<PAGE> 1
- - --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number:
June 30, 1996 33-61516
THE ROBERT MONDAVI CORPORATION
Incorporated under the laws I.R.S. Employer Identification:
of the State of California 94-2765451
Principal Executive Offices:
7801 St. Helena Highway
Oakville, CA 94562
Telephone: (707) 259-9463
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
X
---------
As of August 31, 1996 there were issued and outstanding (i) 7,281,779 shares of
the Registrant's Class A Common Stock and (ii) 7,676,012 shares of the
Registrant's Class B Common Stock. The aggregate market value of the
Registrant's voting stock held by non-affiliates was $204,700,602 as of August
31, 1996.
- - --------------------------------------------------------------------------------
<PAGE> 2
PART I
ITEM 1. BUSINESS.
INTRODUCTION
The Company is a leading producer of premium table wines. The Company
markets wines worldwide under the following labels: Robert Mondavi, Woodbridge
by Robert Mondavi, Vichon, Byron, Opus One, Caliterra and Errazuriz.
The Company's products are available through all principal retail
channels for premium table wine, including fine restaurants, hotels, specialty
shops, supermarkets and club stores in all fifty states and 85 countries
throughout the world. Sales of the Company's products outside the United States
accounted for approximately 7% of net revenues in fiscal 1996.
The Robert Mondavi Winery was incorporated under the laws of California
in 1966, and the Company was incorporated under the laws of California in 1981
as a holding company for the various business interests of the Robert Mondavi
Winery. The Company's principal executive offices are located at 7801 St. Helena
Highway, Oakville, California 94562. Its telephone number is (707) 259-9463. As
used herein, unless the context indicates otherwise, the "Company" shall mean
The Robert Mondavi Corporation and its consolidated subsidiaries.
INDUSTRY BACKGROUND
"Table" wines are those with 7%-14% alcohol by volume and which are
traditionally consumed with food. Other wine products, such as sparkling wines,
wine coolers, pop wines and fortified wines, are not sold in commercial
quantities by the Company. To have a vintage date, a table wine must be made at
least 95% from grapes harvested, crushed and fermented in the calendar year
shown on the label and must use an appellation of origin (e.g. Napa Valley).
Table wines that retail at less than $3.00 per 750 ml. bottle are generally
considered to be generic or "jug" wines, while those that retail at $3.00 or
more per bottle are considered premium wines. The Company produces and sells
only premium table wines. The premium category is generally divided by the trade
into three segments: popular premium wines that retail at $3.00 to $7.00 per
bottle; super premium wines that retail at $7.01 to $14.00 per bottle; and ultra
premium wines that retail at over $14.00 per bottle. The Company also recognizes
a fourth segment, not generally recognized by the trade, consisting of
super-ultra premium wines that retail at above $20.00 per bottle. The Company
sells wines in each price segment of the premium table wine market.
PRODUCT LINES
The Company's business began in 1966 at the Robert Mondavi Winery in
Oakville where the Company produces its flagship products, the Robert Mondavi
Napa Valley reserve, district and varietal wines. The Napa Valley wines are
marketed under the prestigious "Robert Mondavi" label. The principal Napa Valley
offerings include Cabernet Sauvignon, Pinot Noir, Chardonnay and Fume Blanc.
In May 1994 the Robert Mondavi Coastal line of wines was introduced in
California. Distribution has since been expanded to additional markets,
resulting in Coastal sales of 399,000 cases and 184,000 cases in fiscal 1996 and
1995, respectively.
<PAGE> 3
The Woodbridge Winery, located in the Northern San Joaquin Valley in
Acampo, California, produces popular premium wines for sale under the
"Woodbridge" label. Although competitively priced, Woodbridge wines are made in
the Robert Mondavi tradition of quality, including oak barrel aging of its
Cabernet Sauvignon, Zinfandel, Chardonnay and Sauvignon Blanc wines. All of the
Woodbridge wines are vintage-dated and sold under varietal names, including
Cabernet Sauvignon, Chardonnay, Sauvignon Blanc and red and white Zinfandel.
The Vichon Winery, located on the Oakville Grade in the Napa Valley,
produces Napa Valley Cabernet Sauvignon, Merlot, Chardonnay and Chevrignon
wines. Chevrignon is a proprietary blend of two varietals, Sauvignon Blanc and
Semillon. Vichon also offers the Vichon California line of wines from select
California growing regions outside the Napa Valley. The Company recently
purchased 600,000 gallons of 1995 vintage wine from the Languedoc region of
France which will be imported to California for blending and bottling. The
Languedoc wines will be sold beginning in the Fall of 1996 under the new Vichon
Mediterranean line.
The Company purchased the Byron Winery located near Santa Maria in
1990. Byron Pinot Noir and Chardonnay are made in the traditional Burgundian
style of winemaking. To date, the Byron wines have been offered in only a few
prominent markets due to limited supply. The Company intends to broaden
distribution as production capacity increases. Construction of a new 32,000
square foot winery at Byron was completed in August 1996.
The Opus One Winery, located in Oakville across from the original
Robert Mondavi Winery, is a joint venture between the Company and a corporation
owned by members of the family of Baron Philippe de Rothschild, the owners of
Chateau Mouton-Rothschild, one of the first-growth wines of Bordeaux, France. At
Opus One, the Company and its partner employ unique production techniques which
balance the newest technology with traditional methods in a manner designed to
minimize mechanical handling of the grapes and the finished wine.
In March 1996 the Company and the Chadwick family of Chile formed a
50/50 joint venture, Vina Caliterra S.A., to produce and market the Caliterra
brand of Chilean premium wines. The Company also acts as the exclusive United
States importer of the Caliterra wines and the Chadwick family's Errazuriz
brand.
During fiscal 1996 the Company also completed the formation of a 50/50
joint venture, Solaria S.R.L., with Marchesi de' Frescobaldi to produce and
market ultra-premium and super-premium Italian wines under a new proprietary
label. Sales of the Italian wines are scheduled to commence during fiscal 1998.
MARKETING AND DISTRIBUTION
The Company sells its products through a wide variety of "on-sale"
retail establishments (meaning the wine is consumed on the premises), and
"off-sale" retail establishments (meaning the wine is purchased for consumption
off the premises). On-sale retailers include restaurants and hotels and off-sale
retailers include bottle shops, grocery stores, supermarkets and club stores.
Substantially all of the Company's wines are sold through a three-tier
system: the Company sells to wholesalers for resale to retailers, such as
restaurants and supermarkets, who sell the products to the consumer. Domestic
sales of the Company's wines are made through more than 100 independent wine and
spirits distributors. International sales are made through independent importers
and brokers.
3
<PAGE> 4
The Company's wines are distributed in California, Florida,
Pennsylvania and Southern Nevada by Southern Wine and Spirits, a large national
beverage distributor. Sales to Southern Wine and Spirits nationwide represented
approximately 28%, 29% and 26% of the Company's net revenues for the fiscal
years ended June 30, 1996, 1995 and 1994, respectively. Sales to the Company's
15 largest distributors represented 66% of the Company's net revenues in fiscal
1996. The Company's distributors also offer table wines of other companies that
directly compete with the Company's products.
Sales of the Company's wines in California accounted for approximately
22%, 23%, and 22% of the Company's net revenues for the fiscal years ended June
30, 1996, 1995 and 1994, respectively. Other major domestic markets include New
York, New Jersey, Texas, Pennsylvania and Florida where annual sales aggregated
25%, 26% and 25%, respectively, in each of the same fiscal periods.
GRAPE SUPPLY
In fiscal 1996, approximately 8% of the Company's total grape supply
came from Company-owned or leased vineyards, including approximately 35% of the
grape supply for wines produced at the Robert Mondavi Winery in Oakville. The
Company owns and leases vineyards throughout California as described in the
table below. Approximately 1,800 acres of the total amount indicated were added
by purchase or lease since the start of fiscal 1996, of which 800 acres were
planted and 1,000 acres were fallow.
<TABLE>
<CAPTION>
APPROXIMATE 1996
PLANTABLE ACREAGE
-----------------
LOCATION (1) PLANTED FALLOW TOTAL
- - ------------ ------- ------ -----
<S> <C> <C> <C>
NAPA VALLEY (2) 623 427 1,050
CARNEROS (3) 441 18 459
MENDOCINO (4) 58 252 310
MONTEREY 196 141 337
SAN JOAQUIN 87 -- 87
SAN LUIS OBISPO 434 -- 434
SANTA BARBARA (5) 1,104 529 1,633
----- ----- -----
Total 2,943 1,367 4,310
===== ===== =====
</TABLE>
(1) Excludes vineyards owned by the Opus One, Twin Oaks, Caliterra and Solaria
joint ventures, in each of which the Company owns a 50% interest. Vineyards
described are owned by the Company unless otherwise indicated.
(2) Includes 72 acres held pursuant to a 28 1/2-year lease that expires in
2024.
(3) Includes 45 acres held pursuant to a 15-year lease that expires in 2010.
(4) Includes 155 acres held pursuant to a 28-year lease that expires in 2023.
(5) Includes 56 acres held pursuant to a 2 1/2-year lease that expires in 1998
and 191 acres held pursuant to a 40-year lease that expires in 2011.
In addition to the grapes it grows in its own vineyards, the Company
purchases grapes in California from approximately 300 independent growers,
including approximately 100 growers in Napa Valley. The grower contracts range
from one-year spot market purchases to intermediate and long-term agreements.
4
<PAGE> 5
PHYLLOXERA
In recent years, phylloxera, a pest that feeds on susceptible grape
rootstocks, has infested Napa Valley vineyards planted with nonresistant
rootstock, principally the widely-used AXR #1 variety. The pest generally
renders a vine unproductive within a few years following initial infestation.
Although phylloxera over time decreases the amount of fruit that a vine
produces, it does not directly impair the quality of the fruit and there are no
known human health risks. No pesticide has been proven to be effective in
stopping the spread of phylloxera. The only known solution is to replant
infested vineyards with resistant rootstocks. Although the economic life of a
vineyard is normally 20 years, some of the Company's infested vineyards are at
or near the end of their economic lives. The economic effect of phylloxera
therefore depends upon the individual vineyard. It generally takes 3-5 years for
a replanted vineyard to bear grapes in commercial quantities.
Of the Company's 1,064 total acres of planted Napa Valley and Carneros
vineyards, 148 acres are planted with nonresistant rootstock and are infested
with phylloxera. The Company has recognized write-downs and adjusted the
remaining productive lives of this acreage. The remaining 916 acres of planted
Napa Valley and Carneros vineyards are on rootstocks the Company believes to be
resistant to this strain of phylloxera. The Company plans to remove its
remaining infested vineyards from production and to replant vineyards as
required to meet its production needs.
WINEMAKING
The Company's winemaking philosophy is to make wines in the traditional
manner by starting with high quality fruit and handling it as gently and
naturally as possible all the way to the bottle. Each of the Company's wineries
is equipped with modern equipment and technology that is appropriate for the
style and scale of the wines being produced. Examples include barrel
fermentation and aging and handling methods that allow the Company to produce
wines with elegance, body and complexity at high volumes.
The Company emphasizes traditional barrel aging as a cornerstone of its
winemaking approach. The Company has approximately 73,000 French and American
oak barrels in its statewide barreling system. The barrels vary in terms of age,
forest source and "toast" level. The Company views its barrels as key winemaking
assets and its substantial annual investment in new oak barrels enables it to
consistently produce premium quality wines and to accomplish both its economic
and stylistic objectives within its statewide system of wineries.
EMPLOYEES
As of June 30, 1996, the Company had 989 employees, 877 of whom were
full-time employees and 112 of whom were part-time. In addition, a significant
number of seasonal hourly employees are hired during each autumn harvest. None
of the Company's employees is represented by a labor union and the Company
believes that its relationship with its employees is good.
5
<PAGE> 6
TRADEMARKS
The Company has federal trademark registrations for wine of the marks
"ROBERT MONDAVI," "WOODBRIDGE" and the "Arch and Tower" motif used on the Robert
Mondavi Napa Valley label. Through its wholly-owned subsidiaries, the Company
has also federally registered the trademarks "VICHON and design" and "BYRON" for
wine. The Company also has foreign registrations of the trademarks "MONDAVI"
and/or "ROBERT MONDAVI" for goods covering wine in those countries it considers
to be the major winemaking countries of the world. The Opus One joint venture,
through the partnership to which it succeeded, has federal trademark
registrations for wine of the mark "OPUS ONE" and the "Silhouette Logo" used on
the Opus One label. Opus One, either directly or through its predecessor, also
has foreign registrations of the trademarks "OPUS" and/or "OPUS ONE" for goods
covering wine in those countries it considers to be the major winemaking
countries of the world. Each of the United States trademark registrations is
renewable indefinitely so long as the Company is making a bona fide usage of the
trademark.
ITEM 2. PROPERTIES.
The Company operates five wineries, including Opus One which is
co-managed with the owners of Chateau Mouton-Rothschild. The current annual
production capacity is up to 600,000 cases at the Robert Mondavi Winery in
Oakville, 4.5 million cases at Woodbridge, 100,000 cases at Vichon, 75,000 cases
at Byron and 25,000 cases at Opus One. The Woodbridge winery serves as a central
warehouse and distribution point for all of the Company's wines. For information
regarding the Company's vineyards, see "Grape Supply" under Item 1 above.
The Company also leases at market rates approximately 178,000 square
feet of administrative and warehouse space under various leases expiring between
March 1997 and January 2001. The Company believes that its current facilities,
leased and owned, are adequate for their current uses. The Company is in the
process of expanding and improving its winery facilities as described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to litigation in the ordinary course of its
business. In the opinion of management, the ultimate outcome of existing
litigation will not have a material adverse effect on the Company's consolidated
financial condition or the results of its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the Company's fourth quarter ended June 30, 1996.
6
<PAGE> 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Prior to June 10, 1993, the date of the Company's initial public
offering at $13.50 per share, there was no public market for the Company's Class
A Common Stock. Since June 10, 1993, the Class A Common Stock of the Company has
been traded in the Nasdaq National Market under the symbol "MOND." The following
table sets forth the high and low closing prices for the Class A Common Stock on
the Nasdaq National Market for the periods indicated as reported by Nasdaq.
<TABLE>
<CAPTION>
Class A Common Stock
------------------------
High Low
----------- ----------
<S> <C> <C>
1995 Fiscal Year:
First Quarter 9 5/8 6 1/2
Second Quarter 11 7/8 8 3/8
Third Quarter 13 7/8 10 3/8
Fourth Quarter 17 1/2 12 1/8
1996 Fiscal Year:
First Quarter 26 17 5/8
Second Quarter 32 1/2 22 5/8
Third Quarter 31 25 3/4
Fourth Quarter 33 3/4 24 3/4
1997 Fiscal Year:
First Quarter (through August 31) 32 1/2 26 1/2
</TABLE>
At June 30, 1996, there were approximately 1,300 record holders of the
Class A Common Stock. All of the Company's outstanding Class B Common Stock is
owned by members of the immediate family of Robert Mondavi or trusts for the
benefit of family members. There is no established public trading market for the
Class B Common Stock, but the Class B Common Stock is convertible on a
share-for-share basis into Class A Common Stock.
The Company has never declared or paid dividends on its Common Stock
and anticipates that all earnings will be retained for use in its business. The
payment of any future dividends will be at the discretion of the Board of
Directors and will continue to be subject to certain limitations and
restrictions under the terms of the Company's indebtedness to certain
institutional lenders, including a prohibition on the payment of dividends
without the prior written consent of such lenders.
7
<PAGE> 8
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Gross revenues $ 253,540 $ 210,361 $ 176,236 $ 177,748 $ 154,349
Less excise taxes 12,710 10,892 9,209 9,608 8,755
--------- --------- --------- --------- ---------
Net revenues 240,830 199,469 167,027 168,140 145,594
Cost of goods sold 122,385 97,254 88,102 92,979 80,084
--------- --------- --------- --------- ---------
Gross profit 118,445 102,215 78,925 75,161 65,510
Operating expenses 70,707 64,160 56,198 52,191 44,870
--------- --------- --------- --------- ---------
Operating income 47,738 38,055 22,727 22,970 20,640
Other income (expense):
Interest (8,814) (8,675) (6,698) (7,486) (8,223)
Other 1,543 215 (305) (1,020) (384)
--------- --------- --------- --------- ---------
Income before income taxes 40,467 29,595 15,724 14,464 12,033
Provision for income taxes 16,029 11,775 6,212 5,801 4,928
--------- --------- --------- --------- ---------
Net income $ 24,438 $ 17,820 $ 9,512 $ 8,663 $ 7,105
========= ========= ========= ========= =========
Earnings per share $ 1.61 $ 1.39 $ .75 $ .83 $ .69
========= ========= ========= ========= =========
Weighted average number of common
shares and equivalents
outstanding (1) 15,203 12,787 12,731 10,385 10,233
========= ========= ========= ========= =========
BALANCE SHEET DATA
Working capital $ 152,757 $ 116,899 $ 59,493 $ 90,075 $ 83,246
Long-term debt, less
current portion 123,713 113,017 55,902 84,203 107,429
Total debt 127,828 119,088 107,409 95,237 111,232
Total liabilities 172,940 157,752 137,884 127,558 140,602
Shareholders' equity (2) 188,255 124,562 106,352 96,775 56,294
Total assets 361,195 282,314 244,236 224,333 196,896
</TABLE>
- - -----------------------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in computing earnings
per share.
(2) The Company has never paid or declared dividends on its common stock.
8
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<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING DATA (UNAUDITED)
CASES SOLD (3):
Robert Mondavi (4) 756 613 474 468 483
Woodbridge 4,466 3,767 3,281 3,406 3,063
Vichon (5) 172 143 96 92 51
Byron 32 27 22 25 21
Imports 11 -- -- -- --
--------- --------- --------- --------- ---------
Total 5,437 4,550 3,873 3,991 3,618
========= ========= ========= ========= =========
AVERAGE NET SELLING PRICE (6):
Robert Mondavi (7) $ 88.88 $ 91.02 $ 93.58 $ 91.09 $ 90.24
Woodbridge 34.76 34.31 34.09 33.80 30.61
Vichon (8) 67.25 65.94 69.11 67.61 80.94
Byron 120.10 115.76 112.65 102.82 95.78
Imports 55.78 -- -- -- --
Company average net
selling price $ 43.86 $ 43.42 $ 42.70 $ 41.73 $ 39.65
</TABLE>
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(3) Case information based on industry standard 9-liter case.
(4) Includes 399,000 cases, 184,000 cases and 27,000 cases of Robert
Mondavi Coastal sold in fiscal 1996, 1995 and 1994, respectively.
(5) Includes 135,000 cases, 108,000 cases, 56,000 cases and 51,000 cases of
Vichon California sold in fiscal 1996, 1995, 1994 and 1993,
respectively.
(6) Average net selling price is reported on a per-case basis and
represents net revenues received per brand, excluding net revenues from
bulk wine and grape sales, divided by the total number of cases sold
during the period.
(7) Excluding the impact of Robert Mondavi Coastal, average net selling
price would have been $113.16, $99.63 and $94.72 for fiscal 1996, 1995
and 1994, respectively.
(8) Excluding the impact of Vichon California, average net selling price
would have been $90.95, $89.93, $83.87 and $78.58 for fiscal 1996,
1995, 1994 and 1993, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
INTRODUCTION The Company was founded in 1966 to make quality premium table wines
that would compete with the finest wines of the world. The Company's strategy is
to sell its wines across all principal price segments of the premium wine
market.
Fiscal 1996 was a year of significant accomplishment and growth for Robert
Mondavi. The Company saw increasing demand for its wines, which led to most of
its products being placed on allocation during the year. The Company also
experienced increasing grape and bulk wine costs due to an industry-wide
shortage of premium grapes. The Company expects the industry's premium grape
shortage to continue in fiscal 1997. To improve its future grape supply, the
Company added approximately 1,500 acres of premium California vineyards and
vineyard land through acquisitions and long-term leases during the fiscal year.
The Company also added another 300 acres during the first quarter of fiscal
1997.
In addition, the Company secured international sources of premium wine during
the year by establishing a new joint venture, Caliterra, to produce and market
premium wines from Chile and by purchasing premium wines from the Languedoc
region of France that will be introduced under the new Vichon Mediterranean
line. The Company also established a joint venture, Solaria, to produce and
market premium wines from Italy. The Company plans to begin importing and
selling these Italian wines during fiscal 1998.
FORWARD-LOOKING STATEMENTS This Form 10-K and other information provided from
time to time by the Company contain historical information as well as
forward-looking statements about the Company, the premium wine industry and
general business and economic conditions. Such forward-looking statements
include, for example, projections or predictions about the Company's future
growth, consumer demand for its wines, including new brands and brand
extensions, margin trends, the premium wine grape market and the Company's
anticipated future investment in vineyards and other capital projects. Actual
results may differ materially from the Company's present expectations. Among
other things, reduced consumer spending or a change in consumer preferences
could reduce demand for the Company's wines. Similarly, competition from
numerous domestic and foreign vintners could affect the Company's ability to
sustain volume and revenue growth. The price of grapes, the Company's single
largest product cost, is beyond the Company's control and higher grape costs may
put more pressure on the Company's gross profit margin than is currently
forecast. Interest rates and other business and economic conditions could
increase significantly the cost and risks of projected capital spending. For
these and other reasons, no forward-looking statement by the Company can nor
should be taken as a guarantee of what will happen in the future.
KEY ACCOUNTING MATTERS The Company uses the last-in, first-out (LIFO) method of
valuing its wine inventories. The LIFO method attempts to match the most current
inventory cost with sales for the period. LIFO adjustments can increase or
decrease the Company's cost of goods sold as determined under alternative
valuation methods, and such variances can be significant and unpredictable since
LIFO adjustments depend on many interrelated factors not all of which are within
the Company's control. In the premium wine business, the difference between LIFO
and FIFO (first-in, first-out) inventory costs can be significant due to the
extended period of time that wines remain in inventory, typically from one to
three years or longer depending on the style and variety of wine. The use of the
LIFO method has led, and will continue to lead, to volatility in quarterly and
annual financial results. For example, the Company's LIFO provision resulted in
reductions in FIFO costs of goods sold in the amount of approximately $545,000,
$9.2 million and $4.6 million in fiscal 1996, 1995 and 1994, respectively.
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<PAGE> 11
The Company's joint venture interests in Opus One, Caliterra and Solaria are
accounted for as investments under the equity method. Accordingly, the Company's
share of their results is reflected in "equity in net income of joint ventures"
and "investments in joint ventures" on the Consolidated Statements of Income and
Consolidated Balance Sheets, respectively. The Company also imports wines under
importing and marketing agreements with certain of its joint ventures and their
affiliates. Under the terms of these agreements the Company purchases wine for
resale in the United States. Revenues and expenses related to importing and
selling these wines are included in the appropriate sections of the Consolidated
Statements of Income.
In October 1995, Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation," was issued. The Company is required
to adopt this standard in fiscal 1997. This standard encourages companies to use
the fair value based method to measure compensation cost, but it allows the
Company to continue measuring compensation cost using the intrinsic value based
method as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." The Company intends to continue applying the intrinsic value based
method and as a result, adoption of SFAS 123 will not have any effect on the
Company's consolidated financial statements other than to require disclosure of
the pro forma effect on net income and earnings per share of using the fair
value based method of accounting.
PHYLLOXERA The Company accounts for its phylloxera-infested vineyards by
determining on a vineyard-by-vineyard basis if the projected future net cash
flow exceeds the net book value of such vineyard; if it does not, the net book
value is written down to the present value of the currently projected future net
cash flow from that vineyard. Each infested vineyard's remaining useful life is
reduced to its projected remaining productive life and the resulting increased
annual depreciation is added to the cost of grapes harvested from that vineyard,
increasing inventory and ultimately cost of goods sold. The Company has
recognized write-downs and adjusted the remaining productive lives for all of
its vineyards believed to be susceptible to phylloxera.
The increased cost of goods sold resulting from such additional depreciation, as
well as the vineyard write-downs, are set forth in the table below on an actual
pre-tax basis for fiscal 1990 through fiscal 1996 and on an estimated pre-tax
basis for fiscal 1997 through fiscal 1998:
<TABLE>
<CAPTION>
ACCOUNTING FOR PHYLLOXERA IMPACT ON A PRE-TAX BASIS (1)
Actual
-------------------------------------------------------------- Estimated
Fiscal Year Ended June 30, (Unaudited)
--------------------------------------------------------------- ----------------
1993 Total Total
and 1990- Projected
Prior 1996 1997-1998
1996 1995 1994 (4 years) (7 years) (2 years)
---- ---- ----- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Cost of goods sold impact $226 $330 $375 $ 992 $1,923 $100
Vineyard write-downs -- 260 84 612 956 --
---- ---- ---- ------ ------ ----
Total $226 $590 $459 $1,604 $2,879 $100
==== ==== ==== ====== ====== ====
</TABLE>
- - ---------------
(1) Data set forth in this table represent accounting for vineyards known
to be currently infested with phylloxera. At June 30, 1996 and 1995,
all vineyards located in areas where phylloxera is present and that are
planted with non-resistant rootstock have been infested.
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<PAGE> 12
SEASONALITY AND QUARTERLY RESULTS The Company has historically experienced and
expects to continue experiencing seasonal and quarterly fluctuations in its net
revenues, cost of goods sold, and net income. Sales volume tends to increase in
advance of holiday periods, before price increases go into effect, and during
promotional periods, which generally last for one month. Sales volume tends to
decrease if distributors begin a quarter with larger than standard inventory
levels. The timing of releases for certain wines, such as Cabernet Sauvignon
Reserve futures, which may be shipped in either the third or fourth fiscal
quarter, depending on the aging requirements of the vintage, also can have a
significant impact on quarterly results. Additionally, the Company may schedule
price increases on July 1, which, when combined with June promotions and
intensive sales force efforts to meet fiscal year goals, can result in increased
sales in the Company's fourth fiscal quarter and lower than average sales in the
Company's first fiscal quarter. Significant fluctuations in quarterly financial
results have also historically resulted and are expected to continue to result
from adjustments that are required by the Company's LIFO method of valuing
inventories.
The following table sets forth certain information regarding the Company's net
revenues and net income for each of the last eight fiscal quarters:
<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED FISCAL 1995 QUARTER ENDED
------------------------------------------------- ---------------------------------------------
SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30
------- ------- ------- ------- ------- ------- ------- -------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $45.5 $70.8 $58.4 $66.1 $35.0 $57.6 $52.7 $54.2
% of annual net revenues 18.9% 29.4% 24.3% 27.4% 17.5% 28.9% 26.4% 27.2%
Net income $ 4.5 $ 8.1 $ 5.9 $ 5.9 $ 1.4 $ 5.7 $ 5.7 $ 5.0
% of annual net income 18.4% 33.2% 24.2% 24.2% 8.4% 31.8% 31.8% 28.0%
</TABLE>
Seasonal cash requirements increase just after harvest in the fall as a result
of contract grape payments and, to a lesser degree, due to the large seasonal
work force employed in both the vineyards and wineries during harvest. Also,
many grape contracts include a deferral of a portion of the payment obligations
until April 1st of the following calendar year, resulting in significant cash
payments on March 31 of each year. As a result of harvest costs and the timing
of its contract grape payments, the Company's borrowings, net of cash, generally
peak during December and March of each year. Cash requirements also fluctuate
depending on the level and timing of capital spending and joint venture
investments. The following table sets forth the Company's total borrowings, net
of cash, at the end of each of its last eight fiscal quarters:
<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED FISCAL 1995 QUARTER ENDED
---------------------------------------- ----------------------------------------
SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30
------- ------- ------- ------- ------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total borrowings,
net of cash $ 81.4 $105.1 $134.1 $128.2 $108.1 $112.2 $124.4 $118.2
</TABLE>
12
<PAGE> 13
PERIOD TO PERIOD COMPARISON The following table sets forth, for the periods
indicated, selected income statement data expressed as a percentage of net
revenues:
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET REVENUES FOR THE
FISCAL YEAR ENDED JUNE 30,
---------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Gross revenues 105.3% 105.5% 105.5%
Less excise taxes 5.3 5.5 5.5
----- ----- -----
Net revenues 100.0 100.0 100.0
Cost of goods sold 50.8 48.8 52.7
----- ----- -----
Gross profit 49.2 51.2 47.3
Operating expenses 29.4 32.1 33.7
----- ----- -----
Operating income 19.8 19.1 13.6
Other income (expense):
Interest (3.6) (4.3) (4.0)
Other 0.6 -- (0.2)
----- ----- -----
Income before income taxes 16.8 14.8 9.4
Provision for income taxes 6.7 5.9 3.7
----- ----- -----
Net income 10.1% 8.9% 5.7%
===== ===== =====
</TABLE>
THREE YEARS ENDED JUNE 30, 1996
GROSS REVENUES Gross revenues increased by 20.5% to $253.5 million in fiscal
1996 from fiscal 1995, and by 19.4% to $210.4 million in fiscal 1995 from $176.2
million in fiscal 1994. In fiscal 1996, sales volume increased by 19.5% to
5,437,000 cases from fiscal 1995, and by 17.5% to 4,550,000 cases in fiscal 1995
from 3,873,000 cases in fiscal 1994. The increase in gross revenues in fiscal
1996 and 1995 was primarily attributable to the increase in sales volume,
particularly in the Woodbridge and Robert Mondavi Coastal wines. During fiscal
1996 and 1995, many of the Company's wines were in limited supply, resulting in
wines being allocated to customers. The Company expects many of its wines will
remain on allocation during fiscal 1997.
EXCISE TAXES The Company's federal and state excise taxes increased by 16.5% to
$12.7 million in fiscal 1996 from fiscal 1995, and by 18.5% to $10.9 million in
fiscal 1995 from $9.2 million in fiscal 1994. The dollar increase in excise
taxes in fiscal 1996 and 1995 correlates to an increase in domestic sales
volume, since the excise tax is assessed on a per gallon basis and the excise
tax rate remained unchanged during these periods. Excise taxes as a percentage
of net revenues decreased in the 1996 and 1995 periods as a result of higher net
average selling prices per case during these periods.
NET REVENUES As a result of the above factors, net revenues increased by 20.7%
to $240.8 million in fiscal 1996 from fiscal 1995, and by 19.5% to $199.5
million in fiscal 1995 from $167.0 million in fiscal 1994. Net revenues per case
increased by 1.0% to $43.86 per case in fiscal 1996 from fiscal 1995, and by
1.7% to $43.42 per case in fiscal 1995 from $42.70 per case in fiscal 1994.
COST OF GOODS SOLD Cost of goods sold increased by 25.8% to $122.4 million in
fiscal 1996 from fiscal 1995, and by 10.4% to $97.3 million in fiscal 1995 from
$88.1 million in fiscal 1994. The dollar increase in fiscal 1996 reflects the
increase in sales volume and a 5.2% increase in average cost per case. The
increase in average cost per case in fiscal 1996 reflects increasing grape and
bulk wine prices, as well as lower grape yields on the Company's vineyards. The
dollar increase in fiscal 1995 reflects the increase in sales volume, partially
offset by a 6.1% decrease in average cost per case. The decrease in average cost
per case in fiscal 1995 reflects lower grape costs experienced during the 1994
harvest, purchases of bulk wine at favorable costs and improved capacity
utilization; however, these lower costs were partially offset by the shift in
mix to the Robert Mondavi brand, which has a higher cost per case.
13
<PAGE> 14
If inventories valued at LIFO cost had been valued at FIFO cost, then cost
of goods sold would have been $545,000, $9.2 million and $4.6 million higher in
fiscal 1996, 1995 and 1994, respectively. The Company expects the trend of
increasing grape and bulk wine costs to continue in fiscal 1997.
GROSS PROFIT As a result of the factors discussed above, gross profit increased
by 15.9% to $118.4 million in fiscal 1996 from fiscal 1995, and by 29.5% to
$102.2 million in fiscal 1995 from $78.9 million in fiscal 1994. The Company's
gross profit margins were 49.2%, 51.2% and 47.3% of net revenues for fiscal
1996, 1995 and 1994, respectively. The fiscal 1996 gross profit percentage
reflects the increase in average cost per case discussed above. The improved
gross profit percentage in fiscal 1995 was the result of higher net revenues per
case combined with the lower average cost per case described above. Rising grape
and bulk wine costs are expected to lead to a decrease in the gross profit
percentage in fiscal 1997.
OPERATING EXPENSES Operating expenses increased by 10.1% to $70.7 million in
fiscal 1996 from fiscal 1995, and by 14.2% to $64.2 million in fiscal 1995 from
$56.2 million in fiscal 1994. The ratio of operating expenses to net revenues
was 29.4% in fiscal 1996, 32.1% in fiscal 1995 and 33.7% in fiscal 1994. The
dollar increase in operating expenses in fiscal 1996 and 1995 was primarily
attributable to an increase in sales and marketing expenses and employee
compensation associated with increased sales volume and improved profitability.
The decrease in operating expense ratio in fiscal 1996 was due to an 8.0%
decrease in the average promotional dollars spent per case and economies of
scale in personnel and overhead costs achieved as a result of increased net
revenues. The decrease in operating expense ratio in fiscal 1995 was due to
economies of scale in personnel and overhead costs achieved as a result of
increased net revenues.
OPERATING INCOME As a result of the factors discussed above, operating income
increased by 25.2% to $47.7 million in fiscal 1996 from fiscal 1995, and by
67.8% to $38.1 million in fiscal 1995 from $22.7 million in fiscal 1994.
Operating income constituted 19.8% of net revenues in fiscal 1996, 19.1% in
fiscal 1995, and 13.6% in fiscal 1994.
INTEREST Interest expense increased by 1.1% to $8.8 million in fiscal 1996 from
fiscal 1995, and by 29.9% to $8.7 million in fiscal 1995 from $6.7 million in
fiscal 1994. The Company's average interest rates were 8.61%, 8.60% and 7.78% in
fiscal 1996, 1995 and 1994, respectively. The increase in interest expense in
fiscal 1995 was primarily attributable to increases in the Company's average
interest rate and average borrowing levels, as well as a decrease in the amount
of interest capitalized.
OTHER "Other" primarily consists of the Company's equity income in its joint
ventures and miscellaneous non-operating income and expense items.
In fiscal 1996, "Other" was $1,543,000 compared to $215,000 in fiscal 1995 and
$(305,000) in fiscal 1994. The improvement in "Other" in fiscal 1996 compared to
fiscal 1995 was mainly due to tax refunds and a decrease in vineyard
write-downs. The improvement in "Other" in fiscal 1995 compared to fiscal 1994
was primarily attributable to improved income from the Opus One joint venture.
INCOME BEFORE INCOME TAXES As a result of the factors discussed above, income
before income taxes increased by 36.8% to $40.5 million in fiscal 1996 from
fiscal 1995, and by 88.5% to $29.6 million in fiscal 1995 from $15.7 million in
fiscal 1994. Pre-tax income as a percentage of net revenues increased to 16.8%
in fiscal 1996 from 14.8% and 9.4% in fiscal 1995 and fiscal 1994, respectively.
PROVISION FOR INCOME TAXES The provision for income taxes and the Company's
effective tax rates were $16.0 million and 39.6%, $11.8 million and 39.8%, and
$6.2 million and 39.5% in fiscal 1996, 1995 and 1994, respectively.
14
<PAGE> 15
NET INCOME AND EARNINGS PER SHARE As a result of the above factors, net income
increased by 37.1% to $24.4 million in fiscal 1996 from fiscal 1995, and by
87.4% to $17.8 million in fiscal 1995 from $9.5 million in fiscal 1994. Earnings
per share were $1.61, $1.39 and $.75 in fiscal 1996, 1995 and 1994,
respectively. Fiscal 1996 earnings per share reflect the dilutive impact of the
increase in the weighted average shares outstanding resulting from the Company's
second public offering of stock in August 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of June 30, 1996, was $152.8 million compared to $116.9
million at June 30, 1995. The $35.9 million increase in working capital was
primarily attributable to a $29.3 million increase in inventories. Borrowings
under the Company's credit lines totaled $40.0 million at June 30, 1996,
compared to $28.2 million at June 30, 1995. The Company had a book overdraft of
$403,000 at June 30,1996, compared to a cash balance of $900,000 at June 30,
1995.
The Company has historically financed its growth through increases in borrowings
and cash flow from operations. In addition, the Company received $32.3 million
in net proceeds from its initial public offering of stock in June 1993 and an
additional $35.3 million in net proceeds from its second public offering of
stock in August 1995. During fiscal 1996, the Company's primary uses of capital
have been to finance the following: a $40.1 million increase in property, plant
and equipment (including vineyard land acquisitions and development, expansion
of the Woodbridge and Byron wineries and purchases of new oak barrels), a $29.3
million increase in inventories, $9.4 million in repayments of term debt and
$7.5 million in contributions to the Caliterra and Solaria joint ventures. In
addition to the net proceeds from the Company's August 1995 public offering of
stock, the primary sources of funds during fiscal 1996 were from the following:
$24.4 million in net income, as well as the non-cash impact on pre-tax income of
$10.3 million in depreciation and amortization, $11.9 million in net additions
under the Company's long-term credit lines, a $6.2 million increase in accounts
payable and accruals, $4.1 million in distributions from joint ventures and $2.4
million in proceeds from the exercise of stock options.
Management expects that the Company's working capital needs will grow
significantly to support expected future growth in sales volumes. Due to the
lengthy aging and processing cycles involved in premium wine production,
expenditures for inventory and fixed assets need to be made one to three years
or more in advance of anticipated sales. The Company's capital spending
requirements increased during fiscal 1996 due to vineyard acquisitions and
developments to improve the Company's long-term grape supply and to support
expected future sales volume growth. The Company currently expects its capital
spending requirements will total approximately $90.0 million for the two fiscal
years ending June 30, 1998. As of June 30, 1996, the Company had entered into
commitments totaling approximately $5.0 million for additional vineyard and
vineyard land acquisitions that were funded during the first quarter of fiscal
1997.
On July 8, 1996, the Company entered into unsecured term loans totaling $50.0
million. The proceeds from these loans were used to pay down long-term credit
line borrowings and to pay off secured term loans that matured in July 1996.
15
<PAGE> 16
The Company currently has credit lines that provide both short-term and
long-term borrowings. The short-term credit lines expire on December 27, 1996,
and have maximum credit available of $41.2 million. The long-term credit lines
expire on December 31, 1998, and have maximum credit available ranging from
$40.0 million to $50.0 million. The annual interest rates on these lines are
based on various bank programs and ranged from 5.69% to 9.00% during fiscal
1996.
Management believes that the Company's capital requirements over the next two
fiscal years will be met by additional borrowing under its credit lines and/or
new arrangements for term debt and by funds generated through operating
activities.
16
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Robert Mondavi Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 35 present fairly, in all material
respects, the financial position of The Robert Mondavi Corporation and its
subsidiaries at June 30, 1996 and 1995, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1996,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICE WATERHOUSE LLP
- - -------------------------------
PRICE WATERHOUSE LLP
San Francisco, California
July 26, 1996
17
<PAGE> 18
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
JUNE 30,
--------
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash $ -- $ 900
Accounts receivable--trade, net 39,495 32,601
Advances to joint ventures 118 116
Inventories 142,565 113,375
Prepaid income taxes 2,370 --
Deferred income taxes 570 --
Prepaid expenses and other current assets 722 770
-------- --------
Total current assets 185,840 147,762
Property, plant and equipment, net 156,754 120,934
Investments in joint ventures 17,100 11,792
Other assets 1,501 1,826
-------- --------
Total assets $361,195 $282,314
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Book overdraft $ 403 $ --
Accounts payable--trade 13,733 9,411
Accrued payroll, bonuses and benefits 10,322 9,247
Other accrued expenses 2,828 1,986
Current portion of long-term debt 4,115 6,071
Income taxes payable -- 1,160
Deferred revenue 1,682 1,493
Deferred income taxes -- 1,495
-------- --------
Total current liabilities 33,083 30,863
Long-term debt, less current portion 123,713 113,017
Deferred income taxes 8,944 7,368
Deferred executive compensation 6,098 5,839
Other liabilities 1,102 665
-------- --------
Total liabilities 172,940 157,752
-------- --------
Commitments and contingencies (Note 12)
Shareholders' equity:
Preferred Stock: Authorized--5,000,000 shares
Issued and outstanding--no shares -- --
Class A Common Stock, without par value: Authorized--25,000,000 shares
Issued and outstanding--7,281,529 and 4,448,853 shares 73,402 34,441
Class B Common Stock, without par value: Authorized--12,000,000 shares
Issued and outstanding--7,676,012 and 8,325,781 shares 12,324 13,364
Paid-in capital 1,334 --
Retained earnings 101,195 76,757
-------- --------
188,255 124,562
-------- --------
Total liabilities and shareholders' equity $361,195 $282,314
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE> 19
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Gross revenues $ 253,540 $ 210,361 $ 176,236
Less excise taxes 12,710 10,892 9,209
--------- --------- ---------
Net revenues 240,830 199,469 167,027
Cost of goods sold 122,385 97,254 88,102
--------- --------- ---------
Gross profit 118,445 102,215 78,925
Selling, general and administrative expenses 70,707 64,160 56,198
--------- --------- ---------
Operating income 47,738 38,055 22,727
Other income (expense):
Interest (8,814) (8,675) (6,698)
Equity in net income of joint ventures 1,751 1,547 973
Other (208) (1,332) (1,278)
--------- --------- ---------
Income before income taxes 40,467 29,595 15,724
Provision for income taxes 16,029 11,775 6,212
--------- --------- ---------
Net income $ 24,438 $ 17,820 $ 9,512
========= ========= =========
Earnings per share: $ 1.61 $ 1.39 $ .75
========= ========= =========
Weighted average number of common shares
and equivalents outstanding 15,203 12,787 12,731
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
19
<PAGE> 20
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
SHARE-
SERIES A CLASS A CLASS B PAID-IN RETAINED HOLDERS'
PREFERRED STOCK COMMON STOCK COMMON STOCK CAPITAL EARNINGS EQUITY
--------------- ------------ ------------ ------- -------- ------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----- ----- ------ ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 -- $ -- 3,700 $32,858 9,026 $ 14,492 $ -- $ 49,425 $ 96,775
Net income 9,512 9,512
Conversion of Class B
Common Stock to Class A
Common Stock 700 1,127 (700) (1,127)
Issuance of Class A Common
Stock through Employee
Stock Purchase Plan 8 65 65
----- ----- ------ ------- ----- -------- -------- -------- --------
Balance at June 30, 1994 -- -- 4,408 34,050 8,326 13,365 -- 58,937 106,352
Net income 17,820 17,820
Conversion of Class B
Common Stock to Class A
Common Stock 1 1 (1) (1)
Exercise of Class A Common
Stock Options 18 208 208
Issuance of Class A Common
Stock through Employee
Stock Purchase Plan 22 182 182
----- ----- ------ ------- ----- -------- -------- -------- --------
Balance at June 30, 1995 -- -- 4,449 34,441 8,325 13,364 -- 76,757 124,562
Net income 24,438 24,438
Conversion of Class B
Common Stock to Class A
Common Stock 650 1,040 (650) (1,040)
Exercise of Class A Common
Stock Options including
related tax benefits 215 2,401 1,334 3,735
Issuance of Class A Common
Stock through public offering 1,955 35,323 35,323
Issuance of Class A Common
Stock through Employee
Stock Purchase Plan 13 197 197
----- ----- ------ ------- ----- -------- -------- -------- --------
Balance at June 30, 1996 -- $ -- $7,282 $73,402 7,675 $ 12,324 $ 1,334 $101,195 $188,255
===== ===== ====== ======= ===== ======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
20
<PAGE> 21
THE ROBERT MONDAVI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 24,438 $ 17,820 $ 9,512
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes (489) 710 1,126
Depreciation and amortization 10,263 8,854 7,955
Equity in net income of joint ventures (1,751) (1,547) (973)
Other 178 687 (305)
Changes in assets and liabilities:
Accounts receivable--trade (6,894) (501) 2,566
Inventories (29,319) (17,230) (10,377)
Prepaid income taxes (1,036) -- --
Other assets 148 (353) 431
Accounts payable--trade and accrued expenses 6,239 6,625 (779)
Income taxes payable (1,160) 733 (1,912)
Deferred revenue 189 (366) 41
Deferred executive compensation 259 516 (188)
Other liabilities 437 (29) (134)
-------- -------- --------
Net cash provided by operating activities 1,502 15,919 6,963
-------- -------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (40,084) (27,823) (19,088)
Distributions from joint ventures 4,102 482 681
Contributions to joint ventures (7,530) (458) (571)
-------- -------- --------
Net cash used in investing activities (43,512) (27,799) (18,978)
-------- -------- --------
Cash flows from financing activities:
Book overdraft 403 -- --
Net additions (repayments) under notes payable to banks -- (18,050) 18,950
Proceeds from issuance of long-term debt 40,368 43,547 7,557
Principal repayments of long-term debt (37,572) (13,818) (14,335)
Proceeds from issuance of Class A Common Stock 35,520 182 65
Exercise of Class A Common Stock options 2,401 208 --
Other (10) 318 (84)
-------- -------- --------
Net cash provided by financing activities 41,110 12,387 12,153
-------- -------- --------
Net increase (decrease) in cash (900) 507 138
Cash at the beginning of the year 900 393 255
-------- -------- --------
Cash at the end of the year $ -- $ 900 $ 393
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE> 22
THE ROBERT MONDAVI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Robert Mondavi Corporation (RMC) and its consolidated subsidiaries
(the Company) are primarily engaged in the production and sale of premium table
wine. The Company also markets wine under importing and marketing agreements.
The Company markets wines worldwide under the following labels: Robert Mondavi,
Woodbridge by Robert Mondavi, Vichon, Byron, Opus One, Caliterra and Errazuriz.
The Company sells its products principally to distributors for resale
to restaurants and retail outlets in the United States. A substantial part of
the Company's wine sales is concentrated in California and, to a lesser extent,
the states of New York, New Jersey, Texas, Pennsylvania, Florida and
Massachusetts. Export sales account for approximately 7% of net revenues, with
major markets in Canada, Europe and Asia.
A summary of significant accounting policies follows:
Basis of presentation
The consolidated financial statements include the accounts of RMC and
all its subsidiaries. All significant intercompany transactions and balances
have been eliminated. Investments in joint ventures are accounted for using the
equity method. Certain fiscal 1995 and 1994 balances have been reclassified to
conform with current year presentation.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Inventories
Inventories are valued at the lower of cost or market. Wine inventory
costs are determined using the dollar value last-in, first-out (LIFO) method,
applying the double extension pricing method to natural business units.
Inventory costs for bottling and other supplies are determined using the
first-in, first-out (FIFO) method. Costs associated with growing crops are
recorded as inventory and are recognized as wine inventory costs in the year in
which the related crop is harvested.
In accordance with the general practice in the wine industry, wine
inventories are included in current assets, although a portion of such
inventories may be aged for periods longer than one year.
Property, plant and equipment
Property, plant and equipment is stated at cost. Vineyards infested
with phylloxera are stated at the lower of cost or adjusted cost as determined
by the estimated future net cash flows (Note 3). Maintenance and repairs are
expensed as incurred. Costs incurred in developing vineyards, including related
interest costs, are capitalized until the vineyards become commercially
productive.
22
<PAGE> 23
Depreciation and amortization is computed using the straight-line
method, with the exception of barrels which are depreciated using an accelerated
method, over the estimated useful lives of the assets amounting to 20 years for
vineyards, 45 years for buildings and 3 to 12 years for machinery and equipment.
Estimated useful lives of vineyards infested with phylloxera are adjusted to the
Company's estimate of the remaining productive life of the vineyards ranging
from 1 to 6 years. Leasehold improvements are amortized over the estimated
useful lives of the improvements or the terms of the related lease, whichever is
shorter.
Other assets
Other assets include goodwill, loan fees and label design costs.
Goodwill, loan fees and label design costs are amortized on a straight-line
basis over 40 years, the terms of the related loans, and 5 years, respectively.
Advertising costs
Advertising costs are expensed in the year in which they are incurred.
Advertising expense totaled $3,073,000, $451,000 and $24,000, respectively, for
the year ended June 30, 1996, 1995 and 1994.
Income taxes
Deferred income taxes are computed using the liability method. Under
the liability method, taxes are recorded based on the future tax effects of the
difference between the tax and financial reporting bases of the Company's assets
and liabilities. In estimating future tax consequences, all expected future
events are considered, except for potential income tax law or rate changes.
Major customers
The Company sells the majority of its wines through distributors in the
United States and through brokers and agents in export markets. There is a
common ownership in several distributorships in different states that, when
considered to be one entity, represented 28%, 29% and 26%, respectively, of
gross revenues for the year ended June 30, 1996, 1995 and 1994. Trade accounts
receivable from these distributors at June 30, 1996 and 1995 totaled $11,498,000
and $9,657,000, respectively.
Allowance for uncollectible accounts
Accounts receivable--trade are presented net of an allowance for
uncollectible accounts totaling $500,000 and $300,000 at June 30, 1996 and 1995,
respectively. The provision for uncollectible accounts for the year ended June
30, 1996, 1995 and 1994 totaled $219,000, $127,000 and $76,000, respectively.
Wine futures program
The Company has a wine futures program whereby contracts to buy cased
wine are sold to distributors prior to the time the wine is available for
shipment. The agreement to deliver the wine in the future is recorded when the
Company receives the distributor's deposit representing the total purchase
price. Revenue relating to this program is deferred and recognized when the wine
is shipped. Deferred revenue relating to wine scheduled for shipment during the
next fiscal year is included as a current liability while the remainder of the
deferred revenue is included in other liabilities in the consolidated balance
sheet. Deferred revenue included in other liabilities at June 30, 1996 and 1995
totaled $23,000 and $14,000, respectively.
Earnings per share
Earnings per share have been computed by dividing net income by the sum
of the weighted average number of Class A and Class B common shares outstanding
plus the dilutive effect, if any, of common share equivalents for stock option
awards.
23
<PAGE> 24
Fair value of financial instruments
The fair value of the Company's notes payable to banks and long-term
debt is estimated based on the current market rates available to the Company for
debt of the same remaining maturities. At June 30, 1996, the carrying amount and
estimated fair value of notes payable to banks and long-term debt are
$127,828,000 and $132,141,000, respectively. At June 30, 1995, the carrying
amount and estimated fair value of notes payable to banks and long-term debt are
$119,088,000 and $125,177,000, respectively.
Derivative financial instruments
The Company has only a limited involvement with derivative financial
instruments and does not use them for trading purposes. Forward exchange
contracts are used to manage exchange rate risks on certain purchase commitments
denominated in foreign currencies. Gains and losses relating to firm purchase
commitments are deferred and are recognized as adjustments of carrying amounts
or in income when the hedged transaction occurs.
At June 30, 1996, the Company has outstanding forward exchange
contracts to purchase 13,100,000 French francs through November 1996 for the
U.S. dollar equivalent of $2,585,000. Using exchange rates outstanding as of
June 30, 1996, the U.S. dollar equivalent of the contracts is $2,542,000.
NOTE 2--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------
1996 1995
---- ----
<S> <C> <C>
Wine in production $ 95,747 $ 84,652
Bottled wine 46,247 32,460
Crop costs and supplies 13,097 9,333
----------- ----------
Inventories stated at FIFO cost 155,091 126,445
Reserve for LIFO valuation method (12,526) (13,070)
---------- ----------
$142,565 $113,375
</TABLE>
Wine inventory costs are determined using the LIFO method, which
attempts to match the most current inventory cost with sales for the period.
Information related to the FIFO method may be useful in comparing operating
results to those of companies not on LIFO. If inventories valued at LIFO cost
had been valued at FIFO cost, net income would have decreased by approximately
$329,000, $5,537,000 and $2,776,000, respectively, for the year ended June 30,
1996, 1995 and 1994.
Certain wine inventory levels were reduced in fiscal 1995 and 1994 in
an effort to better match inventory levels with sales requirements, resulting in
liquidations of prior year LIFO inventory levels. These liquidations reduced net
income by approximately $24,000 and $106,000 for the year ended June 30, 1995
and 1994, respectively.
24
<PAGE> 25
NOTE 3--PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment
consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------
1996 1995
---- ----
<S> <C> <C>
Land $ 38,235 $ 28,742
Vineyards 29,716 26,514
Machinery and equipment 99,211 81,096
Buildings 31,739 29,581
Vineyards under development 7,461 4,126
Construction in progress 21,429 12,928
--------- ---------
227,791 182,987
Less--accumulated depreciation (71,037) (62,053)
--------- ---------
$ 156,754 $ 120,934
========= =========
</TABLE>
Included in property, plant and equipment are assets leased under
capital leases with cost and accumulated depreciation totaling $6,514,000 and
$673,000, respectively, at June 30, 1996 and $4,912,000 and $3,055,000,
respectively, at June 30, 1995. Depreciation expense for machinery and equipment
under capital leases was $793,000, $366,000 and $455,000 for the year ended June
30, 1996, 1995 and 1994, respectively.
Included in property, plant and equipment is $532,000, $687,000 and
$1,337,000 of interest capitalized for the year ended June 30, 1996, 1995 and
1994, respectively.
The Company has detected phylloxera in certain of its Napa Valley
vineyards. Phylloxera attacks root systems of vines planted on susceptible
rootstock, significantly shortening the estimated useful life of the vineyard.
When phylloxera is discovered in a vineyard, the net book value of the vineyard
is written down to the present value of estimated future net cash flow if the
estimated future net cash flow is lower than the net book value of the vineyard,
resulting in an additional operating expense in the current year. This
additional operating expense totaled $260,000 and $84,000, respectively, for the
year ended June 30, 1995 and 1994. The estimated useful life of a vineyard
infested with phylloxera is adjusted to its projected remaining productive life,
resulting in increased wine inventory costs and ultimately impacting cost of
goods sold. The increase in cost of goods sold as a result of accelerating the
depreciation of infested vineyards totaled $226,000, $330,000 and $375,000,
respectively, for the year ended June 30, 1996, 1995 and 1994.
NOTE 4--INVESTMENTS IN JOINT VENTURES
During March 1996, the Company and Vina Errazuriz S.A. (Errazuriz),
Santiago, Chile, completed the formation of Vina Caliterra S.A. (Caliterra), a
50/50 joint venture created to produce and market wines from Chile. As of June
30, 1996, the Company had contributed $5,900,000 to this joint venture.
During April 1996, the Company and Marchesi de' Frescobaldi S.P.A.,
Florence, Italy, completed the formation of Solaria S.R.L. (Solaria), a 50/50
joint venture created to produce and market wines from Italy. As of June 30,
1996, the Company had contributed $1,417,000 to this joint venture.
25
<PAGE> 26
Investments in joint ventures are summarized below (in thousands). The
Company's interest in income and losses for each joint venture is stated within
parentheses.
<TABLE>
<CAPTION>
JUNE 30,
--------
1996 1995
---- ----
<S> <C> <C>
Opus One (50%) $ 9,238 $ 11,414
Twin Oaks (50%) 360 228
Caliterra (50%) 6,010 - -
Solaria (50%) 1,365 - -
Other 127 150
---------- ----------
$ 17,100 $ 11,792
========== ==========
</TABLE>
The condensed combined balance sheets and statements of operations of
the joint ventures, along with the Company's proportionate share, are summarized
as follows (in thousands):
BALANCE SHEETS
<TABLE>
<CAPTION>
COMBINED PROPORTIONATE SHARE
-------- -------------------
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current assets $ 22,136 $ 9,419 $ 11,038 $ 4,695
Other assets 33,440 32,305 16,623 16,018
---------- ---------- ---------- ----------
Total assets $ 55,576 $ 41,724 $ 27,661 $ 20,713
========== ========== ========== ==========
Current liabilities $ 6,084 $ 2,056 $ 3,042 $ 1,028
Other liabilities 16,057 16,425 8,029 8,213
Venturers' equity 33,435 23,243 16,590 11,472
---------- ---------- ---------- ----------
Total liabilities and venturers' equity $ 55,576 $ 41,724 $ 27,661 $ 20,713
========== ========== ========== ==========
</TABLE>
The Company's investments in joint ventures differ from the amount that
would be obtained by applying the Company's ownership interest to the venturers'
equity of these entities due to preferred capital accounts and capital account
differences specified in the joint venture agreements.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMBINED Proportionate Share
-------- -------------------
YEAR ENDED JUNE 30, Year Ended June 30,
------------------- -------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 17,171 $ 11,773 $ 10,052 $ 8,511 $ 5,887 $ 5,026
Cost of goods sold 7,179 4,017 4,449 3,590 2,009 2,225
---------- ---------- ---------- ---------- ---------- ----------
Gross profit 9,992 7,756 5,603 4,921 3,878 2,801
Other expenses 6,588 5,101 4,974 3,184 2,550 2,487
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 3,404 $ 2,655 $ 629 $ 1,737 $ 1,328 $ 314
========== ========== ========== ========== ========== ==========
</TABLE>
The Company's equity in net income of certain joint ventures is higher
than the amount which would be obtained by applying the Company's interest in
income and losses to the net income or loss of those entities due to special
profit allocations and preferred interest amounts specified in the joint venture
agreements.
The Company has preferred capital accounts in Opus One totaling
$487,000 and $3,276,000 at June 30, 1996 and 1995, respectively. During December
1995, preferred capital accounts totaling $2,789,000 were distributed to the
Company in accordance with the joint venture agreement. The remaining balance of
$487,000 represents the agreed value of certain land and capital improvements
contributed to Opus One by the Company.
26
<PAGE> 27
The preferred capital accounts earn interest at 8.25% at June 30, 1996, and at
variable rates ranging from 1.63% to 10.16% at June 30, 1995 and 1994. During
the year ended June 30, 1996, 1995 and 1994, the Company earned preferred
interest on these accounts of $141,000, $220,000, and $208,000, respectively. As
of June 30, 1996, $21,000 of preferred interest was unpaid.
NOTE 5--OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Goodwill $ 696 $ 696
Loan fees 910 910
Label design costs 685 662
Other 239 354
---------- ----------
2,530 2,622
Less--accumulated amortization (1,029) (796)
---------- ----------
$ 1,501 $ 1,826
========== ==========
</TABLE>
NOTE 6--ACCRUED PAYROLL, BONUSES AND BENEFITS
Accrued payroll, bonuses and benefits consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------
1996 1995
---- ----
<S> <C> <C>
Accrued vacation $ 2,244 $ 2,277
Accrued profit sharing and bonuses 4,718 4,296
Accrued payroll and payroll taxes 1,921 1,254
Accrued retirement 1,167 946
Other 272 474
---------- ----------
$ 10,322 $ 9,247
========== ==========
</TABLE>
The Company has a tax-qualified defined contribution retirement plan
(the Plan) which covers substantially all of its employees. Company
contributions to the Plan are 7% of eligible compensation paid to participating
employees. Company contributions to the Plan were $1,925,000, $1,797,000 and
$1,649,000 for the year ended June 30, 1996, 1995 and 1994, respectively.
Contributions to the Plan are limited by the Internal Revenue Code. The Company
has a non-qualified supplemental executive retirement plan to restore
contributions limited by the Plan. This plan is administered on an unfunded
basis. The unfunded liability relating to this plan totaled $623,000 and
$371,000 at June 30, 1996 and 1995, respectively.
The Company has a deferred executive incentive compensation plan with
certain present and past key officers. Under the provisions of this plan, units
are awarded to participants at the discretion of the Board of Directors. The
units each earn a percentage of Company profits as defined by the plan over a
five year vesting period. In February 1993, the Board of Directors determined
that no future units will be awarded under the plan; however, the plan remains
in place with respect to existing units. Subject to participant election for
deferral of payments and payment terms for participants no longer in the plan,
the accrued amounts are distributable in cash when fully vested. The
compensation earned on the units and accumulated interest on fully vested
amounts not distributed, are accrued but unfunded. The current portion of this
liability of $1,400,000 and $806,000 at June 30, 1996 and 1995, respectively, is
included in accrued profit sharing and bonuses presented above.
27
<PAGE> 28
NOTE 7--LONG-TERM DEBT AND NOTES PAYABLE TO BANKS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------
1996 1995
----- -----
<S> <C> <C>
Long-term unsecured credit lines $ 40,000 $ 28,150
Fixed rate secured term loans;
interest rates 6.33% to 10.00% at June 30, 1996;
principal and interest payable monthly; due 1996--2005 41,238 50,009
Fixed rate unsecured term loans;
interest rate 8.92% at June 30, 1996;
interest payable quarterly through January 1, 1997;
principal and interest payable quarterly from April 1, 1997; due 2004 40,000 40,000
Capitalized lease obligations;
interest rates 6.96% to 8.00% at June 30, 1996;
principal and interest payable monthly; due 2002--2010 6,448 736
Other borrowings, interest rate 10.00% at June 30, 1996 142 193
--------- ---------
127,828 119,088
Less--current portion (4,115) (6,071)
--------- ---------
$ 123,713 $ 113,017
========= =========
</TABLE>
Aggregate annual maturities of long-term debt at June 30, 1996 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
--------
<S> <C>
1997 $ 4,115
1998 46,790
1999 10,960
2000 10,252
2001 10,103
Thereafter 45,608
----------
$ 127,828
==========
</TABLE>
The Company has unsecured credit lines with two banks that provide for
both short-term and long-term borrowings. The short-term credit lines expire on
December 27, 1996, and have maximum credit available of $41,150,000. The
long-term credit lines expire on December 31, 1998, and have maximum credit
available ranging from $40,000,000 to $50,000,000. The credit lines bear
interest, which is payable monthly, at rates determined under various bank
interest programs, ranging from 6.09% to 8.25% at June 30, 1996. There were no
borrowings outstanding under the Company's short-term credit lines as of June
30, 1996 and 1995.
On July 8, 1996, the Company entered into unsecured term loans totaling
$50,000,000 that bear interest, payable semiannually, at a fixed rate of 7.39%.
Semiannual principal payments commence on July 8, 1998. The proceeds from these
loans were used to refinance secured term loans that matured in July 1996 and to
pay down long-term credit line borrowings. The fixed rate secured term loans
totaling $18,856,000 that were refinanced during July 1996 are classified as
long-term at June 30, 1996.
Property, plant and equipment with a net book value of approximately
$72,000,000 at June 30, 1996 is pledged as collateral for long-term debt.
Subsequent to the refinancing of fixed rate secured term loans described above,
property, plant and equipment with a net book value of approximately $42,000,000
was pledged as collateral for long-term debt. The terms of the unsecured credit
lines and certain long-term debt agreements include covenants that require the
maintenance of various minimum financial ratios and other covenants. The most
restrictive of these covenants requires the ratio of net tangible assets to debt
maturing in excess of one year to be 1.75 to 1 or greater. The Company was in
compliance with all such covenants during the year ended June 30, 1996.
28
<PAGE> 29
NOTE 8--INCOME TAXES
The provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Current:
Federal $14,760 $ 9,182 $4,435
State 1,758 1,883 651
------- ------- ------
16,518 11,065 5,086
------- ------- ------
Deferred:
Federal (824) 874 1,178
State 335 (164) (52)
------- ------- ------
(489) 710 1,126
------- ------- ------
$16,029 $11,775 $6,212
======= ======= ======
</TABLE>
Income tax expense differs from the amount computed by multiplying the
statutory federal income tax rate times income before taxes, due to the
following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 3.4 4.6 3.0
Permanent differences 0.5 0.7 1.1
Other 0.7 (0.5) 0.4
---- ---- ----
39.6% 39.8% 39.5%
==== ==== ====
</TABLE>
The approximate effect of temporary differences and carryforwards that
give rise to deferred tax balances at June 30, 1996 and 1995 are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------
1996 1995
------- -------
<S> <C> <C>
GROSS DEFERRED TAX ASSETS
Liabilities and accruals $(1,388) $(1,442)
Deferred compensation (3,797) (3,211)
Tax credits (45) (350)
------- -------
Gross deferred tax assets (5,230) (5,003)
------- -------
GROSS DEFERRED TAX LIABILITIES
Property, plant and equipment 11,431 9,315
Retirement plans 583 485
Inventories 340 2,691
Investments in joint ventures 1,144 1,113
State taxes 106 262
------- -------
Gross deferred tax liabilities 13,604 13,866
------- -------
Net deferred tax liability $ 8,374 $ 8,863
======= =======
</TABLE>
The Company has foreign tax credits at June 30, 1996, that can be
carried forward five years. The state investment tax credits were fully utilized
during the year ended June 30, 1996.
During the year ended June 30, 1996, the Company recognized certain tax
benefits related to stock option plans in the amount of $1,334,000. These
benefits were recorded as an increase in prepaid income taxes and paid-in
capital.
29
<PAGE> 30
NOTE 9--SHAREHOLDERS' EQUITY
The authorized capital stock of the Company consists of Preferred
Stock, Class A Common Stock and Class B Common Stock.
On July 17, 1995 and December 22, 1993, 649,769 and 700,000 shares,
respectively, of Class B Common Stock, owned by a major shareholder, were
converted into 649,769 and 700,000 shares, respectively, of Class A Common
Stock. The conversion of the shares represents a non-cash financing activity for
purposes of the consolidated statement of cash flows.
On August 3, 1995, the Company completed a public offering of 1,955,000
shares of Class A Common Stock, resulting in net proceeds to the Company of
$35,323,000.
Each share of Class A Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes on all matters submitted
to a vote of the shareholders. The holders of the Class A Common Stock, voting
as a separate class, elect 25% of the total Board of Directors of the Company
and the holders of the Class B Common Stock, voting as a separate class, elect
the remaining directors.
All shares of common stock share equally in dividends, except that any
stock dividends are payable only to holders of the respective class. If
dividends or distributions payable in shares of stock are made to either class
of common stock, a pro rata and simultaneous dividend or distribution payable in
shares of stock must be made to the other class of common stock. Upon
liquidation, dissolution or winding up of the Company, after distributions as
required to the holders of outstanding Preferred Stock, if any, all shares of
Class A and Class B Common Stock share equally in the remaining assets of the
Company available for distribution.
The holders of the outstanding shares of Class B Common Stock and the
Company are parties to a Stock Buy-Sell Agreement. Subject to the provisions of
the Buy-Sell Agreement, each share of Class B Common Stock is convertible at the
option of the holder into Class A Common Stock on a share-for-share basis. The
Class A Common Stock is not convertible.
Included in retained earnings at June 30, 1996, is $1,800,000 of
undistributed income from joint ventures that has been accounted for using the
equity method.
NOTE 10--TRANSACTIONS WITH RELATED PARTIES (NOTE 4)
The Company has an agricultural, selling and administrative services
agreement with Opus One under which it earned fees totaling $846,000, $789,000
and $580,000 for the year ended June 30, 1996, 1995 and 1994, respectively. In
addition, the Company has purchased barrels and bulk wine from Opus One at
market value. Aggregate purchases of $146,000, $66,000 and $409,000 were made
for the year ended June 30, 1996, 1995 and 1994, respectively. Included in
advances to joint ventures are amounts due under the above arrangements and
receivables relating to charges for services and goods paid by the Company on
behalf of Opus One.
The Opus One joint venture agreement provides for a grape sourcing fee
through harvest year 1999 relating to grapes procured by the Company and
selected by Opus One for the production of Opus One wine. During the year ended
June 30, 1996, 1995 and 1994, Opus One purchased grapes from the Company in the
amount of $526,000, $509,000 and $529,000, respectively, of which $319,000,
$330,000 and $328,000, respectively, related to the grape sourcing fee. During
the year ended June 30, 1995 and 1994, payment of 50% of the grape sourcing fee
was deferred and recorded as a capital contribution to the preferred capital
account discussed at Note 4.
The Company imports and sells wines produced by Caliterra and
Errazuriz. During the year ended June 30, 1996, the Company purchased $1,547,499
and $585,430 of wine from Caliterra and Errazuriz, respectively, as part of its
importing arrangement. These amounts are included in accounts payable--trade at
June 30, 1996.
30
<PAGE> 31
During the year ended June 30, 1996, 1995 and 1994, the Company
purchased grapes under a long-term contract with the Twin Oaks joint venture
totaling $728,000, $615,000 and $436,000, respectively.
During the year ended June 30, 1996, 1995 and 1994, the Company
incurred fees for legal services, provided by a law firm in which a member of
its Board of Directors is a partner, totaling $95,000, $36,000 and $586,000,
respectively, and purchased grapes from a member of its Board of Directors
totaling $43,000, $98,000 and $139,000, respectively.
During the year ended June 30, 1994, the Company concluded the sale of
land to two major shareholders of the Company pursuant to an agreement reached
in February 1993. The land was sold at the appraised fair market value of
$759,000, resulting in a gain of $503,000.
NOTE 11--STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
Stock Options
In February 1993, the Company established two stock option plans--the
1993 Equity Incentive Plan for key employees and the 1993 Non-Employee
Directors' Stock Option Plan for non-employee members of the Board of Directors
(the Board) of the Company.
Equity Incentive Plan
Under the Equity Incentive Plan, the Company is authorized to grant
both incentive stock options and non-qualified stock options for up to 1,835,294
shares of Class A Common Stock. Incentive stock options may not be granted for
less than the fair market value of the Class A Common Stock at the date of
grant. Non-qualified stock options may not be granted for less than 50% of the
fair market value of the Class A Common Stock at the date of grant. The stock
options are exercisable over a period determined by the Board at the time of
grant, but no longer than ten years after the date they are granted.
On September 2, 1994, the Board granted 255,000 options to officers and
employees, which become exercisable over five years, to purchase Class A Common
Stock for $7-7/8 per share. On December 14, 1994, the Board granted 3,000
options to an employee, which vest in twelve equal monthly installments, to
purchase Class A Common Stock for $10-1/2 per share. On November 6, 1995, the
Board granted 2,500 options to an employee, which vest in twelve equal monthly
installments, to purchase Class A Common Stock for $30-5/8 per share. On
December 29, 1995, the Board granted 105,000 options to certain officers, which
vested immediately, to purchase Class A Common Stock for $27-5/8 per share.
Non-Employee Directors' Stock Option Plan
Under the Non-Employee Directors' Stock Option Plan the Company is
authorized to grant options for up to 100,000 shares of Class A Common Stock.
These options may not be granted for less than the fair market value of the
Class A Common Stock at the date of grant. Non-employee directors are granted
options when they are elected for the first time to the Board. These options
become exercisable over five years from the date of grant and expire ten years
after the date of grant. Incumbent non-employee directors are granted options
annually on the date of the Annual Meeting of Shareholders. These options vest
in twelve equal monthly installments and expire ten years after the date of
grant.
31
<PAGE> 32
On December 14, 1994, each of the incumbent non-employee directors was
granted 3,000 options, which vest in twelve equal monthly installments, to
purchase Class A Common Stock for $10-1/2 per share. On November 6, 1995, each
of the incumbent non-employee directors was granted 2,500 options, which vest in
twelve equal monthly installments, to purchase Class A Common Stock for $30-5/8
per share. On May 29, 1996, a new outside director was granted 5,345 options,
which become exercisable over five years, to purchase Class A Common Stock for
$28-1/16 per share.
Additional information relating to the stock option plans is as
follows:
<TABLE>
<CAPTION>
NON-EMPLOYEE
DIRECTORS'
EQUITY STOCK
INCENTIVE OPTION
PLAN PLAN
------------------------------------ ----------------------------------
EXERCISE EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE
OPTIONS PER SHARE OPTIONS PER SHARE
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Balance at June 30, 1993 1,187,500 $11 9/10 - $13 1/2 36,000 $11 9/10
Canceled (68,850) $11 9/10 --
--------- ------
Balance at June 30, 1994 1,118,650 $11 9/10 - $13 1/2 36,000 $11 9/10
Granted 258,000 $ 7 7/8 - $10 1/2 9,000 $10 1/2
Canceled (15,325) $11 9/10 --
Exercised (17,500) $11 9/10 --
--------- ------
Balance at June 30, 1995 1,343,825 $ 7 7/8 - $13 1/2 45,000 $10 1/2 - $11 9/10
Granted 107,500 $27 5/8 - $30 5/8 12,845 $28 1/16 - $30 5/8
Canceled (6,800) $ 7 7/8 - $11 9/10 --
Exercised (215,182) $ 7 7/8 - $11 9/10 --
--------- ------
Balance at June 30, 1996 1,229,343 $ 7 7/8 - $30 5/8 57,845 $10 1/2 - $30 5/8
========= ======
Exercisable at June 30, 1996 826,398 33,000
--------- ------
Available for grant at June 30, 1996 373,269 42,155
--------- ------
</TABLE>
Employee Stock Purchase Plan
In February 1993, the Company established the Employee Stock Purchase
Plan under which the Board will from time to time grant rights to eligible
employees to purchase Class A Common Stock. Under this plan, the Company is
authorized to grant rights to purchase up to 300,000 shares of Class A Common
Stock.
The purchase price is the lower of 85% of the fair market value on the
date the Company grants the right to purchase or 85% of the fair market value on
the date of purchase. Employees, through payroll deductions of no more than 15%
of their base compensation, may exercise their rights to purchase for the period
specified in the related offering. No compensation expense will be recorded in
connection with the plan. During the year ended June 30, 1996, 1995 and 1994,
shares totaling 12,725, 22,258 and 8,395, respectively, were issued under the
Employee Stock Purchase Plan at average prices of $15.47, $8.13 and $7.76 per
share, respectively.
32
<PAGE> 33
NOTE 12--COMMITMENTS AND CONTINGENCIES
The Company leases some of its office space, warehousing facilities,
vineyards and equipment under non-cancelable leases accounted for as operating
leases. Certain of these leases have options to renew. Rental expense amounted
to $2,126,000, $1,781,000 and $2,224,000, respectively, for the year ended June
30, 1996, 1995 and 1994. The Company also leases machinery and equipment under
capital leases. The minimum rental payments under non-cancelable operating and
capital leases at June 30, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
JUNE 30, LEASES LEASES
-------- ------ ------
<S> <C> <C>
1997 $1,011 $1,581
1998 1,011 1,315
1999 1,011 960
2000 1,011 608
2001 1,011 341
Thereafter 4,797 1,554
------- ------
9,852 $6,359
======
Less amount representing interest (3,404)
Present value of minimum lease
payments $ 6,448
=======
</TABLE>
Interest expense on capital lease obligations was $176,000, $50,000 and
$131,000 for the year ended June 30, 1996, 1995 and 1994, respectively.
The Company has guaranteed certain debt of Opus One in the amount of
$2,250,000.
The Company has contracted with various growers and certain wineries to
supply a large portion of its future grape requirements and a smaller portion of
its future bulk wine requirements. While most of these contracts call for prices
to be determined by market conditions, several long-term contracts provide for
minimum grape or bulk wine purchase prices.
The Company is subject to litigation in the ordinary course of
business. In the opinion of management, the ultimate outcome of existing
litigation will not have a material adverse effect on the Company's consolidated
financial condition or the results of its operations.
NOTE 13--SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest, net of amounts capitalized, was $7,999,000,
$8,614,000 and $6,249,000 for the year ended June 30, 1996, 1995 and 1994,
respectively. Cash paid for income taxes was $20,048,000, $10,322,000 and
$6,998,000 for the year ended June 30, 1996, 1995 and 1994, respectively.
Non-cash investing activities not included in the statements of cash
flows include capital lease obligations incurred during the year ended June 30,
1996 and 1995, totaling $5,944,000 and $570,000, respectively.
Non-cash financing activities not included in the statements of cash
flows include the conversions of stock in fiscal 1996 and 1994 (Note 9) and the
tax benefits related to stock option plans in fiscal 1996 (Note 8).
33
<PAGE> 34
NOTE 14--QUARTERLY HIGHLIGHTS (UNAUDITED)
Selected highlights for each of the fiscal quarters during the year
ended June 30, 1996 and 1995 are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Year ended June 30, 1996:
Net revenues $45,561 $70,786 $58,389 $66,094
Gross profit 22,093 34,142 28,304 33,906
Net income 4,557 8,059 5,881 5,941
Earnings per share .31 .52 .38 .38
Year ended June 30, 1995:
Net revenues $34,992 $57,553 $52,737 $54,187
Gross profit 16,565 28,400 27,808 29,442
Net income 1,450 5,693 5,692 4,985
Earnings per share .11 .44 .44 .38
</TABLE>
34
<PAGE> 35
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated by reference from
pages 2-4 of the registrant's definitive proxy statement dated September 20,
1996, as filed with the Commission.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
pages 7-11 of the registrant's definitive proxy statement dated September 20,
1996, as filed with the Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from
pages 5-6 of the registrant's definitive proxy statement dated September 20,
1996, as filed with the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from
page 13 of the registrant's definitive proxy statement dated September 20, 1996,
as filed with the Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
1) Financial Statements: PAGE
----
<S> <C>
Report of Independent Accountants 17
Consolidated Balance Sheets as of June 30, 1996 and 1995 18
Consolidated Statements of Income for the years ended
June 30, 1996, 1995 and 1994 19
Consolidated Statements of Changes in Shareholders' Equity
for the years ended June 30, 1996, 1995 and 1994 20
Consolidated Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994 21
Notes to Consolidated Financial Statements 22
2) Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts 38
3) Exhibits:
(1) Exhibit 3.1 Restated Articles of Incorporation
</TABLE>
35
<PAGE> 36
(2) Exhibit 3.2 Certificate of Amendment of Articles
of Incorporation filed on June 4,
1993.
(2) Exhibit 3.3 Restated Bylaws.
(1) Exhibit 10.1 Form of Registrant's Indemnification
Agreement for Directors and Officers
(1) Exhibit 10.2 Stock Buy-Sell Agreement between
Registrant and the holders of Class B
Common Stock, dated as of March 1,
1982
(1) Exhibit 10.3 First Amendment to Stock Buy-Sell
Agreement between Registrant and the
holders of Class B Common Stock, dated
as of March 8, 1993
(1) Exhibit 10.4 Registration Rights Agreement between
Registrant and the holders of Class B
Common Stock, dated as of February 26,
1993
(1) Exhibit 10.5 1993 Non-Employee Directors' Stock
Option Plan, and form of agreement
thereunder
(1) Exhibit 10.7 1993 Employee Stock Purchase Plan, and
form of plan offering document
thereunder
(1) Exhibit 10.8 Second Amended and Restated Executive
Incentive Compensation Plan, dated
July 1, 1988, as amended effective
June 30, 1992 and April 20, 1993
(1) Exhibit 10.9 Retirement Restoration Plan, effective
as of April 1, 1992
(1) Exhibit 10.11 Form of Supplemental Long Term
Disability Income Plan for certain
Executive Officers of Registrant
(1) Exhibit 10.12 Personal Services Agreement, dated as
of February 26, 1993, between
Registrant and Robert Mondavi
(1) Exhibit 10.14 Grape Purchase Agreement, dated August
7, 1992, between Registrant and Frank
E. Farella
(1) Exhibit 10.20 $9,400,000 Promissory Note, Deed of
Trust, Security Agreement and Fixture
Filing, with Assignment of Rents as
amended and Agreement Concerning
Special Requirements, dated December
15,1989, between Registrant and John
Hancock Mutual Life Insurance Company
36
<PAGE> 37
(1) Exhibit 10.21 $4,900,000 Promissory Note, Deed of
Trust, Security Agreement and Fixture
Filing, with Assignment of Rents as
amended and Agreement Concerning
Special Requirements between
Registrant and John Hancock Mutual
Life Insurance Company
(1) Exhibit 10.24 $5,600,000 Promissory Note, Deed of
Trust, Security Agreement and Fixture
Filing, with Assignment of Rents as
amended and Agreement Concerning
Special Requirements, dated December
29, 1989, between Registrant and John
Hancock Mutual Life Insurance Company
(1) Exhibit 10.27 Agreement of Guaranty, dated May 22,
1992, with Registrant as the guarantor
and John Hancock Mutual Life Insurance
Company as the lender guaranteeing
$2,500,000 of the debt of Opus One to
the lender
(1) Exhibit 10.28 Third Restatement of Joint Venture
Agreement of Opus One dated January 1,
1991, between Robert Mondavi
Investments and B.Ph.R. (California),
Inc.
(3) Exhibit 10.32 Business Loan Agreement dated December
29, 1994 among Bank of America, The
Registrant and RME, Inc.
(3) Exhibit 10.33 Revolving Credit Agreement dated
December 29, 1994 among The
Registrant, RME, Inc. and Cooperatieve
Centrale Raiffeisen - Boerenleenbank
B.A.
(3) Exhibit 10.34 Note Agreement dated December 1, 1994.
Exhibit 10.36 Amended and Restated 1993 Equity
Incentive Plan.
Exhibit 10.37 Note Agreement dated July 8, 1996.
Exhibit 11 Statement re Computation of Per Share
Earnings
(1) Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Price Waterhouse LLP
(1) Incorporated by reference to Registration Statement on Form
S-1 filed on April 23, 1993.
(2) Incorporated by reference to Amendment No. 3 to Registration
Statement on Form S-1 filed on June 7, 1993.
(3) Incorporated by reference to Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1994.
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
37
<PAGE> 38
ROBERT MONDAVI CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1994:
Allowance for uncollectible accounts $195 $ 76 $-- $ 71(1) $ 200
Inventory reserves for write
down to net realizable value 554 751 -- 373 932
YEAR ENDED JUNE 30, 1995:
Allowance for uncollectible accounts 200 127 -- 27(1) 300
Inventory reserve for write
down to net realizable value 932 348 -- 535 745
YEAR ENDED JUNE 30, 1996:
Allowance for uncollectible accounts 300 219 -- 19(1) 500
Inventory reserve for write
down to net realizable value 745 755 -- 402 1,098
</TABLE>
Notes:
(1) Balances written off as uncollectible.
38
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE ROBERT MONDAVI CORPORATION
By /s/ GREGORY M. EVANS
---------------------------
Gregory M. Evans,
Senior Vice President and
Chief Financial Officer
39
<PAGE> 40
Pursuant to the Requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - --------- ----- ----
<S> <C> <C>
/s/ ROBERT G. MONDAVI
- - ------------------------
Robert G. Mondavi Chairman of the Board September 26, 1996
/s/ R. MICHAEL MONDAVI
- - ------------------------
R. Michael Mondavi President and Director
(Principal Executive Officer) September 26, 1996
/s/ TIMOTHY J. MONDAVI
- - ------------------------
Timothy J. Mondavi Managing Director, Winegrower and Director September 26, 1996
/s/ GREGORY M. EVANS
- - ------------------------
Gregory M. Evans Chief Financial Officer
(Principal Financial and Accounting Officer) September 26, 1996
/s/ CLIFFORD S. ADAMS
- - ------------------------
Clifford S. Adams Director September 26, 1996
/s/ JAMES L. BARKSDALE
- - ------------------------
James L. Barksdale Director September 26, 1996
/s/ MARCIA MONDAVI BORGER
- - ------------------------
Marcia Mondavi Borger Director September 26, 1996
/s/ FRANK E. FARELLA
- - ------------------------
Frank E. Farella Director September 26, 1996
/s/ PHILIP GREER
- - ------------------------
Philip Greer Director September 26, 1996
/s/ BARTLETT R. RHOADES
- - ------------------------
Bartlett R. Rhoades Director September 26, 1996
</TABLE>
40
<PAGE> 1
EXHIBIT 10.36
THE ROBERT MONDAVI CORPORATION
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted on February 26, 1993
Approved by Shareholders on February 26, 1993
Amended and Restated on December 14, 1994
1. PURPOSE
(a) The purpose of the 1993 Non-Employee Directors' Stock Option Plan
(the "Plan") is to provide a means by which each director of The Robert Mondavi
Corporation (the "Company") who is not otherwise an employee of the Company or
of any Affiliate of the Company (each such person being hereafter referred to as
a "Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to options granted
under the Plan shall not exceed in the aggregate one hundred thousand (100,000)
shares of the Company's Class A Common Stock. If any option granted
<PAGE> 2
under the Plan shall for any reason expire or otherwise terminate without having
been exercised in full, the stock not purchased under such option shall again
become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or required
shares, bought on the market or otherwise.
4. ELIGIBILITY
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS
(a) Upon the date of the approval of the Plan by the Board (the
"Adoption Date"), each person who is then a Non-Employee Director shall be
granted an option to purchase twelve thousand (12,000) shares of Class A Common
Stock of the Company on the terms and conditions set forth herein.
(b) After the Adoption Date and prior to the date of the Company's
first underwritten registration of an offering of securities of the Company
under the Securities Act of 1933, as amended (the "IPO"), each person who is
elected for the first time to be a Non-Employee Director shall, upon the date of
his or her initial election to be a Non-Employee Director by the Board or
shareholders of the Company, be granted an option to purchase twelve thousand
(12,000) shares of Class A Common Stock of the Company on the terms and
conditions set forth herein.
(c) After the date of the Company's IPO, each person who is elected for
the first time to be a Non-Employee Director shall, upon the date of his or her
initial election to be a Non-Employee Director by the Board or the shareholders
of the Company, be granted an option to purchase that whole number of shares of
the Company's Class A Common Stock closest to the number determined by dividing
one hundred fifty thousand (150,000) by the closing price per share of the
Company's Class A Common Stock as reported on the NASDAQ National Market System
on the date each such Non-Employee Director is elected, on the terms and
conditions set forth herein.
(d) Each person serving as a Non-Employee Director on December 14, 1994
shall be granted: (i) an option to purchase three thousand (3,000) shares of
Class A Common Stock of the Company on the terms and conditions set forth herein
on the date of approval of the Plan, as amended and restated, by the Board; and
(ii) subsequent options on the terms and conditions set forth herein to purchase
an additional two thousand five hundred (2,500) shares on the date of the 1995
Annual Meeting of Shareholders of the Company, two thousand (2,000) snares on
the date of the 1996 Annual Meeting of Shareholders of the Company, and two
thousand (2,000) shares on the date of each subsequent Annual Meeting of
Shareholders of the Company; provided, however, that such person has provided
continuous service as a Non-Employee Director to the Company since December 14,
1994 and until the applicable subsequent grant date.
(e) Each person who is elected for the first time to be a Non-Employee
Director on or after December 15, 1994 shall be granted, on the terms and
conditions set forth herein: (i) on the date of the first Annual Meeting of
Shareholders of the Company following such election, an option to purchase 5.48
shares of the Company's Class A Common Stock for each day of continuous service
as a Non-Employee Director provided since such Non-Employee Director's initial
election until (but not including) the date of such Annual Meeting (rounded to
the next highest whole share); and (ii) on the date of each subsequent Annual
Meeting of Shareholders of the Company thereafter, an option to purchase an
additional two thousand (2,000) shares; provided, however, that such person has
provided continuous service as a
<PAGE> 3
Non-Employee Director to the Company since his or her date of election and until
the applicable subsequent grant date.
(f) The exercise price per share of each option granted under this Plan
shall be equal to the fair market value on the date of grant of a share of Class
A Common Stock, as determined by the Board or the Committee.
6. OPTION PROVISIONS
Each option shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires ten (10) years from the
date of grant (the "Expiration Date"). If the optionee's service as a
Non-Employee Director of the Company terminates for any reason or for no reason,
the option shall terminate on the earlier of the Expiration Date or the date one
hundred eighty (180) days after the date of termination of such services;
provided, however, that if such termination is due to the optionee's death or
permanent disability, the option shall terminate on the earlier of (i) the
Expiration Date or (ii) the date that occurs one hundred eighty (180) days after
the optionee's "period of service" as a director would have ended under the
Company's written policy (in effect as of the date the option is granted)
regarding tenure of the members of the Company's Board of Directors had such
director been able to complete the full period of service as a member of the
Company's Board of Directors permitted under such policy. In any and all
circumstances, an option may be exercised following termination of the
optionee's service as a Non-Employee Director of the Company only as to that
number of shares as to which it was exercisable on the date of termination of
such services under the provisions of subparagraph 6(d).
(b) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than one hundred (100) shares; but when the number of shares being
purchased upon an exercise is one hundred (100) or more shares, the optionee may
elect to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash at the
time of exercise; or
(ii) Provided that at the time of the exercise the Company's
Class A Common Stock is publicly traded and quoted regularly in the Wall Street
Journal, payment by delivery of shares of Class A Common Stock of the Company
already owned by the optionee, held for the period required to avoid a charge to
the Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which Class A Common Stock shall be valued at
fair market value (as determined in good faith by the Board) on the date
preceding the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subparagraph 6(b)(i) and 6(b)(ii) above.
(c) An option shall not be transferable except by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations order
satisfying the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 and the rules thereunder (a "QDRO"), and shall be
exercisable during the lifetime of the person to whom the option is granted only
by such person (or his guardian or legal representative) or any transferee
pursuant to a QDRO. The person to whom the option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the option.
<PAGE> 4
(d) The shares covered by an option shall become exercisable ("vest")
as follows:
(i) With respect to any option granted under the provisions of
subparagraphs 5(a), (b) or (c), in equal monthly installments of 1.667% of such
shares over a period of five (5) years after the date the option is granted; and
(ii) With respect to any option granted under the provisions
of subparagraphs 5(d) or (e), in equal monthly installments over a period of
twelve (12) months after the date the option is granted;
provided, however, that the optionee has during the entire period prior to such
vesting date, continuously served as a Non-Employee Director or as an employee
of or consultant to the Company or any Affiliate of the Company.
(e) The Company may require any optionee, or any person to whom an
option is transferred under subparagraph 6(c), as a condition of exercising any
such option: (i) to give written assurances satisfactory to the Company as to
the optionee's knowledge and experience in financial and business matters; and
(ii) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then-currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii), as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then-applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to legends
restricting the transfer of the stock.
(f) Notwithstanding anything to the contrary contained herein, an
option may not be exercised unless the shares issuable upon exercise of such
option are then registered under the Securities Act or, if such shares are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act.
(g) The Company (or a representative of the underwriters) may, in
connection with the filing of a registration statement of the Company filed
under the Securities Act, require that any optionee not sell or otherwise
transfer or dispose of any shares of common stock or other securities of the
Company during such period (not to exceed one hundred eighty (180) days)
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Securities Act as may be requested by
the Company or the representative of the underwriters.
7. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company
<PAGE> 5
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
9. MISCELLANEOUS
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(c) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any
Non-Employee Director with or without cause.
(c) No Non-Employee Director, individually or as a member of a group,
and no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of Class A Common Stock, if any, as shall have
been reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall
be a condition precedent to the Company's obligation to issue or transfer shares
to a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) In the event of: (1) a dissolution or liquidation or the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's Class A Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4) any
other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, then the time during which
such option may be exercised shall be accelerated and the options terminated if
not exercised prior to such event.
<PAGE> 6
11. AMENDMENT OF THE PLAN
(a) The Board at any time, and form time to time, may amend the plan,
provided, however, that the Board shall not amend the plan more than once every
six months with respect to the provisions of the plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares which may be issued under
the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to comply with the requirements of Rule 16b-3);
or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to comply with the
requirements of Rule 16b-3.
(b) Rights and obligations under any option granted before any
amendment of the Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on February 25, 2003. No options may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE
(a) The Plan, as amended and restated, shall become effective upon
adoption by the Board of Directors, subject to the condition subsequent that the
Plan is approved by the stockholders of the Company.
(b) Notwithstanding any other provision in the Plan to the contrary, no
option granted under the Plan on or after December 14, 1994 shall be exercised
or exercisable unless and until the condition of subparagraph 13(a) above has
been met.
<PAGE> 1
EXHIBIT 10.37
THE ROBERT MONDAVI CORPORATION
AND
R.M.E., INC.
COMPOSITE CONFORMED COPY OF THE NOTE AGREEMENT
Re: $50,000,000 7.39% Senior Notes
Due July 8, 2006
PPN 77035* AB 3
Closing Date: July 8, 1996
================================================================================
Separate and several Note Agreements, each dated as of June 26, 1996,
in the form attached hereto, were entered into by The Robert Mondavi
Corporation, a California corporation, R.M.E., Inc., a California corporation,
and each of the institutions named below. Each of said Note Agreements was
executed on behalf of The Robert Mondavi Corporation and R.M.E., Inc. by Greg
Evans, Chief Financial Officer. The separate Note Agreements were addressed to
each of the institutions as shown on Schedule I attached thereto and were
accepted by the officers of the respective institutions as shown below.
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ William F. Covington
Assistant Vice-President
GOLDMAN, SACHS & CO.
By: /s/ Keith Alexis Malas
Authorized Signatory
<PAGE> 2
THE ROBERT MONDAVI CORPORATION
R.M.E., INC.
NOTE AGREEMENT
Dated as of June 26, 1996
Re: $50,000,000 7.39% Senior Notes
Due July 8, 2006
<PAGE> 3
The Robert Mondavi Corporation
R.M.E., INC.
7801 St. Helena Highway
Oakville, California 94562
Note Agreement
Re: $50,000,000 7.39% Senior Notes
Due July 8, 2006
Dated as of
June 26, 1996
To the Purchaser named in Schedule I hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, The Robert Mondavi Corporation, a California corporation
("RMC"), and R.M.E., Inc., a California corporation ("RME", RMC and RME each
being hereinafter sometimes individually referred to as an "Obligor" and
collectively as the "Obligors"), jointly and severally agree with you as
follows:
Section 1. Description of Notes and Commitment.
Section 1.1. Description of Notes. The Obligors will authorize the
issue and sale of $50,000,000 aggregate principal amount of their 7.39% Senior
Notes (the "Notes") to be dated the date of issue, to bear interest from such
date at the rate of 7.39% per annum, payable semiannually on the eighth day of
January and July in each year (commencing January 8, 1997) and at maturity and
to bear interest on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the extent
legally enforceable) on any overdue installment of interest at the Overdue Rate
after the date due, whether by acceleration or otherwise, until paid, to be
expressed to mature on July 8, 2006, and to be substantially in the form
attached hereto as Exhibit A. Interest on the Notes shall be computed on the
basis of a 360-day year of twelve 30-day months. The Notes are not subject to
prepayment or redemption at the option of the Obligors prior to their expressed
maturity dates except on the terms and conditions and in the amounts and with
the premium, if any, set forth in SECTION 2 of this Agreement. The term "Notes"
as used herein shall include each Note delivered pursuant to this Agreement and
the separate agreements with the other purchasers named in Schedule I. You and
the other purchasers named in Schedule I are hereinafter sometimes referred to
as the "Purchasers". The terms which are capitalized herein shall have the
meanings set forth in SECTION 8.1 unless the context shall otherwise require.
<PAGE> 4
Section 1.2. Commitment, Execution Date, Closing Date. Subject to the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, the Obligors and you agree to execute and
deliver this Agreement on the Execution Date hereafter mentioned. The Obligors
further agree to issue and sell to you, and you further agree to purchase from
the Obligors, Notes in the principal amount set forth opposite your name on
Schedule I hereto at a price of 100% of the principal amount thereof on the
Closing Date hereafter mentioned.
Execution and delivery of the Agreements will be made at the offices of Chapman
and Cutler, 111 West Monroe Street, Chicago, Illinois 60603 on June 26, 1996 or
such later date (not later than June 30, 1996) as shall be mutually agreed upon
by the Obligors and the Purchasers (the "Execution Date"). Delivery of the Notes
will be made at the offices of Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, against payment therefor in Federal Reserve or other
funds current and immediately available at the principal office of Bank of
America, 345 Montgomery Street, San Francisco, California (A.B.A. No.
121000358), for credit to RMC's Account No. 14999-01601, Attention: Julie Poole
(415/622-5791) in the amount of the purchase price at 10:00 A.M., Chicago,
Illinois time, on July 8, 1996 or such later date (not later than July 10, 1996)
as shall mutually be agreed upon by the Obligors and the Purchasers (the
"Closing Date"). The Notes delivered to you on the Closing Date will be
delivered to you in the form of a single registered Note in the form attached
hereto as Exhibit A for the full amount of your purchase (unless different
denominations are specified by you), registered in your name or in the name of
such nominee, as may be specified in Schedule I attached hereto.
Section 1.3. Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Obligors are entering into similar agreements
with the other Purchasers under which such other Purchasers agree to purchase
from the Obligors the principal amount of Notes set opposite such Purchasers'
names in Schedule I, and your obligation and the obligations of the Obligors
hereunder are subject to the execution and delivery of the similar agreements by
the other Purchasers. This Agreement and said similar agreements with the other
Purchasers are herein collectively referred to as the "Agreements". The
obligations of each Purchaser shall be several and not joint and no Purchaser
shall be liable or responsible for the acts of any other Purchaser.
Section 2. Prepayment of Notes.
Section 2.1. Required Prepayments. In addition to paying the entire
outstanding principal amount and the interest due on the Notes on the maturity
date thereof, the Obligors agree that on the eighth day of January and July in
each year, commencing July 8, 1998 and ending January 8, 2006, both inclusive,
they will prepay and apply and there shall become due and payable on the
principal Indebtedness evidenced by the Notes an amount equal to the lesser of
(a) $2,205,500 or (b) the principal amount of the Notes then outstanding. The
entire remaining principal amount of the Notes shall become due and payable on
July 8, 2006. No premium shall be payable in connection with any required
prepayment made pursuant to this SECTION 2.1.
In the event that the Obligors shall prepay less than all of the Notes pursuant
to SECTION 2.2 hereof, the amounts of the prepayments required by this SECTION
2.1 shall be reduced by an amount which is the same percentage of
<PAGE> 5
such required prepayment as the percentage that the principal amount of Notes
prepaid pursuant to SECTION 2.2 is of the aggregate principal amount of
outstanding Notes immediately prior to such prepayment.
Section 2.2. Optional Prepayment with Premium. In addition to the
payments required by SECTION 2.1, upon compliance with SECTION 2.4, the Obligors
shall have the privilege, at any time and from time to time of prepaying the
outstanding Notes, either in whole or in part (but if in part then in a minimum
principal amount of $1,000,000), by payment of the principal amount of the
Notes, or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, together with a premium equal to the Make-Whole Amount,
determined as of two Business Days prior to the date of such prepayment pursuant
to this SECTION 2.2.
Section 2.3. Prepayment of Notes upon an Asset Disposition. In the
event that either Obligor shall sell, lease, transfer, abandon or otherwise
dispose of assets (an "Asset Disposition") and, in conjunction therewith, the
Obligors shall, at their option, desire to prepay on a pro rata basis Senior
Indebtedness, including the Notes, as contemplated in SECTION 5.12(b)(6)(z)(B)
or (c)(3)(z)(B), the Obligors will give written notice of such fact (the "Asset
Disposition Prepayment Offer") in the manner provided in SECTION 9.6 hereof to
all holders of the Notes. The Asset Disposition Prepayment Offer shall (1)
describe the facts and circumstances of such Asset Disposition in reasonable
detail, (2) make reference to this SECTION 2.3 and the right of the holders of
the Notes to be prepaid on the terms and conditions provided for in this
SECTION 2.3, (3) offer in writing to prepay the outstanding Notes to the extent
proceeds from the Asset Disposition are to be applied to the Notes, together
with accrued interest to the date of prepayment, but without premium, and (4)
specify a date for such prepayment (the "Asset Disposition Prepayment Date"),
which Asset Disposition Prepayment Date shall be not more than 60 days nor less
than 30 days following the date of such Asset Disposition Prepayment Offer. Each
holder of the then outstanding Notes shall have the right to accept such offer
and require prepayment of the Notes held by such holder by written notice to the
Obligors (a "Noteholder Notice") given not later than 20 days after receipt of
the Asset Disposition Prepayment Offer. The Obligors shall on the Asset
Disposition Prepayment Date prepay the Notes designated in the Asset Disposition
Prepayment Offers and held by holders which have so accepted such offer of
prepayment. The prepayment price of the Notes payable upon the occurrence of any
Asset Disposition shall be an amount equal to 100% of the outstanding principal
amount of the Notes so to be prepaid and accrued interest thereon to the date of
such prepayment, but without premium.
Section 2.4. Notice of Optional Prepayments. The Obligors will give
notice of any prepayment of the Notes pursuant to SECTION 2.2 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (a) such date, (b) the principal amount of
the holder's Notes to be prepaid on such date, (c) that a premium may be
payable, (d) the date when such premium will be calculated, (e) the estimated
premium, together with a reasonably detailed computation of such estimated
premium, and (f) the accrued interest applicable to the prepayment. Such notice
of prepayment shall also certify all facts, if any, which are conditions
precedent to any such prepayment. Notice of prepayment having been so given, the
aggregate principal amount of the Notes specified in such notice, together with
accrued interest thereon and the premium, if any, payable with respect thereto
shall become due and payable on the prepayment date specified in said notice.
Two Business Days prior to the prepayment date specified in such notice, the
Obligors shall provide each
<PAGE> 6
holder of a Note written notice of the premium, if any, payable in connection
with such prepayment and, whether or not any premium is payable, a reasonably
detailed computation of the Make-Whole Amount.
Section 2.5. Application of Prepayments. All partial prepayments made
pursuant to SECTION 2.1 or SECTION 2.2 shall be applied on all outstanding Notes
ratably in accordance with the unpaid principal amounts thereof. All partial
prepayments made pursuant to SECTION 2.3 shall be applied only to the Notes of
the holders who have elected to participate in such prepayment.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by you
or your nominee or owned by any subsequent Institutional Holder which has given
written notice to the Obligors requesting that the provisions of this SECTION
2.6 shall apply, the Obligors will punctually pay when due the principal
thereof, interest thereon and premium, if any, due with respect to said
principal, without any presentment thereof, directly to you, to your nominee or
to such subsequent Institutional Holder at your address or your nominee's
address set forth in Schedule I hereto or such other address as you, your
nominee or such subsequent Institutional Holder may from time to time designate
in writing to the Obligors or, if a bank account with a United States bank is
designated for you or your nominee on Schedule I hereto or in any written notice
to the Obligors from you, from your nominee or from any such subsequent
Institutional Holder, the Obligors will make such payments in immediately
available funds to such bank account, no later than 11:00 a.m. New York, New
York time on the date due, marked for attention as indicated, or in such other
manner or to such other account in any United States bank as you, your nominee
or any such subsequent Institutional Holder may from time to time direct in
writing. If for any reason whatsoever the Obligors do not make any such payment
by such 11:00 a.m. transmittal time, such payment shall be deemed to have been
made on the next following Business Day and such payment shall bear interest at
the Overdue Rate.
Section 3. Representations.
Section 3.1. Representations of the Obligors. The Obligors represent
and warrant that all representations and warranties set forth in Exhibit B are
true and correct as of the date hereof and are incorporated herein by reference
with the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchaser. (a) You represent, and
in entering into this Agreement the Obligors understand, that you are acquiring
the Notes either (i) for the purpose of investment and not with a view to the
distribution thereof, and that you have no present intention of selling,
negotiating or otherwise disposing of the Notes, or any participations, rights
or interests therein or (2) for your own account for resale to one or more
accredited investors (as defined in Rule 501 under the Securities Act of 1933,
as amended) pursuant to one or more transactions in which such accredited
investors make the representation contained in this SECTION 3.2(a) to you; it
being understood, however, that the disposition of your property shall at all
times be and remain within your control. (b) You further represent that at least
one of the following statements concerning each source of funds to be used by
you to purchase the Notes shall be accurate as of the Closing Date: (1) the
source of funds to be used by you to pay the purchase price of the Notes is an
"insurance company general account" within the meaning of Department of Labor
Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there
is no employee benefit plan, treating as a single plan, all plans maintained by
the same employer or
<PAGE> 7
employee organization, with respect to which the amount of the general account
reserves and liabilities for all contracts held by or on behalf of such plan,
exceed ten percent (10%) of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement filed with your state of domicile; (2) all or a
part of such funds constitute assets of one or more separate accounts, trusts or
a commingled pension trust maintained by you, and you have disclosed to the
Obligors the names of such employee benefit plans whose assets in such separate
account or accounts or pension trusts exceed 10% of the total assets or are
expected to exceed 10% of the total assets of such account or accounts or trusts
as of the date of such purchase (for the purpose of this clause (2), all
employee benefit plans maintained by the same employer or employee organization
are deemed to be a single plan); (3) all or part of such funds constitute assets
of a bank collective investment fund maintained by you, and you have disclosed
to the Obligors the names of such employee benefit plans whose assets in such
collective investment fund exceed 10% of the total assets or are expected to
exceed 10% of the total assets of such fund as of the date of such purchase (for
the purpose of this clause (3), all employee benefit plans maintained by the
same employer or employee organization are deemed to be a single plan); (4) all
or part of such funds constitute assets of one or more employee benefit plans,
each of which has been identified to the Obligors in writing; (5) you are
acquiring the Notes for the account of one or more pension funds, trust funds or
agency accounts, each of which is a "governmental plan" as defined in Section
3(32) of ERISA; (6) the source of funds is an "investment fund" managed by a
"qualified professional asset manager" or "QPAM" (as defined in Part V of PTE
84-14, issued March 13, 1984), provided that no other party to the transactions
described in this Agreement and no "affiliate" of such other party (as defined
in Section V(c) of PTE 84-14) has at this time, and during the immediately
preceding one year has exercised the authority to appoint or terminate said QPAM
as manager of the assets of any plan identified in writing pursuant to this
clause (6) or to negotiate the terms of said QPAM's management agreement on
behalf of any such identified plans; or (7) if you are other than an insurance
company, all or a portion of such funds consists of funds which do not
constitute "plan assets". The Obligors shall deliver a certificate on or before
the Closing Date which certificate shall either state that (i) it is neither a
"party in interest" (as defined in Title I, Section 3(14) of ERISA) nor a
"disqualified person" (as defined in Section 4975(e)(2) of the Internal Revenue
Code of 1986, as amended), with respect to any plan identified pursuant to
paragraphs (2), (3) or (4) above, or (ii) with respect to any plan identified
pursuant to paragraph (6) above, neither it nor any "affiliate" (as defined in
Section V(c) of PTE 84-14) is described in the proviso to said paragraph (6). As
used in this Section 3.2(b), the terms "separate account", "employer
securities", and "employee benefit plan" shall have the respective meanings
assigned to them in ERISA and the term "plan assets" shall have the meaning
assigned to it in Department of Labor Regulation 29 C.F.R. Section 2510.3-101.
Section 4. Closing Conditions.
Section 4.1. Conditions. Your obligation to execute and deliver this
Agreement on the Execution Date and to purchase the Notes on the Closing Date
shall be subject to the performance by the Obligors of their agreements
hereunder which by the terms hereof are to be performed at or prior to the time
of the execution and delivery of the Agreements or the issuance and delivery of
the Notes, as the case may be, and to the following further conditions
precedent:
<PAGE> 8
(a) Closing Certificate. You shall have received a certificate dated
the Execution Date and a certificate dated the Closing Date, each signed by the
President or a Vice President of each of the Obligors, the truth and accuracy of
which shall be a condition to your obligation to execute and deliver the
Agreement or to purchase the Notes proposed to be sold to you, as the case may
be, and to the effect that (1) the representations and warranties of the
Obligors set forth in Exhibit B hereto are true and correct on and with respect
to the Execution Date or the Closing Date, as the case may be, provided that,
with respect to the certificate to be delivered on the Closing Date, Schedule II
may be adjusted with your prior approval, which approval shall not be
unreasonably withheld, to reflect any changes that have occurred between the
Execution Date and the Closing Date, (2) each of the Obligors has performed all
of its obligations hereunder which are to be performed on or prior to the
Execution Date or the Closing Date, as the case may be, and (3) no Default or
Event of Default has occurred and is continuing on the date of such certificate.
(b) Legal Opinions. You shall have received from Chapman and Cutler,
who are acting as your special counsel in this transaction, and from Michael K.
Beyer, counsel for the Obligors, their respective opinions dated the Closing
Date, in form and substance satisfactory to you, and covering the matters set
forth in Exhibits C and D, respectively, hereto.
(c) Obligors' Existence and Authority. On or prior to the Execution
Date and the Closing Date, you shall have received, in form and substance
reasonably satisfactory to you and your special counsel, such documents and
evidence with respect to the Obligors as you may reasonably request in order to
establish the existence and good standing of the Obligors and the authorization
of the transactions contemplated by this Agreement (including, without
limitation, the written approval of RMC as the sole shareholder of RME of the
execution, delivery and performance by RME of its obligations contemplated by
this Agreement).
(d) Related Transactions. On the Closing Date:
(1) the Obligors shall have consummated the sale of the entire
principal amount of the Notes scheduled to be sold on the Closing Date pursuant
to this Agreement and the other agreements referred to in SECTION 1.3; and
(2) you shall have received such written evidence as you or your
special counsel may require demonstrating (i) that RMC has transferred the
proceeds of the issuance of the Notes to RME as equity, and (ii) the payment by
RME of $50,000,000 aggregate principal amount of Indebtedness of RMC and RME
outstanding under their existing Lines of Credit.
(e) Prior to the Closing Date, you shall have received such written
evidence as you or your special counsel may require demonstrating that all
obligations under and with respect to the Equitable Notes have been paid in full
and that all actions have been taken by The Equitable Life Assurance Society of
the United States to terminate or otherwise release the Liens securing such
obligations.
(f) Private Placement Number. On or prior to the Closing Date, special
counsel to the Purchasers shall have duly made the appropriate filings with
Standard & Poor's CUSIP Service Bureau, as agent for the National Association of
Insurance Commissioners, in order to obtain a private placement number for the
Notes.
<PAGE> 9
(g) Funding Instructions. At least three Business Days prior to the
Closing Date, you shall have received written instructions executed by a
Responsible Officer of the Obligors directing the manner of the payment of funds
and setting forth (1) the name and address of the transferee bank, (2) such
transferee bank's ABA number, (3) the account name and number into which the
purchase price for the Notes is to be deposited, and (4) the name and telephone
number of the account representative responsible for verifying receipt of such
funds.
(h) Special Counsel Fees. Concurrently with the delivery of the Notes
to you on the Closing Date, the reasonable charges and disbursements of Chapman
and Cutler, your special counsel, shall have been paid by the Obligors.
(i) Legality of Investment. On each of the Execution Date and the
Closing Date, the Notes to be purchased by you shall be a legal investment for
you under the laws of each jurisdiction to which you may be subject (without
resort to any so-called "basket provisions" of such laws).
(j) Satisfactory Proceedings. On each of the Execution Date and the
Closing Date, all proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents necessary to the consummation
thereof, shall be satisfactory in form and substance to you and your special
counsel, and you shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection with the
consummation of said transactions.
Section 4.2. Waiver of Conditions. If on the Execution Date, the
Obligors fail to execute and deliver the Agreement or on the Closing Date, the
Obligors fail to tender to you the Notes to be issued to you on the Closing
Date, or if on either the Execution Date or the Closing Date the conditions
specified in SECTION 4.1 to be fulfilled on such date have not been fulfilled,
you may thereupon elect to be relieved of all further obligations under this
Agreement. Without limiting the foregoing, if the conditions specified in
SECTION 4.1 have not been fulfilled, you may waive compliance by the Obligors
with any such condition to such extent as you may in your sole discretion
determine. Nothing in this SECTION 4.2 shall operate to relieve the Obligors of
any of their obligations hereunder or to waive any of your rights against the
Obligors.
Section 5. Obligors' Covenants.
From and after the Closing Date and continuing so long as any amount remains
unpaid on any Note:
Section 5.1. Corporate Existence, Etc. Each Obligor will preserve and
keep in full force and effect, and will cause each Restricted Subsidiary to
preserve and keep in full force and effect, its corporate existence and all
licenses and permits necessary to the proper conduct of its business where the
failure to do so could reasonably be expected to materially and adversely affect
the properties, business, prospects, profits or condition (financial or
otherwise) of the Obligors and their respective Restricted Subsidiaries,
provided that the foregoing shall not prevent any transaction permitted by
SECTION 5.12.
Section 5.2. Insurance. Each Obligor will maintain, and will cause each
of its Restricted Subsidiaries to maintain, insurance coverage by financially
sound and reputable insurers and in such forms and amounts and against such
risks as are (a) customary for corporations of established reputation engaged in
the same or a similar business and owning and operating similar properties and
(b) consistent with such Obligor's insurance practices existing on the Closing
Date, all as more fully set forth in Schedule II hereto.
<PAGE> 10
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with
Laws. (a) Each Obligor will promptly pay and discharge, and will cause each of
its Restricted Subsidiaries promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed upon such Obligor or such
Restricted Subsidiary, respectively, or upon or in respect of all or any part of
the property or business of such Obligor or such Restricted Subsidiary, all
trade accounts payable in accordance with usual and customary business terms,
and all claims for work, labor or materials, which if unpaid might become a Lien
upon any property of such Obligor or such Restricted Subsidiary; provided such
Obligor or such Restricted Subsidiary shall not be required to pay any such tax,
assessment, charge, levy, account payable or claim if (1) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of such Obligor or such Restricted Subsidiary or any material interference with
the use thereof by such Obligor or such Restricted Subsidiary, and (2) such
Obligor or such Restricted Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto.
(b) Each Obligor will promptly comply and will cause each of its
Restricted Subsidiaries to promptly comply with all laws, ordinances or
governmental rules and regulations to which it is subject, including, without
limitation, ERISA and all Environmental Laws, the violation of which could
materially and adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of either Obligor and any of its Restricted
Subsidiaries or would result in any Lien not permitted under SECTION 5.10.
Section 5.4. Maintenance, Etc. Each Obligor will maintain, preserve and
keep, and will cause each of its Restricted Subsidiaries to maintain, preserve
and keep, its material properties which are used or useful in the conduct of its
business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained.
Section 5.5. Nature of Business. Neither Obligor nor any of their
respective Restricted Subsidiaries will engage in any business if, as a result,
the general nature of the business, taken on a consolidated basis, which would
then be engaged in by the Obligors and their Restricted Subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Obligors and their Restricted Subsidiaries as described in the Offering
Materials.
Section 5.6. Consolidated Funded Debt Maintenance Ratio. The Obligors
will not at any time permit Consolidated Funded Debt to exceed 60% of
Consolidated Total Capitalization.
Section 5.7. Consolidated Adjusted Net Worth. The Obligors will at all
times keep and maintain Consolidated Adjusted Net Worth at an amount not less
than the sum of (a) $125,000,000 plus (b) 25% of Consolidated Net Income for
each Specified Fiscal Period ending after March 31, 1996, provided that
notwithstanding that Consolidated Net Income for any elapsed Specified Fiscal
Period may be a deficit figure, no reduction as a result thereof shall be made
in the sum to be maintained pursuant hereto.
Section 5.8. Fixed Charges Coverage Ratio. The Obligors will at all
times keep and maintain the ratio of Consolidated Net Income Available for Fixed
Charges for the immediately
<PAGE> 11
preceding four fiscal quarter period to Consolidated Fixed Charges (less
Capitalized Interest) for such four fiscal quarter period at not less than 1.50
to 1.0.
Section 5.9. Limitations on Indebtedness. (a) The Obligors will not
create, assume, guarantee or otherwise incur or in any manner be or become
liable in respect of any Funded Debt, and will not permit any of their
Restricted Subsidiaries to create, assume, guarantee or otherwise incur or in
any manner be or become liable in respect of any Indebtedness, except:
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Obligors and Indebtedness of Restricted
Subsidiaries outstanding as of the Closing Date and described on Schedule II
hereto;
(3) Indebtedness of a Restricted Subsidiary to an Obligor in respect of
which such Restricted Subsidiary is a Restricted Subsidiary or to a Wholly-owned
Restricted Subsidiary;
(4) Funded Debt of the Obligors and Indebtedness of Restricted
Subsidiaries, in each such case secured by Liens permitted by SECTION
5.10(a)(7), (8) or (9), provided that at the time of creation, issuance,
assumption, guarantee or other incurrence thereof and after giving effect
thereto and to the application of the proceeds thereof, no Default or Event of
Default would exist;
(5) additional Funded Debt of RMC and Indebtedness of RME or any other
Restricted Subsidiary, provided that at the time of creation, issuance,
assumption, guarantee or other incurrence thereof and after giving effect
thereto and to the application of the proceeds thereof:
(i) no Default or Event of Default would exist; and
(ii) in the case of the issuance of any Funded Debt of RMC secured by
Liens permitted by SECTION 5.10(a)(10) or the issuance of Indebtedness of RME or
any other Restricted Subsidiary (other than Indebtedness of RME or any other
Restricted Subsidiary secured by Liens permitted by SECTIONS 5.10(a)(7), (8) or
(9) and RME joint Indebtedness), the sum of (A) all Funded Debt of RMC secured
by Liens permitted by SECTION 5.10(a)(10), plus (B) the aggregate amount of all
Indebtedness of RME and all other Restricted Subsidiaries (other than RME Joint
Indebtedness) incurred in accordance with the provisions of this clause (ii)
shall not exceed 10% of Consolidated Total Assets.
(b) Indebtedness issued or incurred in accordance with the limitations
of SECTION 5.9(a) may be renewed, extended or refunded (without increase in
principal amount remaining unpaid at the time of such renewal, extension or
refunding), provided that at the time of such renewal, extension or refunding
and after giving effect thereto, no Default or Event of Default would exist.
Section 5.10. Limitation on Liens. (a) The Obligors will not, and will
not permit any of their respective Restricted Subsidiaries to, create or incur,
or suffer to be incurred or to exist, any Lien on its or their property or
assets, whether now owned or hereafter acquired, or upon any income or profits
therefrom, or transfer any property for the purpose of subjecting the same to
the payment of obligations in priority to the payment of its or their general
creditors, or acquire or agree to acquire, or permit any of their respective
Restricted Subsidiaries to acquire, any property or assets upon conditional
sales agreements or other title retention devices, except:
(1) Liens for property taxes and assessments or governmental charges or
levies and Liens securing claims or demands of mechanics and materialmen,
provided that payment thereof is not at the time required by SECTION 5.3;
<PAGE> 12
(2) Liens of or resulting from any litigation or legal proceeding which
are currently being contested in good faith by appropriate proceedings and for
which the Obligors or the relevant Restricted Subsidiary shall have set aside on
its books, reserves deemed by it to be adequate with respect thereto, unless the
judgment they secure shall not have been stayed, bonded or discharged within 60
days;
(3) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's compensation,
unemployment insurance and other like laws, warehousemen's and attorneys' liens
and statutory landlords' liens) and Liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations, surety or appeal
bonds or other Liens of like general nature, in any such case incurred in the
ordinary course of business and not in connection with the borrowing of money,
which in any such case would not materially and adversely affect the properties,
business, prospects, profits or condition (financial or otherwise) of the
Obligors and their Restricted Subsidiaries, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings;
(4) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary for the conduct of the activities of the Obligors and their
Restricted Subsidiaries or which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which do not in any
event materially impair their use in the operation of the business of the
Obligors and their Restricted Subsidiaries;
(5) Liens securing Indebtedness of a Restricted Subsidiary to an
Obligor in respect of which such Restricted Subsidiary is a Restricted
Subsidiary or to another Wholly-owned Restricted Subsidiary;
(6) Liens existing as of the Closing Date and described on Schedule II
hereto;
(7) Liens created or incurred after the Closing Date given to secure
the payment of the purchase price incurred in connection with the acquisition or
purchase of real or personal property or the cost of construction or
improvements to real or personal property, in any such case, useful and intended
to be used in carrying on the business of an Obligor or any of its respective
Restricted Subsidiaries, provided that (i) the Lien shall attach solely to the
real or personal property acquired, purchased, constructed or improved, (ii)
such Lien shall have been created or incurred within 270 days after the date of
acquisition or purchase or the date of completion of construction or improvement
of such real or personal property, as the case may be, and (iii) at the time of
the imposition of the Lien, the aggregate amount remaining unpaid on all
Indebtedness secured by Liens on such real or personal property, as the case may
be (whether or not assumed by an Obligor or any of its respective Restricted
Subsidiaries) shall not exceed an amount equal to the lesser of the total
acquisition or purchase price or cost of construction or improvement, as the
case may be, or fair market value of such real or personal property (as
determined in good faith by the Board of Directors of such Obligor);
(8) Liens affixed on real or personal property (including without
limitation outstanding shares of capital stock and Indebtedness) of any entity
at the time such entity becomes a Restricted Subsidiary given to secure the
payment of the purchase price incurred in connection with the acquisition of
such entity by an Obligor or any of its respective Restricted Subsidiaries;
provided that (i) the Lien shall attach solely to such real or personal
property, (ii) such Lien shall have been created or incurred
<PAGE> 13
substantially concurrently with such acquisition or purchase, and (iii) at the
time of acquisition or purchase of such Restricted Subsidiary, the aggregate
amount of Indebtedness secured by Liens on such real or personal property
(whether or not assumed by such Obligor or such Restricted Subsidiary) shall not
exceed an amount equal to the lesser of the purchase price or fair market value
of such real property or such personal property (as determined in good faith by
the Board of Directors of such Obligor);
(9) Liens affixed on real or personal property existing (i) at the time
of acquisition thereof, whether or not the Indebtedness secured thereby is
assumed by an Obligor or any of its respective such Restricted Subsidiaries, or
(ii) on the property or outstanding shares of a corporation at the time such
corporation is merged into or consolidated with such Obligor or such Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties or outstanding shares or Indebtedness of a corporation or firm as an
entirety to such Obligor or such Restricted Subsidiary; provided that the amount
of Indebtedness secured by such Liens shall not exceed an amount equal to the
lesser of the acquisition or purchase price or fair market value of such real or
personal property (as determined in good faith by the Board of Directors of such
Obligor);
(10) Liens created or incurred after the Closing Date given to secure
Indebtedness of an Obligor or Indebtedness of any of its respective Restricted
Subsidiaries in addition to the Liens permitted by the preceding clauses (1)
through (9) hereof, provided that all Indebtedness secured by such new Liens
incurred after the Closing Date shall have been incurred within the limitations
provided in SECTION 5.9(a)(5); and
(11) any extension, renewal or refunding of any Lien permitted by the
preceding clauses (5) through (10) of this SECTION 5.10 in respect of the same
property theretofore subject to such Lien in connection with the extension,
renewal or refunding of the Indebtedness secured thereby; provided that (1) such
extension, renewal or refunding of Indebtedness shall be without increase in the
principal amount remaining unpaid as of the date of such extension, renewal or
refunding, (2) such Lien shall attach solely to the same such property, and (3)
the principal amount remaining unpaid as of the date of such extension, renewal
or refunding of Indebtedness is less than or equal to the fair market value of
the property (determined in good faith by the Board or Directors of the
Obligors) to which such Lien is attached.
(b) In the event that any property, asset or income or profits
therefrom is subjected to a Lien not expressly enumerated in this SECTION 5.10,
the Obligors will make or cause to be made provision whereby the Notes will be
secured equally and ratably with all other obligations secured thereby and
concurrently therewith the Obligors shall furnish to the holders of the Notes an
opinion to such effect in scope and form reasonably satisfactory to the holders
of at least 66-2/3% of the aggregate principal amount of the Notes at the time
outstanding of independent counsel satisfactory to such holders, and in any case
if the Obligors fail to make such provision to secure the Notes equally and
ratably with such other obligations, the Notes shall in any event have the
benefit, to the full extent that, and with such priority as, the holders may be
entitled thereto under applicable law, of an equitable Lien securing the Notes
on such property, asset, income or profit.
Section 5.11. Dividends, Stock Purchases, Restricted Investments. (a)
RMC will not and RMC will not permit any of its Restricted Subsidiaries to,
directly or indirectly, or through any Affiliate,
<PAGE> 14
declare or make or incur any liability to declare or make any Distribution and
neither RMC nor any of its Restricted Subsidiaries will declare, make or
authorize any Restricted Investment, unless, immediately after giving effect to
the proposed Distribution or Restricted Investment, the aggregate amount of
Distributions declared in the case of dividends or made in the case of other
Distributions plus the aggregate amount of Restricted Investments then held by
RMC and its Restricted Subsidiaries (valued immediately after the making of such
Restricted Investment as provided in the definition thereof) during the period
from and after the date of this Agreement to and including the date of
declaration in the case of a dividend, the date of payment in the case of any
other Distribution and the date such Investment is committed to in the case of a
Restricted Investment, would not exceed the sum of:
(1) $25,000,000; plus
(2) 75% of Consolidated Net Income (or if such Consolidated Net Income
is a deficit figure, then minus 100% of such deficit) for such period determined
on a cumulative basis commencing on March 31, 1996, to and including the date of
such declaration, payment or commitment; plus
(3) an amount equal to (i) the aggregate net cash proceeds received by
RMC from the sale on or after the date of this Agreement of shares of its
capital stock or other Securities or Indebtedness converted into capital stock
of RMC minus (ii) all amounts paid by RMC and its Restricted Subsidiaries on or
after the date of this Agreement to purchase, redeem or retire any shares of
RMC's or any Restricted Subsidiary's capital stock of any class (including
preferred stock) or any warrants, rights or options to purchase or acquire any
shares of such capital stock; plus
(4) any amount received by an Obligor which is not treated as
Consolidated Net Income and which represents a return of capital from (i) any
Restricted Investment or (ii) any Investment described in clause (c) of the
definition of Restricted Investments, the effect of which is to decrease such
Obligor's net current investment therein.
(b) For the purposes of making computations under paragraph (a) of this
SECTION 5.11, the amount of any Distribution declared, paid or distributed or
Restricted Investment made in property or assets of RMC or a Restricted
Subsidiary shall be deemed to be the greater of the book value or fair market
value (as determined in good faith by the Board of Directors of RMC), of such
property or assets as of the date of declaration in the case of a dividend, the
date of payment in the case of any other Distribution and the date the
Investment is committed to in the case of any Restricted Investment. Any
corporation which becomes a Restricted Subsidiary after the date of this
Agreement shall be deemed to have made, at the time it becomes a Restricted
Subsidiary, all Restricted Investments of such corporation existing immediately
after it becomes a Restricted Subsidiary.
(c) RMC will not authorize a Distribution on its capital stock which is
not payable within 90 days of authorization.
(d) RMC will not authorize or make a Distribution on its capital stock
and neither RMC nor any Restricted Subsidiary will make any Restricted
Investment if after giving effect to the proposed Distribution or Restricted
Investment, a Default or Event of Default would exist.
Section 5.12. Mergers, Consolidations and Sales of Assets. (a) The
Obligors will not, and will not permit any of their respective Restricted
Subsidiaries to, consolidate with or be a party to a merger
<PAGE> 15
with any other corporation, or sell, lease or otherwise dispose of all or
substantially all of its assets; provided that:
(1) any Restricted Subsidiary may merge or consolidate with or into any
Obligor or any Wholly-owned Restricted Subsidiary so long as in any merger or
consolidation involving an Obligor, such Obligor shall be the surviving or
continuing corporation;
(2) RMC may consolidate or merge with or into any other corporation if
(i) the corporation which results from such consolidation or merger (the
"surviving corporation") is organized under the laws of any state of the United
States or the District of Columbia, (ii) the due and punctual payment of the
principal of and premium, if any, and interest on all of the Notes, according to
their tenor, and the due and punctual performance and observation of all of the
covenants in the Notes and this Agreement to be performed or observed by RMC are
expressly assumed in writing by the surviving corporation and the surviving
corporation shall furnish to the holders of the Notes an opinion of counsel
satisfactory to such holders to the effect that the instrument of assumption has
been duly authorized, executed and delivered and constitutes the legal, valid
and binding contract and agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles, (iii) RME shall confirm in writing its obligations under and in
respect of the Notes and this Agreement, and (iv) at the time of such
consolidation or merger and immediately after giving effect thereto, no Default
or Event of Default would exist;
(3) RMC may sell or otherwise dispose of all or substantially all of
its assets (other than stock and Indebtedness of a Restricted Subsidiary, which
may only be sold or otherwise disposed of pursuant to Section 5.12(c)) to any
Person for consideration which represents the fair market value of such assets
(as determined in good faith by the Board of Directors of RMC, a copy of which
determination, certified by the Secretary or an Assistant Secretary of RMC,
shall have been furnished to the holders of the Notes) at the time of such sale
or other disposition if (i) the acquiring Person is a corporation organized
under the laws of any state of the United States or the District of Columbia,
(ii) the due and punctual payment of the principal of and premium, if any, and
interest on all the Notes, according to their tenor, and the due and punctual
performance and observance of all of the covenants in the Notes and in this
Agreement to be performed or observed by RMC are expressly assumed in writing by
the acquiring corporation and the acquiring corporation shall furnish to the
holders of the Notes an opinion of counsel satisfactory to such holders to the
effect that the instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and agreement of
such acquiring corporation enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, (iii) RME shall
have confirmed in writing its obligations under and in respect of the Notes and
this Agreement, and (iv) at the time of such sale or disposition and immediately
after giving effect thereto, no Default or Event of Default would exist.
<PAGE> 16
(b) The Obligors will not, and will not permit any of their respective
Restricted Subsidiaries to, sell, lease, transfer, abandon or otherwise dispose
of assets (except assets sold in the ordinary course of business for fair market
value and except as provided in SECTION 5.12(a)(3)); provided that the foregoing
restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of assets of a
Restricted Subsidiary to an Obligor or a Wholly-owned Restricted Subsidiary; or
(2) the transfer made as a capital contribution to a corporation,
partnership, limited partnership or limited liability company of certain real
property used, or to be used, to grow grapes which is owned by an Obligor or a
Restricted Subsidiary, provided that the power to direct or cause the direction
of the management, operations and policies of such transferee entity is held by
an Obligor or a Wholly-owned Restricted Subsidiary; or
(3) the sale, lease, transfer or other disposition of any fixed asset
of an Obligor or a Restricted Subsidiary the book value of which at the time of
such sale, lease, transfer or other disposition shall be less than $1,000,000;
provided that in the opinion of the Board of Directors of such Obligor (i) the
sale is for fair value and is in the best interests of such Obligor and (ii)
such sale, lease, transfer or other disposition is not part of a plan by the
Obligors to divest themselves of fixed assets (in which event such sale, lease,
transfer or other disposition shall be made within the limitations of
SECTION 5.12(a)(3), (b)(6) or (c)(3)); or
(4) the sale or transfer of assets of an Obligor or a Restricted
Subsidiary whenever it is determined in the good faith judgment of the Board of
Directors of such Obligor that such assets are obsolete, worn-out or without
economic value to such Obligor or any of its Restricted Subsidiaries; or
(5) the exchange in an arm's-length transaction of assets, provided
that (i) the assets acquired by an Obligor or its Restricted Subsidiaries in
connection with such exchange shall have a fair market value (as determined in
good faith by the Board of Directors of such Obligor) equal to or greater than
the fair market value of the assets disposed of by such Obligor or any of its
Restricted Subsidiaries in connection with such exchange, (ii) the assets
acquired by such Obligor or any of its Restricted Subsidiaries in connection
with such exchange shall be similar in nature to the assets sold or otherwise
disposed of in connection with such exchange, and (iii) the assets so acquired
are free and clear of any Lien (other than Liens permitted by SECTION 5.10) and
arE useful and intended to be used in the business of such Obligor and its
Restricted Subsidiaries as described in SECTION 5.5; or
(6) the sale of such assets for cash or other property to a Person or
Persons if all of the following conditions are met:
(i) such assets (valued at net book value) do not, together with all
other assets of the Obligors and their respective Restricted Subsidiaries
previously disposed of during the same fiscal year (other than in the ordinary
course of business), exceed 10% of Consolidated Total Assets determined as of
the end of the immediately preceding fiscal quarter;
(ii) in the opinion of the Board of Directors of RMC, the sale is for
fair value and is in the best interests of the Obligors; and
(iii) immediately after the consummation of the transaction and after
giving effect thereto, no Default or Event of Default would exist;
<PAGE> 17
provided, however, that for purposes of the foregoing calculation, there shall
not be included any assets the proceeds of which were or are (x) immediately
after the consummation of such sale deposited in an escrow account with a
depository institution or trust company of the character described in clause (g)
of the definition of "Restricted Investments" contained in SECTION 8.1 acting as
escrow agent, (y) invested in Investments of the character described in clauses
(e), (f) and (g) of said definition of "Restricted Investments," and (z) applied
within twelve months of the date of sale of such assets to either (A) the
acquisition of fixed assets useful and intended to be used in the operation of
the business of an Obligor and its respective Restricted Subsidiaries as
described in SECTION 5.5 and having a fair market value (as determined in good
faith by the Board of Directors of such Obligor) at least equal to that of the
assets so disposed of and/or (B) the prepayment at any applicable prepayment
premium, on a pro rata basis, of Senior Indebtedness of the Obligors. It is
understood and agreed by the Obligors that any optional prepayment of the Notes
as hereinabove provided shall be made pursuant to an Asset Disposition
Prepayment Offer as and to the extent provided in SECTION 2.3. Computations
pursuant to this SECTION 5.12(b) shall include dispositions made pursuant to
SECTION 5.12(c) and computations pursuant to SECTION 5.12(c) shall include
dispositions made pursuant to this SECTION 5.12(b).
(c) The Obligors will not, and will not permit any Restricted
Subsidiary to, sell, pledge or otherwise dispose of any shares of the stock
(including as "stock" for the purposes of this Section any options or warrants
to purchase stock or other Securities exchangeable for or convertible into
stock) of a Restricted Subsidiary (said stock, options, warrants and other
Securities herein called "Subsidiary Stock") or any Indebtedness of any
Restricted Subsidiary, nor will any Restricted Subsidiary issue, sell, pledge or
otherwise dispose of any shares of its own Subsidiary Stock, provided that the
foregoing restrictions do not apply to:
(1) the issue of directors' qualifying shares; or
(2) the issue of Subsidiary Stock to RMC; or
(3) the sale or other disposition at any one time to a Person (other
than directly or indirectly to an Affiliate) of the entire Investment of the
Obligors and their respective Restricted Subsidiaries in any Restricted
Subsidiary if all of the following conditions are met:
(i) the assets (valued at net book value) of such Restricted Subsidiary
do not, together with all other assets of the Obligors and their respective
Restricted Subsidiaries previously disposed of during the same fiscal year
(other than in the ordinary course of business), exceed 10% of Consolidated
Total Assets determined as of the end of the immediately preceding fiscal
quarter;
(ii) in the opinion of the Board of Directors of RMC, the sale is for
fair value and is in the best interests of the Obligors;
(iii) immediately after the consummation of the transaction and after
giving effect thereto, such Restricted Subsidiary shall have no Indebtedness of
or continuing Investment in the capital stock of the Obligors or of any of their
respective Restricted Subsidiaries and any such Indebtedness or Investment shall
have been discharged or acquired, as the case may be, by an Obligor or any of
its Restricted Subsidiaries; and
(iv) immediately after the consummation of the transaction and after
giving effect thereto, no Default or Event of Default would exist;
<PAGE> 18
provided, however, that for purposes of the foregoing calculation, there shall
not be included any assets of any Subsidiary so disposed of the proceeds of
which were or are (x) deposited immediately after the consummation of such sale
in an escrow account with a depository institution or trust company of the
character described in clause (g) of the definition of "Restricted Investments"
contained in SECTION 8.1 acting as escrow agent, (y) invested in Investments of
the character described in clauses (e), (f) and (g) of said definition of
"Restricted Investments," and (z) applied within twelve months of the date of
sale of such assets to either (A) the acquisition of fixed assets useful and
intended to be used in the operation of the business of an Obligor and its
respective Restricted Subsidiaries as described in SECTION 5.5 and having a fair
market value (as determined in good faith by the Board of Directors of such
Obligor) at least equal to that of the assets so disposed of and/or (B) the
prepayment at any applicable prepayment premium, on a pro rata basis, of Senior
Indebtedness of the Obligors. It is understood and agreed by the Obligors that
any optional prepayment of the Notes as hereinabove provided shall be made
pursuant to an Asset Disposition Prepayment Offer as and to the extent provided
in SECTION 2.3.
Computations pursuant to this SECTION 5.12(c) shall include dispositions made
pursuant to SECTION 5.12(b) and computations pursuant to SECTION 5.12(b) shall
include dispositions made pursuant to this SECTION 5.12(c).
Section 5.13. Guaranties. The Obligors will not, and will not permit
any of their respective Restricted Subsidiaries to, become or be liable in
respect of any Guaranty except Guaranties by an Obligor which are limited in
amount to a stated maximum dollar exposure or which constitute Guaranties of
obligations incurred by any Restricted Subsidiary in compliance with the
provisions of this Agreement.
Section 5.14. Repurchase of Notes. Neither the Obligors nor any of
their Restricted Subsidiaries or any Affiliate, directly or indirectly, may
repurchase or make any offer to repurchase any Notes unless an offer has been
made to repurchase Notes, pro rata, from all holders of the Notes at the same
time and upon the same terms. In case an Obligor or any of its respective
Restricted Subsidiaries or any Affiliate repurchases or otherwise acquires any
Notes, such Notes shall immediately thereafter be cancelled and no Notes shall
be issued in substitution therefor. Without limiting the foregoing, upon the
purchase or other acquisition of any Notes by an Obligor, any of its respective
Restricted Subsidiaries or any Affiliate, such Notes shall no longer be
outstanding for purposes of any section of this Agreement relating to the taking
by the holders of the Notes of any actions with respect hereto, including,
without limitation, SECTION 6.3, SECTION 6.4 and SECTION 7.1.
Section 5.15. Transactions with Affiliates. Neither Obligor will, nor
will either Obligor permit any Restricted Subsidiary to, enter into or be a
party to any transaction or arrangement with any Affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of such Obligor's or such
Restricted Subsidiary's business and upon fair and reasonable terms no less
favorable to such Obligor or such Restricted Subsidiary than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate,
provided that the Specified Joint Venture Agreements, as in effect on the
Closing Date, shall be excluded from the requirements of this SECTION 5.15.
Section 5.16. Termination of Pension Plans. No Obligor will, nor will
either Obligor permit any Subsidiary to, withdraw from any Multiemployer Plan or
permit any employee benefit plan
<PAGE> 19
maintained by it to be terminated if such withdrawal or termination could result
in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of
ERISA) or the imposition of a Lien on any property of such Obligor or any
Subsidiary pursuant to Section 4068 of ERISA.
Section 5.17. Designation of Subsidiaries. RMC may designate any
Unrestricted Subsidiary (which was not previously designated a Restricted
Subsidiary) to be a Restricted Subsidiary and any Restricted Subsidiary to be an
Unrestricted Subsidiary by giving prompt written notice to the holders of the
Notes that the Board of Directors of RMC has made such designation, provided,
however, that no Unrestricted Subsidiary may be designated as a Restricted
Subsidiary and no Restricted Subsidiary may be designated as an Unrestricted
Subsidiary if, at the time of such action and after giving effect thereto, a
Default or Event of Default would exist. In addition to the foregoing, any
Restricted Subsidiary which has been designated as an Unrestricted Subsidiary in
accordance with the preceding sentence may not at any time thereafter again be
designated as a Restricted Subsidiary.
Section 5.18. Reports and Rights of Inspection. Each Obligor will keep,
and will cause each Restricted Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of, or in relation to, the business and affairs of such Obligor or
such Restricted Subsidiary, in accordance with GAAP consistently applied (except
for changes disclosed in the financial statements furnished to you pursuant to
this SECTION 5.18 and concurred in by the independent public accountants
referred to in SECTION 5.18(b)), and will furnish to you so long as you are the
holder of any Note and to each other Institutional Holder of the then
outstanding Notes (in duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event within
90 days after the end of each quarterly fiscal period (except the last) of each
fiscal year, copies of:
(1) a consolidated balance sheet of RMC and its consolidated
Subsidiaries as of the close of such quarterly fiscal period, setting forth in
comparative form the consolidated figures for the fiscal year then most recently
ended,
(2) consolidated statements of income of RMC and its consolidated
Subsidiaries for such quarterly fiscal period and for the portion of the fiscal
year ending with such quarterly fiscal period, in each case setting forth in
comparative form the consolidated figures for the corresponding periods of the
preceding fiscal year, and
(3) consolidated statements of cash flows of RMC and its consolidated
Subsidiaries for the portion of the fiscal year ending with such quarterly
fiscal period, setting forth in comparative form the consolidated figures for
the corresponding period of the preceding fiscal year, all in reasonable detail
and certified as complete and correct by an authorized financial officer of RMC;
(b) Annual Statements. As soon as available and in any event within 120
days after the close of each fiscal year of RMC, copies of:
(1) a consolidated balance sheet of RMC and its consolidated
Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income, changes in shareholders' equity
and cash flows of RMC and its consolidated Subsidiaries for such fiscal year,
<PAGE> 20
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by a report
thereon of a firm of independent public accountants of recognized national
standing selected by RMC to the effect that the consolidated financial
statements present fairly, in all material respects, the consolidated financial
position of RMC and its consolidated Subsidiaries as of the end of the fiscal
year being reported on and the consolidated results of the operations and cash
flows for said year in conformity with GAAP and that the examination of such
accountants in connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such tests of
the accounting records and such other auditing procedures as said accountants
deemed necessary in the circumstances;
(c) Reports of RME. If at any time after the Closing Date audited or
unaudited financial statements of RME are prepared (1) as soon as available, and
in any event within 90 days after the end of each quarterly fiscal period
(except the last) of each fiscal year of RME, copies of any unaudited quarterly
statements of RME for such quarterly fiscal period, of the character as provided
in paragraph (a) above to the extent prepared, and (2) as soon as available, and
in any event within 120 days after the close of each fiscal year of RME, copies
of any audited or unaudited financial statements of RME as of the close of such
fiscal year, of the character as provided in paragraph (b) above to the extent
so prepared;
(d) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of an
Obligor or any Restricted Subsidiary received from such accountants, in each
case, prepared at the request of the Board of Directors of either Obligor or
otherwise presented to the Board of Directors of either Obligor;
(e) SEC and Other Reports. Promptly upon their becoming available, one
copy of each financial statement, report, notice or proxy statement sent by an
Obligor to its creditors and stockholders generally and of each regular or
periodic report, and any registration statement or prospectus filed by an
Obligor or any Subsidiary with any securities exchange or the Securities and
Exchange Commission or any successor agency, and copies of any orders in any
proceedings to which an Obligor or any of its Subsidiaries is a party, issued by
any governmental agency, Federal or state, having jurisdiction over an Obligor
or any of its Subsidiaries;
(f) ERISA Reports. Promptly upon the occurrence thereof, written notice
of (1) a Reportable Event with respect to any Plan; (2) the institution of any
steps by an Obligor, any ERISA Affiliate, the PBGC or any other Person to
terminate any Plan; (3) the institution of any steps by an Obligor or any ERISA
Affiliate to withdraw from any Plan; (4) a non-exempt "prohibited transaction"
within the meaning of Section 406 of ERISA in connection with any Plan; (5) any
material increase in the contingent liability of an Obligor or any Restricted
Subsidiary with respect to any post-retirement welfare liability; or (6) the
taking of any action by, or the threatening of the taking of any action by, the
Internal Revenue Service, the Department of Labor or the PBGC with respect to
any of the foregoing;
(g) Officer's Certificates. Within the periods provided in paragraphs
(a) and (b) above, a certificate of the chief financial officer or treasurer of
the Obligors substantially in the form of Exhibit E-1 attached hereto stating
that such officer has reviewed the provisions of this Agreement and setting
forth: (1) the information and computations (in sufficient detail) required in
order to establish whether
<PAGE> 21
the Obligors were in compliance with the requirements of SECTIONS 5.6 through
5.12 at the end of the period covered by the Financial statements then being
furnished, and (2) whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there exists on
the date of the certificate or existed at any time during the period covered by
such financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying the nature
and period of existence thereof and the action the Obligors are taking and
propose to take with respect thereto;
(h) Accountant's Certificates. Within the period provided in paragraph
(b) above, a certificate of the accountants who render an opinion with respect
to such financial statements, substantially in the form of Exhibit E-2 attached
hereto stating that they have reviewed this Agreement and stating further
whether, in making their audit, such accountants have become aware of any
Default or Event of Default under any of the terms or provisions of this
Agreement insofar as any such terms or provisions pertain to or involve
accounting matters or determinations, and if any such condition or event then
exists, specifying the nature and period of existence thereof;
(i) Restricted Subsidiaries. In the event the Unrestricted Subsidiaries
of RMC shall at any time constitute 5% or more of the consolidated total assets
of RMC and its consolidated Subsidiaries (determined in accordance with GAAP),
then within the respective periods provided in paragraphs (a) and (b) above,
financial statements of the character and for the dates and periods described in
said paragraphs (a) and (b) covering RMC and its Restricted Subsidiaries for
such dates and periods; and
(j) Requested Information. With reasonable promptness, such other data
and information as you or any such Institutional Holder may reasonably request.
Without limiting the foregoing, each of the Obligors will permit you, so long as
you are the holder of any Note, and each Institutional Holder of the then
outstanding Notes (or such Persons as either you or such Institutional Holder
may designate), to visit and inspect, under such Obligor's guidance, any of the
properties of such Obligor or any Restricted Subsidiary, to examine all of their
books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision each Obligor authorizes said accountants to discuss with you the
finances and affairs of such Obligor and its Restricted Subsidiaries), all at
such reasonable times and as often as may be reasonably requested. Any
visitation shall be at the sole expense of you or such Institutional Holder,
unless a Default or Event of Default shall have occurred and be continuing or
the holder of any Note or of any other evidence of Indebtedness of either
Obligor or any Restricted Subsidiary having an aggregate principal amount
outstanding of $1,000,000 or more gives any written notice with respect to a
claimed default, in which case, any such visitation or inspection shall be at
the sole expense of the Obligors.
Section 5.19. Ownership of RME. RMC will at all times directly own not
less than 100% of all of the issued and outstanding capital stock (and any
Securities convertible at any time and from time into capital stock) of RME free
and clear of all Liens, it being understood that this SECTION 5.19 shall not be
construed to prevent a merger of RME into RMC as otherwise permitted by this
Agreement.
<PAGE> 22
Section 5.20. Release of Liens. Within 60 days of the Closing Date, the
Obligors shall provide to you and your special counsel such written evidence,
recording data and other confirmations as you or your special counsel shall
reasonably request demonstrating that all Liens relating to the Equitable Notes
which have been terminated as required by SECTION 4.1(e) are no longer of
record.
Section 6. Events of Default and Remedies Therefor.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note when the
same shall have become due and such default shall continue for more than five
Business Days; or
(b) Default shall occur in the making of any required prepayment on any
of the Notes as provided in SECTION 2.1 or in the making of any other payment of
the principal or premium, if any, thereon at the expressed or any accelerated
maturity date or at any date fixed for prepayment; provided that in the case of
any Default pursuant to this SECTION 6.1(b) which is caused by the breakdown of
any electronic payment system utilized by the Obligors and authorized by the
holders of the Notes, the cause of which is not related to any act or omission
on the part of the Obligors, then and in such event, but only in such event, the
Obligors shall have two Business Days following the date of such Default to cure
the same; or
(c) Default shall occur in the observance or performance of any
covenant or agreement contained in SECTION 5.6 through SECTION 5.12 and SECTION
5.15; or
(d) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within 30 days after the
earlier of (1) the day on which a Responsible Officer of either of the Obligors
first obtains knowledge of such default, or (2) the day on which written notice
thereof is given to the Obligors by the holder of any Note; provided that in the
case of any Default pursuant to this SECTION 6.1(d) which cannot with due
diligence be cured within such 30-day period, if the Obligors shall commence
promptly to cure the same and thereafter prosecute the curing of such Default
with due diligence, the time within which to cure such Default shall be extended
for such period as may be necessary to effect such cure but in no event more
than 30 additional days; or
(e) Default shall be made in the payment when due (whether by lapse of
time, by declaration, by call for redemption or otherwise) of the principal of
or interest on any Indebtedness for borrowed money (other than the Notes) of
either Obligor or any Restricted Subsidiary aggregating in excess of $1,000,000
and such default shall continue beyond the period of grace, if any, allowed with
respect thereto; or
(f) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness for
borrowed money (other than the Notes) of either Obligor or any Restricted
Subsidiary aggregating in excess of $1,000,000 may be issued and such default or
event shall occur at the maturity of, or result in the acceleration of, such
Indebtedness for borrowed money of either Obligor or any Restricted Subsidiary
and such acceleration shall not have been rescinded or annulled; or
(g) Any representation or warranty made by either Obligor herein, or
made by either Obligor in any statement or certificate furnished by such Obligor
in connection with the consummation of the
<PAGE> 23
issuance and delivery of the Notes or furnished by such Obligor pursuant hereto,
is untrue in any material respect as of the date of the issuance or making
thereof; or
(h) Final judgment or judgments for the payment of money aggregating in
excess of $1,000,000 (net of insurance proceeds to the extent the insurer has
acknowledged liability with respect thereto or which insurer's liability is
being contested in good faith by appropriate proceedings by the Obligors or a
Restricted Subsidiary) is or are outstanding against an Obligor or any
Restricted Subsidiary or against any property or assets of either and any one of
such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 60 days from the date of its entry; or
(i) A custodian, liquidator, trustee or receiver is appointed for an
Obligor or any Restricted Subsidiary or for the major part of the property of
any thereof and is not discharged within 60 days after such appointment; or
(j) Either Obligor or any Restricted Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or either Obligor or any Restricted
Subsidiary applies for or consents to the appointment of a custodian,
liquidator, trustee or receiver for such Obligor or such Restricted Subsidiary
or for the major part of the property of any thereof; or
(k) Bankruptcy, reorganization, arrangement or insolvency proceedings,
or other proceedings for relief under any bankruptcy or similar law or laws for
the relief of debtors, are instituted by or against an Obligor or any Restricted
Subsidiary and, if instituted against an Obligor or any Restricted Subsidiary,
are consented to or are not dismissed within 60 days after such institution.
Section 6.2. Notice to Holders. When any Event of Default described in
the foregoing SECTION 6.1 has occurred, or if the holder of any Note or of any
other evidence of Indebtedness for borrowed money of an Obligor gives any notice
or takes any other action with respect to a claimed default, each Obligor agrees
to give notice within ten Business Days after a Responsible Officer of such
Obligor first obtains knowledge of such event to all holders of the Notes then
outstanding.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of SECTION 6.1 has happened and is
continuing, any holder of any Note may, by notice in writing sent to the
Obligors in the manner provided in SECTION 9.6, declare the entire principal and
all interest accrued on such Note TO be, and such Note shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraphs (a) through (h), inclusive, of said SECTION 6.1
has happened and is continuing, the holder or holders of 66-2/3% or more of the
principal amount of the Notes at the time outstanding may, by notice in writing
to the Obligors in the manner provided in SECTION 9.6, declare the entire
principal and all interest accrued on all Notes TO be, and all Notes shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
When any Event of Default described in paragraph (i), (j) or (k) of SECTION 6.1
has occurred, then all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind. Upon the Notes
becoming due and payable as a result of any Event of Default as aforesaid, the
Obligors will forthwith pay to the holders of the Notes the entire
<PAGE> 24
principal and interest accrued on the Notes and, to the extent not prohibited by
applicable law, an amount as liquidated damages for the loss of the bargain
evidenced hereby (and not as a penalty) equal to the Make-Whole Amount,
determined as of the date on which the Notes shall so become due and payable. No
course of dealing on the part of the holder or holders of any Notes nor any
delay or failure on the part of any holder of Notes to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies. The Obligors further agree, to the extent permitted by law,
to pay to the holder or holders of the Notes all costs and expenses incurred by
them in the enforcement of the terms and provisions of this Agreement and the
collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all services
rendered in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of SECTION 6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (h), inclusive, of SECTION 6.1, the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with the Obligors, rescind and annul such declaration and the consequences
thereof, provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal, interest
or premium on the Notes which has become due and payable solely by reason of
such declaration under SECTION 6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to SECTION 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
Section 7. Amendments, Waivers and Consents.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Obligors, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Obligors shall have obtained
the consent in writing of the holders of at least 66-2/3% in aggregate principal
amount of outstanding Notes; provided that without the written consent of the
holders of all of the Notes then outstanding, no such amendment or waiver shall
be effective (a) which will change the time of payment (including any prepayment
required by SECTION 2.1) of THe principal of or the interest on any Note or
reduce the principal amount thereof or reduce the rate of interest thereon, or
(b) which will change any of the provisions with respect to optional
prepayments, or (c) which will change the percentage of holders of the Notes
required to consent to any such amendment or waiver of any of the provisions of
this SECTION 7 or SECTION 6.
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Obligors will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each holder of Notes (irrespective of the amount
of
<PAGE> 25
Notes then owned by it) shall be informed thereof by the Obligors and shall be
afforded the opportunity of considering the same and shall be supplied by the
Obligors with sufficient information to enable it to make an informed decision
with respect thereto. The Obligors will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any holder of Notes as consideration for or as an
inducement to entering into by any holder of Notes of any waiver or amendment of
any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently offered, on the same terms, ratably to the holders
of all Notes then outstanding. Promptly and in any event within 30 days of the
date of execution and delivery of any such waiver or amendment, the Obligors
shall provide a true, correct and complete copy thereof to each of the holders
of the Notes.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Obligors,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
Section 8. Interpretation of Agreement; Definitions.
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined: "Affiliate" shall mean any
Person (other than a Restricted Subsidiary) (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, either Obligor, (b) which beneficially owns or holds 5% or
more of any class of the Voting Stock of either Obligor or (c) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by either Obligor
or a Subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise.
"Agreements" shall have the meaning set forth in SECTION 1.3.
"Business Day" shall mean any day other than a Saturday, Sunday or other day on
which banks in San Francisco, California or New York, New York are required by
law to close or are customarily closed. "Capitalized Interest" for any period
shall mean a reasonable estimate of capitalized interest included in the
depreciation expense used to arrive at Consolidated Net Income for such period,
provided that the Obligors shall demonstrate, in the Officer's Certificates
delivered pursuant to the requirements of SECTION 5.18(g), the basis for Such
estimate to the satisfaction of the holders of the Notes.
"Capitalized Lease" shall mean any lease the obligation for Rentals with respect
to which is required to be capitalized on a consolidated balance sheet of the
lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
<PAGE> 26
"Closing Date" shall have the meaning set forth in SECTION 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations from time to time promulgated thereunder.
"Consolidated Adjusted Net Worth" shall mean, as of the date of any
determination thereof, the arithmetic sum of:
(a) the amount of the capital stock accounts (net of treasury stock, at
cost, but including preferred stock), plus (or minus in the case of a deficit)
the surplus and retained earnings of RMC and its Restricted Subsidiaries as set
forth in the consolidated financial statements of RMC as at the end of the
fiscal quarter immediately preceding the date of such determination, MINUS
(b) the net book value, after deducting any reserves applicable
thereto, of all items of the following character which are included in the
assets of RMC and its Restricted Subsidiaries, to wit:
(1) the incremental increase in an asset resulting from any
reappraisal, revaluation or write-up of assets, other than an increase to the
extent permitted by GAAP; and
(2) (i) unamortized debt discount and expense and (ii) goodwill,
patents, patent applications, permits, trademarks, trade names, copyrights,
licenses, franchises, experimental expense, organizational expense, research and
development expense and such other assets as are properly classified as
"intangible assets" acquired by RMC or any of its Restricted Subsidiaries after
the Closing Date; provided, however, that notwithstanding the foregoing, RMC may
include in any determination of "Consolidated Adjusted Net Worth" the aggregate
net value of prepaid royalties, patents, patent applications, trademarks, trade
names, copyrights and other intellectual property acquired after the Closing
Date; all determined in accordance with GAAP.
"Consolidated Fixed Charges" for any period shall mean on a consolidated basis
the sum of (a) all Rentals (other than Rentals on Capitalized Leases) payable
during such period by RMC and its Restricted Subsidiaries, plus (b) all Interest
Expense on all Indebtedness (including the interest component of Rentals on
Capitalized Leases) of RMC and its Restricted Subsidiaries.
"Consolidated Funded Debt" shall mean all Funded Debt of RMC and its Restricted
Subsidiaries, determined on a consolidated basis eliminating intercompany items.
"Consolidated Net Income" for any period shall mean the consolidated net income
of RMC and its Restricted Subsidiaries for such period determined in accordance
with GAAP, excluding in any event extraordinary items in accordance with GAAP.
"Consolidated Net Income Available for Fixed Charges" for any period shall mean
the sum of (a) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (b) all provisions for any
Federal, state or other income taxes made by RMC and its Restricted Subsidiaries
during such period and (c) Consolidated Fixed Charges during such period.
"Consolidated Total Assets" shall mean, as of the date of any determination
thereof, total assets of RMC and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP.
<PAGE> 27
"Consolidated Total Capitalization" shall mean, as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt plus (b)
Consolidated Adjusted Net Worth. "Consolidated Total Liabilities" shall mean, as
of the date of any determination thereof, total liabilities of RMC and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP.
"Default" shall mean any event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"Distribution" in respect of RMC and its Restricted Subsidiaries shall mean:
(a) dividends or other distributions on capital stock (including,
without limitation, preferred stock) of a corporation (except dividends or other
distributions payable solely in shares of common stock of such corporation); and
(b) redemption, acquisition or retirement of any shares of its capital
stock or warrants, rights or other options to purchase any shares of its capital
stock (other than in exchange for or out of the net proceeds to RMC from the
concurrent issue or sale of shares of common stock of RMC).
"Environmental Law" shall mean any international, federal, state or local
statute, law, regulation, order, consent decree, judgment, permit, license,
code, covenant, deed restriction, common law, treaty, convention, ordinance or
other requirement relating to public health, safety or the environment,
including, without limitation, those relating to releases, discharges or
emissions to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated biphenyls or asbestos,
to the disposal, treatment, storage or management of hazardous or solid waste,
or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance, in each case
applicable to the property of the Obligors and their Subsidiaries or the
operation, construction or modification of any thereof, including without
limitation, the following: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, the Hazardous Materials Transportation Act, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976,
the Safe Drinking Water Control Act, the Clean Air Act of 1966, as amended, the
Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of
1977, as amended, the Emergency Planning and Community Right-to-Know Act of
1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of
1990 and any similar or implementing state law, and any state statute and any
further amendments to these laws providing for financial responsibility for
cleanup or other actions with respect to the release or threatened release of
Hazardous Substances or crude oil, or any fraction thereof, and all rules,
regulations, guidance documents and publications promulgated thereunder.
"Equitable Notes" shall mean (a) that certain promissory note issued by RME,
Robert Mondavi Winery, a California corporation, and Robert Mondavi Vineyards,
Inc., a California corporation, and payable to the order of The Equitable Life
Assurance Society of the United States, a New York corporation, dated June 18,
1986, due July 1, 1996, assigned loan identifying number F-0195763-00,
outstanding on the
<PAGE> 28
Execution Date in the aggregate principal amount of $7,663,639.00, and secured
by that certain Long Form Deed of Trust, Assignment of Rents, Security Agreement
and Financing Statement (California) dated as of June 18, 1986 by and among
R.M.E., Inc., Robert Mondavi Winery, Robert Mondavi Vineyards, Inc., Chicago
Title Insurance, a Missouri corporation, and The Equitable Life Assurance
Society of the United States and (b) that certain promissory note issued by RME,
Robert Mondavi Vineyards, Inc., Robert Mondavi Winery and Robert Mondavi
Properties, Inc. and payable to The Equitable Life Assurance Society of the
United States dated May 1, 1990, due July 1, 1996, assigned loan identifying
number F-0195763-02, outstanding on the Execution Date in the aggregate
principal amount of $11,192,406.65, and secured by that certain Long Form Deed
of Trust, Assignment of Rents, Security Agreement and Financing Statement
(California) dated as of May 1, 1990 by and among R.M.E., Inc., Robert Mondavi
Winery, Robert Mondavi Vineyards, Inc., Chicago Title Insurance Company and The
Equitable Life Assurance Society of the United States.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that is, along
with the Obligors, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in SECTION 6.1.
"Execution Date" shall have the meaning set forth in SECTION 1.2.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such Person for
borrowed money or which has been incurred in connection with the acquisition of
assets in each case having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not the
obligation to make such payments shall constitute a current liability of the
obligor under GAAP, (b) all Capitalized Rentals of such Person, and (c) all
Guaranties by such Person of Funded Debt of others; provided that up to
$10,000,000 of Indebtedness of the Obligors outstanding under bank lines
established for working capital purposes and having final maturities of not
longer than three years shall be excluded from Funded Debt.
"GAAP" shall mean generally accepted accounting principles at the time.
"Guaranties" by any Person shall mean all obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing, or in effect guaranteeing, any
Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation, or (2)
to maintain working capital or any balance sheet or income statement condition
or otherwise to advance or make available funds for the
<PAGE> 29
purchase or payment of such Indebtedness or obligation, (c) to lease property or
to purchase Securities or other property or services primarily for the purpose
of assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (d)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal amount
of such Indebtedness for borrowed money which has been guaranteed, and a
Guaranty in respect of any other obligation or liability or any dividend shall
be deemed to be Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material, substance or
waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or federal authority
having jurisdiction over the property of the Obligors and its Subsidiaries or
its use, including but not limited to any material, substance or waste which is:
(a) defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), as amended; (c) defined as a hazardous substance
unDEr Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), as amended; or (d) defined or
regulated as a hazardous substance or hazardous waste under any rules or
regulations promulgated under any of the foregoing statutes.
"Indebtedness" of any Person shall mean and include all (a) obligations of such
Person for borrowed money or which have been incurred in connection with the
acquisition of property or assets, (b) obligations secured by any Lien upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (c) obligations created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of property, (d)
Capitalized Rentals and (e) Guaranties of obligations of others of the character
referred to in this definition, provided that (1) letters of credit issued for
the benefit of an Obligor or any of its Restricted Subsidiaries to support
payment of trade payables and (2) Guaranties existing on the Closing Date and
described in Schedule II (including extension and renewals of any such Guaranty,
but without increase in the maximum dollar exposure under any such Guaranty) may
be excluded from any determination of "Indebtedness". Indebtedness of any
corporation which becomes a Restricted Subsidiary after the Closing Date, which
is existing immediately after such corporation becomes a Restricted Subsidiary,
shall for purposes of any determination pursuant to SECTION 5.9(a)(5)(ii) be
disregarded, but for all other purposes under this Agreement shall be
Indebtedness which must be incurred and outstanding within the applicable
limitations hereof.
"Institutional Holder" shall mean any of the following Persons: (a) any bank,
savings and loan association, savings institution, trust company or national
banking association, acting for its own account or in a fiduciary capacity, (b)
any charitable foundation, (c) any insurance company, (d) any fraternal
<PAGE> 30
benefit society, (e) any pension, retirement or profit-sharing trust or fund
within the meaning of Title I of ERISA or for which any bank, trust company,
national banking association or investment adviser registered under the
Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f)
any investment company or business development company, as defined in the
Investment Company Act of 1940, as amended, (g) any small business investment
company licensed under the Small Business Investment Act of 1958, as amended,
(h) any broker or dealer registered under the Securities Exchange Act of 1934,
as amended, or any investment adviser registered under the Investment Adviser
Act of 1940, as amended, (i) any government, any public employees' pension or
retirement system, or any other government agency supervising the investment of
public funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the definition
of "qualified institutional buyer" as such term is used in Rule 144A, as from
time to time in effect, promulgated under the Securities Act of 1933, as
amended.
"Interest Expense" for any period shall mean all interest and all amortization
of debt discount and expense on any particular Indebtedness (including, without
limitation, payment-in-kind, zero coupon and other like Securities) for which
such calculations are being made.
"Investments" shall mean all investments, in cash or by delivery of property,
made directly or indirectly in any Person, whether by acquisition of shares of
capital stock, Indebtedness or other obligations or Securities or by loan,
advance, capital contribution or otherwise; provided that "Investments" shall
not mean or include routine investments in property to be used or consumed in
the ordinary course of business.
"Lien" shall mean any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, an Obligor or a Restricted Subsidiary shall be deemed to be the owner
of any property which it has acquired or holds subject to a conditional sale
agreement, Capitalized Lease or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Lines of Credit" shall mean and include the bank lines of credit available to
RMC and RME under (i) that certain Business Loan Agreement dated as of December
29, 1994, as amended on December 28, 1995, among Bank of America National Trust
and Savings Association, RMC and RME and (ii) that certain Revolving Credit
Agreement dated as of December 29, 1994, as amended May 2, 1995 and December 27,
1995, among Cooperatieve Centrale Raiffeisen - Boerenleenbank B.A., "Rabobank
Nederland", New York Branch, and RMC and RME.
"Long Term Lease" shall mean any lease of real or personal property (other than
Capitalized Leases, leases between an Obligor and any Restricted Subsidiary and
leases between Restricted Subsidiaries)
<PAGE> 31
having an original term, including any period for which the lease may be renewed
or extended at the option of the lessor, of more than three years.
"Make-Whole Amount" shall mean in connection with any prepayment of the Notes
the excess, if any, of (a) the aggregate present value as of the date of such
prepayment of each dollar of principal being prepaid (taking into account the
application of such prepayment required by SECTION 2.1) and the amount of
interest (exclusive of intereST accrued to the date of prepayment) that would
have been payable in respect of such dollar if such prepayment had not been
made, determined by discounting such amounts at the Reinvestment Rate from the
respective dates on which they would have been payable, over (b) 100% of the
principal amount of the outstanding Notes being prepaid. If the Reinvestment
Rate is equal to or higher than 7.39%, the Make-Whole Amount shall be zero. For
purposes of any determination of the Make-Whole Amount:
"Reinvestment Rate" shall mean (1) the sum of 0.50%, plus the yield reported on
page "USD" of the Bloomberg Financial Markets Services Screen (or, if not
available, any other nationally recognized trading screen reporting on-line
intraday trading in the United States government Securities) at 9:00 A.M. (San
Francisco, California time) for the United States government Securities having a
maturity (rounded to the nearest month) corresponding to the remaining Weighted
Average Life to Maturity of the principal being prepaid (taking into account the
application of such prepayment required by SECTION 2.1) or (2) in the event that
no nationally recognized trading screen reporting on-line intraday trading in
the United States government Securities is available, Reinvestment Rate shall
mean the sum of 0.50%, plus the arithmetic mean of the yields for the two
columns under the heading "Week Ending" published in the Statistical Release
under the caption "Treasury Constant Maturities" for the maturity (rounded to
the nearest month) corresponding to the Weighted Average Life to Maturity of the
principal being prepaid (taking into account the application of such prepayment
required by SECTION 2.1). If no maturity exactly corresponds to such Weighted
Average Life to Maturity, yields for the two published maturities most closely
corresponding to such Weighted Average Life to Maturity shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For the purposes
of calculating the "Reinvestment Rate", the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount shall be
used.
"Statistical Release" shall mean the then most recently published statistical
release designated "H.15(519)" or any successor publication which is published
weekly by the Federal Reserve System and which establishes yields on actively
traded U.S. Government Securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination hereunder,
then such other reasonably comparable index which shall be designated by the
holders of 66-2/3% in aggregate principal amount of the outstanding Notes.
"Weighted Average Life to Maturity" of the principal amount of the Notes being
prepaid shall mean, as of the time of any determination thereof, the number of
years obtained by dividing the then Remaining Dollar-Years of such principal by
the aggregate amount of such principal. The term "Remaining Dollar-Years" of
such principal shall mean the amount obtained by (1) multiplying (i) the
remainder of (A) the amount of principal that would have become due on each
scheduled payment date if such prepayment
<PAGE> 32
had not been made, less (B) the amount of principal on the Notes scheduled to
become due on such date after giving effect to such prepayment and the
application thereof in accordance with the provisions of SECTION 2.1, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between the date of determination and such scheduled payment date, and (2)
totalling the products obtained in (1).
"Minority Interests" shall mean any shares of stock of any class of a Restricted
Subsidiary (other than directors' qualifying shares as required by law) that are
not owned by an Obligor and/or one or more of its Restricted Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Offering Materials" shall mean and include (i) the Annual Report of RMC to the
SEC on Form 10-K for the fiscal year ending June 30, 1995, (ii) the Prospectus
of RMC dated August 3, 1995 relating to the offering by RMC of its Class A
Common Stock and (iii) the Quarterly Report of RMC to the SEC on Form 10-Q for
the quarterly period ended March 31, 1996.
"Opus One" shall mean Opus One, a California general partnership, of which
Robert Mondavi Investments, a California corporation, and B.Ph.R. (California),
Inc. are the sole general partners.
"Overdue Rate" shall mean the lesser of (a) the maximum interest rate permitted
by law and (b) 8.39%.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, partnership, limited liability company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Obligors or any ERISA Affiliate or as to which
the Obligors or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Purchasers" shall have the meaning set forth in SECTION 1.1.
"Rentals" shall mean and include as of the date of any determination thereof all
fixed payments (including as such all payments which the lessee is obligated to
make to the lessor on termination of the lease or surrender of the property)
payable by an Obligor or a Restricted Subsidiary, as lessee or sublessee under
Long-Term Leases, but shall be exclusive of any amounts required to be paid by
an Obligor or a Restricted Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
"Responsible Officer" shall mean the President, Executive Vice President, the
Chief Financial Officer, or the Treasurer of an Obligor, and any other executive
or financial officer of either Obligor.
"Restricted Investments" shall mean all Investments, other than:
<PAGE> 33
(a) Investments by an Obligor and its Restricted Subsidiaries in and to
Restricted Subsidiaries, including any Investment in a corporation which, after
giving effect to such Investment, will become a Restricted Subsidiary;
(b) Investments representing loans or advances in the usual and
ordinary course of business to officers, directors and employees for expenses
(including moving expenses related to a transfer) incidental to carrying on the
business of an Obligor or any Restricted Subsidiary, including loans to
employees secured by capital stock of RMC;
(c) Investments of the Obligors existing as of the Closing Date and
described on Schedule II hereto;
(d) receivables arising from the sale of goods and services in the
ordinary course of business of the Obligors and any of their respective
Restricted Subsidiaries;
(e) Investments in commercial paper of corporations organized under the
laws of the United States or any state thereof maturing in 270 days or less from
the date of issuance which, at the time of acquisition by an Obligor or any
Subsidiary, is accorded a rating of "A-2" or better by Standard & Poor's
Corporation or "P-2" by Moody's Investors Service, Inc.;
(f) Investments in direct obligations of the United States of America
or any agency or instrumentality of the United States of America, the payment or
guarantee of which constitutes a full faith and credit obligation of the United
States of America, in either case, maturing within three years from the date of
acquisition thereof;
(g) Investments in certificates of deposit and time deposits maturing
within one year from the date of issuance thereof, either (1) issued by a bank
or trust company organized under the laws of the United States or any State
thereof, Canada or any province thereof, Japan, Great Britain, Germany, France,
Italy, Switzerland or the Netherlands, having capital, surplus and undivided
profits aggregating at least $250,000,000 (or the equivalent under local
currency), provided that at the time of acquisition thereof by an Obligor or a
Subsidiary, (1) the senior unsecured long-term debt of such bank or trust
company or of the holding company of such bank or trust company is rated "A-" or
better by Standard & Poor's Corporation or "A-3" or better by Moody's Investors
Service, Inc. or (2) such certificate of deposit or time deposit is issued by
any bank or trust company organized under the laws of the United States or any
state thereof to the extent that such Investments are fully insured by the
Federal Depository Insurance Corporation, and provided, further, the aggregate
amount of such certificates of deposit or time deposits issued by any bank or
trust company organized under the laws of jurisdictions other than the United
States or any state thereof shall not exceed 10% of consolidated gross sales of
the Obligors and the Restricted Subsidiaries determined as of the end of the
immediately preceding fiscal year;
(h) Investments in repurchase agreements with respect to any Security
described in clause (f) of this definition entered into with a depository
institution or trust company acting as principal described in clause (g) of this
definition if such repurchase agreements are by their terms to be performed by
the repurchase obligor and such repurchase agreements are deposited with a bank
or trust company of the type described in clause (g) of this definition;
(i) Investments in any money market fund which is classified as a
current asset in accordance with GAAP, the aggregate asset value of which
"marked to market" is at least
<PAGE> 34
$1,000,000,000 and which is managed by a fund manager of recognized national
standing, and which invests substantially all of its assets in obligations
described in clauses (e) through (g) above;
(j) Investments in readily-marketable obligations of indebtedness of
any State of the United States or any municipality organized under the laws of
any State of the United States or any political subdivision thereof which, at
the time of acquisition by the Obligors or any Subsidiary, are accorded either
of the two highest ratings by Standard & Poor's Corporation, Moody's Investors
Service, Inc. or another nationally recognized credit rating agency of similar
standard which in any such case mature no later than three years after the date
of acquisition thereof;
(k) Investments in money market preferred stock which, at the date of
acquisition by an Obligor or any Subsidiary, are accorded either of the two
highest ratings by Standard & Poor's Corporation, Moody's Investors Services,
Inc. or Duff & Phelps or their respective successors or assigns;
(l) advances in the usual and ordinary course of business to grape
suppliers pursuant to the reasonable and customary terms of written contracts
under which an Obligor has agreed to procure grapes from such suppliers,
provided that such advances do not in the aggregate exceed $5,000,000 at any one
time outstanding;
(m) Investments consisting of deposit accounts to the extent reasonably
required by financial institutions providing an Obligor with operating lines of
credit, provided that amounts on deposit in such deposits accounts do not any
time exceed $3,000,000;
(n) Investments in joint ventures engaged in the same business engaged
in by an Obligor and its Restricted Subsidiaries as described in SECTION 5.5 and
in which such Obligor or any Restricted Subsidiary has an interest; provided
that the aggregate amount of all such Investments made after the Closing Date
shall not at any time exceed 7.5% of Consolidated Total Assets; and
(o) Investments of the Obligors not described in the foregoing clauses
(a) through (n) made for cash management purposes which Investments are, in the
prudent judgment of a Responsible Office, in the best interests of the Obligors,
provided that to the extent such Investments consist of Investments in
agreements, devices or arrangements designed to provide protection from the
fluctuations of interest rates, exchange rates or forward rates applicable to a
party's assets, liabilities or exchange transactions, such Investments shall be
made solely for cash management and interest hedging purposes and not for
speculative investment purposes, and provided further, that the aggregate amount
of all such Investments shall not at any time exceed 2.5% of Consolidated Total
Assets.
In valuing any Investments for the purpose of applying the limitations
set forth in SECTION 5.12, Investments shall Be taken at the original cost
thereof, without allowance for any subsequent write-offs or appreciation or
depreciation therein, but less any amount repaid or recovered in cash on account
of capital or principal.
"Restricted Subsidiary" shall mean any Subsidiary which is not designated as an
Unrestricted Subsidiary on Schedule II to this Agreement or in accordance with
SECTION 5.17.
"RME Joint Indebtedness" shall mean all Indebtedness under and pursuant to which
RME and RMC are jointly and severally obligated for the repayment thereof.
"SEC" shall mean the Securities and Exchange Commission, or any other Federal
agency at the time administering the Securities Act of 1933, as amended.
<PAGE> 35
"Security" shall have the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
"Senior Indebtedness" shall mean all Indebtedness for borrowed money of either
Obligor which is not expressed to be subordinate or junior in rank to any other
Indebtedness for borrowed money of the Obligors.
"Specified Fiscal Period" shall mean any of the following fiscal periods of the
Obligors, as the context may require: (i) the semi-annual fiscal period ending
December 31 in any fiscal year, (ii) the quarterly fiscal period ending March 31
in any fiscal year or (iii) the quarterly fiscal period ending June 30 in any
fiscal year.
"Specified Joint Venture Agreements" shall mean (a) that certain Agreement to
Provide Agricultural Services between Opus One and Robert Mondavi Properties,
Inc., a California corporation, dated January 1, 1991, (b) that certain
Amendment and Restatement of Administrative Services Agreement between Opus One
and Robert Mondavi Investments, Inc., a California corporation, B.Ph.R.
(California), Inc., a California corporation, and Robert Mondavi Winery, a
California corporation, dated January 1, 1991, (c) that certain Amendment and
Restatement of Sales Representation Agreement between Opus One, Robert Mondavi
Investments, Inc., B.Ph.R. (California), Inc. and Robert Mondavi Winery, dated
January 1, 1991, (d) that certain Shareholders Agreement between Vina Errazuriz
S.A. and Inversiones RMC Limitada, dated as of February 1, 1996, and (e) that
certain Shareholders Agreement among Marchesi de Frescobaldi S.p.a., Tenuta di
Castelgiocondo S.p.a. and RMC, dated January 18, 1996, each such agreement as in
effect on the Execution Date.
The term "subsidiary" shall mean as to any particular parent corporation any
corporation of which more than 50% (by number of votes) of the Voting Stock
shall be beneficially owned, directly or indirectly, by such parent corporation.
The term "Subsidiary" shall mean a subsidiary of an Obligor. For purposes of
this Agreement, it is understood and agreed that none of the following shall be
deemed to be a Subsidiary of either Obligor: (a) Opus One, a joint venture
partnership owned 50% by the Obligors and 50% by the Baron Philippe de
Rothschild family, (b) Vina Caliterra S.A., a Chilean corporation owned 50% by
the Obligors (as the co-owners of Inversiones RMC Limitada) and 50% by Vina
Errazuriz S.A. and (c) Solaria S.r.l., an Italian limited liability company
owned 50% by Marchesi de Frescobaldi S.p.a. and Tenuta di Castelgiocondo S.p.a.
and 50% by RMC.
"Subsidiary Stock" shall have the meaning set forth in SECTION 5.12(c).
"Unrestricted Subsidiary" shall mean any Subsidiary which is designated as an
Unrestricted Subsidiary in Schedule II to this Agreement or in accordance with
SECTION 5.17. "
"Voting Stock" shall mean Securities of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Obligors and/or one or more of their
respective Wholly-owned Subsidiaries.
Section 8.2. Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting
<PAGE> 36
computation is required to be made for the purposes of this Agreement, the same
shall be done in accordance with GAAP, to the extent applicable, except where
such principles are inconsistent with the requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
Section 9. Miscellaneous.
Section 9.1. Registered Notes. RMC, as agent and attorney-in-fact for
the Obligors pursuant to this SECTION 9.1 and SECTIONS 9.2 and 9.3, which RME
hereby appoints as its agent and attorney-in-fact as herein contemplated by its
execution of this Agreement, shall cause to be kept at its principal office a
register for the registration and transfer of the Notes, and RMC will register
or transfer or cause to be registered or transferred, as hereinafter provided,
any Note issued pursuant to this Agreement. At any time and from time to time
the holder of any Note which has been duly registered as hereinabove provided
may transfer such Note upon surrender thereof at the principal office of RMC
duly endorsed or accompanied by a written instrument of transfer duly executed
by the holder of such Note or its attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order of such holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon
notice to that effect given by the holder of any Note initially delivered or of
any Note substituted therefor pursuant to SECTION 9.1, this SECTION 9.2 or
SECTION 9.3, and, upon surrender of such Note at its office, RMC will, and will
cause the other Obligor to, deliver in exchange therefor, without expense to
such holder, except as set forth below, a Note for the same aggregate principal
amount as the then unpaid principal amount of the Note so surrendered, or Notes
in the denomination of $100,000 (or such lesser amount as shall constitute 100%
of the Notes of such holder) or any amount in excess thereof as such holder
shall specify, dated as of the date to which interest has been paid on the Note
so surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Obligors may
require the payment of a sum sufficient to cover any stamp tax or governmental
charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to RMC of the loss, theft, mutilation or destruction of any Note,
and in the case of any such loss, theft or destruction upon delivery of a bond
of indemnity in such form and amount as shall be reasonably satisfactory to RMC,
or in the event of such mutilation upon surrender and cancellation of the Note,
RMC will, and will cause the other Obligor to, make and deliver without expense
to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Note. If the Purchaser or any subsequent Institutional
Holder is the owner of any such lost, stolen or destroyed Note, then the
affidavit of an authorized officer of such owner, setting forth the fact of
loss, theft or destruction and of its ownership of such Note at the time of such
loss, theft or destruction shall be accepted as satisfactory evidence thereof
<PAGE> 37
and no further indemnity shall be required as a condition to the execution and
delivery of a new Note other than the written agreement of such owner to
indemnify the Obligors.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Obligors agree to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions contemplated
hereby, including but not limited to the charges and disbursements of Chapman
and Cutler, your special counsel, duplicating and printing costs and charges for
shipping the Notes, adequately insured to you at your home office or at such
other place as you may designate, and all such expenses relating to any
amendments, waivers or consents pursuant to the provisions hereof (whether or
not the same are actually executed and delivered), including, without
limitation, any amendments, waivers, or consents resulting from any work-out,
renegotiation or restructuring relating to the performance by the Obligors of
its obligations under this Agreement and the Notes. The Obligors also agree to
pay, within five Business Days of receipt thereof, supplemental statements of
Chapman and Cutler for disbursements unposted or not incurred as of the Closing
Date and to pay and save you harmless against any and all liability with respect
to stamp and other taxes, if any, which may be payable or which may be
determined to be payable in connection with the execution and delivery of this
Agreement or the Notes, whether or not any Notes are then outstanding and to
protect and indemnify you against any liability for any and all brokerage fees
and commissions payable or claimed to be payable to any Person in connection
with the transactions contemplated by this Agreement. Without limiting the
foregoing, the Obligors agree to pay the cost of obtaining the private placement
number for the Notes and authorizes the submission of such information as may be
required by Standard & Poor's CUSIP Service Bureau for the purpose of obtaining
such number.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall
be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Obligors in writing, and if to the Obligors,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Obligors c/o RMC at 7801 St. Helena Highway,
Oakville, California 94562, Attention: Chief Financial Officer, or to such other
address as the Obligors may in writing designate to you or to a subsequent
holder of the Note initially issued to you; provided, however, that a notice to
you by overnight air courier shall only be effective if delivered to you at a
street address designated for such purpose in Schedule I, and a notice to you by
facsimile communication shall only be effective if confirmed by transmission of
a copy thereof by prepaid overnight air courier, or, in either case, as you or a
subsequent holder of any Note initially issued to you may designate to the
Obligors in writing.
<PAGE> 38
Section 9.7. Successors and Assigns. This Agreement shall be binding
upon the Obligors and their successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes.
Section 9.8. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Obligors herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Execution Date or the Closing Date, shall survive the closing and the delivery
of this Agreement and the Notes.
Section 9.9. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 9.10. Governing Law. This Agreement and the Notes issued and
sold hereunder shall be governed by and construed in accordance with California
law, including all matters of construction, validity and performance.
Section 9.11. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
<PAGE> 39
The execution hereof by you shall constitute a contract between us for the uses
and purposes hereinabove set forth, and this Agreement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together only one agreement.
THE ROBERT MONDAVI CORPORATION
By
Its
R.M.E., INC.
By
Its
Accepted as of June __, 1996.
[VARIATION]
By
Its
<PAGE> 40
NAMES AND ADDRESSES OF PURCHASERS PRINCIPAL AMOUNT OF
NOTES TO BE PURCHASED
METROPOLITAN LIFE INSURANCE COMPANY $40,000,000
One Madison Avenue
New York, New York 10010
Attention: Treasurer
Telecopier Number: (212) 578-3910
PAYMENTS
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
principal, premium or interest with respect to the 7.39% Senior Notes, due
July 8, 2006 of The Robert Mondavi Corporation and R.M.E., Inc., Private
Placement Number 77035* AB 3) to:
The Chase Manhattan Bank, N.A.
(ABA #021000021)
Metropolitan Branch
33 East 23rd Street
New York, New York 10010
for credit to:
Metropolitan Life Insurance Company-Corporate Investments
Account Number 002-2-410591
NOTICES
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above with duplicate notices to:
Metropolitan Life Insurance Company
Fixed Income Investments-
Private Placement Unit
334 Madison Avenue
Convent Station, New Jersey 07961
Attention: Vice President
Telecopier Number: (201) 254-3050
Metropolitan Life Insurance Company
2601 Main Street
Suite 1210
Irvine, California 92714
Attention: Investment Department
Telecopier Number: (714) 474-1630
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-5581829
EXHIBIT D
(to Note Agreement)
<PAGE> 41
NAMES AND ADDRESSES OF PURCHASERS PRINCIPAL AMOUNT OF
NOTES TO BE PURCHASED
GOLDMAN, SACHS & CO. $10,000,000
85 Broad Street
New York, New York 10004
Telecopier Number: (212) 902-1431
Receipt confirmation number: (212) 902-1370
PAYMENTS
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
principal, premium or interest with respect to the 7.39% Senior Notes, due
July 8, 2006 of The Robert Mondavi Corporation and R.M.E., Inc., Private
Placement Number 77035* AB 3) to:
Chase Manhattan Bank
(ABA No. 021-0000-21)
1 Chase Plaza
New York, New York 10181
for credit to the account of
Goldman, Sachs & Co.'s
Account No. 930-1-011483
Attention: Bond Int.
NOTICES
All notices and communications, including notices with respect to payments, and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. No.: 13-510888
D-41
<PAGE> 1
EXHIBIT 11
THE ROBERT MONDAVI CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average number of common shares
outstanding during the year 14,612,994 12,748,729 12,730,598
Common Stock equivalents considered to be
outstanding for years presented:
Options 589,514 38,292 --
Preferred shares -- -- --
=========== =========== ===========
15,202,508 12,787,021 12,730,598
=========== =========== ===========
Net Income $24,438,000 $17,820,000 $ 9,512,000
=========== =========== ===========
Primary earnings per share $ 1.61 $ 1.39 $ .75
=========== =========== ===========
</TABLE>
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average number of common shares 14,612,994 12,748,729 12,730,598
outstanding during the year
Common Stock equivalents considered to be
outstanding for years presented:
Options 668,364 370,032 --
Preferred shares -- -- --
=========== =========== ===========
15,281,358 13,118,761 12,730,598
=========== =========== ===========
Net Income $24,438,000 $17,820,000 $ 9,512,000
=========== =========== ===========
Fully Dilutive earnings per share $ 1.60 $ 1.36 $ .75
=========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 (No. 33-61516) of our report dated July 26, 1996 appearing
on page 17 of The Robert Mondavi Corporation's Annual Report on Form 10-K for
the year ended June 30, 1996.
/s/ PRICE WATERHOUSE LLP
- - -------------------------
Price Waterhouse LLP
San Francisco, CA
September 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 39,495
<ALLOWANCES> 0
<INVENTORY> 142,565
<CURRENT-ASSETS> 185,840
<PP&E> 227,791
<DEPRECIATION> 71,037
<TOTAL-ASSETS> 361,195
<CURRENT-LIABILITIES> 33,083
<BONDS> 123,713
0
0
<COMMON> 85,726
<OTHER-SE> 102,529
<TOTAL-LIABILITY-AND-EQUITY> 361,195
<SALES> 240,830
<TOTAL-REVENUES> 240,830
<CGS> 122,385
<TOTAL-COSTS> 122,385
<OTHER-EXPENSES> 70,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,814
<INCOME-PRETAX> 40,467
<INCOME-TAX> 16,029
<INCOME-CONTINUING> 24,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,438
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.60
</TABLE>
