company believes those declines are consistent with a general decline in
consumption of dessert wines. Declines in the Company's beverage dessert wines
were partially offset by growth in higher priced traditional dessert wines
such as port and sherry.
Net sales and unit volume of the Company's sparkling wine brands for fiscal
1995 declined 10.1% and 11.7%, respectively, as compared to fiscal 1994. These
declines were primarily the result of strong competition and weak consumer
demand for sparkling wine.
Net sales and unit volume of the Company's beer brands for fiscal 1995
increased 24.3% and 23.9%, respectively, as compared to fiscal 1994. These
increases resulted primarily from increased sales of the Company's Corona
brand and its other Mexican beer brands.
Net sales and unit volume of the Company's spirits brands for fiscal 1995
increased 4.3% and 4.0%, respectively, as compared to fiscal 1994. The growth
is due to increased shipments of brandy, vodka, and tequila.
Gross Profit
Gross profit for the fiscal year ended August 31, 1995, increased to $252.7
million from $182.4 million for the fiscal year ended August 31, 1994, an
increase of $70.3 million, or approximately 38.6%. This increase resulted from
the inclusion of the Almaden/Inglenook Product Lines with those of the
Company, and to a lesser extent from increased sales of imported beer brands
and the inclusion of Vintners' product lines with those of the Company. The
Company's gross profit as a percentage of net sales decreased to 27.9% for the
fiscal year ended August 31, 1995, from 29.0% for the fiscal year ended August
31, 1994. The Company's gross profit percentages decreased as a result of the
inclusion of operations acquired in the Almaden/Inglenook Acquisition, which
had a lower gross profit percentage than the remainder of the Company's
operations, and reduced gross profit percentages on sales of certain of the
Company's table wine brands in fiscal 1995 as compared to fiscal 1994. The
cost of grapes, a major component of the Company's raw materials for its
winemaking, increased significantly for the 1995 harvest compared with the
1994 harvest.
41
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the fiscal year ended
August 31, 1995 increased to $159.2 million from $121.4 million for the fiscal
year ended August 31, 1994, an increase of $37.8 million, or approximately
31.1%. This increase primarily resulted from the additional expenses
associated with the sales and marketing of the products acquired in the
Almaden/Inglenook Acquisition, and to a lesser extent, higher advertising and
promotion expenses associated with certain wine brands. As a percentage of net
sales, selling, general and administrative expenses decreased to 17.6% for
fiscal 1995 as compared to 19.3% for fiscal 1994 as a result of increased
economies of scale.
Nonrecurring Restructuring Expenses
In fiscal 1995, the Company incurred a nonrecurring restructuring charge of
$2.2 million related to its Restructuring Plan which reduced net income per
share by $0.07 on a fully diluted basis as compared to a nonrecurring
restructuring charge of $24.0 million in fiscal 1994, also related to the
Restructuring Plan, which reduced net income per share by $0.91 on a fully
diluted basis. See the Notes to the Company's Consolidated Financial
Statements included herein.
Interest Expense, Net
Net interest expense increased $6.5 million to $24.6 million in the fiscal
year ended August 31, 1995, as compared to the fiscal year ended August 31,
1994. The increase is primarily due to borrowings related to the Vintners and
Almaden/Inglenook Acquisitions.
Net Income
Net income for the fiscal year ended August 31, 1995, increased to $41.0
million from $11.7 million for the fiscal year ended August 31, 1994, an
increase of $29.3 million, or approximately 249.6%. Fully diluted earnings per
share increased to $2.13 in the fiscal year ended August 31, 1995, from $0.74
in the fiscal year ended August 31, 1994, a 187.8% improvement.
Excluding the impact of the nonrecurring restructuring expenses, net income
was $42.4 million in fiscal 1995 as compared to $26.6 million in fiscal 1994.
This represents an improvement in net income of $15.8 million or 59.4%.
Excluding the impact of the nonrecurring restructuring expenses, fully diluted
earnings per common share increased to $2.20 from $1.65, an increase of 33.3%.
These increases were due to the contribution of the Almaden/Inglenook Product
Lines and other products acquired in the Almaden/Inglenook Acquisition and
increased sales of imported beer brands.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
General
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventory of raw materials, inventories in process and
finished goods. The Company's primary source of liquidity has historically
been cash flow from operations, except during the annual fall grape harvests
when the Company has relied on short-term borrowings. The annual grape crush
normally begins in August and runs through October. The Company generally
begins purchasing grapes in August with payments for such grapes beginning to
come due in September. The Company's short-term borrowings to support such
purchases generally reach their highest levels in November or December.
Historically, the Company has used cash flow from operating activities to
repay its short-term borrowings.
During January 1996, the Company's Board of Directors authorized the
repurchase of up to $30.0 million of the Company's Class A Common Stock and
Class B Common Stock (the "Stock Repurchase
42
<PAGE>
Program"). The repurchase of shares of common stock will be accomplished, from
time to time, depending upon market conditions, through open market or
privately negotiated transactions. The Company may finance such repurchases
through cash generated from operations or through the Credit Facility. The
repurchased shares will become treasury shares and may be used for general
corporate purposes. As of November 22, 1996, the Company had repurchased
785,200 shares of Class A Common Stock at an aggregate cost of $20.7 million.
The Company's cash requirements have increased during the past twelve months
due to increased grape costs, operating inefficiencies at its West Coast wine
operations, and increased working capital needs from the Company's expanded
business. See "Risk Factors--Difficulty in Integrating Acquisitions," and "--
Dependence on Raw Materials." The Company used the net proceeds of the Old
Notes Offering to repay amounts outstanding under the Credit Facility,
including $50.0 million under the Revolving Loans and approximately $9.6
million to repay and permanently reduce the Term Loans. The Company will
continue to use the Revolving Loans to support its working capital
requirements. In addition, the Company intends to use the Revolving Loans to
complete the Stock Repurchase Program. Revolving Loans repaid from the net
proceeds of the Offering may be re-borrowed from time to time. The Company
believes that the Revolving Loans, its financing activities, including the
issuance of the Notes, and cash provided by operating activities will provide
adequate resources to satisfy its working capital, liquidity and anticipated
capital expenditure requirements for at least the next four fiscal quarters
and to complete the Stock Repurchase Program.
Cash Flows for Six Months Ended August 31, 1996
Operating Activities
Net cash provided by operating activities in the Six Months 1997 was $89.8
million. The net cash provided by operating activities for the Six Months 1997
resulted principally from a net increase in current liabilities (primarily a
$43.6 million increase in accounts payable as a result of purchases associated
with the 1996 grape harvest), net income adjusted for noncash items plus a net
decrease in current assets (primarily a $13.3 million net decrease in
inventories).
Investing Activities and Financing Activities
Net cash used in investing activities in the Six Months 1997 was $16.6
million, resulting primarily from $21.8 million of capital expenditures,
offset in part by proceeds from the sale of property, plant and equipment of
$5.2 million, resulting principally from the May 1996 sale of the Company's
Central Cellars winery, located in Lodi, California.
Net cash used in financing activities in the Six Months 1997 was $74.5
million, resulting principally from net repayments of $49.3 million of
Revolving Loan borrowings under the Credit Facility, principal payments of
$20.4 million of long-term debt and repurchases of $5.4 million of the
Company's Class A Common Stock.
As of November 22, 1996, under its Credit Facility, the Company had
outstanding Term Loans of $197.0 million bearing interest at 6.5%, $110.0
million of Revolving Loans bearing interest at 6.2%, $11.1 million of
Revolving Letters of Credit and $13.7 million under the Barton Letter of
Credit. As of November 22, 1996, under the Credit Facility, $63.9 million of
Revolving Loans were available to be drawn by the Company.
As of November 22, 1996, the Company had outstanding $130.0 million of
Original Notes. The terms of the Original Notes are substantially identical to
the terms of the Notes offered hereby.
Capital Expenditures
During the Transition Period and the Six Months 1997, the Company expended
approximately $16.1 million and $21.8 million, respectively, for capital
expenditures. Capital expenditures for the remainder of Fiscal 1997 and Fiscal
1998 are expected to be approximately $17.6 million and $24.5 million,
respectively.
43
<PAGE>
Other
The Company engages in operations at its facilities for the purpose of
disposing of waste and by-products generated in its production process. These
operations include the treatment of wastewater to comply with regulatory
requirements prior to disposal in public facilities or upon property owned by
the Company or others and do not constitute a material part of the Company's
overall cost of product sold. Expenditures for the purpose of maintaining or
improving the Company's wastewater treatment facilities have not constituted a
material part of the Company's maintenance or capital expenditures over the
last three fiscal years and the Company does not expect to incur any such
material expenditures during Fiscal 1997. During the last three fiscal years,
the Company has not incurred, nor does it expect to incur in Fiscal 1997, any
material expenditures related to remediation of previously contaminated sites
or other nonrecurring environmental matters.
CAUTIONARY STATEMENTS RELATED TO PROJECTED RESULTS
The Company makes forward-looking statements from time to time and desires
to take advantage of the "safe harbor" which is afforded such statements under
the Private Securities Litigation Reform Act of 1995 when they are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the forward-looking
statements.
The statements contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations," including under
"Projected Fiscal 1997 Results," and elsewhere in this Prospectus which are
not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. Any projections of future results
of operations, and in particular, (i) the Company's estimated net income per
share for Fiscal 1997, and (ii) the Company's estimated cash flows as measured
by EBITDA for Fiscal 1997, should not be construed in any manner as a
guarantee that such results will in fact occur. There can be no assurance that
any forward-looking statement will be realized or that actual results will not
be significantly higher or lower than set forth in such forward-looking
statement. In addition to the risks and uncertainties of ordinary business
operations, the forward-looking statements of the Company contained in this
Prospectus are also subject to the following risks and uncertainties:
. The Company believes that its future results of operations are inherently
difficult to predict due to the Company's use of the LIFO method of
accounting for inventory valuation, particularly as it relates to the
Company's purchase of grapes from the 1996 fall harvest. In particular,
the Company found it necessary to revise its estimate of the impact of
LIFO in the first quarter and second quarter of the current fiscal year
versus its previous estimates. There are no assurances that the Company
may not have to revise this estimate further.
. The Company could experience worse than expected production
inefficiencies or other raw material supply, production or shipment
difficulties which could adversely affect (i) its ability to supply goods
to its customers and (ii) the willingness of its wholesale or retail
customers to purchase the Company's products. The Company could also
experience higher than expected increases in its cost of product sold as
a result of inefficiencies or if raw materials such as grapes,
concentrate or packaging materials are in short supply or if the Company
experiences increased overhead costs. The Company believes that further
production inefficiencies and higher than expected other costs related to
such matters as loss rates, imported concentrate costs, freight costs and
yields will negatively impact its results.
. Manufacturing economies related to such matters as bottling line speeds
and warehousing capabilities could fail to develop when planned. The
Company believes that worse than expected bottling line and warehouse
efficiencies will negatively impact its results.
44
<PAGE>
. The Company is in a highly competitive environment and its dollar sales
and unit volume could be negatively affected by its inability to maintain
or increase prices, changes in geographic or product mix, a general
decline in beverage alcohol consumption or the decision of its wholesale
customers, retailers or consumers to purchase competitive products
instead of the Company's products. The Company believes its branded wine
unit volume has been negatively impacted by the effect price increases
have had on its competitive positioning. This could limit the Company's
ability to increase the selling prices of its branded wine products
further to offset anticipated higher costs in Fiscal 1997, and could
require selling price decreases of its branded wine products in the
future to maintain volume. Wholesaler, retailer and consumer purchasing
decisions are influenced by, among other things, the perceived absolute
or relative overall value of the Company's products, including their
quality or pricing, compared to competitive products. Unit volume and
dollar sales could also be affected by pricing, purchasing, financing,
operational, advertising or promotional decisions made by wholesalers and
retailers which could affect their supply of, or consumer demand for, the
Company's products. The Company has also experienced a substantial
increase in its sales of its imported beer products, particularly its
Mexican brands. The Company does not believe that the high growth rate in
its imported beer business will be sustainable over an extended period of
time.
. The Company could experience higher than expected selling, general and
administrative expenses if it finds it necessary to increase its number
of personnel or its advertising or promotional expenditures to maintain
its competitive position or for other reasons.
. The Company is currently undergoing a Reengineering Effort involving the
evaluation of its business processes and organizational structure and
could make changes in its business in response to this effort which are
not currently contemplated.
. The Company could experience difficulties or delays in the development,
production, testing and marketing of new products.
. The Company could experience changes in its ability to obtain or hedge
against foreign currency, foreign exchange rates and fluctuations in
those rates. The Company could also be affected by nationalizations or
unstable governments or legal systems or intergovernmental disputes.
These currency, economic and political uncertainties may affect the
Company's results, especially to the extent these matters, or the
decisions, policies or economic strength of the Company's suppliers,
affect the Company's Mexican, German, Chinese and other imported beer
products.
. The forward-looking statements contained herein are based on estimates
which the Company believes are reasonable. This means that the Company's
actual results could differ materially from such estimates as a result of
being negatively affected as described above, or otherwise, or positively
affected.
45
<PAGE>
INDUSTRY
The beverage alcohol industry in the United States consists of the
production, importation, marketing and distribution of beer, wine and
distilled spirits products. Over the past five years there has been increasing
consolidation at the supplier, wholesaler and, in certain markets, retailer
tiers of the beverage alcohol industry. As a result, it has become
advantageous for certain suppliers to expand their portfolio of brands through
acquisitions and internal development in order to take advantage of economies
of scale and to increase their importance to a more limited number of
wholesalers and, in certain markets, retailers. From 1978 through 1995, the
overall per capita consumption of beverage alcohol products in the United
States has generally declined. However, consumption of table wine, and in
particular varietal table wine, and imported beer, has increased during the
period.
The following table sets forth the industry unit volumes for shipments of
beverage alcohol products in the Company's five principal beverage alcohol
product categories in the United States for the five calendar years ended
December 31, 1995:
<TABLE>
<CAPTION>
INDUSTRY DATA 1991 1992 1993 1994 1995
- ------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Domestic Table Wines (a)(b)............. 285,282 308,169 300,953 307,481 318,546
Domestic Dessert Wines (a)(c)........... 35,181 32,449 29,698 27,634 25,439
Domestic Sparkling Wines (a)............ 24,386 23,794 23,600 22,855 22,298
Imported Beer (d)....................... 109,212 114,590 127,418 144,527 155,177
Distilled Spirits (e)................... 147,025 148,017 144,162 139,497 137,810
</TABLE>
- --------
(a) Units are in thousands of gallons. Data exclude sales of wine coolers.
(b) Includes other special natural (flavored) wines under 14% alcohol.
(c) Includes dessert wines, other special natural (flavored) wines over 14%
alcohol and vermouth.
(d) Units are in thousands of cases (2.25 gallons per case).
(e) Units are in thousands of 9-liter cases (2.378 gallons per case).
Table Wines. Wines containing 14% or less alcohol by volume are generally
referred to as table wines. Within this category, table wines are further
characterized as either "non-varietal" or "varietal." Non-varietal wines
include wines named after the European regions where similar types of wines
were originally produced (e.g., burgundy), niche products and proprietary
brands. Varietal wines are those named for the grape that comprises the
principal component of the wine. Table wines that retail at less than $5.75
per 750 ml. bottle are generally considered to be popularly priced while those
that retail at $5.75 or more per 750 ml. bottle are considered premium wines.
During the period from 1991 to 1995, shipments of domestic table wines
increased at an average compound annual rate of 3%. Shipments of varietal
table wines have grown at an average compound annual rate of 13% since 1991,
while shipments of non-varietal table wines have generally declined over the
same period. The Company believes that the growth in wine shipments was partly
the result of the November 1991 television broadcast of The French Paradox on
CBS' 60 Minutes program, which discussed the healthful benefits of moderate
red wine consumption. These findings have been supported by other studies,
including a 60 Minutes update on The French Paradox in 1995. More recently, in
January 1996 the Dietary Guidelines for Americans, released jointly by the
U.S. Agriculture Department and the Department of Health and Human Services,
acknowledged that moderate drinking may lower the risk of heart attacks.
Based on shipments of California table wines, which constituted
approximately 88% of the total domestically produced table wine market in
1995, shipments of all table wines increased 6% for the first eight months of
calendar 1996 over the same period in 1995. Shipments of varietal table wines
in the first eight months of calendar 1996 increased by 10% over the same
period in the prior year.
46
<PAGE>
Shipments of imported table wines, which constituted 16% of the United States
table wine market in 1995, grew by a compound annual rate of 6% between 1991
and 1995.
Dessert Wines. Wines containing more than 14% alcohol by volume are
generally referred to as dessert wines. Dessert wines generally fall into the
same price categories as table wines. In 1995, shipments of domestic dessert
wines decreased 8% as compared to 1994. During the period from 1991 to 1995,
shipments of domestic dessert wines declined at an average compound annual
rate of 8%. Dessert wine consumption in the United States has been declining
for many years, reflecting the impact of an increase in federal excise taxes
in 1991 and a general shift in consumer preferences to table wines.
Sparkling Wines. Sparkling wines include effervescent wines like champagne
and spumante. Sparkling wines generally fall into the same price categories as
table wines. Shipments of sparkling wines declined at an average compound
annual rate of 2% from 1991 to 1995. The Company believes that the decline in
sparkling wine consumption between 1991 and 1995 reflects concerns about
drinking and driving, as a large part of sparkling wine consumption occurs
outside the home at social gatherings and restaurants. Based on shipments of
California sparkling wines, which constituted 88% of the domestically produced
sparkling wine market in 1995, shipments of all sparkling wines increased 4%
in the first eight months of 1996, as compared to the same period a year ago.
Imported Beer. Imported beers, along with microbrews and super-premium
priced domestic beers, are generally priced above the leading domestic premium
brands. Shipments of imported beers have increased at an average compound rate
of 9% from 1991 to 1995. Imported beer shipments have increased 12% for the
first six months of calendar 1996, and shipments of Mexican beers have
increased 29% during the first six months as compared to the same period in
1995. Shipments of imported beers as a percentage of the United States beer
market, increased to 6.0% in 1995 from 5.5% in 1994.
Distilled Spirits. Shipments of distilled spirits in the United States
declined at an average compound annual rate of 2% from 1991 to 1995. Shipments
of distilled spirits have been affected by many of the same trends evident in
the rest of the beverage alcohol industry. Over the past five years, sales of
most types of spirits have declined. The Company believes that distilled
spirits can be divided into two general price segments, with distilled spirits
selling for less than $7.00 per 750 ml. bottle being referred to as price
value products and those selling for over $7.00 per 750 ml. bottle being
referred to as premium products.
47
<PAGE>
BUSINESS
The Company is a leading producer and marketer of branded beverage alcohol
products, with over 125 national and regional brands which are distributed by
over 1,200 wholesalers throughout the United States and in selected
international markets. The Company is the second largest supplier of wines,
the third largest importer of beers and the fourth largest supplier of
distilled spirits in the United States. The Company's beverage alcohol brands
are marketed in five general categories: table wines, sparkling wines, dessert
wines, imported beer and distilled spirits, and include the following
principal brands:
. Table Wines: Inglenook, Almaden, Paul Masson, Taylor California Cellars,
Cribari, Manischewitz, Taylor, Marcus James, Deer Valley and Dunnewood
. Sparkling Wines: Cook's, J. Roget, Great Western and Taylor
. Dessert Wines: Richards Wild Irish Rose, Cisco and Taylor
. Imported Beer: Corona, Modelo Especial, St. Pauli Girl and Tsingtao
. Distilled Spirits: Barton, Fleischmann's, Mr. Boston, Montezuma, Canadian
LTD, Ten High, Inver House and Monte Alban
Based on available industry data, the Company believes that during calendar
year 1995 it had a 22% share of the market for domestic wines, a 12% share of
the imported beer market and its distilled spirits brands had an 8% share of
the distilled spirits market in the United States. Within the market for
domestic wines, the Company believes it had a 28% share of the non-varietal
table wine market, a 12% share of the varietal table wine market, a 42% share
of the dessert wine market and a 29% share of the sparkling wine market. Many
of the Company's brands are leaders in their respective categories in the
United States, including Corona, the second largest selling imported beer
brand; Inglenook and Almaden, the fifth and sixth largest selling wine brands,
respectively; Richards Wild Irish Rose, the largest selling dessert wine
brand; Cook's champagne, the second largest selling sparkling wine brand;
Fleischmann's, the fourth largest blended whiskey and fourth largest
domestically bottled gin; Montezuma, the second largest selling tequila brand;
and Monte Alban, the largest selling mezcal brand.
The Company has diversified its product portfolio through a series of
strategic acquisitions that have resulted in an increase in the Company's net
sales from $176.6 million in fiscal 1991 to $1.1 billion for the twelve months
ended August 31, 1996. Through these acquisitions, the Company developed
strong market positions in the growing beverage alcohol product categories of
varietal table wine and imported beer. The Company ranks second and third in
the varietal table wine and imported beer categories, respectively. From 1992
through 1995, industry shipments of varietal table wine and imported beer have
each grown 35%. During this period, the Company has also strengthened its
relationship with wholesalers, expanded its distribution and enhanced its
production capabilities as well as acquired additional management,
operational, marketing and research and development expertise.
THE ACQUISITIONS
The Barton Acquisition. On June 29, 1993, the Company acquired all of the
outstanding shares of capital stock of Barton. Barton was the eighth largest
supplier of distilled spirits and fourth largest importer of beer in the
United States. With this acquisition, the Company acquired the right to
distribute Corona and Modelo Especial beer in 25 primarily western states,
national distribution rights for St. Pauli Girl and Tsingtao and a diversified
line of distilled spirits including Barton Gin and Vodka, Ten High Bourbon
Whiskey and Montezuma Tequila.
48
<PAGE>
The Vintners Acquisition. On October 15, 1993, the Company acquired
substantially all of the assets of Vintners, and assumed certain liabilities.
Vintners was the United States' fifth largest supplier of wine with two of the
country's most highly recognized brands, Paul Masson and Taylor California
Cellars. With this acquisition, the Company acquired the Paul Masson, Taylor
California Cellars, Taylor, Deer Valley, St. Regis (nonalcoholic) and Great
Western brands and related facilities.
The Almaden/Inglenook Acquisition. On August 5, 1994, the Company acquired
the Inglenook and Almaden brands, currently the fifth and sixth largest
selling table wines in the United States, a grape juice concentrate business,
and wineries in Madera and Escalon, California, from Heublein. The Company
also acquired Belaire Creek Cellars, Chateau La Salle and Charles Le Franc
table wines, Le Domaine champagne and Almaden, Hartley and Jacques Bonet
brandy. The accounts receivable and the accounts payable related to the
acquired assets were not acquired by the Company.
Following the Almaden/Inglenook Acquisition, the Company entered into the
Restructuring Plan to consolidate certain of its California winery operations.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Notes to the Company's consolidated financial
statements included herein.
The UDG Acquisition. On September 1, 1995, the Company acquired from UDG,
the Skol, Mr. Boston, Canadian LTD, Glenmore, Old Thompson, Kentucky Tavern,
and di Amore distilled spirits brands; the rights to the Fleischmann's and
Chi-Chi's distilled spirits brands under long term license agreements; the
U.S. rights to Inver House, Schenley and El Toro distilled spirits brands; and
inventories and other related assets. The UDG Acquisition also included two of
UDG's production facilities, one located in Owensboro, Kentucky, and the other
located in Albany, Georgia. In addition, the transaction included multiyear
agreements under which UDG will supply the Company with bulk whisky and the
Company will supply UDG with services including continued packaging of various
UDG brands not acquired by the Company. The aggregate consideration for the
brands and other assets acquired from UDG consisted of $141.8 million in cash,
plus transaction costs of $2.3 million, and assumption of certain current
liabilities. The source of the cash payment made at closing, together with
payment of other costs and expenses required by the UDG Acquisition, was
financing provided by the Company pursuant to a Term Loan under the Credit
Facility.
CURRENT OPERATING ENVIRONMENT
The Company's growth through acquisitions over the past five years has
substantially expanded its portfolio of brands and has enabled it to become a
major participant in additional product categories of the beverage alcohol
business. This expansion has positioned the Company to benefit from faster
growing categories with over one-third of the Company's sales generated from
the growth categories of imported beer and varietal wines. However, recent
operating results have been negatively impacted by two factors: increases in
grape prices and certain costs and operating inefficiencies relating to the
consolidation of certain West Coast winery operations in connection with the
acquisitions.
While the consolidation of certain wine operations has produced significant
overall synergies, some of the planned efficiencies have not materialized and
unanticipated costs have occurred. The Company believes that the unanticipated
production costs resulted from its rapid growth over the last three years,
combined with the lack of integrated production control systems and the
complexity of production at its newly consolidated Mission Bell Winery.
Additionally, as the Company has increased its wine and grape juice
concentrate business, it has become the second largest purchaser of grapes for
wine and concentrate in California. The Company's profits are significantly
influenced by grape price changes. Costs for grapes have escalated
dramatically over the last two grape harvests (fall 1995 and fall 1996). Based
on constant tonnage purchased, the Company's overall cost of grapes increased
18.9% in the 1996 harvest.
49
<PAGE>
In order to address these matters, the Company is taking a number of
specific steps to improve sales and margins, minimize unexpected costs related
to inefficiencies and realize opportunities for efficiencies afforded by the
Company's consolidation of its West Coast wine operations and its economies of
scale as a $1.1 billion participant in the beverage alcohol industry. Such
steps include the following:
. The Company has launched a comprehensive Reengineering Effort in its wine
division. The Reengineering Effort is intended to increase the efficiency
of all of the Company's operating processes, create smaller, more
manageable business units and create greater management accountability
for its wine business. Organizational changes include the creation of
Accountable Business Units organized by product categories which will be
accountable for production and marketing, and Customer Business Centers,
organized by region, which are responsible for sales, customer service
and product delivery. The Company intends, through the creation of remote
distribution centers, to store inventory closer to its customers, thereby
reducing delivery times. The Company believes these efforts will reduce
the overall amount of inventory it and its customers carry, thus reducing
capital employed and offering benefits to its customers that cannot
currently be obtained from competitors. The Company will be implementing
the distribution center concept on a measured basis to determine its
efficacy.
. In connection with the Reengineering Effort, the Company is implementing
a new accounting and management information system to upgrade the type
and level of information the Company can generate, and to enable it to
manage its business more precisely.
. The Company has created a number of special task forces specifically to
address various issues related to inefficiencies at its West Coast wine
operations, and has relocated, in some cases temporarily and in others
permanently, personnel with particular expertise necessary to address
these matters. All aspects of the Company's wine and grape juice
concentrate production, material requirements planning functions,
warehousing logistics and bottling operations at the Company's Mission
Bell Winery in California, are being reviewed and changed as necessary to
create greater efficiencies.
. The Company has instituted several price increases on its varietal and
non-varietal table wines in response to increased grape costs from the
1995 grape harvest. In general, it is both industry and Company practice
to make selling price adjustments around the time the wine produced with
the higher cost grapes is actually sold, which generally occurs in the
calendar year following the grape harvest. Over the last year the
industry and the Company have increased their selling prices. In the case
of the Company, these selling price increases, on an annualized basis,
have more than offset the increased costs associated with the fall 1995
harvest.
. The Company is in the process of recruiting new management in several key
positions and has previously hired a new President of its wine division
with extensive experience in the U.S. beverage industry, a new Vice
President and Controller of the wine division and an experienced manager
for its Mission Bell Winery. It is expected that the filling of these
positions has given, and will continue to give, the Company significantly
increased management depth and experience.
BUSINESS STRATEGY
The Company's business strategy is to manage its existing portfolio of
brands and businesses in order to maximize profit and return on investment,
and reposition its portfolio of brands to benefit from growth trends in the
beverage alcohol industry. To achieve the foregoing, the Company intends to:
(i) adjust the price/volume relationships of certain brands; (ii) develop new
brands and introduce line extensions; (iii) expand geographic distribution;
and (iv) acquire businesses that meet its strategic and financial objectives.
50
<PAGE>
PRODUCT CATEGORIES
The Company produces, imports and markets beverage alcohol products in five
principal product categories: table wines, dessert wines, sparkling wines,
imported beer and distilled spirits. The table below sets forth the net sales
(in thousands of dollars) and unit volumes (in thousands of gallons) for all
of the table, dessert and sparkling wines, grape juice concentrate and other
wine-related products and services sold by the Company and under brands and
products acquired in the Vintners Acquisition and the Almaden/Inglenook
Acquisition for the 1994 and 1995 fiscal years and the twelve months ended
August 31, 1996.
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
1994 1995 AUGUST 31, 1996
---------------- ---------------- ---------------
NET NET NET
TOTAL WINES SALES VOLUME SALES VOLUME SALES VOLUME
- ----------- -------- ------- -------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Company....................... $245,083 36,613 $209,957 35,481 $220,308 34,399
Vintners...................... 125,923 20,461 141,790 20,949 148,558 20,425
Almaden/ 237,853 46,269 251,779 45,000 256,555 44,540
Inglenook.................... -------- ------- -------- ------- -------- ------
Total......................... $608,859 103,343 $603,526 101,430 $625,421 99,364
======== ======= ======== ======= ======== ======
</TABLE>
Table Wines. The Company sells over 40 different brands of non-varietal
table wines, substantially all of which are marketed in the popularly priced
segment, which constituted approximately 42% of the domestic table wine market
in the United States for the 1995 calendar year, the latest year for which
data is available. The Company also sells over 15 different brands of varietal
table wines in both the popularly priced and premium categories. The table
below sets forth the unit volumes (in thousands of gallons) for the domestic
table wines sold by the Company and under domestic table wine brands acquired
in the Vintners Acquisition and the Almaden/Inglenook Acquisition for the 1994
and 1995 fiscal years, and the twelve months ended August 31, 1996:
<TABLE>
<CAPTION>
TWELVE MONTHS
1994 1995 ENDED AUGUST 31,
TABLE WINES VOLUME VOLUME 1996
- ----------- ------ ------ ----------------
<S> <C> <C> <C>
Non-varietal..................................... 52,610 47,774 44,682
Varietal......................................... 12,794 16,344 17,971
------ ------ ------
Total (a)........................................ 65,404 64,118 62,653
====== ====== ======
</TABLE>
- --------
(a) Excludes sales of wine coolers but includes sales of wine in bulk.
The Company's table wine brands include:
Inglenook: The fifth largest selling table wine brand and the seventh
largest varietal wine in the United States with a significant restaurant and
bar presence.
Almaden: The sixth largest selling table wine brand and the eleventh largest
varietal wine brand in the United States. Almaden is one of the oldest and
best known table wines in the United States.
Paul Masson: The tenth largest selling table wine brand in the United
States. Paul Masson is offered in all major varietal and non-varietal product
categories in a full range of sizes.
Taylor California Cellars: The thirteenth largest domestic selling table
wine brand in the United States. This brand is also offered in all major
varietal and non-varietal product categories in a full range of sizes.
Cribari: A well-known brand of both varietal and non-varietal table wines,
marketed in the popularly priced segment.
51
<PAGE>
Manischewitz: The largest selling brand of kosher wine in the United States.
Taylor: One of the United States' oldest brands of non-varietal wine,
marketed primarily in the eastern half of the United States.
Deer Valley: This line of California varietal and non-varietal table wines
introduced in 1989 has had significant success in California. The Company has
been expanding its distribution of this brand in other regions of the country.
Dunnewood: Unit volumes of this varietal wine from California's North Coast
region have also increased significantly. This brand is marketed at the lower
end of the premium price category.
The Company also markets a selection of popularly priced imported table
wines. These brands include:
Marcus James: One of the largest selling imported varietal wines in the
United States. Marcus James is a line of varietal table wines which includes
White Zinfandel, Chardonnay, Cabernet Sauvignon and Merlot. The Company owns
the Marcus James brand and contracts for its production in Brazil.
Santa Carolina: The fourth largest table wine brand imported from Chile.
Santa Carolina is a line of varietal wines which include Chardonnay, Cabernet
and Merlot. The Company began to distribute this brand on May 20, 1996, under
an exclusive distribution agreement.
Mateus: The second largest selling Portuguese table wine and a highly
recognized brand name. This brand is imported by the Company under a
distribution agreement.
Partager: A popularly priced table wine with both varietal and non-varietal
products. The Company owns the Partager brand and contracts for its production
in Chile.
The Company's unit volume sales of imported wine increased steadily from 1.9
million gallons in fiscal 1994 to 2.4 million gallons for the twelve months
ended August 31, 1996. The improvement in unit volume of imported wine is
attributable primarily to increased sales of the Marcus James varietal wine
brand.
Dessert Wines. With the exception of the premium dessert wine brands
acquired in the Vintners Acquisition, the Company markets its dessert wines in
the lower end of the popularly priced category. The popularly priced category
represented approximately 89% of the dessert wine market in calendar 1995, the
latest year for which data is available. The table below sets forth the unit
volumes (in thousands of gallons) for the domestic dessert wines sold by the
Company and under domestic dessert wine brands acquired in the Vintners
Acquisition for the 1994 and 1995 fiscal years, and the twelve months ended
August 31, 1996.
<TABLE>
<CAPTION>
TWELVE MONTHS
1994 1995 ENDED
VOLUME VOLUME AUGUST 31, 1996
------ ------ ---------------
<S> <C> <C> <C>
Dessert Wines..................................... 12,037 10,962 10,098
</TABLE>
The Company's dessert wines include:
Richards Wild Irish Rose: The largest selling dessert wine brand in the
United States and the Company's leading dessert wine brand.
Taylor: Premium traditional dessert wines, including port and sherry.
Cisco: One of the leading dessert wine brands in the United States. Cisco is
a flavored dessert wine positioned higher in price than Richards Wild Irish
Rose.
52
<PAGE>
The Company's unit volumes of dessert wines have declined over the last
three years. The decline can be attributed to a general decline in dessert
wine consumption in the United States. The Company's unit volume sales of its
dessert wine brands (including the brands acquired from Vintners) have
decreased 16% from fiscal 1994 through the twelve months ended August 31,
1996.
Sparkling Wines. The Company markets substantially all of its sparkling
wines in the popularly priced segment, which constituted approximately 46% of
the domestic sparkling wine market in calendar 1995, the latest year for which
data is available. The table below sets forth the unit volumes (in thousands
of gallons) for the domestic sparkling wines sold by the Company and under
domestic sparkling wine brands acquired in the Vintners Acquisition and the
Almaden/Inglenook Acquisition for the 1994 and 1995 fiscal years, and the
twelve months ended August 31, 1996:
<TABLE>
<CAPTION>
TWELVE MONTHS
1994 1995 ENDED
VOLUME VOLUME AUGUST 31, 1996
------ ------ ---------------
<S> <C> <C> <C>
Sparkling Wines................................... 7,353 6,500 6,565
</TABLE>
The Company's sparkling wine brands include:
Cook's: The second largest selling domestic sparkling wine in the United
States. This brand of champagne is marketed in a bell shaped bottle and is
cork-finished, packaging generally associated with higher priced products.
J. Roget: The fourth largest selling domestic sparkling wine in the United
States, priced slightly below Cook's.
Great Western: A premium priced champagne.
Taylor: A premium priced champagne.
Codorniu: The second largest Spanish sparkling wine imported in the United
States, sold in the premium price category. The Company sells this brand under
an exclusive distribution agreement.
Grape Juice Concentrate. As a related part of its wine business, the Company
produces grape juice concentrate. Grape juice concentrate is sold to the food
and wine industries as a raw material for the production of juice-based
products, no-sugar-added foods and beverages. Grape juice concentrate competes
with other domestically produced and imported fruit-based concentrates. The
Company believes that it is the leading grape juice concentrate producer in
the United States. The table below sets forth the unit volumes (in thousands
of gallons) for the grape juice concentrate sold by the Company and the grape
juice concentrate business acquired in the Almaden/Inglenook Acquisition for
the 1994 and 1995 fiscal years, and the twelve months ended August 31, 1996:
<TABLE>
<CAPTION>
TWELVE MONTHS
1994 1995 ENDED
VOLUME VOLUME AUGUST 31, 1996
------ ------ ---------------
<S> <C> <C> <C>
Grape Juice Concentrate........................... 11,826 11,017 11,863
</TABLE>
Other Wine Products and Related Services. The Company's other wine related
products and services include: grape juice; St. Regis, the leading
nonalcoholic line of wines in the United States; wine coolers sold primarily
under the Sun Country brand name; cooking wine; and wine for the production of
vinegar. The Company also provides various bottling and distillation
production services for third parties.
Beer. The Company is the third largest marketer of imported beers in the
United States. The Company distributes three of the top 20 imported beers in
the United States: Corona, Modelo Especial and St. Pauli Girl. The table below
sets forth the net sales (in thousands of dollars) and unit volumes
53
<PAGE>
(in thousands of cases) for the beer sold by Barton and the Company for the
1994 and 1995 fiscal years and the twelve months ended August 31, 1996:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED AUGUST 31,
1994 1995 1996
---------------------- ---------------------------- ----------------------------
NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
$173,883 14,100 $216,159 17,471 $279,070 22,388
</TABLE>
The Company's principal imported beer brands include:
Corona: The second largest selling imported beer in the United States and
the number one selling beer in Mexico. The Company believes that Corona is the
largest selling import in the territory in which it is distributed by the
Company. The Company has represented the supplier of Corona since 1978 and
currently sells Corona and its related Mexican beer brands in 25 primarily
western states.
Modelo Especial: One of the family of products imported from the supplier of
Corona, Modelo Especial has grown to be the fifteenth largest selling imported
beer in the United States.
St. Pauli Girl: The sixteenth largest selling imported beer in the United
States, and the second largest selling German import.
Tsingtao: The largest selling Chinese beer in the United States.
The Company's other imported beer brands include Pacifico and Negra Modelo
from Mexico, Peroni from Italy and Double Diamond from the United Kingdom. The
Company owns and operates the Stevens Point Brewery, a regional brewer located
in Wisconsin, which produces Point Special, among other brands.
Net sales and unit volumes of the Company's beer brands have grown during
the previous three fiscal years primarily as a result of the increased sales
of Corona and the Company's other Mexican beer brands. During the two years
ended August 31, 1996, net sales and unit volume of the Company's beer brands
increased at an annual rate of 27% and 26%, respectively.
Distilled Spirits. The Company is the fourth largest supplier of distilled
spirits in the United States. The Company produces, bottles, imports and
markets a diversified line of quality distilled spirits, and also exports
distilled spirits to more than 15 foreign countries. The table below sets
forth the net sales (in thousands of dollars) and unit volumes (in thousands
of 9-liter cases) for the distilled products case goods sold by Barton and
under brands acquired in the Vintners Acquisition and the Almaden/ Inglenook
Acquisition for the 1994 and 1995 fiscal years and the twelve months ended
August 31, 1996, and for the brands and products acquired in the UDG
Acquisition for the twelve months ended August 31, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
1994 1995 AUGUST 31, 1996
--------------- --------------- ---------------------
NET NET NET
SPIRITS SALES VOLUME SALES VOLUME SALES VOLUME
- ------- -------- ------ -------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Barton/Vintners/Almaden/Inglenook. $ 88,549 5,678 $ 92,400 5,917 $ 98,166 6,021
UDG............................... 101,916 4,941 92,136 5,013 83,274 4,867
-------- ------ -------- ------ ---------- --------
Total............................. $190,465 10,619 $184,536 10,930 $181,440 10,888
======== ====== ======== ====== ========== ========
</TABLE>
The Company's leading distilled spirits brands include:
Barton Gin and Vodka: The fifth largest domestically bottled gin and the
fifth largest domestically bottled vodka.
54
<PAGE>
Fleischmann's Vodka, Gin and Preferred: The fourth largest blended whiskey
and the fourth largest domestically bottled gin.
Mr. Boston: A highly recognized name with a full line of spirits, including
cordials, cocktails, flavored brandies, gin and vodka.
Montezuma: The second largest selling tequila in the United States.
Canadian LTD: The fifth largest domestically bottled Canadian whisky.
Ten High Bourbon: The seventh largest bourbon brand in the United States.
Inver House: The fifth largest domestically bottled Scotch whisky.
Monte Alban: A premium priced product which the Company believes is the
largest selling mezcal in the United States.
Paul Masson Grande Amber: The fourth largest selling aged brandy in the
United States, and one of the fastest-growing domestic brandies.
Other products include Skol Vodka, Gin and Rum; Crystal Palace Gin and
Vodka; Glenmore spirits; Chi-Chi's cocktails; Lauder's, House of Stuart and
Highland Mist Scotch whiskies; Old Thompson; Kentucky Gentleman, Kentucky
Tavern, Very Old Barton and Tom Moore bourbon whiskies; di Amore liqueurs;
Schenley spirits; Sabroso coffee liqueur; Northern Light, Canadian Host and
Canadian Supreme Canadian whiskies and Imperial, Barton Reserve and Barton
Premium blended whiskies. Substantially all of the Company's spirits unit
volume consists of products marketed in the price value segment, which the
Company believes constituted approximately 48% of the distilled spirits market
in calendar 1994, the latest year for which data is available.
During the two years ended August 31, 1996, net sales and unit volumes of
distilled spirits brands sold by Barton and under brands acquired in the
Vintners and Almaden/Inglenook Acquisitions increased at an annual rate of 5%
and 3%, respectively. Unit volumes of vodka, tequila and brandy have
increased, while Scotch and bourbon have experienced decreases in unit volume.
During the two years ended August 31, 1996, the net sales of brands acquired
in the UDG Acquisition declined in excess of industry rates. The Company
believes that these declines resulted from noncompetitive retail pricing and
promotional activities of the brands' previous owner. The Company has
implemented pricing and promotional activities which have reduced the rate of
decline during Fiscal 1997.
In addition to the branded products described above, the Company also sells
distilled spirits in bulk and provides contract production and bottling
services. These activities accounted for net sales during the 1994 and 1995
fiscal years and for the twelve months ended August 31, 1996 of $7.0 million,
$5.8 million, and $21.3 million, respectively. The significant increase in
contract production services is a result of the UDG Acquisition.
MARKETING AND DISTRIBUTION
The Company's products are distributed and sold throughout the United States
through over 1,200 wholesalers, as well as through state alcoholic beverage
control agencies. The Company employs a full-time, in-house marketing and
sales organization of approximately 400 people to develop and service its
sales to wholesalers and state agencies. The Company's sales force is
organized in separate sales divisions: a beer division, a spirits division and
a wine division. The Company believes that the organization of its sales force
into separate divisions positions it to maintain a high degree of
55
<PAGE>
focus on each of its principal product categories. For the 1994 and 1995
fiscal years and the twelve months ended August 31, 1996, gross sales to the
Company's largest wholesaler, Southern Wine and Spirits, represented 12.3%,
10.6% and 8.0% of the Company's gross sales, respectively.
The Company's marketing strategy places primary emphasis upon promotional
programs directed at its broad national distribution network (and to the
retailers served by that network). The Company has extensive marketing
programs for its brands including promotional programs on both a national
basis and regional basis in accordance with the strength of the brands, point-
of-sale materials, consumer media advertising, event sponsorship, market
research, trade advertising and public relations.
TRADEMARKS AND DISTRIBUTION AGREEMENTS
The Company's wine and distilled spirits products are sold under a number of
trademarks. Most of these trademarks are owned by the Company.
The Company also produces and sells wines and distilled spirits products
under exclusive license or distribution agreements. Significant agreements
include: a long term license agreement with Nabisco Brands Company for a term
which expires in 2008 and which automatically renews for successive additional
20 year terms unless cancelled by the Company for the Fleischmann's spirits
brands; a long term license agreement with Hiram Walker & Sons, Inc. for a
term which expires in 2116 for the Ten High, Crystal Palace, Northern Light
and Imperial Spirits brands; and a long term license agreement with the B.
Manischewitz Company for a term which expires in 2042 for the Manischewitz
brand of kosher wines.
The Company also has other less significant license and distribution
agreements related to the sale of wine and distilled spirits with terms of
various durations.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products.
These agreements have terms that vary
and prohibit the Company from importing other beers from the same country. The
Company's agreement to distribute Corona and its other Mexican beer brands
exclusively throughout 25 states expires in December 2006 and, subject to
compliance with certain performance criteria and other terms under the
agreement, will be automatically renewed for additional terms of five years.
Under this agreement, the Mexican supplier has the right to consent to Mr.
Goodman's successor as Chairman and Chief Executive Officer of Barton's beer
subsidiary, which consent may not be unreasonably withheld, and, if such
consent is properly withheld, to terminate the agreement. The Company's
agreement for the importation of St. Pauli Girl expires in 1998 and, subject
to compliance with certain performance criteria, may be extended by the
Company until 2003. The Company's agreement for the exclusive importation of
Tsingtao throughout the entire United States expires in December 1999 and,
subject to compliance with certain performance criteria and other terms under
the agreement, will be automatically renewed until December 2002. Prior to
their expiration, these agreements may be terminated if the Company fails to
meet certain performance criteria. The Company believes it is currently in
compliance with its imported beer distribution agreements. From time to time,
the Company has failed, and may in the future fail, to satisfy certain
performance criteria in its distribution agreements. Although there can be no
assurance that its beer distribution agreements will be renewed, given the
Company's long term relationships with its suppliers, the Company expects that
such agreements will be renewed prior to their expiration and does not believe
that these agreements will be terminated.
COMPETITION
The beverage alcohol industry is highly competitive. The Company competes on
the basis of quality, price, brand recognition and distribution. The Company's
beverage alcohol products compete with other alcoholic and nonalcoholic
beverages for consumer purchases, as well as shelf space in
56
<PAGE>
retail stores and marketing focus by the Company's wholesalers. The Company
competes with numerous multinational producers and distributors of beverage
alcohol products, many of which have significantly greater resources than the
Company. The Company's principal competitors include E & J Gallo Winery and
The Wine Group in the wine category, Heineken USA, Molson Breweries USA,
Labatt's USA and Guinness Import Company in the imported beer category, and
Jim Beam Brands in the distilled spirits category.
PRODUCTION
The Company's wines are produced from several varieties of wine grapes grown
principally in California and New York. The grapes are crushed at the
Company's wineries and stored as wine, grape juice or concentrate. Such grape
products may be made into wine for sale under the Company's brand names, sold
to other companies for resale under their own labels, or shipped to customers
in the form of juice, juice concentrate, unfinished wines, high-proof grape
spirits or brandy. Most of the Company's wines are bottled and sold within 18
months after the grape crush. The Company's inventories of wines, grape juice
and concentrate are usually at their highest levels in November and December,
immediately after the crush of each year's grape harvest, and are
substantially reduced prior to the subsequent year's crush.
The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed
by the Company are primarily produced and aged by the Company at its
distillery in Bardstown, Kentucky, though it may from time to time supplement
its inventories through purchases from other distillers. At its Atlanta and
Albany, Georgia, facilities, the Company produces all of the neutral grain
spirits and whiskeys used by it in the production of vodka, gin and blended
whiskey sold by it to customers in the state of Georgia. The Company's
requirements of Canadian and Scotch whiskies, and tequila, mezcal, and the
neutral grain spirits used by it in the production of gin and vodka for sale
outside of Georgia, and other spirits products, are purchased from various
suppliers.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal components in the production of the Company's branded beverage
alcohol products are: packaging materials, primarily glass; grapes; and other
agricultural products, such as grain.
The Company utilizes glass and PET bottles and other materials, such as
caps, corks, capsules, labels and cardboard cartons, in the bottling and
packaging of its products. Glass bottle costs are one of the largest
components of the Company's cost of product sold. The glass bottle industry is
highly concentrated with only a small number of producers. The Company has
traditionally obtained, and continues to obtain, its glass requirements from a
limited number of producers. The Company has not experienced difficulty in
satisfying its requirements with respect to any of the foregoing and considers
its sources of supply to be adequate. However, the inability of any of the
Company's glass bottle suppliers to satisfy the Company's requirements could
adversely affect the Company's operations.
Most of the Company's annual grape requirements are satisfied by purchases
from each year's harvest, which normally begins in August and runs through
October. Costs for grapes have escalated dramatically over the last two grape
harvests (fall 1995 and fall 1996). The Company believes that it has adequate
sources of grape supplies to meet its sales expectations for Fiscal 1997.
However, in the event demand for certain wine products exceeds expectations
for Fiscal 1997, the Company could experience shortages.
The Company purchases grapes from over 700 independent growers principally
in the San Joaquin Valley and Monterey regions of California and in New York
State. The Company enters into written purchase agreements with a majority of
these growers on a year-to-year basis. However, in connection with the
Vintners Acquisition and the Almaden/Inglenook Acquisition, the Company
57
<PAGE>
acquired certain long-term grape purchase contracts. In addition, the
Company's negligible purchases of grapes from the Napa Valley and related
regions minimize its exposure to phylloxera and other agricultural risks.
However, phylloxera in these regions has caused certain wineries to increase
their purchases of grapes from the San Joaquin and Monterey regions. The
Company has recently purchased approximately 1,000 acres of vineyards in
California and leases a small number of additional acres in California for
vineyard plantings. The Company continues to consider the purchase or lease of
additional vineyards, and additional land for vineyard plantings, to
supplement its grape supply. The Company is also planting vineyards on land in
California currently owned by the Company.
The distilled spirits manufactured by the Company require various
agricultural products, neutral grain spirits and bulk spirits. The Company
fulfills its requirements through purchases from various sources, through
contractual arrangements and through purchases on the open market. The Company
believes that adequate supplies of the aforementioned products are available
at the present time.
GOVERNMENT REGULATION
The Company's operations are subject to extensive federal and state
regulation. These regulations cover, among other matters, sales promotion,
advertising and public relations, labeling and packaging, changes in officers
or directors, ownership or control, distribution methods and relationships,
and requirements regarding brand registration and the posting of prices and
price changes. All of the Company's facilities are also subject to federal,
state and local environmental laws and regulations and the Company is required
to obtain permits and licenses to operate its facilities. The Company believes
that it is in compliance in all material respects with all presently
applicable governmental laws and regulations and that the cost of
administration of compliance with such laws and regulations does not have, and
is not expected to have, a material adverse impact on the Company's financial
condition or results of operations.
EMPLOYEES
The Company had approximately 2,800 full-time employees as of August 31,
1996, as compared to 2,150 employees at the end of fiscal 1995. The net
increase of 650 employees was due primarily to increases in production,
marketing and sales staff levels and the UDG Acquisition. As of August 31,
1996, approximately 1,200 employees were covered by collective bargaining
agreements. Additional workers may be employed by the Company during the grape
crushing season. The Company considers its employee relations to be good.
PROPERTIES
The Company currently operates 13 wineries, three distilling and bottling
plants, two bottling plants and a brewery, all of which include warehousing
and distribution facilities on the premises. The Company considers its
principal facilities to be the Mission Bell winery in Madera, California; the
Canandaigua, New York winery; the Monterey Cellars winery in Gonzales,
California; the distilling and bottling facility located in Bardstown,
Kentucky; and the bottling facility located in Owensboro, Kentucky.
In New York, the Company operates three wineries located in Canandaigua,
Naples and Batavia. The Company currently operates 10 winery facilities in
California. The Mission Bell winery is a crushing, wine production, bottling
and distribution facility and a grape juice concentrate production facility.
The Monterey Cellars winery is a crushing, wine production and bottling
facility. The other wineries operated in California are located in Escalon,
Lodi, McFarland, Madera, Fresno, Soledad and Ukiah. The Escalon facility is
operated under a long term lease with an option to buy. The Company has
entered into an agreement to sell the Soledad facility, which sale is expected
to close by the end
58
<PAGE>
of Fiscal 1997. The Company recently purchased approximately 1,000 acres of
vineyards in California and leases a small number of additional acres in
California for vineyard plantings.
The Company operates five facilities that produce, bottle and store
distilled spirits. It owns production, bottling and storage facilities in
Bardstown, Kentucky, and Atlanta and Albany, Georgia, and operates bottling
plants in Owensboro, Kentucky, and Carson, California. The Carson plant is
operated under a management contract, which is scheduled to expire on December
31, 1997, subject to a one year extension at the option of the plant lessor.
The Carson plant receives distilled spirits in bulk from Bardstown and outside
vendors, which it bottles and distributes. The Company also performs contract
bottling at the Carson plant. The Bardstown facility distills, bottles and
warehouses whiskey for the Company's account and on a contractual basis for
other participants in the industry. The Owensboro facility bottles and
warehouses whiskey for the Company's account and performs contract bottling.
The Company also owns production plants in Atlanta and Albany, Georgia, which
produce vodka, gin and blended whiskeys.
The Company owns a brewery in Stevens Point, Wisconsin, where it produces
and bottles Point beer and brews and packages on a contract basis for a
variety of brewing and other food and beverage industry members. In addition,
the Company owns and maintains its corporate headquarters in Canandaigua, New
York, where it also leases additional office space, and leases office space in
Chicago, Illinois, for its Barton headquarters.
The Company believes that all of its facilities are in good condition and
working order and have adequate capacity to meet its needs for the foreseeable
future.
Most of the Company's real property has been pledged under the terms of
collateral security mortgages as security for the payment of outstanding loans
under the Credit Facility. See "Description of Credit Facility".
LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to litigation from time to time
in the ordinary course of business. Although the amount of any liability with
respect to such litigation cannot be determined, in the opinion of management,
such liability will not have a material adverse effect on the Company's
financial condition or results of operations.
In connection with an investigation in the State of New Jersey into
regulatory trade practices in the beverage alcohol industry, one employee of
the Company was arrested in March 1994 and another employee subsequently came
under investigation in connection with providing "free goods" to retailers in
violation of New Jersey beverage alcohol laws. A proposed consent order has
been received from the appropriate regulatory agency by the Company which
would, when finalized, fully resolve the matter without any material effect on
the Company.
On November 13, 1995, a purported stockholder of the Company filed a class
action in the United States District Court for the Southern District of New
York, Ventry, et al. v. Canandaigua Wine Company, Inc., et al. (the "Ventry
Class Action"). On November 16, 1995, another purported stockholder of the
Company filed a class action in the United States District Court for the
Southern District of New York, Brickell Partners, et al. v. Canandaigua Wine
Company, Inc., et al. (the "Brickell Class Action"). On December 6, 1995, a
third purported stockholder of the Company filed a class action in the United
States District Court for the Southern District of New York, Babich, et al. v.
Canandaigua Wine Company, Inc., et al. (and this class action together with
the Brickell Class Action and the Ventry Class Action, the "Class Actions").
The defendants in the Class Actions are the Company, Richard Sands and Lynn K.
Fetterman. The Class Actions have been consolidated and a
59
<PAGE>
consolidated complaint was filed on January 16, 1996. The Class Actions assert
violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder and seek to recover damages in an unspecified amount which the
class members allegedly sustained by purchasing the Company's common stock at
artificially inflated prices. The complaints in the Class Actions allege that
the Company's public documents and statements were materially incomplete and,
as a result, misleading.
The Class Actions were filed after the Company announced its results of
operations for the year ended August 31, 1995, on November 9, 1995. These
results were below the expectations of analysts and on November 10, 1995, the
price of the Company's Class A common stock fell approximately 38% and the
price of the Company's Class B common stock fell approximately 30%.
On November 8, 1996 the District Court entered summary judgment in favor of
the Company and the other defendants. The Court's judgment resolves all claims
against all of the defendants in this litigation.
Plaintiffs may file a notice of appeal to the United States Court of Appeals
for the Second Circuit on or before December 12, 1996. The Company believes
that the District Court's decision is correct and intends to defend vigorously
any appeal by plaintiff.
60
<PAGE>
MANAGEMENT
The following table sets forth information with respect to the current
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION/OFFICE HELD
---- --- --------------------
<S> <C> <C>
Marvin Sands............ 72 Chairman of the Board
Richard Sands........... 45 President, Chief Executive Officer and Director
Robert Sands............ 38 Executive Vice President, General Counsel, Secretary and Director
Ellis M. Goodman........ 59 Chief Executive Officer of Barton Incorporated
Lynn K. Fetterman....... 49 Senior Vice President and Chief Financial Officer
Daniel C. Barnett....... 47 Senior Vice President and President of Wine Division
Bertram E. Silk......... 64 Senior Vice President and Director
George Bresler.......... 72 Director
James A. Locke, III..... 54 Director
</TABLE>
Marvin Sands is the founder of the Company, which is the successor to a
business he started in 1945. He has been a director of the Company and its
predecessor since 1946 and was Chief Executive Officer until October 1993.
Marvin Sands is the father of Richard Sands and Robert Sands.
Richard Sands, Ph.D., has been employed by the Company in various capacities
since 1979. He was elected Executive Vice President and a director in 1982,
became President and Chief Operating Officer in May 1986 and was elected Chief
Executive Officer in October 1993. He is a son of Marvin Sands and the brother
of Robert Sands.
Robert Sands was appointed Executive Vice President, General Counsel in
October 1993. In January 1995, he was appointed Secretary of the Company. He
was elected a director of the Company in January 1990 and served as Vice
President, General Counsel since June 1990. From June 1986, until his
appointment as Vice President, General Counsel, Mr. Sands was employed by the
Company as General Counsel. He is a son of Marvin Sands and the brother of
Richard Sands.
Ellis M. Goodman is the Chief Executive Officer of Barton and serves in that
capacity under the terms of an employment agreement with Barton. By virtue of
his position and responsibilities with Barton, Mr. Goodman is deemed an
executive officer of the Company. From July 1993 to January 1996, Mr. Goodman
served as a director of the Company. Also, from July 1993 to October 1993, he
served as a Vice President of the Company and from October 1993 to January
1996, Mr. Goodman served as an Executive Vice President of the Company. Mr.
Goodman has been Chief Executive Officer of Barton since 1987 and Chief
Executive Officer of Barton Brands, Ltd. (predecessor to Barton) since 1982.
Lynn K. Fetterman joined the Company during April 1990 as its Vice
President, Finance and Administration, Secretary and Treasurer and was elected
Senior Vice President, Chief Financial Officer and Secretary in October 1993.
For more than ten years prior to that, he was employed by Reckitt and Colman
in various executive capacities, including Vice President, Finance of its
Airwick Industries Division and Vice President, Finance of its Durkee-French
Foods Division. Mr. Fetterman's most recent position with Reckitt and Colman
was as its Vice President-Controller. Reckitt and Colman's principal business
relates to consumer food and household products.
Daniel C. Barnett joined the Company during November 1995 as a Senior Vice
President and President of the Company's wine division. From July 1994 to
October 1995, Mr. Barnett served as President and Chief Executive Officer of
Koala Springs International, a juice beverage company. Prior to that, from
April 1991 to June 1994, Mr. Barnett was Vice President and General Manager of
Nestle USA's beverage businesses. From October 1988 to April 1991, he was
President of Weyerhauser's baby diaper division.
61
<PAGE>
Bertram E. Silk has been a director and Vice President of the Company since
1973 and was elected Senior Vice President in October 1993. He has been
employed by the Company since 1965. Currently, Mr. Silk is responsible for
industry relations with respect to labor unions in California, as well as for
various trade association and international alcohol beverage industry matters.
Immediately prior to his current position, he was in charge of the Company's
grape grower relations in California. Before moving from Canandaigua, New York
to California in 1989, Mr. Silk was in charge of production for the Company.
From 1989 to August 1994, Mr. Silk was in charge of the Company's grape juice
concentrate business in California.
George Bresler has served as a director of the Company since 1992 and has
been engaged in the practice of law since 1957. From August 1987 through July
1992, Mr. Bresler was a partner in the law firm of Bresler and Bab, New York,
New York. Currently, Mr. Bresler is a partner in the law firm of Rosner,
Bresler, Goodman & Bucholz in New York, New York.
James A. Locke, III has served as a director of the Company since 1983.
Since January 1, 1996, Mr. Locke has been a partner in the law firm of Nixon,
Hargrave, Devans and Doyle LLP, Rochester, New York, which firm is the
Company's principal outside counsel. For twenty years prior to joining this
firm, Mr. Locke was a partner in the law firm of Harter, Secrest and Emery,
Rochester, New York.
Directors of the Company hold office until the next Annual Meeting of
Stockholders of the Company and until their successors are elected and
qualified. Executive officers of the Company hold office until the next Annual
Meeting of the Board of Directors and until their successors are chosen and
qualify.
EXECUTIVE COMPENSATION AND STOCK OWNERSHIP
The current annual base compensation for the Company's four most highly
compensated officers is as follows: Marvin Sands--$434,700; Richard Sands--
$426,800; Robert Sands--$414,569 and Ellis Goodman--$412,000. In addition,
Ellis Goodman has an employment agreement with Barton which expires in
December 1999, but will be automatically extended for additional one-year
periods unless Mr. Goodman or Barton notifies the other, within a specified
time period, of the desire not to extend such employment agreement.
As of December 6, 1996, the directors and principal officers of the Company
listed above as a group beneficially owned approximately 14% of the
outstanding shares of Class A Common Stock (exclusive of shares of Class A
Common Stock issuable pursuant to the conversion feature of the Class B Common
Stock beneficially owned by officers and directors) and approximately 85% of
the outstanding shares of Class B Common Stock.
DESCRIPTION OF CREDIT FACILITY
On September 1, 1995, the Company, its principal operating subsidiaries, and
a syndicate of 20 banks (the "Syndicate Banks"), for which The Chase Manhattan
Bank ("Chase") acts as Administrative Agent, entered into the Third Amended
and Restated Credit Agreement. The Third Amended and Restated Credit
Agreement, as amended, is referred to as the "Credit Facility." The following
summary of the principal terms of the Credit Facility does not purport to be
complete and is subject to the detailed provisions of the Credit Facility, a
copy of which is available upon request.
As of August 31, 1996, the Credit Facility consisted of (i) a $216.0 million
Term Loan facility due in August 2001 ("Term Loans"), (ii) a $185.0 million
Revolving Loan facility, including all drawn or undrawn letters of credit
("Revolving Letters of Credit"), which expires in June 2001 ("Revolving
Loans"), and (iii) a $13.7 million irrevocable standby Letter of Credit (the
"Barton Letter of Credit") related to certain earn-out payments related to the
Barton Acquisition. The Barton Letter of Credit will expire on December 31,
1996.
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The Term Loans and the Revolving Loans, at the Company's option, can be
either a base rate loan or a Eurodollar rate loan. In addition, the Revolving
Loans can be a money market loan. A base rate loan bears interest at the rate
per annum equal to the higher of (1) the Federal Funds rate for such day plus
1/2 of 1%, or (2) the Chase prime commercial lending rate. A Eurodollar rate
loan bears interest at LIBOR plus a margin. The interest rate margin for
Eurodollar rate loans may be decreased
by up to 0.50% or increased by up to 0.25% depending on the Company's debt
coverage ratio (as defined in the Credit Facility). The interest rate on a
money market loan is determined by a competitive bid process among the
Syndicate Banks. As of August 31, 1996, the interest rate margin on a
Eurodollar rate loan was 1%.
As of August 31, 1996, the Term Loans bore interest at a per annum rate of
6.6% with quarterly principal payments of $10.0 million and a final payment of
$16.0 million in August 2001.
The $185.0 million Revolving Loan facility may be utilized by the Company
either in the form of Revolving Loans or as Revolving Letters of Credit up to
a maximum of $20.0 million. Additionally, availability of Revolving Loans is
subject to a formula based on the amount of certain eligible receivables and
certain eligible inventory and is reduced by the amount of Revolving Letters
of Credit. As of August 31, 1996, there were outstanding Revolving Loans of
$62.0 million bearing interest at 6.7%, undrawn Revolving Letters of Credit of
$8.1 million and $114.9 million available to be drawn in Revolving Loans. The
Revolving Loans are required to be prepaid in such amounts that, for a single
period of at least thirty consecutive days at any time during the fiscal
quarters ending on May 31 and August 31 of each fiscal year, the aggregate
principal amount of Revolving Loans outstanding, together with drawn and
undrawn Revolving Letters of Credit, will not exceed $60.0 million, plus the
amount expended by the Company relating to certain capital expenditures at any
time during Fiscal 1997 up to $17.5 million.
Each of the Company's operating subsidiaries has guaranteed, jointly and
severally, the Company's obligations under the Credit Facility. The Syndicate
Banks have been given security interests in substantially all of the assets of
the Company and its subsidiaries. The Company and its subsidiaries are subject
to customary secured lending covenants including those restricting additional
liens, the incurrence of additional indebtedness, the sale of assets, the
payment of dividends, transactions with affiliates, the making of certain
investments and certain other fundamental changes. The Company and its
subsidiaries are also required to maintain a minimum level of interest rate
protection instruments and the following financial covenants above specified
levels: debt coverage ratio; tangible net worth; fixed charges ratio; and
operating cash flow to interest expense. Among the most restrictive covenants
contained in the Credit Facility, the Company is required to maintain a fixed
charge ratio not less than 1.0 to 1.0 at the last day of each fiscal quarter
for the most recent four quarter periods. The Credit Facility permits the
Company to repurchase up to $30.0 million of the Company's outstanding Common
Stock.
The Company may prepay the principal of the Term Loans and the Revolving
Loans at its discretion. The Revolving Loans and the Term Loan are required to
be prepaid and the Revolving Loans commitment, the Term Loan commitment and
the Barton Letter of Credit commitment will be automatically reduced in the
following aggregate amounts: (i) the amount equal to 100% of the net proceeds
from insurance, condemnation awards or other compensation arising out of
certain casualty events; (ii) the amount equal to 50% of the net proceeds of
certain capital contributions or the sale of certain equity interests; (iii)
the amount equal to the excess of (A) the amount equal to 50% of excess cash
flow for the period of four fiscal quarters ending on each August 31 over (B)
the aggregate amount of prepayments of the Term Loan made during such period
and, after payment in full of the Term Loan, the aggregate amount of voluntary
reductions made during such period of Revolving Loan commitments; (iv) the
amount equal to 100% of the net proceeds of any sales of assets, other than
assets disposed of in the ordinary course of business, when such sales of
assets in the aggregate exceed $15.0 million; (v) 100% of net proceeds in
excess of $50 million from the issuance of certain
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subordinated indebtedness (including the Notes); and (vi) in full upon certain
changes of control (including a Change of Control under the Indenture) if such
event requires the Company to redeem or offer to redeem certain subordinated
indebtedness under the terms thereof.
Events of Default. Events of Default under the Credit Facility include,
among other things, (a) failure of the Company or any subsidiary to pay when
due principal of or interest on the loans, fees, other amounts owing under the
Credit Facility and such default shall continue for two or more business days;
(b) failure of the Company or any subsidiary to pay when due principal of or
interest on any other Indebtedness or any amount under any interest rate
protection agreement or the Barton acquisition agreement, provided that such
payment due is in an aggregate amount greater than or equal to $100,000; or
any event relating to Indebtedness in an aggregate principal amount greater
than or equal to $100,000 or any event specified in any interest rate
protection agreement occurs that permits acceleration of such Indebtedness or
the payments due under such interest rate protection agreement; (c) default by
the Company or any subsidiary in the due observance or performance of certain
agreements and covenants contained in the Credit Facility or other documents
related thereto; (d) material inaccuracy of any representation or warranty
made by the Company or any subsidiary in connection with the Credit Facility
or other documents related thereto; (e) a final judgment against the Company
or any subsidiary in excess of $500,000 (exclusive of judgment amounts covered
by insurance) or in excess of $5.0 million (regardless of insurance coverage)
that remains undischarged (unless a stay of execution has been procured) for
45 days; (f) the occurrence of certain events respecting pension plans; (g) a
reasonable basis shall exist for the assertion against the Company or any
subsidiary of material claims or liabilities respecting hazardous materials;
(h) Marvin Sands or members of his immediate family or a trust for their
benefit shall cease to own in the aggregate and on a fully diluted basis
common stock of the Company having by its terms voting power to elect at least
50% (in number of votes) of the board of directors of the Company or certain
other change-of-control events shall occur; (i) the face amount of the Barton
Letter of Credit shall not be reduced as scheduled; and (j) certain bankruptcy
related events.
Change of Control Under the Notes. All amounts outstanding under the Credit
Facility must be repaid in full before the Company can purchase any Original
Notes or any Notes upon a Change of Control. See "Risk Factors--Change of
Control Offer."
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DESCRIPTION OF NOTES
The Old Notes were, and the Exchange Notes will be, issued under an
Indenture (the "Indenture") dated as of October 29, 1996, between the Company,
the Guarantors and Harris Trust and Savings Bank, as trustee (the "Trustee"),
copies of which are available upon request. The terms of the Exchange Notes
are identical in all material respects to the Old Notes, except that the
Exchange Notes have been registered under the Securities Act and therefore
will not bear legends restricting their transfer and will not contain certain
provisions providing for the payment of liquidated damages under certain
circumstances related to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer.
The following summary of the material provisions of the Indenture does not
purport to be complete, and where reference is made to particular provisions
of the Indenture, such provisions, including the definitions of certain terms,
are qualified in their entirety by reference to all of the provisions of the
Indenture and those terms made a part of the Indenture by the Trust Indenture
Act. For definitions of certain capitalized terms used in the following
summary, see "--Certain Definitions."
GENERAL
The Exchange Notes will mature on December 15, 2003, will be limited to
$65,000,000 aggregate principal amount and will be unsecured senior
subordinated obligations of the Company. Each Exchange Note will bear interest
at the rate set forth on the cover page hereof from October 29, 1996 or from
the most recent interest payment date to which interest has been paid, payable
semi-annually on June 15 and December 15 in each year, commencing June 15,
1997, to the Person in whose name the Exchange Note (or any predecessor
Exchange Note) is registered at the close of business on the June 1 or
December 1 next preceding such interest payment date.
Payment of the Notes is guaranteed by the Guarantors on a senior
subordinated basis. The Guarantors are comprised of substantially all the
direct and indirect Wholly Owned Subsidiaries of the Company.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable (subject to compliance
with transfer restrictions imposed by applicable securities laws for so long
as the Notes are not registered for resale under the Securities Act), at the
office or agency of the Company in the City of New York maintained for such
purposes (which initially will be the Trustee); provided, however, that
payment of interest may be made at the option of the Company by check mailed
to the Person entitled thereto as shown on the security register. The Notes
will be issued only in fully registered form without coupons, in denominations
of $1,000 and any integral multiple thereof. (Section 302) No service charge
will be made for any registration of transfer, exchange or redemption of
Notes, except in certain circumstances for any tax or other governmental
charge that may be imposed in connection therewith. (Section 305)
The Company currently has outstanding $130.0 million aggregate principal
amount of Original Notes pursuant to the Original Indenture, the terms of
which are substantially similar to the Notes and Indenture, respectively.
OPTIONAL REDEMPTION
The Notes will be subject to redemption at any time on or after December 15,
1998, at the option of the Company, in whole or in part, on not less than 30
nor more than 60 days' prior notice in amounts of $1,000 or an integral
multiple thereof at the following redemption prices (expressed as percentages
of the principal amount), if redeemed during the 12-month period beginning
December 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1998.............................................................. 104.375%
1999.............................................................. 102.917%
2000.............................................................. 101.458%
</TABLE>
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and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
right of holders of record on regular record dates to receive interest due on
an Interest Payment Date).
Notwithstanding the preceding paragraph, the Company will not be permitted
to redeem the Original Notes unless, substantially concurrently with such
redemption, the Company redeems an aggregate principal amount of Notes
(rounded to the nearest integral multiple of $1,000) equal to the product of
(1) a fraction, the numerator of which is the aggregate principal amount of
Original Notes to be so redeemed and the denominator of which is the aggregate
principal amount of Original Notes outstanding immediately prior to such
proposed redemption, and (2) the aggregate principal amount of Notes
outstanding immediately prior to such proposed redemption.
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee shall deem fair and reasonable. (Sections 203, 1101 and
1108)
SINKING FUND
The Notes are not entitled to the benefit of any sinking fund.
RANKING
The payment of the principal of, premium, if any, and interest on, the Notes
and all other Indenture Obligations are subordinated, as set forth in the
Indenture, in right of payment to the prior payment in full of all Senior
Indebtedness in cash or cash equivalents or in any other form acceptable to
the holders of Senior Indebtedness. The Notes are senior subordinated
indebtedness of the Company ranking pari passu with all other existing and
future senior subordinated indebtedness of the Company and senior to all
existing and future Subordinated Indebtedness of the Company.
During the continuance of any default in the payment of any Designated
Senior Indebtedness, no payment (other than payments previously made pursuant
to the provisions described under "--Defeasance or Covenant Defeasance of
Indenture") or distribution of any assets of the Company of any kind or
character (excluding certain permitted equity or certain debt securities)
shall be made by the Company on account of principal of, premium, if any, or
interest on, the Notes or any other Indenture Obligations or on account of the
purchase, redemption, defeasance or other acquisition of or in respect of the
Notes unless and until such default shall have been cured or waived or shall
have ceased to exist or the Designated Senior Indebtedness with respect to
which such payment default shall have occurred shall have been discharged or
paid in full in cash or cash equivalents or in any other form acceptable to
the holders of such Senior Indebtedness, after which the Company shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
During the continuance of any non-payment default with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated (a "Non-payment Default") and after receipt by the Trustee and the
Company from a representative of the holders of Designated Senior Indebtedness
of written notice of such default, no payment (other than payments previously
made pursuant to the provisions described under "--Defeasance or Covenant
Defeasance of Indenture") or distribution of any assets of the Company of any
kind or character (excluding certain permitted equity or certain debt
securities) shall be made by the Company on account of any principal of,
premium, if any, or interest on, the Notes or any other Indenture Obligations
or on account of the purchase, redemption, defeasance or other acquisition of
or in respect of the Notes for the period specified below (the "Payment
Blockage Period").
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The Payment Blockage Period shall commence upon the receipt of notice of the
Nonpayment Default by the Trustee from a representative of the holder of any
Designated Senior Indebtedness and shall end on the earliest of (i) the first
date on which more than 179 days shall have elapsed since the receipt of such
written notice (provided such Designated Senior Indebtedness as to which
notice was given shall not theretofore have been accelerated), (ii) the date
on which such Nonpayment Default is cured, waived or ceases to exist or on
which such Designated Senior Indebtedness is discharged or paid in full in
cash or cash equivalents or in any other manner acceptable to the holders of
Designated Senior Indebtedness or (iii) the date on which such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from the representatives of holders of Designated Senior
Indebtedness initiating such Payment Blockage Period, after which, in the case
of clauses (i), (ii) and (iii), the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments. In
no event will a Payment Blockage Period extend beyond 179 days from the date
of the receipt by the Company or the Trustee of the notice initiating such
Payment Blockage Period (such 179-day period referred to as the "Initial
Period"). Any number of notices of Nonpayment Defaults may be given during the
Initial Period; provided that during any 365 consecutive day period only one
such period during which payment of principal of, or interest on, the Notes
may not be made may commence and the duration of such period may not exceed
179 days. No Nonpayment Default with respect to Designated Senior Indebtedness
which existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default has been cured or waived for a period of
not less than 90 consecutive days. (Section 1203)
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "--Events of Default."
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or
to its creditors, as such, or to its assets, or any liquidation, dissolution
or other winding up of the Company, whether voluntary or involuntary, or any
assignment for the benefit of creditors or any other marshalling of assets or
liabilities of the Company, all Senior Indebtedness must be paid in full in
cash or cash equivalents or in any other form acceptable to the holders of
Senior Indebtedness, before any payment or distribution (excluding
distributions of certain permitted equity or certain debt securities) is made
on account of the principal of, premium, if any, or interest on the Notes or
any other Indenture Obligations.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and, funds which would be
otherwise payable to the holders of the Notes will be paid to the holders of
the Senior Indebtedness to the extent necessary to pay the Senior Indebtedness
in full in cash or cash equivalents or in any other form acceptable to the
holders of Senior Indebtedness, and the Company may be unable to meet its
obligations fully with respect to the Notes.
Each Guarantee of a Guarantor is an unsecured senior subordinated obligation
of such Guarantor, ranking pari passu with, or senior in right of payment to,
all other existing and future Indebtedness of such Guarantor that is expressly
subordinated to Senior Guarantor Indebtedness. The Indebtedness evidenced by
the Guarantees is subordinated to Senior Guarantor Indebtedness to the same
extent as the Notes are subordinated to Senior Indebtedness and during any
period when payment on the Notes is blocked by Designated Senior Indebtedness,
payment on the Guarantees is similarly blocked.
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"Senior Indebtedness" means the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding) on any Indebtedness of the Company
(other than as otherwise provided in this definition), whether outstanding on
the date of the Original Indenture or thereafter created, incurred or assumed,
and whether at any time owing, actually or contingent, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
(i) the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy laws whether or not allowable as a claim
in such proceeding) and all other obligations of every nature of the Company
from time to time owed to the lenders (or their agent) under the Credit
Agreement; provided, however, that any Indebtedness under any refinancing,
refunding or replacement of the Credit Agreement shall not constitute Senior
Indebtedness to the extent that the Indebtedness thereunder is by its express
terms subordinate to any other Indebtedness of the Company and (ii)
Indebtedness under Interest Rate Agreements. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (i) Indebtedness evidenced by the
Notes, (ii) Indebtedness that is subordinate or junior in right of payment to
any Indebtedness of the Company, (iii) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 United
States Code, is without recourse to the Company, (iv) Indebtedness which is
represented by Redeemable Capital Stock, (v) any liability for foreign,
federal, state, local or other taxes owed or owing by the Company to the
extent such liability constitutes Indebtedness, (vi) Indebtedness of the
Company to a Subsidiary or any other Affiliate of the Company or any of such
Affiliate's subsidiaries, (vii) that portion of any Indebtedness which at the
time of issuance is issued in violation of the Indenture and (viii)
Indebtedness owed by the Company for compensation to employees or for
services.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under the
Credit Agreement and (ii) any other Senior Indebtedness which is incurred
pursuant to an agreement (or series of related agreements) simultaneously
entered into providing for Indebtedness, or commitments to lend, of at least
$30,000,000 at the time of determination and is specifically designated in the
instrument evidencing such Senior Indebtedness or the agreement under which
such Senior Indebtedness arises as "Designated Senior Indebtedness" by the
Company.
"Senior Guarantor Indebtedness" means the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of the Original Indenture or thereafter created,
incurred or assumed, and whether at any time owing, actually or contingent,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to any
Guarantee. Without limiting the generality of the foregoing, "Senior Guarantor
Indebtedness" shall include the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy laws whether or not
allowable as a claim in such proceeding) and all other obligations of every
nature of any Guarantor from time to time owed to the lenders (or their agent)
under the Credit Agreement; provided, however, that any Indebtedness under any
refinancing, refunding or replacement of the Credit Agreement shall not
constitute Senior Guarantor Indebtedness to the extent that the Indebtedness
thereunder is by its express terms subordinate to any other Indebtedness of
any Guarantor. Notwithstanding the foregoing, "Senior Guarantor Indebtedness"
shall not include (i) Indebtedness evidenced by the Guarantees, (ii)
Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of any Guarantor, (iii) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 United
States Code, is without
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recourse to any Guarantor, (iv) Indebtedness which is represented by
Redeemable Capital Stock, (v) any liability for foreign, federal, state, local
or other taxes owed or owing by any Guarantor to the extent such liability
constitutes Indebtedness, (vi) Indebtedness of any Guarantor to a Subsidiary
or any other Affiliate of the Company or any of such Affiliate's subsidiaries,
(vii) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture and (viii) Indebtedness owed by any Guarantor
for compensation to employees or for services.
As of August 31, 1996, on a pro forma basis, after giving effect to the sale
of the Old Notes and application of the net proceeds therefrom, the aggregate
amount of outstanding Senior Indebtedness would have been approximately $220.4
million, the aggregate amount of outstanding Pari Passu Indebtedness would
have been $130.0 million and the aggregate amount of outstanding Senior
Guarantor Indebtedness would have been approximately $219.4 million (including
$218.8 million of outstanding indebtedness representing guarantees of Senior
Indebtedness). See "Risk Factors--Subordination of the Notes and the
Guarantees; Asset Encumbrances" and "Capitalization."
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness.
(a) The Company will not, and will not permit any of its Subsidiaries to,
create, issue, assume, guarantee, or otherwise in any manner become directly
or indirectly liable for or with respect to or otherwise incur (collectively,
"incur") any Indebtedness (including any Acquired Indebtedness), except that
the Company and any Guarantor may incur Indebtedness (including any Acquired
Indebtedness) and any Subsidiary that is not a Guarantor may incur Acquired
Indebtedness if, in each case, the Consolidated Fixed Charge Coverage Ratio
for the Company for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness taken as one period (and after giving pro
forma effect to (i) the incurrence of such Indebtedness and (if applicable)
the application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of
such proceeds occurred, at the beginning of such four-quarter period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company
and its Subsidiaries since the first day of such four-quarter period as if
such Indebtedness was incurred, repaid or retired at the beginning of such
four-quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four- quarter
period); (iii) in the case of Acquired Indebtedness, the related acquisition
as if such acquisition occurred at the beginning of such four quarter period;
and (iv) any acquisition or disposition by the Company and its Subsidiaries of
any company or any business or any assets out of the ordinary course of
business, whether by merger, stock purchase or sale or asset purchase or sale,
as if such acquisition or disposition occurred at the beginning of such four
quarter period or any related repayment of Indebtedness, in each case since
the first day of such four-quarter period, assuming such acquisition or
disposition had been consummated on the first day of such four-quarter period)
is at least equal to 2.25:1.00. (Section 1008)
(b) The foregoing limitation will not apply to the incurrence of any of the
following (collectively "Permitted Indebtedness"):
(i) Indebtedness of the Company and any Subsidiary under the Credit
Agreement in an aggregate principal amount at any one time outstanding not
to exceed (x) $50,000,000 under any term loans made pursuant thereto, minus
all principal payments made in respect of any term loans, (y) $100,000,000
under any revolving credit facility thereunder and (z) $28,200,000 of
"Letter of Credit Liabilities" (as defined in the Credit Agreement as in
effect on the date of the Original Indenture) in respect to the Barton
Letter of Credit, less any reduction on such "Letter of
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Credit Liabilities" (whether through payments or reductions of the face
amount of the Barton Letter of Credit);
(ii) Indebtedness of the Company pursuant to the Notes and Indebtedness
of any Guarantor pursuant to a Guarantee;
(iii) Indebtedness of the Company or any Subsidiary outstanding on the
date of the Indenture and listed on Schedule I thereto;
(iv) Indebtedness of the Company owing to a Subsidiary; provided that any
Indebtedness of the Company owing to a Subsidiary that is not a Guarantor
is made pursuant to an intercompany note in the form attached to the
Indenture and is subordinated in right of payment from and after such time
as the Notes shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Notes; provided further that any disposition, pledge
or transfer of any such Indebtedness to a Person (other than a disposition,
pledge or transfer to a Subsidiary or a pledge to or for the benefit of the
lenders under the Credit Agreement) shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (iv);
(v) Indebtedness of a Wholly Owned Subsidiary owing to the Company or
another Wholly Owned Subsidiary; provided that, with respect to
Indebtedness owing to a Wholly Owned Subsidiary that is not a Guarantor,
(x) any such Indebtedness is made pursuant to an intercompany note in the
form attached to the Indenture and (y) any such Indebtedness shall be
subordinated in right of payment from and after such time as the
obligations under the Guarantee by such Wholly Owned Subsidiary shall
become due and payable to the payment and performance of such Wholly Owned
Subsidiary's obligations under its Guarantee; provided further that (a) any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than a disposition, pledge or transfer to the Company or a Wholly Owned
Subsidiary or a pledge to or for the benefit of the lenders under the
Credit Agreement) shall be deemed to be an incurrence of such Indebtedness
by the obligor not permitted by this clause (v), and (b) any transaction
pursuant to which any Wholly Owned Subsidiary, which has Indebtedness owing
to the Company or any other Wholly Owned Subsidiary, ceases to be a Wholly
Owned Subsidiary shall be deemed to be the incurrence of Indebtedness by
such Wholly Owned Subsidiary that is not permitted by this clause (v);
(vi) guarantees of any Subsidiary made in accordance with the provisions
of "--Limitation on Issuances of Guarantees of and Pledges for
Indebtedness";
(vii) obligations of the Company entered into in the ordinary course of
business pursuant to Interest Rate Agreements designed to protect the
Company or any Subsidiary against fluctuations in interest rates in respect
of Indebtedness of the Company or any of its Subsidiaries, as long as such
obligations at the time incurred do not exceed the aggregate principal
amount of such Indebtedness then outstanding or in good faith anticipated
to be outstanding within 90 days of such incurrence;
(viii) any renewals, extensions, substitutions, refundings, refinancings
or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the
aggregate principal amount of Indebtedness represented thereby is not
increased by such refinancing plus the lesser of (1) the stated amount of
any premium, interest or other payment required to be paid in connection
with such a refinancing pursuant to the terms of the Indebtedness being
refinanced or (2) the amount of premium, interest or other payment actually
paid at such time to refinance the Indebtedness, plus, in either case, the
amount of expenses of the Company incurred in
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connection with such refinancing and, in the case of Pari Passu
Indebtedness or Subordinated Indebtedness, such refinancing does not reduce
the Average Life to Stated Maturity or the Stated Maturity of such
Indebtedness; and
(ix) Indebtedness, in addition to that described in clauses (i) through
(viii) of this definition of "Permitted Indebtedness," and any renewals,
extensions, substitutions, refinancings or replacements of such
Indebtedness, not to exceed $25,000,000 outstanding at any one time in the
aggregate.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Company's Capital Stock (other than dividends or
distributions payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire such Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value, directly
or indirectly, any shares of the Capital Stock of the Company or any
Affiliate thereof (other than any Wholly Owned Subsidiary of the Company)
or options, warrants or other rights to acquire such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease,
retire or otherwise acquire for value, prior to any scheduled principal
payment, sinking fund or maturity, any Pari Passu Indebtedness or
Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock of
any Subsidiary to any Person (other than the Company or any of its Wholly
Owned Subsidiaries) or purchase, redeem or otherwise acquire or retire for
value any Capital Stock of any Subsidiary held by any Person (other than
the Company or any of its Wholly Owned Subsidiaries);
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Subsidiary of the Company); or
(vi) make any Investment in any Person (other than any Permitted
Investments)
(any of the foregoing payments described in clauses (i) through (vi), other
than any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by
the Board of Directors of the Company, whose determination shall be conclusive
and evidenced by a board resolution), (1) no Default or Event of Default shall
have occurred and be continuing and such Restricted Payment shall not be an
event which is, or after notice or lapse of time or both, would be, an "event
of default" under the terms of any Indebtedness of the Company or its
Subsidiaries; (2) immediately before and immediately after giving effect to
such transaction on a pro forma basis, the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
provisions described under "--Limitation on Indebtedness"; and (3) the
aggregate amount of all such Restricted Payments declared or made after the
date of the Original Indenture does not exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on the
first day of the Company's fiscal quarter commencing prior to the date of
the Original Indenture and ending on the last day of the Company's last
fiscal quarter ending prior to the date of the Restricted Payment (or, if
such aggregate cumulative Consolidated Net Income shall be a loss, minus
100% of such loss);
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(B) the aggregate Net Cash Proceeds received after the date of the
Original Indenture by the Company from the issuance or sale (other than to
any of its Subsidiaries) of its shares of Qualified Capital Stock or any
options, warrants or rights to purchase such shares of Qualified Capital
Stock of the Company (except, in each case, to the extent such proceeds are
used to purchase, redeem or otherwise retire Capital Stock or Subordinated
Indebtedness as set forth below);
(C) the aggregate Net Cash Proceeds received after the date of the
Original Indenture by the Company (other than from any of its Subsidiaries)
upon the exercise of any options or warrants to purchase shares of
Qualified Capital Stock of the Company; and
(D) the aggregate Net Cash Proceeds received after the date of the
Original Indenture by the Company from debt securities or Redeemable
Capital Stock that have been converted into or exchanged for Qualified
Capital Stock of the Company to the extent such debt securities or
Redeemable Capital Stock are originally sold for cash plus the aggregate
Net Cash Proceeds received by the Company at the time of such conversion or
exchange.
(b) Notwithstanding the foregoing, and in the case of clauses (ii), (iii)
and (iv) below, so long as there is no Default or Event of Default continuing,
the foregoing provisions shall not prohibit the following actions (clauses (i)
through (iv) being referred to as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (a) of this Section and such
payment shall be deemed to have been paid on such date of declaration for
purposes of the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or retirement of
any shares of any class of Capital Stock of the Company in exchange for
(including any such exchange pursuant to the exercise of a conversion right
or privilege in connection therewith cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the Net Cash Proceeds of, a
substantially concurrent issue and sale for cash (other than to a
Subsidiary) of other shares of Qualified Capital Stock of the Company;
provided that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of paragraph (a) of
this Section;
(iii) any repurchase, redemption, defeasance, retirement, refinancing or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the net proceeds of, a
substantially concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Capital Stock of the Company,
provided that the Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of paragraph (a) of
this Section; and
(iv) the repurchase, redemption, defeasance, retirement, refinancing or
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing")
through the issuance of new Subordinated Indebtedness of the Company,
provided that any such new Subordinated Indebtedness (1) shall be in a
principal amount that does not exceed the principal amount so refinanced
(or, if such Subordinated Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration or
acceleration thereof, then such lesser amount as of the date of
determination), plus the lesser of (I) the stated amount of any premium,
interest or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or
(II) the amount of premium, interest or other payment actually paid at such
time to refinance the Indebtedness, plus, in either case, the amount of
expenses of the Company incurred in connection with such refinancing; (2)
has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the Notes; (3) has a Stated Maturity for its
final
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scheduled principal payment later than the Stated Maturity for the final
scheduled principal payment of the Notes; and (4) is expressly subordinated
in right of payment to the Notes at least to the same extent as the
Indebtedness to be refinanced. (Section 1009)
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property
or services) with any Affiliate of the Company (other than the Company or a
Wholly Owned Subsidiary) unless (i) such transaction or series of transactions
is in writing on terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party, (ii) with
respect to any transaction or series of transactions involving aggregate
payments in excess of $5,000,000, the Company delivers an officers'
certificate to the Trustee certifying that such transaction or series of
related transactions complies with clause (i) above and such transaction or
series of related transactions has been approved by the Board of Directors of
the Company, and (iii) with respect to a transaction or series of related
transactions involving aggregate value in excess of $10,000,000, the Company
delivers to the Trustee an opinion of an independent investment banking firm
of national standing stating that the transaction or series of transactions is
fair to the Company or such Subsidiary; provided, however, that this provision
shall not apply to any transaction with an officer or director of the Company
entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any officer or director of the Company).
(Section 1010)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit any Guarantor to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinate in right of payment to any Indebtedness of
the Company or such Guarantor, as the case may be, unless such Indebtedness is
also pari passu with the Notes or the Guarantee of such Guarantor or
subordinate in right of payment to the Notes or such Guarantee to at least the
same extent as the Notes or such Guarantee are subordinate in right of payment
to Senior Indebtedness or Senior Guarantor Indebtedness, as the case may be,
as set forth in the Indenture. (Section 1011)
Limitation on Liens. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, incur, affirm or suffer to
exist any Lien of any kind upon any of its property or assets (including any
intercompany notes), owned at the date of the Indenture or acquired after the
date of the Indenture, or any income or profits therefrom, except if the Notes
(or a Guarantee, in the case of Liens of a Guarantor) are directly secured
equally and ratably with (or prior to in the case of Liens with respect to
Subordinated Indebtedness or Indebtedness of a Guarantor subordinated in right
of payment to any Guarantee) the obligation or liability secured by such Lien,
excluding, however, from the operation of the foregoing any of the following:
(a) any Lien existing as of the date of the Indenture;
(b) any Lien arising by reason of (1) any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (2)
taxes not yet delinquent or which are being contested in good faith; (3)
security for payment of workers' compensation or other insurance; (4) good
faith deposits in connection with tenders, leases, contracts (other than
contracts for the payment of money); (5) zoning restrictions, easements,
licenses, reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor irregularities of title (and with
respect to leasehold interests, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist and arising by,
through or under a landlord or owner of the leased property, with or without
consent of the lessee), none of which materially impairs the use of any
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parcel of property material to the operation of the business of the Company or
any Subsidiary or the value of such property for the purpose of such business;
(6) deposits to secure public or statutory obligations, or in lieu of surety
or appeal bonds; (7) certain surveys, exceptions, title defects, encumbrances,
easements, reservations of, or rights of others for, rights of way, sewers,
electric lines, telegraph or telephone lines and other similar purposes or
zoning or other restrictions as to the use of real property not interfering
with the ordinary conduct of the business of the Company or any of its
Subsidiaries; or (8) operation of law in favor of mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof;
(c) any Lien now or hereafter existing on property of the Company or any
Guarantor securing Senior Indebtedness or Senior Guarantor Indebtedness, in
each case which Indebtedness is permitted under the provisions of "--
Limitation on Indebtedness" and provided that the provisions described under
"--Limitation on Issuances of Guarantees of and Pledges for Indebtedness" are
complied with;
(d) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Subsidiary, in each case which Indebtedness
is permitted under the provisions of "Limitation on Indebtedness"; provided
that any such Lien only extends to the assets that were subject to such lien
securing such Acquired Indebtedness prior to the related transaction by the
Company or its Subsidiaries; and
(e) any extension, renewal, refinancing or replacement, in whole or in part,
of any Lien described in the foregoing clauses (a) through (d) so long as the
amount of security is not increased thereby. (Section 1012)
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, consummate an Asset Sale
unless (i) at least 75% of the proceeds from such Asset Sale are received in
cash and (ii) the Company or such Subsidiary receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the shares
or assets sold (other than in the case of an involuntary Asset Sale, as
determined by the Board of Directors of the Company and evidenced in a board
resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to repay permanently any Senior Indebtedness or Senior
Guarantor Indebtedness then outstanding as required by the terms thereof, or
the Company determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Senior Indebtedness or Senior Guarantor Indebtedness or if
no such Senior Indebtedness or Senior Guarantor Indebtedness is then
outstanding, then the Company may within 12 months of the Asset Sale, invest
the Net Cash Proceeds in other properties and assets that (as determined by
the Board of Directors of the Company) replace the properties and assets that
were the subject of the Asset Sale or in properties and assets that will be
used in the businesses of the Company or its Subsidiaries existing on the date
of the Original Indenture or reasonably related thereto. The amount of such
Net Cash Proceeds neither used to permanently repay or prepay Senior
Indebtedness or Senior Guarantor Indebtedness nor used or invested as set
forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $10,000,000 or more,
the Company shall apply the Excess Proceeds to the repayment of the Notes and
any Pari Passu Indebtedness required to be repurchased under the instrument
governing such Pari Passu Indebtedness as follows: (a) the Company shall make
an offer to purchase (an "Offer") from all holders of the Notes in accordance
with the procedures set forth in the Indenture in the maximum principal amount
(expressed as a multiple of $1,000) of Notes that may be purchased out of an
amount (the "Note Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes, and the denominator of which is the sum of the
outstanding
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principal amount of the Notes and such Pari Passu Indebtedness (subject to
proration in the event such amount is less than the aggregate Offered Price
(as defined) of all Notes tendered) and (b) to the extent required by such
Pari Passu Indebtedness to permanently reduce the principal amount of such
Pari Passu Indebtedness, the Company shall make an offer to purchase or
otherwise repurchase or redeem Pari Passu Indebtedness (a "Pari Passu Offer")
in an amount (the "Pari Passu Debt Amount") equal to the excess of the Excess
Proceeds over the Note Amount; provided that in no event shall the Pari Passu
Debt Amount exceed the principal amount of such Pari Passu Indebtedness plus
the amount of any premium required to be paid to repurchase such Pari Passu
Indebtedness. The offer price shall be payable in cash in an amount equal to
100% of the principal amount of the Notes plus accrued and unpaid interest, if
any, to the date (the "Offer Date") such Offer is consummated (the "Offered
Price"), in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate Offered Price of the Notes tendered pursuant to the
Offer is less than the Note Amount relating thereto or the aggregate amount of
Pari Passu Indebtedness that is purchased is less than the Pari Passu Debt
Amount (the amount of such shortfall, if any, constituting a "Deficiency"),
the Company shall use such Deficiency in the business of the Company and its
Subsidiaries. Upon completion of the purchase of all the Notes tendered
pursuant to an Offer and the purchase of the Pari Passu Indebtedness pursuant
to a Pari Passu Offer, the amount Of Excess Proceeds, if any, shall be reset
at zero.
(d) Whenever the Excess Proceeds received by the Company exceed $7,000,000,
such Excess Proceeds shall be set aside by the Company in a separate account
pending (i) deposit with the depositary or a paying agent of the amount
required to purchase the Notes or Pari Passu Indebtedness tendered in an Offer
or a Pari Passu Offer, (ii) delivery by the Company of the Offered Price to
the holders of the Notes or Pari Passu Indebtedness tendered in an Offer or a
Pari Passu Offer and (iii) application, as set forth above, of Excess Proceeds
in the business of the Company and its Subsidiaries. Such Excess Proceeds may
be invested in Temporary Cash Investments, provided that the maturity date of
any such investment made after the amount of Excess Proceeds exceeds
$7,000,000 shall not be later than the earlier of three months or the Offer
Date, if known. The Company shall be entitled to any interest or dividends
accrued, earned or paid on such Temporary Cash Investments, provided that the
Company shall not withdraw such interest from the separate account if an Event
of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause (c)
above, the Notes shall be purchased by the Company, at the option of the
holder thereof, in whole or in part in integral multiples of $1,000, on a date
that is not earlier than 45 days and not later than 60 days from the date the
notice is given to holders, or such later date as may be necessary for the
Company to comply with the requirements under the Exchange Act, subject to
proration in the event the Note Amount is less than the aggregate Offered
Price of all Notes tendered.
(f) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable
securities laws or regulations in connection with an Offer.
(g) The Company will not, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under (i) Indebtedness as in effect on the date of the Indenture as
such Indebtedness may be refinanced from time to time, provided that such
restrictions are no less favorable to the Holders of Notes than those existing
on the date of the Indenture or (ii) any Senior Indebtedness and any Senior
Guarantor Indebtedness) that would materially impair the ability of the
Company to make an Offer to purchase the Notes or, if such Offer is made, to
pay for the Notes tendered for purchase. (Section 1013)
Limitation on Issuances of Guarantees of and Pledges for Indebtedness. (a)
The Company will not permit any Subsidiary, other than the Guarantors,
directly or indirectly, to secure the payment of any Senior Indebtedness of
the Company and the Company will not, and will not permit a Subsidiary
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to, pledge any intercompany notes representing obligations of any Subsidiary
(other than a Guarantor) to secure the payment of any Senior Indebtedness
unless (x) such Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for a guarantee of payment of the Notes
by such Subsidiary, which guarantee shall be on the same terms as the
guarantee of the Senior Indebtedness (if a guarantee of Senior Indebtedness is
granted by any such Subsidiary) except that the guarantee of the Notes need
not be secured and shall be subordinated to the claims against such Subsidiary
in respect of Senior Indebtedness to the same extent as the Notes are
subordinated to Senior Indebtedness of the Company under the Indenture and (y)
such Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of any rights of reimbursement, indemnity or subrogation
or any other rights the Company or any other Subsidiary has as a result of any
payment by such Subsidiary under its guarantee.
(b) The Company will not permit any Subsidiary, other than the Guarantors,
directly or indirectly to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company unless (i) such
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Indenture providing for a guarantee of the Notes on the same terms as the
guarantee of such Indebtedness except that (A) such guarantee need not be
secured unless required pursuant to""--Limitation on Liens," (B) if the Notes
are subordinated in right of payment to such Indebtedness, the guarantee under
the supplemental indenture shall be subordinated to the guarantee of such
Indebtedness to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture and (C) if such Indebtedness is by its terms
expressly subordinated to the Notes, any such assumption, guarantee or other
liability of such Subsidiary with respect to such Indebtedness shall be
subordinated to such Subsidiary's assumption, guarantee or other liability
with respect to the Notes to the same extent as such Indebtedness is
subordinated to the Notes and (ii) such Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Subsidiary as a result of any payment by such Subsidiary
under its Guarantee.
(c) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each
such Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing,
any Guarantee by a Subsidiary of the Notes shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon (i)
any sale, exchange or transfer, to any Person not an Affiliate of the Company,
of all of the Company's Capital Stock in, or all or substantially all the
assets of, such Subsidiary, which is in compliance with the terms of the
Indenture or (ii) the release by the holders of the Indebtedness of the
Company described in clauses (a) and (b) above of their security interest or
their guarantee by such Subsidiary (including any deemed release upon payment
in full of all obligations under such Indebtedness), at a time when (A) no
other Indebtedness of the Company has been secured or guaranteed by such
Subsidiary, as the case may be, or (B) the holders of all such other
Indebtedness which is secured or guaranteed by such Subsidiary also release
their security interest in, or guarantee by, such Subsidiary (including any
deemed release upon payment in full of all obligations under such
Indebtedness). (Section 1014)
Restriction on Transfer of Assets. The Company will not sell, convey,
transfer or otherwise dispose of its assets or property to any of its
Subsidiaries (other than to the Guarantors), except for sales, conveyances,
transfers or other dispositions made in the ordinary course of business. For
purposes of this provision, any sale, conveyance, transfer, lease or other
disposition of property or assets, having a Fair Market Value in excess of (a)
$2,000,000 for any sale, conveyance, transfer or disposition or series of
related sales, conveyances, transfers, leases or dispositions and (b)
$10,000,000 in the aggregate for all such sales, conveyances, transfers,
leases or dispositions in any fiscal year of the Company shall not be
considered "in the ordinary course of business." (Section 1015)
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Purchase of Notes Upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes shall have the right to require
that the Company purchase such holder's Notes in whole or in part in integral
multiples of $1,000, at a purchase price (the "Change of Control Purchase
Price") in cash in an amount equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Purchase Date"), pursuant to the offer described below (the
"Change of Control Offer") and the other procedures set forth in the
Indenture.
Within 15 days following any Change of Control, the Company shall notify the
Trustee thereof and give written notice of such Change of Control to each
holder of Notes by first-class mail, postage prepaid, at his address appearing
in the security register, stating, among other things, the purchase price and
that the purchase date shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed, or such later date as
is necessary to comply with requirements under the Exchange Act; that any Note
not tendered will continue to accrue interest; that, unless the Company
defaults in the payment of the purchase price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest after
the Change of Control Purchase Date; and certain other procedures that a
holder of Notes must follow to accept a Change of Control Offer or to withdraw
such acceptance. (Section 1016)
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. The Credit Facility
prohibits the purchase of the Notes by the Company prior to full repayment of
indebtedness under the Credit Facility and, upon a Change of Control, all
amounts outstanding under the Credit Facility become due and payable. There
can be no assurance that in the event of a Change in Control the Company will
be able to obtain the necessary consents from the lenders under the Credit
Facility to consummate a Change of Control Offer. The failure of the Company
to make or consummate the Change of Control Offer or pay the Change of Control
Purchase Price when due will result in an Event of Default and will give the
Trustee and the holders of the Notes the rights described under "--Events of
Default."
The definition of "Change of Control" in the Indenture is defined to mean
the occurrence of any of the following events: (i) any "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than Permitted Holders, is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have beneficial ownership of all shares that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 30% of the voting
power of the total outstanding Voting Stock of the Company voting as one
class, provided that the Permitted Holders "beneficially own" (as so defined)
a percentage of Voting Stock having a lesser percentage of the voting power
than such other Person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Company; (ii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose election to
such Board or whose nomination for election by the shareholders of the
Company, was approved by a vote of 66 2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of such Board of Directors then in office;
(iii) the Company consolidates with or merges with or into any Person or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates with or merges into or with the
Company, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company is changed into or exchanged for cash, securities
or other property, other than any such transaction where the outstanding
Voting Stock of the Company is not changed or
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exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock
of the surviving corporation which is not Redeemable Capital Stock or (y)
cash, securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company as a Restricted
Payment in accordance with "--Limitation on Restricted Payments" (and such
amount shall be treated as a Restricted Payment subject to the provisions in
the Indenture described under "--Limitation on Restricted Payments") and (B)
no "person" or "group" other than Permitted Holders owns immediately after
such transaction, directly or indirectly, more than the greater of (1) 30% of
the voting power of the total outstanding Voting Stock of the surviving
corporation voting as one class and (2) the percentage of such voting power of
the surviving corporation held, directly or indirectly, by Permitted Holders
immediately after such transaction; or (iv) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions described under "--
Consolidation, Merger, Sale of Assets."
"Permitted Holders" means as of the date of determination (i) Marvin Sands,
Richard Sands and Robert Sands; (ii) family members or the relatives of the
Persons described in clause (i); (iii) any trusts created for the benefit of
the Persons described in clauses (i), (ii) or (iv) or any trust for the
benefit of any such trust; or (iv) in the event of the incompetence or death
of any of the persons described in clauses (i) and (ii), such Person's estate,
executor, administrator, committee or other personal representative or
beneficiaries, in each case who at any particular date shall beneficially own
or have the right to acquire, directly or indirectly, Capital Stock of the
Company.
The term "all or substantially all" as used in the definition of "Change of
Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The definition of "Change of Control" is limited in scope. As a result the
provisions of the Indenture will not afford holders of Notes the right to
require the Company to purchase the Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction (including, in certain circumstances, an acquisition of the
Company by management or its affiliates) involving the Company that may
adversely affect holders of the Notes, if such transaction is not a
transaction defined as a Change of Control. A transaction involving the
Company's management or its affiliates, or a transaction involving a
recapitalization of the Company, will result in a Change of Control if it is
the type of transaction specified by such definition.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The Company will comply with the applicable tender offer rules, including
Rule 14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under Indebtedness as in effect on the date of the Indenture) that
would materially impair the ability of the Company to make a Change of Control
Offer to purchase the Notes or, if such Change of Control Offer is made, to
pay for the Notes tendered for purchase. (Section 1016)
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Limitation on Subsidiary Capital Stock. The Company will not permit any
Subsidiary of the Company to issue any Capital Stock, except for (i) Capital
Stock issued to and held by the Company or a Wholly Owned Subsidiary, and (ii)
Capital Stock issued by a Person prior to the time (A) such Person becomes a
Subsidiary, (B) such Person merges with or into a Subsidiary or (C) a
Subsidiary merges with or into such Person, provided that such Capital Stock
was not issued or incurred by such Person in anticipation of the type of
transaction contemplated by subclauses (A), (B) or (C). (Section 1017)
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not permit any of its
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 Subsidiary of the Company to (i) pay dividends or make any other
distribution on its Capital Stock, (ii) pay any Indebtedness owed to the
Company or a Subsidiary of the Company, (iii) make any Investment in the
Company or a Subsidiary of the Company or (iv) transfer any of its properties
or assets to the Company or any Subsidiary, except (a) any encumbrance or
restriction pursuant to an agreement in effect on the date of the Indenture
and listed as a schedule thereto; (b) any encumbrance or restriction, with
respect to a Subsidiary that is not a Subsidiary of the Company on the date of
the Indenture, in existence at the time such Person becomes a Subsidiary of
the Company and, in the case of clauses (a) and (b), not incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary;
(c) any encumbrance or restriction existing under any agreement that extends,
renews, refinances or replaces the agreements containing the encumbrances or
restrictions in the foregoing clauses (a) and (b), or in this clause (c),
provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of the Notes
than those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced (except that an encumbrance or
restriction that is not more restrictive than those set forth in the Indenture
shall in any event be permitted); and (d) any encumbrance or restriction
created pursuant to an asset sale agreement, stock sale agreement or similar
instrument pursuant to which an Asset Sale permitted under "--Limitation on
Sale of Assets" is to be consummated, so long as such restriction or
encumbrance shall be effective only for a period from the execution and
delivery of such agreement or instrument through a termination date not later
than 270 days after such execution and delivery. (Section 1018)
Provision of Financial Statements. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Sections 13(a) or 15(d)
if the Company were so subject, such documents to be filed with the Commission
on or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company were
so subject. The Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders, as their names and
addresses appear in the security register, without cost to such Holders and
(ii) file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act if the
Company were subject to such Sections and (y) if filing such documents by the
Company with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective Holder at the
Company's cost. (Section 1019)
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
and partnership existence; (v) payment of taxes and other claims; (vi)
maintenance of properties; and (vii) maintenance of insurance.
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CONSOLIDATION, MERGER, SALE OF ASSETS
The Company shall not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to any Person or
group of affiliated Persons, or permit any of its Subsidiaries to enter into
any such transaction or transactions if such transaction or transactions, in
the aggregate, would result in a sale, assignment, conveyance, transfer, lease
or disposal of all or substantially all of the properties and assets of the
Company and its Subsidiaries on a Consolidated basis to any other Person or
group of affiliated Persons, unless at the time and after giving effect
thereto: (i) either (a) the Company shall be the continuing corporation or (b)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by sale, assignment,
conveyance, transfer, lease or disposition of all or substantially all of the
properties and assets of the Company and its Subsidiaries on a Consolidated
basis (the "Surviving Entity") shall be a corporation duly organized and
validly existing under the laws of the United States of America, any state
thereof or the District of Columbia and such Person assumes, by a supplemental
indenture in a form reasonably satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture, and the
Indenture shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Consolidated Net Worth of
the Company (or the Surviving Entity if the Company is not the continuing
obligor under the Indenture) is equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; (iv) immediately
before and immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred on the first day of the
four-quarter period immediately prior to the consummation of such transaction
with the appropriate adjustments with respect to the transaction being
included in such pro forma calculation), the Company (or the Surviving Entity
if the Company is not the continuing obligor under the Indenture) could incur
$1.00 of additional Indebtedness under the provisions of "--Certain
Covenants--Limitation on Indebtedness" (other than Permitted Indebtedness);
(v) each Guarantor, if any, unless it is the other party to the transactions
described above, shall have by supplemental indenture confirmed that its
Guarantee shall apply to such Person's obligations under the Indenture and the
Notes; (vi) if any of the property or assets of the Company or any of its
Subsidiaries would thereupon become subject to any Lien, the provisions of "--
Certain Covenants--Limitation on Liens" are complied with; and (vii) the
Company or the Surviving Entity shall have delivered, or caused to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each to the
effect that such consolidation, merger, transfer, sale, assignment,
conveyance, lease or other transaction and the supplemental indenture in
respect thereto comply with the Indenture and that all conditions precedent
herein provided for relating to such transaction have been complied with.
(Section 801(a))
Each Guarantor shall not, and the Company will not permit a Guarantor to, in
a single transaction or through a series of related transactions merge or
consolidate with or into any other corporation (other than the Company or any
other Guarantor) or other entity, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets on
a Consolidated basis to any entity (other than the Company or any other
Guarantor) unless at the time and after giving effect thereto: (i) either (1)
such Guarantor shall be the continuing corporation or partnership or (2) the
entity (if other than such Guarantor) formed by such consolidation or into
which such Guarantor is merged or the entity which acquires by sale,
assignment, conveyance, transfer, lease or disposition the properties and
assets of such Guarantor shall be a corporation duly organized and validly
existing under the laws of the United States, any state thereof or the
District of Columbia and shall expressly assume by a supplemental indenture,
executed and delivered to the Trustee, in a form reasonably satisfactory to
the Trustee, all the obligations of such Guarantor under its Guarantee and the
Indenture; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of
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Default shall have occurred and be continuing; and (iii) such Guarantor shall
have delivered to the Trustee an officers' certificate and an opinion of
counsel in form and substance reasonably satisfactory to the Trustee, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or disposition and such supplemental indenture comply with the
Indenture, and thereafter all obligations of the predecessor shall terminate.
The provisions of this paragraph shall not apply to any transaction (including
any Asset Sale made in accordance with "--Certain Covenants--Limitation on
Sale of Assets") with respect to any Guarantor if the Guarantee of such
Guarantor is released in connection with such transaction in accordance with
subparagraph (c) of "--Certain Covenants--Limitation on Issuances of
Guarantees of and Pledges for Indebtedness" and Section 1414 of the Indenture.
(Section 801(b))
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs
in which the Company or any Guarantor is not the continuing corporation, the
successor Person formed or remaining shall succeed to, and be substituted for,
and may exercise every right and power of, the Company or such Guarantor, as
the case may be, and the Company or such Guarantor, as the case may be, would
be discharged from all obligations and covenants under the Indenture and the
Notes. (Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any interest on any Note
when it becomes due and payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the principal of (or
premium, if any, on) any Note at its Maturity (upon acceleration, optional
or mandatory redemption, required repurchase or otherwise);
(iii) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under the Indenture
(other than a default in the performance, or breach, of a covenant or
agreement which is specifically dealt with in clauses (i) or (ii) or in
clauses (b), (c) and (d) of this clause (iii)) and such default or breach
shall continue for a period of 30 days after written notice has been given,
by certified mail, (x) to the Company by the Trustee or (y) to the Company
and the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding Notes, specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under the Indenture; (b) there shall be a default in the
performance or breach of the provisions described in "--Consolidation,
Merger, Sale of Assets"; (c) the Company shall have failed to make or
consummate an Offer in accordance with the provisions of "--Certain
Covenants--Limitation on Sale of Assets," or (d) the Company shall have
failed to make or consummate a Change of Control Offer in accordance with
the provisions of "--Certain Covenants--Purchase of Notes Upon a Change of
Control";
(iv) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or any
Subsidiary then has outstanding Indebtedness in excess of $10,000,000 in
the aggregate and, if not already matured at its final maturity in
accordance with its terms, such Indebtedness shall have been accelerated;
(v) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and effect
and enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and any such Guarantee;
(vi) one or more judgments, orders or decrees for the payment of money in
excess of $5,000,000, either individually or in the aggregate (net of
amounts covered by insurance, bond,
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surety or similar instrument), shall be entered against the Company, any
Guarantor, any Subsidiary or any of their respective properties and shall
not be discharged and either (a) any creditor shall have commenced an
enforcement proceeding upon such judgment, order or decree or (b) there
shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of an appeal or otherwise,
shall not be in effect;
(vii) any holder or holders of at least $10,000,000 in aggregate
principal amount of Indebtedness of the Company, any Guarantor or any
Subsidiary after a default under such Indebtedness shall notify the Trustee
of the intended sale or disposition of any assets of the Company, any
Guarantor or any Subsidiary that have been pledged to or for the benefit of
such holder or holders to secure such Indebtedness or shall commence
proceedings, or take any action (including by way of set-off), to retain in
satisfaction of such Indebtedness or to collect on, seize, dispose of or
apply in satisfaction of Indebtedness, assets of the Company, any Guarantor
or any Subsidiary (including funds on deposit or held pursuant to lock-box
and other similar arrangements);
(viii) there shall have been the entry by a court of competent
jurisdiction of (a) a decree or order for relief in respect of the Company,
any Guarantor or any Subsidiary in an involuntary case or proceeding under
any applicable Bankruptcy Law or (b) a decree or order adjudging the
Company, any Guarantor or any Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company, any Guarantor or any Subsidiary under any applicable federal
or state law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company, any
Guarantor or any Subsidiary or of any substantial part of their respective
properties, or ordering the winding up or liquidation of their affairs, and
any such decree or order for relief shall continue to be in effect, or any
such other decree or order shall be unstayed and in effect, for a period of
60 consecutive days; or
(ix) (a) the Company, any Guarantor or any Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any
other case or proceeding to be adjudicated bankrupt or insolvent, (b) the
Company, any Guarantor or any Subsidiary consents to the entry of a decree
or order for relief in respect of the Company, any Guarantor or such
Subsidiary in an involuntary case or proceeding under any applicable
Bankruptcy Law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, (c) the Company, any Guarantor or any Subsidiary
files a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, (d) the Company, any Guarantor
or any Subsidiary (x) consents to the filing of such petition or the
appointment of, or taking possession by, a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company, any
Guarantor or such Subsidiary or of any substantial part of their respective
properties, (y) makes an assignment for the benefit of creditors or (z)
admits in writing its inability to pay its debts generally as they become
due or (e) the Company, any Guarantor or any Subsidiary takes any corporate
action in furtherance of any such actions in this paragraph (ix). (Section
501)
If an Event of Default (other than as specified in clauses (viii) and (ix)
of the prior paragraph) shall occur and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may, and the Trustee at the request of such holders shall, declare
all unpaid principal of, premium, if any, and accrued interest on all the
Notes to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by the holders of the Notes); provided that so
long as the Credit Agreement is in effect, such declaration shall not become
effective until the earlier of (a) five business days after receipt of such
notice of acceleration from the holders or the Trustee by the agent under the
Credit Agreement or (b) acceleration of the Indebtedness under the Credit
Agreement. Thereupon such principal shall become immediately due and payable,
and the Trustee may, at its discretion, proceed to protect and enforce the
rights of the holders of Notes
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by appropriate judicial proceeding. If an Event of Default specified in clause
(viii) or (ix) of the prior paragraph occurs and is continuing, then all the
Notes shall ipso facto become and be immediately due and payable, in an amount
equal to the principal amount of the Notes, together with accrued and unpaid
interest, if any, to the date the Notes become due and payable, without any
declaration or other act on the part of the Trustee or any Holder. The Trustee
or, if notice of acceleration is given by the Holders, the Holders shall give
notice to the agent under the Credit Agreement of any such acceleration.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of Notes outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Notes, and (iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes; and (b) all
Events of Default, other than the non-payment of principal of the Notes which
have become due solely by such declaration of acceleration, have been cured or
waived; and (c) the rescission will not conflict with any judgment or decree.
(Section 502)
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may on behalf of the holders of all the Notes waive any past
defaults under the Indenture and its consequences, except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each Note
outstanding. (Section 513)
The Company is also required to notify the Trustee within five business days
of the occurrence of any Default. (Section 501)
The Trust Indenture Act of 1939 contains limitations on the rights of the
Trustee, should it become a creditor of the Company or any Guarantor, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
Trustee is permitted to engage in other transactions, provided that if it
acquires any conflicting interest it must eliminate such conflict upon the
occurrence of an Event of Default or else resign.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have the
obligations of the Company and any Guarantor and any other obligor upon the
Notes, if any, discharged with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations with respect
to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen 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 (iv) the
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 and any
Guarantor released with respect to certain covenants that are described in the
Indenture ("covenant defeasance") and any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes. In the event covenant defeasance occurs, certain events (not
including non-payment, enforceability of any Guarantee, bankruptcy and
insolvency events) described under "--Events of Default" will no longer
constitute an Event of Default with respect to the Notes. (Sections 401, 402
and 403)
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In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), 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 and discharge the principal of,
premium, if any, and interest on the outstanding Notes on the Stated Maturity
of such principal or installment of principal (or on any date after December
15, 1998 (such date being referred to as the "Defeasance Redemption Date"), if
when exercising either defeasance or covenant defeasance, the Company has
delivered to the Trustee an irrevocable notice to redeem all of the
outstanding Notes on the Defeasance Redemption Date); (ii) in the case of
defeasance, the Company shall have delivered to the Trustee an opinion of
independent counsel in the United States stating 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 in the United States 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 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 defeasance had not
occurred; (iii) in the case of covenant defeasance, the Company shall have
delivered to the Trustee an opinion of independent counsel in the United
States to the effect 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 or
insofar as clause (vii) or (viii) under the first paragraph under "--Events of
Default" are concerned, at any time during the period ending on the 91st day
after the date of deposit; (v) such defeasance or covenant defeasance shall
not cause the Trustee for the Notes to have a conflicting interest with
respect to any securities of the Company or any Guarantor; (vi) such
defeasance or covenant defeasance shall not result in a breach or violation
of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the Company or any Guarantor is a party or by
which it is bound; (vii) the Company shall have delivered to the Trustee an
opinion of independent counsel to the effect that (A) the trust funds will not
be subject to any rights of holders of Senior Indebtedness or Senior Guarantor
Indebtedness, including, without limitation, those arising under the Indenture
and (B) 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; (viii) 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
of the Notes or any Guarantee over the other creditors of the Company or any
Guarantor with the intent of defeating, hindering, delaying or defrauding
creditors of the Company, any Guarantor or others; (ix) no event or condition
shall exist that would prevent the Company from making payments of the
principal of, premium, if any, and interest on the Notes on the date of such
deposit or at any time ending on the 91st day after the date of such deposit;
and (x) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with. (Section 404)
SATISFACTION AND DISCHARGE
The Indenture shall cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when (a) either (i)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) cancelled or have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee cancelled or for cancellation (x) have become due and
payable, (y) will become due and payable at their Stated Maturity within one
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year, or (z) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company or any Guarantor has irrevocably deposited or caused to be
deposited with the Trustee funds in an amount sufficient to pay and discharge
the entire indebtedness on the Notes not theretofore delivered to the Trustee
cancelled or for cancellation, including principal of, premium, if any, and
accrued interest at such Stated Maturity or redemption date; (b) the Company
or any Guarantor has paid or caused to be paid all other sums payable under
the Indenture by the Company or any Guarantor; and (c) the Company has
delivered to the Trustee an officers' certificate and an opinion of counsel
each stating that (i) all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with and
(ii) such satisfaction and discharge will not result in a breach or violation
of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the Company or any Guarantor is a party or by
which the Company or any Guarantor is bound. (Section 1301)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture may be made by the Company,
each Guarantor, if any, and the Trustee with the consent of the Holders of not
less than a majority in aggregate outstanding principal amount of the Notes;
provided, however, that no such modification or amendment may, without the
consent of the holder of each outstanding Note affected thereby: (i) change
the Stated Maturity of the principal of, or any installment of interest on,
any Note or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or change the coin
or currency in which the principal of any Note or any premium or the interest
thereon is payable, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof; (ii) amend,
change or modify the obligation of the Company to make and consummate an Offer
with respect to any Asset Sale or Asset Sales in accordance with "--Certain
Covenants--Limitation on Sale of Assets" or the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of
Control in accordance with "--Certain Covenants--Purchase of Notes Upon a
Change of Control," including amending, changing or modifying any definitions
with respect thereto; (iii) reduce the percentage in principal amount of
outstanding Notes, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver; (iv) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past defaults or
relating to the waiver of certain covenants, except to increase the percentage
of outstanding Notes required for such actions or to provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the holder of each Note affected thereby; (v) except as otherwise
permitted under "--Consolidation, Merger, Sale of Assets," consent to the
assignment or transfer by the Company or any Guarantor of any of its rights
and obligations under the Indenture; or (vi) amend or modify any of the
provisions of the Indenture relating to the subordination of the Notes or any
Guarantee in any manner adverse to the holders of the Notes or any Guarantee.
(Section 902)
The holders of not less than a majority in aggregate principal amount of the
Notes outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1021)
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by, and construed
in accordance with the laws of the State of New York, without giving effect to
the conflicts of law principles thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made in same day funds. All payments of
principal and interest will be made by the Company in same day funds. The
Notes will trade in the Same-Day Funds
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Settlement System of The Depository Trust Company (the "Depositary" or "DTC")
until maturity, and secondary market trading activity for the Notes will
therefore settle in same day funds.
BOOK-ENTRY DELIVERY AND FORM
The Exchange Notes are to be issued in the form of one "Global Note". The
Global Note will be deposited on the date of the closing of the sale of the
Exchange Offer with the Trustee as custodian for the Depository Trust Company,
New York, New York ("DTC") and registered in the name of Cede & Co. or such
other nominee as DTC may designate. If any Holders elect to take physical
delivery of their certificates instead of holding their interest through the
Global Note (and thus are unable to trade through DTC), such certificates will
be issued in registered form without interest coupons ("Certificated Notes").
The Global Certificates. The Company expects that pursuant to procedures
established by DTC (i) upon deposit of the Global Note, DTC or its custodian
will credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the
accounts of persons who have accounts with DTC and (ii) ownership of
beneficial interests in the Global Note will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC or
its nominee (with respect to interest of participants) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Holders of the Notes may hold their interests
in the Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Notes represented by the Global Note for
all purposes under the Indenture and the Notes. No beneficial owner of an
interest in the Global Note will be able to transfer such interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
Payments of the principal of, premium (if any) and interest (including
liquidated damages) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest (including liquidated damages)
on, the Global Note will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of such Global Note as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Note held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of
Certificated Notes for any reason, including to sell Notes to persons in
states which require physical delivery of such Notes or to pledge such Notes,
such holder must transfer its interest in the Global Note in accordance with
the normal procedures of DTC and the procedures set forth in the Indenture.
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DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of,
and cause the same to be delivered to, such person or persons (or the nominee
of any thereof). In addition, if DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, the Company will issue Certificated
Notes in exchange for the Global Note.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person
that owns, directly or indirectly, 5% or more of such Person's Capital Stock
or any officer or director of any such Person or other Person or, with respect
to any natural Person, any person having a relationship with such Person by
blood, marriage or adoption not more remote than first cousin or (iii) any
other Person 10% or more of the voting Capital Stock of which are beneficially
owned or held directly or indirectly by such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
Sale and Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital
Stock of any Subsidiary; (ii) all or substantially all of the properties and
assets of any division or line of business of the Company or its Subsidiaries;
or (iii) any other properties or assets of the Company or any Subsidiary,
other than in the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include (x) any transfer of
properties and assets (A) that is governed by the first paragraph under "--
Consolidation, Merger, Sale of Assets" or (B) that is of the
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Company to any Wholly Owned Subsidiary, or of any Subsidiary to the Company or
any Wholly Owned Subsidiary in accordance with the terms of the Indenture or
(y) transfers of properties and assets in any given fiscal year with an
aggregate Fair Market Value of less than $1,000,000.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the
sum of the products of (a) the number of years from the date of determination
to the date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by
(ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States Federal or State law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization
or relief of debtors or any amendment to, succession to or change in any such
law.
"Barton Letter of Credit" means the "Barton Letter of Credit" issued to
American National Bank and Trust Company of Chicago, as escrowee, under the
Credit Agreement.
"Capital Lease Obligation" means any obligations of the Company and its
Subsidiaries on a Consolidated basis under any capital lease of real or
personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of the Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means Canandaigua Wine Company, Inc., a corporation incorporated
under the laws of Delaware, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter
"Company" shall mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss),
Consolidated Interest Expense, Consolidated Income Tax Expense and
Consolidated Non-cash Charges deducted in computing Consolidated Net Income
(Loss) in each case, for such period, of the Company and its Subsidiaries on a
Consolidated basis, all determined in accordance with GAAP to (b) the sum of
Consolidated Interest Expense for such period and cash and non-cash dividends
paid on any Preferred Stock of the Company during such period; provided that
(i) in making such computation, the Consolidated Interest Expense attributable
to interest on any Indebtedness computed on a pro forma basis and (A) bearing
a floating interest rate, shall be computed as if the rate in effect on the
date of computation had been the applicable rate for the entire period and (B)
which was not outstanding during the period for which the computation is being
made but which bears, at the option of the Company, a fixed or floating rate
of interest, shall be computed by applying at the option of the Company,
either the fixed or floating rate and (ii) in making such computation, the
Consolidated Interest Expense of the Company attributable to interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
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"Consolidated Income Tax Expense" means for any period, as applied to the
Company, the provision for federal, state, local and foreign income taxes of
the Company and its Consolidated Subsidiaries for such period as determined in
accordance with GAAP on a Consolidated basis.
"Consolidated Interest Expense" of the Company means, without duplication,
for any period, the sum of (a) the interest expense of the Company and its
Consolidated Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net cost under
interest rate contracts (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation and (iv) accrued interest,
plus (b) (i) the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by the Company during such
period and (ii) all capitalized interest of the Company and its Consolidated
Subsidiaries, in each case as determined in accordance with GAAP on a
Consolidated basis.
"Consolidated Net Income (Loss)" of the Company means, for any period, the
Consolidated net income (or loss) of the Company and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP on a
Consolidated basis, adjusted, to the extent included in calculating such net
income (loss), by excluding, without duplication, (i) all extraordinary gains
or losses (less all fees and expenses relating thereto), (ii) the portion of
net income (or loss) of the Company and its Consolidated Subsidiaries
allocable to minority interests in unconsolidated Persons to the extent that
cash dividends or distributions have not actually been received by the Company
or one of its Consolidated Subsidiaries, (iii) net income (or loss) of any
Person combined with the Company or any of its Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan, (v) net gains (but not losses) (less all fees
and expenses relating thereto) in respect of dispositions of assets other than
in the ordinary course of business, or (vi) the net income of any Subsidiary
to the extent that the declaration of dividends or similar distributions by
that Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the Consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its
subsidiaries, as determined in accordance with GAAP on a Consolidated basis.
"Consolidated Non-cash Charges" of the Company means, for any period, the
aggregate depreciation, amortization and other non-cash charges of the Company
and its Consolidated subsidiaries for such period, as determined in accordance
with GAAP (excluding any non-cash charge which requires an accrual or reserve
for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Credit Agreement" means the Credit Agreement, dated as of June 29, 1993,
between the Company, the Subsidiaries of the Company identified on the
signature pages thereof under the caption "Subsidiary Guarantors," the lenders
named therein and The Chase Manhattan Bank, as agent, including any ancillary
documents executed in connection therewith, as such agreement has and may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing). For all purposes under the Indenture, "Credit Agreement" shall
include any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements,
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supplements or any other modifications that increase the principal amount of
the Indebtedness or the commitments to lend thereunder and have been made in
compliance with the provisions of "--Certain Covenants--Limitation on
Indebtedness"; provided that, for purposes of the definition of "Permitted
Indebtedness," no such increase may result in the principal amount of
Indebtedness of the Company under the Credit Agreement exceeding the amount
permitted by subparagraph (b)(i) of "--Certain Covenants--Limitation on
Indebtedness."
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles in the United States, consistently applied,
which are in effect on the date of the Indenture.
"Guarantee" means the guarantee by any Guarantor of the Company's Indenture
Obligations pursuant to a guarantee given in accordance with the Indenture,
including the Guarantees by the Guarantors and any Guarantee delivered
pursuant to provisions of "--Certain Covenants--Limitation on Issuances of
Guarantees of and Pledges for Indebtedness."
"Guaranteed Debt" of any Person means, without duplication, all Indebtedness
of any other Person referred to in the definition of Indebtedness contained in
this Section guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Indebtedness or to advance or supply
funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii)
to supply funds to, or in any other manner invest in, the debtor (including
any agreement to pay for property or services without requiring that such
property be received or such services be rendered), (iv) to maintain working
capital or equity capital of the debtor, or otherwise to maintain the net
worth, solvency or other financial condition of the debtor or (v) otherwise to
assure a creditor against loss; provided that the term "guarantee" shall not
include endorsements for collection or deposit, in either case in the ordinary
course of business.
"Guarantor" means the Subsidiaries listed on the signature pages of the
Indenture as guarantors or any other guarantor of the Indenture Obligations.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit issued under letter of
credit facilities, acceptance facilities or other similar facilities and in
connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or hereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade payables arising
in the ordinary course of
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business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness
referred to in clauses (i) through (v) above of other Persons and all
dividends of other Persons, the payment of which is secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien, upon or with respect to property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vii) all Guaranteed Debt of such Person, (viii)
all Redeemable Capital Stock valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid dividends,
and (ix) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types referred to
in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the Fair
Market Value of such Redeemable Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Indenture Obligations" means the obligations of the Company and any other
obligor under the Indenture or under the Notes, including any Guarantor, to
pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with the Indenture,
the Notes and the performance of all other obligations to the Trustee and the
Holders under the Indenture and the Notes, according to the terms thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest
rate protection agreements (including, without limitation, interest rate
swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time.
"Investments" means, with respect to any Person, directly or indirectly, any
advance, loan (including guarantees), or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase, acquisition or ownership by such Person of any Capital Stock,
bonds, notes, debentures or other securities issued or owned by, any other
Person and all other items that would be classified as investments on a
balance sheet prepared in accordance with GAAP.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Maturity" when used with respect to any Note means the date on which the
principal of such Note becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect
of Excess Proceeds, Change of Control, call for redemption or otherwise.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any Person,
the proceeds thereof in the form of cash or Temporary Cash Investments
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed for, cash or Temporary
Cash Investments (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary) net of (i) brokerage
commissions and other actual fees and expenses (including fees and expenses of
counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes payable as a result of such Asset Sale, (iii) payments made to
retire Indebtedness where payment of such Indebtedness is secured by the
assets or properties the subject of such Asset Sale, (iv) amounts required to
be paid to any Person (other than the Company or any
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Subsidiary) owning a beneficial interest in the assets subject to the Asset
Sale and (v) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee and (b) with respect to any issuance or
sale of Capital Stock or options, warrants or rights to purchase Capital
Stock, or debt securities or Capital Stock that have been converted into or
exchanged for Capital Stock, as referred to under "--Certain Covenants--
Limitation on Restricted Payments," the proceeds of such issuance or sale in
the form of cash or Temporary Cash Investments, including payments in respect
of deferred payment obligations when received in the form of, or stock or
other assets when disposed for, cash or Temporary Cash Investments (except to
the extent that such obligations are financed or sold with recourse to the
Company or any Subsidiary), net of attorneys' fees, accountants' fees and
brokerage, consultation, underwriting and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Original Notes" means the Company's outstanding 8 3/4% Senior Subordinated
Notes due 2003.
"Pari Passu Indebtedness" means any Indebtedness of the Company or a
Guarantor that is pari passu in right of payment to the Notes or a Guarantee,
as the case may be.
"Permitted Investment" means (i) Investments in any Wholly Owned Subsidiary
or any Person which, as a result of such Investment, becomes a Wholly Owned
Subsidiary; (ii) Indebtedness of the Company or a Subsidiary described under
clauses (iv) and (v) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments acquired by the Company or any
Subsidiary in connection with an Asset Sale permitted under "--Certain
Covenants--Limitation on Sale of Assets" to the extent such Investments are
non-cash proceeds as permitted under such covenant; (v) guarantees of
Indebtedness otherwise permitted by the Indenture; and (vi) Investments in
existence on the date of the Original Indenture.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred stock whether now outstanding, or issued after the date of
the Original Indenture, and including, without limitation, all classes and
series of preferred or preference stock.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its terms
or by the terms of any security into which it is convertible or exchangeable
or otherwise, is or upon the happening of an event or passage of time would
be, required to be redeemed prior to any Stated Maturity of the principal of
the Notes or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which the Company or a Subsidiary sells or transfers
any property or asset in connection
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with the leasing, or the resale against installment payments, of such property
or asset to the seller or transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor
subordinated in right of payment to the Notes or a Guarantee, as the case may
be.
"Subsidiary" means any Person a majority of the equity ownership or the
Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries.
"Temporary Cash Investments" means (i) any evidence of Indebtedness of a
Person, other than the Company or its Subsidiaries, maturing not more than one
year after the date of acquisition, issued by the United States of America, or
an instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (ii) any
certificate of deposit, maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital
and surplus and undivided profits of not less than $500,000,000, whose debt
has a rating, at the time as of which any investment therein is made, of "P-1"
(or higher) according to Moody's Investors Service, Inc. ("Moody's") or any
successor rating agency or "A-1" (or higher) according to Standard and Poor's
Corporation ("S&P") or any successor rating agency, (iii) commercial paper,
maturing not more than one year after the date of acquisition, issued by a
corporation (other than an Affiliate or Subsidiary of the Company) organized
and existing under the laws of the United States of America with a rating, at
the time as of which any investment therein is made, of "P-1" (or higher)
according to Moody's or "A-1" (or higher) according to S&P and (iv) any money
market deposit accounts issued or offered by a domestic commercial bank having
capital and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Subsidiary" means (i) a Subsidiary all the Capital Stock of
which is owned by the Company or another Wholly Owned Subsidiary and (ii)
Monarch Wine Company, Limited Partnership, so long as the Company owns
directly or indirectly at least 99% of the outstanding interests in such
partnership and is the general partner thereof.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
Set forth below is a summary of the material United States Federal tax
considerations applicable to the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), its legislative history,
existing and proposed regulations thereunder (including regulations concerning
the treatment of debt instruments issued with OID (the "OID Regulations"),
published rulings and court decisions all as in effect and existing on the
date hereof and all of which are subject to change at any time, which change
may be applied retroactively in a manner that could adversely affect holders
of the Notes.
The Company has not sought and will not seek any rulings from the IRS with
respect to the tax consequences of the Exchange Offer. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the Exchange Offer or of the purchase, ownership or
disposition of the Exchange Notes or that any such different position would
not be sustained.
This summary applies only to those persons who are the initial holders of
the Old Notes and who held the Old Notes, and who will hold the Exchange
Notes, as capital assets. The summary does not address the tax consequences to
taxpayers who purchase the Notes from such initial holders or taxpayers who
are subject to special rules (such as dealers in securities or currencies,
financial institutions, tax-exempt organizations and insurance companies), or
aspects of Federal income taxation that may be relevant to a prospective
investor based upon such investor's particular tax situation.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for an Exchange Note pursuant to the Exchange Offer should not be treated
as an exchange or otherwise as a taxable event for Federal income tax
purposes. Accordingly, the Exchange Notes should have the same issue price as
the Old Notes and each holder should have the same adjusted basis and holding
period in the Exchange Notes as it had in the Old Notes immediately before the
Exchange Offer.
Notwithstanding the foregoing, the IRS might attempt to treat the Exchange
Offer as an "exchange" for Federal income tax purposes. In such event, the
Exchange Offer could be treated as a taxable transaction in which case a
holder could be required to recognize gain or loss equal to the difference
between such holder's tax basis in the Old Notes and the issue price of the
Exchange Notes, and the amount of OID on such Exchange Notes, if any, could be
different from the amount of OID on the Old Notes. In addition, if the issue
price of the Exchange Notes is deemed to be less than the adjusted issue price
of the Old Notes, the Company could recognize cancellation of indebtedness
income in an amount equal to such difference.
HOLDERS OF OLD NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF OLD NOTES FOR
EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS TO WHICH THEY MAY BE SUBJECT AS WELL AS
WITH RESPECT TO THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
CONSEQUENCES FOR U.S. HOLDERS
As used herein, a "U.S. Holder" means a holder of a Note that is a citizen
or individual resident of the United States, a corporation or partnership
created or organized in or under the laws of the United States, or of any
political subdivision thereof, an estate the income of which is includible in
its gross income for U.S. Federal income tax purposes without regard to its
source or a "U.S. Trust". A U.S.
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<PAGE>
Trust is (a) for taxable years beginning after December 31, 1996, or if the
trustee of a trust elects to apply the following definition to an earlier
taxable year, any trust if, and only if, (i) a court within the United States
is able to exercise primary supervision over the administration of the trust
and (ii) one or more U.S. trustees have the authority to control all
substantial decisions of the trust and (b) for all other taxable years, any
trust the income of which is subject to United States Federal income taxation
regardless of its source. A non-U.S. citizen is considered a resident alien,
and hence a U.S. Holder, if that person is present in the United States at
least 183 days in the calendar year and for an aggregate of at least 183 days
during a three-year period, counting for such purposes all of the days present
in the current year, one-third of the days present in the immediately
preceding year, and one-sixth of the days present in the second preceding
year.
ISSUE PRICE
The issue price of the Exchange Notes will equal the issue price of the Old
Notes.
TAXATION OF THE NOTES
Payments of Interest
Interest paid on a Note, to the extent considered "qualified stated
interest" (as defined below), will generally be taxable to a U.S. Holder as
ordinary income at the time it accrues or is received in accordance with the
holder's method of accounting for Federal income tax purposes.
Original Issue Discount
Because the Old Notes were issued with OID, the Exchange Notes will also be
deemed to have been issued with OID. For Federal income tax purposes, a Note
will be issued with OID if its "stated redemption price at maturity" exceeds
its "issue price" by more than a de minimis amount. The stated redemption
price at maturity of a Note will be the sum of all cash payments (including
principal and interest) required to be made thereunder until maturity, other
than "qualified stated interest" payments. Qualified stated interest is stated
interest that is unconditionally payable at least annually at a single fixed
rate that appropriately takes into account the length of the interval between
payments. Since the interest payable on the Notes constitutes qualified stated
interest, a Note will bear OID only to the extent of the excess of the Note's
face amount over its issue price.
A U.S. Holder of a Note will be required to include OID in income
periodically over the term of a Note without regard to when the cash or other
payments attributable to such income are received. In general, a U.S. Holder
must include in gross income for Federal income tax purposes the sum of the
daily portions of OID with respect to the Note for each day during the taxable
year on which such holder holds the Note ("Accrued OID"). The daily portion is
determined by allocating to each day of any accrual period within a taxable
year a pro rata portion of the OID allocable to such accrual period. The
amount of such OID is equal to the adjusted issue price of the Note at the
beginning of the accrual period multiplied by the yield to maturity of the
Note. For purposes of computing OID, the Company will use six-month accrual
periods that end on the days in the calendar year corresponding to the
maturity date of the Notes and the date six months prior to such maturity
date, with the exception of an initial short accrual period. The adjusted
issue price of a Note at the beginning of any accrual period is the issue
price of the Note increased by the Accrued OID for all prior accrual periods
and decreased by any cash payments on the Notes (other than qualified stated
interest). Under these rules, U.S. Holders will have to include in gross
income increasingly greater amounts of OID in each successive accrual period.
Each payment made under a Note (except for payments of qualified stated
interest and certain early redemption payments discussed below) will be
treated first as a payment of OID (which was previously includable in income)
to the extent of OID that has accrued as of the date of payment
95
<PAGE>
and has not been allocated to prior payments and second as a payment of
principal (which is not includable in income).
Optional Redemption
Under the OID Regulations, for purposes of determining the amount of OID,
the Company will be presumed to exercise its option to redeem the Notes at any
time on or after December 15, 1998, if, by utilizing the date of exercise of
the call option as the maturity date and the Redemption Price (as defined in
the Indenture) as the stated redemption price at maturity, the yield on the
Notes would be lower than such yield would be if the option were not
exercised. See "Description of Notes--Optional Redemption."
If the Company's option to redeem the Notes were presumed exercised on a
given date (the "Presumed Exercise Date"), the Notes would bear OID in an
amount equal to the sum of all payments for which the Notes could be redeemed
(the "Redemption Amount") over their issue price. For purposes of calculating
the current inclusion of such OID, the yield on the Notes would be computed on
their issue date by treating the Presumed Exercise Date as the maturity date
of the Notes and the Redemption Amount as their stated redemption price at
maturity. If the Company's option to redeem the Notes were presumed exercised
but were not exercised in fact on the Presumed Exercise Date, the Notes would
be treated, for certain purposes, as if the option were exercised and new debt
instruments were issued on the Presumed Exercise Date for an amount of cash
equal to the adjusted issue price of the Notes on that date.
The Notes will be subject to redemption at the option of the holders should
the Company experience a Change of Control. See "Description of Notes--Certain
Covenants--Purchase of Notes Upon a Change of Control." Such additional
redemption rights should not affect, and will not be treated by the Company as
affecting, the determination of the yield or maturity of the Notes for
purposes of the calculation of OID. The tax treatment of these redemptions and
the optional redemptions described above should be governed by the rules for
dispositions generally. See "--Disposition of Notes."
Disposition of Notes
Generally, any sale or redemption of a Note will result in taxable gain or
loss equal to the difference between the amount of cash and the fair market
value of other property received (except to the extent the consideration
received is attributable to qualified stated interest not previously taken
into account, which consideration is treated as interest received) and the
holder's adjusted tax basis in the Note. If a holder purchases a Note for its
issue price, the holder's adjusted tax basis for determining gain or loss on
the sale or other disposition of a Note will initially equal the issue price
of the Note and will be increased by any Accrued OID includable in such
holder's gross income and decreased by the amount of any cash payments
received by such holder with respect to the Notes regardless of whether such
payments are denominated as principal or interest (other than payments of
qualified stated interest). Any gain or loss upon a sale or other disposition
of a Note will generally be capital gain or loss, which will be long term if
the Note has been held by the holder for more than one year.
Backup Withholding
A holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to payments received with respect to the Notes.
This withholding generally applies only if the holder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the Internal Revenue Service
(the "Service") that he or she has failed to property report payments of
interest and dividends and the Service has notified the Company that he or she
is subject to backup withholding, or (iv) fails, under certain circumstances,
to provide a certified statement, signed under penalty of perjury, that the
TIN provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment
96
<PAGE>
to a holder under the backup withholding rules is allowable as a credit
against such holder's Federal income tax liability, provided that the required
information is furnished to the Service. Certain holders (including, among
others, corporations and foreign individuals who comply with certain
certification requirements described below under "Foreign Holders") are not
subject to backup withholding. Holders should consult their tax advisors as to
their qualification for exemption from backup withholding and the procedure
for obtaining such an exemption.
FOREIGN HOLDERS
The following discussion is a summary of certain United States Federal tax
consequences to Non-U.S. Holders. As used herein, a "Non-U.S. Holder" is any
holder of a Note who is not a U.S. Holder.
A Non-U.S. Holder that is engaged in a trade or business within the United
States will be subject to tax on any income or gain that is effectively
connected with such trade or business ("U.S. trade or business income") in
essentially the same manner as a U.S. Holder, as discussed above. A Non-U.S.
Holder that is a foreign corporation engaged in a U.S. trade or business also
may be subject to the branch profits tax with respect to income or gain on the
Note.
Payments of principal and interest (including OID) on the Notes by the
Company that are not U.S. trade or business income to a Non-U.S. Holder will
not be subject to United States Federal income tax provided that, in the case
of interest (including OID), (1) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (2) the Non-U.S. Holder is
not a controlled foreign corporation that is related to the Company through
stock ownership, (3) the Non-U.S. Holder is not a bank receiving interest on a
loan entered into in the ordinary course of business, and (4) either the
beneficial owner of the Note certifies to the Company or its agent under
penalties of perjury that it is a Non-U.S. Holder and provides its name and
address, 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 a Note on behalf
of such owner, certifies to the Company or its agent, under penalties of
perjury, that such statement has been received by it from the beneficial owner
or by another financial institution between it and the beneficial owner, and
furnishes the Company or its agent with a copy of such statement. A Non-U.S.
Holder that does not qualify for such exemption will be subject to United
States Federal income tax, payable by withholding, at a flat rate of 30% (or a
lower applicable treaty rate) on interest payments and payments (including
redemption proceeds) attributable to OID on the Notes provided that such
payments are not U.S. trade or business income. If such payments are U.S.
trade or business income, such Foreign Person will be required to provide to
the Company a properly executed Internal Revenue Service Form 4224 in order to
claim an exemption from withholding tax.
In general, gain (to the extent it is not U.S. trade or business income)
recognized by a Non-U.S. Holder upon the redemption, sale or exchange of a
Note will not be subject to United States Federal income tax unless such Non-
U.S. Holder is an individual present in the United States for 183 days or more
during the taxable year in which the Note is redeemed, sold or exchanged, and
certain other requirements are met.
A Note held by an individual who at the time of his or her death is not a
citizen or resident of the United States will not be includable in such
individual's gross estate subject to United States Federal estate tax as a
result of such individual's death if the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and the interest (including
OID) on the Note would not have been U.S. trade or business income if it had
been received by such individual at the time of his or her death.
Information reporting and backup withholding will generally not apply to
payments made on a Note to a Non-U.S. Holder provided that the certification
described in clause (4) of the third paragraph in this section is received,
and provided further that the payor does not have actual knowledge that the
information is false.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 promulgated 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
holder's business, such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes and neither such holder
nor any such other person is engaging in or intends to engage in a
distribution of such Exchange Notes. Accordingly, any holder who is an
affiliate of the Company or any holder using the Exchange Offer to participate
in a distribution of the Exchange Notes will not be able to rely on such
interpretations by the staff of the SEC and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a resale transaction. Notwithstanding the foregoing, each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of Exchange Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company and the Guarantors have agreed that, for a
period of 180 days after the Expiration Date, they will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale.
The Company and the Guarantors will not receive any proceeds from any sale
of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such 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 such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker-dealer that participates in a distribution of such Exchange Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such 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 as
required, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company and the
Guarantors will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company and the Guarantors
have agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Old Notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Old Notes (including any broker-dealers) participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
Certain matters with respect to the validity of the Exchange Notes will be
passed upon for the Company by McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company included or
incorporated in this Prospectus and elsewhere in this Registration Statement
to the extent and for the periods indicated in their reports have been audited
by Arthur Andersen LLP, independent public accountants, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
The financial statements incorporated in this Registration Statement by
reference to the Current Report on Form 8-K/A (Amendment No. 1) which amends
and forms part of Canandaigua Wine Company, Inc.'s Current Report on Form 8-K
dated August 29, 1995, have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act, for the registration
of the securities offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement, certain items of which are contained in
exhibits and schedules to the Registration Statement as permitted by the rules
and regulations of the SEC. For further information with respect to the
Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, and financial
statements and notes filed as a part thereof. Statements made in this
Prospectus concerning the contents of any document referred to herein are not
necessarily complete. With respect to each document filed with the SEC as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
may be inspected at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Company has made certain filings to the
SEC electronically. The SEC maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the SEC at the following address: http: //
www.sec.gov.
The Company's Class A Common Stock and Class B Common Stock are quoted on
the Nasdaq Stock Market (National Market), and reports, proxy and information
statements and other information concerning the Company can be inspected at
the public reference facilities maintained by the Nasdaq Stock Market at 1735
K Street, N.W. Washington, D.C. 20006.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of the Indenture and the Company's Restated Certificate of
Incorporation and Bylaws. Requests should be directed to: Canandaigua Wine
Company, Inc., Attention: Robert S. Sands, Secretary, 116 Buffalo Street,
Canandaigua, New York 14424; telephone number (716) 394-7900.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
Exchange Act are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1995;
(2) the Company's Proxy Statement for its Annual Meeting of Stockholders
held on January 18, 1996;
(3) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended November 30, 1995;
(4) the Company's Transition Report on Form 10-K for the Transition Period
ended February 29, 1996;
(5) the Company's Quarterly Reports on Form 10-Q for the quarterly periods
ended May 31, 1996 and August 31, 1996; and
(6) the Company's Current Reports on Form 8-K dated August 29, 1995;
October 31, 1995; April 29, 1996; September 5, 1996; October 11, 1996
and October 29, 1996; and Form 8-K/A dated August 29, 1995.
All reports and other documents filed with the SEC by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering relating
to this Prospectus shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified, replaced, or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any or all of the documents incorporated by reference herein (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to: Canandaigua Wine Company, Inc.,
Attention: Robert S. Sands, Secretary, 116 Buffalo Street, Canandaigua, New
York 14424; telephone number (716) 394-7900.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of August 31, 1996 (unaudited), February
29, 1996,
February 28, 1995 (unaudited), August 31, 1995, and 1994................. F-3
Consolidated Statements of Income for the six month periods ended August
31, 1996 (unaudited), August 31, 1995 (unaudited), February 29, 1996, and
February 28, 1995 (unaudited), and for the years ended August 31, 1995,
1994, and 1993........................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the six
month periods ended
August 31, 1996 (unaudited), and February 29, 1996, and for the years
ended August 31, 1995, 1994, and 1993.................................... F-5
Consolidated Statements of Cash Flows for the six month periods ended
August 31, 1996 (unaudited), August 31,1995 (unaudited), February 29,
1996, and February 28, 1995 (unaudited), and for the years ended August
31, 1995, 1994, and 1993................................................. F-6
Notes to Consolidated Financial Statements................................ F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canandaigua Wine Company, Inc.:
We have audited the accompanying consolidated balance sheets of Canandaigua
Wine Company, Inc. (a Delaware corporation) and subsidiaries as of February
29, 1996 and August 31, 1995 and 1994, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for the six months
ended February 29, 1996 and each of the three years in the period ended August
31, 1995. These financial statements are the responsibility of the Company's
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 financial position of Canandaigua Wine Company,
Inc. and subsidiaries as of February 29, 1996 and August 31, 1995 and 1994,
and the results of their operations and their cash flows for the six months
ended February 29, 1996 and each of the three years in the period ended August
31, 1995, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Rochester, New York, May 17, 1996
F-2
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1996 1996 1995 1995 1994
----------- ------------ ------------ ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash invest-
ments................ $ 2,030 $ 3,339 $ 3,090 $ 4,180 $ 1,495
Accounts receivable,
net.................. 152,343 142,471 120,538 115,448 122,124
Inventories, net...... 328,505 341,838 319,836 256,811 301,053
Prepaid expenses and
other current assets. 18,665 30,372 26,298 25,070 29,377
---------- ---------- -------- -------- --------
Total current as-
sets............... 501,543 518,020 469,762 401,509 454,049
PROPERTY, PLANT AND
EQUIPMENT, NET......... 254,500 250,638 195,839 217,505 194,283
OTHER ASSETS............ 282,148 285,922 167,316 166,907 178,230
---------- ---------- -------- -------- --------
Total assets........ $1,038,191 $1,054,580 $832,917 $785,921 $826,562
========== ========== ======== ======== ========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
----------------------
CURRENT LIABILITIES:
Notes payable......... $ 62,000 $ 111,300 $ 7,000 $ -- $ 19,000
Current maturities of
long-term debt....... 40,766 40,797 37,857 29,133 31,001
Accounts payable...... 103,299 59,730 45,438 62,091 75,506
Accrued Federal and
state excise taxes... 21,544 19,699 23,564 15,633 16,657
Other accrued expenses
and liabilities...... 75,086 68,440 77,192 67,896 96,061
---------- ---------- -------- -------- --------
Total current lia-
bilities........... 302,695 299,966 191,051 174,753 238,225
---------- ---------- -------- -------- --------
LONG-TERM DEBT, less
current maturities..... 307,204 327,616 239,791 198,859 289,122
---------- ---------- -------- -------- --------
DEFERRED INCOME TAXES... 58,194 58,194 43,831 49,827 43,774
---------- ---------- -------- -------- --------
OTHER LIABILITIES....... 4,927 12,298 30,077 10,600 51,248
---------- ---------- -------- -------- --------
COMMITMENTS AND CONTIN-
GENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock,
$.01 par value-
Authorized,
60,000,000 shares:
Issued, 17,458,582
shares at August 31,
1996, 17,423,082
shares at February
29, 1996, 17,343,889
shares at February
28, 1995, 17,400,082
shares at August 31,
1995, and 13,832,597
shares at August 31,
1994................. 174 174 173 174 138
Class B Convertible
Common Stock, $.01
par value-Authorized,
20,000,000 shares;
Issued 3,956,183
shares at August 31,
1996, 3,991,683
shares at February
29, 1996, 4,015,626
shares at February
28, 1995, 3,996,683
shares at August 31,
1995, and 4,015,776
shares at August 31,
1994................. 40 40 40 40 40
Additional paid-in
capital.............. 221,728 221,133 216,967 219,894 113,348
Retained earnings..... 156,042 142,600 118,578 139,278 98,258
---------- ---------- -------- -------- --------
377,984 363,947 335,758 359,386 211,784
---------- ---------- -------- -------- --------
Less-Treasury stock-
Class A Common Stock,
1,320,446 shares at
August 31, 1996,
1,165,786 shares at
February 29, 1996,
1,215,296 shares at
February 28, 1995,
1,186,655 shares at
August 31, 1995, and
1,215,296 shares at
August 31, 1994, at
cost................. (10,606) (5,234) (5,384) (5,297) (5,384)
Class B Convertible
Common Stock, 625,725
shares at August 31,
1996, February 29,
1996, February 28,
1995, August 31,
1995, and 1994, at
cost................. (2,207) (2,207) (2,207) (2,207) (2,207)
---------- ---------- -------- -------- --------
(12,813) (7,441) (7,591) (7,504) (7,591)
---------- ---------- -------- -------- --------
Total stockholders'
equity............. 365,171 356,506 328,167 351,882 204,193
---------- ---------- -------- -------- --------
Total liabilities
and stockholders'
equity............. $1,038,191 $1,054,580 $832,917 $785,921 $826,562
========== ========== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-3
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
AUGUST 31, FEBRUARY 29, FEBRUARY 28, AUGUST 31,
------------------------ ------------ ------------ -------------------------------------
1996 1995 1996 1995 1995 1994 1993
----------- ----------- ------------ ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
GROSS SALES............. $ 754,866 $ 592,769 $ 738,415 $ 592,305 $ 1,185,074 $ 861,059 $ 389,417
Less--Excise taxes..... (199,155) (140,710) (203,391) (137,820) (278,530) (231,475) (83,109)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net sales............ 555,711 452,059 535,024 454,485 906,544 629,584 306,308
COST OF PRODUCT SOLD.... (412,969) (326,117) (396,208) (327,694) (653,811) (447,211) (214,931)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit........... 142,742 125,942 138,816 126,791 252,733 182,373 91,377
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... (102,870) (79,271) (112,411) (79,925) (159,196) (121,388) (59,983)
NONRECURRING -- (1,553) (2,404) (685) (2,238) (24,005) --
RESTRUCTURING EXPENSES. ----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income...... 39,872 45,118 24,001 46,181 91,299 36,980 31,394
INTEREST EXPENSE, net... (16,803) (11,460) (17,298) (13,141) (24,601) (18,056) (6,126)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before
provision for Federal
and state income
taxes................. 23,069 33,658 6,703 33,040 66,698 18,924 25,268
PROVISION FOR FEDERAL (9,627) (12,958) (3,381) (12,720) (25,678) (7,191) (9,664)
AND STATE INCOME TAXES. ----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCOME.............. $ 13,442 $ 20,700 $ 3,322 $ 20,320 $ 41,020 $ 11,733 $ 15,604
=========== =========== =========== =========== =========== =========== ===========
SHARE DATA:
Net income per common
and common equivalent
share:
Primary................ $.68 $1.03 $.17 $1.11 $2.14 $.74 $1.30
==== ===== ==== ===== ===== ==== =====
Fully diluted.......... $.68 $1.03 $.17 $1.11 $2.13 $.74 $1.20
==== ===== ==== ===== ===== ==== =====
Weighted average common
shares outstanding:
Primary................ 19,794,740 20,002,568 20,006,267 18,343,870 19,147,935 15,783,583 11,963,652
Fully diluted.......... 19,794,740 20,081,014 20,006,267 18,346,513 19,296,269 16,401,598 15,203,114
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-4
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED TREASURY
CLASS A CLASS B CAPITAL EARNINGS STOCK TOTAL
------- ------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, August 31,
1992................... $ 96 $41 $ 32,338 $ 70,921 ($7,847) $ 95,549
Conversion of 1,165
Class B Convertible
Common shares to Class
A Common shares........ -- -- -- -- -- --
Issuance of 1,000,000
Class A Common shares.. 10 -- 13,584 -- -- 13,594
Conversion of 7% Con-
vertible debentures to
Class A Common shares.. -- -- 976 -- -- 976
Employee stock purchase
of 21,071 treasury
shares................. -- -- 266 -- 64 330
Issuance of 4,104 trea-
sury shares to stock
incentive plan......... -- -- 38 -- 13 51
Net income for fiscal -- -- -- 15,604 -- 15,604
1993................... ---- --- -------- -------- -------- --------
BALANCE, August 31,
1993................... 106 41 47,202 86,525 (7,770) 126,104
Conversion of 52,800
Class B Convertible
Common shares to Class
A Common shares........ 1 (1) -- -- -- --
Conversion of 7% Con-
vertible debentures to
Class A Common shares.. 31 -- 58,925 -- -- 58,956
To write-off unamortized
deferred financing
costs on
debentures converted,
net of amortization.... -- -- (1,569) -- -- (1,569)
To write-off interest
accrued on debentures,
net of tax
effect................. -- -- 850 -- -- 850
Employee stock purchase
of 58,955 treasury
shares................. -- -- 878 -- 179 1,057
To record exercise of
2,250 Class A stock op-
tions.................. -- -- 10 -- -- 10
To record 500,000 Class
A stock options related
to the Vintners Acqui-
sition................. -- -- 4,210 -- -- 4,210
To record 600,000 Class
A stock options related
to the
Almaden/Inglenook asset
purchase............... -- -- 2,842 -- -- 2,842
Net income for fiscal -- -- -- 11,733 -- 11,733
1994................... ---- --- -------- -------- -------- --------
BALANCE, August 31,
1994................... 138 40 113,348 98,258 (7,591) 204,193
Conversion of 19,093
Class B Convertible
Common shares to Class
A Common shares........ -- -- -- -- -- --
Issuance of 3,000,000
Class A Common shares.. 30 -- 90,353 -- -- 90,383
Exercise of 432,067
Class A stock options
related to the Vintners
Acquisition............ 5 -- 13,013 -- -- 13,018
Employee stock purchase
of 28,641 treasury
shares................. -- -- 546 -- 87 633
To record exercise of
114,075 Class A stock
options................ 1 -- 1,324 -- -- 1,325
To record tax benefit on
stock options exer-
cised.................. -- -- 1,251 -- -- 1,251
To record tax benefit on
disposition of employee
stock purchases........ -- -- 59 -- -- 59
Net income for fiscal -- -- -- 41,020 -- 41,020
1995................... ---- --- -------- -------- -------- --------
BALANCE, August 31,
1995................... 174 40 219,894 139,278 (7,504) 351,882
Conversion of 5,000
Class B Convertible
Common shares to Class
A Common shares........ -- -- -- -- -- --
To record exercise of
18,000 Class A stock
options................ -- -- 238 -- -- 238
Employee stock purchase
of 20,869 treasury
shares................. -- -- 593 -- 63 656
To record issuance of
10,000 Class A stock
options................ -- -- 134 -- -- 134
To record tax benefit on
stock options exer-
cised.................. -- -- 198 -- -- 198
To record tax benefit on
disposition of employee
stock purchases........ -- -- 76 -- -- 76
Net income for Transi- -- -- -- 3,322 -- 3,322
tion Period............ ---- --- -------- -------- -------- --------
BALANCE, February 29,
1996................... $174 $40 $221,133 $142,600 ($7,441) $356,506
Conversion of 35,500
Class B Convertible
Common shares to Class
A Common shares (unau-
dited)................. -- -- -- -- -- --
To record the repurchase
of 175,000 shares of
Class A common stock
(unaudited)............ -- -- -- -- (5,434) (5,434)
Employee stock purchase
of 20,340 treasury
shares
(unaudited)............ -- -- 595 -- 62 657
Net income for six
months ended August 31,
1996 -- -- -- 13,442 -- 13,442
(unaudited)............ ---- --- -------- -------- -------- --------
BALANCE, August 31, 1996 $174 $40 $221,728 $156,042 ($12,813) $365,171
(unaudited)............ ==== === ======== ======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE YEARS
ENDED ENDED ENDED
----------------------- ------------------------- ----------------------------
AUGUST 31, AUGUST 31,
FEBRUARY 29, FEBRUARY 28,
1996 1995 1996 1995 1995 1994 1993
----------- ----------- ------------ ------------ -------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............. $ 13,442 $ 20,700 $ 3,322 $ 20,320 $ 41,020 $ 11,733 $ 15,604
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation of
property, plant and
equipment............. 12,424 5,782 9,521 9,786 15,568 10,534 7,389
Amortization of
intangible assets..... 4,870 2,279 4,437 2,865 5,144 3,281 1,286
Deferred tax provision
(benefit)............. -- 19,175 1,991 57 19,232 (4,319) 1,028
Loss (gain) on sale of
property, plant and
equipment............. 201 (33) 81 -- (33) -- (524)
Accrued interest on
converted debentures,
net of taxes.......... -- -- -- -- -- 161 --
Restructuring
charges--fixed asset
write-down............ -- (2,050) 275 -- (2,050) 13,935 --
Change in assets and
liabilities, net of
effects from
purchases of
businesses:
Accounts receivable,
net................. (9,872) 5,806 (27,008) 1,586 7,392 (17,946) (5,761)
Inventories, net..... 13,333 60,311 (70,172) (18,783) 41,528 784 8,966
Prepaid expenses..... 5,109 (6,963) (2,350) 3,079 (3,884) 1,703 (8,571)
Accounts payable..... 43,569 16,653 (2,362) (30,068) (13,415) 2,680 (18,948)
Accrued Federal and
state excise taxes.. 1,845 (7,932) 4,066 6,907 (1,025) 4,405 845
Other accrued
expenses and
liabilities......... 13,351 (20,822) (8,564) (28,175) (20,784) 4,023 6,687
Other.................. (8,466) (11,558) 1,930 (3,817) (15,375) (3,795) 911
-------- -------- -------- -------- -------- -------- --------
Total adjustments.... 76,364 60,648 (88,155) (56,563) 32,298 15,446 (6,692)
-------- -------- -------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities.......... 89,806 81,348 (84,833) (36,243) 73,318 27,179 8,912
-------- -------- -------- -------- -------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
property, plant and
equipment............. 5,200 1,336 555 -- 1,336 -- 1,337
Purchases of property,
plant and equipment,
net of minor
disposals............. (21,795) (25,779) (16,077) (11,342) (37,121) (7,853) (6,949)
Payment of accrued
Earn-Out Amounts...... -- -- (11,307) -- (28,300) (4,000) --
Purchases of
businesses, net of
cash acquired......... -- -- -- -- -- 3 8,710
Purchase of brands..... -- -- -- -- -- (5,100) --
-------- -------- -------- -------- -------- -------- --------
Net cash (used in)
provided by
investing
activities.......... (16,595) (24,443) (26,829) (11,342) (64,085) (16,950) 3,098
-------- -------- -------- -------- -------- -------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds (repayment)
of notes payable,
short-term
borrowings............ (49,300) (7,000) 111,300 57,100 50,100 (2,035) (9,835)
Repayment of notes
payable from equity
offering proceeds..... -- -- -- (22,100) (22,100) -- --
Repayment of notes
payable from proceeds
of Term Loan.......... -- -- -- (47,000) (47,000) -- --
Payment of fees for
subordinated notes
offering.............. -- -- -- -- -- (4,624) --
Principal payments of
long-term debt........ (20,443) (50,432) (14,579) (7,474) (57,906) (6,856) (981)
</TABLE>
F-6
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE YEARS
ENDED ENDED ENDED
----------------------- ------------------------- ----------------------------
AUGUST 31, AUGUST 31,
FEBRUARY 29, FEBRUARY 28,
1996 1995 1996 1995 1995 1994 1993
----------- ----------- ------------ ------------ ------- --------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Proceeds of Term Loan,
long-term debt........ $ -- $ -- $ 13,220 $ 47,000 $47,000 $ -- $ --
Repayment of Term Loan
from equity offering
proceeds, long-term
debt.................. -- -- -- (82,000) (82,000) -- --
Proceeds from equity
offering, net......... -- -- -- 103,313 103,400 -- --
Purchases of treasury
stock................. (5,434) -- -- -- -- -- --
Proceeds from employee
stock purchases....... 657 633 656 -- 633 1,056 330
Exercise of employee
stock options......... -- 984 224 341 1,325 10 --
Fractional shares paid
for debenture
conversions........... -- -- -- -- -- (3) --
-------- ------- --------- -------- ------- --------- --------
Net cash (used in)
provided by
financing
activities.......... (74,520) (55,815) 110,821 49,180 (6,548) (12,452) (10,486)
-------- ------- --------- -------- ------- --------- --------
NET (DECREASE) INCREASE
IN CASH AND CASH
INVESTMENTS............ (1,309) 1,090 (841) 1,595 2,685 (2,223) 1,524
CASH AND CASH
INVESTMENTS, beginning
of period.............. 3,339 3,090 4,180 1,495 1,495 3,718 2,194
-------- ------- --------- -------- ------- --------- --------
CASH AND CASH
INVESTMENTS, end of
period................. $ 2,030 $ 4,180 $ 3,339 $ 3,090 $ 4,180 $ 1,495 $ 3,718
======== ======= ========= ======== ======= ========= ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid during the
period for:
Interest............. $ 16,893 $11,014 $ 14,720 $ 14,068 $25,082 $ 14,727 $ 5,910
======== ======= ========= ======== ======= ========= ========
Income taxes......... $ 3,188 $ 2,255 $ 3,612 $ 9,454 $11,709 $ 15,751 $ 5,670
======== ======= ========= ======== ======= ========= ========
SUPPLEMENTAL DISCLOSURES
OF NONCASH INVESTING
AND FINANCING
ACTIVITIES:
Fair value of assets
acquired, including
cash acquired......... $ -- $ -- $ 144,927 $ -- $ -- $ 428,442 $135,280
Liabilities assumed.... -- -- (3,147) -- -- (153,827) (52,851)
-------- ------- --------- -------- ------- --------- --------
Cash paid.............. -- -- 141,780 -- -- 274,615 82,429
Less--Amounts
borrowed.............. -- -- (141,780) -- -- (276,860) (68,835)
Less--Issuance of
Class A Common Stock.. -- -- -- -- -- -- (13,594)
Less--Issuance of
Class A Common Stock
options............... -- -- -- -- -- (7,052) --
Add--Receivable from
Seller................ -- -- -- -- -- 9,297 --
-------- ------- --------- -------- ------- --------- --------
Net cash paid for
acquisition........... $ -- $ -- $ -- $ -- $ -- $ -- $ --
======== ======= ========= ======== ======= ========= ========
Accrued Earn-Out
Amounts............... $ -- $10,000 $ 15,155 $ -- $10,000 $ 28,300 $ 4,000
======== ======= ========= ======== ======= ========= ========
Issuance of Class A
Common Stock for
conversion of
debentures............ $ -- $ -- $ -- $ -- $ -- $ 58,960 $ 976
======== ======= ========= ======== ======= ========= ========
Write-off of
unamortized deferred
financing costs on
debentures............ $ -- $ -- $ -- $ -- $ -- $ 1,569 $ --
======== ======= ========= ======== ======= ========= ========
Write-off unpaid
accrued interest on
debentures through
conversion date....... $ -- $ -- $ -- $ -- $ -- $ 1,371 $ --
======== ======= ========= ======== ======= ========= ========
Issuance of treasury
shares to stock
incentive plan........ $ -- $ -- $ -- $ -- $ -- $ -- $ 51
======== ======= ========= ======== ======= ========= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND AUGUST 31, 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of business--
Canandaigua Wine Company, Inc. and its subsidiaries (the Company) operates
in the beverage alcohol industry. The Company is a producer and supplier of
wines, an importer and producer of beers and distilled spirits, and a producer
and supplier of grape juice concentrate in the United States. It maintains a
portfolio of over 125 national and regional brands of beverage alcohol which
are distributed by over 1,200 wholesalers throughout the United States and
selected international markets. Its beverage alcohol brands are marketed in
five general categories: table wines, sparkling wines, dessert wines, imported
beer and distilled spirits.
Year-end change--
The Company changed its fiscal year end from the twelve month period ending
August 31 to the twelve month period ending on the last day of February. The
period from September 1, 1995, through February 29, 1996, is hereinafter
referred to as the "Transition Period".
Principles of consolidation--
The consolidated financial statements of the Company include the accounts of
Canandaigua Wine Company, Inc., and all of its subsidiaries. All intercompany
accounts and transactions have been eliminated.
Unaudited financial statements--
The consolidated financial statements as of August 31, 1996 and February 28,
1995, and for the six month periods ended August 31, 1996, August 31, 1995,
and February 28, 1995, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission applicable to interim reporting and reflect, in the opinion of the
Company, all adjustments necessary to present fairly the financial information
for Canandaigua Wine Company, Inc., and its subsidiaries. All such adjustments
are of a normal recurring nature.
Management's use of estimates and judgment--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash investments--
Cash investments consist of money market funds and a certificate of deposit
and are stated at cost, which approximates market value. These investments
amounted to approximately $17,000 (unaudited) at August 31, 1996, $1,732,000
at February 29, 1996, and $12,900 (unaudited) at February 28, 1995, and
$2,462,000 and $10,000 at August 31, 1995 and 1994, respectively.
Fair value of financial instruments--
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107 ("Disclosures About Fair Value of Financial Instruments"),
the Company calculates the fair value of financial instruments and includes
this additional information in the notes to the financial statements when the
fair value is different than the book value of those financial instruments.
When the fair value is equal to the book value, no additional disclosure is
made. The Company uses quoted market prices
F-8
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
whenever available to calculate these fair values. When quoted market prices
are not available, the Company uses standard pricing models for various types
of financial instruments (such as forwards, options, swaps, etc.) which take
into account the present value of estimated future cash flows.
Interest rate futures and currency forward contracts--
From time to time, the Company enters into interest rate futures and a
variety of currency forward contracts in the management of interest rate risk
and foreign currency transaction exposure. Unrealized gains and losses on
interest rate futures are deferred and recognized as a component of interest
expense over the borrowing period. Unrealized gains and losses on foreign
currency forward contracts are deferred and recognized as a component of the
related transactions in the accompanying financial statements. Discounts or
premiums on forward contracts are recognized over the life of the contract.
Inventories--
Inventories are valued at the lower of cost (computed in accordance with the
last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market.
The percentage of inventories valued using the LIFO method is 93% at August
31, 1996, 94% at February 29, 1996, 95% at February 28, 1995, and 94% and 95%
at August 31, 1995 and 1994, respectively. Replacement cost of the inventories
determined on a FIFO basis is approximately $333,266,000 (unaudited) at August
31, 1996, $332,849,000 at February 29, 1996, $306,991,000 (unaudited) at
February 28, 1995, and $240,895,000 and $289,209,000 at August 31, 1995 and
1994, respectively. The net realizable value of the Company's inventories was
in excess of $328,505,000 (unaudited), $341,838,000, $319,836,000 (unaudited),
$256,811,000 and $301,053,000 at August 31, 1996, February 29, 1996, February
28, 1995, and August 31, 1995 and 1994, respectively.
A substantial portion of barreled whiskey and brandy will not be sold within
one year because of the duration of the aging process. All barreled whiskey
and brandy are classified as in-process inventories and are included in
current assets, in accordance with industry practice. The Company's bulk wine
inventories are also classified as in-process inventories.
Warehousing, insurance, ad valorem taxes and other carrying charges
applicable to barreled whiskey and brandy held for aging are included in
inventory costs.
Elements of cost include materials, labor and overhead and consist of the
following:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1996 1996 1995 1995 1994
----------- ------------ ------------ ---------- ----------
(UNAUDITED) (UNAUDITED)
(in thousands)
<S> <C> <C> <C> <C> <C>
Raw materials and sup-
plies.................. $ 25,802 $ 24,197 $ 42,478 $ 19,753 $ 25,225
Wines and distilled
spirits in process..... 217,754 254,956 212,483 174,399 209,999
Finished case goods..... 84,949 62,685 64,875 62,659 65,829
--------- --------- --------- --------- ---------
$ 328,505 $ 341,838 $ 319,836 $ 256,811 $ 301,053
========= ========= ========= ========= =========
</TABLE>
Property, plant and equipment--
Property, plant and equipment is stated at cost. Major additions and
betterments are charged to property accounts, while maintenance and repairs
are charged to operations as incurred. The cost of properties sold or
otherwise disposed of and the related allowance for depreciation are
eliminated from the accounts at the time of disposal and resulting gains and
losses are included as a component of operating income.
F-9
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation--
Depreciation is computed primarily using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
DESCRIPTION DEPRECIABLE LIFE
----------- ----------------
<S> <C>
Buildings and improvements 10 to 33 1/3 years
Machinery and equipment 7 to 15 years
Motor vehicles 3 to 7 years
</TABLE>
Amortization of assets capitalized under capital leases is included with
depreciation expense. Amortization is calculated using the straight-line
method over the shorter of the estimated useful life of the asset or the lease
term.
Other assets--
Other assets, which consist of goodwill, distribution rights, agency license
agreements, trademarks, deferred financing costs, cash surrender value of
officers' life insurance and other amounts, are stated at cost, net of
accumulated amortization. Amortization is calculated on a straight-line or
effective interest basis over periods ranging from five to forty years. At
February 29, 1996, the weighted average of the remaining useful lives of these
assets was approximately thirty-seven years. The face value of the officers'
life insurance policies totaled $2,852,000 for all periods presented.
Advertising and Promotion Costs--
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at August 31, 1996, February
29, 1996, February 28, 1995 and August 31, 1995 and 1994, are not material.
Advertising expense for the six months ended August 31, 1996, the comparable
six months ended August 31, 1995, the Transition Period, the comparable six
months ended February 28, 1995, and the years ended August 31, 1995 and 1994,
were approximately $52,202,000 (unaudited), $42,588,000 (unaudited),
$60,187,000, $41,658,000 (unaudited), $84,246,000 and $64,540,000
respectively.
Income taxes--
The Company uses the liability method of accounting for income taxes. The
liability method accounts for deferred income taxes by applying statutory
rates in effect at the balance sheet date to the difference between the
financial reporting and tax basis of assets and liabilities.
Environmental--
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with
completion of a feasibility study or the Company's commitment to a formal plan
of action. At August 31, 1996, February 29, 1996, February 28, 1995, and
August 31, 1995 and 1994, liabilities for environmental costs totaled $449,000
(unaudited), $465,000, $250,000 (unaudited), $550,000 and $100,000,
respectively, and are recorded in other accrued liabilities.
Net income per common and common equivalent share--
Primary net income per common and common equivalent share is based on the
weighted average number of common and common equivalent shares (stock options
determined under the treasury stock method) outstanding during the year for
Class A Common Stock and Class B Convertible Common
F-10
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock. Fully diluted earnings per common and common equivalent share assumes
the conversion of the 7% convertible subordinated debentures under the "if
converted method" and assumes exercise of stock options using the treasury
stock method.
Other--
Certain fiscal 1995, 1994 and 1993 balances have been reclassified to
conform with current period presentation.
2. ACQUISITIONS:
Barton--
On June 29, 1993, pursuant to the terms of a Stock Purchase Agreement (the
Stock Purchase Agreement) among the Company, Barton Incorporated (Barton) and
the former Barton stockholders (the Selling Stockholders), the Company
acquired from the Selling Stockholders all of the outstanding shares of the
capital stock of Barton (the Barton Acquisition), a marketer of imported beers
and imported distilled spirits and a producer and marketer of distilled
spirits and domestic beers.
The aggregate consideration for Barton consisted of approximately
$65,510,000 in cash, one million shares of the Company's Class A Common Stock
and payments of up to an aggregate amount of $57,300,000 (the Earn-Out
Amounts) which are payable to the Selling Stockholders in cash over a three
year period upon the satisfaction of certain performance goals and achievement
of targets for earnings before interest and taxes. In addition, the Company
paid approximately $1,981,000 of direct acquisition costs, $2,269,000 of
direct financing costs, and assumed liabilities of approximately $47,926,000.
The purchase price was funded through a $50,000,000 term loan (see Note 7),
through $18,835,000 of revolving loans under the Company's Credit Agreement
(see Note 7), and through approximately $925,000 of accrued expenses. In
addition, one million shares of the Company's Class A Common Stock were issued
at $13.59 per share, which reflects the closing market price of the stock at
the closing date, discounted for certain restrictions on the issued shares. Of
these shares, 428,571 were delivered to the Selling Stockholders and 571,429
were delivered into escrow to secure the Selling Stockholders' indemnification
obligations to the Company. The 571,429 shares were released from escrow and
delivered to the Selling Stockholders in fiscal 1995.
The Earn-Out Amounts consist of four payments scheduled to be made over a
three year period ending November 29, 1996. The first payment of $4,000,000
was required to be made to the Selling Stockholders upon satisfaction of
certain performance goals. These goals were satisfied and this payment was
accrued at August 31, 1993, and was made on December 31, 1993. The second
payment of $28,300,000 was accrued at August 31, 1994, and was made on
December 30, 1994, as a result of satisfaction of certain performance goals
and achievement of targets for earnings before interest and taxes at August
31, 1994. The third payment of $10,000,000 was accrued at August 31, 1995, and
was made to the Selling Stockholders on November 30, 1995, as a result of the
achievement of targets for earnings before interest and taxes at August 31,
1995. The final remaining payment has been accrued as of February 29, 1996, as
a result of the achievement of certain targets for earnings before interest
and taxes and is to be made by November 29, 1996. Such payment obligations are
secured by the Company's irrevocable standby letter of credit (see Note 7)
under the Credit Agreement in an original maximum face amount of $28,200,000
and are subject to acceleration in certain events as defined in the Stock
Purchase Agreement. All Earn-Out Amounts have been accounted for as additional
purchase price for the Barton Acquisition when the contingency was satisfied
in accordance with the Stock Purchase Agreement and allocated based upon the
fair market value of the underlying assets.
F-11
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to Barton's Phantom Stock Plan (the Phantom Stock Plan) effective
April 1, 1990, and amended and restated for Units (as defined in the Phantom
Stock Plan) granted after March 31, 1992, certain participants received
payments at closing amounting in the aggregate to $1,959,000 in connection
with the Barton Acquisition. Certain other participants will receive payments
only upon vesting in the Phantom Stock Plan during years subsequent to the
acquisition. All participants under the Phantom Stock Plan may receive
additional payments in the event of satisfaction of the performance goals set
forth in the Stock Purchase Agreement and upon release of the shares held in
escrow. In January 1995, Barton paid approximately $840,000 to participants
which included $403,000 relating to the satisfaction of requirements for
releasing stock from escrow and on November 30, 1995, paid $403,000. As of
February 29, 1996, all remaining payments to be made in accordance with the
Phantom Stock Plan, totaling $892,000, have been accrued as all performance
criteria has been satisfied. Payments of $605,000 will be made by November 30,
1996, and payments of $277,000 will be made by April 1, 1997, and $10,000 will
be made by February 10, 2024. At August 31, 1995 and 1994, $581,000 and
$554,000, respectively, were accrued under the Phantom Stock Plan.
The Barton Acquisition was accounted for using the purchase method.
Accordingly, Barton's assets were recorded at fair market value at the date of
acquisition. The fair market value of Barton totaled $236,178,000 which was
adjusted for negative goodwill of $47,235,000 and an additional deferred tax
liability of $36,075,000 based on the difference between the fair market value
of Barton's assets and liabilities as adjusted for allocation of negative
goodwill and the tax basis of those assets and liabilities which was allocated
on a pro rata basis to noncurrent assets. The results of operations of Barton
have been included in the Consolidated Statements of Income since the date of
the acquisition.
Vintners--
On October 15, 1993, the Company acquired substantially all the tangible and
intangible assets of Vintners International Company, Inc. (Vintners) other
than cash and the Hammondsport Winery (the Vintners Assets), and assumed
certain current liabilities associated with the ongoing business (the Vintners
Acquisition). Vintners was the United States' fifth largest supplier of wine
with two of the country's most highly recognized brands, Paul Masson and
Taylor California Cellars. The wineries acquired from Vintners are the
Gonzales winery in Gonzales, California, and the Paul Masson wineries in
Madera and Soledad, California. In addition, the Company leased from Vintners
the Hammondsport winery in Hammondsport, New York. The lease was for a period
of 18 months from the date of the Vintners Acquisition. The lease expired
during fiscal 1995.
The aggregate purchase price of $148,900,000 (the Cash Consideration) is
subject to adjustment based upon the determination of the Final Net Current
Asset Amount (as defined below). In addition, the Company incurred $8,961,000
of direct acquisition and financing costs. The Company also delivered options
to Vintners and Household Commercial of California, Inc., one of Vintners'
lenders, to purchase an aggregate of 500,000 shares (the Vintners Option
Shares) of the Company's Class A Common Stock, at an exercise price per share
of $18.25, which are exercisable at any time until October 15, 1996. These
options have been recorded at $8.42 per share, based upon an independent
appraisal and $4,210,000 has been reflected as a component of additional paid-
in capital. On November 18, 1994, 432,067 of the Vintners Option Shares were
exercised (see Note 10).
The Cash Consideration was funded by the Company pursuant to (i)
approximately $12,600,000 of Revolving Loans under the Credit Facility of
which $11,200,000 funded the Cash Consideration and $1,400,000 funded the
payment of direct acquisition costs; (ii) an accrued liability of
approximately $7,700,000 for the holdback described below and (iii) the
$130,000,000 Subordinated Loan (see Note 7).
F-12
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At closing, the Company held back from the Cash Consideration approximately
10% of the then estimated net current assets of Vintners purchased by the
Company and deposited an additional $2,800,000 of the Cash Consideration into
an escrow pending consent of both parties for its release. If the amount of
the net current assets as determined after the closing (the Final Net Current
Asset Amount) is greater than 90% and less than 100% of the amount of net
current assets estimated at closing (the Estimated Net Current Asset Amount),
then the Company shall pay into the established escrow an amount equal to the
Final Net Current Asset Amount less 90% of the Estimated Net Current Asset
Amount. If the Final Net Current Asset Amount is greater than the Estimated
Net Current Asset Amount, then, in addition to the payment described above,
the Company shall pay an amount equal to such excess, plus interest from the
closing, to Vintners. If the Final Net Current Asset Amount is less than 90%
of the Estimated Net Current Asset Amount, then the Company shall be paid such
deficiency out of the escrow account. As of February 29, 1996, no adjustment
to the established escrow was required and the Final Net Current Asset Amount
has not been determined.
The Vintners Acquisition was accounted for using the purchase method;
accordingly, the Vintners Assets were recorded at fair market value at the
date of acquisition. The excess of the purchase price over the estimated fair
market value of the net assets acquired (goodwill), $44,151,000, is being
amortized on a straight-line basis over forty years. The results of operations
of Vintners have been included in the Consolidated Statements of Income since
the date of acquisition.
Almaden/Inglenook--
On August 5, 1994, the Company acquired the Inglenook and Almaden brands,
the fifth and sixth largest selling table wines in the United States, a grape
juice concentrate business and wineries in Madera and Escalon, California,
from Heublein, Inc. (Heublein) (the Almaden/Inglenook Acquisition). The
Company also acquired Belaire Creek Cellars, Chateau La Salle and Charles Le
Franc table wines, Le Domaine champagne and Almaden, Hartley and Jacques Bonet
brandy. The accounts receivable and the accounts payable related to the
acquired assets were not acquired by the Company.
The aggregate consideration for the acquired brands and other assets
consisted of $130,600,000 in cash, assumption of certain current liabilities
and options to purchase an aggregate of 600,000 shares of Class A Common Stock
(the Almaden Option Shares). Of the Almaden Option Shares, 200,000 were
exercisable at a price of $30 per share and the remaining 400,000 were
exercisable at a price of $35 per share. All of the options expired on August
5, 1996, unexercised. The 200,000 and 400,000 options have been recorded at
$5.83 and $4.19 per share, respectively, based upon an independent appraisal,
and $2,842,000 has been reflected as a component of additional paid-in
capital. The source of the cash payment made at closing, together with payment
of other costs and expenses required by the Almaden/Inglenook Acquisition, was
financing provided by the Company pursuant to a term loan under the Credit
Facility (see Note 7).
The cash purchase price was subject to adjustment based upon the
determination of the Final Net Asset Amount as defined in the Asset Purchase
Agreement; and, based upon the final closing statement delivered to the
Company by Heublein, was reduced by $9,297,000 which was paid to the Company
in November 1994.
Heublein also agreed not to compete with the Company in the United States
and Canada for a period of five years following the closing of the
Almaden/Inglenook Acquisition in the production and sale of grape juice
concentrate or sale of packaged wines bearing the designation "Chablis" or
"Burgundy" except where, among other exceptions, such designations are
currently used with certain brands retained by Heublein. Certain companies
acquired by Heublein, however, may compete directly with the Company.
F-13
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Almaden/Inglenook Acquisition was accounted for using the purchase
method; accordingly, the Almaden/Inglenook assets were recorded at fair market
value at the date of acquisition. During fiscal 1995, the Company terminated
certain of its long-term grape contracts acquired in connection with the
Almaden/Inglenook Acquisition. As a result, the estimated loss reserve at the
date of acquisition was reduced by approximately $23,751,000, with a
corresponding reduction in goodwill (see Note 11). The excess of purchase
price over the estimated fair market value of the net assets acquired
(goodwill), $24,028,000, is being amortized on a straight-line basis over
forty years. The results of operations of Almaden/Inglenook have been included
in the Consolidated Statements of Income since the date of the acquisition.
UDG Acquisition--
On September 1, 1995, the Company through its wholly-owned subsidiary,
Barton Incorporated (Barton), acquired certain of the assets of United
Distillers Glenmore, Inc., and certain of its North American affiliates
(collectively, UDG) (the UDG Acquisition). The acquisition was made pursuant
to an Asset Purchase Agreement dated August 29, 1995 (the Purchase Agreement),
entered into between Barton and UDG. The acquisition included all of UDG's
rights to the Fleischmann's, Skol, Mr. Boston, Canadian LTD, Old Thompson,
Kentucky Tavern, Chi-Chi's, Glenmore and di Amore distilled spirits brands;
the U.S. rights to Inver House, Schenley and El Toro distilled spirits brands;
and related inventories and other assets. The acquisition also included two of
UDG's production facilities; one located in Owensboro, Kentucky, and the other
located in Albany, Georgia. In addition, pursuant to the Purchase Agreement,
the parties entered into multiyear agreements under which Barton will (i)
purchase various bulk distilled spirits brands from UDG and (ii) provide
packaging services for certain of UDG's distilled spirits brands as well as
warehousing services.
The aggregate consideration for the acquired brands and other assets
consisted of $141,780,000 in cash, plus transaction costs of $2,300,000, and
assumption of certain current liabilities. The source of the cash payment made
at closing, together with payment of other costs and expenses required by the
UDG Acquisition, was financing provided by the Company pursuant to a term loan
under the Credit Facility (see Note 7).
The following table sets forth the unaudited pro forma results of operations
of the Company for the six months ended August 31, 1996 and 1995, the audited
results of operations of the Company for the Transition Period, the unaudited
comparable six month period ended February 28, 1995, and for the fiscal years
ended August 31, 1995 and 1994. The unaudited comparable six month periods
ended August 31, 1995, and February 28, 1995, and the fiscal year ended August
31, 1995, unaudited pro forma results of operations give effect to the UDG
Acquisition as if it occurred on September 1, 1994. The fiscal 1994 unaudited
pro forma results of operations give effect to the Almaden/Inglenook
Acquisition, the Vintners Acquisition and the UDG Acquisition as if they
occurred on September 1, 1993. The unaudited pro forma results of operations
are presented after giving effect to certain adjustments for depreciation,
amortization of goodwill, interest expense on the acquisition financing and
related income tax effects. The unaudited pro forma results of operations are
based upon currently available information and upon certain assumptions that
the Company believes are reasonable under the circumstances. The unaudited pro
forma results of operations do not purport to represent what the Company's
results of operations would actually have been if the aforementioned
transactions in fact had occurred on such dates or to project the Company's
financial position or results of operations at any future date or for any
future period.
F-14
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
-------------------------- ------------------------- -----------------------
AUGUST 31, FEBRUARY 29, FEBRUARY 28, AUGUST 31,
1996 1995 1996 1995 1995 1994
------------ ------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(in thousands, except share data)
Net sales........................ $ 555,711 $ 493,572 $ 535,024 $ 505,107 $ 998,679 $ 978,275
Income before provision for
income taxes.................... $ 26,069 $ 37,141 $ 6,703 $ 37,318 $ 107,129 $ 29,392
Net income....................... $ 13,442 $ 22,842 $ 3,322 $ 22,951 $ 45,793 $ 17,654
Share data:
Net income per common and common
equivalent share:
Primary........................ $.68 $1.14 $.17 $1.25 $2.39 $1.12
Fully diluted.................. $.68 $1.14 $.17 $1.25 $2.37 $1.10
Weighted average shares
outstanding:
Primary........................ 19,794,740 20,002,568 20,006,267 18,343,870 19,147,935 15,783,583
Fully diluted.................. 19,794,740 20,081,014 20,006,267 18,346,513 19,296,269 16,401,598
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------------
AUGUST 31, FEBRUARY 29, FEBRUARY 28,
1996 1996 1995 1995 1994
----------- ------------ ------------ -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
(in thousands)
Land.................... $ 16,271 $ 16,867 $ 13,814 $ 15,257 $ 13,814
Buildings and improve-
ments.................. 73,235 76,694 62,583 65,084 62,440
Machinery and equipment. 229,049 226,432 168,767 197,266 168,222
Motor vehicles.......... 5,340 5,814 2,552 5,204 2,552
Construction in pro- 29,804 12,404 19,643 12,171 8,989
gress.................. -------- -------- -------- -------- --------
353,699 338,211 267,359 294,982 256,017
Less--Accumulated depre- (99,199) (87,573) (71,520) (77,477) (61,734)
ciation................ -------- -------- -------- -------- --------
$254,500 $250,638 $195,839 $217,505 $194,283
======== ======== ======== ======== ========
</TABLE>
F-15
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER ASSETS:
The major components of other assets are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
AUGUST 31, FEBRUARY 29, FEBRUARY 28, ------------------
1996 1996 1995 1995 1994
----------- ------------ ------------ -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
(in thousands)
Goodwill................ $156,489 $156,489 $ 79,511 $ 70,141 $ 88,459
Distribution rights,
agency license
agreements and
trademarks............. 119,316 119,316 72,970 83,536 72,970
Other................... 24,219 23,123 23,195 23,187 22,296
-------- -------- -------- -------- --------
300,024 298,928 175,676 176,864 183,725
Less--Accumulated
amortization........... (17,876) (13,006) (8,360) (9,957) (5,495)
-------- -------- -------- -------- --------
$282,148 $285,922 $167,316 $166,907 $178,230
======== ======== ======== ======== ========
</TABLE>
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as
follows:
<TABLE>
<CAPTION>
AUGUST 31,
AUGUST 31, FEBRUARY 29, FEBRUARY 28, ---------------
1996 1996 1995 1995 1994
----------- ------------ ------------ ------- -------
(UNAUDITED) (UNAUDITED)
(in thousands)
<S> <C> <C> <C> <C> <C>
Accrued Earn-Out Amounts. $13,848 $13,848 $ -- $10,000 $28,300
Accrued loss on
noncancelable grape
contracts............... 1,716 1,719 13,646 10,862 14,410
Other.................... 59,522 52,873 63,546 47,034 53,351
------- ------- ------- ------- -------
$75,086 $68,440 $77,192 $67,896 $96,061
======= ======= ======= ======= =======
</TABLE>
6. OTHER LIABILITIES:
The major components of other liabilities are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
---------------
AUGUST 31, FEBRUARY 29, FEBRUARY 28,
1996 1996 1995 1995 1994
----------- ------------ ------------ ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
(in thousands)
Accrued loss on
noncancelable grape
contracts............... $1,171 $ 8,937 $27,170 $ 7,374 $48,254
Other.................... 3,756 3,361 2,907 3,226 2,994
------ ------- ------- ------- -------
$4,927 $12,298 $30,077 $10,600 $51,248
====== ======= ======= ======= =======
</TABLE>
F-16
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. BORROWINGS:
Borrowings consists of the following:
<TABLE>
<CAPTION>
AUGUST 31,
-----------------
FEBRUARY 28,
AUGUST 31, 1996 FEBRUARY 29, 1996 1995 1995 1994
------------------------- -------------------------- ------------ -------- --------
LONG- LONG-
CURRENT TERM TOTAL CURRENT TERM TOTAL TOTAL TOTAL TOTAL
------- -------- -------- -------- -------- -------- ------------ -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands)
Notes Payable:
Senior Credit
Facility:
Revolving Credit $62,000 $ -- $ 62,000 $111,300 $ -- $111,300 $ 7,000 $ -- $ 19,000
Loans............... ======= ======== ======== ======== ======== ======== ======== ======== ========
Long-term Debt:
Senior Credit
Facility:
Term loan, variable
rate, aggregate
proceeds of $246,000,
due in installments
through August 2001... $40,000 $176,000 $216,000 $ 40,000 $196,000 $236,000 $135,000 $ 91,000 $177,000
Senior Subordinated
Notes:
8.75% redeemable after
December 15, 1998,
due 2003.............. -- 130,000 130,000 -- 130,000 130,000 130,000 130,000 130,000
Capitalized Lease
Agreements:
Capitalized facility
and equipment leases
at interest rates
ranging from 8.9% to
11.5%, due in monthly
installments through
fiscal 1998........... 648 -- 648 679 293 972 2,137 1,338 2,292
Industrial Development
Agencies:
7.50% 1980 issue,
original proceeds
$2,370, due in annual
installments of $118
through fiscal 2000... 118 237 355 118 356 474 592 592 592
Other Long-term Debt:
Loans payable--5%
secured by cash
surrender value of
officers' life
insurance policies.... -- 967 967 -- 967 967 967 967 967
Notes payable at
prime................. -- -- -- -- -- -- 8,632 3,775 8,632
Promissory note at
prime rate, due in
equal annual
installments through -- -- -- -- -- -- 320 320 640
fiscal 1996........... ------- -------- -------- -------- -------- -------- -------- -------- --------
$40,766 $307,204 $347,970 $ 40,797 $327,616 $368,413 $277,648 $227,992 $320,123
======= ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Senior credit facility--
The Company and a syndicate of 20 banks (the Syndicate Banks) for which The
Chase Manhattan Bank acts as agent, entered into a third amended and restated
credit agreement (the Credit Agreement) dated September 1, 1995 which provided
for (i) a $246,000,000 Term Loan (the Term Loan) Facility and (ii) a
$185,000,000 Revolving Credit (the Revolving Credit Loans) Facility and (iii)
a $25,000,000 Letter of Credit
F-17
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Barton Letter of Credit) Facility related to the stockholder contingent
payments incurred with the Barton Acquisition. On September 1, 1995 the
Company borrowed $155,000,000 on the Term Loan in connection with the UDG
Acquisition. This Third Amended and Restated Credit Agreement was further
amended (i) as of December 20, 1995 to permit the use of Revolving Loans to
repurchase up to $30,000,000 of its Class A and Class B Common Stock, (ii) as
of January 10, 1996 to accommodate the change in the Company's fiscal year
end, and (iii) as of May 17, 1996 to, among other things, modify certain
financial covenants, effective February 29, 1996, to which the Company is
subject. Term loans under the Senior Credit Facility may be either base rate
loans or Eurodollar rate loans. Base rate loans have an interest rate equal to
the higher of either the Federal Funds rate plus 0.5% or the prime rate.
Eurodollar loans have an interest rate equal to the London Interbank Offering
Rate (LIBOR) plus a margin of 1.00% (unaudited), 0.75%, 1.25% (unaudited),
1.00%, 1.25%, and 1.63% at August 31, 1996, February 29, 1996, February 28,
1995, and August 31, 1995, 1994 and 1993 respectively. The interest rate
margin for Eurodollar loans ranges from 0.5% to 1.25% depending on the
Company's debt coverage ratio (as defined by the Senior Credit Facility). The
principal of the Term Loan is to be repaid in 23 quarterly installments of
$10,000,000 with a final payment of $16,000,000, which is due on August 15,
2001.
The $185,000,000 Revolving Credit Loans, available under the Senior Credit
Facility, may be utilized by the Company either in the form of Revolving
Credit Loans or as Revolving Letters of Credit up to a maximum of $20,000,000.
At August 31, 1996, February 29, 1996, February 28, 1995, and August 31, 1995
and 1994, the Company had available to be drawn Revolving Credit Loans of
$114,869,000 (unaudited), $68,680,000, $176,670,000 (unaudited), $172,461,000
and $163,753,000, respectively. The Revolving Credit Loans have the same
borrowing options and margins as the Term Loan Facility and in addition the
Company may borrow under a money market option. The interest rate is
determined by a competitive bid process among the Syndicate Banks. For 30
consecutive days at any time during the fiscal quarters ending on May 31 and
August 31 of each fiscal year, the aggregate outstanding principal amount of
Revolving Credit Loans combined with Letters of Credit cannot exceed
$60,000,000. The weighted average interest rate on the Revolving Credit Loans
was 6.66% (unaudited), 7.77% (unaudited), 6.76%, 6.97% (unaudited), 7.16% and
6.07% for the six months ended August 31, 1996, the comparable six month
period ended August 31, 1995, for the Transition Period, the comparable six
month period ended February 28, 1995 and the fiscal years ended August 31,
1995, and 1994, respectively.
The Syndicate Banks have been given security interest in substantially all
of the assets of the Company including mortgage liens on certain real
property. The Credit Facility requires the Company to meet certain covenants
and provides for restrictions on mergers, consolidations, sale of assets,
payment of dividends, and incurring of other debt, liens or guarantees and
making of investments. The primary financial covenants as defined in the
Credit Facility require the maintenance of minimum tangible net worth and
maximum debt ratio, fixed charge and interest coverage ratios.
The Revolving Credit Loans require commitment fees based on the daily
average unused portion of the Revolving Credit Facility. The fee is based upon
the Company's debt ratio as defined in the Credit Agreement and can range from
0.2% to 0.375%. At August 31, 1996 and February 29, 1996, the commitment fee
percentage was 0.25%. Commitment fees totaled approximately $182,300
(unaudited), $215,800 (unaudited), $142,600, $269,600 (unaudited), $635,000,
$223,000 and $228,000 for the six months ended August 31, 1996, the comparable
six month period ended August 31, 1995, for the Transition Period, the
comparable six month period ended February 28, 1995 and the fiscal years ended
August 31, 1995, 1994 and 1993 respectively.
F-18
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At February 29, 1996, the Company maintains in accordance with the Senior
Credit Facility an interest rate cap agreement, in an amount equal to
$61,000,000, which protects the Company against three-month LIBOR exceeding
8.75% per annum and expires in September 1996 and an interest rate collar
agreement in the amount of $20,000,000 which protects the Company against
three month LIBOR exceeding 6.25% per annum with a floor rate of 4.75% per
annum expiring in September 1997.
Senior subordinated notes --
During fiscal 1994, the Company borrowed $130,000,000 under a senior
subordinated loan agreement (the Subordinated Loan). The Company repaid the
Subordinated Loan in December 1993 with the proceeds from the $130,000,000
Senior Subordinated Notes (the Notes) offering together with revolving loan
borrowings. The Notes are due in 2003 with a stated interest rate of 8.75% per
annum. Interest is payable semi-annually on June 15 and December 15 of each
year. The Notes are unsecured and subordinated to the prior payment in full of
all senior indebtedness of the Company, which includes the Senior Credit
Facility. The Notes are guaranteed, on a senior subordinated basis, by all of
the Company's significant operating subsidiaries.
The Trust Indenture relating to the Notes contains certain covenants,
including, but not limited to, (i) limitation on indebtedness; (ii) limitation
on restricted payments; (iii) limitation on transactions with affiliates; (iv)
limitation on senior subordinated indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii) limitation on issuance of guarantees of
and pledges for indebtedness; (viii) restriction on transfer of assets; (ix)
limitation on subsidiary capital stock; (x) limitation on the creation of any
restriction on the ability of the Company's subsidiaries to make distributions
and other payments; and (xi) restrictions on mergers, consolidations and the
transfer of all or substantially all of the assets of the Company to another
person. The limitation on indebtedness covenant is governed by a rolling four
quarter fixed charge coverage ratio covenant requiring a specified minimum.
Convertible subordinated debentures --
On July 23, 1986, the Company issued $60,000,000 7% convertible subordinated
debentures used to expand the Company's operations through capital
expenditures and acquisitions. The debentures were convertible at any time
prior to maturity, unless previously redeemed, into Class A Common Stock of
the Company at a conversion price of $18.22 per share, subject to adjustment
in the event of future issuances of common stock.
During fiscal 1993, an aggregate principal amount of $976,000 of these
debentures was converted to 53,620 shares of Class A Common Stock.
On October 18, 1993, the Company called its convertible debentures for
redemption on November 19, 1993, at a redemption price of 102.1% plus accrued
interest. Bondholders had until November 19, 1993, to convert their debentures
to common stock; any debentures remaining unconverted after that date would be
redeemed for cash in accordance with the terms of the original indenture.
During the period September 1, 1993, through November 19, 1993, debentures
in an aggregate principal amount of $58,960,000 were converted to 3,235,882
shares of the Company's Class A Common Stock at a price of $18.22 per share.
Debentures in an aggregate principal amount of approximately $63,000 were
redeemed. Interest was accrued on the debentures until the date of conversion
but was forfeited by the debenture holders upon conversion. Accrued interest
of approximately $1,370,000, net of the related tax effect of $520,000, was
recorded as an addition to additional paid-in capital.
F-19
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At the redemption date, the capitalized debenture issuance costs of
approximately $2,246,000, net of accumulated amortization of approximately
$677,000, were recorded as a reduction of additional paid-in capital.
Loans payable --
Loans payable, secured by officers' life insurance policies, carry an
interest rate of 5%. The notes carry no due dates and it is management's
intention not to repay the notes during the next fiscal year.
Capitalized lease agreements--Industrial Development Agencies --
Certain capitalized lease agreements require the Company to make lease
payments equal to the principal and interest on certain bonds issued by
Industrial Development Agencies (IDA's). The bonds are secured by the leases
and the related facilities. These transactions have been treated as capital
leases with the related assets acquired to date of $10,731,000 included in
property, plant and equipment and the lease commitments included in long-term
debt. Accumulated amortization of the foregoing assets under capital leases at
August 31, 1996, February 29, 1996, February 28, 1995, and August 31, 1995 and
1994, is approximately $9,763,000 (unaudited), $9,436,000, $8,783,000
(unaudited), $9,109,000 and $8,456,000, respectively.
Among the provisions under the debenture and lease agreements are covenants
that define minimum levels of working capital and tangible net worth and the
maintenance of certain financial ratios as defined in the debt agreements.
Debt payments--
Principal payments required under long-term debt obligations during the next
five fiscal years are as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, 1996:
------------------
(IN THOUSANDS)
<S> <C>
1997............ $ 40,797
1998............ 40,411
1999............ 40,119
2000............ 40,119
2001............ 40,000
Thereafter...... 166,967
--------
$368,413
========
</TABLE>
8. INCOME TAXES:
The provision for Federal and state income taxes consists of the following:
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEARS ENDED
FEBRUARY 29, 1996 AUGUST 31,
------------------------ -----------------------
STATE &
FEDERAL LOCAL TOTAL 1995 1994 1993
(in thousands) ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Current income tax (benefit)
provision...................... $ (116) $1,506 $1,390 $ 6,446 $11,510 $8,636
Deferred income tax (benefit) 2,224 (233) 1,991 19,232 (4,319) 1,028
provision...................... ------ ------ ------ ------- ------- ------
$2,108 $1,273 $3,381 $25,678 $ 7,191 $9,664
====== ====== ====== ======= ======= ======
</TABLE>
F-20
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred income tax provision (benefit) are as
follows:
<TABLE>
<CAPTION>
FOR THE FOR THE YEARS ENDED
SIX MONTHS ENDED AUGUST 31,
FEBRUARY 29, ------------------------
1996 1995 1994 1993
---------------- ------- ------- ------
(in thousands)
<S> <C> <C> <C> <C>
Accelerated tax depreciation
and amortization............. $ 4,752 $10,089 $ 4,610 $ 758
LIFO reserve.................. (2,007) 1,871 1,306 (202)
Prepaid advertising........... (922) 792 258 701
Inventory reserves............ 1,868 5,163 (2,186) (249)
Restructuring costs........... 2,155 3,144 (8,843) --
Other accruals................ (3,855) (1,827) 536 20
------- ------- ------- ------
$ 1,991 $19,232 $(4,319) $1,028
======= ======= ======= ======
</TABLE>
The deferred tax provision has been increased by approximately $45,000 and
$235,000 in fiscal 1994 and 1993, respectively, for the impact of the change
in the federal statutory rate.
A reconciliation of total tax provision to the amount computed by applying
the expected U.S. Federal income tax rate to income before provision for
income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE YEARS ENDED AUGUST 31, 1996
SIX MONTHS ENDED ------------------------------------------------
FEBRUARY 29, 1996 1995 1994 1993
------------------ ------------------ -------------- --------------
% OF % OF
% OF % OF PRE- PRE-
PRE-TAX PRE- TAX TAX TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
--------- -------- ------- --------- ------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
"Expected" tax provi-
sion................... $ 2,346 35.0 $23,344 35.0 $6,623 35.0 $8,758 34.7
State and local income
taxes, net of federal
income tax benefit..... 827 12.3 2,395 3.6 644 3.4 870 3.4
Nondeductible meals and
entertainment expenses. 205 3.1 290 .4 87 .5 48 .2
Miscellaneous items, 3 -- (351) (.5) (163) (.9) (12) (.1)
net.................... --------- ------- ------- ---- ------ ---- ------ ----
$ 3,381 50.4 $25,678 38.5 $7,191 38.0 $9,664 38.2
========= ======= ======= ==== ====== ==== ====== ====
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
------------ ----------------
1996 1995 1994
(in thousands) ------------ ------- -------
<S> <C> <C> <C>
Depreciation & amortization................ $66,746 $55,015 $40,152
LIFO reserve............................... 2,638 4,644 2,672
Prepaid advertising........................ 2,201 3,107 2,281
Restructuring costs........................ (3,963) (6,133) (9,482)
Inventory reserves......................... 3,648 1,718 (3,734)
Other accruals............................. (9,685) (5,027) 2,511
------- ------- -------
$61,585 $53,324 $34,400
======= ======= =======
</TABLE>
F-21
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At February 29, 1996, the Company has state and U.S. Federal net operating
loss carryforwards of $15,655,000 and $3,880,000, respectively, to offset
future taxable income that, if not otherwise utilized, will expire at February
28, 2001 and 2011, respectively.
9. PROFIT SHARING RETIREMENT PLANS AND RETIREMENT SAVINGS PLAN:
The Company's profit sharing retirement plans, which cover substantially all
employees, provide for contributions by the Company in such amounts as the
Board of Directors may annually determine and for voluntary contributions by
employees. The plans have qualified as tax-exempt under the Internal Revenue
Code and conform with the Employee Retirement Income Security Act of 1974.
Company contributions to the plans, including the Barton plan described below,
were $2,442,000 (unaudited) and $769,000 (unaudited) for the six months ended
August 31, 1996 and 1995, respectively, $3,608,000 in the Transition Period,
$3,830,000, $3,414,000, and $1,290,000 in fiscal 1995, 1994 and 1993,
respectively.
In connection with the Barton Acquisition, the Company assumed Barton's
profit sharing and 401(k) plan which covers all salaried employees of Barton.
The amount of Barton's contribution under the profit sharing portion of the
plan is at the discretion of its Board of Directors, subject to limitations of
the plan. Contribution expense was $1,131,000 (unaudited) and $769,000
(unaudited) for the six months ended August 31, 1996 and 1995, respectively,
and $1,095,000 in the Transition Period, $1,430,000 in fiscal 1995, $1,395,000
in fiscal 1994, and $230,000 from the date of acquisition to August 31, 1993.
Pursuant to the 401(k) portion of the plan, participants may defer up 8% of
their compensation for the year and receive no matching contribution from
Barton.
The Company's retirement savings plan, established pursuant to Section
401(k) of the Internal Revenue Code, permits substantially all full-time
employees of the Company to defer a portion of their compensation on a pre-tax
basis. Participants, exclusive of Barton employees, may defer up to 10% of
their compensation for the year and the Company makes a matching contribution
of 25% of the first 4% of compensation an employee defers. Company
contributions to this plan were $317,000 (unaudited) and $139,000 (unaudited)
for the six months ended August 31, 1996 and 1995, respectively, $325,000 in
the Transition Period and $281,000, $207,000, and $131,000 in fiscal 1995,
1994 and 1993, respectively.
10. STOCKHOLDERS' EQUITY:
Common stock --
The Company has two classes of common stock: Class A Common Stock and Class
B Convertible Common Stock. Class B Convertible Common Stock shares are
convertible into shares of Class A Common Stock on a one-to-one basis at any
time at the option of the holder. Holders of Class B Convertible Common Stock
are entitled to ten votes per share. Holders of Class A Common Stock are
entitled to only one vote per share but are entitled to a cash dividend
premium. If the Company pays a cash dividend on Class B Convertible Common
Stock, each share of Class A Common Stock will receive an amount at least ten
percent greater than the amount of the cash dividend per share paid on Class B
Convertible Common Stock. In addition, the Board of Directors may declare and
pay a dividend on Class A Common Stock without paying any dividend on Class B
Convertible Common Stock.
At February 29, 1996, there were 16,257,296 shares of Class A Common Stock
and 3,365,958 shares of Class B Convertible Common Stock outstanding, net of
treasury stock.
F-22
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On June 28, 1993, the Company approved an increase in the number of
authorized shares of the Company's Class A Common Stock from 15,000,000 shares
to 60,000,000 shares and an increase in the number of authorized shares of the
Company's Class B Convertible Common Stock from 5,000,000 shares to 20,000,000
shares.
Stock repurchase authorization --
On January 11, 1996, the Company's Board of Directors authorized the
repurchase of up to $30,000,000 of its Class A and Class B Common stock. The
Company may finance such purchases, which will become treasury shares, through
cash generated from operations or through the Credit Facility. No shares were
repurchased as of February 29, 1996, and 175,000 shares of Class A Common
stock totaling $5,433,750 were repurchased during the six months ended August
31, 1996.
Preferred stock --
The Company is authorized to issue up to 1,000,000 shares of preferred
stock, par value $.01 per share, in one or more series. The Board of Directors
of the Company is entitled to authorize the issuance of preferred stock with
such rights, qualifications, limitations and restrictions as may be determined
by the Board. No preferred stock has been issued as of February 29, 1996.
Stock option and stock appreciation right plan--
Canandaigua Wine Company, Inc. has in place a Stock Option and Stock
Appreciation Right Plan (the Plan). Under the Plan, nonqualified stock options
and incentive stock options may be granted to purchase and stock appreciation
rights may be granted with respect to, in the aggregate, not more than
3,000,000 shares of the Company's Class A Common Stock. Options and stock
appreciation rights may be issued to employees, officers or directors of the
Company. Nonemployee directors are eligible to receive only nonqualified stock
options and stock appreciation rights. The option price of any incentive stock
option may not be less than the fair market value of the shares on the date of
grant. The exercise price of any nonqualified stock option must equal or
exceed 50% of the fair market value of the shares on the date of grant.
Options are exercisable as determined by the Compensation Committee of the
Board of Directors. Changes in the status of the Plan during the six months
ended August 31, 1996, the Transition Period and fiscal 1995, 1994 and 1993
are summarized as follows:
<TABLE>
<CAPTION>
AUGUST 31,
AUGUST 31, FEBRUARY 29, --------------------------
1996 1996 1995 1994
----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Options outstanding at
beginning of period.... 1,093,725 733,925 563,500 452,375
Options granted......... 631,900 571,050 289,000 125,000
Options exercised....... -- (18,000) (114,075) (2,250)
Options
forfeited/canceled..... (573,100) (193,250) (4,500) (11,625)
----------- ------------ ------------ ------------
Options outstanding at
end
of period.............. 1,152,525 1,093,725 733,925 563,500
Number of options at end of period:
Exercisable........... 28,675 28,675 39,675 2,250
Available for grant... 1,680,750 1,739,550 2,117,350 2,401,850
Price range of options:
Granted during period. $30.00 $35.75-49.00 $33.25-44.75 $22.25-30.25
Outstanding at end of
period............... $4.44-36.00 $4.44-36.00 $4.44-44.75 $4.44-30.25
Exercised during the pe-
riod................... -- $4.44-33.25 $4.44-24.25 $4.44
</TABLE>
F-23
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Employee stock purchase plan--
In fiscal 1989, the Company approved a stock purchase plan under which
1,125,000 shares of Class A Common Stock can be issued. Under the terms of the
plan, eligible employees may purchase shares of the Company's Class A Common
Stock through payroll deductions. The purchase price is the lower of 85% of
the fair market value of the stock on the first or last day of the purchase
period. During the six months ended August 31, 1996, the Transition Period and
fiscal 1995, 1994 and 1993, employees purchased 20,340 (unaudited), 20,869,
28,641, 58,955 and 21,071 shares, respectively.
Stock Offering--
During November 1994, the Company completed a public offering and sold
3,000,000 shares of its Class A Common Stock (the Stock Offering), resulting
in net proceeds to the Company of approximately $95,515,000 after
underwriters' discounts and commissions and expenses. In connection with the
offering, 432,067 of the Vintners Option Shares were exercised and the Company
received proceeds of $7,885,000. Under the terms of the amended Credit
Agreement, approximately $82,000,000 was used to repay a portion of the Term
Loan under the Company's Credit Facility. The balance of net proceeds was used
to repay Revolving Credit Loans under the Credit Facility.
11. COMMITMENTS AND CONTINGENCIES:
Operating leases--
Future payments under noncancelable operating leases having initial or
remaining terms of one year or more are as follows:
<TABLE>
<CAPTION>
FEBRUARY 29, 1996
-----------------
(IN THOUSANDS)
<S> <C>
1997................................. $1,169
1998................................. 923
1999................................. 766
2000................................. 742
2001................................. 732
2002................................. 724
Thereafter........................... 1,802
------
$6,858
======
</TABLE>
Rental expense was approximately $2,307,000 (unaudited) and $2,376,000
(unaudited) for the six months ended August 31, 1996 and 1995, respectively,
$2,382,000 in the Transition Period, $4,193,000 in fiscal 1995, $3,318,000 in
fiscal 1994 and $1,841,000 in fiscal 1993.
Purchase commitments and contingencies--
The Company has four agreements with certain suppliers to purchase blended
Scotch whisky through December 31, 1999. The purchase prices under the
agreements are denominated in British pounds sterling and based upon exchange
rates at February 29, 1996, the Company's aggregate future obligation will be
approximately $1,376,000 to $1,681,000 for the contracts expiring on December
31, 1996, and approximately $10,730,000 to $24,748,000 for the contracts
expiring through December 31, 1999.
F-24
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company has two agreements to purchase Canadian blended whisky through
December 31, 1999 at a purchase price of approximately $2,819,000 to
$13,035,000. The Company also has two agreements to purchase Canadian new
distillation whisky (including dumping charges) through December 2002 at
purchase prices of approximately $15,129,000 to $16,626,000. In addition, the
Company has an agreement to purchase corn whiskey through April 1999 at a
purchase price of approximately $562,000.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements from the suppliers of these products. The
agreements have terms that vary and require compliance with certain terms and
conditions. The Company's agreement to distribute Corona and its other Mexican
beer brands exclusively throughout 25 states was renewed effective January
1994 and expires in December 1998 with automatic renewal thereafter for one
year periods from year to year unless terminated. The remaining agreements
expire through the year 2003. Prior to their expiration, these agreements may
be terminated if the Company fails to meet certain performance criteria. At
February 29, 1996, the Company believes it is in compliance with all of its
material distribution agreements and given the Company's long-term
relationships with its suppliers, the Company does not believe that these
agreements will be terminated.
In connection with the Vintners Acquisition and the Almaden/Inglenook
Acquisition, the Company assumed purchase contracts with certain growers and
suppliers. In addition, the Company has also entered into other purchase
contracts with various growers and suppliers in the normal course of business.
Under the grape purchase contracts, the Company is committed to purchase all
grape production yielded from a specified number of acres for a period of time
ranging up to sixteen years. The actual tonnage and price of grapes that must
be purchased by the Company will vary each year depending on certain factors,
including weather, time of harvest, overall market conditions and the
agricultural practices and location of the growers and suppliers under
contract.
The Company purchased $113,880,000 of grapes under these contracts during
the Transition Period. Based on current production yields and published grape
prices, the Company estimates that the aggregate purchases under these
contracts over the remaining term of the contracts will be approximately
$730,574,000. During fiscal 1994, in connection with the Vintners Acquisition
and the Almaden/Inglenook Acquisition, the Company established a reserve for
the estimated loss on these firm purchase commitments of approximately
$62,664,000 which was subsequently reduced during fiscal 1995, to reflect the
effects of the termination payments to cancel contracts with certain growers
(see Note 2). The remaining reserve for the estimated loss on the remaining
contracts is approximately $2,347,000 (unaudited) at August 31, 1996 and
$10,656,000 at February 29, 1996.
The Company's aggregate obligations under grape crush and processing
contracts will be approximately $5,662,000 over the remaining term of the
contracts which expire through fiscal 2000.
Currency forward contracts--
At February 29, 1996, the Company had open currency forward contracts to
purchase British pound sterling of $3,129,000, which mature through September
1996; the fair market value, based upon February 29, 1996, market rates was
$3,164,000. At August 31, 1995, there were no currency forward contracts
outstanding. At August 31, 1994, the Company had open currency forward
contracts to purchase German marks of $6,674,000 and British pounds sterling
of $579,000, both of which matured within 12 months; their fair market values,
based upon August 31, 1994, market exchange rates, were $7,382,000 and
$614,000, respectively.
F-25
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Employment contracts--
The Company has employment contracts with certain of its executive officers
and certain other management personnel with remaining terms ranging up to five
years. These agreements provide for minimum salaries, as adjusted for annual
increases, and may include incentive bonuses based upon attainment of
specified management goals. In addition, these agreements also provide for
severance payments in the event of specified termination of employment. The
aggregate commitment for future compensation and severance, excluding
incentive bonuses, was approximately $5,278,000 as of February 29, 1996, of
which approximately $1,879,000 is accrued in other liabilities as of February
29, 1996.
Legal matters--
The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to such
litigation cannot be determined, in the opinion of management, such liability
will not have a material adverse effect on the Company's financial condition
or results of operations.
12. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
The Company sells its products principally to wholesalers for resale to
retail outlets including grocery stores, package liquor stores, club and
discount stores and restaurants. Gross sales to the five largest wholesalers
of the Company represented 16.9%, 21.6%, 23.7% and 25.1% of the Company's
gross sales for the Transition Period and for the fiscal years ended August
31, 1995, 1994 and 1993, respectively. Gross sales to the Company's largest
wholesaler represented 10.6% and 12.3% of the Company's gross sales for the
fiscal years ended August 31, 1995 and 1994; no single wholesaler was
responsible for greater than 10% of gross sales during the Transition Period
and the fiscal year ended August 31, 1993. Gross sales to the Company's five
largest wholesalers are expected to continue to represent a significant
portion of the Company's revenues. The Company's arrangements with certain of
its wholesalers may, generally, be terminated by either party with prior
notice. The Company performs ongoing credit evaluations of its customers'
financial position, and management of the Company is of the opinion that any
risk of significant loss is reduced due to the diversity of customers and
geographic sales area.
13. RESTRUCTURING PLAN:
The Company provided for costs to restructure the operations of its
California wineries (the Restructuring Plan) in the fourth quarter of fiscal
1994. Under the Restructuring Plan, all bottling operations at the Central
Cellars Winery in Lodi, California, and the branded wine bottling operations
at the Monterey Cellars Winery in Gonzales, California, were moved to the
Mission Bell Winery located in Madera, California. The Monterey Cellars Winery
will continue to be used as a crushing, winemaking and contract bottling
facility. The Central Cellars Winery was closed in the fourth quarter of
fiscal 1995 and was sold for its approximate net book value subsequent to
February 29, 1996. In fiscal 1994, the Restructuring Plan reduced income
before taxes and net income by approximately $24,005,000 and $14,883,000,
respectively, or $.91 per share on a fully diluted basis. Of the total pretax
charge in fiscal 1994, approximately $16,481,000 was to recognize estimated
losses associated with the revaluation of land, buildings and equipment
related to facilities described above, to their estimated net realizable
value; and approximately $7,524,000 related to severance and other benefits
associated with the elimination of 260 jobs. In fiscal 1995, the Restructuring
Plan reduced income before income taxes and net income by approximately
$2,238,000 and $1,376,000, respectively, or $.07 per share on a fully
F-26
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
diluted basis. Of this total pretax charge in fiscal 1995, $4,288,000 relates
to equipment relocation and employee hiring and relocation costs, offset by a
decrease of $2,050,000 in the valuation reserve as compared to fiscal 1994,
primarily related to the land, buildings and equipment at the Central Cellars
Winery. The Company also expended approximately $19,071,000 in fiscal 1995 for
capital expenditures to expand storage capacity and install certain relocated
equipment. In the Transition Period, the expense incurred in connection with
the Restructuring Plan reduced income before taxes and net income by
approximately $2,404,000 and $1,192,000, respectively, or $.06 per share.
These charges represent incremental, nonrecurring expenses of $3,982,000
primarily incurred for overtime and freight expenses resulting from
inefficiencies related to the Restructuring Plan, offset by a reduction in the
accrual for restructuring expenses of $1,578,000, primarily for severance and
facility holding and closure costs. The Company expended approximately
$6,644,000 during the Transition Period, for capital expenditures to expand
storage capacity. As of February 29, 1996, employment has been reduced by 177
jobs and no additional reductions are expected. As of August 31, 1996,
February 29, 1996, August 31, 1995 and 1994, the Company had accrued
approximately $685,000 (unaudited), $1,186,000, $4,251,000 and $9,106,000,
respectively, relating to the Restructuring Plan.
14. ACCOUNTING PRONOUNCEMENTS:
In March 1995, Statement of Financial Accounting Standards No. 121 (SFAS No.
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," was issued. This statement requires companies to
review long-lived assets, including certain intangibles and goodwill, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company will be
required to adopt SFAS No. 121 in fiscal 1997. The Company believes the effect
of adoption will not be material.
In October 1995, Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation," was issued. This
statement encourages companies to use the fair value based method to measure
compensation cost, which is then recognized over the service period (usually
the vesting period). Companies which continue to measure compensation cost
using the intrinsic value method as prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees", will be required to disclose pro
forma net income and, if presented, earnings per share as if the fair value
based method had been applied. The Company will be required to adopt SFAS No.
123 on a prospective basis beginning in fiscal 1997. The Company has elected
to apply the provisions of APB Opinion No. 25 and will comply with the
disclosure requirements in the notes to its fiscal 1997 consolidated financial
statements.
F-27
<PAGE>
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. FEBRUARY FISCAL YEAR FINANCIAL DATA (UNAUDITED):
The financial data presented below summarizes unaudited activity for the
1996, 1995 and 1994 fiscal years ended the last day of February.
<TABLE>
<CAPTION>
FULL YEAR FULL YEAR FULL YEAR
RECAST RECAST RECAST
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
(in thousands)
GROSS SALES.......................... $1,331,184 $1,046,792 $ 635,983
Less--Excise taxes................. (344,101) (257,239) (165,049)
---------- ---------- ---------
Net Sales........................ 987,083 789,553 470,934
COST OF PRODUCT SOLD................. (722,325) (566,713) (332,463)
---------- ---------- ---------
Gross profit..................... 264,758 222,840 138,471
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ (191,683) (141,653) (93,903)
NONRECURRING RESTRUCTURING EXPENSES.. (3,957) (24,690) --
---------- ---------- ---------
Operating income................. 69,118 56,497 44,568
INTEREST EXPENSE--NET................ (28,758) (22,911) (11,495)
---------- ---------- ---------
Income before provision for Federal
and state income taxes ........... 40,360 33,586 33,073
PROVISION FOR FEDERAL AND STATE
INCOME TAXES ....................... (16,339) (12,928) (12,629)
---------- ---------- ---------
NET INCOME........................... $ 24,021 $ 20,658 $ 20,444
========== ========== =========
</TABLE>
16. SUBSEQUENT EVENTS (UNAUDITED):
Vintners Holdback--
On September 26, 1996, the Company reached a final settlement with the
company formerly known as Vintners International Company, Inc. and its lenders
on the disputed final closing net asset statement. As a result, the Company
will record a purchase price reduction for the Vintners Acquisition, which
will reduce recorded goodwill by approximately $5.9 million.
F-28
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary.................................................................... 2
Risk Factors............................................................... 13
The Exchange Offer......................................................... 20
Use of Proceeds............................................................ 28
Capitalization............................................................. 29
Selected Historical Financial Data......................................... 30
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 32
Industry................................................................... 46
Business................................................................... 48
Management................................................................. 61
Description of Credit Facility............................................. 62
Description of Notes....................................................... 65
Certain Federal Income Tax Considerations.................................. 94
Plan of Distribution....................................................... 98
Legal Matters.............................................................. 99
Experts.................................................................... 99
Available Information...................................................... 99
Incorporation of Certain Documents by Reference............................ 100
Index to Consolidated Financial Statements................................. F-1
</TABLE>
PROSPECTUS
CANANDAIGUA WINE
COMPANY, INC.
OFFER TO EXCHANGE UP TO $65,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS 8 3/4%
SERIES C SENIOR SUBORDINATED NOTES DUE 2003 FOR ANY AND ALL OF ITS 8 3/4%
SERIES B SENIOR SUBORDINATED NOTES DUE 2003
[LOGO]
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of Delaware (Section 102) allows a corporation
to eliminate the personal liability of directors of a corporation to the
corporation or to any of its stockholders for monetary damage for a breach of
his/her fiduciary duty as a director, except in the case where the director
breached his/her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of
a dividend or approved a stock repurchase in violation of Delaware corporate
law or obtained an improper personal benefit. The Restated Certificate of
Incorporation of the Company contains a provision which eliminates directors'
personal liability as set forth above.
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes the Company to buy directors' and
officers' liability insurance. Such indemnification is not exclusive of any
other right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
The Company's Restated Certificate of Incorporation provides for
indemnification to the fullest extent authorized by Section 145 of the General
Corporation Law of Delaware for directors, officers and employees of the
Company and also to persons who are serving at the request of the Company as
directors, officers or employees of other corporations (including
subsidiaries); provided that, with respect to proceedings initiated by such
indemnitee, indemnification shall be provided only if such proceedings were
authorized by the Board of Directors. This right of indemnification is not
exclusive of any other right which any person may acquire under any statute,
bylaw, agreement, contract, vote of stockholders or otherwise.
The Company maintains directors' and officers' liability insurance and
corporate reimbursement policies insuring directors and officers against loss
arising from claims made arising out of the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.1 Asset Purchase Agreement dated August 2, 1991 between the Registrant
and Guild Wineries and Distilleries, as assigned to an acquiring
subsidiary (filed as Exhibit 2(a) to the Registrant's Report on Form
8-K dated October 1, 1991 and incorporated herein by reference).
2.2 Stock Purchase Agreement dated April 27, 1993 among the Registrant,
Barton Incorporated and the stockholders of Barton Incorporated,
Amendment No. 1 to Stock Purchase Agreement dated May 3, 1993, and
Amendment No. 2 to Stock Purchase Agreement dated June 29, 1993 (filed
as Exhibit 2(a) to the Registrant's Current Report on Form 8-K dated
June 29, 1993 and incorporated herein by reference).
2.3 Asset Sale Agreement dated September 14, 1993 between the Registrant
and Vintners International Company, Inc. (filed as Exhibit 2(a) to the
Registrant's Current Report on Form 8-K dated October 15, 1993 and
incorporated herein by reference).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.4 Amendment dated as of October 14, 1993 to Asset Sale Agreement dated
as of September 14, 1993 by and between Vintners International
Company, Inc. and the Registrant (filed as Exhibit 2(b) to the
Registrant's Current Report on Form 8-K dated October 15, 1993 and
incorporated herein by reference).
2.5 Amendment No. 2 dated as of January 18, 1994 to Asset Sale Agreement
dated as of September 14, 1993 by and between Vintners International
Company, Inc. and the Registrant (filed as Exhibit 2.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1994 and incorporated herein by reference).
2.6 Asset Purchase Agreement dated August 3, 1994 between the Registrant
and Heublein, Inc. (filed as Exhibit 2(a) to the Registrant's Current
Report on Form 8-K dated August 5, 1994 and incorporated herein by
reference).
2.7 Amendment dated November 8, 1994 to Asset Purchase Agreement between
Heublein, Inc. and Registrant (filed as Exhibit 2.2 to the
Registrant's Registration Statement on Form S-3 (Amendment No. 2)
(Registration No. 33-55997) filed with the Securities and Exchange
Commission on November 8, 1994 and incorporated herein by reference).
2.8 Amendment dated November 18, 1994 to Asset Purchase Agreement between
Heublein, Inc. and the Registrant (filed as Exhibit 2.8 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994 and incorporated herein by reference).
2.9 Amendment dated November 30, 1994 to Asset Purchase Agreement between
Heublein, Inc. and the Registrant (filed as Exhibit 2.9 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1994 and incorporated herein by reference).
2.10 Asset Purchase Agreement among Barton Incorporated (a wholly-owned
subsidiary of the Registrant), United Distillers Glenmore, Inc.,
Schenley Industries, Inc., Medley Distilling Company, United
Distillers Manufacturing, Inc., and The Viking Distillery, Inc., dated
August 29, 1995 (filed as Exhibit 2(a) to the Registrant's Current
Report on Form 8-K, dated August 29, 1995 and incorporated herein by
reference).
3.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1 to the Registrant's Transition Report on Form 10-K for the
fiscal period ended February 29, 1996 and incorporated herein by
reference).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2
to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 1995 and incorporated herein by reference).
4.1 Form of Note (filed herewith).
4.2 Indenture (filed herewith).
4.3 Specimen of Certificate of Class A Common Stock of the Company (filed
as Exhibit 1.1 to the Registrant's Statement on Form 8-A dated April
28, 1992 and incorporated herein by reference).
4.4 Specimen of Certificate of Class B Common Stock of the Company (filed
as Exhibit 1.2 to the Registrant's Statement on Form 8-A dated April
28, 1992 and incorporated herein by reference).
4.5 Indenture dated as of December 27, 1993 among the Registrant, its
Subsidiaries and Chemical Bank (filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1993 and incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.6 First Supplemental Indenture dated as of August 3, 1994 among the
Registrant, Canandaigua West, Inc. and Chemical Bank (filed as Exhibit
4.5 to the Registrant's Registration Statement on Form S-8
(Registration No. 33-56557) and incorporated herein by reference).
4.7 Second Supplemental Indenture dated August 25, 1995, among the
Registrant, V Acquisition Corp. (a subsidiary of the Registrant now
known as The Viking Distillery, Inc.) and Chemical Bank (filed as
Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1995 and incorporated herein by
reference).
4.8 Registration Rights Agreement (filed herewith)
5.1 Opinion of McDermott, Will & Emery (filed herewith).
8.1 Opinion of McDermott, Will & Emery regarding Certain Tax Matters
(filed herewith).
10.1 The Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation
Right Plan (filed as Appendix B of the Company's Definitive Proxy
Statement dated December 23, 1987 and incorporated herein by
reference.
10.2 Amendment No. 1 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 1992
and incorporated herein by reference).
10.3 Amendment No. 2 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 28 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended November
30, 1992 and incorporated herein by reference.
10.4 Amendment No. 3 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1993 and incorporated herein by reference).
10.5 Amendment No. 4 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1993 and incorporated herein by reference).
10.6 Amendment No. 5 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1994 and incorporated herein by reference).
10.7 Amendment No. 6 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.7 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1995 and incorporated herein by reference).
10.8 Amendment No. 7 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.8 to the
Registrant's Transition Report on Form 10-K for the fiscal period
ended February 29, 1996 and incorporated herein by reference).
10.9 Employment Agreement between Barton Incorporated and Ellis M. Goodman
dated as of October 1, 1991 as amended by Amendment to Employment
Agreement between Barton Incorporated and Ellis M. Goodman dated as of
June 29, 1993 (filed as Exhibit 10.5 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
10.10 Barton Incorporated Management Incentive Plan (filed as Exhibit 10.6
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1993 and incorporated herein by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.11 Ellis M. Goodman Split Dollar Insurance Agreement (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by reference).
10.12 Barton Brands, Ltd. Deferred Compensation Plan (filed as Exhibit 10.8
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1993 and incorporated herein by reference).
10.13 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit 10.9
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1993 and incorporated herein by reference).
10.14 Amendment and Restatement dated as of June 29, 1993 of Credit
Agreement among the Registrant, its subsidiaries and certain banks for
which The Chase Manhattan Bank (National Association) acts as agent
(filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K
dated June 29, 1993 and incorporated herein by reference).
10.15 Amendment No. 1 dated as of October 15, 1993 to Amendment and
Restatement dated as of June 29, 1993 of Credit Agreement among the
Registrant, its subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent (filed as Exhibit
2(c) to the Registrant's Current Report on Form 8-K dated October 15,
1993 and incorporated herein by reference).
10.16 Senior Subordinated Loan Agreement dated as of October 15, 1993 among
the Registrant, its subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent (filed as Exhibit
2(d) to the Registrant's Current Report on Form 8-K dated October 15,
1993 and incorporated herein by reference).
10.17 Second Amendment and Restatement dated as of August 5, 1994 of
Amendment and Restatement of Credit Agreement dated as of June 29,
1993 among the Registrant, its subsidiaries and certain banks for
which The Chase Manhattan Bank (National Association) acts as agent
(filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K
dated August 5, 1994 and incorporated herein by reference).
10.18 Amendment No. 1 (dated as of August 5, 1994) to Second Amendment and
Restatement dated as of August 5, 1994 of Amendment and Restatement of
Credit Agreement dated as of June 29, 1993 among the Registrant, its
subsidiaries and certain banks for which The Chase Manhattan Bank
(National Association) acts as agent (filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994 and incorporated herein by reference).
10.19 Third Amended and Restated Credit Agreement between the Registrant,
its principal operating subsidiaries, and certain banks for which The
Chase Manhattan Bank (National Association) acts as Administrative
Agent, dated as of September 1, 1995 (filed as Exhibit 2(b) to the
Registrant's Current Report on Form 8-K, dated August 29, 1995 and
incorporated herein by reference).
10.20 Amendment No. 1, dated as of December 20, 1995 to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (National Association) acts as Administrative Agent
(filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1995 and incorporated
herein by reference).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.21 Amendment No. 2, dated as of January 10, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (National Association) acts as Administrative Agent
(filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1995 and incorporated
herein by reference).
10.22 Letter agreement, addressing compensation, between the Registrant and
Lynn Fetterman, dated March 22, 1990 (filed as Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1995 and incorporated herein by reference).
10.23 Letter agreement, effective as of October 7, 1995, as amended,
addressing compensation, between the Registrant and Daniel Barnett
(filed as Exhibit 10.24 to the Registrant's Transition Report on Form
10-K for the fiscal period ended February 29, 1996 and incorporated
herein by reference).
10.24 Amendment No. 3, dated as of May 17, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (National Association) acts as Administrative Agent
(filed as Exhibit 10.23 to the Registrant's Transition Report on Form
10-K for the fiscal period ended February 29, 1996 and incorporated
herein by reference).
10.25 Amendment No. 4, dated as of May 17, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)
act as Administrative Agent (filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended May 31,
1996 and incorporated herein by reference).
10.26 Amendment No. 5, dated as of October 10, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)
acts as administrative agent (filed herewith).
10.27 Amendment No. 8 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed herewith).
11.1 Statement regarding Computation of Per Share Earnings (filed
herewith).
12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith).
23.1 Consent of Arthur Andersen LLP (filed herewith).
23.2 Consent of Price Waterhouse LLP (filed herewith).
23.3 Consent of McDermott, Will & Emery (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
25.1 Statement of Eligibility of Trustee (filed herewith).
27.1 Financial Data Schedule (filed herewith).
99.1 Form of Letter of Transmittal (filed herewith).
99.2 Form of Notice of Guaranteed Delivery (filed herewith).
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees (filed herewith).
99.4 Form of Letter to Clients (filed herewith).
</TABLE>
- --------
(b) Financial Statement Schedules:
All schedules have been omitted either as inapplicable or because the
required information is included in the financial statements or notes thereto.
II-5
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant for 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
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective, and (ii) each post-effective amendment
that contains a form of prospectus 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.
(d) 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.
(e) 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.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Canandaigua Wine Company, Inc.
/s/ Richard Sands
By __________________________________
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Canandaigua Wine Company, Inc.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Marvin Sands Chairman of the Board of Directors
- -------------------------------------
MARVIN SANDS
/s/ Richard Sands President, Chief Executive Officer and
- ------------------------------------- a Director (Principal Executive
RICHARD SANDS Officer)
/s/ Robert Sands Executive Vice President, General
- ------------------------------------- Counsel, Secretary and a Director
ROBERT SANDS
/s/ Bertram E. Silk Senior Vice President and a Director
- -------------------------------------
BERTRAM E. SILK
/s/ James A. Locke, III Director
- -------------------------------------
JAMES A. LOCKE, III
/s/ George Bresler Director
- -------------------------------------
GEORGE BRESLER
/s/ Lynn K. Fetterman Senior Vice President and Chief
- ------------------------------------- Financial Officer (Principal
LYNN K. FETTERMAN Financial Officer and Principal
Accounting Officer)
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Batavia Wine Cellars, Inc.
/s/ Ned Cooper
By __________________________________
NED COOPER, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Batavia Wine Cellars, Inc.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands Vice President and a Director
- -------------------------------------
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Ned Cooper President (Principal Executive
- ------------------------------------- Officer)
NED COOPER
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Bisceglia Brothers Wine Co.
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Bisceglia Brothers Wine Co.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
California Products Company
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
California Products Company) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Guild Wineries & Distilleries, Inc.
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Guild Wineries & Distilleries, Inc.) to sign any or all amendments (including
pre-effective and post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Widmer's Wine Cellars, Inc.
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Widmer's Wine Cellars, Inc.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Tenner Brothers, Inc.
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Tenner Brothers, Inc.) to sign any or all amendments (including pre-effective
and post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Vintners International Company, Inc.
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Vintners International Company, Inc.) to sign any or all amendments (including
pre-effective and post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Secretary and a Director
- -------------------------------------
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CANANDAIGUA, STATE OF NEW YORK ON DECEMBER 9, 1996.
Canandaigua West, Inc.
/s/ Richard Sands
By __________________________________
RICHARD SANDS, PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Batavia Wine Cellars, Inc.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 DECEMBER 9, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Richard Sands President and a Director (Principal
- ------------------------------------- Executive Officer)
RICHARD SANDS
/s/ Robert Sands Vice President, Secretary and a
- ------------------------------------- Director
ROBERT SANDS
/s/ Lynn K. Fetterman Treasurer (Principal Financial Officer
- ------------------------------------- and Principal Accounting Officer)
LYNN K. FETTERMAN
II-15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Incorporated
/s/ Ellis M. Goodman
By __________________________________
ELLIS M. GOODMAN,
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Incorporated) to sign any or all amendments (including pre-effective
and post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman Chairman of the Board of Directors and
- ------------------------------------- Chief Executive Officer (Principal
ELLIS M. GOODMAN Executive Officer)
/s/ Alexander L. Berk President and a Director
- -------------------------------------
ALEXANDER L. BERK
/s/ Edward L. Golden Vice President and a Director
- -------------------------------------
EDWARD L. GOLDEN
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary and a Director
RAYMOND E. POWERS (Principal Financial Officer and
Principal Accounting Officer)
/s/ William F. Hackett Director
- -------------------------------------
WILLIAM F. HACKETT
II-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Brands, Ltd.
/s/ Ellis M. Goodman
By: _________________________________
ELLIS M. GOODMAN,
CHAIRMAN OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Brands, Ltd.) to sign any or all amendments (including pre-effective
and post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman Chairman of the Board of Directors
- ------------------------------------- (Principal Executive Officer)
ELLIS M. GOODMAN
/s/ Edward L. Golden President and a Director
- -------------------------------------
EDWARD L. GOLDEN
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary (Principal
RAYMOND E. POWERS Financial Officer and Principal
Accounting Officer)
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
II-17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Beers, Ltd.
/s/ Ellis M. Goodman
By __________________________________
ELLIS M. GOODMAN,
CHAIRMAN OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Beers, Ltd.) to sign any or all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman Chairman of the Board of Directors
- ------------------------------------- (Principal Executive Officer)
ELLIS M. GOODMAN
/s/ Raymond E. Powers Executive Vice President, Treasurer
- ------------------------------------- and Assistant Secretary (Principal
RAYMOND E. POWERS Financial Officer and Principal
Accounting Officer)
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ William F. Hackett President and a Director
- -------------------------------------
WILLIAM F. HACKETT
II-18
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Brands of California, Inc.
/s/ Ellis M. Goodman
By __________________________________
ELLIS M. GOODMAN,
PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Brands of California, Inc.) to sign any or all amendments (including
pre-effective and post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman President and a Director (Principal
- ------------------------------------- Executive Officer)
ELLIS M. GOODMAN
/s/ Edward L. Golden Vice President and a Director
- -------------------------------------
EDWARD L. GOLDEN
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary and a Director
RAYMOND E. POWERS (Principal Financial Officer and
Principal Accounting Officer)
II-19
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Brands of Georgia, Inc.
/s/ Ellis M. Goodman
By __________________________________
ELLIS M. GOODMAN,
PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Brands of Georgia, Inc.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman President and a Director (Principal
- ------------------------------------- Executive Officer)
ELLIS M. GOODMAN
/s/ Edward L. Golden Vice President and a Director
- -------------------------------------
EDWARD L. GOLDEN
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ Raymond E. Powers Executive Vice President, Treasurer
- ------------------------------------- and Assistant Secretary (Principal
RAYMOND E. POWERS Financial Officer and Principal
Accounting Officer)
II-20
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Distillers Import Corp.
/s/ Ellis M. Goodman
By: _________________________________
ELLIS M. GOODMAN,
PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Distillers Import Corp.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman President and a Director (Principal
- ------------------------------------- Executive Officer)
ELLIS M. GOODMAN
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary and a Director
RAYMOND E. POWERS (Principal Financial Officer and
Principal Accounting Officer)
II-21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 25, 1996.
Barton Financial Corporation
/s/ Raymond E. Powers
By: _________________________________
RAYMOND E. POWERS,
PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Financial Corporation) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 NOVEMBER 25, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Raymond E. Powers President and Secretary (Principal
- ------------------------------------- Executive Officer)
RAYMOND E. POWERS
/s/ Charles T. Schlau Treasurer and a Director (Principal
- ------------------------------------- Financial Officer and Principal
CHARLES T. SCHLAU Accounting Officer)
/s/ Charles B. Campbell, Jr. Director
- -------------------------------------
CHARLES B. CAMPBELL, JR.
II-22
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Stevens Point Beverage Co.
/s/ Ellis M. Goodman
By: _________________________________
ELLIS M. GOODMAN,
CHAIRMAN OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Stevens Point Beverage Co.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman Chairman of the Board of Directors
- -------------------------------------
ELLIS M. GOODMAN
/s/ James P. Ryan Chief Executive Officer, President and
- ------------------------------------- a Director (Principal Executive
JAMES P. RYAN Officer)
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary and a Director
RAYMOND E. POWERS (Principal Financial Officer and
Principal Accounting Officer)
II-23
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Monarch Wine Company, Limited
Partnership
/s/ Ellis M. Goodman
By: _________________________________
ELLIS M. GOODMAN,
PRESIDENT AND CHAIRMAN OF THE
BOARD OF DIRECTORS OF BARTON
MANAGEMENT, INC., ITS GENERAL
PARTNER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Monarch Wine company, Limited Partnership) to sign any or all amendments
(including pre-effective and post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman President and Chairman of the Board of
- ------------------------------------- Directors of Barton Management, Inc.
ELLIS M. GOODMAN
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director of Barton Management, Inc.
ALEXANDER L. BERK
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary and a Director of
RAYMOND E. POWERS Barton Management, Inc.
II-24
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
Barton Management, Inc.
/s/ Ellis M. Goodman
By __________________________________
ELLIS M. GOODMAN,
PRESIDENT AND CHAIRMAN OF THE
BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Management, Inc.) to sign any or all amendments (including pre-
effective and post-effective amendments) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman President and Chairman of the Board of
- ------------------------------------- Directors (Principal Executive
ELLIS M. GOODMAN Officer)
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary and a Director
RAYMOND E. POWERS (Principal Financial Officer and
Principal Accounting Officer)
II-25
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4, AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS ON NOVEMBER 21, 1996.
The Viking Distillery, Inc.
/s/ Ellis M. Goodman
By __________________________________
ELLIS M. GOODMAN,
PRESIDENT
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Sands and Robert Sands and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (including his capacity as a director and/or officer of
Barton Foreign Sales Corporation) to sign any or all amendments (including
pre-effective and post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully 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 NOVEMBER 21, 1996 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
/s/ Ellis M. Goodman President and a Director (Principal
- ------------------------------------- Executive Officer)
ELLIS M. GOODMAN
/s/ Alexander L. Berk Executive Vice President and a
- ------------------------------------- Director
ALEXANDER L. BERK
/s/ Edward L. Golden Vice President and a Director
- -------------------------------------
EDWARD L. GOLDEN
/s/ Raymond E. Powers Executive Vice President, Treasurer,
- ------------------------------------- Assistant Secretary (Principal
RAYMOND E. POWERS Financial Officer and Principal
Accounting Officer)
II-26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ----
<C> <S> <C>
4.1 Form of Note
4.2 Indenture
4.8 Registration Rights Agreement
5.1 Opinion of McDermott, Will & Emery
8.1 Opinion of McDermott, Will & Emery regarding Certain Tax
Matters
10.26 Amendment No. 5 to Third Amended and Restated Credit Agreement
10.27 Amendment No. 8 to the Canandaigua Wine Company, Inc. Stock
Option and Stock Appreciation Right Plan
11.1 Statement regarding Computation of Per Share Earnings
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of McDermott, Will & Emery (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature pages)
25.1 Statement of Eligibility of Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letter to Clients
</TABLE>
II-27
<PAGE>
EXHIBIT 4.1
[Face of Note]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES
OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT AND ANY SUCH
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS 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.
CANANDAIGUA WINE COMPANY, INC.
-----------------
8 3/4% SERIES C SENIOR SUBORDINATED NOTE DUE 2003
CUSIP NO.____________
No. __________ $____________
CANANDAIGUA WINE COMPANY, INC., a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_____________ or registered assigns, the principal sum of _______________ United
States dollars on December 15, 2003, at the office or agency of the Company
referred to below, and to pay interest thereon from ______ __, 1996, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on June 15 and December 15, in each year, commencing
December 15, 1996 at the rate of 8 3/4% per annum, in United States dollars,
until the principal hereof is paid or duly provided for; provided that to the
--------
extent interest has not been paid or duly provided for with respect to the
Series B Security exchanged for this Series C Security, interest on this Series
C Security shall accrue from the most recent Interest Payment Date to which
interest on the Series B Security which was exchanged for this Series C Security
has been paid or duly provided for. Interest shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
This Series C Security was issued pursuant to the Exchange Offer
pursuant to which the 8 3/4% Series B Senior Subordinated Notes due 2003 (herein
called the "Series B Securities") in like principal amount were exchanged for
the Series C Securities. The Series C Securities rank pari passu in right of
payment with the Series B Securities.
In addition, for any period in which the Series B Security exchanged
for this Series C Security was outstanding, in the event that (i) the applicable
Registration Statement is not filed with the Commission on or prior to 45 days
after the Closing Date, (ii) the Exchange Offer Registration Statement or, as
the case may be, the Shelf Registration Statement, is not declared effective
within 105 days after the Closing Date, (iii) the Exchange Offer is not
consummated on or prior to 135 days after the Closing Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 105 days after the
Closing Date but shall thereafter cease to be effective (at any time that the
Company and the Guarantors are obligated to maintain the effectiveness thereof)
without being succeeded within 30 days by an additional Registration Statement
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"), the Company will pay liquidated damages to each
holder of Transfer Restricted Securities (as defined below) in an amount equal
to $0.192 per week per $1,000 principal amount of the Securities constituting
Transfer Restricted Securities held by such holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Registration Statement is
declared effective and the Exchange Offer is consummated, (iii) the Shelf
Registration statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
"Transfer Restricted Securities" means each Class B Security until (i) the date
on which such Class B Security has been exchanged for a freely transferable
Class C Security in the Exchange Offer, (ii) the date on which such Class B
Security has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iii) the date on
which such Class B Security is distributed to the public pursuant to Rule 144
under the Securities Act or is salable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company shall not be required to pay liquidated damages to the holder of
Transfer Restricted Securities if such holder failed to comply with its
obligations to the Company pursuant to the Registration Rights Agreement.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be June 1 or December 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid, or duly provided for, and interest on such defaulted
interest at the interest rate borne by the Series C Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such defaulted interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose, 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; provided,
--------
however, that payment of interest may be made at the option of the Company, (i)
- -------
in the case of a Global Security, by wire or book entry transfer to the
Depository Trust Company or its nominee, or (ii) in all other cases, by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by each of the
Guarantors of the punctual payment when due of the Indenture Obligations made in
favor of the Trustee for the benefit of the Holders. Reference is hereby made
to Article Fourteen of the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations under the Guarantees of each of
the Guarantors.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
Dated: CANANDAIGUA WINE COMPANY, INC.
By:__________________________________
Attest:
- --------------------
Authorized Officer
<PAGE>
GUARANTEES
For value received, each of the undersigned hereby unconditionally
guarantees, jointly and severally, to the holder of this Security the payment of
principal of, premium, if any, and interest on this Security upon which these
Guarantees are endorsed in the amounts and at the time when due and payable
whether by declaration thereof, or otherwise, and interest on the overdue
principal and interest, if any, of this Security, if lawful, and the payment or
performance of all other obligations of the Company under the Indenture or the
Securities, to the holder of this Security and the Trustee, all in accordance
with and subject to the terms and limitations of this Security and Article
Fourteen of the Indenture. These Guarantees will not become effective until the
Trustee duly executes the certificate of authentication on this Security.
The Indebtedness evidenced by these Guarantees are, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Guarantor Indebtedness (as
defined in the Indenture), whether Outstanding on the date of the Indenture or
thereafter, and these Guarantees are issued subject to such provisions.
Dated: __________
BATAVIA WINE CELLARS, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
BISCEGLIA BROTHERS WINE CO.
Attest: By
------------------------ -------------------------
Authorized Officer
CALIFORNIA PRODUCTS COMPANY
Attest: By
------------------------ -------------------------
Authorized Officer
GUILD WINERIES & DISTILLERIES,
INC.
Attest: By
------------------------ -------------------------
Authorized Officer
<PAGE>
TENNER BROTHERS, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
WIDMER'S WINE CELLARS, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON INCORPORATED
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON BRANDS, LTD.
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON BEERS, LTD.
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON BRANDS OF CALIFORNIA,
INC.
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON BRANDS OF GEORGIA, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
<PAGE>
BARTON DISTILLERS IMPORT CORP.
Attest: By
------------------------ -------------------------
Authorized Officer
THE VIKING DISTILLERY, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON FINANCIAL CORPORATION
Attest: By
------------------------ -------------------------
Authorized Officer
STEVENS POINT BEVERAGE CO.
Attest: By
------------------------ -------------------------
Authorized Officer
MONARCH WINE COMPANY,
LIMITED PARTNERSHIP
By: BARTON MANAGEMENT, INC.,
as corporate general
partner
Attest: By
------------------------ -------------------------
Authorized Officer
BARTON MANAGEMENT, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
<PAGE>
VINTNERS INTERNATIONAL
COMPANY, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
CANANDAIGUA WEST, INC.
Attest: By
------------------------ -------------------------
Authorized Officer
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8 3/4% Series C Senior Subordinated Notes due 2003
referred to in the within-mentioned Indenture.
As Trustee, Harris Trust and Savings Bank
By:
-------------------------
Authorized Officer
<PAGE>
[Reverse of Note]
CANANDAIGUA WINE COMPANY, INC.
8 3/4% SERIES C SENIOR SUBORDINATED NOTE DUE 2003
This Security is one of a duly authorized issue of Securities of the
Company designated as its 8 3/4% Series C Senior Subordinated Notes due 2003
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $65,000,000,
issued under an indenture (herein called the "Indenture") dated as of October
29, 1996, among the Company, the Guarantors and Harris Trust and Savings Bank,
as trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Company, the Guarantors, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the Securities or (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture), whether Outstanding on the date of the Indenture or thereafter,
and this Security is issued subject to such provisions. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose; provided, however, that, subject to Section 406 of the Indenture,
-------- -------
the Indebtedness evidenced by this Security shall cease to be so subordinate and
subject in right of payment upon any defeasance of this Security referred to in
clause (a) or (b) of the preceding paragraph.
The Securities are subject to redemption at any time on or after
December 15, 1998, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice by first-class mail in amounts
of $1,000 or an integral multiple of $1,000 at the following redemption prices
(expressed as a percentage of the principal amount), redeemed during the 12-
month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
1998.................................................. 104.375%
1999.................................................. 102.917%
2000.................................................. 101.458%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on Regular Record Dates to receive interest due on an
Interest Payment Date). If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Notwithstanding the preceding paragraph, the Company will not be
permitted to redeem the Original Securities unless, substantially concurrently
with such redemption, the Company redeems an aggregate principal amount of
Securities (rounded to the nearest integral multiple of $1,000) equal to the
product of (a) a fraction, the numerator of which is the aggregate principal
amount of Original Securities to be so redeemed and the denominator of which is
the aggregate principal amount of Original Securities outstanding immediately
prior to such proposed redemption, and (b) the aggregate principal amount of
Securities outstanding immediately prior to such proposed transaction.
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's Securities in an
amount of $1,000 or integral multiples of $1,000, at a purchase price in cash
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company from any Asset Sale, which proceeds are not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company or reasonably related thereto, exceeds a specified
amount the Company will be required to apply such proceeds to the repayment of
the Securities and certain indebtedness ranking pari passu to the Securities.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is on
or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the date of redemption.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Guarantors and the Holders under the Indenture and
the Securities and the Guarantees at any time by the Company and the Trustee
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company and the
Guarantors with certain provisions of the Indenture and the Securities and the
Guarantees and certain past Defaults under the Indenture and the Securities and
the Guarantees and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, any
Guarantor or any other obligor on the Securities (in the event such Guarantor or
other obligor is obligated to make payments in respect of the Securities), which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed, subject to the subordination provisions of the
Indenture.
If this Series C Security is in certificated form, then as provided in
the Indenture and subject to certain limitations therein set forth, the transfer
of this Series C Security is registrable on the Security Register of the
Company, upon surrender of this Series C Security for registration of transfer
at the office or agency of the Company maintained for such purpose in The City
of New York or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized in
writing, and thereupon one or more new Series C Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
If this Series C Security is a U.S. Global Security, it is
exchangeable for a Series C Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and the
Depositary. In addition, certificated securities shall be transferred to all
beneficial holders in exchange for their beneficial interests in the U.S. Global
Security if (x) the Depository notifies the Company that it is unwilling or
unable to continue as depository for the U.S. Global Security and a successor
depository is not appointed by the Company within 90 days or (y) there shall
have occurred and be continuing an Event of Default and the Security Registrar
has received a request from the Depositary. Upon any such issuance, the Trustee
is required to register such certificated Series C Securities in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof).
The Series C Securities in certificated form are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Series B Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to and at the time of due presentment of this Security for
registration of transfer, the Company, any Guarantor, the Trustee and any agent
of the Company, any Guarantor or the Trustee may treat the Person in whose name
this Security is registered as the owner hereof for all purposes, whether or not
this Security is overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
<PAGE>
FORM OF TRANSFER NOTICE
I or we assign and transfer this Security to:
- --------------------------------------------
Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably
appoint_____________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated Signed
-------------------- ---------------------------------
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8 3/4% Series C Senior Subordinated Notes due 2003
referred to in the within-mentioned Indenture.
As Trustee, Harris Trust and Savings Bank
By:
------------------------
Authorized Officer
<PAGE>
CANANDAIGUA WINE COMPANY, INC.
8 3/4% SERIES C SENIOR SUBORDINATED NOTE DUE 2003
[Back of Note]
This Security is one of a duly authorized issue of Securities of the
Company designated as its 8 3/4% Series C Senior Subordinated Notes due 2003
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $65,000,000,
issued under an indenture (herein called the "Indenture") dated as of October
29, 1996, among the Company, the Guarantors and Harris Trust and Savings Bank,
as trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Company, the Guarantors, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the Securities or (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior
11
<PAGE>
payment in full of all Senior Indebtedness (as defined in the Indenture),
whether Outstanding on the date of the Indenture or thereafter, and this
Security is issued subject to such provisions. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose;
provided, however, that, subject to Section 406 of the Indenture, the
-------- -------
Indebtedness evidenced by this Security shall cease to be so subordinate and
subject in right of payment upon any defeasance of this Security referred to in
clause (a) or (b) of the preceding paragraph.
The Securities are subject to redemption at any time on or after
December 15, 1998, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice by first-class mail in amounts
of $1,000 or an integral multiple of $1,000 at the following redemption prices
(expressed as a percentage of the principal amount), redeemed during the 12-
month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
1998.................................................. 104.375%
1999.................................................. 102.917%
2000.................................................. 101.458%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on Regular Record Dates to receive interest due on an
Interest Payment Date). If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Notwithstanding the preceding paragraph, the Company will not be
permitted to redeem the Original Securities unless, substantially concurrently
with such redemption, the Company redeems an aggregate principal amount of
Securities (rounded to the nearest integral multiple of $1,000) equal to the
product of (a) a fraction, the numerator of which is the aggregate principal
amount of Original Securities to be so redeemed and the denominator of which is
the aggregate principal amount of Original Securities outstanding immediately
prior to such proposed redemption, and (b) the aggregate principal amount of
Securities outstanding immediately prior to such proposed transaction.
12
<PAGE>
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's Securities in an
amount of $1,000 or integral multiples of $1,000, at a purchase price in cash
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company from any Asset Sale, which proceeds are not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company or reasonably related thereto, exceeds a specified
amount the Company will be required to apply such proceeds to the repayment of
the Securities and certain indebtedness ranking pari passu to the Securities.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is on
or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the date of redemption.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Guarantors and the Holders under the Indenture and
the Securities and the Guarantees at any time by the Company and the Trustee
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company and the
Guarantors with certain provisions of the Indenture and the Securities and the
Guarantees and certain past Defaults under the Indenture and the Securities and
the Guarantees and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer
13
<PAGE>
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, any
Guarantor or any other obligor on the Securities (in the event such Guarantor or
other obligor is obligated to make payments in respect of the Securities), which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed, subject to the subordination provisions of the
Indenture.
If this Series C Security is in certificated form, then as provided in
the Indenture and subject to certain limitations therein set forth, the transfer
of this Series C Security is registrable on the Security Register of the
Company, upon surrender of this Series C Security for registration of transfer
at the office or agency of the Company maintained for such purpose in The City
of New York or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized in
writing, and thereupon one or more new Series C Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
If this Series C Security is a U.S. Global Security, it is
exchangeable for a Series C Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and the
Depositary. In addition, certificated securities shall be transferred to all
beneficial holders in exchange for their beneficial interests in the U.S. Global
Security if (x) the Depository notifies the Company that it is unwilling or
unable to continue as depository for the U.S. Global Security and a successor
depository is not appointed by the Company within 90 days or (y) there shall
have occurred and be continuing an Event of Default and the Security Registrar
has received a request from the Depositary. Upon any such issuance, the Trustee
is required to register such certificated Series C Securities in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof).
The Series C Securities in certificated form are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Series B Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
14
<PAGE>
Prior to and at the time of due presentment of this Security for
registration of transfer, the Company, any Guarantor, the Trustee and any agent
of the Company, any Guarantor or the Trustee may treat the Person in whose name
this Security is registered as the owner hereof for all purposes, whether or not
this Security is overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
15
<PAGE>
FORM OF TRANSFER NOTICE
I or we assign and transfer this Security to:
- --------------------------------------------
Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably
appoint_____________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated Signed
-------------------- ---------------------------------
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
<PAGE>
EXHIBIT 4.2
CANANDAIGUA WINE COMPANY, INC., as Issuer,
The Subsidiaries listed on the signature pages
hereto, as Guarantors
and
HARRIS TRUST AND SAVINGS BANK, as Trustee
----------------
INDENTURE
Dated as of October 29, 1996
-----------------
$65,000,000
8 3/4% Series B Senior Subordinated Notes due 2003
8 3/4% Series C Senior Subordinated Notes due 2003
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
PARTIES.................................................................1
RECITALS OF THE COMPANY.................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.............................................2
"Acquired Indebtedness"..................................2
"Affiliate"..............................................2
"Asset Sale".............................................3
"Average Life to Stated Maturity"........................3
"Bankruptcy Law".........................................3
"Barton Letter of Credit"................................3
"Board of Directors".....................................3
"Board Resolution".......................................3
"Book-Entry Security"....................................4
"Business Day"...........................................4
"Capital Lease Obligation"...............................4
"Capital Stock"..........................................4
"Cash Equivalents".......................................4
"Change of Control"......................................4
"Closing Date"...........................................5
"Code"...................................................5
"Commission".............................................6
"Company"................................................6
"Company Request" or "Company Order".....................6
"Consolidated Fixed Charge Coverage Ratio"...............6
"Consolidated Income Tax Expense"........................6
"Consolidated Interest Expense"..........................7
"Consolidated Net Income (Loss)".........................7
"Consolidated Net Worth".................................7
"Consolidated Non-cash Charges"..........................7
"Consolidation"..........................................7
"Corporate Trust Office".................................8
(i)
<PAGE>
PAGE
----
"Credit Agreement"................................................8
"Default".........................................................8
"Depositary"......................................................8
"Designated Senior Guarantor Indebtedness"........................8
"Designated Senior Indebtedness"..................................9
"Event of Default"................................................9
"Exchange Act"....................................................9
"Exchange Offer"..................................................9
"Exchange Offer Registration Statement"...........................9
"Fair Market Value"...............................................9
"GAAP" or "Generally Accepted Accounting Principles"..............9
"Global Securities"...............................................9
"Guarantee".......................................................9
"Guaranteed Debt".................................................9
"Guarantor"......................................................10
"Holder".........................................................10
"Indebtedness"...................................................10
"Indenture"......................................................11
"Indenture Obligations"..........................................11
"Initial Securities".............................................11
"Initial Purchasers".............................................11
"Interest Payment Date"..........................................11
"Interest Rate Agreements".......................................11
"Investments"....................................................11
"Lien"...........................................................12
"Maturity".......................................................12
"Moody's"........................................................12
"Net Cash Proceeds"..............................................12
"Non-payment Default"............................................13
"Non-U.S. Person"................................................13
"Officers' Certificate"..........................................13
"Opinion of Counsel".............................................13
"Opinion of Independent Counsel".................................13
"Original Indenture".............................................13
"Original Securities"............................................13
"Outstanding"....................................................13
"Pari Passu Indebtedness"........................................14
"Paying Agent"...................................................14
"Payment Default"................................................14
"Permitted Guarantor Junior Securities"..........................15
"Permitted Holders"..............................................15
(ii)
<PAGE>
PAGE
----
"Permitted Investment".........................................15
"Permitted Junior Securities"..................................15
"Person".......................................................16
"Predecessor Security".........................................16
"Preferred Stock"..............................................16
"Qualified Capital Stock"......................................16
"QIB"..........................................................16
"Redeemable Capital Stock".....................................16
"Redemption Date"..............................................16
"Redemption Price".............................................17
"Registration Rights Agreement"................................17
"Registration Statement".......................................17
"Regular Record Date"..........................................17
"Responsible Officer"..........................................17
"Restricted Payment"...........................................17
"S&P"..........................................................17
"Sale and Leaseback Transaction"...............................17
"Securities Act"...............................................17
"Security Register" and "Security Registrar"...................17
"Senior Guarantor Indebtedness"................................17
"Senior Indebtedness"..........................................18
"Shelf Registration Statement".................................19
"Special Record Date"..........................................19
"Stated Maturity"..............................................19
"Subordinated Indebtedness"....................................19
"Subsidiary"...................................................19
"Temporary Cash Investments"...................................20
"Trust Indenture Act"..........................................20
"Trustee"......................................................20
"Voting Stock".................................................20
"Wholly Owned Subsidiary"......................................20
Section 102. Other Definitions..............................................21
Section 103. Compliance Certificates and Opinions...........................21
Section 104. Form of Documents Delivered to Trustee.........................22
Section 105. Acts of Holders................................................23
Section 106. Notices, etc., to the Trustee, the Company and any Guarantor...24
Section 107. Notice to Holders; Waiver......................................25
Section 108. Conflict with Trust Indenture Act..............................25
Section 109. Effect of Headings and Table of Contents.......................25
Section 110. Successors and Assigns.........................................26
Section 111. Separability Clause............................................26
(iii)
<PAGE>
PAGE
----
Section 112. Benefits of Indenture.........................................26
Section 113. GOVERNING LAW.................................................26
Section 114. Legal Holidays................................................26
Section 115. Schedules and Exhibits........................................26
Section 116. Counterparts..................................................27
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally..............................................27
Section 202. Form of Face of Security.....................................28
Section 203. Form of Reverse of Securities................................38
Section 204. Form of Trustee's Certificate of Authentication..............46
Section 205. Form of Guarantee of Each of the Guarantors..................47
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms..............................................53
Section 302. Denominations................................................54
Section 303. Execution, Authentication, Delivery and Dating...............54
Section 304. Temporary Securities.........................................55
Section 305. Registration, Registration of Transfer and Exchange..........56
Section 306. Book-Entry Provisions for U.S. Global Security...............58
Section 307. Special Transfer Provisions..................................59
Section 308. Mutilated, Destroyed, Lost and Stolen Securities.............64
Section 309. Payment of Interest; Interest Rights Preserved...............65
Section 310. CUSIP Numbers................................................66
Section 311. Persons Deemed Owners........................................66
Section 312. Cancellation.................................................67
Section 313. Computation of Interest......................................67
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
Defeasance...................................................67
Section 402. Defeasance and Discharge.....................................67
Section 403. Covenant Defeasance..........................................68
Section 404. Conditions to Defeasance or Covenant Defeasance..............68
Section 405. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions................71
(iv)
<PAGE>
PAGE
----
Section 406. Reinstatement.................................................72
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.............................................72
Section 502. Acceleration of Maturity; Rescission and Annulment............74
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.......................................................76
Section 504. Trustee May File Proofs of Claim..............................77
Section 505. Trustee May Enforce Claims without Possession of Securities...77
Section 506. Application of Money Collected................................78
Section 507. Limitation on Suits...........................................78
Section 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest..........................................79
Section 509. Restoration of Rights and Remedies............................79
Section 510. Rights and Remedies Cumulative................................80
Section 511. Delay or Omission Not Waiver..................................80
Section 512. Control by Holders............................................80
Section 513. Waiver of Past Defaults.......................................80
Section 514. Undertaking for Costs.........................................81
Section 515. Waiver of Stay, Extension or Usury Laws.......................81
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults...........................................82
Section 602. Certain Rights of Trustee....................................82
Section 603. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof................83
Section 604. Trustee and Agents May Hold Securities; Collections; etc.....84
Section 605. Money Held in Trust..........................................84
Section 606. Compensation and Indemnification of Trustee and Its Prior
Claim........................................................84
Section 607. Conflicting Interests........................................85
Section 608. Corporate Trustee Required; Eligibility......................85
Section 609. Resignation and Removal; Appointment of Successor Trustee....86
Section 610. Acceptance of Appointment by Successor.......................87
Section 611. Merger, Conversion, Consolidation or Succession to
Business.....................................................88
Section 612. Preferential Collection of Claims Against Company............89
(v)
<PAGE>
PAGE
----
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders....89
Section 702. Disclosure of Names and Addresses of Holders.................89
Section 703. Reports by Trustee...........................................90
Section 704. Reports by Company and Guarantors............................90
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company or Any Guarantor May Consolidate, etc., Only on Certain
Terms.........................................................91
Section 802. Successor Substituted.........................................93
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders......................................................93
Section 902. Supplemental Indentures and Agreements with Consent of
Holders......................................................94
Section 903. Execution of Supplemental Indentures and Agreements..........96
Section 904. Effect of Supplemental Indentures............................96
Section 905. Conformity with Trust Indenture Act..........................96
Section 906. Reference in Securities to Supplemental Indentures...........96
Section 907. Effect on Senior Indebtedness................................97
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest..................97
Section 1002. Maintenance of Office or Agency.............................97
Section 1003. Money for Security Payments to Be Held in Trust.............97
Section 1004. Corporate Existence.........................................99
Section 1005. Payment of Taxes and Other Claims...........................99
Section 1006. Maintenance of Properties..................................100
Section 1007. Insurance..................................................100
Section 1008. Limitation on Indebtedness.................................100
(vi)
<PAGE>
PAGE
----
Section 1009. Limitation on Restricted Payments..........................103
Section 1010. Limitation on Transactions with Affiliates.................106
Section 1011. Limitation on Senior Subordinated Indebtedness.............106
Section 1012. Limitation on Liens........................................106
Section 1013. Limitation on Sale of Assets...............................108
Section 1014. Limitation on Issuances of Guarantees of and Pledges for
Indebtedness...............................................112
Section 1015. Restriction on Transfer of Assets..........................113
Section 1016. Purchase of Securities upon a Change of Control............114
Section 1017. Limitation on Subsidiary Capital Stock.....................117
Section 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.....................................118
Section 1019. Provision of Financial Statements..........................118
Section 1020. Statement by Officers as to Default........................119
Section 1021. Waiver of Certain Covenants................................119
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.......................................120
Section 1102. Applicability of Article...................................120
Section 1103. Election to Redeem; Notice to Trustee......................120
Section 1104. Selection by Trustee of Securities to Be Redeemed..........121
Section 1105. Notice of Redemption.......................................121
Section 1106. Deposit of Redemption Price................................122
Section 1107. Securities Payable on Redemption Date......................122
Section 1108. Securities Redeemed or Purchased in Part...................123
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior Indebtedness..............123
Section 1202. Payment Over of Proceeds Upon Dissolution, etc.............123
Section 1203. Suspension of Payment When Senior Indebtedness in Default..125
Section 1204. Payment Permitted if No Default............................126
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness....127
Section 1206. Provisions Solely to Define Relative Rights................127
Section 1207. Trustee to Effectuate Subordination........................127
Section 1208. No Waiver of Subordination Provisions......................128
Section 1209. Notice to Trustee..........................................128
Section 1210. Reliance on Judicial Order or Certificate of Liquidating
Agent......................................................129
(vii)
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Section 1211. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights................................130
Section 1212. Article Applicable to Paying Agents.............................130
Section 1213. No Suspension of Remedies.......................................130
Section 1214. Trustee's Relation to Senior Indebtedness.......................130
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ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
<S> <C> <C>
Section 1301. Satisfaction and Discharge of Indenture...........................131
Section 1302. Application of Trust Money........................................132
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ARTICLE FOURTEEN
GUARANTEES
<S> <C> <C>
Section 1401. Guarantors' Guarantee.............................................132
Section 1402. Continuing Guarantee; No Right of Set-Off; Independent
Obligation........................................................133
Section 1403. Guarantee Absolute................................................134
Section 1404. Right to Demand Full Performance..................................136
Section 1405. Waivers...........................................................137
Section 1406. The Guarantors Remain Obligated in Event the Company Is
No Longer Obligated to Discharge Indenture Obligations............137
Section 1407. Fraudulent Conveyance; Subrogation................................138
Section 1408. Guarantee Is in Addition to Other Security........................138
Section 1409. Release of Security Interests.....................................138
Section 1410. No Bar to Further Actions.........................................138
Section 1411. Failure to Exercise Rights Shall Not Operate as a Waiver; No
Suspension of Remedies............................................139
Section 1412. Trustee's Duties; Notice to Trustee...............................139
Section 1413. Successors and Assigns............................................139
Section 1414. Release of Guarantee..............................................140
Section 1415. Execution of Guarantee............................................140
Section 1416. Guarantee Subordinate to Senior Guarantor Indebtedness............140
Section 1417. Payment Over of Proceeds Upon Dissolution of the Guarantor, etc...141
Section 1418. Default on Senior Guarantor Indebtedness..........................142
Section 1419. Payment Permitted by Each of the Guarantors if No Default.........143
Section 1420. Subrogation to Rights of Holders of Senior Guarantor
Indebtedness......................................................143
Section 1421. Provisions Solely to Define Relative Rights.......................143
Section 1422. Trustee to Effectuate Subordination...............................144
</TABLE>
(viii)
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Section 1423. No Waiver of Subordination Provisions...........................144
Section 1424. Notice to Trustee by Each of the Guarantors.....................145
Section 1425. Reliance on Judicial Order or Certificate of Liquidating
Agent...........................................................146
Section 1426. Rights of Trustee as a Holder of Senior Guarantor
Indebtedness; Preservation of Trustee's Rights..................146
Section 1427. Article Applicable to Paying Agents.............................147
Section 1428. No Suspension of Remedies.......................................147
Section 1429. Trustee's Relation to Senior Guarantor Indebtedness.............147
TESTIMONIUM ................................................................146
SIGNATURES AND SEALS.............................................................146
</TABLE>
ACKNOWLEDGMENTS
SCHEDULE I Permitted Indebtedness
SCHEDULE II List of Dividend Restrictions
EXHIBIT A Form of Intercompany Note
EXHIBIT B Form of Certificate to Be Delivered upon Termination of
Restricted Period
EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers
to Non-QIB Institutional Accredited Investors
EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
APPENDIX I Form of Transfer Notice for Series B Securities
APPENDIX II Form of Transfer Notice for Series C Securities
(ix)
<PAGE>
PAGE
----
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of October 29, 1996
Trust Indenture Indenture
Act Section Section
- ----------- ---------
(S) 310(a)(1) ............................. 608
(a)(2) ............................. 608
(b) ............................. 607, 609
(S) 311(a) ............................. 612
(S) 312(c) ............................. 702
(S) 313(a) ............................. 703
(c) ............................. 703, 704
(S) 314(a) ............................. 704
(a)(4) ............................. 1020
(c)(1) ............................. 103
(c)(2) ............................. 103
(e) ............................. 103
(S) 315(b) ............................. 601
(S) 316(a)(last
sentence) ............................. 101 ("Outstanding")
(a)(1)(A) ............................. 502, 512
(a)(1)(B) ............................. 513
(b) ............................. 508
(c) ............................. 105
(S) 317(a)(1) ............................. 503
(a)(2) ............................. 504
(b) ............................. 1003
(S) 318(a) ............................. 108
- ------------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of this Indenture.
(x)
<PAGE>
PARTIES
INDENTURE, dated as of October 29, 1996, among CANANDAIGUA WINE
COMPANY, INC., a Delaware corporation (the "Company"), the Subsidiaries listed
on the signature pages hereto ("Guarantors"), and HARRIS TRUST AND SAVINGS BANK,
an Illinois banking corporation as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 8 3/4%
Series B Senior Subordinated Notes due 2003 (the "Series B Securities" or the
"Initial Securities"), and an issue of 8 3/4% Series C Senior Subordinated Notes
due 2003 (the "Series C Securities", and together with the Series B Securities,
the "Securities"), of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture and the Securities;
Each Guarantor has duly authorized the issuance of a guarantee (the
"Guarantees") of the Securities, of substantially the tenor hereinafter set
forth, and to provide therefor, each Guarantor has duly authorized the execution
and delivery of this Indenture and the Guarantee;
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make (i) the
Securities, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid obligations of the Company, (ii) the Guarantees,
when executed by each of the Guarantors and delivered hereunder, the valid
obligation of each of the Guarantors subject to applicable principles of
bankruptcy, creditors' rights and fraudulent conveyance and (iii) this Indenture
a valid agreement of the Company and each of the Guarantors in accordance with
the terms of this Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
<PAGE>
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions For all purposes of this Indenture, except as
-----------
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer to
this Indenture unless otherwise so indicated.
Certain terms used principally in Article Four are defined in Article
Four.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing a
t the time such Person becomes a Subsidiary or (ii) assumed in connection with
the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
Ebecoming a Subsidiary or such acquisition. Acquired Indebtedness shall be
deemed to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any other Person that
owns, directly or indirectly, 5% or more of such Person's Capital Stock or any
officer or director of any such Person or other Person or, with respect to any
natural Person, any person having a relationship with such Person by blood,
marriage or adoption not more remote than first cousin or (iii) any other Person
10% or more of the voting Capital Stock of which are beneficially owned or held
directly or indirectly by such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
2
<PAGE>
means the power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (i) any
Capital Stock of any Subsidiary; (ii) all or substantially all of the properties
and assets of any division or line of business of the Company or its
Subsidiaries; or (iii) any other properties or assets of the Company or any
Subsidiary, other than in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include (x) any transfer of
properties and assets (A) that is governed by Section 801(a) or (B) that is of
the Company to any Wholly Owned Subsidiary, or of any Subsidiary to the Company
or any Wholly Owned Subsidiary in accordance with the terms of this Indenture or
(y) transfers of properties and assets in any given fiscal year with an
aggregate Fair Market Value of less than $1,000,000.
"Average Life to Stated Maturity" means, as of the date o f
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States Federal or State law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Barton Letter of Credit" means the "Barton Letter of Credit" issued
to American National Bank and Trust Company of Chicago, as escrowee, under the
Credit Agreement.
"Board of Directors" means the board of directors of th e Company or
any Guarantor, as the case may be, or any duly authorized committee of such
board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or any Guarantor, as the case
may be, to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Book-Entry Security" means any Securities bearing the legend
specified in Section 202 evidencing all or part of a series of Securities,
authenticated and delivered to
3
<PAGE>
the Depositary for such series or its nominee, and registered in the name of
such Depositary or nominee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions or trust companies in
The City of New York or the city in which the Corporate Trust Office of the
Trustee is located are authorized or obligated by law, regulation or executive
order to close.
"Capital Lease Obligation" means any obligations of the Company and
its Subsidiaries on a Consolidated basis under any capital lease of real or
personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock.
"Cash Equivalents" means, (i) any evidence of Indebtedness of a
Person, other than the Company or its Subsidiaries, with a maturity of one year
or less from the date of acquisition issued or directly and fully guaranteed or
insured by the United
States of America or any agency or instrumentality thereof (provided, that the
--------
full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of one
year or less from the date of acquisition of any financial institution that is a
member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than $500,000,000; (iii) commercial paper with a
maturity of one year or less from the date of acquisition issued by a
corporation that is not an Affiliate of the Company organized under the laws of
any state of the United States or the District of Columbia and rated A-1 (or
higher) according to S&P or P-1 (or higher) according to Moody's or at least an
equivalent rating category of another nationally recognized securities rating
agency; (iv) any money market deposit accounts issued or offered by a domestic
commercial bank having capital and surplus in excess of $500,000,000; and (v)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the government of the
United States of America or issued by any agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
one year from the date of acquisition; provided that the terms of such
--------
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985.
"Change of Control" means the occurrence of any of the following
events: (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time),
4
<PAGE>
directly or indirectly, of more than 30% of the voting power of the total
outstanding Voting Stock of the Company voting as one class, provided that the
--------
Permitted Holders "beneficially own" (as so defined) a percentage of Voting
Stock having a lesser percentage of the voting power than such other Person and
do not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of the Company;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board or whose
nomination for election by the shareholders of the Company, was approved by a
vote of 66 2/3% of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of such
Board of Directors then in office; (iii) the Company consolidates with or merges
with or into any Person or conveys, transfers or leases all or substantially all
of its assets to any Person, or any corporation consolidates with or merges into
or with the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction where the
outstanding Voting Stock of the Company is not changed or exchanged at all
(except to the extent necessary to reflect a change in the jurisdiction of
incorporation of the Company) or where (A) the outstanding Voting Stock of the
Company is changed into or exchanged for (x) Voting Stock of the surviving
corporation which is not Redeemable Capital Stock or (y) cash, securities and
other property (other than Capital Stock of the surviving corporation) in an
amount which could be paid by the Company as a Restricted Payment in accordance
with Section 1009 (and such amount shall be treated as a Restricted Payment
subject to the provisions described under Section 1009) and (B) no "person" or
"group" other than Permitted Holders owns immediately after such transaction,
directly or indirectly, more than the greater of (1) 30% of the voting power of
the total outstanding Voting Stock of the surviving corporation voting as one
class and (2) the percentage of such voting power of the surviving corporation
held, directly or indirectly, by Permitted Holders immediately after such
transaction; or (iv) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions described under Article Eight.
"Closing Date" is defined to mean the date on which the Series B
Securities are originally issued under this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
5
<PAGE>
"Company" means Canandaigua Wine Company, Inc., a corporation
incorporated under the laws of Delaware, until a successor Person shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice-Chairman, its President, its Chief Operating Officer or a Vice President
(regardless of Vice Presidential designation), and by any one of its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Fixed Charge Coverage Ratio" of the Company means, for
any period, the ratio of (a) the sum of Consolidated Net Income (Loss),
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Net Income (Loss) in each
case, for such period, of the Company and its Subsidiaries on a Consolidated
basis, all determined in accordance with GAAP to (b) the sum of Consolidated
Interest Expense for such period and cash and non-cash dividends paid on any
Preferred Stock of the Company during such period; provided that (i) in making
such computation, the Consolidated Interest --------
Expense attributable to interest on any Indebtedness computed on a pro forma
--- -----
basis and (A) bearing a floating interest rate, shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Company, a fixed
or floating rate of interest, shall be computed by applying at the option of the
Company, either the fixed or floating rate and (ii) in making such computation,
the Consolidated Interest Expense of the Company attributable to interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
--- -----
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period.
"Consolidated Income Tax Expense" means for any period, as applied to
the Company , the provision for federal, state, local and foreign income taxes
of the Company and its Consolidated Subsidiaries for such period as determined
in accordance with GAAP on a Consolidated basis.
"Consolidated Interest Expense" of the Company means, without
duplication , for any period, the sum of (a) the interest expense of the Company
and its Consolidated Subsidiaries for such period, on a Consolidated basis,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost under interest rate contracts (including amortization of discounts), (iii)
the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) (i) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Company during such
period and (ii) all capitalized interest of the Company and its Consolidated
6
<PAGE>
Subsidiaries, in each case as determined in accordance with GAAP on a
Consolidated basis.
"Consolidated Net Income (Loss)" of the Company means, for any period,
the Consolidated net income (or loss) of the Company and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP on a
Consolidated basis, adjusted, to the extent included in calculating such net
income (loss), by excluding, without duplication, (i) all extraordinary gains or
losses (less all fees and expenses relating thereto), (ii) the portion of net
income (or loss) of the Company and its Consolidated Subsidiaries allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by the Company or one of its
Consolidated Subsidiaries, (iii) net income (or loss) of any Person combined
with the Company or any of its Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (iv) any gain or
loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (v) net gains (but not losses) (less all fees and expenses
relating thereto) in respect of dispositions of assets other than in the
ordinary course of business, or (vi) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the Consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and its
subsidiaries, as determined in accordance with GAAP on a Consolidated basis.
"Consolidated Non-cash Charges" of the Company means, for any period,
the aggregate depreciation, amortization and other non-cash charges of the
Company and its Consolidated subsidiaries for such period, as determined in
accordance with GAAP (excluding any non-cash charge which requires an accrual or
reserve for cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation
of the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally administered,
which office at the date of execution of this Indenture is located at 311 West
Monroe Street, 12th Floor, Chicago, Illinois 60606.
7
<PAGE>
"Credit Agreement" means the Credit Agreement, dated as of June 29,
1993, between the Company, the Subsidiaries of the Company identified on the
signature pages thereof under the caption "Subsidiary Guarantors," the lenders
named therein and The Chase Manhattan Bank, as agent, including any ancillary
documents executed in connection therewith, as such agreement has and may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing). For all purposes under this Indenture, "Credit Agreement" shall
include any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplements or any other modifications that
increase the principal amount of the Indebtedness or the commitments to lend
thereunder and have been made in compliance with Section 1008; provided that,
for purposes of the--------definition of "Permitted Indebtedness," no such
increase may result in the principal amount of Indebtedness of the Company under
the Credit Agreement exceeding the amount permitted by Section 1008(b)(i).
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form
of one or more Book-Entry Securities, The Depository Trust Company ("DTC"), its
nominees and successors, or another Person designated as Depositary by the
Company, which must be a clearing agency registered under the Exchange Act.
"Designated Senior Guarantor Indebtedness" means (i) all Senior
Guarantor Indebtedness which guarantees Indebtedness under the Credit Agreement
and (ii) any other Senior Guarantor Indebtedness which is incurred pursuant to
an agreement (or series of related agreements) simultaneously entered into
providing for Indebtedness, or commitments to lend, of at least $30,000,000 at
the time of determination and is specifically designated in the instrument
evidencing such Senior Guarantor Indebtedness or the agreement under which such
Senior Guarantor Indebtedness arises as "Designated Senior Guarantor
Indebtedness" by the Guarantor which is the obligor under the Senior Guarantor
Indebtedness.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Credit Agreement and (ii) any other Senior Indebtedness which is
incurred pursuant to an agreement (or series of related agreements)
simultaneously entered into providing for Indebtedness, or commitments to lend,
of at least $30,000,000 at the time of determination and is specifically
designated in the instrument evidencing such Senior Indebtedness or the
agreement under which such Senior Indebtedness arises as "Designated Senior
Indebtedness" by the Company.
"Event of Default" has the meaning specified in Section 501.
8
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the exchange offer by the Company of Series C
Securities for Series B Securities to be effected pursuant to Section 1 of the
Registration Rights Agreement.
"Exchange Offer Registration Statement" means the registration
statement under The Securities Act contemplated by Section 1 of the Registration
Rights Agreement.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"GAAP" or "Generally Accepted Accounting Principles" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect on the date of this Indenture.
"Global Securities" means a security evidencing all or a part of the
Securities to be issued as Book-Entry Securities issued to the Depositary in
accordance with Section 305.
"Guarantee" means the guarantee by any Guarantor of the Company's
Indenture Obligations pursuant to a guarantee given in accordance with this
Indenture, including the Guarantees by the Guarantors included in Article
Fourteen of this Indenture and any Guarantee delivered pursuant to Section 1014.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
contained in this Section guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include endorsements
--------
for collection or deposit, in either case in the ordinary course of business.
9
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"Guarantor" means the Subsidiaries listed on the signature pages
hereto as guarantors or any other guarantor of the Indenture Obligations.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities and in connection
with any agreement to purchase, redeem, exchange, convert or otherwise acquire
for value any Capital Stock of such Person, or any warrants, rights or options
to acquire such Capital Stock, now or hereafter outstanding, (ii) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (iv) all obligations under Interest Rate Agreements of such Person,
(v) all Capital Lease Obligations of such Person, (vi) all Indebtedness referred
to in clauses (i) through (v) above of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien, upon or with respect to property (including, without limitation,
accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness, (vii) all
Guaranteed Debt of such Person, (viii) all Redeemable Capital Stock valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends, and (ix) any amendment, supplement, modification,
deferral, renewal, extension, refunding or refinancing of any liability of the
types referred to in clauses (i) through (viii) above. For purposes hereof, the
"maximum fixed repurchase price" of any Redeemable Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to this Indenture, and if such price is based upon, or measured by, the
Fair Market Value of such Redeemable Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Indenture" means this instrument as originally executed (including
all exhibits and schedules thereto) and as it may from time to time be
supplemented or
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<PAGE>
amended by one or more indentures supplemental hereto entered into pursuant to
the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the Securities, including any
Guarantor, to pay principal of, premium, if any, and interest when due and
payable, and all other amounts due or to become due under or in connection with
this Indenture, the Securities and the performance of all other obligations to
the Trustee and the Holders under this Indenture and the Securities, according
to the terms hereof and thereof.
"Initial Securities" has the meaning stated in the first recital of
this Indenture.
"Initial Purchasers" means Chase Securities Inc. and CS First Boston
Corporation.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
interest rate protection agreements (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements) and/or other types of
interest rate hedging agreements from time to time .
"Investments" means, with respect to any Person, directly or
indirectly, any advance, loan (including guarantees), or other extension of
credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities issued or owned by,
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein provided
or as provided in this Indenture, whether at Stated Maturity, the Offer Date or
the Redemption Date and whether by declaration of acceleration, Offer in respect
of Excess Proceeds, Change of Control, call for redemption or otherwise.
11
<PAGE>
"Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by any
Person, the proceeds thereof in the form of cash or Temporary Cash Investments
including payments in respect of deferred payment obligations when received in
the form of, or stock or other assets when disposed of for, cash or Temporary
Cash Investments (except to the extent that such obligations are financed or
sold with recourse to the Company or any Subsidiary) net of (i) brokerage
commissions and other actual fees and expenses (including fees and expenses of
counsel and investment bankers) related to such Asset Sale, (ii) provisions for
all taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company or any Subsidiary) owning a beneficial
interest in the assets subject to the Asset Sale and (v) appropriate amounts to
be provided by the Company or any Subsidiary, as the case may be, as a reserve,
in accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any Subsidiary, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an Officers' Certificate delivered to the Trustee and
(b) with respect to any issuance or sale of Capital Stock or options, warrants
or rights to purchase Capital Stock, or debt securities or Capital Stock that
have been converted into or exchanged for Capital Stock, as referred to under
Section 1009, the proceeds of such issuance or sale in the form of cash or
Temporary Cash Investments, including payments in respect of deferred payment
obligations when received in the form of, or stock or other assets when disposed
for, cash or Temporary Cash Investments (except to the extent that such
obligations are financed or sold with recourse to the Company or any
Subsidiary), net of attorneys' fees, accountants' fees and brokerage,
consultation, underwriting and other fees and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-payment Default" means any event (other than a Payment Default)
the occurrence of which entitles one or more Persons to accelerate the maturity
of any Designated Senior Indebtedness.
"Non-U.S. Person" means a Person that is not a "U.S. person" as
defined in Regulation S under the Securities Act.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Vice Chairman, the President, the Chief Operating Officer or a Vice
President (regardless of Vice Presidential designation), and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company
or any Guarantor, as the case may be, and delivered to the Trustee.
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"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or any Guarantor, as applicable, unless an Opinion of
Independent Counsel is required pursuant to the terms of this Indenture, and who
shall be acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel
issued by someone who is not an employee or consultant (other than non-employee
legal counsel) of the Company or any Guarantor and who shall be reasonably
acceptable to the Trustee.
"Original Indenture" means the Indenture, dated as of December 27,
1993, among the Company, the Subsidiaries listed on the signature pages thereto
and The Chase Manhattan Bank (successor by merger to Chemical Bank), as trustee,
relating to the Original Securities.
"Original Securities"
means the Company's 8-3/4% Senior Subordinated Notes due 2003 issued
pursuant to the Original Indenture.
"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the Company shall act as its own Paying Agent) for
the Holders; provided that if such Securities are to be redeemed, notice of such
--------
redemption has been duly given pursuant to this Indenture or provision therefor
reasonably satisfactory to the Trustee has been made;
(c) Securities, except to the extent provided in Sections 402 and 403,
with respect to which the Company has effected defeasance or covenant defeasance
as provided in Article Four; and
(d) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee proof reasonably satisfactory to it that such Securities are held by a
bona fide purchaser in whose hands the Securities are valid obligations of the
Company;
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provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Guarantor, or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor, or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the reasonable satisfaction of the Trustee the pledgee's right so
to act with respect to such Securities and that the pledgee is not the Company,
any Guarantor or any other obligor upon the Securities or any Affiliate of the
Company, any Guarantor or such other obligor.
"Pari Passu Indebtedness" means any Indebtedness of the Company or a
Guarantor that is pari passu in right of payment to the Securities or a
---- -----
Guarantee, as the case may be.
"Paying Agent" means any Person authorized by the Company to pay the
principal, premium, if any, or interest on any Securities on behalf of the
Company.
"Payment Default" means any default in the payment of principal,
premium, if any, or interest, on any Designated Senior Indebtedness.
"Permitted Guarantor Junior Securities" means, so long as the effect
of any exclusion employing this definition is not to cause the Guarantee to be
treated in any case or proceeding or similar event described in clauses (a), (b)
or (c) of Section 1417 as part of the same class of claims as the Senior
Guarantor Indebtedness or any class of claims pari passu with, or senior to, the
Senior Guarantor Indebtedness, for any payment or distribution, debt or equity
securities of any Guarantor or any successor corporation provided for by a plan
of reorganization or readjustment that are subordinated at least to the same
extent that the Guarantee is subordinated to the payment of all Senior Guarantor
Indebtedness then outstanding; provided that (1) if a new corporation results
--------
from such reorganization or readjustment, such corporation assumes any Senior
Guarantor Indebtedness not paid in full in cash or Cash Equivalents in
connection with such reorganization or readjustment and (2) the rights of the
holders of such Senior Guarantor Indebtedness are not, without the consent of
such holders, altered by such reorganization or readjustment.
"Permitted Holders" means as of the date of determination (i) Marvin
Sands, Richard Sands and Robert Sands; (ii) family members or the relatives of
the Persons described in clause (i); (iii) any trusts created for the benefit of
the Persons described in clauses (i), (ii) or (iv) or any trust for the benefit
of any such trust; or (iv) in the event of the incompetence or death of any of
the persons described in clauses (i) and
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(ii), such Person's estate, executor, administrator, committee or other personal
representative or beneficiaries, in each case who at any particular date shall
beneficially own or have the right to acquire, directly or indirectly, Capital
Stock of the Company.
"Permitted Investment" means (i) Investments in any Wholly Owned
Subsidiary or any Person which, as a result of such Investment, becomes a Wholly
Owned Subsidiary; (ii) Indebtedness of the Company or a Subsidiary described
under clauses (iv) and (v) of the definition of "Permitted Indebtedness"; (iii)
Temporary Cash Investments; (iv) Investments acquired by the Company or any
Subsidiary in connection with an Asset Sale permitted under Section 1013 to the
extent such Investments are non-cash proceeds as permitted under such covenant;
(v) guarantees of Indebtedness otherwise permitted by the Indenture; and (vi)
Investments in existence on the date of the Original Indenture.
"Permitted Junior Securities" means, so long as the effect of any
exclusion employing this definition is not to cause the Securities to be treated
in any case or proceeding or similar event described in clauses (a), (b) or (c)
of Section 1202 as part of the same class of claims as the Senior Indebtedness
or any class or claims pari passu with, or senior to, the Senior Indebtedness,
for any payment or distribution, debt or equity securities of the Company or any
successor corporation provided for by a plan of reorganization or readjustment
that are subordinat ed at least to the same extent that the Securities are
subordinated to the payment of all Senior Indebtedness then outstanding;
provided that (1) if a new corporation results from such reorganization
- --------
or readjustment, such corporation assumes any Senior Indebtedness not paid in
full in cash or Cash Equivalents in connection with such reorganization or
readjustment and (2) the rights of the holders of such Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for a mutilated
Security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred stock whether now outstanding, or issued after the date
of the Original Indenture, and including, without limitation, all classes and
series of preferred or preference stock.
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<PAGE>
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A under
the Securities Act.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Securities or is redeemable at the option of the holder thereof
at any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Redemption Date" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the date fixed for
such redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the price at which it
is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement dated the date hereof between the Company, the Guarantors and
the Initial Purchasers.
"Registration Statement" means any registration statement of the
Company which covers any of the Series B Securities or Series C Securities
pursuant to the provisions of the Registration Rights Agreement, and all
amendments and supplements to any such Registration Statement, including post-
effective amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference therein.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the 15th day (whether or not a Business Day) next preceding such
Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or any other officer or assistant officer of the Trustee or
the agent of the Trustee appointed hereunder to whom any corporate trust matter
is referred because of his or her knowledge of and familiarity with the
particular subject.
"Restricted Payment" has the meaning specified in Section 1009.
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<PAGE>
"S&P" means Standard and Poor's Corporation or any successor rating
agency.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or a Subsidiary sells or
transfers any property or asset in connection with the leasing, or the resale
against installment payments, of such property or asset to the seller or
transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Guarantor Indebtedness" means the principal of, premium, if
any, and interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of the Original Indenture or thereafter created,
incurred or assumed, and whether at any time owing, actually or contingent,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to any
Guarantee. Without limiting the generality of the foregoing, "Senior Guarantor
Indebtedness" shall include the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy laws whether or not
allowable as a claim in such proceeding) and all other obligations of every
nature of any Guarantor from time to time owed to the lenders (or their agent)
under the Credit Agreement; provided, however, that any Indebtednes s under any
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refinancing, refunding or replacement of the Credit Agreement shall not
constitute Senior Guarantor Indebtedness to the extent that the Indebtedness
thereunder is by its express terms subordinate to any other Indebtedness of any
Guarantor. Notwithstanding the foregoing, "Senior Guarantor Indebtedness" shall
not include (i) Indebtedness evidenced by the Guarantees, (ii) Indebtedness that
is subordinate or junior in right of payment to any Indebtedness of any
Guarantor, (iii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 United States Code, is without
recourse to any Guarantor, (iv) Indebtedness which is represented by Redeemable
Capital Stock, (v) any liability for foreign, federal, state, local or other
taxes owed or owing by any Guarantor to the extent such liability constitutes
Indebtedness, (vi) Indebtedness of any Guarantor to a Subsidiary or any other
Affiliate of the Company or any of such Affiliate's subsidiaries, (vii) that
portion of any Indebtedness which at the time of issuance is issued in violation
of this Indenture and (viii) Indebtedness owed by any Guarantor for compensation
to employees or for services.
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<PAGE>
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition initiating
any proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claim in such proceeding) on any Indebtedness of the Company
(other than as otherwise provided in this definition), whether outstanding on
the date of the Original Indenture or thereafter created, incurred or assumed,
and whether at any time owing, actually or contingent, unless, in the case of
any particular indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Securities. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
(i) the principal of, premium, if any, and interest (including interest accruing
after the filing of a petition initiating any proceeding under any state,
federal or foreign bankruptcy laws whether or not allowable as a claim in such
proceeding) and all other obligations of every nature of the Company from time
to time owed to the lenders (or their agent) under the Credit Agreement;
provided, however, that any Indebtedness under any refinancing , refunding or
- -------- -------
replacemen t of the Credit Agreement shall not constitute Senior Indebtedness to
the extent that the Indebtedness thereunder is by its express terms subordinate
to any other Indebtedness of the Company, and (ii) Indebtedness under Interest
Rate Agreements. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include (i) Indebtedness evidenced by the Securities, (ii) Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of the Company,
(iii) Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 United States Code, is without recourse to the
Company, (iv) Indebtedness which is represented by Redeemable Capital Stock, (v)
any liability for foreign, federal, state, local or other taxes owed or owing by
the Company to the extent such liability constitutes Indebtedness, (vi)
Indebtedness of the Company to a Subsidiary or any other Affiliate of the
Company or any of such Affiliate's subsidiaries, (vii) that portion of any
Indebtedness which at the time of issuance is issued in violation of this
Indenture and (viii) Indebtedness owed by the Company for compensation to
employees or for services.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to Section 2 of the of the Registration Rights
Agreement, which covers all of the Transfer Restricted Securities (as defined in
the Registration Rights Agreement) on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the Commission,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
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"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Guarantor subordinated in right of payment to the Securities or a Guarantee, as
the case may be.
"Subsidiary" means any Person a majority of the equity ownership or
the Voting Stock of which is at the time owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries.
"Temporary Cash Investments" means (i) any evidence of Indebtedness of
a Person, other than the Company or its Subsidiaries, maturing not more than one
year after the date of acquisition, issued by the United States of America, or
an instrumentality or agency thereof and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (ii) any
certificate of deposit, maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital and
surplus and undivided profits of not less than $500,000,000, whose debt has a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's Investors Service, Inc. ("Moody's") or any
successor rating agency or "A-1" (or higher) according to Standard and Poor's
Corporation ("S&P") or any successor rating agency, (iii) commercial paper,
maturing not more than one year after the date of acquisition, issued by a
corporation (other than an Affiliate or Subsidiary of the Company) organized and
existing under the laws of the United States of America with a rating, at the
time as of which any investment therein is made, of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P and (iv) any money market
deposit accounts issued or offered by a domestic commercial bank having capital
and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trustee" means, except as set forth in Section 405 hereof, the Person
named as the "Trustee" in the first paragraph of this instrument, until a
successor trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor trustee.
"Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
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"Wholly Owned Subsidiary" means (i) a Subsidiary all the Capital Stock
of which is owned by the Company or another Wholly Owned Subsidiary and (ii)
Monarch Wine Company, Limited Partnership, so long as the Company owns directly
or indirectly at least 99% of the outstanding interests in such partnership and
is the general partner thereof .
Section 102. Other Definitions.
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Defined in
Term Section
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"Act" 105
"Change of Control Offer" 1016
"Change of Control Purchase Date" 1016
"Change of Control Purchase Notice" 1016
"Change of Control Purchase Price" 1016
"Series B Securities" Recitals
"Series C Securities" Recitals
"covenant defeasance" 403
"Defaulted Interest" 307
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Deficiency" 1013
"Excess Proceeds" 1013
"incur" 1008
"Initial Blockage Period" 1203
"Offer" 1013
"Offer Date" 1013
"Offered Price" 1013
"Pari Passu Debt Amount" 1013
"Pari Passu Offer" 1013
"Payment Blockage Period" 1203
"Permitted Indebtedness" 1008
"Permitted Payment" 1009
"refinancing" 1008
"Required Filing Dates" 1019
"Security" or "Securities" Recitals
"Security Amount" 1013
"Senior Guarantor Representative" 1424
"Senior Representative" 1203
"Surviving Entity" 801
"U.S. Government Obligations" 404
20
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Section 103. Compliance Certificates and Opinions.
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Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company and any Guarantor
(if applicable) and any other obligor on the Securities (if applicable) shall
furnish to the Trustee an Officers' Certificate in a form and substance
reasonably acceptable to the Trustee stating that all conditions precedent, if
any, provided for in this Indenture (including any covenants compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with, and an Opinion of Counsel in a form and substance reasonably
acceptable to the Trustee stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents,
certificates or opinions is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(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 each such individual, he 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
complied with; and
(d) a statement as to whether or not, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
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Any certificate or opinion of an officer of the Company, any Guarantor
or other obligor on the Securities may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer has actual knowledge that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company, any Guarantor or
other obligor on the Securities stating that the information with respect to
such factual matters is in the possession of the Company, any Guarantor or other
obligor on the Securities, unless such counsel has actual knowledge that the
certificate or opinion or representations with respect to such matters are
erroneous. Opinions of Counsel required to be delivered to the Trustee may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 105. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are received
by the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section. The fact and date of the execution by any
Person of any such instrument or writing may be proved in any reasonable manner
which the Trustee deems sufficient.
(b) The ownership of Securities shall be proved by the Security
Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security or the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, suffered or omitted to be
22
<PAGE>
done by the Trustee, any Paying Agent or the Company or any Guarantor in
reliance thereon, whether or not notation of such action is made upon such
Security.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding Trust Indenture Act
Section 316(c), any such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not more than 30 days
prior to the first solicitation of Holders generally in connection therewith and
no later than the date such solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided
--------
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date.
Section 106. Notices, etc., to the Trustee, the Company and any
--------------------------------------------------
Guarantor.
- ---------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or any Guarantor or
any other obligor on the Securities or a Senior Representative or holder of
Senior Indebtedness shall be sufficient for every purpose hereunder if in
writing and mailed, first-class postage prepaid, or delivered by recognized
overnight courier, to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Department, or at any other address previously
furnished in writing to the Holders, the Company, any Guarantor or any other
obligor on the Securities or a Senior Representative or holder of Senior
Indebtedness by the Trustee; or
(b) the Company or any Guarantor by the Trustee or any Holder shall be
sufficient for every purpose (except as provided in Section 501(c)) hereunder if
in writing and mailed, first-class postage prepaid, or delivered by recognized
overnight courier, to
23
<PAGE>
the Company or such Guarantor addressed to it at Canandaigua Wine Company, Inc.,
116 Buffalo Street, Canandaigua, New York 14424, Attention: General Counsel, or
at any other address previously furnished in writing to the Trustee by the
Company.
Section 107. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or requirement of the Trust Indenture Act shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section 109. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
24
<PAGE>
Section 110. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company and the
Guarantors shall bind their successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities 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 112. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent, the Holders, the holders of Senior Indebtedness and
the holders of Guarantor Senior Indebtedness) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 113. GOVERNING LAW.
-------------
THIS INDENTURE, THE SECURITIES AND ANY GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
Section 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Maturity
or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date or at the,
Maturity or Stated Maturity and no interest shall accrue with respect to such
payment for the period from and after such Interest Payment Date, Redemption
Date, Maturity or Stated Maturity, as the case may be, to the next succeeding
Business Day.
Section 115. Schedules and Exhibits.
----------------------
All schedules and exhibits attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
25
<PAGE>
Section 116. Counterparts.
------------
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication thereon
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by the Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with the rules of any securities exchange, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Section 202 (the "U.S. Global Security")
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold inside the United States to an
institutional investor within the meaning of subparagraphs (a)(1), (a)(2),
(a)(3) or (a)(7) of Rule 501 under the Securities Act shall be issued in
certificated form substantially in the form set forth in Section 202 (the "U.S.
Physical Securities").
Initial Securities offered and sold in reliance on Regulation S shall
be issued initially in
26
<PAGE>
the form of temporary certificated Securities in registered form substantially
in the form set forth in Section 202 (the "Temporary Offshore Physical
Securities"). The Temporary Offshore Physical Securities will be registered in
the name of, and held by, a temporary certificate holder designated by the
Initial Purchasers until the later of the completion of the distribution of the
Initial Securities and the termination of the "restricted period" (as defined in
Regulation S) with respect to the offer and sale of the Initial Securities (the
"Offshore Securities Exchange Date"). At any time following the Offshore
Securities Exchange Date, upon receipt by the Trustee and the Company of a
certificate substantially in the form of Exhibit B hereto, the Company shall
execute, and the Trustee shall authenticate and deliver, one or more permanent
certificated Securities in registered form substantially in the form set forth
in Section 202 (the "Permanent Offshore Physical Securities"), in exchange for
the surrender of Temporary Offshore Physical Securities of like tenor and
amount.
Section 202. Form of Face of Security.
------------------------
(a) The form of the face of Series B Securities shall be substantially
as follows:
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, then (A) the U.S. Global Security
and each U.S. Physical Security shall bear the legend set forth below (the
"Private Placement Legend") on the face thereof and (B) the Temporary Offshore
Physical Securities shall bear the Private Placement Legend on the face thereof
until at least 41 days after the Issue Date and receipt by the Company and the
Trustee of a certificate substantially in the form as set forth in Exhibit B:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AS
SET FORTH BELOW.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A")) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE
27
<PAGE>
SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) OUTSIDE THE
UNITED STATES PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS IN AN
OFFSHORE TRANSACTION WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1),
(a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSES (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
28
<PAGE>
AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. AS USED
HEREIN, THE TERMS "UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S.
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT
IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS 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.
29
<PAGE>
CANANDAIGUA WINE COMPANY, INC.
-----------------
8 3/4% SERIES B SENIOR SUBORDINATED NOTE DUE 2003
CUSIP NO.____________
No. __________ $____________
CANANDAIGUA WINE COMPANY, INC., a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_____________ or registered assigns, the principal sum of _______________ United
States dollars on December 15, 2003, at the office or agency of the Company
referred to below, and to pay interest thereon from October 29, 1996, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on June 15 and December 15, in each year, commencing
December 15, 1996 at the rate of 8 3/4% per annum, in United States dollars,
until the principal hereof is paid or duly provided for.
The Holder of this Series B Security is entitled to the benefits of
the Exchange and Registration Rights Agreement dated October 29, 1996 among the
Company, the Guarantors and the Initial Purchasers (the "Registration Rights
Agreement"), pursuant to which, subject to the terms and conditions thereof, the
Company is obligated to consummate the Exchange Offer pursuant to which the
Holder of this Security shall have the right to exchange this Security for 8
3/4% Series C Senior Subordinated Notes due 2003 (the "Series C Securities") in
like principal amount as provided therein. The Series B Securities and the
Series C Securities are together referred to as the "Securities."
In the event that (i) the applicable Registration Statement is not
filed with the Commission on or prior to 45 days after the Closing Date, (ii)
the Exchange Offer Registration Statement or, as the case may be, the Shelf
Registration Statement, is not declared effective within 105 days after the
Closing Date, (iii) the Exchange Offer is not consummated on or prior to 135
days after the Closing Date, or (iv) the Shelf Registration Statement is filed
and declared effective within 105 days after the Closing Date but shall
thereafter cease to be effective (at any time that the Company and the
Guarantors are obligated to maintain the effectiveness thereof) without being
succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will pay liquidated damages to each holder
of Transfer Restricted Securities (as defined below) in an amount equal to
$0.192 per week per $1,000 principal amount of the Securities constituting
Transfer Restricted Securities held by such holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Registration Statement is
30
<PAGE>
declared effective and the Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
"Transfer Restricted Securities" means each Series B Security until (i) the date
on which such Series B Security has been exchanged for a freely transferable
Series C Security in the Exchange Offer, (ii) the date on which such Series B
Security has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iii) the date on
which such Series B Security is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company shall not be required to pay liquidated damages to the holder of
Transfer Restricted Securities if such holder failed to comply with its
obligations to the Company pursuant to the Registration Rights Agreement.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be June 1 or December 1 (whether or not a Business Day),
as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid, or duly provided for, and interest on such
defaulted interest at the interest rate borne by the Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such defaulted interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose, 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; provided,
--------
however, that payment of interest may be made at the option of the Company, (i)
- -------
in the case of a Global Security, by wire or book entry transfer to the
Depository Trust Company or its nominee, or (ii) in all other cases, by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
31
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by each of the
Guarantors of the punctual payment when due of the Indenture Obligations made in
favor of the Trustee for the benefit of the Holders. Reference is hereby made
to Article Fourteen of the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations under the Guarantees of each of
the Guarantors.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
Dated: CANANDAIGUA WINE COMPANY, INC.
By:
---------------------------
Attest:
- ------------------------
Authorized Officer
(b) The form of the face of Series C Securities shall be substantially
as follows:
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT
IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
32
<PAGE>
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 306 AND 307 OF
THE INDENTURE .
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS 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.
CANANDAIGUA WINE COMPANY, INC.
-----------------
8 3/4% SERIES C SENIOR SUBORDINATED NOTE DUE 2003
CUSIP NO.____________
No. __________ $____________
CANANDAIGUA WINE COMPANY, INC., a Delaware corporation (herein called
the "Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
_____________ or registered assigns, the principal sum of _______________ United
States dollars on December 15, 2003, at the office or agency of the Company
referred to below, and to pay interest thereon from ______ __, 1996, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually on June 15 and December 15, in each year, commencing
December 15, 1996 at the rate of 8 3/4% per annum, in United States dollars,
until the principal hereof is paid or duly provided for; provided that to the
extent interest has not been paid or duly provided for with respect to the
Series B Security exchanged for this Series C Security, interest on this Series
C Security shall accrue from the most recent Interest Payment Date to which
interest on the Series B Security which
33
<PAGE>
was exchanged for this Series C Security has been paid or duly provided for.
Interest shall be computed on the basis of a 360-day year comprised of twelve
30-day months..
This Series C Security was issued pursuant to the Exchange Offer
pursuant to which the 8 3/4% Series B Senior Subordinated Notes due 2003 (herein
called the "Series B Securities") in like principal amount were exchanged for
the Series C Securities. The Series C Securities rank pari passu in right of
payment with the Series B Securities.
In addition, for any period in which the Series B Security exchanged
for this Series C Security was outstanding, in the event that (i) the applicable
Registration Statement is not filed with the Commission on or prior to 45 days
after the Closing Date, (ii) the Exchange Offer Registration Statement or, as
the case may be, the Shelf Registration Statement, is not declared effective
within 105 days after the Closing Date, (iii) the Exchange Offer is not
consummated on or prior to 135 days after the Closing Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 105 days after the
Closing Date but shall thereafter cease to be effective (at any time that the
Company and the Guarantors are obligated to maintain the effectiveness thereof)
without being succeeded within 30 days by an additional Registration Statement
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"), the Company will pay liquidated damages to each
holder of Transfer Restricted Securities (as defined below) in an amount equal
to $0.192 per week per $1,000 principal amount of the Securities constituting
Transfer Restricted Securities held by such holder until (i) the applicable
Registration Statement is filed, (ii) the Exchange Registration Statement is
declared effective and the Exchange Offer is consummated, (iii) the Shelf
Registration statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
"Transfer Restricted Securities" means each Class B Security until (i) the date
on which such Class B Security has been exchanged for a freely transferable
Class C Security in the Exchange Offer, (ii) the date on which such Class B
Security has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iii) the date on
which such Class B Security is distributed to the public pursuant to Rule 144
under the Securities Act or is salable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company shall not be required to pay liquidated damages to the holder of
Transfer Restricted Securities if such holder failed to comply with its
obligations to the Company pursuant to the Registration Rights Agreement.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be June 1 or December
34
<PAGE>
1 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Series C Securities, to the extent lawful, shall forthwith cease to be
payable to the Holder on such Regular Record Date, and may be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such defaulted interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose, 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; provided,
--------
however, that payment of interest may be made at the option of the Company, (i)
- -------
in the case of a Global Security, by wire or book entry transfer to the
Depository Trust Company or its nominee, or (ii) in all other cases, by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Security Register. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by each of the
Guarantors of the punctual payment when due of the Indenture Obligations made in
favor of the Trustee for the benefit of the Holders. Reference is hereby made
to Article Fourteen of the Indenture for a statement of the respective rights,
limitations of rights, duties and obligations under the Guarantees of each of
the Guarantors.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
35
<PAGE>
Dated: CANANDAIGUA WINE COMPANY, INC.
By:__________________________________
Attest:
- --------------------
Authorized Officer
Section 203. Form of Reverse of Securities.
-----------------------------
(a) The form of the reverse of the Series B Securities shall be
substantially as follows:
This Security is one of a duly authorized issue of Securities of the
Company designated as its 8 3/4% Series B Senior Subordinated Notes due 2003
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $65,000,000,
issued under an indenture (herein called the "Indenture") dated as of October
29, 1996, among the Company, the Guarantors and Harris Trust and Savings Bank,
as trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Company, the Guarantors, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the Securities or (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness (as defined in
the Indenture), whether Outstanding on the date of the Indenture or thereafter,
and this Security is issued subject to such provisions. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose; provided, however, that, subject to Section 406 of the Indenture,
-------- -------
the Indebtedness evidenced by this Security shall cease to be so subordinate and
subject in
36
<PAGE>
right of payment upon any defeasance of this Security referred to in clause (a)
or (b) of the preceding paragraph.
The Securities are subject to redemption at any time on or after
December 15, 1998, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice by first-class mail in amounts
of $1,000 or an integral multiple of $1,000 at the following redemption prices
(expressed as a percentage of the principal amount), redeemed during the 12-
month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
1998.................................................. 104.375%
1999.................................................. 102.917%
2000.................................................. 101.458%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on Regular Record Dates to receive interest due on an
Interest Payment Date). If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Notwithstanding the preceding paragraph, the Company will not be
permitted to redeem the Original Securities unless, substantially concurrently
with such redemption, the Company redeems an aggregate principal amount of
Securities (rounded to the nearest integral multiple of $1,000) equal to the
product of (a) a fraction, the numerator of which is the aggregate principal
amount of Original Securities to be so redeemed and the denominator of which is
the aggregate principal amount of Original Securities outstanding immediately
prior to such proposed redemption, and (b) the aggregate principal amount of
Securities outstanding immediately prior to such proposed redemption.
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's Securities in an
amount of $1,000 or integral multiples of $1,000, at a purchase price in cash
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company from any Asset Sale, which proceeds are not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company or reasonably related thereto, exceeds a specified
amount the Company will be required to
37
<PAGE>
apply such proceeds to the repayment of the Securities and certain indebtedness
ranking pari passu to the Securities.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is on
or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the date of redemption.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Guarantors and the Holders under the Indenture and
the Securities and the Guarantees at any time by the Company and the Trustee
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company and the
Guarantors with certain provisions of the Indenture and the Securities and the
Guarantees and certain past Defaults under the Indenture and the Securities and
the Guarantees and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, any
Guarantor or any other obligor on the Securities (in the event such Guarantor or
other obligor is obligated to make payments in respect of the Securities), which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed, subject to the subordination provisions of the
Indenture.
38
<PAGE>
If this Series B Security is in certificated form, then as provided in
the Indenture and subject to certain limitations therein set forth, the transfer
of this Security is registrable on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the office or agency
of the Company maintained for such purpose in The City of New York or at such
other office or agency of the Company as may be maintained for such purpose,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or its attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
If this Series B Security is a Restricted Security in certificated
form, then as provided in the Indenture and subject to certain limitations
therein set forth, the Holder, provided it is a Qualified Institutional Buyer,
may exchange this Series B Security for a Book-Entry Security by instructing the
Trustee (by completing the Transferee Certificate in the form in Appendix II) to
arrange for such Series B Security to be represented by a beneficial interest in
a Global Security in accordance with the customary procedures of the Depository,
unless the Company has elected not to issue a Global Security.
If this Series B Security is a U.S. Global Security, it is
exchangeable for a Series B Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and the
Depositary. In addition, certificated securities shall be transferred to all
beneficial holders in exchange for their beneficial interests in the U.S. Global
Securities if (x) the Depository notifies the Company that it is unwilling or
unable to continue as depository for the U.S. Global Security and a successor
depository is not appointed by the Company within 90 days or (y) there shall
have occurred and be continuing an Event of Default and the Security Registrar
has received a request from the Depositary. Upon any such issuance, the Trustee
is required to register such certificated Series B Securities in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof). All such certificated Series B Securities would be required to
include the Private Placement Legend.
The Series B Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
the Securities are exchangeable for a like aggregate principal amount of
Securities of a different authorized denomination, as requested by the Holder
surrendering the same.
At any time when the Company is not subject to Sections 13 or 15(d) of
the Exchange Act, upon the written request of a Holder of a Series B Security,
the Company will promptly furnish or cause to be furnished such information as
is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) to such Holder or to a prospective purchaser of
such Series B Security who such Holder informs the Company is reasonably
believed to be a "Qualified Institutional Buyer" within the
39
<PAGE>
meaning of Rule 144A under the Securities Act, as the case may be, in order to
permit compliance by such Holder with Rule 144A under the Securities Act.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to and at the time of due presentment of this Security for
registration of transfer, the Company, any Guarantor, the Trustee and any agent
of the Company, any Guarantor or the Trustee may treat the Person in whose name
this Security is registered as the owner hereof for all purposes, whether or not
this Security is overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
[The Transfer Notice, in the form of Appendix I hereto, will be
attached to the Series B Security.]
(b) The form of the reverse of the Series C Securities shall be
substantially as follows:
This Security is one of a duly authorized issue of Securities of the
Company designated as its 8 3/4% Series C Senior Subordinated Notes due 2003
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $65,000,000,
issued under an indenture (herein called the "Indenture") dated as of October
29, 1996, among the Company, the Guarantors and Harris Trust and Savings Bank,
as trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties, obligations and immunities thereunder of the
Company, the Guarantors, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the Securities or (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior
40
<PAGE>
payment in full of all Senior Indebtedness (as defined in the Indenture),
whether Outstanding on the date of the Indenture or thereafter, and this
Security is issued subject to such provisions. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose;
provided, however, that, subject to Section 406 of the Indenture, the
-------- -------
Indebtedness evidenced by this Security shall cease to be so subordinate and
subject in right of payment upon any defeasance of this Security referred to in
clause (a) or (b) of the preceding paragraph.
The Securities are subject to redemption at any time on or after
December 15, 1998, at the option of the Company, in whole or in part, on not
less than 30 nor more than 60 days' prior notice by first-class mail in amounts
of $1,000 or an integral multiple of $1,000 at the following redemption prices
(expressed as a percentage of the principal amount), redeemed during the 12-
month period beginning December 15 of the years indicated below:
Redemption
Year Price
---- ----------
1998.................................................. 104.375%
1999.................................................. 102.917%
2000.................................................. 101.458%
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on Regular Record Dates to receive interest due on an
Interest Payment Date). If less than all of the Securities are to be redeemed,
the Trustee shall select the Securities or portions thereof to be redeemed pro
rata, by lot or by any other method the Trustee shall deem fair and reasonable.
Notwithstanding the preceding paragraph, the Company will not be
permitted to redeem the Original Securities unless, substantially concurrently
with such redemption, the Company redeems an aggregate principal amount of
Securities (rounded to the nearest integral multiple of $1,000) equal to the
product of (a) a fraction, the numerator of which is the aggregate principal
amount of Original Securities to be so redeemed and the denominator of which is
the aggregate principal amount of Original Securities outstanding immediately
prior to such proposed redemption, and (b) the aggregate principal amount of
Securities outstanding immediately prior to such proposed transaction.
41
<PAGE>
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's Securities in an
amount of $1,000 or integral multiples of $1,000, at a purchase price in cash
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
Under certain circumstances, in the event the Net Cash Proceeds
received by the Company from any Asset Sale, which proceeds are not used to
prepay Senior Indebtedness or invested in properties or assets used in the
businesses of the Company or reasonably related thereto, exceeds a specified
amount the Company will be required to apply such proceeds to the repayment of
the Securities and certain indebtedness ranking pari passu to the Securities.
In the case of any redemption or repurchase of Securities in
accordance with the Indenture, interest installments whose Stated Maturity is on
or prior to the Redemption Date will be payable to the Holders of such
Securities of record as of the close of business on the relevant Regular Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the date of redemption.
In the event of redemption or repurchase of this Security in
accordance with the Indenture in part only, a new Security or Securities for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Guarantors and the Holders under the Indenture and
the Securities and the Guarantees at any time by the Company and the Trustee
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company and the
Guarantors with certain provisions of the Indenture and the Securities and the
Guarantees and certain past Defaults under the Indenture and the Securities and
the Guarantees and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer
42
<PAGE>
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, any
Guarantor or any other obligor on the Securities (in the event such Guarantor or
other obligor is obligated to make payments in respect of the Securities), which
is absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, place, and rate, and in the coin or
currency, herein prescribed, subject to the subordination provisions of the
Indenture.
If this Series C Security is in certificated form, then as provided in
the Indenture and subject to certain limitations therein set forth, the transfer
of this Series C Security is registrable on the Security Register of the
Company, upon surrender of this Series C Security for registration of transfer
at the office or agency of the Company maintained for such purpose in The City
of New York or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or its attorney duly authorized in
writing, and thereupon one or more new Series C Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
If this Series C Security is a U.S. Global Security, it is
exchangeable for a Series C Security in certificated form as provided in the
Indenture and in accordance with the rules and procedures of the Trustee and the
Depositary. In addition, certificated securities shall be transferred to all
beneficial holders in exchange for their beneficial interests in the U.S. Global
Security if (x) the Depository notifies the Company that it is unwilling or
unable to continue as depository for the U.S. Global Security and a successor
depository is not appointed by the Company within 90 days or (y) there shall
have occurred and be continuing an Event of Default and the Security Registrar
has received a request from the Depositary. Upon any such issuance, the Trustee
is required to register such certificated Series C Securities in the name of,
and cause the same to be delivered to, such Person or Persons (or the nominee of
any thereof).
The Series C Securities in certificated form are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, the Series B Securities are exchangeable for a
like aggregate principal amount of Securities of a differing authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
43
<PAGE>
Prior to and at the time of due presentment of this Security for
registration of transfer, the Company, any Guarantor, the Trustee and any agent
of the Company, any Guarantor or the Trustee may treat the Person in whose name
this Security is registered as the owner hereof for all purposes, whether or not
this Security is overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
[The Transfer Notice, in the form of Appendix II hereto, will be
attached to the Series B Security.]
Section 204. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
[Series B Securities]
This is one of the 8 3/4% Series B Senior Subordinated Notes due 2003
referred to in the within-mentioned Indenture.
As Trustee, Harris Trust and Savings Bank
By:
-------------------------------------
Authorized Officer
[Series C Securities]
This is one of the 8 3/4% Series C Senior Subordinated Notes due 2003
referred to in the within-mentioned Indenture.
As Trustee, Harris Trust and Savings Bank
By:
-------------------------------------
Authorized Officer
44
<PAGE>
Section 205. Form of Guarantee of Each of the Guarantors.
-------------------------------------------
The form of Guarantee shall be set forth on the Securities
substantially as follows:
GUARANTEES
For value received, each of the undersigned hereby unconditionally
guarantees, jointly and severally, to the holder of this Security the payment of
principal of, premium, if any, and interest on this Security upon which these
Guarantees are endorsed in the amounts and at the time when due and payable
whether by declaration thereof, or otherwise, and interest on the overdue
principal and interest, if any, of this Security, if lawful, and the payment or
performance of all other obligations of the Company under the Indenture or the
Securities, to the holder of this Security and the Trustee, all in accordance
with and subject to the terms and limitations of this Security and Article
Fourteen of the Indenture. These Guarantees will not become effective until the
Trustee duly executes the certificate of authentication on this Security.
The Indebtedness evidenced by these Guarantees are, to the extent and
in the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Guarantor Indebtedness (as
defined in the Indenture), whether Outstanding on the date of the Indenture or
thereafter, and these Guarantees are issued subject to such provisions.
45
<PAGE>
Dated:
BATAVIA WINE CELLARS, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
BISCEGLIA BROTHERS WINE CO.
Attest: By
------------------ -------------------------------
Authorized Officer
CALIFORNIA PRODUCTS COMPANY
Attest: By
------------------ -------------------------------
Authorized Officer
GUILD WINERIES & DISTILLERIES,
INC.
Attest: By
------------------ -------------------------------
Authorized Officer
TENNER BROTHERS, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
WIDMER'S WINE CELLARS, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
46
<PAGE>
BARTON INCORPORATED
Attest: By
------------------ -------------------------------
Authorized Officer
BARTON BRANDS, LTD.
Attest: By
------------------ -------------------------------
Authorized Officer
BARTON BEERS, LTD.
Attest: By
------------------ -------------------------------
Authorized Officer
BARTON BRANDS OF CALIFORNIA,
INC.
Attest: By
------------------ -------------------------------
Authorized Officer
BARTON BRANDS OF GEORGIA, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
BARTON DISTILLERS IMPORT CORP.
Attest: By
------------------ -------------------------------
Authorized Officer
THE VIKING DISTILLERY, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
47
<PAGE>
BARTON FINANCIAL CORPORATION
Attest: By
------------------ -------------------------------
Authorized Officer
STEVENS POINT BEVERAGE CO.
Attest: By
------------------ -------------------------------
Authorized Officer
MONARCH WINE COMPANY,
LIMITED PARTNERSHIP
By: BARTON MANAGEMENT, INC.,
as corporate general
partner
Attest: By
------------------ -------------------------------
Authorized Officer
BARTON MANAGEMENT, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
VINTNERS INTERNATIONAL
COMPANY, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
CANANDAIGUA WEST, INC.
Attest: By
------------------ -------------------------------
Authorized Officer
48
<PAGE>
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $65,000,000 in
principal amount of Series B Securities and $65,000,000 principal amount of
Series C Securities, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 303, 304, 305, 306, 307, 308, 906, 1013, 1016 or 1108.
The Series B Securities shall be known and designated as the "8 3/4%
Series B Senior Subordinated Notes due 2003" of the Company. The Stated
Maturity of the Series B Securities shall be December 15, 2003, and the Series B
Securities shall each bear interest at the rate of 8 3/4% per annum, as such
interest rate may be adjusted as set forth in the Series B Security, from
October 29, 1996 or from the most recent Interest Payment Date to which interest
has been paid, as the case may be, payable on December 15, 1996 and semi-
annually thereafter on June 15 and December 15, in each year, until the
principal thereof is paid or duly provided for. Interest on any overdue
principal, interest (to the extent lawful) or premium, if any, shall be payable
on demand.
The Series C Securities shall be known and designated as the "8 3/4%
Series C Senior Subordinated Notes due 2003" of the Company. The Stated
Maturity of the Series C Securities shall be December 15, 2003, and the Series C
Securities shall each bear interest at the rate of 8 3/4% per annum, as such
interest rate may be adjusted as set forth in the Series C Security, from their
issuance date or from the most recent Interest Payment Date to which interest
has been paid, as the case may be, payable on December 15, 1996 and semi-
annually thereafter on June 15 and December 15, in each year, until the
principal thereof is paid or duly provided for. Interest on any overdue
principal, interest (to the extent lawful) or premium, if any, shall be payable
on demand.
The principal of, premium, if any, and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose; provided, however, that at the option of the Company interest may be
-------- -------
paid by check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Security Register.
For all purposes hereunder, the Series B Securities and the Series C
Securities will be treated as one class and are together referred to as the
"Securities." The Series B Securities rank pari passu in right of payment with
the Series C Securities.
The Securities shall be redeemable as provided in Article Eleven and
in the Securities.
49
<PAGE>
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Four.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
Section 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
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The Securities shall be executed on behalf of the Company by one of
its Chairman of the Board, its President, its Chief Executive Officer, its Chief
Operating Officer, its Chief Financial Officer or one of its Vice Presidents and
attested by an authorized officer.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee with Guarantees endorsed thereon for authentication, together with a
Company Order for the authentication and delivery of such Securities; and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Securities as provided in this Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security or Guarantee endorsed thereon shall be entitled to any
benefit under this Indenture or be valid or obligatory for any purpose unless
there appears on such Security a certificate of authentication substantially in
the form provided for herein duly executed by the Trustee by manual signature of
an authorized officer, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder.
In case the Company or any Guarantor, pursuant to Article Eight, shall
be consolidated, merged with or into any other Person or shall sell, assign,
convey, transfer or lease substantially all of its properties and assets to any
Person, and the successor Person resulting from such consolidation or surviving
such merger, or into which the
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Company or such Guarantor shall have been merged, or the Person which shall have
participated in the sale, assignment, conveyance, transfer or lease as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article Eight, any of the Securities authenticated or delivered
prior to such consolidation, merger, sale, assignment, conveyance, transfer or
lease may, from time to time, at the request of the successor Person, be
exchanged for other Securities executed in the name of the successor Person with
such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Securities surrendered for such exchange and of
like principal amount; and the Trustee, upon Company Request of the successor
Person, shall authenticate and deliver Securities as specified in such request
for the purpose of such exchange. If Securities shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities on behalf of the Trustee. Unless
limited by the terms of such appointment, an authenticating agent may
authenticate Securities 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 any Security Registrar or
Paying Agent to deal with the Company and its Affiliates.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates such Security such Security shall
be valid nevertheless.
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.
After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of the
temporary Securities at the office or agency of the Company designated for such
purpose pursuant to Section 1002, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Securities the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of authorized denominations.
Until so exchanged the temporary Securities shall in all respects be entitled to
the same benefits under this Indenture as definitive Securities.
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Section 305. Registration, Registration of Transfer and Exchange.
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The Company shall direct the Trustee to keep, so long as it is the
Security Registrar, at the Corporate Trust Office of the Trustee, or such other
office as the Trustee may designate, a register (the register maintained in such
office or in any other office or agency designated pursuant to Section 1002
being herein sometimes referred to as the "Security Register") in which, subject
to such reasonable regulations as the Security Registrar may prescribe, the
Company shall provide for the registration of Securities and of transfers of
Securities. The Trustee shall initially be the "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of the same
series of any authorized denomination or denominations, of a like aggregate
principal amount.
Furthermore, any Holder of the U.S. Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial interest
in such Global Security may be effected only through a book-entry system
maintained by the Holder of such Global Security (or its agent), and that
ownership of a beneficial interest in the Security shall be required to be
reflected in a book entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities of the same series which the Holder making the exchange is entitled
to receive; provided that no exchange of Series B Securities for Series C
Securities shall occur until an Exchange Offer Registration Statement shall have
been declared effective by the Commission and that the Series B Securities
exchanged for the Series C Securities shall be cancelled.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange or redemption shall (if so required by the Company or the
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
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No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charges that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 303, 304, 305, 306, 307, 308, 906, 1013, 1016 or
1108 not involving any transfer.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of the Securities selected
for redemption under Section 1104 and ending at the close of business on the day
of such mailing, or (b) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
Securities being redeemed in part.
Every Restricted Security shall be subject to the restrictions on
transfer provided in the legend required to be set forth on the face of each
Restricted Security pursuant to Section 202, and the restrictions set forth in
this Section 305, and the Holder of each Restricted Security, by such Holder's
acceptance thereof (or interest therein), agrees to be bound by such
restrictions on transfer.
The restrictions imposed by this Section 305 upon the transferability
of any particular Restricted Security shall cease and terminate on (a) the later
of three years from their date of issuance or three years after the last date on
which the Company or any Affiliate of the Company was the owner of such
Restricted Security (or any predecessor of such Restricted Security) or (b) (if
earlier) if and when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred
pursuant to Rule 144 or Rule 904 under the Securities Act (or any successor
provision), unless the Holder thereof is an affiliate of the Company within the
meaning of Rule 144 (or such successor provisions). Any Restricted Security as
to which such restrictions on transfer shall have expired in accordance with
their terms or shall have terminated may, upon surrender of such Restricted
Security for exchange to the Security Registrar in accordance with the provision
of this Section 305 (accompanied, in the event that such restrictions on
transfer have terminated pursuant to Rule 144 or Rule 904 (or any successor
provision), by an Opinion of Counsel satisfactory to the Company and the
Trustee, to the effect that the transfer of such Restricted Security has been
made in compliance with Rule 144 or Rule 904 (or any such successor provision)),
be exchanged for a new Security, of like tenor and aggregate principal amount,
which shall not bear the Private Placement Legend. The Company shall inform the
Trustee of the effective date of any Registration Statement registering the
Securities under the Securities Act no later than two Business Days after such
effective date.
Except as provided in the preceding paragraph, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any U.S. Global Security, whether pursuant to this Section,
Section 304, 308, 906 or 1108
53
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or otherwise, shall also be a U.S. Global Security and bear the legend specified
in Section 202.
Section 306. Book-Entry Provisions for U.S. Global Security.
----------------------------------------------
(a) The U.S. Global Security initially shall (i) be registered in the
name of the Depositary for such Global Security or the nominee of such
Depositary, (ii) be deposited with, or on behalf of, the Depositary or with the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Section 202.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any U.S. Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the U.S. Global Security, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such U.S. Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or shall
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Security.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in the U.S. Global Security may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
307. Beneficial owners may obtain U.S. Physical Securities in exchange for
their beneficial interests in the U.S. Global Security upon request in
accordance with the Depositary's and the Security Registrar's procedures. In
connection with the execution, authentication and delivery of such Physical
Securities, the Security Registrar shall reflect on its books and records a
decrease in the principal amount of the relevant Global Security equal to the
principal amount of such Physical Securities and the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Securities
having an equal aggregate principal amount. In addition, U.S. Physical
Securities and Offshore Physical Securities shall be issued to all beneficial
owners in exchange for their beneficial interests in the U.S. Global Security or
the Offshore Global Security, respectively if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the U.S.
Global Security or the Offshore Global Security and a successor Depositary is
not appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Security Registrar has received a
request from the Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security pursuant to subsection (b) of this Section
to beneficial owners who are required to hold U.S. Physical Securities, the
Security Registrar shall reflect on
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its books and records the date and a decrease in the principal amount of the
U.S. Global Security in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Security to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more U.S. Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security or Offshore Global Security to beneficial owners pursuant to subsection
(b) of this Section, the U.S. Global Security or Offshore Global Security, as
the case may be, shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial owner identified by the Depositary in exchange for its
beneficial interest in the U.S. Global Security or Offshore Global Security, as
the case may be, an equal aggregate principal amount of U.S. Physical Securities
or Offshore Physical Security, as the case may be, of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an interest
in U.S. Global Securities pursuant to subsection (c) or subsection (d) of this
Section shall, except as otherwise provided by paragraph (a)(i)(x) and paragraph
(f) of Section 307, bear the Private Placement Legend.
(f) The registered holder of the U.S. Global Security may grant
proxies and otherwise authorize any person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
Section 307. Special Transfer Provisions.
---------------------------
Unless and until (i) an Initial Security is sold under an effective
Registration Statement, or (ii) an Initial Security is exchanged for a Series C
Security in connection with the Exchange Offer, in each case pursuant to the
Registration Rights Agreement, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
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following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) which is not a QIB (excluding Non-U.S. Persons):
(i) The Security Registrar shall register the transfer of any
Initial Security whether or not such Initial Security bears the
Private Placement Legend, if (x) the requested transfer is at least
three years after the original issue date of the Initial Securities or
(y) the proposed transferee has delivered to the Security Registrar a
certificate substantially in the form of Exhibit C hereto.
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(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Security Registrar of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with the Depositary's and
the Security Registrar's procedures therefor, the Security Registrar
shall reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Security in an amount equal to the
principal amount of the beneficial interest in the U.S. Global
Security transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more U.S. Physical Certificates
of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of an Initial Security to a
QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Physical Securities or Permanent
Offshore Physical Securities, the Security Registrar shall register
the transfer if such transfer is being made by a proposed transferor
who has checked the box provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Security
Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to the transferee who has signed the
certification provided for on the form of Initial Security stating, or
has otherwise advised the Company and the Security Registrar in
writing, that it is purchasing the Initial Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it, or the person on whose behalf it is
acting with respect to any such account, is a QIB within the meaning
of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Initial Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Physical Securities or Permanent
Offshore Physical Securities, upon receipt by the Security Registrar
of instructions given in accordance with the Depositary's and the
Security Registrar's procedures therefor, the Security Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the U.S. Global Security in an amount equal to the
principal amount of the U.S. Physical Securities, Temporary
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Offshore Physical Securities or Permanent Offshore Physical
Securities, as the case may be, to be transferred, and the Trustee
shall cancel the Physical Security so transferred.
(c) Transfers by Non-U.S. Persons on or Prior to December 8, 1996.
-------------------------------------------------------------
The following provisions shall apply with respect to registration of any
proposed transfer of an Initial Security by a Non-U.S. Person on or prior to
December 8, 1996:
(i) The Security Registrar shall register the transfer of any
Initial Security (x) if the proposed transferee is a Non-U.S. Person
and the proposed transferor has delivered to the Security Registrar a
certificate substantially in the form of Exhibit D hereto or (y) if
the proposed transferee is a QIB and the proposed transferor has
checked the box provided for on the form of Initial Security stating,
or has otherwise advised the Company and the Security Registrar in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Initial Security stating, or has otherwise advised
the Company and the Security Registrar in writing, that it is
purchasing Initial Security for its own account or an account with
respect to which it exercises sole investment discretion and that it,
or the person on whose behalf it is acting with respect to any such
account, is a QIB within the meaning of Rule 144A, and is aware that
the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A. Unless clause (ii) below is
applicable, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Physical
Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt
by the Security Registrar of instructions given in accordance with the
Depositary's and the Security Registrar's procedures therefor, the
Security Registrar shall reflect on its books and records the date and
an increase in the principal amount at maturity of the U.S. Global
Security in an amount equal to the principal amount of the Temporary
Offshore Physical Security to be transferred, and the Trustee shall
cancel the Temporary Offshore Physical Security if any so transferred.
(d) Transfers by Non-U.S. Persons on or After December 9, 1996. The
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following provisions shall apply with respect to any transfer of an Initial
Security by a Non-U.S. Person on or after December 9, 1996:
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(i)(x) If the Initial Security to be transferred is a Permanent
Offshore Physical Security, the Security Registrar shall register such
transfer, (y) if the Initial Security to be transferred is a Temporary
Offshore Physical Security, upon receipt of a certificate
substantially in the form of Exhibit B from the proposed transferor,
the Security Registrar shall register such transfer and (z) in the
case of either clause (x) or (y), unless clause (ii) below is
applicable, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore Physical
Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt
by the Security Registrar of instructions given in accordance with the
Depositary's and the Security Registrar's procedures therefor, the
Security Registrar shall reflect on its books and records the date and
an increase in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the Temporary Offshore
Physical Security or Permanent Offshore Physical Security to be
transferred, and the Trustee shall cancel the Physical Security so
transferred.
(e) Transfers to Non-U.S. Persons at Any Time. The following
-----------------------------------------
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) Prior to December 9, 1996, the Security Registrar shall
register any proposed transfer of an Initial Security to a Non-U.S.
Person upon receipt of a certificate substantially in the form of
Exhibit D hereto from the proposed transferor and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more
Temporary Offshore Physical Securities of like tenor and amount.
(ii) On and after December 9, 1996, the Security Registrar shall
register any proposed transfer to any Non-U.S. Person (w) if the
Initial Security to be transferred is a Permanent Offshore Physical
Security, (x) if the Initial Security to be transferred is a Temporary
Offshore Physical Security, upon receipt of a certificate
substantially in the form of Exhibit D from the proposed transferor,
(y) if the Initial Security to be transferred is a U.S. Physical
Security or an interest in the U.S. Global Security, upon receipt of a
certificate substantially in the form of Exhibit D from the proposed
transferor and (z) in the case of either clause (w), (x) or (y), the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more Permanent Offshore Physical Securities of like tenor and
amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Security
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Registrar of (x) the document, if any, required by paragraph (i), and
(y) instructions in accordance with the Depositary's and the Security
Registrar's procedures therefor, the Security Registrar shall reflect
on its books and records the date and a decrease in the principal
amount of the U.S. Global Security in an amount equal to the principal
amount of the beneficial interest in the U.S. Global Security to be
transferred and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore Physical
Securities of like tenor and amount.
(f) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Securities not bearing the Private Placement Legend,
the Security Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the registration of transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Security Registrar shall
deliver only Securities that bear the Private Placement Legend unless either (i)
the circumstances contemplated by paragraphs (a)(i)(x), (d)(i) or (e)(ii) of
this Section 307 exist or (ii) there is delivered to the Security Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(g) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 306 or this Section
307. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Security Registrar.
Section 308. Mutilated, Destroyed, Lost and Stolen Securities.
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If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, each Guarantor and the Trustee, such security or indemnity, in each
case, as may be required by them to save each of them harmless, then, in the
absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon a Company Request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a replacement Security of like tenor and principal amount,
bearing a number not contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charge that may
be imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company and the Guarantors, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 309. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on the Stated Maturity of such interest shall be paid to the
Person in whose name the Security (or any Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest payment
date.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on the Stated Maturity of such interest and interest
on such defaulted interest at the then applicable interest rate borne by the
Securities, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or any relevant Predecessor
Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee
in writing of the amount of Defaulted Interest proposed to be paid on
each Security and the date (not less than 30 days after such notice)
of the proposed payment (the "Special Payment Date"), and at the same
time the Company shall deposit
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with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior
to the Special Payment Date, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Subsection provided. Thereupon the Trustee shall
fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior
to the Special Payment Date and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company in writing of such Special
Record Date. In the name and at the expense of the Company, the
Trustee shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date and Special Payment Date therefor
to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons
in whose names the Securities are registered on such Special Record
Date and shall no longer be payable pursuant to the following
Subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after written
notice given by the Company to the Trustee of the proposed payment
pursuant to this Subsection, such payment shall be deemed practicable
by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 310. CUSIP Numbers.
-------------
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Company, or the Trustee on behalf of the Company,
shall use CUSIP numbers in notices of redemption or exchange as a convenience to
Holders; provided, however, that any such notice shall state that no
-------- -------
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or exchange and
that reliance may be placed only on the other identification numbers printed on
the Securities; and provided further, however, that failure to use CUSIP numbers
-------- ------- -------
in any notice of redemption or exchange shall not affect the validity or
sufficiency of such notice.
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Section 311. Persons Deemed Owners.
---------------------
The Company, any Guarantor, the Trustee and any agent of the Company,
any Guarantor or the Trustee may treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 307) interest on such
Security and for all other purposes whatsoever, whether or not such Security is
overdue, and neither the Company, any Guarantor, the Trustee nor any agent of
the Company, any Guarantor or the Trustee shall be affected by notice to the
contrary.
Section 312. Cancellation.
------------
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already cancelled, shall be promptly cancelled by it. The Company and any
Guarantor may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company or such
Guarantor may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be destroyed and certification of their
destruction delivered to the Company unless by a Company Order the Company shall
direct that the cancelled Securities be returned to it. The Trustee shall
provide the Company a list of all Securities that have been cancelled from time
to time as requested by the Company.
Section 313. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
- ----------
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 402 or Section 403 be
applied to all of the Outstanding Securities (the "Defeased Securities"), upon
compliance with the conditions set forth below in this Article Four.
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Section 402. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 401 of the option applicable
to this Section 402, the Company, each of the Guarantors and any other obligor
upon the Securities, if any, shall be deemed to have been discharged from its
obligations with respect to the Defeased Securities on the date the conditions
set forth in Section 404 below are satisfied (hereinafter, "defeasance"). For
this purpose, such defeasance means that the Company, each Guarantor and any
other obligor upon the Securities shall be deemed to have paid and discharged
the entire Indebtedness represented by the Defeased Securities, which shall
thereafter be deemed to be "Outstanding" only for the purposes of Section 405
and the other Sections of this Indenture referred to in (a) and (b) below, and
to have satisfied all its other obligations under such Securities and this
Indenture insofar as such Securities are concerned (and the Trustee, at the
expense of the Company, and, upon Company Request, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Securities to receive, solely from the trust fund described
in Section 404 and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on such Securities when such
payments are due, (b) the Company's obligations with respect to such Defeased
Securities under Sections 304, 305, 308, 1002 and 1003, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder, including, without
limitation, the Trustee's rights under Section 606, and (d) the defeasance
provisions under this Article Four. Subject to compliance with this Article
Four, the Company may exercise its option under this Section 402 notwithstanding
the prior exercise of its option under Section 403 with respect to the
Securities.
Section 403. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 401 of the option applicable
to this Section 403, the Company and each Guarantor shall be released from its
obligations under any covenant or provision contained or referred to in Sections
1005 through 1019, inclusive, and the provisions of Article Twelve and Sections
1416 through 1429 shall not apply, with respect to the Defeased Securities on
and after the date the conditions set forth in Section 404 below are satisfied
(hereinafter, "covenant defeasance"), and the Defeased Securities shall
thereafter be deemed to be 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 and the provisions of Article Twelve
and Sections 1416 through 1429, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Defeased Securities, the Company and each
Guarantor may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or Article, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
Section or Article or by reason of any reference in any such
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Section or Article 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 501(c), (d) or (g), but, except as specified above, the remainder
of this Indenture and such Defeased Securities shall be unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
402 or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 608 who shall agree to comply with the provisions of this Article Four
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, (a) United States dollars in
an amount, or (b) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with their
terms and with no further reinvestment will provide, not later than one day
before the due date of any payment, money in an amount, or (c) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment banking
firm expressed in a written certification thereof delivered to the Trustee, to
pay and discharge and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge the principal of, premium, if any, and interest on
the Defeased Securities on the Stated Maturity of such principal or installment
of principal or interest (or on any date after December 15, 1998 (such date
being referred to as the "Defeasance Redemption Date") if when exercising under
Section 401 either its option applicable to Section 402 or its option applicable
to Section 403, the Company shall have delivered to the Trustee an irrevocable
notice to redeem all of the Outstanding Securities on the Defeasance Redemption
Date); provided that the Trustee shall have been irrevocably instructed to apply
--------
such United States dollars or the proceeds of such U.S. Government Obligations
to said payments with respect to the Securities; and provided, further, that the
-------- -------
United States dollars or U.S. Government Obligations deposited shall not be
subject to the rights of the holders of Senior Indebtedness and Senior Guarantor
Indebtedness pursuant to the provisions of Article Twelve and Article Fourteen.
For this purpose, "U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt, provided that (except as
--------
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment
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of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
(2) In the case of an election under Section 402, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States stating 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
Independent Counsel in the United States shall confirm that, the Holders of the
Outstanding Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such 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 defeasance had not occurred.
(3) In the case of an election under Section 403, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States to the effect that the Holders of the Outstanding Securities 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.
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as subsections 501(h) and (i)
are concerned, at any time during the period ending on the 91st day after the
date of deposit.
(5) Such defeasance or covenant defeasance shall not cause the Trustee
for the Securities to have a conflicting interest with respect to any securities
of the Company or any Guarantor.
(6) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any Guarantor is
a party or by which it is bound.
(7) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel to the effect that (A) the trust funds will not be subject
to any rights of holders of Senior Indebtedness or Senior Guarantor
Indebtedness, including, without limitation, those arising under this Indenture
and (B) after the 91st day following the
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deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally.
(8) 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 of the Securities or any Guarantee over the other
creditors of the Company or any Guarantor with the intent of defeating,
hindering, delaying or defrauding creditors of the Company, any Guarantor or
others.
(9) No event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on the
Securities on the date of such deposit or at any time ending on the 91st day
after the date of such deposit.
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 402 or
the covenant defeasance under Section 403 (as the case may be) have been
complied with as contemplated by this Section 404.
Opinions of Counsel required to be delivered under this Section may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be
-----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
- ---------------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee--collectively
for purposes of this Section 405, the "Trustee") pursuant to Section 404 in
respect of the Defeased Securities shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities 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 U.S. Government Obligations
deposited pursuant to Section 404 or the principal and interest received in
respect thereof other than
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any such tax, fee or other charge which by law is for the account of the Holders
of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any United States dollars or U.S. Government Obligations held by it as
provided in Section 404 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect defeasance or covenant defeasance.
Section 406. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403, 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 and each Guarantor's obligations under this Indenture and the
Securities, and the provisions of Articles Twelve and Fourteen hereof, shall be
revived and reinstated as though no deposit had occurred pursuant to Section 402
or 403, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such United States dollars or U.S. Government Obligations
in accordance with Section 402 or 403, as the case may be; provided, however,
-------- -------
that if the Company makes any payment to the Trustee or Paying Agent of
principal, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Trustee or Paying Agent shall promptly pay
any such amount to the Holders of the Securities and the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) there shall be a default in the payment of any interest on any
Security when it becomes due and payable, and such default shall continue for a
period of 30 days;
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(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any Security at its Maturity (upon acceleration, optional
or mandatory redemption, required repurchase or otherwise);
(c) (i) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or any Guarantor under this Indenture
(other than a default in the performance, or breach, of a covenant or agreement
which is specifically dealt with in clauses (a) or (b) or in clauses (ii), (iii)
and (iv) of this clause (c)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail, (x) to
the Company by the Trustee or (y) to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the Outstanding Securities,
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; (ii) there shall be a
default in the performance or breach of the provisions of Article Eight; (iii)
the Company shall have failed to make or consummate an Offer in accordance with
the provisions of Section 1013; or (iv) the Company shall have failed to make or
consummate a Change of Control Offer in accordance with the provisions of
Section 1016;
(d) one or more defaults shall have occurred under any agreements,
indentures or instruments under which the Company, any Guarantor or any
Subsidiary then has outstanding Indebtedness in excess of $10,000,000 in the
aggregate and, if not already matured at its final maturity in accordance with
its terms, such Indebtedness shall have been accelerated;
(e) any Guarantee shall for any reason cease to be, or be asserted in
writing by any Guarantor or the Company not to be, in full force and effect and
enforceable in accordance with its terms, except to the extent contemplated by
this Indenture and any such Guarantee;
(f) one or more judgments, orders or decrees for the payment of money
in excess of $5,000,000 either individually or in the aggregate (net of amounts
covered by insurance, bond, surety or similar instrument), shall be entered
against the Company, any Guarantor, any Subsidiary or any of their respective
properties and shall not be discharged and either (a) any creditor shall have
commenced an enforcement proceeding upon such judgment, order or decree or (b)
there shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of an appeal or otherwise,
shall not be in effect;
(g) any holder or holders of at least $10,000,000 in aggregate
principal amount of Indebtedness of the Company, any Guarantor or any Subsidiary
after a default under such Indebtedness shall notify the Trustee of the intended
sale or disposition of any assets of the Company, any Guarantor or any
Subsidiary that have been pledged to or for the benefit of such holder or
holders to secure such Indebtedness or shall commence proceedings, or take any
action (including by way of set-off), to retain in satisfaction of
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such Indebtedness or to collect on, seize, dispose of or apply in satisfaction
of Indebtedness, assets of the Company, any Guarantor or any Subsidiary
(including funds on deposit or held pursuant to lock-box and other similar
arrangements);
(h) there shall have been the entry by a court of competent
jurisdiction of (i) a decree or order for relief in respect of the Company, any
Guarantor or any Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or (ii) a decree or order adjudging the Company, any
Guarantor or any Subsidiary bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company, any
Guarantor or any Subsidiary under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company, any Guarantor or any Subsidiary or
of any substantial part of their respective properties, or ordering the winding
up or liquidation of their affairs, and any such decree or order for relief
shall continue to be in effect, or any such other decree or order shall be
unstayed and in effect, for a period of 60 consecutive days; or
(i) (i) the Company, any Guarantor or any Subsidiary commences a
voluntary case or proceeding under any applicable Bankruptcy Law or any other
case or proceeding to be adjudicated bankrupt or insolvent, (ii) the Company,
any Guarantor or any Subsidiary consents to the entry of a decree or order for
relief in respect of the Company, any Guarantor or such Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
(iii) the Company, any Guarantor or any Subsidiary files a petition or answer or
consent seeking reorganization or relief under any applicable federal or state
law, (iv) the Company, any Guarantor or any Subsidiary (1) consents to the
filing of such petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company, any Guarantor or such Subsidiary or of any substantial
part of their respective properties, (2) makes an assignment for the benefit of
creditors or (3) admits in writing its inability to pay its debts generally as
they become due, or (v) the Company, any Guarantor or any Subsidiary takes any
corporate action in furtherance of any such actions in this paragraph (i).
The Company shall deliver to the Trustee within five days after the
occurrence thereof, written notice, in the form of an Officers' Certificate, of
any Default, its status and what action the Company is taking or proposes to
take with respect thereto.
Section 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Sections 501(h) and (i)) shall occur and be continuing, the Trustee or the
Holders of not less than 25% in aggregate principal amount of the
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Securities Outstanding may, and the Trustee at the request of the Holders of not
less than 25% in aggregate principal amount of the Securities Outstanding shall,
declare all unpaid principal of, premium, if any, and accrued interest on all
the Securities to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by the Holders of the Securities); provided
--------
that so long as the Credit Agreement is in effect, such declaration shall not
become effective until the earlier of (a) five Business Days after receipt of
such notice of acceleration from the Holders or the Trustee by the agent under
the Credit Agreement or (b) acceleration of the Indebtedness under the Credit
Agreement. Thereupon such principal shall become immediately due and payable,
and the Trustee may, at its discretion, proceed to protect and enforce the
rights of the holders of Securities by appropriate judicial proceeding. If an
Event of Default specified in clause (h) or (i) of Section 501 occurs relating
to the Company, or any Subsidiary and is continuing, then all the Securities
shall ipso facto become and be immediately due and payable, in an amount equal
---- -----
to the principal amount of the Securities, together with accrued and unpaid
interest, if any, to the date the Securities become due and payable, without any
declaration or other act on the part of the Trustee or any Holder. The Trustee
or, if notice of acceleration is given by the Holders, the Holders shall give
notice to the agent under the Credit Agreement of any such acceleration.
At any time after such declaration of acceleration has been made but
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Securities Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all sums paid or advanced by the Trustee under Section 606
and the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel,
(ii) all overdue interest on all Securities, and
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
(b) all Events of Default, other than the non-payment of principal of
the Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513; and
(c) the rescission will not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
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Section 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company and each Guarantor covenant that if
(a) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues
for a period of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any Security at the Stated Maturity thereof,
the Company and each such Guarantor will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of such Securities, subject to Articles Twelve
and Fourteen, the whole amount then due and payable on such Securities for
principal and premium, if any, and interest, with interest upon the overdue
principal and premium, if any, and, to the extent that payment of such interest
shall be legally enforceable, upon overdue installments of interest, at the rate
borne by the Securities; and, in addition thereto, 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.
If the Company or any Guarantor, as the case may be, fails to pay such
amounts forthwith upon such demand, the Trustee, in its own name and as trustee
of an express trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Company or any Guarantor or
any other obligor upon the Securities and collect the moneys adjudged or decreed
to be payable in the manner provided by law out of the property of the Company
or any Guarantor or any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture or the Guarantees by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including, seeking recourse against any Guarantor pursuant
to the terms of any Guarantee, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein or therein, or to enforce any other proper remedy, including,
without limitation, seeking recourse against any Guarantor pursuant to the terms
of a Guarantee, or to enforce any other proper remedy, subject however to
Section 512.
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Section 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, including each
Guarantor, upon the Securities or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of principal, and
premium, if any, and interest owing and unpaid in respect of the Securities and
to file such 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 of the Holders allowed in such judicial proceeding, and
(b) subject to Articles Twelve and Fourteen, to collect and receive
any moneys or other property payable or deliverable on any such claims and to
distribute the same;
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 the
Trustee any amount due 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 606.
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 Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and may be a member of the creditors'
committee.
Section 505. Trustee May Enforce Claims without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture, the Securities
or the Guarantees may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name and as trustee
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of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders
of the Securities in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article or
otherwise on behalf of the Holders or the Trustee pursuant to this Article or
through any proceeding or any arrangement or restructuring in anticipation or in
lieu of any proceeding contemplated by this Article shall be applied, subject to
applicable law, in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: Subject to Articles Twelve and Fourteen, to the payment of
the amounts then due and unpaid upon the Securities for principal, premium, if
any, and interest, in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal,
premium, if any, and interest; and
THIRD: Subject to Articles Twelve and Fourteen, the balance, if any,
to the Person or Persons entitled thereto, including the Company, provided that
all sums due and owing to the Holders and the Trustee have been paid in full as
required by this Indenture.
Section 507. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and liabilities to be
incurred in compliance with such request;
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(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Guarantee to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner provided in this Indenture or any Guarantee and for the equal and ratable
benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision in this Indenture, but subject to
Articles Twelve and Fourteen, the Holder of any Security shall have the right
based on the terms stated herein, which is absolute and unconditional, to
receive payment of the principal of, premium, if any, and (subject to Section
307) interest on such Security on the respective Stated Maturities expressed in
such Security (or, in the case of redemption or repurchase, on the Redemption
Date or the repurchase date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the consent of such
Holder, subject to Articles Twelve and Fourteen.
Section 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or the Guarantees and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case the
Company, each of the Guarantors, any other obligor on the Securities, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative.
------------------------------
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise,
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shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 512. Control by Holders.
------------------
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred on the Trustee, provided that
--------
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or any Guarantee, expose the Trustee to personal liability,
or be unduly prejudicial to Holders not joining therein; provided, however, that
(subject to Section 602) the Trustee shall have no duty to ascertain whether or
not such actions or forbearances are unduly prejudicial to such Holders; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past Default hereunder and its consequences, except a Default
(a) in the payment of the principal of, premium, if any, or interest
on any Security; or
(b) in respect of a covenant or a provision hereof which under Article
Nine cannot be modified or amended without the consent of a higher percentage of
the principal amount of the Outstanding Securities affected.
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.
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Section 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, 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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
Section 515. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the principal of, premium, if any, or interest
on the Securities contemplated herein or in the Securities or which may affect
the covenants or the performance of this Indenture; and each of the Company and
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 will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
------------------
Within 30 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
-------- -------
the case of a Default in the payment of the principal of, premium, if any, or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as a trust committee
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of Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders.
Section 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Trust Indenture Act Sections 315(a)
through 315(d):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of Indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) before the Trustee acts or refrains from acting, the Trustee may
consult with counsel and any written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon in accordance with such advice or Opinion of Counsel;
(d) 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 pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred therein or thereby
in compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document
unless requested in writing to do so by the Holders of not less than a majority
in aggregate principal amount of the Securities then Outstanding; provided that,
--------
if the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable
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expenses of every such investigation shall be paid by the Company or, if paid by
the Trustee or any predecessor Trustee, shall be repaid by the Company upon
demand; provided, further, the Trustee in its discretion may make such further
inquiry or investigation into such facts or matters as it may deem fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
(g) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(h) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(i) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers;
(j) the Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder; and
(k) except for (i) a default under Section 501(a) or (b) hereof, or
(ii) any other event of which the Trustee has "actual knowledge" and which
event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any default or Event of Default unless specifically
notified in writing of such event by the Company or the Holders of not less than
25% in aggregate principal amount of the Securities then outstanding; as used
herein, the term "actual knowledge" means the actual fact or statement of
knowing, without any duty to make any investigation with regard thereto.
Section 603. Trustee Not Responsible for Recitals, Dispositions of
-----------------------------------------------------
Securities or Application of Proceeds Thereof.
- ---------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made by
it in a Statement of Eligibility and Qualification on Form T-1 supplied to the
Company are true and accurate subject to the qualifications set forth
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therein. The Trustee shall not be accountable for the use or application by the
Company of Securities or the proceeds thereof.
Section 604. Trustee and Agents May Hold Securities; Collections;
----------------------------------------------------
etc.
The Trustee, any Paying Agent, Security Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 605. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided, in Temporary Cash
Investments in accordance with the directions of the Company.
Section 606. Compensation and Indemnification of Trustee and Its
---------------------------------------------------
Prior Claim.
- -----------
The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation for all
services rendered by it hereunder (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust) and the
Company covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all reasonable expenses, disbursements
and advances incurred (including the costs of collection) or made by or on
behalf of the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all agents and other persons not regularly in its employ) except
any such expense, disbursement or advance as may arise from its negligence or
bad faith. The Company also covenants and agrees to indemnify the Trustee and
each predecessor Trustee for, and to hold it harmless against, any loss,
liability, tax, assessment or other governmental charge (other than taxes
applicable to the Trustee's compensation hereunder) or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and its
duties hereunder, including enforcement of this Section 606 and also including
any liability which the Trustee may incur as a result of failure to withhold,
pay or report any tax, assessment or other governmental charge, and
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the costs and expenses of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The obligations of the Company under this Section to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses, disbursements
and advances shall constitute an additional obligation hereunder and shall
survive the satisfaction and discharge of this Indenture. When the Trustee
incurs expenses or renders services in connection with an Event of Default
specified in Article Five hereof, the expenses (including reasonable fees and
expenses of its counsel) and the compensation for the services in connection
therewith are intended to constitute expense of administration under any
applicable bankruptcy law.
As security for the performance of the obligations of the Company
under this Section, the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, excluding any
property or funds which are held in trust for the holders of Senior Indebtedness
and except funds held in trust for the payment of principal of, premium, if any,
or interest on particular Securities. The obligations of the Company under this
Section shall not be subordinated to the payment of Senior Indebtedness pursuant
to Article Twelve.
Section 607. Conflicting Interests.
---------------------
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
Section 608. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under Trust Indenture Act Section 310(a)(1) and which
shall have a combined capital and surplus of at least $100,000,000, to the
extent there is an institution eligible and willing to serve. If the Trustee
does not have an office in The City of New York, the Trustee may appoint an
agent in The City of New York reasonably acceptable to the Company to conduct
any activities which the Trustee may be required under this Indenture to conduct
in The City of New York. If the Trustee does not have an office in The City of
New York or has not appointed an agent in The City of New York, the Trustee
shall be a participant in The Depository Trust Company and FAS distribution
systems. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of federal, state, territorial or
District of Columbia supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
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Section 609. Resignation and Removal; Appointment of Successor
-------------------------------------------------
Trustee.
- -------
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 610.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice thereof to the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
Directors of the Company, a copy of which shall be delivered to the resigning
Trustee and a copy to the successor trustee. If an instrument of acceptance by
a successor trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may, or
any Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.
(c) The Trustee may be removed at any time by an Act of the Holders of
not less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security
for at least six months, or
(2) the Trustee shall cease to be eligible under Section 608 and
shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any Security who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if
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any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee. Such successor trustee so
appointed shall forthwith upon its acceptance of such appointment become the
successor trustee and supersede the successor trustee appointed by the Company.
If no successor trustee shall have been so appointed by the Company or the
Holders of the Securities and accepted appointment in the manner hereinafter
provided, the Holder of any Security who has been a bona fide Holder for at
least six months may, subject to Section 514, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor trustee and the address of its
Corporate Trust Office and any agent hereunder.
Section 610. Acceptance of Appointment by Successor.
--------------------------------------
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee as if originally named as Trustee hereunder;
but, nevertheless, on the written request of the Company or the successor
trustee, upon payment of its charges then unpaid, such retiring Trustee shall,
pay over to the successor trustee all moneys at the time held by it hereunder
and shall execute and deliver an instrument transferring to such successor
trustee all such rights, powers, duties and obligations. Upon request of any
such successor trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain
a prior lien upon all property or funds held or collected by such Trustee or
such successor trustee to secure any amounts then due such Trustee pursuant to
the provisions of Section 606.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 610 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act
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Section 310(a) and this Article Sixth and shall have a combined capital and
surplus of at least $100,000,000 and have a Corporate Trust Office or an agent
selected in accordance with Section 608.
Upon acceptance of appointment by any successor trustee as provided in
this Section 610, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
609. If the Company fails to give such notice within 10 days after acceptance
of appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
Section 611. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
- --------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under Trust Indenture Act Section
310(a) and this Article Sixth and shall have a combined capital and surplus of
at least $100,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 608 without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided that the right to adopt
--------
the certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, amalgamation, conversion or consolidation.
Section 612. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such
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other obligor). A Trustee who has resigned or been removed shall be subject to
the Trust Indenture Act Section 311(a) to the extent indicated therein.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders.
- -------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the names
and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
provided, however, that if and so long as the Trustee shall be the Security
- -------- -------
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee or any
agent of either of them shall be held accountable by reason of the disclosure of
any information as to the names and addresses of the Holders in accordance with
Trust Indenture Act Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Trust Indenture
Act Section 312.
Section 703. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Securities, the Trustee shall transmit by mail to
all Holders, as their names and addresses appear in the Security Register, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15 in accordance with and to the extent required by Trust Indenture Act
Section 313(a).
Section 704. Reports by Company and Guarantors.
---------------------------------
The Company, and any Guarantor shall:
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(a) file with the Trustee, within 30 days after the Company or any
Guarantor, as the case may be, is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company or any
Guarantor may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company, or any Guarantor, as the
case may be, is not required to file information, documents or reports pursuant
to either of said Sections, then it shall file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Company or any Guarantor, as the case may be, with the conditions and covenants
of this Indenture as may be required from time to time by such rules and
regulations; and
(c) transmit or cause to be transmitted by mail to all Holders, as
their names and addresses appear in the Security Register, within 30 days after
the filing thereof with the Trustee, in the manner and to the extent provided in
Trust Indenture Act Section 313(c), such summaries of any information, documents
and reports required to be filed by the Company or any Guarantor, as the case
may be, pursuant to Subsections (a) and (b) of this Section as may be required
by rules and regulations prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company or Any Guarantor May Consolidate, etc., Only on
-------------------------------------------------------
Certain Terms.
- -------------
(a) The Company shall not, in a single transaction or through a series
of related transactions, consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to any Person or
group of affiliated Persons, or permit any of its Subsidiaries to enter into any
such transaction or transactions if such transaction or transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
disposal of all or substantially all of the properties and assets of the Company
and
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its Subsidiaries on a Consolidated basis to any other Person or group of
affiliated Persons, unless at the time and after giving effect thereto:
(i) either (a) the Company shall be the continuing corporation, or
(b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or
disposition of all or substantially all of the properties and assets
of the Company and its Subsidiaries on a Consolidated basis (the
"Surviving Entity") shall be a corporation duly organized and validly
existing under the laws of the United States of America, any state
thereof or the District of Columbia and such Person assumes, by a
supplemental indenture in a form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Securities and
this Indenture, and this Indenture shall remain in full force and
effect;
(ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction on a pro
---
forma basis, the Consolidated Net Worth of the Company (or the
-----
Surviving Entity if the Company is not the continuing obligor under
this Indenture) is equal to or greater than the Consolidated Net Worth
of the Company immediately prior to such transaction;
(iv) immediately before and immediately after giving effect to such
transaction on a pro forma basis (on the assumption that the
--- -----
transaction occurred on the first day of the four-quarter period
immediately prior to the consummation of such transaction with the
appropriate adjustments with respect to the transaction being included
in such pro forma calculation), the Company (or the Surviving Entity
--- -----
if the Company is not the continuing obligor under this Indenture)
could incur $1.00 of additional Indebtedness under Section 1008 (other
than Permitted Indebtedness);
(v) each Guarantor, if any, unless it is the other party to the
transactions described above, shall have by supplemental indenture
confirmed that its Guarantee shall apply to such Person's obligations
under this Indenture and the Securities;
(vi) if any of the property or assets of the Company or any of its
Subsidiaries would thereupon become subject to any Lien, the
provisions of Section 1012 are complied with; and
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(vii) the Company or the Surviving Entity shall have delivered, or
caused to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an Officers' Certificate and
an Opinion of Counsel, each to the effect that such consolidation,
merger, transfer, sale, assignment, conveyance, lease or other
transaction and the supplemental indenture in respect thereto comply
with this Indenture and that all conditions precedent herein provided
for relating to such transaction have been complied with.
(b) Each Guarantor shall not, and the Company will not permit a
Guarantor to, in a single transaction or through a series of related
transactions merge or consolidate with or into any other corporation (other than
the Company or any other Guarantor) or other entity, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets on a Consolidated basis to any entity (other than the
Company or any other Guarantor) unless at the time and after giving effect
thereto:
(i) either (1) such Guarantor shall be the continuing corporation or
partnership or (2) the entity (if other than such Guarantor) formed by
such consolidation or into which such Guarantor is merged or the
entity which acquires by sale, assignment, conveyance, transfer, lease
or disposition the properties and assets of such Guarantor shall be a
corporation duly organized and validly existing under the laws of the
United States, any state thereof or the District of Columbia and shall
expressly assume by an indenture supplemental hereto, executed and
delivered to the Trustee, in a form reasonably satisfactory to the
Trustee, all the obligations of such Guarantor under its Guarantee and
this Indenture;
(ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and
(iii) such Guarantor shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation,
merger, sale, assignment, conveyance, transfer, lease or disposition
and such supplemental indenture comply with this Indenture, and
thereafter all obligations of the predecessor shall terminate.
The provisions of this Section 801(b) shall not apply to any transaction
(including any Asset Sale made in accordance with Section 1013) with respect to
any Guarantor if the Guarantee of such Guarantor is released in connection with
such transaction in accordance with Section 1014(c) and Section 1414.
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Section 802. Successor Substituted.
---------------------
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Guarantor in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company or such
Guarantor, as the case may be, is merged or the successor Person to which such
sale, assignment, conveyance, transfer, lease or disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor, as the case may be, under this Indenture in the
Securities and/or the Guarantees, as the case may be, with the same effect as if
such successor had been named as the Company or such Guarantor, as the case may
be, herein in the Securities and/or in the Guarantees, as the case may be. When
a successor assumes all the obligations of its predecessor under this Indenture,
the Securities or a Guarantee, as the case may be, the predecessor shall be
released from those obligations; provided that in the case of a transfer by
--------
lease, the predecessor shall not be released from the payment of principal and
interest on the Securities or a Guarantee, as the case may be.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent
------------------------------------------------------
of Holders.
- ----------
Without the consent of any Holders, the Company and the Guarantors, if
any, when authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto or
agreements or other instruments with respect to any Guarantee, in form and
substance satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company, any
Guarantor or any other obligor upon the Securities, and the assumption by any
such successor of the covenants of the Company or such Guarantor or obligor
herein and in the Securities and in any Guarantee;
(b) to add to the covenants of the Company, any Guarantor or any other
obligor upon the Securities for the benefit of the Holders, or to surrender any
right or power herein conferred upon the Company, any Guarantor or any other
obligor upon the Securities, as applicable, herein, in the Securities or in any
Guarantee;
(c) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
in the Securities or in any Guarantee, or to make any other provisions with
respect to matters or questions
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arising under this Indenture, the Securities or any Guarantee; provided that, in
--------
each case, such provisions shall not adversely affect the interests of the
Holders;
(d) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust Indenture
Act, as contemplated by Section 905 or otherwise;
(e) to add a Guarantor pursuant to the requirements of Section 1014;
(f) to evidence and provide the acceptance of the appointment of a
successor trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security interest in
favor of the Trustee for the benefit of the Holders as additional security for
the payment and performance of the Indenture Obligations, in any property or
assets, including any which are required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be granted to the
Trustee pursuant to this Indenture or otherwise.
Section 902. Supplemental Indentures and Agreements with Consent of
------------------------------------------------------
Holders.
- -------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company, each Guarantor, if any, and the Trustee, the Company
and each Guarantor (if a party thereto) when authorized by a Board Resolution,
and the Trustee may enter into an indenture or indentures supplemental hereto or
agreements or other instruments with respect to any Guarantee in form and
substance satisfactory to the Trustee, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders under this
Indenture, the Securities or any Guarantee; provided, however, that no such
-------- -------
supplemental indenture, agreement or instrument shall, without the consent of
the Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the rate
of interest thereon or any premium payable upon the redemption thereof, or
change the coin or currency in which the principal of any Security or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date);
(b) amend, change or modify the obligation of the Company to make and
consummate an Offer with respect to any Asset Sale or Asset Sales in accordance
with Section 1013 or the obligation of the Company to make and consummate a
Change
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of Control Offer in the event of a Change of Control in accordance with Section
1016, including amending, changing or modifying any definitions with respect
thereto;
(c) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver or
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture or with respect
to any Guarantee;
(d) modify any of the provisions of this Section or Sections 513 or
1021, except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Security affected thereby;
(e) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Guarantor of any of its rights and
obligations under this Indenture; or
(f) amend or modify any of the provisions of this Indenture relating
to the subordination of the Securities or any Guarantee in any manner adverse to
the Holders of the Securities or any Guarantee.
Upon the written request of the Company and each Guarantor, if any,
accompanied by a copy of a Board Resolution authorizing the execution of any
such supplemental indenture or Guarantee, and upon the filing with the Trustee
of evidence of the consent of Holders as aforesaid, the Trustee shall join with
the Company and each Guarantor in the execution of such supplemental indenture
or Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or instrument relating to any Guarantee, but it shall be sufficient
if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
---------------------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Trust Indenture Act Section 315(a)
through 315(d) and Section 602 hereof) shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate stating that the execution of
such supplemental indenture, agreement or instrument is authorized or permitted
by this Indenture. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture, agreement or instrument which affects the
Trustee's own rights, duties or immunities under this Indenture, any Guarantee
or otherwise.
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Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Company and each Guarantor and authenticated and delivered by
the Trustee in exchange for Outstanding Securities.
Section 907. Effect on Senior Indebtedness.
-----------------------------
No supplemental indenture shall adversely affect the rights under
Articles Twelve and Fourteen, or any definitions or provisions related thereto,
or the Guarantees of any holder of Senior Indebtedness or Senior Guarantor
Indebtedness unless the requisite holders of each issue of Senior Indebtedness
or Senior Guarantor Indebtedness affected thereby shall have consented to such
supplemental indenture.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
------------------------------------------
Subject to the provisions of Articles Twelve and Fourteen, the Company
will duly and punctually pay the principal of, premium, if any, and interest on
the Securities in accordance with the terms of the Securities and this
Indenture.
Section 1002. Maintenance of Office or Agency.
------------------------------
The Company will maintain an office or agency where Securities may be
presented or surrendered for payment. The Company also will maintain in The
City of New York an office or agency where Securities may be surrendered for
registration of
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transfer, redemption or exchange and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location and any
change in the location of any such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the office of the agent
of the Trustee described above and the Company hereby appoints such agent as its
agent to receive all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designation. The Company will give prompt written notice to the
Trustee of any such designation or rescission and any change in the location of
any such office or agency.
Section 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of, premium, if any, or interest on
any of the Securities, segregate and hold in trust for the benefit of the
Holders entitled thereto a sum sufficient to pay the principal, premium, if any,
or interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, on or
before each due date of the principal of, premium, if any, or interest on, any
Securities, deposit with a Paying Agent a sum in same day funds sufficient to
pay the principal, premium, if any, or interest so becoming due, such sum to be
held in trust for the benefit of the Persons entitled to such principal, premium
or interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company or any
Guarantor (or any other obligor upon the Securities) in the making of any
payment of principal, premium, if any, or interest;
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(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
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 Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and payable shall
promptly be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, 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), and mail to each such Holder, 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,
publication and mailing, any unclaimed balance of such money then remaining will
promptly be repaid to the Company.
Section 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Subsidiary; provided, however, that the Company shall not be
-------- -------
required to preserve any such right or franchise or the corporate existence of
any such Subsidiary if the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof would not reasonably be expected to have a material adverse effect on
the ability of the Company to perform its obligations hereunder; and provided,
--------
further, however, that
- ------- -------
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the foregoing shall not prohibit a sale, transfer or conveyance of a Subsidiary
or any of its assets in compliance with the terms of this Indenture.
Section 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
on or before the date the same shall become due and payable, (a) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary shown to be due on any return of the Company or any Subsidiary or
otherwise assessed or upon the income, profits or property of the Company or any
Subsidiary if failure to pay or discharge the same could reasonably be expected
to have a material adverse effect on the ability of the Company or any Guarantor
to perform its obligations hereunder and (b) all lawful claims for labor,
materials and supplies, which, if unpaid, would by law become a Lien upon the
property of the Company or any Subsidiary, except for any Lien permitted to be
incurred under Section 1012 if failure to pay or discharge the same could
reasonably be expected to have a material adverse effect on the ability of the
Company or any Guarantor to perform its obligations hereunder; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and in respect of which
appropriate reserves (in the good faith judgment of management of the Company)
are being maintained in accordance with GAAP consistently applied.
Section 1006. Maintenance of Properties.
-------------------------
The Company will cause all material properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be consistent with sound business practice and necessary so that
the business carried on in connection therewith may be properly conducted at all
times; provided, however, that nothing in this Section shall prevent the Company
-------- -------
from discontinuing the maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary and not reasonably expected to
have a material adverse effect on the ability of the Company to perform its
obligations hereunder.
Section 1007. Insurance.
---------
The Company will at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company to be
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responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties.
Section 1008. Limitation on Indebtedness.
--------------------------
(a) The Company will not, and will not permit any of its Subsidiaries
to, create, issue, assume, guarantee, or otherwise in any manner become directly
or indirectly liable for or with respect to or otherwise incur (collectively,
"incur") any Indebtedness (including any Acquired Indebtedness), except that the
Company and any Guarantor may incur Indebtedness (including any Acquired
Indebtedness) and any Subsidiary that is not a Guarantor may incur Acquired
Indebtedness if, in each case, the Consolidated Fixed Charge Coverage Ratio for
the Company for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness taken as one period (and after giving pro forma
--- -----
effect to (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, at the beginning of such four-quarter period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company and
its Subsidiaries since the first day of such four-quarter period as if such
Indebtedness was incurred, repaid or retired at the beginning of such four-
quarter period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four-quarter period);
(iii) in the case of Acquired Indebtedness, the related acquisition as if such
acquisition occurred at the beginning of such four-quarter period; and (iv) any
acquisition or disposition by the Company and its Subsidiaries of any company or
any business or any assets out of the ordinary course of business, whether by
merger, stock purchase or sale or asset purchase or sale, as if such acquisition
or disposition occurred at the beginning of such four-quarter period or any
related repayment of Indebtedness, in each case since the first day of such
four-quarter period, assuming such acquisition or disposition had been
consummated on the first day of such four-quarter period) is at least equal to
2.25:1.00.
(b) The foregoing limitation will not apply to the incurrence of any
of the following (collectively "Permitted Indebtedness"):
(i) Indebtedness of the Company and any Subsidiary under the Credit
Agreement in an aggregate principal amount at any one time outstanding not to
exceed (x) $50,000,000 under any term loans made pursuant thereto, minus all
principal payments made in respect of any term loans, (y) $100,000,000 under any
revolving credit facility thereunder and (z) $28,200,000 of "Letter of Credit
Liabilities" (as defined in the Credit Agreement as in effect on the date of the
Original Indenture) in respect to the Barton Letter of Credit, less any
reduction on such "Letter of Credit Liabilities" (whether through payments or
reductions of the face amount of the Barton Letter of Credit);
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(ii) Indebtedness of the Company pursuant to the Securities and
Indebtedness of any Guarantor pursuant to a Guarantee;
(iii) Indebtedness of the Company or any Subsidiary outstanding on
the date of this Indenture and listed on Schedule I hereto;
(iv) Indebtedness of the Company owing to a Subsidiary; provided that
--------
any Indebtedness of the Company owing to a Subsidiary that is not a Guarantor is
made pursuant to an intercompany note in the form attached to this Indenture as
Exhibit A and is subordinated in right of payment from and after such time as
the Securities shall become due and payable (whether at Stated Maturity,
acceleration or otherwise) to the payment and performance of the Company's
obligations under the Securities; provided further that any disposition, pledge
-------- -------
or transfer of any such Indebtedness to a Person (other than a disposition,
pledge or transfer to a Subsidiary or a pledge to or for the benefit of the
lenders under the Credit Agreement) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause (iv);
(v) Indebtedness of a Wholly Owned Subsidiary owing to the Company
or another Wholly Owned Subsidiary; provided that, with respect to Indebtedness
--------
owing to a Wholly Owned Subsidiary that is not a Guarantor, (x) any such
Indebtedness is made pursuant to an intercompany note in the form attached to
this Indenture as Exhibit A and (y) any such Indebtedness shall be subordinated
in right of payment from and after such time as the obligations under the
Guarantee by such Wholly Owned Subsidiary shall become due and payable to the
payment and performance of such Wholly Owned Subsidiary's obligations under its
Guarantee; provided further that (a) any disposition, pledge or transfer of any
-------- -------
such Indebtedness to a Person (other than a disposition, pledge or transfer to
the Company or a Wholly Owned Subsidiary or a pledge to or for the benefit of
the lenders under the Credit Agreement) shall be deemed to be an incurrence of
such Indebtedness by the obligor not permitted by this clause (v), and (b) any
transaction pursuant to which any Wholly Owned Subsidiary, which has
Indebtedness owing to the Company or any other Wholly Owned Subsidiary, ceases
to be a Wholly Owned Subsidiary shall be deemed to be the incurrence of
Indebtedness by such Wholly Owned Subsidiary that is not permitted by this
clause (v);
(vi) guarantees of any Subsidiary made in accordance with the
provisions of Section 1014 of this Indenture;
(vii) obligations of the Company entered into in the ordinary course
of business pursuant to Interest Rate Agreements designed to protect the Company
or any Subsidiary against fluctuations in interest rates in respect of
Indebtedness of the Company or any of its Subsidiaries, as long as such
obligations at the time incurred do not exceed the aggregate principal amount of
such Indebtedness then outstanding or in good faith anticipated to be
outstanding within 90 days of such incurrence;
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(viii) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any Indebtedness
described in clauses (ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so long as the aggregate
principal amount of Indebtedness represented thereby is not increased by such
refinancing plus the lesser of (I) the stated amount of any premium, interest or
other payment required to be paid in connection with such a refinancing pursuant
to the terms of the Indebtedness being refinanced or (II) the amount of premium,
interest or other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the Company
incurred in connection with such refinancing and, in the case of Pari Passu
Indebtedness or Subordinated Indebtedness, such refinancing does not reduce the
Average Life to Stated Maturity or the Stated Maturity of such Indebtedness; and
(ix) Indebtedness, in addition to that described in clauses (i)
through (viii) of this definition of "Permitted Indebtedness," and any renewals,
extensions, substitutions, refinancings or replacements of such Indebtedness,
not to exceed $25,000,000 outstanding at any one time in the aggregate.
Section 1009. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any Subsidiary to,
directly or indirectly:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than
dividends or distributions payable solely in shares of its Qualified
Capital Stock or in options, warrants or other rights to acquire such
Qualified Capital Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of the Capital Stock of the Company
or any Affiliate thereof (other than any Wholly Owned Subsidiary of
the Company) or options, warrants or other rights to acquire such
Capital Stock;
(iii) make any principal payment on, or repurchase, redeem,
defease, retire or otherwise acquire for value, prior to any scheduled
principal payment, sinking fund or maturity, any Pari Passu
Indebtedness or Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital
Stock of any Subsidiary to any Person (other than the Company or any
of its Wholly Owned Subsidiaries) or purchase, redeem or otherwise
acquire or retire for value any Capital Stock of any Subsidiary held
by any Person (other than the Company or any of its Wholly Owned
Subsidiaries);
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(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Subsidiary of the Company); or
(vi) make any Investment in any Person (other than any Permitted
Investments);
(any of the foregoing payments described in clauses (i) through (vi), other than
any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing and such Restricted Payment shall not be an event
which is, or after notice or lapse of time or both, would be, an "event of
default" under the terms of any Indebtedness of the Company or its Subsidiaries;
(2) immediately before and immediately after giving effect to such transaction
on a pro forma basis, the Company could incur $1.00 of additional Indebtedness
--- -----
(other than Permitted Indebtedness) under the provisions contained in Section
1008; and (3) the aggregate amount of all such Restricted Payments declared or
made after the date of the Original Indenture does not exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of the
Company accrued on a cumulative basis during the period beginning on the first
day of the Company's fiscal quarter commencing prior to the date of the Original
Indenture and ending on the last day of the Company's last fiscal quarter ending
prior to the date of the Restricted Payment (or, if such aggregate cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Original Indenture by the Company from the issuance or sale (other than to any
of its Subsidiaries) of its shares of Qualified Capital Stock or any options,
warrants or rights to purchase such shares of Qualified Capital Stock of the
Company (except, in each case, to the extent such proceeds are used to purchase,
redeem or otherwise retire Capital Stock or Subordinated Indebtedness as set
forth below);
(C) the aggregate Net Cash Proceeds received after the date of the
Original Indenture by the Company (other than from any of its Subsidiaries) upon
the exercise of any options or warrants to purchase shares of Qualified Capital
Stock of the Company; and
(D) the aggregate Net Cash Proceeds received after the date of the
Original Indenture by the Company from debt securities or Redeemable Capital
Stock that have been converted into or exchanged for Qualified Capital Stock of
the Company to the extent such debt securities or Redeemable Capital Stock are
originally sold for cash
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plus the aggregate Net Cash Proceeds received by the Company at the time of such
conversion or exchange.
(b) Notwithstanding the foregoing, and in the case of clauses (ii),
(iii) and (iv) below, so long as there is no Default or Event of Default
continuing, the foregoing provisions shall not prohibit the following actions
(clauses (i) through (iv) being referred to as "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date of declaration such payment would be
permitted by the provisions of paragraph (a) of this Section and such payment
shall be deemed to have been paid on such date of declaration for purposes of
the calculation required by paragraph (a) of this Section;
(ii) the repurchase, redemption, or other acquisition or
retirement of any shares of any class of Capital Stock of the Company in
exchange for (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection therewith cash is paid in lieu of
the issuance of fractional shares or scrip), or out of the Net Cash Proceeds of,
a substantially concurrent issue and sale for cash (other than to a Subsidiary)
of other shares of Qualified Capital Stock of the Company; provided that the Net
--------
Cash Proceeds from the issuance of such shares of Qualified Capital Stock are
excluded from clause (3)(B) of paragraph (a) of this Section;
(iii) any repurchase, redemption, defeasance, retirement,
refinancing or acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or out of the net proceeds of, a substantially
concurrent issuance and sale for cash (other than to any Subsidiary of the
Company) of any Qualified Capital Stock of the Company, provided that the Net
--------
Cash Proceeds from the issuance of such shares of Qualified Capital Stock are
excluded from clause (3)(B) of paragraph (a) of this Section; and
(iv) the repurchase, redemption, defeasance, retirement,
refinancing or acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Redeemable Capital Stock) (a "refinancing") through the
issuance of new Subordinated Indebtedness of the Company, provided that any such
--------
new Subordinated Indebtedness (1) shall be in a principal amount that does not
exceed the principal amount so refinanced (or, if such Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration or acceleration thereof, then such lesser amount as
of the date of determination), plus the lesser of (I) the stated amount of any
premium, interest or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or (II)
the amount of premium, interest or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing; (2) has an Average Life to
Stated Maturity greater than
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the remaining Average Life to Stated Maturity of the Securities; (3) has a
Stated Maturity for its final scheduled principal payment later than the Stated
Maturity for the final scheduled principal payment of the Securities; and (4) is
expressly subordinated in right of payment to the Securities at least to the
same extent as the Indebtedness to be refinanced.
Section 1010. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of the
Company (other than the Company or a Wholly Owned Subsidiary) unless (i) such
transaction or series of transactions is in writing on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party, (ii) with respect to any transaction or series of transactions
involving aggregate payments in excess of $5,000,000, the Company delivers an
Officers' Certificate to the Trustee certifying that such transaction or series
of related transactions complies with clause (i) above and such transaction or
series of related transactions has been approved by the Board of Directors of
the Company, and (iii) with respect to a transaction or series of related
transactions involving aggregate value in excess of $10,000,000, the Company
delivers to the Trustee an opinion of an independent investment banking firm of
national standing stating that the transaction or series of transactions is fair
to the Company or such Subsidiary; provided, however, that this provision shall
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not apply to any transaction with an officer or director of the Company entered
into in the ordinary course of business (including compensation or employee
benefit arrangements with any officer or director of the Company).
Section 1011. Limitation on Senior Subordinated Indebtedness.
----------------------------------------------
The Company will not, and will not permit any Guarantor to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise in any
manner become directly or indirectly liable for or with respect to or otherwise
permit to exist any Indebtedness that is subordinate in right of payment to any
Indebtedness of the Company or such Guarantor, as the case may be, unless such
Indebtedness is also pari passu with the Securities or the Guarantee of such
Guarantor or subordinate in right of payment to the Securities or such Guarantee
to at least the same extent as the Securities or such Guarantee are subordinate
in right of payment to Senior Indebtedness or Senior Guarantor Indebtedness, as
the case may be, as set forth in this Indenture.
Section 1012. Limitation on Liens.
-------------------
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create, incur, affirm or suffer to exist any Lien of any kind
upon any of its
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property or assets (including any intercompany notes), owned at the date of this
Indenture or acquired after the date of this Indenture, or any income or profits
therefrom, except if the Securities (or a Guarantee, in the case of Liens of a
Guarantor) are directly secured equally and ratably with (or prior to in the
case of Liens with respect to Subordinated Indebtedness or Indebtedness of a
Guarantor subordinated in right of payment to any Guarantee) the obligation or
liability secured by such Lien, excluding, however, from the operation of the
foregoing any of the following:
(a) any Lien existing as of the date of this Indenture;
(b) any Lien arising by reason of (1) any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such judgment,
decree or order shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired; (2) taxes not
yet delinquent or which are being contested in good faith; (3) security for
payment of workers' compensation or other insurance; (4) good faith deposits in
connection with tenders, leases, contracts (other than contracts for the payment
of money); (5) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or minor irregularities of title (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created, assumed
or permitted to exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee), none of which
materially impairs the use of any parcel of property material to the operation
of the business of the Company or any Subsidiary or the value of such property
for the purpose of such business; (6) deposits to secure public or statutory
obligations, or in lieu of surety or appeal bonds; (7) certain surveys,
exceptions, title defects, encumbrances, easements, reservations of, or rights
of others for, rights of way, sewers, electric lines, telegraph or telephone
lines and other similar purposes or zoning or other restrictions as to the use
of real property not interfering with the ordinary conduct of the business of
the Company or any of its Subsidiaries; or (8) operation of law in favor of
mechanics, materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business for sums which are not yet delinquent or are being
contested in good faith by negotiations or by appropriate proceedings which
suspend the collection thereof;
(c) any Lien now or hereafter existing on property of the Company or
any Guarantor securing Senior Indebtedness or Senior Guarantor Indebtedness, in
each case which Indebtedness is permitted under the provisions of Section 1008
and provided that the provisions described under Section 1014 are complied with;
(d) any Lien securing Acquired Indebtedness created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Indebtedness by the Company or any Subsidiary, in each case which Indebtedness
is permitted under the provisions of Section 1008; provided that any such Lien
--------
only extends to the assets that
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were subject to such Lien securing such Acquired Indebtedness prior to the
related transaction by the Company or its Subsidiaries; and
(e) any extension, renewal, refinancing or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through (d) so long as
the amount of security is not increased thereby.
Section 1013. Limitation on Sale of Assets.
----------------------------
(a) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, consummate an Asset Sale unless (i) at least 75% of
the proceeds from such Asset Sale are received in cash and (ii) the Company or
such Subsidiary receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the shares or assets sold (other than in the
case of an involuntary Asset Sale, as determined by the Board of Directors of
the Company and evidenced in a Board Resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are
not required to be applied to repay permanently any Senior Indebtedness or
Senior Guarantor Indebtedness then outstanding as required by the terms thereof,
or the Company determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Senior Indebtedness or Senior Guarantor Indebtedness or if no
such Senior Indebtedness or Senior Guarantor Indebtedness is then outstanding,
then the Company may within twelve months of the Asset Sale, invest the Net Cash
Proceeds in other properties and assets that (as determined by the Board of
Directors of the Company) replace the properties and assets that were the
subject of the Asset Sale or in properties and assets that will be used in the
businesses of the Company or its Subsidiaries existing on the date of the
Original Indenture or reasonably related thereto. The amount of such Net Cash
Proceeds neither used to permanently repay or prepay Senior Indebtedness or
Senior Guarantor Indebtedness nor used or invested as set forth in this
paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $10,000,000 or
more, the Company shall apply the Excess Proceeds to the repayment of the
Securities and any Pari Passu Indebtedness required to be repurchased under the
instrument governing such Pari Passu Indebtedness as follows: (a) the Company
shall make an offer to purchase (an "Offer") from all holders of the Securities
in accordance with the procedures set forth in this Indenture in the maximum
principal amount (expressed as a multiple of $1,000) of Securities that may be
purchased out of an amount (the "Security Amount") equal to the product of such
Excess Proceeds multiplied by a fraction, the numerator of which is the
outstanding principal amount of the Securities, and the denominator of which is
the sum of the outstanding principal amount of the Securities and such Pari
Passu Indebtedness (subject to proration in the event such amount is less than
the aggregate Offered Price (as defined herein) of all Securities tendered) and
(b) to the
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extent required by such Pari Passu Indebtedness to permanently reduce the
principal amount of such Pari Passu Indebtedness, the Company shall make an
offer to purchase or otherwise repurchase or redeem Pari Passu Indebtedness (
"Pari Passu Offer") in an amount (the "Pari Passu Debt Amount") equal to the
excess of the Excess Proceeds over the Security Amount; provided that in no
event shall the Pari Passu Debt Amount exceed the principal amount of such Pari
Passu Indebtedness plus the amount of any premium required to be paid to
repurchase such Pari Passu Indebtedness. The offer price shall be payable in
cash in an amount equal to 100% of the principal amount of the Securities plus
accrued and unpaid interest, if any, to the date (the "Offer Date") such Offer
is consummated (the "Offered Price"), in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate Offered Price of the
Securities tendered pursuant to the Offer is less than the Security Amount
relating thereto or the aggregate amount of Pari Passu Indebtedness that is
purchased is less than the Pari Passu Debt Amount (the amount of such shortfall,
if any, constituting a "Deficiency"), the Company shall use such Deficiency in
the business of the Company and its Subsidiaries. Upon completion of the
purchase of all the Securities tendered pursuant to an Offer and the purchase of
the Pari Passu Indebtedness pursuant to a Pari Passu Offer, the amount of Excess
Proceeds, if any, shall be reset at zero.
(d) Whenever the Excess Proceeds received by the Company exceed
$7,000,000, such Excess Proceeds shall be set aside by the Company in a separate
account pending (i) deposit with the depositary or a Paying Agent of the amount
required to purchase the Securities or Pari Passu Indebtedness tendered in an
Offer or a Pari Passu Offer, (ii) delivery by the Company of the Offered Price
to the Holders or holders of Pari Passu Indebtedness tendered in an Offer or a
Pari Passu Offer and (iii) application, as set forth above, of Excess Proceeds
in the business of the Company and its Subsidiaries. Such Excess Proceeds may
be invested in Temporary Cash Investments, provided that the maturity date of
--------
any such investment made after the amount of Excess Proceeds exceeds $7,000,000
shall not be later than the earlier of three months or the Offer Date, if known.
The Company shall be entitled to any interest or dividends accrued, earned or
paid on such Temporary Cash Investments, provided that the Company shall not
--------
withdraw such interest from the separate account if an Event of Default has
occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to
clause (c) above, the Securities shall be purchased by the Company, at the
option of the holder thereof, in whole or in part in integral multiples of
$1,000, on a date that is not earlier than 45 days and not later than 60 days
from the date the notice is given to holders, or such later date as may be
necessary for the Company to comply with the requirements under the Exchange
Act, subject to proration in the event the Security Amount is less than the
aggregate Offered Price of all Securities tendered.
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(f) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with an Offer.
(g) The Company will not, and will not permit any Subsidiary to,
create or permit to exist or become effective any restriction (other than
restrictions existing under (i) Indebtedness as in effect on the date of this
Indenture as such Indebtedness may be refinanced from time to time, provided
--------
that such restrictions are no less favorable to the Holders of Securities than
those existing on the date of this Indenture or (ii) any Senior Indebtedness and
any Senior Guarantor Indebtedness) that would materially impair the ability of
the Company to make an Offer to purchase the Securities or, if such Offer is
made, to pay for the Securities tendered for purchase.
(h) Subject to paragraph (f) above, within 30 days after the date on
which the amount of Excess Proceeds equals or exceeds $10,000,000, the Company
shall send or cause to be sent by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Securities, at his address appearing in the
Security Register, a notice stating or including:
(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Securities at the
Offered Price;
(2) the Offer Date;
(3) the instructions a Holder must follow in order to have its
Securities purchased in accordance with paragraph (c) of this Section;
and
(4) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q and
any Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report, other than Current Reports describing Asset Sales
otherwise described in the offering materials (or corresponding
successor reports) (or in the event the Company is not required to
prepare any of the foregoing Forms, the comparable information
required pursuant to Section 1019), (ii) a description of material
developments in the Company's business subsequent to the date of the
latest of such Reports, (iii) if material, appropriate pro forma
financial information, and (iv) such other information, if any,
concerning the business of the Company which the Company in good faith
believes will enable such Holders to make an informed investment
decision.
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(i) Holders electing to have Securities purchased hereunder will be
required to surrender such Securities at the address specified in the notice at
least three Business Days prior to the Offer Date. Holders will be entitled to
withdraw their election to have their Securities purchased pursuant to this
Section 1012 if the Company receives, not later than three Business Days prior
to the Offer Date, a telegram, telex, facsimile transmission or letter setting
forth (1) the name of the Holder, (2) the certificate number of the Security in
respect of which such notice of withdrawal is being submitted, (3) the principal
amount of the Security (which shall be $1,000 or an integral multiple thereof)
delivered for purchase by the Holder as to which his election is to be
withdrawn, (4) a statement that such Holder is withdrawing his election to have
such principal amount of such Security purchased, and (5) the principal amount,
if any, of such Security (which shall be $1,000 or an integral multiple thereof)
that remains subject to the original notice of the Offer and that has been or
will be delivered for purchase by the Company.
(j) The Company shall (i) not later than the Offer Date, accept for
payment Securities or portions thereof tendered pursuant to the Offer, (ii) not
later than 10:00 a.m. (New York time) on the Offer Date, deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in same day funds (or New York Clearing House funds if such deposit is
made prior to the Offer Date) sufficient to pay the aggregate Offered Price of
all the Securities or portions thereof which are to be purchased on that date
and (iii) not later than the Offer Date, deliver to the Paying Agent (if other
than the Company) an Officers' Certificate stating the Securities or portions
thereof accepted for payment by the Company.
Subject to applicable escheat laws, as provided in the Securities, the
Trustee and the Paying Agent shall return to the Company any cash that remains
unclaimed, together with interest, if any, thereon, held by them for the payment
of the Offered Price; provided, however, that, (x) to the extent that the
-------- -------
aggregate amount of cash deposited by the Company with the Trustee in respect of
an Offer exceeds the aggregate Offered Price of the Securities or portions
thereof to be purchased, then the Trustee shall hold such excess for the Company
and (y) unless otherwise directed by the Company in writing, promptly after the
Business Day following the Offer Date the Trustee shall return any such excess
to the Company together with interest or dividends, if any, thereon.
(k) Securities to be purchased shall, on the Offer Date, become due
and payable at the Offered Price and from and after such date (unless the
Company shall default in the payment of the Offered Price) such Securities shall
cease to bear interest. Such Offered Price shall be paid to such Holder
promptly following the later of the Offer Date and the time of delivery of such
Security to the relevant Paying Agent at the office of such Paying Agent by the
Holder thereof in the manner required. Upon surrender of any such Security for
purchase in accordance with the foregoing provisions, such Security shall be
paid by the Company at the Offered Price; provided, however, that installments
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of interest whose Stated Maturity is on or prior to the Offer Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates according to
the terms and the provisions of Section 307; provided further that Securities to
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be purchased are subject to proration in the event the Excess Proceeds are less
than the aggregate Offered Price of all Securities tendered for purchase, with
such adjustments as may be appropriate by the Trustee so that only Securities in
denominations of $1,000 or integral multiples thereof, shall be purchased. If
any Security tendered for purchase shall not be so paid upon surrender thereof
by deposit of funds with the Trustee or a Paying Agent in accordance with
paragraph (j) above, the principal thereof (and premium, if any, thereon) shall,
until paid, bear interest from the Offer Date at the rate borne by such
Security. Any Security that is to be purchased only in part shall be
surrendered to a Paying Agent at the office of such Paying Agent (with, if the
Company, the Security Registrar or the Trustee so requires, due endorsement by,
or a written instrument of transfer in form satisfactory to the Company and the
Security Registrar or the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute and
the Trustee shall authenticate and deliver to the Holder of such Security,
without service charge, one or more new Securities of any authorized
denomination as requested by such Holder in an aggregate principal amount equal
to, and in exchange for, the portion of the principal amount of the Security so
surrendered that is not purchased.
Section 1014. Limitation on Issuances of Guarantees of and Pledges
----------------------------------------------------
for Indebtedness.
- ----------------
(a) The Company will not permit any Subsidiary, other than the
Guarantors, directly or indirectly, to secure the payment of any Senior
Indebtedness of the Company and the Company will not, and will not permit a
Subsidiary to, pledge any intercompany notes representing obligations of any
Subsidiary (other than a Guarantor) to secure the payment of any Senior
Indebtedness unless (x) such Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a guarantee of payment of
the Securities by such Subsidiary, which guarantee shall be on the same terms as
the guarantee of the Senior Indebtedness (if a guarantee of Senior Indebtedness
is granted by any such Subsidiary) except that the guarantee of the Securities
need not be secured and shall be subordinated to the claims against such
Subsidiary in respect of Senior Indebtedness to the same extent as the
Securities are subordinated to Senior Indebtedness of the Company under this
Indenture and (y) such Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of any rights of reimbursement, indemnity
or subrogation or any other rights the Company or any other Subsidiary as a
result of any payment by such Subsidiary under its guarantee.
(b) The Company will not permit any Subsidiary, other than the
Guarantors, directly or indirectly, to guarantee, assume or in any other manner
become liable with respect to any Indebtedness of the Company unless (i) such
Subsidiary
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simultaneously executes and delivers a supplemental indenture to this
Indenture providing for a guarantee of the Securities on the same terms as the
guarantee of such Indebtedness except that (A) such guarantee need not be
secured unless required pursuant to Section 1012, (B) if the Securities are
subordinated in right of payment to such Indebtedness, the guarantee under the
supplemental indenture shall be subordinated to the guarantee of such
Indebtedness to the same extent as the Securities are subordinated to such
Indebtedness under this Indenture and (C) if such Indebtedness is by its terms
expressly subordinated to the Securities, any such assumption, guarantee or
other liability of such Subsidiary with respect to such Indebtedness shall be
subordinated to such Subsidiary's assumption, guarantee or other liability with
respect to the Securities to the same extent as such Indebtedness is
subordinated to the Securities and (ii) such Subsidiary waives and will not in
any manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Subsidiary as a result of any payment by such Subsidiary under its
Guarantee.
(c) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each such
Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing, any
Guarantee by a Subsidiary of the Securities shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon (i) any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's Capital Stock in, or all or substantially all the assets
of, such Subsidiary, which is in compliance with the terms of this Indenture or
(ii) the release by the holders of the Indebtedness of the Company described in
clauses (a) and (b) above of their security interest or their guarantee by such
Subsidiary (including any deemed release upon payment in full of all obligations
under such Indebtedness), at a time when (A) no other Indebtedness of the
Company has been secured or guaranteed by such Subsidiary, as the case may be,
or (B) the holders of all such other Indebtedness which is secured or guaranteed
by such Subsidiary also release their security interest in, or guarantee by,
such Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness).
Section 1015. Restriction on Transfer of Assets.
---------------------------------
The Company will not sell, convey, transfer or otherwise dispose of
its assets or property to any of its Subsidiaries (other than to the
Guarantors), except for sales, conveyances, transfers or other dispositions made
in the ordinary course of business. For purposes of this Section 1015, any
sale, conveyance, transfer, lease or other disposition of property or assets,
having a Fair Market Value in excess of (a) $2,000,000 for any sale, conveyance,
transfer or disposition or series of related sales, conveyances, transfers,
leases and dispositions and (b) $10,000,000 in the aggregate for all such sales,
conveyances, transfers, leases or dispositions in any fiscal year of the Company
shall not be considered "in the ordinary course of business."
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Section 1016. Purchase of Securities upon a Change of Control.
-----------------------------------------------
(a) If a Change of Control shall occur at any time, then each Holder
shall have the right to require that the Company purchase such Holder's
Securities in whole or in part in integral multiples of $1,000, at a purchase
price (the "Change of Control Purchase Price") in cash in an amount equal to
101% of the principal amount of such Securities, plus accrued and unpaid
interest, if any, to the date of purchase (the "Change of Control Purchase
Date"), pursuant to the offer described in subsection (c) of this Section (the
"Change of Control Offer") and in accordance with the procedures set forth in
Subsections (b), (c), (d) and (e) of this Section.
(b) Within 15 days following any Change of Control, the Company shall
notify the Trustee thereof and give written notice (a "Change of Control
Purchase Notice") of such Change of Control to each Holder by first-class mail,
postage prepaid, at his address appearing in the Security Register stating or
including:
(1) that a Change of Control has occurred, the date of such
event, and that such Holder has the right to require the Company to
repurchase such Holder's Securities at the Change of Control Purchase
Price;
(2) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro
---
forma historical income, cash flow and capitalization after giving
-----
effect to such Change of Control, if any);
(3) (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of the Company,
the most recent subsequently filed Quarterly Report on Form 10-Q, as
applicable, and any Current Report on Form 8-K of the Company filed
subsequent to such Quarterly Report (or in the event the Company is
not required to prepare any of the foregoing Forms, the comparable
information required to be prepared by the Company and any Guarantor
pursuant to Section 1019), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such
reports and (iii) such other information, if any, concerning the
business of the Company which the Company in good faith believes will
enable such Holders to make an informed investment decision;
(4) that the Change of Control Offer is being made pursuant to
this Section 1016(a) and that all Securities properly tendered
pursuant to the Change of Control Offer will be accepted for payment
at the Change of Control Purchase Price;
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(5) the Change of Control Purchase Date which shall be a Business
Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed, or such later date as is necessary to comply with
requirements under the Exchange Act;
(6) the Change of Control Purchase Price;
(7) the names and addresses of the Paying Agent and the offices
or agencies referred to in Section 1002;
(8) that Securities must be surrendered on or prior to the Change
of Control Purchase Date to the Paying Agent at the office of the
Paying Agent or to an office or agency referred to in Section 1002 to
collect payment;
(9) that the Change of Control Purchase Price for any Security
which has been properly tendered and not withdrawn will be paid
promptly following the Change of Control Offer Purchase Date;
(10) the procedures for withdrawing a tender of Securities and
Change of Control Purchase Notice;
(11) that any Security not tendered will continue to accrue
interest; and
(12) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Security accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Purchase Date.
(c) Upon receipt by the Company of the proper tender of Securities,
the Holder of the Security in respect of which such proper tender was made shall
(unless the tender of such Security is properly withdrawn) thereafter be
entitled to receive solely the Change of Control Purchase Price with respect to
such Security. Upon surrender of any such Security for purchase in accordance
with the foregoing provisions, such Security shall be paid by the Company at the
Change of Control Purchase Price; provided, however, that installments of
-------- -------
interest whose Stated Maturity is on or prior to the Change of Control Purchase
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 307. If any Security
tendered for purchase shall not be so paid upon surrender thereof, the principal
thereof (and premium, if any, thereon) shall, until paid, bear interest from the
Change of Control Purchase Date at the rate borne by such Security. Holders
electing to have Securities purchased will be required to surrender such
Securities to the Paying Agent at the address specified in the Change of Control
Purchase Notice at least two Business Days prior to the Change of
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Control Purchase Date. Any Security that is to be purchased only in part shall
be surrendered to a Paying Agent at the office of such Paying Agent (with, if
the Company, the Security Registrar or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Security Registrar or the Trustee, as the case may be, duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing), and the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security, without service charge, one or more new Securities of
any authorized denomination as requested by such Holder in an aggregate
principal amount equal to, and in exchange for, the portion of the principal
amount of the Security so surrendered that is not purchased.
(d) The Company shall (i) not later than the Change of Control
Purchase Date, accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer, (ii) not later than 11:00 a.m. (New
York time) on the Change of Control Purchase Date, deposit with the Paying Agent
an amount of cash sufficient to pay the aggregate Change of Control Purchase
Price of all the Securities or portions thereof which are to be purchased as of
the Change of Control Purchase Date and (iii) not later than the Change of
Control Purchase Date, deliver to the Paying Agent an Officers' Certificate
stating the Securities or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the Change of Control Purchase Price of
the Securities purchased from each such Holder, and the Company shall execute
and the Trustee shall promptly authenticate and mail or deliver to such Holders
a new Security equal in principal amount to any unpurchased portion of the
Security surrendered. Any Securities not so accepted shall be promptly mailed
or delivered by the Paying Agent at the Company's expense to the Holder thereof.
The Company will publicly announce the results of the Change of Control Offer on
the Change of Control Purchase Date. For purposes of this Section 1016, the
Company shall choose a Paying Agent which shall not be the Company.
(e) A Change of Control Purchase Notice may be withdrawn before or
after delivery by the Holder to the Paying Agent at the office of the Paying
Agent of the Security to which such Change of Control Purchase Notice relates,
by means of a written notice of withdrawal delivered by the Holder to the Paying
Agent at the office of the Paying Agent or to the office or agency referred to
in Section 1002 to which the related Change of Control Purchase Notice was
delivered not later than three Business Days prior to the Change of Control
Purchase Date specifying, as applicable:
(1) the name of the Holder;
(2) the certificate number of the Security in respect of which
such notice of withdrawal is being submitted;
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(3) the principal amount of the Security (which shall be $1,000
or an integral multiple thereof) delivered for purchase by the Holder
as to which such notice of withdrawal is being submitted; and
(4) the principal amount, if any, of such Security (which shall
be $1,000 or an integral multiple thereof) that remains subject to the
original Change of Control Purchase Notice and that has been or will
be delivered for purchase by the Company.
(f) Subject to applicable escheat laws, as provided in the Securities,
the Trustee and the Paying Agent shall return to the Company any cash that
remains unclaimed, together with interest or dividends, if any, thereon, held by
them for the payment of the Change of Control Purchase Price; provided, however,
-------- -------
that, (x) to the extent that the aggregate amount of cash deposited by the
Company pursuant to clause (ii) of paragraph (d) above exceeds the aggregate
Change of Control Purchase Price of the Securities or portions thereof to be
purchased, then the Trustee shall hold such excess for the Company and (y)
unless otherwise directed by the Company in writing, promptly after the Business
Day following the Change of Control Purchase Date the Trustee shall return any
such excess to the Company together with interest, if any, thereon.
(g) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with a Change of Control Offer.
(h) The Company will not, and will not permit any Subsidiary to,
create or permit to exist or become effective any restriction (other than
restrictions existing under Indebtedness as in effect on the date of this
Indenture) that would materially impair the ability of the Company to make a
Change of Control Offer to purchase the Securities or, if such Change of Control
Offer is made, to pay for the Securities tendered for purchase.
Section 1017. Limitation on Subsidiary Capital Stock.
--------------------------------------
The Company will not permit any Subsidiary of the Company to issue any
Capital Stock, except for (i) Capital Stock issued to and held by the Company or
a Wholly Owned Subsidiary, and (ii) Capital Stock issued by a Person prior to
the time (A) such Person becomes a Subsidiary, (B) such Person merges with or
into a Subsidiary or (C) a Subsidiary merges with or into such Person, provided
--------
that such Capital Stock was not issued or incurred by such Person in
anticipation of the type of transaction contemplated by subclauses (A), (B) or
(C).
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Section 1018. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Subsidiaries.
- ----------------------
The Company will not, and will not permit any of its 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 Subsidiary of the
Company to (i) pay dividends or make any other distribution on its Capital
Stock, (ii) pay any Indebtedness owed to the Company or a Subsidiary of the
Company, (iii) make any Investment in the Company or a Subsidiary of the Company
or (iv) transfer any of its properties or assets to the Company or any
Subsidiary, except (a) any encumbrance or restriction pursuant to an agreement
in effect on the date of this Indenture and listed on Schedule II hereto; (b)
any encumbrance or restriction, with respect to a Subsidiary that was not a
Subsidiary of the Company on the date of this Indenture in existence at the time
such Person becomes a Subsidiary of the Company and, in the case of clauses (a)
and (b), not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary; (c) any encumbrance or restriction existing under any
agreement that extends, renews, refinances or replaces the agreements containing
the encumbrances or restrictions in the foregoing clauses (a) and (b), or in
this clause (c), provided that the terms and conditions of any such encumbrances
--------
or restrictions are not materially less favorable to the holders of the
Securities than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced (except that an
encumbrance or restriction that is not more restrictive than those set forth in
this Indenture shall in any event be permitted hereunder); and (d) any
encumbrance or restriction created pursuant to an asset sale agreement, stock
sale agreement or similar instrument pursuant to which an Asset Sale permitted
under Section 1013 is to be consummated, so long as such restriction or
encumbrance shall be effective only for a period from the execution and delivery
of such agreement or instrument through a termination date not later than 270
days after such execution and delivery.
Section 1019. Provision of Financial Statements.
---------------------------------
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to such Sections 13(a) or 15(d) if the Company were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company will also in
any event (x) within 15 days of each Required Filing Date (i) transmit by mail
to all Holders, as their names and addresses appear in the Security Register,
without cost to such Holders and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to Section 13(a) or 15(d) of the
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Exchange Act if the Company were subject to such Sections and (y) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any prospective
Holder at the Company's cost.
Section 1020. Statement by Officers as to Default.
-----------------------------------
(a) The Company will deliver to the Trustee, on or before a date not
more than 60 days after the end of each fiscal quarter and not more than 120
days after the end of each fiscal year of the Company ending after the date
hereof, a written statement signed by two executive officers of the Company, one
of whom shall be the principal executive officer, principal financial officer or
principal accounting officer of the Company, stating whether or not, after a
review of the activities of the Company during such year or such quarter and of
the Company's performance under this Indenture, to the best knowledge, based on
such review, of the signers thereof, the Company has fulfilled all its
obligations and is in compliance with all conditions and covenants under this
Indenture throughout such year or quarter, as the case may be, and, if there has
been a Default specifying each Default and the nature and status thereof.
(b) When any Default or Event of Default has occurred and is
continuing, or if the Trustee or any Holder or the trustee for or the holder of
any other evidence of Indebtedness of the Company or any Subsidiary gives any
notice or takes any other action with respect to a claimed default (other than
with respect to Indebtedness in the principal amount of less than $10,000,000),
the Company shall deliver to the Trustee by registered or certified mail or
facsimile transmission followed by hard copy an Officers' Certificate specifying
such Default, Event of Default, notice or other action within five Business Days
of its occurrence.
Section 1021. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1005 through 1012, 1015 and 1017
through 1019, if, before or after the time for such compliance, the Holders of
not less than a majority in aggregate principal amount of the Securities at the
time Outstanding or shall, by Act of such Holders, waive such compliance in such
instance with such covenant or condition, but no such waiver shall extend to or
affect such covenant or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall remain
in full force and effect.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
--------------------
The Securities may be redeemed at the election of the Company, in
whole or in part, at any time on or after December 15, 1998, subject to the
conditions, and at the Redemption Prices, specified in the form of Security,
together with accrued and unpaid interest, if any, to the Redemption Date.
Notwithstanding the preceding paragraph, the Company will not be
permitted to redeem the Original Securities unless, substantially concurrently
with such redemption, the Company redeems an aggregate principal amount of
Securities (rounded to the nearest integral multiple of $1,000) equal to the
product of (1) a fraction, the numerator of which is the aggregate principal
--------
amount of Original Securities to be so redeemed and the denominator of which is
the aggregate principal amount of Original Securities outstanding immediately
prior to such proposed redemption, and (2) the aggregate principal amount of
Securities outstanding immediately prior to such proposed redemption.
Section 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Company Order and an Officers' Certificate.
In case of any redemption at the election of the Company, the Company shall, not
less than 45 nor more than 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice period shall be satisfactory to the Trustee),
notify the Trustee in writing of such Redemption Date and of the principal
amount of Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than 30
days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, pro rata, by lot or such other
method as the Trustee shall deem fair and reasonable, and the amounts to be
redeemed may be equal to $1,000 or any integral multiple thereof.
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The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
Section 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date upon
surrender of such Security, new Security or Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that (unless the
Company shall default in payment of the Redemption Price) interest thereon shall
cease to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price; and
(h) the CUSIP number, if any, relating to such Securities; provided,
however, that no representation is required to be made or will be deemed to be
made by the Trustee as to the correctness of the CUSIP number as contained in
said notice.
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Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
Section 1106. Deposit of Redemption Price.
---------------------------
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money in same day funds sufficient to pay the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment Date) accrued interest on,
all the Securities or portions thereof which are to be redeemed on that date.
All money earned on funds held in trust by the Trustee or any Paying Agent shall
be remitted to the Company.
Section 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price together with accrued interest to
the Redemption Date; provided, however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such on the relevant Regular Record Dates according to the terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by such
Security.
Section 1108. Securities Redeemed or Purchased in Part.
----------------------------------------
Any Security which is to be redeemed or purchased only in part shall
be surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Security Registrar or the
Trustee duly executed by, the Holder thereof
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or such Holder's attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the unredeemed portion of the principal of the Security so
surrendered that is not redeemed or purchased.
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the Indebtedness
represented by the Securities and the payment of the principal of, premium, if
any, and interest on each and all of the Securities and all other Indenture
Obligations are hereby expressly made subordinate and subject in right of
payment as provided in this Article to the prior payment in full, in cash or
Cash Equivalents or in any other form acceptable to the holders of Senior
Indebtedness, of all Senior Indebtedness.
This Article Twelve shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold
Senior Indebtedness; and such provisions are made for the benefit of the holders
of Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
Section 1202. Payment Over of Proceeds Upon Dissolution, etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of the Company, then and in any
such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or Cash Equivalents or in any other form acceptable to
the holders of Senior Indebtedness, of all amounts due on or in respect of all
Senior Indebtedness, before the Holders of the Securities are entitled to
receive any payment or distribution of any kind or character (excluding
Permitted Junior Securities) on account of the principal of, premium, if any, or
interest on the Securities or any other Indenture Obligations; and
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(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (excluding Permitted
Junior Securities), by set-off or otherwise, to which the Holders or the Trustee
would be entitled but for the provisions of this Article shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or Cash Equivalents or in any
other form acceptable to the holders of Senior Indebtedness, of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, in respect of principal, premium, if
any, and interest on the Securities or any other Indenture Obligations before
all Senior Indebtedness is paid in full, then and in such event such payment or
distribution (excluding Permitted Junior Securities) shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other person making payment or distribution of
assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash or Cash Equivalents or in any other form acceptable to the holders of
Senior Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the sale, assignment, conveyance, transfer, lease or other disposal of
all or substantially all of the Company's properties or assets to another Person
upon the terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshaling of assets and liabilities of the Company for the
purposes of this Section if the Person formed by such consolidation or the
surviving entity of such merger or the Person which acquires by sale,
assignment, conveyance, transfer, lease or other disposal of all or
substantially all of the Company's properties or assets, as the case may be,
shall, as a part of such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposal, comply with the conditions set forth in
Article Eight.
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Section 1203. Suspension of Payment When Senior Indebtedness in
-------------------------------------------------
Default.
- -------
(a) Unless Section 1202 shall be applicable, upon the occurrence of a
Payment Default, no payment (other than any payments previously made pursuant to
the provisions described in Article Four) or distribution of any assets of the
Company of any kind or character (excluding Permitted Junior Securities) shall
be made by the Company on account of principal of, premium, if any, or interest
on, the Securities or any other Indenture Obligations or on account of the
purchase, redemption, defeasance (whether under Section 402 or 403) or other
acquisition of or in respect of the Securities unless and until such Payment
Default shall have been cured or waived or shall have ceased to exist or the
Designated Senior Indebtedness with respect to which such Payment Default shall
have occurred shall have been discharged or paid in full in cash or Cash
Equivalents or in any other form acceptable to the holders of such Senior
Indebtedness, after which the Company shall resume making any and all required
payments in respect of the Securities, including any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the occurrence
of a Non-payment Default and (2) receipt by the Trustee and the Company from a
representative of the holders of Designated Senior Indebtedness (a "Senior
Representative") of written notice of such occurrence, no payment (other than
any payments previously made pursuant to the provisions described in Article
Four) or distribution of any assets of the Company of any kind or character
(excluding Permitted Junior Securities) shall be made by the Company on account
of any principal of, premium, if any, or interest on, the Securities or any
other Indenture Obligations or on account of the purchase, redemption,
defeasance or other acquisition of or in respect of Securities for a period
("Payment Blockage Period") commencing on the date of receipt by the Trustee of
such notice unless and until the earliest of (subject to any blockage of
payments that may then or thereafter be in effect under subsection (a) of this
Section 1203) (x) 179 days having elapsed since receipt of such written notice
by the Trustee (provided any Designated Senior Indebtedness as to which notice
was given shall theretofore have not been accelerated), (y) the date such Non-
payment Default and all other Non-payment Defaults as to which notice is also
given after such period is initiated shall have been cured or waived or shall
have ceased to exist or the Senior Indebtedness related thereto shall have been
discharged or paid in full in cash or Cash Equivalents or in any other form as
acceptable to the holders of Senior Indebtedness, or (z) the date on which such
Payment Blockage Period (and all Non-Payment Defaults as to which notice is
given after such Payment Blockage Period is initiated) shall have been
terminated by written notice to the Company or the Trustee from the Senior
Representative or the holders of at least a majority of the Designated Senior
Indebtedness that initiated such Payment Blockage Period, after which, in each
such case, the Company shall resume making any and all required payments in
respect of the Securities, including any missed payments. Notwithstanding any
other provision of this Indenture, in no event shall a
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Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Company or the Trustee of the notice referred to in clause (2) of this
paragraph (b) (the"Initial Blockage Period"). Any number of notices of Non-
Payment Defaults may be given during the Initial Blockage Period; provided that
------
during any 365-day consecutive period only one Payment Blockage Period during
which payment of principal of, or interest on, the Securities may not be made
may commence and the duration of the Payment Blockage Period may not exceed 179
days. No Non-payment Default with respect to Designated Senior Indebtedness
which existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default shall have been cured or waived for a
period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, then and in such event such payment
shall be paid over and delivered forthwith to a Senior Representative of the
holders of the Designated Senior Indebtedness or as a court of competent
jurisdiction shall direct.
Section 1204. Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article, elsewhere in this Indenture or in
any of the Securities shall prevent the Company, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Company referred to in Section 1202 or under the conditions
described in Section 1203, from making payments at any time of principal of,
premium, if any, or interest on the Securities.
Section 1205. Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness.
Subject to the payment in full of all Senior Indebtedness in cash or
Cash Equivalents or in any other form acceptable to the holders of Senior
Indebtedness, the Holders of the Securities shall be subrogated to the rights of
the holders of such Senior Indebtedness to receive payments and distributions of
cash, property and securities applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Securities shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness of any cash, property or securities to which the
Holders or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Indebtedness by Holders of the Securities or the Trustee,
shall, as among the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness.
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Section 1206. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of, premium, if any, and interest on the Securities as
and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 1202, to receive,
pursuant to and in accordance with such Section, cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder, or (2) under the
conditions specified in Section 1203, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 1203(c).
Section 1207. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the Indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved.
Section 1208. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act by any such holder, or by any non-
compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of Subsection (a) of this Section
and notwithstanding any other provision contained herein, the holders of Senior
Indebtedness
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may, at any time and from time to time, without the consent of or notice to the
Trustee or the Holders of the Securities, without incurring responsibility to
the Holders of the Securities and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of the
Holders of the Securities to the holders of Senior Indebtedness, do any one or
more of the following: (1) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (2) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection or payment of Senior
Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
-------- -------
event shall any such actions limit the right of the Holders of the Securities to
take any action to accelerate the maturity of the Securities in accordance with
the provisions set forth in Article Five or to pursue any rights or remedies
under this Indenture or under applicable laws if the taking of such action does
not otherwise violate the terms of this Article.
Section 1209. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities or other Indenture Obligations.
Notwithstanding the provisions of this Article or any provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Indebtedness or
from a Senior Representative or any trustee, fiduciary or agent therefor; and,
prior to the receipt of any such written notice, the Trustee shall be entitled
in all respects to assume that no such facts exist; provided, however, that if
-------- -------
the Trustee shall not have received the notice provided for in this Section
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Security or other Indenture Obligations),
then, anything herein contained to the contrary notwithstanding but without
limiting the rights and remedies of the holders of Senior Indebtedness or any
trustee, fiduciary or agent thereof, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it after such date; nor shall the Trustee be charged
with knowledge of the curing of any such default or the elimination of the act
or condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
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(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and the Company by a Person representing himself
to be a Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
-------- -------
notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
Section 1210. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent.
- -----------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee and the Holders of the Securities shall be entitled
to rely upon any order or decree entered by any court of competent jurisdiction
in which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article, provided that the foregoing shall apply only if such court has
--------
been fully apprised of the provisions of this Article.
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness;
-----------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 606.
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Section 1212. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting under this Indenture, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
--------
however, that Section 1211 shall not apply to the Company or any Affiliate of
- -------
the Company if it or such Affiliate acts as Paying Agent.
Section 1213. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of Securities to take any action to accelerate the maturity of
the Securities pursuant to Article Five and as set forth in this Indenture or to
pursue any rights or remedies hereunder or under applicable law, subject to the
rights, if any, under this Article of the holders, from time to time, of Senior
Indebtedness to receive the cash, property or securities receivable upon the
exercise of such rights or remedies.
Section 1214. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Article against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall mistakenly in the
absence of gross negligence or willful misconduct pay over or deliver to
Holders, the Company or any other Person moneys or assets to which any holder of
Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 1301. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
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(1) all the Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 or
(ii) all Securities for whose payment United States dollars have
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1003) have been delivered to the
Trustee cancelled or for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee
cancelled or for cancellation (x) have become due and payable, (y)
will become due and payable at their Stated Maturity within one year,
or (z) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company, and the Company or any Guarantor has irrevocably deposited or
caused to be deposited with the Trustee in trust for the purpose an
amount in United States dollars sufficient to pay and discharge the
entire Indebtedness on the Securities not theretofore delivered to the
Trustee cancelled or for cancellation, for the principal of, premium,
if any, and accrued interest at such Stated Maturity or Redemption
Date;
(b) the Company or any Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company or any Guarantor; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that (i) all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with and (ii) such satisfaction and discharge will not result in a
breach or violation of, or constitute a default under, this Indenture or any
other material agreement or instrument to which the Company or any Guarantor is
a party or by which the Company or any Guarantor is bound.
Opinions of Counsel required to be delivered under this Section may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if United
States dollars shall have been deposited with the Trustee pursuant to subclause
(2) of Subsection (a) of this Section, the obligations of the Trustee under
Section 1302 and the last paragraph of Section 1003 shall survive.
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Section 1302. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 1301 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal of,
premium, if any, and interest on the Securities for whose payment such United
States dollars have been deposited with the Trustee, but such money need not be
segregated from other funds except to the extent required by law or GAAP.
ARTICLE FOURTEEN
GUARANTEES
Section 1401. Guarantors' Guarantee.
---------------------
For value received, each of the Guarantors, in accordance with this
Article Fourteen, hereby absolutely, unconditionally and irrevocably guarantees,
jointly and severally, to the Trustee and the Holders, as if the Guarantors were
the principal debtor, the punctual payment and performance when due of all
Indenture Obligations (which for purposes of this Guarantee shall also be deemed
to include all commissions, fees, charges, costs and other expenses (including
reasonable legal fees and disbursements of one counsel) arising out of or
incurred by the Trustee or the Holders in connection with the enforcement of
this Guarantee).
Section 1402. Continuing Guarantee; No Right of Set-Off; Independent
------------------------------------------------------
Obligation.
- ----------
(a) This Guarantee shall be a continuing guarantee of the payment and
performance of all Indenture Obligations and shall remain in full force and
effect until the payment in full of all of the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Guarantor, jointly and severally, covenants and
agrees to comply with all obligations, covenants, agreements and provisions
applicable to it in this Indenture including those set forth in Article Eight.
Without limiting the generality of the foregoing, each of the Guarantors'
liability shall extend to all amounts which constitute part of the Indenture
Obligations and would be owed by the Company under this Indenture and the
Securities but for the fact that they are unenforceable, reduced, limited,
impaired, suspended or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.
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(b) Each Guarantor, jointly and severally, hereby guarantees that the
Indenture Obligations will be paid to the Trustee without set-off or
counterclaim or other reduction whatsoever (whether for taxes, withholding or
otherwise) in lawful currency of the United States of America.
(c) Each Guarantor, jointly and severally, guarantees that the
Indenture Obligations shall be paid strictly in accordance with their terms
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the holders of the
Securities.
(d) Each Guarantor's liability to pay or perform or cause the
performance of the Indenture Obligations under this Guarantee shall arise
forthwith after demand for payment or performance by the Trustee has been given
to the Guarantors in the manner prescribed in Section 106 hereof.
(e) Except as provided herein, the provisions of this Article Fourteen
cover all agreements between the parties hereto relative to this Guarantee and
none of the parties shall be bound by any representation, warranty or promise
made by any Person relative thereto which is not embodied herein; and it is
specifically acknowledged and agreed that this Guarantee has been delivered by
each Guarantor free of any conditions whatsoever and that no representations,
warranties or promises have been made to any Guarantor affecting its liabilities
hereunder, and that the Trustee shall not be bound by any representations,
warranties or promises now or at any time hereafter made by the Company to any
Guarantor.
Section 1403. Guarantee Absolute.
------------------
The obligations of the Guarantors hereunder are independent of the
obligations of the Company under the Securities and this Indenture and a
separate action or actions may be brought and prosecuted against any Guarantor
whether or not an action or proceeding is brought against the Company and
whether or not the Company is joined in any such action or proceeding. The
liability of the Guarantors hereunder is irrevocable, absolute and unconditional
and (to the extent permitted by law) the liability and obligations of the
Guarantors hereunder shall not be released, discharged, mitigated, waived,
impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of any
Indebtedness or other obligation of the Company or any other
Person under this Indenture or the Securities, or any agreement or
instrument relating to any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may
extend to, or make with, the Company, any Guarantor or any other
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Person, or any change in the time, manner or place of payment of,
or in any other term of, all or any of the Indenture Obligations,
or any other amendment or waiver of, or any consent to or
departure from, this Indenture or the Securities, including any
increase or decrease in the Indenture Obligations;
(c) the taking of security from the Company, any Guarantor or any
other Person, and the release, discharge or alteration of, or
other dealing with, such security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of
any governmental authority or court amending, varying, reducing or
otherwise affecting, or purporting to amend, vary, reduce or
otherwise affect, any of the Indenture Obligations and the
obligations of any Guarantor hereunder;
(e) the abstention from taking security from the Company, any
Guarantor or any other Person or from perfecting, continuing to
keep perfected or taking advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from the Company, any Guarantor or any other
Person, and including any other guarantees received by the
Trustee;
(g) any other dealings with the Company, any Guarantor or any other
Person, or with any security;
(h) the Trustee's or the Holders' acceptance of compositions from the
Company or any Guarantor;
(i) the application by the Holders or the Trustee of all monies at any
time and from time to time received from the Company, any
Guarantor or any other Person on account of any indebtedness and
liabilities owing by the Company or any Guarantor to the Trustee
or the Holders, in such manner as the Trustee or the Holders deems
best and the changing of such application in whole or in part and
at any time or from time to time, or any manner of application of
collateral, or proceeds thereof, to all or any of the Indenture
Obligations, or the manner of sale of any Collateral;
(j) the release or discharge of the Company or any Guarantor of the
Securities or of any Person liable directly as surety or otherwise
by
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operation of law or otherwise for the Securities, other than an
express release in writing given by the Trustee, on behalf of the
Holders, of the liability and obligations of any Guarantor
hereunder;
(k) any change in the name, business, capital structure or governing
instrument of the Company or any Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(l) the sale of the Company's or any Guarantor's business or any part
thereof;
(m) subject to Section 1414, any merger or consolidation, arrangement
or reorganization of the Company, any Guarantor, any Person
resulting from the merger or consolidation of the Company or any
Guarantor with any other Person or any other successor to such
Person or merged or consolidated Person or any other change in the
corporate existence, structure or ownership of the Company or any
Guarantor;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership or
distribution of the assets of the Company or its assets or any
resulting discharge of any obligations of the Company (whether
voluntary or involuntary) or of any Guarantor or the loss of
corporate existence;
(o) subject to Section 1414, any arrangement or plan of reorganization
affecting the Company or any Guarantor;
(p) any other circumstance (including any statute of limitations) that
might otherwise constitute a defense available to, or discharge
of, the Company or any Guarantor; or
(q) any modification, compromise, settlement or release by the
Trustee, or by operation of law or otherwise, of the Indenture
Obligations or the liability of the Company or any other obligor
under the Securities, in whole or in part, and any refusal of
payment by the Trustee, in whole or in part, from any other
obligor or other guarantor in connection with any of the Indenture
Obligations, whether or not with notice to, or further assent by,
or any reservation of rights against, each of the Guarantors.
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Section 1404. Right to Demand Full Performance
--------------------------------
In the event of any demand for payment or performance by the Trustee
from any Guarantor hereunder, the Trustee or the Holders shall have the right to
demand its full claim and to receive all dividends or other payments in respect
thereof until the Indenture Obligations have been paid in full, and the
Guarantors shall continue to be jointly and severally liable hereunder for any
balance which may be owing to the Trustee or the Holders by the Company under
this Indenture and the Securities. The retention by the Trustee or the Holders
of any security, prior to the realization by the Trustee or the Holders of its
rights to such security upon foreclosure thereon, shall not, as between the
Trustee and any Guarantor, be considered as a purchase of such security, or as
payment, satisfaction or reduction of the Indenture Obligations due to the
Trustee or the Holders by the Company or any part thereof.
Section 1405. Waivers.
-------
(a) Each Guarantor hereby expressly waives (to the extent permitted by
law) notice of the acceptance of this Guarantee and notice of the existence,
renewal, extension or the non-performance, non-payment, or non-observance on the
part of the Company of any of the terms, covenants, conditions and provisions of
this Indenture or the Securities or any other notice whatsoever to or upon the
Company or such Guarantor with respect to the Indenture Obligations. Each
Guarantor hereby acknowledges communication to it of the terms of this Indenture
and the Securities and all of the provisions therein contained and consents to
and approves the same. Each Guarantor hereby expressly waives (to the extent
permitted by law) diligence, presentment, protest and demand for payment.
(b) Without prejudice to any of the rights or recourses which the
Trustee or the Holders may have against the Company, each Guarantor hereby
expressly waives (to the extent permitted by law) any right to require the
Trustee or the Holders to:
(i) initiate or exhaust any rights, remedies or recourse
against the Company, any Guarantor or any other Person;
(ii) value, realize upon, or dispose of any security of the
Company or any other Person held by the Trustee or the
Holders; or
(iii) initiate or exhaust any other remedy which the Trustee
or the Holders may have in law or equity;
before requiring or becoming entitled to demand payment from such Guarantor
under this Guarantee.
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Section 1406. The Guarantors Remain Obligated in Event the Company Is
-------------------------------------------------------
No Longer Obligated to Discharge Indenture Obligations.
- ------------------------------------------------------
It is the express intention of the Trustee and the Guarantors that if
for any reason the Company has no legal existence, is or becomes under no legal
obligation to discharge the Indenture Obligations owing to the Trustee or the
Holders by the Company or if any of the Indenture Obligations owing by the
Company to the Trustee or the Holders becomes irrecoverable from the Company by
operation of law or for any reason whatsoever, this Guarantee and the covenants,
agreements and obligations of the Guarantors contained in this Article Fourteen
shall nevertheless be binding upon the Guarantors, as principal debtor, until
such time as all such Indenture Obligations have been paid in full to the
Trustee and all Indenture Obligations owing to the Trustee or the Holders by the
Company have been discharged, or such earlier time as Section 402 shall apply to
the Securities and the Guarantors shall be responsible for the payment thereof
to the Trustee or the Holders upon demand.
Section 1407. Fraudulent Conveyance; Subrogation.
----------------------------------
(a) Any term or provision of this Guarantee to the contrary
notwithstanding, the aggregate amount of the Indenture Obligations guaranteed
hereunder shall be reduced to the extent necessary to prevent this Guarantee
from violating or becoming voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) Each Guarantor hereby waives all rights of subrogation or
contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under federal bankruptcy law) or
otherwise by reason of any payment by it pursuant to the provisions of this
Article Fourteen.
Section 1408. Guarantee Is in Addition to Other Security.
------------------------------------------
This Guarantee shall be in addition to and not in substitution for any
other guarantees or other security which the Trustee may now or hereafter hold
in respect of the Indenture Obligations owing to the Trustee or the Holders by
the Company and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of each of the Guarantors any other guarantees or
other security or any moneys or other assets which the Trustee may be entitled
to receive or upon which the Trustee or the Holders may have a claim.
Section 1409. Release of Security Interests.
-----------------------------
Without limiting the generality of the foregoing and except as
otherwise provided in this Indenture, each Guarantor hereby consents and agrees,
to the fullest extent permitted by applicable law, that the rights of the
Trustee hereunder, and the liability of the Guarantors hereunder, shall not be
affected by any and all releases for any
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purpose of any collateral, if any, from the Liens and security interests created
by any collateral document and that this Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Indenture Obligations is rescinded or must otherwise be returned by
the Trustee upon the insolvency, bankruptcy or reorganization of the Company or
otherwise, all as though such payment had not been made.
Section 1410. No Bar to Further Actions.
-------------------------
Except as provided by law, no action or proceeding brought or
instituted under Article Fourteen and this Guarantee and no recovery or judgment
in pursuance thereof shall be a bar or defense to any further action or
proceeding which may be brought under Article Fourteen and this Guarantee by
reason of any further default or defaults under Article Fourteen and this
Guarantee or in the payment of any of the Indenture Obligations owing by the
Company.
Section 1411. Failure to Exercise Rights Shall Not Operate as a
-------------------------------------------------
Waiver; No Suspension of Remedies.
- ---------------------------------
(a) No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, power, privilege or remedy under this
Article Fourteen and this Guarantee shall operate as a waiver thereof, nor shall
any single or partial exercise of any rights, power, privilege or remedy
preclude any other or further exercise thereof, or the exercise of any other
rights, powers, privileges or remedies. The rights and remedies herein provided
for are cumulative and not exclusive of any rights or remedies provided in law
or equity.
(b) Nothing contained in this Article Fourteen shall limit the right
of the Trustee or the Holders to take any action to accelerate the maturity of
the Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
Section 1412. Trustee's Duties; Notice to Trustee.
-----------------------------------
(a) Any provision in this Article Fourteen or elsewhere in this
Indenture allowing the Trustee to request any information or to take any action
authorized by, or on behalf of any Guarantor, shall be permissive and shall not
be obligatory on the Trustee except as the Holders may direct in accordance with
the provisions of this Indenture or where the failure of the Trustee to request
any such information or to take any such action arises from the Trustee's
negligence or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence,
powers or capacities of the Company, any Guarantor or the officers, directors or
agents acting or purporting to act on their respective behalf.
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Section 1413. Successors and Assigns.
----------------------
All terms, agreements and conditions of this Article Fourteen shall
extend to and be binding upon each Guarantor and its successors and permitted
assigns and shall enure to the benefit of and may be enforced by the Trustee and
its successors and assigns; provided, however, that the Guarantors may not
-------- -------
assign any of their rights or obligations hereunder other than in accordance
with Article Eight.
Section 1414. Release of Guarantee.
--------------------
Concurrently with the payment in full of all of the Indenture
Obligations, the Guarantors shall be released from and relieved of their
obligations under this Article Fourteen. Upon the delivery by the Company to
the Trustee of an Officer's Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise to the release
of this Guarantee was made by the Company in accordance with the provisions of
this Indenture and the Securities, the Trustee shall execute any documents
reasonably required in order to evidence the release of the Guarantors from
their obligations under this Guarantee. If any of the Indenture Obligations are
revived and reinstated after the termination of this Guarantee, then all of the
obligations of the Guarantors under this Guarantee shall be revived and
reinstated as if this Guarantee had not been terminated until such time as the
Indenture Obligations are paid in full, and each Guarantor shall enter into an
amendment to this Guarantee, reasonably satisfactory to the Trustee, evidencing
such revival and reinstatement.
This Guarantee shall terminate with respect to each Guarantor and
shall be automatically and unconditionally released and discharged as provided
in Section 1014(c).
Section 1415. Execution of Guarantee.
----------------------
To evidence the Guarantee, each Guarantor hereby agrees to execute the
guarantee substantially in the form set forth in Section 205, to be endorsed on
each Security authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of each Guarantor by its Chairman of the Board, its
President, its Chief Operating Officer or one of its Vice Presidents and
attested by an authorized officer. The signature of any of these officers on
the Securities may be manual or facsimile.
Section 1416. Guarantee Subordinate to Senior Guarantor Indebtedness.
------------------------------------------------------
Each Guarantor covenants and agrees, and each Holder of a Guarantee,
by his acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article, the Indebtedness
represented by the Guarantees is hereby made subordinate and subject in right of
payment as provided in this Article to the prior payment in full, in cash or
Cash Equivalents or in any other form
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<PAGE>
acceptable to the holders of Senior Guarantor Indebtedness, of all Senior
Guarantor Indebtedness; provided, however, that the Indebtedness represented by
-------- -------
this Guarantee in all respects shall rank equally with, or prior to, all
existing and future Indebtedness of such Guarantor that is expressly
subordinated to such Guarantor's Senior Guarantor Indebtedness.
This Article Fourteen shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue to
hold Senior Guarantor Indebtedness; and such provisions are made for the benefit
of the holders of Senior Guarantor Indebtedness; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
With respect to the relative rights of Holders and holders of Senior
Indebtedness and Senior Guarantor Indebtedness and for purposes of Section 1407,
Holders hereby acknowledge that Indebtedness under the Credit Agreement and any
guarantee by a Guarantor of such Indebtedness, in each case incurred in
accordance with the Indenture, shall be deemed to have been incurred
simultaneous with the incurrence by such Guarantor of its liability under its
Guarantee.
Section 1417. Payment Over of Proceeds Upon Dissolution of the
------------------------------------------------
Guarantor, etc.
- --------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of any Guarantor, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the benefit
of creditors or any other marshaling of assets or liabilities of any Guarantor,
then and in any such event:
(1) the holders of Senior Guarantor Indebtedness shall be entitled to
receive payment in full in cash or Cash Equivalents or in any other form
acceptable to the holders of Senior Guarantor Indebtedness, of all amounts due
on or in respect of all Senior Guarantor Indebtedness, before the Holders of the
Securities are entitled to receive any payment or distribution of any kind or
character (excluding Permitted Guarantor Junior Securities) on account of the
Guarantee of such Guarantor; and
(2) any payment or distribution of assets of any Guarantor of any kind
or character, whether in cash, property or securities (excluding Permitted
Guarantor Junior Securities), by set-off or otherwise, to which the Holders or
the Trustee would be entitled but for the provisions of this Article shall be
paid by the liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of Senior Guarantor Indebtedness or their
representative or representatives or to the trustee or trustees under
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<PAGE>
any indenture under which any instruments evidencing any of such Senior
Guarantor Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Guarantor Indebtedness held or
represented by each, to the extent necessary to make payment in full in cash or
Cash Equivalents or in any other form acceptable to the holders of Senior
Guarantor Indebtedness of all Senior Guarantor Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution to the holders of
such Senior Guarantor Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of any Guarantor of any kind or character,
whether in cash, property or securities, in respect of the Guarantee of such
Guarantor before all Senior Guarantor Indebtedness is paid in full, then and in
such event such payment or distribution (excluding Permitted Guarantor Junior
Securities) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
person making payment or distribution of assets of such Guarantor for
application to the payment of all Senior Guarantor Indebtedness remaining
unpaid, to the extent necessary to pay all Senior Guarantor Indebtedness in full
in cash or Cash Equivalents or in any other form acceptable to the holders of
Senior Guarantor Indebtedness, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Guarantor Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another Person or the liquidation or dissolution of any
Guarantor following the sale, assignment, conveyance, transfer, lease or other
disposal of all or substantially all of such Guarantor's properties or assets to
another Person upon the terms and conditions set forth in Article Eight shall
not be deemed a dissolution, winding up, liquidation, reorganization, assignment
for the benefit of creditors or marshaling of assets and liabilities of such
Guarantor for the purposes of this Section if the Person formed by such
consolidation or the surviving entity of such merger or the Person which
acquires by sale, assignment, conveyance, transfer, lease or other disposal of
all or substantially all of such Guarantor's properties and assets, as the case
may be, shall, as a part of such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposal, comply with the conditions set
forth in Article Eight.
Section 1418. Default on Senior Guarantor Indebtedness.
----------------------------------------
(a) Upon the maturity of any Senior Guarantor Indebtedness by lapse of
time, acceleration or otherwise, all principal thereof and interest thereon and
other amounts due in connection therewith shall first be paid in full or such
payment duly provided for before any payment is made by any of the Guarantors or
any Person acting on behalf of any of the Guarantors in respect of the Guarantee
of such Guarantor.
135
<PAGE>
(b) No payment (excluding payments in the form of Permitted Guarantor
Junior Securities) shall be made by any Guarantor in respect of its Guarantee
during the period in which Section 1417 shall be applicable, during any
suspension of payments in effect under Section 1203(a) of this Indenture or
during any Payment Blockage Period in effect under Section 1203(b) of this
Indenture.
(c) In the event that, notwithstanding the foregoing, any Guarantor
shall make any payment to the Trustee or the Holder of its Guarantee prohibited
by the foregoing provisions of this Section, then and in such event such payment
shall be paid over and delivered forthwith to the representatives of the holders
of Senior Guarantor Indebtedness or as a court of competent jurisdiction shall
direct.
Section 1419. Payment Permitted by Each of the Guarantors if No
-------------------------------------------------
Default.
- -------
Nothing contained in this Article, elsewhere in this Indenture or in
any of the Securities shall prevent any Guarantor, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of such Guarantor referred to in Section 1417 or under the
conditions described in Section 1418, from making payments at any time of
principal of, premium, if any, or interest on the Securities.
Section 1420. Subrogation to Rights of Holders of Senior Guarantor
----------------------------------------------------
Indebtedness.
- ------------
Subject to the payment in full of all Senior Guarantor Indebtedness in
cash or Cash Equivalents or in any other form acceptable to the holders of
Senior Guarantor Indebtedness, the Holders of the Securities shall be subrogated
to the rights of the holders of such Senior Guarantor Indebtedness to receive
payments and distributions of cash, property and securities applicable to the
Senior Guarantor Indebtedness until the principal of, premium, if any, and
interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of Senior Guarantor
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article, and no payments over pursuant to the provisions of this Article to the
holders of Senior Guarantor Indebtedness by Holders of the Securities or the
Trustee, shall, as among any Guarantor, its creditors other than holders of
Senior Guarantor Indebtedness, and the Holders of the Securities, be deemed to
be a payment or distribution by such Guarantor to or on account of the Senior
Guarantor Indebtedness.
Section 1421. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of Sections 1416 through 1429 of this Indenture are
intended solely for the purpose of defining the relative rights of the Holders
of the Securities on the one hand and the holders of Senior Guarantor
Indebtedness on the other
136
<PAGE>
hand. Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall (a) impair, as among any Guarantor, its
creditors other than holders of Senior Guarantor Indebtedness and the Holders of
the Securities, the obligation of such Guarantor, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of,
premium, if any, and interest on the Securities as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against each of the Guarantors of the Holders of the Securities
and creditors of each of the Guarantors other than the holders of Senior
Guarantor Indebtedness; or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Guarantor Indebtedness (1) in any case, proceeding,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Guarantors
referred to in Section 1417, to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 1418,
to prevent any payment prohibited by such Section or enforce their rights
pursuant to Section 1418(c).
Section 1422. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of any Guarantor owing to such Holder in the form required
in such proceedings and the causing of such claim to be approved.
Section 1423. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior Guarantor
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act by any such holder, or by any non-
compliance by any Guarantor with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of Subsection (a) of this Section
and notwithstanding any other provision contained herein, the holders of Senior
Guarantor Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of
137
<PAGE>
Senior Guarantor Indebtedness, do any one or more of the following: (1) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Senior Guarantor Indebtedness or any instrument evidencing the same or
any agreement under which Senior Guarantor Indebtedness is outstanding; (2)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Guarantor Indebtedness; (3) release any Person
liable in any manner for the collection or payment of Senior Guarantor
Indebtedness; and (4) exercise or refrain from exercising any rights against any
of the Guarantors and any other Person; provided , however, that in no event
-------- ------
shall any such actions limit the right of the Holders of the Securities to take
any action to accelerate the maturity of the Securities in accordance with the
provisions set forth in Article Five or to pursue any rights or remedies under
this Indenture or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article.
Section 1424. Notice to Trustee by Each of the Guarantors.
-------------------------------------------
(a) Each Guarantor shall give prompt written notice to the Trustee of
any fact known to such Guarantor which would prohibit the making of any payment
to or by the Trustee in respect of the Guarantee. Notwithstanding the
provisions of this Article or any provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the Securities,
unless and until the Trustee shall have received written notice thereof from any
Guarantor or a holder of Senior Guarantor Indebtedness or any trustee, fiduciary
or agent therefor; and, prior to the receipt of any such written notice, the
Trustee shall be entitled in all respects to assume that no such facts exist;
provided, however, that if the Trustee shall not have received the notice
- -------- -------
provided for in this Section prior to the date upon which by the terms hereof
any money may become payable for any purpose (including, without limitation, the
payment of the principal of, premium, if any, or interest on any Security or
other Indenture Obligations), then, anything herein contained to the contrary
notwithstanding but without limiting the rights and remedies of the holders of
Senior Guarantor Indebtedness or any trustee, fiduciary or agent thereof, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it after such
date; nor shall the Trustee be charged with knowledge of the curing of any such
default or the elimination of the act or condition preventing any such payment
unless and until the Trustee shall have received an Officers' Certificate to
such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and each Guarantor by a Person representing
himself to be a representative of one or more holders of Designated Senior
Guarantor Indebtedness (a "Senior Guarantor Representative") or a holder of
Senior Guarantor Indebtedness (or a trustee, fiduciary or agent therefor) to
establish that such notice has been given by a
138
<PAGE>
Senior Guarantor Representative or a holder of Senior Guarantor Indebtedness (or
a trustee, fiduciary or agent therefor); provided, however, that failure to give
-------- -------
such notice to the Company shall not affect in any way the ability of the
Trustee to rely on such notice. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Guarantor Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Guarantor Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 1425. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent.
- -----------------
Upon any payment or distribution of assets of any Guarantor referred
to in this Article, the Trustee and the Holders of the Securities shall be
entitled to rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of Senior Guarantor
Indebtedness and other indebtedness of such Guarantor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article, provided that the foregoing shall
--------
apply only if such court has been fully apprised of the provisions of this
Article.
Section 1426. Rights of Trustee as a Holder of Senior Guarantor
-------------------------------------------------
Indebtedness; Preservation of Trustee's Rights.
- ----------------------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Guarantor
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Guarantor Indebtedness, and nothing in this Indenture
shall deprive the Trustee of any of its rights as such holder. Nothing in this
Article shall apply to claims of, or payments to, the Trustee under or pursuant
to Section 606.
Section 1427. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting under this Indenture, the term
"Trustee" as
139
<PAGE>
used in this Article shall in such case (unless the context otherwise requires)
be construed as extending to and including such Paying Agent within its meaning
as fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however, that
-------- -------
Section 1426 shall not apply to the Company or any Affiliate of the Company if
it or such Affiliate acts as Paying Agent.
Section 1428. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of Securities to take any action to accelerate the maturity of
the Securities pursuant to the provisions described under Article Five and as
set forth in this Indenture or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article of the
holders, from time to time, of Senior Guarantor Indebtedness to receive the
cash, property or securities receivable upon the exercise of such rights or
remedies.
Section 1429. Trustee's Relation to Senior Guarantor Indebtedness.
---------------------------------------------------
With respect to the holders of Senior Guarantor Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of Senior Guarantor
Indebtedness shall be read into this Article against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior Guarantor
Indebtedness and the Trustee shall not be liable to any holder of Senior
Guarantor Indebtedness if it shall mistakenly in the absence of gross negligence
or willful misconduct pay over or deliver to Holders, the Company or any other
Person moneys or assets to which any holder of Senior Guarantor Indebtedness
shall be entitled by virtue of this Article or otherwise.
If an officer whose signature is on this Indenture no longer holds
that office at the time the Trustee authenticates a Security on which a
Guarantee is endorsed, such Guarantee shall be valid nevertheless.
140
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first above written.
CANANDAIGUA WINE COMPANY, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
BATAVIA WINE CELLARS, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
BISCEGLIA BROTHERS WINE CO.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
CALIFORNIA PRODUCTS COMPANY
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
<PAGE>
GUILD WINERIES & DISTILLERIES.
INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
--------------------
Name: Robert Sands
Title: Secretary
TENNER BROTHERS, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
WIDMER'S WINE CELLARS, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
BARTON INCORPORATED
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Vice President
<PAGE>
BARTON BRANDS, LTD.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Vice President
BARTON BEERS, LTD.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Vice President
BARTON BRANDS OF CALIFORNIA, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Vice President
BARTON BRANDS OF GEORGIA, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Vice President
<PAGE>
BARTON DISTILLERS IMPORT CORP.
By: /s/ Richard Sands
---------------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
-----------------------
Name: Robert Sands
Title: Vice President
BARTON FINANCIAL CORPORATION
By: /s/ David Sorce
-------------------------
Name: David Sorce
Title: Vice President
Attest: /s/ Charles T. Schlau
-----------------------
Name: Charles T. Schlau
Title: Treasurer
STEVENS POINT BEVERAGE CO.
By: /s/ Richard Sands
----------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
-----------------------
Name: Robert Sands
Title: Vice President
<PAGE>
MONARCH WINE COMPANY, LIMITED
PARTNERSHIP
By: BARTON MANAGEMENT, INC.
as corporate general partner
By: /s/ Richard Sands
---------------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
-----------------------
Name: Robert Sands
Title: Vice President
BARTON MANAGEMENT, INC.
By: /s/ Richard Sands
-------------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
-----------------------
Name: Robert Sands
Title: Vice President
VINTNERS INTERNATIONAL COMPANY,
INC.
By: /s/ Richard Sands
----------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
-----------------------
Name: Robert Sands
Title: Secretary
<PAGE>
CANANDAIGUA WEST INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Secretary
THE VIKING DISTILLERY, INC.
By: /s/ Richard Sands
---------------------
Name: Richard Sands
Title: President
Attest: /s/ Robert Sands
---------------------
Name: Robert Sands
Title: Vice President
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Patricia Kelly Acker
--------------------------
Name: Patricia Kelly Acker
Title: Vice President
Attest: /s/ D.C. Donovan
---------------------
Name: D.C. Donovan
Title: Assistant Secretary
<PAGE>
SCHEDULE I
INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES
1. $2,000,000 Ontario County Industrial Development Agency 1974
Industrial Development Revenue Bond (Canandaigua Wine Company, Inc. Facility).
Financing documents include (a) Mortgage and Indenture Trust dated September 1,
1974 (as amended and supplemented) from the Ontario County Industrial
Development Agency ("Agency") to The Chase Manhattan Bank, N.A. (as successor in
interest to Chase Lincoln First Bank) ("Trustee"); (b) Guaranty Agreement dated
September 1, 1974 from CWC to Trustee; (c) Ground Lease dated September 1, 1974
(as amended and supplemented) between CWC and Agency; and (d) Lease Agreement
dated September 1, 1974 (as amended and supplemented) between Company and
Agency. A supplemental bond in the amount of $2,370,000 was issued by the Agency
and certain amendments and supplements to the financing documents were entered
into in January, 1980. All such amendments and supplements are included in this
Schedule I.
2. Term Loan Facility, Revolving Credit Facility and Letter of Credit
Facility under the Third Amended and Restated Credit Agreement dated as of
September 1, 1995 among the Company, its principal operating subsidiaries and a
syndicate of banks for which The Chase Manhattan Bank acts as Administrative
Agent, as amended.
3. $130,000,000 aggregate principal amount of 8 3/4% Senior Subordinated
Notes due 2003 and Guarantees thereof pursuant to Indenture dated as of December
27, 1993 between CWC, certain of its subsidiaries and The Chase Manhattan Bank
(successor by merger to Chemical Bank), as trustee.
4. Capital leases for equipment to which CWC and certain subsidiaries
are parties.
5. One loan each against cash surrender values of two officer life
insurance policies, one by Connecticut Mutual Life Insurance Company and one by
Phoenix Mutual Life Insurance Company. Borrowings are usually made annually
against increased cash surrender values.
6. Guarantee by CWC of the obligations of Barton Brands of California,
Inc., ("BBC") under Equipment Lease, Real Estate Sublease and Packaging Services
Agreement between BBC and Joseph E. Seagrams & Sons, Inc.
7. Capital Lease for the Escalon California Facility.
8. Operating Agreement of Polyphenolics, LLC effective as of September
14, 1995 between Canandaigua Wine Company, Inc. and Second Nature Technology,
Inc., as amended.
<PAGE>
SCHEDULE II
ENCUMBRANCES AND RESTRICTIONS
OF THE COMPANY AND ITS SUBSIDIARIES
1. Term Loan Facility, Revolving Credit Facility and Letter of Credit
Facility under the Third Amended and Restated Credit Agreement dated as of
September 1, 1995 among the Company, its principal operating subsidiaries and a
syndicate of banks for which The Chase Manhattan Bank acts as Administrative
Agent, as amended.
2. Restated Certificate of Incorporation of Canandaigua Wine Company, Inc.
(provides for a dividend preference on the Class A Common Stock).
3. $2,000,000 Ontario County Industrial Development Agency 1974 Industrial
Development Revenue Bond (Canandaigua Wine Company, Inc. Facility). Financing
documents include (a) Mortgage and Indenture of Trust dated September 1, 1974
(as amended and supplemented) from the Ontario County Industrial Development
Agency ("Agency") to The Chase Manhattan Bank, N.A. (as successor in interest to
Chase Lincoln First Bank) ("Trustee"); (b) Guaranty Agreement dated September 1,
1974 from CWC to Trustee; (c) Ground Lease dated September 1, 1974 (as amended
and supplemented) between CWC and Agency; and (d) Lease Agreement dated
September 1, 1974 (as amended and supplemented) between Company and Agency. A
supplemental bond in the amount of $2,370,000 was issued by the Agency and
certain amendments and supplements to the financing documents were entered into
in January, 1980. All such amendments and supplements are included in this
Schedule II.
4. $130,000,000 aggregate principal amount of 8 3/4% Senior Subordinated
Notes due 2003 and Guarantees thereof pursuant to Indenture dated as of December
27, 1993 between CWC, certain of its subsidiaries and The Chase Manhattan Bank
(successor by merger to Chemical Bank), as trustee.
5. Operating Agreement of Polyphenolics, LLC effective as of September 14,
1995 between Canandaigua Wine Company, Inc. and Second Nature Technology, Inc.
as amended.
148
<PAGE>
EXHIBIT A
---------
INTERCOMPANY NOTE
-----------------
_____________, 19__
Evidences of all loans or advances ("Loans") made hereunder shall be
reflected on the grid attached hereto. FOR VALUE RECEIVED, ______________, a
________________ corporation (the "Maker"), HEREBY PROMISES TO PAY ON DEMAND to
the order of ________________ (the "Holder") the principal sum of the aggregate
unpaid principal amount of all Loans (plus accrued interest thereon) at any time
and from time to time made hereunder which has not been previously paid.
All capitalized terms used herein that are defined in, or by reference
in, the Indenture among Canandaigua Wine Company, Inc., a Delaware Corporation
(the "Company"), the guarantors a party thereto and Harris Trust and Savings
Bank, as trustee, dated as of October 29, 1996 (the "Indenture"), have the
meanings assigned to such terms therein, or by reference therein, unless
otherwise defined.
ARTICLE I
TERMS OF INTERCOMPANY NOTE
Section 1.01 Note Forgivable. Unless the Maker of the Loan hereunder
---------------
is either of the Company or any Guarantor, the Holder may not forgive any
amounts owing under this intercompany note.
Section 1.02 Interest: Prepayment. (a) The interest rate ("Interest
---------------------
Rate") on the Loans shall be a rate per annum reflected on the grid attached
hereto.
(b) The interest, if any, payable on each of the Loans shall accrue from
the date such Loan is made and, subject to Section 2.01, shall be payable upon
demand of the Holder.
(c) If the principal or accrued interest, if any, of the Loans is not
paid on the date demand is made, interest on the unpaid principal and interest
will accrue at a rate equal to the Interest Rate, if any, plus 100 basis points
per annum from maturity until the principal and interest on such Loans are fully
paid.
(d) Subject to Section 2.01, any amounts hereunder may be prepaid at any
time by the Maker.
A-1
<PAGE>
Section 1.03 Subordination. All loans made to either of the Company or
-------------
any Guarantor shall be subordinated in right of payment to the payment and
performance of the obligations of the Company and any Subsidiary under the
Indenture, the Securities, the Guarantees or any other Indebtedness ranking
senior to or pari passu with the Securities, or any Guarantees, including,
without limitation, any Indebtedness incurred under the Credit Agreement;
provided that with respect to a Subsidiary in any specific instance, such
- --------
Subsidiary is also an obligor under the Indenture, the Securities, a Guarantee
or such other senior or pari passu Indebtedness, as the case may be, whether as
a borrower, guarantor or pledgor of collateral.
ARTICLE II
EVENTS OF DEFAULT
Section 2.01 Events of Default. If after the date of issuance of this
-----------------
Loan (i) an Event of Default has occurred under the Indenture, (ii) an "Event of
Default" (as defined) has occurred under the Credit Agreement, or any
refinancing of the Credit Agreement or (iii) an "event of default" (as defined)
has occurred on any other Indebtedness of the Company or any Guarantor, then (x)
in the event the Maker is not either one of the Company or a Guarantor, all
amounts owing under the Loans hereunder shall be immediately due and payable to
the Holder, and (y) in the event the Maker is either the Company or a Guarantor,
the amounts owing under the Loans hereunder shall not be due and payable;
provided, however, that if such Event of Default or event of default has been
- -------- -------
waived, cured or rescinded, such amounts shall no longer be due and payable in
the case of clause (x), and such amounts may be payable in the case of clause
(y). If the Holder is a Subsidiary, then the Holder hereby agrees that if it
receives any payments or distributions on any Loan from the Company or a
Guarantor which is not payable pursuant to clause (y) of the prior sentence
after any Event of Default or event or default described in clauses (i), (ii) or
(iii) above has occurred, is continuing and has not been waived, cured or
rescinded, it will pay over and deliver forthwith to the Company or such
Guarantor, as the case may be, all such payments and distributions.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments, Etc. No amendment or waiver of any provision
----------------
of this intercompany note, or consent to depart herefrom is permitted at any
time for any reason, except with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities.
Section 3.02 Assignment. No party to this Agreement may assign, in
----------
whole or in part, any of its rights and obligations under this intercompany
note, except to its legal successor in interest.
A-2
<PAGE>
Section 3.03 Third Party Beneficiaries. The holders of the Securities
-------------------------
or any other Indebtedness ranking pari passu with or senior to, the Securities
or any Guarantees, including without limitation, any Indebtedness incurred under
the Credit Agreement, shall be third party beneficiaries to this intercompany
note and shall have the right to enforce this intercompany note against the
Company or any of its Subsidiaries.
Section 3.04 Headings. Article and Section headings in this
--------
intercompany note are included for convenience of reference only and shall not
constitute a part of this intercompany note for any other purpose.
Section 3.05 Entire Agreement. This intercompany note sets forth the
----------------
entire agreement of the parties with respect to its subject matter and
supersedes all previous understandings, written or oral, in respect thereof.
Section 3.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
Section 3.07 Waivers. The Maker hereby waives presentment, demand for
-------
payment, notice of protest and all other demands and notices in connection with
the delivery, acceptance, performance or enforcement hereof.
By:
---------------------------------
Name:
Title:
A-3
<PAGE>
BORROWINGS, MATURITIES, AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Maturity of Amount
Borrowing/ Borrowing/ Principal Paid Unpaid Principal Notation
Date Principal Principal or Prepaid Balance Made by
- ------ ---------- ----------- -------------- ---------------- --------
<S> <C> <C> <C> <C> <C>
</TABLE>
A-4
<PAGE>
Exhibit B
---------
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
-------------------------------
On or after December 9, 1996
HARRIS TRUST AND SAVINGS BANK
___________________________
___________________________
Attention: Corporate Trust Division
Re: Canandaigua Wine Company, Inc. (the "Company") 8 3/4% Series __
Senior
Subordinated Notes due 2003 (the "Securities")
Ladies and Gentlemen:
This letter relates to U.S. $______ principal amount of Securities
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of October 29,
1996 relating to the Securities (the "Indenture"), we hereby certify that (1) we
are the beneficial owner of such principal amount of Securities represented by
the Temporary Certificate and (2) we are a person outside the United States to
whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to issue a certificated Security
representing the undersigned's interest in the principal amount of Securities
represented by the Temporary Certificate, all in the manner provided by the
Indenture.
<PAGE>
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. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
---------------------------
Authorized Signature
B-2
<PAGE>
Exhibit C
----------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
--------------------------------------------------------
__________________, ________
Canandaigua Wine Company, Inc.
c/o Harris Trust and Savings Bank
_________________________
_________________________
Attention: Corporate Trust Division
Re: Canandaigua Wine Company, Inc. (the "Company") 8 3/4% Series __ Senior
Subordinated Notes due 2003 (the "Securities")
----------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $_________ aggregate principal
amount of the Securities:
1. We understand that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be sold
within the United States or to, or for the benefit of, U.S. Persons except as
permitted in the following sentence. We agree on our own behalf and on behalf
of any investor account for which we are purchasing the Securities to offer,
resell, pledge or otherwise transfer such Securities prior to the date which is
three years after the later of the date of original issue and the last date on
which the Company or any affiliate of the Company was the owner of such
Securities, or any predecessor thereto (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement which
has been declared effective under the Securities Act, (c) for so long as the
Securities are eligible for resale pursuant to Rule 144A under the Securities
Act, inside the United States to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB to whom notice is given that the transfer is being
made in reliance on Rule 144A, (d) outside the United States pursuant to offers
and sales to non-U.S. Persons in an Offshore Transaction within the meaning of
<PAGE>
Regulations S under the Securities Act, (e) inside the United States to an
institutional "accredited investor" within the meaning of subparagraph (a)(1),
(2), (3) or (7) of Rule 501 under the Securities Act that is acquiring the
Securities for its own account or for the account of such an institutional
"accredited investor" for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
and the property of such investor account or accounts be at all times within our
or their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Securities
is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from the
transferee substantially in the form of this letter to the Trustee, which shall
provide, among other things, that the transferee is an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act and that it is acquiring such Securities for investment
purposes and not for distribution in violation of the Securities Act. We
acknowledge that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Securities pursuant to clauses (d), (e) and (f) above to require the
delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Trustee. As used herein, the terms "United
States", "Offshore Transaction", and "U.S. Person" have the respective meanings
given to them by Regulation S under the Securities Act.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Securities for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act or the securities laws of any state of the
United States or any other applicable jurisdiction; provided that the
disposition of our property and the property of any accounts for which we are
acting as fiduciary shall remain at all times within our and their control; and
we 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 Securities,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
3. We are acquiring the Securities purchased by us for our own account or
for one or more accounts as to each of which we exercise sole investment
discretion.
4. We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer
C-2
<PAGE>
have been complied with. We further understand that the Notes purchased by us
will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph. We
further agree to provide to any person acquiring any of the Notes from us a
notice advising such person that resales of the Notes are restricted as stated
herein and that certificates representing the Notes will bear a legend to that
effect.
5. We acknowledge that you, the Company, the Trustee and others will rely
upon our acknowledgments, representations and agreements set forth herein, and
we agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein cease to be accurate and complete.
6. We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
By:
--------------------------
(Name of Purchaser)
Date:
------------------
C-3
<PAGE>
Upon transfer, the Securities should be registered in the name of the new
beneficial owner as follows:
Name:_______________________________________________________________
Address:_____________________________________________________________
Taxpayer ID Number:___________________________________________________
C-4
<PAGE>
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
--------------------------
________________, _____
Harris Trust and Savings Bank
________________________
________________________
________________________
Attention: Corporate Trust Division
Re: Canandaigua Wine Company, Inc. (the "Company") 8 3/4% Series ___
Senior
Subordinated Notes due 2003 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the facilities
of a designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been pre-arranged with
a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
<PAGE>
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
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. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ___________________________
Authorized Signature
D-2
<PAGE>
APPENDIX I
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- -----------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- ---------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- ---------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES FOR SERIES B SECURITIES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Security occurring prior to the date
which is the earlier of the date of an effective Registration Statement or
October 29, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
<PAGE>
If none of the foregoing boxes is checked, the Trustee or other Security
Registrar shall not be obligated to register this Security in the name of any
Person other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 307 of the Indenture
shall have been satisfied.
Date: _______________________
_______________________________________
NOTICE: The signature to this assignment
must correspond with the name as written upon
the face of the within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee: _____________________________
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:__________________ _________________________________________
NOTICE: To be executed by an authorized signatory
2
<PAGE>
APPENDIX II
FORM OF TRANSFER NOTICE
I or we assign and transfer this Security to:
- --------------------------------------------
Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably
appoint_____________________________________________________________________
[Agent], to transfer this Security on the books of the Company. The Agent may
substitute another to act for him.
Dated Signed
-------------------- ---------------------------------
(Sign exactly as name appears on the other side of this Security)
[Signature must be guaranteed by an eligible Guarantor Institution (banks, stock
brokers, savings and loan associations and credit unions) with membership in an
approved guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17 Ad-15]
<PAGE>
EXHIBIT 4.8
CANANDAIGUA WINE COMPANY, INC.
$65,000,000
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2003
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------
October 29, 1996
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
Dear Sirs:
Canandaigua Wine Company, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to certain purchasers (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement dated October 24,
1996 (the "Purchase Agreement"), $65,000,000 principal amount of its 8 3/4%
Series B Senior Subordinated Notes due 2003 (the "Notes") to be unconditionally
guaranteed on a senior subordinated basis (the "Guarantees" and together with
the Notes, the "Securities") by certain of the Company's subsidiaries
signatories hereto (collectively, the "Guarantors"). The Securities are to be
issued pursuant to an indenture dated as of October 29, 1996 (the "Indenture"),
between the Company, the Guarantors and First Chicago Corporation, as trustee
(the "Trustee"). Capitalized terms used but not specifically defined herein are
defined in the Purchase Agreement. As an inducement to the Initial Purchasers
to enter into the Purchase Agreement and in satisfaction of a condition to your
obligations thereunder, the Company and the Guarantors agree with you, for the
benefit of the holders of the Securities (including the Initial Purchasers) (the
"Holders"), as follows:
<PAGE>
1. Registered Exchange Offer. The Company and the Guarantors shall
-------------------------
prepare and, not later than 45 days following the Closing Date, shall file with
the Commission a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with respect to a
proposed offer (the "Registered Exchange Offer") to the Holders to issue and
deliver to such Holders, in exchange for the Securities, a like aggregate
principal amount of debt securities of the Company guaranteed by the Guarantors
(the "Exchange Securities") identical in all material respects to the
Securities, except for the transfer restrictions relating to the Securities,
shall use its best efforts to cause the Exchange Offer Registration Statement to
become effective under the Securities Act within 105 days of the Closing Date
and shall keep the Exchange Offer Registration Statement effective for not less
than 30 days (or longer, if required by applicable law) after the date notice of
the Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period"). The Exchange Securities will be issued
under the Indenture or an indenture (the "Exchange Securities Indenture")
between the Company, the Guarantors and the Trustee or such other bank or trust
company reasonably satisfactory to you, as trustee (the "Exchange Securities
Trustee"), such indenture to be identical in all material respects with the
Indenture except for the transfer restrictions relating to the Securities (as
described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company and the Guarantors shall promptly commence the Registered Exchange
Offer, it being the objective of such Registered Exchange Offer to enable each
Holder electing to exchange Securities for Exchange Securities (assuming that
such Holder is not an affiliate of the Company or the Guarantors within the
meaning of the Securities Act, acquires the Exchange Securities in the ordinary
course of such Holder's business and has no arrangements or understandings with
any person to participate in the distribution of the Exchange Securities) to
trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States. The Company and the Guarantors acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
(i) each Holder which is a broker-dealer electing to exchange Securities,
acquired for its own account as a result of market making activities or other
trading activities, for Exchange Securities (an "Exchanging Dealer"), is
required to deliver a prospectus containing the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and in Annex C hereto
in the "Plan of Distribution" section of such prospectus in connection with a
sale of any such Exchange Securities received by such Exchanging Dealer,
pursuant to the Registered Exchange Offer and (ii) if any Initial Purchaser
elects to sell Exchange Securities acquired in
2
<PAGE>
exchange for Securities constituting any portion of an unsold allotment it is
required to deliver a prospectus, containing the information required by items
507 and/or 508 of Regulation S-K under the Securities Act, as applicable, in
connection with such a sale.
In connection with the Registered Exchange Offer, the Company and the
Guarantors shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all applicable laws
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer, the Company and the Guarantors shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder of Securities,
Exchange Securities equal in principal amount to the Securities of such
Holder so accepted for exchange.
The Company and the Guarantors shall make available for a period of
180 days after the consummation of the Registered Exchange Offer, a copy of the
prospectus
3
<PAGE>
forming part of the Exchange Offer Registration Statement to any broker-dealer
for use in connection with any resale of any Exchange Securities.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Securities surrendered in exchange therefor or, if no interest
has been paid on the Securities, from the date of original issue of the
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company and the Guarantors that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act, (iii) such Holder is not an affiliate
of the Company or any Guarantor within the meaning of the Securities Act and
(iv) if the Holder is a broker-dealer that will receive Exchange Securities for
its own account in exchange for Securities that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities to the extent required by the Commission.
Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Exchange Offer Registration Statement and
any amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not include an untrue statement of a
material fact or omit 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.
2. Shelf Registration. If, (a) because of any change in law or
------------------
applicable interpretations thereof by the Commission's staff, the Company and
the Guarantors determine that they are not permitted to effect the Registered
Exchange Offer as contemplated by Section 1 hereof, or (b) if for any other
reason the Registered Exchange Offer is not consummated within 135 days of the
date hereof, or (c) if any Initial Purchaser so requests with respect to
Securities not eligible to be exchanged for Exchange Securities in a Registered
Exchange Offer and held by it following consummation of the
4
<PAGE>
Registered Exchange Offer, or (d) if any applicable laws or applicable
interpretations do not permit any Holder (including an Initial Purchaser, but
excluding any Exchanging Dealer) to participate in such Registered Exchange
Offer, or (e) any Holder that participates in the Registered Exchange Offer
(other than an Exchanging Dealer), does not receive freely tradable Exchange
Securities in exchange for tendered Securities, then the following provisions
shall apply:
(a) The Company and the Guarantors shall use their best efforts as
promptly as practicable to file with the Commission and thereafter shall use its
best efforts to cause to be declared effective a registration statement on an
appropriate form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined below) by the Holders from time to
time in accordance with the methods of distribution elected by such Holders and
set forth in such registration statement (hereafter, a "Shelf Registration
Statement" and, together with any Exchange Offer Registration Statement, a
"Registration Statement").
(b) The Company and the Guarantors shall use their best efforts to
keep the Shelf Registration Statement continuously effective in order to permit
the prospectus forming part thereof to be usable by Holders for a period of
three years from the Closing Date or such shorter period that will terminate
when all the Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or pursuant to Rule 144 under
the Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Company and the Guarantors shall be deemed not to
have used their best efforts to keep the Shelf Registration Statement effective
during the requisite period if any of them voluntarily takes any action that
would result in Holders of Securities covered thereby not being able to offer
and sell such Securities during that period, unless such action, in the opinion
of the Company and the Guarantors after consulting with legal counsel, is
required by applicable law.
(c) Notwithstanding any other provisions hereof, the Company and the
Guarantors will ensure that (i) any Shelf Registration Statement and any
amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus does not include an untrue statement of a material
fact or omit 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.
5
<PAGE>
3. Liquidated Damages. (a) The parties hereto agree that the
------------------
Holders of Securities will suffer damages if the Company and the Guarantors fail
to fulfill their obligations under Section 1 or Section 2, as applicable, and
that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement is not filed with the
Commission on or prior to 45 days after the Closing Date, (ii) the Exchange
Offer Registration Statement or, as the case may be, the Shelf Registration
Statement, is not declared effective within 105 days after the Closing Date,
(iii) the Exchange Offer is not consummated on or prior to 135 days after the
Closing Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 105 days after the Closing Date but shall thereafter cease to
be effective (at any time that the Company and the Guarantors are obligated to
maintain the effectiveness thereof) without being succeeded within 30 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
and the Guarantors will pay liquidated damages to each holder of Transfer
Restricted Securities (as defined below) in an amount equal to $0.192 per week
per $1,000 principal amount of the Securities constituting Transfer Restricted
Securities held by such holder until (i) the applicable Registration Statement
is filed, (ii) the Exchange Registration Statement is declared effective and the
Exchange Offer is consummated, (iii) the Shelf Registration statement is
declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be. Following the cure of all Registration Defaults,
the accrual of liquidated damages will cease. "Transfer Restricted Securities"
means each Security until (i) the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Exchange Offer, (ii) the date
on which such Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Securities Act or is salable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company and the Guarantors shall not be required to pay liquidated damages
to the holder of Transfer Restricted Securities if such holder: (a) failed to
comply with its obligations to make the representations in the second to last
paragraph of Section 1; or (b) failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
The Exchange Offer shall be deemed "Consummated" for purposes of this
Agreement upon the occurrence of (i) the filing and effectiveness under the Act
of the Exchange Offer Registration Statement relating to the Exchange Securities
to be issued in the Exchange Offer, (ii) the maintenance of such Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period no less than the minimum period required pursuant to Section 1 of this
Agreement, and (iii) the delivery by the Company to the Registrar under the
Indenture of Exchange Securities in the same
6
<PAGE>
aggregate principal amount as the aggregate principal amount of Securities that
were tendered by Holders of Securities pursuant to the Exchange Offer.
(b) The Company shall notify the Trustee and Paying Agent under the
Indenture immediately upon the happening of each and every Registration Default.
The Company shall pay the liquidated damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be the company for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m. New York City time on the next interest payment date specified by the
Indenture and the Securities, sums sufficient to pay the liquidated damages then
due. The liquidated damages due shall be payable on each interest payment date
specified by the Indenture and the Securities to the record holder entitled to
receive this interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the applicable
Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to be declared effective or to remain effective, or
(iii) the Exchange Offer Registration Statement to be declared effective and the
Exchange Offer to be consummated, to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
-----------------------
Statement, the following provisions shall apply:
(a) The Company and the Guarantors shall (i) furnish to you, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that any of the Initial Purchasers (with respect to
any portion of an unsold allotment from the original offering) are participating
in the Registered Exchange Offer or the Shelf Registration, shall use reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as you reasonably may propose; (ii) with respect to an Exchange
Offer Registration Statement, include the information set forth in Annex A
hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto in
the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and (iii) if requested by any Initial Purchaser, include the
information required by Items 507 or 508
7
<PAGE>
of Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement.
(b) The Company and the Guarantors shall advise you and, in the case
of a Shelf Registration Statement, the Holders (if applicable), and, if
requested by you or any such Holder, confirm such advice in writing (which
advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite changes
have been made):
(i) when the Registration Statement and any amendment thereto has been
filed with the Commission and when the Registration Statement or any post-
effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company or any Guarantor of any
notification with respect to the suspension of the qualification of the
Securities or the Exchange Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of any
changes in the Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Company and the Guarantors will use their best efforts to
obtain the withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(d) The Company and the Guarantors will furnish to each Holder of
Securities included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits (including those
incorporated by reference).
8
<PAGE>
(e) The Company and the Guarantors will deliver to each Holder of
Securities included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each preliminary
prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the Company and
the Guarantors consent to the use of the prospectus or any amendment or
supplement thereto by each of the selling Holders of Securities in connection
with the offering and sale of the Securities covered by the prospectus or any
amendment or supplement thereto.
(f) The Company and the Guarantors will furnish to each Exchanging
Dealer or Initial Purchaser, as applicable, which so requests, without charge,
at least one copy of the Exchange Offer Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, and,
if the Exchanging Dealer or Initial Purchaser, as applicable, so requests in
writing, all exhibits (including those incorporated by reference).
(g) The Company and the Guarantors will, during the Exchange Offer
Registration Period or the Shelf Registration Period, as applicable, promptly
deliver to each Exchanging Dealer or Initial Purchaser, as applicable, without
charge, as many copies of the prospectus included in such Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable, and any
amendment or supplement thereto as such Exchanging Dealer or Initial Purchaser,
as applicable, may reasonably request for delivery by (i) such Exchanging Dealer
in connection with a sale of Exchange Securities received by it pursuant to the
Registered Exchange Offer or (ii) such Initial Purchaser in connection with a
sale of Exchange Securities received by it in exchange for Securities
constituting any portion of an unsold allotment; and the Company and the
Guarantors consent to the use of the prospectus or any amendment or supplement
thereto by any such Exchanging Dealer or Initial Purchaser, as applicable, as
aforesaid.
(h) Prior to any public offering of Securities or Exchange Securities
pursuant to any Registration Statement, the Company and the Guarantors will use
their best efforts to register or qualify or cooperate with the Holders of
Securities included therein and their respective counsel in connection with the
registration or qualification of such securities for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holder reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the Securities
or Exchange Securities covered by such Registration Statement; provided,
--------
however, that neither the Company nor any Guarantor will be required to qualify
- -------
generally to do business in any jurisdiction where it is not then so qualified
or to take any
9
<PAGE>
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(i) The Company and the Guarantors will cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of certificates
representing Securities or Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such denominations
and registered in such names as Holders may request in writing prior to sales of
Securities or Exchange Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs
(b)(ii) through (v) above during the period for which the Company and the
Guarantors are required to maintain an effective Registration Statement, the
Company and the Guarantors will promptly prepare a post-effective amendment to
the Registration Statement or a supplement to the related prospectus or file any
other required document so that, as so amended or supplemented, the prospectus
will not include 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.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities or
Exchange Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities or Exchange Securities, as the case may
be, in a form eligible for deposit with The Depository Trust Company.
(l) The Company and the Guarantors will comply with all applicable
rules and regulations of the Commission and will make generally available to its
security holders as soon as practicable after the effective date of the
applicable Registration Statement an earnings statement (which need not be
audited) satisfying the provisions of Section 11(a) of the Securities Act.
(m) The Company and the Guarantors will cause the Indenture or the
Exchange Securities Indenture, as the case may be, to be qualified under the
Trust Indenture Act as required by applicable law in a timely manner.
(n) The Company and the Guarantors may require each Holder of
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company and the Guarantors such information regarding the Holder and the
distribution of such Securities as the Company and the Guarantors may from time
to time reasonably require for inclusion in such Registration Statement, and the
Company and the Guarantors
10
<PAGE>
may exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
(o) The Company and the Guarantors shall enter into such customary
agreements (including, if requested, an underwriting agreement in customary
form) and take all such other action, if any, as Holders of a majority in
aggregate principal amount of Securities or Exchange Securities being sold or
the managing underwriters (if any) shall reasonably request in order to
facilitate the disposition of Securities pursuant to any Shelf Registration
Statement. If CSI or an affiliate of CSI acts as a managing underwriter in any
such registered offering, to the extent required by applicable law or
regulations, a "qualified independent underwriter" (as defined in Rule
2720(b)(15) of the National Association of Securities Dealers, Inc. Conduct
Rules) shall be retained by the Company and the Guarantors with the consent of
CSI (which consent shall not be unreasonably withheld or delayed), and the
Company and the Guarantors shall pay all fees and expenses (other than
underwriting commissions and discounts) of such qualified independent
underwriter.
(p) In the case of a Shelf Registration Statement, the Company and the
Guarantors shall (i) make reasonably available for inspection by a
representative of, and Special Counsel (as defined) acting for, a majority in
aggregate principal amount of the Holders, and any underwriter participating in
any disposition pursuant to a Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties of the
Company and the Subsidiaries and (ii) use reasonable efforts to have the
Company's and the Subsidiaries' officers, directors, employees, accountants and
auditors supply all relevant information reasonably requested by such
representative, counsel or any such underwriter (an "Inspector") in connection
with any such Registration Statement, subject to executing a confidentiality
undertaking in customary form with respect to confidential or proprietary
information of the Company or such Subsidiary.
(q) In the case of a Shelf Registration Statement, the Company and the
Guarantors, if requested by Holders of a majority in aggregate principal amount
of the Securities and Exchange Securities being sold, their Special Counsel, or
the managing underwriters (if any) in connection with any Shelf Registration
Statement, shall use their best efforts to cause (w) their counsel to deliver an
opinion relating to the Registration Statement and the Securities or the
Exchange Securities, as applicable, in customary
11
<PAGE>
form, (x) their officers to execute and deliver all customary documents and
certificates requested by Holders of a majority in aggregate principal amount of
the Securities and Exchange Securities being sold, their Special Counsel, or the
managing underwriters (if any) and (y) their independent public accountants to
provide a comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
(r) The Company and the Guarantors will use reasonable efforts to
cause the Securities or the Exchange Securities, as applicable, covered by a
Registration Statement to be rated with an appropriate rating agency, if so
requested by Holders of a majority in aggregate principal amount of Securities
covered by such Registration Statement or the Exchange Securities, as the case
may be, or by the managing underwriters, if any.
(s) The Company and the Guarantors will use reasonable efforts to
cause the Securities or the Exchange Securities, as applicable, relating to such
Registration Statement to be listed on each securities exchange, if any, on
which debt securities issued by the Company are then listed, if so requested by
Holders of a majority in aggregate principal amount of Securities covered by
such Registration Statement or the Exchange Securities, as the case may be, or
by the managing underwriters, if any.
(t) In the case of a Shelf Registration Statement, each Holder of
Securities agrees by acquisition of such Securities that, upon receipt of any
notice of the Company and the Guarantors pursuant to Section 4(b)(ii) through
(v) hereof, such Holder will discontinue disposition of such Securities covered
by such Registration Statement until such Holder's receipt of copies of the
supplemental or amended prospectus contemplated by Section 4(j) hereof, or until
advised in writing (the "Advice") by the Company and the Guarantors that the use
of the applicable prospectus may be resumed. If the Company and the Guarantors
shall give any notice under Section 4(b)(ii) through (v) during the period that
the Company and the Guarantors are required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness Period
shall be extended by the number of days during such period from and including
the date of the giving of such notice to and including the date when each seller
of Securities covered by such Registration Statement shall have received (x) the
copies of the supplemental or amended prospectus contemplated by Section 4(j)
(if an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
5. Registration Expenses. The Company and the Guarantors will bear
---------------------
all expenses incurred in connection with the performance of their obligations
under Sections 1, 2, 3 and 4 hereof, including all fees and expenses of a
qualified independent underwriter, if any, and the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders for the reasonable fees
and disbursements of one firm of attorneys (in addition to local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Securities and
the Exchange Securities to be sold pursuant to a
12
<PAGE>
Registration Statement (the "Special Counsel") acting for the Initial Purchasers
or Holders in connection therewith, provided that the Company and the Guarantors
shall not be liable for more than an aggregate of $25,000 of fees and expenses
of Special Counsel. The Holders shall be responsible for all underwriting
commissions and discounts in the case of a Shelf Registration Statement.
6. Indemnification. (a) In the event of a Shelf Registration
---------------
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or Initial Purchaser, as
applicable, as contemplated in Section 4(g) above, the Company and the
Guarantors, jointly and severally, shall indemnify and hold harmless each Holder
and each person, if any, who controls such Holder within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and
(ii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the reasonable fees and disbursements of
counsel chosen by the indemnified party) reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental or regulatory agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission;
provided, however, that (i) this indemnity shall not apply to any loss,
- -------- --------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company and the
Guarantors by you or any Holder expressly for use in such Registration Statement
and (ii) this indemnity with respect to any untrue statement or alleged untrue
statement or omission or alleged omission in any related preliminary prospectus
shall not inure to the benefit of any indemnified party from whom the person
asserting any such loss, claim damage or liability received Securities or
Exchange Securities if such persons did not receive a copy of the final
prospectus at or prior to the confirmation of the sale of such Securities or
Exchange Securities to such person in any case where such delivery is required
by the Securities Act and the untrue statement or omission of material fact
contained in the related preliminary prospectus was
13
<PAGE>
corrected in the final prospectus unless such failure to deliver the final
prospectus was a result of noncompliance by the Company and the Guarantors with
Sections 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder agrees
to indemnify and hold harmless the Company, the Guarantors, each of their
respective directors, officers, agents and employees and each person, if any,
who controls the Company or each Guarantor within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act and the directors,
officers, agents and employees of such controlling persons against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 6(a) hereof, as incurred, arising out of or based upon any untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment or supplement thereto) in reliance on
and in conformity with written information furnished to the Company and the
Guarantors by such Holder expressly for use in the Registration Statement (or in
such amendment or supplement); provided, however, that no such Holder shall be
-------- -------
liable for any indemnity claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Securities or Exchange
Securities pursuant to the Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any claim or action
commenced against it in respect of which indemnity may be sought hereunder;
provided, however, that failure to so notify an indemnifying party shall not
- -------- -------
relieve such indemnifying party from any obligation that it may have pursuant to
this Section except to the extent it has been materially prejudiced by such
failure; provided "further," however, that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than on account of this Section. If any such
claim or action shall be brought against an indemnified party, the indemnified
party shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
-------- -------
that an indemnified party will have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based on
14
<PAGE>
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party and
indemnifying party (in which case the indemnifying party will not have the right
to direct the defense of such action on behalf of the indemnified party) or (4)
the indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent, but if
settled with its written consent (which consent shall not be unreasonably
withheld) or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) If a claim by an indemnified party for indemnification under this
Section 6 is found unenforceable in a final judgment by a court of competent
jurisdiction (not subject to further appeal or review) even though the express
provisions hereof provide for indemnification in such case, then each applicable
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 in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with the
actions, statements or omissions that resulted in such losses as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
15
<PAGE>
such action, statement or omission. The amount paid or payable by a party as a
result of any losses shall be deemed to include, subject to the limitations set
forth in Section 6(c) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section, an indemnifying party that is a
holder of Transfer Restricted Securities or Exchange Securities shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Securities or Exchange Securities sold by such indemnifying
party and distributed to the public were offered to the public exceeds the
amount of any damages that such indemnifying party 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 Securities Act) shall be entitled to any
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7. Rules 144 and 144A. The Company shall use its best efforts to
------------------
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the written request of any holder of
Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of their securities pursuant to Rules 144 and
144A. The Company covenants that it will take such further action as any holder
of Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including, without limitation,
the requirements of Rule 144A(d)(4)). Upon the written request of any holder of
Transfer Restricted Securities, the Company shall deliver to such holder a
written statement as to whether it has complied with such requirements.
8. Underwritten Registrations. If any of the Transfer Restricted
--------------------------
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the holders of a majority
in aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Company (which shall not be
unreasonably withheld or delayed). The Holders shall be responsible for all
underwriting commissions and discounts.
16
<PAGE>
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous. (a) Amendments and Waivers. The provisions of
------------- ----------------------
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company and the Guarantors have obtained the written consent of Holders of a
majority in aggregate principal amount of the Securities and the Exchange
Securities, taken as a single class. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Securities or Exchange
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of a majority in aggregate principal amount of the Securities or
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company and the Guarantors in accordance with the provisions of this
Section 9(b), which address initially is, with respect to each Holder, the
address of such Holder maintained by the Registrar under the Indenture,
with a copy in like manner to Chase Securities Inc.;
(2) if to you, initially at the respective addresses set forth in the
Purchase Agreement; and
(3) if to the Company or any Guarantor, initially at the address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; when answered back, if faxed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
17
<PAGE>
(c) Successors And Assigns. This Agreement shall be binding upon the
----------------------
Company, the Guarantors and their successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts (which may be delivered in original form or by telecopies) 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.
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH OF THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. EACH OF THE COMPANY AND THE GUARANTORS IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER
OF A TRANSFER RESTRICTED SECURITY TO SERVE PROCESS IN ANY MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY OR
EACH GUARANTOR IN ANY OTHER JURISDICTION.
(g) Remedies. In the event of a breach by the Company, any Guarantor
--------
or by a holder of Transfer Restricted Securities, of any of their obligations
under this Agreement, each holder of Transfer Restricted Securities, the Company
or any Guarantor, as the case may be, in addition to being entitled to exercise
all rights granted by law,
18
<PAGE>
including recovery of damages (other than the recovery of damages for a breach
by the Company or any Guarantor of its obligations under Sections 1 or 2 hereof
for which liquidated damages have been paid pursuant to Section 3 hereof), will
be entitled to specific performance of its rights under this Agreement. Each of
the Company, the Guarantor and the holders of Transfer Restricted Securities
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(h) No Inconsistent Agreements. The Company and the Guarantors have
--------------------------
not, nor shall the Company or any Guarantor on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the holders of Transfer Restricted Securities in this Agreement or otherwise
conflicts with the provisions hereof. The Company has not previously entered
into any agreement which remains in effect granting any registration rights with
respect to any of its debt securities to any person. Without limiting the
generality of the foregoing, without the written consent of the holders of a
majority in aggregate principal amount of the then outstanding Transfer
Restricted Securities, the Company shall not grant to any person the right to
request the Company to register any debt securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights of the holders of Transfer Restricted Securities set forth herein,
and are not otherwise in conflict or inconsistent with the provisions of the
Agreement.
(i) No Piggyback on Registrations. Neither the Company nor any of its
-----------------------------
securityholders (other than the holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Exchange Offer other than Transfer Restricted
Securities.
(j) Severability. The remedies provided herein are cumulative and not
------------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
19
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Guarantors and you.
Very truly yours,
CANANDAIGUA WINE COMPANY, INC.
By: /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Secretary
BATAVIA WINE CELLARS, INC.
By: /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Secretary
BISCEGLIA BROTHERS WINE CO.
By: /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Secretary
CALIFORNIA PRODUCTS COMPANY
By: /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Secretary
<PAGE>
GUILD WINERIES & DISTILLERIES, INC.
By /s/ Robert Sands
---------------------------
Name: Robert Sands
Title: Secretary
TENNER BROTHERS, INC.
By /s/ Robert Sands
---------------------------
Name: Robert Sands
Title: Secretary
CANANDAIGUA WEST, INC.
By /s/ Robert Sands
---------------------------
Name: Robert Sands
Title: Secretary
WIDMER'S WINE CELLAR, INC.
By /s/ Robert Sands
---------------------------
Name: Robert Sands
Title: Secretary
BARTON INCORPORATED
By /s/ Robert Sands
---------------------------
Name: Robert Sands
Title: Secretary
<PAGE>
BARTON BRANDS, LTD.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
BARTON BEERS, LTD.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
BARTON BRANDS OF CALIFORNIA, INC.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
BARTON DISTILLERS IMPORT CORP.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
BARTON FINANCIAL CORPORATION
By /s/ David Sorce
----------------------------
Name: David Sorce
Title: Vice President
<PAGE>
STEVENS POINT BEVERAGE COMPANY
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
MONARCH WINE COMPANY, LIMITED
PARTNERSHIP
By BARTON MANAGEMENT, INC.,
as general partner
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
BARTON MANAGEMENT, INC.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
THE VIKING DISTILLERY, INC.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
<PAGE>
VINTNERS INTERNATIONAL COMPANY, INC.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Secretary
BARTON BRANDS OF GEORGIA, INC.
By /s/ Robert Sands
----------------------------
Name: Robert Sands
Title: Vice President
Accepted in New York, New York
CHASE SECURITIES INC.
By:
------------------------
Name:
Title:
CS FIRST BOSTON CORPORATION
By:
------------------------
Name:
Title:
<PAGE>
VINTNERS INTERNATIONAL COMPANY, INC.
By
----------------------------
Name:
Title:
BARTON BRANDS OF GEORGIA, INC.
By
----------------------------
Name:
Title:
Accepted in New York, New York
CHASE SECURITIES INC.
By: /s/ David Fass
------------------------
Name: David Fass
Title: Vice President
CS FIRST BOSTON CORPORATION
By:
------------------------
Name:
Title:
<PAGE>
VINTNERS INTERNATIONAL COMPANY, INC.
By
----------------------------
Name:
Title:
BARTON BRANDS OF GEORGIA, INC.
By
----------------------------
Name:
Title:
Accepted in New York, New York
CHASE SECURITIES INC.
By:
------------------------
Name:
Title:
CS FIRST BOSTON CORPORATION
By: /s/ Peter A. Fowler
------------------------
Name: Peter A. Fowler
Title: Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company and the
Guarantors have agreed that, for a period of 180 days after the Expiration Date
(as defined herein), they will make this Prospectus available to any broker-
dealer for use in connection with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company and the
Guarantors have agreed that, for a period of 180 days after the Expiration Date,
they will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
______________________, 199 , all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.*/
The Company and the Guarantors will not receive any proceeds from any
sale of Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such 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 such broker-dealer or the purchasers of any
such Exchange Securities. Any broker-dealer that resells Exchange Securities
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of such Exchange
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Securities and any
commission or concessions received by any such 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 be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
- ------------------
*/ In addition, the legend required by Item 502(e) of Regulation S-K
will appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
For a period of 180 days after the Expiration Date the Company and the
Guarantors will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company and the Guarantors
have agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the Holders of the Securities) other than
commissions or concessions of any brokers or dealers and will indemnify the
Holders of the Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
2
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-----------------------------------------
Address:
-----------------------------------------
-----------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 5.1
[MCDERMOTT, WILL & EMERY LETTERHEAD]
December 9, 1996
Canandaigua Wine Company, Inc.
116 Buffalo Street
Canandaigua, NY 14424
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with the above-referenced
registration statement on Form S-4 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), for the registration of $65,000,000 aggregate principal amount of 8
3/4% Series C Senior Subordinated Notes due 2003 (the "Exchange Notes") of
Canandaigua Wine Company, Inc., a Delaware corporation (the "Company") to be
unconditionally guaranteed on a senior subordinated basis (the "Guarantees") by
certain of the Company's subsidiaries that are signatories to the Indenture (the
"Guarantors"). The Exchange Notes will be offered in exchange (the "Exchange")
for the Company's outstanding 8 3/4% Series B Senior Subordinated Notes due 2003
(the "Old Notes").
The Exchange Notes are to be issued in exchange for Old Notes pursuant to
an Indenture (the "Indenture") dated as of October 29, 1996 between the Company,
the Guarantors and Harris Trust and Savings Bank, as Trustee (the "Trustee") and
the related Exchange and Registration Rights Agreement dated as of October 29,
1996 among the Company, the Guarantors, Chase Securities Inc. and CS First
Boston Corporation (the "Registration Rights Agreement").
In arriving at the opinion expressed below, we have examined the
Registration Statement, the Indenture, the Registration Rights Agreement, the
Exchange Notes, the Guarantees and such other documents as we have deemed
necessary to enable us to express the opinion hereinafter set forth. In
addition, we have examined and relied, to the extent we deemed proper, on
certificates of officers of the Company and the Guarantors as to
<PAGE>
factual matters, and on originals or copies certified or otherwise identified to
our satisfaction, of all such corporate records of the Company and the
Guarantors and such other instruments and certificates of public officials and
other persons as we have deemed appropriate. In our examination, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as copies,
the genuineness of all signatures on documents reviewed by us and the legal
capacity of natural persons. We have further assumed that the Exchange Notes
and the Guarantees have been duly executed and delivered, all in accordance with
authorizing resolutions of the Board of Directors of the Company and the
Guarantors.
We express no opinion as to the applicability of, compliance with or effect
of, the law of any jurisdiction other than United States Federal law and the
laws of Delaware, New York and the District of Columbia.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Notes and the Guarantees, when duly executed and authenticated in
accordance with the terms of the Indenture, and delivered in exchange for Old
Notes in accordance with the terms of the Indenture, will be valid and legally
binding obligations of the Company and the Guarantors, respectively and will be
entitled to the benefits of the Indenture, except that the enforceability
thereof may be limited by or subject to bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium or other similar laws now or hereafter
existing which affect the rights and remedies of creditors generally and
equitable principles of general applicability.
We hereby consent to the references to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ McDermott, Will & Emery
<PAGE>
EXHIBIT 8.1
[McDERMOTT, WILL & EMERY LETTERHEAD]
December 9, 1996
Canandaigua Wine Company, Inc.
116 Buffalo Street
Canandaigua, NY 14424
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Canandaigua Wine Company, Inc. (the "Company")
in connection with the above-referenced registration statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), for the registration
of $65,000,000 aggregate principal amount of 8 3/4% Series C Senior Subordinated
Notes due 2003 (the "Exchange Notes") of the Company to be offered in exchange
(the "Exchange") for the Company's outstanding 8 3/4% Series B Senior
Subordinated Notes due 2003 (the "Old Notes").
We have reviewed the information that appears under the caption "Certain
Federal Income Tax Considerations" in the prospectus that is included in the
Registration Statement. In our opinion, subject to the qualifications and
limitations set forth therein, such information is an accurate summary of the
material United States Federal tax considerations applicable to the Exchange of
Old Notes for Exchange Notes and the ownership of Exchange Notes.
Very truly yours,
/s/ McDermott, Will & Emery
<PAGE>
Exhibit 10.26
[Execution Copy]
AMENDMENT NO. 5
AMENDMENT NO. 5 dated as of October 10, 1996, between CANANDAIGUA WINE
COMPANY, INC., a corporation duly organized and validly existing under the laws
of the State of Delaware (the "Company"); each of the Subsidiaries of the
-------
Company identified under the caption "SUBSIDIARY GUARANTORS" on the signature
pages hereto (individually, a "Subsidiary Guarantor" and, collectively the
--------------------
"Subsidiary Guarantors" and, together with the Company, the "Obligors"); each of
- ---------------------- --------
the lenders that is a signatory hereto (individually, a "Bank" and,
----
collectively, the "Banks"); and THE CHASE MANHATTAN BANK (successor by merger to
-----
The Chase Manhattan Bank, N.A.), a New York State banking corporation, as
administrative agent for the Banks (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
--------------------
The Company, the Subsidiary Guarantors, the Banks and the
Administrative Agent are parties to a Third Amended and Restated Credit
Agreement dated as of September 1, 1995 (as modified and supplemented and in
effect on the date hereof, the "Credit Agreement"). The Obligors and the Banks
----------------
wish to amend the Credit Agreement in certain respects and, accordingly, the
parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
-----------
Amendment No. 3, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
----------
set forth in Section 3 hereof, the Credit Agreement shall be amended as follows:
A. The definition of "Adjusted Cash Flow" in Section 1.01 of the
Credit Agreement is hereby amended in its entirety to read as follows:
"Adjusted Cash Flow" shall mean, for any period (the "calculation
------------------ -----------
period"), the sum, for the Company and its Consolidated Subsidiaries
------
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (a) Operating Cash Flow for the calculation
period (excluding the Adjustment Amount for such period but including, for
the fiscal quarter of the Company ending on February 29, 1996, the
aggregate amount of the charges specified in Part I of Schedule A to
Amendment No. 3), minus (b) Capital Expenditures made during the
-----
calculation period (excluding (x) Capital Expenditures made from the
proceeds of Indebtedness other than Indebtedness hereunder and (y)
Restructuring Capital Expenditures made during such period
Amendment No. 5
---------------
<PAGE>
- 2 -
but not exceeding an aggregate amount for all calculation periods of
$22,270,000) plus (c) the decrease (or minus the increase) of Working
---- -----
Capital from the last day of the fiscal quarter immediately preceding the
calculation period to the last day of the calculation period, provided that
--------
for purposes of this clause (c), there shall be excluded any increase of
Working Capital attributable to the prepayment of Revolving Credit Loans
from the proceeds of additional Subordinated Indebtedness incurred pursuant
to Section 9.17 hereof during the calculation period.
B. Section 9.08(k) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(k) the Senior Subordinated Note Guarantees, and any Guarantee of
additional Subordinated Indebtedness that complies with the requirements of
Section 9.17(b) hereof."
Section 3. Conditions. The amendments set forth in Section 2 hereof
----------
shall become effective, as of September 30, 1996, upon the execution of this
Amendment by each Obligor, the Administrative Agent and the Majority Banks.
Section 4. Miscellaneous. Except as herein provided, the Credit
-------------
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 5 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 5 by signing any such counterpart. This
Amendment No. 5 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 5
---------------
<PAGE>
- 3 -
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
5 to be duly executed and delivered as of the day and year first above written.
CANANDAIGUA WINE COMPANY, INC.
By /s/ Lynn K. Fetterman
--------------------------
Title: Senior Vice President
SUBSIDIARY GUARANTORS
---------------------
CANANDAIGUA WEST, INC.
BATAVIA WINE CELLARS, INC.
BISCEGLIA BROTHERS WINE COMPANY
CALIFORNIA PRODUCTS COMPANY
GUILD WINERIES & DISTILLERIES, INC. (formerly
known as Canandaigua California Acquisition Corp.)
TENNER BROTHERS, INC.
WIDMER'S WINE CELLARS, INC.
VINTNERS INTERNATIONAL COMPANY, INC. (formerly
known as Canandaigua/Vintners Acquisition Corp.)
By /s/ Lynn K. Fetterman
--------------------------
Title: Treasurer
BARTON INCORPORATED
BARTON BRANDS, LTD.
BARTON BEERS, LTD.
BARTON BRANDS OF CALIFORNIA, INC.
BARTON BRANDS OF GEORGIA, INC.
BARTON DISTILLERS IMPORT CORP.
STEVENS POINT BEVERAGE COMPANY
MONARCH WINE COMPANY,
LIMITED PARTNERSHIP
By Barton Management, Inc.,
Corporate General Partner
BARTON MANAGEMENT, INC.
V ACQUISITION CORP.(now known as The Viking
Distillery, Inc.)
By /s/ Elizabeth Kutyla
--------------------------
Title: Vice President
BARTON FINANCIAL CORPORATION
By /s/ David S. Sorce
--------------------------
Title: Vice President
Amendment No. 5
---------------
<PAGE>
- 4 -
BANKS
-----
THE CHASE MANHATTAN BANK THE FIRST NATIONAL BANK OF CHICAGO
(successor by merger to (including as successor to NBD Bank)
The Chase Manhattan Bank,
N.A.), ROCHESTER DIVISION
By /s/ Diana Lauria By /s/ J. Garland Smith
---------------------------- ---------------------------
Title: Vice President Title: Managing Director
WELLS FARGO BANK, N.A. MANUFACTURERS AND TRADERS TRUST
COMPANY
By /s/ Clifford Lawrence By /s/ Phillip Smith
---------------------------- -------------------------------------
Title: Vice President Title: Regional Senior Vice President
FLEET BANK PNC BANK, NATIONAL ASSOCIATION
By /s/ Martin K. Birmingham By /s/ Thomas R. Colwell
------------------------------- ---------------------------
Title: Assistant Vice President Title: Vice President
NATIONAL CITY BANK CORESTATES BANK, N.A.
By /s/ Lisa Beth Lisi By /s/ Brian M. Haley
---------------------------- ---------------------------
Title: Account Officer Title: Vice President
THE FUJI BANK LIMITED, THE BANK OF NOVA SCOTIA
NEW YORK BRANCH
By /s/ J. Alan Edwards
---------------------------
Title: Vice President
By /s/ Teiji Teramoto
---------------------------------
Title: Vice President and Manager
CREDIT SUISSE THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /s/ Chris T. Horgan
---------------------------- By /s/ Shigehiko Matsumoto
Title: Associate ----------------------------
Title: Joint General Manager
By /s/ Joel Gladowski
------------------------------- By
Title: Member Senior Management ----------------------------
Title:
Amendment No. 5
---------------
<PAGE>
KEY BANK OF NEW YORK COOPERATIVE CENTRAL RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /s/ K. K. Conte - SVP By
---------------------------- ---------------------------
Title: Senior Vice President Title:
LTCB TRUST COMPANY DG BANK DEUTSCHE GENOSSEN-
SCHAFTSBANK, CAYMAN ISLAND
BRANCH
By /s/ Rene O. LeBlanc By
---------------------------- ----------------------------
Title: Senior Vice President Title:
By
----------------------------
Title:
NBD BANK
By
----------------------------
Title:
THE ADMINISTRATIVE AGENT
------------------------
THE CHASE MANHATTAN BANK
(successor by merger to The
Chase Manhattan Bank, N.A.),
as Administrative Agent
By /s/ Carol A. Ulmer
-----------------------------
Title: Vice President
Amendment No. 5
---------------
<PAGE>
Exhibit 10.27
AMENDMENT NO. 8
TO THE
CANANDAIGUA WINE COMPANY, INC.
STOCK OPTION AND STOCK APPRECIATION RIGHT PLAN
Pursuant to Section 15 of the Canandaigua Wine Company, Inc., Stock
Option and Stock Appreciation Right Plan (the "Plan"), the Board of Directors
hereby amends the Plan, effective upon the date hereof, as set forth below.
Section 9 of the Plan is hereby amended and restated in its entirety as
follows:
9. DEATH OF PARTICIPANT. In the event that a Participant shall die while
he is an employee or director of the Company and prior to the complete
exercise or maturity of options or SARs granted to him under the Plan,
any such remaining options or SARs with exercise periods may be
exercised in whole or in part within one (1) year after the date of the
Participant's death and then only: (i) by the Participant's estate or
by or on behalf of such person or persons to whom the Participant's
rights pass under his Will or the laws of descent and distribution, (ii)
to the extent that the Participant was entitled to exercise the option
or SAR at the date of his death except that the Committee retains
discretionary authority to permit the exercise of any option or SAR
granted to the Participant which was not exercisable at the time of his
death by accelerating the date of exercise of the option or SAR to any
date within one (1) year after the Participant's death and prior to the
expiration of the term of the option or SAR, and subject to all of the
conditions on exercise imposed hereby, and (iii) prior to the expiration
of the term of the option or SAR. If the Committee elects to exercise
its discretionary authority to accelerate the date of exercise of any
option or SAR, then the option or SAR shall be exercisable within the
period specified in the Committee's action. In the case of SARs with
fixed maturity dates, if the Participant dies while he is an employee or
director of the Company such portion of the SAR as shall be set forth in
the SAR Agreement shall be paid on terms set forth in the SAR Agreement
to the Participant's estate or to such person or persons to whom the
Participant's rights pass under his Will or the laws of descent and
distribution.
<PAGE>
-2-
IN WITNESS WHEREOF, Canandaigua Wine Company, Inc., has caused the
instrument to be executed as of September 9, 1996.
CANANDAIGUA WINE COMPANY, INC.
By: /s/ Richard Sands
----------------------------------
Richard Sands
Its: President
<PAGE>
EXHIBIT 11.1
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Six Months Ended August 31,
--------------------------------------------
1996 1995
---------------------- ---------------------
(unaudited) (unaudited)
Fully Fully
Net income per common and common equivalent share: Primary Diluted Primary Diluted
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net income available to common and common equivalent shares $13,442 $13,442 $20,700 $20,700
Adjustments:
Assumed exercise of convertible debt - - - -
------- ------- ------- -------
Net income available to common and common equivalent shares $13,442 $13,442 $20,700 $20,700
------- ------- ------- -------
Shares:
Weighted average common shares outstanding 19,553 19,553 19,550 19,550
Adjustments:
(1) Assumed exercise of convertible debt - - - -
(2) Assumed exercise of incentive stock options 204 204 285 313
(3) Assumed exercise of stock options 38 38 168 218
------- ------- ------- -------
Weighted average common and common equivalent shares outstanding 19,795 19,795 20,003 20,081
------- ------- ------- -------
Net income per common and common equivalent share $.68 $.68 $1.03 $1.03
======= ======= ======= =======
<CAPTION>
For the Six Months Ended
------------------------------------------
February 29, 1996 February 28, 1995
----------------- -------------------
(Unaudited)
Fully Fully
Net income per common and common equivalent share: Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income available to common and common equivalent shares $3,322 $3,322 $20,320 $20,320
Adjustments:
Assumed exercise of convertible debt - - - -
------ ------ ------- -------
Net income available to common and common equivalent shares $3,322 $3,322 $20,320 $20,320
------ ------ ------- -------
Shares:
Weighted average common shares outstanding 19,611 19,611 17,989 17,989
Adjustments:
(1) Assumed exercise of convertible debt - - - -
(2) Assumed exercise of incentive stock options 260 260 284 285
(3) Assumed exercise of stock options 135 135 71 73
------ ------ ------- -------
Weighted average common and common equivalent shares outstanding 20,006 20,006 18,344 18,347
------ ------ ------- -------
Net income per common and common equivalent share $.17 $.17 $1.11 $1.11
====== ====== ======= =======
<CAPTION>
For the Years Ended August 31,
-----------------------------------------------------------
1995 1994 1993
----------------- ----------------- ----------------
Fully Fully Fully
Net income per common and common equivalent share: Primary Diluted Primary Diluted Primary Diluted
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net income available to common and common equivalent shares $41,020 $41,020 $11,733 $11,733 $15,604 $15,604
Adjustments:
Assumed exercise of convertible debt - - - 419 - 2,597
------- ------- ------- ------- ------- -------
Net income available to common and common equivalent shares $41,020 $41,020 $11,733 $12,152 $15,604 $18,201
------- ------- ------- ------- ------- -------
Shares:
Weighted average common shares outstanding 18,776 18,776 15,423 15,423 11,820 11,820
Adjustments:
(1) Assumed exercise of convertible debt - - - 544 - 3,239
(2) Assumed exercise of incentive stock options 252 302 227 257 144 144
(3) Assumed exercise of stock options 120 218 134 177 - -
------- ------- ------- ------- ------- -------
Weighted average common and common equivalent shares outstanding 19,148 19,296 15,784 16,401 11,964 15,203
------- ------- ------- ------- ------- -------
Net income per common and common equivalent share $2.14 $2.13 $.74 $.74 $1.30 $1.20
======= ======= ======= ======= ======= =======
</TABLE>
<PAGE>
EXHIBIT 12.1
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months Ended For the Six Months Ended
August 31, February 29, February 28,
----------------------- ------------ ------------
1996 1995 1996 1995
--------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Earnings: (a)
Income before provision for income taxes $23,069 $33,658 $6,703 $33,040
Add fixed charges 17,945 12,449 18,382 14,138
----------- ------------ ------------ ------------
Earnings $41,014 $46,107 $25,085 $47,178
=========== ============ =========== ===========
Fixed Charges:
Interest on debt and capitalized leases $16,803 $11,460 $17,298 $13,141
Amortization of direct financing costs 963 821 908 829
Interest element of rentals 179 168 176 168
---------- ------------ ----------- ------------
Total fixed charges $17,945 $12,449 $18,382 $14,138
=========== ============ =========== ===========
Ratio of Earnings to Fixed Charges 2.3 3.7 1.4 3.3
=========== ============ =========== ===========
<CAPTION>
For the Years Ended August 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
--------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Earnings: (a)
Income before provision for income taxes $66,698 $18,924 $25,268 $17,884 $11,681
Add fixed charges 26,586 19,492 7,515 7,599 5,140
--------- --------- --------- --------- -----------
Earnings $93,284 $38,416 $32,783 $25,483 $16,821
========== ========== ========== ========== ===========
Fixed Charges:
Interest on debt and capitalized leases $24,601 $18,056 $6,273 $6,510 $4,586
Amortization of direct financing costs 1,650 1,171 628 602 109
Interest element of rentals 335 265 614 487 445
--------- --------- --------- --------- -----------
Total fixed charges $26,586 $19,492 $7,515 $7,599 $5,140
========== ========== ========== ========== ===========
Ratio of Earnings to Fixed Charges 3.5 2.0 4.4 3.4 3.3
========== ========== ========== ========== ===========
</TABLE>
(a) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represents income before provision for income taxes plus fixed
charges. "Fixed charges" consist of interest expense, including
amortization of debt issuance costs, and the portion of rental expense
which management believes is representative of the interest component of
lease expense.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Rochester, New York,
December 10, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-4 of Canandaigua Wine Company, Inc. of our report dated
September 25, 1995 relating to the Statement of Assets and Liabilities and
Statement of Identified Income and Expenses of the Product Lines Acquired of
United Distillers Glenmore, Inc. and Affiliates, which appears in the Current
Report on Form 8-K/A (Amendment No. 1) which amends and forms part of
Canandaigua Wine Company, Inc.'s Current Report on Form 8-K dated August 29,
1995. We also consent to the reference to us under the heading "Experts" in
such Registration Statement.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Stamford, Connecticut
December 10, 1996
<PAGE>
EXHIBIT 25.1
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) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(I.R.S. Employer
(State of Incorporation) Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Daniel G. Donovan, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2908
(Name, address and telephone number for agent for service)
CANANDAIGUA WINE COMPANY, INC.
(Name of Obligor)
Delaware 16-0716709
(I.R.S. Employer
(State of Incorporation) Identification No.)
116 Buffalo Street
Canandaigua, New York 14424
(Address of principal executive offices)
Senior Subordinated Notes
(Title of indenture securities)
<PAGE>
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.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; 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.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in effect
which includes the authority of the trustee to commence business and to
exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between Harris
Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which
constitutes the articles of association of the Trustee as now in effect
and includes the authority of the Trustee to commence business and to
exercise corporate trust powers was filed in connection with the
Registration Statement of Louisville Gas and Electric Company, File No.
2-44295, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in connection
with the Registration Statement of C-Cube Microsystems, Inc., File No.
33-97166, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 15th day of November, 1996.
Harris Trust and Savings Bank
By: /s/ D.G. Donovan
------------------------
D.G. Donovan
Assistant Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
Harris Trust and Savings Bank
By: /s/ D.G. Donovan
------------------------
D.G. Donovan
Assistant Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of September 30, 1996, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on September 30, 1996, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
THOUSANDS
ASSETS OF DOLLARS
Cash and balances due from depository
institutions:
Non-interest bearing balances
and currency and coin.............. $1,751,494
Interest bearing balances........... $839,856
Securities:
a. Held-to-maturity securities............ $0
b. Available-for-sale securities.......... $3,137,919
Federal funds sold and securities
purchased under agreements to resell in
domestic offices of the bank and
of its Edge and Agreement
subsidiaries, and in IBF's:
Federal funds sold.................. $478,625
Securities purchased under
agreements to resell............... $0
Loans and lease financing receivables:
Loans and leases, net of
unearned income.................... $7,897,067
LESS: Allowance for loan and
lease losses........................ $108,949
----------
Loans and leases, net of
unearned income, allowance, and
reserve (item 4.a minus 4.b)....... $7,788,118
Assets held in trading accounts............ $74,302
Premises and fixed assets (including
capitalized leases)....................... $172,267
Other real estate owned.................... $142
Investments in unconsolidated
subsidiaries and associated companies..... $60
Customer's liability to this bank on
acceptances outstanding................... $100,950
Intangible assets.......................... $299,478
Other assets............................... $563,022
-----------
TOTAL ASSETS............................... $15,206,233
===========
3
<PAGE>
LIABILITIES
Deposits:
In domestic offices................... $8,013,146
Non-interest bearing............. $3,248,897
Interest bearing................. $4,764,249
In foreign offices, Edge and
Agreement subsidiaries, and IBF's.... $2,055,520
Non-interest bearing............. $32,775
Interest bearing................. $2,022,745
Federal funds purchased and securities
sold under agreements to repurchase in
domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds purchased.......... $886,457
Securities sold under agreements
to repurchase................... $1,841,475
Trading Liabilities $40,157
Other borrowed money:
a. With remaining maturity of one year
or less............................ $606,331
b. With remaining maturity of more
than one year...................... $9,434
Bank's liability on acceptances
executed and outstanding............... $100,950
Subordinated notes and debentures....... $310,000
Other liabilities....................... $186,408
-----------------------
TOTAL LIABILITIES $14,049,878
=======================
EQUITY CAPITAL
Common stock............................ $100,000
Surplus................................. $600,295
a. Undivided profits and capital
reserves........................... $486,054
b. Net unrealized holding gains
(losses) on available-for-sale
securities......................... ($29,994)
-----------------------
TOTAL EQUITY CAPITAL $1,156,355
=======================
Total liabilities, limited-life
preferred stock, and equity capital.... $15,206,233
=======================
I, Steve Neudecker, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
STEVE NEUDECKER
10/30/96
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
MARIBETH S. RAHE
Directors.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's August 31, 1996 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000016918
<NAME> CANANDAIGUA WINE COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> AUG-31-1996
<CASH> 2,030
<SECURITIES> 0
<RECEIVABLES> 152,343
<ALLOWANCES> 0
<INVENTORY> 328,505
<CURRENT-ASSETS> 501,543
<PP&E> 353,699
<DEPRECIATION> 99,199
<TOTAL-ASSETS> 1,038,191
<CURRENT-LIABILITIES> 302,695
<BONDS> 307,204
0
0
<COMMON> 214
<OTHER-SE> 364,957
<TOTAL-LIABILITY-AND-EQUITY> 1,038,191
<SALES> 555,711
<TOTAL-REVENUES> 555,711
<CGS> 412,969
<TOTAL-COSTS> 515,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,803
<INCOME-PRETAX> 23,069
<INCOME-TAX> 9,627
<INCOME-CONTINUING> 13,442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,442
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
8 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2003
OF
CANANDAIGUA WINE COMPANY, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON _______________, 1997, UNLESS EXTENDED
(THE "EXPIRATION DATE")
EXCHANGE AGENT:
HARRIS TRUST AND SAVINGS BANK
C/O HARRIS TRUST COMPANY OF NEW YORK
IF YOU WISH TO ACCEPT THE EXCHANGE OFFER,
THIS LETTER OF TRANSMITTAL SHOULD BE COMPLETED,
SIGNED AND SUBMITTED BY REGISTERED OR CERTIFIED MAIL,
BY FACSIMILE WITH ORIGINAL TO FOLLOW,
BY OVERNIGHT COURIER OR BY HAND TO:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
77 Water Street
4th Floor
New York, NY 10005
Attn: Reorganization Department
By Facsimile:
(212) 701-7636
Confirm by Telephone:
(212) 701-7624
<PAGE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
dated ______________, 199__ (the "Prospectus") of Canandaigua Wine Company, Inc.
(the "Company") which, together with this Letter of Transmittal and the
instructions hereto (the "Letter of Transmittal"), describes the Company's offer
(the "Exchange Offer") to exchange $1,000 in principal amount of a new series of
notes known as 8 3/4% Series C Senior Subordinated Notes due 2003 (the "Exchange
Notes") for each $1,000 in principal amount of outstanding 8 3/4% Series B
Senior Subordinated Notes due 2003 (the "Old Notes"). The terms of the Exchange
Notes are identical in all material respects (including principal amount,
interest rate and maturity) to the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the offering of the
Exchange Notes will have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR OLD
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by such Holder; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in the Prospectus under "The Exchange Offer
- - Book-Entry Transfer" by any financial institution that is a participant in DTC
and whose name appears on a security position listing as the owner of Old Notes
(such participants, acting on behalf of Holders, are referred to herein,
together with such Holders, as "Acting Holders"); or (iii) tender of Old Notes
is to be made according to the
-2-
<PAGE>
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer - Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person: (i) in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder or (ii) whose Old Notes
are held of record by DTC who desires to deliver such Old Notes by book-entry
transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER
THEIR OLD NOTES MUST COMPLETE THIS LETTER IN ITS ENTIRETY.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS, THIS LETTER OF TRANSMITTAL OR THE NOTICE OF GUARANTEED DELIVERY MAY
BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separate signed schedule and affix the schedule to this
Letter of Transmittal.
-3-
<PAGE>
===============================================================================
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
Name(s) and Certificate Aggregate
Address(es) of Number(s)/*/ Principal Amount
Registered Tendered (if less
Holder(s) (Please (Attach signed list than all)/**////
fill in) if necessary)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total
*Need not be completed by Holders tendering by book-entry
transfer.
**Unless otherwise indicated, the Holder will be deemed to
have tendered the full aggregate principal amount represented
by Old Notes. See Instruction 2.
================================================================================
/__/ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DEPOSITORY
TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________
DTC Participant Number_______________________________________
Transaction Code Number______________________________________
Name of Participant Contact Person___________________________
Telephone number_____________________________________________
/__/ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) of Old Notes________________________
Window Ticket No. (if any)__________________________________________
Date of Execution of Notice of Guaranteed Delivery__________________
-4-
<PAGE>
Name of Eligible Institution that Guaranteed Delivery
---------------------------------------------------------------------
DTC Book-Entry Account Number
_______________________________________
If Delivered by Book-Entry Transfer:
Name of Tendering Institution
_________________________________________
Transaction Code Number
_______________________________________________
/__/ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
_________________________________________________________________
Address:
______________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
-5-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent also acts as the agent of the Company and as Trustee under the Indenture
for the Old Notes and the Exchange Notes) with respect to the tendered Old Notes
with full power of substitution to (i) deliver certificates for such Old Notes
to the Company, or transfer ownership of such Old Notes on the account books
maintained by DTC, together, in either such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(ii) present such Old Notes for transfer on the books of the Company and receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Old Notes, all in accordance with the terms of the Exchange Offer. The power of
attorney granted in this paragraph shall be deemed irrevocable and coupled with
an interest.
The undersigned represents and warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes tendered
hereby and to acquire Exchange Notes issuable upon the exchange of such tendered
Old Notes, and that, when the Old Notes are accepted for exchange, the Company
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
The undersigned also warrants that it will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the exchange, sale, assignment and transfer
of tendered Old Notes or transfer ownership of such Old Notes on the account
books maintained by DTC.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Old Notes tendered hereby
and, in such event, certificates for such Old Notes not exchanged will be
returned (except as noted below with respect to tenders through DTC), without
expense, to the
-6-
<PAGE>
undersigned at the address shown below the signature of the undersigned.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance upon interpretations by the staff of the Securities and Exchange
Commission that the Exchange Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that 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 Holder's business, such Holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such Holder nor any other such person is engaging in
or intends to engage in a distribution of such Exchange Notes. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of the Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Old Notes, the undersigned represents that
such Old Notes were acquired as a result of market-making activities or other
trading activities and acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The undersigned represents to the Company that (i) the Exchange Notes
acquired by the Holder and any beneficial owners of Old Notes pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, (ii) neither the Holder nor any such
beneficial owner has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes, (iii) neither the
Holder, nor such beneficial owner, nor any such other person is engaged in or
intends to engage in a distribution of the Exchange Notes and (iv) neither the
Holder nor any such other person is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act or, if such Holder is an affiliate,
that such Holder will comply with the registration and prospectus delivery
requirements of the Act to the extent applicable.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, bankruptcy 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.
-7-
<PAGE>
TENDERED OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.
Unless otherwise indicated under "Special Issuance Instructions,"
certificates representing the Exchange Notes issued in exchange for the Old
Notes accepted for exchange will be issued, and any Old Notes not tendered or
not exchanged will be returned, in the name(s) of the undersigned (or in either
such event in the case of Old Notes tendered by DTC, by credit to the account at
DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," certificates representing the Exchange Notes issued in exchange
for the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged (and accompanying documents, as appropriate) will be
sent to the undersigned at the address shown below the undersigned's signatures,
unless, in either event, tender is being made through DTC. In the event that
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, certificates representing the Exchange Notes issued in exchange for
the Old Notes accepted for exchange will be issued, and any Old Notes not
tendered or not exchanged will be returned, in the name(s) of, and said
certificates will be sent to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Old Notes from
the name of the registered Holder(s) thereof if the Company does not accept for
exchange any of the Old Notes so tendered.
-8-
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES REGARDLESS
OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. 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 under "Capacity" and submit evidence satisfactory to the
Issuers of such person's authority to so act. See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of the
Old Notes, then the registered Holder(s) must sign a valid proxy.
X_____________________________ Date:_____________________________________
X_____________________________ Date:_____________________________________
SIGNATURE(S) OF HOLDER(S) OR
AUTHORIZED SIGNATORY
Name(s): _________________________ Address:__________________________________
__________________________ ___________________________________
(PLEASE PRINT) (INCLUDING ZIP CODE)
Capacity:_________________________ Area Code and Telephone No.:______________
Social Security No.:______________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN)
Certain Signatures Must Be Medallion Stamp Guaranteed by an Eligible Institution
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number (including area code) of
Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Date:______________________
-9-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered are to be issued in the name of, or the Exchange Notes issued pursuant
to the Exchange Offer are to be issued to the order of, someone other than the
person or persons whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
"Description of Old Notes Tendered Herewith" within this Letter of Transmittal,
or if Old Notes tendered by book-entry transfer that are not accepted for
purchase are to be credited to a different account maintained at DTC.
Name:...................................................................
(Please Print)
Address:................................................................
(Please Print)
........................................................................
Zip Code
........................................................................
Taxpayer Identification or Social Security Number
(See Substitute Form W-9 herein)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 4 HEREIN)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for purchase or the Exchange Notes issued pursuant to
the Exchange Offer are to be sent to someone other than the person or persons
whose signature(s) appear(s) within this Letter of Transmittal or to an address
different from that shown in the box entitled "Description of Old Notes Tendered
Herewith" within this Letter of Transmittal.
Name:.......................................................................
(Please Print)
Address:....................................................................
(Please Print)
............................................................................
Zip Code
.............................................................................
Taxpayer Identification or Social Security Number
(See Substitute Form W-9 herein)
-10-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR OLD NOTES.
Certificates for all physically delivered Old Notes or confirmation of any book-
entry transfer to the Exchange Agent's account at DTC of Old Notes tendered by
book-entry transfer, as well as a properly completed and duly executed copy of
this Letter of Transmittal or facsimile thereof with original to follow, 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.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE TENDERED OLD
NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER
AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT
IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IF
SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such
tender must be made by or through an Eligible Institution (as defined therein);
(ii) on or prior to the Expiration Date the Exchange Agent must have received
from such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the tendering Holder, the certificate number(s) of
such Old Notes (if available) and the principal amount of Old Notes tendered and
stating that the tender is being made thereby, and (iii) all tendered Old Notes
(or a confirmation of any book-entry transfer of such Old Notes into the
Exchange Agent's account at DTC) as well as this Letter of Transmittal and all
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
Expiration Date, all as provided in the Prospectus
-11-
<PAGE>
under the caption "The Exchange Offer--Guaranteed Delivery Procedures."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Old Notes, nor shall any of them incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that the Company determines are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted in
denominations of $1000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the third column of the chart entitled "Description of Old
Notes Tendered Herewith." The entire principal amount of Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Old Notes is not tendered, Old
Notes for the principal amount of Old Notes not tendered and a certificate or
certificates representing Exchange Notes issued in exchange for any Old Notes
accepted will be sent to the Holder at his or her registered address, unless
otherwise indicated under "Special Issuance Instructions" or "Special Delivery
Instructions" or unless tender is made through DTC, promptly after the Old Notes
are accepted for exchange.
-12-
<PAGE>
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m. New York City time on the Expiration
Date. Any such notice of withdrawal must specify the person named in the Letter
of Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers of the Old Notes to be withdrawn, the principal amount of Old Notes
delivered for exchange, a statement that such Holder is withdrawing its election
to have such Old Notes exchanged, and the name of the registered Holder of such
Old Notes, and must be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee register the transfer of such Old Notes into the name of the person(s)
withdrawing the tender, and specify the name in which any such Old Notes are to
be registered, if different from the person having deposited the Old Notes.
If certificates for Old Notes have been delivered or otherwise identified
to the Exchange Agent, then, prior to the release of such certificates, the
withdrawing Holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
Medallion Stamp guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawn Old
Notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company in its sole discretion, which
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes
may be retendered by following one of the procedures described in the Prospectus
under "The Exchange Offer - Procedures for Tendering" at any time prior to the
Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at DTC pursuant to the book-
-13-
<PAGE>
entry transfer procedures described above, such Old Notes will be credited to an
account maintained with DTC for the Old Notes).
3. SIGNATURE ON LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered Holder(s) of the Old Notes tendered hereby, the signature must
correspond with name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever. If any of the Old Notes
tendered hereby are owned of record by two or more joint owners, all such owners
must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
If this Letter of Transmittal is signed by the registered Holder(s) of Old
Notes tendered hereby, such Holder(s) need not and should not endorse any
tendered Old Note, nor provide a separate bond power.
If this Letter of Transmittal is signed by a person other than the
registered Holder(s) of the Old Notes tendered, such Old Notes must either be
properly endorsed or accompanied by a properly completed separate bond power in
form satisfactory to the Company and duly executed by the registered Holder(s),
in either case signed exactly as the name or names of the registered Holder(s)
appear(s) on the Old Notes, and with the signatures on the bond power Medallion
Stamp guaranteed by an Eligible Institution.
If this Letter of Transmittal, any certificates for Old Notes or separate
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, proper evidence satisfactory to the Company of
their authority so to act must be submitted with this Letter of Transmittal.
Endorsements on certificates for Old Notes or signatures on separate bond
powers required by this Instruction 3 must be Medallion Stamp guaranteed by a
Eligible Institution.
Signatures on this Letter of Transmittal need not be Medallion Stamp
guaranteed by an Eligible Institution, unless the Old Notes are tendered: (i) by
a registered Holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal;
or (ii) for the account of an Eligible Institution.
-14-
<PAGE>
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable spaces, the name and address to which Exchange Notes
or substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be registered or issued in the name of, any person other than the registered
Holder(s) of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person(s) other than the person(s) signing this
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify, in whole or in part, any of the conditions to the Exchange
Offer set forth in the Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance, as well as requests for additional copies of the Prospectus and this
Letter of Transmittal, may be directed to the Exchange Agent at the address and
telephone number set forth herein. Holders may also contact their broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF WITH
ORIGINAL TO FOLLOW (TOGETHER WITH CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER
-15-
<PAGE>
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
(DO NOT WRITE IN SPACE BELOW)
================================================================================
Certificate Surrendered Old Notes Tendered Old Notes Accepted
Delivery Prepared by Checked by Date
================================================================================
-16-
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose tendered Old Notes are
accepted for payment is required to provide the Exchange Agent (as payer) with
such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his social security number. If the Exchange Agent is not provided
with the correct TIN, a $50 penalty may be imposed by the Internal Revenue
Service, and payments made with respect to Old Notes purchased pursuant to the
Exchange offer may be subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Exchange Agent a properly completed Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to the Holder's exempt status. A
Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is
not an additional federal income tax. Rather, the federal income tax liability
of persons 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 from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to the Exchange
Notes, the Holder is required to provide the Exchange Agent, with either: (i)
the Holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
TIN) and that (A) the Holder has not been notified by the Internal Revenue
Service that the Holder is subject to backup withholding as a result of failure
to report all interest or dividends or (B) the Internal Revenue Service has
notified the Holder that the Holder is no longer subject to backup withholding;
or (ii) an adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder of
the Old Notes. If the Old Notes are held in more than one name or are held 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.
-17-
<PAGE>
<TABLE>
<CAPTION>
PAYER'S NAME:____________________________________________
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND ------------------------------------
FORM W-9 CERTIFY BY SIGNING AND Social Security Number
DATING BELOW
OR
------------------------------------
Employer Identification Number
Department of the Treasury Part 2 - Certification. Under Penalties
Internal Revenue Service of Perjury, I certify that:
(1) The number shown on this form is
my correct Taxpayer Identification
Payer's Request for Taxpayer Number (or I am waiting for a number
Identification Number (TIN) to be issued to me) and
(2) I am not subject to backup
withholding because I have not been
notified by the Internal Revenue Service Part 3 -
("IRS") that I am subject to backup
withholding as a result of failure to Awaiting TIN [ ]
report all interest or dividends, or the
IRS has notified me that I am no longer
subject to backup withholding.
</TABLE>
Certificate Instruction - You must cross
out item (2) in Part 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 stating
that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within 60 days, 31 percent of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- --------------------------------------------------------------------------------
Signature Date
-18-
<PAGE>
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
HARRIS TRUST AND SAVINGS BANK
C/O HARRIS TRUST COMPANY OF NEW YORK
By Mail, Hand or Overnight Courier: By Facsimile:
Harris Trust and Savings Bank (212) 701-7636
c/o Harris Trust Company of New York
77 Water Street, 4th Floor
New York, NY 10005 Confirm by Telephone:
Attn: Reorganization Department (212) 701-7624
-19-
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
OFFER TO EXCHANGE
8 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2003
OF
CANANDAIGUA WINE COMPANY, INC.
As set forth in the Prospectus, dated __________________, 199__ (the
"Prospectus"), of Canandaigua Wine Company, Inc. (the "Company"), and the
accompanying Letter of Transmittal and instructions thereto (the "Letter of
Transmittal"), this form or one substantially equivalent hereto must be used to
accept the Company's offer to exchange (the "Exchange Offer") 8 3/4% Series C
Senior Subordinated Notes due 2003 (the "Exchange Notes") for any and all of its
outstanding 8 3/4% Series B Senior Subordinated Notes due 2003 (the "Old Notes")
if (i) certificates representing the Old Notes to be tendered for purchase and
payment are not immediately available, or (ii) time will not permit the Letter
of Transmittal, certificates representing such Old Notes or other required
documents to reach the Exchange Agent prior to the Expiration Date. This form
may be delivered by an Eligible Institution by mail or hand delivery, or
transmitted via facsimile with original to follow, to the Exchange Agent as set
forth below. All capitalized terms used herein but not defined herein shall
have the meanings ascribed to them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________________, 1997 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE").
TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE
EXPIRATION DATE.
THE EXCHANGE AGENT:
HARRIS TRUST AND SAVINGS BANK
C/O HARRIS TRUST COMPANY OF NEW YORK
By Mail, Hand or Overnight Courier: By Facsimile:
Harris Trust and Savings Bank (212) 701-7636
c/o Harris Trust Company of New York
77 Water Street, 4th Floor Confirm by Telephone:
New York, NY 10005 (212) 701-7624
Attn: Reorganization Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be Medallion Stamp 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>
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Exchange Offer and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted only
in principal amounts equal to $1000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time on the Expiration Date.
Tenders of Old Notes may also be withdrawn if the Exchange Offer is terminated
without any such Old Notes being purchased thereunder or as otherwise provided
in the Prospectus.
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
<PAGE>
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Owner(s) or Authorized Signatory:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Name(s) of Registered Holder(s):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Principal Amount of Old Notes Tendered:_________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Certificate No(s). of Old Notes (if available):_________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Area Code and Telephone No.:____________________________________________________
If Old Notes will be delivered by book-entry
transfer at The Depository Trust Company, insert
Depository Account No.:_________________________________________________________
Date:___________________________________________________________________________
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or
on a security position identifying it (them) as the owner of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements 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
provide the following information.
Please print name(s) and address(es)
Name(s) _______________________________________________________________
_______________________________________________________________
Capacity: _______________________________________________________________
Address(es): _______________________________________________________________
_______________________________________________________________
_______________________________________________________________
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office, branch, agency or correspondent in the United
States, hereby guarantees that, within three New York Stock Exchange, Inc.
trading days after the Expiration Date, a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), with any required signature
guarantees, together with certificates representing the Old Notes covered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at the Depository Trust Company,
pursuant to the procedure for book-entry transfer set forth in the Prospectus)
and any other documents required by the Letter of Transmittal will be delivered
by undersigned to the Exchange Agent at its address set forth above.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET
FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm:___________________________________________________________________
________________________________________________________________________________
Authorized Signature
Address:________________________________________________________________________
Name:___________________________________________________________________________
Title:__________________________________________________________________________
Area Code and Telephone No.:____________________________________________________
Date:___________________________________________________________________________
\25309\037\10DOCJFW.002
<PAGE>
EXHIBIT 99.3
OFFER TO EXCHANGE
8 3/4% SERIES C SENIOR SUBORDINATED NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2003
OF
CANANDAIGUA WINE COMPANY, INC.
TO BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
We are enclosing herewith the material listed below relating to the offer
by Canandaigua Wine Company, Inc., a Delaware corporation (the "Company") to
exchange its 8 3/4% Series C Senior Subordinated Notes due 2003 (the "Exchange
Notes"), for a like principal amount of its issued and outstanding 8 3/4% Series
B Senior Subordinated Notes due 2003 (the "Old Notes") pursuant to an offering
registered under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms and subject to the conditions set forth in the Company's
Prospectus, dated __________, 199__, and the related Letter of Transmittal
(which together constitute the "Exchange Offer").
The Exchange Offer provides a procedure for holders to tender the Old Notes
by means of guaranteed delivery.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
______________, 199__, unless extended (the "Expiration Date"). Tendered Old
Notes may be withdrawn at any time prior to 5:00 p.m. New York City time on the
Expiration Date, if such Old Notes have not previously been accepted for
exchange pursuant to the Exchange Offer.
Based on interpretations of the staff of the Securities and Exchange
Commission (the "SEC"), Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such holder is acquiring the
Exchange Notes in its ordinary course of business, such holder has no
arrangement or understanding with any person to participate in a distribution of
the Exchange Notes, and neither such holder nor any other such person is
engaging in or intends to engage in a distribution of such Exchange Notes.
Holders of Old Notes wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
<PAGE>
Exchange Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. The Prospectus,
as it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities (other than Old Notes
acquired directly from the Company). The Company has agreed that, for a period
of 180 days after the date of the Prospectus, it will make the Prospectus and
any amendments or supplements thereto required for compliance with the
Securities Act available to any broker-dealer for use in connection with any
such resale.
THE EXCHANGE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF OLD NOTES
BEING TENDERED.
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided in the Prospectus.
THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED OLD NOTES FROM ANY
TENDERING HOLDER IF THE COMPANY DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION,
THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE SECURITIES LAWS.
For your information and for forwarding to your clients for whom you hold
Old Notes registered in your name or in the name of your nominee, enclosed
herewith are copies of the following documents:
1. Prospectus dated _____________, 199__;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or DTC Participant from
Beneficial Owner;
5. Letter which may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee, to
accompany the instruction form referred to above, for obtaining
such client's instruction with regard to the Exchange Offer; and
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 of the Internal Revenue Service (attached to
Letter of Transmittal).
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<PAGE>
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 5 of the
enclosed Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer may be
addressed to, and additional copies of the enclosed materials may be obtained
from the Exchange Agent, Harris Trust and Savings Bank c/o Harris Trust Company
of New York, at the telephone number set forth below:
Telephone: 212-701-7624
Very truly yours,
Canandaigua Wine Company, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF CANANDAIGUA WINE COMPANY, INC. OR HARRIS TRUST AND SAVINGS BANK C/O
HARRIS TRUST COMPANY OF NEW YORK OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE
ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
\25309\037\10DOCJFW.001
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<PAGE>
EXHIBIT 99.4
INSTRUCTION TO REGISTERED HOLDER AND/OR
DTC PARTICIPANT FROM BENEFICIAL OWNER
OF
8 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2003
OF
CANANDAIGUA WINE COMPANY, INC.
TO REGISTERED HOLDER AND/OR DTC PARTICIPANT:
The undersigned hereby acknowledges receipt of the prospectus dated
___________________, 199__ (the "Prospectus") of Canandaigua Wine Company, Inc.,
a Delaware corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer") to exchange 8 3/4% Series C Senior
Subordinated Notes due 2003 (the "Exchange Notes") for any and all of its
outstanding 8 3/4% Series B Senior Subordinated Notes due 2003 (the "Old
Notes"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or DTC participant, as to
the action to be taken by you relating to the Exchange Offer with respect to the
Old Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$___________________________________________________.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
/___/ To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, (if any):
$___________________________________________________.
/___/ NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Exchange Notes acquired by the undersigned pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the undersigned, (ii) the
undersigned has no arrangement or understanding with any person
<PAGE>
to participate in a distribution of such Exchange Notes, (iii) the undersigned
is not engaged in and does not intend to engage in a distribution of such
Exchange Notes and (iv) the undersigned is not an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act"). If the undersigned is a broker-dealer (whether or not it is
also an "affiliate") that will receive Exchange Notes for its account in
exchange for Old Notes, it represents that such Old Notes were acquired as a
result of market-making activities or other trading activities, and acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes. By acknowledging that it
will deliver, and by delivering, a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
-2-
<PAGE>
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name(s) (please print):_________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer identification or Social Security Number:
________________________________________________________________________________
________________________________________________________________________________
Date:___________________________________________________________________________
\25309\037\10DOCJFW.003
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