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RULE NO. 424(b)(2)
REGISTRATION NO. 333-91587
[LOGO]
CANANDAIGUA BRANDS, INC.
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(pound) 80,000,000
Canandaigua Brands, Inc.
8 1/2% Series C Senior Notes due 2009
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Issue price................ 99.5%.
Net proceeds............... The net proceeds from the sale of the notes are
estimated to be (pound)78,500,000 after deducting
underwriting discounts and estimated fees and
expenses.
Maturity.................. November 15, 2009.
Interest rate............. 81/2% per year is payable semi-annually on May 15
and November 15 of each year commencing on November
15, 2000.
Redemption................ We may redeem the notes at any time at a make-whole
amount.
Ranking................... The notes will be senior unsecured obligations and
will rank equally with our other current and future
unsecured and unsubordinated indebtedness.
Guarantors................ The notes will be unconditionally guaranteed by
each of our subsidiaries that guarantee any of our
other indebtedness or other indebtedness of the
guarantors of the notes.
Listing................... Application has been made to list the notes on the
Luxembourg Stock Exchange.
You should be aware that this investment involves risks. Please see the section
"Risk Factors" beginning on page S-13.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy of this Prospectus Supplement or the Prospectus. Any representation to
the contrary is a criminal offense.
We expect that delivery of the notes will be made to investors on or about May
15, 2000.
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<CAPTION>
Discounts and Proceeds to
Price to Public Commissions Canandaigua Brands, Inc.
--------------- ------------ ------------------------
<S> <C> <C> <C>
Per (pound)note............. 99.5% 1.0% 98.5%
Total(pound)................ (pound)79,600,000 (pound)800,000 (pound)78,800,000
</TABLE>
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Barclays Capital
Prospectus Supplement (to Prospectus dated December 3, 1999) dated May 5, 2000
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Table of Contents
Prospectus Supplement
Currencies ......................................................... i
Forward-Looking Statements ......................................... i
Industry Data ...................................................... i
Summary ............................................................ S-1
Risk Factors ....................................................... S-13
Use of Proceeds .................................................... S-15
Capitalization ..................................................... S-15
Business ........................................................... S-16
Management ......................................................... S-26
Description of the Senior Credit Facilities ........................ S-29
Description of the Notes ........................................... S-31
The Subsidiary Guarantors .......................................... S-70
Information Concerning the Subsidiary Guarantors .................. S-70
Summary Historical Financial
Information of the Subsidiary Guarantors ......................... S-92
Certain United States Federal Income Tax Considerations ............ S-93
General Listing Information ........................................ S-97
Plan of Distribution ............................................... S-99
Legal Opinions ..................................................... S-100
Experts ............................................................ S-100
Available Information .............................................. S-101
Incorporation of Certain Documents by Reference .................... S-101
Prospectus
About this Prospectus .............................................. i
Where You Can Find More Information ................................ ii
Special Note Regarding Forward-Looking Statements .................. ii
Canandaigua Brands, Inc. ........................................... 1
The Guarantors ..................................................... 1
Risk Factors ....................................................... 1
Use of Proceeds .................................................... 4
Dividend Policy .................................................... 4
Ratio of Earnings to Fixed Charges ................................. 5
Description of Debt Securities ..................................... 5
Description of Preferred Stock ..................................... 10
Description of Depositary Shares ................................... 11
Description of Class A Common Stock ................................ 14
Plan of Distribution ............................................... 16
Legal Opinions ..................................................... 17
Experts ............................................................ 17
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CURRENCIES
In this Prospectus Supplement references to "dollars" and "$" are references
to United States dollars, and references to "U.S." mean the United States of
America. In addition, references to "pounds sterling," "sterling" and
"(Pounds)" are references to the United Kingdom currency. Except as otherwise
stated herein, conversion of pounds sterling for the sterling notes have been
calculated using an exchange rate of (Pounds)1.00=$1.6083. These translations
should not be construed as representations that the amounts in pounds sterling
actually represent such U.S. dollar amounts or could be converted into U.S.
dollars at the rate indicated or at any other rate.
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FORWARD-LOOKING STATEMENTS
This Prospectus Supplement contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are subject to a number
of risks and uncertainties, many of which are beyond our control. All
statements other than statements of historical facts included in this
Prospectus Supplement, including the statements under "Summary" and "Business"
regarding our business strategy, future operations, financial position,
estimated revenues, projected costs, prospects, plans and objectives of
management, as well as information concerning expected actions of third
parties are forward-looking statements. When used in this Prospectus
Supplement, the words "anticipate," "intend," "estimate," "expect," "project"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such identifying words.
All forward-looking statements speak only as of the date of this Prospectus
Supplement. Neither we nor the underwriter undertakes any obligation to update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
can give no assurance that such expectations will prove to be correct.
Important factors that could cause our actual results to differ materially
from our expectations ("cautionary statements") are disclosed under "Risk
Factors" and elsewhere in this Prospectus Supplement and the Prospectus. The
cautionary statements qualify all forward-looking statements attributable to
us or persons acting on our behalf.
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INDUSTRY DATA
Market share and industry data disclosed in this Prospectus Supplement have
been obtained from the following industry and government publications: The
Gomberg-Fredrikson Report; Adams Liquor Handbook; Adams Wine Handbook; Adams
Beer Handbook; Adams Media Handbook Advance; The U.S. Wine Market: Impact
Databank Review and Forecast; The U.S. Beer Market: Impact Databank Review and
Forecast; The U.S. Distilled Spirits Markets: Impact Databank Review and
Forecast; NACM, AC Nielsen, the Zenith Guide, Office for National Statistics
(U.K.) and Beer Marketer's Insights. Neither we nor the underwriter has
independently verified these data. References to market share data are based
on unit volume.
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No action has been or will be taken in any jurisdiction by us, the
Subsidiary Guarantors or the underwriter that would permit distribution of a
Prospectus in any jurisdiction where action for that purpose is required,
other than in the United States. Any person into whose possession this
Prospectus Supplement and the accompanying Prospectus comes is advised by us,
the Subsidiary Guarantors and the underwriter to inform themselves about, and
to observe any restrictions as to, the offering of the notes and the
distribution of this Prospectus Supplement and accompanying Prospectus.
i
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We, as the issuer of the notes, and the Subsidiary Guarantors, having made
all reasonable inquiries, confirm that this Prospectus Supplement, the
accompanying Prospectus and the documents incorporated by reference contain
all information with respect to us, the Subsidiary Guarantors and the notes
which is material in the context of the listing of the notes, that the
information contained herein and in the incorporated documents is true and
accurate in all material respects and is not misleading, that the opinions and
intentions expressed herein are honestly held and have been reached after
considering all relevant circumstances and are based on reasonable
assumptions, that there are not other facts the omission of which would, in
the context of the listing of the notes, make this Prospectus Supplement, the
Prospectus and the documents incorporated by reference as a whole or any such
information or the expression of any such opinions or intentions misleading in
any material respect, that all reasonable inquiries have been made by us and
the Subsidiary Guarantors to verify the accuracy of such information and that
this Prospectus Supplement, the Prospectus and the documents incorporated by
reference do not contain an untrue statement of material fact or omit to state
a material fact required to be stated herein or necessary in order to make the
statements herein, in the light of the circumstances under which they were
made, not misleading. We and the Subsidiary Guarantors accept responsibility
accordingly.
ii
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Summary
The following summary highlights selected information from this Prospectus
Supplement and the Prospectus and may not contain all the information that is
important to you. We encourage you to read this Prospectus Supplement and the
Prospectus in its entirety. Unless we indicate otherwise, the terms "Company",
"we", "us" and "our" refer to Canandaigua Brands, Inc. together with its
subsidiaries. The Company is a Delaware (U.S.) corporation that was
incorporated on December 4, 1972.
Company Overview
We are a leading producer and marketer of branded beverage alcohol products
in North America and the United Kingdom. According to available industry data,
we rank as the second largest supplier of wine, the second largest importer of
beer and the fourth largest supplier of distilled spirits in the United States.
Our wholly-owned British subsidiary, Matthew Clark plc, is a leading producer
of cider, wine and bottled water, and a leading beverage alcohol wholesaler in
the United Kingdom.
Since our founding in 1945 as a producer and marketer of wine products, we
have grown through acquisitions, new product offerings and new distribution
agreements. Since 1991 we have successfully integrated numerous acquisitions
that have diversified our product portfolio and increased our market share, net
sales and cash flow. Internal growth has been driven by developing new products
and repositioning existing brands to focus on the fastest growing sectors of
the beverage alcohol industry.
We completed several significant acquisitions in the past eighteen months.
Most recently, in June 1999 we completed the complementary acquisitions of all
the capital stock and related assets of Franciscan Vineyards, Inc.
("Franciscan") and Simi Winery, Inc. ("Simi"), both producers of fine wine.
These transactions followed our April 1999 acquisition of several well known
Canadian whisky brands, including Black Velvet and related assets (the "Black
Velvet Assets"), from Diageo Inc. and certain of its affiliates, and our
December 1998 acquisition of Matthew Clark. For the fiscal year ended February
29, 2000 ("Fiscal 2000"), based on our preliminary unaudited results and giving
pro forma effect to the acquisitions of the Black Velvet Assets, Franciscan and
Simi, our net sales were $2.4 billion and adjusted EBITDA was $317 million.
We market and sell more than 185 premier branded products in North America
and the United Kingdom. Our products are distributed by more than 1,000
wholesalers in North America. In the United Kingdom, Matthew Clark distributes
our branded products and those of other companies to more than 16,000
customers. We operate more than 20 production facilities throughout the world
and purchase products for resale from other producers.
Competitive Strengths
Leading Market Positions. We are a leading marketer and producer of beverage
alcohol products in each of our major product segments. We have strong market
share and leading market positions in both the United States and United
Kingdom.
. In the United States, we are the second largest supplier of wine with a
16% market share, the second largest importer of beer with a 17% market
share and the fourth largest supplier of distilled spirits with a 10%
market share.
. In the United Kingdom, we are the second largest producer of cider with
a 34% market share and the largest producer and marketer of sparkling
bottled water with an 11% market share.
Our leading market positions increase our purchasing and distribution
leverage with our suppliers and distributors. Our broad product offerings and
nationwide networks in combination with our leading market positions make us an
attractive one-stop supplier to our customers.
S-1
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Leading Brand Recognition. Many of our products are recognized leaders in
their respective categories in the United States and United Kingdom.
. We are the second largest marketer of imported beers in the United
States and are the distributor of six of the top 25 imported beers: Co-
rona Extra, Corona Light, Modelo Especial, St. Pauli Girl, Pacifico, and
Negra Modelo. We enjoy an exclusive distribution agreement in 25 primar-
ily Western states through 2006 for Corona, the largest selling imported
beer in the United States, with provisions for automatic renewals there-
after.
. We sell more than 100 different brands of table wines, dessert wines and
sparkling wines, including seven of the top 30 wine brands in the United
States: Almaden, Inglenook, Arbor Mist, Richards Wild Irish Rose, Paul
Masson, Cook's and Taylor California Cellars. Stowells of Chelsea is the
leading branded box wine and QC is the leading fortified British wine in
the United Kingdom.
. Diamond White is the leading fashion cider and Blackthorn is the number
two mainstream cider brand sold in the United Kingdom.
. We sell seven of the top 55 distilled spirits brands in the United
States: Black Velvet, Barton and Skol vodkas, Paul Masson Grande Amber
Brandy, Canadian LTD, Montezuma and Fleischmann's Royal.
. Strathmore is the leading brand of sparkling bottled water in the United
Kingdom.
Diversified Product Mix. Through product line extensions and acquisitions we
have diversified our product mix and improved the consistency of our earnings.
. We have reduced our reliance on any one product segment.
. Our sales are spread across four divisions: Barton (beer and spirits),
Canandaigua Wine (wine and related products), Matthew Clark (wholesale
beverages, cider, wine and bottled water) and Franciscan (products of
Simi and Franciscan).
Proven Acquisition Track Record. We have successfully integrated newly
acquired companies with existing operations and achieved revenue growth
opportunities and cost savings in the process.
. We have demonstrated an ability to acquire brands that have been previ-
ously in decline and then revitalize and grow these brands.
. Between Fiscal 1991 and Fiscal 2000, we successfully integrated nine ma-
jor acquisitions which have led to compound annual growth rates in net
sales and EBITDA of 36% and 37%, respectively.
. Due in part to our ability to successfully integrate acquisitions and
achieve cost savings, over the past four fiscal years in the United
States we have significantly increased the average gross profit margin
for our wine portfolio from 25.3% in 1996 to 29.4% in 2000, and for our
spirits portfolio from 35.6% to 46.4%.
. Our December 1998 acquisition of Matthew Clark gives us a platform for
further acquisitions in the United Kingdom and Europe. Since 1991, Mat-
thew Clark has completed eight major acquisitions.
. The Franciscan and Simi acquisitions give us an entree into the high-
growth fine wine category.
Experienced and Incentivized Management Team. We have one of the most
experienced management teams in the beverage alcohol industry.
. Our executive officers have an average of eight years with the Company
or its affiliates and an average of 16 years in the beverage alcohol in-
dustry.
S-2
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. Richard Sands, our Chairman, Chief Executive Officer and President, and
Robert Sands, our Group President, are members of the Sands family,
which beneficially owns 65% of the voting power of our common stock and
controls 26% of our outstanding equity.
Business Strategy
We intend to continue to enhance sales and profitability and strengthen our
position as an industry leader through the following key initiatives:
Effectively Manage Our Brand Portfolio. Our objective is to maximize the
profitability of our brand portfolio.
. We intend to focus our portfolio on growth segments of the beverage al-
cohol market.
. We plan to adjust the price/volume relationship of certain brands on a
local basis to maximize profits without negatively affecting market
share.
. We will support existing brands through aggressive marketing and compet-
itive pricing.
Introduce Product Line Extensions. The success and brand name recognition of
our products give us the ability to introduce product line extensions to
generate additional growth and to gain market share.
. We are using the well-known Almaden wine name to expand our presence in
the growing box wine market in the United States by offering an increas-
ing number of blends, including proprietary red wine blends designed to
increase the size of the wine market by appealing to consumers with
preferences for lighter-tasting red wines not offered by competitors. We
moved into second place in the highly competitive boxed wine category in
1999.
. We will use our 99 Bananas flavored liqueur product line to introduce
new flavors designed to capitalize on changing consumer tastes.
. We are taking advantage of the top-ranked position of the Stowells of
Chelsea boxed wine brand in the United Kingdom by introducing Stowells
of Chelsea wine in a variety of bottle sizes, encouraging consumers to
try an assortment of blends.
. We are taking advantage of the strength of the Strathmore brand in the
United Kingdom by introducing new bottled water flavors.
Capitalize on Growth Opportunities. We are focusing on a number of categories
that have demonstrated growth potential in an existing market or are under-
served by products currently available in the market.
. We are continuing to build distribution of Arbor Mist, a line of fruit-
flavored varietal specialty wines that we introduced in June 1998. We
shipped two million cases of Arbor Mist in Fiscal 1999 and four million
cases in Fiscal 2000.
. We recently launched two new wine products targeted at the consumer
preference theme we identified and exploited with Arbor Mist: Nectar
Valley, a white merlot/white zinfandel product, and Motif, a fruit-fla-
vored sparkling wine.
. We are increasing our advertising support for Corona Extra imported beer
to support the brand's sales momentum following a mid-1999 price in-
crease.
. The Franciscan Estates and Simi product lines are well-established in
the fine wine category, which has a 16% three-year compounded annual
growth rate.
. We have established our wholesale business in the United Kingdom as the
leading independent multiple product line supplier to the growing on-
premises trade.
. We are introducing a new Swedish vodka brand in the United States to
capitalize on consumer trends.
S-3
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Consider Selective Acquisition Opportunities. Strategic acquisitions will
continue to be a component of our growth strategy to complement our internal
brand development initiatives.
. We have supplemented our internal growth with nine major acquisitions
since 1991.
. Matthew Clark's established reputation within the industry and proven
track record provide us with an additional platform from which to pursue
future international acquisitions.
. We will continue to seek acquisitions that capitalize on our existing
infrastructure or that offer complementary product lines, geographic
scope or additional distribution channels.
S-4
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The Offering
Issuer................................ Canandaigua Brands, Inc.
Total Amount of Notes Offered......... (Pounds)80,000,000 aggregate principal
amount of 8 1/2% Series C Senior Notes
due 2009.
Maturity.............................. November 15, 2009.
Interest Payment Dates................ Semi-annually on May 15 and November
15, commencing November 15, 2000.
Subsidiary Guarantors................. The notes will be unconditionally guar-
anteed by each of our subsidiaries that
guarantee any of our other indebtedness
or other indebtedness of the guarantors
of the notes.
Ranking............................... The notes will be senior unsecured ob-
ligations and will rank equally with
our other unsecured and unsubordinated
indebtedness. The notes will be effec-
tively subordinated to our secured in-
debtedness.
Optional Redemption................... The notes are redeemable at any time at
a make-whole amount. See "Description
of the Notes--Optional Redemption."
Change of Control..................... Upon the occurrence of a "Change of
Control," each holder of the notes will
have the right to require us to repur-
chase such holder's notes at a price
equal to 101% of the principal amount
hereof, plus accrued and unpaid inter-
est, if any, to the date of repurchase.
Covenants............................. The indenture relating to the notes
will contain various covenants, includ-
ing, but not limited to, covenants with
respect to the following matters:
. limitation on indebtedness;
. limitation on restricted payments;
. limitation on transactions with af-
filiates;
. limitation on liens;
. limitation on sale of assets;
. limitation on issuances of guaran-
tees;
. limitation on subsidiary capital
stock;
. limitation on dividends and other
payment restrictions affecting sub-
sidiaries; and
. restrictions on consolidations,
mergers and the sale of assets.
S-5
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Additional Amounts.................... All payments with respect to the notes
or guarantees will be made without
withholding or deduction for taxes un-
less required by law, regulation or
governmental policy or the interpreta-
tion or administration thereof, in
which case, we will, except in certain
circumstances (e.g., where a holder has
failed to provide proper certification,
such as a Form W-8, serving as a pre-
condition to exemption from, or reduc-
tion in the rate of, such withholding
or deduction), pay such additional
amounts as may be necessary so that the
net amount received by the holders af-
ter such withholding or deduction will
not be less than the amount that would
have been received in the absence of
such withholding or deduction. See "De-
scription of the Notes--Additional
Amounts."
Redemption for Changes in Withholding
Tax.................................. We may, at our option, redeem the notes
of any holder, in whole but not in
part, at a redemption price equal to
100% of the principal amount of the
notes of such holder, plus accrued and
unpaid interest, if any, if we have
then become, or if on the next date
thereafter on which any amount will
fall due for payment under or with re-
spect to the notes or guarantees we
will in the absence of such redemption
become, obligated to pay any Additional
Amounts on such notes as a result of
any changes in withholding tax laws,
policies, treaties or regulations, or
any change in or amendment to any offi-
cial position or administration or as-
sessing practices regarding the appli-
cation or interpretation of such laws,
policies, treaties or regulations,
which change or amendment is announced
or becomes effective on or after the
date the notes are issued; provided,
however, that (i) notice shall not be
given earlier than 60 days prior to the
earliest date on which we would be ob-
ligated to pay Additional Amounts, (ii)
we will be required to consummate such
redemption within 180 days of the date
on which such Additional Amounts are
payable and (iii) if, after giving ef-
fect to such redemption, less than a
majority of the aggregate principal
amount of notes originally issued would
remain outstanding, we will be required
to make an offer to purchase the re-
maining notes at a purchase price equal
to 100% of the aggregate principal
amount thereof, plus accrued and unpaid
inter- est, if any, to the date of re-
demption. See
S-6
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"Description of the Notes--Redemption
of the Notes--Redemption for Changes in
Withholding Tax."
Use of Proceeds.......................
We estimate that the net proceeds from
this offering will be approximately
(Pounds)78.5 million ($126.2 million).
We intend to use these proceeds to re-
pay bank debt. See "Use of Proceeds."
Governing Law......................... The notes and the indenture will be
governed by the laws of the State of
New York.
Exchange Offer Election...............
After the closing of this offering, we
may elect to offer an equal principal
amount of these notes for our outstand-
ing 8 1/2% Series B Senior Notes due
2009, so that the Series B Notes and
the notes being offered hereby are part
of a single series to provide more li-
quidity for investors in the Series B
Notes and these notes.
Risk Factors
You should carefully consider all of the information set forth in this
Prospectus Supplement and the Prospectus and, in particular, you should
evaluate the specific factors under "Risk Factors" beginning on page S-13
before purchasing the notes.
S-7
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Unaudited Summary Pro Forma Combined Financial Data
The information on this and the following page present (i) unaudited summary
pro forma combined financial data based on our preliminary unaudited Fiscal
2000 results and giving effect to our acquisitions, and related financings, of
Franciscan, Simi and the Black Velvet Assets during Fiscal 2000 and this
offering, as if all such transactions had occurred on March 1, 1999, and (ii)
unaudited summary pro forma combined financial data for the year ended February
28, 1999 ("Fiscal 1999") and for the nine months ended November 30, 1999,
giving effect to the acquisitions, and related financings, of Franciscan, Simi
and the Black Velvet Assets during Fiscal 2000 and Matthew Clark in December
1998 and this offering, as if all such transactions had occurred on March 1,
1998. The following unaudited summary pro forma combined financial data do not
purport to represent what our results of operations or financial condition
would have actually been had the indicated transactions been consummated as of
such dates or to project our results of operations or financial condition for
any future period. The financial information on this and the following page
should be read in conjunction with our audited and unaudited consolidated
financial statements, related notes and other financial information included in
or incorporated by reference into the Prospectus and this Prospectus
Supplement. See "Incorporation of Certain Documents by Reference."
Preliminary Pro Forma Combined Financial Data for Fiscal 2000
<TABLE>
<CAPTION>
Year Ended
February 29, 2000
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(Dollars in millions)
<S> <C>
Income Statement Data:
Net sales............................................... $2,368
Gross profit............................................ 738
Selling, general and administrative expenses............ (505)
Nonrecurring charges.................................... (6)
Operating income (a).................................... 227
Other Data:
EBITDA (b)(c)........................................... $ 317
Ratio of EBITDA to interest expense..................... 2.8x
Capital expenditures.................................... $ 61
Depreciation and amortization........................... 68
</TABLE>
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(a) Operating income for Fiscal 2000 reflects operating income on our
historical income statement of $235 million plus $3 million for the
acquisition of the Black Velvet Assets, partially offset by an operating
loss of $11 million relating to the Franciscan and Simi acquisitions.
(b) EBITDA is defined as net income before interest expense, income taxes,
depreciation and amortization, losses on disposal of fixed assets, and
nonrecurring and onetime charges. Management believes that EBITDA is a
measure commonly used by analysts and investors to determine a company's
ability to service and incur debt. Accordingly, this information has been
presented to permit a more complete analysis. EBITDA should not be
considered as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
profitability or liquidity.
(c) EBITDA for Fiscal 2000 reflects operating income of $227 million plus
depreciation and amortization of $68 million, nonrecurring charges relating
to the Franciscan acquisition of $16 million and nonrecurring charges of $6
million relating to Matthew Clark and Canandaigua Wine.
S-8
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Pro Forma Combined Financial Data for Fiscal 1999 and Nine Months Ended
November 30, 1999
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
February 28, 1999 November 30, 1999
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(Dollars in millions)
<S> <C> <C>
Income Statement Data:
Net sales................................ $2,155 $1,841
Gross profit............................. 694 570
Selling, general and administrative
expenses................................ (486) (391)
Nonrecurring charges..................... (22) (6)
Operating income (a)..................... 186 173
Other Data:
EBITDA (b)(c)............................ $ 305 $ 251
Ratio of EBITDA to interest expense...... 2.8x 2.9x
Capital expenditures..................... $ 82 $ 50
Depreciation and amortization............ 65 54
</TABLE>
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(a) Operating income for Fiscal 1999 reflects operating income as set forth on
our historical income statement of $146 million plus $27 million of operating
income related to the acquisition of the Black Velvet Assets and $15 million of
operating income related to the Franciscan and Simi acquisitions, partially
offset by an operating loss of $2 million relating to the Matthew Clark
acquisition. Operating income for the nine months ended November 30, 1999,
reflects operating income set forth on our historical income statement of $181
million plus $3 million for the acquisition of the Black Velvet Assets,
partially offset by an operating loss of $11 million relating to the Franciscan
and Simi acquisitions.
(b) EBITDA is defined as net income before interest expense, income taxes,
depreciation and amortization, losses on disposal of fixed assets, and
nonrecurring and onetime charges. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered as a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(c) EBITDA for Fiscal 1999 reflects operating income of $186 million plus
depreciation and amortization of $65 million, nonrecurring charges at Matthew
Clark set forth on the income statement of $22 million, one time noncash
charges of Matthew Clark of $23 million, corporate overhead of $5 million which
was allocated to the Black Velvet Assets that will not be incurred by us, and
losses on the disposal of fixed assets at Matthew Clark of $4 million. EBITDA
for the nine months ended November 30, 1999, reflects operating income of $173
million plus depreciation and amortization of $54 million, nonrecurring charges
relating to the Franciscan acquisition of $18 million and nonrecurring charges
of $6 million relating to Matthew Clark and Canandaigua Wine.
S-9
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Summary Historical Financial Data
The summary historical financial data on this and the following two pages
present (i) summary financial data derived from our preliminary unaudited
results for Fiscal 2000, and (ii) summary financial data for each of the three
fiscal years in the period ended February 28, 1999, and for each of the nine
months ended November 30, 1998 and 1999. The statement of income data for the
three fiscal years in the period ended February 28, 1999, are derived from our
audited historical financial statements incorporated by reference into the
Prospectus and this Prospectus Supplement. The statement of income data for the
nine months ended November 30, 1998 and 1999, has been derived from our
unaudited financial statements incorporated by reference into the Prospectus
and this Prospectus Supplement. "Other Data" below, not directly derived from
our historical financial statements, have been presented to provide additional
analysis. The summary financial data below reflect results of Matthew Clark
since December 1, 1998, results of the Black Velvet Assets since April 9, 1999,
and the results of the Franciscan and Simi acquisitions since June 4, 1999, the
respective dates we acquired each.
In the opinion of our management, the unaudited data includes all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the data for such periods. Interim results for the nine months ended November
30, 1998 and 1999, are not necessarily indicative of results that can be
expected in future periods. The summary historical financial data should be
read in conjunction with our audited and unaudited financial statements,
related notes and other financial information included in or incorporated by
reference into the Prospectus and this Prospectus Supplement. See
"Incorporation of Certain Documents by Reference."
Preliminary Unaudited Results for Fiscal 2000
<TABLE>
<CAPTION>
Year Ended
February 29, 2000
---------------------
(Dollars in millions)
<S> <C>
Income Statement Data:
Net sales.......................................... $2,340
Gross profit....................................... 722
Selling, general and administrative expenses....... (481)
Nonrecurring charges............................... (6)
Operating income................................... 235
Interest expense, net.............................. (106)
Income before provision for taxes.................. 129
Provision for income taxes......................... 52
Net income......................................... 77
Balance Sheet Data (end of period):
Working capital.................................... $ 558
Total assets....................................... 2,349
Total debt......................................... 1,318
Stockholders' equity............................... 521
</TABLE>
Consolidated Results
For Fiscal 2000, net sales grew by over 56% to $2.3 billion from $1.5 billion
for Fiscal 1999. Approximately $700 million of the increase in net sales was
related to acquisitions completed since December 1998. Net sales growth of over
19% in the beer portfolio led a 9% increase in net sales for the year,
exclusive of acquisitions. Gross profit for Fiscal 2000 reached $722 million,
an increase of over $274 million or 61% from Fiscal 1999. The increased sales
and higher gross profit margins from the acquisitions accounted for the
significant increase in gross profit.
S-10
<PAGE>
Selling, general and administrative expenses for Fiscal 2000 were $182
million higher than in Fiscal 1999 primarily due to the acquisitions that
occurred in Fiscal 2000. Fiscal 2000 and Fiscal 1999 operating income were $241
million and $149 million, respectively, excluding pretax nonrecurring charges
of $6 million and $3 million, respectively. Net interest expense grew to $106
million in Fiscal 2000 from $41 million in Fiscal 1999. The increase can be
attributed to increased debt to fund the acquisitions made since December 1998.
Barton Results
Net sales for our Barton segment for Fiscal 2000 grew to $838 million from
$665 million in Fiscal 1999, representing an increase of 26%. The increase can
be attributed to selling price increases and volume growth in the Mexican beer
portfolio as well as sales attributable to the Black Velvet Assets. Operating
income was $143 million in Fiscal 2000 compared to $103 million in Fiscal 1999,
an increase of 39%. The volume and sales growth generated by the beer
portfolio, coupled with the Black Velvet Assets acquisition, accounted for the
increase in operating income for Fiscal 2000, partially offset by increased
selling and marketing expenses related to the growth of the Mexican beer
portfolio.
Canandaigua Wines Results
Net sales for our Canandaigua Wines segment were $712 million in Fiscal 2000
and $669 million in Fiscal 1999, representing a 6% increase. The net sales
growth can be attributed to the impact of favorable volume and mix primarily
related to Arbor Mist sales. Additionally, grape juice concentrate and bulk
wine sales increased 17% for Fiscal 2000 versus a year ago. For Fiscal 2000,
excluding a nonrecurring charge of approximately $3 million, operating income
grew to $49 million, an increase of 7% compared to Fiscal 1999, primarily
related to increased net sales.
Matthew Clark Results
Net sales for our Matthew Clark segment for Fiscal 2000 were $730 million, an
increase of $571 million from Fiscal 1999, most of which reflects the timing of
our acquisition of Matthew Clark in December 1998. Matthew Clark net sales
increased 9% for Fiscal 2000 as compared to pro forma net sales for the
previous 12 months. Operating income for Fiscal 2000, excluding a nonrecurring
charge of approximately $3 million, grew to $51 million, approximately $40
million higher than Fiscal 1999, which only included Matthew Clark's results
during the fourth quarter of 1999. A portion of the increase is also
attributable to higher net sales and reduced marketing costs.
Franciscan Results
We completed the acquisitions of Franciscan and Simi in June 1999, both of
which are reported together as the Franciscan segment. Fiscal 2000 net sales
and operating income were $62 million and $13 million, respectively,
representing nine months of operations. On a pro forma basis, net sales for
Fiscal 2000 increased by 24% versus the comparable year-ago period.
S-11
<PAGE>
Results for the Three Fiscal Years in the Period Ended February 28, 1999 and
Nine Months Ended November 30, 1998 and 1999
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended February 28, November 30,
---------------------------- ------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales................... $1,135.0 $1,212.8 $1,497.3 $1,037.9 $1,813.3
Gross profit................ 322.2 343.8 448.0 311.0 554.9
Selling, general and
administrative expenses.... (209.0) (231.7) (299.5) (202.6) (368.1)
Nonrecurring charges........ -- -- (2.6) -- (5.5)
-------- -------- -------- -------- --------
Operating income............ 113.2 112.1 145.9 108.4 181.3
Interest expense, net....... (34.0) (32.2) (41.5) (23.7) (78.2)
-------- -------- -------- -------- --------
Income before provision for
taxes and extraordinary
item....................... 79.2 79.9 104.4 84.7 103.1
Provision for income taxes.. (33.0) (32.8) (42.5) (34.7) (41.3)
Extraordinary item, net of
income taxes............... -- -- (11.4) -- --
-------- -------- -------- -------- --------
Net income.................. $ 46.2 $ 47.1 $ 50.5 $ 50.0 $ 61.8
======== ======== ======== ======== ========
Other Data:
EBITDA (a).................. $ 145.0 $ 145.2 $ 188.3 $ 134.1 $ 232.1
EBITDA margin (b)........... 12.8% 12.0% 12.6% 12.9% 12.8%
Cash flows from operating
activities................. $ 107.8 $ 28.8 $ 107.2 $ 59.3 $ 56.3
Cash flows from investing
activities................. (36.3) (18.7) (382.4) (22.3) (497.9)
Cash flows from financing
activities................. (64.8) (18.9) 301.0 (36.1) 441.3
Capital expenditures........ 31.6 31.2 49.9 21.7 46.7
Depreciation and
amortization............... 31.8 33.2 38.6 25.7 50.8
Ratio of earnings to fixed
charges (c)................ 3.1x 3.2x 3.2x 4.1x 2.2x
</TABLE>
<TABLE>
<CAPTION>
February 28, February 28, November 30,
1998 1999 1999
------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet
Data (end of
period):
Working
capital..... $ 291 $ 440 $ 531
Total
assets...... 1,091 1,794 2,533
Total debt... 425 925 1,409
Stockholders'
equity...... 425 435 497
</TABLE>
- --------
(a) EBITDA is defined as net income before interest expense, income taxes,
depreciation and amortization, losses on disposal of fixed assets, and
nonrecurring and onetime charges. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered as a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity.
(b) EBITDA margin is computed as EBITDA as a percentage of net sales.
(c) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represent income before provision for income taxes plus fixed
charges. "Fixed charges" consist of interest expensed and capitalized,
amortization of debt issuance costs, amortization of discount on debt, and the
portion of rental expense which management believes is representative of the
interest component of lease expense.
S-12
<PAGE>
RISK FACTORS
Before you buy any securities offered by this Prospectus Supplement and the
Prospectus, you should be aware that there are various risks, including those
described below and in the Prospectus. You should consider carefully these risk
factors, together with all of the other information in this Prospectus
Supplement and the Prospectus and the documents that are incorporated by
reference before you decide to acquire any securities.
This Prospectus Supplement includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. These forward-looking statements include, in particular, the statements
about our plans, strategies and prospects under the headings "Summary" and
"Business." Although we believe that our plans, intentions and expectations
reflected in or suggested by such forward-looking statements are reasonable, we
cannot assure you that we will achieve such plans, intentions or expectations.
Important factors that could cause actual results to differ materially from the
forward-looking statements we make in this Prospectus Supplement and the
Prospectus are set forth below and elsewhere in this Prospectus Supplement and
the Prospectus. All forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by the following
cautionary statements.
The Notes Are Unsecured; the Stock of Some of Our Subsidiaries is Pledged to
Secure Our Bank Credit Facility
The notes will not be secured by any of our assets. Our obligations under our
bank credit facility, however, are secured by (i) first priority pledges of
100% of the capital stock of Canandaigua Limited and all of our domestic
operating subsidiaries and (ii) first priority pledges of 65% of the capital
stock held by us of Matthew Clark, B.B. Servicios, S.A. de C.V., Canandaigua
World Sales Limited and Schenley Distilleries Inc./Les Distilleries Schenley
Inc. If the Company becomes insolvent or is liquidated, or if payment under our
bank credit facility is accelerated, the lenders under the facility would be
entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to the agreement governing such indebtedness. In
any such event, because the notes will not be secured by any of our assets, it
is possible that there would be no assets remaining from which claims of the
holders of the notes could be satisfied or, if any such assets remained, such
assets might be insufficient to satisfy such claims fully. See "Description of
the Senior Credit Facilities."
Our Ability to Make Payments on the Notes Depends on Our Ability to Receive
Dividends from Our Subsidiaries; Matthew Clark is not a Guarantor of the Notes
We are a holding company and conduct almost all of our operations through our
subsidiaries. As of February 29, 2000, approximately 88% of our tangible assets
were held by our subsidiaries. The capital stock of our subsidiaries represents
substantially all the assets of the holding company. Accordingly, we are
dependent on the cash flows of our subsidiaries to meet our obligations,
including the payment of the principal and interest on the notes.
The notes will be guaranteed, jointly and severally, by each of our
subsidiaries that guarantee any of our other indebtedness or other indebtedness
of the guarantors of the notes. Holders of the notes will not have a direct
claim on assets of subsidiaries that do not guarantee the notes (including,
most significantly, the assets of Matthew Clark). For the year ended February
29, 2000 (based on our preliminary unaudited results and giving pro forma
effect to the acquisitions of the Black Velvet Assets, Franciscan and Simi, as
if each had occurred on March 1, 1999) approximately $730 million of our net
sales were from operations of Matthew Clark, which is not a guarantor of the
notes, and approximately $1.6 billion from our operations and the operations of
the Subsidiary Guarantors. Under U.S. bankruptcy law and comparable provisions
of state fraudulent transfer laws, a court could subordinate or void any
guarantee if it found that the guarantee was incurred with actual intent to
hinder, delay or defraud creditors or the Subsidiary Guarantor did not receive
fair consideration or reasonably
S-13
<PAGE>
equivalent value for the guarantee and the Subsidiary Guarantor was any of the
following: (i) insolvent or was rendered insolvent because of the guarantee;
(ii) engaged in a business or transaction for which its remaining assets
constituted unreasonably small capital; or (iii) intended to incur, or
believed that it would incur, debts beyond its ability to pay at maturity. To
the extent any guarantee were to be voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the notes would cease to have
any claim in respect of such Subsidiary Guarantor and would be solely our
creditors and any Subsidiary Guarantor whose guarantee was not voided or held
unenforceable. In such event, the claims of the holders of the notes against
the issuer of an invalid guarantee would be subject to the prior payment of
all liabilities of such Subsidiary 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 notes relating to any voided
guarantee.
Based upon financial and other information currently available to us, we
believe that the notes and the guarantees are being incurred for proper
purposes and in good faith and that we and each Subsidiary Guarantor is
solvent and will continue to be solvent after issuing the notes or its
guarantee, as the case may be, will have sufficient capital for carrying on
its business after such issuance and will be able to pay its debts as they
mature. See "Description of the Senior Credit Facilities" and "Description of
the Notes."
We May Not Be Able to Purchase the Notes in the Event of a Change of Control
Upon the occurrence of certain specific kinds of change of control events,
we will be required to make an offer to repurchase the notes at 101% of their
principal amount plus accrued interest and we will be required to repay our
senior secured credit facility in full. However, it is possible that we will
not have sufficient funds at the time of the change of control to make the
required repurchase of notes or to repay our senior secured credit facility.
Even if we did have sufficient funds to carry out such a repurchase, the
financial effect of the repurchase could cause us to default on our other
indebtedness. See "Description of the Notes--Certain Covenants--Purchase of
Notes Upon a Change of Control."
An Active Trading Market for the Notes May Not Develop and the Market Price of
the Notes May Be Lower Than the Offering Price
Although the notes have identical terms to a previous series of notes we
have issued, the notes are a new issue of securities with no established
trading market, and there can be no assurance as to (i) the liquidity of any
such market that may develop, (ii) the ability of holders of notes to sell
their notes or (iii) the price at which the holders of notes would be able to
sell their notes. If such a market were to exist, the notes could trade at
prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
market for similar notes and our financial performance. Although the notes
have been registered, there can be no assurance that an active trading market
will exist for the new notes or that such trading market will be liquid.
S-14
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the notes offered hereby, after deducting
the underwriter's discount and our estimated offering fees and expenses, are
estimated to be approximately (Pounds)78.5 million ($126.2 million). The net
proceeds from the sale of the notes will be used to repay amounts outstanding
under our bank credit facility. See "Description of the Senior Credit
Facilities."
CAPITALIZATION
The following table sets forth our unaudited capitalization (i) as of
February 29, 2000, and (ii) as adjusted to reflect the effect of this
offering, and the application of the net proceeds therefrom. Since February
29, 2000, except as set forth in this Prospectus Supplement, there has been no
material change in our capitalization.
<TABLE>
<CAPTION>
February 29, 2000 February 29, 2000
(Actual) (As Adjusted)
----------------- -----------------
(Dollars in millions)
<S> <C> <C>
Long term debt (including current
maturities):
Revolving credit facility................ $ 26.8 $ 28.6
Term loan facility....................... 570.1 444.4
8 5/8% Senior Notes due 2006............. 200.0 200.0
8 1/2% Series B Senior Notes due 2009.... 118.4(a) 118.4(a)
8 1/2% Series C Senior Notes due 2009
offered hereby.......................... -- 125.7(b)
8 3/4% Senior Subordinated Notes due 2003
........................................ 192.9 192.9
8 1/2% Senior Subordinated Notes due
2009.................................... 200.0 200.0
Other ................................... 9.8 9.8
-------- --------
Total debt............................. 1,318.0 1,319.8
-------- --------
Stockholders' equity:
Preferred Stock, $.01 par value--
authorized 1,000,000 shares; issued
none.................................... -- --
Class A Common Stock, $.01 par value--
authorized 120,000,000 shares; issued
18,206,662 shares....................... 0.2 0.2
Class B Convertible Common Stock, $.01
par value--
authorized 20,000,000 shares; issued
3,745,560 shares........................ -- --
Additional paid-in capital............... 247.9 247.9
Retained earnings........................ 358.5 358.5
Accumulated other comprehensive income--
cumulative translation adjustment....... (4.1) (4.1)
Less: Treasury stock..................... (81.7) (81.7)
-------- --------
Total stockholders' equity............. 520.8 520.8
-------- --------
Total capitalization................... $1,838.8 $1,840.6
======== ========
</TABLE>
- --------
(a) Represents (Pounds)75.0 million converted at a rate of (Pounds)1.00 =
$1.5791.
(b) Represents (Pounds)79.6 million converted at a rate of (Pounds)1.00 =
$1.5791.
S-15
<PAGE>
BUSINESS
Canandaigua Brands, Inc. is a leading producer and marketer of branded
beverage alcohol products in North America and the United Kingdom. According
to available industry data, we rank as the second largest supplier of wine,
the second largest importer of beer and the fourth largest supplier of
distilled spirits in the United States. Our Matthew Clark subsidiary is a
leading British producer of cider, wine and bottled water, and a leading
beverage alcohol wholesaler in the United Kingdom.
The Company is a Delaware corporation incorporated on December 4, 1972 as
the successor to a business founded in 1945. We have aggressively pursued
growth in recent years through acquisitions, brand development, new product
offerings and new distribution agreements. The recent acquisitions of
Franciscan and Simi, the Black Velvet Assets and Matthew Clark continued a
series of strategic acquisitions made since 1991 by which we have diversified
our offerings and as a result, increased our market share, net sales and cash
flow. We have also achieved internal growth by developing new products and
repositioning existing brands to focus on the fastest growing sectors of the
beverage alcohol industry. For Fiscal 2000, based on our preliminary unaudited
results and giving pro forma effect to the acquisitions of the Black Velvet
Assets, Franciscan and Simi, our net sales were $2.4 billion and adjusted
EBITDA was $317 million.
We market and sell more than 185 premier branded products in North America
and the United Kingdom. Our products are distributed by more than 1,000
wholesalers in North America. In the United Kingdom, Matthew Clark distributes
our branded products and those of other companies to more than 16,000
customers. We operate more than 20 production facilities throughout the world
and purchase products for resale from other producers.
Competitive Strengths
According to industry data, in 1998 we had a 16% share of the market for
wines, a 17% share of the imported beer market and a 10% share of the
distilled spirits market in the United States. In 1998 in the United Kingdom,
we had a 34% share of the market for cider and an 11% share of the market for
bottled sparkling water. The Stowells of Chelsea boxed wine brand has a 63%
and a 41% market share in the on-premises and off-premises branded segments,
respectively.
Many of our brands are leaders in their respective categories in the United
States, including Corona Extra, the largest selling imported beer brand;
Almaden and Inglenook, the fourth and eighth largest selling table wine
brands, respectively; Arbor Mist, the largest selling fruit-flavored varietal
wine brand; Richards Wild Irish Rose, the largest selling dessert wine brand;
Cook's champagne, the second largest selling sparkling wine brand;
Fleischmann's, the third largest blended whiskey and fourth largest
domestically bottled gin; Montezuma, the second largest selling tequila brand;
and Black Velvet, the third largest Canadian whisky brand. In the United
Kingdom, Blackthorn is the second largest selling on-premises draft cider, and
Gaymer's Olde English is the second largest cider brand in the take-home
market. Strathmore is the leading brand of sparkling bottled water in the
United Kingdom, and Stowells of Chelsea is the leading brand of boxed wine.
Through product line extensions and acquisitions we have diversified our
product mix and improved profitability by reducing reliance on any one product
category and stressing the growing categories of imported beers and varietal
wines. Our portfolio of beers imported into the United States grew at a
compound annual growth rate of 22% versus 13% for the overall imported beer
industry from 1996 through 1999. Excluding the recently acquired Canadian
whisky brands (which had been experiencing declining sales during the three
years before we acquired them), our spirits portfolio experienced a 4% growth
rate versus less than 1% growth for the overall spirits industry between 1996
and 1999. In addition, we have successfully revitalized acquired brands
previously in decline, increasing average gross profit margins. In the United
States the average gross profit margin of our wine portfolio increased from
25.3% to 29.4% during the four years ending with Fiscal 2000, and the average
gross profit margin of our spirits portfolio increased from 35.6% to 46.4%
over the same period.
S-16
<PAGE>
We have one of the most experienced management teams in the beverage alcohol
industry. Our executive officers have an average of eight years with the
Company or its affiliates and an average of 16 years in the beverage alcohol
industry.
Acquisitions in Fiscal 2000 and Fiscal 1999
Acquisitions of Franciscan and Simi
On June 4, 1999, we purchased all of the outstanding capital stock of
Franciscan Vineyards, Inc. and, in related transactions, we purchased a
winery, vineyards and related vineyard assets located in Northern California.
In these transactions, we acquired:
. the Franciscan Oakville Estate, Estancia and Mt. Veeder brands;
. wineries located in Rutherford, Monterey and Mt. Veeder, California;
. vineyards in the Napa Valley, Alexander Valley, Monterey and Paso Robles
appellations (and we entered into long-term grape contracts with certain
parties related to Franciscan to purchase additional grapes grown in the
Napa and Alexander Valley appellations);
. distribution rights to the Quintessa and Veramonte brands; and
. majority interests in entities that own the Veramonte brand, and the
Veramonte winery and vineyards located in the Casablanca Valley, Chile.
Franciscan is one of the foremost super-premium and ultra-premium wine
companies in California. Franciscan's net sales for its fiscal year ended
December 31, 1998, were approximately $50 million on volume of approximately
600,000 cases. While the super-premium and ultra-premium wine categories
represented only 9% of the total United States wine market by volume in 1997,
they accounted for more than 25% of sales dollars. Super-premium and ultra-
premium wine sales in the United States grew at an annual rate of 16% between
1995 and 1998 and Franciscan recorded a compound annual growth rate of more
than 17% for the same period.
Also on June 4, 1999, we acquired all of the outstanding capital stock of
Simi Winery, Inc. This acquisition included the Simi winery (located in
Healdsburg, California), equipment, vineyards, inventory and worldwide
ownership of the Simi brand name. Founded in 1876, Simi is one of the oldest
and best known wineries in California, combining a strong super-premium and
ultra-premium brand with a flexible and well-equipped facility and high
quality vineyards in the key Sonoma appellation. On February 29, 2000, Simi
Winery, Inc. was merged into Franciscan Vineyards, Inc.
The Franciscan and Simi acquisitions have established us as a leading
producer and marketer of super-premium and ultra-premium wine. The Franciscan
and Simi operations complement each other and offer synergies in the areas of
sales and distribution, grape usage and capacity utilization. Together,
Franciscan and Simi represent the sixth largest presence in the super-premium
and ultra-premium wine categories. We operate Franciscan and Simi, and their
properties, together as a separate business segment. Our strategy is to
further penetrate the super-premium and ultra-premium wine categories, which
have higher gross profit margins than popularly-priced wine.
Acquisition of the Black Velvet Assets
On April 9, 1999, in an asset acquisition, we acquired several well-known
Canadian whisky brands, including Black Velvet, the third best selling
Canadian whisky and the 16th best selling spirits brand in the United States,
production facilities located in Alberta and Quebec, Canada, case goods and
bulk whisky inventories and other related assets from affiliates of Diageo
plc. Other principal brands acquired in the transaction were Golden Wedding,
OFC, MacNaughton, McMaster's and Triple Crown. In connection with the
transaction, we also entered into multi-year agreements with affiliates of
Diageo Inc. to provide packaging and distilling services for various brands
retained by the Diageo affiliates.
S-17
<PAGE>
The addition of the Canadian whisky brands from this transaction
strengthened our position in the North American distilled spirits category,
and enhances our portfolio of brands and category participation. The acquired
operations are being integrated with our existing spirits business.
Matthew Clark Acquisition
On December 1, 1998, we acquired control of Matthew Clark and have since
acquired all of Matthew Clark's outstanding shares. Matthew Clark grew
substantially in the 1990s through a series of strategic acquisitions,
including Grants of St. James's in 1993, the Gaymer Group in 1994 and Taunton
Cider Co. in 1995. These acquisitions served to solidify Matthew Clark's
position within its key markets and contributed to an increase in net sales to
approximately $671 million for Matthew Clark's fiscal year ended April 30,
1998. Matthew Clark has developed a number of leading market positions,
including positions as a leading independent beverage supplier to the on-
premise trade, the number one producer of branded boxed wine, the number one
branded producer of fortified British wine, the number one branded bottler of
sparkling water and the number two producer of cider.
The acquisition of Matthew Clark strengthens our position in the beverage
alcohol industry by providing us with a presence in the United Kingdom and a
platform for growth in the European market. The acquisition of Matthew Clark
also offers potential benefits including distribution opportunities to market
California-produced wine and U.S.-produced spirits in the United Kingdom, as
well as the potential to market Matthew Clark products in the United States.
Business Segments
We operate primarily in the beverage alcohol industry in North America and
the United Kingdom. We report our operating results in five segments:
Canandaigua Wine (branded popularly-priced wine and brandy, and other,
primarily grape juice concentrate); Barton (primarily beer and spirits);
Matthew Clark (branded wine, cider and bottled water, and wholesale wine,
cider, spirits, beer and soft drinks); Franciscan (primarily branded super-
premium and ultra-premium wine); and Corporate Operations and Other (primarily
corporate related items).
Canandaigua Wine
Canandaigua Wine produces, bottles, imports and markets wine and brandy in
the United States. It is the second largest supplier of wine in the United
States and exports wine to approximately 70 countries from the United States.
Canandaigua Wine sells table wine, dessert wine, sparkling wine and brandy.
Its leading brands include Almaden, Inglenook, Arbor Mist, Paul Masson,
Manischewitz, Taylor, Marcus James, Estate Cellars, Vina Santa Carolina,
Dunnewood, Mystic Cliffs, Cook's, J. Roget, Richards Wild Irish Rose and Paul
Masson Grande Amber Brandy. Most of its wine is marketed in the popularly-
priced category of the wine market.
As a related part of its U.S. wine business, Canandaigua Wine is a leading
grape juice concentrate producer in the United States. Grape juice concentrate
competes with other domestically produced and imported fruit-based
concentrates. Canandaigua Wine's other wine-related products and services
include bulk wine, cooking wine, grape juice and Inglenook-St. Regis, a
leading de-alcoholized line of wine in the United States.
Barton
Barton produces, bottles, imports and markets a diversified line of beer and
distilled spirits. It is the second largest marketer of imported beer in the
United States and distributes six of the top 25 imported beer brands in the
United States: Corona Extra, Modelo Especial, Corona Light, Pacifico, St.
Pauli Girl and Negra Modelo. Corona Extra is the number one imported beer
nationwide. Barton's other imported beer brands include Tsingtao from China,
Peroni from Italy and Double Diamond and Tetley's English Ale from the United
Kingdom. Barton also operates the Stevens Point Brewery, a regional brewer
located in Wisconsin, which produces Point Special, among other brands.
S-18
<PAGE>
Barton is the fourth largest supplier of distilled spirits in the United
States and exports distilled spirits to approximately 15 countries from the
United States. Barton's principal distilled spirits brands include
Fleischmann's, Mr. Boston, Canadian LTD, Chi-Chi's prepared cocktails, Ten
High, Montezuma, Barton, Monte Alban, Inver House and the recently acquired
Black Velvet brand. Substantially all of Barton's spirits unit volume consists
of products marketed in the price value category. Barton also sells distilled
spirits in bulk and provides contract production and bottling services for
third parties.
Matthew Clark
Matthew Clark is a leading producer and distributor of cider, wine and
bottled water and a leading drinks wholesaler throughout the United Kingdom.
Matthew Clark also exports its branded products to approximately 50 countries
from the United Kingdom. Matthew Clark is the second largest producer and
marketer of cider in the United Kingdom. Matthew Clark distributes its cider
brands in both the on-premise and off-premise markets and these brands compete
in both the mainstream and premium brand categories. Matthew Clark's leading
mainstream cider brands include Blackthorn and Gaymer's Olde English.
Blackthorn is the number two mainstream cider brand and Gaymer's Olde English
is the UK's second largest cider brand in the take-home market. Matthew
Clark's leading premium cider brands are Diamond White and K.
Matthew Clark is the largest supplier of wine to the on-premise trade in the
United Kingdom. Its Stowells of Chelsea brand maintains a leading share in the
branded boxed wine segment. Matthew Clark also maintains a leading market
share position in fortified British wine through its QC and Stone's brand
names. It also produces and markets Strathmore bottled water in the United
Kingdom, the leading bottled sparkling water brand in the country.
Matthew Clark is a leading independent beverage supplier to the on-premise
trade in the United Kingdom and has one of the largest customer bases in the
United Kingdom, with more than 16,000 on-premise accounts. Matthew Clark's
wholesaling business involves the distribution of branded wine, spirits,
cider, beer and soft drinks. While these products are primarily produced by
third parties, they also include Matthew Clark's cider and wine branded
products.
Franciscan
Our Franciscan segment is comprised of the Franciscan Estates and Simi
Winery portfolios. These acquisitions are managed together as a separate
division of the Company, and position us as a major player in the premium wine
market. Franciscan also exports its products to approximately 25 countries
from the United States.
Our Franciscan segment includes the prestigious Franciscan Oakville Estate
(Napa Valley), Estancia (Monterey and Sonoma), Simi (Sonoma), Mt. Veeder and
Quintessa (Napa Valley), and Veramonte (Casablanca Valley, Chile) wines. The
portfolio of fine wines is supported by the division's winery and vineyard
holdings in California and Chile.
These brands are marketed by a dedicated sales force, primarily focusing on
high-end restaurants and fine wine shops.
Business Strategy
Our business strategy is to increase sales and profitability through
disciplined management of our existing product portfolio and aggressive
pursuit of internal and external growth opportunities. Elements of this
strategy include effectively managing our brand portfolio, the introduction of
product line extensions and pursuing selective acquisition opportunities.
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We seek to maximize the profitability of our brand portfolio by focusing on
segments growing at a faster pace than the industry average. For example, our
portfolio of beers imported into the United States have grown at a three-year
compound annual growth rate of 22% through 1999 compared to 13% for the
overall imported beer industry. Our spirits portfolio (excluding the Black
Velvet Assets) experienced a 4% growth rate versus a less than one percent
growth rate for the overall spirits industry between 1996 and 1999. We
actively manage the price/volume relationship of certain brands on a local
basis to maximize profits without negatively affecting market share, as well
as supporting existing brands through aggressive marketing.
We believe that brand name recognition of our principal products enables us
to introduce product line extensions to generate additional growth and to gain
market share. In accordance with this strategy we are using the well-known
Almaden wine name to expand our presence in the growing box wine market in the
United States by offering an increasing number of blends, including
proprietary red wine blends designed to increase the size of the wine market
by appealing to consumers with preferences for lighter-tasting red wines. In
1999, we moved into second place in the highly competitive boxed wine
category. We are leveraging the top-ranked position of the Stowells of Chelsea
boxed wine brand in the United Kingdom by introducing Stowells of Chelsea wine
in a variety of bottle sizes, encouraging consumers to try an assortment of
blends. We are also leveraging the strength of the Strathmore brand by
introducing new bottled water flavors. Also, we are using the 99 Bananas
flavored liqueur brand name to introduce new flavors designed to capitalize on
changing consumer tastes.
We are focusing on a number of categories in which there is demonstrated
growth potential in an existing market, or where we have identified market
segments that we believe are under-served by products currently available in
the market. We continue to build distribution of Arbor Mist, a line of fruit-
flavored varietal wines that the Company introduced in June 1998. We shipped
two million cases of Arbor Mist in Fiscal 1999 and four million cases in
Fiscal 2000. We continue to stimulate growth by introducing new flavors as
well as additional package size options. We recently launched two new wine
products targeted at the consumer preference theme we identified and exploited
with Arbor Mist: Nectar Valley, a white merlot brand that combines the fruity,
slightly sweet flavor of a white zinfandel with the popular taste of merlot,
and Motif, a sparkling wine brand with fruit flavors.
We are increasing advertising for Corona Extra imported beer to support the
brand's sales momentum following a mid-1999 price increase. We have
established our wholesale business in the United Kingdom as the leading
independent beverage supplier to the on-premises trade. Our recently acquired
fine wine portfolio is well positioned for growth in a category that has a
three-year compounded annual growth rate of 16%. We also are introducing a new
Swedish vodka brand in the United States with an innovative packaging concept
to capitalize on consumer trends.
We expect that strategic acquisitions will continue to be a component of our
growth strategy. Since 1991, we have completed nine major acquisitions,
including Matthew Clark, which itself has completed eight acquisitions. This
combination of experience and expertise, along with an established reputation
for success in business combinations within the industry, gives us a solid
platform from which to pursue future acquisitions. We expect to continue to
seek acquisitions that capitalize on our existing infrastructure or that offer
complementary product lines, geographic scope or additional distribution
channels.
Marketing and Distribution
North America
Our products are distributed and sold throughout North America through over
1,000 wholesalers, as well as through state and provincial alcoholic beverage
control agencies. Canandaigua Wine, Barton and Franciscan employ full-time,
in-house marketing, sales and customer service organizations to develop and
service their sales to wholesalers and state agencies.
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We believe that the organization of our sales force into separate segments
positions us to maintain a high degree of focus on each of our principal
product categories.
Our marketing strategy places primary emphasis upon promotional programs
directed at our broad national distribution network, and at the retailers
served by that network. We have extensive marketing programs for our 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.
During Fiscal 2000, we increased our advertising expenditures to put more
emphasis on consumer advertising for our imported beer brands, primarily with
respect to the Mexican brands. In addition, promotional spending for our wine
brands increased to address competitive factors.
United Kingdom
The Company's U.K.-produced branded products are distributed throughout the
United Kingdom by Matthew Clark. The products are packaged at one of three
production facilities. Shipments of cider and wine are then made to Matthew
Clark's national distribution center for branded products. All branded
products are then distributed to either the on-premise or off-premise markets
with some of the sales to on-premise customers made through Matthew Clark's
wholesale business. Matthew Clark's wholesale products are distributed through
12 depots located throughout the United Kingdom. On-premise distribution
channels include hotels, restaurants, pubs, wine bars and clubs. The off-
premise distribution channels include grocers, convenience retail, cash-and-
carry outlets and wholesalers.
Matthew Clark employs a full-time, in-house marketing and sales organization
that targets off-premise customers for Matthew Clark's branded products.
Matthew Clark also employs a full-time, in-house branded products marketing
and sales organization that services specifically the on-premise market in the
United Kingdom. Additionally, Matthew Clark employs a full-time, in-house
marketing and sales organization to service the customers of its wholesale
business.
Trademarks and Distribution Agreements
Our products are sold under a number of trademarks, most of which we own. We
also produce and sell wine and distilled spirits products under exclusive
license or distribution agreements. Important agreements include a long-term
license agreement with Hiram Walker & Sons, Inc. (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 (which expires
in 2042) for the Manischewitz brand of kosher wine. On September 30, 1998,
under the provisions of an existing long-term license agreement, Nabisco
Brands Company agreed to transfer to Barton all of its right, title and
interest to the corporate name "Fleischmann Distilling Company" and worldwide
trademark rights to the "Fleischmann" mark for alcoholic beverages. Pending
the completion of the assignment of such interests, the license will remain in
effect. We also have other less significant license and distribution
agreements related to the sale of wine and distilled spirits with terms of
various durations.
All of our 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 us from importing other beer from
the same country. Our agreement to distribute Corona and other Mexican beer
brands exclusively throughout 25 primarily U.S. western states expires in
December 2006 and, subject to compliance with certain performance criteria,
continued retention of certain Company personnel and other terms under the
agreement, will be automatically renewed for additional terms of five years.
Changes in control of the Company or of its subsidiaries involved in importing
the Mexican beer brands, changes in the position of the Chief Executive
Officer of Barton Beers, Ltd. (including by death or disability) or the
termination of the President of Barton Incorporated, may be a
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basis for the supplier, unless it consents to such changes, to terminate the
agreement. The supplier's consent to such changes may not be unreasonably
withheld. Our agreement for the importation of St. Pauli Girl expires in June
2003. Prior to their expiration, these agreements may be terminated if we fail
to meet certain performance criteria. We believe we are currently in
compliance with our material imported beer distribution agreements. From time
to time, we have failed, and may in the future fail, to satisfy certain
performance criteria in our distribution agreements. Although there can be no
assurance that our beer distribution agreements will be renewed, given our
long-term relationships with our suppliers, we expect that such agreements
will be renewed prior to their expiration and we do not believe that these
agreements will be terminated.
We own the trademarks for the leading brands and most of the other brands
that we acquired in the Matthew Clark acquisition. We have a series of
distribution agreements and supply agreements in the United Kingdom related to
the sale of our products with varying terms and durations.
Competition
The beverage alcohol industry is highly competitive. We compete on the basis
of quality, price, brand recognition and distribution. Our beverage alcohol
products compete with other alcoholic and nonalcoholic beverages for consumer
purchases, as well as shelf space in retail stores, a presence in restaurants
and marketing focus by our wholesalers. We compete with numerous multinational
producers and distributors of beverage alcohol products, some of which have
significantly greater resources than us. In the United States, Canandaigua
Wine's principal competitors include E & J Gallo Winery and The Wine Group.
Barton's principal competitors include Heineken USA, Molson Breweries USA,
Labatt's USA, Guinness Import Company, Brown-Forman Beverages, Jim Beam Brands
and Heaven Hill Distilleries, Inc. In the United Kingdom, Matthew Clark's
principal competitors include Halewood Vintners, H.P. Bulmer, Tavern, Waverley
Vintners and Perrier. In connection with its wholesale business, Matthew Clark
distributes the branded wine of third parties that compete directly against
its own wine brands.
Production
In the United States, our wine is produced from several varieties of wine
grapes grown principally in California and New York. The grapes are crushed at
our wineries and stored as wine, grape juice or concentrate. Such grape
products may be made into wine for sale under our brand names, sold to other
companies for resale under their own labels, or shipped to customers in the
form of juice, juice concentrate, unfinished wine, high-proof grape spirits or
brandy. Most of our wine is bottled and sold within eighteen months after the
grape crush. Our inventories of wine, 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 us are primarily produced and aged by us at our distillery in Bardstown,
Kentucky. Following the Black Velvet Assets acquisition, the majority of our
Canadian whisky requirements are produced and aged at our Canadian
distilleries in Lethbridge, Alberta, and Valleyfield, Quebec. At our Albany,
Georgia, facility, we produce all of the neutral grain spirits and whiskeys we
use in the production of vodka, gin and blended whiskey we sell to customers
in the state of Georgia. Our requirements of Scotch whisky, tequila, mezcal
and the neutral grain spirits we use in the production of gin and vodka for
sale outside of Georgia, and other spirits products, are purchased from
various suppliers.
We operate three facilities in the United Kingdom that produce, bottle and
package cider, wine and water. To produce Stowells of Chelsea, wine is
imported in bulk from various countries such as Chile, Germany, France, Spain,
South Africa and Australia, which is then packaged at our facility at Bristol
and distributed under the Stowells of Chelsea brand name. The Strathmore brand
of bottled water
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(which is available in still, sparkling, and flavored varieties) is sourced
and bottled in Forfar, Scotland. Cider production was consolidated at our
facility at Shepton Mallet, where apples of many different varieties are
purchased from U.K. growers and crushed. This juice, along with European-
sourced concentrate, is then fermented into cider.
We operate one winery in Chile that crushes, vinifies, cellars and bottles
wine.
Sources and Availability of Raw Materials
The principal components in our production of branded beverage alcohol
products are packaging materials (primarily glass) and agricultural products,
such as grapes and grain. We utilize glass and PET bottles and other materials
such as caps, corks, capsules, labels and cardboard cartons in the bottling
and packaging of our products. Glass bottle costs are one of the largest
components of our cost of product sold. The glass bottle industry is highly
concentrated with only a small number of producers. We have traditionally
obtained, and continue to obtain, our glass requirements from a limited number
of producers. We have not experienced difficulty in satisfying our
requirements with respect to any of the foregoing and consider our sources of
supply to be adequate. However, the inability of any of our glass bottle
suppliers to satisfy our requirements could adversely affect our operations.
Most of our annual grape requirements are satisfied by purchases from each
year's harvest that normally begins in August and runs through October. We
believe that we have adequate sources of grape supplies to meet our sales
expectations. However, in the event demand for certain wine products exceeds
expectations, we could experience shortages.
We purchase grapes from over 800 independent growers, principally in the San
Joaquin Valley and North Coast regions of California and in New York State. We
enter into written purchase agreements with a majority of these growers on a
year-to-year basis. We currently own or lease approximately 7,000 acres of
land and vineyards, either fully bearing or under development, in California,
New York and Chile. This acreage supplies only a small percentage of our total
needs. We continue to consider the purchase or lease of additional vineyards,
and additional land for vineyard plantings, to supplement our grape supply.
The distilled spirits we manufacture require various agricultural products,
neutral grain spirits and bulk spirits. We fulfill our requirements through
purchases from various sources through contractual arrangements and through
purchases on the open market. We believe that adequate supplies of the
aforementioned products are available at the present time.
We manufacture cider, perry, light and fortified British wine from materials
that are purchased either on a contracted basis or on the open market. In
particular, supplies of cider apples are sourced through long term supply
arrangements with owners of apple orchards. There are adequate supplies of the
various raw materials at this particular time.
Government Regulation
Our operations in the United States 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 our operations and facilities are also
subject to federal, state, foreign and local environmental laws and
regulations and we are required to obtain permits and licenses to operate our
facilities.
In the United Kingdom, we have secured a Customs and Excise License to carry
on an excise trade. Licenses are required for all premises where wine is
produced. We hold a license to act as an
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excise warehouse operator. Registrations have been secured for the production
of cider and bottled water. Formal approval of product labeling is not
required.
In Canada, our operations are also subject to extensive federal and
provincial regulation. These regulations cover, among other matters,
advertising and public relations, labeling and packaging, environmental
matters, and customs and duty requirements. We are also required to obtain
licenses and permits in order to operate our facilities.
We believe that we are in compliance in all material respects with all
applicable governmental laws and regulations and that the cost of
administration and compliance with, and liability under, such laws and
regulations does not have, and is not expected to have, a material adverse
impact on our financial condition, results of operations or cash flows.
Employees
We had approximately 2,540 full-time employees in the United States at the
end of February 2000, of which approximately 860 were covered by collective
bargaining agreements. Additional workers may be employed by the Company
during the grape crushing season.
We had approximately 1,770 full-time employees in the United Kingdom at the
end of February 2000, of which approximately 380 were covered by collective
bargaining agreements. Additional workers may be employed during the peak
season.
We had approximately 255 full-time employees in Canada at the end of
February 2000, of which approximately 200 were covered by collective
bargaining agreements.
We consider our employee relations generally to be good.
Properties
The Company, maintaining its corporate headquarters in offices leased in
Fairport, New York, consists of four business operating segments. Through
these business segments, we currently operate wineries, distilling plants,
bottling plants, a brewery, cider and water producing facilities, most of
which include warehousing and distribution facilities on the premises. We also
operate separate distribution centers under the Matthew Clark segment's
wholesaling business. We believe that all of our facilities are in good
condition and working order and have adequate capacity to meet our needs for
the foreseeable future.
Canandaigua Wine
Canandaigua Wine maintains its headquarters in owned and leased offices in
Canandaigua, New York. It operates three wineries in New York, located in
Canandaigua, Naples and Batavia, and six wineries in California, located in
Madera, Gonzales, Escalon, Fresno, and Ukiah. All of the facilities in which
these wineries operate are owned, except for the winery in Batavia, New York,
which is leased. Canandaigua Wine considers its principal wineries to be the
Mission Bell winery in Madera, California; the Canandaigua winery in
Canandaigua, New York; and the Riverland Vineyards winery in Gonzales,
California. The Mission Bell winery crushes grapes, produces, bottles and
distributes wine and produces grape juice concentrate. The Canandaigua winery
crushes grapes and produces, bottles and distributes wine. The Riverland
Vineyards winery crushes grapes and produces, bottles and distributes wine for
Canandaigua Wine's account and, on a contractual basis, for third parties.
Canandaigua Wine currently owns or leases approximately 4,200 acres of
vineyards, either fully bearing or under development, in California and New
York.
Barton
Barton maintains its headquarters in leased offices in Chicago, Illinois. It
owns and operates four distilling plants, two in the United States and two in
Canada. The two distilling plants in the United
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States are located in Bardstown, Kentucky; and Albany, Georgia; and the two
distilling plants in Canada, which were acquired in connection with the Black
Velvet Acquisition, are located in Valleyfield, Quebec; and Lethbridge,
Alberta. Barton considers its principal distilling plants to be the facilities
located in Bardstown, Kentucky; Valleyfield, Quebec; and Lethbridge, Alberta.
The Bardstown facility distills, bottles and warehouses distilled spirits
products for Barton's account and, on a contractual basis, for other
participants in the industry. The two Canadian facilities distill, bottle and
store Canadian whisky for Barton's own account, and distill and/or bottle and
store Canadian whisky, vodka, rum, gin and liqueurs for third parties.
In the United States, Barton also operates a brewery and three bottling
plants. The brewery is located in Stevens Point, Wisconsin; and the bottling
plants are located in Atlanta, Georgia; Owensboro, Kentucky; and Carson,
California. All of these facilities are owned by Barton except for the
bottling plant in Carson, California, which is operated and leased through an
arrangement involving an ongoing management contract. Barton considers the
bottling plant located in Owensboro, Kentucky to be one of its principal
facilities. The Owensboro facility bottles and warehouses distilled spirits
products for Barton's account and performs contract bottling.
Matthew Clark
Matthew Clark maintains its headquarters in owned offices in Bristol,
England. It currently owns and operates two facilities in England that are
located in Bristol and Shepton Mallet and one facility in Scotland, located in
Forfar. Matthew Clark considers all three facilities to be its principal
facilities. The Bristol facility produces, bottles and packages wine; the
Shepton Mallet facility produces, bottles and packages cider; and the Forfar
facility produces, bottles and packages water products. Matthew Clark also
owns another facility in England, located in Taunton, the operations of which
have now been consolidated into its Shepton Mallet facility. Matthew Clark
plans to sell the Taunton property.
Matthew Clark operates a National Distribution Centre, located at
Severnside, England to distribute its products that are produced at the
Bristol and Shepton Mallet facilities. This distribution facility is leased by
Matthew Clark. To support its wholesaling business, Matthew Clark operates 12
distribution centers located throughout the United Kingdom, all of which are
leased. These distribution centers are used to distribute products produced by
third parties, as well as by Matthew Clark. Matthew Clark has been and will
continue consolidating the operations of its wholesaling distribution centers.
Franciscan
Franciscan maintains its headquarters in offices owned in Rutherford,
California. Through this segment we own and operate four wineries in the
United States and, through a majority owned subsidiary, operate one winery in
Chile. All four wineries in the United States are located in the state of
California, in Rutherford, Healdsburg, Monterey and Mt. Veeder, and the winery
in Chile is located in the Casablanca Valley. Franciscan considers its
principal wineries to be those located in Rutherford, California; Healdsburg,
California; Monterey, California; and the Casablanca Valley, Chile. The
wineries in Rutherford, California; Healdsburg, California; and the Casablanca
Valley, Chile crush grapes, vinify, cellar and bottle wine. The winery in
Monterey, California crushes, vinifies and cellars wine.
Franciscan also owns and leases approximately 2,000 plantable acres of
vineyards in California and approximately 800 plantable acres of vineyards in
Chile.
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 our financial
condition or results of operations.
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MANAGEMENT
The following table sets forth information with respect to the current
executive officers and directors of the Company:
<TABLE>
<CAPTION>
Name Age Office Held
---- --- -----------
<C> <C> <S>
Richard Sands 49 Chairman of the Board, President and Chief Executive
Officer and Director
Robert Sands 41 Group President, General Counsel and Director
Peter Aikens 61 President and Chief Executive Officer of Matthew Clark
plc
President and Chief Executive Officer of Barton
Alexander L. Berk 50 Incorporated
Jon Moramarco 43 President and Chief Executive Officer of Canandaigua
Wine Company, Inc.
Executive Vice President and Chief Human Resources
George H. Murray 53 Officer
Thomas S. Summer 46 Executive Vice President and Chief Financial Officer
President and Chief Executive Officer of Franciscan
Jean-Michel Valette 39 Vineyards, Inc.
George Bresler 75 Director
James A. Locke, III 58 Director
Thomas C. McDermott 63 Director
Paul L. Smith 64 Director
</TABLE>
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. In September 1999, Mr. Sands was elected
Chairman of the Board. He is the brother of Robert Sands.
Robert Sands was appointed Group President in April 2000 and has served as
General Counsel since June 1986 and a director since January 1990. Mr. Sands
also had served as Vice President from June 1990 through October 1993, and as
Executive Vice President from October 1993 through April 2000. He is the
brother of Richard Sands.
Peter Aikens serves as President and Chief Executive Officer of Matthew
Clark plc, a wholly-owned subsidiary of the Company. In this capacity, Mr.
Aikens is in charge of the Company's Matthew Clark segment, and has been since
the Company acquired control of Matthew Clark in December 1998. He has been
the Chief Executive Officer of Matthew Clark plc since May 1990 and has been
in the brewing and drinks industry for most of his career.
Alexander L. Berk serves as President and Chief Executive Officer of Barton
Incorporated, a wholly-owned subsidiary of the Company. In this capacity, Mr.
Berk is in charge of the Company's Barton segment. From 1990 until February
1998, Mr. Berk was President and Chief Operating Officer of Barton and from
1988 to 1990, he was the President and Chief Executive Officer of Schenley
Industries. Mr. Berk has been in the alcoholic beverage industry for most of
his career, serving in various positions.
Jon Moramarco became President and Chief Executive Officer of Canandaigua
Wine Company, Inc., a wholly-owned subsidiary of the Company, in November
1999. In this capacity, Mr. Moramarco is in charge of the Company's
Canandaigua Wine segment. Prior to joining Canandaigua Wine Company, Inc., he
served as President and Chief Executive Officer of Allied Domecq Wines, USA
since 1992. Mr. Moramarco has more than 15 years of diverse experience in the
wine industry and currently serves as Chairman of the American Vintners
Association, a national wine trade organization.
George H. Murray joined the Company in April 1997 as Senior Vice President
and Chief Human Resources Officer and in April 2000 was elected Executive Vice
President. From August 1994 to April
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1997, Mr. Murray served as Vice President-Human Resources and Corporate
Communications of ACC Corp., an international long distance reseller. For
eight and a half years prior to that, he served in various senior management
positions with First Federal Savings and Loan of Rochester, New York,
including the position of Senior Vice President of Human Resources and
Marketing from 1991 to 1994.
Thomas S. Summer joined the Company in April 1997 as Senior Vice President
and Chief Financial Officer and in April 2000 was elected Executive Vice
President. From November 1991 to April 1997, Mr. Summer served as Vice
President, Treasurer of Cardinal Health, Inc., a large national health care
services company, where he was responsible for directing financing strategies
and treasury matters. Prior to that, from November 1987 to November 1991, Mr.
Summer held several positions in corporate finance and international treasury
with PepsiCo, Inc.
Jean-Michel Valette serves as President and Chief Executive Officer of
Franciscan Vineyards, Inc., a wholly-owned subsidiary of the Company. In this
capacity, Mr. Valette is in charge of the Company's Franciscan segment, and
has been since the Company acquired Franciscan in June 1999. He has been the
President and Chief Executive Officer of Franciscan Vineyards, Inc. since
August 1998. From October 1994 to August 1998, Mr. Valette served as a
Managing Director of Hambrecht & Quist LLC, an investment banking company, and
from November 1992 to October 1994, he was a Senior Analyst with Hambrecht &
Quist LLC. Mr. Valette is one of a few Americans to hold the title of Master
of Wine. Effective on May 15, 2000, Mr. Valette will resign from his current
positions and assume a new role with Franciscan, which will include serving on
the Franciscan advisory board and consulting in the areas of potential
vineyard and brand acquisitions.
George Bresler has been engaged in the practice of law since 1957. From
August 1987 through July 1992, Mr. Bresler was a partner of the law firm of
Bresler and Bab, New York, New York. Since 1992, Mr. Bresler has been a
partner of the law firm of Bresler Goodman & Unterman, LLP, and its
predecessor firm, in New York, New York. Mr. Bresler provides legal services
to the Company.
James A. Locke, III has been a partner of the law firm of Nixon Peabody LLP,
and its predecessor firm, in Rochester, New York, the Company's principal
outside counsel, since January 1, 1996. For twenty years prior to joining
Nixon Peabody, Mr. Locke was a partner in the law firm of Harter, Secrest and
Emery, Rochester, New York.
Thomas C. McDermott has been a proprietor of Forbes Products, LLC, a custom
vinyl business products company, since January 1998. From 1994 to 1997, Mr.
McDermott was President and Chief Executive Officer of Goulds Pumps,
Incorporated, a centrifugal pumps company for industrial, domestic and
agricultural markets, where he also was Chairman from 1995 to 1997. From 1986
to 1993, he was President and Chief Operating Officer of Bausch & Lomb
Incorporated, a contact lens, lens-care and eyewear products company.
Paul L. Smith retired from Eastman Kodak Company in 1993 after working there
for thirty-five years. Mr. Smith was employed in various positions at Eastman
Kodak Company, the last of which was from 1983 to 1993, when he served as
Senior Vice President and Chief Financial Officer. Also, from 1983 to 1993,
Mr. Smith served on the Board of Directors of Eastman Kodak Company. Mr. Smith
also currently serves on the Board of Directors of Home Properties of New
York, Inc. and Performance Technologies, Incorporated.
Effective on May 15, 2000, Agustin Francisco Huneeus will become President
of Franciscan Vineyards, Inc. Previously, he has served in various positions
at Franciscan and currently serves as Senior Vice President Sales and
Marketing.
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Beneficial Ownership of Management
As of February 29, 2000, the current directors and executive officers of the
Company as a group beneficially owned (including shares owned or controlled by
family members as to which certain of these individuals disclaim beneficial
ownership) approximately 13% of our outstanding 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 91% of our outstanding Class B Common Stock.
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DESCRIPTION OF THE SENIOR CREDIT FACILITIES
On October 6, 1999, the Company, certain of its principal operating
subsidiaries, and a syndicate of banks (the "Syndicate Banks"), for which The
Chase Manhattan Bank ("Chase") acts as administrative agent, entered into a
Credit Agreement (the "Credit Agreement"). The Company is the borrower under
the Credit Agreement and all of its domestic operating subsidiaries are joint
and several guarantors of the Company's obligations thereunder. The Credit
Agreement includes both U.S. dollar and pound sterling commitments of the
Syndicate Banks of up to, in the aggregate, the equivalent of $1.0 billion
(subject to increase as therein provided to $1.2 billion). The proceeds under
the Credit Agreement have been used in part for the repayment of all
outstanding principal and accrued interest under the Company's Second Amended
and Restated Credit Agreement dated as of May 12, 1999, and are also available
for funding of permitted acquisitions, ongoing working capital needs of the
Company and its subsidiaries, and other general corporate purposes of the
Company and its subsidiaries, including capital expenditures.
The Credit Agreement is secured by (i) first priority pledges of 100% of the
capital stock of Canandaigua Limited and all of the Company's domestic
operating subsidiaries and (ii) first priority pledges of 65% of the capital
stock held by us of Matthew Clark, B.B. Servicios, S.A. de C.V., Canandaigua
World Sales Limited and Schenley Distilleries Inc./Les Distilleries Schenley
Inc. Upon the achievement of certain ratings of the Company's senior,
unsecured, long-term indebtedness for borrowed money and the satisfaction of
certain other conditions, the foregoing pledges securing the Credit Agreement
would be released, subject to the obligation of the Company to restore such
pledges in the event of a downgrading of such ratings.
The Credit Agreement provides for a $380.0 million Tranche I Term Loan
facility due in December 2004, a $320.0 million Tranche II Term Loan facility
due in December 2004 (funded and repayable in pounds sterling only), a $300.0
million Revolving Credit facility (including letters of credit up to a maximum
of approximately $20.0 million and swingline loans up to a maximum of $30.0
million) which expires in December 2004, and a $200.0 million uncommitted
incremental term loan and/or revolving loan facility due no later than
December 2004.
The obligations of the Syndicate Banks to make Revolving Credit loans to the
Company or of Chase to issue letters of credit are subject to the satisfaction
of certain customary conditions, including but not limited to (i) the absence
of a default or event of default under the Credit Agreement and (ii) all
representations and warranties being true and correct.
The Tranche I Term Loan facility requires quarterly repayments, starting at
$12 million in March 2000 and increasing annually thereafter. The Tranche II
Term Loan facility requires quarterly repayments, starting at 0.50% of the
aggregate outstanding principal amount thereof in March 2000 and increasing to
21.25% of the aggregate outstanding principal amount thereof in March 2004.
The Company may optionally prepay the term loans and revolving loans from time
to time in whole or in part, without premium or penalty. In addition, there
are certain mandatory term loan prepayments, including those based on sale of
assets, the occurrence of casualty events, issuance of debt (including the
notes) or equity, and change of control requiring a redemption of subordinated
debt, in each case subject to certain baskets, thresholds, and other
exceptions.
The rate of interest payable, at the Company's option, is a function of the
London interbank offered rate ("LIBOR") plus a margin, the federal funds rate
plus a margin, or at the prime rate plus a margin; the Company also has the
option to request competitive bids on Revolving Credit borrowings. The margin
is adjustable quarterly based upon the ratio of the Company's consolidated
average debt to consolidated operating cash flow (such ratio is defined in the
Credit Agreement as the "Debt Ratio"). The initial margin on LIBOR borrowings
is 1.25% in respect of Revolving Credit and swingline loans and 1.75% in
respect of Tranche I and II Term Loans. After the first delivery of the
Company's quarterly
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or annual financial statements pursuant to the Credit Agreement, the margin on
LIBOR borrowings will fluctuate between 0.75% and 1.75%, depending on the
Company's Debt Ratio. In addition to interest, the Company pays a facility fee
on the Revolving Credit commitments (whether used or unused), at either 0.5%
per annum, 0.375% per annum or 0.25% per annum, depending on the Company's
Debt Ratio. The Company is also required to pay fees with respect to any
letters of credit issued pursuant to the Credit Agreement; such letter of
credit fees include (i) a participation fee payable to the Syndicate Banks on
the average daily amount of outstanding letters of credit and unreimbursed
letter of credit drawings, equal to the applicable margin for LIBOR-based
Revolving Credit borrowings, and (ii) a fronting fee payable to Chase of
0.125% per annum on the average daily amount of outstanding letters of credit
issued by Chase. The Company is required to pay default interest on all
amounts that are not paid when due at a rate equal to (A) in the case of any
overdue principal of any loan, 2% above the interest rate otherwise applicable
to such loan, and (B) in the case of any other amount, 2% above the rate
applicable to prime rate-based loans.
The Company and its subsidiaries are subject to customary secured lending
covenants including, but not limited to, those restricting additional liens,
the incurrence of additional indebtedness, the sale of assets, mergers and
consolidations, the payment of dividends, transactions with affiliates, the
purchase or redemption of subordinated debt, the purchase or redemption of
senior unsecured debt (including the notes), and the making of certain
acquisitions and investments, in most cases subject to baskets, thresholds,
and other exceptions. The primary financial covenants require the maintenance
of a debt coverage ratio, a senior debt coverage ratio, a fixed charges ratio
and an interest coverage ratio. The fixed charges ratio is required to be at
least 1.0 to 1 as at the last day of each fiscal quarter for the most recent
four quarters.
The Credit Agreement contains customary events of default, including, but
not limited to, (a) the non-payment of principal when due, (b) the nonpayment
of interest, fees, or other amounts within five business days after the same
is due and payable, (c) default by the Company or any subsidiary in the
observance or performance of certain agreements and covenants contained in the
Credit Agreement 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 Agreement or other documents related thereto; (e)
cross-default to material indebtedness of the Company or any of its
subsidiaries; (f) one or more judgments against the Company or any subsidiary
in excess of $15.0 million (regardless of insurance coverage) that remains
undischarged (unless a stay of execution has been procured) for 45 days; (g)
the occurrence of a material adverse ERISA event (h) the occurrence of a
material adverse event relating to hazardous materials; (i) a change of
control and (j) certain bankruptcy-related events.
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DESCRIPTION OF THE NOTES
We are offering (Pounds)80 million aggregate principal amount of 8 1/2%
Series C Senior Notes due 2009 (the "Notes"). The Notes constitute a series of
debt securities (which are more fully described in the Prospectus dated
December 3, 1999) to be issued under an indenture dated as of February 25,
1999 (the "Base Indenture"), between the Company, the Subsidiary Guarantors
and Harris Trust and Savings Bank, as trustee (the "Trustee"), as supplemented
by Supplemental Indenture Number 4 to the Base Indenture to be dated May 15,
2000 (together with the Base Indenture, the "Indenture"), copies of which are
available to prospective purchasers of the Notes upon request. The maximum
aggregate principal amount of Notes that may be issued under the Indenture is
(Pounds)300 million.
The following is a summary of the material provisions of the Indenture. It
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 of 1939, as amended. The Base Indenture is more fully
described in the accompanying Prospectus.
The following description of the terms of the Notes supplements the
description of the general terms and provisions of the Debt Securities set
forth in the accompanying Prospectus. If these descriptions are inconsistent,
then the description in this Prospectus Supplement shall govern. For
definitions of certain capitalized terms used in the following summary, see
"--Certain Definitions."
General
The Notes will mature on November 15, 2009, will be unsecured senior
obligations of the Company and will rank pari passu in right of payment to all
existing and future unsecured senior Indebtedness. Each Note will bear
interest at the rate set forth on the cover page hereof from its date of
issuance or from the most recent interest payment date to which interest has
been paid. Interest on the Notes will be payable semi-annually on May 15 and
November 15 in each year, commencing November 15, 2000, to the Person in whose
name the Note (or any predecessor Note) is registered at the close of business
on the May 1 or November 1 next preceding such interest payment date. The
entire aggregate principal amount of the Notes will become due and payable
upon maturity.
Payment of the Notes is guaranteed unconditionally by the Subsidiary
Guarantors on a senior basis. The Subsidiary Guarantors are comprised of all
of the direct and indirect Domestic Restricted Subsidiaries of the Company and
direct and indirect Foreign Restricted Subsidiaries that in each case
guarantee Other Indebtedness. The Subsidiary Guarantors (except Canandaigua
B.V. and M.J. Lewis Corp.) have also guaranteed all obligations of the Company
under the Credit Agreement. No holder of any other Indebtedness of the Company
will have the benefit of any guarantees which the holders of the Notes do not
have.
The Notes are direct, senior unsecured obligations of the Company and rank
and will rank pari passu, without any preferences among themselves, with all
other outstanding unsecured and unsubordinated indebtedness, present and
future.
The Indenture provides that additional Notes may be issued thereunder after
the Issue Date (i) pursuant to Rule 144A under the Securities Act, (ii)
pursuant to Regulation S under the Securities Act, (iii) in exchange for any
Notes issued under the Indenture pursuant to Rule 144A or Regulation S, (iv)
in exchange for all or a portion of the Company's existing (Pounds)75,000,000
of 8 1/2% Series B Senior Notes due 2009, which were issued on March 24, 2000
or (v) pursuant to another registered public offering. The maximum aggregate
principal amount of such additional Notes that may be issued under the
Indenture is (Pounds)220,000,000.
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Substitution of Currency
The Euro, the currency introduced at the start of the third stage of
economic and monetary union pursuant to the treaty establishing the European
Economic Community, as amended by the Treaty on European Union, was introduced
on January 1, 1999. The United Kingdom was not a participant at that date;
however, the United Kingdom Government stated that the United Kingdom might
wish to join the single currency at a later date. If the United Kingdom adopts
the Euro, it will replace pounds sterling as the legal tender in the United
Kingdom and result in the effective redenomination of the Notes into Euro and
the regulations of the European Commission relating to the Euro shall apply to
the Notes. The circumstances and consequences described in this paragraph
entitle neither the Company, the Subsidiary Guarantors nor any holder of Notes
to early redemption, rescission, notice or repudiation of the terms and
conditions of the Notes or the Indenture or to raise other defenses or to
request any compensation claim, nor will they affect any of the other
obligations of the Company or the Subsidiary Guarantors under the Notes and
the Indenture.
Notices
Notices to Holders shall, at such time as, and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
shall so require, be published in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort). Notices to Holders
of Notes shall also be mailed by first class mail to each Holder at its
address appearing in the register of Holders on the appropriate date provided
herein. For so long as any of the Notes are represented by the Global Notes,
notice to Holders shall (in addition to publication as described above) also
be given by delivery of the relevant notice to The Depository Trust Company
("DTC"), Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear System ("Euroclear") and/or Clearstream Banking,
which is owned by a parent corporation, Clearstream International, societe
anonyme (as the case may be) for communication to the Holders of the book-
entry interests in the Notes.
Additional Amounts
All payments made by the Company or any Subsidiary Guarantor under or with
respect to the Notes or any Guarantee will be made free and clear of and
without withholding or deduction for or on account of any present or future
tax, duty, levy, impost, assessment or other governmental charge (including
penalties, interest and other liabilities related thereto) imposed or levied
by or on behalf of the government of the United States of America or any other
jurisdiction in which any Subsidiary Guarantor is incorporated or of any
prefecture or territory thereof or by any authority or agency therein or
thereof having power to tax (hereinafter, "Taxes"), unless the Company or such
Subsidiary Guarantor is required to withhold or deduct Taxes by law,
regulation or governmental policy or by the interpretation or administration
thereof. If the Company or any Subsidiary Guarantor is required to withhold or
deduct any amount for or on account of Taxes from any payment made under or
with respect to the Notes or any Guarantee, the Company or such Subsidiary
Guarantor will pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each Holder (including Additional
Amounts) after such withholding or deduction will not be less than the amount
the Holder would have received if such Taxes had not been withheld or
deducted; provided that no Additional Amounts will be payable with respect to
a payment made to a Holder and no reimbursement shall be made to a Holder for
Taxes paid by such Holder (each such Holder, an "Excluded Holder") with
respect to any Tax imposed, levied, payable or due (i) by reason of the
Holder's or beneficial owner's present or former connection with the United
States of America or any other jurisdiction in which any Subsidiary Guarantor
is incorporated or any prefecture or territory thereof, other than through the
mere receipt or holding of Notes or by reason of the receipt of payments
thereunder; (ii) by reason of the failure of the Holder or beneficial owner of
Notes to satisfy any certification, identification, information or other
reporting requirements which the Holder or such
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beneficial owner is legally required to satisfy, whether imposed by statute,
treaty, regulation, administrative practice or otherwise, as a precondition to
exemption from, or reduction in the rate of deduction or withholding of,
Taxes; or (iii) by reason of the presentation (where presentation is required
in order to receive payment) of such Notes for payment more than 30 days after
the date such payment became due and payable or was duly provided for under
the terms of the Notes, whichever is later. The obligation of the Company or
any Subsidiary Guarantor to pay Additional Amounts or to reimburse a Holder
for Taxes paid by such Holder in respect of Taxes shall not apply with respect
to: (x) any estate, inheritance, gift, sales, transfer, personal property or
similar Taxes; (y) any Tax which is payable otherwise than by deduction or
withholding from payments made under or with respect to the Notes or any
Guarantee; or (z) Taxes imposed on or with respect to any payment by the
Company or such Subsidiary Guarantor to the Holder or beneficial owner if such
Holder or beneficial owner is a fiduciary or partnership or person other than
the sole beneficial owner of such payment to the extent that such Taxes would
not have been imposed on a beneficiary or settlor with respect to such
fiduciary, a member of such partnership or the beneficial owner of such
payment had such beneficiary, settlor, member or beneficial owner been the
Holder of such Note. The Company or such Subsidiary Guarantor will also (i)
make such withholding or deduction compelled by applicable law and (ii) remit
the full amount deducted or withheld to the relevant authority in accordance
with applicable law. The Company or such Subsidiary Guarantor will, upon
written request of a Holder, furnish to each such Holder certified copies of
tax receipts evidencing the payment of any Taxes by the Company or such
Subsidiary Guarantor in such form as provided in the normal course by the
taxing authority imposing such Taxes and as is reasonably available to the
Company or such Subsidiary Guarantor, within 60 days after the later of the
date of receipt of such written request and the date of receipt of such
evidence. If notwithstanding the Company's or such Subsidiary Guarantor's
efforts to obtain such receipts, the same are not obtainable, the Company or
such Subsidiary Guarantor will promptly provide such Holder with other
evidence reasonably satisfactory to such Holder of such payments by the
Company or such Subsidiary Guarantor. The Indenture will further provide that,
if the Company conducts business in any jurisdiction (the "Taxing
Jurisdiction") other than the United States of America, or if any Subsidiary
Guarantor conducts business in any Taxing Jurisdiction other than the
jurisdiction under which such Subsidiary Guarantor is incorporated, in a
manner which causes Holders to be liable for taxes on payments under the Notes
or any Guarantee for which they would not have been so liable but for such
conduct of business in the Taxing Jurisdiction, the provision of the Notes
described above shall be considered to apply to such Holders as if references
in such provision to "Taxes" included taxes imposed by way of deduction or
withholding by such Taxing Jurisdiction and references to Excluded Holder
shall be deemed to include Holders or beneficial owners having a present or
former connection with such Taxing Jurisdiction or any state, prefecture or
territory thereof. The Company or such Subsidiary Guarantor will, upon written
request of any Holder (other than an Excluded Holder), reimburse each such
Holder for the amount of (i) any Taxes so levied or imposed and paid by such
Holder as a result of payments made under or with respect to the Notes and
(ii) any Taxes so levied or imposed with respect to any reimbursement under
the foregoing clause (i) and paid by such Holder so that the net amount
received by such Holder (net of payments made under or with respect to the
Notes) after such reimbursement will not be less than the net amount the
Holder would have received if Taxes on such reimbursement had not been
imposed. The Indenture will provide that neither the Company nor any
Subsidiary Guarantor will take any action or fail to act in any manner which
will have the effect of requiring the payment of any Additional Amounts such
that the Company may exercise its option to effect a Tax Redemption; provided,
however, that the Company and its Subsidiaries will not be required to change
their jurisdiction or alter their operations in any manner and will not be
required to take any other unreasonable act thereunder.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Company or any Subsidiary
Guarantor will pay Additional Amounts with respect to such payment (unless
such obligation to pay Additional Amounts arises after the 30th day prior to
the date on which payment under or with respect to the Notes is due and
payable, in which case it
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<PAGE>
shall be promptly thereafter), the Company or such Subsidiary Guarantor will
deliver to the Trustee an officers' certificate stating the fact that such
Additional Amounts will be payable and the amounts so payable and will set
forth such other information necessary to enable the Trustee to pay such
Additional Amounts to Holders on the payment date. Whenever in the Indenture
or in this "Description of the Notes" there is mentioned, in any context, the
payment of principal, interest, if any, or any other amount payable under or
with respect to any Note, such mention shall be deemed to include mention of
the payment of Additional Amounts to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof.
Optional Redemption
The Notes will be redeemable, in whole or in part, at the option of the
Company at any time at a redemption price equal to the greater of (i) 100% of
the principal amount of such Notes, and (ii) as determined by the Quotation
Agent (as defined below), the sum of the present values of the remaining
scheduled payments of principal and interest thereon (not including any
portion of such payments of interest accrued as of the date of redemption)
discounted to the date of redemption on a semi-annual basis (assuming a 360-
day year consisting of twelve 30-day months) at the Adjusted Gilt Rate (as
defined below) plus 50 basis points plus, in each case, accrued interest
thereon to the date of redemption.
As used herein:
"Adjusted Gilt Rate" means, with respect to any redemption date, the rate
per annum equal to the semi-annual equivalent yield to maturity of the Compa-
rable Gilt Issue, assuming a price for the Comparable Gilt Issue (expressed as
a percentage of its principal amount) equal to the Comparable Gilt Price for
such redemption date.
"Comparable Gilt Issue" means the United Kingdom Government Obligation se-
lected by the Quotation Agent as having a maturity comparable to the remaining
term of the Notes to be redeemed, that would be utilized, at the time of se-
lection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining
term of such Notes.
"Comparable Gilt Price" means, with respect to any redemption date, (i) the
average of the Reference Gilt Dealer Quotations for such redemption date, af-
ter excluding the highest and lowest such Reference Gilt Dealer Quotations, or
(ii) if the Trustee obtains fewer than three such Reference Gilt Dealer Quota-
tions, the average of all such Quotations.
"Quotation Agent" means the Reference Gilt Dealer appointed by the Company.
"Reference Gilt Dealer" means each of (x) Barclays Bank PLC and its succes-
sors; provided, however, that if the foregoing shall cease to be a primary
United Kingdom Government Obligations dealer in London (a "Primary U.K. Gov-
ernment Obligations Dealer"), the Company shall substitute therefor another
Primary U.K. Government Obligations Dealer; and (y) any other Primary U.K.
Government Obligations Dealer selected by the Company.
"Reference Gilt Dealer Quotations" means, with respect to each Reference
Gilt Dealer and any redemption date, the average, as determined by the Compa-
ny, of the bid and asked prices for the Comparable Gilt Issue (expressed in
each case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Gilt Dealer at 11:00 a.m.; London time, on the third
business day preceding such redemption date.
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Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of the Notes to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date, interest will cease to accrue on the Notes or portions
thereof called for redemption.
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption
will be made by the Trustee in compliance with the requirements of the Luxem-
bourg Stock Exchange, if the Notes are listed thereon, or if the Notes are not
then listed on the Luxembourg Stock Exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided, how-
ever, that no Notes of a principal amount of (Pounds)1,000, or less shall be
redeemed in part. Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be re-
deemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note
in a principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Note. On
and after the redemption date, interest will cease to accrue on Notes or por-
tions thereof called for redemption as long as the Company has deposited with
the paying agent for the Notes funds in satisfaction of the applicable redemp-
tion price pursuant to the Indenture. Notice of optional redemption will be
published in the manner described above under "--Notices." In addition, legal
notice relating to a new issue of notes will be deposited as described below
under "General Listing Information."
Redemption for Changes in Withholding Tax. The Notes of any Holder will be
subject to redemption as a whole, but not in part, at the option of the Com-
pany (a "Tax Redemption") at any time upon not less than 30 nor more than 60
days' notice mailed to such Holder of Notes to be redeemed, at 100% of the
principal amount thereof on the date of redemption, plus accrued and unpaid
interest, if any, to the redemption date, in the event the Company or any Sub-
sidiary Guarantor has become or would be obligated to pay, on any date on
which any amount would be payable with respect to such Notes or any Guarantee
any Additional Amounts as a result of any change in or amendment to the laws,
policies or treaties (including any regulation or ruling promulgated thereun-
der) of the United States of America or any jurisdiction in which any Subsidi-
ary Guarantor is incorporated (or any prefecture, territory or taxing author-
ity thereof or therein), or any change in or amendment to any official posi-
tion or administration or assessing practices regarding the application or in-
terpretation of such laws, policies, treaties, rulings or regulations, which
change or amendment is announced or becomes effective on or after November 17,
1999, provided, however, that, (i) no notice of redemption shall be given ear-
lier than 60 days prior to the earliest date on which the Company or such Sub-
sidiary Guarantor would be obligated to pay such Additional Amounts were a
payment in respect of the Notes then due, (ii) if the Company elects to exer-
cise its Tax Redemption option, it shall consummate any such Tax Redemption
within 180 days following the date on which the amount to which the payment of
such Additional Amounts relates would be payable to such Holder and (iii) upon
the exercise by the Company of its Tax Redemption option at any time such
that, after giving effect to the exercise of such Tax Redemption option, less
than a majority of the aggregate principal amount of the Notes originally is-
sued remains outstanding, prior to the consummation of such Tax Redemption the
Company shall make an offer to purchase from all Holders, upon not less than
30 nor more than 60 days' notice, the Notes of such Holders at 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the re-
demption date; provided further, that prior to any such Tax Redemption, (i)
the Company will deliver to the Trustee a copy of the written opinion of inde-
pendent counsel to the effect that the Company or any Subsidiary Guarantor has
or will become obligated to pay Additional Amounts as a result of such change,
amendment, administration, application or interpretation and (ii) the Company
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<PAGE>
or such Subsidiary Guarantor will use reasonable efforts to cause the reduc-
tion or elimination of the obligation to pay any such Additional Amounts.
Sinking Fund
The Notes will not be entitled to the benefit of any sinking fund.
Guarantees of the Notes
The Indenture will provide that each of the Subsidiary Guarantors will
unconditionally guarantee (the "Guarantees") on a senior basis, jointly and
severally, all of the Company's obligations under the Notes, including its
obligations to pay principal, premium, if any, and interest with respect to
the Notes. The Guarantees will be general unsecured obligations of the
Subsidiary Guarantors. The Subsidiary Guarantors (except for Canandaigua B.V.
and M.J. Lewis Corp.) have also guaranteed all obligations of the Company
under the Credit Agreement. The obligations under the Credit Agreement are
secured by (i) first priority pledges of 100% of the capital stock of
Canandaigua Limited and all of the Company's domestic operating subsidiaries
and (ii) first priority pledges of 65% of the capital stock held by the
Company of Matthew Clark, B.B. Servicios, S.A. de C.V., Canandaigua World
Sales Limited and Schenley Distilleries Inc./Les Distelleries Schenley Inc.
The obligations of each Subsidiary Guarantor are limited to the maximum amount
which, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in
the obligations of such Subsidiary Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Subsidiary Guarantor that makes a payment or distribution
under a Guarantee shall be entitled to a contribution from each other
Subsidiary Guarantor in a pro rata amount, based on the net assets of each
Subsidiary Guarantor determined in accordance with GAAP.
The Company shall cause each Restricted Subsidiary issuing a Guarantee after
the Issue Date to execute and deliver to the Trustee a supplemental indenture
in form reasonably satisfactory to the Trustee pursuant to which such
Restricted Subsidiary shall become a party to the Indenture and thereby
unconditionally guarantee all of the Company's Obligations under the Notes and
the Indenture on the terms set forth therein. Thereafter, such Restricted
Subsidiary shall (unless released in accordance with the terms of the
Indenture) be a Subsidiary Guarantor for all purposes of the Indenture. When
new Subsidiary Guarantors are added, the Company will prepare a supplement to
this Prospectus Supplement, which will be submitted to the Luxembourg Stock
Exchange.
The Indenture will provide that if the Notes are defeased in accordance with
the terms of the Indenture, or if, subject to the requirements of the first
paragraph under "Consolidation, Merger, Sale of Assets" all or substantially
all of the assets of any Subsidiary Guarantor or all of the Capital Stock of
any Subsidiary Guarantor are sold (including by issuance or otherwise) by the
Company in a transaction constituting an Asset Sale, and if (x) the Net Cash
Proceeds from such Asset Sale are used in accordance with the covenant
described under "Certain Covenants--Limitation on Sale of Assets" or (y) the
Company delivers to the Trustee an Officers' Certificate to the effect that
the Net Cash Proceeds from such Asset Sale shall be used in accordance with
the covenant described under "Certain Covenants--Limitation on Sale of Assets"
and within the time limits specified by such covenant, then such Subsidiary
Guarantor or the Subsidiary Guarantors, as the case may be (in the event of a
defeasance of the Notes or a sale or other disposition of all of the Capital
Stock of such Subsidiary Guarantor) or the corporation acquiring such assets
(in the event of a sale or other disposition of all or substantially all of
the assets of such Subsidiary Guarantor) shall be released and discharged of
its Guarantee obligations in respect of the Indenture and the Notes.
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Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary
pursuant to and in accordance with "Certain Covenants--Designation of
Unrestricted Subsidiaries" below shall upon such Designation be released and
discharged of its Guarantee obligations in respect of the Indenture and the
Notes and any Unrestricted Subsidiary whose Designation is revoked pursuant to
"Certain Covenants--Designation of Unrestricted Subsidiaries" below will be
required to become a Subsidiary Guarantor in accordance with the procedure
described in the third preceding paragraph. In the case where a Subsidiary
Guarantor is released and discharged of its Guarantee, we will, if listed on
the Luxembourg Stock Exchange, inform the Luxembourg Stock Exchange and
Holders will be notified in accordance with the procedure described in "--
Notices."
As of February 29, 2000, on a pro forma basis after giving effect to this
Offering, the aggregate amount of outstanding Indebtedness would have been
approximately $1.3 billion and the aggregate amount of outstanding secured
Indebtedness would have been approximately $473 million. See "Risk Factors--
The Notes Are Unsecured; the Stock of Some of Our Subsidiaries is Pledged to
Secure Our Bank Credit Facility" 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 Restricted Subsidiaries to, Incur any Indebtedness (including any
Acquired Indebtedness), except that the Company and any Subsidiary Guarantor
may Incur Indebtedness (including any Acquired Indebtedness) and any
Restricted Subsidiary that is not a Subsidiary 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 Restricted 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 Restricted 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, 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 equal to at least 2.00:1.00.
(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 Restricted Subsidiary under the
Credit Agreement in an aggregate principal amount at any one time
outstanding not to exceed an amount equal to the greater of (x) $1 billion,
minus the amount of any repayment of such Indebtedness under the Credit
Agreement pursuant to "Certain Covenants--Limitation on Sale of Assets"
below and (y) the Borrowing Base;
(ii) Indebtedness of the Company pursuant to the Notes and other
Indebtedness outstanding on the Issue Date (other than Indebtedness under
the Credit Agreement);
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(iii) Indebtedness of any Subsidiary Guarantor pursuant to a Guarantee;
(iv) Indebtedness of the Company owing to a Restricted Subsidiary;
provided that any Indebtedness of the Company owing to a Restricted
Subsidiary that is not a Subsidiary 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
Restricted 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 Restricted Subsidiary owing to the Company or a
Wholly Owned Restricted Subsidiary; provided that, with respect to
Indebtedness owing to a Wholly Owned Restricted Subsidiary that is not a
Subsidiary 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 Restricted
Subsidiary shall become due and payable to the payment and performance of
such Wholly Owned Restricted 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 Restricted 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 Restricted Subsidiary, which has
Indebtedness owing to the Company or any other Restricted Subsidiary,
ceases to be a Restricted Subsidiary shall be deemed to be the incurrence
of Indebtedness by such Restricted Subsidiary that is not permitted by this
clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance with the
provisions of "Certain Covenants--Limitation on Guarantees by Restricted
Subsidiaries";
(vii) Hedging Obligations of the Company or any Subsidiary Guarantor
entered into in the ordinary course of business (and not for speculative
purposes) designed to protect against fluctuations in: (x) interest rates
in respect of Indebtedness of the Company or any of its Restricted
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, (y) currencies or (z) commodities;
(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 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 $75.0 million outstanding at any one time in
the aggregate.
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Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted 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 Restricted 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 Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock of
any Restricted Subsidiary to any Person (other than the Company or any of
its Restricted Subsidiaries) or purchase, redeem or otherwise acquire or
retire for value any Capital Stock of any Restricted Subsidiary held by any
Person (other than the Company or any of its Wholly Owned Restricted
Subsidiaries);
(v) Incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than a Wholly Owned Restricted 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
Restricted 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
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
December 1, 1998 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); plus
(B) the aggregate Net Cash Proceeds received after November 17, 1999 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); plus
(C) the aggregate Net Cash Proceeds received after November 17, 1999 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; plus
(D) the aggregate Net Cash Proceeds received after November 17, 1999 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
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Stock are originally sold for cash plus the aggregate Net Cash Proceeds
received by the Company at the time of such conversion or exchange; plus
(E) in the event the Company or any Restricted Subsidiary has made since
November 17, 1999 or makes an Investment in a Person that, as a result of
or in connection with such Investment becomes a Restricted Subsidiary, an
amount equal to the Company's or any Restricted Subsidiary's existing
Investment in such Person that was previously treated as a Restricted
Payment; plus
(F) so long as the Designation thereof was treated as a Restricted
Payment made after November 17, 1999, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after the
Issue Date in accordance with "Certain Covenants--Designation of
Unrestricted Subsidiaries", an amount equal to the Company's Investment in
such Unrestricted Subsidiary (provided that such amount shall not in any
case exceed the Designation Amount with respect to such Restricted
Subsidiary upon its Designation); plus
(G) $50.0 million; minus
(H) the Designation Amount (measured as of the date of Designation) with
respect to any Subsidiary of the Company which has been designated as an
Unrestricted Subsidiary after November 17, 1999 in accordance with "Certain
Covenants--Designation of Unrestricted Subsidiaries;" minus
(I) all Restricted Payments made after November 17, 1999 (other than
Permitted Payments made and calculated on the basis set forth below).
(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 or in which 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 Cash 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;
(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 (x) the stated amount of any premium,
interest or other payment required to be paid
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in connection with such a refinancing pursuant to the terms of the
Indebtedness being refinanced or (y) 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 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.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any of its Restricted 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 Restricted Subsidiary) unless (i)
such transaction or series of transactions is in writing on terms that are no
less favorable to the Company or such Restricted 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 $10.0
million, 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 $25.0 million, the Company delivers to the Trustee an
opinion of either an independent investment banking firm of national standing
in the United States or an independent public accounting firm of national
standing in the United States, stating that the transaction or series of
transactions is fair to the Company or such Restricted 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).
Limitation on Liens. The Company will not, and will not permit any
Restricted 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 Subsidiary
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
Subsidiary 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 Issue Date;
(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, or
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 Restricted
Subsidiary or the value of such property for the purpose of such business;
(6) deposits to secure public or statutory obligations,
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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 Restricted Subsidiaries; (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; or (9)
standard custodial, bailee or depository arrangements (including (x) in
respect of deposit accounts with banks and other financial institutions and
(y) standard customer agreements in respect of accounts for the purchase
and sale of securities and other property with brokerage firms or other
types of financial institutions);
(c) any Lien now or hereafter existing on property of the Company or any
Subsidiary Guarantor securing Indebtedness outstanding under the Credit
Agreement;
(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 Restricted Subsidiary, in each case
which Indebtedness is permitted under the provisions of "Certain
Covenants--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
Restricted 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.
Limitation on Sale of Assets. (a) The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, consummate an
Asset Sale (other than an Asset Swap permitted by clause (g) below) unless (i)
at least 75% of the proceeds from such Asset Sale are received in cash;
provided, however that the amount of (A) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or the
notes thereto) of the Company or any Restricted Subsidiary that are assumed by
the transferee in such Asset Sale and from which the Company or such
Restricted Subsidiary is released and (B) any notes or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are immediately converted by the Company or such Restricted Subsidiary
into cash, shall be deemed cash for purposes of this covenant, and (ii) the
Company or such Restricted 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 secured Indebtedness
then outstanding as required by the terms thereof or the Company determines
not to apply such Net Cash Proceeds to the permanent repayment of such
secured Indebtedness or if no secured 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 Restricted Subsidiaries as existing at
such time or reasonably related thereto. The amount of such Net Cash
Proceeds neither used to permanently repay or prepay secured Indebtedness
nor used or invested as set forth in this paragraph constitutes "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $10.0 million 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
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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 (Pounds)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 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 Restricted 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) 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
(Pounds)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.
(e) 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.
(f) 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) 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 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.
(g) The Company will not, and will not permit any Restricted Subsidiary,
to engage in any Asset Swaps, unless: (i) at the time of entering into such
Asset Swap, and immediately after giving effect to such Asset Swap, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof; (ii) in the event such Asset Swap involves
an aggregate amount in excess of $10.0 million, the terms of such Asset
Swap have been approved by a majority of the members of the board of
directors of the Company which determination shall include a determination
that the Fair Market Value of the assets being received in such swap are at
least equal to the Fair Market Value of the assets being swapped and (iii)
in the event such Asset Swap involves an aggregate amount in excess of
$20.0 million, the Company has also received a written opinion from an
independent investment banking firm of nationally recognized standing or an
independent public accounting firm of nationally recognized standing that
such
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Asset Swap is fair to the Company or such Restricted Subsidiary, as the
case may be, from a financial point of view.
Limitation on Guarantees by Restricted Subsidiaries. The Indenture will
provide that in the event the Company (i) organizes or acquires any Domestic
Restricted Subsidiary after November 17, 1999 that is not a Subsidiary
Guarantor and causes or permits such Restricted Subsidiary to, directly or
indirectly, guarantee the payment of any Indebtedness ("Other Indebtedness")
of the Company or any Subsidiary Guarantor or (ii) causes or permits any
Foreign Restricted Subsidiary that is not a Subsidiary Guarantor to, directly
or indirectly, guarantee the payment of any Other Indebtedness, then, in each
case the Company shall cause such Restricted Subsidiary to simultaneously
execute and deliver a supplemental indenture to the Indenture pursuant to
which it will become a Subsidiary Guarantor under the Indenture; provided,
however, that in the event a Domestic Restricted Subsidiary is acquired in a
transaction in which a merger agreement is entered into, such Domestic
Restricted Subsidiary shall not be required to execute and deliver such
supplemental indenture until the consummation of the merger contemplated by
any such merger agreement; provided, further, that if such Other Indebtedness
is (i) Indebtedness that is ranked pari passu in right of payment with the
Notes or the Guarantees of such Restricted Subsidiary, as the case may be, the
Guarantee of such Restricted Subsidiary shall be pari passu in right of
payment with the guarantee of the Other Indebtedness; or (ii) Subordinated
Indebtedness, the Guarantee of such Restricted Subsidiary shall be senior in
right of payment to the guarantee of the Other Indebtedness (which guarantee
of such Subordinated Indebtedness shall provide that such guarantee is
subordinated to the Guarantees of such Subsidiary to the same extent and in
the same manner as the Other Indebtedness is subordinated to the Notes or the
Guarantee of such Restricted Subsidiary, as the case may be). The Guarantee of
a Subsidiary Guarantor shall be released upon the sale or transfer of all or
substantially all of the assets or all of the Capital Stock of such Subsidiary
Guarantor; provided, that, either (i) such sale or transfer complies with the
provisions set forth in "Certain Covenants--Limitation on Sale of Assets" or
(ii) such sale or transfer need not comply with the provisions set forth in
"Certain Covenants--Limitation on Sale of Assets" because the Capital Stock so
sold or transferred does not constitute an "Asset Sale" by operation of the
provisions of clause (y) of the last sentence of the definition of Asset Sale.
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 (Pounds)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, 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 and publish such notice in a leading Luxembourg newspaper,
if the Company is then listed on the Luxembourg Stock Exchange, 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.
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
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be delivered by holders of the Notes seeking to accept the Change of Control
Offer. The Credit Agreement restricts the ability of the Company to purchase
the Notes prior to full repayment of indebtedness under the Credit Agreement
and, upon a Change of Control, all amounts outstanding under the Credit
Agreement 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 Agreement 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 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
"Certain Covenants--Limitation on Restricted Payments" (and such amount shall
be treated as a Restricted Payment subject to the provisions in the Indenture
described under "Certain Covenants--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) Marilyn Sands,
Richard Sands and Robert Sands; (ii) family members or the relatives of the
Persons described in clause (i) or the Mac and Sally Sands Foundation,
Incorporated; (iii) any trusts created for the benefit of the Persons
described in clauses (i), (ii) or (v) or for the benefit of Andrew Stern or
any trust for the benefit of any such trust; (iv) any partnerships that are
controlled by (and a majority of the partnership interests in which are owned
by) any of the Persons described in clauses (i), (ii), (iii) or (v) or by any
partnership
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that satisfies the conditions of this clause (iv); or (v) in the case of
Marvin Sands and 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.
Limitation on Restricted Subsidiary Capital Stock. The Company will not
permit any Restricted 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 Restricted Subsidiary, (ii) Capital Stock issued by a Person prior to
the time (A) such Person becomes a Restricted Subsidiary, (B) such Person
merges with or into a Restricted Subsidiary or (C) a Restricted 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), and (iii) Capital Stock issued or
sold by a Restricted Subsidiary, where immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary 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 Restricted Subsidiary of the Company, (iii) make any Investment
in the Company or a Restricted Subsidiary of the Company or (iv) transfer any
of its properties or assets to the Company or any Restricted Subsidiary,
except (a) any
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encumbrance or restriction pursuant to an agreement in effect on the date of
the Indenture; (b) any encumbrance or restriction, with respect to a
Restricted Subsidiary that is not a Restricted Subsidiary of the Company on
the date of the Indenture, in existence at the time such Person becomes a
Restricted 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 Restricted 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 "Certain
Covenants--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.
Designation of Unrestricted Subsidiaries. The Company may designate after
the Issue Date any Subsidiary of the Company as an "Unrestricted Subsidiary"
under the Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation;
(ii) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Fixed Charge Coverage Ratio of the
first paragraph of "Certain Covenants--Limitation on Indebtedness"; and
(iii) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to paragraph (a) of "Certain
Covenants--Limitation on Restricted Payments" above in an amount (the
"Designation Amount") equal to the amount of the Company's Investment in
such Subsidiary on such date.
Neither the Company nor any Restricted Subsidiary shall at any time (x)
provide credit support for, subject any of its property or assets (other than
the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) or (y) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary. For purposes of the foregoing, the Designation of a Subsidiary of
the Company as an Unrestricted Subsidiary shall be deemed to include the
Designation of all of the Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
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Limitation of Applicability of Certain Covenants if Notes Rated Investment
Grade. Notwithstanding the foregoing, the Company's and its Restricted
Subsidiaries' obligations to comply with the provisions of the Indenture
described (x) above under the captions "Certain Covenants--Limitation on
Indebtedness," "Certain Covenants--Limitation on Restricted Payments,"
"Certain Covenants--Limitation on Transactions with Affiliates," "Certain
Covenants--Limitation on Restricted Subsidiary Capital Stock," "Certain
Covenants--Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries," and "Certain Covenants--Designation of Unrestricted
Subsidiaries," and (y) below in clause (iv) of the first paragraph under the
caption "Consolidation, Merger, Sale of Assets," will terminate and cease to
have any further effect from and after the first date when the Notes are rated
Investment Grade.
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.
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.
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 Restricted 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 Restricted 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 Restricted 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
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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
Subsidiary 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
Restricted 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.
Each Subsidiary Guarantor shall not, and the Company will not permit a
Subsidiary 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 Subsidiary 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 Subsidiary Guarantor) unless at
the time and after giving effect thereto: (i) either (1) such Subsidiary
Guarantor shall be the continuing corporation or partnership or (2) the entity
(if other than such Subsidiary Guarantor) formed by such consolidation or into
which such Subsidiary Guarantor is merged or the entity which acquires by
sale, assignment, conveyance, transfer, lease or disposition the properties
and assets of such Subsidiary 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 Subsidiary Guarantor
under its Guarantee and the 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 Subsidiary 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 Subsidiary Guarantor (i) if the Guarantee of
such Subsidiary Guarantor is released in connection with such transaction in
accordance with the last sentence of "Certain Covenants--Limitation on
Guarantees by Restricted Subsidiaries" or (ii) if such transaction need not
comply with the provisions set forth in "Certain Covenants--Limitation on Sale
of Assets" because the properties or assets so sold, assigned, conveyed,
transferred, leased or otherwise disposed of do not constitute an "Asset Sale"
by operation of the provisions of clause (y) of the last sentence of the
definition of Asset Sale.
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 Subsidiary Guarantor is not the continuing
corporation, the successor Person formed or remaining shall succeed to, and be
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substituted for, and may exercise every right and power of, the Company or
such Subsidiary Guarantor, as the case may be, and the Company or such
Subsidiary Guarantor, as the case may be, would be discharged from all
obligations and covenants under the Indenture and the Notes.
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 Subsidiary 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 Subsidiary Guarantor
or any Subsidiary then has outstanding Indebtedness in excess of $10.0
million 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 Subsidiary 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 $15.0 million, either individually or in the aggregate (net of
amounts covered by insurance, bond, surety or similar instrument), shall be
entered against the Company, any Subsidiary 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 $10.0 million in aggregate
principal amount of Indebtedness of the Company, any Subsidiary 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 Subsidiary 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 Subsidiary Guarantor or any Subsidiary (including funds on deposit or
held pursuant to lock-box and other similar arrangements);
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(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 Subsidiary 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 Subsidiary Guarantor or any Subsidiary bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Subsidiary 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 Subsidiary 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 Subsidiary 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 Subsidiary Guarantor or any Subsidiary
consents to the entry of a decree or order for relief in respect of the
Company, any Subsidiary 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 Subsidiary 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 Subsidiary 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 Subsidiary
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 Subsidiary Guarantor or any Subsidiary takes
any corporate action in furtherance of any such actions in this paragraph
(ix).
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 of 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). 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.
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
the Notes, and (iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes; (b) all Events
of Default, other than the nonpayment 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.
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
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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 series of Notes outstanding.
The Company is also required to notify the Trustee within five business days
of the occurrence of any Default.
The Trust Indenture Act of 1939 contains limitations on the rights of the
Trustee, should it become a creditor of the Company or any Subsidiary
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.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal 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 the Notes to
receive payments in respect of the principal of, premium, if any, and interest
on the 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 payments; (iii) the rights, powers, trust duties and
immunities of the Trustee and the Company's obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the particular series of Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
particular series of Notes subject to such Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant Defeasance: (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes cash in pounds sterling, non-callable United
Kingdom Government Obligations, or a combination thereof, in such amounts as
will be sufficient, in the opinion of an internationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes, on the stated date for payment thereof;
(ii) in the case of Legal Defeasance, the Company shall have delivered to the
Trustee, (x) an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred and (y) an opinion of counsel in the United
Kingdom or a ruling of the Inland Revenue of the United Kingdom to the effect
that holders of the Notes will not recognize income, gain or loss for United
Kingdom income tax or other tax purposes as a result of such termination and
will be subject to United Kingdom income tax and other tax on the same
amounts, in the same manner and at the same times as would have been the case
had such Legal Defeasance not occurred (and for purposes of such opinion, such
United Kingdom counsel shall assume that holders of the Notes include holders
who are not resident in the United Kingdom); (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee opinions of
counsel in the
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United States and counsel in the United Kingdom reasonably acceptable to the
Trustee confirming that the holders of the Notes will not recognize income,
gain or loss for United States federal income tax purposes or United Kingdom
income tax purposes as a result of such Covenant Defeasance and will be
subject to United States federal income tax and United Kingdom income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other that a Default or Event of Default with respect to the
Indenture resulting from the Incurrence of Indebtedness, all or a portion of
which will be used to defease the Notes concurrently with such Incurrence);
(v) such Legal 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 of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) 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 over any other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company or others; (vii) the Company shall have
delivered to the Trustee an officers' certificate and opinions of counsel,
each stating that all conditions precedent provided for or relating to the
Legal Defeasance or the Covenant Defeasance have been complied with; (viii)
the Company shall have delivered to the Trustee opinions of counsel to the
effect that (A) the trust funds will not be subject to any rights of holders
of Indebtedness of the Company other than the Notes and (B) assuming no
intervening bankruptcy of the Company between the date of deposit and the 91st
day following the deposit and that no Holder of the Notes is an insider of the
Company, after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; and (ix) certain other
customary conditions precedent specified in the Indenture are satisfied.
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) canceled or have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee canceled 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 Subsidiary 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 canceled or for cancellation, including principal of, premium, if
any, and accrued interest at such Stated Maturity or redemption date; (b) the
Company or any Subsidiary Guarantor has paid or caused to be paid all other
sums payable under the Indenture by the Company or any Subsidiary 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 Subsidiary
Guarantor is a party or by which the Company or any Subsidiary Guarantor is
bound.
Modifications and Amendments
Modifications and amendments of the Indenture with respect to the Notes may
be made by the Company, each Subsidiary 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
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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 Subsidiary Guarantor of any of its rights and obligations under the
Indenture; or (vi) amend or modify any of the provisions of the Indenture to
cause the Notes or any Guarantee to be subordinate to any other Indebtedness.
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, as they relate to such series of Notes.
Governing Law
The Indenture, the Notes and the Guarantees will be 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. Under the Judiciary Law of
the State of New York, a judgment or decree in an action based upon an
obligation denominated in a currency other than United States dollars will be
rendered in the foreign currency of the underlying obligation and converted
into United States dollars at a rate of exchange prevailing on the date of
entry of the judgment or decree.
The Trustee
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the applicable Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it by the
Indenture, and use the same degree of care and skill in its exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
Book-Entry, Delivery and Form
The Notes will be issued initially in the form of global notes (the "Global
Notes") deposited with the Paying Agent in London, Citibank, N.A., as common
depositary (in such capacity, the "Common
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Depositary"), in the name of Citivic Nominees Ltd. as nominee for Euroclear
and Clearstream Banking, and in the name of Cede & Co. as nominee for DTC.
Except in the limited circumstances described in this Prospectus Supplement,
beneficial interests in the Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained in book-entry form
by DTC, Euroclear and Clearstream Banking.
Depositary Procedures
DTC. We understand as follows with respect to DTC: DTC is a limited-purpose
trust company organized under the New York Banking Law, 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 New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities of its participants and to facilitate the clearance and settlement
of transactions amongst its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. DTC's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, some of whom (and/or their
representative) own DTC.
Euroclear and Clearstream Banking. We understand as follows with respect to
Euroclear and Clearstream Banking: Euroclear and Clearstream Banking each hold
securities for their account holders and facilitate the clearance and
settlement of securities transactions by electronic book-entry transfer
between their respective account holders, thereby eliminating the need for
physical movements of certificates and any risk from lack of simultaneous
transfers of securities. Euroclear and Clearstream Banking each provide
various services including safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Each of Euroclear and Clearstream Banking can settle securities
transactions in any of more than 30 currencies, including pounds sterling.
Euroclear and Clearstream Banking each also deal with domestic securities
markets in several countries through established depository and custodial
relationships. The respective systems of Euroclear and Clearstream Banking
have established an electronic bridge between their two systems across which
their respective holders may settle trades with one another. Account holders
in both Euroclear and Clearstream Banking are worldwide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Indirect access to both Euroclear and Clearstream
Banking is available to other institutions that clear through or maintain a
custodial relationship with a holder of either system. An account holder's
overall contractual relations with either Euroclear or Clearstream Banking are
governed by the respective rules and operating procedures of Euroclear or
Clearstream Banking and any applicable laws. Both Euroclear and Clearstream
Banking act under such rules and operating procedures only on behalf of their
respective holders and have no record of or relationship with any persons who
are not direct holders.
Investors who hold accounts with Euroclear or Clearstream Banking may
acquire, hold and transfer security entitlements with respect to Global Notes
against Euroclear or Clearstream Banking and its respective property by book-
entry to accounts with Euroclear or Clearstream Banking, each of which has an
account with the Common Depositary and subject at all times to the procedures
and requirements of Euroclear or Clearstream Banking, as the case may be.
"Security entitlement" means the rights and property interests of a holder
against its securities intermediary under applicable law in or with respect to
a security, including any ownership, co-ownership, contractual or other
rights. Investors who do not have accounts with Euroclear or Clearstream
Banking may acquire, hold and transfer security entitlements with respect to a
Global Note against the securities intermediary and its property with which
such investors hold accounts by book-entry to accounts with such securities
intermediary, which in turn may hold a security entitlement with respect to
the Global Note through
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Euroclear or Clearstream Banking. Investors electing to acquire security
entitlements with respect to a Global Note through an account with Euroclear
or Clearstream Banking or some other securities intermediary must follow the
settlement procedures of their securities intermediary with respect to the
settlement of new issues of securities. Security entitlements with respect to
the Global Notes to be acquired through an account with Euroclear or
Clearstream Banking will be credited to such account as of the settlement date
against payment in pounds sterling for value as of the settlement date.
Investors electing to acquire, hold or transfer security entitlements with
respect to a Global Note through an account with Euroclear, Clearstream
Banking or some other securities intermediary other than in connection with
the initial distribution of the Notes must follow the settlement procedures of
their securities intermediary with respect to the settlement of secondary
market transactions in securities.
Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders of Notes for any purpose. So long as the Common Depositary is the
registered owner or holder of a Global Note, such party will be considered the
sole owner or holder of the notes represented by such Global Note for all
purposes under the Indenture and the Notes. Accordingly, each person owning a
beneficial interest in a Global Note must rely on the procedures of DTC,
Euroclear and Clearstream Banking, as the case may be, and their participants
or holders to exercise any rights and remedies of a holder under the
Indenture. Payments of principal and interest on the Global Notes will be made
to the Common Depositary on behalf of DTC, Euroclear and Clearstream Banking,
as the case may be, as the registered owners thereof.
The laws of some countries require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons may
be limited to that extent. Because DTC, Euroclear and Clearstream Banking can
act only on behalf of their respective participants or holders, as the case
may be, the ability of a person having beneficial interests in a Global Note
to pledge such interests to persons or entities that do not participate in the
relevant clearing system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
The Global Note issued in the name of Cede & Co. has the CUSIP number
137219AH4 and the ISIN number US137219AH40. The Global Note issued in the name
of Citivic Nominees Ltd. has the ISIN number XS0111357140. No CUSIP number has
been issued for this Global Note. The Notes have been accepted for clearance
by Euroclear and Clearstream Banking under the common code 011135714.
Payments on the Notes
While the Notes are represented by the Global Notes, payments in respect of
the principal of, premium, if any, and interest on the Global Notes will be
made through the Paying Agent and will be payable to the Common Depositary on
behalf of DTC, Euroclear and Clearstream Banking, each in its capacity as the
registered holder of the Notes under the Indenture. If definitive notes have
been issued, the Indenture requires us to make payments in respect of such
definitive notes (including principal, premium and interest) by wire transfer
of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address.
So long as the Notes are listed on the Luxembourg Stock Exchange, we will
maintain a paying and transfer agent in Luxembourg. See "General Listing
Information". As further described in the "Transfer and Exchange" section
below, payments of principal on the Notes may be received at the office of the
paying agent in Luxembourg upon surrender of the Notes.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes, including the Global Notes, are registered
as the owners thereof for the purpose of
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receiving such payments and for any and all other purposes whatsoever.
Consequently, none of the Company, the Trustee, or any agent of the Company,
or the Trustee has or will have any responsibility or liability for
(i) any aspect or accuracy of the records of the relevant clearing system,
the participants therein or the holders thereof, as the case may be,
relating to payments made on account of beneficial ownership interests
in the Global Notes, or for maintaining, supervising or reviewing any
records of such clearing system, participant or holder relating to
beneficial ownership interests in the Global Notes, or
(ii) any other matter relating to the actions and practices of the
relevant clearing system or the participants therein or the holders
thereof.
DTC, Euroclear or Clearstream Banking, as the case may be, upon receipt of
any such payment, will immediately credit the accounts of their relevant
participants or holders, as the case may be, with payments in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the Global Notes, as shown on the records of DTC, Euroclear or
Clearstream Banking. The Company expects that payments by such participants or
holders, as the case may be, to the beneficial owners of Global Notes will be
governed by standing instructions and customary practices and will be the
responsibility of such participants or holders. Neither the Company nor the
Trustee will have responsibility or liability for the payment of amounts owing
in respect of beneficial interests in the Global Notes held by the Common
Depositary for DTC, Euroclear and Clearstream Banking.
Transfers of Global Securities and Interests Therein
Unless definitive securities are issued, the Global Notes may be
transferred, in whole and not in part, only by DTC, Euroclear and Clearstream
Banking to the Common Depositary, as the case may be, or by the Common
Depositary to DTC, Euroclear and Clearstream Banking, respectively, or to
another nominee or successor thereof or a nominee of such successor.
Transfers of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC, Euroclear and Clearstream Banking, as
the case may be, and their respective holders and intermediaries. Any
secondary market trading activity in beneficial interests in the Global Notes
is expected to occur through the participants or holders and intermediaries,
as the case may be, of DTC, Euroclear and Clearstream Banking, and the
securities custody accounts of investors will be credited with their holdings
against payment in same-day funds on the settlement date.
No service charge will be made for any registration of transfer or exchange
of the Notes, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Although DTC, Euroclear and Clearstream Banking have agreed to various
procedures to facilitate transfers of interests in the Global Notes among
participants and holders in DTC, Euroclear and Clearstream Banking, they are
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither we, the Trustee, nor
any agent of ours or the Trustee will have any responsibility for the
nonperformance or misperformance (as a result of insolvency, mistake,
misconduct or otherwise) by DTC, Euroclear or Clearstream Banking or their
respective participants, indirect participants, holders or intermediaries of
their respective obligations under the rules and procedures governing their
operations.
We understand that under existing industry practices, if we or the Trustee
requests any action of holders of Notes, or if an owner of a beneficial
interest in a Global Note desires to give instructions or take an action that
a holder is entitled to give or take under the Indenture, DTC, Euroclear or
Clearstream Banking, as the case may be, would authorize their respective
participants or holders, as
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the case may be, owning the relevant beneficial interest to give instructions
to take such action, and such participants or holders would authorize indirect
participants or intermediaries to give instructions or take such action, or
would otherwise act upon the instructions of such indirect participants or
intermediaries. DTC, Euroclear and Clearstream Banking are not required to
authorize holders to take any action.
We understand that under existing practices of DTC, Euroclear or Clearstream
Banking if less than all of the Notes are to be redeemed at any time, DTC,
Euroclear or Clearstream Banking, as the case may be, will credit their
participants' or holders' accounts on a proportionate basis, with adjustments
to prevent fractions, or by lot or on such other basis as DTC, Euroclear or
Clearstream Banking, as the case may be, deems fair and appropriate, provided
that no beneficial interests of less than (Pounds)1,000, may be redeemed in
part.
Except in the limited circumstances described below, owners of beneficial
interests in Global Notes will not be entitled to receive physical delivery of
definitive notes. Transfers of beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC, Euroclear and
Clearstream Banking and their respective direct or indirect participants which
rules and procedures may change from time to time.
All exchanges for definitive notes may be effected at the offices of the
paying and transfer agent in Luxembourg. All payments of interest may be
received at the offices of the Luxembourg paying agent upon presentation of
definitive notes and all payments of principal may be received at such offices
upon surrender of the notes.
Certificated Notes
Beneficial interests in a Global Note are exchangeable for definitive notes
in registered certificated form only if (i) (in whole but not in part) either
DTC, Euroclear or Clearstream Banking is closed for business for a continuous
period of 14 days (other than by reason of holiday, statutory or otherwise) or
announces an intention permanently to cease business or does in fact do so and
no alternative clearance system satisfactory to the Trustee is available, (ii)
(in part) an Event of Default under the Indenture occurs and is continuing,
upon the request delivered in writing to DTC, Euroclear and/or Clearstream
Banking, the Trustee or the Common Depositary, (iii) (in whole but not in
part) at any time the Company in its sole discretion determines that the
Global Notes should be exchanged for definitive notes or (iv) (in whole but
not in part) the Common Depositary is at any time unwilling or unable to
continue as Common Depositary and a successor depositary is not able to be
appointed by the Company within 90 days.
Any certificated notes will be issued in registered form in denominations of
(Pounds)1,000 in nominal amount and integral multiples thereof. In all cases,
certificated notes delivered in exchange for any Global Note or beneficial
interest in the Global Notes will be registered in the names, and issued in
any approved denominations, requested by or on behalf of DTC, Euroclear or
Clearstream Banking, as the case may be, in accordance with their customary
procedures. The notes may not be issued in bearer form.
In the case of the issuance of certificated notes in the limited
circumstances set forth above, the holder of any such certificated note may
transfer such note by surrendering it at the offices or agencies of the
Company maintained for such purpose within the City and State of New York.
Until otherwise designated by the Company, the Company's office or agency in
the City and State of New York and London, England, respectively, will be the
offices of the Trustee maintained for such purpose. In the event of a partial
transfer of a holding of Notes represented by one certificate, or partial
redemption of such a holding represented by one certificate, a new certificate
shall be issued to the transferee in
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respect of the part transferred or redeemed and a further new certificate in
respect of the balance of the holding not transferred or redeemed shall be
issued to the transferor, provided that no certificate in denominations less
than (Pounds)1,000 shall be issued. Each new certificate to be issued shall be
available for delivery within ten business days at the office of the Trustee.
The cost of preparing, printing, packaging and delivering the certificated
notes shall be borne by the Company.
The Company shall not be required to register the transfer or exchange of
certificated notes for a period of 15 days preceding
(a) the due date for any payment of principal of or interest on the Notes
or
(b) the date fixed for a selection of Notes to be redeemed.
Also, the Company is not required to register the transfer or exchange of
any notes selected for redemption. In the event of the transfer of any
certificated note, the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a holder to pay any taxes and fees required by law and permitted by
the Indenture and the Notes.
If certificated notes are issued and a holder of a certificated note claims
that the note has been lost, destroyed or wrongfully taken or if such note is
mutilated and is surrendered to the Trustee, the Company shall issue and the
Trustee shall authenticate a replacement note if the Trustee's and the
Company's requirements are met. If required by the Trustee or the Company, an
indemnity bond sufficient in the judgment of both to protect the Company, the
Trustee or any paying agent or authenticating agent appointed pursuant to the
Indenture from any loss which any of them may suffer if a note is replaced
must be posted. The Company may charge for its expenses in replacing a note.
In case any such mutilated, destroyed, lost or stolen note has become or is
about to become due and payable, or is about to be redeemed or purchased by
the Company pursuant to the provisions of the Indenture, the Company in its
discretion may, instead of issuing a new note, pay, redeem or purchase such
note, as the case may be.
To the extent permitted by law, the Company, the Paying Agent, the Registrar
and the Transfer Agent shall be entitled to treat the person in whose name any
certificated note is registered as the absolute owner thereof. The Indenture
will contain provisions relating to the maintenance of a register reflecting
ownership of certificated notes, if any, and other provisions customary for a
registered debt security including registration as to both principal and
stated interest and restrictions on transfer except by surrender of a
certificated note and either the reissuance of such certificated note or the
issuance of a new certificated note to the new holder. Payment of principal on
each certificated note will be made to the holder against presentation and
surrender. Payment of interest on each certificated note will be made to the
holder appearing on the register at the close of business on the record date
at his address shown on the register on the record date.
None of the Company, the Trustee, the Common Depositary or any Paying Agent
will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, any book-entry interest.
Transfer And Exchange
A holder may transfer or exchange interests in the Notes in accordance with
procedures described in accordance with the Indenture. The registrar and the
Trustee may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a holder to
pay any taxes and fees required by law or permitted by the Indenture. The
Company is not
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required to transfer or exchange any Note selected for redemption. Also, the
Company is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed.
The Company will cause to be kept, at the specified office of the Registrar,
a register (the "Register") on which should be kept the names and addresses of
the holders of the Notes and the particulars of the Notes held by them and of
all transfers and exchanges of Notes. Definitive Notes issued will be issued
in registered form and will be transferable in whole or in part in an
authorized denomination only upon the surrender of the definitive form of the
Notes being transferred, accompanied by a duly completed and signed transfer
form, and otherwise in accordance with the Indenture at the specified office
of the Registrar or the specified office of any other paying or transfer agent
including, while the Notes are listed on the Luxembourg Stock Exchange and the
rules of the Luxembourg Stock Exchange so require, at the offices of the
paying agent in Luxembourg for registration of that transfer. No transfer of
title to any such Note will be effective unless and until entered on the
Register.
Transfers of interests in Notes represented by Global Notes will be effected
in accordance with the rules of DTC, Euroclear or Clearstream Banking. See
"Depositary Procedures" above for a more detailed description of the
procedures for the transfer of interests in the Global Notes.
Each new definitive Note to be issued upon a transfer of Notes will, after
receipt by the relevant agent of the definitive form of the Note to be
transferred together with a duly completed and executed form of transfer, be
made available for collection at the specified office of the relevant agent
or, if so requested in the form of transfer, be mailed at the risk of the
holder entitled to the Note (but free of charge to such holder) to the address
specified in the form of transfer.
Where only part of the principal amount of a Note (being an authorized
denomination) that has been issued in definitive form is to be transferred or
redeemed, a new definitive Note in respect of the Notes not so transferred or
redeemed will, within three business days of deposit or surrender of the
original definitive Note with or to the relevant agent, be made available for
collection at the specified office of such agent, or, if so requested by the
holder, be mailed by uninsured mail at the risk of the holder of the Notes to
the address of such holder appearing on the Register.
Registration of transfers of Notes (or parts thereof in authorized
denominations) will be effected without charge by or on our behalf or on
behalf of any of the agents, but upon payment (or the giving of such indemnity
as we or any of the Transfer Agents may reasonably require) in respect of any
taxes, duties or other governmental charges which may be imposed in relation
to it.
Neither we nor the Registrar will be required to register the transfer of a
Note (or any part thereof in authorised denominations) during the period of 15
days up to and including the due date for any payment of principal or premium,
if any, on that Note or during the period of 15 days before a selection of
Notes to be redeemed.
All transfers of Notes and entries on the Register will be made subject to
the detailed requirements concerning transfer of Notes set out in our
agreement with the Transfer Agent. Such requirements may be changed by us,
with the prior written approval of the applicable Trustee and the Registrar.
The Registrar will mail a copy of the current requirements for the transfer of
Notes free of charge to any holder of Notes upon request.
Redemption of Global Notes
In the event that any Global Note (or any portion thereof) is redeemed, the
Common Depositary will redeem an equal amount of the book-entry interests in
such Global Note from the amount received by it in respect to the redemption
of such Global Note. The redemption price payable in connection
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with the redemption of such book-entry interests will be equal to the amount
received by the Common Depositary in connection with the redemption of such
Global Note (or any portion thereof).
Resignation of Common Depositary
The Common Depositary may at any time resign as Common Depositary by written
notice to the Company and the Trustee, such resignation to become effective
upon the appointment of a successor Common Depositary, in which case the
Global Notes shall be delivered to such successor. If no successor has been so
appointed by the Company within 90 days, certificated notes shall be issued in
exchange therefor as described above.
Listing
Application has been made to list the notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the Notes and the
Certificate of Incorporation of the Company will be registered prior to the
listing with the Chief Registrar of the District Court in Luxembourg, where
such documents are available for inspection and where copies thereof can be
obtained upon request. In addition, as long as the notes are listed on the
Luxembourg Stock Exchange, an agent for making payments on, and transfers of,
Notes will be maintained in Luxembourg. The Company has initially designated
Paribas Luxembourg as its agent for this purpose.
Reports
The Trustee will immediately send to DTC, Euroclear and Clearstream Banking,
a copy of any notices, reports and other communications received relating to
the Company, the Notes, or the Guarantees.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted 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 Restricted 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 Restricted
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; (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 Restricted Subsidiary; (ii) all or substantially all of the
properties and assets of
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any division or line of business of the Company or its Restricted
Subsidiaries; or (iii) any other properties or assets of the Company or any
Restricted 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 Company to
any Restricted Subsidiary, or of any Subsidiary to the Company or any
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 $3,000,000.
"Asset Swap" means the execution of a definitive agreement, subject only to
customary closing conditions, that the Company in good faith believes will be
satisfied, for a substantially concurrent purchase and sale, or exchange, of
Productive Assets between the Company or any of its Restricted Subsidiaries
and another Person or group of affiliated Persons; it being understood that an
Asset Swap may include a cash equalization payment made in connection
therewith provided that such cash payment, if received by the Company or its
Subsidiaries, shall be deemed to be proceeds received from an Asset Sale and
applied in accordance with "Certain Covenants--Limitation on Sale of Assets."
"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.
"Borrowing Base" means the sum of (i) 85% of accounts receivable of the
Company and its Subsidiaries and (ii) 50% of the net book value of the
inventory of the Company and its Subsidiaries, in each case, as determined on
a consolidated basis in accordance with GAAP.
"Capital Lease Obligation" means any obligations of the Company and its
Restricted 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 Brands, 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 Restricted
Subsidiaries on a Consolidated basis, all determined in accordance with GAAP
to (b) the sum of Consolidated Interest Expense for
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such period and cash and non-cash dividends paid on any Preferred Stock of the
Company and its Restricted Subsidiaries 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 Restricted 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
Restricted 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 and its
Restricted Subsidiaries during such period and (ii) all capitalized interest
of the Company and its Restricted Subsidiaries, in each case as determined in
accordance with GAAP on a basis. Whenever pro forma effect is to be given to
an acquisition or disposition of assets for the purpose of calculating the
Consolidated Fixed Charge Coverage Ratio, the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection with such
acquisition or disposition of assets, shall be calculated on a pro forma basis
in accordance with Regulation S-X under the Securities Act, as in effect on
the date of such calculation.
"Consolidated Net Income (Loss)" of the Company means, for any period, the
Consolidated net income (or loss) of the Company and its Restricted
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 Restricted 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 Restricted Subsidiaries; (iii) net income (or loss) of any Person
combined with the Company or any of its Restricted 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 Restricted Subsidiary to the extent that the declaration
of dividends or similar distributions by that Restricted 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 Restricted
Subsidiary or its stockholders. Whenever pro forma effect is to be given to an
acquisition or disposition of assets for the purpose of calculating the
Consolidated Fixed Charge Coverage Ratio, the amount of income or earnings
related to such assets shall be calculated on a pro forma basis in accordance
with Regulation S-X under the Securities Act, as in effect on the date of such
calculation.
"Consolidated Net Tangible Assets" means with respect to any Person, as of
any date of determination, the book value of such Persons total assets, less
goodwill, deferred financing costs and
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other intangibles and less accumulated amortization, shown on the most recent
balance sheet of such Person, determined on a consolidated basis in accordance
with GAAP.
"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 Restricted Subsidiaries for such period, as determined in
accordance with GAAP on a Consolidated basis (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 October 6, 1999,
between the Company, the Subsidiaries of the Company identified on the
signature pages thereof, the lenders named therein, and The Chase Manhattan
Bank, as administrative agent, including any deferrals, renewals, extensions,
replacements, refinancings or refundings thereof or amendments, modifications
or supplements thereto and any agreements therefor (including any of the
foregoing that increase the principal amount of 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 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"), whether by or with the same or any
other lender, creditor, group of lenders or group of creditors, and including
related notes, guarantees and note agreements and other instruments and
agreements executed in connection therewith.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designation" has the meaning set forth under "Certain Covenants--
Designation of Unrestricted Subsidiaries."
"Designation Amounts" has the meaning set forth under "Certain Covenants--
Designation of Unrestricted Subsidiaries."
"Domestic Restricted Subsidiary" means a Restricted Subsidiary of the
Company organized under the laws of the United States or any political
subdivision thereof or the operations of which are located substantially
inside the United States.
"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.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary of the Company
not organized under the laws of the United States or any political subdivision
thereof and the operations of which are located substantially outside of the
United States.
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"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 each Subsidiary Guarantor of the
Company's Indenture Obligations pursuant to a guarantee given in accordance
with the Indenture, including the Guarantees by the Subsidiary Guarantors and
any Guarantee delivered pursuant to provisions of "Certain Covenants--
Limitation on Guarantees by Restricted Subsidiaries."
"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.
"Hedging Agreement" means, with respect to any Person, all interest rate
swap or similar agreements or foreign currency or commodity hedge, exchange or
similar agreements of such Person.
"Hedging Obligations" means, with respect to any Person, the Obligations of
such Person under Hedging Agreements.
"Holders" mean the registered holders of the Notes.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
GAAP or otherwise, of any such Indebtedness or other obligation on the balance
sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall have
meanings correlative to the foregoing). Indebtedness of any Acquired Person or
any of its Subsidiaries existing at the time such Acquired Person becomes a
Subsidiary (or is merged into or consolidated with the Company or any
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Subsidiary (or being merged into or consolidated with the Company or any
Subsidiary), shall be deemed Incurred at the time any such Acquired Person
becomes a Subsidiary or merges into or consolidates with the Company or any
Subsidiary.
"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
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repossession or sale of such property), but excluding trade payables arising
in the ordinary course of business, (iv) all Hedging Obligations 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 Subsidiary
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.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"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.
"Investment Grade" means a rating of (i) BBB- or higher by S&P and Ba1 or
higher by Moody's or (ii) Baa3 or higher by Moody's and BB+ or higher by S&P.
"Issue Date" means May 15, 2000.
"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.
"Moody's" means Moody's Investors Service, Inc. or any successor thereto.
"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
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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
Restricted 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 Restricted 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 Restricted 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 Restricted 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 Restricted 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.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Other Indebtedness" has the meaning set forth under "Certain Covenants--
Limitation on Guarantees by Restricted Subsidiaries."
"Pari Passu Indebtedness" means any Indebtedness of the Company or a
Subsidiary 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 Restricted
Subsidiary or any Person which, as a result of such Investment, becomes a
Wholly Owned Restricted Subsidiary; (ii) Indebtedness of the Company or a
Restricted 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 Restricted 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; (vi) Investments in existence on the date of the Indenture; and
(vii) Investments in joint ventures in an aggregate amount not to exceed at
any one time the greater of (x) $50.0 million and (y) 5.0% of Consolidated Net
Tangible Assets.
"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.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person
in accordance with and at the contract rate (including, without limitation,
any rate applicable upon default) specified in the agreement or instrument
creating,
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evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"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 Issue Date, and including, without limitation, all classes and series of
preferred or preference stock.
"Productive Assets" means assets of a kind used or usable by the Company and
its Restricted Subsidiaries in their respective businesses (including without
limitation, contracts, leases, licenses, or other agreements of value to the
Company or any of its Restricted Subsidiaries), provided, however, that
productive assets to be acquired by the Company or any Restricted Subsidiary
shall be, in the good faith judgment of management of the Company or such
Restricted Subsidiary, assets which are reasonably related, ancillary or
complementary to the business of the Company and its Restricted Subsidiaries
as conducted on the Issue Date.
"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 (other than as a result of
a change of control provision substantially similar to that contained in
"Certain Covenants--Purchase of Notes Upon a Change of Control") 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.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a resolution of
the Board of Directors of the Company delivered to the Trustee, as an
Unrestricted Subsidiary pursuant to "Certain Covenants--Designation of
Unrestricted Subsidiaries" above. Any such designation may be revoked by a
resolution of the Board of Directors of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which the Company or a Restricted 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.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., or any successor thereto.
"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
Subsidiary 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.
S-68
<PAGE>
"Subsidiary Guarantor" means the Subsidiaries listed on the signature pages
of the Indenture as guarantors and each other Subsidiary, formed, created or
acquired after the Issue Date, required to become a Guarantor after the Issue
Date, pursuant to "Certain Covenants--Limitation on Guarantees by Restricted
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
the United Kingdom, or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
America or the United Kingdom, (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.
"United Kingdom Government Obligations" means direct obligations of, and
obligations guaranteed by, the United Kingdom for the payment of which the
full faith and credit of the United Kingdom is pledged.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "Certain Covenants--Designation of Unrestricted Subsidiaries"
above. Any such designation may be revoked by a resolution of the Board of
Directors of the Company delivered to the Trustee, subject to the provisions
of such covenant.
"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 Restricted Subsidiary" means any Restricted Subsidiary all the
Capital Stock of which (other than directors' qualifying shares and up to 5%
of the issued and outstanding Capital Stock which may be owned by executive
officers of such Subsidiary) is owned by the Company or another Wholly Owned
Restricted Subsidiary.
S-69
<PAGE>
THE SUBSIDIARY GUARANTORS
The Subsidiary Guarantors of the Notes are the following subsidiaries of the
Company: Allberry, Inc., Barton Beers, Ltd., Barton Brands of California,
Inc., Barton Brands of Georgia, Inc., Barton Brands, Ltd., Barton Canada,
Ltd., Barton Distillers Import Corp., Barton Financial Corporation, Barton
Incorporated, Batavia Wine Cellars, Inc., Canandaigua B.V., Canandaigua Europe
Limited, Canandaigua Limited, Canandaigua Wine Company, Inc., Cloud Peak
Corporation, Franciscan Vineyards, Inc., M.J. Lewis Corp., Monarch Import
Company, Mt. Veeder Corporation, Polyphenolics, Inc., Roberts Trading Corp.
and Stevens Point Beverage Co. As of February 29, 2000, SCV-EPI Vineyards,
Inc., Simi Winery, Inc. and The Viking Distillery, Inc., each of which was
previously a Subsidiary Guarantor of certain of the Company's debt securities,
merged into other continuing Subsidiary Guarantors.
INFORMATION CONCERNING THE SUBSIDIARY GUARANTORS
Allberry, Inc.
1. Incorporation, Duration and Domicile
Allberry, Inc. ("Allberry") was incorporated in California on February 16,
1994 as a business corporation. Allberry is of perpetual duration, and
operates primarily under the General Corporation Law of the State of
California.
The chief executive office of Allberry is located at 1178 Galleron Road, St.
Helena, California 94574.
2. Purpose
Pursuant to Article 2 of its Articles of Incorporation, the purpose of
Allberry is generally to engage in any lawful activity for which corporations
may be organized under the laws of California.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 100,000 shares of voting
common stock and no shares of nonvoting common stock shares of Allberry have
been authorized. All outstanding shares of capital stock have been validly
issued and fully paid and are currently held as follow:
<TABLE>
<CAPTION>
Number of
Shareholder Shares Percent
----------- --------- -------
<S> <C> <C>
Franciscan Vineyards, Inc. ............................. 1,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Allberry is
managed by a Board consisting of not less than one or more than three
directors. Each director is elected annually by Allberry's sole shareholder
and holds office until a successor is elected and qualified or until the
earlier resignation or removal of such director.
The members of Allberry's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year/Appointed
Name Elected Other Positions
---- -------------- ---------------
<S> <C> <C>
Richard Sands.............................. 1999 Vice President
Robert Sands............................... 1999 Vice President
</TABLE>
S-70
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of Canandaigua Brands, Inc. (the "Parent") include
the results of each of Allberry and the Parent's other subsidiaries on a
consolidated basis. Financial statements for each of Allberry and the other
subsidiaries are not prepared and will not be available, but summarized
financial information concerning the guarantor subsidiaries as a group and the
non-guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
Barton Beers, Ltd.
1. Incorporation, Duration and Domicile
Barton Beers, Ltd. ("Barton Beers") was incorporated in Maryland on
September 15, 1975 as a business corporation. Barton Beers is of perpetual
duration, and operates primarily under the General Corporation Law of the
State of Maryland.
The chief executive office of Barton Beers is located at 55 East Monroe
Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Third of its Articles of Incorporation, the purpose of
Barton Beers is specifically to engage in activities consisting of and
relating to the manufacturing, production, purchase and sale of beverages of
all kinds and generally to engage in any other lawful activity for which
corporations may be organized under the laws of Maryland.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 1,500 shares of voting common
stock and 1,500 shares of nonvoting common stock shares of Barton Beers have
been authorized. All outstanding shares of capital stock have been validly
issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number of
Shareholder shares Percent
----------- -------------- -------
<S> <C> <C>
Barton Incorporated ............................... 1,000 (voting) 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Barton Beers is
managed by a Board consisting of not less than three nor more than ten
directors. Each director is elected annually by Barton Beers' sole shareholder
and holds office until a successor is elected and qualified or until the
earlier resignation or removal of such director.
The members of Barton Beers' Board of Directors are as follows:
<TABLE>
<CAPTION>
Appointed/Year
Name Elected Other Positions
---- -------------- ---------------
<S> <C> <C>
Richard Sands......... 1998 CEO
Alexander L. Berk..... 1990 Executive Vice President
William F. Hackett.... 1995 President
Troy J. Christensen... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla...... 2000 Senior Vice President and Secretary
</TABLE>
S-71
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Beers and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Barton Beers and the other subsidiaries are not
prepared and will not be available, but summarized financial information
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
Barton Brands of California, Inc.
1. Incorporation, Duration and Domicile
Barton Brands of California, Inc. ("Barton Brands of California") was
incorporated in Connecticut on September 3, 1981 as a business corporation.
Barton Brands of California is of perpetual duration, and operates primarily
under the Stock Corporation Act of the State of Connecticut.
The chief executive office of Barton Brands of California is located at 55
East Monroe Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Barton Brands of California is specifically to engage in any other lawful
activity for which corporations may be formed under the laws of Connecticut
Stock Corporation Act.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200 common shares of Barton
Brands of California capital stock have been authorized. All outstanding
shares of capital stock have been validly issued and fully paid and are
currently held as follows:
<TABLE>
<CAPTION>
Number of
Shareholder shares Percent
----------- --------- -------
<S> <C> <C>
Barton Incorporated .................................... 200 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Barton Brands
of California is managed by a Board consisting of not less than three nor more
than ten directors. Each director is elected annually by Barton Brands of
California's sole shareholder and holds office until a successor is elected
and qualified or until the earlier resignation or removal of such director.
The members of Barton Brands of California's Board of Directors are as
follows:
<TABLE>
<CAPTION>
Year/Appointed
Name Elected Other Positions
---- -------------- ---------------
<S> <C> <C>
Alexander L. Berk..... 1990 President
Edward L. Golden...... 1991 Vice President
Troy J. Christensen... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla...... 2000 Senior Vice President and Secretary
</TABLE>
S-72
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Brands of California and the Parent's other subsidiaries on a consolidated
basis. Financial statements for each of Barton Brands of California and the
other subsidiaries are not prepared and will not be available, but summarized
financial information concerning the guarantor subsidiaries as a group and the
non-guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
Barton Brands of Georgia, Inc.
1. Incorporation, Duration and Domicile
Barton Brands of Georgia, Inc. ("Barton Georgia") was incorporated in
Georgia on February 19, 1975 as a business corporation. Barton Georgia is of
perpetual duration, and operates primarily under the Business Corporation law
of the State of Georgia.
The chief executive office of Barton Georgia is located at 55 East Monroe
Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Three of its Articles of Incorporation, the corporation
is organized as a corporation for profit for any lawful purpose not
specifically prohibited to corporations under the applicable laws of the State
of Georgia, including but not limited to the manufacture and sale of distilled
spirits, and shall be authorized in connection therewith to carry on any
lawful business.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 20,000 common shares of Barton
Georgia capital stock have been authorized. All outstanding shares of capital
stock have been validly issued and fully paid and are currently held as
follows:
<TABLE>
<CAPTION>
Number of
Shareholder Shares Percent
----------- --------- -------
<S> <C> <C>
Barton Incorporated .................................... 200 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Barton Georgia
is managed by a Board consisting of not less than three nor more than ten
directors. Each director is elected annually by Barton Georgia's sole
shareholder and holds office until a successor is elected and qualified or
until the earlier resignation or removal of such director.
The members of Barton Georgia's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- -----------------------------------
<S> <C> <C>
Alexander L. Berk....... 1990 President
Edward L. Golden........ 1991 Vice President
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
S-73
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Georgia and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Barton Georgia and the other subsidiaries are not
prepared and will not be available, but summarized financial information
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
Barton Brands, Ltd.
1. Incorporation, Duration and Domicile
Barton Brands, Ltd. ("Barton Brands") was incorporated in Delaware on June
18, 1982 as a business corporation. Barton Brands is of perpetual duration,
and operates primarily under the General Corporation Law of the State of
Delaware.
The chief executive office of Barton Brands is located at 55 East Monroe
Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Third of its Certificate of Incorporation, the purpose
of Barton Brands is to engage in any lawful activity for which corporations
may be organized under the laws of Delaware.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 2,500 shares of Voting Common
Stock, 2,500 Shares of Nonvoting Common Stock and 10,000 Shares of Preferred
Stock of Barton Brands have been authorized. All shares of outstanding capital
stock have been validly issued and fully paid and are currently held as
follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- ------------------- -------
<S> <C> <C>
Barton Incorporated........................... 250 (voting common) 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Barton Brands
is managed by a Board consisting of not less than three nor more than ten
directors. Each director is elected annually by Barton Brands' sole
shareholder and holds office until a successor is elected and qualified or
until the earlier resignation or removal of such director.
The members of Barton Brands' Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- -----------------------------------
<S> <C> <C>
Alexander L. Berk....... 1990 Executive Vice President
Edward L. Golden........ 1992 President
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
S-74
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Brands and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Barton Brands and the other subsidiaries are not
prepared and will not be available, but summarized financial information
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
Barton Canada, Ltd.
1. Incorporation, Duration and Domicile
Barton Canada, Ltd. ("Barton Canada") was incorporated in Illinois on March
12, 1999 as a business corporation. Barton Canada is of perpetual duration,
and operates primarily under the Business Corporation Act of the State of
Illinois.
The chief executive office of Barton Canada is located at 55 East Monroe
Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article 3 of its Articles of Incorporation, the purpose of
Barton Canada is generally to engage in any or all lawful activity for which
corporations may be formed under the laws of the State of Illinois.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 1,000 common shares of Barton
Canada capital stock have been authorized. All outstanding shares of capital
stock have been validly issued and fully paid and are currently held as
follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Barton Brands, Ltd. .................................... 1,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Barton Canada is
managed by a Board consisting of not less than three nor more than ten
directors. Each director is elected annually by Barton Canada's sole
shareholder and holds office until a successor is elected and qualified or
until the earlier resignation or removal of such director.
The members of Barton Canada's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- -----------------------------------
<S> <C> <C>
Alexander L. Berk....... 1999 President
Edward L. Golden........ 1999 Vice President
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
S-75
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Canada and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Barton Canada and the other subsidiaries are not
prepared and will not be available, but summarized financial information
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
Barton Distillers Import Corp.
1. Incorporation, Duration and Domicile
Barton Distillers Import Corp. ("Barton Distillers") was incorporated in New
York on September 19, 1950 as a business corporation. Barton Distillers is of
perpetual duration, and operates primarily under the Business Corporation Law
of the State of New York.
The chief executive office of Barton Distillers is located at 55 East Monroe
Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Barton Distillers is specifically to engage in activities consisting of and
relating to the manufacturing, production, purchase and sale of beverages of
all kinds and generally to engage in any other lawful activity for which
corporations may be organized under the laws of New York.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 500 common shares of Barton
Distillers capital stock have been authorized. All shares of outstanding
capital stock have been validly issued and fully paid and are currently held
as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Barton Incorporated. ................................... 50 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Barton
Distillers is managed by a Board consisting of not less than three nor more
than ten directors. Each director is elected annually by Barton Distiller's
sole shareholder and holds office until a successor is elected and qualified
or until the earlier resignation or removal of such director.
The members of Barton Distillers' Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- ---------------
<S> <C> <C>
Alexander L. Berk....... 1990 President
Edward L. Golden........ 1998 None
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
S-76
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Distillers and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Barton Distillers and the other subsidiaries
are not prepared and will not be available, but summarized financial
information concerning the guarantor subsidiaries as a group and the non-
guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
Barton Financial Corporation
1. Incorporation, Duration and Domicile
Barton Financial Corporation ("Barton Financial") was incorporated in
Delaware on September 13, 1988 as a business corporation. Barton Financial is
of perpetual duration, and operates primarily under the General Corporation
law of the State of Delaware.
The chief executive office of Barton Financial is located at 55 East Monroe
Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Third of its Certificate of Incorporation, the purpose
of Barton Financial is to engage in the maintenance and management of
intangible investments and to engage in any other lawful activity for which
corporations may be organized under the laws of Delaware.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 3,000 shares of common stock
of Barton Financial have been authorized. All outstanding shares of capital
stock have been validly issued and fully paid and are currently held as
follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Barton Incorporated. ................................... 1,000 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Barton
Financial is managed by a Board consisting of not less than two nor more than
ten directors. Each director is elected annually by Barton Financial's sole
shareholder and holds office until a successor is elected and qualified or
until the earlier resignation or removal of such director.
The members of Barton Financial's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- ---------------
<S> <C> <C>
Charles T. Schlau............... 1997 Treasurer
Charles B. Campbell, Jr......... 1997 Vice President
Troy J. Christensen............. 2000 President and Secretary
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Financial and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Barton Financial
S-77
<PAGE>
and the other subsidiaries are not prepared and will not be available, but
summarized financial information concerning the guarantor subsidiaries as a
group and the non-guarantor subsidiaries as a group is provided in a note to
the Parent's financial statements in annual and quarterly reports filed with
the SEC and such information as of and for the nine months and year ended
November 30, 1999 and February 28, 1999, respectively, is included in this
Prospectus Supplement under the caption "Summary Historical Financial
Information of the Subsidiary Guarantors."
Barton Incorporated
1. Incorporation, Duration and Domicile
Barton Incorporated ("Barton Incorporated") was incorporated in Delaware on
January 13, 1987 as a business corporation. Barton Incorporated is of
perpetual duration, and operates primarily under the General Corporation Law
of the State of Delaware.
The chief executive office of Barton Incorporated is located at 55 East
Monroe Street, Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Third of its Certificate of Incorporation, the purpose
of Barton Incorporated is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 30,000 shares of Barton
Incorporated capital stock (10,000 class A, 10,000 class B and 10,000
preferred) have been authorized. All shares of outstanding capital stock have
been validly issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Shareholder Number of Shares Percent
----------- --------------------- -------
<S> <C> <C>
Canandaigua Brands, Inc.................... 7,750.765335 (class A) 100%
Canandaigua Brands, Inc.................... 7,745.075439 (class B) 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Barton
Incorporated is managed by a Board consisting of not less than three nor more
than ten directors. Each director is elected annually by Barton Incorporated's
sole shareholder and holds office until a successor is elected and qualified
or until the earlier resignation or removal of such director.
The members of Barton Incorporated's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- ---------------
<S> <C> <C>
Alexander L. Berk....... 1990 President and CEO
Edward L. Golden........ 1989 Vice President
William F. Hackett...... 1995 None
Richard Sands........... 1996 Vice President
Robert Sands............ 1996 Vice President
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
S-78
<PAGE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Barton
Incorporated and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Barton Incorporated and the other
subsidiaries are not prepared and will not be available, but summarized
financial information concerning the guarantor subsidiaries as a group and the
non-guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
Batavia Wine Cellars, Inc.
1. Incorporation, Duration and Domicile
Batavia Wine Cellars, Inc. ("Batavia") was incorporated in New York on March
20, 1984 as a business corporation. Batavia is of perpetual duration, and
operates primarily under the Business Corporation Law of the State of New
York.
The chief executive office of Batavia is located at 398 School Street,
Batavia, New York 14020.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Batavia is to engage in any lawful activity for which corporations may be
organized under the laws of New York.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200 common shares of Batavia
capital stock have been authorized. All shares of capital stock have been
validly issued and full paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc................................. 100 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Batavia is
managed by a Board consisting of two directors. Each director is elected
annually by Batavia shareholders and holds office until a successor is elected
and qualified or until the earlier resignation or removal of such director.
The members of Batavia's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Appointed/Elected
Name Other Positions
---- ----------------- ---------
<S> <C> <C>
Richard Sands............................ 1984 Vice President
Robert Sands............................. 1995 Secretary
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Batavia and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Batavia and the other subsidiaries are not prepared and
will not be available, but summarized financial information
S-79
<PAGE>
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
Canandaigua B.V.
1. Incorporation, Duration and Domicile
Canandaigua B.V. ("Canandaigua B.V.") was incorporated in the Netherlands on
December 4, 1998 as a business corporation. Canandaigua B.V. is of perpetual
duration, and operates primarily under the laws of the Kingdom of the
Netherlands.
The chief executive office of Canandaigua B.V. is located at Drentestraat
24, 1083-HK Amsterdam, The Netherlands.
2. Purpose
Pursuant to its Articles of Incorporation, the purpose of Canandaigua B.V.
is specifically to engage in activities consisting of and relating to the
manufacturing, production, purchase and sale of beverages of all kinds and
generally to engage in any other lawful activity for which corporations may be
organized under the laws of the Netherlands.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200,000 shares of voting
common stock and no shares of nonvoting common stock shares of Canandaigua
B.V. have been authorized. All outstanding shares of capital stock have been
validly issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc. ............................... 40,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Canandaigua B.V.
is managed by a Board consisting of directors. Each director is elected
annually by Canandaigua B.V.'s sole shareholder and holds office until a
successor is elected and qualified or until the earlier resignation or removal
of such director.
The members of Canandaigua B.V.'s Board of Directors are as follows:
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- ---------
<S> <C> <C>
G.A.L.R. Diepenhorst.......................... 1998 none
E.F. Switters................................. 1999 none
ING Trust B.V. ............................... 1999 none
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Canandaigua B.V. and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Canandaigua B.V. and the other subsidiaries
are not prepared and will not be available, but summarized financial
S-80
<PAGE>
information concerning the guarantor subsidiaries as a group and the non-
guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
Canandaigua Europe Limited
1. Incorporation, Duration and Domicile
Canandaigua Europe Limited ("Canandaigua Europe") was incorporated in New
York on March 7, 1983 as a business corporation. Canandaigua Europe is of
perpetual duration, and operates primarily under the Business Corporation Law
of the State of New York.
The chief executive office of Canandaigua Europe is located at 235 North
Bloomfield Road, Canandaigua, New York 14424.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Canandaigua Europe is to engage in any lawful activity for which
corporations may be organized under the laws of New York.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200 ordinary shares of capital
stock of Canandaigua Europe have been authorized. All shares of capital stock
have been validly issued and full paid and are currently held as follows as
follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc................................. 10 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Canandaigua
Europe is managed by a Board consisting of one director. This director is
elected annually by Canandaigua Europe's shareholders and holds office until a
successor is elected and qualified or until the earlier resignation or removal
of such director.
The sole member of Canandaigua Europe's Board of Directors is as follows:
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- ---------
<S> <C> <C>
Richard Sands............................ 1983 Vice President
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Canandaigua Europe and the Parent's other subsidiaries on a consolidated
basis. Financial statements for each of Canandaigua Europe and the other
subsidiaries are not prepared and will not be available, but summarized
financial information concerning the guarantor subsidiaries as a group and the
non-guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
S-81
<PAGE>
Canandaigua Limited
1. Incorporation, Duration and Domicile
Canandaigua Limited was incorporated in England and Wales on October 14,
1998 as a limited company. Canandaigua Limited is of perpetual duration, and
operates primarily under the Companies Act 1985 of England and Wales.
The chief executive office of Canandaigua Limited is located at Whitchurch
Lane, Bristol, England BS14 0JZ, United Kingdom.
2. Purpose
Pursuant to Article Third of its Memorandum of Association, the purposes of
Canandaigua Limited is to act as a holding company and carry on any business
permitted to limited companies under the Companies Act 1985 of England and
Wales.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200,000,000 ordinary shares of
capital stock of Canandaigua Limited have been authorized. All ordinary shares
of capital stock have been validly issued and full paid and are currently held
as follows as follows:
<TABLE>
<CAPTION>
Number of
Shareholder Shares Percent
----------- ---------- -------
<S> <C> <C>
Canandaigua Brands, Inc................................ 92,954,506 100%
</TABLE>
4. Management
Pursuant to its Memorandum and Articles of Association, Canandaigua Limited
is managed by a Board consisting of three directors. Each director is elected
annually by Canandaigua Limited's shareholders and holds office until a
successor is elected and qualified or until the earlier resignation or removal
of such director.
The members of Canandaigua Limited's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- -----------------------
<S> <C> <C>
Robert Sands.................... 1998 Chief Executive Officer
Thomas S. Summer................ 1998 Finance Director
Peter Aikens.................... 2000 Chief Operating Officer
Anne Colquhoun.................. 2000 Company Secretary
Hugh Etheridge.................. 2000 Treasurer
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Canandaigua Limited and the Parent's other subsidiaries on a consolidated
basis. Financial statements for each of Canandaigua Limited and the other
subsidiaries are not prepared and will not be available, but summarized
financial information concerning the guarantor subsidiaries as a group and the
non-guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed
S-82
<PAGE>
with the SEC and such information as of and for the nine months and year ended
November 30, 1999 and February 28, 1999, respectively, is included in this
Prospectus Supplement under the caption "Summary Historical Financial
Information of the Subsidiary Guarantors."
Canandaigua Wine Company, Inc.
1. Incorporation, Duration and Domicile
Canandaigua Wine Company, Inc. ("Canandaigua Wine") was incorporated in New
York on July 8, 1994 as a business corporation. Canandaigua Wine is of
perpetual duration, and operates primarily under the Business Corporation Law
of the State of New York.
The chief executive office of Canandaigua Wine is located at 235 North
Bloomfield Road, Canandaigua, New York 14424.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Canandaigua Wine is to engage in any lawful activity for which corporations
may be organized under the laws of New York.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200 common shares of capital
stock of Canandaigua Wine have been authorized. All shares of capital stock
have been validly issued and full paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc. ............................... 100 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Canandaigua
Wine is managed by a Board consisting of two directors. Each director is
elected annually by Canandaigua Wine's shareholders and holds office until a
successor is elected and qualified or until the earlier resignation or removal
of such director.
The members of Canandaigua Wine's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- --------------
<S> <C> <C>
Robert Sands............................. 1995 Vice President
Richard Sands............................ 1994 Vice President
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Canandaigua Wine and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Canandaigua Wine and the other subsidiaries
are not prepared and will not be available, but summarized financial
information concerning the guarantor subsidiaries as a group and the non-
guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
S-83
<PAGE>
Cloud Peak Corporation
1. Incorporation, Duration and Domicile
Cloud Peak Corporation ("Cloud Peak") was incorporated in California on
February 16, 1994 as a business corporation. Cloud Peak is of perpetual
duration, and operates primarily under the General Corporation Law of the
State of California.
The chief executive office of Cloud Peak is located a 1178 Galleron Road,
St. Helena, California 94574.
2. Purpose
Pursuant to Article 2 of its Articles of Incorporation, the purpose of Cloud
Peak is generally to engage in any other lawful activity for which
corporations may be organized under the laws of California.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 100,000 shares of voting
common stock and no shares of nonvoting common stock shares of Cloud Peak have
been authorized. All outstanding shares of capital stock have been validly
issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Franciscan Vineyards, Inc............................... 1,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Cloud Peak is
managed by a Board consisting of not less than one or more than three
directors. Each director is elected annually by Cloud Peak's sole shareholder
and holds office until a successor is elected and qualified or until the
earlier resignation or removal of such director.
The members of Cloud Peak's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- --------------
<S> <C> <C>
Richard Sands............................ 1999 Vice President
Robert Sands............................. 1999 Vice President
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Cloud
Peak and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Cloud Peak and the other subsidiaries are not prepared
and will not be available, but summarized financial information concerning the
guarantor subsidiaries as a group and the non-guarantor subsidiaries as a
group is provided in a note to the Parent's financial statements in annual and
quarterly reports filed with the SEC and such information as of and for the
nine months and year ended November 30, 1999 and February 28, 1999,
respectively, is included in this Prospectus Supplement under the caption
"Summary Historical Financial Information of the Subsidiary Guarantors."
S-84
<PAGE>
Franciscan Vineyards, Inc.
1. Incorporation, Duration and Domicile
Franciscan Vineyards, Inc. ("Franciscan") was incorporated in Delaware on
July 23, 1979 as a business corporation. Franciscan is of perpetual duration,
and operates primarily under the General Corporation Law of the State of
Delaware.
The chief executive office of Franciscan is located at 1178 Galleron Road,
St. Helena, California 94574.
2. Purpose
Pursuant to Article 2 of its Certificate of Incorporation, the purpose of
Franciscan is generally to engage in any lawful activity for which
corporations may be organized under the laws of Delaware.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 1,010,000 shares of voting
common stock and 1,000,000 shares of nonvoting common stock shares of
Franciscan have been authorized. All outstanding shares of capital stock have
been validly issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc.
Class A............................................... 5,099 100%
Class B............................................... 5,099 100%
Class C............................................... 628,500 100%
Preferred............................................. 901,087 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Franciscan is
managed by a Board consisting of 2 directors. Each director is elected
annually by Franciscan's sole shareholder and holds office until a successor
is elected and qualified or until the earlier resignation or removal of such
director.
The members of Franciscan's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- --------------
<S> <C> <C>
Richard Sands............................ 1999 Vice President
Robert Sands............................. 1999 Vice President
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Franciscan and the Parent's other subsidiaries on the consolidated basis.
Financial statements for each of Franciscan and the other subsidiaries are not
prepared and will not be available, but summarized financial information
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
S-85
<PAGE>
M.J. Lewis Corp.
1. Incorporation, Duration and Domicile
M.J. Lewis Corp. ("M.J. Lewis") was incorporated in California on November
23, 1987 as a business corporation. M.J. Lewis is of perpetual duration, and
operates primarily under the General Corporation Law of the State of
California.
The chief executive office of M.J. Lewis is located at 1178 Galleron Road,
St. Helena, California 94574.
2. Purpose
Pursuant to Article 2 of its Articles of Incorporation, the purpose of M.J.
Lewis is generally to engage in any other lawful activity for which
corporations may be organized under the laws of California.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 10,000 shares of voting common
stock and no shares of nonvoting common stock shares of M.J. Lewis have been
authorized. All outstanding shares of capital stock have been validly issued
and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number of
Shareholder Shares Percent
----------- --------- -------
<S> <C> <C>
Franciscan Vineyards, Inc. ............................. 1,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, M.J. Lewis is
managed by a Board consisting of at least one director. Each director is
elected annually by M.J. Lewis's sole shareholder and holds office until a
successor is elected and qualified or until the earlier resignation or removal
of such director.
The members of M.J. Lewis's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- ---------
<S> <C> <C>
Richard Sands............................ 1999 Vice President
Robert Sands............................. 1999 Vice President
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of M.J.
Lewis and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of M.J. Lewis and the other subsidiaries are not prepared
and will not be available, but summarized financial information concerning the
guarantor subsidiaries as a group and the non-guarantor subsidiaries as a
group is provided in a note to the Parent's financial statements in annual and
quarterly reports filed with the SEC and such information as of and for the
nine months and year ended November 30, 1999 and February 28, 1999,
respectively, is included in this Prospectus Supplement under the caption
"Summary Historical Financial Information of the Subsidiary Guarantors."
S-86
<PAGE>
Monarch Import Company
1. Incorporation, Duration and Domicile
Monarch Import Company ("Monarch") was incorporated in Illinois on July 24,
1987 as a business corporation. Monarch is of perpetual duration, and operates
primarily under the Business Corporation Act of the State of Illinois.
The chief executive office of Monarch is located at 55 East Monroe Street,
Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Three of its Articles of Incorporation, the purpose of
Monarch is the transaction of any or all lawful purposes for which
corporations may be incorporated under the Illinois Business Corporation Act
of 1983.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 1,000 shares of Monarch common
stock have been authorized. All outstanding shares of common stock have been
validly issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Barton Beers, Ltd. ..................................... 1,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Monarch is managed
by a Board consisting of not less than three nor more than ten directors. Each
director is elected annually by Monarch's sole shareholder and holds office
until a successor is elected and qualified or until the earlier resignation or
removal of such director.
The members of Monarch's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- ---------------
<S> <C> <C>
Alexander L. Berk....... 1990 President
William F. Hackett...... 1998 Vice President
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Monarch and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Monarch and the other subsidiaries are not prepared and
will not be available, but summarized financial information concerning the
guarantor subsidiaries as a group and the non-guarantor subsidiaries as a
group is provided in a note to the Parent's financial statements in annual and
quarterly reports filed with the SEC and such information as of and for the
nine months and year ended November 30, 1999 and February 28, 1999,
respectively, is included in this Prospectus Supplement under the caption
"Summary Historical Financial Information of the Subsidiary Guarantors."
S-87
<PAGE>
Mt. Veeder Corporation
1. Incorporation, Duration and Domicile
Mt. Veeder Corporation ("Mt. Veeder") was incorporated in California on
November 26, 1982 as a business corporation. Mt. Veeder is of perpetual
duration, and operates primarily under the General Corporation Law of the
State of California.
The chief executive office of Mt. Veeder is located at 1178 Galleron Road,
St. Helena, California 94574.
2. Purpose
Pursuant to Article 2 of its Articles of Incorporation, the purpose of Mt.
Veeder is generally to engage in any lawful activity for which corporations
may be organized under the laws of California.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 500,000 shares of voting
common stock and no shares of nonvoting common stock shares of Mt. Veeder have
been authorized. All outstanding shares of capital stock have been validly
issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Franciscan Vineyards, Inc. ............................. 1,000 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Mt. Veeder is
managed by a Board consisting of at least one director. Each director is
elected annually by Mt. Veeder's sole shareholder and holds office until a
successor is elected and qualified or until the earlier resignation or removal
of such director.
<TABLE>
<CAPTION>
Year Other
Name Appointed/Elected Positions
---- ----------------- ---------
<S> <C> <C>
Richard Sands............................ 1999 Vice President
Robert Sands............................. 1999 Vice President
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Mt.
Veeder and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Mt. Veeder and the other subsidiaries are not prepared
and will not be available, but summarized financial information concerning the
guarantor subsidiaries as a group and the non-guarantor subsidiaries as a
group is provided in a note to the Parent's financial statements in annual and
quarterly reports filed with the SEC and such information as of and for the
nine months and year ended November 30, 1999 and February 28, 1999,
respectively, is included in this Prospectus Supplement under the caption
"Summary Historical Financial Information of the Subsidiary Guarantors."
S-88
<PAGE>
Polyphenolics, Inc.
1. Incorporation, Duration and Domicile
Polyphenolics, Inc. ("Polyphenolics") was incorporated in New York on March
13, 1998 as a business corporation. Polyphenolics is of perpetual duration,
and operates primarily under the Business Corporation Law of the State of New
York.
The chief executive office of Polyphenolics is located at 300 WillowBrook
Office Park, Fairport, New York 14450.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Polyphenolics is to engage in any lawful activity for which corporations
may be organized under the laws of New York.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200 shares of common stock of
Polyphenolics have been authorized. All shares of capital stock have been
validly issued and full paid and are currently held as follows as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc. ............................... 100 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Polyphenolics
is managed by a Board consisting of one director. This director is elected
annually by Polyphenolics' shareholder and holds office until a successor is
elected and qualified or until the earlier resignation or removal of such
director.
The members of Polyphenolics' Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- --------------- ---
<S> <C> <C> <C>
Howard Jacobson....... 2000 President
Thomas S. Summer...... 2000 Vice President and Treasurer
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Polyphenolics and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Polyphenolics and the other subsidiaries are
not prepared and will not be available, but summarized financial information
concerning the guarantor subsidiaries as a group and the non-guarantor
subsidiaries as a group is provided in a note to the Parent's financial
statements in annual and quarterly reports filed with the SEC and such
information as of and for the nine months and year ended November 30, 1999 and
February 28, 1999, respectively, is included in this Prospectus Supplement
under the caption "Summary Historical Financial Information of the Subsidiary
Guarantors."
S-89
<PAGE>
Roberts Trading Corp.
1. Incorporation, Duration and Domicile
Roberts Trading Corp. ("Roberts Trading") was incorporated in New York on
June 23, 1959 as a business corporation. Roberts Trading is of perpetual
duration, and operates primarily under the Business Corporation Law of the
State of New York.
The chief executive office of Roberts Trading is located at 235 North
Bloomfield Road, Canandaigua, New York 14424.
2. Purpose
Pursuant to Article Second of its Certificate of Incorporation, the purpose
of Roberts Trading is to engage in any lawful activity for which corporations
may be organized under the laws of New York.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 200 shares of common capital
stock of Roberts Trading have been authorized. All shares of capital stock
have been validly issued and full paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
Shareholder of Shares Percent
----------- --------- -------
<S> <C> <C>
Canandaigua Brands, Inc. ............................... 100 100%
</TABLE>
4. Management
Pursuant to its Certificate of Incorporation and its Bylaws, Roberts Trading
is managed by a Board consisting of two directors. Each director is elected
annually by Roberts Trading's shareholders and holds office until a successor
is elected and qualified or until the earlier resignation or removal of such
director.
The members of Roberts Trading's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- ---------------
<S> <C> <C>
Richard Sands.............. 1997 Vice President
Robert Sands............... 1997 Vice President and Secretary
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of
Roberts Trading and the Parent's other subsidiaries on a consolidated basis.
Financial statements for each of Roberts Trading and the other subsidiaries
are not prepared and will not be available, but summarized financial
information concerning the guarantor subsidiaries as a group and the non-
guarantor subsidiaries as a group is provided in a note to the Parent's
financial statements in annual and quarterly reports filed with the SEC and
such information as of and for the nine months and year ended November 30,
1999 and February 28, 1999, respectively, is included in this Prospectus
Supplement under the caption "Summary Historical Financial Information of the
Subsidiary Guarantors."
Stevens Point Beverage Co.
1. Incorporation, Duration and Domicile
Stevens Point Beverage Co. ("Point") was incorporated in Wisconsin on
February 20, 1924 as a business corporation. Point is of perpetual duration,
and operates primarily under Chapter 180 of the Wisconsin Statutes.
S-90
<PAGE>
The chief executive office of Point is located at 55 East Monroe Street,
Chicago, Illinois 60603.
2. Purpose
Pursuant to Article Three of its Restated Articles of Incorporation, the
purpose of Point is specifically to engage in any lawful activities authorized
by Chapter 180 of the Wisconsin Statutes.
3. Shares and Shareholders
As of the date of this Prospectus Supplement, 2,300 common shares of Point
capital stock have been authorized. All outstanding shares of capital stock
have been validly issued and fully paid and are currently held as follows:
<TABLE>
<CAPTION>
Number
of
Shareholder Shares Percent
----------- ------ -------
<S> <C> <C>
Barton Incorporated........................................ 254.7 100%
</TABLE>
4. Management
Pursuant to its Articles of Incorporation and its Bylaws, Point is managed
by a Board consisting of not less than three nor more than ten directors. Each
director is elected annually by Point's sole shareholder and holds office
until a successor is elected and qualified or until the earlier resignation or
removal of such director.
The members of Point's Board of Directors are as follows:
<TABLE>
<CAPTION>
Year
Name Appointed/Elected Other Positions
---- ----------------- ---------------
<S> <C> <C>
Alexander L. Berk....... 1994 Executive Vice President
James P. Ryan........... 1992 President, CEO
William F. Hackett...... 1998 None
Troy J. Christensen..... 2000 Senior Vice President and Treasurer
Elizabeth Kutyla........ 2000 Senior Vice President and Secretary
</TABLE>
5. Capitalization, Financial Statements and Dividends
The financial statements of the Parent include the results of each of Point
and the Parent's other subsidiaries on a consolidated basis. Financial
statements for each of Point and the other subsidiaries are not prepared and
will not be available, but summarized financial information concerning the
guarantor subsidiaries as a group and the non-guarantor subsidiaries as a
group is provided in a note to the Parent's financial statements in annual and
quarterly reports filed with the SEC and such information as of and for the
nine months and year ended November 30, 1999 and February 28, 1999,
respectively, is included in this Prospectus Supplement under the caption
"Summary Historical Financial Information of the Subsidiary Guarantors."
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SUMMARY HISTORICAL FINANCIAL INFORMATION OF THE SUBSIDIARY GUARANTORS
The following table presents summarized financial information as of and for
the nine months and year ended November 30, 1999, and February 28, 1999,
respectively, for Canandaigua Brands, Inc. (the "Parent Company"), the
combined subsidiaries of the Company that will guarantee the notes
("Subsidiary Guarantors") and the combined subsidiaries of the Company which
are not Subsidiary Guarantors, primarily Matthew Clark ("Subsidiary
Nonguarantors"). The Subsidiary Guarantors are wholly owned and the guarantees
are full, unconditional, joint and several obligations of each of the
Subsidiary Guarantors. Separate financial statements for the Subsidiary
Guarantors of the Company are not presented because the Company has determined
that such financial statements would not be material to investors. The
Subsidiary Guarantors comprise all of the direct and indirect subsidiaries of
the Company, other than Matthew Clark, the Company's Canadian subsidiary, and
certain other subsidiaries that individually, and in the aggregate, are
inconsequential. There are no restrictions on the ability of the Subsidiary
Guarantors to transfer funds to the Company in the form of cash dividends,
loans or advances.
<TABLE>
<CAPTION>
Parent Subsidiary Subsidiary
Company Guarantors Nonguarantors Eliminations Consolidated
---------- ---------- ------------- ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
November 30, 1999
Current assets.......... $ 134,516 $ 677,250 $359,476 $ -- $1,171,242
Noncurrent assets....... 925,739 1,237,679 479,165 (1,280,830) 1,361,753
Current liabilities..... 271,984 107,038 261,346 -- 640,368
Noncurrent liabilities.. 1,246,277 95,757 53,298 -- 1,395,332
February 28, 1999
Current assets.......... $ 114,243 $ 532,028 $209,468 $ -- $ 855,739
Noncurrent assets....... 646,133 396,125 421,867 (526,088) 938,037
Current liabilities..... 157,648 126,803 130,821 -- 415,272
Noncurrent liabilities.. 815,421 73,178 54,633 -- 943,232
Income Statement Data:
For the nine months
ended November 30, 1999
Net sales............... $ 476,108 $1,035,493 $574,351 $ (272,683) $1,813,269
Gross profit............ 130,394 261,156 163,387 -- 554,937
(Loss) income before
income taxes........... (289) 66,034 37,333 -- 103,078
Net (loss) income....... (173) 39,620 22,400 -- 61,847
For the year ended
February 28, 1999
Net sales............... $ 615,270 $1,080,466 $158,761 $ (357,154) $1,497,343
Gross profit............ 168,575 237,437 42,022 -- 448,034
Income before taxes and
extraordinary item..... 4,849 96,935 2,646 -- 104,430
Net income.............. 2,861 45,781 1,830 -- 50,472
</TABLE>
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain anticipated U.S. federal income tax
consequences of the purchase, ownership and disposition of the notes, based
upon the Internal Revenue Code of 1986, as amended, and existing regulations,
rulings and judicial decisions as of the date of this Prospectus Supplement.
Such authorities may be repealed, revoked or modified, possibly with
retroactive effect, so as to result in federal income tax consequences
different from those discussed below. Except as specifically set forth in this
Prospectus Supplement, this summary deals only with notes held as capital
assets by initial holders, and does not deal with special situations, such as
those of dealers in securities or currencies, financial institutions, banks,
tax-exempt organizations, insurance companies, holders that are partnerships
or other pass-through entities and holders whose "functional currency" is not
the U.S dollar, or special rules with respect to "straddle," "conversion,"
"hedging" or "constructive sales" transactions. This summary is not binding on
the Internal Revenue Service or the courts. No ruling has been sought or will
be sought from the Internal Revenue Service with respect to the positions and
issues discussed herein, and there can be no assurance that the Internal
Revenue Service will not take a different position concerning the tax
consequences of the purchase, ownership or disposition of the notes or that
any such position would not be sustained. Prospective investors are urged to
consult their tax advisors regarding the particular tax consequences of
purchasing, holding and disposing of notes that may be specific to them,
including the tax consequences arising under any state, local or foreign laws.
As used in this Prospectus Supplement, the term "U.S. Holder" means a
beneficial owner of a note who or that is for United States federal income tax
purposes (i) a citizen or resident of the United States, (ii) a corporation
created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject
to U.S. federal income taxation regardless of source, or (iv) a trust if both:
(A) a U.S. court is able to exercise primary supervision over the
administration of the trust, and (B) one or more U.S. persons have the
authority to control all substantial decisions of the trust. As used in this
Prospectus Supplement, the term "Non-U.S. Holder" means a holder of a note
that is not a U.S. Holder.
U.S. Holders
Interest. Interest (including additional amounts, if any) on the notes
generally will be taxable to a U.S. Holder as ordinary interest income at the
time accrued or received in accordance with the U.S. Holder's regular method
of accounting for federal income tax purposes.
A U.S. Holder who uses the cash method of accounting for federal income tax
purposes and who receives interest on a note in pounds sterling will be
required to include in income the U.S. dollar value of such pounds sterling.
The U.S. dollar value will be determined using the spot rate in effect on the
date such payment is received, regardless of whether the payment is in fact
converted to U.S. dollars at that time. No exchange gain or loss will be
recognized by such holder if the pounds sterling are converted to U.S. dollars
on the date received. The U.S. federal income tax consequences of the
conversion of pounds sterling into U.S. dollars are described below. See "--
Exchange of Foreign Currencies."
A U.S. Holder who uses the accrual method of accounting for federal income
tax purposes, or who is otherwise required to accrue interest prior to
receipt, will be required to include in income the U.S. dollar value of the
amount of interest income accrued, or otherwise required to be taken into
account, with respect to a note in a taxable year. The U.S. dollar value of
the accrued income will be determined by translating that income at the
average rate of exchange for the relevant interest accrual period, or with
respect to an accrual period that spans two taxable years, at the average rate
for the portion of the accrual period within the taxable year. The average
rate of exchange for an interest accrual period,
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or portion thereof, is the simple average of the exchange rates for each
business day of the period, or another average that is reasonably derived and
consistently applied.
An accrual basis U.S. Holder may elect, however, to translate the accrued
interest income using the spot rate of exchange in effect on the last day of
the accrual period or, with respect to the earlier taxable year portion of an
accrual period that spans two taxable years, using the spot rate of exchange
in effect on the last day of the taxable year. In addition, if the last day of
an accrual period is within five business days of the receipt, or payment, of
the accrued interest, a U.S. Holder may elect to translate such interest using
the spot rate of exchange in effect on the date of receipt or payment. The
above election must be made in a statement filed with the U.S. Holder's tax
return and will apply to other debt obligations held by the U.S. Holder at the
beginning of the first taxable year in which the election applies or acquired
thereafter and may not be changed without the consent of the Internal Revenue
Service. Whether or not such election is made, a U.S. Holder may recognize
exchange gain or loss with respect to accrued interest income on the date such
interest income is received.
The exchange gain or loss will be treated as ordinary income or loss. The
amount of ordinary income or loss recognized will equal the difference, if
any, between the U.S. dollar value of the pounds sterling received, determined
using the spot rate in effect on the date the payment is received and the U.S.
dollar value of the interest income that has accrued during the interest
accrual period, as determined above. No additional exchange gain or loss will
be recognized by the holder if the pounds sterling are converted to U.S.
dollars on the date received. The U.S. federal income tax consequences of the
conversion of pounds sterling into U.S. dollars are described below. See "--
Exchange of Foreign Currencies."
Dispositions. Upon the sale, exchange, retirement or other disposition of a
note, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the disposition (other than any
amounts attributable to accrued but unpaid interest) and the holder's adjusted
tax basis in the note. The gain or loss generally will be capital gain or
loss, except with respect to gains or losses attributable to changes in
currency exchange rates, as described below. To the extent that the amount
realized represents accrued but unpaid interest, however, such amounts must be
taken into account as interest income, with exchange gain or loss computed as
described above. If a U.S. Holder receives foreign currency on a sale,
exchange or retirement, the amount realized will be based on the U.S. dollar
value of the foreign currency on the date of disposition assuming the notes
are not traded on an established securities market. A U.S. Holder's adjusted
tax basis in a note will equal the U.S. dollar cost of the note to the holder
on the date of purchase assuming the notes are not traded on an established
securities market. If a U.S. Holder purchases a note with previously owned
foreign currency, the holder will recognize ordinary income or loss in an
amount equal to the difference, if any, between the holder's tax basis in the
foreign currency and the U.S. dollar value of the foreign currency used to
purchase the note, determined on the date of purchase.
If the notes are traded on an established securities market, there is a
special rule for purchases and sales of those notes by a cash basis taxpayer
under which units of foreign currency paid or received are translated into
U.S. dollars at the spot rate on the settlement date of the purchase or sale.
In that case, no exchange gain or loss will result from currency fluctuations
between the trade date and the settlement of such a purchase or sale. An
accrual basis taxpayer may elect the same treatment required of cash basis
taxpayers with respect to purchases and sales of publicly traded notes,
provided the election is applied consistently. Such election cannot be changed
without the consent of the Internal Revenue Service.
Gain or loss realized by a U.S. Holder upon the sale, exchange or retirement
of a note that is attributable to fluctuations in the currency exchange rates
will be ordinary income or loss and generally will not be treated as interest
income or expense. Gain or loss attributable to fluctuations in exchange
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<PAGE>
rates will equal the difference between the U.S. dollar value of the foreign
currency principal amount of the note, determined on the date the payment is
received or the note is disposed of, and the U.S. dollar value of the foreign
currency principal amount of the note, determined on the date the U.S. Holder
acquired the note. The foreign currency gain or loss will be recognized only
to the extent of the total gain or loss realized by the U.S. Holder on the
sale, exchange or retirement of the note.
For certain non-corporate U.S. Holders, including individuals, the rate of
taxation of capital gains will depend upon the holder's holding period in the
note, with a preferential rate generally available for notes held for more
than one year. The deductibility of capital losses is subject to limitations.
Exchange of Foreign Currencies. A. U.S. Holder will have a tax basis in any
pounds sterling received, as interest or on the sale, exchange, retirement or
other disposition of a note, equal to their U.S. dollar value at the time the
interest is received or at the time payment is received in consideration of
the sale, exchange or retirement. Any gain or loss realized by a U.S. Holder
on a sale or other disposition of pounds sterling, including their exchange
for U.S. dollars or their use to purchase notes, will be ordinary income or
loss.
Non-U.S. Holders
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a note that is a Non-U.S. Holder.
Interest. Subject to the discussion below concerning backup withholding,
payments of interest on a note to any Non-U.S. Holder will generally not be
subject to U.S. federal income or withholding tax, provided that (1) the
holder is not (i) a direct or indirect owner, taking into account certain
attribution rules, of 10% or more of the total voting power of all voting
stock of the issuer or (ii) a controlled foreign corporation related to the
issuer through stock ownership, (2) such interest payments are not effectively
connected with the conduct by the Non-U.S. Holder of a trade or business
within the United States and (3) the issuer or its paying agent receives (i)
from the Non-U.S. Holder, a properly completed Form W-8BEN, or substitute Form
W-8BEN, under penalties of perjury, which provides the Non-U.S. Holder's name
and address and certifies that the Non-U.S. Holder of the note is a Non-U.S.
Holder or (ii) from a security clearing organization, bank or other financial
institution that holds the notes in the ordinary course of its trade or
business (a "financial institution") on behalf of the Non-U.S. Holder,
certification under penalties of perjury that such a Form W-8BEN or substitute
Form W-8BEN has been received by it, or by another such financial institution,
from the Non-U.S. Holder, and a copy of the Form W-8BEN or substitute Form W-
8BEN, is furnished to the payor.
A Non-U.S. Holder that does not qualify for exemption from withholding under
the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30%, or lower applicable treaty rate, on
payments of interest on the notes. To the extent a Non-U.S. Holder seeks a
reduced rate of withholding under a treaty, such holder must provide the
issuer or its paying agent with a properly completed Form W-8BEN.
If the payments of interest on a note are effectively connected with the
conduct by a Non-U.S. Holder of a trade or business in the United States, such
payments will be subject to U.S. federal income tax on a net basis at the
rates applicable to United States persons generally and, with respect to
corporate holders, may also be subject to a 30% branch profits tax. If
payments are subject to U.S. federal income tax on a net basis in accordance
with the rules described in the preceding sentence, those payments will not be
subject to U.S. withholding tax so long as the holder provides the issuer or
its paying agent with a properly executed Form W-8ECI.
Non-U.S. Holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax, exemption from or reduction
of branch profits tax, or other rules different from those described above.
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<PAGE>
Dispositions. Subject to the discussion below concerning backup withholding,
any gain realized by a Non-U.S. Holder on the sale, exchange, retirement or
other disposition of a note generally will not be subject to U.S. federal
income or withholding tax, unless (i) such gain is effectively connected with
the conduct by such Non-U.S. Holder of a trade or business within the United
States, (ii) the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of the disposition and certain
other conditions are satisfied, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
Federal Estate Tax. Notes held, or treated as held, by an individual who is
a Non-U.S. Holder at the time of his or her death will not be subject to U.S.
federal tax provided that (i) the individual does not actually or
constructively own 10% or more of the total voting power of all voting stock
of the issuer and (ii) income on the notes was not effectively connected with
the conduct by the Non-U.S. Holder of a trade or business within the United
States.
Information Reporting and Backup Withholding
Payments with respect to the notes and the proceeds upon the sale or other
disposition of the notes may be subject to information reporting and possibly
U.S. backup withholding at a 31% rate. Backup withholding will not apply to a
U.S. Holder who furnishes its correct taxpayer identification number and
provides other certification. Backup withholding will not apply to payments
made by the issuer in respect of the notes to a Non-U.S. Holder, if the holder
certifies, under penalty of perjury, that it is not a U.S. person and provides
its name and address, provided that neither the issuer nor its paying agent
has actual knowledge that the holder is a U.S. person, or the Non-U.S. Holder
otherwise establishes an exemption. Copies of information returns may be made
available, under the provisions of a specific treaty or agreement, to the tax
authorities of the country in which the Non-U.S. Holder resides.
Payment of proceeds from the disposition of notes to or through the United
States office of any broker, U.S. or foreign, will be subject to information
reporting and backup withholding unless the owner certifies as to its non-U.S.
status under penalty of perjury or otherwise establishes an exemption,
provided that the broker does not have actual knowledge that the holder is a
U.S. person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a note to or
through a non-U.S. office of a non-U.S broker that is not a "U.S. related
person," as defined in applicable Treasury Regulations, will not be subject to
information reporting or backup withholding. In the case of the payment of
proceeds from the disposition of a note to or through a non-U.S. office of a
broker that is a U.S. person or a "U.S. related person," the regulations
require information reporting on the payment unless the broker has documentary
evidence in its files that the owner is not a U.S. person and the broker has
no knowledge to the contrary. Backup withholding will not apply to payments
made through a non-U.S. foreign office of a broker that is a U.S. person or a
"U.S. related person," absent actual knowledge that the payee is a U.S.
person.
Amounts withheld under the backup withholding rules do not constitute a
separate United States federal income tax. Rather, any amount withheld under
the backup withholding rules will be allowed as a refund or a credit against a
holder's U.S. federal income tax liability, if any, provided that the
requisite procedures are followed.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify certain standards governing the information
upon which a withholding agent may rely. The final regulations are generally
effective for payments made after December 31, 2000 subject to certain
transition rules. Non-U.S. Holders should consult their own tax advisors with
respect to the impact, if any, of the final regulations.
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GENERAL LISTING INFORMATION
1. The principal executive offices of the Company are located at 300
WillowBrook Office Park, Fairport, New York 14450, United States of America.
2. Application has been made to list the notes on the Luxembourg Stock
Exchange. The certified Certificate of Incorporation of the Company and the
Subsidiary Guarantors and the legal notice relating to the issue of the notes
will be deposited prior to any listing with the Chief Registrar of the
District Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement
Luxembourg), where such documents are available for inspection and where
copies thereof can be obtained upon request. As long as the notes are listed
on the Luxembourg Stock Exchange and as long as the rules of such exchange so
require an agent for making payments on, and transfers of, the notes will be
maintained in Luxembourg. We have initially designated Paribas Luxembourg as
our agent for such purposes. As long as the notes are listed on the Luxembourg
Stock Exchange, any change in the paying and transfer agent in Luxembourg
shall be notified to holders in accordance with the procedures described above
in the section "Description of the Notes-Notices".
3. The consolidated financial statements as of February 28, 1999 and 1998,
and for each of the three years in the period ended February 28, 1999, of
Canandaigua Brands, Inc. and subsidiaries incorporated by reference in this
Prospectus Supplement have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report incorporated by reference
herein.
4. When and for so long as the notes are listed in the Luxembourg Stock
Exchange and the rules of such exchange so require, copies of the following
documents may be inspected at the specific office of the Paying and Transfer
Agent in Luxembourg:
. Certified Certificate of Incorporation of the issuer;
. Certified Certificates of Incorporation of the Subsidiary Guarantors;
. Paying Agency Agreement;
. the indenture relating to the notes, which include the forms of the note
certificates;
. any agreement relating to the guarantees.
In addition, copies of the most recent annual consolidated financial
statements of the Company and its subsidiaries for the preceding financial
year, and any interim unaudited consolidated quarterly financial statements
published by the Company and its subsidiaries, will be available for
collection at the specified office of the Paying Agent in Luxembourg when and
for so long as the notes are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require. Annual and/or interim unconsolidated
financial statements are prepared by neither the Company nor the Subsidiary
Guarantors. The Subsidiary Guarantors do not prepare consolidated financial
statements in accordance with generally accepted accounting principles for
themselves and their subsidiaries.
5. Except as disclosed in this Prospectus Supplement, each of the Company
and the Subsidiary Guarantors represents that there has been no material
adverse change in its financial position since February 29, 2000.
6. Except as disclosed in this Prospectus Supplement, neither the Company
nor the Subsidiary Guarantors is involved in any litigation or arbitration
proceedings related to claims or amounts which are material in the context of
the issue of the notes, and (so far as the issuer or the Subsidiary Guarantors
are aware) no such litigation or arbitration pending or threatened.
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7. The issuance of the notes was authorized pursuant to resolutions of the
Company's board of directors passed on February 18, 1999. The giving of the
guarantees was authorized on behalf of each Subsidiary Guarantor by
resolutions adopted by its respective Board of Directors on September 29,
1999, except that the giving of the guarantee by Canandaigua B.V. was
authorized by its Board of Management on November 16, 1999.
8. The Company has initially issued the notes in the form of two
unrestricted Global Notes. The Global Note issued in the name of Cede & Co.
has the CUSIP number 137219AH4 and the ISIN number US137219AH40. The Global
Note issued in the name of Citivic Nominees Ltd. has the ISIN number
XS0111357140. No CUSIP number has been issued for this Global Note.
The notes have been accepted for clearance by Euroclear and Clearstream
Banking under the common code 011135714. The Company will deposit the two
Global Notes with Citibank, N.A. on May 15, 2000.
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PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
dated the date hereof, we have agreed to sell to Barclays Bank PLC (the
underwriter), and the underwriter has agreed to purchase from us, all of the
notes to be sold in the offering.
Under the terms and conditions of the underwriting agreement, if the
underwriter takes any of the notes, then the underwriter is obligated to take
and pay for all of the notes.
The underwriter initially proposes to offer part of the notes directly to
the public at the offering price set forth on the cover page and part to
certain dealers at a price that represents a concession not in excess of 0.5%
of the principal amount of the notes. The underwriter may allow, and any such
dealer may reallow, a concession not in excess of 0.25% of the principal
amount of the notes to certain other dealers. After the initial offering of
the notes, the underwriter may from time to time vary the offering price and
other selling terms.
Application has been made to list the notes on the Luxembourg Stock
Exchange. Currently, there is no public market for the notes. The underwriter
has advised us that it currently intends to make a market in the notes, but
the underwriter is not obligated to do so and may discontinue any such market-
making at any time. There can be no assurance as to the liquidity of any
market that may develop for the notes, the ability of holders to sell their
notes or the price at which holders would be able to sell their notes.
We and the Subsidiary Guarantors have also agreed to indemnify the
underwriter against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments which the underwriter may be
required to make in respect of any such liabilities.
In connection with the offering of the notes, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price of the
notes. Specifically, the underwriter may overallot in connection with the
offering of the notes, creating a syndicate short position. In addition, the
underwriter may bid for, and purchase, notes in the open market to cover
syndicate short positions or to stabilize the price of the notes. Any of these
activities may stabilize or maintain the market price of the notes above
independent market levels. The underwriter is not required to engage in any of
these activities, and may end any of them at any time.
The following table sets forth the underwriting discount for this offering:
<TABLE>
<CAPTION>
Per note Total
-------- ----------
<S> <C> <C>
Underwriting discount................................ 1.0% $1,286,640
</TABLE>
Expenses associated with this offering, to be paid by us, are estimated to
be $500,000.
The offered notes will be registered under the Securities Act of 1933.
Barclays Bank PLC will sell the offered notes within the United States through
its U.S. registered broker-dealer.
The underwriter represents and agrees that:
. It has not offered or sold, and, before the expiry of six months from
the closing date, will not offer or sell, any offered notes to persons
in the United Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(as principal or agent) for purposes of their business, or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995;
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. It has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the offered notes in, from or otherwise involving the United
Kingdom; and
. It is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
(as amended) or is a person to whom the document may otherwise lawfully
be issued or passed on.
In the ordinary course of its business, the underwriter and its affiliates
have engaged, and may in the future engage, in commercial banking and/or
investment banking transactions with us and our affiliates. Barclays Bank PLC
is a lender under our bank credit facility.
LEGAL OPINIONS
The validity of the notes offered hereby will be passed upon for the Company
by McDermott, Will & Emery. Certain legal matters in connection with the
offering will be passed upon for the underwriter by Cahill Gordon & Reindel,
New York, New York.
EXPERTS
The audited consolidated financial statements incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The statement of assets and liabilities related to the product lines sold to
Canandaigua Brands, Inc. as of April 9, 1999 and the related statement of
identified income and expenses for the year ended December 31, 1998, have been
incorporated by reference herein in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
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AVAILABLE INFORMATION
The Company is required to file reports and other information with the SEC
pursuant to the information requirements of the Exchange Act. The Company
intends to furnish the holders of the notes with annual reports containing
consolidated financial statements audited by independent certified public
accounts following the end of each fiscal year and with quarterly reports
containing unaudited information for each of the first three quarters of each
fiscal year following the end of such quarter.
The Company's filings with the SEC may be inspected without charge at the
office of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, registration statements and certain other filings made with the SEC
through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system
are publicly available through the SEC's site on the Internet's World Wide
Web, located at http://www.sec.gov.
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
February 28, 1999;
(2) the Company's Quarterly Report on Form 10-Q for the quarterly periods
ended May 31, 1999, August 31, 1999 and November 30, 1999; and
(3) the Company's Current Reports on Form 8-K filed on March 3, 1999,
April 13, 1999, April 15, 1999, April 23, 1999, April 26, 1999, June 9,
1999, June 21, 1999, and June 23, 1999, August 4, 1999, September 27, 1999,
October 13, 1999, January 4, 2000, and April 11, 2000 and amended Current
Reports on Form 8-K/A filed on June 25, 1999 and November 23, 1999.
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 Supplement and prior to the termination of the
offering relating to this Prospectus Supplement shall be deemed to be
incorporated by reference into this Prospectus Supplement 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 Supplement
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 Supplement.
The Company will provide without charge to each person to whom a copy of
this Prospectus Supplement 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 Supplement incorporates). Requests should be directed to
Canandaigua Brands, Inc., Attention: David Sorce, Secretary, 300 WillowBrook
Office Park, Fairport, New York 14450; telephone number 716-218-2169. In
addition, any of the documents incorporated herein by reference are available
free of charge at the offices of the Paying Agent in Luxembourg.
S-101
<PAGE>
PROSPECTUS
$300,000,000
CANANDAIGUA BRANDS, INC.
Debt Securities, Preferred Stock and Class A Common Stock
----------------
We may sell from time to time for proceeds of up to $300,000,000:
. our debt securities;
. shares of our Preferred Stock, which may be represented by depositary
shares;
. shares of our Class A Common Stock; or
. any combination of the foregoing.
The debt securities may be guaranteed by our subsidiaries identified in this
prospectus.
We will provide specific terms of the securities which we may offer in
supplements to this prospectus. You should read this prospectus and any
supplement carefully before you invest. Securities may be sold for U.S.
dollars, foreign currency or currency units.
Our Class A Common Stock is listed on the New York Stock Exchange under the
symbol "CDB".
See "Risk Factors" beginning on page 1 for a discussion of certain factors
that you should consider before purchasing any securities.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
The date of this prospectus is December 3, 1999.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
About this Prospectus...................................................... i
Where You Can Find More Information........................................ ii
Special Note Regarding Forward-Looking Statements.......................... ii
Canandaigua Brands, Inc.................................................... 1
The Guarantors............................................................. 1
Risk Factors............................................................... 1
Use of Proceeds............................................................ 4
Dividend Policy............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 5
Description of Debt Securities............................................. 5
Description of Preferred Stock............................................. 10
Description of Depositary Shares........................................... 11
Description of Class A Common Stock........................................ 14
Plan of Distribution....................................................... 16
Legal Opinions............................................................. 17
Experts.................................................................... 17
</TABLE>
----------------
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. Under this process, we may sell any
combination of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $300,000,000. This prospectus
provides you with a general description of the securities we may offer. Each
time we offer to sell securities, we will provide a supplement to this
prospectus that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update, or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information
described under the heading "Where You Can Find More Information", below.
i
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy reports, statements or other
information at the SEC's public reference rooms in Washington, D.C., New York,
New York or Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services, at the
web site maintained by the SEC at "http://www.sec.gov", and at our own web
site at "http://www.cbrands.com".
As noted above, we have filed with the SEC a registration statement on Form
S-3 to register the securities. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information set forth in the registration statement. For further information
you may refer to the registration statement and to the exhibits and schedules
filed as part of the registration statement. You can review and copy the
registration statement and its exhibits and schedules at the public reference
facilities maintained by the SEC as described above. The registration
statement, including its exhibits and schedules, is also available on SEC's
web site.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and the information that we file
with the SEC later will automatically update and supersede this information.
We incorporate by reference the documents listed below and any future filings
we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, until we sell all of the securities:
. Annual Report on Form 10-K for the fiscal year ended February 28, 1999;
. Quarterly Reports on Form 10-Q for the quarterly periods ended May 31,
1999 and August 31, 1999; and
. Current Reports on Form 8-K filed on March 3, 1999, April 13, 1999,
April 15, 1999, April 23, 1999, April 26, 1999, June 9, 1999, June 21,
1999, June 23, 1999, August 4, 1999, September 27, 1999 and October 13,
1999, and on Form 8-K/A filed on June 25, 1999 and November 23, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at: Canandaigua Brands, Inc., Attention: David S. Sorce,
Secretary, 300 WillowBrook Office Park, Fairport, New York 14450; telephone
number (716) 218-2169.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different or additional
information. You should not assume that the information in this prospectus or
any supplement is accurate as of any date other than the date on the front of
those documents.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this prospectus or in the information
incorporated by reference may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
information may involve known and unknown risks, uncertainties and other
factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
ii
<PAGE>
CANANDAIGUA BRANDS, INC.
We are a leading producer and marketer of branded beverage alcohol products
in the United States and the United Kingdom. We market and sell over 175
national and regional branded products to more than 1,000 wholesale
distributors in the United States. We also distribute our own branded products
and those of other companies to more than 16,000 customers in the United
Kingdom. In the United States, we are the second largest importer of beer, the
second largest supplier of wine and the fourth largest supplier of distilled
spirits. We are a leading British producer of cider, wine and bottled water
and a leading beverage alcohol wholesaler in the United Kingdom. We operate
more than 20 production facilities throughout the world and purchase products
for resale from other producers.
The Company is a Delaware corporation incorporated on December 4, 1972 as
the successor to a business founded in 1945. Our executive offices are located
at 300 WillowBrook Office Park, Fairport, New York 14450, and our telephone
number is (716) 218-2169.
THE GUARANTORS
The guarantors are our following subsidiaries: Allberry, Inc., Barton Beers,
Ltd., Barton Brands of California, Inc., Barton Brands of Georgia, Inc.,
Barton Brands, Ltd., Barton Canada, Ltd., Barton Distillers Import Corp.,
Barton Financial Corporation, Barton Incorporated, Batavia Wine Cellars, Inc.,
Canandaigua B.V., Canandaigua Europe Limited, Canandaigua Limited, Canandaigua
Wine Company, Inc., Cloud Peak Corporation, Franciscan Vineyards, Inc., M.J.
Lewis Corp., Monarch Import Company, Mt. Veeder Corporation, Polyphenolics,
Inc., Roberts Trading Corp., SCV-EPI Vineyards, Inc., Simi Winery, Inc.,
Stevens Point Beverage Co., and The Viking Distillery, Inc. We directly or
indirectly own all of the stock of the guarantors.
If so provided in a prospectus supplement, each of the guarantors will fully
and unconditionally guarantee on a joint and several basis our obligations
under the debt securities, subject to certain limitations.
RISK FACTORS
Before you buy any securities offered by this prospectus or a prospectus
supplement, you should be aware that there are various risks, including those
described below. You should consider carefully these risk factors, together
with all of the other information in this prospectus, any prospectus
supplement and the documents that are incorporated by reference before you
decide to acquire any securities.
Our Indebtedness Could Have a Material Adverse Effect on Our Financial Health
We have incurred substantial indebtedness to finance our acquisitions and we
may incur substantial additional indebtedness in the future to finance further
acquisitions. Our ability to satisfy our financial obligations under our
indebtedness outstanding from time to time will depend upon our 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 our control. Therefore, there can be no assurance that our
cash flow from operations will be sufficient to meet all of our debt service
requirements and to fund our capital expenditure requirements.
Our current and future debt service obligations and covenants could have
important consequences to you if you purchase the securities offered by this
prospectus. Such obligations and covenants include the following:
. Our ability to obtain financing for future working capital needs or
acquisitions or other purposes may be limited;
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<PAGE>
. A significant portion of our cash flow from operations will be dedicated
to the payment of principal and interest on our indebtedness, thereby
reducing funds available for operations;
. We are subject to restrictive covenants that could limit our ability to
conduct our business; and
. We may be more vulnerable to adverse economic conditions than less
leveraged competitors and, thus, may be limited in our ability to
withstand competitive pressures.
The restrictive covenants included in our bank facility and our indentures
under which debt securities are issued include, among others, those
restricting additional liens, additional borrowing, the sale of assets, the
payment of dividends, transactions with affiliates, the making of investments
and certain other fundamental changes. The bank credit facility also contains
restrictions on acquisitions and certain financial ratio tests including a
debt coverage ratio, a senior debt coverage ratio, a fixed charge ratio and an
interest coverage ratio. These restrictions could limit our ability to conduct
business. A failure to comply with the obligations contained in the bank
credit facility and our indentures could result in an event of default under
such agreements, which could require us to immediately repay the related debt
and also debt under other agreements that may contain cross-acceleration or
cross-default provisions.
Our Acquisition Strategy May Not Be Successful
We have recently made a number of acquisitions and anticipate that we may,
from time to time, acquire additional businesses, assets or securities of
companies which we believe would provide a strategic fit with our business.
Any other acquired business will need to be integrated with our existing
operations. There can be no assurance that we will effectively assimilate the
business or product offerings of acquired companies into our business or
product offerings. Any acquisitions also will be accompanied by risks such as
potential exposure to unknown liabilities of acquired companies, the
difficulty and expense of integrating the operations and personnel of the
acquired companies, the potential disruption to our business, the diversion of
management time and attention, the impairment of relationships with and the
possible loss of key employees and customers of the acquired business, the
incurrence of amortization expenses if any acquisition is accounted for as a
purchase. Our failure to adequately manage the risks associated with any
acquisitions could have a material adverse effect on our financial condition
or results of operations.
The Termination or Non-Renewal of Imported Beer Distribution Agreements Could
Have a Material Adverse Effect on Our Business
All of our 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. Our exclusive agreement to
distribute Corona and its other Mexican beer brands in 25 primarily Western
states expires in December 2006 and, subject to compliance with certain
performance criteria, continued retention of personnel and other terms of the
agreement, will be automatically renewed for additional terms of five years.
Changes in control of our company or our subsidiaries involved in importing
the Mexican beer brands, or changes in the chief executive officer of such
subsidiaries, may be a basis for the supplier, unless it consents to such
changes, to terminate the agreement. The supplier's consent to such changes
may not be unreasonably withheld. Prior to their expiration, these agreements
may be terminated if we fail to meet certain performance criteria. We believe
that we are currently in compliance with all of our material imported beer
distribution agreements. From time to time we have failed, and may in the
future fail, to satisfy certain performance criteria in our distribution
agreements. It is possible that our beer distribution agreements may not be
renewed or may be terminated prior to expiration.
2
<PAGE>
Our Business Could Be Adversely Affected by a General Decline in the
Consumption of Products We Sell
In the United States the overall per capita consumption of beverage alcohol
products by adults (ages 21 and over) has declined substantially over the past
twenty years. These declines have been caused by a variety of factors
including:
. increased concern 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 various states;
and
. increased federal and state excise taxes.
Increase in Excise Taxes and Government Restrictions Could Have a Material
Adverse Effect on Our Business
In the United States, 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 our financial condition or
results of operations. In addition, the beverage alcohol products industry is
subject to extensive regulation by 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 labeling, advertising and relations with
wholesalers and retailers. In recent years, federal and state regulators have
required warning labels and signage. In the United Kingdom, Matthew Clark
carries on its excise trade under a Customs and Excise License. Licenses are
required for all premises where wine is produced. Matthew Clark holds a
license to act as an excise warehouse operator and registrations have been
secured for the production of cider and bottled water. New or revised
regulations or increased licensing fees and requirements could have a material
adverse effect on our financial condition or results of operations.
We Rely on the Performance of Wholesale Distributors for the Success of Our
Business
In the United States, we sell our 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
our major wholesalers or our inability to collect accounts receivable from our
major wholesalers could materially and adversely affect our 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. In addition, wholesalers and retailers
of our products offer products which compete directly with our 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 our
competitors. In the future, our wholesalers and retailers may not continue to
purchase our products or provide our products with adequate levels of
promotional support.
We Generally Do Not Have Long-Term Supply Contracts and We Are Subject to
Substantial Price Fluctuations for Grapes and Grape-Related Materials; We Have
a Limited Group of Suppliers of Glass Bottles
Our business is heavily dependent upon raw materials, such as grapes, grape
juice concentrate, grains, and alcohol from third-party suppliers, tequila
from Mexico and packaging materials. We could
3
<PAGE>
experience raw material supply, production or shipment difficulties which
could adversely affect our ability to supply goods to our customers. We are
also directly affected by increases in the costs of such raw materials. In the
recent past we have experienced dramatic increases in the cost of grapes.
Although we believe we have adequate sources of grape supplies, in the event
demand for certain wine products exceeds expectations, we could experience
shortages. In addition, one of our largest components of cost of goods sold is
that of glass bottles, which have only a small number of producers. The
inability of any of our glass bottle suppliers to satisfy our requirements
could adversely affect our business.
Competition Could Have a Material Adverse Effect on Our Business
We are in a highly competitive industry and the dollar amount, and unit
volume, of our sales could be negatively affected by our inability to maintain
or increase prices, changes in geographic or product mix, a general decline in
beverage alcohol consumption or the decision of our wholesale customers,
retailers or consumers to purchase competitive products instead of our
products. Wholesaler, retailer and consumer purchasing decisions are
influenced by, among other things, the perceived absolute or relative overall
value of our 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, our products. We could also experience higher than
expected selling, general and administrative expenses if we find it necessary
to increase the number of our personnel or our advertising or promotional
expenditures to maintain our competitive position or for other reasons.
We Are Controlled by the Sands Family
Our outstanding 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 August 31, 1999, the Sands family beneficially owned approximately 13% 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 90% 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 65% of the
votes entitled to be cast by holders of our outstanding capital stock, voting
as a single class. Consequently, we are essentially controlled by the Sands
family and they would generally have sufficient voting power to determine the
outcome of any corporate transaction or other matter submitted to our
stockholders for approval.
USE OF PROCEEDS
Except as we may otherwise set forth in a prospectus supplement, we will use
the net proceeds from the sale of the securities offered by this prospectus
for working capital and general corporate purposes. Pending such application
of the proceeds, we will invest the proceeds in certificates of deposit,
United States government securities or certain other interest bearing
securities.
DIVIDEND POLICY
Our policy is to retain all of our earnings to finance the development and
expansion of our business. In addition, the indentures for our outstanding
senior notes, our outstanding senior subordinated notes and our existing bank
credit facility restrict the payment of dividends. Any supplemental indentures
for the debt securities offered by this prospectus may also restrict or
prohibit the payment of dividends.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our historical ratio of earnings to fixed
charges:
<TABLE>
<CAPTION>
For the For the
Six Fiscal
Months Years
Ended For the Fiscal Ended
August Years Ended For the Six Month August
31, February 28, Transition Period 31,
--------- -------------- Ended February 29, ---------
1999 1998 1999 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ------------------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1)(2).... 2.0x 3.8x 3.2x 3.2x 3.1x 1.7x 3.3x 1.4x
</TABLE>
- --------
(1) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represent income before provision for income taxes plus fixed
charges. "Fixed charges" consist of interest expensed and capitalized,
amortization of debt issuance costs, amortization of discount on debt, and
the portion of rental expense which management believes is representative
of the interest component of lease expense.
(2) The ratio of earnings to combined fixed charges and preferred stock
dividend requirements is the same as the ratio of earnings to fixed
charges.
DESCRIPTION OF DEBT SECURITIES
We may offer debt securities under this prospectus, any of which may be
issued as convertible and/or exchangeable debt securities. The following
description of the terms of the debt securities sets forth certain general
terms and provisions of the debt securities to which any prospectus supplement
may relate. We will set forth the particular terms of the debt securities we
offer in a prospectus supplement. The extent, if any, to which the following
general provisions apply to particular debt securities, will be described in
the applicable prospectus supplement. The following description of general
terms relating to the debt securities and the Indenture (as defined below) are
summaries only and therefore are not complete. You should read the Indenture
and the prospectus supplement regarding any particular issuance of debt
securities.
The debt securities will represent our unsecured general obligations, unless
otherwise provided in the prospectus supplement. If so provided in a
prospectus supplement, the debt securities will have the benefit of the
guarantees from the guarantors. Our subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the debt securities or to make any funds available
therefor, whether by dividends, loans or other payments, other than as
expressly provided in the guarantees.
Our ability to service our indebtedness, including the debt securities, is
dependent primarily upon the receipt of funds from our subsidiaries. The
payment of dividends or the making of loans and advances to us by our
subsidiaries are subject to contractual, statutory or regulatory restrictions,
are contingent upon the earnings of those subsidiaries and are subject to
various business considerations. Further, any right we may have to receive
assets of any of our subsidiaries upon liquidation or recapitalization of any
such subsidiaries (and the consequent right of the holders of debt securities
to participate in those assets) will be subject to the claims of our
subsidiaries' creditors. Even in the event that we are recognized as a
creditor of a subsidiary, our claims would still be subject to any security
interest in the assets of such subsidiary and any indebtedness of such
subsidiary senior to our claim.
The debt securities will be issued under an Indenture (the "Indenture") that
we have entered into with the guarantors and Harris Trust and Savings Bank, as
trustee (the "Trustee"). A copy of the form of Indenture has been filed as an
exhibit to the Registration Statement of which this prospectus is a part and
is available for inspection at the corporate trust office of the Trustee at
311 West Monroe
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<PAGE>
Street, 12th Floor, Chicago, Illinois 60606, or as described above under
"Where You Can Find More Information." The Indenture is subject to, and is
governed by, the Trust Indenture Act of 1939, as amended.
Except to the extent set forth in a prospectus supplement, the Indenture
does not contain any covenants or restrictions that afford holders of the debt
securities special protection in the event of a change of control or highly
leveraged transaction.
The following summary of certain provisions of the debt securities and the
Indenture is not complete. You should read carefully the provisions of
particular debt securities we may issue, the Indenture and the Guarantees, if
any, including the definitions in those documents of certain terms and of
those terms made a part of those documents by the Trust Indenture Act. All
capitalized terms used but not defined below have the meanings set forth in
the Indenture.
General
The Indenture does not limit the aggregate principal amount of debt
securities which may be issued under it and provides that debt securities may
be issued in one or more series, in such form or forms, with such terms and up
to the aggregate principal amount that we may authorize from time to time. Our
Board of Directors will establish the terms of each series of debt securities
and such terms will be set forth or determined in the manner provided in an
officers' certificate or by a supplemental indenture. The particular terms of
the debt securities offered pursuant to any prospectus supplement will be
described in such prospectus supplement. All debt securities of one series
need not be issued at the same time and, unless otherwise provided, a series
may be reopened, without the consent of any holder, for issuances of
additional debt securities of that series.
Unless otherwise provided in the prospectus supplement, debt securities may
be presented for registration of transfer and exchange and for payment or, if
applicable, for conversion and/or exchange at the office of the applicable
Trustee. At our option, the payment of interest may also be made by check
mailed to the address of the person entitled to such payment as it appears in
the debt security register.
The applicable prospectus supplement will describe the following terms of
any debt securities (the "Offered Debt Securities") in respect of which this
prospectus is being delivered (to the extent applicable to the Offered Debt
Securities):
. the designation (including whether they are senior debt securities,
senior subordinated debt securities or subordinated debt securities and
whether such debt securities are convertible and/or exchangeable) and
aggregate principal amount of the Offered Debt Securities;
. the percentage of the principal amount at which such Offered Debt
Securities will be issued;
. the date or dates (and whether fixed or extendable) on which the
principal of the Offered Debt Securities is payable or the method of
determination thereof;
. the rate or rates (which may be fixed, floating or adjustable) at which
the Offered Debt Securities will bear interest, if any, the method of
calculating such rates, the date or dates from which such interest will
accrue or the manner of determining such dates, the interest payment
dates on which such interest shall be payable and the record dates for
the determination of the holders of debt securities to whom interest
will be payable;
. the place where the principal of, premium, if any, and interest, if any,
on the Offered Debt Securities will be payable;
. any provisions relating to the issuance of the Offered Debt Securities
at an original issue discount;
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<PAGE>
. the terms and conditions upon which the Offered Debt Securities may be
redeemed (including the form or method of payment if other than in cash,
which may include securities of other issuers);
. the obligation, if any, that we may have to redeem, purchase or repay
the Offered Debt Securities pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of the holder of
any debt securities and the terms and conditions of such redemption,
purchase or repayment (including the form or method of payment if other
than in cash, which may include securities of other issuers), and any
provisions for the remarketing of such debt securities;
. if other than denominations of $1,000 and any integral multiple thereof,
the denominations in which the Offered Debt Securities shall be
issuable;
. if other than the principal amount thereof, the portion of the principal
amount of the Offered Debt Securities which will be payable upon
declaration of acceleration of the maturity thereof or in bankruptcy;
. any Events of Default in lieu of or in addition to those described in
this prospectus and remedies relating to such Events of Default;
. whether the Offered Debt Securities are convertible or exchangeable and,
if so, the securities or rights into which they are convertible or
exchangeable and the terms and conditions upon which such conversion or
exchange will be effected;
. any trustees, authenticating or paying agents, transfer agents or
registrars or any other agents with respect to the Offered Debt
Securities;
. the currency or currencies, including composite currencies, in which the
Offered Debt Securities will be denominated if other than the currency
of the United States of America;
. if other than the coin or currency in which the Offered Debt Securities
are denominated, the coin or currency in which payment of the principal
of, premium, if any, or interest on the Offered Debt Securities will be
payable (and the manner in which the equivalent of the principal amount
thereof in the currency of the United States is to be determined for any
purpose, including for determining the principal amount outstanding);
. if the principal of, premium, if any, or interest on the Offered Debt
Securities will be payable, at our election or the election of a holder
thereof, in a coin or currency other than that in which the Offered Debt
Securities are denominated and terms and conditions upon which, such
election may be made;
. if the amount of payments of principal of, premium, if any, and interest
on the Offered Debt Securities may be determined with reference to the
value, rate or price of one or more specified commodities, currencies or
indices, the manner in which such amounts shall be determined;
. whether and under what circumstances we will pay additional amounts on
the Offered Debt Securities held by a person who is not a United States
of America person in respect of any tax, assessment or governmental
charge withheld or deducted and, if so, whether we will have the option
to redeem such debt securities rather than pay such additional amounts;
. if receipt of certain certificates or other documents or satisfaction of
other conditions will be necessary for any purpose, including, without
limitation, as a condition to the issuance of the Offered Debt
Securities in definitive form (whether upon original issue or upon
exchange of a temporary Debt Security), the form and terms of such
certificates, documents or conditions;
. any other affirmative or negative covenants with respect to the Offered
Debt Securities;
7
<PAGE>
. whether the Offered Debt Securities will be issued in whole or in part
in the form of one or more global securities and, in such case, the
depositary for such a global security and the circumstances under which
any global security may be exchanged for Offered Debt Securities
registered in the name of, and under which any transfer of such global
security may be registered in the name of, any person other than the
depositary;
. whether the debt securities are defeasible;
. whether and the extent that the Offered Debt Securities shall be
guaranteed by the guarantors and the form of any such Guarantee; and
. any other specific terms of the Offered Debt Securities.
Unless otherwise indicated in the prospectus supplement relating to the debt
securities, principal of and any premium or interest on the debt securities
will be payable, and the debt securities will be exchangeable and transfers
thereof will be registrable, at the office of the Trustee at its principal
executive offices. However, at our option, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in
the debt security register. Any payment of principal and any premium or
interest required to be made on an interest payment date, redemption date or
at maturity which is not a business day 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 applicable date, and no interest shall accrue for the period
from and after such date.
Unless otherwise indicated in the prospectus supplement relating to debt
securities, the debt securities will be issued only in fully registered form,
without coupons, in denominations of $1,000 or any integral multiple thereof.
No service charge will be made for any transfer or exchange of the debt
securities, but we may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with a transfer or exchange.
Debt securities may be issued under the Indenture as Original Issue Discount
Securities (as defined below) to be offered and sold at a substantial discount
from their stated principal amount. In addition, under Treasury Regulations it
is possible that the debt securities which are offered and sold at their
stated principal amount would, under certain circumstances, be treated as
issued at an original issue discount for federal income tax purposes. federal
income tax consequences and other special considerations applicable to any
such Original Issue Discount Securities (or other debt securities treated as
issued at an original issue discount) will be described in the prospectus
supplement relating to such securities. "Original Issue Discount Security"
means any debt security that does not provide for the payment of interest
prior to maturity or which is issued at a price lower than its principal
amount and which provides that upon redemption or acceleration of its stated
maturity an amount less than its principal amount shall become due and
payable.
Global Securities
The debt securities of a series may be issued in the form of one or more
global securities that will be deposited with a depositary or its nominees
identified in the prospectus supplement relating to the debt securities. In
such a case, one or more global securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of outstanding debt securities of the series to be represented by such global
security or securities.
Unless and until it is exchanged in whole or in part for debt securities in
definitive registered form, a global security may not be registered for
transfer or exchange except as a whole by the depositary for such global
security to a nominee of the depositary and except in the circumstances
described in the prospectus supplement relating to the Offered Debt
Securities. The specific terms of the depositary arrangement with respect to a
series of debt securities will be described in the prospectus supplement
relating to such series.
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Guarantees
In order to enable us to obtain more favorable interest rates and terms,
payment of principal of, premium, if any, and interest on the Offered Debt
Securities, such Offered Debt Securities may (if so specified in the
prospectus supplement) be guaranteed, jointly and severally by all of the
guarantors pursuant to guarantees. Guarantees will not be applicable to or
guarantee our obligations with respect to the conversion of the debt
securities into shares of our other securities. Each guarantee will be an
unsecured obligation of each guarantor issuing such guarantee. The ranking of
a guarantee and the terms of the subordination, if any, will be set forth in
the prospectus supplement.
The Indenture provides that, in the event any guarantee would constitute or
result in a violation of any applicable fraudulent conveyance or similar law
of any relevant jurisdiction, the liability of the guarantor under such
Guarantee will be reduced to the maximum amount (after giving effect to all
other contingent and other liabilities of such guarantor) permissible under
the applicable fraudulent conveyance or similar law.
Modification of the Indenture
We and the Trustee may modify the Indenture with respect to the debt
securities of any series, with or without the consent of the holders of debt
securities, under certain circumstances to be described in a prospectus
supplement.
Defeasance; Satisfaction and Discharge
The prospectus supplement will outline the conditions under which we may
elect to have certain of our obligations under the Indenture discharged and
under which the Indenture obligations will be deemed satisfied.
Defaults and Notice
The debt securities will contain Events of Default to be specified in the
applicable prospectus supplement, including, without limitation:
. failure to pay the principal of, or premium, if any, on any debt
security of such series when due and payable (whether at maturity, by
call for redemption, through any mandatory sinking fund, by redemption
at the option of the holder, by declaration or acceleration or
otherwise);
. failure to make a payment of any interest on any debt security of such
series when due;
. our, or any guarantor's, failure to perform or observe any other
covenants or agreements in the Indenture or in the debt securities of
such series;
. certain events of bankruptcy, insolvency or reorganization of us or any
guarantor;
. any guarantee in respect of such series of debt securities shall for any
reason cease to be, or be asserted in writing by any guarantor thereof
or us not to be, in full force and effect, and enforceable in accordance
with its terms; and
. certain cross defaults.
If an Event of Default with respect to debt securities of any series shall
occur and be continuing, the Trustee or the holders of not less than 25% in
aggregate principal amount of the then outstanding debt securities of such
series may declare the principal amount (or, if the debt securities of such
series are issued at an original issue discount, such portion of the principal
amount as may be specified in the terms of the debt securities of such series)
of all debt securities of such series and/or such other amount or amounts as
the debt securities or supplemental indenture with respect to such series may
provide, to be due and payable immediately.
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The Indenture provides that the Trustee will, within 90 days after the
occurrence of a default, give to holders of debt securities of any series
notice of all uncured defaults with respect to such series known to it.
However, in the case of a default that results from the failure to make any
payment of the principal of, premium, if any, or interest on the debt
securities of any series, or in the payment of any mandatory sinking fund
installment with respect to debt securities of such series, the Trustee may
withhold such notice if it in good faith determines that the withholding of
such notice is in the interest of the holders of debt securities of such
series.
The Indenture contains a provision entitling the Trustee to be indemnified
by holders of debt securities before proceeding to exercise any trust or power
under the Indenture at the request of such holders. The Indenture provides
that the holders of a majority in aggregate principal amount of the then
outstanding debt securities of any series may direct the time, method and
place of conducting any proceedings for any remedy available to the Trustee,
or of exercising any trust or power conferred upon the Trustee with respect to
the debt securities of such series. However, the Trustee may decline to follow
any such direction if, among other reasons, the Trustee determines in good
faith that the actions or proceedings as directed may not lawfully be taken,
would involve the Trustee in personal liability or would be unduly prejudicial
to the holders of the debt securities of such series not joining in such
direction.
The right of a holder to institute a proceeding with respect to the
Indenture is subject to certain conditions including, that the holders of a
majority in aggregate principal amount of the debt securities of such series
then outstanding make a written request upon the Trustee to exercise its power
under the Indenture, indemnify the Trustee and afford the Trustee reasonable
opportunity to act. Even so, the holder has an absolute right to receipt of
the principal of, premium, if any, and interest when due, to require
conversion or exchange of debt securities if the Indenture provides for
convertibility or exchangeability at the option of the holder and to institute
suit for the enforcement of such rights.
Concerning the Trustees
The prospectus supplement with respect to particular debt securities will
describe any relationship that we may have with the Trustee for such debt
securities.
Reports to Holders of Debt Securities
We intend to furnish to holders of debt securities all quarterly and annual
reports which we furnish to holders of our Common Stock.
DESCRIPTION OF PREFERRED STOCK
Our Board of Directors is authorized to issue in one or more series, without
stockholder approval, up to a maximum of 1,000,000 shares of Preferred Stock.
The shares can be issued with such designations, preferences, qualifications,
privileges, limitations, restrictions, options, voting powers (full or
limited), conversion or exchange rights and other special or relative rights
as the Board of Directors shall from time to time fix by resolution. Thus,
without stockholder approval, our Board of Directors could authorize the
issuance of Preferred Stock with voting, conversion and other rights that
could dilute the voting power and other rights of holders of our common stock.
The prospectus supplement relating to a series of Preferred Stock will set
forth the dividend, voting, conversion, exchange, repurchase and redemption
rights, if applicable, the liquidation preference, and other specific terms of
such series of the Preferred Stock. We currently have no shares of Preferred
Stock outstanding. Prior to the issuance of any series of Preferred Stock, we
must obtain consent of the administrative agent of our bank credit facility.
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The applicable prospectus supplement will describe the following terms of
any Preferred Stock in respect of which this prospectus is being delivered (to
the extent applicable to such Preferred Stock):
. the specific designation, number of shares, seniority and purchase
price;
. any liquidation preference per share;
. any date of maturity;
. any redemption, repayment or sinking fund provisions;
. any dividend rate or rates and the dates on which any such dividends
will be payable (or the method by which such rates or dates will be
determined);
. any voting rights;
. if other than the currency of the United States of America, the currency
or currencies (including composite currencies) in which such Preferred
Stock is denominated and/or in which payments will or may be payable;
. the method by which amounts in respect of such Preferred Stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation;
. whether the Preferred Stock is convertible or exchangeable and, if so,
the securities or rights into which it is convertible or exchangeable,
and the terms and conditions upon which such conversions or exchanges
will be effected;
. the place or places where dividends and other payments on the Preferred
Stock will be payable; and
. any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
As described under "Description of Depositary Shares" below we may, at our
option, elect to offer depositary shares evidenced by depositary receipts,
each representing an interest (to be specified in the prospectus supplement
relating to the particular series of the Preferred Stock) in a share of the
particular series of the Preferred Stock issued and deposited with a
depositary.
All shares of Preferred Stock offered by this prospectus, or issuable upon
conversion, exchange or exercise of securities, will, when issued, be fully
paid and non-assessable.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any prospectus supplement of certain
provisions of the deposit agreement and of the depositary shares and
depositary receipts is not complete. You should carefully review the
prospectus supplement and the form of deposit agreement and form of depositary
receipts relating to each series of the Preferred Stock.
General
We may, at our option, elect to have shares of Preferred Stock be
represented by depositary shares. The shares of any series of the Preferred
Stock underlying the depositary shares will be deposited under a separate
deposit agreement that we will enter with a bank or trust company having its
principal office in the United States and a combined capital and surplus of at
least $50,000,000. Such bank will be considered the depositary. The prospectus
supplement relating to a series of depositary shares will set forth the name
and address of the depositary. Subject to the terms of the deposit agreement,
each owner of a depositary share will be entitled, in proportion to the
applicable
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interest in the number of shares of Preferred Stock underlying such depositary
share, to all the rights and preferences of the Preferred Stock underlying
such depositary share (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued
pursuant to the deposit agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable prospectus supplement.
Unless otherwise specified in the prospectus supplement, a holder of
depositary shares is not entitled to receive the shares of Preferred Stock
underlying the depositary shares.
If required by law or applicable securities exchange rules, engraved
depositary receipts will be prepared. Pending their preparation, the
depositary may, upon our written order, issue temporary depositary receipts
substantially identical to the definitive depositary receipts. Definitive
depositary receipts will thereafter be prepared without unreasonable delay.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of depositary shares representing such Preferred Stock in proportion to the
numbers of such depositary shares owned by such holders on the relevant record
date.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary shares
entitled to such property, as nearly as practicable, in proportion to the
number of depositary shares owned by such holder. However, if the depositary
determines that it is not feasible to make such distribution, it may, with our
approval, sell such property and distribute the net proceeds from such sale to
such holders.
The deposit agreement also contains provisions relating to the manner in
which any subscription or similar rights we offer to holders of Preferred
Stock shall be made available to holders of depositary shares.
Conversion and Exchange
If any Preferred Stock underlying the depositary shares is subject to
provisions relating to its conversion or exchange as set forth in the
prospectus supplement relating thereto, each record holder of depositary
shares will have the right or obligation to convert or exchange such
depositary shares pursuant to its terms.
Redemption of Depositary Shares
If a series of Preferred Stock underlying the depositary shares is subject
to redemption, the depositary shares will be redeemed from the proceeds
received by the depositary resulting from the redemption, in whole or in part,
of the series of Preferred Stock held by the depositary. The redemption price
per depositary share will be equal to the aggregate redemption price payable
with respect to the number of shares of Preferred Stock underlying the
depositary shares. Whenever we redeem Preferred Stock from the depositary, the
depositary will redeem as of the same redemption date a proportionate number
of depositary shares representing the shares of Preferred Stock that were
redeemed. If less than all the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by lot or pro rata as we may
determine.
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After the date fixed for redemption, the depositary shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the depositary shares will cease, except the right to receive the
redemption price payable upon such redemption. Any funds we deposit with the
depositary for any depositary shares which the holders fail to redeem will be
returned to us after a period of two years from the date we deposit such
funds.
Voting
Upon receipt of notice of any meeting or action in lieu of any meeting at
which the holders of any shares of Preferred Stock underlying the depositary
shares are entitled to vote, the depositary will mail the information
contained in such notice to the record holders of the depositary shares
relating to such Preferred Stock. Each record holder of such depositary shares
on the record date (which will be the same date for the Preferred Stock) will
be entitled to instruct the depositary as to the exercise of the voting rights
pertaining to the number of shares of Preferred Stock underlying such holder's
depositary shares. The depositary will endeavor, as practicable, to vote the
number of shares of Preferred Stock underlying such depositary shares in
accordance with such instructions, and we will agree to take all action which
may be deemed necessary by the depositary in order to enable the depositary to
do so.
Amendment of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may at any time be amended by agreement
between us and the depositary. However, any amendment which materially and
adversely alters the rights of the existing holders of depositary shares will
not be effective unless such amendment has been approved by at least a
majority of the depositary shares then outstanding.
Charges of Depositary
We will pay all transfer and other taxes and governmental charges that arise
solely from the existence of the depositary arrangements. We will pay charges
of the depositary in connection with the initial deposit of the Preferred
Stock and any exchange or redemption of the Preferred Stock. Holders of
depositary shares will pay all other transfer and other taxes and governmental
charges, and, in addition, such other charges as are expressly provided in the
deposit agreement to be for their accounts.
Miscellaneous
We, or at our option, the depositary, will forward to the holders of
depositary shares all of our reports and communications which we are required
to furnish to the holders of Preferred Stock.
Neither we nor the depositary will be liable if we or it is prevented or
delayed by law or any circumstances beyond our or its control in performing
our or its obligations under the deposit agreement. Our obligations and the
depositary's obligations under the deposit agreement will be limited to
performance in good faith and neither we nor the depositary will be obligated
to prosecute or defend any legal proceeding in respect of any depositary share
or Preferred Stock unless satisfactory indemnity has been furnished. Both we
and the depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting Preferred Stock for deposit,
holders of depositary shares or other persons believed to be competent and on
documents believed to be genuine.
Resignation and Removal of Depositary; Termination of the Deposit Agreement
The depositary may resign at any time by delivering notice to us of its
election to do so, and we may at any time remove the depositary. Any such
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of such appointment. We will appoint a successor
depositary within 60 days after delivery of the notice of resignation or
removal. We may
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terminate the deposit agreement or it may be terminated by the depositary if a
period of 90 days expires after the depositary has delivered written notice to
us of its election to resign and we have not appointed a successor depositary.
Upon termination of the deposit agreement, the depositary will discontinue the
transfer of depositary receipts, will suspend the distribution of dividends to
the holders of depositary receipts, and will not give any further notices
(other than notice of such termination) or perform any further acts under the
deposit agreement except that the depositary will continue to deliver
Preferred Stock certificates, together with dividends and distributions and
the net proceeds of any sales of rights, preferences, privileges or other
property in exchange for depositary receipts surrendered. Upon our request,
the depositary will deliver to us all books, records, certificates evidencing
Preferred Stock, depositary receipts and other documents relating to the
subject matter of the deposit agreement.
DESCRIPTION OF CLASS A COMMON STOCK
If we offer shares of Class A Common Stock, the prospectus supplement will
set forth the number of shares offered, the public offering price, information
regarding our dividend history and Class A Common Stock prices as reflected on
the New York Stock Exchange, including a recent reported last sale price of
the Class A Common Stock.
Our authorized common stock consists of 140,000,000 shares, of which
120,000,000 shares are Class A Common Stock, par value $.01 per share, and
20,000,000 shares are Class B Common Stock, par value $.01 per share. At
August 31, 1999, we had 14,879,274 shares of Class A Common Stock outstanding
and held of record by 972 stockholders, and 3,170,799 shares of Class B Common
Stock outstanding and held of record by 285 stockholders. In addition, at
August 31, 1999, options to purchase an aggregate of 2,825,370 shares of Class
A Common Stock were outstanding.
All shares of Class A Common Stock and Class B Common Stock currently
outstanding are, and the shares of Class A Common Stock offered hereby will
be, validly issued and fully paid and non-assessable, not subject to
redemption (except as described below) and without preemptive or other rights
to subscribe for or purchase any proportionate part of any new or additional
issues of stock of any class or of securities convertible into stock of any
class.
The following descriptions of our Class A Common Stock and certain
provisions of our Restated Certificate of Incorporation and Amended and
Restated By-Laws are summaries and are not complete. You should carefully
review the provisions of our Certificate of Incorporation and By-Laws and
appropriate provisions of the Delaware General Corporation Law.
General
The rights of holders of Class A Common Stock and Class B Common Stock are
identical except for voting, dividends and conversion rights.
Voting
Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share. Holders
of Class A Common Stock, voting as a class, are entitled to elect at least
one-fourth of the members of our Board of Directors to be elected at a meeting
of stockholders, and holders of Class B Common Stock, voting as a class, are
entitled to elect the remaining directors. If the number of outstanding shares
of Class B Common Stock is less than 12 1/2% of the aggregate number of
outstanding shares of Class A Common Stock and Class B Common Stock, the
holders of Class A Common Stock will become entitled to elect at least one-
fourth of the directors voting as a class and to elect the remaining directors
voting together as a single class with holders of Class B Common Stock,
provided that the holders of Class A Common Stock shall have one vote per
share and the holders of Class B Common Stock shall have 10 votes per share.
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On all other matters submitted to a vote of the stockholders, the holders of
Class A Common Stock and Class B Common Stock vote together as a single class,
except where a separate class vote is required under Delaware law.
Dividends
If we pay a cash dividend on Class B Common Stock, each share of Class A
Common Stock will receive an amount at least 10% greater than the amount of
the cash dividend per share paid on Class B Common Stock. In addition, our
Board of Directors may declare and pay a dividend on Class A Common Stock
without paying any dividend on Class B Common Stock. The indentures for our
outstanding senior subordinated notes and our existing bank credit facility
restrict the payment of dividends. In addition, any supplemental indentures
for the debt securities may restrict or prohibit the payment of dividends.
Conversion
Each share of Class B Common Stock is convertible into one fully paid and
non-assessable share of Class A Common Stock at the option of the holder at
any time. The shares of Class A Common Stock are not convertible into or
exchangeable for shares of Class B Common Stock or any of our other
securities.
Other Provisions
Holders of Class A Common Stock and Class B Common Stock are entitled to
share pro rata in the distribution of our assets available for such purpose in
the event of our liquidation, dissolution or winding up, after payment of, or
provision for, creditors and distribution of, or provision for, preferential
amounts and unpaid accumulated dividends to holders of Preferred Stock, if
any. Holders of Class A Common Stock and Class B Common Stock have no
preemptive rights to subscribe for any additional securities of any class
which we may issue, and there are no redemption provisions or sinking fund
provisions applicable to any such classes, nor is the Class A Common Stock and
Class B Common Stock subject to calls or assessments.
Certain Statutory Provisions
We are subject to Section 203 of the Delaware General Corporation Law.
Section 203 prohibits a publicly held Delaware corporation from engaging in
any "business combination" with any "interested stockholder" for a period of
three years following the time that such person became an interested
stockholder, unless
. prior to the time of the business combination, the transaction is
approved by the board of directors of the corporation;
. upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at
least 85% of the outstanding voting stock; or
. at or subsequent to such time the business combination is approved by
the board of directors and authorized at a meeting of the corporation's
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.
For purposes of Section 203, a "business combination" includes a merger,
assets sale or other transaction resulting in a financial benefit to the
interested stockholder, and an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.
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PLAN OF DISTRIBUTION
We may sell securities on a negotiated or competitive bid basis to or
through one or more underwriters or dealers. We may also sell securities
directly to institutional investors or other purchasers or through agents. Any
underwriter, dealer or agent involved in the offer and sale of securities, and
any applicable commissions, discounts and other items constituting
compensation to such underwriters, dealers or agents, will be set forth in the
prospectus supplement.
We may effect distribution of securities from time to time in one or more
transactions at a fixed price or prices (which may be changed) or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Unless otherwise indicated in a prospectus supplement, the obligations of
any underwriters to purchase securities will be subject to certain conditions
and the underwriters will be obligated to purchase all of the applicable
securities if any are purchased. If a dealer is used in a sale, we may sell
the securities to the dealer as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at
the time of resale.
We or our agents may solicit offers to purchase securities from time to
time. Unless otherwise indicated in a prospectus supplement, any agent will be
acting on a best efforts basis for the period of its appointment.
In connection with the sale of securities, underwriters or agents may
receive compensation (in the form of discounts, concessions or commissions)
from us or from purchasers of securities for whom they may act as agents.
Underwriters may sell securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act
as agents. Underwriters, dealers and agents that participate in the
distribution of securities may be deemed to be underwriters as that term is
defined in the Securities Act, and any discounts or commissions received by
them from us and any profits on the resale of the securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such underwriter or agent will be identified, and any such compensation
received from us will be described, in the related prospectus supplement.
Underwriters, dealers and agents may be entitled, under agreements with us,
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the prospectus supplement, we will authorize agents and
underwriters to solicit offers by certain specified institutions to purchase
securities at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on a
specified date in the future. Institutions with whom such contracts may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions but shall in all cases be subject to our approval. Such contracts
will be subject only to those conditions set forth in the prospectus
supplement and the prospectus supplement will set forth the commission payable
for solicitation of such contracts. The obligations of any purchaser under any
such contract will be subject to the condition that the purchase of the
securities shall not be prohibited at the time of delivery under the laws of
the jurisdiction to which the purchaser is subject. The underwriters and other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for us or our affiliates in the
ordinary course of their respective businesses.
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The securities may or may not be listed on a national securities exchange or
traded in the over-the-counter market (other than the Class A Common Stock,
which is listed on the New York Stock Exchange). No assurance can be given as
to the liquidity of the trading market for any such securities.
If underwriters or dealers are used in the sale, until the distribution of
the securities is completed, SEC rules may limit the ability of any such
underwriters and selling group members to bid for and purchase the securities.
As an exception to these rules, representatives of any underwriters are
permitted to engage in certain transactions that stabilize the price of the
securities. Such transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the securities. If the
underwriters create a short position in the securities in connection with the
offerings (i.e., if they sell more securities than are set forth on the cover
page of the prospectus supplement) the representatives of the underwriters may
reduce that short position by purchasing securities in the open market. The
representatives of the underwriters may also elect to reduce any short
position by exercising all or part of any over-allotment option described in
the prospectus supplement. The representatives of the underwriters may also
impose a penalty bid on certain underwriters and selling group members. This
means that if the representatives purchase securities in the open market to
reduce the underwriters' short position or to stabilize the price of the
securities, they may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those shares as part of the
offering. In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of the securities to the
extent that it discourages resales of the securities. We make no
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the securities.
In addition, the representatives of any underwriters may determine not to
engage in such transactions or that such transactions, once commenced, may be
discontinued without notice.
LEGAL OPINIONS
McDermott, Will & Emery, Chicago, Illinois, will pass upon the legality of
the securities offered by this prospectus.
EXPERTS
The audited consolidated financial statements incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The statement of assets and liabilities related to the product lines sold to
Canandaigua Brands, Inc. as of April 9, 1999 and the related statement of
identified income and expenses for the year ended December 31, 1998, have been
incorporated by reference herein in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
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PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER
Canandaigua Brands, Inc.
300 WillowBrook Office Park
Fairport, New York 14450
INDEPENDENT AUDITORS
Arthur Andersen LLP
Suite 1500
100 Chestnut Street
Rochester, New York 14604-2494
LEGAL ADVISORS
To the Issuer To the Underwriter
McDermott, Will & Emery Cahill Gordon & Reindel
227 West Monroe Street 80 Pine Street
Chicago, Illinois 60606-5096 New York, New York 10005
TRUSTEE
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
REGISTRAR, TRANSFER AGENT AND PRINCIPAL PAYING AGENT
Citibank N.A., London
P.O. Box 18055
5 Carmelite Street
London EC4Y 0PA
LISTING AGENT, LUXEMBOURG PAYING AGENT AND TRANSFER AGENT
Paribas Luxembourg
10A Boulevard Royal
L-2093 Luxembourg
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No person is authorized to give any information or to make any representations
other than those contained or incorporated by reference in this Prospectus
Supplement or the Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell or
the solicitation of any offer to buy any securities other than the securities
described in this Prospectus Supplement or an 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 Supplement or
the Prospectus, nor any sale made hereunder and thereunder, shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date hereof or that the information contained or incorporated
by reference herein or therein is correct as of any time subsequent to the date
of such information
Table of Contents
Prospectus Supplement
Currencies..................................................... i
Forward-Looking Statements..................................... i
Industry Data.................................................. i
Summary........................................................ S-1
Risk Factors................................................... S-13
Use of Proceeds................................................ S-15
Capitalization................................................. S-15
Business....................................................... S-16
Management..................................................... S-26
Description of the Senior Credit Facilities.................... S-29
Description of the Notes....................................... S-31
The Subsidiary Guarantors...................................... S-70
Information Concerning the Subsidiary Guarantors............... S-70
Summary Historical Financial
Information of the Subsidiary Guarantors....................... S-92
Certain United States Federal Income Tax Considerations........ S-93
General Listing Information.................................... S-97
Plan of Distribution........................................... S-99
Legal Opinions................................................. S-100
Experts........................................................ S-100
Available Information.......................................... S-101
Incorporation of Certain Documents by Reference................ S-101
Prospectus
About this Prospectus.......................................... i
Where You Can Find More Information............................ ii
Special Note Regarding Forward-Looking Statements.............. ii
Canandaigua Brands, Inc........................................ 1
The Guarantors................................................. 1
Risk Factors................................................... 1
Use of Proceeds................................................ 4
Dividend Policy................................................ 4
Ratio of Earnings to Fixed Charges............................. 5
Description of Debt Securities................................. 5
Description of Preferred Stock................................. 10
Description of Depositary Shares............................... 11
Description of Class A Common Stock............................ 14
Plan of Distribution........................................... 16
Legal Opinions................................................. 17
Experts........................................................ 17
(Pounds)80,000,000
Canandaigua Brands, Inc
8 1/2% Series C Senior Notes due 2009
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CANANDAIGUA BRANDS, INC
Fine Wines, Spirits & Beers
Barclays Capital
