AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1997
REGISTRATION NO. 333-17673
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------As filed with the Securities and Exchange Commission on February 14, 2000
Registration No. 333-94369
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
AMENDMENT NO.No. 1
TOto
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
--------------------------
DELAWARE CANANDAIGUA WINE 16-0716709 2084
COMPANY, INC.
AND ITS SUBSIDIARY
GUARANTORS
NEW YORK BATAVIA WINE CELLARS, 16-1222994 2084
INC.
DELAWARE BISCEGLIA BROTHERS WINE 94-2248544 2087
CO.
CALIFORNIA CALIFORNIA PRODUCTS 94-0360780 2084
COMPANY
NEW YORK GUILD WINERIES & 16-1401046 2084
DISTILLERIES, INC.
SOUTH CAROLINA TENNER BROTHERS, INC. 57-0474561 2084
NEW YORK WIDMER'S WINE CELLARS, 16-1184188 2084
INC.
DELAWARE BARTON INCORPORATED 36-3500366 2085
DELAWARE BARTON BRANDS, LTD. 36-3185921 2085
MARYLAND BARTON BEERS, LTD. 36-2855879 5181
CONNECTICUT BARTON BRANDS OF 06-1048198 5181
CALIFORNIA, INC.
GEORGIA BARTON BRANDS OF 58-1215938 5181
GEORGIA, INC.
NEW YORK BARTON DISTILLERS IMPORT 13-1794441 5182
CORP.
DELAWARE BARTON FINANCIAL 51-0311795 6153
CORPORATION
WISCONSIN STEVENS POINT BEVERAGE 39-0638900 2082
CO.
NEW YORK MONARCH WINE COMPANY, 36-3547524 5181
LIMITED PARTNERSHIP
ILLINOIS BARTON MANAGEMENT, INC. 36-3539106 5181
NEW YORK VINTNERS INTERNATIONAL 16-1443663 2084
COMPANY, INC.
NEW YORK CANANDAIGUA WEST, INC. 16-1462887 2084
GEORGIA THE VIKING DISTILLERY, 58-2183528 5181
INC.
(State or other jurisdiction (Exact name of (I.R.S. Employer (Primary Standard
of incorporation or organization) registrant Identification No.) Industrial Classification
as specified in its Code Number)
charter)
116 BUFFALO STREET CANANDAIGUA BRANDS, INC. 16-0716709 2084
AND ITS SUBSIDIARY GUARANTORS:
NEW YORK 14424
(716) 394-7900
(ADDRESS, INCLUDING ZIP CODE,BATAVIA WINE CELLARS, INC. 16-1222994 2084
NEW YORK CANANDAIGUA WINE COMPANY, INC. 16-1462887 2084
NEW YORK CANANDAIGUA EUROPE LIMITED 16-1195581 5182
NEW YORK ROBERTS TRADING CORP. 16-0865491 4212
NEW YORK POLYPHENOLICS, INC. 16-1546354 2834
ENGLAND AND TELEPHONE NUMBER, INCLUDING AREA CODE, OR
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)WALES CANANDAIGUA LIMITED 98-0198402 6719
NETHERLANDS CANANDAIGUA B.V. 98-0205132 6159
CALIFORNIA SIMI WINERY, INC. 94-2244918 2084
NEW YORK SCV-EPI VINEYARDS, INC. 16-1568478 0172
DELAWARE FRANCISCAN VINEYARDS, INC. 94-2602962 2084
CALIFORNIA ALLBERRY, INC. 68-0324763 2084
CALIFORNIA CLOUD PEAK CORPORATION 68-0324762 2084
CALIFORNIA M.J. LEWIS CORP. 94-3065450 2084
CALIFORNIA MT. VEEDER CORPORATION 94-2862667 2084
DELAWARE BARTON INCORPORATED 36-3500366 5181
DELAWARE BARTON BRANDS, LTD. 36-3185921 2085
MARYLAND BARTON BEERS, LTD. 36-2855879 5181
CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC. 06-1048198 5182
GEORGIA BARTON BRANDS OF GEORGIA, INC. 58-1215938 2085
NEW YORK BARTON DISTILLERS IMPORT CORP. 13-1794441 5182
DELAWARE BARTON FINANCIAL CORPORATION 51-0311795 6153
ILLINOIS BARTON CANADA, LTD. 36-4283446 6794
WISCONSIN STEVENS POINT BEVERAGE CO. 39-0638900 2082
ILLINOIS MONARCH IMPORT COMPANY 36-3539106 5181
GEORGIA THE VIKING DISTILLERY, INC. 58-2183528 2085
(State or other (Exact name of registrant (I.R.S. (Primary
jurisdiction of as specified in its charter) Employer Standard
incorporation Identification Industrial
or organization) No.) Classification
Code Number)
300 WILLOWBROOK OFFICE PARK
FAIRPORT, NEW YORK 14450
716-218-2169
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
ROBERT SANDS, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
CANANDAIGUA WINE COMPANY,BRANDS, INC.
116 BUFFALO STREET
CANANDAIGUA,300 WILLOWBROOK OFFICE PARK
FAIRPORT, NEW YORK 14424
(716) 394-7900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
Copies to:14450
716-218-2169
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------
COPY TO:
BERNARD S. KRAMER, ESQ.
MCDERMOTT, WILL & EMERY
227 WEST MONROE STREET
CHICAGO, ILLINOIS 60606-5096
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:---------------------------
Approximate date of commencement of proposed sale of securities to the
public: As soon as practicable after the effective date of this registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
--------------/_/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
---------------------------
THE REGISTRANTSREGISTRANT HEREBY AMENDAMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTSREGISTRANT SHALL
HAVE FILEDFILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CANANDAIGUA WINE COMPANY, INC.
CROSS REFERENCE SHEET
ITEM NUMBER OF CAPTION LOCATION OR HEADING IN PROSPECTUS
- ---------------------- -------------------------------------------
A. INFORMATION ABOUT THE TRANSAC-
TION
- ---------------------------------
1. Forepart of Registration
Statement and Outside Front Forepart of Registration Statement and
Cover of Prospectus........... Outside Front Cover Page of Prospectus
2. Inside Front Cover and Outside
Back Cover Pages of Inside Front and Outside Back Cover Pages
Prospectus.................... of Prospectus; Available Information;
Incorporation of Certain Documents by
Reference
3. Risk Factors, Ratio of
Earnings to Fixed Charges, and Summary; Risk Factors; The Exchange Offer;
Other Information............. Selected Historical Financial Data;
Business; Management
4. Terms of the Transaction...... Summary; The Exchange Offer; Description of
Notes; Certain Federal Income Tax
Considerations; Incorporation of Certain
Documents by Reference
5. Pro Forma Financial
Information..................... Not Applicable
6. Material Contacts With the
Company Being Acquired........ Not Applicable
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters............... Not Applicable
8. Interests of Named Experts and
Counsel......................... Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
For Securities Act
Liabilities................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Summary; Available Information;
Registrants......................... Incorporation of Certain Documents by
Reference
11. Incorporation of Certain Information
by Reference........................ Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2 or
S-3 Registrants..................... Not Applicable
13. Incorporation of Certain Information
by Reference........................ Not Applicable
14. Information With Respect to
Registrants Other than S-3 or S-2
Registrants......................... Not Applicable
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
SUBJECT TO COMPLETION, JANUARY 31, 1997DATED FEBRUARY 14, 2000
CANANDAIGUA WINE COMPANY,BRANDS, INC.
OFFER TO EXCHANGE
UP TO $65,000,000 AGGREGATE
PRINCIPAL AMOUNT OF ITS 8 3/4% SERIES C1/2% SENIOR SUBORDINATEDB SENIOR NOTES DUE 20032009
FOR
ANY AND ALL OF
ITS OUTSTANDING 8 3/4%1/2% SERIES B SENIOR
SUBORDINATED NOTES DUE 2003.
LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS
EXTENDED.
Canandaigua Wine Company, Inc. (the "Company") hereby offers, upon the terms
and conditions set forth in this Prospectus and the accompanying Letter2009
----------------------------------
o We are offering to exchange(pound)75,000,000 of Transmittal (which together constitute the "Exchange Offer"), to exchange up to
$65,000,000 aggregate principal amount ofour new 8 3/4% Series C Senior Subordinated
Notes due 2003 of the Company (the "Exchange Notes") for any and all of the
issued and outstanding 8 3/4%1/2%
Series B Senior Subordinated Notes due 20032009 for(pound)75,000,000 of our old
8 1/2% Senior Notes due 2009. We are offering to issue the Company (the "Old Notes,"new
notes to satisfy our obligations contained in the registration
rights agreement entered into when the old notes were sold in
transactions permitted by Rule 144A and together withRegulation S under the
Exchange Notes, the
"Notes") from the holders thereof. As of the date of this Prospectus, there is
$65,000,000 aggregate principal amount of the Old Notes outstanding.Securities Act.
o The terms of the Exchange Notes are identical in all material respects tonew notes and the Old Notes,
except that the Exchange Notes have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and therefore will not bear legends
restricting their transfer and will not contain provisions providing for
payment of liquidated damages under certain circumstances relating to the
Registration Rights Agreement (as defined herein), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offer.
The maximum period of time that the Exchange Offer will remain in effect will
be from the date hereof through March 13, 1997.
Interest on the Exchange Notes will be payable semi-annually on June 15 and
December 15 of each year, commencing on June 15, 1997. The Exchange Notes will
mature on December 15, 2003. Except as described below, the Company may not
redeem the Exchange Notes prior to December 15, 1998. On or after such date,
the Company may redeem the Exchange Notes, in whole or in part, at the
redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. In addition, upon the occurrence of a Change
of Control (as defined), each holder of Exchange Notes will have the right to
require the Company to make an offer to repurchase all or a portion of such
holder's Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
There can be no assurance, however, that in the event of a Change of Control
the Company will be able to obtain the necessary consents from the lender under
its Credit Facility (as defined) or, if necessary, the holders of the Original
Notes (as defined), to make any purchases requested by the holders of the
Exchange Notes or that the Company will have available funds sufficient to make
any purchases requested by the holders of Exchange Notes. See "Description of
Notes." The terms of the Notesold notes are substantially
identical, to those of the
Company's 8 3/4% Senior Subordinated Notes due 2003, which were issued in a
registered offering on December 27, 1993except for transfer restrictions, registration
rights, and of which $130.0 million aggregate
principal amount is outstanding (the "Original Notes").
The Exchange Notes will be unsecured obligations of the Company and will be
subordinated to all existing and future Senior Indebtedness (as defined) of the
Company. The Exchange Notes are guaranteed, jointly and severally, on a senior
subordinated basis (the "Guarantees") by substantially all of the Company's
subsidiaries (the "Guarantors"). The Guarantees will be unsecured obligations
of the Guarantors and will be subordinated to all existing and future Senior
Guarantor Indebtedness (as defined). The Exchange Notes will rank pari passu
with any existing or future senior subordinated indebtedness of the Company and
senior to all other subordinated indebtedness of the Company. The Indenture (as
defined) permits the Company to incur additional indebtedness, including Senior
Indebtedness under the Credit Facility (as defined), subject to certain
limitations. As of November 30, 1996, after giving effectliquidated damages that apply to the sale of the
Old Notes to the Initial Purchasers (as defined)old notes.
o The exchange offer expires at 5:00 p.m., New York City time,
on October 29, 1996 (the "Old
Notes Offering") and the application of the net proceeds therefrom, the
aggregate amount of the Company's outstanding Senior Indebtedness was $328.8
million, the aggregate amount of the Company's outstanding Pari Passu
Indebtedness (as defined) was $130.0 million, and the aggregate amount___________________, 2000, unless we extend it.
o The exchange of outstanding Senior Guarantor Indebtedness was $327.8 million (including $327.4
million of outstanding indebtedness representing guarantees of Senior
Indebtedness). Revolving Loans (as defined) repaid from the net proceeds of the
Old Notes Offering may be re-borrowed from time to time. See "Use of Proceeds"
and "Description of Notes--Ranking."
The Old Notes were not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof. In general, the Old Notes
mayold notes for new notes will not
be offered or sold unless registered undera taxable event for United States federal income tax
purposes. See "U.S. Federal Income Tax Considerations" on page
49 for more information.
o We have applied to list the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to,new notes on the Securities Act. The Exchange Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement (as defined). Based on interpretations by the staff of the Securities
and Exchange Commission (the "SEC") set forth in no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than a holder that
is an "affiliate" of the Company with the meaning of Rule 405 promulgated under
the Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business, such holder has
no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and neither such holder nor any such
person is engaging in or intends to engage in a distribution of such Exchange
(continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BYLuxembourg Stock
Exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF RISK
FACTORS THAT YOU SHOULD CONSIDER BEFORE DECIDING TO TENDER YOUR OLD NOTES.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACYADEQUACY OR ADEQUACYACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this prospectus is , 2000.
TABLE OF CONTENTS
PAGE
Where You Can Find More Information......................................... i
Forward-Looking Statements.................................................. ii
Prospectus is ,1997
Notes. NotwithstandingSummary.......................................................... 1
Risk Factors................................................................ 9
The Exchange Offer.......................................................... 13
Use of Proceeds............................................................. 18
Capitalization.............................................................. 18
Description of Notes........................................................ 19
U.S. Federal Income Tax Considerations...................................... 49
Plan of Distribution........................................................ 52
Legal Matters............................................................... 53
Experts..................................................................... 53
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the foregoing, each broker-dealer that receives
Exchange NotesSEC. You may read and copy reports, statements or
other information at the SEC's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and its regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York
10048. Please call the SEC at 1-800-SEC-0330 for its own account pursuantfurther information on the
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services, at the web site maintained by the SEC at
"http://www.sec.gov", and at our own web site at "http://www.cbrands.com". If
the new notes are listed on the Luxembourg Stock Exchange, Offer must
acknowledgecopies of our
reports, proxy statements and other information will also be made available free
of charge at the office of our agent, Paribas Luxembourg, in Luxembourg.
We have filed with the SEC a registration statement on Form S-4
to register the securities. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information set forth in the registration statement. For further information you
may refer to the registration statement and to the exhibits and schedules filed
as part of the registration statement. You can review and copy the registration
statement and its exhibits and schedules at the SEC's public reference rooms as
described above. The registration statement, including its exhibits and
schedules, is also available on SEC's web site.
The SEC allows us to "incorporate by reference" the information
we file with it, which means that we can disclose important business and
financial information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and the information that we file with the SEC later will
deliverautomatically update and supersede this information. We incorporate by reference
the documents listed below and any filings that we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
subsequent to the date of this prospectus and prior to the expiration of the
exchange offer:
o Annual Report on Form 10-K for the fiscal year ended February
28, 1999;
o Quarterly Reports on Form 10-Q for the quarterly periods ended
May 31, 1999, August 31, 1999, and November 30, 1999; and
o Current Reports on Form 8-K filed on March 3, 1999, April 13,
1999, April 15, 1999, April 23, 1999, April 26, 1999, June 9,
1999, June 21, 1999, June 23, 1999, August 4, 1999, September
27, 1999 October 13, 1999, and January 4, 2000, and on Form
8-K/A filed on June 25, 1999 and November 23, 1999.
This prospectus incorporates important business and financial
information about the Company and the guarantors of the new notes that is not
included in or delivered with this prospectus. You may request a copy of this
information and any of the filings identified above, at no cost, by writing or
telephoning us at: Canandaigua Brands, Inc., Attention: David S. Sorce,
Secretary, 300 WillowBrook Office Park, Fairport, New York 14450; telephone
number 716-218-2169. TO ENSURE TIMELY DELIVERY OF ANY DOCUMENTS YOU REQUEST, YOU
SHOULD MAKE YOUR REQUEST NO LATER THAN ____________, 2000 (FIVE DAYS PRIOR TO
THE EXPIRATION DATE OF THE EXCHANGE OFFER). In addition, copies of those
documents will also be made available free of charge at the office of our agent
in Luxembourg.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE
OR PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT
IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
---------------------
FORWARD-LOOKING STATEMENTS
This prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter"contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act. This
Prospectus,Act and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements are subject to a number
of risks and uncertainties, many of which are beyond our control. All statements
other than statements of historical facts included in this prospectus, including
the statements under "Prospectus Summary," regarding our business strategy,
future operations, financial position, estimated revenues, projected costs,
prospects, plans and objectives of management, as it may be amendedwell as information concerning
expected actions of third parties are forward-looking statements. When used in
this prospectus, the words "anticipate," "intend," "estimate," "expect,"
"project" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such identifying
words. All forward-looking statements speak only as of the date of this
prospectus. We do not undertake any obligation to update or supplemented from time to time, may be
used by a broker-dealer in connection withrevise any
resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealerforward-looking statements, whether as a result of market-making activitiesnew information, future
events or other trading
activities. The Company andotherwise. Although we believe that the Guarantors have agreed that, for a period of
180 days after the Expiration Date (as defined), they will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
The Old Notes are currently eligible for tradingexpectations reflected in the
Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the Exchange Notes. The Company does not
currently intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system.
Accordingly, thereforward-looking statements are reasonable, we can begive no assurance asthat such
expectations will prove to the development or liquidity of
any market for the Exchange Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all of the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined). The Exchange Offer is
subject to certain customary conditions.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
---------------
This prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Canandaigua Wine Company, Inc., Attention: Robert S. Sands, Secretary, 116
Buffalo Street, Canandaigua, New York 14424; telephone number (716) 394-7900.
In order to ensure timely delivery of the documents, any request should be
made by , 1997.
i
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, consolidated financial
statements and notes thereto included elsewhere in this Prospectus or
incorporated herein by reference. Unless the context indicates otherwise, the
term "Company" refers to Canandaigua Wine Company, Inc. and its subsidiaries,
all references to "net sales" refer to gross revenues less excise taxes and
returns and allowances to conform with the Company's method of classification;
all references to the Company's fiscal year shall refer to August 31 of the
indicated year except that references to fiscal 1997 shall refer to the
Company's fiscal year ending February 28, 1997; and all references to the
"Transition Period" shall refer to the six month transition period ended
February 29, 1996; all references to "Nine Months 1997" shall refer to the nine
months ended November 30, 1996; and all references to "November 1995 Nine
Months" shall refer to the nine months ended November 30, 1995. Market share
and industry data disclosed in this Prospectus have been obtained from the
following industry publications: Wines & Vines; The Gomberg-Fredrikson Report;
Jobson's Liquor Handbook; Jobson's Wine Handbook; Nielsen Wine Scan; Jobson's
Beer Handbook; Adams/Jobson's Handbook Advance; The U.S. Wine Market: Impact
Databank Review and Forecast; The U.S. Beer Market: Impact Databank Review and
Forecast; Beer Marketer's Insights; Beer Industry Update; U.S. Department of
the Treasury Statistical Releases; and the Maxwell Consumer Report. The Company
has not independently verified this data. References to market share data are
based on unit volume. Certain statements contained in this Prospectus which are
not historical facts are forward-looking statements that involve risks and
uncertaintiescorrect. Important factors that could cause our
actual results to differ materially from thoseour expectations ("cautionary
statements") are disclosed under "Risk Factors" and elsewhere in this
prospectus. The cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
PROSPECTUS SUMMARY
The following summary highlights selected information from this
prospectus and may not contain all the forward-looking statements. See "Risk Factors--Forward-Looking
Statements"information that is important to you. We
encourage you to read this prospectus in its entirety. Unless we indicate
otherwise, the terms "Company", "we", "us" and "Management's Discussion"our" refer to Canandaigua
Brands, Inc. together with its subsidiaries. The Company is a Delaware
corporation that was incorporated on December 4, 1972. Our principal executive
offices are located at 300 WillowBrook Office Park, Fairport, New York 14450,
and Analysis of Financial Condition
and Results of Operations--Cautionary Statements Related to Projected Results."our telephone number is 716-218-2169.
THE COMPANY
The Company is a leading producer and marketer of branded
beverage alcohol products with over 125 nationalin North America and regional brands which are distributed by
over 1,200 wholesalers throughout the United States and in selected
international markets. The Company isKingdom. According
to available industry data, we rank as the second largest supplier of wines,wine, the
thirdsecond largest importer of beersbeer and the fourth largest supplier of distilled
spirits in the United States. The Company'sOur wholly-owned British subsidiary, Matthew Clark
plc ("Matthew Clark"), is a leading producer of cider, wine and bottled water,
and a leading beverage alcohol wholesaler in the United Kingdom.
Since our founding in 1945 as a producer and marketer of wine
products, we have grown through acquisitions, new product offerings and new
distribution agreements. Since 1991 we have successfully integrated numerous
acquisitions that have diversified our product portfolio and increased our
market share, net sales and cash flow. Internal growth has been driven by
developing new products and repositioning existing brands are
marketed in five general categories: table wines, sparkling wines, dessert
wines, imported beer and distilled spirits, and includeto focus on the
following principal
brands:
. Table Wines: Almaden, Inglenook, Paul Masson, Taylor California Cellars,
Cribari, Manischewitz, Taylor, Marcus James, Deer Valley and Dunnewood
. Sparkling Wines: Cook's, J. Roget, Great Western and Taylor
. Dessert Wines: Richards Wild Irish Rose, Cisco and Taylor
. Imported Beer: Corona, Modelo Especial, St. Pauli Girl and Tsingtao
. Distilled Spirits: Barton, Fleischmann's, Mr. Boston, Montezuma,
Canadian LTD, Ten High, Inver House and Monte Alban
Based on available industry data, the Company believes that, during calendar
year 1995, it had a 22% sharefastest growing sectors of the market for domestic wines, a 12% share of
the imported beerbeverage alcohol industry.
We market and its distilled spirits brands had an 8% share of
the distilled spirits marketsell over 180 premier branded products to more than
1,000 wholesale distributors in the United States. Within the market for
domestic wines, the Company believes it had a 28% shareWe also distribute our own
branded products and those of the non-varietal
table wine market, a 12% share of the varietal table wine market, a 42% share
of the dessert wine market and a 29% share
1
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the Exchange Notes. The Company does not
currently intendother companies to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the Exchange Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all of the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined). The Exchange Offer is
subject to certain customary conditions.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ,1996
1-1
of the sparkling wine market. Many of the Company's brands are leaders in their
respective categoriesmore than 16,000 customers in
the United States, including Corona, the second
largest selling imported beer brand; Inglenook and Almaden, the fifth and sixth
largest selling wine brands, respectively; Richards Wild Irish Rose, the
largest selling dessert wine brand; Cook's champagne, the second largest
selling sparkling wine brand; Fleischmann's, the fourth largest blended whiskey
and fourth largest domestically bottled gin; Montezuma, the second largest
selling tequila brand; and Monte Alban, the largest selling mezcal brand.
The Company has diversified its product portfolio through a series of
strategic acquisitions that have resulted in an increase in the Company's net
sales from $176.6 million in fiscal 1991 to $1.1 billion for the twelve months
ended August 31, 1996, representing a compound annual growth rate of 43.9%.
During this same period, EBITDA (earnings before interest, taxes, depreciation
and amortization) has increased at a compound annual growth rate of 35.6% from
$20.7 million in fiscal 1991 to an aggregate of $95.1 million for the two six
month periods constituting the twelve months ended August 31, 1996. EBITDA for
the six month transition period ended February 29, 1996 (the "Transition
Period") and the six months ended August 31, 1996 (the "Six Months 1997")
includes approximately $14.3 million of items which the Company believes are
nonrecurring in nature, in part due to the Company's change in fiscal year.
Through its acquisitions, the Company has developed strong market positions in
the growing beverage alcohol product categories of varietal table wine and
imported beer. The Company ranks second and third in the varietal table wine
and imported beer categories, respectively. From 1992 through 1995, industry
shipments of varietal table wine and imported beer have each grown 35%. During
this period, the Company has strengthened its relationship with wholesalers,
expanded its distribution and enhanced its production capabilities as well as
acquired additional management, operational, marketing and research and
development expertise.
In October 1991, the Company acquired Cook's, Cribari, Dunnewood and other
brands and related facilities and assets (the "Guild Acquisition") from Guild
Wineries and Distillers ("Guild"). The Company acquired Barton Incorporated
("Barton") in June 1993 (the "Barton Acquisition"), further diversifying into
the imported beer and distilled spirits categories. In October 1993, the
Company acquired the Paul Masson, Taylor California Cellars and other brands,
and related facilities and assets of Vintners International Company, Inc.
("Vintners") (the "Vintners Acquisition"). In August 1994, the Company acquired
the Almaden, Inglenook and other brands, a grape juice concentrate business and
related facilities and assets (the "Almaden/Inglenook Product Lines") from
Heublein, Inc. ("Heublein") (the "Almaden/Inglenook Acquisition"). In September
1995, the Company acquired the Skol, Mr. Boston, Canadian LTD, Glenmore, Old
Thompson, Kentucky Tavern, and di Amore distilled spirits brands; the rights to
the Fleischmann's and Chi-Chi's distilled spirits brands under long term
license agreements; the U.S. rights to the Inver House, Schenley and El Toro
distilled spirits brands; and related facilities and assets from United
Distillers Glenmore, Inc. and certain of its North American affiliates
(collectively, "UDG") (collectively, the "UDG Acquisition," and together with
the Barton Acquisition, the Vintners Acquisition and the Almaden/Inglenook
Acquisition, the "Acquisitions"). See "Business--Recent Acquisitions."
CURRENT OPERATING ENVIRONMENT
The Company's growth through acquisitions over the past five years has
substantially expanded its portfolio of brands and has enabled it to become a
major participant in additional product categories of the beverage alcohol
business. This expansion has positioned the Company to benefit from faster
growing categories with over one-third of the Company's sales generated from
the growth categories of imported beer and varietal wines. However, recent
operating results have been negatively impacted by two factors: increases in
grape prices and certain costs and operating inefficiencies relating to the
consolidation of certain West Coast winery operations in connection with the
acquisitions.
2
While the consolidation of certain wine operations has produced significant
overall synergies, some of the planned efficiencies have not materialized and
unanticipated costs have occurred. The Company believes that the unanticipated
production costs resulted from its rapid growth over the last three years,
combined with the lack of integrated production control systems and the
complexity of production at its newly consolidated Mission Bell Winery.
Additionally, as the Company has increased its wine and grape juice
concentrate business, it believes that it has become the second largest
purchaser of grapes for wine and concentrate in California. The Company's
profits are significantly influenced by grape price changes. Costs for grapes
have escalated dramatically over the last two grape harvests (fall 1995 and
fall 1996). Based on constant tonnage purchased, the Company's overall cost of
grapes increased 17.5% in the 1996 harvest.
In order to address these matters, the Company is taking a number of specific
steps to improve sales and margins, minimize unexpected costs related to
inefficiencies and realize opportunities for efficiencies afforded by the
Company's consolidation of its West Coast wine operations and its economies of
scale as a $1.1 billion participant in the beverage alcohol industry. There can
be no assurance, however, that the specific steps the Company is taking will
address such inefficiencies and unexpected costs that the Company has incurred.
Such steps include the following:
. The Company has launched a comprehensive reengineering effort in its wine
division (the "Reengineering Effort"). The Reengineering Effort is
intended to increase the efficiency of all of the Company's operating
processes, create smaller, more manageable business units and create
greater management accountability for its wine business.
. In connection with the Reengineering Effort, the Company is implementing
a new accounting and management information system to upgrade the type
and level of information the Company can generate, and to enable it to
manage its business more precisely.
. The Company has created a number of special task forces specifically to
address various issues related to inefficiencies at its West Coast wine
operations, and has relocated, in some cases temporarily and in others
permanently, personnel with particular expertise necessary to address
these matters. All aspects of the Company's wine and grape juice
concentrate production, material requirements planning functions,
warehousing logistics and bottling operations at the Company's Mission
Bell Winery in California are being reviewed and changed as necessary to
create greater efficiencies.
. The Company has instituted several price increases on its varietal and
non-varietal table wines in response to increased grape costs from the
1995 grape harvest. In general, it is both industry and Company practice
to make selling price adjustments around the time the wine produced with
the higher cost grapes is actually sold, which generally occurs in the
calendar year following the grape harvest. Over the last year the
industry and the Company have increased their selling prices. In the case
of the Company, these selling price increases, on an annualized basis,
haveKingdom. We operate more than offset20 production facilities throughout the
increased costs associated with the fall 1995
harvest.
. The Company is in the process of recruiting new management in several key
positionsworld and has previously hired a new President of its wine division
with extensive experience in the U.S. beverage industry, a new Vice
President and Controller of the wine division and an experienced managerpurchase products for its Mission Bell Winery. It is expected that the filling of these
positions has given, and will continue to give, the Company significantly
increased management depth and experience.
3resale from other producers.
BUSINESS STRATEGY
The Company's business strategy is to manage its existing portfolio of brands
and businesses in order to maximize profit and return on investment, and
reposition its portfolio of brands to benefit from growth trends in the
beverage alcohol industry. To achieve the foregoing, the Company intends to:
(i) adjust the price/volume relationships of certain brands; (ii) develop new
brands and introduce line extensions; (iii) expand geographic distribution; and
(iv) acquire businesses that meet its strategic and financial objectives.
THE PRIOR OFFERING
On December 27, 1993, the Company issued $130.0 million inEXCHANGE OFFER
NOTES OFFERED......................... We are offering up to(pound)75,000,000
aggregate principal amount of Originalnew 8 1/2%
Series B Senior Notes pursuant to an indenture (the "Original
Indenture"), amongdue 2009.
The new 8 1/2% Series B Senior Notes
have been registered under the
Company, substantially all of its Subsidiaries and The
Chase Manhattan Bank (successor by merger to Chemical Bank), as trustee. The
Original Notes are fully and unconditionally guaranteed on a joint and several
basis by substantially all of the Company's subsidiaries.
----------------
The Company is a Delaware corporation organized in 1972 as the successor to a
business founded in 1945 by Marvin Sands, Chairman of the Board of the Company.
The Company's executive offices are located at 116 Buffalo Street, Canandaigua,
New York 14424, and its telephone number is (716) 394-7900.
4
Securities Act.
THE EXCHANGE OFFER
Registration Rights Agreement ....
The Old Notes were sold byOFFER.................... We are offering to issue the Company on
October 29, 1996 (the "Issue Date") to
Chase Securities Inc. and CS First Boston
Corporation (the "Initial Purchasers"), who
placed the Old Notes with institutional
investors. In connection therewith, the
Company and the Initial Purchasers executed
and delivered for the benefit of the
holders of the Old Notes an exchange and
registration rights agreement (the
"Registration Rights Agreement") providing,
among other things, for the Exchange Offer.
The Exchange Offer................ Exchange Notes are being offerednew notes
in exchange for a like principal amount
of Old
Notes. Asyour old notes. For procedures for
tendering, see "The Exchange Offer."
EXPIRATION DATE; WITHDRAWAL RIGHTS.... The exchange offer expires at, and you
may withdraw your tender of old notes at
any time before, 5:00 p.m. New York City
time (10:00 p.m. London time) on
_______, 2000 unless we extend the
expiration date.
PROCEDURES FOR TENDERING OLD NOTES.... We issued the old notes as global
securities. Two global securities were
issued, one of which was for issuances
of notes under Rule 144A of the
date hereof, $65,000,000
aggregate principal amountSecurities Act, the other of Old Noteswhich was
for issuances of notes under Regulation
S under the Securities Act.
The Rule 144A global note was deposited
with Citibank, N.A., as custodian for
the Depository Trust Company ("DTC").
Citibank, N.A. holds this global note in
the name of Cede & Co., as the nominee
of DTC. Beneficial interests in notes
issued under Rule 144A are outstanding.shown on
records that the DTC maintains in
book-entry form.
The Company will issueRegulation S global note was
deposited with Citibank, N.A. as common
depositary in the Exchange Notes promptly followingname of Citivic
Nominees Ltd., as nominee for Euroclear
and Cedelbank. Security entitlements
with respect to notes issued under
Regulation S are shown on records in
book-entry form that Euroclear,
Cedelbank, or your securities
intermediary maintain.
To tender old notes in the Expiration Date. See "Risk Factors--
Consequencesexchange
offer the registered holder (Euroclear,
Cedelbank, or DTC) must transfer your
outstanding notes in accordance with
Euroclear's, Cedelbank's, or DTC's
standard procedures for such transfer.
In lieu of Failuredelivering a letter of
transmittal to Exchange."
Expiration Date...................the exchange agent, a
computer-generated message, in which the
holder of the old notes acknowledges and
agrees to be bound by the letter of
transmittal, must be transmitted by
Euroclear, Cedelbank, or DTC on behalf
of a holder and received by the exchange
agent before 5:00 p.m., New York City
time on (10:00 p.m.. London time),
1997, unless the Exchange Offer is extended
as provided herein, in which case the term
"Expiration Date" means the latest date and
time to which the Exchange Offer is
extended. The maximum period of time that
the Exchange Offer will remain in effect
will be from the date hereof through March
13, 1997.
Interest.......................... Interest on the
Exchange Notes will be
payable semi-annually on June 15 and
December 15expiration date.
U.S. FEDERAL INCOME TAX CONSEQUENCES.. Your exchange of each year, commencing on
June 15, 1997. The Exchange Notes will
mature on December 15, 2003.
Conditions to the Exchange Offer.. The Exchange Offer is subject to certain
customary conditions, which may be waived
by the Company. The Company reserves the
right to amend, terminate or extend the
Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any
such condition. See "The Exchange Offer--
Conditions."
Proceduresold notes for Tendering Old Each holder of Old Notes wishing to accept
Notes............................ the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof,new notes
in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter
of Transmittal, or such facsimile, together
with the Old Notes and any other required
documentation to the exchange agent (the
"Exchange Agent") at the address set forth
herein. By executing the Letter of
Transmittal, each holder of Old Notes will
representoffer should not result
in any income, gain or loss to 5
the Company, among other things, that (i)
the Exchange Notes acquired pursuant to the
Exchange Offer by the holder and any
beneficial owners of Old Notes are being
obtained in the ordinary course of business
of the person receiving such Exchange
Notes, (ii) neither the holder nor such
beneficial owner has an arrangement or
understanding with any person to
participate in the distribution of such
Exchange Notes, (iii) neither the holder
nor such beneficial owner nor any such
other person is engaging in or intends to
engage in a distribution of such Exchange
Notes and (iv) neither the holder nor such
beneficial owner is an "affiliate,you for
United States federal income tax
purposes. See "U.S. Federal Income Tax
Considerations."
as
defined under Rule 405 promulgated under
the Securities Act, of the Company. Each
broker-dealer that receives Exchange Notes
for its own account in exchange for Old
Notes, where such Old Notes were acquired
by such broker-dealer as a result of
market-making activities or other trading
activities (other than Old Notes acquired
directly from the Company), may participate
in the Exchange Offer but may be deemed an
"underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter
of Transmittal that it will deliver a
prospectus in connection with any resale of
such Exchange Notes. The Letter of
Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-
dealerUSE OF PROCEEDS....................... We will not be deemed to admit that it
is an "underwriter" within the meaning of
the Securities Act. See '"The Exchange
Offer--Procedures for Tendering" and '"Plan
of Distribution."
Special Procedures for Beneficial Any beneficial owner whose Old Notes are
Owners........................... registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender should
contact such registered holder promptly and
instruct such registered holder to tender
on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such
beneficial owner must, prior to completing
and executing the Letter of Transmittal and
delivering his Old Notes, either make
appropriate arrangements to register
ownership of the Old Notes in such
beneficial owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of
registered ownership may take considerable
time. See "The Exchange Offer--Procedures
for Tendering."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately
6
available or who cannot deliver their Old
Notes, the Letter of Transmittal orreceive any other documents required by the Letter of
Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Old
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights.................
Tenders may be withdrawn as provided herein
at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes............. The Company will accept for exchange any
and all Old Notes which are properly
tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Exchange Agent.................... Harris Trust and Savings Bank is serving as
Exchange Agent in connection with the
Exchange Offer. See "The Exchange Offer--
Exchange Agent."
Use of Proceeds...................
There will be no cash proceeds to the
Company from
the exchange pursuant to the exchange
offer.
EXCHANGE AGENT........................ Citibank N.A., through its offices in
London specified in this prospectus, is
acting as the exchange agent for the
exchange offer. See "The Exchange
Offer.
Federal Income Tax Consequences...Offer-Exchange Agent" for the telephone
number of the offices of the exchange
agent.
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the new notes to be issued in the exchange offer and
the outstanding old notes are substantially identical, except for transfer
restrictions, registration rights, and liquidated damages that apply to the old
notes. When we refer to the term "note" or "notes", we are referring to both the
outstanding old notes and the new notes to be issued in the exchange offer.
ISSUER................................ Canandaigua Brands, Inc.
TOTAL AMOUNT OF NOTES OFFERED......... (pound)75,000,000 aggregate principal
amount of Oldnew 8 1/2% Series B Senior
Notes due 2009.
MATURITY.............................. November 15, 2009.
INTEREST PAYMENT DATES................ Semi-annually on May 15 and November 15,
commencing May 15, 2000.
SUBSIDIARY GUARANTORS................. The notes will be unconditionally
guaranteed by each of our subsidiaries
that guarantee any of our other
indebtedness or other indebtedness of
the guarantors of the notes.
RANKING............................... The notes will be senior unsecured
obligations and will rank equally with
our other unsecured and unsubordinated
indebtedness. The notes will be
effectively subordinated to our secured
indebtedness.
OPTIONAL REDEMPTION................... The notes are redeemable at any time at
a make-whole amount. See "Description of
the Notes-Optional Redemption."
CHANGE OF CONTROL..................... Upon the occurrence of a "Change of
Control," each holder of the notes will
have the right to require us to
repurchase such holder's notes at a
price equal to 101% of the principal
amount hereof, plus accrued and unpaid
interest, if any, to the date of
repurchase.
COVENANTS............................. The indenture relating to the notes will
contain various covenants, including,
but not limited to, covenants with
respect to the following matters:
o limitation on indebtedness;
o limitation on restricted payments;
o limitation on transactions with
affiliates;
o limitation on liens;
o limitation on sale of assets;
o limitation on issuances of
guarantees;
o limitation on subsidiary capital
stock;
o limitation on dividends and other
payment restrictions affecting
subsidiaries; and
o restrictions on consolidations,
mergers and the sale of assets.
ADDITIONAL AMOUNTS.................... All payments with respect to the notes
or guarantees will be made without
withholding or deduction for Exchange
Notes shouldtaxes
unless required by law, regulation or
governmental policy or the
interpretation or administration
thereof, in which case, we will, except
in certain circumstances (e.g., where a
holder has failed to provide proper
certification, such as a Form W-8,
serving as a precondition to exemption
from, or reduction in the rate of such
withholding or deduction), pay such
additional amounts as may be necessary
so that the net amount received by the
holders after such withholding or
deduction will not be less than the
amount that would have been received in
the absence of such withholding or
deduction. See "Description of the
Notes-Additional Amounts".
REDEMPTION FOR CHANGES IN
WITHHOLDING TAX..................... We may, at our option, redeem the notes
of any holder, in whole but not in part,
at a taxableredemption price equal to 100% of
the principal amount of the notes of
such holder, plus accrued and unpaid
interest, if any, if we have then
become, or if on the next date
thereafter on which any amount will fall
due for payment under or with respect to
the notes or guarantees we will in the
absence of such redemption become,
obligated to pay any Additional Amounts
on such notes as a result of any changes
in withholding tax laws, policies,
treaties or regulations, or any change
in or amendment to any official position
or administration or assessing practices
regarding the application or
interpretation of such laws, policies,
treaties or regulations, which change or
amendment is announced or becomes
effective on or after the date the notes
are issued; provided, however, that (i)
notice shall not be given earlier than
60 days prior to the earliest date on
which we would be obligated to pay
Additional Amounts, (ii) we will be
required to consummate such redemption
within 180 days of the date on which
such Additional Amounts are payable and
(iii) if, after giving effect to such
redemption, less than a majority of the
aggregate principal amount of notes
originally issued would remain
outstanding, we will be required to make
an offer to purchase the remaining notes
at a purchase price equal to 100% of the
aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to
the date of redemption. See "Description
of the Notes-Redemption for Changes in
Withholding Tax."
LISTING............................... We have applied to list the new notes on
the Luxembourg Stock Exchange.
GOVERNING LAW......................... The notes and the indenture will be
governed by the laws of the State of New
York.
TRUSTEE............................... Harris Trust and Savings Bank, Chicago.
PRINCIPAL PAYING AGENT, TRANSFER AGENT,
AND REGISTRAR........................ Citibank, N.A, London.
PAYING AGENT, TRANSFER AGENT, AND
LISTING AGENT IN LUXEMBOURG.......... Paribas Luxembourg.
BOOK-ENTRY TRANSFER FACILITIES........ Euroclear and Cedelbank, as appropriate.
RISK FACTORS
You should carefully consider all of the information set forth in
this prospectus and, in particular, should evaluate the specific factors under
"Risk Factors" beginning on page 9 before tendering your old notes in the
exchange offer.
SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the
Company for Federaleach of the three fiscal years in the period ended February 28,
1999, for the six month period ended February 29, 1996, for each of the two
fiscal years in the period ended August 31, 1995 and for each of the nine month
periods ended November 30, 1998 and 1999. The statement of income tax purposes.data for the
three fiscal years ended February 28, 1999, the six month period ended February
29, 1996, and the two fiscal years ended August 31, 1995 is derived from our
audited historical financial statements incorporated by reference into this
prospectus, which financial statements have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports thereon. The
statement of income data for the nine month periods ended November 30, 1998 and
1999 has been derived from our unaudited financial statements incorporated by
reference into this prospectus. The summary financial data below reflect results
of Matthew Clark since its acquisition on December 1, 1998, results of several
well known Canadian whisky brands, including Black Velvet and related assets
since their acquisition from Diageo Inc. and certain of its affiliates on April
9, 1999, and the results of Franciscan Vineyards, Inc. and Simi Winery, Inc.
since their acquisition on June 4, 1999. During January 1996, the Board of
Directors of the Company changed the Company's fiscal year end from August 31 to
the last day of February.
In the opinion of our management, the unaudited data includes all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the data for such periods. Interim results are not necessarily
indicative of results that can be expected in future periods. It is important
that you read the selected financial data presented below in conjunction with
the historical financial statements and unaudited pro forma financial data
included in reports we have filed with the SEC that are incorporated by
reference into this prospectus. See "Certain
Federal Income Tax Considerations."Where You Can Find More Information."
Consequences
FOR THE SIX
MONTHS
FOR THE NINE MONTHS ENDED FOR THE YEARS
ENDED NOVEMBER 30, FOR THE YEARS ENDED FEBRUARY 28, FEBRUARY 2, ENDED AUGUST 31,
------------------------ ------------------------------------- ----------- ------------------------
1999 1998 1999 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(in thousands, except per share data)
Gross sales $ 2,383,909 $ 1,374,183 $ 1,984,801 $ 1,632,357 $ 1,534,452 $ 738,415 $ 1,185,074 $ 861,059
Less-excise taxes (570,640) (336,283) (487,458) (419,569) (399,439) (203,391) (278,530) (231,475)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net sales 1,813,269 1,037,900 1,497,343 1,212,788 1,135,013 535,024 906,544 629,584
Cost of product sold (1,258,332) (726,908) (1,049,309) (869,038) (812,812) (389,281) (657,883) (458,311)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit 554,937 310,992 448,034 343,750 322,201 145,743 248,661 171,273
Selling, general and
administrative expenses (368,130) (202,561) (299,526) (231,680) (208,991) (112,411) (159,196) (121,388)
Nonrecurring charges (5,510) -- (2,616) -- -- (2,404) (2,238) (24,005)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income 181,297 108,431 145,892 112,070 113,210 30,928 87,227 25,880
Interest expense, net (78,219) (23,700) (41,462) (32,189) (34,050) (17,298) (24,601) (18,056)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before taxes and
extraordinary item 103,078 84,731 104,430 79,881 79,160 13,630 62,626 7,824
Provision for income taxes (41,231) (34,740) (42,521) (32,751) (32,977) (6,221) (24,008) (2,640)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before
extraordinary item 61,847 49,991 61,909 47,130 46,183 7,409 38,618 5,184
Extraordinary item, net of
income taxes -- -- (11,437) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income $ 61,847 $ 49,991 $ 50,472 $ 47,130 $ 46,183 $ 7,409 $ 38,618 $ 5,184
=========== =========== =========== =========== =========== =========== =========== ===========
Earnings per common share:
Basic:
Income before
extraordinary item $ 3.43 $ 2.72 $ 3.38 $ 2.52 $ 2.39 $ 0.38 $ 2.06 $ 0.34
Extraordinary item -- -- (0.62) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings per common
share - basic $ 3.43 $ 2.72 $ 2.76 $ 2.52 $ 2.39 $ 0.38 $ 2.06 $ 0.34
=========== =========== =========== =========== =========== =========== =========== ===========
Diluted:
Income before
extraordinary item $ 3.34 $ 2.65 $ 3.30 $ 2.47 $ 2.37 $ 0.37 $ 2.03 $ 0.33
Extraordinary item -- -- (0.61) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings per common
share - diluted $ 3.34 $ 2.65 $ 2.69 $ 2.47 $ 2.37 $ 0.37 $ 2.03 $ 0.33
=========== =========== =========== =========== =========== =========== =========== ===========
Total assets $ 2,532,995 $ 1,186,246 $ 1,793,776 $ 1,090,555 $ 1,043,281 $ 1,045,590 $ 770,004 $ 814,718
=========== =========== =========== =========== =========== =========== =========== ===========
Long-term debt $ 1,253,863 $ 291,386 $ 831,689 $ 309,218 $ 338,884 $ 327,616 $ 198,859 $ 289,122
=========== =========== =========== =========== =========== =========== =========== ===========
Ratio of earnings to fixed
charges(1)(2) 2.2x 4.1x 3.2x 3.2x 3.1x 1.7x 3.3x 1.4x
=========== =========== =========== =========== =========== =========== =========== ===========
(1) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represent income before provision for income taxes plus fixed
charges. "Fixed charges" consist of interest expensed and capitalized,
amortization of debt issuance costs, amortization of discount on debt, and the
portion of rental expense which management believes is representative of the
interest component of lease expense.
(2) The ratio of earnings to combined fixed charges and preferred stock dividend
requirements is the same as the ratio of earnings to fixed charges.
RISK FACTORS
You should consider carefully all of Failurethe information in this
prospectus and incorporated by reference in this prospectus. In particular, you
should carefully evaluate the following risks before tendering your old notes in
the exchange offer. However, the risk factors set forth below, other than the
first risk factor, are also generally applicable to Exchange......................... Holders of Old Notes whothe old notes as well as the
new notes.
IF YOU DO NOT EXCHANGE YOUR OLD NOTES FOR NEW NOTES, YOU WILL CONTINUE TO HOLD
NOTES SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND WHICH ARE NOT FREELY
TRANSFERABLE
If you do not exchange
their Old Notes for Exchange Notes pursuant
totender your old notes or you tender your old notes
and we do not accept the Exchange Offertender, your old notes will continue to be subject to
thetheir existing restrictions on transfer of
such Old Notes as set forth in the legend
thereon as a consequence of the issuance of
the Old Notes pursuant to exemptions from,
or in transactions not subject to, the
registration requirements of the Securities
Act and applicable state securities laws.exchange. In general, Old Notes may not be offered or
sold unless the old
notes are registered under the Securities Act, you cannot offer or sell your old
notes except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. 7
SUMMARY DESCRIPTION OF THE NOTES
TheExcept in limited
circumstances which we summarize under "The Exchange Offer applies to $65,000,000 aggregate principal amount of Old
Notes. The termsOffer-Purpose and Effect of
the Exchange Notes are identicalOffer" in all material respectsthis prospectus, we do not have any obligation to
register your old notes under the Old Notes, exceptSecurities Act. We do not expect that we will
take any action to register the Exchange Notes have been registeredold notes under the Securities Act and, therefore, will not bear legends restricting their transfer
and will not contain certain provisions providing for payment of liquidated
damages under certain circumstances relating to the Registration Rights
Agreement, which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Old Notes and, except as set forth in the immediately preceding
sentence, will be entitled to the benefits of the Indenture, under which both
the Old Notes were, and the Exchange Notes will be, issued. See "Description of
Notes."
Issuer............................ Canandaigua Wine Company, Inc.
Securities Offered for Exchange... $65,000,000 aggregate principal amount of 8
3/4% Series C Senior Subordinated Notes due
2003.
Maturity.......................... December 15, 2003.
Interest Payment Dates............ June 15 and December 15 of each year,
commencing on June 15, 1997.
Except as described below, the Company may
Optional Redemption............... not redeem the Exchange Notes prior to
December 15, 1998. On or after such date,
the Company may redeem the Exchange Notes,
in whole or in part, at the redemption
prices set forth herein, together with
accrued and unpaid interest, if any, to the
date of redemption.
Change of Control................. Upon the occurrence of a Change of Control,
each holder of Notes will have the right to
require the Company to purchase all or a
portion of such holder's Notes at a
purchase price in cash equal to 101% of the
principal amount thereof, together with
accrued and unpaid interest, if any, to the
date of purchase. In the event of a Change
of Control, the Company is prohibited under
the Credit Facility from purchasing the
Exchange Notes and all amounts outstanding
under the Credit Facility become due and
payable. In addition, the repurchase of the
Exchange Notes upon the occurrence of a
Change of Control (or otherwise) will be
prohibited by the Original Indenture unless the Company has sufficient ability at such
time to make "Restricted Payments"
thereunder. See "Description of Notes--
Certain Covenants--Purchase of Notes Upon a
Change of Control." There can be no
assurance that in the event of a Change of
Control the Company will be able to obtain
the necessary consents from the lenders
under its Credit Facility or,
8
if necessary, the holders of the Original
Notes, to make any purchases requested by
the holders of the Exchange Notes or that
the Company will have available funds
sufficient to make any purchases requested
by the holders of the Exchange Notes.
Neither the Company's Board of Directors
nor the trustee under the Indenture is
permitted to waive the right of the holders
of the Exchange Notes to require the
Company to purchase the holders' Exchange
Notes upon a Change of Control.
Subsidiary Guarantees.............
The Exchange Notes will be guaranteed,
jointly and severally, on a senior
subordinated basis by substantially all
existing direct and indirect subsidiaries
of the Company. As of November 30, 1996,
after giving effect to the sale of the Old
Notes and the application of the net
proceeds therefrom, the aggregate amount of
outstanding Senior Guarantor Indebtedness
was $327.8 million (including $327.4
million of outstanding indebtedness
representing guarantees of Senior
Indebtedness).
Ranking...........................
The Exchange Notes will be unsecured
subordinated obligations of the Company
and, as such, will be subordinated to all
existing and future Senior Indebtedness of
the Company. The Notes will rank pari passu
with all existing and future senior
subordinated indebtedness of the Company,
including the Original Notes. As of
November 30, 1996, after giving effect to
the sale of the Old Notes and the
application of the net proceeds therefrom,
the aggregate amount of outstanding Senior
Indebtedness of the Company was $328.8
million and the aggregate amount of
outstanding Pari Passu Indebtedness was
$130.0 million. Revolving Loans repaid from
the net proceeds of the Old Notes Offering
may be re-borrowed from time to time. See
"Use of Proceeds" and "Description of
Notes--Ranking."
Restrictive Covenants............. The Indenture relating to the Exchange
Notes contains certain covenants,
including, but not limited to, covenants
with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation
on restricted payments; (iii) limitation on
transactions with affiliates; (iv)
limitation on senior subordinated
indebtedness; (v) limitation on liens; (vi)
limitation on sale of assets; (vii)
limitation on issuances of guarantees of
and pledges for indebtedness; (viii)
restriction on transfer of assets; (ix)
limitation on subsidiary capital stock; (x)
limitation on dividends and other payment
restrictions
9
affecting subsidiaries; and (xi)
restrictions on consolidations, mergers and
the sale of assets. See "Description of
Notes--Certain Covenants."
Absence of a Public Market
for the Notes..................... The Exchange Notes generally will be freely
transferable (subject to the restrictions
discussed elsewhere herein) but will be new
securities for which initially there will
not be a market. Accordingly, there can be
no assurance as to the development or
liquidity of any market for the Exchange
Notes. The Company does not intend to apply
for listing of the Exchange Notes on any
national securities exchange or for
quotation through the National Association
of Securities Dealers Automated Quotation
System. See "Risk Factors--Lack of Public
Market; Restrictions on Transferability."
Certain Tax Consequences.......... Because the Old Notes were issued with
original issue discount ("OID"), the
Exchange Notes will also be deemed to have
been issued with OID. As a result, for
Federal income tax purposes, holders may bewe are
required to include amountsdo so in income prior
to the receipt of cash attributable
thereto. See "Certain Federal Income Tax
Consequences."
Risk Factors......................
Prior to tendering Old Notes in the
Exchange Offer, holders of Old Notes should
carefully consider all of the information
set forth in this Prospectus and, in
particular, should evaluate the specific
factors set forth under "Risk Factors"
beginning on page 13 for risks involved
with an investment in the Notes. Certain
statements contained in this Prospectus
which are not historical facts are forward-
looking statements that involve risks and
uncertainties that could cause actual
results to differ materially from those in
the forward-looking statements. See "Risk
Factors--Forward Looking Statements" and
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations--Cautionary Statements Related
to Projected Results."
For additional information concerning the
Exchange Notes, see "Description of Notes."
10
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
NINE MONTHS ENDED
YEAR ENDED AUGUST 31, SIX MONTHS ENDED NOVEMBER 30,
------------------------------------------------- ------------------ ------------------
FEB. 28, FEB. 29,
1991 1992(A) 1993(B) 1994(C)(D) 1995 1995 1996(E) 1995(E) 1996
-------- -------- -------- ---------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales............... $176,559 $245,243 $306,308 $629,584 $906,544 $454,485 $535,024 $737,644 $873,444
Gross profit........... 45,495 70,557 91,377 182,373 252,733 126,791 138,816 203,195 224,425
Selling, general and
administrative
expenses............... (30,184) (46,491) (59,983) (121,388) (159,196) (79,925) (112,411) (129,375) (161,139)
Nonrecurring
restructuring expenses. -- -- -- (24,005) (2,238) (685) (2,404) (3,301) --
Operating income........ 15,311 24,066 31,394 36,980 91,299 46,181 24,001 70,519 63,286
Interest expense, net... (3,631) (6,182) (6,126) (18,056) (24,601) (13,141) (17,298) (19,507) (25,468)
Income before provision
for income taxes....... 11,680 17,884 25,268 18,924 66,698 33,040 6,703 51,012 37,818
Net income.............. $ 7,710 $ 11,356 $ 15,604 $ 11,733 $ 41,020 $ 20,320 $ 3,322 $ 31,112 $ 21,753
OTHER DATA:
Gross profit margin(f).. 25.8% 28.8% 29.8% 29.0% 27.9% 27.9% 25.9% 27.5% 25.7%
EBITDA(g)............... $ 20,737 $ 31,141 $ 40,069 $ 50,795 $112,011 $ 58,832 $ 37,959(h) $ 85,913 $ 89,123
EBITDA margin(i)........ 11.7% 12.7% 13.1% 8.1% 12.4% 12.9% 7.1% 11.6% 10.2%
Cash flows from
operating activities... $ 9,275 $ 16,199 $ 8,912 $ 27,179 $ 73,318 $(36,243) $(84,833) $(43,390) $ 15,364
Cash flows from
investing activities... $ 182 $ (9,347) $ 3,098 $(16,950) $(64,085) $(11,342) $(26,829) $(41,359) $(33,995)
Cash flows from
financing activities... $ (3,766) $(11,515) $(10,486) $(12,452) $ (6,548) $ 49,180 $110,821 $ 82,953 $ 20,289
Depreciation and
amortization........... $ 5,426 $ 7,075 $ 8,675 $ 13,815 $ 20,712 $ 12,651 $ 13,958 $ 15,394 $ 25,837
Capital expenditures.... $ 2,844 $ 4,713 $ 6,949 $ 7,853 $ 37,121 $ 11,342 $ 16,077 $ 32,753 $ 25,318
AS OF AS OF
AS OF AUGUST 31, FEBRUARY 29, NOVEMBER 30,
---------------------------------------------- ------------ ------------
1991 1992(A) 1993(B) 1994(C)(D) 1995 1996(E) 1996
-------- -------- -------- ---------- -------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
BALANCE SHEET DATA:
Total assets............ $147,207 $217,835 $355,182 $826,562 $785,921 $1,054,580 $1,119,513
Indebtedness (including
current maturities).... 63,134 62,174 129,131 339,123 227,992 479,713 520,498
Stockholders' equity.... 51,975 95,549 126,104 204,193 351,882 356,506 358,565
Cash dividends declared
per common share(j).... -- -- -- -- -- -- --
- -------
(a) The Company acquired Guild on October 1, 1991, and accounted for this
acquisition utilizing the purchase method of accounting. Guild's results of
operations have been included in the Company's results of operations since
October 1, 1991.
(b) The Company acquired Barton on June 29, 1993, and accounted for the
acquisition utilizing the purchase method of accounting. Barton's results
of operations have been included in the Company's results of operations
since June 29, 1993.
(c) The Company acquired substantially all of the assets and businesses of
Vintners on October 15, 1993, and accounted for the acquisition utilizing
the purchase method of accounting. Vintners' results of operations have
been included in the Company's results of operations since October 15,
1993.
(d) The Company acquired substantially all of the assets and business
associated with the Almaden/Inglenook Product Lines from Heublein on August
5, 1994, utilizing the purchase method of accounting. The Almaden/Inglenook
Product Lines have been included in the Company's results of operations
since August 5, 1994.
(e) The Company acquired certain assets of UDG on September 1, 1995, and
accounted for the acquisition utilizing the purchase method of accounting.
UDG's results of operations have been included in the Company's results of
operations since September 1, 1995.
(f) Represents gross profit as a percentage of net sales.
(g) EBITDA represents operating income plus depreciation of property, plant and
equipment and amortization of intangible assets. EBITDA is presented here
as a measure of the Company's debt service ability. EBITDA should not be
construed as an alternative to operating income or net cash flow from
operating activities and should not be construed as an indication of
operating performance or as a measure of liquidity.
(h) EBITDA for the six months ended February 29, 1996 includes approximately
$14,300 of charges that the Company believes are nonrecurring in nature due
in part to the Company's change in fiscal year.
(i) Represents EBITDA as a percentage of net sales.
(j) The Company's policy is to retain all of its earnings to finance the
development and expansion of its business, and the Company has not paid any
cash dividends since its initial public offering in 1973. In addition, the
Company's current bank credit agreement prohibits and the Company's
indentures for the Original Notes and Old Notes restrict the payment of
cash dividends.
11
RISK FACTORS
The Exchange Notes offered hereby involve a high degree of risk. In addition
to the other information in this Prospectus, the following principal risk
factors should be considered carefully by holders of Old Notes prior to making
a decision to tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESTRICTIONS ON TRANSFER OF THE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate
that it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the SEC set forth in no-action letters issued
to third parties, the Company believes that the Exchange Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business,
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any such
other person is engaging in or intends to engage in a distribution of such
Exchange Notes. Notwithstanding the foregoing, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with any resale of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities (other than
Old Notes acquired directly from the Company.) The Company has agreed that, for
a period of 180 days from the date of this Prospectus, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, holders of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to the Exchange Agent at the address set forth below
under "The Exchange Offer--Exchange Agent" on or prior to the Expiration Date.
In addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with a Letter of Transmittal or (ii) a timely confirmation
of a book-entry transfer of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company pursuant to
the procedure for book-entry transfer described herein, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply
with the guaranteed delivery procedures described herein. See "The Exchange
Offer."
RISK OFlimited circumstances.
OUR INDEBTEDNESS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL HEALTH
AND OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE COMPANY FROM INDEBTEDNESS AND RESTRICTIVE
COVENANTS
The Company hasNOTES
We have incurred substantial indebtedness to finance our
acquisitions and we may incur substantial additional indebtedness in the Acquisitions.future
to finance further acquisitions. As of November 30, 1996, after giving effect to the sale of the
Old Notes and the application of the net proceeds
12
therefrom, the Company had $520.5 million1999, we have approximately
$1.4 billion of indebtedness outstanding, which amount does not include $46.1approximately
$183 million of Revolving Loansrevolving loans we had available to be drawndraw under the Credit Facility. Revolving Loans repaid from the net proceeds of the
Old Notes Offering may be re-borrowed from time to time. See "Use of
Proceeds." The Company'sour bank credit
facility. Our ability to satisfy itsour financial obligations under the Exchange Notes and under its otherour
indebtedness outstanding from time to time will depend upon itsour future operating
performance, which is subject to prevailing economic conditions, levels of
interest rates and financial, business and other factors, many of which are
beyond the Company'sour control. Therefore, there can be no assurance that the Company'sour cash flow from
operations will be sufficient to meet all of our debt service requirements and
cash provided by its financing activities will provide adequate
resources to satisfy its working capital, liquidity and anticipatedfund our capital expenditure requirements.
The Company'sOur current and future debt service obligations and covenants
could have important consequences to holders ofyou if you purchase the Exchange Notes, includingnotes offered by
this prospectus. Such obligations and covenants include the following:
(i) the Company'so Our ability to obtain financing for future working capital needs
or acquisitions or other purposes may be limited;
(ii) ao A significant portion of the Company'sour cash flow from operations will be
dedicated to the payment of principal and interest on itsour
indebtedness, thereby reducing funds available for operations;
o We are subject to restrictive covenants that could limit our
ability to conduct our business; and
(iii) the Companyo We may be more vulnerable to adverse economic conditions than
less leveraged competitors and, thus, may be limited in itsour
ability to withstand competitive pressures.
The Credit Facility, the Original Indenturerestrictive covenants included in our bank credit facility,
our current indentures and the Indenture contain
restrictive covenants including,indenture under which the notes will be issued
include, among others, those restricting additional liens, incurrence of additional indebtedness,borrowing,
the sale of assets, the payment of dividends, transactions with affiliates, the
making of investments and certain other fundamental changes. The Credit Facilitybank credit
facility also contains restrictions on capital expendituresacquisitions and certain financial ratio
tests including current assets to current liabilities, maximum indebtedness to
tangible net worth, minimum interest anda debt coverage ratio, a senior debt coverage ratio, a fixed
charges coveragesratio and minimum
levels of tangible net worth.an interest coverage ratio. These restrictions could limit the Company'sour
ability to conduct its business. A failure to comply with the obligations contained
in the Credit Facility, the Original Indenturebank credit facility, our current indentures or the Indentureindenture under which
the new notes will be issued could result in an event of default under such
agreements, which could permit
acceleration ofrequire us to immediately repay the related debt and
acceleration ofalso debt under other agreements that may contain cross-acceleration or
cross-default provisions.
RISK OF ADVERSE EFFECTS ON THE HOLDERS OF EXCHANGE NOTES OCCURRING DUE TO
SUBORDINATION OF THE NOTES ANDARE UNSECURED; THE GUARANTEES AND ENCUMBRANCES ON COMPANY
ASSETSSTOCK OF SOME OF OUR SUBSIDIARIES IS PLEDGED TO
SECURE OUR BANK CREDIT FACILITY
The payment of principal of, premium, if any, and interest on the Exchange
Notes will be subordinated, to the extent set forth in the Indenture, to the
prior payment in full of existing and future Senior Indebtedness of the
Company, which includes the indebtedness under the Credit Facility. Therefore,
in the event of the liquidation, dissolution, reorganization, or any similar
proceeding regarding the Company, the assets of the Company will be available
to pay obligations on the Exchange Notes only after the Senior Indebtedness
has been paid in full, and there may not be sufficient assets to pay amounts
due on all or any of the Exchange Notes. In addition, the Company may not pay
principal of, premium, if any, interest on or any other amounts owing in
respect of the Exchange Notes, make any deposit pursuant to defeasance
provisions or purchase, redeem or otherwise retire the Exchange Notes, if any
Designated Senior Indebtedness (as defined) is not paid when due or any other
default on Designated Senior Indebtedness occurs and the maturity of such
indebtedness is accelerated in accordance with its terms unless, in either
case, such default has been cured or waived, any such acceleration has been
rescinded or such indebtedness has been repaid in full. Moreover, under
certain circumstances, if any nonpayment default exists with respect to
Designated Senior Indebtedness, the Company may not make any payments on the
Exchange Notes for a specified period of time, unless such default is cured or
waived or such indebtedness has been repaid in full. As of November 30, 1996,
after giving effect to the sale of the Old Notes and the application of the
net proceeds therefrom, the aggregate amount of outstanding Senior
Indebtedness that ranked senior in right of payment to the Exchange Notes was
$328.8 million, and the aggregate amount of outstanding Pari Passu
Indebtedness was $130.0 million. See "Description of Notes--
13
Subordination." Revolving Loans repaid from the net proceeds of the Old Notes
Offering may be re-borrowed from time to time. See "Use of Proceeds."
The Guarantees will be subordinated in right of payment to the guarantees by
the Guarantors of the Company's obligations under the Credit Facility and will
be subordinated in the future to all future guarantees by the Guarantors of
Senior Indebtedness of the Company and any other Senior Guarantor Indebtedness.
As of November 30, 1996, after giving effect to the sale of the Old Notes and
the application of the net proceeds therefrom, the aggregate amount of
outstanding Senior Guarantor Indebtedness that ranked senior in right of
payment to the Guarantees was $327.8 million (including $327.4 million of
outstanding indebtedness representing guarantees of Senior Indebtedness).
The Exchange Notesnotes will not be secured by any of the Company'sour assets. TheOur
obligations of the Company under the Credit Facility,our bank credit facility, however, are secured by a(i) first
priority security interest in a majoritypledges of 100% of the Company's assets.capital stock of Canandaigua Limited and all of
our domestic operating subsidiaries and (ii) first priority pledges of 65% of
the capital stock held by us of Matthew Clark, B.B. Servicios, S.A. de C.V.,
Canandaigua World Sales Limited and Schenley Distilleries Inc./Les Distilleries
Schenley Inc. If the Company becomes insolvent or is liquidated, or if payment
under the Credit
Facilityour bank credit facility is accelerated, the lenders under the Credit Facilityfacility
would be entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to instrumentsthe agreement governing such indebtedness.
Accordingly, such lenders will have a prior claim on such of the Company's
assets. In any
such event, because the Exchange Notesnotes will not be secured by any of the Company'sour assets, it is
possible that there would be no assets remaining from which claims of the
holders of the Exchange Notesnotes could be satisfied or, if any such assets remained, such
assets might be insufficient to satisfy such claims fully.
See "Capitalization," "Management's Discussions and
Analysis of Financial Condition and Results of Operations--Financial Liquidity
and Capital Resources," "Description of Notes" and Notes to the Consolidated
Financial Statements.
DEPENDENCY UPON OPERATIONSOUR ABILITY TO MAKE PAYMENTS ON THE NOTES DEPENDS ON OUR ABILITY TO RECEIVE
DIVIDENDS FROM OUR SUBSIDIARIES; MATTHEW CLARK IS NOT A GUARANTOR OF THE COMPANY'S SUBSIDIARIES
The Exchange NotesNOTES
We are obligationsa holding company and conduct almost all of the Company.our operations
through our subsidiaries. As of November 30, 1996,
75.5%1999, approximately 87% of our
tangible assets were held by our subsidiaries. The capital stock of our
subsidiaries represents substantially all the tangible assets of the Company were held by its subsidiaries.
Therefore,holding company.
Accordingly, we are dependent on the Company's abilitycash flows of our subsidiaries to make interest and principal payments when
due to holdersmeet our
obligations, including the payment of the Exchange Notes is dependent, in part, uponprincipal and interest on the operations
of its subsidiaries.notes.
The Company's obligations under the Exchange Notes willnotes are expected to be guaranteed, jointly and severally,
by each of our subsidiaries that guarantee any of our other indebtedness or
other indebtedness of the guarantors of the notes. Holders of the notes will not
have a direct claim on assets of subsidiaries that do not guarantee the notes
(including, most significantly, the assets of Matthew Clark). For the year ended
February 28, 1999 (giving pro forma effect to the acquisitions of Matthew Clark,
the Black Velvet Assets, Franciscan and Simi, as if each had occurred on March
1, 1998) approximately $679 million of our net sales were from operations of
Matthew Clark, which is not a senior subordinated basis byguarantor of the Guarantors.notes, and approximately $1.5
billion from our operations and the operations of the guarantors. Under U.S.
bankruptcy law and comparable provisions of state fraudulent transfer laws, a
court could subordinate or void any guarantee if it found that the guarantee was
incurred with actual intent to hinder, delay or defraud creditors or the
guarantor did not receive fair consideration or reasonably equivalent value for
the guarantee and the guarantor was any of the following: (i) insolvent or was
rendered insolvent because of the guarantee; (ii) engaged in a business or
transaction for which its remaining assets constituted unreasonably small
capital; or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay at maturity. To the extent any Guaranteeguarantee were to be
avoidedvoided as a fraudulent conveyance or held unenforceable for any other reason,
holders of the Exchange Notesnotes would cease to have any claim in respect of such Guarantorguarantor
and would be creditors solely of
the Companyour creditors and any Guarantorguarantor whose Guaranteeguarantee was not
avoidedvoided or held unenforceable. In such event, the claims of the holders of the
Exchange Notesnotes against the issuer of an invalid Guaranteeguarantee would be subject to the prior
payment of all liabilities of such Guarantor.guarantor. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Exchange Notesnotes relating to any voided Guarantee.guarantee.
Based upon financial and other information currently available to
us, we believe that the notes and the guarantees are being incurred for proper
purposes and in good faith and that we and each guarantor is solvent and will
continue to be solvent after issuing the notes or its guarantee, as the case may
be, will have sufficient capital for carrying on its business after such
issuance and will be able to pay its debts as they mature. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--FinancialOperations-Financial Liquidity and Capital Resources," "Description
of Credit Facility"Resources" and "Description of the
Notes."
RISK OF DEFAULT UNDER INDENTUREWE MAY NOT BE ABLE TO PURCHASE THE NOTES IN THE EVENT OF A CHANGE OF CONTROL
If a Change of Control shall occur at any time, then each holder of the
Exchange Notes shall have the right to require that the Company purchase such
holder's Notes for cash in an amount equal to 101% of the principal amount of
such Exchange Notes plus accrued and unpaid interest, if any, to the date of
purchase pursuant to procedures set forth in the Indenture. In the event of a
Change of Control, the Company is prohibited under the Credit Facility from
purchasing the Exchange Notes until either all amounts outstanding under the
Credit Facility are paid in full or the Company obtains the necessary consents
from the lenders under the Credit Facility to make any purchases requested by
the holders of the Exchange Notes. In addition, the repurchase of the Exchange
Notes upon the occurrence of a
14
Change of Control (or otherwise) will be prohibited by the Original Indenture
unless the Company has sufficient ability at such time to make "Restricted
Payments" thereunder. There can be no assurance that, in the event of a Change
of Control, the Company will be able to obtain the necessary consents from the
lenders under the Credit Facility or, if necessary, the holders of the
Original Notes to make any purchases requested by the holders of the Exchange
Notes or that the Company will have available funds sufficient to make any
such purchases. The failure of the Company upon a Change of Control to offer
to purchase the Notes or to consummate the purchases requested by the holders
of the Exchange Notes will constitute an Event of Default under the Indenture.
Such Event of Default would permit acceleration of indebtedness under the
Credit Facility and would also permit acceleration of indebtedness under other
debt agreements that contain cross-acceleration or cross-default provisions.
Moreover, all amounts outstanding under the Credit Facility become due and
payable upon a Change of Control and it is an event of default under the
Credit Facility uponUpon the occurrence of certain specific kinds of change of
control events.events, we will be required to make an offer to repurchase the notes at
101% of their principal amount plus accrued interest and we will be required to
repay our senior secured credit facility in full. However, it is possible that
we will not have sufficient funds at the time of the change of control to make
the required repurchase of notes or to repay our senior secured credit facility.
Even if we did have sufficient funds to carry out such a repurchase, the
financial effect of the repurchase could cause us to default on our other
indebtedness. See "Description of Credit Facility," "Description of Notes--Events of Default,
and--Certain Covenants--Purchasethe Notes-Certain Covenants-Purchase of Notes
Upon a Change of Control."
COMPETITION
The CompanyOUR ACQUISITION STRATEGY MAY NOT BE SUCCESSFUL
We have recently made a number of acquisitions and anticipate
that we may, from time to time, acquire additional businesses, assets or
securities of companies which we believe would provide a strategic fit with our
business. Any other acquired business will need to be integrated with our
existing operations. There can be no assurance that we will effectively
assimilate the business or product offerings of acquired companies into our
business or product offerings. Any acquisitions also will be accompanied by
risks such as potential exposure to unknown liabilities of acquired companies,
the difficulty and expense of integrating the operations and personnel of the
acquired companies, the potential disruption to our business, the diversion of
management time and attention, the impairment of relationships with and the
possible loss of key employees and customers of the acquired business, the
incurrence of amortization expenses if any acquisition is inaccounted for as a
highly competitive environmentpurchase. Our failure to adequately manage the risks associated with any
acquisitions could have a material adverse effect on our financial condition or
results of operations.
THE TERMINATION OR NON-RENEWAL OF IMPORTED BEER DISTRIBUTION AGREEMENTS COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
All of our imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products which
are subject to renewal from time to time. Our exclusive agreement to distribute
Corona and its dollar salesother Mexican beer brands in 25 primarily Western states expires
in December 2006 and, unit volume couldsubject to compliance with certain performance criteria,
continued retention of personnel and other terms of the agreement, will be
negatively affected by its inability to maintainautomatically renewed for additional terms of five years. Changes in control of
our company or increase prices,our subsidiaries involved in importing the Mexican beer brands,
or changes in geographic or product mix,the chief executive officer of such subsidiaries, may be a general decline in
beverage alcohol consumption or the decision of its wholesale customers,
retailers or consumers to purchase competitive products instead of the
Company's products. Wholesaler, retailer and consumer purchasing decisions are
influenced by, among other things, the perceived absolute or relative overall
value of the Company's products, including their quality or pricing, compared
to competitive products. Unit volume and dollar sales could also be affected
by pricing, purchasing, financing, operational, advertising or promotional
decisions made by wholesalers and retailers which could affect their supply,
or consumer demandbasis
for the Company's products.supplier, unless it consents to such changes, to terminate the
agreement. The supplier's consent to such changes may not be unreasonably
withheld. Prior to their expiration, these agreements may be terminated if we
fail to meet certain performance criteria. We believe that we are currently in
compliance with all of our material imported beer distribution agreements. From
time to time we have failed, and may in the future fail, to satisfy certain
performance criteria in our distribution agreements. It is possible that our
beer distribution agreements may not be renewed or may be terminated prior to
expiration.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A GENERAL DECLINE IN THE CONSUMPTION
OF BEVERAGE ALCOHOL PRODUCTS The beverage alcohol industry inWE SELL
In the United States consists of the
production, importation, marketing and distribution of beer, wine and
distilled spirits products. From 1978 through 1995 the overall per capita consumption of
beverage alcohol products by adults (ages 21 and over) has declined
with annual beer consumption declining 14%, from 36.3 to 31.3
gallons per capita, annual wine consumption declining 40%, from 3.0 to 1.8
gallons per capita, and annual distilled spirits consumption declining 58%,
from 3.1 to 1.3 gallons per capita.substantially over the past twenty years. These declines have been caused by a
variety of factors including:
o increased concernsconcern about the health consequences of consuming
beverage alcohol products and about drinking and driving;
o a trend toward a healthier diet including lighter, lower calorie
beverages such as diet soft drinks, juices and sparkling water
products;
o the increased activity of anti-alcohol consumer groups;
o an increase in the minimum drinking age from 18 to 21 in allvarious
states; and
o increased Federalfederal and state excise taxes.
LACK OF PUBLIC MARKET FOR THE NOTES
The notes will be new securities for which there currently is no
established trading market. Although we have applied for listing of the old
notes and new notes on the Luxembourg Stock Exchange, there can be no assurance
regarding the future development of a market for the notes or the ability of
holders of the notes to sell their notes or the price at which such holders may
be able to sell their notes. If such a market were to develop, the notes could
trade at prices that may be higher or lower than the initial offering price
depending on many factors, including prevailing interest rates, our operating
results and the market for similar securities. Therefore, thee can be no
assurance as to the liquidity of any trading market for the notes or that an
active public market for the notes will develop. See the section entitled "Plan
of Distribution."
INCREASE IN EXCISE TAXES AND GOVERNMENT REGULATIONS
The FederalRESTRICTIONS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS
In the United States, the federal government and individual
states impose excise taxes on beverage alcohol products in varying amounts which
have been subject to change. Increases in excise taxes on beverage alcohol
products, if enacted, could materially and adversely affect the Company'sour financial
condition or results of operations. In addition, the beverage alcohol products
industry is subject to extensive regulation by state and Federalfederal agencies. The
Federalfederal Bureau of Alcohol, Tobacco and Firearms and the various state liquor
authorities regulate such matters as licensing requirements, trade and pricing
practices, permitted and required labelling,labeling, advertising and relations with
wholesalers and retailers. In recent years, Federalfederal and state regulators have
required warning labels and signage. There can be no assurance that newIn the United Kingdom, Matthew Clark
carries on its excise trade under a Customs and Excise License. Licenses are
required for all premises where wine is produced. Matthew Clark holds a license
to act as an excise warehouse operator and registrations have been secured for
the production of cider and bottled water. New or revised regulations or
increased licensing fees and requirements will notcould have
15
a material adverse effect
on the Company'sour financial condition or results of operations.
See "Business--Government Regulation."
DIFFICULTY IN INTEGRATING ACQUISITIONS
To successfully implement its acquisition strategy,WE RELY ON THE PERFORMANCE OF WHOLESALE DISTRIBUTORS FOR THE SUCCESS OF OUR
BUSINESS
In the Company must not only
negotiate, finance and consummate such acquisitions, but also integrate the
acquired businesses into its operations. The Company has experienced
difficulties in the past year in achieving operating efficiencies from the
consolidation of certain of its West Coast wine operations. There can be no
assurance that the Company will be able to integrate any existing or future
acquisitions successfully into its operations and achieve cost savings from
such integration.
DEPENDENCE ON DISTRIBUTION CHANNELS
The Company sells itsUnited States, we sell our products principally to
wholesalers for resale to retail outlets including grocery stores, package
liquor stores, club and discount stores and restaurants. The replacement or poor
performance of the
Company'sour major wholesalers or the Company'sour inability to collect accounts
receivable from itsour major wholesalers could materially and adversely affect the
Company'sour
results of operations and financial condition. Distribution channels for
beverage alcohol products have been characterized in recent years by rapid
change, including consolidations of certain wholesalers. WholesalersIn addition,
wholesalers and retailers of the Company'sour products offer products which compete directly
with the Company'sour products for retail shelf space and consumer purchases. Accordingly,
there is a risk that these wholesalers or retailers may give higher priority to
products of our competitors. In the Company's competitors. There can be no
assurance that the Company'sfuture, our wholesalers and retailers willmay
not continue to purchase the Company'sour products or provide the Company'sour products with adequate
levels of promotional support.
See "Business--Marketing and Distribution."
RISK RELATEDWE GENERALLY DO NOT HAVE LONG-TERM SUPPLY CONTRACTS AND WE ARE SUBJECT TO
THE TERMINATION OR NON-RENEWALSUBSTANTIAL PRICE FLUCTUATIONS FOR GRAPES AND GRAPE-RELATED MATERIALS; WE HAVE A
LIMITED GROUP OF IMPORTED BEER DISTRIBUTION
AGREEMENTS
All of the Company's imported beer products are marketed and sold pursuant to
exclusive distribution agreements with the suppliers of these products which
are subject to renewal from time to time. The Company's agreement to distribute
Corona and its other Mexican beer brands expires in December 2006 and, subject
to compliance with certain performance criteria and other terms of the
agreement, will be automatically renewed for additional terms of five years.
The Company's agreement for the importation of St. Pauli Girl expires in 1998
and, subject to compliance with certain performance criteria, may be extended
by the Company until 2003. The Company's Tsingtao agreement expires in December
1999 and, subject to compliance with certain performance criteria and other
terms of the agreement, will be automatically renewed until December 2002.
Prior to their expiration, these agreements may be terminated if the Company
fails to meet certain performance criteria or, in the case of the Mexican beer
brands, the supplier does not consent to certain key management changes, which
consent may not be unreasonably withheld. There can be no assurance that the
Company's beer distribution agreements will be renewed or not terminated prior
to expiration.
DEPENDENCE ON RAW MATERIALS
The Company'sSUPPLIERS OF GLASS BOTTLES
Our business is heavily dependent upon raw materials, such as
grapes, grape juice concentrate, grains, and alcohol from third-party suppliers,
tequila from Mexico and packaging materials. The CompanyWe could experience raw material
supply, production or shipment difficulties which could adversely affect itsour
ability to supply goods to itsour customers. The Company isWe are also directly affected by
increases in the costcosts of such raw materials. Grape
prices increased significantly duringIn the 1995 harvest and the Company hasrecent past we have
experienced higher than anticipated costs related to the purchase of grapes
from the 1996 fall harvest. By August 31, 1996, the Company was able to
increase prices, on an annualized basis, to offset the increased costs
16
associated with the 1995 harvest. If the Company is unable to recover the
increased costs associated with the 1996 harvestdramatic increases in the formcost of selling price
increases or operational efficiencies, the Company's resultsgrapes. Although we believe we
have adequate sources of operations in
its fiscal year ended February 28, 1998 associated with the 1996 harvest could
be negatively affected.
COSTS ASSOCIATED WITH THE COMPANY'S REENGINEERING EFFORT
The Company's wine division is currently undergoing a Reengineering Effort.
In connection with the Reengineering Effort, the Company isgrape supplies, in the process of
recruiting new management in several key positions. There can be no assurance
that the Reengineering Effort will generate positive results or offset the
costs related thereto. See "Summary--Current Operating Environment."
FORWARD-LOOKING STATEMENTS MAY NOT ACCURATELY PREDICT ACTUAL FUTURE
PERFORMANCE
Certain statements contained in this Prospectus which are not historical
facts are forward-looking statements that involve risks and uncertainties thatevent demand for certain wine
products exceeds expectations, we could cause actual results to differ materially from those set forth in the
forward-looking statements. Any estimated results for the Company's fiscal
year ended February 28, 1997 ("Fiscal 1997") should not be construed in any
manner as a guarantee that such results will in fact occur. These forward-
looking statements are based on assumptions which the Company believes are
reasonable. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Projected 1997 Results." However, there can be no
assurance that any forward-looking statement will be realized or that actual
results will not be significantly higher or lower than set forth in such
forward-looking statement. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Cautionary Statements Related
to Projected Results."
DEPENDENCE UPON MANAGEMENT
The Company's success depends in part on a few key management employees.
These key management employees are Marvin Sands, the Chairman of the Board,
Richard Sands, the President and Chief Executive Officer, Robert Sands,
Executive Vice President and General Counsel, and Ellis Goodman, Executive
Vice President of the Company and the Chief Executive Officer of Barton. If,
for any reason, such key personnel do not continue to be active in the
Company's management, operations could be adversely affected.
CONTROL BY SANDS FAMILY
The Company's capital stock consists of Class A Common Stock and Class B
Common Stock. Holders of Class A Common Stock are entitled to one vote per
share and are entitled, as a class, to elect one-fourth of the members of the
Board of Directors. Holders of Class B Common Stock are entitled to 10 votes
per share and are entitled, as a class, to elect the remaining directors. As
of December 6, 1996, the family of Marvin Sands, the founder and Chairman of
the Board of the Company, beneficially owned approximately 12% of the
outstanding shares of Class A Common Stock (exclusive of shares of Class A
Common Stock issuable pursuant to the conversion feature of the Class B Common
Stock owned by the Sands family) and approximately 85% of the outstanding
shares of Class B Common Stock. On all matters other than the election of
directors, the Sands family has the ability to vote approximately 62% of the
votes entitled to be cast by holders of the Company's capital stock, voting as
a single class. Consequently, the Sands family effectively has control of the
Company and would generally have sufficient voting power to determine the
outcome of any corporate transaction or other matter submitted to the
stockholders for approval.
17
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The Exchange Notes will constitute a new issue of securities with no
established trading market. Although the Initial Purchasers have informed the
Company that they currently intend to make a market in the Exchange Notes,
they are not obligated to do so and any such market making may be discontinued
at any time without notice. The Company does not intend to apply for listing
of the Exchange Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
Accordingly, no assurance can be given as to the continued development or
liquidity of the trading market for the Exchange Notes, or, in the case of
non-tendering holders of Old Notes, the trading market for the Old Notes
following the Exchange Offer.
The liquidity of, and trading market for, the Old Notes or the Exchange
Notes also may be adversely affected by general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading markets independent of the financial performance of, and prospects
for, the Company.
POTENTIAL TAX AND BANKRUPTCY CONSEQUENCES RESULTING FROM THE ISSUANCE OF OLD
NOTES WITH ORIGINAL ISSUE DISCOUNT
The Old Notes were issued with OID (i.e., the difference between the "stated
redemption price at maturity" of the Notes and the issue price of the Notes).
For Federal income tax purposes, the issue price of the Exchange Notes will
equal the issue price of the Old Notes. Thus, OID will accrue from the issue
date of the Exchange Notes (which is deemed to be October 29, 1996) and will
be includable as interest income periodically in a holder's gross income for
United States federal income tax purposes in advance of receipt of the cash
payments to which the income is attributable. See "Certain Federal Income Tax
Considerations--Taxation of the Notes--Original Issue Discount." Similar
results may apply under state tax laws. If a bankruptcy case were commenced by
or against the Company under the United States Bankruptcy Code after the
issuance of the Exchange Notes, the claim of a holder of the Exchange Notes
with respect to the principal amount thereof may be limited to an amount equal
to the sum of (i) the initial offering price and (ii) that portion of the
original issue discount that is not deemed to constitute "unmatured interest"
for purposes of the United States Bankruptcy Code. Any original issue discount
that was not amortized as of any such bankruptcy filing would constitute
"unmatured interest."
18
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on October 29, 1996 to the Initial
Purchasers, who placed the Old Notes with institutional investors.experience shortages. In connection therewith, the Company and the Initial Purchasers entered into the
Registration Rights Agreement, pursuant to which the Company agreed, for the
benefit of the Holders of the Old Notes, that the Company would, at its sole
cost, (i) within 45 days following the original issuance of the Old Notes,
file with the SEC the Registration Statement (of which this Prospectus is a
part) under the Securities Act with respect to an issue of a series of new
notes of the Company identical in all material respects to the series of Old
Notes (except that such new notes would not contain terms with respect to
transfer restrictions) and (ii) cause such Registration Statement to be
declared effective under the Securities Act within 105 days following the
original issuance of the Old Notes. Upon the effectiveness of the Registration
Statement, the Company will offer, pursuant to this Prospectus, to the Holders
(as hereinafter defined) the opportunity to exchange their Old Notes for a
like principal amount of Exchange Notes, to be issued without a restrictive
legend and which may, generally, be reoffered and resold by the holder without
restrictions or limitations under the Securities Act. The term "Holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the SEC with respect to whether the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may
be offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the SEC set
forth in no-action letters issued to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 promulgated under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business, such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any other such person is engaging
in or intends to engage in a distribution of such Exchange Notes. Since the
SEC has not considered the Exchange Offer in the context of a no-action
letter, there can be no assurance that the staff of the SEC would make a
similar determination with respect to the Exchange Offer. Any Holder who is an
affiliate of the Company or who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes cannot rely on such
interpretations by the staff of the SEC and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. See "Plan of Distribution." The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Company). The Company and the Guarantors have agreed that, for a
period of 180 days after the Expiration Date, they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
19
In the event that any change in law or applicable interpretations of the
staff of the SEC do not permit the Company to effect the Exchange Offer or do
not permit any Holder (including the Initial Purchasers), to participate in
the Exchange Offer, the Company will file with the SEC a shelf registration
statement (the "Shelf Registration Statement") to cover resales of Transfer
Restricted Securities by such holders who satisfy certain conditions relating
to the provision of information in connection with the Shelf Registration
Statement. As used herein, the term "Transfer Restricted Securities" means
each Old Note until (i) the date on which such Old Note has been exchanged for
a freely transferable Exchange Note in the Exchange Offer, (ii) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Note is distributed to the public pursuant to Rule 144
under the Securities Act or is salable pursuant to Rule 144(k) under the
Securities Act.
Pursuant to the Registration Rights Agreement, the Company agreed to
commence the Exchange Offer (unless such Exchange Offer would not be permitted
by SEC policy) and to use its best efforts to consummate the Exchange Offer as
promptly as practicable, but in any event prior to 135 days after the Issue
Date. If applicable, the Company agreed to use its best efforts to keep the
Shelf Registration Statement effective for a period of three years after the
Issue Date. If (i) the Registration Statement or, as the case may be, the
Shelf Registration Statement, is not declared effective within 105 days after
the Issue Date, (ii) the Exchange Offer is not consummated on or prior to 135
days after the Issue Date, or (iii) the Shelf Registration Statement is filed
and declared effective within 105 days after the Issue Date but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 30 days by
an additional Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (iii), a "Registration Default"), the
Company will pay liquidated damages to each holder of Transfer Restricted
Securities, during the period of such Registration Default, in an amount equal
to $0.192 per week per $1,000 principal amount of the Old Notes constituting
Transfer Restricted Securities held by such holder until the applicable
Registration Statement is filed or declared effective, the Exchange Offer is
consummated or the Shelf Registration Statement again becomes effective, as
the case may be. All accrued liquidated damages shall be paid to holders in
the same manner as interest payments on the Old Notes on semiannual payment
dates which correspond to interest payment dates for the Old Notes. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease.
Holders will be required to make certain representations to the Company (as
described above) in order to participate in the Exchange Offer and will be
required to deliver information to be used in connection with the Shelf
Registration Statement in order to have their Old Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth in the preceding paragraphs. A Holder who sells Old Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations).
The Old Notes are designated for trading in the PORTAL market. To the extent
Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders who were eligible to participate in the Exchange Offer but who
did not tender their Old Notes will not be entitled to certain rights under
the Registration Rights Agreement and such Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior
20
to 5:00 p.m., New York City time, on the Expiration Date. The Company will
issue $1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of outstanding Old Notes accepted in the Exchange Offer.
Holders may tender some or all of their Old Notes pursuant to the Exchange
Offer. However, Old Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the Exchange
Notes have been registered under the Securities Act and therefore will not
bear legends restricting their transfer and will not contain certain
provisions providing for payment of liquidated damages under certain
circumstances relating to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Old Notes and will be entitled to the
benefits of the Indenture under which the Old Notes were, and the Exchange
Notes will be, issued.
As of the date of this Prospectus, $65,000,000 aggregate principal amount of
the Old Notes are outstanding. The Company has fixed the close of business on
, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will be sent. As of such date, there were registered Holders.
Holders do not have any appraisal or dissenters' righters under the Delaware
General Corporation Law (the "DGCL") or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer, by giving oral notice (confirmed in writing)
or
21
written notice of such delay, extension or termination to the Exchange Agent
or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay
in acceptance, extension, termination or amendment will be followed as
promptly as practicable by a public announcement thereof. If the Exchange
Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of
a prospectus supplement that will be distributed to the registered Holders,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five- to ten-business-day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcements, other than by making a timely
release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
The tender of Old Notes by a Holder thereof pursuant toaddition, one
of the
procedures set forth below and the acceptance thereof by the Company will
constitute a binding agreement between such Holder and the Company in
accordance with the terms and subject to the conditions set forth herein and
in the Letterour largest components of Transmittal. This Prospectus, together with the Letter of
Transmittal, will first be sent on or about , 1997, to all Holders of Old
Notes known to the Company and the Exchange Agent.
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, including any other required documents,
to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal or (ii)
a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation")
of such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
Holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Old Notes, Letter of Transmittal and other
required documents must be received by the Exchange Agent at the address set
forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder and delivery will be deemed made only when actually received by the
Exchange Agent. Instead of delivery by mail, it is recommended that Holders
use an overnight or hand delivery service. If such delivery is by mail, it is
recommended that registered mail, return receipt requested, be used and proper
insurance be obtained. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial
22
owner's name or obtain a properly completed bond power form the registered
Holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 promulgated under the Exchange Act (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify Holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that the Company determines are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
By tendering, each Holder will represent to the Company, among other things,
that (i) the Exchange Notes acquired by the Holder and any beneficial owners
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, (ii) neither
the Holder nor such beneficial owner has an arrangement or understanding with
any person to participate in the distribution of such Exchange Notes, (iii)
neither the Holder nor such beneficial owner nor any such other person is
engaging in or intends to engage in a distribution of such Exchange Notes and
(iv) neither the Holder nor any such other person is an "affiliate," as
defined under Rule 405 promulgated under the Securities Act, of the Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities
(other than Old Notes acquired directly from the Company), may participate in
the
23
Exchange Offer but may be deemed an "underwriter" under the Securities Act
and, therefore, must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such Exchange Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date may effect a tender if:
a) the tender is made through an Eligible Institution;
b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate
number(s) of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes, or a Book-
Entry Confirmation, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Old
Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of
24
such Old Notes), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the persons
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing Holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, which determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described above under "--Procedures for Tendering" at any time
prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without
cost to such Holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility for the Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the SEC; or
b) any action or proceeding is instituted or threatened in any court or by
any governmental agency that might materially impair the ability of the
Company to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with
respect to the Company; or
c) any governmental approval has not been obtained, which approval the
Company shall deem necessary for the consummation of the Exchange Offer.
If the Company receives an opinion of counsel that any of the conditions are
not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering Holders (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry transfer provisions
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of Holders to withdraw such Old Notes (see "--
Withdrawal of Tenders"), or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn. If such waiver constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver
25
by means of a prospectus supplement that will be distributed to the registered
Holders, and the Company will extend the Exchange Offer for a period of five
to ten business days, depending upon the significance of the waiver and the
manner of disclosure to the registered Holders, if the Exchange Offer would
otherwise expire during such five- to ten-business-day period.
EXCHANGE AGENT
Harris Trust & Savings Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, request for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Mail or Hand/Overnight By Facsimile:
Delivery: (212) 701-7636
Harris Trust & Savings Bank
c/o Harris Trust Company of Confirm by Telephone:
New York (212) 701-7624
77 Water Street, 4th Floor
New York, NY 10005
Attn: Reorganization
Department
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting fees and legal fees, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value less accrued original issue discount, as reflected
in the Company's accounting records on the date of the exchange. Accordingly,
no gain or loss for accounting purposes will be recognized as a result of
consummation of the Exchange Offer. The expenses of the Exchange Offer and the
unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the Exchange Notes.
26
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the Old Notes Offering were approximately $59.6 million (after
deduction of discounts to the Initial Purchasers and other expenses). Such net
proceeds were used to repay amounts outstanding under the Credit Facility,
including $50.0 million under the Revolving Loans and $9.6 million to repay
and permanently reduce the Term Loans. Revolving Loans repaid from the net
proceeds of the Old Notes Offering may be re-borrowed from time to time. The
Company will continue to use the Revolving Loans to support its working
capital requirements including purchases related to the 1996 grape harvest. In
addition, the Company intends to use the Revolving Loans to complete the Stock
Repurchase Program (as defined). As of January 10, 1997, the Company had
repurchased 785,200 shares of Class A Common Stock at an aggregate cost of
$20.7 million under the Stock Repurchase Program. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The interest rate for the Term Loans and the Revolving Loans currently is
the sum of LIBOR plus 1.0% and/or the prime rate. The weighted average
interest rate on borrowings under the Credit Facility, as of November 30,
1996, was 6.5%. Both the Term Loans and the Revolving Loans expire in 2001.
The portion of the Term Loans and Revolving Loans repaid from the net proceeds
of the Old Notes Offering were incurred to finance working capital
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Financial Liquidity and Capital Resources,"
"Description of Credit Facility" and "Plan of Distribution."
27
CAPITALIZATION
The following table sets forth the unaudited short-term debt and
capitalization of the Company as of November 30, 1996, after giving effect to
the sale of the Old Notes on October 29, 1996, and the application of the net
proceeds therefrom. This table should be read in conjunction with the
historical consolidated financial statements and the related Notes appearing
elsewhere in this Prospectus.
AS OF NOVEMBER 30,
----------------------
1996
----------------------
(DOLLARS IN THOUSANDS)
Short-term debt:
Revolving Loans(a).................................... $130,000
Current maturities of Term Loans...................... 40,000
Current maturities of other long-term debt and
other short-term debt................................ 597
--------
Total short-term debt................................. $170,597
========
Long-term debt:
Term Loans............................................ $157,000
Other................................................. 1,204
8 3/4% Senior Subordinated Notes due 2003............. 130,000
8 3/4% Series B Senior Subordinated Notes due 2003,
net of unamortized discount of $3,303................ 61,697
--------
Total long-term debt (excluding current maturities)... 349,901
--------
Stockholders' equity:
Class A Common Stock, $.01 par value--
60,000,000 authorized shares; 17,460,832 shares
issued............................................... 174
Class B Common Stock, $.01 par value--
20,000,000 authorized shares; 3,956,183 shares
issued............................................... 40
Additional paid-in capital............................ 222,026
Retained earnings..................................... 164,353
Less--Treasury stock
Class A Common Stock, 1,913,207 shares, at cost....... (25,821)
Class B Common Stock, 625,725 shares, at cost......... (2,207)
--------
Total stockholders' equity.............................. 358,565
--------
Total capitalization.................................... $708,466
========
- --------
(a) Net proceeds from the Old Notes Offering were used to repay amounts
outstanding under the Credit Facility, including $50,000 under the
Revolving Loans. Revolving Loans repaid from the net proceeds of the Old
Notes Offering may be re-borrowed from time to time. See "Use of
Proceeds." Under the terms of the Company's Credit Facility, for 30
consecutive days at any time during the fiscal quarters ending on May 31
and August 31 of each fiscal year, the aggregate outstanding principal
amount of the Revolving Loans combined with all drawn and undrawn
Revolving Letters of Credit (as defined) cannot exceed $60,000, plus the
amount expended by the Company related to certain capital expenditures at
any time during Fiscal 1997 up to $17,500. The Credit Facility expires in
June 2001. As of November 30, 1996, there were outstanding Revolving Loans
of $130,000 and $46,100 available to be drawn in Revolving Loans. See
"Description of Credit Facility."
28
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical consolidated financial and other data
should be read in conjunction with the consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein. The summary selected
financial information for each of the five fiscal years ended August 31, 1995
and the six month period ended February 29, 1996 is derived from the Company's
consolidated financial statements for such fiscal years, which financial
statements have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports thereon. The summary financial
information for the six month period ended February 28, 1995 and the nine month
periods ended November 30, 1995 and 1996 and as of November 30, 1996 has been
derived from the unaudited financial statements, which, in the opinion of
management, include all adjustments necessary for a fair presentation of the
results of operations for such periods. The financial information for the six
months ended February 29, 1996 and the nine months ended November 30, 1995 and
1996 is not necessarily indicative of the results of operation for a full
fiscal year.
NINE MONTHS ENDED
YEAR ENDED AUGUST 31, SIX MONTHS ENDED NOVEMBER 30,
------------------------------------------------- ------------------ ------------------
FEB. 28, FEB. 29,
1991 1992(A) 1993(B) 1994(C)(D) 1995 1995 1996(E) 1995(E) 1996
-------- -------- -------- ---------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales.............. $176,559 $245,243 $306,308 $629,584 $906,544 $454,485 $535,024 $737,644 $873,444
Cost of product sold... (131,064) (174,686) (214,931) (447,211) (653,811) (327,694) (396,208) (534,449) (649,019)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit.......... 45,495 70,557 91,377 182,373 252,733 126,791 138,816 203,195 224,425
Selling, general and
administrative
expenses.............. (30,184) (46,491) (59,983) (121,388) (159,196) (79,925) (112,411) (129,375) (161,139)
Nonrecurring
restructuring
expenses.............. -- -- -- (24,005) (2,238) (685) (2,404) (3,301) --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income....... 15,311 24,066 31,394 36,980 91,299 46,181 24,001 70,519 63,286
Interest expense, net.. (3,631) (6,182) (6,126) (18,056) (24,601) (13,141) (17,298) (19,507) (25,468)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before provision
for income taxes...... 11,680 17,884 25,268 18,924 66,698 33,040 6,703 51,012 37,818
Provision for federal
and state income
taxes................. (3,970) (6,528) (9,664) (7,191) (25,678) (12,720) (3,381) (19,900) (16,065)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income............. $ 7,710 $ 11,356 $ 15,604 $ 11,733 $ 41,020 $ 20,320 $ 3,322 $ 31,112 $ 21,753
======== ======== ======== ======== ======== ======== ======== ======== ========
OTHER DATA:
Gross profit margin(f). 25.8% 28.8% 29.8% 29.0% 27.9% 27.9% 25.9% 27.5% 25.7%
EBITDA(g).............. $ 20,737 $ 31,141 $ 40,069 $ 50,795 $112,011 $ 58,832 $ 37,959(h) $ 85,913 $ 89,123
EBITDA margin(i)....... 11.7% 12.7% 13.1% 8.1% 12.4% 12.9% 7.1% 11.6% 10.2%
Cash flows from
operating activities.. $ 9,275 $ 16,199 $ 8,912 $ 27,179 $ 73,318 $(36,243) $(84,833) $(43,390) $ 15,364
Cash flows from
investing activities.. $ 182 $ (9,347) $ 3,098 $(16,950) $(64,085) $(11,342) $(26,829) $(41,359) $(33,995)
Cash flows from
financing activities.. $ (3,766) $(11,515) $(10,486) $(12,452) $ (6,548) $ 49,180 $110,821 $ 82,953 $ 20,289
Depreciation and
amortization.......... $ 5,426 $ 7,075 $ 8,675 $ 13,815 $ 20,712 $ 12,651 $ 13,958 $ 15,394 $ 25,837
Capital expenditures... $ 2,844 $ 4,713 $ 6,949 $ 7,853 $ 37,121 $ 11,342 $ 16,077 $ 32,753 $ 25,318
Ratio of earnings to
fixed charges(j)...... 3.3x 3.4x 4.4x 2.0x 3.5x 3.3x 1.4x 3.4x 2.4x
AS OF AS OF
AS OF AUGUST 31, FEBRUARY 29, NOVEMBER 30,
---------------------------------------------- ------------ ------------
1991 1992(A) 1993(B) 1994(C)(D) 1995 1996(E) 1996
-------- -------- -------- ---------- -------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ---
BALANCE SHEET DATA:
Total assets............ $147,207 $217,835 $355,182 $826,562 $785,921 $1,054,580 $1,119,513
Indebtedness (including
current maturities).... 63,134 62,174 129,131 339,123 227,992 479,713 520,498
Stockholders' equity.... 51,975 95,549 126,104 204,193 351,882 356,506 358,565
Cash dividends declared
per common share(k).... -- -- -- -- -- -- --
See accompanying Notes to Selected Historical Financial Data
29
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) The Company acquired Guild on October 1, 1991, and accounted for this
acquisition utilizing the purchase method of accounting. Guild's results
of operations have been included in the Company's results of operations
since October 1, 1991.
(b) The Company acquired Barton on June 29, 1993, and accounted for the
acquisition utilizing the purchase method of accounting. Barton's results
of operations have been included in the Company's results of operations
since June 29, 1993.
(c) The Company acquired substantially all of the assets and businesses of
Vintners on October 15, 1993, and accounted for the acquisition utilizing
the purchase method of accounting. Vintners' results of operations have
been included in the Company's results of operations since October 15,
1993.
(d) The Company acquired substantially all of the assets and business
associated with the Almaden/Inglenook Product Lines from Heublein on
August 5, 1994, utilizing the purchase method of accounting. The
Almaden/Inglenook Product Lines have been included in the Company's
results of operations since August 5, 1994.
(e) The Company acquired certain assets of UDG on September 1, 1995, and
accounted for the acquisition utilizing the purchase method of accounting.
UDG's results of operations have been included in the Company's results of
operations since September 1, 1995.
(f) Represents gross profit as a percentage of net sales.
(g) EBITDA represents operating income plus depreciation of property, plant
and equipment and amortization of intangible assets. EBITDA is presented
here as a measure of the Company's debt service ability. EBITDA should not
be construed as an alternative to operating income or net cash flow from
operating activities and should not be construed as an indication of
operating performance or as a measure of liquidity.
(h) EBITDA for the six months ended February 29, 1996 includes approximately
$14,300 of charges that the Company believes are nonrecurring in nature
due in part to the Company's change in fiscal year.
(i) Represents EBITDA as a percentage of net sales.
(j) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" represents income before provision for income taxes plus fixed
charges. "Fixed charges" consist of interest expense, including
amortization of debt issuance costs, and the portion of rental expense
which management believes is representative of the interest component of
lease expense.
(k) The Company's policy is to retain all of its earnings to finance the
development and expansion of its business, and the Company has not paid
any cash dividends since its initial public offering in 1973. In addition,
the Company's current bank credit agreement prohibits and the Company's
indentures for the Original Notes and Old Notes restrict the payment of
cash dividends.
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information contained herein includes certain forward-looking
statements. The Company desires to take advantage of the "safe harbor" which
is afforded such statements under the Private Securities Litigation Reform Act
of 1995 when they are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those in the forward-looking statements. See "Cautionary
Statements Related to Projected Results."
GENERAL
On January 11, 1996, the Company changed its fiscal year end from the twelve
month period ending August 31 to the twelve month period ending the last day
of February. The Company believes that this change creates a better planning
and financial reporting cycle by allowing the Company to take into account new
costs from the fall grape harvest, other inventory costs, summer sales of
imported beer products and holiday shipments of wines and spirits products in
its fiscal planning and reporting process. The accompanying financial
statements for the six months ended February 29, 1996 (the "Transition
Period") are based on the newly adopted fiscal year. Accordingly, the reported
results for the Transition Period reflect the effect of, among other matters,
seasonal factors related primarily to the timing of advertising and promotion
expenditures and inventory levels during the six months ended February 29,
1996.
The Company's results of operations over recent years have been
significantly impacted by acquisitions. The Company acquired the outstanding
capital stock of Barton on June 29, 1993, the assets of Vintners on October
15, 1993, the Almaden/Inglenook Product Lines on August 5, 1994 and certain
assets from UDG on September 1, 1995. See "Business--Recent Acquisitions." The
Company financed the UDG Acquisition through an amendment to its then-existing
bank credit facility, primarily through an increase in the term loan facility
under that credit facility. See "--Financial Liquidity and Capital Resources."
The cost of grapes, a major component of the Company's raw materials for its
winemaking, increased significantly for the 1995 and 1996 harvests.The Company
uses the last-in, first-out ("LIFO") method of valuing its inventories. The
increased grape costs associated with the fall 1996 grape harvest therefore
increased the Company's costs of goods sold for the twelve months ending
February 28, 1997 ("Fiscal 1997"). Asis that of glass bottles, which
have only a result, gross profit margins for the
Company's wine business weresmall number of producers. The inability of any of our glass bottle
suppliers to satisfy our requirements could adversely affected during the nine months ended
November 30, 1996 ("Nine Months 1997")..
PROJECTED FISCAL 1997 RESULTS
On September 5, 1996, the Company reduced its estimated net income per share
for Fiscal 1997 to a new range of $1.10 to $1.40. The Company's net income per
share for Nine Months 1997 was $1.10. For financial analysis purposes only,
the Company estimates that EBITDA for Fiscal 1997 will be in the range of
$102.5 million to $117.5 million. The Company's EBITDA for Nine Months 1997
was $89.1 million. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity. The Company revised its estimated net income per share for Fiscal
1997 as a result of below expectation performance of the Company's wine
division, offset in part by better than expected performance of the Company's
beer and spirits division. The Company believes its wine division performance
will be negatively impacted by (i) increased cost of product sold relating to
increased grape costs from the 1996 harvest which the Company does not expect
to offset through selling price increases in Fiscal 1997; (ii) inefficiencies
in its wine division operations; and (iii) decreased unit volume of its
branded wine products. These projected resultsaffect our business.
COMPETITION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
We are based on certain
assumptions, including the following: (i) the Company's unit volume sales of
branded wine products
31
will continue to decrease at approximately the same rate as they decreased
during the Nine Months 1997; (ii) increases in the Company's costs will not
result in a LIFO adjustment materially in excess of the current estimate of
$29.0 million for Fiscal 1997; (iii) the Company will continue to experience
wine production operating inefficiencies, although at lower levels as compared
to the Nine Months 1997; (iv) the Company's beer and spirits division will
continue to experience strong growth; (v) the Company will not materially
change its selling prices, on an overall basis, as compared to current levels
at the end of the Nine Months 1997; and (vi) the Company's promotional levels
will continue at comparable rates to the Nine Months 1997. See "--Cautionary
Statements Related to Projected Results."
The projected results set forth above have not been examined by Arthur
Andersen LLP, the Company's independent public accountants, and such
accountants assume no responsibility for such projected results.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of income expressed as a percentage of
net sales:
NINE MONTHS ENDED
YEAR ENDED AUGUST 31, SIX MONTHS ENDED NOVEMBER 30,
---------------------- ------------------------- ------------------
FEBRUARY 28, FEBRUARY 29,
1994 1995 1995 1996 1995 1996
---------- ---------- ------------ ------------ -------- --------
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of product sold.... 71.0 72.1 72.1 74.1 72.5 74.3
---------- ---------- ----- ----- -------- --------
Gross profit.......... 29.0 27.9 27.9 25.9 27.5 25.7
Selling, general and
administrative
expenses............... 19.3 17.6 17.6 21.0 17.5 18.4
Nonrecurring 3.8 0.2 0.1 0.4 0.4 0.0
restructuring expenses. ---------- ---------- ----- ----- -------- --------
Operating income........ 5.9 10.1 10.2 4.5 9.6 7.3
Interest expense, net... 2.9 2.7 2.9 3.2 2.7 2.9
---------- ---------- ----- ----- -------- --------
Income before
provision for
income taxes....... 3.0 7.4 7.3 1.3 6.9 4.4
Provision for federal 1.1 2.9 2.8 0.7 2.7 1.9
and state income taxes. ---------- ---------- ----- ----- -------- --------
Net income............ 1.9% 4.5% 4.5% 0.6% 4.2% 2.5%
========== ========== ===== ===== ======== ========
NINE MONTHS ENDED NOVEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED NOVEMBER
30, 1995
Net Sales
Net sales for the Company's Nine Months 1997 increased to $873.4 million
from $737.6 million for the nine months ended November 30, 1995, ("November
1995 Nine Months"), an increase of $135.8 million, or approximately 18.4%.
This increase resulted primarily from (i) $52.1 million of additional imported
beer sales, primarily Mexican beers; (ii) the inclusion of $49.0 million of
net sales of products and services from the UDG Acquisition during the period
from March 1, 1996 through August 31, 1996; (iii) $19.8 million of increased
net sales of the Company's varietal table wine products resulting from selling
price increases implemented between October 1995 and May 1996, as well as
additional unit volume; (iv) $17.2 million of higher sales of grape juice
concentrate; (v) $7.6 million of additional sales of spirits brands; partially
offset by $5.1 million of decreased sales of the Company's non-varietal table
wine brands and a decrease of $4.8 million in sales of other nonbranded
products and services.
32
For purposes of computing the net sales and unit volume comparative data for
the table below and for the remainder of the discussion of net sales, sales of
spirits products acquired in the UDG Acquisition have been included for the
period from March 1, 1995 through August 31, 1995, which was prior to the UDG
Acquisition.
The table below sets forth the net sales (in thousands of dollars) and unit
volumes (in thousands of cases) for the branded beverage alcohol products,
branded wine products, each category of branded wine products, beer and
spirits brands sold by the Company for Nine Months 1997highly competitive industry and the November 1995
Nine Months:
NINE MONTHS ENDED NOVEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED NOVEMBER
30, 1995
NET SALES UNIT VOLUME
----------------------------- -------------------------
1996 1995 % INC/(DEC) 1996 1995 % INC/(DEC)
-------- -------- ----------- ------ ------ -----------
Branded Beverage Alcohol
Products (1)........... $771,098 $697,512 10.5% 47,008 43,421 8.2%
Branded Wine Products... 392,629 377,095 4.1 20,809 21,485 (3.1)
Non-varietal Table
Wines................ 164,148 169,258 (3.0) 10,190 10,901 (6.5)
Varietal Table Wines.. 124,419 104,628 18.9 5,214 4,928 5.8
Sparkling Wines....... 54,127 53,075 2.0 2,296 2,364 (2.9)
Dessert Wines......... 49,935 50,134 (0.4) 3,109 3,292 (5.6)
Beer.................... 237,628 185,514 28.1 18,964 14,985 26.6
Spirits (2)............. 141,266 134,348 5.1 7,235 6,928 4.4
- --------
(1) The sum of net sales and unit volume amounts from the categories may not
equal total Branded Beverage Alcohol Products because miscellaneous items
affecting net sales and unit volume may be included in total Branded
Beverage Alcohol Products but not reflected in the category information.
(2) For comparison purposes only, net sales of $41,514dollar amount,
and unit volume, of 2,001 of distilled spirits brands acquired in the September 1, 1995, UDG
Acquisition have been included in the table for the nine months ended
November 30, 1995. These amounts represent netour sales and unit volume of
those brands for the period March 1, 1995, through August 31, 1995, which
was prior to the UDG Acquisition.
Net sales and unit volume of the Company's branded beverage alcohol products
for Nine Months 1997 increased 10.5% and 8.2%, respectively, as compared to
the November 1995 Nine Months. The net sales increase resulted from higher
imported beer sales, price increases on most of the Company's branded wine
products, particularly varietal table wine brands, and increased sales of the
Company's spirits brands. Unit volume increases were led by substantial growth
in the Company's imported beer brands and increases in its varietal table wine
and spirits brands, partially offset by declines in unit volume of non-
varietal table wines, dessert wines and sparkling wines.
Net sales and unit volume of the Company's non-varietal table wine products
declined by 3.0% and 6.5%, respectively, for Nine Months 1997 as compared to
the November 1995 Nine Months. The Company believes that the decline in unit
volume reflects the impact of the Company's selling price increases and other
competitive pressures.
Net sales and unit volume of the Company's varietal table wine brands
increased by 18.9% and 5.8%, respectively. Net sales increased at a greater
rate than unit volume due to selling price increases instituted between
October 1995 and May 1996. Net sales and unit volume of the Company's varietal
table wine products such as chardonnay, cabernet sauvignon and merlot, which
represent more than half of the Company's varietal table wine volume,
increased substantially in Nine
33
Months 1997. While unit volume of white zinfandel products declined in Nine
Months 1997, net sales for these products were virtually unchanged due to the
Company's selling price increases.
Net sales of the Company's sparkling wines increased 2.0%, while unit volume
decreased by 2.9% during Nine Months 1997 as compared to the November 1995
Nine Months. The company believes that the decline in unit volume is
consistent with industry trends as well as the impact of price increases
implemented in May 1996.
Net sales and unit volume of the Company's dessert wine brands declined by
0.4% and 5.6%, respectively, during Nine Months 1997. The Company believes
that, although the decline in
unit volume was mitigated by selling price increases, these results reflect
the continuing trend of consumer preferences away from the dessert wine
category.
Net sales and unit volume of the Company's beer brands increased 28.1% and
26.6%, respectively, during Nine Months 1997. These increases were largely due
to the Company's Mexican beer brands, which represented over 70% of total beer
sales, which continued strong growth trends. The Company believes that the
growth in its Mexican beers is related to the growth of the Hispanic
population in the Company's distribution areas, the continued popularity of
imported beers in general and the narrowing retail price gap between imported
beers and domestic beers.
Net sales and unit volume of the Company's distilled spirits brands
increased by 5.1% and 4.4%, respectively, in Nine Months 1997 as compared to
the November 1995 Nine Months. Excluding the impact of the UDG Acquisition,
spirits net sales and unit volume increased by 8.8% and 2.9%, respectively,
reflecting strong brandy sales, increases in tequila and liqueurs and the
introduction of a number of new products. Net sales and unit volume of the
brands acquired in the UDG Acquisition increased by 1.0% and 6.4%,
respectively, in Nine Months 1997, with net sales growth lagging unit volume
increases due to the impact of downward selling price adjustments for these
brands to be more in line with the pricing strategy of the rest of the
Company's spirits portfolio.
Gross Profit
The Company's gross profit increased to $224.4 million in Nine Months 1997
from $203.2 million in the November 1995 Nine Months, an increase of $21.2
million, or 10.4%. This change in gross profit resulted primarily from (i)
approximately $20.5 million of gross profit from sales generated during the
period from March 1, 1996, through August 31, 1996, from the business acquired
from UDG; (ii) approximately $16.8 million of additional gross profit from
increases in beer sales; and (iii) approximately $16.1 million of lower gross
profit primarily due to increased cost of product sold, particularly higher
grape costs in the fall 1996 harvest and additional costs resulting from
inefficiencies in the production of wine and grape juice concentrate,
particularly at the Company's newly consolidated West Coast operations,
partially offset by additional net sales resulting primarily from selling
price increases of the Company's branded wines and grape juice concentrate
products and a partial reduction of certain grape contract loss reserves
established in connection with the 1993 Vintners' Acquisition, which reduction
corresponds to the increase in grape costs relative to the contract pricing
and the termination of certain unfavorable contracts. The Company's increased
production costs stemmed from low bulk wine conversion rates and bottling
inefficiencies. The Company also experienced high imported concentrate and
bulk freight costs. The Company has instituted a series of steps to address
these matters, including a reengineering effort to redesign more effectively
its work processes, organizational structure and information systems.
Gross profit as a percentage of net sales was 25.7% for Nine Months 1997 as
compared to 27.5% in the November 1995 Nine Months. The decline in the gross
profit margin was largely due to higher costs, particularly grape costs, of
wine and grape juice concentrate products, partially offset by increased
selling prices on most of the Company's branded wines and grape juice
concentrate products.
34
The Company has experienced significant increases in its cost of grapes in
both the 1995 and 1996 harvests. The Company believes that these increases in
grape costs were due to an imbalance in supply and demand in the varieties
which the Company purchases.
In general, the preferred method of accounting for inventory valuation is
the last-in, first-out method ("LIFO") because, in most circumstances, it
results in a better matching of costs and revenues. For comparison purposes to
companies using the first-in, first-out method of accounting for inventory
valuation ("FIFO") only, the Company's Nine Months 1997 results reflect a
reduction in gross profit of approximately $21.8 million due to the Company's
LIFO accounting method. For comparison purposes, results for the Company's
November 1995 Nine Months reflected an addition to gross profit of
approximately $0.2 million due to LIFO.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for Nine Months 1997 were
$161.1 million, an increase of $31.8 million as compared to the November 1995
Nine Months. Of this amount, $13.9 million was due primarily to increased
personnel and related expenses stemming from the Company's reengineering
efforts and the continued expansion of the Company's management capabilities
and other expenses consistent with the Company's growth; $11.3 million related
to the UDG Acquisition; and $6.6 million was due to additional advertising,
promotion and selling expenses associated with increased unit volume exclusive
of sales related to the UDG Acquisition during the period from March 1, 1996,
through August 31, 1996.
Interest Expense, Net
Net interest expense totaled $25.5 million in Nine Months 1997, an increase
of $6.0 million as compared to the November 1995 Nine Months, primarily due to
additional interest expense from the UDG Acquisition financing and increased
borrowing levels related to working capital needs.
Provision for Federal and State Income Taxes
The Company's effective tax rate for NIne Months 1997 increased to 42.5%
from 39.0% for the November 1995 Nine Months due to a higher effective tax
rate in California caused by statutory limitations on the Company's ability to
utilize certain deductions.
Net Income
As a result of the foregoing, net income for Nine Months 1997 was $21.8
million, a decrease of $9.4 million as compared to the November 1995 Nine
Months.
For financial analysis purposes only, the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") for Nine Months 1997
was $89.1 million. EBITDA should not be construed as an alternative to
operating income or net cash flow from operating activities and should not be
construed as an indication of operating performance or as a measure of
liquidity.
SIX MONTH TRANSITION PERIOD ENDED FEBRUARY 29, 1996, COMPARED TO
SIX MONTHS ENDED FEBRUARY 28, 1995
Net Sales
Net sales for the Transition Period increased to $535.0 million from $454.5
million for the six months ended February 28, 1995 (the "February 1995 Six
Months"), an increase of $80.5 million, or 17.7%. In addition to the sales of
products and services from the UDG Acquisition, the Company had
35
additional net sales of $23.6 million from its imported beer brands and $14.1
million from its varietal wine products, partially offset by lower sales of
bulk wine, non-varietal wine, contract bottling services, grape juice
concentrate and dessert wine.
For purposes of computing the net sales and unit volume comparative data
below, sales of products acquired in the UDG Acquisition have been included in
the Company's results for the entire Transition Period and the entire February
1995 Six Months, which was prior to the UDG Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volumes (in thousands of cases) for the branded beverage alcohol
products, branded wine products, each category of branded wine product, beer
and spirits brands sold by the Company for the Transition Period and the
February 1995 Six Months:
SIX MONTHS ENDED FEBRUARY 29, 1996, COMPARED TO SIX MONTHS ENDED FEBRUARY 28,
1995
NET SALES UNIT VOLUME
----------------------------------- -----------------------------------
TRANSITION FEBRUARY 1995 % INCREASE TRANSITION FEBRUARY 1995 % INCREASE
PERIOD SIX MONTHS (DECREASE) PERIOD SIX MONTHS (DECREASE)
---------- ------------- ---------- ---------- ------------- ----------
Branded Beverage Alcohol
Products (1)........... $474,450 $443,204 7.1% 28,748 26,786 7.3%
Branded Wine Products... 268,782 255,881 5.0 14,783 14,537 1.7
Non-varietal wines.... 116,128 117,805 (1.4) 7,325 7,699 (4.9)
Varietal wines........ 78,182 64,049 22.1 3,637 2,971 22.4
Dessert wines......... 32,640 33,435 (2.4) 2,033 2,137 (4.9)
Sparkling wines....... 41,831 40,592 3.1 1,788 1,731 3.3
Beer.................... 115,757 92,131 25.6 9,316 7,444 25.1
Spirits (2)............. 91,219 96,547 (5.5) 4,648 4,793 (3.0)
- --------
(1) The sum of the net sales and unit volume amounts from the individual
categories do not equal total Branded Beverage Alcohol Products because
miscellaneous items reducing net sales and adding to unit volume are
included in total Branded Beverage Alcohol Products but are not reflected
in the category information.
(2) For comparison purposes only, net sales of $50,622 and unit volume of
2,340 of distilled spirits have been included in the table for the six
months ended February 28, 1995, which was prior to the UDG Acquisition.
Net sales and unit volume of the Company's branded beverage alcohol products
for the Transition Period increased 7.1% and 7.3%, respectively, as compared
to the February 1995 Six Months. These increases were principally due to
increased net sales and unit volume of the Company's imported beer brands and
varietal table wine brands.
Net sales of the Company's branded wine products increased by $12.9 million,
or 5.0%, for the Transition Period as compared to the February 1995 Six
Months. Unit volume of the Company's branded wine products increased by
approximately 246,000 cases, or 1.7%. Of the $12.9 million increase in net
sales, (i) $8.6 million was due to higher average selling prices per case due
to a combination of price increases implemented by the Company between October
1995 and January 1996 and a change in the product mix in favor of higher-
priced categories; and (ii) $4.3 million was due to increased shipments of the
Company's varietal table wines and sparkling wines, partially offset by lower
shipments of non-varietal table wines and dessert wines. The Company believes
that the increase in unit volume was partially due to the fulfillment of a
backlog of orders at the end of fiscal 1995 caused by production and shipping
delays associated with the consolidation of certain of its California wineries
(the "Restructuring Plan"). The backlog of unfilled orders from August 1995
was substantially eliminated in the first three months of the Transition
Period.
36
Net sales and unit volume of the Company's non-varietal table wine brands
for the Transition Period decreased by 1.4% and 4.9%, respectively, as
compared to the February 1995 Six Months. The decline in net sales was less
than the decline in unit volume as a result of the selling price increases
implemented by the Company. The Company believes that the volume decline is
consistent with a general change in consumer preferences from non-varietal
table wines to varietal table wines and may also reflect the impact of the
Company's price increases.
Net sales and unit volume of the Company's varietal table wine brands for
the Transition Period increased 22.1% and 22.4%, respectively, as compared to
the February 1995 Six Months. With the price increases implemented in the
Transition Period, the phasing out of introductory pricing on varietal wine
line extensions, and changes in mix, the average price per case of varietal
wine has virtually returned to the level the Company experienced in the
February 1995 Six Months. In addition, the Company initiated a second round of
price increases on most of its varietal wine brands which were implemented
over the first three months of Fiscal 1997.
Net sales and unit volume of the Company's sparkling wine brands increased
by 3.1% and 3.3%, respectively, in the Transition Period as compared to the
February 1995 Six Months. While these results were better than the industry
growth rate in the category during this period, they reflect comparisons to
lower sales for the Company in the February 1995 Six Months relative to the
industry.
Net sales and unit volume of the Company's dessert wine brands decreased by
2.4% and 4.9%, respectively, in the Transition Period as compared to the
February 1995 Six Months, reflecting the continuing decline in the consumption
of beverage dessert wines, partially offset by increases in the sale of
traditional dessert wines such as ports and sherries.
Net sales and unit volume of the Company's beer brands for the Transition
Period increased by 25.6% and 25.1%, respectively, as compared to the February
1995 Six Months. These increases were principally driven by growth in the
Company's Mexican beer brands, which represented over 70% of total beer sales.
Net sales and unit volume of the Company's distilled spirits brands declined
by 5.5% and 3.0%, respectively, in the Transition Period as compared to the
February 1995 Six Months. Excluding the impact of the UDG Acquisition, net
sales and unit volume of the Company's distilled spirits brands grew by 6.2%
and 5.0%, respectively, in the Transition Period, led by higher brandy,
tequila, liqueur and rum sales, partially offset by lower whiskey, gin and
vodka sales. Unit sales of the brands acquired in the UDG Acquisition were
11.5% lower than in the February 1995 Six Months, accounting for lower overall
spirits sales. During the period from 1993 to 1995, the brands acquired in the
UDG Acquisition declined in excess of industry rates. The Company believes
that these declines resulted from noncompetitive retail pricing and
promotional activities.
Gross Profit
Gross profit for the Transition Period was $138.8 million, an increase of
$12.0 million, as compared to gross profit of $126.8 million for the February
1995 Six Months. This increase in gross profit resulted from $18.5 million of
additional gross profit from sales generated from the business acquired from
UDG and $1.0 million from ongoing operations, which was offset in part by $7.5
million of (i) overtime, freight and other expenses and restructuring charges
related to production and shipping delays associated with the relocation of
West Coast bottling operations to the Company's Mission Bell winery, employee
bonuses and certain nonrecurring expenses; and (ii) as a result of the change
in the Company's fiscal year end, increased cost of product sold due to the
different amount and composition of inventory levels at the end of February
versus the end of August, the Company's former fiscal year end. The $1.0
million increase in gross profit from ongoing operations resulted from a $7.3
million increase in gross profit, primarily due to increased sales and gross
margins from the Company's imported beer business, partially offset by $6.3
million of lower gross profits in the Company's wine and grape juice
concentrate businesses, which was due primarily to higher grape costs which
were only partially recovered by selling price increases in the Transition
Period.
37
Gross profit as a percentage of net sales declined from 27.9% to 25.9% in
the Transition Period. This decline was due primarily to the impact of higher
grape and other costs in the Transition Period, partially offset by the higher
gross profit sales of brands acquired from UDG and improved gross profit as a
percentage of net sales in the Company's imported beer business. The gross
profit percentage was positively impacted by the UDG Acquisition, as gross
profit as a percentage of net sales on the business acquired from UDG was
34.7%.
Selling, General and Administrative Expenses
Selling, general and administrative expenses totalled $112.4 million for the
Transition Period, an increase of $32.5 million as compared to the February
1995 Six Months. Exclusive of $11.1 million of nonrecurring costs including,
as a result of the change in the Company's fiscal year end, the recognition of
higher than normal advertising and promotion expenses in the Transition Period
due to the seasonality of these expenses and employee bonuses and other
nonrecurring costs and $8.3 million related to the UDG Acquisition, selling,
general and administrative expenses increased by $13.1 million, or 16.3%, as
compared to the February 1995 Six Months. Advertising and promotion increases
of $6.7 million were related primarily to the Almaden/Inglenook Product Lines
which were acquired in August 1994 and which the Company did not advertise or
promote at a full level in the first several months after their acquisition.
The Company also incurred increased advertising and promotion expenses related
to the increased sales of its imported beers. Selling expenses increased by
$5.4 million primarily as a result of the Almaden/Inglenook Product Line
acquisitions, with the Transition Period including a full complement of sales
and marketing personnel to service the brands that were not in place for the
entire period in the February 1995 Six Months. The Transition Period also
included additional sales personnel in the Company's spirits and imported beer
divisions. Other general and administrative expenses increased by $1.0
million.
Excluding the nonrecurring costs referred to above and the UDG Acquisition,
selling, general and administrative expenses as a percent of net sales
increased to 19.3% from 17.6% in the February 1995 Six Months due to the
inclusion of a full complement of advertising, promotion and selling expense
related to the Almaden/Inglenook Product Lines.
Nonrecurring Restructuring Expenses
The Company incurred net restructuring charges of $2.4 million in the
Transition Period, as compared to restructuring charges of $0.7 million in the
February 1995 Six Months. The restructuring expenses in the Transition Period
represent $3.1 million of incremental, nonrecurring expenses such as overtime
and freight expense related to production and shipment delays associated with
the Restructuring Plan, offset by a net reduction of $0.7 million in accrued
liabilities associated with the Restructuring Plan to take into account lower
than expected expenses for severance and facility holding and closure costs.
See the Notes to the Company's Consolidated Financial Statements included
herein.
Interest Expense, Net
Net interest expense increased $4.2 million to $17.3 million in the
Transition Period as compared to the February 1995 Six Months. The increase
resulted from additional interest expense associated with the borrowings
related to the UDG Acquisition, amounting to $5.1 million, and increased
working capital requirements due primarily to higher grape costs and the UDG
Acquisition, partially offset by net reductions in the Company's Term Loans
and Revolving Loans using proceeds of the Company's November 18, 1994 public
equity offering.
Provision for Federal and State Income Taxes
The Company's effective tax rate for the Transition Period increased to
50.4% from 38.5% for the February 1995 Six Months due to a higher effective
tax rate in California caused by statutory limitations on the Company's
ability to utilize certain deductions.
38
Net Income
As a result of the foregoing, net income for the Transition Period was $3.3
million, a decrease of $17.0 million as compared to the February 1995 Six
Months.
FISCAL YEAR ENDED AUGUST 31, 1995, COMPARED TO FISCAL YEAR ENDED AUGUST 31,
1994
Net Sales
Net sales for the 1995 fiscal year increased to $906.5 million from $629.6
million for the fiscal year ended August 31, 1994, an increase of $276.9
million, or approximately 44.0%. This increase resulted from the inclusion of
(i) $234.7 million of net sales of products acquired in the Almaden/Inglenook
Acquisition; (ii) an overall increase of $25.8 million in net sales of Company
products, excluding the impact of the net sales of products that were acquired
during fiscal 1994; and (iii) an additional $16.4 million of net sales of
Vintners' products resulting from inclusion of these products in the Company's
portfolio for the entire first quarter of fiscal 1995 versus only six weeks in
the first quarter of fiscal 1994. Excluding the impact of the additional six
weeks of net sales of Vintners' products during the first quarter of fiscal
1995 and all of the net sales resulting from the Almaden/Inglenook Acquisition
during the 1995 fiscal year, the Company's net sales increased 4.1% as
compared to the fiscal year ended August 31, 1994. This was principally due to
increased net sales of imported beer brands and varietal table wines.
For purposes of computing the net sales and unit volume comparative data
below, sales of products acquired in the Vintners and Almaden/Inglenook
Acquisitions have been included in the entire period for the fiscal year ended
August 31, 1995 and the entire fiscal year ended August 31, 1994, part of
which was prior to the Vintners Acquisition and the Almaden/Inglenook
Acquisition.
The following table sets forth the net sales (in thousands of dollars) and
unit volumes (in thousands of cases) for the branded beverage alcohol
products, branded wine products, each category of branded wine products, beer
and spirits brands sold by the Company for the 1995 and 1994 fiscal years:
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
NET SALES UNIT VOLUME
---------------------------- ------------------------
% INCREASE % INCREASE
1995 1994 (DECREASE) 1995 1994 (DECREASE)
-------- -------- ---------- ------ ------ ----------
Branded Beverage Alcohol
Products (1)............ $795,290 $750,180 6.0% 50,547 47,688 6.0%
Branded Wine Products
(2)..................... 487,101 486,838 0.1 28,019 28,657 (2.2)
Non-varietal wines..... 223,391 234,541 (4.8) 14,577 15,594 (6.5)
Varietal wines......... 128,679 106,559 20.8 6,032 4,943 22.0
Dessert wines.......... 68,094 71,320 (4.5) 4,474 4,794 (6.7)
Sparkling wines........ 66,937 74,418 (10.1) 2,936 3,326 (11.7)
Beer..................... 216,159 173,883 24.3 17,471 14,100 23.9
Spirits (2) (3).......... 92,400 88,549 4.3 5,041 4,847 4.0
- --------
(1) The sum of the net sales and unit volume amounts from the categories do
not equal total Branded Beverage Alcohol Products because miscellaneous
items affecting net sales and unit volume are included in total Branded
Beverage Alcohol Products but are not reflected in the category
information.
39
(2) For comparison purposes only, the following amounts of net sales and unit
volume of brands acquired in the Vintners Acquisition and the
Almaden/Inglenook Acquisition have been included in the table for Fiscal
Year 1994;
NET
SALES UNIT VOLUME
-------- -----------
Non-varietal wines...................................... $113,754 7,964
Varietal wines.......................................... 53,622 2,818
Dessert wines........................................... 1,637 78
Sparkling wines......................................... 7,701 265
Spirits................................................. 3,566 134
These amounts represent net sales and unit volume of brands from the
Vintners Acquisition for the period September 1, 1993, through October 14,
1993, which was prior to the Vintners Acquisition, and net sales and unit
volume of brands from the Almaden/Inglenook Acquisition for the period
September 1, 1993, through August 4, 1994, which was prior to the
Almaden/Inglenook Acquisition.
(3) The Spirits category includes for both years presented case goods sales of
a number of brandy products under brands acquired in the Vintners and
Almaden/Inglenook Acquisitions.
Net sales and unit volume of the Company's branded beverage alcohol products
for the fiscal year ended August 31, 1995, each increased 6% as compared to
the fiscal year ended August 31, 1994. This increase was principally due to
increased net sales and unit volume of the Company's imported beer brands and
varietal table wine brands.
Net sales and unit volume of the Company's branded wine products for fiscal
1995 increased 0.1% and decreased 2.2%, respectively, as compared to fiscal
1994. These results were primarily due to lower non-varietal table wine,
sparkling wine and dessert wine sales offset by improved varietal wine sales.
The Company's results were also negatively affected by a backlog in fulfilling
orders at the end of fiscal 1995 due to production and shipment delays
associated with the relocation of West Coast bottling operations to the
Company's Mission Bell winery under the Restructuring Plan. The backlog was
substantially eliminated in the first three months of the Transition Period.
The Company also increased prices on selected branded wine products during the
Transition Period in response to increased grape costs associated with the
1995 harvest and to phase out introductory pricing on recently introduced line
extensions of varietal wine products.
Net sales and unit volume of the Company's non-varietal table wine brands
for fiscal 1995 declined 4.8% and 6.5%, respectively, as compared to fiscal
1994. The Company believes these declines are consistent with a general
decline in the consumption of non-varietal table wine products reflecting
changing consumer preferences toward varietal table wines.
Net sales and unit volume of the Company's varietal table wine brands for
fiscal 1995 increased 20.8% and 22.0%, respectively, as compared to fiscal
1994. These increases reflect the continuation of the Company's strategy to
expand distribution into new markets and increase penetration of existing
markets primarily through line extensions and promotional activities. As part
of this strategy, the Company also offered certain new and existing products
at highly competitive prices.
Net sales and unit volume of the Company's dessert wine brands for fiscal
1995 decreased 4.5% and 6.7%, respectively, as compared to fiscal 1994. The
Company believes those declines are consistent with a general decline in
consumption of dessert wines. Declines in the Company's beverage dessert wines
were partially offset by growth in higher priced traditional dessert wines
such as port and sherry.
Net sales and unit volume of the Company's sparkling wine brands for fiscal
1995 declined 10.1% and 11.7%, respectively, as compared to fiscal 1994. These
declines were primarily the result of strong competition and weak consumer
demand for sparkling wine.
40
Net sales and unit volume of the Company's beer brands for fiscal 1995
increased 24.3% and 23.9%, respectively, as compared to fiscal 1994. These
increases resulted primarily from increased sales of the Company's Corona
brand and its other Mexican beer brands, which represented over 70% of total
beer sales.
Net sales and unit volume of the Company's spirits brands for fiscal 1995
increased 4.3% and 4.0%, respectively, as compared to fiscal 1994. The growth
is due to increased shipments of brandy, vodka, and tequila.
Gross Profit
Gross profit for the fiscal year ended August 31, 1995, increased to $252.7
million from $182.4 million for the fiscal year ended August 31, 1994, an
increase of $70.3 million, or approximately 38.6%. This increase resulted from
the inclusion of the Almaden/Inglenook Product Lines with those of the
Company, and to a lesser extent from increased sales of imported beer brands
and the inclusion of Vintners' product lines with those of the Company. The
Company's gross profit as a percentage of net sales decreased to 27.9% for the
fiscal year ended August 31, 1995, from 29.0% for the fiscal year ended August
31, 1994. The Company's gross profit percentages decreased as a result of the
inclusion of operations acquired in the Almaden/Inglenook Acquisition, which
had a lower gross profit percentage than the remainder of the Company's
operations, and reduced gross profit percentages on sales of certain of the
Company's table wine brands in fiscal 1995 as compared to fiscal 1994. The
cost of grapes, a major component of the Company's raw materials for its
winemaking, increased significantly for the 1995 harvest compared with the
1994 harvest.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the fiscal year ended
August 31, 1995 increased to $159.2 million from $121.4 million for the fiscal
year ended August 31, 1994, an increase of $37.8 million, or approximately
31.1%. This increase primarily resulted from the additional expenses
associated with the sales and marketing of the products acquired in the
Almaden/Inglenook Acquisition, and to a lesser extent, higher advertising and
promotion expenses associated with certain wine brands. As a percentage of net
sales, selling, general and administrative expenses decreased to 17.6% for
fiscal 1995 as compared to 19.3% for fiscal 1994 as a result of increased
economies of scale.
Nonrecurring Restructuring Expenses
In fiscal 1995, the Company incurred a nonrecurring restructuring charge of
$2.2 million related to its Restructuring Plan which reduced net income per
share by $0.07 on a fully diluted basis as compared to a nonrecurring
restructuring charge of $24.0 million in fiscal 1994, also related to the
Restructuring Plan, which reduced net income per share by $0.91 on a fully
diluted basis. See the Notes to the Company's Consolidated Financial
Statements included herein.
Interest Expense, Net
Net interest expense increased $6.5 million to $24.6 million in the fiscal
year ended August 31, 1995, as compared to the fiscal year ended August 31,
1994. The increase is primarily due to borrowings related to the Vintners and
Almaden/Inglenook Acquisitions.
Net Income
Net income for the fiscal year ended August 31, 1995, increased to $41.0
million from $11.7 million for the fiscal year ended August 31, 1994, an
increase of $29.3 million, or approximately
41
249.6%. Fully diluted earnings per share increased to $2.13 in the fiscal year
ended August 31, 1995, from $0.74 in the fiscal year ended August 31, 1994, a
187.8% improvement.
Excluding the impact of the nonrecurring restructuring expenses, net income
was $42.4 million in fiscal 1995 as compared to $26.6 million in fiscal 1994.
This represents an improvement in net income of $15.8 million or 59.4%.
Excluding the impact of the nonrecurring restructuring expenses, fully diluted
earnings per common share increased to $2.20 from $1.65, an increase of 33.3%.
These increases were due to the contribution of the Almaden/Inglenook Product
Lines and other products acquired in the Almaden/Inglenook Acquisition and
increased sales of imported beer brands.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
General
The Company's principal use of cash in its operating activities is for
purchasing and carrying inventories. The Company's primary source of liquidity
has historically been cash flow from operations, except during the annual fall
grape harvests when the Company has relied on short-term borrowings. The
annual grape crush normally begins in August and runs through October. The
Company generally begins purchasing grapes in August with payments for such
grapes beginning to come due in September. The Company's short-term borrowings
to support such purchases generally reach their highest levels in November or
December. Historically, the Company has used cash flow from operating
activities to repay its short-term borrowings.
During January 1996, the Company's Board of Directors authorized the
repurchase of up to $30.0 million of the Company's Class A Common Stock and
Class B Common Stock (the "Stock Repurchase Program"). The repurchase of
shares of common stock will be accomplished, from time to time, depending upon
market conditions, through open market or privately negotiated transactions.
The Company may finance such repurchases through cash generated from
operations or through the Credit Facility. The repurchased shares will become
treasury shares and may be used for general corporate purposes. As of January
10, 1997, the Company had repurchased 785,200 shares of Class A Common Stock
at an aggregate cost of $20.7 million.
The Company's cash requirements have increased during the past twelve months
due to increased grape costs, operating inefficiencies at its West Coast wine
operations, and increased working capital needs from the Company's expanded
business. These increased working capital needs are primarily the result of
the UDG Acquisition and increased sales, which in turn have resulted in higher
accounts receivable and inventory levels. The Company's wine business requires
that substantially all of its grape purchases be made during the annual fall
harvest, thereby increasing inventory levels to their peak levels in this
period of time. These inventory levels are subsequently reduced during the
next twelve months as wine and grape juice concentrate products are produced,
bottled and shipped to customers. Substantially all of the Company's inventory
is sold within twelve months. See "Risk Factors--Difficulty in Integrating
Acquisitions," and "--Dependence on Raw Materials." The Company used the net
proceeds of the Old Notes Offering to repay amounts outstanding under the
Credit Facility, including $50.0 million under the Revolving Loans and
approximately $9.6 million to repay and permanently reduce the Term Loans. The
Company will continue to use the Revolving Loans to support its working
capital requirements. In addition, the Company intends to use the Revolving
Loans to complete the Stock Repurchase Program. Revolving Loans repaid from
the net proceeds of the Offering may be re-borrowed from time to time. The
Company believes that the Revolving Loans, its financing activities, including
the issuance of the Notes, and cash provided by operating activities will
provide adequate resources to satisfy its working capital, liquidity and
anticipated capital expenditure requirements for both its short-term and long-
term capital needs and to complete the Stock Repurchase Program.
42
Cash Flows for Nine Months Ended November 30, 1996
Operating Activities
Net cash provided by operating activities in Nine Months 1997 was $15.4
million. The net cash provided by operating activities for Nine Months 1997
resulted principally from net income adjusted for noncash items and a net
increase in operating liabilities (primarily an $18.5 million increase in
accounts payable associated with the 1996 grape harvest and an $18.0 million
increase in other accrued expenses and liabilities principally the result of
an increase of $7.2 million in accrued income taxes and an increase of $4.3
million in accrued interest), partially offset by a net increase in operating
assets (primarily a $55.6 million increase in accounts receivable associated
with higher seasonal sales of products and a $31.8 million increase in
inventories as a result of the purchase of grapes from the 1996 grape
harvest).
Investing Activities and Financing Activities
Net cash used in investing activities in Nine Months 1997 was $34.0 million,
resulting primarily from $25.3 million of capital expenditures and the final
$13.8 million earn-out payment to the former Barton stockholders, offset in
part by proceeds from the sale of property, plant and equipment of $5.2
million, resulting principally from the May 1996 sale of the Company's Central
Cellars winery, located in Lodi, California.
Net cash provided by financing activities in Nine Months 1997 was $20.3
million, resulting principally from net proceeds of $61.7 million from the
issuance of additional subordinated notes and net proceeds of $18.7 million
from revolving loan borrowings under the Company's bank credit facility,
partially offset by principal payments of $39.6 million of long-term debt and
repurchases of $20.0 million of the Company's Class A Common Stock.
As of January 10, 1997, under its Credit Facility, the Company had
outstanding Term Loans of $185.9 million bearing interest at 6.5%, $70.0
million of Revolving Loans bearing interest at 6.4% and $9.3 million of
Revolving Letters of Credit. As of January 10, 1997, under the Credit
Facility, $105.7 million of Revolving Loans were available to be drawn by the
Company. The Company's Credit Facility requires compliance with certain
financial covenants, including a fixed charge ratio that must exceed 1.0. In
the event the Company is not in compliance with these covenants, and after a
forty-five day cure period, the maturity of the outstanding Revolving Loans,
Term Loans and the Revolving Letters of Credit may be accelerated.
As of January 10, 1997, the Company had outstanding an aggregate principal
amount of $195.0 million of 8 3/4% Senior Subordinated Notes due 2003, being
the Original Notes and the Old Notes. The terms of the Notes offered hereby
are substantially identical to the terms of the Original Notes.
Capital Expenditures
During the Transition Period and the Nine Months 1997, the Company expended
approximately $16.1 million and $25.3 million, respectively, for capital
expenditures. Capital expenditures for the remainder of Fiscal 1997 and Fiscal
1998 are expected to be approximately $5.7 million and $20.5 million,
respectively. In addition to the above, the Company is in the process of
purchasing, leasing and developing vineyards. See "Business--Sources and
Availability of Raw Materials." The Company expects that in Fiscal 1998
capital expenditures for currently identified projects could range from $11.5
million to $22.5 million.
43
Commitments
The Company has agreements with suppliers to purchase various spirits and
blends of which certain agreements are denominated in British pounds sterling.
The future obligations under these agreements, based upon exchange rates at
November 30, 1996, aggregate approximately $28.0 million to $43.0 million for
contracts expiring through December 2005.
At November 30, 1996, the Company had open currency forward contracts to
purchase British pounds sterling of $500,000 which mature February 28, 1997.
The Company's use of such contracts is limited to the management of currency
rate risks related to purchases denominated in a foreign currency. The
Company's strategy is to enter into currency exchange contracts that are
matched to specific purchases and not to enter into any speculative contracts.
Other
The Company engages in operations at its facilities for the purpose of
disposing of waste and by-products generated in its production process. These
operations include the treatment of wastewater to comply with regulatory
requirements prior to disposal in public facilities or upon property owned by
the Company or others and do not constitute a material part of the Company's
overall cost of product sold. Expenditures for the purpose of maintaining or
improving the Company's wastewater treatment facilities have not constituted a
material part of the Company's maintenance or capital expenditures over the
last three fiscal years and the Company does not expect to incur any such
material expenditures during Fiscal 1997. During the last three fiscal years,
the Company has not incurred, nor does it expect to incur in Fiscal 1997, any
material expenditures related to remediation of previously contaminated sites
or other nonrecurring environmental matters.
CAUTIONARY STATEMENTS RELATED TO PROJECTED RESULTS
The Company makes forward-looking statements from time to time and desires
to take advantage of the "safe harbor" which is afforded such statements under
the Private Securities Litigation Reform Act of 1995 when they are accompanied
by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those in the forward-looking
statements.
The statements contained in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations," including under
"Projected Fiscal 1997 Results," and elsewhere in this Prospectus which are
not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. Any projections of future results
of operations, and in particular, (i) the Company's estimated net income per
share for Fiscal 1997, and (ii) the Company's estimated cash flows as measured
by EBITDA for Fiscal 1997, should not be construed in any manner as a
guarantee that such results will in fact occur. There can be no assurance that
any forward-looking statement will be realized or that actual results will not
be significantly higher or lower than set forth in such forward-looking
statement. In addition to the risks and uncertainties of ordinary business
operations, the forward-looking statements of the Company contained in this
Prospectus are also subject to the following risks and uncertainties:
. The Company believes that its future results of operations are inherently
difficult to predict due to the Company's use of the LIFO method of
accounting for inventory valuation, particularly as it relates to the
Company's purchase of grapes from the 1996 fall harvest. In particular,
the Company found it necessary to revise its estimate of the impact of
LIFO in the first quarter, second quarter and third quarter of the
current fiscal year versus its previous estimates. There are no
assurances that the Company may not have to revise this estimate further.
44
. The Company could experience worse than expected production
inefficiencies or other raw material supply, production or shipment
difficulties which could adversely affect (i) its ability to supply goods
to its customers and (ii) the willingness of its wholesale or retail
customers to purchase the Company's products. The Company could also
experience higher than expected increases in its cost of product sold as
a result of inefficiencies or if raw materials such as grapes,
concentrate or packaging materials are in short supply or if the Company
experiences increased overhead costs. The Company believes that further
production inefficiencies and higher than expected other costs related to
such matters as loss rates, imported concentrate costs, freight costs and
yields will negatively impact its results.
. Manufacturing economies related to such matters as bottling line speeds
and warehousing capabilities could fail to develop when planned. The
Company believes that worse than expected bottling line and warehouse
efficiencies will negatively impact its results.
. The Company is in a highly competitive environment and its dollar sales
and unit volume could be negatively affected by itsour inability to
maintain or increase prices, changes in geographic or product mix, a general
decline in beverage alcohol consumption or the decision of itsour wholesale
customers, retailers or consumers to purchase competitive products instead of
the Company'sour products. The Company believes its branded wine
unit volume has been negatively impacted by the effect price increases
have had on its competitive positioning. This could limit the Company's
ability to increase the selling prices of its branded wine products
further to offset anticipated higher costs in Fiscal 1997, and could
require selling price decreases of its branded wine products in the
future to maintain volume. Wholesaler, retailer and consumer purchasing decisions are
influenced by, among other things, the perceived absolute or relative overall
value of the Company'sour products, including their quality or pricing, compared to
competitive products. Unit volume and dollar sales could also be affected by
pricing, purchasing, financing, operational, advertising or promotional
decisions made by wholesalers and retailers which could affect their supply of,
or consumer demand for, the
Company'sour products. The Company hasWe could also experienced a substantial
increase in its sales of its imported beer products, particularly its
Mexican brands. The Company does not believe that the high growth rate in
its imported beer business will be sustainable over an extended period of
time.
. The Company could experience higher than
expected selling, general and administrative expenses if it findswe find it necessary to
increase itsthe number of our personnel or itsour advertising or promotional
expenditures to maintain itsour competitive position or for other reasons.
. The Company is currently undergoingWE ARE CONTROLLED BY THE SANDS FAMILY
Our outstanding capital stock consists of Class A Common Stock
and Class B Common Stock. Holders of Class A Common Stock are entitled to one
vote per share and are entitled, as a Reengineering Effort involving the
evaluation of its business processes and organizational structure and
could make changes in its business in responseclass, to this effort which are
not currently contemplated.
. The Company could experience difficulties or delays in the development,
production, testing and marketing of new products.
. The Company could experience changes in its ability to obtain or hedge
against foreign currency, foreign exchange rates and fluctuations in
those rates. The Company could also be affected by nationalizations or
unstable governments or legal systems or intergovernmental disputes.
These currency, economic and political uncertainties may affect the
Company's results, especially to the extent these matters, or the
decisions, policies or economic strengthelect one fourth of the Company's suppliers,
affectmembers
of the Company's Mexican, German, ChineseBoard of Directors. Holders of Class B Common Stock are entitled to 10
votes per share and other imported beer
products.
. The forward-looking statements contained herein are based on estimates
which the Company believes are reasonable. This means that the Company's
actual results could differ materially from such estimatesentitled, as a result of
being negatively affected as described above, or otherwise, or positively
affected.
45
INDUSTRY
The beverage alcohol industry inclass, to elect the United States consists of the
production, importation, marketing and distribution of beer, wine and
distilled spirits products. Over the past five years there has been increasing
consolidation at the supplier, wholesaler and, in certain markets, retailer
tiers of the beverage alcohol industry. As a result, it has become
advantageous for certain suppliers to expand their portfolio of brands through
acquisitions and internal development in order to take advantage of economies
of scale and to increase their importance to a more limited number of
wholesalers and, in certain markets, retailers. From 1978 through 1995, the
overall per capita consumption of beverage alcohol products in the United
States has generally declined. However, consumption of table wine, and in
particular varietal table wine, and imported beer, has increased during the
period.
The following table sets forth the industry unit volumes for shipments of
beverage alcohol products in the Company's five principal beverage alcohol
product categories in the United States for the five calendar years ended
December 31, 1995:
INDUSTRY DATA 1991 1992 1993 1994 1995
- ------------- ------- ------- ------- ------- -------
Domestic Table Wines (a)(b)............. 285,282 308,169 300,953 307,481 318,546
Domestic Dessert Wines (a)(c)........... 35,181 32,449 29,698 27,634 25,439
Domestic Sparkling Wines (a)............ 24,386 23,794 23,600 22,855 22,298
Imported Beer (d)....................... 109,212 114,590 127,418 144,527 155,177
Distilled Spirits (e)................... 147,025 148,017 144,162 139,497 137,810
- --------
(a) Units are in thousands of gallons. Data exclude sales of wine coolers.
(b) Includes other special natural (flavored) wines under 14% alcohol.
(c) Includes dessert wines, other special natural (flavored) wines over 14%
alcohol and vermouth.
(d) Units are in thousands of cases (2.25 gallons per case).
(e) Units are in thousands of 9-liter cases (2.378 gallons per case).
Table Wines. Wines containing 14% or less alcohol by volume are generally
referred to as table wines. Within this category, table wines are further
characterized as either "non-varietal" or "varietal." Non-varietal wines
include wines named after the European regions where similar types of wines
were originally produced (e.g., burgundy), niche products and proprietary
brands. Varietal wines are those named for the grape that comprises the
principal component of the wine. Table wines that retail at less than $5.75
per 750 ml. bottle are generally considered to be popularly priced while those
that retail at $5.75 or more per 750 ml. bottle are considered premium wines.
During the period from 1991 to 1995, shipments of domestic table wines
increased at an average compound annual rate of 3%. Shipments of varietal
table wines have grown at an average compound annual rate of 13% since 1991,
while shipments of non-varietal table wines have generally declined over the
same period. The Company believes that the growth in wine shipments was partly
the result of the November 1991 television broadcast of The French Paradox on
CBS' 60 Minutes program, which discussed the healthful benefits of moderate
red wine consumption. These findings have been supported by other studies,
including a 60 Minutes update on The French Paradox in 1995. More recently, in
January 1996 the Dietary Guidelines for Americans, released jointly by the
U.S. Agriculture Department and the Department of Health and Human Services,
acknowledged that moderate drinking may lower the risk of heart attacks.
Based on shipments of California table wines, which constituted
approximately 88% of the total domestically produced table wine market in
1995, shipments of all table wines increased 6% for the first eight months of
calendar 1996 over the same period in 1995. Shipments of varietal table wines
in the first eight months of calendar 1996 increased by 10% over the same
period in the prior year.
46
Shipments of imported table wines, which constituted 16% of the United States
table wine market in 1995, grew by a compound annual rate of 6% between 1991
and 1995.
Dessert Wines. Wines containing more than 14% alcohol by volume are
generally referred to as dessert wines. Dessert wines generally fall into the
same price categories as table wines. In 1995, shipments of domestic dessert
wines decreased 8% as compared to 1994. During the period from 1991 to 1995,
shipments of domestic dessert wines declined at an average compound annual
rate of 8%. Dessert wine consumption in the United States has been declining
for many years, reflecting the impact of an increase in federal excise taxes
in 1991 and a general shift in consumer preferences to table wines.
Sparkling Wines. Sparkling wines include effervescent wines like champagne
and spumante. Sparkling wines generally fall into the same price categories as
table wines. Shipments of sparkling wines declined at an average compound
annual rate of 2% from 1991 to 1995. The Company believes that the decline in
sparkling wine consumption between 1991 and 1995 reflects concerns about
drinking and driving, as a large part of sparkling wine consumption occurs
outside the home at social gatherings and restaurants. Based on shipments of
California sparkling wines, which constituted 88% of the domestically produced
sparkling wine market in 1995, shipments of all sparkling wines increased 4%
in the first eight months of 1996, as compared to the same period a year ago.
Imported Beer. Imported beers, along with microbrews and super-premium
priced domestic beers, are generally priced above the leading domestic premium
brands. Shipments of imported beers have increased at an average compound rate
of 9% from 1991 to 1995. Imported beer shipments have increased 12% for the
first six months of calendar 1996, and shipments of Mexican beers have
increased 29% during the first six months as compared to the same period in
1995. Shipments of imported beers as a percentage of the United States beer
market, increased to 6.0% in 1995 from 5.5% in 1994.
Distilled Spirits. Shipments of distilled spirits in the United States
declined at an average compound annual rate of 2% from 1991 to 1995. Shipments
of distilled spirits have been affected by many of the same trends evident in
the rest of the beverage alcohol industry. Over the past five years, sales of
most types of spirits have declined.
47
BUSINESS
The Company is a leading producer and marketer of branded beverage alcohol
products, with over 125 national and regional brands which are distributed by
over 1,200 wholesalers throughout the United States and in selected
international markets. The Company is the second largest supplier of wines,
the third largest importer of beers and the fourth largest supplier of
distilled spirits in the United States. The Company's beverage alcohol brands
are marketed in five general categories: table wines, sparkling wines, dessert
wines, imported beer and distilled spirits, and include the following
principal brands:
. Table Wines: Inglenook, Almaden, Paul Masson, Taylor California Cellars,
Cribari, Manischewitz, Taylor, Marcus James, Deer Valley and Dunnewood
. Sparkling Wines: Cook's, J. Roget, Great Western and Taylor
. Dessert Wines: Richards Wild Irish Rose, Cisco and Taylor
. Imported Beer: Corona, Modelo Especial, St. Pauli Girl and Tsingtao
. Distilled Spirits: Barton, Fleischmann's, Mr. Boston, Montezuma, Canadian
LTD, Ten High, Inver House and Monte Alban
Based on available industry data, the Company believes that during calendar
year 1995 it had a 22% share of the market for domestic wines, a 12% share of
the imported beer market and its distilled spirits brands had an 8% share of
the distilled spirits market in the United States. Within the market for
domestic wines, the Company believes it had a 28% share of the non-varietal
table wine market, a 12% share of the varietal table wine market, a 42% share
of the dessert wine market and a 29% share of the sparkling wine market. Many
of the Company's brands are leaders in their respective categories in the
United States, including Corona, the second largest selling imported beer
brand; Inglenook and Almaden, the fifth and sixth largest selling wine brands,
respectively; Richards Wild Irish Rose, the largest selling dessert wine
brand; Cook's champagne, the second largest selling sparkling wine brand;
Fleischmann's, the fourth largest blended whiskey and fourth largest
domestically bottled gin; Montezuma, the second largest selling tequila brand;
and Monte Alban, the largest selling mezcal brand.
The Company has diversified its product portfolio through a series of
strategic acquisitions that have resulted in an increase in the Company's net
sales from $176.6 million in fiscal 1991 to $1.1 billion for the twelve months
ended August 31, 1996. Through these acquisitions, the Company developed
strong market positions in the growing beverage alcohol product categories of
varietal table wine and imported beer. The Company ranks second and third in
the varietal table wine and imported beer categories, respectively. From 1992
through 1995, industry shipments of varietal table wine and imported beer have
each grown 35%. During this period, the Company has also strengthened its
relationship with wholesalers, expanded its distribution and enhanced its
production capabilities as well as acquired additional management,
operational, marketing and research and development expertise.
THE ACQUISITIONS
The Barton Acquisition. On June 29, 1993, the Company acquired all of the
outstanding shares of capital stock of Barton. Barton was the eighth largest
supplier of distilled spirits and fourth largest importer of beer in the
United States. With this acquisition, the Company acquired the right to
distribute Corona and Modelo Especial beer in 25 primarily western states,
national distribution rights for St. Pauli Girl and Tsingtao and a diversified
line of distilled spirits including Barton Gin and Vodka, Ten High Bourbon
Whiskey and Montezuma Tequila.
48
The Vintners Acquisition. On October 15, 1993, the Company acquired
substantially all of the assets of Vintners, and assumed certain liabilities.
Vintners was the United States' fifth largest supplier of wine with two of the
country's most highly recognized brands, Paul Masson and Taylor California
Cellars. With this acquisition, the Company acquired the Paul Masson, Taylor
California Cellars, Taylor, Deer Valley, St. Regis (nonalcoholic) and Great
Western brands and related facilities.
The Almaden/Inglenook Acquisition. On August 5, 1994, the Company acquired
the Inglenook and Almaden brands, currently the fifth and sixth largest
selling table wines in the United States, a grape juice concentrate business,
and wineries in Madera and Escalon, California, from Heublein. The Company
also acquired Belaire Creek Cellars, Chateau La Salle and Charles Le Franc
table wines, Le Domaine champagne and Almaden, Hartley and Jacques Bonet
brandy. The accounts receivable and the accounts payable related to the
acquired assets were not acquired by the Company.
Following the Almaden/Inglenook Acquisition, the Company entered into the
Restructuring Plan to consolidate certain of its California winery operations.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Notes to the Company's consolidated financial
statements included herein.
The UDG Acquisition. On September 1, 1995, the Company acquired from UDG,
the Skol, Mr. Boston, Canadian LTD, Glenmore, Old Thompson, Kentucky Tavern,
and di Amore distilled spirits brands; the rights to the Fleischmann's and
Chi-Chi's distilled spirits brands under long term license agreements; the
U.S. rights to Inver House, Schenley and El Toro distilled spirits brands; and
inventories and other related assets. The UDG Acquisition also included two of
UDG's production facilities, one located in Owensboro, Kentucky, and the other
located in Albany, Georgia. In addition, the transaction included multiyear
agreements under which UDG will supply the Company with bulk whisky and the
Company will supply UDG with services including continued packaging of various
UDG brands not acquired by the Company. The aggregate consideration for the
brands and other assets acquired from UDG consisted of $141.8 million in cash,
plus transaction costs of $2.3 million, and assumption of certain current
liabilities. The source of the cash payment made at closing, together with
payment of other costs and expenses required by the UDG Acquisition, was
financing provided by the Company pursuant to a Term Loan under the Credit
Facility.
CURRENT OPERATING ENVIRONMENT
The Company's growth through acquisitions over the past five years has
substantially expanded its portfolio of brands and has enabled it to become a
major participant in additional product categories of the beverage alcohol
business. This expansion has positioned the Company to benefit from faster
growing categories with over one-third of the Company's sales generated from
the growth categories of imported beer and varietal wines. However, recent
operating results have been negatively impacted by two factors: increases in
grape prices and certain costs and operating inefficiencies relating to the
consolidation of certain West Coast winery operations in connection with the
acquisitions.
While the consolidation of certain wine operations has produced significant
overall synergies, some of the planned efficiencies have not materialized and
unanticipated costs have occurred. The Company believes that the unanticipated
production costs resulted from its rapid growth over the last three years,
combined with the lack of integrated production control systems and the
complexity of production at its newly consolidated Mission Bell Winery.
Additionally, as the Company has increased its wine and grape juice
concentrate business, it has become the second largest purchaser of grapes for
wine and concentrate in California. The Company's profits are significantly
influenced by grape price changes. Costs for grapes have escalated
dramatically over the last two grape harvests (fall 1995 and fall 1996). Based
on constant tonnage purchased, the Company's overall cost of grapes increased
17.5% in the 1996 harvest.
49
In order to address these matters, the Company is taking a number of
specific steps to improve sales and margins, minimize unexpected costs related
to inefficiencies and realize opportunities for efficiencies afforded by the
Company's consolidation of its West Coast wine operations and its economies of
scale as a $1.1 billion participant in the beverage alcohol industry. Such
steps include the following:
. The Company has launched a comprehensive Reengineering Effort in its wine
division. The Reengineering Effort is intended to increase the efficiency
of all of the Company's operating processes, create smaller, more
manageable business units and create greater management accountability
for its wine business. Organizational changes include the creation of
Accountable Business Units organized by product categories which will be
accountable for production and marketing, and Customer Business Centers,
organized by region, which are responsible for sales, customer service
and product delivery. The Company intends, through the creation of remote
distribution centers, to store inventory closer to its customers, thereby
reducing delivery times. The Company believes these efforts will reduce
the overall amount of inventory it and its customers carry, thus reducing
capital employed and offering benefits to its customers that cannot
currently be obtained from competitors. The Company will be implementing
the distribution center concept on a measured basis to determine its
efficacy.
. In connection with the Reengineering Effort, the Company is implementing
a new accounting and management information system to upgrade the type
and level of information the Company can generate, and to enable it to
manage its business more precisely.
. The Company has created a number of special task forces specifically to
address various issues related to inefficiencies at its West Coast wine
operations, and has relocated, in some cases temporarily and in others
permanently, personnel with particular expertise necessary to address
these matters. All aspects of the Company's wine and grape juice
concentrate production, material requirements planning functions,
warehousing logistics and bottling operations at the Company's Mission
Bell Winery in California, are being reviewed and changed as necessary to
create greater efficiencies.
. The Company has instituted several price increases on its varietal and
non-varietal table wines in response to increased grape costs from the
1995 grape harvest. In general, it is both industry and Company practice
to make selling price adjustments around the time the wine produced with
the higher cost grapes is actually sold, which generally occurs in the
calendar year following the grape harvest. Over the last year the
industry and the Company have increased their selling prices. In the case
of the Company, these selling price increases, on an annualized basis,
have more than offset the increased costs associated with the fall 1995
harvest.
. The Company is in the process of recruiting new management in several key
positions and has previously hired a new President of its wine division
with extensive experience in the U.S. beverage industry, a new Vice
President and Controller of the wine division and an experienced manager
for its Mission Bell Winery. It is expected that the filling of these
positions has given, and will continue to give, the Company significantly
increased management depth and experience.
BUSINESS STRATEGY
The Company's business strategy is to manage its existing portfolio of
brands and businesses in order to maximize profit and return on investment,
and reposition its portfolio of brands to benefit from growth trends in the
beverage alcohol industry. To achieve the foregoing, the Company intends to:
(i) adjust the price/volume relationships of certain brands; (ii) develop new
brands and introduce line extensions; (iii) expand geographic distribution;
and (iv) acquire businesses that meet its strategic and financial objectives.
50
PRODUCT CATEGORIES
The Company produces, imports and markets beverage alcohol products in five
principal product categories: table wines, dessert wines, sparkling wines,
imported beer and distilled spirits. The table below sets forth the net sales
(in thousands of dollars) and unit volumes (in thousands of gallons) for all
of the table, dessert and sparkling wines, grape juice concentrate and other
wine-related products and services sold by the Company and under brands and
products acquired in the Vintners Acquisition and the Almaden/Inglenook
Acquisition for the 1994 and 1995 fiscal years and the twelve months ended
August 31, 1996.
TWELVE MONTHS
ENDED
1994 1995 AUGUST 31, 1996
---------------- ---------------- ---------------
NET NET NET
TOTAL WINES SALES VOLUME SALES VOLUME SALES VOLUME
- ----------- -------- ------- -------- ------- -------- ------
Company....................... $245,083 36,613 $209,957 35,481 $220,308 34,399
Vintners...................... 125,923 20,461 141,790 20,949 148,558 20,425
Almaden/ 237,853 46,269 251,779 45,000 256,555 44,540
Inglenook.................... -------- ------- -------- ------- -------- ------
Total......................... $608,859 103,343 $603,526 101,430 $625,421 99,364
======== ======= ======== ======= ======== ======
Table Wines. The Company sells over 40 different brands of non-varietal
table wines, substantially all of which are marketed in the popularly priced
segment, which constituted approximately 42% of the domestic table wine market
in the United States for the 1995 calendar year, the latest year for which
data is available. The Company also sells over 15 different brands of varietal
table wines in both the popularly priced and premium categories. The table
below sets forth the unit volumes (in thousands of gallons) for the domestic
table wines sold by the Company and under domestic table wine brands acquired
in the Vintners Acquisition and the Almaden/Inglenook Acquisition for the 1994
and 1995 fiscal years, and the twelve months ended August 31, 1996:
TWELVE MONTHS
1994 1995 ENDED AUGUST 31,
TABLE WINES VOLUME VOLUME 1996
- ----------- ------ ------ ----------------
Non-varietal..................................... 52,610 47,774 44,682
Varietal......................................... 12,794 16,344 17,971
------ ------ ------
Total (a)........................................ 65,404 64,118 62,653
====== ====== ======
- --------
(a) Excludes sales of wine coolers but includes sales of wine in bulk.
The Company's table wine brands include:
Inglenook: The fifth largest selling table wine brand and the seventh
largest varietal wine in the United States with a significant restaurant and
bar presence.
Almaden: The sixth largest selling table wine brand and the eleventh largest
varietal wine brand in the United States. Almaden is one of the oldest and
best known table wines in the United States.
Paul Masson: The tenth largest selling table wine brand in the United
States. Paul Masson is offered in all major varietal and non-varietal product
categories in a full range of sizes.
Taylor California Cellars: The thirteenth largest domestic selling table
wine brand in the United States. This brand is also offered in all major
varietal and non-varietal product categories in a full range of sizes.
Cribari: A well-known brand of both varietal and non-varietal table wines,
marketed in the popularly priced segment.
51
Manischewitz: The largest selling brand of kosher wine in the United States.
Taylor: One of the United States' oldest brands of non-varietal wine,
marketed primarily in the eastern half of the United States.
Deer Valley: This line of California varietal and non-varietal table wines
introduced in 1989 has had significant success in California. The Company has
been expanding its distribution of this brand in other regions of the country.
Dunnewood: Unit volumes of this varietal wine from California's North Coast
region have also increased significantly. This brand is marketed at the lower
end of the premium price category.
The Company also markets a selection of popularly priced imported table
wines. These brands include:
Marcus James: One of the largest selling imported varietal wines in the
United States. Marcus James is a line of varietal table wines which includes
White Zinfandel, Chardonnay, Cabernet Sauvignon and Merlot. The Company owns
the Marcus James brand and contracts for its production in Brazil.
Santa Carolina: The fourth largest table wine brand imported from Chile.
Santa Carolina is a line of varietal wines which include Chardonnay, Cabernet
and Merlot. The Company began to distribute this brand on May 20, 1996, under
an exclusive distribution agreement.
Mateus: The second largest selling Portuguese table wine and a highly
recognized brand name. This brand is imported by the Company under a
distribution agreement.
Partager: A popularly priced table wine with both varietal and non-varietal
products. The Company owns the Partager brand and contracts for its production
in Chile.
The Company's unit volume sales of imported wine increased steadily from 1.9
million gallons in fiscal 1994 to 2.4 million gallons for the twelve months
ended August 31, 1996. The improvement in unit volume of imported wine is
attributable primarily to increased sales of the Marcus James varietal wine
brand.
Dessert Wines. With the exception of the premium dessert wine brands
acquired in the Vintners Acquisition, the Company markets its dessert wines in
the lower end of the popularly priced category. The popularly priced category
represented approximately 89% of the dessert wine market in calendar 1995, the
latest year for which data is available. The table below sets forth the unit
volumes (in thousands of gallons) for the domestic dessert wines sold by the
Company and under domestic dessert wine brands acquired in the Vintners
Acquisition for the 1994 and 1995 fiscal years, and the twelve months ended
August 31, 1996.
TWELVE MONTHS
1994 1995 ENDED
VOLUME VOLUME AUGUST 31, 1996
------ ------ ---------------
Dessert Wines..................................... 12,037 10,962 10,098
The Company's dessert wines include:
Richards Wild Irish Rose: The largest selling dessert wine brand in the
United States and the Company's leading dessert wine brand.
Taylor: Premium traditional dessert wines, including port and sherry.
Cisco: One of the leading dessert wine brands in the United States. Cisco is
a flavored dessert wine positioned higher in price than Richards Wild Irish
Rose.
52
The Company's unit volumes of dessert wines have declined over the last
three years. The decline can be attributed to a general decline in dessert
wine consumption in the United States. The Company's unit volume sales of its
dessert wine brands (including the brands acquired from Vintners) have
decreased 16% from fiscal 1994 through the twelve months ended August 31,
1996.
Sparkling Wines. The Company markets substantially all of its sparkling
wines in the popularly priced segment, which constituted approximately 46% of
the domestic sparkling wine market in calendar 1995, the latest year for which
data is available. The table below sets forth the unit volumes (in thousands
of gallons) for the domestic sparkling wines sold by the Company and under
domestic sparkling wine brands acquired in the Vintners Acquisition and the
Almaden/Inglenook Acquisition for the 1994 and 1995 fiscal years, and the
twelve months ended August 31, 1996:
TWELVE MONTHS
1994 1995 ENDED
VOLUME VOLUME AUGUST 31, 1996
------ ------ ---------------
Sparkling Wines................................... 7,353 6,500 6,565
The Company's sparkling wine brands include:
Cook's: The second largest selling domestic sparkling wine in the United
States. This brand of champagne is marketed in a bell shaped bottle and is
cork-finished, packaging generally associated with higher priced products.
J. Roget: The fourth largest selling domestic sparkling wine in the United
States, priced slightly below Cook's.
Great Western: A premium priced champagne.
Taylor: A premium priced champagne.
Codorniu: The second largest Spanish sparkling wine imported in the United
States, sold in the premium price category. The Company sells this brand under
an exclusive distribution agreement.
Grape Juice Concentrate. As a related part of its wine business, the Company
produces grape juice concentrate. Grape juice concentrate is sold to the food
and wine industries as a raw material for the production of juice-based
products, no-sugar-added foods and beverages. Grape juice concentrate competes
with other domestically produced and imported fruit-based concentrates. The
Company believes that it is the leading grape juice concentrate producer in
the United States. The table below sets forth the unit volumes (in thousands
of gallons) for the grape juice concentrate sold by the Company and the grape
juice concentrate business acquired in the Almaden/Inglenook Acquisition for
the 1994 and 1995 fiscal years, and the twelve months ended August 31, 1996:
TWELVE MONTHS
1994 1995 ENDED
VOLUME VOLUME AUGUST 31, 1996
------ ------ ---------------
Grape Juice Concentrate........................... 11,826 11,017 11,863
Other Wine Products and Related Services. The Company's other wine related
products and services include: grape juice; St. Regis, the leading
nonalcoholic line of wines in the United States; wine coolers sold primarily
under the Sun Country brand name; cooking wine; and wine for the production of
vinegar. The Company also provides various bottling and distillation
production services for third parties.
Beer. The Company is the third largest marketer of imported beers in the
United States. The Company distributes three of the top 20 imported beers in
the United States: Corona, Modelo Especial and St. Pauli Girl. The table below
sets forth the net sales (in thousands of dollars) and unit volumes
53
(in thousands of cases) for the beer sold by Barton and the Company for the
1994 and 1995 fiscal years and the twelve months ended August 31, 1996:
TWELVE MONTHS
ENDED AUGUST 31,
1994 1995 1996
---------------------- ---------------------------- ----------------------------
NET SALES VOLUME NET SALES VOLUME NET SALES VOLUME
--------- ------ --------- ------ --------- ------
$173,883 14,100 $216,159 17,471 $279,070 22,388
The Company's principal imported beer brands include:
Corona: The second largest selling imported beer in the United States and
the number one selling beer in Mexico. The Company believes that Corona is the
largest selling import in the territory in which it is distributed by the
Company. The Company has represented the supplier of Corona since 1978 and
currently sells Corona and its related Mexican beer brands in 25 primarily
western states.
Modelo Especial: One of the family of products imported from the supplier of
Corona, Modelo Especial has grown to be the fifteenth largest selling imported
beer in the United States.
St. Pauli Girl: The sixteenth largest selling imported beer in the United
States, and the second largest selling German import.
Tsingtao: The largest selling Chinese beer in the United States.
The Company's other imported beer brands include Pacifico and Negra Modelo
from Mexico, Peroni from Italy and Double Diamond from the United Kingdom. The
Company owns and operates the Stevens Point Brewery, a regional brewer located
in Wisconsin, which produces Point Special, among other brands.
Net sales and unit volumes of the Company's beer brands have grown during
the previous three fiscal years primarily as a result of the increased sales
of Corona and the Company's other Mexican beer brands. During the two years
ended August 31, 1996, net sales and unit volume of the Company's beer brands
increased at an annual rate of 27% and 26%, respectively.
Distilled Spirits. The Company is the fourth largest supplier of distilled
spirits in the United States. The Company produces, bottles, imports and
markets a diversified line of quality distilled spirits, and also exports
distilled spirits to more than 15 foreign countries. The table below sets
forth the net sales (in thousands of dollars) and unit volumes (in thousands
of 9-liter cases) for the distilled products case goods sold by Barton and
under brands acquired in the Vintners Acquisition and the Almaden/ Inglenook
Acquisition for the 1994 and 1995 fiscal years and the twelve months ended
August 31, 1996, and for the brands and products acquired in the UDG
Acquisition for the twelve months ended August 31, 1994, 1995, and 1996:
TWELVE MONTHS ENDED
1994 1995 AUGUST 31, 1996
--------------- --------------- ---------------------
NET NET NET
SPIRITS SALES VOLUME SALES VOLUME SALES VOLUME
- ------- -------- ------ -------- ------ ---------- ----------
Barton/Vintners/Almaden/Inglenook. $ 88,549 5,678 $ 92,400 5,917 $ 98,166 6,021
UDG............................... 101,916 4,941 92,136 5,013 83,274 4,867
-------- ------ -------- ------ ---------- --------
Total............................. $190,465 10,619 $184,536 10,930 $181,440 10,888
======== ====== ======== ====== ========== ========
The Company's leading distilled spirits brands include:
Barton Gin and Vodka: The fifth largest domestically bottled gin and the
fifth largest domestically bottled vodka.
54
Fleischmann's Vodka, Gin and Preferred: The fourth largest blended whiskey
and the fourth largest domestically bottled gin.
Mr. Boston: A highly recognized name with a full line of spirits, including
cordials, cocktails, flavored brandies, gin and vodka.
Montezuma: The second largest selling tequila in the United States.
Canadian LTD: The fifth largest domestically bottled Canadian whisky.
Ten High Bourbon: The seventh largest bourbon brand in the United States.
Inver House: The fifth largest domestically bottled Scotch whisky.
Monte Alban: A premium priced product which the Company believes is the
largest selling mezcal in the United States.
Paul Masson Grande Amber: The fourth largest selling aged brandy in the
United States, and one of the fastest-growing domestic brandies.
Other products include Skol Vodka, Gin and Rum; Crystal Palace Gin and
Vodka; Glenmore spirits; Chi-Chi's cocktails; Lauder's, House of Stuart and
Highland Mist Scotch whiskies; Old Thompson; Kentucky Gentleman, Kentucky
Tavern, Very Old Barton and Tom Moore bourbon whiskies; di Amore liqueurs;
Schenley spirits; Sabroso coffee liqueur; Northern Light, Canadian Host and
Canadian Supreme Canadian whiskies and Imperial, Barton Reserve and Barton
Premium blended whiskies. Substantially all of the Company's spirits unit
volume consists of products marketed in the price value segment.
During the two years ended August 31, 1996, net sales and unit volumes of
distilled spirits brands sold by Barton and under brands acquired in the
Vintners and Almaden/Inglenook Acquisitions increased at an annual rate of 5%
and 3%, respectively. Unit volumes of vodka, tequila and brandy have
increased, while Scotch and bourbon have experienced decreases in unit volume.
During the two years ended August 31, 1996, the net sales of brands acquired
in the UDG Acquisition declined in excess of industry rates. The Company
believes that these declines resulted from noncompetitive retail pricing and
promotional activities of the brands' previous owner. The Company has
implemented pricing and promotional activities which have reduced the rate of
decline during Fiscal 1997.
In addition to the branded products described above, the Company also sells
distilled spirits in bulk and provides contract production and bottling
services. These activities accounted for net sales during the 1994 and 1995
fiscal years and for the twelve months ended August 31, 1996 of $7.0 million,
$5.8 million, and $21.3 million, respectively. The significant increase in
contract production services is a result of the UDG Acquisition.
MARKETING AND DISTRIBUTION
The Company's products are distributed and sold throughout the United States
through over 1,200 wholesalers, as well as through state alcoholic beverage
control agencies. The Company employs a full-time, in-house marketing and
sales organization of approximately 300 people to develop and service its
sales to wholesalers and state agencies. The Company's sales force is
organized in separate sales divisions: a beer division, a spirits division and
a wine division. The Company believes that the organization of its sales force
into separate divisions positions it to maintain a high degree of
55
focus on each of its principal product categories. For the 1994 and 1995
fiscal years and the twelve months ended August 31, 1996, gross sales to the
Company's largest wholesaler, Southern Wine and Spirits, represented 12.3%,
10.6% and 8.0% of the Company's gross sales, respectively.
The Company's marketing strategy places primary emphasis upon promotional
programs directed at its broad national distribution network (and to the
retailers served by that network). The Company has extensive marketing
programs for its brands including promotional programs on both a national
basis and regional basis in accordance with the strength of the brands, point-
of-sale materials, consumer media advertising, event sponsorship, market
research, trade advertising and public relations.
TRADEMARKS AND DISTRIBUTION AGREEMENTS
The Company's wine and distilled spirits products are sold under a number of
trademarks. Most of these trademarks are owned by the Company.
The Company also produces and sells wines and distilled spirits products
under exclusive license or distribution agreements. Significant agreements
include: a long term license agreement with Nabisco Brands Company for a term
which expires in 2008 and which automatically renews for successive additional
20 year terms unless cancelled by the Company for the Fleischmann's spirits
brands; a long term license agreement with Hiram Walker & Sons, Inc. for a
term which expires in 2116 for the Ten High, Crystal Palace, Northern Light
and Imperial Spirits brands; and a long term license agreement with the B.
Manischewitz Company for a term which expires in 2042 for the Manischewitz
brand of kosher wines.
The Company also has other less significant license and distribution
agreements related to the sale of wine and distilled spirits with terms of
various durations.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products.
These agreements have terms that vary
and prohibit the Company from importing other beers from the same country. The
Company's agreement to distribute Corona and its other Mexican beer brands
exclusively throughout 25 states expires in December 2006 and, subject to
compliance with certain performance criteria and other terms under the
agreement, will be automatically renewed for additional terms of five years.
Under this agreement, the Mexican supplier has the right to consent to Mr.
Goodman's successor as Chairman and Chief Executive Officer of Barton's beer
subsidiary, which consent may not be unreasonably withheld, and, if such
consent is properly withheld, to terminate the agreement. The Company's
agreement for the importation of St. Pauli Girl expires in 1998 and, subject
to compliance with certain performance criteria, may be extended by the
Company until 2003. The Company's agreement for the exclusive importation of
Tsingtao throughout the entire United States expires in December 1999 and,
subject to compliance with certain performance criteria and other terms under
the agreement, will be automatically renewed until December 2002. Prior to
their expiration, these agreements may be terminated if the Company fails to
meet certain performance criteria. The Company believes it is currently in
compliance with its imported beer distribution agreements. From time to time,
the Company has failed, and may in the future fail, to satisfy certain
performance criteria in its distribution agreements. Although there can be no
assurance that its beer distribution agreements will be renewed, given the
Company's long term relationships with its suppliers, the Company expects that
such agreements will be renewed prior to their expiration and does not believe
that these agreements will be terminated.
COMPETITION
The beverage alcohol industry is highly competitive. The Company competes on
the basis of quality, price, brand recognition and distribution. The Company's
beverage alcohol products compete with other alcoholic and nonalcoholic
beverages for consumer purchases, as well as shelf space in
56
retail stores and marketing focus by the Company's wholesalers. The Company
competes with numerous multinational producers and distributors of beverage
alcohol products, many of which have significantly greater resources than the
Company. The Company's principal competitors include E & J Gallo Winery and
The Wine Group in the wine category, Heineken USA, Molson Breweries USA,
Labatt's USA and Guinness Import Company in the imported beer category, and
Jim Beam Brands in the distilled spirits category.
PRODUCTION
The Company's wines are produced from several varieties of wine grapes grown
principally in California and New York. The grapes are crushed at the
Company's wineries and stored as wine, grape juice or concentrate. Such grape
products may be made into wine for sale under the Company's brand names, sold
to other companies for resale under their own labels, or shipped to customers
in the form of juice, juice concentrate, unfinished wines, high-proof grape
spirits or brandy. Most of the Company's wines are bottled and sold within 18
months after the grape crush. The Company's inventories of wines, grape juice
and concentrate are usually at their highest levels in November and December,
immediately after the crush of each year's grape harvest, and are
substantially reduced prior to the subsequent year's crush.
The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed
by the Company are primarily produced and aged by the Company at its
distillery in Bardstown, Kentucky, though it may from time to time supplement
its inventories through purchases from other distillers. At its Atlanta and
Albany, Georgia, facilities, the Company produces all of the neutral grain
spirits and whiskeys used by it in the production of vodka, gin and blended
whiskey sold by it to customers in the state of Georgia. The Company's
requirements of Canadian and Scotch whiskies, and tequila, mezcal, and the
neutral grain spirits used by it in the production of gin and vodka for sale
outside of Georgia, and other spirits products, are purchased from various
suppliers.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The principal components in the production of the Company's branded beverage
alcohol products are: packaging materials, primarily glass; grapes; and other
agricultural products, such as grain.
The Company utilizes glass and PET bottles and other materials, such as
caps, corks, capsules, labels and cardboard cartons, in the bottling and
packaging of its products. Glass bottle costs are one of the largest
components of the Company's cost of product sold. The glass bottle industry is
highly concentrated with only a small number of producers. The Company has
traditionally obtained, and continues to obtain, its glass requirements from a
limited number of producers. The Company has not experienced difficulty in
satisfying its requirements with respect to any of the foregoing and considers
its sources of supply to be adequate. However, the inability of any of the
Company's glass bottle suppliers to satisfy the Company's requirements could
adversely affect the Company's operations.
Most of the Company's annual grape requirements are satisfied by purchases
from each year's harvest, which normally begins in August and runs through
October. Costs for grapes have escalated dramatically over the last two grape
harvests (fall 1995 and fall 1996). The Company believes that it has adequate
sources of grape supplies to meet its sales expectations for Fiscal 1997.
However, in the event demand for certain wine products exceeds expectations
for Fiscal 1997, the Company could experience shortages.
The Company purchases grapes from over 700 independent growers principally
in the San Joaquin Valley and Monterey regions of California and in New York
State. The Company enters into written purchase agreements with a majority of
these growers on a year-to-year basis. However, in connection with the
Vintners Acquisition and the Almaden/Inglenook Acquisition, the Company
57
acquired certain long-term grape purchase contracts. In addition, the
Company's negligible purchases of grapes from the Napa Valley and related
regions minimize its exposure to phylloxera and other agricultural risks.
However, phylloxera in these regions has caused certain wineries to increase
their purchases of grapes from the San Joaquin and Monterey regions. The
Company has recently purchased approximately 1,000 acres of vineyards in
California and leases a small number of additional acres in California for
vineyard plantings. The Company continues to consider the purchase or lease of
additional vineyards, and additional land for vineyard plantings, to
supplement its grape supply. The Company is also planting vineyards on land in
California currently owned by the Company.
The distilled spirits manufactured by the Company require various
agricultural products, neutral grain spirits and bulk spirits. The Company
fulfills its requirements through purchases from various sources, through
contractual arrangements and through purchases on the open market. The Company
believes that adequate supplies of the aforementioned products are available
at the present time.
GOVERNMENT REGULATION
The Company's operations are subject to extensive federal and state
regulation. These regulations cover, among other matters, sales promotion,
advertising and public relations, labeling and packaging, changes in officers
or directors, ownership or control, distribution methods and relationships,
and requirements regarding brand registration and the posting of prices and
price changes. All of the Company's facilities are also subject to federal,
state and local environmental laws and regulations and the Company is required
to obtain permits and licenses to operate its facilities. The Company believes
that it is in compliance in all material respects with all presently
applicable governmental laws and regulations and that the cost of
administration of compliance with such laws and regulations does not have, and
is not expected to have, a material adverse impact on the Company's financial
condition or results of operations.
EMPLOYEES
The Company had 2,518 full-time employees as of November 30, 1996, as
compared to 2,538 employees as of November 30, 1995.remaining directors.
As of November 30, 1996,
approximately 1,200 employees were covered by collective bargaining
agreements. Additional workers may be employed by1999, the Company during the grape
crushing season. The Company considers its employee relations to be good.
PROPERTIES
The Company currently operates 12 wineries, three distilling and bottling
plants, two bottling plants and a brewery, all of which include warehousing
and distribution facilities on the premises. The Company considers its
principal facilities to be the Mission Bell winery in Madera, California; the
Canandaigua, New York winery; the Monterey Cellars winery in Gonzales,
California; the distilling and bottling facility located in Bardstown,
Kentucky; and the bottling facility located in Owensboro, Kentucky. All of
these facilities are owned by the Company other than a winery in Escalon,
California, and bottling plants in Carson, California, and Batavia, New York,
each of which is leased.
In New York, the Company operates three wineries located in Canandaigua,
Naples and Batavia. The Company currently operates 9 winery facilities in
California. The Mission Bell winery is a crushing, wine production, bottling
and distribution facility and a grape juice concentrate production facility.
The Monterey Cellars winery is a crushing, wine production and bottling
facility. The other wineries operated in California are located in Escalon,
Lodi, McFarland, Madera, Fresno, and Ukiah. The Escalon facility is operated
under a long term lease with an option to buy. The Company recently purchased
approximately 1,000 acres of vineyards in California and leases a small number
of additional acres in California for vineyard plantings.
58
The Company operates five facilities that produce, bottle and store distilled
spirits. It owns production, bottling and storage facilities in Bardstown,
Kentucky, and Atlanta and Albany, Georgia, and operates bottling plants in
Owensboro, Kentucky, and Carson, California. The Carson plant is operated under
a management contract and a sublease, each of which is scheduled to expire on
December 31, 1997, subject to a one year extension at the option of the
sublessor. The Carson plant receives distilled spirits in bulk from Bardstown
and outside vendors, which it bottles and distributes. The Company also
performs contract bottling at the Carson plant. The Bardstown facility
distills, bottles and warehouses whiskey for the Company's account and on a
contractual basis for other participants in the industry. The Owensboro
facility bottles and warehouses whiskey for the Company's account and performs
contract bottling. The Company also owns production plants in Atlanta and
Albany, Georgia, which produce vodka, gin and blended whiskeys.
The Company owns a brewery in Stevens Point, Wisconsin, where it produces and
bottles Point beer and brews and packages on a contract basis for a variety of
brewing and other food and beverage industry members. In addition, the Company
owns and maintains its corporate headquarters in Canandaigua, New York, where
it also leases additional office space, and leases office space in Chicago,
Illinois, for its Barton headquarters.
The Company believes that all of its facilities are in good condition and
working order and have adequate capacity to meet its needs for the foreseeable
future.
Most of the Company's real property has been pledged under the terms of
collateral security mortgages as security for the payment of outstanding loans
under the Credit Facility. See "Description of Credit Facility".
LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to litigation from time to time
in the ordinary course of business. Although the amount of any liability with
respect to such litigation cannot be determined, in the opinion of management,
such liability will not have a material adverse effect on the Company's
financial condition or results of operations.
In connection with an investigation in the State of New Jersey into
regulatory trade practices in the beverage alcohol industry, one employee of
the Company was arrested in March 1994 and another employee subsequently came
under investigation in connection with providing "free goods" to retailers in
violation of New Jersey beverage alcohol laws. A proposed consent order has
been received from the appropriate regulatory agency by the Company which
would, when finalized, fully resolve the matter without any material effect on
the Company.
With respect to the following described litigation, on November 8, 1996, the
District Court entered summary judgment in favor of the Company and the other
defendants. The Court's judgment resolves all claims against all of the
defendants in this litigation. The time period in which plaintiffs could have
filed a notice of appeal to the United States Court of Appeals for the Second
Circuit expired on December 12, 1996, without any such notice being filed.
On November 13, 1995, a purported stockholder of the Company filed a class
action in the United States District Court for the Southern District of New
York, VENTRY, ET AL. V. CANANDAIGUA WINE COMPANY, INC., ET AL. (the "Ventry
Class Action"). On November 16, 1995, another purported stockholder of the
Company filed a class action in the United States District Court for the
Southern District of New York, BRICKELL PARTNERS, ET AL. V. CANANDAIGUA WINE
COMPANY, INC., ET AL. (the "Brickell Class Action"). On December 6, 1995, a
third purported stockholder of the Company filed a class action in the United
States District Court for the Southern District of New York, BABICH, ET AL. V.
CANANDAIGUA WINE COMPANY, INC., ET AL. (and this class action together with the
59
Brickell Class Action and the Ventry Class Action, the "Class Actions"). The
defendants in the Class Actions were the Company, Richard Sands and Lynn K.
Fetterman. The Class Actions were consolidated and a consolidated complaint was
filed on January 16, 1996. The Class Actions asserted violations of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder and sought to recover damages in an unspecified amount which the
class members allegedly sustained by purchasing the Company's common stock at
artificially inflated prices. The complaints in the Class Actions alleged that
the Company's public documents and statements were materially incomplete and,
as a result, misleading.
On April 8, 1996, the Company filed a motion to dismiss the consolidated
complaint and oral argument was held on September 25, 1996. After oral
argument, the Court stated that it intended to construe the Company's motion to
dismiss as a motion for summary judgment. As noted above, on November 8, 1996,
the District Court entered summary judgment in favor of the Company and the
other defendants.
MANAGEMENT
The following table sets forth information with respect to the current
directors and executive officers of the Company:
NAME AGE POSITION/OFFICE HELD
---- --- --------------------
Marvin Sands............ 73 Chairman of the Board
Richard Sands........... 45 President, Chief Executive Officer and Director
Robert Sands............ 38 Executive Vice President, General Counsel, Secretary and Director
Ellis M. Goodman........ 59 Chief Executive Officer of Barton Incorporated
Daniel C. Barnett....... 47 Senior Vice President and President of Wine Division
Bertram E. Silk......... 65 Senior Vice President and Director
George Bresler.......... 72 Director
James A. Locke, III..... 54 Director
Marvin Sands is the founder of the Company, which is the successor to a
business he started in 1945. He has been a director of the Company and its
predecessor since 1946 and was Chief Executive Officer until October 1993.
Marvin Sands is the father of Richard Sands and Robert Sands.
Richard Sands, Ph.D., has been employed by the Company in various capacities
since 1979. He was elected Executive Vice President and a director in 1982,
became President and Chief Operating Officer in May 1986 and was elected Chief
Executive Officer in October 1993. He is a son of Marvin Sands and the brother
of Robert Sands.
Robert Sands was appointed Executive Vice President, General Counsel in
October 1993. In January 1995, he was appointed Secretary of the Company. He
was elected a director of the Company in January 1990 and served as Vice
President, General Counsel since June 1990. From June 1986, until his
appointment as Vice President, General Counsel, Mr. Sands was employed by the
Company as General Counsel. He is a son of Marvin Sands and the brother of
Richard Sands.
Ellis M. Goodman is the Chief Executive Officer of Barton and serves in that
capacity under the terms of an employment agreement with Barton. By virtue of
his position and responsibilities with Barton, Mr. Goodman is deemed an
executive officer of the Company. From July 1993 to January 1996, Mr. Goodman
served as a director of the Company. Also, from July 1993 to October 1993, he
served as a Vice President of the Company and from October 1993 to January
1996, Mr. Goodman served as an Executive Vice President of the Company. Mr.
Goodman has been Chief Executive Officer of Barton since 1987 and Chief
Executive Officer of Barton Brands, Ltd. (predecessor to Barton) since 1982.
60
Daniel C. Barnett joined the Company during November 1995 as a Senior Vice
President and President of the Company's wine division. From July 1994 to
October 1995, Mr. Barnett served as President and Chief Executive Officer of
Koala Springs International, a juice beverage company. Prior to that, from
April 1991 to June 1994, Mr. Barnett was Vice President and General Manager of
Nestle USA's beverage businesses. From October 1988 to April 1991, he was
President of Weyerhauser's baby diaper division.
Bertram E. Silk has been a director and Vice President of the Company since
1973 and was elected Senior Vice President in October 1993. He has been
employed by the Company since 1965. Currently, Mr. Silk is responsible for
industry relations with respect to labor unions in California, as well as for
various trade association and international alcohol beverage industry matters.
Immediately prior to his current position, he was in charge of the Company's
grape grower relations in California. Before moving from Canandaigua, New York
to California in 1989, Mr. Silk was in charge of production for the Company.
From 1989 to August 1994, Mr. Silk was in charge of the Company's grape juice
concentrate business in California.
George Bresler has served as a director of the Company since 1992 and has
been engaged in the practice of law since 1957. From August 1987 through July
1992, Mr. Bresler was a partner in the law firm of Bresler and Bab, New York,
New York. Currently, Mr. Bresler is a partner in the law firm of Rosner,
Bresler, Goodman & Bucholz in New York, New York.
James A. Locke, III has served as a director of the Company since 1983. Since
January 1, 1996, Mr. Locke has been a partner in the law firm of Nixon,
Hargrave, Devans and Doyle LLP, Rochester, New York, which firm is the
Company's principal outside counsel. For twenty years prior to joining this
firm, Mr. Locke was a partner in the law firm of Harter, Secrest and Emery,
Rochester, New York.
Directors of the Company hold office until the next Annual Meeting of
Stockholders of the Company and until their successors are elected and
qualified. Executive officers of the Company hold office until the next Annual
Meeting of the Board of Directors and until their successors are chosen and
qualify.
EXECUTIVE COMPENSATION AND STOCK OWNERSHIP
The current annual base compensation for the Company's four most highly
compensated officers is as follows: Marvin Sands--$478,170; Richard Sands--
$469,480; Robert Sands--$456,026 and Ellis Goodman--$412,000. In addition,
Ellis Goodman has an employment agreement with Barton which expires in December
1999, but will be automatically extended for additional one-year periods unless
Mr. Goodman or Barton notifies the other, within a specified time period, of
the desire not to extend such employment agreement.
As of December 6, 1996, the directors and principal officers of the Company
listed above as a groupfamily beneficially owned approximately 14%13%
of the outstanding shares of Class A Common Stock (exclusive of shares of Class
A Common Stock issuable pursuant to the conversion feature of the Class B Common
Stock beneficially owned by officers and directors)the Sands family) and approximately 85%90% of the outstanding shares
of Class B Common Stock. 61
DESCRIPTIONOn all matters other than the election of directors,
the Sands family has the ability to vote approximately 65% of the votes entitled
to be cast by holders of our outstanding capital stock, voting as a single
class. Consequently, we are essentially controlled by the Sands family and they
would generally have sufficient voting power to determine the outcome of any
corporate transaction or other matter submitted to our stockholders for
approval.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF CREDIT FACILITY
On September 1, 1995,THE EXCHANGE OFFER
In connection with the Company, its principal operating subsidiaries, and
a syndicateissuance of 20 banks (the "Syndicate Banks"), for which The Chase Manhattan
Bank ("Chase") acts as Administrative Agent,the old notes, we entered into
a registration rights agreement. Under the Third Amended
and Restated Credit Agreement. The Third Amended and Restated Credit
Agreement, as amended, is referredregistration rights agreement, we
agreed to:
o use our reasonable best efforts to asfile a registration
statement with the "Credit Facility." The following
summarySEC for an exchange of the principalnew notes for
the old notes under the Securities Act and to keep such
registration statement effective until the closing of the
exchange offer;
o use our reasonable best efforts to cause the exchange offer to
be consummated within 210 days following the original issuance
of the old notes;
o keep the exchange offer open for acceptance for a period of
not less than 20 business days after the date notice thereof
is mailed to holders of the old notes, or longer if required
by applicable law; and
o accept for exchange all old notes validly tendered and not
validly withdrawn in the exchange offer in accordance with the
terms of the Credit Facility doesexchange offer registration statement and letter
of transmittal.
As soon as practicable after the exchange offer registration
statement becomes effective, we will offer eligible holders of the old notes the
opportunity to exchange their old notes for new notes registered under the
Securities Act. Holders are eligible if they are not purport toprohibited by any law or
policy of the SEC from participating in this exchange offer. The new notes will
be complete and is subjectsubstantially identical to the detailedold notes except that the new notes will not
contain terms with respect to transfer restrictions, registration rights or
additional interest.
In the event that due to a change in current interpretations by
the SEC, we are not permitted to effect the exchange offer, it is contemplated
that we will instead file a shelf registration statement covering resales by the
holders of the old notes and will use our reasonable best efforts to cause the
shelf registration statement to become effective and to keep the shelf
registration statement effective for a maximum of two years from the closing
date, which is the date we delivered the old notes to their initial purchaser.
The description of the registration rights agreement contained in
this section is a summary only. For more information, you should review the
provisions of the Credit Facility, a
copyregistration rights agreement that we filed with the SEC as an
exhibit to the registration statement of which this prospectus is availablea part.
In this section entitled "The Exchange Offer," the term "holder"
means any person whose old notes are held of record by DTC, Euroclear or
Cedelbank and who wants to deliver these old notes by book-entry transfer.
TERMS OF THE EXCHANGE OFFER
The expiration date of the exchange offer is 5:00 p.m., New York
City time (10:00 p.m., London time), on ________, _________ , 2000 unless we
extend the exchange offer.
The exchange offer is not conditioned upon request.
As of November 30, 1996, the Credit Facility consisted of (i)holders tendering a
$216.0
million Term Loan facility due in August 2001 ("Term Loans"), (ii) a $185.0
million Revolving Loan facility, including all drawn or undrawn letters of
credit ("Revolving Letters of Credit"), which expires in June 2001 ("Revolving
Loans"), and (iii) a $13.7 million irrevocable standby Letter of Credit (the
"Barton Letter of Credit") related to certain earn-out payments related to the
Barton Acquisition. The Barton Letter of Credit expired on December 31, 1996.
The Term Loans and the Revolving Loans, at the Company's option, can be
either a base rate loan or a Eurodollar rate loan. In addition, the Revolving
Loans can be a money market loan. A base rate loan bears interest at the rate
per annum equal to the higher of (1) the Federal Funds rate for such day plus
1/2 of 1%, or (2) the Chase prime commercial lending rate. A Eurodollar rate
loan bears interest at LIBOR plus a margin. The interest rate margin for
Eurodollar rate loans may be decreased
by up to 0.50% or increased by up to 0.25% depending on the Company's debt
coverage ratio (as defined in the Credit Facility). The interest rate on a
money market loan is determined by a competitive bid process among the
Syndicate Banks. As of November 30, 1996, the interest rate margin on a
Eurodollar rate loan was 1%.
As of November 30, 1996, the Term Loans bore interest at a per annum rate of
6.5% with quarterly principal payments of $10.0 million and a final payment of
$7.0 million in August 2001.
The $185.0 million Revolving Loan facility may be utilized by the Company
either in the form of Revolving Loans or as Revolving Letters of Credit up to
a maximum of $20.0 million. Additionally, availability of Revolving Loans is
subject to a formula based on the amount of certain eligible receivables and
certain eligible inventory and is reduced by the amount of Revolving Letters
of Credit. As of November 30, 1996, there were outstanding Revolving Loans of
$130.0 million bearing interest at 6.7%, undrawn Revolving Letters of Credit
of $8.9 million and $46.1 million available to be drawn in Revolving Loans.
The Revolving Loans are required to be prepaid in such amounts that, for a
single period of at least thirty consecutive days at any time during the
fiscal quarters ending on May 31 and August 31 of each fiscal year, the
aggregateminimum principal amount of Revolving Loans outstanding, together with drawnold notes.
You do not have any appraisal or dissenters' rights in the
exchange offer. If you do not tender old notes or you tender old notes that we
do not accept, your old notes will remain outstanding. Any old notes will be
entitled to the benefits of the indenture under which they were, and undrawn Revolving Letters of Credit,the new
notes will be, issued. The old notes will not, exceed $60.0 million, plus
the amount expended by the Company relatinghowever, be entitled to certain capital expenditures at
any
time during Fiscal 1997 up to $17.5 million.
Each of the Company's operating subsidiaries has guaranteed, jointly and
severally, the Company's obligationsfurther registration rights under the Credit Facility. The Syndicate
Banksregistration rights agreement, except
under limited circumstances. See "Risk Factors-If You Do Not Exchange Your Old
Notes for New Notes, You Will Continue to Hold Notes Subject to Restrictions on
Transferability and Which Are Not Freely Transferable" for more information
regarding notes outstanding after the exchange offer.
After the expiration date, we will return to you any tendered old
notes that we did not accept for exchange.
You will not have been given security interests in substantially all ofto pay brokerage commissions or fees or
transfer taxes for exchanging your notes if you follow the assets of
the Company and its subsidiaries. The Company and its subsidiaries are subject
to customary secured lending covenants including those restricting additional
liens, the incurrence of additional indebtedness, the sale of assets, the
payment of dividends, transactions with affiliates, the making of certain
investments and certain other fundamental changes. The Company and its
subsidiaries are also required to maintain a minimum level of interest rate
protection instruments and the following financial covenants above specified
levels: debt coverage ratio; tangible net worth; fixed charges ratio; and
operating cash flow to interest expense. Among the most restrictive covenants
containedinstructions in the
Credit Facility,letter of transmittal. We will pay the Company is required to maintain a fixed
charge ratio not lesscharges and expenses, other than 1.0 to 1.0 at the last day of each fiscal quarter
for the most recent four
62
quarter periods. The Credit Facility permits the Company to repurchase up to
$30.0 million of the Company's outstanding Common Stock.
The Company may prepay the principal of the Term Loans and the Revolving
Loans at its discretion. The Revolving Loans and the Term Loan are required to
be prepaid and the Revolving Loans commitment, the Term Loan commitment and
the Barton Letter of Credit commitment will be automatically reducedthose
taxes described below, in the following aggregate amounts: (i)exchange offer. See "-Fees and Expenses" below for
further information regarding fees and expenses. Neither we nor our board of
directors recommends that you tender or not tender old notes in the amount equalexchange
offer. In addition, we have not authorized anyone to 100% ofmake any recommendation.
You must decide whether to tender in the net proceeds
from insurance, condemnation awards or other compensation arising out of
certain casualty events; (ii) the amount equal to 50% of the net proceeds of
certain capital contributions or the sale of certain equity interests; (iii)
the amount equal to the excess of (A) the amount equal to 50% of excess cash
flow for the period of four fiscal quarters ending on each August 31 over (B)exchange offer and, if so, the
aggregate amount of prepaymentsold notes to tender.
We have the right, in accordance with applicable law, at any
time:
o to delay the acceptance of the Term Loan made during such period
and, after payment in fullold notes;
o to terminate the exchange offer if we determine that any of
the Term Loan,conditions to the aggregate amount of voluntary
reductions made during such period of Revolving Loan commitments; (iv)exchange offer have not occurred or have
not been satisfied;
o to extend the amount equal to 100%expiration date of the net proceedsexchange offer and keep
all old notes tendered other than those notes properly
withdrawn; and
o to waive any condition or amend the terms of the exchange
offer.
If we materially change the exchange offer, or if we waive a
material condition of the exchange offer, we will promptly distribute a
prospectus supplement to you disclosing the change or waiver. We also will
extend the exchange offer if required by Rule 14e-1 under the U.S. Securities
Exchange Act of 1934. If we exercise any of the rights listed above, we will
promptly give written notice of the action to the exchange agent, as described
below under "-Exchange Agent", and we will issue a release to appropriate news
agencies. In the case of an extension, an announcement will be made no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE, AND ISSUANCE OF NEW NOTES
We will issue to the exchange agent new notes for old notes
tendered and accepted and not withdrawn promptly after the expiration date. The
exchange agent might not deliver the new notes to all tendering holders at the
same time. The timing of delivery depends upon when the exchange agent receives
and processes the required documents.
We will be deemed to have exchanged old notes validly tendered
and not withdrawn when we give written notice to the exchange agent of their
acceptance. The exchange agent is our agent for receiving tenders of old notes,
letters of transmittal and related documents. If for any reason, we:
o delay the acceptance or exchange of any salesold notes, or
o extend the exchange offer, or
o are unable to accept or exchange notes,
then the exchange agent may, on our behalf and subject to Rule 14e-1(c) under
the Exchange Act, retain tendered notes. Old notes that the exchange agent
retains may not be withdrawn, except according to the withdrawal procedures
outlined below in "Procedures for Tendering Old Notes-Withdrawal of assets,Tenders."
In tendering old notes, you must warrant in the letter of
transmittal or in an agent's message, which is described below, that:
o you have full power and authority to tender, exchange, sell,
assign and transfer old notes;
o we will acquire good, marketable and unencumbered title to the
tendered old notes, free and clear of all liens, restrictions,
charges and other than
assets disposedencumbrances; and
o the old notes tendered for exchange are not subject to any
adverse claims or proxies.
You also must warrant and agree that you will, upon request,
execute and deliver any additional documents that either we or the exchange
agent requests to complete the exchange, sale, assignment, and transfer of the
old notes.
PROCEDURES FOR TENDERING OLD NOTES
To tender old notes in the exchange offer, the registered holder
of the notes must transfer such old notes into the exchange agent's account in
accordance with DTC's ATOP procedures or Euroclear's or Cedelbank's standard
transfer procedures.
In lieu of delivering a letter of transmittal to the exchange
agent, a computer-generated message, in which the holder of the old notes
acknowledges and agrees to be bound by the terms of the letter of transmittal
must be transmitted by DTC, Euroclear or Cedelbank as the case may be, on behalf
of a holder and received by the exchange agent prior to 5:00 p.m., New York City
time (10:00 p.m., London time), on the expiration date.
The tender by a holder of old notes will constitute an agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth herein and in the letter of transmittal.
No letter of transmittal should be sent to us.
Only a registered holder of old notes may tender old notes in the
exchange offer.
Any beneficial holder whose old notes are registered in the name
of his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf.
DETERMINATION OF VALIDITY
All the questions as to the validity, form, eligibility, time of
receipt, acceptance and withdrawal of the tendered old notes will be determined
by us in our sole discretion, which determinations will be final and binding. We
reserve the absolute right to reject any and all old notes not validly tendered
or any old notes our acceptance of which would, in the opinion of our counsel,
be unlawful. We also reserve the absolute right to waive any irregularities or
conditions of tender as to particular old notes. Our interpretation of the terms
and conditions of the exchange offer, including the instructions in the letter
of transmittal, will be final and binding on parties. Unless waived, any defects
or irregularities in connection with tenders of old notes must be cured within
such time as we shall determine. Neither we, the exchange agent, nor any other
person shall be under any duty to give notification of defects or irregularities
with respect to tenders of old notes nor shall any of them incur any liability
for failure to give such notification. Tenders of old notes will not be deemed
to have been made until such irregularities have been cured or waived. Any old
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost by the exchange agent to the tendering holder of such old
notes unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
In addition, we reserve the right in our sole discretion to:
o purchase or make offers for any old notes that remain
outstanding subsequent to the expiration date, or to terminate
the exchange offer, and
o to the extent permitted by applicable law, purchase old notes
in the open market, in privately negotiated transactions or
otherwise.
The terms of any such purchases or offers may differ from the terms of the
exchange offer.
By tendering, each holder of old notes will represent to us that,
among other things, the new notes acquired pursuant to the exchange offer are
being obtained in the ordinary course of business whenof the person receiving such
sales of
assetsnew notes, whether or not such person is the holder, that neither the holder nor
any other person has an arrangement or understanding with any person to
participate in the aggregate exceed $15.0 million; (v) 100%distribution of net proceeds in
excessthe new notes and that neither the holder nor
any such other person is an "affiliate" of $50 million fromours within the issuancemeaning of certain subordinated indebtedness
(including the Notes); and (vi) in full upon certain changes of control
(including a Change of ControlRule 405
under the Indenture)Securities Act.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of old notes may be
withdrawn at any time prior to 5:00 p.m. New York City time (10:00 p.m. London
time), on the expiration date unless previously accepted for exchange.
To withdraw a tender of old notes in the exchange offer, a notice
of withdrawal must be transmitted by DTC, Euroclear, Cedelbank, as the case may
be, and received by the exchange agent, in accordance with the standard
operating procedures of DTC, Euroclear or Cedelbank, as the case may be, on
behalf of a holder, prior to 5:00 p.m. New York City time (10:00 p.m. London
time), on the expiration date and prior to acceptance for exchange thereof by
us. Any such notice of withdrawal must:
o specify the name of the person having deposited the old notes
to be withdrawn;
o identify the old notes to be withdrawn, including the
principal amount of such old notes; and
o be signed by the depositor in the same manner as the original
signature on the letter of transmittal by which such old notes
were tendered, or be accompanied by documents of transfers
sufficient to permit the trustee with respect to the old notes
to register the transfer of such old notes into the name of
the depositor withdrawing the tender.
All questions as to the validity, form and eligibility, including
time of receipt, for such withdrawal notices will be determined by us, whose
determination shall be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer and no exchange notes will be issued with respect thereto unless
the old notes so withdrawn are validly tendered. Any old notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn old
notes may be tendered by following one of the procedures for tendering described
above at any time prior to the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, we
are not required to accept for exchange, or to issue new notes in exchange for,
any old notes and may terminate or amend the exchange offer if at any time
before the acceptance of the old notes for exchange or the exchange of the new
notes for the old notes, if (i) such event requiresacceptance or issuance would violate
applicable law or any applicable interpretation of the SEC's staff, (ii) any
action or proceeding is instituted or threatened in any court or by any
governmental agency which might materially impair the ability of the Company to
redeemproceed with the exchange offer, or offer to redeem certain subordinated indebtedness underthere has occurred in any existing action or
proceeding that would materially impair the terms thereof.
Events of Default. Events of Default under the Credit Facility include,
among other things, (a) failureability of the Company to consummate
the exchange offer, and (iii) the Company has not obtained all governmental
approvals that it deems necessary to consummate the exchange offer.
The foregoing conditions are for our sole benefit and any of them
may be asserted by us regardless of the circumstances giving rise to such
condition or may be waived by us in whole or in part at any subsidiarytime and from time
to pay when
due principaltime in our sole discretion. Our failure at any time to exercise the
foregoing rights is not to be deemed a waiver of any of our rights and each of
our rights shall be deemed an ongoing right which may be asserted at any time
and from time to time.
In addition, we will not accept for exchange any old notes
tendered, and no new notes will be issued in exchange for any such old notes, if
at such time any stop order is threatened or interestin effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act.
EXCHANGE AGENT
Citibank, N.A. has been appointed as exchange agent for the
exchange of the old notes. Questions and requests for assistance relating to the
exchange of the old notes and requests for additional copies of this prospectus
or of the letter of transmittal should be directed to the exchange agent at
Citibank N.A. (telephone (44 171) 508-3839).
RESALES OF NEW NOTES
Based on the loans, fees, other amounts owing under the
Credit Facility and such default shall continue for two or more business days;
(b) failurestaff of the Company or any subsidiarySEC's letters to pay when due principalother parties, we
believe that holders of or
interest on anynew notes, other Indebtedness or any amount under any interest rate
protection agreement orthan broker-dealers, can offer the Barton acquisition agreement, provided that such
payment duenew
notes for resale, resell and otherwise transfer the new notes without delivering
a prospectus to prospective purchasers. However, you must acquire the new notes
in the ordinary course of business and have no intention of engaging in a
distribution of the new notes, as a "distribution" is in an aggregate amount greater than or equal to $100,000; or
any event relating to Indebtedness in an aggregate principal amount greater
than or equal to $100,000 or any event specified in any interest rate
protection agreement occurs that permits acceleration of such Indebtedness or
the payments due under such interest rate protection agreement; (c) defaultdefined by the CompanySecurities
Act. We are exchanging the old notes for new notes in reliance upon the staff of
the SEC's position, set forth in interpretive letters to third parties in other
similar transactions. We will not seek our own interpretive letter. As a result,
we cannot assure you that the staff will take the same position on this exchange
offer as it did in interpretive letters to other parties.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or any subsidiary inothers
soliciting acceptances of the due observance or performanceexchange offer except for reimbursement of certain
agreements and covenants contained in the Credit Facility or other documents
related thereto; (d) material inaccuracy of any representation or warranty
made by the Company or any subsidiarymailing
expenses.
The estimated cash expenses to be incurred in connection with the
Credit Facilityexchange offer will be paid by the Company. Such expenses include fees and
expenses of the Exchange Agent and Trustee, accounting fees and legal fees,
among others.
TRANSFER TAXES
You will not be obligated to pay any transfer taxes in connection
with any tender of old notes for exchange, except if you instruct us to register
new notes in the name of, or request that old notes not tendered or not accepted
in the exchange offer be returned to, a person other documents related thereto; (e) a final judgment againstthan the Company
orregistered
tendering holder, you will be responsible for the payment of any subsidiaryapplicable
transfer tax thereon.
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange of old
notes for new notes in excessthe exchange offer. We have used the net proceeds from
the sale of $500,000 (exclusivethe old notes to repay amounts that were outstanding under our bank
credit facility.
CAPITALIZATION
The following table sets forth our unaudited actual
capitalization as of judgment amounts covered
by insurance) or in excess of $5.0 million (regardless of insurance coverage)
that remains undischarged (unless a stay of executionNovember 30, 1999. Since November 30, 1999, there has been
procured) for
45 days; (f) the occurrence of certain events respecting pension plans; (g) a
reasonable basis shall exist for the assertion against the Company or any
subsidiary ofno material claims or liabilities respecting hazardous materials;
(h) Marvin Sands or members of his immediate family or a trust for their
benefit shall cease to ownchange in the aggregate and on a fully diluted basis
common stock of the Company having by its terms voting power to elect at least
50% (in number of votes) of the board of directors of the Company or certain
other change-of-control events shall occur; (i) the face amount of the Barton
Letter of Credit shall not be reduced as scheduled; and (j) certain bankruptcy
related events.
Change of Control Under the Notes. All amounts outstanding under the Credit
Facility must be repaid in full before the Company can purchase any Original
Notes or any Notes upon a Change of Control. See "Risk Factors--Change of
Control Offer."
63our capitalization.
NOVEMBER 30,
1999
-------------
Dollars in millions (except share data)
Long term debt (including current maturities):
Revolving credit facility ...................................................... $ 106.4
Term loan facility ............................................................. 572.3
8 5/8% Senior Notes due 2006 ................................................... 200.0
8 1/2% Senior Notes due 2009 ................................................... 119.9(a)
8 3/4% Senior Subordinated Notes due 2003 ...................................... 192.8
8 1/2% Senior Subordinated Notes due 2009 ...................................... 200.0
Other .......................................................................... 17.1
----------
Total debt .............................................................. 1,408.5
----------
Stockholders' equity:
Preferred Stock, $.01 par value-authorized 1,000,000 shares; issued none ....... --
Class A Common Stock, $.01 par value-
authorized 120,000,000 shares; issued 18,135,272 shares ................. .2
Class B Convertible Common Stock, $.01 par value-
authorized 20,000,000 shares; issued 3,762,970 shares ................... --
Additional paid-in capital ..................................................... 243.6
Retained earnings .............................................................. 342.9
Accumulated other comprehensive income-
cumulative translation adjustment ....................................... (7.7)
Less: Treasury stock ........................................................... (81.7)
----------
Total stockholders' equity .............................................. 497.3
----------
Total capitalization .................................................... $ 1,905.8
----------
- ---------
(a) Represents(pound)75.0 million converted at a rate of(pound)1.00 = $1.5981.
DESCRIPTION OF THE NOTES
The Old Notes were,terms of the new notes to be issued in the exchange offer and
the Exchange Notesoutstanding old notes are substantially identical, except for transfer
restrictions, registration rights, and liquidated damages provisions that apply
to the old notes. Any old notes that remain outstanding after the exchange
offer, together with new notes issued in the exchange offer, will be treated as
a single class of securities under the Indenture for voting purposes. When we
refer to the term "note" or "notes", we are referring to both the outstanding
old notes and the new notes to be issued in the exchange offer. When we refer to
"holders" of the notes, we are referring to those persons who are the registered
holders of notes on the books of the registrar appointed under the Indenture.
The new notes will be issued under an
Indenturethe indenture (the
"Indenture"), dated as of October 29, 1996, betweenNovember 17, 1999, among the Company, certain
subsidiaries of the GuarantorsCompany that are guaranteeing the notes (the "Guarantors"),
and Harris Trust and Savings Bank, as trustee (the "Trustee"),
copies. The Indenture is
filed as an exhibit to the registration statement of which are available upon request.this prospectus forms
a part. The termsmaximum aggregate principal amount of the Exchange Notes
are identical in all material respects to the Old Notes, exceptnotes that the
Exchange Notes have been registeredmay be issued under
the Securities Act and therefore
will not bear legends restricting their transfer and will not contain certain
provisions providing for the payment of liquidated damages under certain
circumstances related to the Registration Rights Agreement, which provisions
will terminate upon the consummation of the Exchange Offer.Indenture is (pound)150.0 million.
The following is a summary of the material provisions of the
IndentureIndenture. It does not purport to be complete, and where reference is made to
particular provisions of the Indenture, such provisions, including the
definitions of certain terms, are qualified in their entirety by reference to
all of the provisions of the Indenture and those terms made a part of the
Indenture by the Trust Indenture Act. For definitions of certain capitalized
terms used in the following summary, see "--Certain"-Certain Definitions."
GENERAL
The Exchange Notesnotes will mature on DecemberNovember 15, 2003, will be limited to
$65,000,000 aggregate principal amount2009 and will be unsecured
senior subordinated obligations of the Company.Company and will rank pari passu in right of payment
to all existing and future unsecured senior Indebtedness. Each Exchange Notenote will bear
interest at thean annual rate set forth on the cover page hereofof 8 1/2% from October 29, 1996November 17, 1999 or from the most
recent interest payment date to which interest has been paid,paid. Interest on the
notes will be payable semi-annually on JuneMay 15 and DecemberNovember 15 in each year,
commencing JuneMay 15, 1997,2000, to the Person in whose name the Exchange Notenote (or any
predecessor Exchange Note)note) is registered at the close of business on the JuneMay 1 or
DecemberNovember 1 next preceding such interest payment date. The entire aggregate
principal amount of the notes will become due and payable upon maturity.
Payment of the Notesnotes is guaranteed unconditionally by the
Guarantors on a senior subordinated basis. The Guarantors are comprised of substantially all of the direct
and indirect Wholly OwnedDomestic Restricted Subsidiaries of the Company.
PrincipalCompany and direct and
indirect Foreign Restricted Subsidiaries that in each case guarantee Other
Indebtedness. The Guarantors (except Canandaigua B.V. and M.J. Lewis Corp.) have
also guaranteed all obligations of premium,the Company under the Credit Agreement. No
holder of any other Indebtedness of the Company will have the benefit of any
guarantees which the holders of the notes do not have.
The notes are direct, senior unsecured obligations of the Company
and rank and will rank pari passu, without any preferences among themselves,
with all other outstanding unsecured and unsubordinated indebtedness, present
and future.
PAYMENT ON NOTES; SUBSTITUTION OF CURRENCY
The euro, the currency introduced at the start of the third stage
of economic and monetary union pursuant to the treaty establishing the European
Economic Community, as amended by the Treaty on European Union, was introduced
on January 1, 1999. The United Kingdom was not a participant at that date;
however, the United Kingdom Government stated that the United Kingdom might wish
to join the single currency at a later date. If the United Kingdom adopts the
euro, it will replace pounds sterling as the legal tender in the United Kingdom
and result in the effective redenomination of the notes into euros and the
regulations of the European Commission relating to the euro shall apply to the
notes. The circumstances and consequences described in this paragraph entitle
neither the Company, the Guarantors nor any holder of notes to early redemption,
rescission, notice or repudiation of the terms and conditions of the notes or
the Indenture or to raise other defenses or to request any compensation claim,
nor will they affect any of the other obligations of the Company or the
Guarantors under the notes and the Indenture.
NOTICES
Notices to holders shall, at such time as, and so long as the
notes are listed on the Luxembourg Stock Exchange and the rules of such stock
exchange shall so require, be published in a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxemburger Wort).
Notices to holders of notes shall also be mailed by first class mail to each
holder at its address appearing in the register of holders on the appropriate
date provided herein. For so long as any of the notes are represented by the
Global Notes, notice to holders shall (in addition to publication as described
above) also be given by delivery of the relevant notice to DTC, Euroclear and/or
Cedelbank (as the case may be) for communication to the holders of the
Book-Entry Interests.
ADDITIONAL AMOUNTS
All payments made by the Company or any Guarantor under or with
respect to the notes or any Guarantee will be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge (including penalties,
interest and other liabilities related thereto) imposed or levied by or on
behalf of the government of the United States of America or any other
jurisdiction in which any Guarantor is incorporated or of any prefecture or
territory thereof or by any authority or agency therein or thereof having power
to tax (hereinafter, "Taxes"), unless the Company or such Guarantor is required
to withhold or deduct Taxes by law, regulation or governmental policy or by the
interpretation or administration thereof. If the Company or any Guarantor is
required to withhold or deduct any amount for or on account of Taxes from any
payment made under or with respect to the notes or any Guarantee, the Company or
such Guarantor will pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each holder (including Additional
Amounts) after such withholding or deduction will not be less than the amount
the holder would have received if such Taxes had not been withheld or deducted;
provided that no Additional Amounts will be payable with respect to a payment
made to a holder and no reimbursement shall be made to a holder for Taxes paid
by such holder (each such holder, an "Excluded holder") with respect to any Tax
imposed, levied, payable or due (i) by reason of the holder's or beneficial
owner's present or former connection with the United States of America or any
other jurisdiction in which any Guarantor is incorporated or any prefecture or
territory thereof, other than through the mere receipt or holding of notes or by
reason of the receipt of payments thereunder; (ii) by reason of the failure of
the holder or beneficial owner of notes to satisfy any certification,
identification, information or other reporting requirements which the holder or
such beneficial owner is legally required to satisfy, whether imposed by
statute, treaty, regulation, administrative practice or otherwise, as a
precondition to exemption from, or reduction in the rate of deduction or
withholding of, Taxes; or (iii) by reason of the presentation (where
presentation is required in order to receive payment) of such notes for payment
more than 30 days after the date such payment became due and payable or was duly
provided for under the terms of the notes, whichever is later. The obligation of
the Company or any Guarantor to pay Additional Amounts or to reimburse a holder
for Taxes paid by such holder in respect of Taxes shall not apply with respect
to: (x) any estate, inheritance, gift, sales, transfer, personal property or
similar Taxes; (y) any Tax which is payable otherwise than by deduction or
withholding from payments made under or with respect to the notes or any
Guarantee; or (z) Taxes imposed on or with respect to any payment by the Company
or such Guarantor to the holder or beneficial owner if such holder or beneficial
owner is a fiduciary or partnership or person other than the sole beneficial
owner of such payment to the extent that such Taxes would not have been imposed
on a beneficiary or settlor with respect to such fiduciary, a member of such
partnership or the beneficial owner of such payment had such beneficiary,
settlor, member or beneficial owner been the holder of such Note. The Company or
such Guarantor will also (i) make such withholding or deduction compelled by
applicable law and (ii) remit the full amount deducted or withheld to the
relevant authority in accordance with applicable law. The Company or such
Guarantor will, upon written request of a holder, furnish to each such holder
certified copies of tax receipts evidencing the payment of any Taxes by the
Company or such Guarantor in such form as provided in the normal course by the
taxing authority imposing such Taxes and as is reasonably available to the
Company or such Guarantor, within 60 days after the later of the date of receipt
of such written request and the date of receipt of such evidence. If
notwithstanding the Company's or such Guarantor's efforts to obtain such
receipts, the same are not obtainable, the Company or such Guarantor will
promptly provide such holder with other evidence reasonably satisfactory to such
holder of such payments by the Company or such Guarantor. The Indenture will
further provide that, if the Company conducts business in any jurisdiction (the
"Taxing Jurisdiction") other than the United States of America, or if any
Guarantor conducts business in any Taxing Jurisdiction other than the
jurisdiction under which such Guarantor is incorporated, in a manner which
causes holders to be liable for taxes on payments under the notes or any
Guarantee for which they would not have been so liable but for such conduct of
business in the Taxing Jurisdiction, the provision of the notes described above
shall be considered to apply to such holders as if references in such provision
to "Taxes" included taxes imposed by way of deduction or withholding by such
Taxing Jurisdiction and interestreferences to Excluded holder shall be deemed to include
holders or beneficial owners having a present or former connection with such
Taxing Jurisdiction or any state, prefecture or territory thereof. The Company
or such Guarantor will, upon written request of any holder (other than an
Excluded holder), reimburse each such holder for the amount of (i) any Taxes so
levied or imposed and paid by such holder as a result of payments made under or
with respect to the notes and (ii) any Taxes so levied or imposed with respect
to any reimbursement under the foregoing clause (i) and paid by such holder so
that the net amount received by such holder (net of payments made under or with
respect to the notes) after such reimbursement will not be less than the net
amount the holder would have received if Taxes on such reimbursement had not
been imposed. The Indenture will provide that neither the NotesCompany nor any
Guarantor will take any action or fail to act in any manner which will have the
effect of requiring the payment of any Additional Amounts such that the Company
may exercise its option to effect a Tax Redemption; provided, however, that the
Company and its Subsidiaries will not be required to change their jurisdiction
or alter their operations in any manner and will not be required to take any
other unreasonable act thereunder.
At least 30 days prior to each date on which any payment under or
with respect to the notes is due and payable, if the Company or any Guarantor
will pay Additional Amounts with respect to such payment (unless such obligation
to pay Additional Amounts arises after the 30th day prior to the date on which
payment under or with respect to the notes is due and payable, in which case it
shall be promptly thereafter), the Company or such Guarantor will deliver to the
Trustee an officers' certificate stating the fact that such Additional Amounts
will be payable and the Notesamounts so payable and will set forth such other
information necessary to enable the Trustee to pay such Additional Amounts to
holders on the payment date. Whenever in the Indenture or in this "Description
of the Notes" there is mentioned, in any context, the payment of principal,
interest, if any, or any other amount payable under or with respect to any note,
such mention shall be deemed to include mention of the payment of Additional
Amounts to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof.
OPTIONAL REDEMPTION
The notes will be exchangeable and transferable (subject to compliance
with transfer restrictions imposed by applicable securities laws for so long
as the Notes are not registered for resale under the Securities Act), at the
officeredeemable, in whole or agency of the Company in the City of New York maintained for such
purposes (which initially will be the Trustee); provided, however, that
payment of interest may be madepart, at the option
of the Company by check mailedat any time at a redemption price equal to the Person entitled theretogreater of (i)
100% of the principal amount of such notes, and (ii) as showndetermined by the
Quotation Agent (as defined below), the sum of the present values of the
remaining scheduled payments of principal and interest thereon (not including
any portion of such payments of interest accrued as of the date of redemption)
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Gilt Rate (as defined
below) plus 50 basis points plus, in each case, accrued interest thereon to the
date of redemption.
As used herein:
"Adjusted Gilt Rate" means, with respect to any redemption date,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Gilt Issue, assuming a price for the Comparable Gilt Issue (expressed
as a percentage of its principal amount) equal to the Comparable Gilt Price for
such redemption date.
"Comparable Gilt Issue" means the United Kingdom Government
Obligation selected by the Quotation Agent as having a maturity comparable to
the remaining term of the notes to be redeemed, that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such notes.
"Comparable Gilt Price" means, with respect to any redemption
date, (i) the average of the Reference Gilt Dealer Quotations for such
redemption date, after excluding the highest and lowest such Reference Gilt
Dealer Quotations, or (ii) if the Trustee obtains fewer than three such
Reference Gilt Dealer Quotations, the average of all such Quotations.
"Quotation Agent" means the Reference Gilt Dealer appointed by
the Company.
"Reference Gilt Dealer" means each of (x) J.P. Morgan Securities
Ltd., and its respective successors; provided, however, that if the foregoing
shall cease to be a primary United Kingdom Government Obligations dealer in
London (a "Primary U.K. Government Obligations Dealer"), the Company shall
substitute therefor another Primary U.K. Government Obligations Dealer; and (y)
any other Primary U.K. Government Obligations Dealer selected by the Company.
"Reference Gilt Dealer Quotations" means, with respect to each
Reference Gilt Dealer and any redemption date, the average, as determined by the
Company, of the bid and asked prices for the Comparable Gilt Issue (expressed in
each case as a percentage of its principal amount) quoted in writing to the
Trustee by such Reference Gilt Dealer at 11:00 a.m.; London time, on the security register. The Notesthird
business day preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each holder of the notes to be
redeemed. Unless the Company defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the notes or
portions thereof called for redemption.
In the event that less than all of the notes are to be redeemed
at any time pursuant to an optional redemption, selection of such notes for
redemption will be made by the Trustee in compliance with the requirements of
the Luxembourg Stock Exchange, if the notes are listed thereon, or if the notes
are not then listed on the Luxembourg Stock Exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no notes of a principal amount of (pound)1,000, or less shall be
redeemed in part. Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each holder of
notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued only in fully registered form without coupons,the
name of the holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on notes or portions thereof
called for redemption as long as the Company has deposited with the paying agent
for the notes funds in denominationssatisfaction of $1,000 and any integral multiple thereof. (Section 302) No service charge
will be made for any registration of transfer, exchange orthe applicable redemption of
Notes, except in certain circumstances for any tax or other governmental
charge that may be imposed in connection therewith. (Section 305)
The Company currently has outstanding $130.0 million aggregate principal
amount of Original Notesprice pursuant
to the Original Indenture,Indenture. Notice of optional redemption will be published in the termsmanner
described above under "-Notices."
REDEMPTION FOR CHANGES IN WITHHOLDING TAX
The notes of which are substantially similar to the Notes and Indenture, respectively.
OPTIONAL REDEMPTION
The Notesany holder will be subject to redemption at any time on or after December 15,
1998,as a whole,
but not in part, at the option of the Company in whole or in part, on(a "Tax Redemption") at any time
upon not less than 30 nor more than 60 days' prior notice in amountsmailed to such holder of
$1,000 or an integral
multiple thereof at the following redemption prices (expressed as percentages
of the principal amount), ifnotes to be redeemed, during the 12-month period beginning
December 15 of the years indicated below:
REDEMPTION
YEAR PRICE
---- ----------
1998.............................................................. 104.375%
1999.............................................................. 102.917%
2000.............................................................. 101.458%
64
and thereafter at 100% of the principal amount in each case, together withthereof on the date of
redemption, plus accrued and unpaid interest, if any, to the redemption date, (subjectin
the event the Company or any Guarantor has become or would be obligated to pay,
on any date on which any amount would be payable with respect to such notes or
any Guarantee any Additional Amounts as a result of any change in or amendment
to the rightlaws, policies or treaties (including any regulation or ruling
promulgated thereunder) of holdersthe United States of recordAmerica or any jurisdiction in
which any Guarantor is incorporated (or any prefecture, territory or taxing
authority thereof or therein), or any change in or amendment to any official
position or administration or assessing practices regarding the application or
interpretation of such laws, policies, treaties, rulings or regulations, which
change or amendment is announced or becomes effective on regular record datesor after the Issue
Date, provided, however, that, (i) no notice of redemption shall be given
earlier than 60 days prior to receive interest duethe earliest date on an Interest Payment Date).
Notwithstanding the preceding paragraph,which the Company will notor such
Guarantor would be permittedobligated to redeempay such Additional Amounts were a payment in
respect of the Original Notes unless, substantially concurrently with such
redemption,notes then due, (ii) if the Company redeems an aggregate principalelects to exercise its Tax
Redemption option, it shall consummate any such Tax Redemption within 180 days
following the date on which the amount to which the payment of Notes
(roundedsuch Additional
Amounts relates would be payable to such holder and (iii) upon the exercise by
the Company of its Tax Redemption option at any time such that, after giving
effect to the nearest integral multipleexercise of $1,000) equal to the productsuch Tax Redemption option, less than a majority of
(1) a fraction, the numerator of which is
the aggregate principal amount of Original Notesthe notes originally issued remains
outstanding, prior to be so redeemed and the denominatorconsummation of which issuch Tax Redemption the aggregateCompany shall
make an offer to purchase from all holders, upon not less than 30 nor more than
60 days' notice, the notes of such holders at 100% of the principal amount
of Original Notes outstanding immediatelythereof, plus accrued and unpaid interest, if any, to the redemption date;
provided further, that prior to any such proposed redemption, and (2)Tax Redemption, (i) the aggregate principal amount of Notes
outstanding immediately priorCompany will
deliver to such proposed redemption.
If less than allthe Trustee a copy of the Notes arewritten opinion of independent counsel to
be redeemed, the Trustee shall selecteffect that the NotesCompany or portions thereofany Guarantor has or will become obligated to be redeemed pro rata, by lotpay
Additional Amounts as a result of such change, amendment, administration,
application or byinterpretation and (ii) the Company or such Guarantor will use
reasonable efforts to cause the reduction or elimination of the obligation to
pay any other
method the Trustee shall deem fair and reasonable. (Sections 203, 1101 and
1108)such Additional Amounts.
SINKING FUND
The Notes arenotes will not be entitled to the benefit of any sinking
fund.
RANKINGGUARANTEES OF THE NOTES
The paymentIndenture will provide that each of the Guarantors will
unconditionally guarantee (the "Guarantees") on a senior basis, jointly and
severally, all of the Company's obligations under the notes, including its
obligations to pay principal, of, premium, if any, and interest on, the Notes
and all other Indenture Obligations are subordinated, as set forth in the
Indenture, in right of paymentwith respect to the
prior payment in fullnotes. The Guarantees will be general unsecured obligations of the Guarantors.
The Guarantors (except for Canandaigua B.V. and M.J. Lewis Corp.) have also
guaranteed all Senior
Indebtedness in cash or cash equivalents or in any other form acceptable to
the holders of Senior Indebtedness. The Notes are senior subordinated
indebtednessobligations of the Company ranking pari passu with all other existing and
future senior subordinated indebtednessunder the Credit Agreement. The
obligations under the Credit Agreement are secured by (i) first priority pledges
of 100% of the Companycapital stock of Canandaigua Limited and senior to all
existing and future Subordinated Indebtedness of the Company.
DuringCompany's
domestic operating subsidiaries and (ii) first priority pledges of 65% of the
continuance of any default in the payment of any Designated
Senior Indebtedness, no payment (other than payments previously made pursuant
to the provisions described under "--Defeasance or Covenant Defeasance of
Indenture") or distribution of any assets ofcapital stock held by the Company of Matthew Clark, B.B. Servicios, S.A. de
C.V., Canandaigua World Sales Limited and Schenley Distilleries Inc./Les
Distelleries Schenley Inc. The obligations of each Guarantor are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any kindcollections from or
character (excluding certain permitted equity or certain debt securities)
shall bepayments made by the Companyor on accountbehalf of principal of, premium, if any, or
interest on, the Notes or any other Indenture Obligations or on account of the
purchase, redemption, defeasance or other acquisition of orGuarantor in respect of the
Notes unlessobligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount, based on the net assets of each
Guarantor determined in accordance with GAAP.
The Company shall cause each Restricted Subsidiary issuing a
Guarantee after the Issue Date to execute and until such default shall have been cured or waived or shall
have ceaseddeliver to exist or the Designated Senior Indebtedness with respectTrustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such payment defaultRestricted Subsidiary shall have occurred shall have been discharged or
paid in full in cash or cash equivalents or in any other form acceptablebecome a party to the holdersIndenture and
thereby unconditionally guarantee all of the Company's Obligations under the
notes and the Indenture on the terms set forth therein. Thereafter, such
Restricted Subsidiary shall (unless released in accordance with the terms of the
Indenture) be a Guarantor for all purposes of the Indenture.
The Indenture will provide that if the notes are defeased in
accordance with the terms of the Indenture, or if, subject to the requirements
of the first paragraph under "Consolidation, Merger, Sale of Assets" all or
substantially all of the assets of any Guarantor or all of the Capital Stock of
any Guarantor are sold (including by issuance or otherwise) by the Company in a
transaction constituting an Asset Sale, and if (x) the Net Cash Proceeds from
such Asset Sale are used in accordance with the covenant described under
"Certain Covenants-Limitation on Sale of Assets" or (y) the Company delivers to
the Trustee an Officers' Certificate to the effect that the Net Cash Proceeds
from such Asset Sale shall be used in accordance with the covenant described
under "Certain Covenants-Limitation on Sale of Assets" and within the time
limits specified by such covenant, then such Guarantor or the Guarantors, as the
case may be (in the event of a defeasance of the notes or a sale or other
disposition of all of the Capital Stock of such Senior Indebtedness, after whichGuarantor) or the Companycorporation
acquiring such assets (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall resume
making anybe released and
all required paymentsdischarged of its Guarantee obligations in respect of the Notes, including any
missed payments.
DuringIndenture and the
continuance of any non-payment default with respect to any
Designated Senior Indebtednessnotes.
Any Guarantor that is designated an Unrestricted Subsidiary
pursuant to which the maturity thereof mayand in accordance with "Certain Covenants-Designation of
Unrestricted Subsidiaries" below shall upon such Designation be accelerated (a "Non-payment Default")released and
after receipt by the Trustee and the
Company from a representativedischarged of the holders of Designated Senior Indebtedness
of written notice of such default, no payment (other than payments previously
made pursuant to the provisions described under "--Defeasance or Covenant
Defeasance of Indenture") or distribution of any assets of the Company of any
kind or character (excluding certain permitted equity or certain debt
securities) shall be made by the Company on account of any principal of,
premium, if any, or interest on, the Notes or any other Indenture Obligations
or on account of the purchase, redemption, defeasance or other acquisition of
orits Guarantee obligations in respect of the Notes forIndenture and the
period specifiednotes and any Unrestricted Subsidiary whose Designation is revoked pursuant to
"Certain Covenants-Designation of Unrestricted Subsidiaries" below (the "Payment
Blockage Period").
65
The Payment Blockage Period shall commence uponwill be
required to become a Guarantor in accordance with the receipt of notice of the
Nonpayment Default by the Trustee from a representative of the holder of any
Designated Senior Indebtedness and shall end on the earliest of (i) the first
date on which more than 179 days shall have elapsed since the receipt of such
written notice (provided such Designated Senior Indebtedness as to which
notice was given shall not theretofore have been accelerated), (ii) the date
on which such Nonpayment Default is cured, waived or ceases to exist or on
which such Designated Senior Indebtedness is discharged or paid in full in
cash or cash equivalents or in any other manner acceptable to the holders of
Designated Senior Indebtedness or (iii) the date on which such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from the representatives of holders of Designated Senior
Indebtedness initiating such Payment Blockage Period, after which,procedure described in the
third preceding paragraph. In the case of clauses (i), (ii) and (iii), the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments. In
no event will a Payment Blockage Period extend beyond 179 days from the date
of the receipt by the Company or the Trustee of the notice initiating such
Payment Blockage Period (such 179-day period referred to as the "Initial
Period"). Any number of notices of Nonpayment Defaults may be given during the
Initial Period; provided that during any 365 consecutive day period only one
such period during which payment of principal of, or interest on, the Notes
may not be made may commence and the duration of such period may not exceed
179 days. No Nonpayment Default with respect to Designated Senior Indebtedness
which existed or was continuing on the date of the commencement of any Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period, whether or not within a period of 365
consecutive days, unless such default has been cured or waived for a period of
not less than 90 consecutive days. (Section 1203)
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "--Events of Default."
The Indenture provides that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the Company or
to its creditors, as such, or to its assets, or any liquidation, dissolution
or other winding up of the Company, whether voluntary or involuntary, or any
assignment for the benefit of creditors or any other marshalling of assets or
liabilities of the Company, all Senior Indebtedness must be paid in full in
cash or cash equivalents or in any other form acceptable to the holders of
Senior Indebtedness, before any payment or distribution (excluding
distributions of certain permitted equity or certain debt securities) is made
on account of the principal of, premium, if any, or interest on the Notes or
any other Indenture Obligations.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes, and, funds which would be
otherwise payable to the holders of the Notes will be paid to the holders of
the Senior Indebtedness to the extent necessary to pay the Senior Indebtedness
in full in cash or cash equivalents or in any other form acceptable to the
holders of Senior Indebtedness, and the Company may be unable to meet its
obligations fully with respect to the Notes.
Each Guarantee ofwhere a Guarantor is an unsecured senior subordinated obligationreleased and
discharged of such Guarantor, ranking pari passu with, or senior in right of payment to,
all other existing and future Indebtedness of such Guarantor that is expressly
subordinated to Senior Guarantor Indebtedness. The Indebtedness evidenced by
the Guarantees is subordinated to Senior Guarantor Indebtedness to the same
extent as the Notes are subordinated to Senior Indebtedness and during any
period when paymentits Guarantee, we will, if listed on the Notes is blocked by Designated Senior Indebtedness,
payment onLuxembourg Stock
Exchange, inform the Guarantees is similarly blocked.
66
"Senior Indebtedness" meansLuxembourg Stock Exchange and holders will be notified in
accordance with the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy law whether or not
allowable as a claimprocedure described in such proceeding) on any Indebtedness"-Notices."
The Guarantors of the Company
(other than as otherwise provided in this definition), whether outstanding onnotes are the datefollowing subsidiaries of the
Original Indenture or thereafter created, incurred or assumed,Company: Allberry, Inc., Barton Beers, Ltd., Barton Brands of California, Inc.,
Barton Brands of Georgia, Inc., Barton Brands, Ltd., Barton Canada, Ltd. Barton
Distillers Import Corp., Barton Financial Corporation, Barton Incorporated,
Batavia Wine Cellars, Inc., Canandaigua B.V., Canandaigua Europe Limited,
Canandaigua Limited, Canandaigua Wine Company, Inc., Cloud Peak Corporation,
Franciscan Vineyards, Inc., M.J. Lewis Corp., Monarch Import Company, Mt. Veeder
Corporation, Polyphenolics, Inc., Roberts Trading Corp., SCV-EPI Vineyards,
Inc., Simi Winery, Inc., Stevens Point Beverage Co., and whether at any time owing, actually or contingent, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
(i) the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding under any
state, federal or foreign bankruptcy laws whether or not allowable as a claim
in such proceeding) and all other obligations of every nature of the Company
from time to time owed to the lenders (or their agent) under the Credit
Agreement; provided, however, that any Indebtedness under any refinancing,
refunding or replacement of the Credit Agreement shall not constitute Senior
Indebtedness to the extent that the Indebtedness thereunder is by its express
terms subordinate to any other Indebtedness of the Company and (ii)
Indebtedness under Interest Rate Agreements. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (i) Indebtedness evidenced by the
Notes, (ii) Indebtedness that is subordinate or junior in right of payment to
any Indebtedness of the Company, (iii) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 United
States Code, is without recourse to the Company, (iv) Indebtedness which is
represented by Redeemable Capital Stock, (v) any liability for foreign,
federal, state, local or other taxes owed or owing by the Company to the
extent such liability constitutes Indebtedness, (vi) Indebtedness of the
Company to a Subsidiary or any other Affiliate of the Company or any of such
Affiliate's subsidiaries, (vii) that portion of any Indebtedness which at the
time of issuance is issued in violation of the Indenture and (viii)
Indebtedness owed by the Company for compensation to employees or for
services.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under the
Credit Agreement and (ii) any other Senior Indebtedness which is incurred
pursuant to an agreement (or series of related agreements) simultaneously
entered into providing for Indebtedness, or commitments to lend, of at least
$30,000,000 at the time of determination and is specifically designated in the
instrument evidencing such Senior Indebtedness or the agreement under which
such Senior Indebtedness arises as "Designated Senior Indebtedness" by the
Company.
"Senior Guarantor Indebtedness" means the principal of, premium, if any, and
interest (including interest accruing after the filing of a petition
initiating any proceeding under any state, federal or foreign bankruptcy laws
whether or not allowable as a claim in such proceeding) on any Indebtedness of
any Guarantor (other than as otherwise provided in this definition), whether
outstanding on the date of the Original Indenture or thereafter created,
incurred or assumed, and whether at any time owing, actually or contingent,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to any
Guarantee. Without limiting the generality of the foregoing, "Senior Guarantor
Indebtedness" shall include the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any state, federal or foreign bankruptcy laws whether or not
allowable as a claim in such proceeding) and all other obligations of every
nature of any Guarantor from time to time owed to the lenders (or their agent)
under the Credit Agreement; provided, however, that any Indebtedness under any
refinancing, refunding or replacement of the Credit Agreement shall not
constitute Senior Guarantor Indebtedness to the extent that the Indebtedness
thereunder is by its express terms subordinate to any other Indebtedness of
any Guarantor. Notwithstanding the foregoing, "Senior Guarantor Indebtedness"
shall not include (i) Indebtedness evidenced by the Guarantees, (ii)
Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of any Guarantor, (iii) Indebtedness which when incurred and
without respect to any election under Section 1111(b) of Title 11 United
States Code, is without
67
recourse to any Guarantor, (iv) Indebtedness which is represented by
Redeemable Capital Stock, (v) any liability for foreign, federal, state, local
or other taxes owed or owing by any Guarantor to the extent such liability
constitutes Indebtedness, (vi) Indebtedness of any Guarantor to a Subsidiary
or any other Affiliate of the Company or any of such Affiliate's subsidiaries,
(vii) that portion of any Indebtedness which at the time of issuance is issued
in violation of the Indenture and (viii) Indebtedness owed by any Guarantor
for compensation to employees or for services.
As of November 30, 1996, after giving effect to the sale of the Old Notes
and the application of the net proceeds therefrom, the aggregate amount of
outstanding Senior Indebtedness was approximately $328.8 million, the
aggregate amount of outstanding Pari Passu Indebtedness was $130.0 million and
the aggregate amount of outstanding Senior Guarantor Indebtedness was
approximately $327.8 million (including $327.4 million of outstanding
indebtedness representing guarantees of Senior Indebtedness). See "Risk
Factors--Subordination of the Notes and the Guarantees; Asset Encumbrances"
and "Capitalization."The Viking Distillery,
Inc.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, create, issue, assume, guarantee, or otherwise in any manner become directly
or indirectly liable for or with respect to or otherwise incur (collectively,
"incur")Incur any Indebtedness
(including any Acquired Indebtedness), except that the Company and any Guarantor
may incurIncur Indebtedness (including any Acquired Indebtedness) and any Restricted
Subsidiary that is not a Guarantor may incurIncur Acquired Indebtedness if, in each
case, the Consolidated Fixed Charge Coverage Ratio for the Company for the four
full fiscal quarters immediately preceding the incurrenceIncurrence of such Indebtedness
taken as one period (and after giving pro forma effect to (i) the incurrenceIncurrence of
such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred,Incurred, and the application of such proceeds occurred, at the beginning of
such four-quarter period; (ii) the incurrence,Incurrence, repayment or retirement of any
other Indebtedness by the Company and its Restricted Subsidiaries since the
first day of such four-quarter period as if such Indebtedness was incurred,Incurred,
repaid or retired at the beginning of such four-quarter period (except that, in
making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such four- quarterfour-quarter period); (iii) in the case of Acquired
Indebtedness, the related acquisition as if such acquisition occurred at the
beginning of such four quarter period; and (iv) any acquisition or disposition
by the Company and its Restricted Subsidiaries of any company or any business or
any assets out of the ordinary course of business, whether by merger, stock
purchase or sale or asset purchase or sale,
as if such acquisition or disposition occurred at the beginning of such four
quarter period or any related repayment of
Indebtedness, in each case since the first day of such four-quarter period,
assuming such acquisition or disposition had been consummated on the first day
of such four-quarter period) is equal to at least equal to 2.25:2.00:1.00. (Section 1008)
(b) The foregoing limitation will not apply to the incurrence of any of the
following (collectively "Permitted Indebtedness"):
(i) Indebtedness of the Company and any Restricted Subsidiary
under the Credit Agreement in an aggregate principal
amount at any one time outstanding not to exceed an amount
equal to the greater of (x) $50,000,000 under any term loans made pursuant thereto,$1 billion, minus all principal payments made in respectthe amount
of any term loans, (y) $100,000,000repayment of such Indebtedness under any revolving credit facility thereunder and (z) $28,200,000 of
"Letter of Credit Liabilities" (as defined in the Credit
Agreement as in
effectpursuant to "Certain Covenants-Limitation on
Sale of Assets" below and (y) the date of the Original Indenture) in respect to the Barton
Letter of Credit, less any reduction on such "Letter of
68
Credit Liabilities" (whether through payments or reductions of the face
amount of the Barton Letter of Credit);Borrowing Base;
(ii) Indebtedness of the Company pursuant to the Notesnotes and
other Indebtedness outstanding on the Issue Date (other
than Indebtedness under the Credit Agreement);
(iii) Indebtedness of any Guarantor pursuant to a Guarantee;
(iii) Indebtedness of the Company or any Subsidiary outstanding on the
date of the Indenture and listed on Schedule I thereto;
(iv) Indebtedness of the Company owing to a Restricted
Subsidiary; provided that any Indebtedness of the Company
owing to a Restricted Subsidiary that is not a Guarantor
is made pursuant to an intercompany note in the form
attached to the Indenture and is subordinated in right of
payment from and after such time as the Notesnotes shall become
due and payable (whether at Stated Maturity, acceleration
or otherwise) to the payment and performance of the
Company's obligations under the Notes;notes; provided, further
that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge
or transfer to a Restricted Subsidiary or a pledge to or
for the benefit of the lenders under the Credit Agreement)
shall be deemed to be an incurrence of such Indebtedness
by the obligor not permitted by this clause (iv);
(v) Indebtedness of a Wholly OwnedRestricted Subsidiary owing to the
Company or anothera Wholly Owned Restricted Subsidiary; provided
that, with respect to Indebtedness owing to a Wholly Owned
Restricted Subsidiary that is not a Guarantor, (x) any
such Indebtedness is made pursuant to an intercompany note
in the form attached to the Indenture and (y) any such
Indebtedness shall be subordinated in right of payment
from and after such time as the obligations under the
Guarantee by such Wholly Owned Restricted Subsidiary shall
become due and payable to the payment and performance of
such Wholly Owned Restricted Subsidiary's obligations
under its Guarantee; provided, further that (a) any
disposition, pledge or transfer of any such Indebtedness
to a Person (other than a disposition, pledge or transfer
to the Company or a Wholly OwnedRestricted Subsidiary or a pledge to
or for the benefit of the lenders under the Credit
Agreement) shall be deemed to be an incurrence of such
Indebtedness by the obligor not permitted by this clause
(v), and (b) any transaction pursuant to which any
Wholly OwnedRestricted Subsidiary, which has Indebtedness owing to the
Company or any other Wholly OwnedRestricted Subsidiary, ceases to be a
Wholly
OwnedRestricted Subsidiary shall be deemed to be the incurrence
of Indebtedness by such Wholly OwnedRestricted Subsidiary that is not
permitted by this clause (v);
(vi) guarantees of any Restricted Subsidiary made in accordance
with the provisions of "--Limitation"Certain Covenants-Limitation on
Issuances of Guarantees of and Pledges for
Indebtedness"by Restricted Subsidiaries";
(vii) obligationsHedging Obligations of the Company or any Guarantor
entered into in the ordinary course of business pursuant to Interest Rate Agreements(and not
for speculative purposes) designed to protect the
Company or any Subsidiary against
fluctuations inin: (x) interest rates in respect of
Indebtedness of the Company or any of its Restricted
Subsidiaries, as long as such obligations at the time
incurred do not exceed the aggregate principal amount of
such Indebtedness then outstanding or in good faith
anticipated to be outstanding within 90 days of such
incurrence;Incurrence, (y) currencies or (z) commodities;
(viii) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a
"refinancing") of any Indebtedness described in clauses
(ii) and (iii) of this definition of "Permitted
Indebtedness," including any successive refinancings so
long as the aggregate principal amount of Indebtedness
represented thereby is not increased by such refinancing
plus the lesser of (1) the stated amount of any premium,
interest or other payment required to be paid in
connection with such a refinancing pursuant to the terms
of the Indebtedness being refinanced or (2) the amount of
premium, interest or other payment actually paid at such
time to refinance the Indebtedness, plus, in either case,
the amount of expenses of the Company incurred in
69
connection with such refinancing and, in the case of Pari
Passu Indebtedness or Subordinated Indebtedness, such
refinancing does not reduce the Average Life to Stated
Maturity or the Stated Maturity of such Indebtedness; and
(ix) Indebtedness, in addition to that described in clauses (i)
through (viii) of this definition of "Permitted
Indebtedness," and any renewals, extensions,
substitutions, refinancings or replacements of such
Indebtedness, not to exceed $25,000,000$75.0 million outstanding at
any one time in the aggregate.
Limitation on Restricted Payments. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Company's Capital Stock
(other than dividends or distributions payable solely in
shares of its Qualified Capital Stock or in options,
warrants or other rights to acquire such Qualified Capital
Stock);
(ii) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of the Capital Stock of
the Company or any Affiliate thereof (other than any
Wholly Owned Restricted Subsidiary of the Company) or
options, warrants or other rights to acquire such Capital
Stock;
(iii) make any principal payment on, or repurchase, redeem,
defease, retire or otherwise acquire for value, prior to
any scheduled principal payment, sinking fund or maturity,
any Pari Passu Indebtedness or
Subordinated Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital
Stock of any Restricted Subsidiary to any Person (other
than the Company or any of its Wholly
OwnedRestricted Subsidiaries) or
purchase, redeem or otherwise acquire or retire for value
any Capital Stock of any Restricted Subsidiary held by any
Person (other than the Company or any of its Wholly Owned
Restricted Subsidiaries);
(v) incur,Incur, create or assume any guarantee of Indebtedness of
any Affiliate (other than a Wholly Owned Restricted
Subsidiary of the Company); or
(vi) make any Investment in any Person (other than any
Permitted Investments)
(any of the foregoing payments described in clauses (i) through (vi), other than
any such action that is a Permitted Payment, collectively, "Restricted
Payments") unless after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a board resolution), (1) no Default or Event of Default shall have
occurred and be continuing and such Restricted Payment shall not be an event
which is, or after notice or lapse of time or both, would be, an "event of
default" under the terms of any Indebtedness of the Company or its Restricted
Subsidiaries; (2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, the Company could incurIncur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the provisions described
under "--Limitation"Limitation on Indebtedness"; and (3) the aggregate amount of all such
Restricted Payments declared or made after the date of the Original Indenture does not
exceed the sum of:
(A) 50% of the aggregate cumulative Consolidated Net Income of
the Company accrued on a cumulative basis during the
period beginning on the
first day of the Company's fiscal quarter commencing prior to the date of
the Original IndentureDecember 1, 1998 and ending on the
last day of the Company's last fiscal quarter ending prior
to the date of the Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss); 70
plus
(B) the aggregate Net Cash Proceeds received after the date of
the
Original Indenture by the Company from the issuance or sale
(other than to any of its Subsidiaries) of its shares of
Qualified Capital Stock or any options, warrants or rights
to purchase such shares of Qualified Capital Stock of the
Company (except, in each case, to the extent such proceeds
are used to purchase, redeem or otherwise retire Capital
Stock or Subordinated Indebtedness as set forth below);
plus
(C) the aggregate Net Cash Proceeds received after the date of
the
Original Indenture by the Company (other than from any of its
Subsidiaries) upon the exercise of any options or warrants
to purchase shares of Qualified Capital Stock of the
Company; andplus
(D) the aggregate Net Cash Proceeds received after the date of
the
Original Indenture by the Company from debt securities or
Redeemable Capital Stock that have been converted into or
exchanged for Qualified Capital Stock of the Company to
the extent such debt securities or Redeemable Capital
Stock are originally sold for cash plus the aggregate Net
Cash Proceeds received by the Company at the time of such
conversion or exchange.exchange; plus
(E) in the event the Company or any Restricted Subsidiary
makes an Investment in a Person that, as a result of or in
connection with such Investment becomes a Restricted
Subsidiary, an amount equal to the Company's or any
Restricted Subsidiary's existing Investment in such Person
that was previously treated as a Restricted Payment; plus
(F) so long as the Designation thereof was treated as a
Restricted Payment made after the Issue Date, with respect
to any Unrestricted Subsidiary that has been redesignated
as a Restricted Subsidiary after the Issue Date in
accordance with "Certain Covenants-Designation of
Unrestricted Subsidiaries", an amount equal to the
Company's Investment in such Unrestricted Subsidiary
(provided that such amount shall not in any case exceed
the Designation Amount with respect to such Restricted
Subsidiary upon its Designation); plus
(G) $50.0 million; minus
(H) the Designation Amount (measured as of the date of
Designation) with respect to any Subsidiary of the Company
which has been designated as an Unrestricted Subsidiary
after the Issue Date in accordance with "Certain
Covenants-Designation of Unrestricted Subsidiaries."
(b) Notwithstanding the foregoing, and in the case of clauses (ii),
(iii) and (iv) below, so long as there is no Default or Event of
Default continuing, the foregoing provisions shall not prohibit
the following actions (clauses (i) through (iv) being referred to
as a "Permitted Payment"):
(i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date of declaration
such payment would be permitted by the provisions of
paragraph (a) of this Section and such payment shall be
deemed to have been paid on such date of declaration for
purposes of the calculation required by paragraph (a) of
this Section;
(ii) the repurchase, redemption, or other acquisition or
retirement of any shares of any class of Capital Stock of
the Company in exchange for (including any such exchange
pursuant to the exercise of a conversion right or
privilege or in connection therewithwhich cash is paid in lieu of the issuance
of fractional shares or scrip), or out of the Net Cash
Proceeds of, a substantially concurrent issue and sale for
cash (other than to a Subsidiary) of other shares of
Qualified Capital Stock of the Company; provided that the
Net Cash Proceeds from the issuance of such shares of
Qualified Capital Stock are excluded from clause (3)(B) of
paragraph (a) of this Section;
(iii) any repurchase, redemption, defeasance, retirement,
refinancing or acquisition for value or payment of
principal of any Subordinated Indebtedness in exchange
for, or out of the net proceedsNet Cash Proceeds of, a substantially
concurrent issuance and sale for cash (other than to any
Subsidiary of the Company) of any Qualified Capital Stock
of the Company, provided that the Net Cash Proceeds from
the issuance of such shares of Qualified Capital Stock are
excluded from clause (3)(B) of paragraph (a) of this
Section; and
(iv) the repurchase, redemption, defeasance, retirement,
refinancing or acquisition for value or payment of
principal of any Subordinated Indebtedness (other than
Redeemable Capital Stock) (a "refinancing") through the
issuance of new Subordinated Indebtedness of the Company,
provided that any such new Subordinated Indebtedness (1)
shall be in a principal amount that does not exceed the
principal amount so refinanced (or, if such Subordinated
Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a
declaration or acceleration thereof, then such lesser
amount as of the date of determination), plus the lesser
of (I)(x) the stated amount of any premium, interest or other
payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness
being refinanced or (II)(y) the amount of premium, interest or
other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses
of the Company incurredIncurred in connection with such
refinancing; (2) has an Average Life to Stated Maturity
greater than the remaining Average Life to Stated Maturity
of the Notes;notes; (3) has a Stated Maturity for its final
71
scheduled principal payment later than the Stated Maturity
for the final scheduled principal payment of the Notes;notes;
and (4) is expressly subordinated in right of payment to
the Notesnotes at least to the same extent as the Indebtedness
to be refinanced. (Section 1009)
Limitation on Transactions with Affiliates. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange or
lease of assets, property or services) with any Affiliate of the Company (other
than the Company or a Wholly Owned Restricted Subsidiary) unless (i) such
transaction or series of transactions is in writing on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
would be available in a comparable transaction in arm's-length dealings with an
unrelated third party, (ii) with respect to any transaction or series of
transactions involving aggregate payments in excess of $5,000,000,$10.0 million, the
Company delivers an officers' certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause (i) above and
such transaction or series of related transactions has been approved by the
Board of Directors of the Company, and (iii) with respect to a transaction or
series of related transactions involving aggregate value in excess of $10,000,000,$25.0
million, the Company delivers to the Trustee an opinion of either an independent
investment banking firm of national standing in the United States or an
independent public accounting firm of national standing in the United States,
stating that the transaction or series of transactions is fair to the Company or
such Restricted Subsidiary; provided, however, that this provision shall not
apply to any transaction with an officer or director of the Company entered into
in the ordinary course of business (including compensation or employee benefit
arrangements with any officer or director of the Company).
(Section 1010)
Limitation on Senior Subordinated Indebtedness. The Company will not, and
will not permit any Guarantor to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinate in right of payment to any Indebtedness of
the Company or such Guarantor, as the case may be, unless such Indebtedness is
also pari passu with the Notes or the Guarantee of such Guarantor or
subordinate in right of payment to the Notes or such Guarantee to at least the
same extent as the Notes or such Guarantee are subordinate in right of payment
to Senior Indebtedness or Senior Guarantor Indebtedness, as the case may be,
as set forth in the Indenture. (Section 1011)
Limitation on Liens. The Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, create, incur,Incur, affirm or
suffer to exist any Lien of any kind upon any of its property or assets
(including any intercompany notes), owned at the date of the Indenture or
acquired after the date of the Indenture, or any income or profits therefrom,
except if the Notesnotes (or a Guarantee, in the case of Liens of a Guarantor) are
directly secured equally and ratably with (or prior to in the case of Liens with
respect to Subordinated Indebtedness or Indebtedness of a Guarantor subordinated
in right of payment to any Guarantee) the obligation or liability secured by
such Lien, excluding, however, from the operation of the foregoing any of the
following:
(a) any Lien existing as of the date of the Indenture;
(b) any Lien arising by reason of (1) any judgment, decree or
order of any court, so long as such Lien is adequately
bonded and any appropriate legal proceedings which may
have been duly initiated for the review of such judgment,
decree or order shall not have been finally terminated or
the period within which such proceedings may be initiated
shall not have expired; (2) taxes not yet delinquent or
which are being contested in good faith; (3) security for
payment of workers' compensation or other insurance; (4)
good faith deposits in connection with tenders, leases, or
contracts (other than contracts for the payment of money);
(5) zoning restrictions, easements, licenses,
reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor
irregularities of title (and with respect to leasehold
interests, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to
exist and arising by, through or under a landlord or owner
of the leased property, with or without consent of the
lessee), none of which materially impairs the use of any
72
parcel of property material to the operation of the
business of the Company or any Restricted Subsidiary or
the value of such property for the purpose of such
business; (6) deposits to secure public or statutory
obligations, or in lieu of surety or appeal bonds; (7)
certain surveys, exceptions, title defects, encumbrances,
easements, reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph or
telephone lines and other similar purposes or zoning or
other restrictions as to the use of real property not
interfering with the ordinary conduct of the business of
the Company or any of its Restricted Subsidiaries; or (8)
operation of law in favor of mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary
course of business for sums which are not yet delinquent
or are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection
thereof; or (9) standard custodial, bailee or depository
arrangements (including (x) in respect of deposit accounts
with banks and other financial institutions and (y)
standard customer agreements in respect of accounts for
the purchase and sale of securities and other property
with brokerage firms or other types of financial
institutions);
(c) any Lien now or hereafter existing on property of the
Company or any Guarantor securing Senior Indebtedness or Senior Guarantor Indebtedness, in
each case which Indebtedness is permittedoutstanding
under the provisions of "--
Limitation on Indebtedness" and provided that the provisions described under
"--Limitation on Issuances of Guarantees of and Pledges for Indebtedness" are
complied with;Credit Agreement;
(d) any Lien securing Acquired Indebtedness created prior to
(and not created in connection with, or in contemplation
of) the incurrence of such Indebtedness by the Company or
any Restricted Subsidiary, in each case which Indebtedness
is permitted under the provisions of "Limitation"Certain
Covenants-Limitation on Indebtedness"; provided that any
such Lien only extends to the assets that were subject to
such lien securing such Acquired Indebtedness prior to the
related transaction by the Company or its Restricted
Subsidiaries; and
(e) any extension, renewal, refinancing or replacement, in
whole or in part, of any Lien described in the foregoing
clauses (a) through (d) so long as the amount of security
is not increased thereby.
(Section 1012)
Limitation on Sale of Assets. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
consummate an Asset Sale (other than an Asset Swap permitted by clause (g)
below) unless (i) at least 75% of the proceeds from such Asset Sale are received
in cash; provided, however that the amount of (A) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet or the
notes thereto) of the Company or any Restricted Subsidiary that are assumed by
the transferee in such Asset Sale and from which the Company or such Restricted
Subsidiary is released and (B) any notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash,
shall be deemed cash for purposes of this covenant, and (ii) the Company or such
Restricted Subsidiary receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the shares or assets sold (other than in
the case of an involuntary Asset Sale, as determined by the Board of Directors
of the Company and evidenced in a board resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset
Sale are not required to be applied to repay permanently
any Senior Indebtedness or Senior
Guarantorsecured Indebtedness then outstanding as required by
the terms thereof or the Company determines not to apply
such Net Cash Proceeds to the permanent prepaymentrepayment of such
Senior Indebtedness or Senior Guarantorsecured Indebtedness or if no such Senior Indebtedness or Senior Guarantorsecured Indebtedness is then
outstanding, then the Company may within 12 months of the
Asset Sale, invest the Net Cash Proceeds in other
properties and assets that (as determined by the Board of
Directors of the Company) replace the properties and
assets that were the subject of the Asset Sale or in
properties and assets that will be used in the businesses
of the Company or its Restricted Subsidiaries as existing
on the date
of the Original Indentureat such time or reasonably related thereto. The amount of
such Net Cash Proceeds neither used to permanently repay
or prepay Senior
Indebtedness or Senior Guarantorsecured Indebtedness nor used or invested as set
forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals $10,000,000$10.0
million or more, the Company shall apply the Excess
Proceeds to the repayment of the Notesnotes and any Pari Passu
Indebtedness required to be repurchased under the
instrument governing such Pari Passu Indebtedness as
follows: (a) the Company shall make an offer to purchase
(an "Offer") from all holders of the Notesnotes in accordance
with the procedures set forth in the Indenture in the
maximum principal amount (expressed as a multiple
of(pound)1,000) of $1,000) of Notesnotes that may be purchased out of an
amount (the "Note Amount") equal to the product of such
Excess Proceeds multiplied by a fraction, the numerator of
which is the outstanding principal amount of the Notes,notes,
and the denominator of which is the sum of the outstanding
73
principal amount of the Notesnotes and such Pari Passu
Indebtedness (subject to proration in the event such
amount is less than the aggregate Offered Price (as
defined) of all Notesnotes tendered) and (b) to the extent
required by such Pari Passu Indebtedness to permanently
reduce the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase
or otherwise repurchase or redeem Pari Passu Indebtedness
(a "Pari Passu Offer") in an amount (the "Pari Passu Debt
Amount") equal to the excess of the Excess Proceeds over
the Note Amount; provided that in no event shall the Pari
Passu Debt Amount exceed the principal amount of such Pari
Passu Indebtedness plus the amount of any premium required
to be paid to repurchase such Pari Passu Indebtedness. The
offer price shall be payable in cash in an amount equal to
100% of the principal amount of the Notesnotes plus accrued and
unpaid interest, if any, to the date (the "Offer Date")
such Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture.
To the extent that the aggregate Offered Price of the
Notesnotes tendered pursuant to the Offer is less than the Note
Amount relating thereto or the aggregate amount of Pari
Passu Indebtedness that is purchased is less than the Pari
Passu Debt Amount (the amount of such shortfall, if any,
constituting a "Deficiency"), the Company shall use such
Deficiency in the business of the Company and its
Restricted Subsidiaries. Upon completion of the purchase
of all the Notesnotes tendered pursuant to an Offer and the
purchase of the Pari Passu Indebtedness pursuant to a Pari
Passu Offer, the amount Ofof Excess Proceeds, if any, shall
be reset at zero.
(d) Whenever the Excess Proceeds received by the Company exceed $7,000,000,
such Excess Proceeds shall be set aside by the Company in a separate account
pending (i) deposit with the depositary or a paying agent of the amount
required to purchase the Notes or Pari Passu Indebtedness tendered in an Offer
or a Pari Passu Offer, (ii) delivery by the Company of the Offered Price to
the holders of the Notes or Pari Passu Indebtedness tendered in an Offer or a
Pari Passu Offer and (iii) application, as set forth above, of Excess Proceeds
in the business of the Company and its Subsidiaries. Such Excess Proceeds may
be invested in Temporary Cash Investments, provided that the maturity date of
any such investment made after the amount of Excess Proceeds exceeds
$7,000,000 shall not be later than the earlier of three months or the Offer
Date, if known. The Company shall be entitled to any interest or dividends
accrued, earned or paid on such Temporary Cash Investments, provided that the
Company shall not withdraw such interest from the separate account if an Event
of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant
to clause (c) above, the Notesnotes shall be purchased by the
Company, at the option of the holder thereof, in whole or
in part in integral multiples of $1,000,(pound)1,000, on a date
that is not earlier than 45 days and not later than 60
days from the date the notice is given to holders, or such
later date as may be necessary for the Company to comply
with the requirements under the Exchange Act, subject to
proration in the event the Note Amount is less than the
aggregate Offered Price of all Notesnotes tendered.
(f)(e) The Company shall comply with the applicable tender offer
rules, including Rule 14e-1 under the Exchange Act, and
any other applicable securities laws or regulations in
connection with an Offer.
(g)(f) The Company will not, and will not permit any Subsidiary
to, create or permit to exist or become effective any
restriction (other than restrictions existing under
(i) Indebtedness as in effect on the date of the IndentureIndenture) as
such Indebtedness may be refinanced from time to time,
provided that such restrictions are no less favorable to
the Holdersholders of Notesnotes than those existing on the date of
the Indenture or (ii) any Senior Indebtedness and any Senior
Guarantor Indebtedness) that would materially impair the ability of
the Company to make an Offer to purchase the Notesnotes or, if
such Offer is made, to pay for the Notesnotes tendered for
purchase.
(Section 1013)
Limitation on Issuances of Guarantees of and Pledges for Indebtedness. (a)(g) The Company will not permit any Subsidiary, other than the Guarantors,
directly or indirectly, to secure the payment of any Senior Indebtedness of
the Company and the Company will not, and will not permit any Restricted
Subsidiary, to engage in any Asset Swaps, unless: (i) at
the time of entering into such Asset Swap, and immediately
after giving effect to such Asset Swap, no Default or
Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; (ii) in the event
such Asset Swap involves an aggregate amount in excess of
$10.0 million, the terms of such Asset Swap have been
approved by a majority of the members of the board of
directors of the Company which determination shall include
a determination that the Fair Market Value of the assets
being received in such swap are at least equal to the Fair
Market Value of the assets being swapped and (iii) in the
event such Asset Swap involves an aggregate amount in
excess of $20.0 million, the Company has also received a
written opinion from an independent investment banking
firm of nationally recognized standing or an independent
public accounting firm of nationally recognized standing
that such Asset Swap is fair to the Company or such
Restricted Subsidiary, 74
as the case may be, from a
financial point of view.
Limitation on Guarantees by Restricted Subsidiaries. The
Indenture will provide that in the event the Company (i) organizes or acquires
any Domestic Restricted Subsidiary after the Issue Date that is not a Guarantor
and causes or permits such Restricted Subsidiary to, pledge any intercompany notes representing obligations of any Subsidiary
(other than a Guarantor) to securedirectly or indirectly,
guarantee the payment of any Senior Indebtedness unless (x)("Other Indebtedness") of the Company
or any Guarantor or (ii) causes or permits any Foreign Restricted Subsidiary
that is not a Guarantor to, directly or indirectly, guarantee the payment of any
Other Indebtedness, then, in each case the Company shall cause such Restricted
Subsidiary to simultaneously executesexecute and deliversdeliver a supplemental indenture to the
Indenture providing forpursuant to which it will become a guarantee of paymentGuarantor under the Indenture;
provided, however, that in the event a Domestic Restricted Subsidiary is
acquired in a transaction in which a merger agreement is entered into, such
Domestic Restricted Subsidiary shall not be required to execute and deliver such
supplemental indenture until the consummation of the Notes
by such Subsidiary, which guarantee shall be on the same terms as the
guarantee of the Senior Indebtedness (if a guarantee of Senior Indebtedness is
grantedmerger contemplated by any
such Subsidiary) exceptmerger agreement; provided, further, that the guarantee of the Notes need
not be secured and shall be subordinated to the claims againstif such Subsidiary
in respect of SeniorOther Indebtedness to the same extent as the Notes are
subordinated to Senioris (i)
Indebtedness of the Company under the Indenture and (y)
such Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of any rights of reimbursement, indemnity or subrogation
or any other rights the Company or any other Subsidiary has as a result of any
payment by such Subsidiary under its guarantee.
(b) The Company will not permit any Subsidiary, other than the Guarantors,
directly or indirectly to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company unless (i) such
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Indenture providing for a guarantee of the Notes on the same terms as the
guarantee of such Indebtedness except that (A) such guarantee need not be
secured unless required pursuant to""--Limitation on Liens," (B) if the Notes
are subordinatedis ranked pari passu in right of payment to such Indebtedness,with the guarantee undernotes or the
supplemental indenture shall be subordinated to the guaranteeGuarantees of such Indebtedness to the same extent as the Notes are subordinated to such
Indebtedness under the Indenture and (C) if such Indebtedness is by its terms
expressly subordinated to the Notes, any such assumption, guarantee or other
liability of such Subsidiary with respect to such Indebtedness shall be
subordinated to such Subsidiary's assumption, guarantee or other liability
with respect to the Notes to the same extent as such Indebtedness is
subordinated to the Notes and (ii) such Subsidiary waives and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Subsidiary as a result of any payment by such Subsidiary
under its Guarantee.
(c) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each
such Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing,
any Guarantee by a Subsidiary of the Notes shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon (i)
any sale, exchange or transfer, to any Person not an Affiliate of the Company,
of all of the Company's Capital Stock in, or all or substantially all the
assets of, such Subsidiary, which is in compliance with the terms of the
Indenture or (ii) the release by the holders of the Indebtedness of the
Company described in clauses (a) and (b) above of their security interest or
their guarantee by such Subsidiary (including any deemed release upon payment
in full of all obligations under such Indebtedness), at a time when (A) no
other Indebtedness of the Company has been secured or guaranteed by suchRestricted Subsidiary, as the case may be, the Guarantee of
such Restricted Subsidiary shall be pari passu in right of payment with the
guarantee of the Other Indebtedness; or (B)(ii) Subordinated Indebtedness, the
holdersGuarantee of such Restricted Subsidiary shall be senior in right of payment to
the guarantee of the Other Indebtedness (which guarantee of such Subordinated
Indebtedness shall provide that such guarantee is subordinated to the Guarantees
of such Subsidiary to the same extent and in the same manner as the Other
Indebtedness is subordinated to the notes or the Guarantee of such Restricted
Subsidiary, as the case may be). The Guarantee of a Guarantor shall be released
upon the sale or transfer of all such other
Indebtedness which is secured or guaranteed by such Subsidiary also release
their security interest in, or guarantee by, such Subsidiary (including any
deemed release upon payment in fullsubstantially all of all obligations under such
Indebtedness). (Section 1014)
Restriction on Transfer of Assets. The Company will not sell, convey,
transfer or otherwise dispose of itsthe assets or property to any of its
Subsidiaries (other than to the Guarantors), except for sales, conveyances,
transfers or other dispositions made in the ordinary course of business. For
purposes of this provision, any sale, conveyance, transfer, lease or other
disposition of property or assets, having a Fair Market Value in excess of (a)
$2,000,000 for any sale, conveyance, transfer or disposition or series of
related sales, conveyances, transfers, leases or dispositions and (b)
$10,000,000 in the aggregate for all such sales, conveyances, transfers,
leases or dispositions in any fiscal year of
the Company shallCapital Stock of such Guarantor; provided, that, either (i) such sale or
transfer complies with the provisions set forth in "Certain Covenants-Limitation
on Sale of Assets" or (ii) such sale or transfer need not be
considered "incomply with the
ordinary courseprovisions set forth in "Certain Covenants-Limitation on Sale of business." (Section 1015)
75
Assets" because
the Capital Stock so sold or transferred does not constitute an "Asset Sale" by
operation of the provisions of clause (y) of the last sentence of the definition
of Asset Sale.
Purchase of Notes Upon a Change of Control. If a Change of
Control shall occur at any time, then each holder of Notesnotes shall have the right
to require that the Company purchase such holder's Notesnotes in whole or in part in
integral multiples of $1,000,(pound)1,000, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the principal amount of
such Notes,notes, plus accrued and unpaid interest, if any, to the date of purchase
(the "Change of Control Purchase Date"), pursuant to the offer described below
(the "Change of Control Offer") and the other procedures set forth in the
Indenture.
Within 15 days following any Change of Control, the Company shall
notify the Trustee thereof, and give written notice of such Change of Control to
each holder of Notesnotes by first-class mail, postage prepaid, at his address
appearing in the security register and publish such notice in a leading
Luxembourg newspaper, if the Company is then listed on the Luxembourg Stock
Exchange, stating, among other things, the purchase price and that the purchase
date shall be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed, or such later date as is necessary to comply
with requirements under the Exchange Act; that any Note not tendered will
continue to accrue interest; that, unless the Company defaults in the payment of
the purchase price, any Notesnotes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Purchase Date; and certain other procedures that a holder of Notesnotes must follow
to accept a Change of Control Offer or to withdraw such acceptance. (Section 1016)
If a Change of Control Offer is made, there can be no assurance
that the Company will have available funds sufficient to pay the Change of
Control Purchase Price for all of the Notesnotes that might be delivered by holders
of the Notesnotes seeking to accept the Change of Control Offer. The Credit Facility
prohibitsAgreement
restricts the purchaseability of the Notes byCompany to purchase the Companynotes prior to full
repayment of indebtedness under the Credit FacilityAgreement and, upon a Change of
Control, all amounts outstanding under the Credit FacilityAgreement become due and
payable. There can be no assurance that in the event of a Change in Control the
Company will be able to obtain the necessary consents from the lenders under the
Credit FacilityAgreement to consummate a Change of Control Offer. Neither the Company's Board
of Directors nor the trustee under the Indenture is permitted to waive the
right of the holders of the Exchange Notes to require the Company to purchase
the holders' Exchange Notes upon a Change of Control. As of January 10, 1997,
the amount of borrowings outstanding and letters of credit under the Credit
Facility was $265.2 million. In addition, the Original Notes are pari passu
with the Notes and contain similar repurchase requirements upon a Change of
Control. Except for the Notes and the Original Notes, there are currently no
other outstanding securities or liabilities of the Company that are pari passu
with the Exchange Notes and contain similar repurchase requirements upon a
Change of Control. The failure of the
Company to make or consummate the Change of Control Offer or pay the Change of
Control Purchase Price when due will result in an Event of Default and will give
the Trustee and the holders of the Notesnotes the rights described under "--Events"Events of
Default."
The definition of "Change of Control" in the Indenture is defined
to mean the occurrence of any of the following events: (i) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), other than Permitted Holders,holders, is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have beneficial ownership of all shares that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 30% of the
voting power of the total outstanding Voting Stock of the Company voting as one
class, provided that the Permitted Holdersholders "beneficially own" (as so defined) a
percentage of Voting Stock having a lesser percentage of the voting power than
such other Person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election to such
Board or whose nomination for election by the shareholders of the Company, was
approved by a vote of 66 2/662/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of such Board of Directors then in office; (iii) the Company
consolidates with or merges with or into any Person or conveys, transfers or
leases all or substantially all of its assets to any Person, or any corporation
consolidates with or merges into or with the Company, in any such event pursuant
to a transaction in which the outstanding Voting
76
Stock of the Company is changed
into or exchanged for cash, securities or other property, other than any such
transaction where the outstanding Voting Stock of the Company is not changed or
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company) or where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting Stock of
the surviving corporation which is not Redeemable Capital Stock or (y) cash,
securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company as a Restricted
Payment in accordance with "--Limitation"Certain Covenants-Limitation on Restricted Payments"
(and such amount shall be treated as a Restricted Payment subject to the
provisions in the Indenture described under "--
Limitation"Certain Covenants-Limitation on
Restricted Payments") and (B) no "person" or "group" other than Permitted
Holders owns immediately after such transaction, directly or indirectly, more
than the greater of (1) 30% of the voting power of the total outstanding Voting
Stock of the surviving corporation voting as one class and (2) the percentage of
such voting power of the surviving corporation held, directly or indirectly, by
Permitted Holders immediately after such transaction; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions described under
"--Consolidation,"Consolidation, Merger, Sale of Assets."
"Permitted Holders" means as of the date of determination (i)
MarvinMarilyn Sands, Richard Sands and Robert Sands; (ii) family members or the
relatives of the Persons described in clause (i); or the Mac and Sally Sands
Foundation, Incorporated; (iii) any trusts created for the benefit of the
Persons described in clauses (i), (ii) or (iv)(v) or for the benefit of Andrew Stern
or any trust for the benefit of any such trust; (iv) any partnerships that are
controlled by (and a majority of the partnership interests in which are owned
by) any of the Persons described in clauses (i), (ii), (iii) or (v) or by any
partnership that satisfies the conditions of this clause (iv); or (v) in the
case of Marvin Sands and in the event of the incompetence or death of any of the
persons described in clauses (i) and (ii), such Person's estate, executor,
administrator, committee or other personal representative or beneficiaries, in
each case who at any particular date shall beneficially own or have the right to
acquire, directly or indirectly, Capital Stock of the Company.
The term "all or substantially all" as used in the definition of
"Change of Control" has not been interpreted under New York law (which is the
governing law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the Notesnotes elected to exercise their
rights under the Indenture and the Company elected to contest such election,
there could be no assurance as to how a court interpreting New York law would
interpret the phrase.
The definition of "Change of Control" is limited in scope. As a
result the provisions of the Indenture will not afford holders of Notesnotes the
right to require the Company to purchase the Notesnotes in the event of a highly
leveraged transaction or certain transactions with the Company's management or
its affiliates, including a reorganization, restructuring, merger or similar
transaction (including, in certain circumstances, an acquisition of the Company
by management or its affiliates) involving the Company that may adversely affect
holders of the Notes,notes, if such transaction is not a transaction defined as a
Change of Control. A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, will
result in a Change of Control if it is the type of transaction specified by such
definition.
The existence of a holder's right to require the Company to
purchase such holder's Notesnotes upon a Change of Control may deter a third party
from acquiring the Company in a transaction which constitutes a Change of
Control.
The Company will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any Subsidiary to,
create or permit to exist or become effective any restriction (other than
restrictions existing under Indebtedness as in effect on the date of the
Indenture) that would materially impair the ability of the Company to make a
Change of Control Offer to purchase the Notesnotes or, if such Change of Control
Offer is made, to pay for the Notesnotes tendered for purchase.
(Section 1016)
77
Limitation on Restricted Subsidiary Capital Stock. The Company
will not permit any Restricted Subsidiary of the Company to issue any Capital
Stock, except for (i) Capital Stock issued to and held by the Company or a
Wholly Owned Restricted Subsidiary, and (ii) Capital Stock issued by a Person prior
to the time (A) such Person becomes a Restricted Subsidiary, (B) such Person
merges with or into a Restricted Subsidiary or (C) a Restricted Subsidiary
merges with or into such Person,Person; provided that such Capital Stock was not issued
or incurred by such Person in anticipation of the type of transaction
contemplated by subclauses (A), (B) or (C). (Section 1017), and (iii) Capital Stock issued or
sold by a Restricted Subsidiary, where immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (i) pay dividends or make
any other distribution on its Capital Stock, (ii) pay any Indebtedness owed to
the Company or a Restricted Subsidiary of the Company, (iii) make any Investment
in the Company or a Restricted Subsidiary of the Company or (iv) transfer any of
its properties or assets to the Company or any Restricted Subsidiary, except (a)
any encumbrance or restriction pursuant to an agreement in effect on the date of
the Indenture
and listed as a schedule thereto;Indenture; (b) any encumbrance or restriction, with respect to a Restricted
Subsidiary that is not a Restricted Subsidiary of the Company on the date of the
Indenture, in existence at the time such Person becomes a Restricted Subsidiary
of the Company and, in the case of clauses (a) and (b), not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary; (c) any encumbrance or restriction existing under any agreement that
extends, renews, refinances or replaces the agreements containing the
encumbrances or restrictions in the foregoing clauses (a) and (b), or in this
clause (c),; provided that the terms and conditions of any such encumbrances or
restrictions are not materially less favorable to the holders of the Notesnotes than
those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced (except that an encumbrance or
restriction that is not more restrictive than those set forth in the Indenture
shall in any event be permitted); and (d) any encumbrance or restriction created
pursuant to an asset sale agreement, stock sale agreement or similar instrument
pursuant to which an Asset Sale permitted under "--Limitation"Certain Covenants-Limitation on
Sale of Assets" is to be consummated, so long as such restriction or encumbrance
shall be effective only for a period from the execution and delivery of such
agreement or instrument through a termination date not later than 270 days after
such execution and delivery.
(Section 1018)Designation of Unrestricted Subsidiaries. The Company may
designate after the Issue Date any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving
effect to such Designation;
(ii) at the time of and after giving effect to such
Designation, the Company could Incur $1.00 of
additional Indebtedness (other than Permitted
Indebtedness) under the Consolidated Fixed Charge
Coverage Ratio of the first paragraph of "Certain
Covenants-Limitation on Indebtedness"; and
(iii) the Company would be permitted to make an
Investment (other than a Permitted Investment) at
the time of Designation (assuming the effectiveness
of such Designation) pursuant to paragraph (a) of
"Certain Covenants-Limitation on Restricted
Payments" above in an amount (the "Designation
Amount") equal to the amount of the Company's
Investment in such Subsidiary on such date.
Neither the Company nor any Restricted Subsidiary shall at any
time (x) provide credit support for, subject any of its property or assets
(other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (y) be directly or indirectly liable for any Indebtedness of
any Unrestricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to
include the Designation of all of the Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred
and be continuing at the time of and after giving
effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such
Revocation would, if Incurred at such time, have
been permitted to be Incurred for all purposes of
the Indenture.
All Designations and Revocations must be evidenced by resolutions
of the Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Limitation of Applicability of Certain Covenants if Notes Rated
Investment Grade. Notwithstanding the foregoing, the Company's and its
Restricted Subsidiaries' obligations to comply with the provisions of the
Indenture described (x) above under the captions "Certain Covenants-Limitation
on Indebtedness," "Certain Covenants-Limitation on Restricted Payments,"
"Certain Covenants-Limitation on Transactions with Affiliates," "Certain
Covenants-Limitation on Restricted Subsidiary Capital Stock," "Certain
Covenants-Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries," and "Certain Covenants-Designation of Unrestricted
Subsidiaries," and (y) below in clause (iv) of the first paragraph under the
caption "Consolidation, Merger, Sale of Assets," will terminate and cease to
have any further effect from and after the first date when the notes are rated
Investment Grade.
Provision of Financial Statements. Whether or not the Company is
subject to Section 13(a) or 15(d) of the Exchange Act, the Company will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Sections 13(a) or 15(d) if
the Company were so subject, such documents to be filed with the Commission on
or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company were
so subject. The Company will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders,holders, as their names and
addresses appear in the security register, without cost to such Holdersholders and (ii)
file with the Trustee copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act if the Company were
subject to such Sections and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holderholder at the Company's cost. (Section 1019)
Additional Covenants. The Indenture also contains covenants with
respect to the following matters: (i) payment of principal, premium and
interest; (ii) maintenance of an office or agency in the City of New York; (iii)
arrangements regarding the handling of money held in trust; (iv) maintenance of
corporate and partnership existence; (v) payment of taxes and other claims; (vi)
maintenance of properties; and (vii) maintenance of insurance.
78
CONSOLIDATION, MERGER, SALE OF ASSETS
The Company shall not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to any Person or
group of affiliated Persons, or permit any of its Restricted Subsidiaries to
enter into any such transaction or transactions if such transaction or
transactions, in the aggregate, would result in a sale, assignment, conveyance,
transfer, lease or disposal of all or substantially all of the properties and
assets of the Company and its Restricted Subsidiaries on a Consolidated basis to
any other Person or group of affiliated Persons, unless at the time and after
giving effect thereto: (i) either (a) the Company shall be the continuing
corporation or (b) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries on a Consolidated basis (the "Surviving Entity") shall be a
corporation duly organized and validly existing under the laws of the United
States of America, any state thereof or the District of Columbia and such Person
assumes, by a supplemental indenture in a form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Notesnotes and the Indenture,
and the Indenture shall remain in full force and effect; (ii) immediately before
and immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Consolidated Net Worth of
the Company (or the Surviving Entity if the Company is not the continuing
obligor under the Indenture) is equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; (iv) immediately
before and immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred on the first day of the
four-quarter period immediately prior to the consummation of such transaction
with the appropriate adjustments with respect to the transaction being included
in such pro forma calculation), the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture) could incur $1.00 of
additional Indebtedness under the provisions of "--Certain
Covenants--Limitation"Certain Covenants-Limitation on
Indebtedness" (other than Permitted Indebtedness); (v) each Guarantor, if any,
unless it is the other party to the transactions described above, shall have by
supplemental indenture confirmed that its Guarantee shall apply to such Person's
obligations under the Indenture and the Notes;notes; (vi) if any of the property or
assets of the Company or any of its Restricted Subsidiaries would thereupon
become subject to any Lien, the provisions of "--
Certain Covenants--Limitation"Certain Covenants-Limitation on
Liens" are complied with; and (vii) the Company or the Surviving Entity shall
have delivered, or caused to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an officers' certificate and an opinion
of counsel, each to the effect that such consolidation, merger, transfer, sale,
assignment, conveyance, lease or other transaction and the supplemental
indenture in respect thereto comply with the Indenture and that all conditions
precedent herein provided for relating to such transaction have been complied
with.
(Section 801(a))
Each Guarantor shall not, and the Company will not permit a
Guarantor to, in a single transaction or through a series of related
transactions merge or consolidate with or into any other corporation (other than
the Company or any other Guarantor) or other entity, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets on a Consolidatedconsolidated basis to any entity (other than the
Company or any other Guarantor) unless at the time and after giving effect
thereto: (i) either (1) such Guarantor shall be the continuing corporation or
partnership or (2) the entity (if other than such Guarantor) formed by such
consolidation or into which such Guarantor is merged or the entity which
acquires by sale, assignment, conveyance, transfer, lease or disposition the
properties and assets of such Guarantor shall be a corporation duly organized
and validly existing under the lawsLaws of the United States, any state thereof or
the District of Columbia and shall expressly assume by a supplemental indenture,
executed and delivered to the Trustee, in a form reasonably satisfactory to the
Trustee, all the obligations of such Guarantor under its Guarantee and the
Indenture; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of
79
Default shall have occurred and be
continuing; and (iii) such Guarantor shall have delivered to the Trustee an
officers' certificate and an opinion of counsel in form and substance reasonably
satisfactory to the Trustee, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer, lease or disposition and such supplemental
indenture comply with the Indenture, and thereafter all obligations of the
predecessor shall terminate. The provisions of this paragraph shall not apply to
any transaction (including any Asset Sale made in accordance with "--Certain Covenants--Limitation"Certain
Covenants-Limitation on Sale of Assets") with respect to any Guarantor (i) if
the Guarantee of such Guarantor is released in connection with such transaction
in accordance with subparagraph (c)the last sentence of "--Certain Covenants--Limitation"Certain Covenants-Limitation on
IssuancesGuarantees by Restricted Subsidiaries" or (ii) if such transaction need not
comply with the provisions set forth in "Certain Covenants-Limitation on Sale of
GuaranteesAssets" because the properties or assets so sold, assigned, conveyed,
transferred, leased or otherwise disposed of and Pledges for Indebtedness" and Section 1414do not constitute an "Asset Sale"
by operation of the Indenture.
(Section 801(b))provisions of clause (y) of the last sentence of the
definition of Asset Sale.
In the event of any transaction (other than a lease) described in
and complying with the conditions listed in the immediately preceding paragraphs
in which the Company or any Guarantor is not the continuing corporation, the
successor Person formed or remaining shall succeed to, and be substituted for,
and may exercise every right and power of, the Company or such Guarantor, as the
case may be, and the Company or such Guarantor, as the case may be, would be
discharged from all obligations and covenants under the Indenture and the Notes. (Section 802)notes.
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture if:
(i) there shall be a default in the payment of any
interest on any Notenote when it becomes due and
payable, and such default shall continue for a
period of 30 days;
(ii) there shall be a default in the payment of the
principal of (or premium, if any, on) any Notenote at
its Maturity (upon acceleration, optional or
mandatory redemption, required repurchase or
otherwise);
(iii) (a) there shall be a default in the performance, or
breach, of any covenant or agreement of the Company
or any Guarantor under the Indenture (other than a
default in the performance, or breach, of a
covenant or agreement which is specifically dealt
with in clauses (i) or (ii) or in clauses (b), (c)
and (d) of this clause (iii)) and such default or
breach shall continue for a period of 30 days after
written notice has been given, by certified mail,
(x) to the Company by the Trustee or (y) to the
Company and the Trustee by the holders of at least
25% in aggregate principal amount of the
outstanding Notes,notes, specifying such default or
breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" under the
Indenture; (b) there shall be a default in the
performance or breach of the provisions described
in "--Consolidation,"Consolidation, Merger, Sale of Assets"; (c) the
Company shall have failed to make or consummate an
Offer in accordance with the provisions of "--Certain
Covenants--Limitation"Certain
Covenants-Limitation on Sale of Assets," or (d) the
Company shall have failed to make or consummate a
Change of Control Offer in accordance with the
provisions of "--Certain Covenants--Purchase"Certain Covenants-Purchase of Notesnotes
Upon a Change of Control";Control;"
(iv) one or more defaults shall have occurred under any
agreements, indentures or instruments under which
the Company, any Guarantor or any Subsidiary then
has outstanding Indebtedness in excess of $10,000,000$10.0
million in the aggregate and, if not already
matured at its final maturity in accordance with
its terms, such Indebtedness shall have been
accelerated;
(v) any Guarantee shall for any reason cease to be, or
be asserted in writing by any Guarantor or the
Company not to be, in full force and effect and
enforceable in accordance with its terms, except to
the extent contemplated by the Indenture and any
such Guarantee;
(vi) one or more judgments, orders or decrees for the
payment of money in excess of $5,000,000,$15.0 million, either
individually or in the aggregate (net of amounts
covered by insurance, bond,
80
surety or similar
instrument), shall be entered against the Company,
any Guarantor, any Subsidiary or any of their
respective properties and shall not be discharged
and either (a) any creditor shall have commenced an
enforcement proceeding upon such judgment, order or
decree or (b) there shall have been a period of 60
consecutive days during which a stay of enforcement
of such judgment or order, by reason of an appeal
or otherwise, shall not be in effect;
(vii) any holder or holders of at least $10,000,000$10.0 million in
aggregate principal amount of Indebtedness of the
Company, any Guarantor or any Subsidiary after a
default under such Indebtedness shall notify the
Trustee of the intended sale or disposition of any
assets of the Company, any Guarantor or any
Subsidiary that have been pledged to or for the
benefit of such holder or holders to secure such
Indebtedness or shall commence proceedings, or take
any action (including by way of set-off), to retain
in satisfaction of such Indebtedness or to collect
on, seize, dispose of or apply in satisfaction of
Indebtedness, assets of the Company, any Guarantor
or any Subsidiary (including funds on deposit or
held pursuant to lock-box and other similar
arrangements);
(viii) there shall have been the entry by a court of
competent jurisdiction of (a) a decree or order for
relief in respect of the Company, any Guarantor or
any Subsidiary in an involuntary case or proceeding
under any applicable Bankruptcy Law or (b) a decree
or order adjudging the Company, any Guarantor or
any Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or
composition of or in respect of the Company, any
Guarantor or any Subsidiary under any applicable
federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the
Company, any Guarantor or any Subsidiary or of any
substantial part of their respective properties, or
ordering the winding up or liquidation of their
affairs, and any such decree or order for relief
shall continue to be in effect, or any such other
decree or order shall be unstayed and in effect,
for a period of 60 consecutive days; or
(ix) (a) the Company, any Guarantor or any Subsidiary
commences a voluntary case or proceeding under any
applicable Bankruptcy Law or any other case or
proceeding to be adjudicated bankrupt or insolvent,insolvent;
(b) the Company, any Guarantor or any Subsidiary
consents to the entry of a decree or order for
relief in respect of the Company, any Guarantor or
such Subsidiary in an involuntary case or
proceeding under any applicable Bankruptcy Law or
to the commencement of any bankruptcy or insolvency
case or proceeding against it,it; (c) the Company, any
Guarantor or any Subsidiary files a petition or
answer or consent seeking reorganization or relief
under any applicable federal or state law,law; (d) the
Company, any Guarantor or any Subsidiary (x)
consents to the filing of such petition or the
appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Company,
any Guarantor or such Subsidiary or of any
substantial part of their respective properties,
(y) makes an assignment for the benefit of
creditors or (z) admits in writing its inability to
pay its debts generally as they become duedue; or (e)
the Company, any Guarantor or any Subsidiary takes
any corporate action in furtherance of any such
actions in this paragraph (ix). (Section
501)
If an Event of Default (other than as specified in clauses (viii)
and (ix) of the prior paragraph) shall occur and be continuing, the Trustee or
the holders of not less than 25% in aggregate principal amount of the Notesnotes then
outstanding may, and the Trustee at the request of such holders shall, declare
all unpaid principal of, premium, if any, and accrued interest on all of the
Notesnotes, to be due and payable immediately, by a notice in writing to the Company
(and to the Trustee if given by the holders of the Notes); provided that so
long as the Credit Agreement is in effect, such declaration shall not become
effective until the earlier of (a) five business days after receipt of such
notice of acceleration from the holders or the Trustee by the agent under the
Credit Agreement or (b) acceleration of the Indebtedness under the Credit
Agreement. Thereupon such principal shall become immediately due and payable,
and the Trustee may, at its discretion, proceed to protect and enforce the
rights of the holders of Notes
81
by appropriate judicial proceeding.notes). If an Event of
Default specified in clause (viii) or (ix) of the prior paragraph occurs and is
continuing, then all the Notesnotes shall ipso facto become and be immediately due
and payable, in an amount equal to the principal amount of the Notes,notes, together
with accrued and unpaid interest, if any, to the date the Notesnotes become due and
payable, without any declaration or other act on the part of the Trustee or any
Holder. The Trustee
or, if notice of acceleration is given by the Holders, the Holders shall give
notice to the agent under the Credit Agreement of any such acceleration.holder.
After a declaration of acceleration, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
holders of a majority in aggregate principal amount of Notesnotes outstanding by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences ifif: (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Notes,the notes, and (iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Notes; andnotes; (b) all Events of
Default, other than the non-paymentnonpayment of principal of the Notesnotes which have become
due solely by such declaration of acceleration, have been cured or waived; and
(c) the rescission will not conflict with any judgment or decree.
(Section 502)
The holders of not less than a majority in aggregate principal
amount of the Notesnotes outstanding, may, on behalf of the holders of all the Notesnotes,
waive any past defaults under the Indenture and its consequences, except a
default in the payment of the principal of, premium, if any, or interest on any
Note,note, or in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each Noteseries of notes
outstanding. (Section 513)
The Company is also required to notify the Trustee within five
business days of the occurrence of any Default.
(Section 501)
The Trust Indenture Act of 1939 contains limitations on the rights of the
Trustee, should it become a creditor of the Company or any Guarantor, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions,transactions; provided that if it acquires any
conflicting interest it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
LEGAL DEFEASANCE ORAND COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, elect to have theits
obligations of the Company and any Guarantor and any other obligor upon the
Notes, if any, discharged with respect to the outstanding Notesnotes ("defeasance"Legal
Defeasance"). Such defeasanceLegal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes,notes, except forfor: (i) the rights of holders of outstanding Notesthe notes to receive payments in
respect of the principal of, premium, if any, and interest on such
Notesthe notes when
such payments are due,due; (ii) the Company's obligations with respect to the Notesnotes
concerning issuing temporary Notes,notes, registration of Notes,notes, mutilated, destroyed,
lost or stolen Notes,notes and the maintenance of an office or agency for payment and money for security payments held in trust,payments;
(iii) the rights, powers, trusts,trust duties and immunities of the Trustee and the
Company's obligations in connection therewith; and (iv) the defeasanceLegal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company and any
Guarantor released with respect to
certain covenants that are described in the Indenture ("covenant defeasance"Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or an Event of Default with respect to the Notes.particular series of notes. In
the event covenant defeasanceCovenant Defeasance occurs, certain events (not including non-payment,
enforceability of any Guarantee, bankruptcy, receivership, reorganization and insolvency events) described under
"--Events"Events of Default" will no longer constitute an Event of Default with respect
to the Notes. (Sections 401, 402
and 403)
82
particular series of notes subject to such Covenant Defeasance.
In order to exercise either defeasanceLegal Defeasance or covenant defeasance,Covenant
Defeasance: (i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the Notes,notes cash in pounds sterling,
non-callable United States dollars, U.S.Kingdom Government Obligations, (as defined in the Indenture), or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationallyan internationally
recognized firm of independent public accountants, to pay and discharge the principal of,
premium, if any, and interest on the outstanding Notesnotes, on the Stated Maturity
of such principal or installment of principal (or on anystated date after December
15, 1998 (such date being referred to as the "Defeasance Redemption Date"), if
when exercising either defeasance or covenant defeasance, the Company has
delivered to the Trustee an irrevocable notice to redeem all of the
outstanding Notes on the Defeasance Redemption Date);for
payment thereof; (ii) in the case of defeasance,Legal Defeasance, the Company shall have
delivered to the Trustee, (x) an opinion of
independent counsel in the United States
statingreasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel in the United States shall confirm that, the holders of the outstanding Notesnotes
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasanceLegal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such defeasanceLegal Defeasance had not occurred;occurred and (y) an opinion of counsel in
the United Kingdom or a ruling of the Inland Revenue of the United Kingdom to
the effect that holders of the notes will not recognize income, gain or loss for
United Kingdom income tax or other tax purposes as a result of such termination
and will be subject to United Kingdom income tax and other tax on the same
amounts, in the same manner and at the same times as would have been the case
had such Legal Defeasance not occurred (and for purposes of such opinion, such
United Kingdom counsel shall assume that holders of the notes include holders
who are not resident in the United Kingdom); (iii) in the case of covenant defeasance,Covenant
Defeasance, the Company shall have delivered to the Trustee an opinionopinions of independent counsel
in the United States and counsel in the United Kingdom reasonably acceptable to
the effectTrustee confirming that the holders of the outstanding Notesnotes will not recognize income,
gain or loss for United States federal income tax purposes or United Kingdom
income tax purposes as a result of such covenant defeasanceCovenant Defeasance and will be subject
to United States federal income tax and United Kingdom income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasanceCovenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other that a
Default or insofar as clause (vii) or (viii) under the first paragraph under "--EventsEvent of Default" are concerned, at any time during the period ending on the 91st day
after the date of deposit; (v) such defeasance or covenant defeasance shall
not cause the Trustee for the Notes to have a conflicting interestDefault with respect to any securitiesthe Indenture resulting from the
Incurrence of Indebtedness, all or a portion of which will be used to defease
the Companynotes concurrently with such Incurrence); (v) such Legal Defeasance or
any Guarantor; (vi) such
defeasance or covenant defeasanceCovenant Defeasance shall not result in a breach or violation of, or constitute
a default under, the Indenture or any other material agreement or instrument to
which the Company or any Guarantorof its Subsidiaries is a party or by which itthe Company
or any of its Subsidiaries is bound; (vi) the Company shall have delivered to
the Trustee an officers' certificate stating that the deposit was not made by
the Company with the intent of preferring the holders of the notes over any
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others; (vii) the
Company shall have delivered to the Trustee an opinionofficers' certificate and
opinions of independentcounsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with; (viii) the Company shall have delivered to the Trustee opinions of counsel
to the effect that (A) the trust funds will not be subject to any rights of
holders of Senior Indebtedness or Senior Guarantor
Indebtedness, including, without limitation, those arising underof the IndentureCompany other than the notes and (B) assuming no
intervening bankruptcy of the Company between the date of deposit and the 91st
day following the deposit and that no holder of the notes is an insider of the
Company, after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (viii) the Company
shall have delivered to the Trustee an officers' certificate stating that the
deposit was not made by the Company with the intent of preferring the holders
of the Notes or any Guarantee over theand (ix) certain other
creditors of the Company or any
Guarantor with the intent of defeating, hindering, delaying or defrauding
creditors of the Company, any Guarantor or others; (ix) no event or condition
shall exist that would prevent the Company from making payments of the
principal of, premium, if any, and interest on the Notes on the date of such
deposit or at any time ending on the 91st day after the date of such deposit;
and (x) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that allcustomary conditions precedent provided for relating to eitherspecified in the defeasance or the covenant
defeasance, as the case may be, have been complied with. (Section 404)Indenture are satisfied.
SATISFACTION AND DISCHARGE
The Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of the Notes,notes, as
expressly provided for in the Indenture) as to all outstanding Notesnotes when (a)
either (i) all the Notesnotes theretofore authenticated and delivered (except lost,
stolen or destroyed Notesnotes which have been replaced or paid) cancelledcanceled or have
been delivered to the Trustee for cancellation or (ii) all Notesnotes not theretofore
delivered to the Trustee cancelledcanceled or for cancellation (x) have become due and
payable, (y) will become due and payable at their Stated Maturity within one
83
year, or (z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee
funds in an amount sufficient to pay and discharge the entire indebtedness on
the Notesnotes not theretofore delivered to the Trustee cancelledcanceled or for cancellation,
including principal of, premium, if any, and accrued interest at such Stated
Maturity or redemption date; (b) the Company or any Guarantor has paid or caused
to be paid all other sums payable under the Indenture by the Company or any
Guarantor; and (c) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel each stating that (i) all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with and (ii) such satisfaction and discharge will
not result in a breach or violation of, or constitute a default under, the
Indenture or any other material agreement or instrument to which the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound.
(Section 1301)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the Indenture with respect to the
notes may be made by the Company, each Guarantor, if any, and the Trustee with
the consent of the Holdersholders of not less than a majority in aggregate outstanding
principal amount of the Notes;notes; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Notenote
affected thereby: (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Notenote or reduce the principal amount thereof or
the rate of interest thereon or any premium payable upon the redemption thereof,
or change the coin or currency in which the principal of any Notenote or any premium
or the interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof;
(ii) amend, change or modify the obligation of the Company to make and
consummate an Offer with respect to any Asset Sale or Asset Sales in accordance
with "--Certain
Covenants--Limitation"Certain Covenants-Limitation on Sale of Assets" or the obligation of the
Company to make and consummate a Change of Control Offer in the event of a
Change of Control in accordance with "--Certain Covenants--Purchase"Certain Covenants-Purchase of Notesnotes Upon a
Change of Control," including amending, changing or modifying any definitions
with respect thereto; (iii) reduce the percentage in principal amount of
outstanding Notes,notes, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required for any
waiver; (iv) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past defaults or
relating to the waiver of certain covenants, except to increase the percentage
of outstanding Notesnotes required for such actions or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each Notenote affected thereby; (v) except as otherwise permitted
under "--Consolidation,"Consolidation, Merger, Sale of Assets," consent to the assignment or
transfer by the Company or any Guarantor of any of its rights and obligations
under the Indenture; or (vi) amend or modify any of the provisions of the
Indenture relating to cause the subordination of the Notesnotes or any Guarantee into be subordinate to any manner adverse to the holders of the Notes or any Guarantee.
(Section 902)other
Indebtedness.
The holders of not less than a majority in aggregate principal
amount of the Notesnotes outstanding may waive compliance with certain restrictive
covenants and provisions of the Indenture. (Section 1021)Indenture, as they relate to such series of
notes.
GOVERNING LAW
The Indenture, the Notesnotes and the Guarantees arewill be governed by,
and construed in accordance with the laws of the State of New York, without
giving effect to the conflicts of law principles thereof. SAME-DAY SETTLEMENT AND PAYMENT
Settlement forUnder the NotesJudiciary
Law of the State of New York, a judgment or decree in an action based upon an
obligation denominated in a currency other than United States dollars will be
maderendered in the foreign currency of the underlying obligation and converted into
United States dollars at a rate of exchange prevailing on the date of entry of
the judgment or decree.
THE TRUSTEE
The Indenture will provide that, except during the continuance of
an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the applicable Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers vested in it
by the Indenture, and use the same day funds. Alldegree of care and skill in its exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
Each Indenture and the provisions of the Trust Indenture Act
contain certain limitations on the rights of the Trustee, should it become a
creditor of the Company, to obtain payments of principal and interestclaims in certain cases or to
realize on certain property received in respect of any such claim as security or
otherwise. Subject to the Trust Indenture Act, the Trustee will be made bypermitted to
engage in other transactions; provided that if the Company in same day funds. The
Notes will tradeTrustee acquires any
conflicting interest as described in the Same-Day Funds
84
Settlement System of The Depository Trust Company (the "Depositary"Indenture Act, it must eliminate
such conflict or "DTC")
until maturity, and secondary market trading activity for the Notes will
therefore settle in same day funds.resign.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes are tonew notes will be issued initially in the form of
oneunrestricted global notes (the "Global Note". The
Global Note will beNotes") deposited on the date of the closing of the sale of the
Exchange Offer with the TrusteePaying Agent
in London, Citibank, N.A., as custodian forcommon depositary (in such capacity, the Depository Trust Company,
New York, New York ("DTC""Common
Depositary") and registered, in the name of Cede & Co. or such
otherCitivic Nominees Ltd., as nominee for Euroclear and
Cedelbank. Except as DTC may designate. If any Holders elect to take physical
delivery of their certificates instead of holding their interest through the
Global Note (and thus are unable to trade through DTC), such certificates will
be issueddescribed in registered form without interest coupons ("Certificated Notes").
The Global Certificates. The Company expects that pursuant to procedures
established by DTC (i) upon deposit of the Global Note, DTC or its custodian
will credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Note to the
accounts of persons who have accounts with DTC and (ii) ownership ofthis prospectus, beneficial interests in the
Global NoteNotes will be shown on, and the transfer of
ownershiptransfers thereof will be effected only
through, records maintained in book-entry form by DTC or
its nominee (withEuroclear and Cedelbank.
DEPOSITARY PROCEDURES
Euroclear and Cedelbank. We understand as follows with respect to
interestEuroclear and Cedelbank: Euroclear and Cedelbank each hold securities for their
holders and facilitate the clearance and settlement of participants)securities transactions
by electronic book-entry transfer between their respective holders, thereby
eliminating the need for physical movements of certificates and any risk from
lack of simultaneous transfers of securities. Euroclear and Cedelbank each
provide various services including safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Each of Euroclear and Cedelbank can settle securities transactions in
any of more than 30 currencies, including pounds sterling. Euroclear and
Cedelbank each also deal with domestic securities markets in several countries
through established depository and custodial relationships. The respective
systems of Euroclear and Cedelbank have established an electronic bridge between
their two systems across which their respective holders may settle trades with
each other. Account holders in both Euroclear and Cedelbank are world-wide
financial institutions including underwriters, securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to both
Euroclear and Cedelbank is available to other institutions that clear through or
maintain a custodial relationship with a holder of either system. A holder's
overall contractual relations with either Euroclear or Cedelbank are governed by
the recordsrespective rules and operating procedures of participants (withEuroclear or Cedelbank and any
applicable laws. Both Euroclear and Cedelbank act under such rules and operating
procedures only on behalf of their respective holders and have no record of or
relationship with any persons who are not direct holders.
Investors who hold accounts with Euroclear or Cedelbank may
acquire, hold and transfer security entitlements with respect to Global Notes
against Euroclear or Cedelbank and its respective property by book-entry to
accounts with Euroclear or Cedelbank, each of which has an account with the
Common Depositary and subject at all times to the procedures and requirements of
Euroclear or Cedelbank, as the case may be. "Security entitlement" means the
rights and property interests of personsa holder against its securities intermediary
under applicable law in or with respect to a security, including any ownership,
co-ownership, contractual or other rights. Investors who do not have accounts
with Euroclear or Cedelbank may acquire, hold and transfer security entitlements
with respect to a Global Note against the securities intermediary and its
property with which such investors hold accounts by book-entry to accounts with
such securities intermediary, which in turn may hold a security entitlement with
respect to the Global Note through Euroclear or Cedelbank. Investors electing to
acquire security entitlements with respect to a Global Note through an account
with Euroclear or Cedelbank or some other securities intermediary must follow
the settlement procedures of their securities intermediary with respect to the
settlement of new issues of securities. Security entitlements with respect to
the Global Notes to be acquired through an account with Euroclear or Cedelbank
will be credited to such account as of the settlement date against payment in
pounds sterling for value as of the settlement date. Investors electing to
acquire, hold or transfer security entitlements with respect to a Global Note
through an account with Euroclear, Cedelbank or some other securities
intermediary other than participants).
Ownershipin connection with the initial distribution of beneficialthe notes
must follow the settlement procedures of their securities intermediary with
respect to the settlement of secondary market transactions in securities.
Except as described below, owners of interests in the Global
NoteNotes will not have notes registered in their names, will not receive physical
delivery of notes in certificated form and will not be limited to
persons who have accounts with DTC ("participants")considered the registered
owners or persons who hold
interests through participants. Holdersholders of the Notes may hold their interests
in the Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.notes for any purpose. So long as DTC, or its nominee,the Common Depositary is
the registered owner or holder of thea Global Note, DTC or such nominee, as the case may be,party will be considered
the sole record owner or holder of the Notesnotes represented by thesuch Global Note for all
purposes under the Indentureindenture and the Notes. Nonotes. Accordingly, each person owning a
beneficial owner of an interest in thea Global Note willmust rely on the procedures of Euroclear
and Cedelbank, as the case may be, ableand their participants or holders to transfer such interest except in
accordance with DTC's applicable procedures, in addition to those provided forexercise
any rights and remedies of a holder under the Indenture. Payments of the principal of, premium (if any)
and interest (including
liquidated damages) on the Global NoteNotes will be made to DTC or its nominee,the Common Depositary on behalf
of Euroclear and Cedelbank, as the case may be, as the registered owners
thereof.
The laws of some countries and some states in the United States
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such persons may be limited to that extent.
Because Euroclear and Cedelbank can act only on behalf of their respective
participants or holders, as the case may be, the ability of a person having
beneficial interests in a Global Note to pledge such interests to persons or
entities that do not participate in the relevant clearing system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests.
The CUSIP for the new notes is 137219 AG 6. The ISIN number for
the new notes is US137219AG66. The new notes have been accepted for clearance by
Euroclear and Cedelbank under the common code 010585295.
PAYMENTS ON THE GLOBAL NOTES
Payments in respect of the principal of, premium, if any, and
interest on a Global Note will be made through the Paying Agent and will be
payable to the Common Depositary on behalf of Euroclear and Cedelbank each in
its capacity as the registered holder of the notes under the Indenture. Under
the terms of the indenture, the Company and the Trustee will treat the persons
in whose names the notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, none of the Company, the Trustee, or
any agent of the Company, or the Trustee has or will have any responsibility or
liability for
(1) any aspect or accuracy of the records of the relevant
clearing system, the participants therein or the holders
thereof, as the case may be, relating to payments made on
account of beneficial ownership interests in the Global
Notes, or for maintaining, supervising or reviewing any
records of such clearing system, participant or holder
relating to beneficial ownership interests in the Global
Notes, or
(2) any other matter relating to the actions and practices of
the relevant clearing system or the participants therein
or the holders thereof.
Euroclear or Cedelbank upon receipt of any such payment, will
immediately credit the accounts of their relevant participants or holders, as
the case maybe, with payments in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Notes, as
shown on the records of Euroclear or Cedelbank. The Company expects that
payments by such participants or holders, as the case may be, to the beneficial
owners of Global Notes will be governed by standing instructions and customary
practices and will be the responsibility of such participants or holders.
Neither the Company nor the Trustee will have responsibility or liability for
the payment of amounts owing in respect of beneficial interests in the Global
Notes held by the Common Depositary for Euroclear and Cedelbank.
TRANSFERS OF GLOBAL SECURITIES AND INTERESTS THEREIN
Unless definitive securities are issued, the Global Notes may be
transferred, in whole and not in part, only by Euroclear and Cedelbank to the
Common Depositary, as the case may be, or by the Common Depositary to Euroclear
and Cedelbank, respectively, or to another nominee or successor thereof or a
nominee of such successor.
Transfers of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of Euroclear and Cedelbank, as
the case maybe, and their respective holders and intermediaries. Any secondary
market trading activity in beneficial interests in the Global Notes is expected
to occur through the participants or holders and intermediaries, as the case may
be, of Euroclear and Cedelbank, and the securities custody accounts of investors
will be credited with their holdings against payment in same-day funds on the
settlement date.
No service charge will be made for any registration of transfer
or exchange of the notes, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith.
Although Euroclear and Cedelbank have agreed to various
procedures to facilitate transfers of interests in the Global Notes among
participants and holders in Euroclear and Cedelbank, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither we, the Trustee, nor any
agent of ours or the Trustee will have any responsibility for the nonperformance
or misperformance (as a result of insolvency, mistake, misconduct or otherwise)
by Euroclear or Cedelbank or their respective participants, indirect
participants, holders or intermediaries of their respective obligations under
the rules and procedures governing their operations.
We understand that under existing industry practices, if we or
the Trustee requests any action of holders of notes, or if an owner of a
beneficial interest in a Global Note desires to give instructions or take an
action that a holder is entitled to give or take under the indenture, Euroclear
or Cedelbank, as the case may be, would authorize their respective participants
or holders, as the case may be, owning the relevant beneficial interest to give
instructions to take such action, and such participants or holders would
authorize indirect participants or intermediaries to give instructions or take
such action, or would otherwise act upon the instructions of such indirect
participants or intermediaries. Euroclear or Cedelbank is not required to
authorize holders to take any action.
We understand that under existing practices of Euroclear or
Cedelbank if less than all of the notes are to be redeemed at any time,
Euroclear or Cedelbank, as the case may be, will credit their participants' or
holders' accounts on a proportionate basis, with adjustments to prevent
fractions, or by lot or on such other basis as Euroclear or Cedelbank, as the
case may be, deems fair and appropriate, provided that no beneficial interests
of less than (pound)1,000, may be redeemed in part.
CERTIFICATED NOTES
Beneficial interests in a Global Note are exchangeable for
definitive notes in registered certificated form only (i) (in whole but not in
part) either Euroclear or Cedelbank is closed for business for a continuous
period of 14 days (other than by reason of holiday, statutory or otherwise) or
announces an intention permanently to cease business or does in fact do so and
no alternative clearance system satisfactory to the Trustee is available, or
(ii) (in part) an Event of Default under the Indenture occurs and is continuing,
upon the request delivered in writing to Euroclear and/or Cedelbank, the Trustee
or the Common Depositary (iii) (in whole but not in part) at any time the
Company in its sole discretion determines that the Global Notes should be
exchanged for definitive notes or (iv) (in whole but not in part) the Common
Depositary is at any time unwilling or unable to continue as Common Depositary
and a successor depositary is not able to be appointed by the Company within 90
days.
Any certificated notes will be issued in registered form in
denominations of (pound)1,000 in nominal amount and integral multiples thereof.
In all cases, certificated notes delivered in exchange for any Global Note or
beneficial interest in the Global Notes will be registered in the names, and
issued in any approved denominations, requested by or on behalf of Euroclear or
Cedelbank, as the case may be, in accordance with their customary procedures.
The notes may not be issued in bearer form.
In the case of the issuance of certificated notes in the limited
circumstances set forth above, the holder of any such certificated note may
transfer such note by surrendering it at the offices or agencies of the Company
maintained for such purpose within the City and State of New York. Until
otherwise designated by the Company, the Company's office or agency in the City
and State of New York and London, England, respectively, will be the offices of
the Trustee maintained for such purpose. In the event of a partial transfer of a
holding of notes represented by one certificate, or partial redemption of such a
holding represented by one certificate, a new certificate shall be issued to the
transferee in respect of the part transferred or redeemed and a further new
certificate in respect of the balance of the holding not transferred or redeemed
shall be issued to the transferor, provided that no certificate in denominations
less than (pound)1,000 shall be issued. Each new certificate to be issued shall
be available for delivery within ten business days at the office of the Trustee.
The cost of preparing, printing, packaging and delivering the certificated notes
shall be borne by the Company.
The Company shall not be required to register the transfer or
exchange of certificated notes for a period of 15 days preceding
(a) the due date for any payment of principal of or interest on
the notes or
(b) the date fixed for a selection of notes to be redeemed.
Also, the Company is not required to register the transfer or
exchange of any notes selected for redemption. In the event of the transfer of
any certificated note, the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a holder to pay any taxes and fees required by law and permitted by the
indenture and the notes.
If certificated notes are issued and a holder of a certificated
note claims that the note has been lost, destroyed or wrongfully taken or if
such note is mutilated and is surrendered to the Trustee, the Company shall
issue and the Trustee shall authenticate a replacement note if the Trustee's and
the Company's requirements are met. If required by the Trustee or the Company,
an indemnity bond sufficient in the judgment of both to protect the Company, the
Trustee or any paying agent or authenticating agent appointed pursuant to the
indenture from any loss which any of them may suffer if a note is replaced must
be posted. The Company may charge for its expenses in replacing a note.
In case any such mutilated, destroyed, lost or stolen note has
become or is about to become due and payable, or is about to be redeemed or
purchased by the Company pursuant to the provisions of the Indenture, the
Company in its discretion may, instead of issuing a new note, pay, redeem or
purchase such note, as the case may be.
To the extent permitted by law, the Company, the Paying Agent,
the Registrar and the Transfer Agent shall be entitled to treat the person in
whose name any certificated note is registered as the absolute owner thereof.
The Indenture will contain provisions relating to the maintenance of a register
reflecting ownership of certificated notes, if any, and other provisions
customary for a registered debt security including registration as to both
principal and stated interest and restrictions on transfer except by surrender
of a certificated note and either the reissuance of such certificated note or
the issuance of a new certificated note to the new holder. Payment of principal
on each certificated note will be made to the holder against presentation and
surrender. Payment of interest on each certificated note will be made to the
holder appearing on the register at the close of business on the record date at
his address shown on the register on the record date.
None of the Company, the Trustee, the Depositary or any Paying
Agent will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial
ownershipany Book-Entry Interest.
TRANSFER AND EXCHANGE
A holder may transfer or exchange interests in the notes in
accordance with procedures described in "Book-Entry; Delivery and Form". The
registrar and the Trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
holder to pay any taxes and fees required by law or permitted by the indenture.
The Company is not required to transfer or exchange any note selected for
redemption. Also, the Company is not required to transfer or exchange any note
for a period of 15 days before a selection of notes to be redeemed. The
registered holder of a note will be treated as the owner of it for all purposes.
REDEMPTION OF GLOBAL NOTES
In the event that any Global Note or for maintaining, supervising or
reviewing(or any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any paymentportion thereof) is
redeemed, the Depositary will redeem an equal amount of the principal of, premium (if any) and interest (including liquidated damages)
on, theBook-Entry Interests
in such Global Note from the amount received by it in respect to the redemption
of such Global Note. The redemption price payable in connection with the
redemption of such Book-Entry Interests will credit participants' accountsbe equal to the amount received by
the Depositary in connection with payments in
amounts proportionate to their respective beneficial interests in the principal amountredemption of such Global Note (or any
portion thereof).
RESIGNATION OF COMMON DEPOSITARY
The Common Depositary may at any time resign as shown onCommon Depositary
by written notice to the recordsCompany and the Trustee, such resignation to become
effective upon the appointment of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interestsa successor Common Depositary, in which case
the Global Note held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of
Certificated Notes for any reason, including to sell Notes to persons in
states which require physical delivery of such Notes or to pledge such Notes,
such holder must transfer its interest in the Global Note in accordance with
the normal procedures of DTC and the procedures set forth in the Indenture.
85
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a participant, either directly or indirectly
("indirect participants").
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of,
and cause the same toshall be delivered to such person or persons (or the nominee
of any thereof). In addition, if DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and asuccessor. If no successor depositary is nothas been
so appointed by the Company within 90 days, certificated notes shall be issued
in exchange therefor as described above.
LISTING
The Company has applied to list the notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the notes and the
certificate of incorporation of the Company will issue Certificated
Notesbe registered prior to the
listing with the Chief Registrar of the District Court in exchangeLuxembourg, where such
documents are available for inspection and where copies thereof can be obtained
upon request. In addition, as long as the Global Note.notes are listed on the Luxembourg
Stock Exchange, an agent for making payments on, and transfers of, notes will be
maintained in Luxembourg. The Company has initially designated Paribas
Luxembourg as its agent for this purpose.
REPORTS
The Trustee will immediately send to Euroclear, Cedelbank and
DTC, a copy of any notices, reports and other communications received relating
to the Company, the notes, the Guarantees or the Book-Entry Interests.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Restricted Subsidiary or (ii) assumed
in connection with the acquisition of assets from such Person, in each case,
other than Indebtedness incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary or such acquisition. Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary.
"Affiliate" means, with respect to any specified Person,Person: (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person orPerson; (ii) any other Person
that owns, directly or indirectly, 5% or more of such Person's Capital Stock or
any officer or director of any such Person or other Person or, with respect to
any natural Person, any person having a relationship with such Person by blood,
marriage or adoption not more remote than first cousincousin; or (iii) any other
Person 10% or more of the voting Capital Stock of which are beneficially owned
or held directly or indirectly by such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer,
lease or other disposition (including, without limitation, by way of merger,
consolidation or Sale and Leaseback Transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, ofof: (i) any
Capital Stock of any Restricted Subsidiary; (ii) all or substantially all of the
properties and assets of any division or line of business of the Company or its
Restricted Subsidiaries; or (iii) any other properties or assets of the Company
or any Restricted Subsidiary, other than in the ordinary course of business. For
the purposes of this definition, the term "Asset Sale" shall not include (x) any
transfer of properties and assets (A) that is governed by the first paragraph
under "--
Consolidation,"Consolidation, Merger, Sale of Assets" or (B) that is of the 86
Company to
any Wholly OwnedRestricted Subsidiary, or of any Subsidiary to the Company or any Wholly Owned Subsidiary
in accordance with the terms of the Indenture or (y) transfers of properties and
assets in any given fiscal year with an aggregate Fair Market Value of less than
$1,000,000.$3,000,000.
"Asset Swap" means the execution of a definitive agreement,
subject only to customary closing conditions, that the Company in good faith
believes will be satisfied, for a substantially concurrent purchase and sale, or
exchange, of Productive Assets between the Company or any of its Restricted
Subsidiaries and another Person or group of affiliated Persons; it being
understood that an Asset Swap may include a cash equalization payment made in
connection therewith provided that such cash payment, if received by the Company
or its Subsidiaries, shall be deemed to be proceeds received from an Asset Sale
and applied in accordance with "Certain Covenants-Limitation on Sale of Assets."
"Average Life to Stated Maturity" means, as of the date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled principal
payment of such Indebtedness multiplied by (b) the amount of each such principal
payment by (ii) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of
1978, as amended, or any similar United States Federal or State law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Barton Letter of Credit""Borrowing Base" means the "Barton Lettersum of Credit" issued to
American National Bank(i) 85% of accounts receivable
of the Company and Trustits Subsidiaries and (ii) 50% of the net book value of the
inventory of the Company of Chicago,and its Subsidiaries, in each case, as escrowee, under the
Credit Agreement.determined on a
consolidated basis in accordance with GAAP.
"Capital Lease Obligation" means any obligations of the Company
and its Restricted Subsidiaries on a Consolidated basis under any capital lease
of real or personal property which, in accordance with GAAP, has been recorded
as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of the Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" means Canandaigua Wine Company,Brands, Inc., a corporation
incorporated under the laws of Delaware, until a successor Person shall have
become such pursuant to the applicable provisions of the Indenture, and
thereafter "Company" shall mean such successor Person.
"Consolidated Fixed Charge Coverage Ratio" of the Company means,
for any period, the ratio of (a) the sum of Consolidated Net Income (Loss),
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges deducted in computing Consolidated Net Income (Loss) in each
case, for such period, of the Company and its Restricted Subsidiaries on a
Consolidated basis, all determined in accordance with GAAP to (b) the sum of
Consolidated Interest Expense for such period and cash and non-cash dividends
paid on any Preferred Stock of the Company and its Restricted Subsidiaries
during such period; provided that (i) in making such computation, the
Consolidated Interest Expense attributable to interest on any Indebtedness
computed on a pro forma basis and (A) bearing a floating interest rate, shall be
computed as if the rate in effect on the date of computation had been the
applicable rate for the entire period and (B) which was not outstanding during
the period for which the computation is being made but which bears, at the
option of the Company, a fixed or floating rate of interest, shall be computed
by applying at the option of the Company, either the fixed or floating rate and
(ii) in making such computation, the Consolidated Interest Expense of the
Company attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the applicable period.
87
"Consolidated Income Tax Expense" means for any period, as
applied to the Company, the provision for federal, state, local and foreign
income taxes of the Company and its ConsolidatedRestricted Subsidiaries for such period as
determined in accordance with GAAP on a Consolidated basis.
"Consolidated Interest Expense" of the Company means, without
duplication, for any period, the sum of (a) the interest expense of the Company
and its ConsolidatedRestricted Subsidiaries for such period, on a Consolidated basis,
including, without limitation, (i) amortization of debt discount, (ii) the net
cost under interest rate contracts (including amortization of discounts), (iii)
the interest portion of any deferred payment obligation and (iv) accrued
interest, plus (b) (i) the interest component of the Capital Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by the Company and its
Restricted Subsidiaries during such period and (ii) all capitalized interest of
the Company and its ConsolidatedRestricted Subsidiaries, in each case as determined in
accordance with GAAP on a basis. Whenever pro forma effect is to be given to an
acquisition or disposition of assets for the purpose of calculating the
Consolidated basis.Fixed Charge Coverage Ratio, the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection with such
acquisition or disposition of assets, shall be calculated on a pro forma basis
in accordance with Regulation S-X under the Securities Act, as in effect on the
date of such calculation.
"Consolidated Net Income (Loss)" of the Company means, for any
period, the Consolidated net income (or loss) of the Company and its ConsolidatedRestricted
Subsidiaries for such period as determined in accordance with GAAP on a
Consolidated basis, adjusted, to the extent included in calculating such net
income (loss), by excluding, without duplication,duplication: (i) all extraordinary gains or
losses (less all fees and expenses relating thereto),; (ii) the portion of net
income (or loss) of the Company and its ConsolidatedRestricted Subsidiaries allocable to
minority interests in unconsolidated Persons to the extent that cash dividends
or distributions have not actually been received by the Company or one of its
Consolidated Subsidiaries,Restricted Subsidiaries; (iii) net income (or loss) of any Person combined with
the Company or any of its Restricted Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination,combination; (iv) any gain
or loss, net of taxes, realized upon the termination of any employee pension
benefit plan,plan; (v) net gains (but not losses) (less all fees and expenses
relating thereto) in respect of dispositions of assets other than in the
ordinary course of business,business; or (vi) the net income of any Restricted Subsidiary
to the extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Restricted Subsidiary or its stockholders. Whenever pro forma
effect is to be given to an acquisition or disposition of assets for the purpose
of calculating the Consolidated Fixed Charge Coverage Ratio, the amount of
income or earnings related to such assets shall be calculated on a pro forma
basis in accordance with Regulation S-X under the Securities Act, as in effect
on the date of such calculation.
"Consolidated Net Tangible Assets" means with respect to any
Person, as of any date of determination, the book value of such Persons total
assets, less goodwill, deferred financing costs and other intangibles and less
accumulated amortization, shown on the most recent balance sheet of such Person,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth" of any Person means the Consolidated
stockholders' equity (excluding Redeemable Capital Stock) of such Person and its
subsidiaries, as determined in accordance with GAAP on a Consolidated basis.
"Consolidated Non-cash Charges" of the Company means, for any
period, the aggregate depreciation, amortization and other non-cash charges of
the Company and its Consolidated subsidiariesRestricted Subsidiaries for such period, as
determined in accordance with GAAP on a Consolidated basis (excluding any
non-cash charge which requires an accrual or reserve for cash charges for any
future period).
"Consolidation" means, with respect to any Person, the
consolidation of the accounts of such Person and each of its subsidiaries if and
to the extent the accounts of such Person and each of its subsidiaries would
normally be consolidated with those of such Person, all in accordance with GAAP.
The term "Consolidated" shall have a similar meaning.
"Credit Agreement" means the Credit Agreement, dated as of
June 29, 1993,October 6, 1999, between the Company, the Subsidiaries of the Company identified
on the signature pages thereof, under the caption "Subsidiary Guarantors," the lenders named therein, and The Chase Manhattan
Bank, as administrative agent, including any ancillary
documents executed in connection therewith, as such agreement has and may be
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified from time to time (including, without
limitation, any successivedeferrals, renewals, extensions,
substitutions,replacements, refinancings restructurings, replacements, supplementations or otherrefundings thereof or amendments, modifications or
supplements thereto and any agreements therefor (including any of the foregoing). For all purposes under the Indenture, "Credit Agreement" shall
include any amendments, renewals, extensions, substitutions, refinancings,
restructurings, replacements,
88
supplements or any other modificationsforegoing
that increase the principal amount of
the Indebtedness or the commitments to lend
thereunder and have been made in compliance with the provisions of "--Certain Covenants--Limitation"Certain
Covenants-Limitation on Indebtedness"; provided that, for purposes of the
definition of "Permitted Indebtedness," no such increase may result in the principal
amount of Indebtedness of the Company under the Credit Agreement exceeding the
amount permitted by subparagraph (b)(i) of "--Certain Covenants--Limitation"Certain Covenants-Limitation on
Indebtedness."Indebtedness"), whether by or with the same or any other lender, creditor, group
of lenders or group of creditors, and including related notes, guarantees and
note agreements and other instruments and agreements executed in connection
therewith.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Designation" has the meaning set forth under "Certain
Covenants-Designation of Unrestricted Subsidiaries."
"Designation Amounts" has the meaning set forth under "Certain
Covenants-Designation of Unrestricted Subsidiaries."
"Domestic Restricted Subsidiary" means a Restricted Subsidiary of
the Company organized under the laws of the United States or any political
subdivision thereof or the operations of which are located substantially inside
the United States.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any asset or property,
the sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary of
the Company not organized under the laws of the United States or any political
subdivision thereof and the operations of which are located substantially
outside of the United States.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles in the United States, consistently
applied, which are in effect on the date of the Indenture.
"Guarantee" means the guarantee by anyeach Guarantor of the
Company's Indenture Obligations pursuant to a guarantee given in accordance with
the Indenture, including the Guarantees by the Guarantors and any Guarantee
delivered pursuant to provisions of "--Certain Covenants--Limitation"Certain Covenants-Limitation on Issuances of
Guarantees
of and Pledges for Indebtedness.by Restricted Subsidiaries."
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
contained in this Section guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include endorsements
for collection or deposit, in either case in the ordinary course of business.
"Guarantor" means the Subsidiaries listed on the signature pages
of the Indenture as guarantors and each other Subsidiary, formed, created or
acquired after the Issue Date, required to become a Guarantor after the Issue
Date, pursuant to "Certain Covenants-Limitation on Guarantees by Restricted
Subsidiaries."
"Hedging Agreement" means, with respect to any Person, all
interest rate swap or similar agreements or foreign currency or commodity hedge,
exchange or similar agreements of such Person.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Person under Hedging Agreements.
"holders" mean the registered holders of the notes.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall
have meanings correlative to the foregoing). Indebtedness of any Acquired Person
or any other guarantor of its Subsidiaries existing at the Indenture Obligations.time such Acquired Person becomes a
Subsidiary (or is merged into or consolidated with the Company or any
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Subsidiary (or being merged into or consolidated with the Company or any
Subsidiary), shall be deemed Incurred at the time any such Acquired Person
becomes a Subsidiary or merges into or consolidates with the Company or any
Subsidiary.
"Indebtedness" means, with respect to any Person, without
duplication,duplication: (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit issued under
letter of credit facilities, acceptance facilities or other similar facilities
and in connection with any agreement to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or hereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of 89
business, (iv) all obligations under Interest Rate AgreementsHedging Obligations of such Person, (v) all Capital Lease
Obligations of such Person, (vi) all Indebtedness referred to in clauses (i)
through (v) above of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien, upon or
with respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vii) all Guaranteed Debt of such
Person, (viii) all Redeemable Capital Stock valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends, and (ix) any amendment, supplement, modification, deferral, renewal,
extension, refunding or refinancing of any liability of the types referred to in
clauses (i) through (viii) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
the Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value to be determined
in good faith by the board of directors of the issuer of such Redeemable Capital
Stock.
"Indenture Obligations" means the obligations of the Company and
any other obligor under the Indenture or under the Notes,notes, including any
Guarantor, to pay principal of, premium, if any, and interest when due and
payable, and all other amounts due or to become due under or in connection with
the Indenture, the Notesnotes and the performance of all other obligations to the
Trustee and the Holdersholders under the Indenture and the Notes,notes, according to the
terms thereof.
"Interest Rate Agreements""Insolvency or Liquidation Proceeding" means, onewith respect to any
Person, any liquidation, dissolution or morewinding up of the following agreements
which shall be entered into by onesuch Person, or more financial institutions: interest
rate protection agreements (including, without limitation, interest rate
swaps, caps, floors, collars andany
bankruptcy, reorganization, insolvency, receivership or similar agreements) and/proceeding with
respect to such Person, whether voluntary or other types of
interest rate hedging agreements from time to time.involuntary.
"Investments" means, with respect to any Person, directly or
indirectly, any advance, loan (including guarantees), or other extension of
credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities issued or owned by,
any other Person and all other items that would be classified as investments on
a balance sheet prepared in accordance with GAAP.
"Investment Grade" means a rating of (i) BBB- or higher by S&P
and Ba1 or higher by Moody's or (ii) Baa3 or higher by Moody's and BB+ or higher
by S&P.
"Issue Date" means November 17, 1999.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"Maturity" when used with respect to any Note means the date on
which the principal of such Note becomes due and payable as therein provided or
as provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Net Cash Proceeds" means (a) with respect to any Asset Sale by
any Person, the proceeds thereof in the form of cash or Temporary Cash
Investments including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed for, cash or
Temporary Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted Subsidiary) net
of (i) brokerage commissions and other actual fees and expenses (including fees
and expenses of counsel and investment bankers) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale, (iii) payments
made to retire Indebtedness where payment of such Indebtedness is secured by the
assets or properties the subject of such Asset Sale, (iv) amounts required to be
paid to any Person (other than the Company or any 90
Restricted Subsidiary) owning
a beneficial interest in the assets subject to the Asset Sale and (v)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the Company or any
Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as reflected in
an officers' certificate delivered to the Trustee and (b) with respect to any
issuance or sale of Capital Stock or options, warrants or rights to purchase
Capital Stock, or debt securities or Capital Stock that have been converted into
or exchanged for Capital Stock, as referred to under "--Certain Covenants--
Limitation"Certain
Covenants-Limitation on Restricted Payments," the proceeds of such issuance or
sale in the form of cash or Temporary Cash Investments, including payments in
respect of deferred payment obligations when received in the form of, or stock
or other assets when disposed for, cash or Temporary Cash Investments (except to
the extent that such obligations are financed or sold with recourse to the
Company or any Restricted Subsidiary), net of attorneys' fees, accountants' fees
and brokerage, consultation, underwriting and other fees and expenses actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Original Notes""Obligations" means any principal, interest (including, without
limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
Company's outstanding 8 3/4% Senior Subordinated
Notes due 2003.documentation governing any Indebtedness.
"Other Indebtedness" has the meaning set forth under "Certain
Covenants-Limitation on Guarantees by Restricted Subsidiaries."
"Pari Passu Indebtedness" means any Indebtedness of the Company
or a Guarantor that is pari passu in right of payment to the Notesnotes or a
Guarantee, as the case may be.
"Permitted Investment" means (i) Investments in any Wholly Owned
Restricted Subsidiary or any Person which, as a result of such Investment,
becomes a Wholly Owned Restricted Subsidiary; (ii) Indebtedness of the Company
or a Restricted Subsidiary described under clauses (iv) and (v) of the
definition of "Permitted Indebtedness"; (iii) Temporary Cash Investments; (iv)
Investments acquired by the Company or any Restricted Subsidiary in connection
with an Asset Sale permitted under "--Certain
Covenants--Limitation"Certain Covenants-Limitation on Sale of
Assets" to the extent such Investments are non-cash proceeds as permitted under
such covenant; (v) guarantees of Indebtedness otherwise permitted by the
Indenture; and (vi) Investments in existence on the date of the Original Indenture.Indenture; and (vii)
Investments in joint ventures in an aggregate amount not to exceed at any one
time the greater of (x) $50.0 million and (y) 5.0% of Consolidated Net Tangible
Assets.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivisions thereof.
"Post-Petition Interest" means, with respect to any Indebtedness
of any Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred stock whether now outstanding, or issued after the date
of the Original Indenture,Issue Date, and including, without limitation, all classes and series of
preferred or preference stock.
"Productive Assets" means assets of a kind used or usable by the
Company and its Restricted Subsidiaries in their respective businesses
(including without limitation, contracts, leases, licenses, or other agreements
of value to the Company or any of its Restricted Subsidiaries), provided,
however, that productive assets to be acquired by the Company or any Restricted
Subsidiary shall be, in the good faith judgment of management of the Company or
such Restricted Subsidiary, assets which are reasonably related, ancillary or
complementary to the business of the Company and its Restricted Subsidiaries as
conducted on the Issue Date.
"Qualified Capital Stock" of any Person means any and all Capital
Stock of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either
by its terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event (other than as a
result of a change of control provision substantially similar to that contained
in "Certain Covenants-Purchase of notes Upon a Change of Control") or passage of
time would be, required to be redeemed prior to any Stated Maturity of the
principal of the Notesnotes or is redeemable at the option of the holder thereof at
any time prior to any such Stated Maturity, or is convertible into or
exchangeable for debt securities at any time prior to any such Stated Maturity
at the option of the holder thereof.
"Restricted Subsidiary" means any Subsidiary of the Company that
has not been designated by the Board of Directors of the Company, by a
resolution of the Board of Directors of the Company delivered to the Trustee, as
an Unrestricted Subsidiary pursuant to "Certain Covenants-Designation of
Unrestricted Subsidiaries" above. Any such designation may be revoked by a
resolution of the Board of Directors of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"Sale and Leaseback Transaction" means any transaction or series
of related transactions pursuant to which the Company or a Restricted Subsidiary
sells or transfers any property or asset in connection
91
with the leasing, or the
resale against installment payments, of such property or asset to the seller or
transferor.
"Securities Act" means the Securities Act of 1933, as amended.
"S&P" means Standard & Poor's Ratings Group or any successor
thereto.
"Stated Maturity" when used with respect to any Indebtedness or
any installment of interest thereon, means the dates specified in such
Indebtedness as the fixed date on which the principal of such Indebtedness or
such installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or
a Guarantor subordinated in right of payment to the Notesnotes, or a Guarantee, as
the case may be.
"Subsidiary" means any Person a majority of the equity ownership
or the Voting Stock of which is at the time owned, directly or indirectly, by
the Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries.
"Temporary Cash Investments" meansmeans: (i) any evidence of
Indebtedness of a Person, other than the Company or its Subsidiaries, maturing
not more than one year after the date of acquisition, issued by the United
States of America or the United Kingdom, or an instrumentality or agency thereof
and guaranteed fully as to principal, premium, if any, and interest by the
United States of America or the United Kingdom, (ii) any certificate of deposit,
maturing not more than one year after the date of acquisition, issued by, or
time deposit of, a commercial banking institution that is a member of the
Federal Reserve System and that has combined capital and surplus and undivided
profits of not less than $500,000,000, whose debt has a rating, at the time as
of which any investment therein is made, of "P-1" (or higher) according to
Moody's Investors Service, Inc. ("Moody's") or any successor rating agency or
"A-1" (or higher) according to Standard and Poor's Corporation ("S&P") or any
successor rating agency, (iii) commercial paper, maturing not more than one year
after the date of acquisition, issued by a corporation (other than an Affiliate
or Subsidiary of the Company) organized and existing under the laws of the
United States of America with a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P and (iv) any money market deposit accounts issued or offered by
a domestic commercial bank having capital and surplus in excess of $500,000,000.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"United Kingdom Government Obligations" means direct obligations
of, and obligations guaranteed by, the United Kingdom for the payment of which
the full faith and credit of the United Kingdom is pledged.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to "Certain Covenants-Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of the
Board of Directors of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"Voting Stock" means stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means (i) aany Restricted
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares and up to 5% of the issued and outstanding Capital Stock which may be
owned by executive officers of such Subsidiary) is owned by the Company or
another Wholly Owned Subsidiary and (ii)
Monarch Wine Company, Limited Partnership, so long as the Company owns
directly or indirectly at least 99% of the outstanding interests in such
partnership and is the general partner thereof.
92
CERTAINRestricted Subsidiary.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
Set forth belowThe following is a summary of the material United States Federalcertain anticipated U.S. federal
income tax considerations applicable to the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer. McDermott, Will & Emery, counsel for the
Company, has reviewed the following discussion and isconsequences of the opinion that it
fairly summarizespurchase, ownership and disposition of the material U.S. Federal income tax considerations to
holders of Notes. The following summary is not exhaustive of all possible tax
considerations. Moreover, this summary does not consider all tax aspects that
might be relevant to a particular holder of Notes in light of his or her
personal circumstances nor does it deal with particular types of holders of
Notes that are subject to special treatment under the Code (as hereinafter
defined), such as insurance companies, financial institutions and dealers. The
following discussions and opinions of McDermott, Will & Emery arenotes,
based upon the Internal Revenue Code of 1986, as amended, (the "Code"), its legislative
history,and existing
and proposed regulations, thereunder (including regulations
concerning the treatment of debt instruments issued with OID (the "OID
Regulations"), published rulings and courtjudicial decisions all as of the date of this prospectus.
Such authorities may be repealed, revoked or modified, possibly with retroactive
effect, so as to result in effectfederal income tax consequences different from those
discussed below. Except as specifically set forth in this prospectus, this
summary deals only with notes held as capital assets by initial holders, and
existingdoes not deal with special situations, such as those of dealers in securities or
currencies, financial institutions, banks, tax-exempt organizations, insurance
companies, holders that are partnerships or other pass-through entities and
holders whose "functional currency" is not the U.S. dollar, or special rules
with respect to "straddle," "conversion," "hedging" or "constructive sales"
transactions. This summary is not binding on the date hereof and all of which are subject to change at any
time, which change mayInternal Revenue Service or the
courts. No ruling has been sought or will be applied retroactively in a manner that could
adversely affect holders of the Notes.
The Company has not sought and will not seek any rulings from the IRSInternal Revenue
Service with respect to the tax consequences of the Exchange Offer. Therepositions and issues discussed herein, and there can
be no assurance that the IRSInternal Revenue Service will not take a different
position concerning the tax consequences of the Exchange Offer or of the purchase, ownership or
disposition of the Exchange Notesnotes or that any such different position would not be sustained.
This summary applies only to those persons who are the initial holders of
the Old Notes and who held the Old Notes, and who will hold the Exchange
Notes, as capital assets. The summary does not address the tax consequences to
taxpayers who purchase the Notes from such initial holders or taxpayers who
are subject to special rules (such as dealers in securities or currencies,
financial institutions, tax-exempt organizations and insurance companies), or
aspects of Federal income taxation that may be relevant to a prospective
investor based upon such investor's particular tax situation.
Although the matter is not entirely free from doubt, the exchange of an Old
Note for an Exchange Note pursuant to the Exchange Offer should not be treated
as an exchange or otherwise as a taxable event for Federal income tax
purposes. Accordingly, the Exchange Notes should have the same issue price as
the Old Notes and each holder should have the same adjusted basis and holding
period in the Exchange Notes as it had in the Old Notes immediately before the
Exchange Offer.
Notwithstanding the foregoing, the IRS might attempt to treat the Exchange
Offer as an "exchange" for Federal income tax purposes. In such event, the
Exchange Offer could be treated as a taxable transaction in which case a
holder could be required to recognize gain or loss equal to the difference
between such holder's tax basis in the Old Notes and the issue price of the
Exchange Notes, and the amount of OID on such Exchange Notes, if any, could be
different from the amount of OID on the Old Notes. In addition, if the issue
price of the Exchange Notes is deemed to be less than the adjusted issue price
of the Old Notes, the Company could recognize cancellation of indebtedness
income in an amount equal to such difference.
HOLDERS OF OLD NOTES SHOULDPROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TOREGARDING THE
PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF NOTES THAT
MAY BE SPECIFIC TO THEM, OF THE EXCHANGE OF OLD NOTES FOR
EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER, INCLUDING THE APPLICABILITY OFTAX CONSEQUENCES ARISING UNDER ANY STATE,
LOCAL OR FOREIGN TAX LAWS TO WHICH THEY MAY BE SUBJECT AS WELL AS
WITH RESPECT TO THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
93
CONSEQUENCES FOR U.S. HOLDERS
As used herein, ain this prospectus, the term "U.S. Holder" means a
holderbeneficial owner of a Notenote who or that is for United States federal income tax
purposes (i) a citizen or individual resident of the United States, (ii) a corporation or partnership
created or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is includible in
its grosssubject to U.S.
federal income for U.S. Federal income tax purposes without regard to itstaxation regardless of source, or (iv) a "U.S. Trust". A U.S. Trust is any trust if and only if, (i)both: (A) a
U.S. court within the United States is able to exercise primary supervision over the administration of
the trust, and (ii)(B) one or more U.S. trusteespersons have the authority to control all
substantial decisions of the trust. A non-U.S.
citizenAs used in this Prospectus, the term
"Non-U.S. Holder" means a holder of a note that is considered a resident alien, and hencenot a U.S. Holder, if that
person is presentHolder.
EXCHANGE OF NOTES
There will be no federal income tax consequences to holders
exchanging old notes for new notes pursuant to the exchange offer since the
exchange offer will be by operation of the original terms of the old notes,
pursuant to a unilateral act by us, and will not result in any material
alteration in the United States at least 183 daysterms of the old notes. Each exchanging holder will have the
same adjusted tax basis and holding period in the calendar year
and for an aggregate of at least 183 days during a three-year period, counting
for such purposes all of the days presentnew notes as it had in the current year, one-third ofold
notes immediately before the days present inexchange.
U.S. HOLDERS
Interest. Interest (including additional amounts, if any) on the
immediately preceding year, and one-sixth of the days
present in the second preceding year.
ISSUE PRICE
The issue price of the Exchange Notesnotes generally will equal the issue price of the Old
Notes.
TAXATION OF THE NOTES
Payments of Interest
Interest paid on a Note, to the extent considered "qualified stated
interest" (as defined below), will generally be taxable to a U.S. Holder as ordinary interest income at
the time it accruesaccrued or is received in accordance with the holder'sU.S. Holder's regular method
of accounting for Federalfederal income tax purposes.
Original Issue Discount
BecauseA U.S. Holder who uses the Old Notes were issued with OID, the Exchange Notes will also be
deemed to have been issued with OID. For Federalcash method of accounting for federal
income tax purposes and who receives interest on a Note
will be issued with OID if its "stated redemption price at maturity" exceeds
its "issue price" by more than a de minimis amount. The stated redemption
price at maturity of a Note will be the sum of all cash payments (including
principal and interest) required to be made thereunder until maturity, other
than "qualified stated interest" payments. Qualified stated interest is stated
interest that is unconditionally payable at least annually at a single fixed
rate that appropriately takes into account the length of the interval between
payments. Since the interest payable on the Notes constitutes qualified stated
interest, a Note will bear OID only to the extent of the excess of the Note's
face amount over its issue price.
A U.S. Holder of a Notenote in pounds sterling will
be required to include OID in income periodically over the termU.S. dollar value of a Note without regardsuch pounds sterling.
The U.S. dollar value will be determined using the spot rate in effect on the
date such payment is received, regardless of whether the payment is in fact
converted to whenU.S. dollars at that time. No exchange gain or loss will be
recognized by such holder if the cash or other
payments attributablepounds sterling are converted to suchU.S. dollars
on the date received. The U.S. federal income tax consequences of the conversion
of pounds sterling into U.S. dollars are received. In general, adescribed below. See "-Exchange of
Foreign Currencies."
A U.S. Holder must include in gross incomewho uses the accrual method of accounting for
Federalfederal income tax purposes, or who is otherwise required to accrue interest
prior to receipt, will be required to include in income the sumU.S. dollar value of
the daily portionsamount of OIDinterest income accrued, or otherwise required to be taken into
account, with respect to a note in a taxable year. The U.S. dollar value of the
accrued income will be determined by translating that income at the average rate
of exchange for the relevant interest accrual period, or with respect to an
accrual period that spans two taxable years, at the average rate for the portion
of the accrual period within the taxable year. The average rate of exchange for
an interest accrual period, or portion thereof, is the simple average of the
exchange rates for each business day of the period, or another average that is
reasonably derived and consistently applied.
An accrual basis U.S. Holder may elect, however, to translate the
accrued interest income using the spot rate of exchange in effect on the last
day of the accrual period or, with respect to the Note for eachearlier taxable year portion
of an accrual period that spans two taxable years, using the spot rate of
exchange in effect on the last day duringof the taxable year on which such holder holdsyear. In addition, if the Note ("Accrued OID"). The daily portion is
determined by allocating to eachlast
day of anyan accrual period is within a taxable
year a pro rata portionfive business days of the OID allocable to such accrual period. The
amount of such OID is equal to the adjusted issue pricereceipt, or
payment, of the Noteaccrued interest, a U.S. Holder may elect to translate such
interest using the spot rate of exchange in effect on the date of receipt or
payment. The above election must be made in a statement filed with the U.S.
Holder's tax return and will apply to other debt obligations held by the U.S.
Holder at the beginning of the accrual period multiplied byfirst taxable year in which the yield to maturityelection applies
or acquired thereafter and may not be changed without the consent of the
Note. For purposes of computing OID, the Company will use six-month accrual
periods that endInternal Revenue Service. Whether or not such election is made, a U.S. Holder
may recognize exchange gain or loss with respect to accrued interest income on
the days in the calendar year corresponding to the
maturity date of the Notes and the date six months prior to such maturity
date, with the exception of an initial short accrual period.interest income is received.
The adjusted
issue price of a Note at the beginning of any accrual period is the issue
price of the Note increased by the Accrued OID for all prior accrual periods
and decreased by any cash payments on the Notes (other than qualified stated
interest). Under these rules, U.S. Holders will have to include in gross
income increasingly greater amounts of OID in each successive accrual period.
Each payment made under a Note (except for payments of qualified stated
interest and certain early redemption payments discussed below)exchange gain or loss will be treated first as aordinary income or
loss. The amount of ordinary income or loss recognized will equal the
difference, if any, between the U.S. dollar value of the pounds sterling
received, determined using the spot rate in effect on the date the payment is
received and the U.S. dollar value of OID (which was previously includable in income)
to the extent of OIDinterest income that has accrued
during the interest accrual period, as determined above. No additional exchange
gain or loss will be recognized by the holder if the pounds sterling are
converted to U.S. dollars on the date received. The U.S. federal income tax
consequences of the dateconversion of payment
94
and has not been allocated to prior payments and second as a paymentpounds sterling into U.S. dollars are
described below. See "-Exchange of principal (which is not includable in income).
Optional Redemption
UnderForeign Currencies."
Dispositions. Upon the OID Regulations, for purposes of determining the amount of OID,
the Company will be presumed to exercise its option to redeem the Notes at any
time onsale, exchange, retirement or after December 15, 1998, if, by utilizing the date of exercise of
the call option as the maturity date and the Redemption Price (as defined in
the Indenture) as the stated redemption price at maturity, the yield on the
Notes would be lower than such yield would be if the option were not
exercised. See "Description of Notes--Optional Redemption."
If the Company's option to redeem the Notes were presumed exercised on a
given date (the "Presumed Exercise Date"), the Notes would bear OID in an
amount equal to the sum of all payments for which the Notes could be redeemed
(the "Redemption Amount") over their issue price. For purposes of calculating
the current inclusion of such OID, the yield on the Notes would be computed on
their issue date by treating the Presumed Exercise Date as the maturity date
of the Notes and the Redemption Amount as their stated redemption price at
maturity. If the Company's option to redeem the Notes were presumed exercised
but were not exercised in fact on the Presumed Exercise Date, the Notes would
be treated, for certain purposes, as if the option were exercised and new debt
instruments were issued on the Presumed Exercise Date for an amount of cash
equal to the adjusted issue price of the Notes on that date.
The Notes will be subject to redemption at the option of the holders should
the Company experience a Change of Control. See "Description of Notes--Certain
Covenants--Purchase of Notes Upon a Change of Control." Such additional
redemption rights should not affect, and will not be treated by the Company as
affecting, the determination of the yield or maturity of the Notes for
purposes of the calculation of OID. The tax treatment of these redemptions and
the optional redemptions described above should be governed by the rules for
dispositions generally. See "--Disposition of Notes."
Disposition of Notes
Generally, any sale or redemptionother
disposition of a Notenote, a U.S. Holder generally will result inrecognize taxable gain or
loss equal to the difference between the amount of cash andrealized on the fair market
value of other property received (except to the extent the consideration
received isdisposition
(other than any amounts attributable to qualified stated interest not previously taken
into account, which consideration is treated as interest received)accrued but unpaid interest) and the
holder's adjusted tax basis in the Note.note. The gain or loss generally will be
capital gain or loss, except with respect to gains or losses attributable to
changes in currency exchange rates, as described below. To the extent that the
amount realized represents accrued but unpaid interest, however, such amounts
must be taken into account as interest income, with exchange gain or loss
computed as described above. If a holder purchasesU.S. Holder receives foreign currency on a
Note for its
issue price,sale, exchange or retirement, the holder'samount realized will be based on the U.S.
dollar value of the foreign currency on the date of disposition assuming the
notes are not traded on an established securities market. A U.S. Holder's
adjusted tax basis in a note will equal the U.S. dollar cost of the note to the
holder on the date of purchase assuming the notes are not traded on an
established securities market. If a U.S. Holder purchases a note with previously
owned foreign currency, the holder will recognize ordinary income or loss in an
amount equal to the difference, if any, between the holder's tax basis in the
foreign currency and the U.S. dollar value of the foreign currency used to
purchase the note, determined on the date of purchase.
If the notes are traded on an established securities market,
there is a special rule for determiningpurchases and sales of those notes by a cash basis
taxpayer under which units of foreign currency paid or received are translated
into U.S. dollars at the spot rate on the settlement date of the purchase or
sale. In that case, no exchange gain or loss will result from currency
fluctuations between the trade date and the settlement of such a purchase or
sale. An accrual basis taxpayer may elect the same treatment required of cash
basis taxpayers with respect to purchases and sales of publicly traded notes,
provided the election is applied consistently. Such election cannot be changed
without the consent of the Internal Revenue Service.
Gain or loss realized by a U.S. Holder upon the sale, exchange or
retirement of a note that is attributable to fluctuations in the currency
exchange rates will be ordinary income or loss and generally will not be treated
as interest income or expense. Gain or loss attributable to fluctuations in
exchange rates will equal the difference between the U.S. dollar value of the
foreign currency principal amount of the note, determined on the date the
payment is received or the note is disposed of, and the U.S. dollar value of the
foreign currency principal amount of the note, determined on the date the U.S.
Holder acquired the note. The foreign currency gain or loss will be recognized
only to the extent of the total gain or loss realized by the U.S. Holder on the
sale, exchange or retirement of the note.
For certain non-corporate U.S. Holders, including individuals,
the rate of taxation of capital gains will depend upon the holder's holding
period in the note, with a preferential rate generally available for notes held
for more than one year. The deductibility of capital losses is subject to
limitations.
Exchange of Foreign Currencies. A. U.S. Holder will have a tax
basis in any pounds sterling received, as interest or on the sale, exchange,
retirement or other disposition of a Note will initiallynote, equal to their U.S. dollar value at
the issue pricetime the interest is received or at the time payment is received in
consideration of the Note and will be increased by any Accrued OID includable in such
holder's gross income and decreased by the amount of any cash payments
received by such holder with respect to the Notes regardless of whether such
payments are denominated as principalsale, exchange or interest (other than payments of
qualified stated interest).retirement. Any gain or loss uponrealized by
a U.S. Holder on a sale or other disposition of a Note will generally be capital gainpounds sterling, including their
exchange for U.S. dollars or loss, whichtheir use to purchase notes, will be long term if
the Note has been held by the holder for more than one year.
Backup Withholding
A holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to payments received with respect to the Notes.
This withholding generally applies only if the holder (i) fails to furnish hisordinary
income or her social security or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) is notified by the Internal Revenue Service
(the "Service") that he or she has failed to property report payments of
interest and dividends and the Service has notified the Company that he or she
is subject to backup withholding, or (iv) fails, under certain circumstances,
to provide a certified statement, signed under penalty of perjury, that the
TIN provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment
95
to a holder under the backup withholding rules is allowable as a credit
against such holder's Federal income tax liability, provided that the required
information is furnished to the Service. Certain holders (including, among
others, corporations and foreign individuals who comply with certain
certification requirements described below under "Foreign Holders") are not
subject to backup withholding. Holders should consult their tax advisors as to
their qualification for exemption from backup withholding and the procedure
for obtaining such an exemption.
FOREIGNloss.
NON-U.S. HOLDERS
The following discussion is a summary of certain United States Federallimited to the U.S. federal income
tax consequences relevant to Non-U.S. Holders. As used herein, a "Non-U.S. Holder" is any holder of a Note whonote that is a Non-U.S. Holder.
Interest. Subject to the discussion below concerning backup
withholding, payments of interest on a note to any Non-U.S. Holder will
generally not be subject to U.S. federal income or withholding tax, provided
that (1) the holder is not (i) a U.S. Holder.
Adirect or indirect owner, taking into account
certain attribution rules, of 10% or more of the total voting power of all
voting stock of the issuer or (ii) a controlled foreign corporation related to
the issuer through stock ownership, (2) such interest payments are not
effectively connected with the conduct by the Non-U.S. Holder that is engaged inof a trade or
business within the United States and (3) the issuer or its paying agent
receives (i) from the Non-U.S. Holder, a properly completed Form W-8, or
substitute Form W-8, under penalties of perjury, which provides the Non-U.S.
Holder's name and address and certifies that the Non-U.S. Holder of the note is
a Non-U.S. Holder or (ii) from a security clearing organization, bank or other
financial institution that holds the notes in the ordinary course of its trade
or business (a "financial institution") on behalf of the Non-U.S. Holder,
certification under penalties of perjury that such a Form W-8 or substitute Form
W-8 has been received by it, or by another such financial institution, from the
Non-U.S. Holder, and a copy of the Form W-8 or substitute Form W-8, is furnished
to the payor.
A Non-U.S. Holder that does not qualify for exemption from
withholding under the preceding paragraph generally will be subject to
withholding of U.S. federal income tax at the rate of 30%, or lower applicable
treaty rate, on any incomepayments of interest on the notes. To the extent a Non-U.S.
Holder seeks a reduced rate of withholding under a treaty, such holder must
provide the issuer or gain that isits paying agent with a properly completed Form 1001 or
Form W-8.
If the payments of interest on a note are effectively connected
with suchthe conduct by a Non-U.S. Holder of a trade or business ("U.S. trade or business income") in essentially the same manner as a U.S. Holder, as discussed above. A Non-U.S.
Holder that is a foreign corporation engaged in a U.S. trade or business also
mayUnited
States, such payments will be subject to U.S. federal income tax on a net basis
at the branch profits taxrates applicable to United States persons generally and, with respect to
income or gain on the
Note.
Payments of principal and interest (including OID) on the Notes by the
Company that are not U.S. trade or business incomecorporate holders, may also be subject to a Non-U.S. Holder30% branch profits tax. If payments
are subject to U.S. federal income tax on a net basis in accordance with the
rules described in the preceding sentence, those payments will not be subject to
withholding tax so long as the holder provides the issuer or its paying agent
with a properly executed Form 4224.
Non-U.S. Holders should consult any applicable income tax
treaties, which may provide for a lower rate of withholding tax, exemption from
or reduction of branch profits tax, or other rules different from those
described above.
Dispositions. Subject to the discussion below concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange,
retirement or other disposition of a note generally will not be subject to U.S.
federal income or withholding tax, unless (i) such gain is effectively connected
with the conduct by such Non-U.S. Holder of a trade or business within the
United States, (ii) the Non-U.S. Holder is an individual who is present in the
United States for 183 days or more in the taxable year of the disposition and
certain other conditions are satisfied, or (iii) the Non-U.S. Holder is subject
to tax pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
Federal incomeEstate Tax. Notes held, or treated as held, by an
individual who is a Non-U.S. Holder at the time of his or her death will not be
subject to U.S. federal tax provided that in(i) the case
of interest (including OID), (1) the Non-U.S. Holderindividual does not actually
or constructively own 10% or more of the total combined voting power of all classes ofvoting stock
of the Company entitled to vote, (2)issuer and (ii) income on the notes was not effectively connected with
the conduct by the Non-U.S. Holder is
notof a controlled foreign corporation that is relatedtrade or business within the United
States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments with respect to the Company through
stock ownership, (3)notes and the proceeds upon the sale
or other disposition of the notes may be subject to information reporting and
possibly U.S. backup withholding at a 31% rate. Backup withholding will not
apply to a U.S. Holder who furnishes its correct taxpayer identification number
and provides other certification. Backup withholding will not apply to payments
made by the issuer in respect of the notes to a Non-U.S. Holder, is not a bank receiving interest on a
loan entered into inif the ordinary course of business, and (4) either the
beneficial owner of the Noteholder
certifies, to the Company or its agent under penaltiespenalty of perjury, that it is not a Non-U.S. HolderU.S. person and provides
its name and address, provided that neither the issuer nor its paying agent has
actual knowledge that the holder is a U.S. person, or the Non-U.S. Holder
otherwise establishes an exemption. Copies of information returns may be made
available, under the provisions of a securities clearing organization, bankspecific treaty or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and that holds a Note on behalf
of such owner, certifiesagreement, to the Company or its agent, under penaltiestax
authorities of perjury, that such statement has been received by itthe country in which the Non-U.S. Holder resides.
Payment of proceeds from the beneficial ownerdisposition of notes to or by another financial institution between it andthrough
the beneficial owner, and
furnishes the CompanyUnited States office of any broker, U.S. or its agent with a copy of such statement. A Non-U.S.
Holder that does not qualify for such exemptionforeign, will be subject to
United
States Federal income tax, payable by withholding, at a flat rate of 30% (or a
lower applicable treaty rate) on interest payments and payments (including
redemption proceeds) attributable to OID on the Notes provided that such
payments are not U.S. trade or business income. If such payments are U.S.
trade or business income, such Foreign Person will be required to provide to
the Company a properly executed Internal Revenue Service Form 4224 in order to
claim an exemption from withholding tax.
In general, gain (to the extent it is not U.S. trade or business income)
recognized by a Non-U.S. Holder upon the redemption, sale or exchange of a
Note will not be subject to United States Federal income tax unless such Non-
U.S. Holder is an individual present in the United States for 183 days or more
during the taxable year in which the Note is redeemed, sold or exchanged, and
certain other requirements are met.
A Note held by an individual who at the time of his or her death is not a
citizen or resident of the United States will not be includable in such
individual's gross estate subject to United States Federal estate tax as a
result of such individual's death if the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and the interest (including
OID) on the Note would not have been U.S. trade or business income if it had
been received by such individual at the time of his or her death.
Informationinformation reporting and backup withholding will generally not applyunless the owner certifies as to
payments made on a Note to a Non-U.S. Holderits non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the certification
described in clause (4) of the third paragraph in this section is received,
and provided further that the payorbroker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a note
to or through a non-U.S. office of a non-U.S broker that is not a "U.S. related
person," as defined in applicable Treasury Regulations, will not be subject to
information reporting or backup withholding. In the case of the payment of
proceeds from the disposition of a note to or through a non-U.S. office of a
broker that is false.
96
a U.S. person or a "U.S. related person," the regulations require
information reporting on the payment unless the broker has documentary evidence
in its files that the owner is not a U.S. person and the broker has no knowledge
to the contrary. Backup withholding will not apply to payments made through a
non-U.S. foreign office of a broker that is a U.S. person or a "U.S. related
person," absent actual knowledge that the payee is a U.S. person.
Amounts withheld under the backup withholding rules do not
constitute a separate United States federal income tax. Rather, any amount
withheld under the backup withholding rules will be allowed as a refund or a
credit against a holder's U.S. federal income tax liability, if any, provided
that the requisite procedures are followed.
The Treasury Department recently promulgated final regulations
regarding the withholding and information reporting rules discussed above. In
general, the final regulations do not significantly alter the substantive
withholding and information reporting requirements but rather unify current
certification procedures and forms and clarify certain standards governing the
information upon which a withholding agent may rely. The final regulations are
generally effective for payments made after December 31, 2000 subject to certain
transition rules. Non-U.S. Holders should consult their own tax advisors with
respect to the impact, if any, of the final regulations.
PLAN OF DISTRIBUTION
Based on interpretations by the staffIf you are a broker-dealer and hold old notes for your own
account as a result of the SEC set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offermarket-making activities or other trading activities and
you receive new notes in exchange for Old Notesold notes in the exchange offer, you may
be offered
for resale, resolda statutory underwriter and otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such Exchange Notes. Accordingly, any holder who is an
affiliate of the Company or any holder using the Exchange Offer to participate
in a distribution of the Exchange Notes will not be able to rely on such
interpretations by the staff of the SEC and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a resale transaction. Notwithstanding the foregoing, each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that ityou will deliver a
prospectus in connection with any resale of such Exchange Notes.new notes. This Prospectus,prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resaleresales of Exchange Notesnew notes received in exchange for
Old Notesold notes where such Old Notesold notes were acquired as a result of market-making
activities or other trading activities. The CompanyWe acknowledge and, the Guarantorsunless you are a
broker-dealer, you must acknowledge that you are not engaged in, do not intend
to engage in, and have no arrangement or understanding with any person to
participate in a distribution of new notes. We have agreed that for a
periodstarting on the
expiration date of 180 days after the Expiration Date, theyexchange offer and ending on the close of business on the
180th day following the expiration date of the exchange offer, we will make this
Prospectus,prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company and the GuarantorsWe will not receive any proceeds from any sale of Exchange Notesnew notes by
broker-dealers. Exchange NotesNew notes received by broker-dealers for their own account
pursuant to the Exchange Offerexchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notesnew notes or a combination of suchthose methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale of that kind may
be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes.new notes. Any broker-dealer
that resells Exchange Notesnew notes that were received by it for its own account pursuant to
the Exchange Offerexchange offer and any broker-dealerbroker or dealer that participates in a distribution
of such Exchange Notesnew notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Notesnew notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letterletter of Transmittaltransmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, as
required, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company and the
Guarantorsexpiration date, we will
promptly send additional copies of this Prospectusprospectus and any amendment or
supplement to this Prospectusprospectus to any broker-dealer that requests such documents
in the Letterletter of Transmittal. The Company and the Guarantorstransmittal.
We have agreed to pay all expenses incident to the Exchange Offerexchange offer
(including the expenses of one counsel for the holders of the Old Notes)notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Old Notes (includingnotes, including any broker-dealers) participating in the
Exchange Offerbroker-dealers, against certainvarious liabilities,
including liabilities under the Securities Act.
97
LEGAL MATTERS
Certain matters with respect to theThe validity of the Exchange Notesissuance of the new notes will be passed upon
for the Companyus by McDermott, Will & Emery, Chicago, Illinois.Emery.
EXPERTS
The audited consolidated financial statements of the Company included or
incorporated by
reference in this Prospectusprospectus and elsewhere in this Registration Statement
to the extent and for the periods indicated in their reportsregistration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are includedincorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.report.
The financial statementsstatement of assets and liabilities related to the product
lines sold to Canandaigua Brands, Inc. as of April 9, 1999 and the related
statement of identified income and expenses for the year ended December 31,
1998, have been incorporated in this Registration Statement by reference to the Current Report on Form 8-K/A (Amendment No. 1) which amends
and forms part of Canandaigua Wine Company, Inc.'s Current Report on Form 8-K
dated August 29, 1995, have been so incorporatedherein in reliance onupon the report of
Price WaterhouseKPMG LLP, independent certified public accountants, given onincorporated by reference
herein, and upon the authority of said firm as experts in auditingaccounting and
accounting.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act, for the registration
of the securities offered hereby. This Prospectus,auditing.
Until , 2000, which constitutes a part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement, certain items of which are contained in
exhibits and schedules to the Registration Statement as permitted by the rules
and regulations of the SEC. For further information with respect to the
Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, and financial
statements and notes filed as a part thereof. Statements made in this
Prospectus concerning the contents of any document referred to herein are not
necessarily complete. With respect to each document filed with the SEC as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
may be inspected at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Company has made certain filings to the
SEC electronically. The SEC maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the SEC at the following address: http: //
www.sec.gov.
The Company's Class A Common Stock and Class B Common Stock are quoted on
the Nasdaq Stock Market (National Market), and reports, proxy and information
statements and other information concerning the Company can be inspected at
the public reference facilities maintained by the Nasdaq Stock Market at 1735
K Street, N.W. Washington, D.C. 20006.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of the Indenture and the Company's Restated Certificate of
Incorporation and Bylaws. Requests should be directed to: Canandaigua Wine
Company, Inc., Attention: Robert S. Sands, Secretary, 116 Buffalo Street,
Canandaigua, New York 14424; telephone number (716) 394-7900.
98
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to the
Exchange Act are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1995;
(2) the Company's Proxy Statement for its Annual Meeting of Stockholders
held on January 18, 1996;
(3) the Company's Quarterly Report on Form 10-Q for the quarterly period
ended November 30, 1995;
(4) the Company's Transition Report on Form 10-K for the Transition Period
ended February 29, 1996;
(5) the Company's Quarterly Reports on Form 10-Q for the quarterly periods
ended May 31, 1996 and August 31, 1996 and the Company's Quarterly
Reports on Form 10-Q and Form 10-Q/A for the quarterly period ended
November 30, 1996; and
(6) the Company's Current Reports on Form 8-K dated August 29, 1995;
October 31, 1995; April 29, 1996; September 5, 1996; October 11, 1996;
October 29, 1996 and December 19, 1996; and Form 8-K/A dated August 29,
1995.
All reports and other documents filed with the SEC by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to90 days after the date of this Prospectus and prior to the termination of the offering relating
to this Prospectus shall be deemed to be incorporated by reference into this
Prospectus and to beprospectus, if you are a
part hereof from the date of filing of such documents.
Any statement incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified, replaced, or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any or all of the documents incorporated by reference herein (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to: Canandaigua Wine Company, Inc.,
Attention: Robert S. Sands, Secretary, 116 Buffalo Street, Canandaigua, New
York 14424; telephone number (716) 394-7900.
99
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of November 30, 1996 (unaudited), February
29, 1996,
February 28, 1995 (unaudited), August 31, 1995, and 1994................. F-3
Consolidated Statements of Income for the nine month periods ended
November 30, 1996 (unaudited), and November 30, 1995 (unaudited), for the
six month periods ended
February 29, 1996, and February 28, 1995 (unaudited), and for the years
ended
August 31, 1995, 1994, and 1993.......................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the nine
month period ended November 30, 1996 (unaudited), for the six month
period ended February 29, 1996, and for the years ended August 31, 1995,
1994, and 1993........................................................... F-5
Consolidated Statements of Cash Flows for the nine month periods ended
November 30, 1996 (unaudited), and November 30, 1995 (unaudited), for the
six month periods ended
February 29, 1996, and February 28, 1995 (unaudited), and for the years
ended
August 31, 1995, 1994, and 1993.......................................... F-6
Notes to Consolidated Financial Statements................................ F-8
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canandaigua Wine Company, Inc.:
We have audited the accompanying consolidated balance sheets of Canandaigua
Wine Company, Inc. (a Delaware corporation) and subsidiaries as of February
29, 1996 and August 31, 1995 and 1994, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for the six months
ended February 29, 1996 and each of the three years in the period ended August
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Canandaigua Wine Company,
Inc. and subsidiaries as of February 29, 1996 and August 31, 1995 and 1994,
and the results of their operations and their cash flows for the six months
ended February 29, 1996 and each of the three years in the period ended August
31, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Rochester, New York, May 17, 1996
F-2
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1996 1996 1995 1995 1994
------------ ------------ ------------ ---------- ----------
(UNAUDITED) (UNAUDITED)
ASSETS
------
CURRENT ASSETS:
Cash and cash invest-
ments................ $ 4,997 $ 3,339 $ 3,090 $ 4,180 $ 1,495
Accounts receivable,
net.................. 198,106 142,471 120,538 115,448 122,124
Inventories, net...... 373,631 341,838 319,836 256,811 301,053
Prepaid expenses and
other current assets. 14,598 30,372 26,298 25,070 29,377
---------- ---------- -------- -------- --------
Total current as-
sets............... 591,332 518,020 469,762 401,509 454,049
PROPERTY, PLANT AND
EQUIPMENT, NET......... 251,218 250,638 195,839 217,505 194,283
OTHER ASSETS............ 276,963 285,922 167,316 166,907 178,230
---------- ---------- -------- -------- --------
Total assets........ $1,119,513 $1,054,580 $832,917 $785,921 $826,562
========== ========== ======== ======== ========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
----------------------
CURRENT LIABILITIES:
Notes payable......... $ 130,000 $ 111,300 $ 7,000 $ -- $ 19,000
Current maturities of
long-term debt....... 40,597 40,797 37,857 29,133 31,001
Accounts payable...... 79,567 59,730 45,438 62,091 75,506
Accrued Federal and
state excise taxes... 22,849 19,699 23,564 15,633 16,657
Other accrued expenses
and liabilities...... 63,906 68,440 77,192 67,896 96,061
---------- ---------- -------- -------- --------
Total current lia-
bilities........... 336,919 299,966 191,051 174,753 238,225
---------- ---------- -------- -------- --------
LONG-TERM DEBT, less
current maturities..... 349,901 327,616 239,791 198,859 289,122
---------- ---------- -------- -------- --------
DEFERRED INCOME TAXES... 64,194 58,194 43,831 49,827 43,774
---------- ---------- -------- -------- --------
OTHER LIABILITIES....... 9,934 12,298 30,077 10,600 51,248
---------- ---------- -------- -------- --------
COMMITMENTS AND CONTIN-
GENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock,
$.01 par value-
Authorized,
60,000,000 shares:
Issued, 17,460,832
shares at November
30, 1996, 17,423,082
shares at February
29, 1996, 17,343,889
shares at
February 28, 1995,
17,400,082 shares at
August 31, 1995, and
13,832,597 shares at
August 31, 1994...... 174 174 173 174 138
Class B Convertible
Common Stock, $.01
par value-Authorized,
20,000,000 shares;
Issued 3,956,183
shares at
November 30, 1996,
3,991,683 shares at
February 29, 1996,
4,015,626 shares at
February 28, 1995,
3,996,683 shares at
August 31, 1995, and
4,015,776 shares at
August 31, 1994...... 40 40 40 40 40
Additional paid-in
capital.............. 222,026 221,133 216,967 219,894 113,348
Retained earnings..... 164,353 142,600 118,578 139,278 98,258
---------- ---------- -------- -------- --------
386,593 363,947 335,758 359,386 211,784
---------- ---------- -------- -------- --------
Less-Treasury stock-
Class A Common Stock,
1,913,207 shares at
November 30, 1996,
1,165,786 shares at
February 29, 1996,
1,215,296 shares at
February 28, 1995,
1,186,655 shares at
August 31, 1995, and
1,215,296 shares at
August 31, 1994, at
cost................. (25,821) (5,234) (5,384) (5,297) (5,384)
Class B Convertible
Common Stock, 625,725
shares at November
30, 1996, February
29, 1996, February
28, 1995, August 31,
1995, and 1994, at
cost................. (2,207) (2,207) (2,207) (2,207) (2,207)
---------- ---------- -------- -------- --------
(28,028) (7,441) (7,591) (7,504) (7,591)
---------- ---------- -------- -------- --------
Total stockholders'
equity............. 358,565 356,506 328,167 351,882 204,193
---------- ---------- -------- -------- --------
Total liabilities
and stockholders'
equity............. $1,119,513 $1,054,580 $832,917 $785,921 $826,562
========== ========== ======== ======== ========
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-3
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
FOR THE NINE MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28, AUGUST 31,
-------------------------- ------------ ------------ -------------------------------------
1996 1995 1996 1995 1995 1994 1993
------------ ------------ ------------ ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
GROSS SALES............. $ 1,180,849 $ 983,955 $ 738,415 $ 592,305 $ 1,185,074 $ 861,059 $ 389,417
Less--Excise taxes..... (307,405) (246,311) (203,391) (137,820) (278,530) (231,475) (83,109)
------------ ------------ ----------- ----------- ----------- ----------- -----------
Net sales............ 873,444 737,644 535,024 454,485 906,544 629,584 306,308
COST OF PRODUCT SOLD.... (649,019) (534,449) (396,208) (327,694) (653,811) (447,211) (214,931)
------------ ------------ ----------- ----------- ----------- ----------- -----------
Gross profit........... 224,425 203,195 138,816 126,791 252,733 182,373 91,377
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... (161,139) (129,375) (112,411) (79,925) (159,196) (121,388) (59,983)
NONRECURRING -- (3,301) (2,404) (685) (2,238) (24,005) --
RESTRUCTURING EXPENSES. ------------ ------------ ----------- ----------- ----------- ----------- -----------
Operating income...... 63,286 70,519 24,001 46,181 91,299 36,980 31,394
INTEREST EXPENSE, net... (25,468) (19,507) (17,298) (13,141) (24,601) (18,056) (6,126)
------------ ------------ ----------- ----------- ----------- ----------- -----------
Income before
provision for Federal
and state income
taxes................. 37,818 51,012 6,703 33,040 66,698 18,924 25,268
PROVISION FOR FEDERAL (16,065) (19,900) (3,381) (12,720) (25,678) (7,191) (9,664)
AND STATE INCOME TAXES. ------------ ------------ ----------- ----------- ----------- ----------- -----------
NET INCOME.............. $ 21,753 $ 31,112 $ 3,322 $ 20,320 $ 41,020 $ 11,733 $ 15,604
============ ============ =========== =========== =========== =========== ===========
SHARE DATA:
Net income per common
and common equivalent
share:
Primary................ $1.10 $1.55 $.17 $1.11 $2.14 $.74 $1.30
===== ===== ==== ===== ===== ==== =====
Fully diluted.......... $1.10 $1.55 $.17 $1.11 $2.13 $.74 $1.20
===== ===== ==== ===== ===== ==== =====
Weighted average common
shares outstanding:
Primary................ 19,864,901 20,038,649 20,006,267 18,343,870 19,147,935 15,783,583 11,963,652
Fully diluted.......... 19,864,901 20,038,649 20,006,267 18,346,513 19,296,269 16,401,598 15,203,114
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-4
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK ADDITIONAL
--------------- PAID-IN RETAINED TREASURY
CLASS A CLASS B CAPITAL EARNINGS STOCK TOTAL
------- ------- ---------- -------- -------- --------
BALANCE, August 31,
1992................... $ 96 $41 $ 32,338 $ 70,921 ($7,847) $ 95,549
Conversion of 1,165
Class B Convertible
Common shares to Class
A Common shares........ -- -- -- -- -- --
Issuance of 1,000,000
Class A Common shares.. 10 -- 13,584 -- -- 13,594
Conversion of 7% Con-
vertible debentures to
Class A Common shares.. -- -- 976 -- -- 976
Employee stock purchase
of 21,071 treasury
shares................. -- -- 266 -- 64 330
Issuance of 4,104 trea-
sury shares to stock
incentive plan......... -- -- 38 -- 13 51
Net income for fiscal -- -- -- 15,604 -- 15,604
1993................... ---- --- -------- -------- -------- --------
BALANCE, August 31,
1993................... 106 41 47,202 86,525 (7,770) 126,104
Conversion of 52,800
Class B Convertible
Common shares to Class
A Common shares........ 1 (1) -- -- -- --
Conversion of 7% Con-
vertible debentures to
Class A Common shares.. 31 -- 58,925 -- -- 58,956
To write-off unamortized
deferred financing
costs on
debentures converted,
net of amortization.... -- -- (1,569) -- -- (1,569)
To write-off interest
accrued on debentures,
net of tax
effect................. -- -- 850 -- -- 850
Employee stock purchase
of 58,955 treasury
shares................. -- -- 878 -- 179 1,057
To record exercise of
2,250 Class A stock op-
tions.................. -- -- 10 -- -- 10
To record 500,000 Class
A stock options related
to the Vintners Acqui-
sition................. -- -- 4,210 -- -- 4,210
To record 600,000 Class
A stock options related
to the
Almaden/Inglenook asset
purchase............... -- -- 2,842 -- -- 2,842
Net income for fiscal -- -- -- 11,733 -- 11,733
1994................... ---- --- -------- -------- -------- --------
BALANCE, August 31,
1994................... 138 40 113,348 98,258 (7,591) 204,193
Conversion of 19,093
Class B Convertible
Common shares to Class
A Common shares........ -- -- -- -- -- --
Issuance of 3,000,000
Class A Common shares.. 30 -- 90,353 -- -- 90,383
Exercise of 432,067
Class A stock options
related to the Vintners
Acquisition............ 5 -- 13,013 -- -- 13,018
Employee stock purchase
of 28,641 treasury
shares................. -- -- 546 -- 87 633
To record exercise of
114,075 Class A stock
options................ 1 -- 1,324 -- -- 1,325
To record tax benefit on
stock options exer-
cised.................. -- -- 1,251 -- -- 1,251
To record tax benefit on
disposition of employee
stock purchases........ -- -- 59 -- -- 59
Net income for fiscal -- -- -- 41,020 -- 41,020
1995................... ---- --- -------- -------- -------- --------
BALANCE, August 31,
1995................... 174 40 219,894 139,278 (7,504) 351,882
Conversion of 5,000
Class B Convertible
Common shares to Class
A Common shares........ -- -- -- -- -- --
To record exercise of
18,000 Class A stock
options................ -- -- 238 -- -- 238
Employee stock purchase
of 20,869 treasury
shares................. -- -- 593 -- 63 656
To record issuance of
10,000 Class A stock
options................ -- -- 134 -- -- 134
To record tax benefit on
stock options exer-
cised.................. -- -- 198 -- -- 198
To record tax benefit on
disposition of employee
stock purchases........ -- -- 76 -- -- 76
Net income for Transi- -- -- -- 3,322 -- 3,322
tion Period............ ---- --- -------- -------- -------- --------
BALANCE, February 29,
1996................... $174 $40 $221,133 $142,600 ($7,441) $356,506
Conversion of 35,500
Class B Convertible
Common shares to Class
A Common shares (unau-
dited)................. -- -- -- -- -- --
To record exercise of
2,250 Class A stock op-
tions
(unaudited)............ -- -- 10 -- -- 10
To record the repurchase
of 785,200 shares of
Class A common stock
(unaudited)............ -- -- -- -- (20,702) (20,702)
Employee stock purchase
of 37,779 treasury
shares
(unaudited)............ -- -- 883 -- 115 998
Net income for nine
months ended November
30, 1996 -- -- -- 21,753 -- 21,753
(unaudited)............ ---- --- -------- -------- -------- --------
BALANCE, November 30, $174 $40 $222,026 $164,353 ($28,028) $358,565
1996 (unaudited)....... ==== === ======== ======== ======== ========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE NINE MONTHS FOR THE SIX MONTHS FOR THE YEARS
ENDED ENDED ENDED
----------------------- ------------------------- ----------------------------
NOVEMBER 30, AUGUST 31,
FEBRUARY 29, FEBRUARY 28,
1996 1995 1996 1995 1995 1994 1993
----------- ----------- ------------ ------------ -------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............. $21,753 $ 31,112 $ 3,322 $ 20,320 $ 41,020 $ 11,733 $ 15,604
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation of
property, plant and
equipment............. 18,662 11,011 9,521 9,786 15,568 10,534 7,389
Amortization of
intangible assets..... 7,175 4,383 4,437 2,865 5,144 3,281 1,286
Deferred tax provision
(benefit)............. 10,000 19,175 1,991 57 19,232 (4,319) 1,028
Loss (gain) on sale of
property, plant and
equipment............. 201 (39) 81 -- (33) -- (524)
Amortization of
discount on long-term
debt.................. 29 -- -- -- -- -- --
Accrued interest on
converted debentures,
net of taxes.......... -- -- -- -- -- 161 --
Restructuring
charges--fixed asset
write-down............ -- (2,050) 275 -- (2,050) 13,935 --
Change in operating
assets and
liabilities, net of
effects from
purchases of
businesses:
Accounts receivable,
net................. (55,635) (70,417) (27,008) 1,586 7,392 (17,946) (5,761)
Inventories, net..... (31,793) (35,460) (70,172) (18,783) 41,528 784 8,966
Prepaid expenses..... 9,176 (3,106) (2,350) 3,079 (3,884) 1,703 (8,571)
Accounts payable..... 18,510 28,966 (2,362) (30,068) (13,415) 2,680 (18,948)
Accrued Federal and
state excise taxes.. 3,150 (7,458) 4,066 6,907 (1,025) 4,405 845
Other accrued
expenses and
liabilities......... 17,951 (7,812) (8,564) (28,175) (20,784) 4,023 6,687
Other.................. (3,815) (11,695) 1,930 (3,817) (15,375) (3,795) 911
------- -------- -------- -------- -------- -------- --------
Total adjustments.... (6,389) (74,502) (88,155) (56,563) 32,298 15,446 (6,692)
------- -------- -------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities.......... 15,364 (43,390) (84,833) (36,243) 73,318 27,179 8,912
------- -------- -------- -------- -------- -------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
property, plant and
equipment............. 5,171 1,394 555 -- 1,336 -- 1,337
Purchases of property,
plant and equipment,
net of minor
disposals............. (25,318) (32,753) (16,077) (11,342) (37,121) (7,853) (6,949)
Payment of accrued
Earn-Out Amounts...... (13,848) (10,000) (11,307) -- (28,300) (4,000) --
Purchases of
businesses, net of
cash acquired......... -- -- -- -- -- 3 8,710
Purchase of brands..... -- -- -- -- -- (5,100) --
------- -------- -------- -------- -------- -------- --------
Net cash (used in)
provided by
investing
activities.......... (33,995) (41,359) (26,829) (11,342) (64,085) (16,950) 3,098
------- -------- -------- -------- -------- -------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds (repayment)
of notes payable,
short-term
borrowings............ 18,700 118,500 111,300 57,100 50,100 (2,035) (9,835)
Repayment of notes
payable from equity
offering proceeds..... -- -- -- (22,100) (22,100) -- --
Repayment of notes
payable from proceeds
of Term Loan.......... -- -- -- (47,000) (47,000) -- --
Payment of fees for
subordinated notes
offering.............. (1,478) -- -- -- -- (4,624) --
Principal payments of
long-term debt........ (39,612) (51,072) (14,579) (7,474) (57,906) (6,856) (981)
Proceeds from issuance
of subordinated
notes, net of
discount.............. 61,668 -- -- -- -- -- --
F-6
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE NINE MONTHS FOR THE SIX MONTHS FOR THE YEARS
ENDED ENDED ENDED
----------------------- ------------------------- ----------------------------
NOVEMBER 30, AUGUST 31,
FEBRUARY 29, FEBRUARY 28,
1996 1995 1996 1995 1995 1994 1993
----------- ----------- ------------ ------------ ------- --------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Proceeds of Term Loan,
long-term debt........ $ -- $ 13,219 $ 13,220 $ 47,000 $47,000 $ -- $ --
Repayment of Term Loan
from equity offering
proceeds, long-term
debt.................. -- -- -- (82,000) (82,000) -- --
Proceeds from equity
offering, net......... -- -- -- 103,313 103,400 -- --
Purchases of treasury
stock................. (19,997) -- -- -- -- -- --
Proceeds from employee
stock purchases....... 998 1,292 656 -- 633 1,056 330
Exercise of employee
stock options......... 10 1,014 224 341 1,325 10 --
Fractional shares paid
for debenture
conversions........... -- -- -- -- -- (3) --
------- -------- --------- -------- ------- --------- --------
Net cash provided by
(used in) financing
activities.......... 20,289 82,953 110,821 49,180 (6,548) (12,452) (10,486)
------- -------- --------- -------- ------- --------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH
INVESTMENTS............ 1,658 (1,796) (841) 1,595 2,685 (2,223) 1,524
CASH AND CASH
INVESTMENTS, beginning
of period.............. 3,339 3,090 4,180 1,495 1,495 3,718 2,194
------- -------- --------- -------- ------- --------- --------
CASH AND CASH
INVESTMENTS, end of
period................. $ 4,997 $ 1,294 $ 3,339 $ 3,090 $ 4,180 $ 1,495 $ 3,718
======= ======== ========= ======== ======= ========= ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid during the
period for:
Interest............. $21,636 $ 13,877 $ 14,720 $ 14,068 $25,082 $ 14,727 $ 5,910
======= ======== ========= ======== ======= ========= ========
Income taxes......... $ 4,156 $ 2,832 $ 3,612 $ 9,454 $11,709 $ 15,751 $ 5,670
======= ======== ========= ======== ======= ========= ========
SUPPLEMENTAL DISCLOSURES
OF NONCASH INVESTING
AND FINANCING
ACTIVITIES:
Fair value of assets
acquired, including
cash acquired......... $ -- $144,936 $ 144,927 $ -- $ -- $ 428,442 $135,280
Liabilities assumed.... -- (3,155) (3,147) -- -- (153,827) (52,851)
------- -------- --------- -------- ------- --------- --------
Cash paid.............. -- 141,781 141,780 -- -- 274,615 82,429
Less--Amounts
borrowed.............. -- (141,781) (141,780) -- -- (276,860) (68,835)
Less--Issuance of
Class A Common Stock.. -- -- -- -- -- -- (13,594)
Less--Issuance of
Class A Common Stock
options............... -- -- -- -- -- (7,052) --
Add--Receivable from
Seller................ -- -- -- -- -- 9,297 --
------- -------- --------- -------- ------- --------- --------
Net cash paid for
acquisition........... $ -- $ -- $ -- $ -- $ -- $ -- $ --
======= ======== ========= ======== ======= ========= ========
Goodwill reduction on
settlement of
disputed final
closing net asset
statement for
Vintners Acquisition.. $ 5,894 $ -- $ -- $ -- $ -- $ -- $ --
======= ======== ========= ======== ======= ========= ========
Accrued Earn-Out
Amounts............... $ -- $ -- $ 15,155 $ -- $10,000 $ 28,300 $ 4,000
======= ======== ========= ======== ======= ========= ========
Issuance of Class A
Common Stock for
conversion of
debentures............ $ -- $ -- $ -- $ -- $ -- $ 58,960 $ 976
======= ======== ========= ======== ======= ========= ========
Write-off of
unamortized deferred
financing costs on
debentures............ $ -- $ -- $ -- $ -- $ -- $ 1,569 $ --
======= ======== ========= ======== ======= ========= ========
Write-off unpaid
accrued interest on
debentures through
conversion date....... $ -- $ -- $ -- $ -- $ -- $ 1,371 $ --
======= ======== ========= ======== ======= ========= ========
Issuance of treasury
shares to stock
incentive plan........ $ -- $ -- $ -- $ -- $ -- $ -- $ 51
======= ======== ========= ======== ======= ========= ========
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND NOVEMBER 30, 1996 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of business--
Canandaigua Wine Company, Inc. and its subsidiaries (the Company) operates
in the beverage alcohol industry. The Company is a producer and supplier of
wines, an importer and producer of beers and distilled spirits, and a producer
and supplier of grape juice concentrate in the United States. It maintains a
portfolio of over 125 national and regional brands of beverage alcohol which
are distributed by over 1,200 wholesalers throughout the United States and
selected international markets. Its beverage alcohol brands are marketed in
five general categories: table wines, sparkling wines, dessert wines, imported
beer and distilled spirits.
Year-end change--
The Company changed its fiscal year end from the twelve month period ending
August 31 to the twelve month period ending on the last day of February. The
period from September 1, 1995, through February 29, 1996, is hereinafter
referred to as the "Transition Period".
Principles of consolidation--
The consolidated financial statements of the Company include the accounts of
Canandaigua Wine Company, Inc., and all of its subsidiaries. All intercompany
accounts and transactions have been eliminated.
Unaudited financial statements--
The consolidated financial statements as of November 30, 1996 and February
28, 1995, for the nine month periods ended November 30, 1996, and November 30,
1995, and for the six month period ended February 28, 1995, have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission applicable to interim reporting and
reflect, in the opinion of the Company, all adjustments necessary to present
fairly the financial information for Canandaigua Wine Company, Inc., and its
subsidiaries. All such adjustments are of a normal recurring nature.
Management's use of estimates and judgment--
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash investments--
Cash investments consist of money market funds and a certificate of deposit
and are stated at cost, which approximates market value. These investments
amounted to approximately $17,000 (unaudited) at November 30, 1996, $1,732,000
at February 29, 1996, and $12,900 (unaudited) at February 28, 1995, and
$2,462,000 and $10,000 at August 31, 1995 and 1994, respectively.
Fair value of financial instruments--
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107 ("Disclosures About Fair Value of Financial Instruments"),
the Company calculates the fair value of financial instruments and includes
this additional information in the notes to the financial statements when the
fair value is different than the book value of those financial instruments.
When the fair value is equal to the book value, no additional disclosure is
made. The Company uses quoted market prices
F-8
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
whenever available to calculate these fair values. When quoted market prices
are not available, the Company uses standard pricing models for various types
of financial instruments (such as forwards, options, swaps, etc.) which take
into account the present value of estimated future cash flows.
Interest rate futures and currency forward contracts--
From time to time, the Company enters into interest rate futures and a
variety of currency forward contracts in the management of interest rate risk
and foreign currency transaction exposure. Unrealized gains and losses on
interest rate futures are deferred and recognized as a component of interest
expense over the borrowing period. Unrealized gains and losses on foreign
currency forward contracts are deferred and recognized as a component of the
relateddealer effecting transactions in the accompanying financial statements. Discountsnew notes, whether or premiums on forward contractsnot you are
recognized overparticipating in the life of the contract.
Inventories--
Inventories are valued at the lower of cost (computed in accordance with the
last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market.
The percentage of inventories valued using the LIFO method is 94% at November
30, 1996, and February 29, 1996, 95% at February 28, 1995, and 94% and 95% at
August 31, 1995 and 1994, respectively. Replacement cost of the inventories
determined on a FIFO basis is approximately $386,421,000 (unaudited) at
November 30, 1996, $332,849,000 at February 29, 1996, $306,991,000 (unaudited)
at February 28, 1995, and $240,895,000 and $289,209,000 at August 31, 1995 and
1994, respectively. The net realizable value of the Company's inventories was
in excess of $373,631,000 (unaudited), $341,838,000, $319,836,000 (unaudited),
$256,811,000 and $301,053,000 at November 30, 1996, February 29, 1996,
February 28, 1995, and August 31, 1995 and 1994, respectively.
A substantial portion of barreled whiskey and brandy will not be sold within
one year because of the duration of the aging process. All barreled whiskey
and brandy are classified as in-process inventories and are included in
current assets, in accordance with industry practice. Bulk wine inventories
are also included as work in process within current assets, in accordance with
the general practices of the wine industry, although a portion of such
inventoriesexchange offer, you may be aged for periods greater than one year.
Warehousing, insurance, ad valorem taxes and other carrying charges
applicable to barreled whiskey and brandy held for aging are included in
inventory costs.
Elements of cost include materials, labor and overhead and consist of the
following:
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1996 1996 1995 1995 1994
------------ ------------ ------------ ---------- ----------
(UNAUDITED) (UNAUDITED)
(in thousands)
Raw materials and sup-
plies.................. $ 25,930 $ 24,197 $ 42,478 $ 19,753 $ 25,225
Wines and distilled
spirits in process..... 269,959 254,956 212,483 174,399 209,999
Finished case goods..... 77,742 62,685 64,875 62,659 65,829
--------- --------- --------- --------- ---------
$ 373,631 $ 341,838 $ 319,836 $ 256,811 $ 301,053
========= ========= ========= ========= =========
Property, plant and equipment--
Property, plant and equipment is stated at cost. Major additions and
betterments are charged to property accounts, while maintenance and repairs
are charged to operations as incurred. The cost of properties sold or
otherwise disposed of and the related allowance for depreciation are
eliminated from the accounts at the time of disposal and resulting gains and
losses are included as a component of operating income.
F-9
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation--
Depreciation is computed primarily using the straight-line method over the
following estimated useful lives:
DESCRIPTION DEPRECIABLE LIFE
----------- ----------------
Buildings and improvements 10 to 33 1/3 years
Machinery and equipment 7 to 15 years
Motor vehicles 3 to 7 years
Amortization of assets capitalized under capital leases is included with
depreciation expense. Amortization is calculated using the straight-line
method over the shorter of the estimated useful life of the asset or the lease
term.
Other assets--
Other assets, which consist of goodwill, distribution rights, agency license
agreements, trademarks, deferred financing costs, cash surrender value of
officers' life insurance and other amounts, are stated at cost, net of
accumulated amortization. Amortization is calculated on a straight-line or
effective interest basis over periods ranging from five to forty years. At
February 29, 1996, the weighted average of the remaining useful lives of these
assets was approximately thirty-seven years. The face value of the officers'
life insurance policies totaled $2,852,000 for all periods presented.
Advertising and Promotion Costs--
The Company generally expenses advertising and promotion costs as incurred,
shown or distributed. Prepaid advertising costs at November 30, 1996, February
29, 1996, February 28, 1995 and August 31, 1995 and 1994, are not material.
Advertising expense for the nine months ended November 30, 1996, the
comparable nine months ended November 30, 1995, the Transition Period, the
comparable six months ended February 28, 1995, and the years ended August 31,
1995 and 1994, were approximately $81,369,000 (unaudited), $70,747,000
(unaudited), $60,187,000, $41,658,000 (unaudited), $84,246,000 and $64,540,000
respectively.
Income taxes--
The Company uses the liability method of accounting for income taxes. The
liability method accounts for deferred income taxes by applying statutory
rates in effect at the balance sheet date to the difference between the
financial reporting and tax basis of assets and liabilities.
Environmental--
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with
completion of a feasibility study or the Company's commitment to a formal plan
of action. At November 30, 1996, February 29, 1996, February 28, 1995, and
August 31, 1995 and 1994, liabilities for environmental costs totaled $417,000
(unaudited), $465,000, $250,000 (unaudited), $550,000 and $100,000,
respectively, and are recorded in other accrued liabilities.
Net income per common and common equivalent share--
Primary net income per common and common equivalent share is based on the
weighted average number of common and common equivalent shares (stock options
determined under the treasury stock method) outstanding during the year for
Class A Common Stock and Class B Convertible Common
F-10
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock. Fully diluted earnings per common and common equivalent share assumes
the conversion of the 7% convertible subordinated debentures under the "if
converted method" and assumes exercise of stock options using the treasury
stock method.
Other--
Certain fiscal 1995, 1994 and 1993 balances have been reclassified to
conform with current period presentation.
2. ACQUISITIONS:
Barton--
On June 29, 1993, pursuant to the terms of a Stock Purchase Agreement (the
Stock Purchase Agreement) among the Company, Barton Incorporated (Barton) and
the former Barton stockholders (the Selling Stockholders), the Company
acquired from the Selling Stockholders all of the outstanding shares of the
capital stock of Barton (the Barton Acquisition), a marketer of imported beers
and imported distilled spirits and a producer and marketer of distilled
spirits and domestic beers.
The aggregate consideration for Barton consisted of approximately
$65,510,000 in cash, one million shares of the Company's Class A Common Stock
and payments of up to an aggregate amount of $57,300,000 (the Earn-Out
Amounts) which are payable to the Selling Stockholders in cash over a three
year period upon the satisfaction of certain performance goals and achievement
of targets for earnings before interest and taxes. In addition, the Company
paid approximately $1,981,000 of direct acquisition costs, $2,269,000 of
direct financing costs, and assumed liabilities of approximately $47,926,000.
The purchase price was funded through a $50,000,000 term loan (see Note 7),
through $18,835,000 of revolving loans under the Company's Credit Agreement
(see Note 7), and through approximately $925,000 of accrued expenses. In
addition, one million shares of the Company's Class A Common Stock were issued
at $13.59 per share, which reflects the closing market price of the stock at
the closing date, discounted for certain restrictions on the issued shares. Of
these shares, 428,571 were delivered to the Selling Stockholders and 571,429
were delivered into escrow to secure the Selling Stockholders' indemnification
obligations to the Company. The 571,429 shares were released from escrow and
delivered to the Selling Stockholders in fiscal 1995.
The Earn-Out Amounts consist of four payments scheduled to be made over a
three year period ending November 29, 1996. The first payment of $4,000,000
was required to be made to the Selling Stockholders upon satisfaction of
certain performance goals. These goals were satisfied and this payment was
accrued at August 31, 1993, and was made on December 31, 1993. The second
payment of $28,300,000 was accrued at August 31, 1994, and was made on
December 30, 1994, asdeliver a
result of satisfaction of certain performance goals
and achievement of targets for earnings before interest and taxes at August
31, 1994. The third payment of $10,000,000 was accrued at August 31, 1995, and
was made to the Selling Stockholders on November 30, 1995, as a result of the
achievement of targets for earnings before interest and taxes at August 31,
1995. The final remaining payment has been accrued as of February 29, 1996, as
a result of the achievement of certain targets for earnings before interest
and taxes andprospectus. This obligation is to be made by November 29, 1996. Such payment obligations are
secured by the Company's irrevocable standby letter of credit (see Note 7)
under the Credit Agreement in an original maximum face amount of $28,200,000
and are subject to acceleration in certain events as defined in the Stock
Purchase Agreement. All Earn-Out Amounts have been accounted for as additional
purchase price for the Barton Acquisition when the contingency was satisfied
in accordance with the Stock Purchase Agreement and allocated based upon the
fair market value of the underlying assets.
F-11
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pursuant to Barton's Phantom Stock Plan (the Phantom Stock Plan) effective
April 1, 1990, and amended and restated for Units (as defined in the Phantom
Stock Plan) granted after March 31, 1992, certain participants received
payments at closing amounting in the aggregate to $1,959,000 in connection
with the Barton Acquisition. Certain other participants will receive payments
only upon vesting in the Phantom Stock Plan during years subsequent to the
acquisition. All participants under the Phantom Stock Plan may receive
additional payments in the event of satisfaction of the performance goals set
forth in the Stock Purchase Agreement and upon release of the shares held in
escrow. In January 1995, Barton paid approximately $840,000 to participants
which included $403,000 relating to the satisfaction of requirements for
releasing stock from escrow and on November 30, 1995, paid $403,000. As of
February 29, 1996, all remaining payments to be made in accordance with the
Phantom Stock Plan, totaling $892,000, have been accrued as all performance
criteria has been satisfied. Payments of $605,000 will be made by November 30,
1996, and payments of $277,000 will be made by April 1, 1997, and $10,000 will
be made by February 10, 2024. At August 31, 1995 and 1994, $581,000 and
$554,000, respectively, were accrued under the Phantom Stock Plan. All amounts
accrued and paid under the Phantom Stock Plan were in addition to the purchase
priceobligation of dealers to
deliver a prospectus when acting as underwriters and were charged to operations in the period earned.
The Barton Acquisition was accounted for using the purchase method.
Accordingly, Barton's assets were recorded at fair market value at the date of
acquisition. The fair market value of Barton totaled $236,178,000 which was
adjusted for negative goodwill of $47,235,000 and an additional deferred tax
liability of $36,075,000 based on the difference between the fair market value
of Barton's assets and liabilities as adjusted for allocation of negative
goodwill and the tax basis of those assets and liabilities which was allocated
on a pro rata basis to noncurrent assets. The results of operations of Barton
have been included in the Consolidated Statements of Income since the date of
the acquisition.
Vintners--
On October 15, 1993, the Company acquired substantially all the tangible and
intangible assets of Vintners International Company, Inc. (Vintners) other
than cash and the Hammondsport Winery (the Vintners Assets), and assumed
certain current liabilities associated with the ongoing business (the Vintners
Acquisition). Vintners was the United States' fifth largest supplier of wine
with two of the country's most highly recognized brands, Paul Masson and
Taylor California Cellars. The wineries acquired from Vintners are the
Gonzales winery in Gonzales, California, and the Paul Masson wineries in
Madera and Soledad, California. In addition, the Company leased from Vintners
the Hammondsport winery in Hammondsport, New York. The lease was for a period
of 18 months from the date of the Vintners Acquisition. The lease expired
during fiscal 1995.
The aggregate purchase price of $148,900,000 (the Cash Consideration) is
subject to adjustment based upon the determination of the Final Net Current
Asset Amount (as defined below). In addition, the Company incurred $8,961,000
of direct acquisition and financing costs. The Company also delivered options
to Vintners and Household Commercial of California, Inc., one of Vintners'
lenders, to purchase an aggregate of 500,000 shares (the Vintners Option
Shares) of the Company's Class A Common Stock, at an exercise price per share
of $18.25, which are exercisable at any time until October 15, 1996. These
options have been recorded at $8.42 per share, based upon an independent
appraisal and $4,210,000 has been reflected as a component of additional paid-
in capital. On November 18, 1994, 432,067 of the Vintners Option Shares were
exercised (see Note 10).
The Cash Consideration was funded by the Company pursuant to (i)
approximately $12,600,000 of Revolving Loans under the Credit Facility of
which $11,200,000 funded the Cash Consideration and
F-12
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$1,400,000 funded the payment of direct acquisition costs; (ii) an accrued
liability of approximately $7,700,000 for the holdback described below and
(iii) the $130,000,000 Subordinated Loan (see Note 7).
At closing, the Company held back from the Cash Consideration approximately
10% of the then estimated net current assets of Vintners purchased by the
Company and deposited an additional $2,800,000 of the Cash Consideration into
an escrow pending consent of both parties for its release. If the amount of
the net current assets as determined after the closing (the Final Net Current
Asset Amount) is greater than 90% and less than 100% of the amount of net
current assets estimated at closing (the Estimated Net Current Asset Amount),
then the Company shall pay into the established escrow an amount equal to the
Final Net Current Asset Amount less 90% of the Estimated Net Current Asset
Amount. If the Final Net Current Asset Amount is greater than the Estimated
Net Current Asset Amount, then, in addition to the payment described above,
the Company shall pay an amount equal to such excess, plus interest from the
closing, to Vintners. If the Final Net Current Asset Amount is less than 90%
of the Estimated Net Current Asset Amount, then the Company shall be paid such
deficiency out of the escrow account. As of February 29, 1996, no adjustment
to the established escrow was required and the Final Net Current Asset Amount
has not been determined (see Note 17).
The Vintners Acquisition was accounted for using the purchase method;
accordingly, the Vintners Assets were recorded at fair market value at the
date of acquisition. The excess of the purchase price over the estimated fair
market value of the net assets acquired (goodwill), $44,151,000, is being
amortized on a straight-line basis over forty years. The results of operations
of Vintners have been included in the Consolidated Statements of Income since
the date of acquisition.
Almaden/Inglenook--
On August 5, 1994, the Company acquired the Inglenook and Almaden brands,
the fifth and sixth largest selling table wines in the United States, a grape
juice concentrate business and wineries in Madera and Escalon, California,
from Heublein, Inc. (Heublein) (the Almaden/Inglenook Acquisition). The
Company also acquired Belaire Creek Cellars, Chateau La Salle and Charles Le
Franc table wines, Le Domaine champagne and Almaden, Hartley and Jacques Bonet
brandy. The accounts receivable and the accounts payable related to the
acquired assets were not acquired by the Company.
The aggregate consideration for the acquired brands and other assets
consisted of $130,600,000 in cash, assumption of certain current liabilities
and options to purchase an aggregate of 600,000 shares of Class A Common Stock
(the Almaden Option Shares). Of the Almaden Option Shares, 200,000 were
exercisable at a price of $30 per share and the remaining 400,000 were
exercisable at a price of $35 per share. All of the options expired on August
5, 1996, unexercised. The 200,000 and 400,000 options have been recorded at
$5.83 and $4.19 per share, respectively, based upon an independent appraisal,
and $2,842,000 has been reflected as a component of additional paid-in
capital. The source of the cash payment made at closing, together with payment
of other costs and expenses required by the Almaden/Inglenook Acquisition, was
financing provided by the Company pursuant to a term loan under the Credit
Facility (see Note 7).
The cash purchase price was subject to adjustment based upon the
determination of the Final Net Asset Amount as defined in the Asset Purchase
Agreement; and, based upon the final closing statement delivered to the
Company by Heublein, was reduced by $9,297,000 which was paid to the Company
in November 1994.
F-13
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Heublein also agreed not to compete with the Company in the United States
and Canada for a period of five years following the closing of the
Almaden/Inglenook Acquisition in the production and sale of grape juice
concentrate or sale of packaged wines bearing the designation "Chablis" or
"Burgundy" except where, among other exceptions, such designations are
currently used with certain brands retained by Heublein. Certain companies
acquired by Heublein, however, may compete directly with the Company.
The Almaden/Inglenook Acquisition was accounted for using the purchase
method; accordingly, the Almaden/Inglenook assets were recorded at fair market
value at the date of acquisition. During fiscal 1995, the Company terminated
certain of its long-term grape contracts acquired in connection with the
Almaden/Inglenook Acquisition. As a result, the estimated loss reserve at the
date of acquisition was reduced by approximately $23,751,000, with a
corresponding reduction in goodwill (see Note 11). The excess of purchase
price over the estimated fair market value of the net assets acquired
(goodwill), $24,028,000, is being amortized on a straight-line basis over
forty years. The results of operations of Almaden/Inglenook have been included
in the Consolidated Statements of Income since the date of the acquisition.
UDG Acquisition--
On September 1, 1995, the Company through its wholly-owned subsidiary,
Barton Incorporated (Barton), acquired certain of the assets of United
Distillers Glenmore, Inc., and certain of its North American affiliates
(collectively, UDG) (the UDG Acquisition). The acquisition was made pursuant
to an Asset Purchase Agreement dated August 29, 1995 (the Purchase Agreement),
entered into between Barton and UDG. The acquisition included all of UDG's
rights to the Fleischmann's, Skol, Mr. Boston, Canadian LTD, Old Thompson,
Kentucky Tavern, Chi-Chi's, Glenmore and di Amore distilled spirits brands;
the U.S. rights to Inver House, Schenley and El Toro distilled spirits brands;
and related inventories and other assets. The acquisition also included two of
UDG's production facilities; one located in Owensboro, Kentucky, and the other
located in Albany, Georgia. In addition, pursuant to the Purchase Agreement,
the parties entered into multiyear agreements under which Barton will (i)
purchase various bulk distilled spirits brands from UDG and (ii) provide
packaging services for certain of UDG's distilled spirits brands as well as
warehousing services.
The aggregate consideration for the acquired brands and other assets
consisted of $141,780,000 in cash, plus transaction costs of $2,300,000, and
assumption of certain current liabilities. The source of the cash payment made
at closing, together with payment of other costs and expenses required by the
UDG Acquisition, was financing provided by the Company pursuant to a term loan
under the Credit Facility (see Note 7).
The following table sets forth the unaudited pro forma results of operations
of the Company for the nine months ended November 30, 1996 and 1995, the
audited results of operations of the Company for the Transition Period and the
unaudited comparable six month period ended February 28, 1995. The comparable
nine and six month periods ended November 30, 1995, and February 28, 1995,
respectively, unaudited pro forma results of operations give effect to the UDG
Acquisition as if it occurred on September 1, 1994. The unaudited pro forma
results of operations are presented after giving effect to certain adjustments
for depreciation, amortization of goodwill, interest expense on the
acquisition financing and related income tax effects. The unaudited pro forma
results of operations are based upon currently available information and upon
certain assumptions that the Company believes are reasonable under the
circumstances. The unaudited pro forma results of operations do not purport to
represent what the Company's results of operations would actually have been if
the aforementioned transactions in fact had occurred on such dates or to
project the Company's financial position or results of operations at any
future date or for any future period.
F-14
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED FOR THE SIX MONTHS ENDED
-------------------------- -------------------------
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28,
1996 1995 1996 1995
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED)
(in thousands, except share data)
Net sales........................ $ 873,444 $ 779,157 $ 535,024 $ 505,107
Income before provision for
income taxes.................... $ 37,818 $ 54,495 $ 6,703 $ 37,318
Net income....................... $ 21,753 $ 33,254 $ 3,322 $ 22,951
Share data:
Net income per common and common
equivalent share:
Primary........................ $1.10 $1.66 $.17 $1.25
Fully diluted.................. $1.10 $1.66 $.17 $1.25
Weighted average shares
outstanding:
Primary........................ 19,864,901 20,038,649 20,006,267 18,343,870
Fully diluted.................. 19,864,901 20,038,649 20,006,267 18,346,513
3. PROPERTY, PLANT AND EQUIPMENT:
The major components of property, plant and equipment are as follows:
AUGUST 31,
------------------
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28,
1996 1996 1995 1995 1994
------------ ------------ ------------ -------- --------
(UNAUDITED) (UNAUDITED)
(in thousands)
Land.................... $ 16,402 $ 16,867 $ 13,814 $ 15,257 $ 13,814
Buildings and improve-
ments.................. 74,663 76,694 62,583 65,084 62,440
Machinery and equipment. 234,883 226,432 168,767 197,266 168,222
Motor vehicles.......... 5,379 5,814 2,552 5,204 2,552
Construction in pro- 24,954 12,404 19,643 12,171 8,989
gress.................. -------- -------- -------- -------- --------
356,281 338,211 267,359 294,982 256,017
Less--Accumulated depre- (105,063) (87,573) (71,520) (77,477) (61,734)
ciation................ -------- -------- -------- -------- --------
$251,218 $250,638 $195,839 $217,505 $194,283
======== ======== ======== ======== ========
F-15
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER ASSETS:
The major components of other assets are as follows:
AUGUST 31,
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28, ------------------
1996 1996 1995 1995 1994
------------ ------------ ------------ -------- --------
(UNAUDITED) (UNAUDITED)
(in thousands)
Goodwill................ $151,153 $156,489 $ 79,511 $ 70,141 $ 88,459
Distribution rights,
agency license
agreements and
trademarks............. 119,316 119,316 72,970 83,536 72,970
Other................... 26,676 23,123 23,195 23,187 22,296
-------- -------- -------- -------- --------
297,145 298,928 175,676 176,864 183,725
Less--Accumulated
amortization........... (20,182) (13,006) (8,360) (9,957) (5,495)
-------- -------- -------- -------- --------
$276,963 $285,922 $167,316 $166,907 $178,230
======== ======== ======== ======== ========
5. OTHER ACCRUED EXPENSES AND LIABILITIES:
The major components of other accrued expenses and liabilities are as
follows:
AUGUST 31,
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28, ---------------
1996 1996 1995 1995 1994
------------ ------------ ------------ ------- -------
(UNAUDITED) (UNAUDITED)
(in thousands)
Accrued Earn-Out
Amounts................ $ -- $13,848 $ -- $10,000 $28,300
Accrued loss on
noncancelable grape
contracts.............. 1,176 1,719 13,646 10,862 14,410
Other................... 62,730 52,873 63,546 47,034 53,351
------- ------- ------- ------- -------
$63,906 $68,440 $77,192 $67,896 $96,061
======= ======= ======= ======= =======
6. OTHER LIABILITIES:
The major components of other liabilities are as follows:
AUGUST 31,
---------------
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28,
1996 1996 1995 1995 1994
------------ ------------ ------------ ------- -------
(UNAUDITED) (UNAUDITED)
(in thousands)
Accrued loss on
noncancelable grape
contracts.............. $1,171 $ 8,937 $27,170 $ 7,374 $48,254
Other................... 8,763 3,361 2,907 3,226 2,994
------ ------- ------- ------- -------
$9,934 $12,298 $30,077 $10,600 $51,248
====== ======= ======= ======= =======
F-16
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. BORROWINGS:
Borrowings consists of the following:
AUGUST 31,
-----------------
FEBRUARY 28,
NOVEMBER 30, 1996 FEBRUARY 29, 1996 1995 1995 1994
-------------------------- -------------------------- ------------ -------- --------
LONG- LONG-
CURRENT TERM TOTAL CURRENT TERM TOTAL TOTAL TOTAL TOTAL
-------- -------- -------- -------- -------- -------- ------------ -------- --------
(UNAUDITED) (UNAUDITED)
(in thousands)
Notes Payable:
Senior Credit
Facility:
Revolving Credit $130,000 $ -- $130,000 $111,300 $ -- $111,300 $ 7,000 $ -- $ 19,000
Loans............... ======== ======== ======== ======== ======== ======== ======== ======== ========
Long-term Debt:
Senior Credit
Facility:
Term loan, variable
rate, aggregate
proceeds of $246,000,
due in installments
through August 2001... $ 40,000 $157,000 $197,000 $ 40,000 $196,000 $236,000 $135,000 $ 91,000 $177,000
Senior Subordinated
Notes:
8.75% redeemable after
December 15, 1998,
due 2003.............. -- 130,000 130,000 -- 130,000 130,000 130,000 130,000 130,000
8.75% Series B
redeemable after
December 15, 1998,
due 2003 (less
unamortized discount
of $3,303--effective
rate 9.76%)........... -- 61,697 61,697 -- -- -- -- -- --
Capitalized Lease
Agreements:
Capitalized facility
and equipment leases
at interest rates
ranging from 8.9% to
11.5%, due in monthly
installments through
fiscal 1998........... 479 -- 479 679 293 972 2,137 1,338 2,292
Industrial Development
Agencies:
7.50% 1980 issue,
original proceeds
$2,370, due in annual
installments of $118
through fiscal 2000... 118 237 355 118 356 474 592 592 592
Other Long-term Debt:
Loans payable--5%
secured by cash
surrender value of
officers' life
insurance policies.... -- 967 967 -- 967 967 967 967 967
Notes payable at
prime................. -- -- -- -- -- -- 8,632 3,775 8,632
Promissory note at
prime rate, due in
equal annual
installments through -- -- -- -- -- -- 320 320 640
fiscal 1996........... -------- -------- -------- -------- -------- -------- -------- -------- --------
$ 40,597 $349,901 $390,498 $ 40,797 $327,616 $368,413 $277,648 $227,992 $320,123
======== ======== ======== ======== ======== ======== ======== ======== ========
F-17
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Senior credit facility--
The Company and a syndicate of 20 banks (the Syndicate Banks) for which The
Chase Manhattan Bank acts as agent, entered into a third amended and restated
credit agreement (the Credit Agreement) dated September 1, 1995 which provided
for (i) a $246,000,000 Term Loan (the Term Loan) Facility and (ii) a
$185,000,000 Revolving Credit (the Revolving Credit Loans) Facility and (iii)
a $25,000,000 Letter of Credit (Barton Letter of Credit) Facility related to
the stockholder contingent payments incurred with the Barton Acquisition. On
September 1, 1995 the Company borrowed $155,000,000 on the Term Loan in
connection with the UDG Acquisition. This Third Amended and Restated Credit
Agreement was further amended (i) as of December 20, 1995 to permit the use of
Revolving Loans to repurchase up to $30,000,000 of its Class A and Class B
Common Stock, (ii) as of January 10, 1996 to accommodate the change in the
Company's fiscal year end, and (iii) as of May 17, 1996 to, among other
things, modify certain financial covenants, effective February 29, 1996, to
which the Company is subject. Term loans under the Senior Credit Facility may
be either base rate loans or Eurodollar rate loans. Base rate loans have an
interest rate equal to the higher of either the Federal Funds rate plus 0.5%
or the prime rate. Eurodollar loans have an interest rate equal to the London
Interbank Offering Rate (LIBOR) plus a margin of 1.00% (unaudited), 0.75%,
1.25% (unaudited), 1.00%, 1.25%, and 1.63% at November 30, 1996, February 29,
1996, February 28, 1995, and August 31, 1995, 1994 and 1993 respectively. The
interest rate margin for Eurodollar loans ranges from 0.5% to 1.25% depending
on the Company's debt coverage ratio (as defined by the Senior Credit
Facility). The principal of the Term Loan is to be repaid in 23 quarterly
installments of $10,000,000 with a final payment of $7,000,000, which is due
on August 15, 2001.
The $185,000,000 Revolving Credit Loans, available under the Senior Credit
Facility, may be utilized by the Company either in the form of Revolving
Credit Loans or as Revolving Letters of Credit up to a maximum of $20,000,000.
At November 30, 1996, February 29, 1996, February 28, 1995, and August 31,
1995 and 1994, the Company had available to be drawn Revolving Credit Loans of
$46,099,000 (unaudited), $68,680,000, $176,670,000 (unaudited), $172,461,000
and $163,753,000, respectively. The Revolving Credit Loans have the same
borrowing options and margins as the Term Loan Facility and in addition the
Company may borrow under a money market option. The interest rate is
determined by a competitive bid process among the Syndicate Banks. For 30
consecutive days at any time during the fiscal quarters ending on May 31 and
August 31 of each fiscal year, the aggregate outstanding principal amount of
Revolving Credit Loans combined with Letters of Credit cannot exceed
$60,000,000. The weighted average interest rate on the Revolving Credit Loans
was 6.58% (unaudited), 7.27% (unaudited), 6.76%, 6.97% (unaudited), 7.16% and
6.07% for the nine months ended November 30, 1996, the comparable nine month
period ended November 30, 1995, for the Transition Period, the comparable six
month period ended February 28, 1995 and the fiscal years ended August 31,
1995, and 1994, respectively.
The Syndicate Banks have been given security interest in substantially all
of the assets of the Company including mortgage liens on certain real
property. The Credit Facility requires the Company to meet certain covenants
and provides for restrictions on mergers, consolidations, sale of assets,
payment of dividends, and incurring of other debt, liens or guarantees and
making of investments. The primary financial covenants as defined in the
Credit Facility require the maintenance of minimum tangible net worth and
maximum debt ratio, fixed charge and interest coverage ratios.
The Revolving Credit Loans require commitment fees based on the daily
average unused portion of the Revolving Credit Facility. The fee is based upon
the Company's debt ratio as defined in the Credit Agreement and can range from
0.2% to 0.375%. At November 30, 1996 and February 29, 1996, the commitment fee
percentages were 0.325% and 0.25%, respectively. Commitment fees totaled
F-18
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
approximately $234,500 (unaudited), $585,000 (unaudited), $142,600, $269,600
(unaudited), $635,000, $223,000 and $228,000 for the nine months ended November
30, 1996, the comparable nine month period ended November 30, 1995, for the
Transition Period, the comparable six month period ended February 28, 1995 and
the fiscal years ended August 31, 1995, 1994 and 1993 respectively.
At February 29, 1996, the Company maintains in accordance with the Senior
Credit Facility an interest rate cap agreement, in an amount equal to
$61,000,000, which protects the Company against three-month LIBOR exceeding
8.75% per annum and expires in September 1996 and an interest rate collar
agreement in the amount of $20,000,000 which protects the Company against three
month LIBOR exceeding 6.25% per annum with a floor rate of 4.75% per annum
expiring in September 1997.
Senior subordinated notes --
During fiscal 1994, the Company borrowed $130,000,000 under a senior
subordinated loan agreement (the Subordinated Loan). The Company repaid the
Subordinated Loan in December 1993 with the proceeds from the $130,000,000
Senior Subordinated Notes (the Notes) offering together with revolving loan
borrowings. The Notes are due in 2003 with a stated interest rate of 8.75% per
annum. Interest is payable semi-annually on June 15 and December 15 of each
year. The Notes are unsecured and subordinated to the prior payment in full of
all senior indebtedness of the Company, which includes the Senior Credit
Facility. The Notes are guaranteed, on a senior subordinated basis, by all of
the Company's significant operating subsidiaries.
On October 29, 1996, the Company issued $65,000,000 aggregate principal
amount of unsecured Series B Senior Subordinated Notes (the "Series B Notes")
due 2003 at a stated rate of 8.75% per annum. The net proceeds from the sale of
the Series B Notes were used to repay amounts outstanding under its bank credit
facility, including revolving loans. Interest on the Series B Notes will be
payable semiannually on June 15 and December 15 of each year. The Series B
Notes are redeemable at the option of the Company, in whole or in part, on or
after December 15, 1998. The Series B Notes are unsecured and subordinated to
the prior payment in full of all senior indebtedness of the Company, which
includes the Senior Credit Facility, and the Series B Notes are guaranteed, on
a senior subordinated basis, by substantially all of the Company's operating
subsidiaries.
The Trust Indentures relating to the Notes and the Series B Notes contain
certain covenants, including, but not limited to, (i) limitation on
indebtedness; (ii) limitation on restricted payments; (iii) limitation on
transactions with affiliates; (iv) limitation on senior subordinated
indebtedness; (v) limitation on liens; (vi) limitation on sale of assets; (vii)
limitation on issuance of guarantees of and pledges for indebtedness; (viii)
restriction on transfer of assets; (ix) limitation on subsidiary capital stock;
(x) limitation on the creation of any restriction on the ability of the
Company's subsidiaries to make distributions and other payments; and (xi)
restrictions on mergers, consolidations and the transfer of all or
substantially all of the assets of the Company to another person. The
limitation on indebtedness covenant is governed by a rolling four quarter fixed
charge coverage ratio covenant requiring a specified minimum.
Convertible subordinated debentures --
On July 23, 1986, the Company issued $60,000,000 7% convertible subordinated
debentures used to expand the Company's operations through capital expenditures
and acquisitions. The debentures were convertible at any time prior to
maturity, unless previously redeemed, into Class A Common Stock of the Company
at a conversion price of $18.22 per share, subject to adjustment in the event
of future issuances of common stock.
During fiscal 1993, an aggregate principal amount of $976,000 of these
debentures was converted to 53,620 shares of Class A Common Stock.
F-19
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On October 18, 1993, the Company called its convertible debentures for
redemption on November 19, 1993, at a redemption price of 102.1% plus accrued
interest. Bondholders had until November 19, 1993, to convert their debentures
to common stock; any debentures remaining unconverted after that date would be
redeemed for cash in accordance with the terms of the original indenture.
During the period September 1, 1993, through November 19, 1993, debentures
in an aggregate principal amount of $58,960,000 were converted to 3,235,882
shares of the Company's Class A Common Stock at a price of $18.22 per share.
Debentures in an aggregate principal amount of approximately $63,000 were
redeemed. Interest was accrued on the debentures until the date of conversion
but was forfeited by the debenture holders upon conversion. Accrued interest
of approximately $1,370,000, net of the related tax effect of $520,000, was
recorded as an addition to additional paid-in capital.
At the redemption date, the capitalized debenture issuance costs of
approximately $2,246,000, net of accumulated amortization of approximately
$677,000, were recorded as a reduction of additional paid-in capital.
Loans payable --
Loans payable, secured by officers' life insurance policies, carry an
interest rate of 5%. The notes carry no due dates and it is management's
intention not to repay the notes during the next fiscal year.
Capitalized lease agreements--Industrial Development Agencies --
Certain capitalized lease agreements require the Company to make lease
payments equal to the principal and interest on certain bonds issued by
Industrial Development Agencies (IDA's). The bonds are secured by the leases
and the related facilities. These transactions have been treated as capital
leases with the related assets acquired to date of $10,731,000 included in
property, plant and equipment and the lease commitments included in long-term
debt. Accumulated amortization of the foregoing assets under capital leases at
November 30, 1996, February 29, 1996, February 28, 1995, and August 31, 1995
and 1994, is approximately $9,926,000 (unaudited), $9,436,000, $8,783,000
(unaudited), $9,109,000 and $8,456,000, respectively.
Among the provisions under the debenture and lease agreements are covenants
that define minimum levels of working capital and tangible net worth and the
maintenance of certain financial ratios as defined in the debt agreements.
Debt payments--
Principal payments required under long-term debt obligations during the next
five fiscal years are as follows:
FEBRUARY 29, 1996:
------------------
(IN THOUSANDS)
1997............ $ 40,797
1998............ 40,411
1999............ 40,119
2000............ 40,119
2001............ 40,000
Thereafter...... 166,967
--------
$368,413
========
F-20
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES:
The provision for Federal and state income taxes consists of the following:
FOR THE FOR THE
SIX MONTHS ENDED YEARS ENDED
FEBRUARY 29, 1996 AUGUST 31,
------------------------ -----------------------
STATE &
FEDERAL LOCAL TOTAL 1995 1994 1993
(in thousands) ------- ------- ------ ------- ------- ------
Current income tax (benefit)
provision...................... $ (116) $1,506 $1,390 $ 6,446 $11,510 $8,636
Deferred income tax (benefit) 2,224 (233) 1,991 19,232 (4,319) 1,028
provision...................... ------ ------ ------ ------- ------- ------
$2,108 $1,273 $3,381 $25,678 $ 7,191 $9,664
====== ====== ====== ======= ======= ======
The components of the deferred income tax provision (benefit) are as
follows:
FOR THE FOR THE YEARS ENDED
SIX MONTHS ENDED AUGUST 31,
FEBRUARY 29, ------------------------
1996 1995 1994 1993
---------------- ------- ------- ------
(in thousands)
Accelerated tax depreciation
and amortization............. $ 4,752 $10,089 $ 4,610 $ 758
LIFO reserve.................. (2,007) 1,871 1,306 (202)
Prepaid advertising........... (922) 792 258 701
Inventory reserves............ 1,868 5,163 (2,186) (249)
Restructuring costs........... 2,155 3,144 (8,843) --
Other accruals................ (3,855) (1,827) 536 20
------- ------- ------- ------
$ 1,991 $19,232 $(4,319) $1,028
======= ======= ======= ======
The deferred tax provision has been increased by approximately $45,000 and
$235,000 in fiscal 1994 and 1993, respectively, for the impact of the change
in the federal statutory rate.
A reconciliation of total tax provision to the amount computed by applying
the expected U.S. Federal income tax rate to income before provision for
income taxes is as follows:
FOR THE FOR THE YEARS ENDED AUGUST 31, 1996
SIX MONTHS ENDED ------------------------------------------------
FEBRUARY 29, 1996 1995 1994 1993
------------------ ------------------ -------------- --------------
% OF % OF
% OF % OF PRE- PRE-
PRE-TAX PRE- TAX TAX TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
--------- -------- ------- --------- ------ ------ ------ ------
(in thousands)
"Expected" tax provi-
sion................... $ 2,346 35.0 $23,344 35.0 $6,623 35.0 $8,758 34.7
State and local income
taxes, net of federal
income tax benefit..... 827 12.3 2,395 3.6 644 3.4 870 3.4
Nondeductible meals and
entertainment expenses. 205 3.1 290 .4 87 .5 48 .2
Miscellaneous items, 3 -- (351) (.5) (163) (.9) (12) (.1)
net.................... --------- ------- ------- ---- ------ ---- ------ ----
$ 3,381 50.4 $25,678 38.5 $7,191 38.0 $9,664 38.2
========= ======= ======= ==== ====== ==== ====== ====
F-21
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax liabilities (assets) are comprised of the following:
FEBRUARY 29, AUGUST 31,
------------ ----------------
1996 1995 1994
(in thousands) ------------ ------- -------
Depreciation & amortization................ $66,746 $55,015 $40,152
LIFO reserve............................... 2,638 4,644 2,672
Prepaid advertising........................ 2,201 3,107 2,281
Restructuring costs........................ (3,963) (6,133) (9,482)
Inventory reserves......................... 3,648 1,718 (3,734)
Other accruals............................. (9,685) (5,027) 2,511
------- ------- -------
$61,585 $53,324 $34,400
======= ======= =======
At February 29, 1996, the Company has state and U.S. Federal net operating
loss carryforwards of $15,655,000 and $3,880,000, respectively, to offset
future taxable income that, if not otherwise utilized, will expire at February
28, 2001 and 2011, respectively.
9. PROFIT SHARING RETIREMENT PLANS AND RETIREMENT SAVINGS PLAN:
The Company's profit sharing retirement plans, which cover substantially all
employees, provide for contributions by the Company in such amounts as the
Board of Directors may annually determine and for voluntary contributions by
employees. The plans have qualified as tax-exempt under the Internal Revenue
Code and conform with the Employee Retirement Income Security Act of 1974.
Company contributions to the plans, including the Barton plan described below,
were $2,792,000 (unaudited) and $3,819,000 (unaudited) for the nine months
ended November 30, 1996 and 1995, respectively, $3,608,000 in the Transition
Period, $3,830,000, $3,414,000, and $1,290,000 in fiscal 1995, 1994 and 1993,
respectively.
In connection with the Barton Acquisition, the Company assumed Barton's
profit sharing and 401(k) plan which covers all salaried employees of Barton.
The amount of Barton's contribution under the profit sharing portion of the
plan is at the discretion of its Board of Directors, subject to limitations of
the plan. Contribution expense was $1,731,000 (unaudited) and $1,252,000
(unaudited) for the nine months ended November 30, 1996 and 1995,
respectively, and $1,095,000 in the Transition Period, $1,430,000 in fiscal
1995, $1,395,000 in fiscal 1994, and $230,000 from the date of acquisition to
August 31, 1993. Pursuant to the 401(k) portion of the plan, participants may
defer up 8% of their compensation for the year and receive no matching
contribution from Barton.
The Company's retirement savings plan, established pursuant to Section
401(k) of the Internal Revenue Code, permits substantially all full-time
employees of the Company to defer a portion of their compensation on a pre-tax
basis. Participants, exclusive of Barton employees, may defer up to 10% of
their compensation for the year and the Company makes a matching contribution
of 25% of the first 4% of compensation an employee defers. Company
contributions to this plan were $544,000 (unaudited) and $270,000 (unaudited)
for the nine months ended November 30, 1996 and 1995, respectively, $325,000
in the Transition Period and $281,000, $207,000, and $131,000 in fiscal 1995,
1994 and 1993, respectively.
F-22
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. STOCKHOLDERS' EQUITY:
Common stock --
The Company has two classes of common stock: Class A Common Stock and Class
B Convertible Common Stock. Class B Convertible Common Stock shares are
convertible into shares of Class A Common Stock on a one-to-one basis at any
time at the option of the holder. Holders of Class B Convertible Common Stock
are entitled to ten votes per share. Holders of Class A Common Stock are
entitled to only one vote per share but are entitled to a cash dividend
premium. If the Company pays a cash dividend on Class B Convertible Common
Stock, each share of Class A Common Stock will receive an amount at least ten
percent greater than the amount of the cash dividend per share paid on Class B
Convertible Common Stock. In addition, the Board of Directors may declare and
pay a dividend on Class A Common Stock without paying any dividend on Class B
Convertible Common Stock.
At February 29, 1996, there were 16,257,296 shares of Class A Common Stock
and 3,365,958 shares of Class B Convertible Common Stock outstanding, net of
treasury stock.
On June 28, 1993, the Company approved an increase in the number of
authorized shares of the Company's Class A Common Stock from 15,000,000 shares
to 60,000,000 shares and an increase in the number of authorized shares of the
Company's Class B Convertible Common Stock from 5,000,000 shares to 20,000,000
shares.
Stock repurchase authorization --
On January 11, 1996, the Company's Board of Directors authorized the
repurchase of up to $30,000,000 of its Class A and Class B Common stock. The
Company may finance such purchases, which will become treasury shares, through
cash generated from operations or through the Credit Facility. No shares were
repurchased as of February 29, 1996, and 785,200 shares of Class A Common
stock totaling $20,702,000 (unaudited) were repurchased during the nine months
ended November 30, 1996.
Preferred stock --
The Company is authorized to issue up to 1,000,000 shares of preferred
stock, par value $.01 per share, in one or more series. The Board of Directors
of the Company is entitled to authorize the issuance of preferred stock with
such rights, qualifications, limitations and restrictions as may be determined
by the Board. No preferred stock has been issued as of February 29, 1996.
Stock option and stock appreciation right plan--
Canandaigua Wine Company, Inc. has in place a Stock Option and Stock
Appreciation Right Plan (the Plan). Under the Plan, nonqualified stock options
and incentive stock options may be granted to purchase and stock appreciation
rights may be granted with respect to in the aggregate, not more than
3,000,000 shares of the Company's Class A Common Stock. Options and stock
appreciation rights may be issued to employees, officerstheir
unsold allotments or directors of the
Company. Nonemployee directors are eligible to receive only nonqualified stock
options and stock appreciation rights. The option price of any incentive stock
option may not be less than the fair market value of the shares on the date of
grant. The exercise price of any nonqualified stock option must equal or
exceed 50% of the fair market value of the shares on the date of grant.
Options are exercisable as determined by the Compensation
F-23
subscriptions.
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Committee of the Board of Directors. Changes in the status of the Plan during
the nine months ended November 30, 1996, the Transition Period and fiscal
1995, 1994 and 1993 are summarized as follows:
NOVEMBER AUGUST 31,
30, FEBRUARY 29, --------------------------
1996 1996 1995 1994
----------- ------------ ------------ ------------
(UNAUDITED)
Options outstanding at
beginning of period.... 1,093,725 733,925 563,500 452,375
Options granted......... 263,850 571,050 289,000 125,000
Options exercised....... (2,250) (18,000) (114,075) (2,250)
Options
forfeited/canceled..... (37,400) (193,250) (4,500) (11,625)
----------- ------------ ------------ ------------
Options outstanding at
end
of period.............. 1,317,925 1,093,725 733,925 563,500
Number of options at end of period:
Exercisable........... 28,675 28,675 39,675 2,250
Available for grant... 1,513,100 1,739,550 2,117,350 2,401,850
Price range of options:
Granted during period. $17.00 $35.75-49.00 $33.25-44.75 $22.25-30.25
Outstanding at end of
period............... $4.44-30.00 $4.44-36.00 $4.44-44.75 $4.44-30.25
Exercised during the pe-
riod................... $4.44 $4.44-33.25 $4.44-24.25 $4.44
Employee stock purchase plan--
In fiscal 1989, the Company approved a stock purchase plan under which
1,125,000 shares of Class A Common Stock can be issued. Under the terms of the
plan, eligible employees may purchase shares of the Company's Class A Common
Stock through payroll deductions. The purchase price is the lower of 85% of
the fair market value of the stock on the first or last day of the purchase
period. During the nine months ended November 30, 1996, the Transition Period
and fiscal 1995, 1994 and 1993, employees purchased 37,779 (unaudited),
20,869, 28,641, 58,955 and 21,071 shares, respectively.
Stock Offering--
During November 1994, the Company completed a public offering and sold
3,000,000 shares of its Class A Common Stock (the Stock Offering), resulting
in net proceeds to the Company of approximately $95,515,000 after
underwriters' discounts and commissions and expenses. In connection with the
offering, 432,067 of the Vintners Option Shares were exercised and the Company
received proceeds of $7,885,000. Under the terms of the amended Credit
Agreement, approximately $82,000,000 was used to repay a portion of the Term
Loan under the Company's Credit Facility. The balance of net proceeds was used
to repay Revolving Credit Loans under the Credit Facility.
F-24
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. COMMITMENTS AND CONTINGENCIES:
Operating leases--
Future payments under noncancelable operating leases having initial or
remaining terms of one year or more are as follows:
FEBRUARY 29, 1996
-----------------
(IN THOUSANDS)
1997................................. $1,169
1998................................. 923
1999................................. 766
2000................................. 742
2001................................. 732
2002................................. 724
Thereafter........................... 1,802
------
$6,858
======
Rental expense was approximately $3,569,000 (unaudited) and $3,325,000
(unaudited) for the nine months ended November 30, 1996 and 1995,
respectively, $2,382,000 in the Transition Period, $4,193,000 in fiscal 1995,
$3,318,000 in fiscal 1994 and $1,841,000 in fiscal 1993.
Purchase commitments and contingencies--
The Company has four agreements with certain suppliers to purchase blended
Scotch whisky through December 31, 1999. The purchase prices under the
agreements are denominated in British pounds sterling and based upon exchange
rates at February 29, 1996, the Company's aggregate future obligation will be
approximately $1,376,000 to $1,681,000 for the contracts expiring on December
31, 1996, and approximately $10,730,000 to $24,748,000 for the contracts
expiring through December 31, 1999.
The Company has two agreements to purchase Canadian blended whisky through
December 31, 1999 at a purchase price of approximately $2,819,000 to
$13,035,000. The Company also has two agreements to purchase Canadian new
distillation whisky (including dumping charges) through December 2002 at
purchase prices of approximately $15,129,000 to $16,626,000. In addition, the
Company has an agreement to purchase corn whiskey through April 1999 at a
purchase price of approximately $562,000.
All of the Company's imported beer products are marketed and sold pursuant
to exclusive distribution agreements from the suppliers of these products. The
agreements have terms that vary and require compliance with certain terms and
conditions. The Company's agreement to distribute Corona and its other Mexican
beer brands exclusively throughout 25 states was renewed effective January
1994 and expires in December 1998 with automatic renewal thereafter for one
year periods from year to year unless terminated. The remaining agreements
expire through the year 2003. Prior to their expiration, these agreements may
be terminated if the Company fails to meet certain performance criteria. At
February 29, 1996, the Company believes it is in compliance with all of its
material distribution agreements and given the Company's long-term
relationships with its suppliers, the Company does not believe that these
agreements will be terminated.
In connection with the Vintners Acquisition and the Almaden/Inglenook
Acquisition, the Company assumed purchase contracts with certain growers and
suppliers. In addition, the Company has also
F-25
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
entered into other purchase contracts with various growers and suppliers in
the normal course of business. Under the grape purchase contracts, the Company
is committed to purchase all grape production yielded from a specified number
of acres for a period of time ranging up to sixteen years. The actual tonnage
and price of grapes that must be purchased by the Company will vary each year
depending on certain factors, including weather, time of harvest, overall
market conditions and the agricultural practices and location of the growers
and suppliers under contract.
The Company purchased $113,880,000 of grapes under these contracts during
the Transition Period. Based on current production yields and published grape
prices, the Company estimates that the aggregate purchases under these
contracts over the remaining term of the contracts will be approximately
$730,574,000. During fiscal 1994, in connection with the Vintners Acquisition
and the Almaden/Inglenook Acquisition, the Company established a reserve for
the estimated loss on these firm purchase commitments of approximately
$62,664,000 which was subsequently reduced during fiscal 1995, to reflect the
effects of the termination payments to cancel contracts with certain growers
(see Note 2). The remaining reserve for the estimated loss on the remaining
contracts is approximately $2,347,000 (unaudited) at November 30, 1996 and
$10,656,000 at February 29, 1996.
The Company's aggregate obligations under grape crush and processing
contracts will be approximately $5,662,000 over the remaining term of the
contracts which expire through fiscal 2000.
Currency forward contracts--
At February 29, 1996, the Company had open currency forward contracts to
purchase British pound sterling of $3,129,000, which mature through September
1996; the fair market value, based upon February 29, 1996, market rates was
$3,164,000. At August 31, 1995, there were no currency forward contracts
outstanding. At August 31, 1994, the Company had open currency forward
contracts to purchase German marks of $6,674,000 and British pounds sterling
of $579,000, both of which matured within 12 months; their fair market values,
based upon August 31, 1994, market exchange rates, were $7,382,000 and
$614,000, respectively.
Employment contracts--
The Company has employment contracts with certain of its executive officers
and certain other management personnel with remaining terms ranging up to five
years. These agreements provide for minimum salaries, as adjusted for annual
increases, and may include incentive bonuses based upon attainment of
specified management goals. In addition, these agreements also provide for
severance payments in the event of specified termination of employment. The
aggregate commitment for future compensation and severance, excluding
incentive bonuses, was approximately $5,278,000 as of February 29, 1996, of
which approximately $1,879,000 is accrued in other liabilities as of February
29, 1996.
Legal matters--
The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to such
litigation cannot be determined, in the opinion of management, such liability
will not have a material adverse effect on the Company's financial condition
or results of operations.
12. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
The Company sells its products principally to wholesalers for resale to
retail outlets including grocery stores, package liquor stores, club and
discount stores and restaurants. Gross sales to the five largest wholesalers
of the Company represented 16.9%, 21.6%, 23.7% and 25.1% of the Company's
F-26
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
gross sales for the Transition Period and for the fiscal years ended August
31, 1995, 1994 and 1993, respectively. Gross sales to the Company's largest
wholesaler represented 10.6% and 12.3% of the Company's gross sales for the
fiscal years ended August 31, 1995 and 1994; no single wholesaler was
responsible for greater than 10% of gross sales during the Transition Period
and the fiscal year ended August 31, 1993. Gross sales to the Company's five
largest wholesalers are expected to continue to represent a significant
portion of the Company's revenues. The Company's arrangements with certain of
its wholesalers may, generally, be terminated by either party with prior
notice. The Company performs ongoing credit evaluations of its customers'
financial position, and management of the Company is of the opinion that any
risk of significant loss is reduced due to the diversity of customers and
geographic sales area.
13. RESTRUCTURING PLAN:
The Company provided for costs to restructure the operations of its
California wineries (the Restructuring Plan) in the fourth quarter of fiscal
1994. Under the Restructuring Plan, all bottling operations at the Central
Cellars Winery in Lodi, California, and the branded wine bottling operations
at the Monterey Cellars Winery in Gonzales, California, were moved to the
Mission Bell Winery located in Madera, California. The Monterey Cellars Winery
will continue to be used as a crushing, winemaking and contract bottling
facility. The Central Cellars Winery was closed in the fourth quarter of
fiscal 1995 and was sold for its approximate net book value subsequent to
February 29, 1996. In fiscal 1994, the Restructuring Plan reduced income
before taxes and net income by approximately $24,005,000 and $14,883,000,
respectively, or $.91 per share on a fully diluted basis. Of the total pretax
charge in fiscal 1994, approximately $16,481,000 was to recognize estimated
losses associated with the revaluation of land, buildings and equipment
related to facilities described above, to their estimated net realizable
value; and approximately $7,524,000 related to severance and other benefits
associated with the elimination of 260 jobs. In fiscal 1995, the Restructuring
Plan reduced income before income taxes and net income by approximately
$2,238,000 and $1,376,000, respectively, or $.07 per share on a fully diluted
basis. Of this total pretax charge in fiscal 1995, $4,288,000 relates to
equipment relocation and employee hiring and relocation costs, offset by a
decrease of $2,050,000 in the valuation reserve as compared to fiscal 1994,
primarily related to the land, buildings and equipment at the Central Cellars
Winery. The Company also expended approximately $19,071,000 in fiscal 1995 for
capital expenditures to expand storage capacity and install certain relocated
equipment. In the Transition Period, the expense incurred in connection with
the Restructuring Plan reduced income before taxes and net income by
approximately $2,404,000 and $1,192,000, respectively, or $.06 per share.
These charges represent incremental, nonrecurring expenses of $3,982,000
primarily incurred for overtime and freight expenses resulting from
inefficiencies related to the Restructuring Plan, offset by a reduction in the
accrual for restructuring expenses of $1,578,000, primarily for severance and
facility holding and closure costs. The Company expended approximately
$6,644,000 during the Transition Period, for capital expenditures to expand
storage capacity. As of February 29, 1996, employment has been reduced by 177
jobs and no additional reductions are expected. As of November 30, 1996,
February 29, 1996, August 31, 1995 and 1994, the Company had accrued
approximately $592,000 (unaudited), $1,186,000, $4,251,000 and $9,106,000,
respectively, relating to the Restructuring Plan.
F-27
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:
The following table presents summarized financial information for subsidiary
guarantors in connection with the Company's 8.75% Series C Senior Subordinated
Notes:
NOVEMBER 30, FEBRUARY 29, FEBRUARY 28, AUGUST 31, AUGUST 31,
1996 1996 1995 1995 1994
------------ ------------ ------------ ---------- ----------
(in thousands)
Balance Sheet Data:
Current assets........ $446,473 $404,655 $358,723 $303,497 $356,331
Noncurrent assets..... $306,147 $306,647 $160,267 $175,198 $162,407
Current liabilities... $140,089 $122,923 $101,876 $ 90,730 $129,252
Noncurrent liabili-
ties................. $ 58,544 $ 67,132 $ 71,732 $ 62,315 $ 93,177
FOR THE NINE MONTHS FOR THE SIX FOR THE YEARS
ENDED NOVEMBER 30, MONTHS ENDED ENDED AUGUST 31,
------------------- ------------------------- ---------------------------
FEBRUARY 29, FEBRUARY 28,
1996 1995 1996 1995 1995 1994 1993
--------- --------- ------------ ------------ -------- -------- --------
(in thousands)
Income Statement Data:
Net sales............. $ 718,676 $ 597,164 $416,839 $334,885 $716,969 $514,466 $122,450
Gross profit.......... $ 127,306 $ 99,787 $ 73,843 $ 62,883 $131,489 $ 81,454 $ 25,378
Income (loss) before
provision for Federal
and state income tax-
es................... $ 34,602 $ 31,940 $ 17,083 $ 22,690 $ 52,756 $ (7,048) $ 8,898
Net income (loss)..... $ 19,903 $ 19,615 $ 8,466 $ 13,954 $ 32,445 $ (4,370) $ 5,495
15. ACCOUNTING PRONOUNCEMENTS:
In March 1995, Statement of Financial Accounting Standards No. 121 (SFAS No.
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," was issued. This statement requires companies to
review long-lived assets, including certain intangibles and goodwill, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company will be
required to adopt SFAS No. 121 in fiscal 1997. The Company believes the effect
of adoption will not be material.
In October 1995, Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation," was issued. This statement
encourages companies to use the fair value based method to measure compensation
cost, which is then recognized over the service period (usually the vesting
period). Companies which continue to measure compensation cost using the
intrinsic value method as prescribed by APB Opinion No. 25, "Accounting for
Stock Issued to Employees", will be required to disclose pro forma net income
and, if presented, earnings per share as if the fair value based method had
been applied. The Company will be required to adopt SFAS No. 123 on a
prospective basis beginning in fiscal 1997. The Company has elected to apply
the provisions of APB Opinion No. 25 and will comply with the disclosure
requirements in the notes to its fiscal 1997 consolidated financial statements.
F-28
CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. FEBRUARY FISCAL YEAR FINANCIAL DATA (UNAUDITED):
The financial data presented below summarizes unaudited activity for the
1996, 1995 and 1994 fiscal years ended the last day of February.
FULL YEAR FULL YEAR FULL YEAR
RECAST RECAST RECAST
FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1996 1995 1994
------------ ------------ ------------
(in thousands)
GROSS SALES.......................... $1,331,184 $1,046,792 $ 635,983
Less--Excise taxes................. (344,101) (257,239) (165,049)
---------- ---------- ---------
Net Sales........................ 987,083 789,553 470,934
COST OF PRODUCT SOLD................. (722,325) (566,713) (332,463)
---------- ---------- ---------
Gross profit..................... 264,758 222,840 138,471
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................ (191,683) (141,653) (93,903)
NONRECURRING RESTRUCTURING EXPENSES.. (3,957) (24,690) --
---------- ---------- ---------
Operating income................. 69,118 56,497 44,568
INTEREST EXPENSE--NET................ (28,758) (22,911) (11,495)
---------- ---------- ---------
Income before provision for Federal
and state income taxes ........... 40,360 33,586 33,073
PROVISION FOR FEDERAL AND STATE
INCOME TAXES ....................... (16,339) (12,928) (12,629)
---------- ---------- ---------
NET INCOME........................... $ 24,021 $ 20,658 $ 20,444
========== ========== =========
17. SUBSEQUENT EVENTS (UNAUDITED):
Vintners Holdback--
On September 26, 1996, the Company reached a final settlement with the
company formerly known as Vintners International Company, Inc. and its lenders
on the disputed final closing net asset statement. As a result, the Company
will record a purchase price reduction for the Vintners Acquisition, which will
reduce recorded goodwill by approximately $5,894,000 (see Note 2).
F-29
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary.................................................................... 1
Risk Factors............................................................... 12
The Exchange Offer......................................................... 19
Use of Proceeds............................................................ 27
Capitalization............................................................. 28
Selected Historical Financial Data......................................... 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 31
Industry................................................................... 46
Business................................................................... 48
Management................................................................. 60
Description of Credit Facility............................................. 62
Description of Notes....................................................... 64
Certain Federal Income Tax Considerations.................................. 93
Plan of Distribution....................................................... 97
Legal Matters.............................................................. 98
Experts.................................................................... 98
Available Information...................................................... 98
Incorporation of Certain Documents by Reference............................ 99
Index to Consolidated Financial Statements................................. F-1
PROSPECTUS
CANANDAIGUA WINE
COMPANY,BRANDS, INC.
OFFER TO EXCHANGE
UP TO $65,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS(POUND)75,000,000
8 3/4%
SERIES C1/2% SENIOR SUBORDINATED NOTES DUE 2003 FOR ANY AND ALL OF ITS 8 3/4%
SERIES B SENIOR SUBORDINATED NOTES DUE 2003
LOGO
, 19972009
---------------------
PROSPECTUS
--------------------
_____________, 2000
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law of Delaware (Section 102) allows a
corporation to eliminate or limit the personal liability of directors of a corporationdirector to the
corporation or to any of its stockholders for monetary damagedamages for a breach of
his/her fiduciary
duty as a director, except inbut a corporation may not so eliminate or limit a director's
liability for a breach of the case where the director
breached his/her duty of loyalty, faileda failure to act in good faith,
engagedengaging in intentional misconduct or knowingly violateda knowing violation of a law, authorizedauthorizing
the payment of a dividend or approvedapproving a stock repurchase in violation of the
Delaware corporate
lawGeneral Corporation Law, or obtainedobtaining an improper personal benefit. The
Company's Restated Certificate of Incorporation of the Company contains a provision which
eliminates directors' personal liability as set forth above.
Theto the extent permitted by the Delaware
General Corporation Law.
The Delaware General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers, subject to specified conditions and
exclusions; gives a director or officer who successfully defends an action the
right to be so indemnified; and authorizes the Company to buy directors' and
officers' liability insurance. Such indemnification is not exclusive of any
other right to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or otherwise.
The Company's Restated Certificate of Incorporation provides for
indemnification to the fullest extent authorized by Section 145 of the Delaware
General Corporation Law of Delaware for directors, officers and employees of the Company and
also to persons who are serving at the request of the Company as directors,
officers or employees of other corporations (including subsidiaries); provided
that, with respect to proceedings initiated by such indemnitee, indemnification
shall be provided only if such proceedings were authorized by the Board of
Directors. This right of indemnification is not exclusive of any other right
which any person may acquire under any statute, bylaw, agreement, contract, vote
of stockholders or otherwise.
The Company maintains a directors' and officers' liability
insurance and corporate reimbursement policiespolicy insuring directors and officers
against loss arising from claims made arising out of the performance of their
duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.EXHIBITS.a
Exhibit
Number Description of Exhibit
- ------ ----------------------
4.1 Indenture, dated as of November 17, 1999, by and among the
Company, certain subsidiaries and Harris Trust and Savings Bank,
as Trustee*
4.2 Registration Rights Agreement, dated as of November 17, 1999, by
and among the Company, the guarantors named therein, and J.P.
Morgan Securities Ltd.*
4.3 Form of new notes (included in Exhibit 4.1)*
5 Opinion of McDermott, Will & Emery*
12 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG LLP
23.3 Consent of McDermott, Will & Emery (included in Exhibit 5)*
24 Powers of Attorney (included on the signature pages of the
registration statement)*
25 Statement of Eligibility of Trustee on Form T-1*
99.1 Form of Letter of Transmittal*
99.2 Form of Letter to Registered Holders*
99.3 Form of Letter to Clients and Instruction to Registered Holder
from Beneficial Owner*
* previously filed
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
*2.1 Asset Purchase Agreement dated August 2, 1991 between the Registrant
and Guild Wineries and Distilleries, as assigned to an acquiring
subsidiary (filed as Exhibit 2(a) to the Registrant's Report on Form
8-K dated October 1, 1991 and incorporated herein by reference).
*2.2 Stock Purchase Agreement dated April 27, 1993 among the Registrant,
Barton Incorporated and the stockholders of Barton Incorporated,
Amendment No. 1 to Stock Purchase Agreement dated May 3, 1993, and
Amendment No. 2 to Stock Purchase Agreement dated June 29, 1993 (filed
as Exhibit 2(a) to the Registrant's Current Report on Form 8-K dated
June 29, 1993 and incorporated herein by reference).
*2.3 Asset Sale Agreement dated September 14, 1993 between the Registrant
and Vintners International Company, Inc. (filed as Exhibit 2(a) to the
Registrant's Current Report on Form 8-K dated October 15, 1993 and
incorporated herein by reference).
II-1
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
*2.4 Amendment dated as of October 14, 1993 to Asset Sale Agreement dated
as of September 14, 1993 by and between Vintners International
Company, Inc. and the Registrant (filed as Exhibit 2(b) to the
Registrant's Current Report on Form 8-K dated October 15, 1993 and
incorporated herein by reference).
*2.5 Amendment No. 2 dated as of January 18, 1994 to Asset Sale Agreement
dated as of September 14, 1993 by and between Vintners International
Company, Inc. and the Registrant (filed as Exhibit 2.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1994 and incorporated herein by reference).
*2.6 Asset Purchase Agreement dated August 3, 1994 between the Registrant
and Heublein, Inc. (filed as Exhibit 2(a) to the Registrant's Current
Report on Form 8-K dated August 5, 1994 and incorporated herein by
reference).
*2.7 Amendment dated November 8, 1994 to Asset Purchase Agreement between
Heublein, Inc. and Registrant (filed as Exhibit 2.2 to the
Registrant's Registration Statement on Form S-3 (Amendment No. 2)
(Registration No. 33-55997) filed with the Securities and Exchange
Commission on November 8, 1994 and incorporated herein by reference).
*2.8 Amendment dated November 18, 1994 to Asset Purchase Agreement between
Heublein, Inc. and the Registrant (filed as Exhibit 2.8 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994 and incorporated herein by reference).
*2.9 Amendment dated November 30, 1994 to Asset Purchase Agreement between
Heublein, Inc. and the Registrant (filed as Exhibit 2.9 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1994 and incorporated herein by reference).
*2.10 Asset Purchase Agreement among Barton Incorporated (a wholly-owned
subsidiary of the Registrant), United Distillers Glenmore, Inc.,
Schenley Industries, Inc., Medley Distilling Company, United
Distillers Manufacturing, Inc., and The Viking Distillery, Inc., dated
August 29, 1995 (filed as Exhibit 2(a) to the Registrant's Current
Report on Form 8-K, dated August 29, 1995 and incorporated herein by
reference).
*3.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1 to the Registrant's Transition Report on Form 10-K for the
fiscal period ended February 29, 1996 and incorporated herein by
reference).
*3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2
to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended November 30, 1995 and incorporated herein by reference).
*4.1 Form of Note.
*4.2 Indenture.
*4.3 Specimen of Certificate of Class A Common Stock of the Company (filed
as Exhibit 1.1 to the Registrant's Statement on Form 8-A dated April
28, 1992 and incorporated herein by reference).
*4.4 Specimen of Certificate of Class B Common Stock of the Company (filed
as Exhibit 1.2 to the Registrant's Statement on Form 8-A dated April
28, 1992 and incorporated herein by reference).
*4.5 Indenture dated as of December 27, 1993 among the Registrant, its
Subsidiaries and Chemical Bank (filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1993 and incorporated herein by reference).
II-2
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
*4.6 First Supplemental Indenture dated as of August 3, 1994 among the
Registrant, Canandaigua West, Inc. and Chemical Bank (filed as Exhibit
4.5 to the Registrant's Registration Statement on Form S-8
(Registration No. 33-56557) and incorporated herein by reference).
*4.7 Second Supplemental Indenture dated August 25, 1995, among the
Registrant, V Acquisition Corp. (a subsidiary of the Registrant now
known as The Viking Distillery, Inc.) and Chemical Bank (filed as
Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended August 31, 1995 and incorporated herein by
reference).
*4.8 Registration Rights Agreement.
*5.1 Opinion of McDermott, Will & Emery.
8.1 Opinion of McDermott, Will & Emery regarding Certain Tax Matters.
*10.1 The Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation
Right Plan (filed as Appendix B of the Company's Definitive Proxy
Statement dated December 23, 1987 and incorporated herein by
reference.
*10.2 Amendment No. 1 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 1992
and incorporated herein by reference).
*10.3 Amendment No. 2 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 28 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended November
30, 1992 and incorporated herein by reference.
*10.4 Amendment No. 3 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1993 and incorporated herein by reference).
*10.5 Amendment No. 4 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1993 and incorporated herein by reference).
*10.6 Amendment No. 5 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1994 and incorporated herein by reference).
*10.7 Amendment No. 6 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.7 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1995 and incorporated herein by reference).
*10.8 Amendment No. 7 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan (filed as Exhibit 10.8 to the
Registrant's Transition Report on Form 10-K for the fiscal period
ended February 29, 1996 and incorporated herein by reference).
*10.9 Employment Agreement between Barton Incorporated and Ellis M. Goodman
dated as of October 1, 1991 as amended by Amendment to Employment
Agreement between Barton Incorporated and Ellis M. Goodman dated as of
June 29, 1993 (filed as Exhibit 10.5 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended August 31, 1993 and
incorporated herein by reference).
*10.10 Barton Incorporated Management Incentive Plan (filed as Exhibit 10.6
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1993 and incorporated herein by reference).
II-3
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
*10.11 Ellis M. Goodman Split Dollar Insurance Agreement (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended August 31, 1993 and incorporated herein by reference).
*10.12 Barton Brands, Ltd. Deferred Compensation Plan (filed as Exhibit 10.8
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1993 and incorporated herein by reference).
*10.13 Marvin Sands Split Dollar Insurance Agreement (filed as Exhibit 10.9
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended August 31, 1993 and incorporated herein by reference).
*10.14 Amendment and Restatement dated as of June 29, 1993 of Credit
Agreement among the Registrant, its subsidiaries and certain banks for
which The Chase Manhattan Bank (National Association) acts as agent
(filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K
dated June 29, 1993 and incorporated herein by reference).
*10.15 Amendment No. 1 dated as of October 15, 1993 to Amendment and
Restatement dated as of June 29, 1993 of Credit Agreement among the
Registrant, its subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent (filed as Exhibit
2(c) to the Registrant's Current Report on Form 8-K dated October 15,
1993 and incorporated herein by reference).
*10.16 Senior Subordinated Loan Agreement dated as of October 15, 1993 among
the Registrant, its subsidiaries and certain banks for which The Chase
Manhattan Bank (National Association) acts as agent (filed as Exhibit
2(d) to the Registrant's Current Report on Form 8-K dated October 15,
1993 and incorporated herein by reference).
*10.17 Second Amendment and Restatement dated as of August 5, 1994 of
Amendment and Restatement of Credit Agreement dated as of June 29,
1993 among the Registrant, its subsidiaries and certain banks for
which The Chase Manhattan Bank (National Association) acts as agent
(filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K
dated August 5, 1994 and incorporated herein by reference).
*10.18 Amendment No. 1 (dated as of August 5, 1994) to Second Amendment and
Restatement dated as of August 5, 1994 of Amendment and Restatement of
Credit Agreement dated as of June 29, 1993 among the Registrant, its
subsidiaries and certain banks for which The Chase Manhattan Bank
(National Association) acts as agent (filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
August 31, 1994 and incorporated herein by reference).
*10.19 Third Amended and Restated Credit Agreement between the Registrant,
its principal operating subsidiaries, and certain banks for which The
Chase Manhattan Bank (National Association) acts as Administrative
Agent, dated as of September 1, 1995 (filed as Exhibit 2(b) to the
Registrant's Current Report on Form 8-K, dated August 29, 1995 and
incorporated herein by reference).
*10.20 Amendment No. 1, dated as of December 20, 1995 to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (National Association) acts as Administrative Agent
(filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1995 and incorporated
herein by reference).
II-4
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
*10.21 Amendment No. 2, dated as of January 10, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (National Association) acts as Administrative Agent
(filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended November 30, 1995 and incorporated
herein by reference).
*10.22 Letter agreement, addressing compensation, between the Registrant and
Lynn Fetterman, dated March 22, 1990 (filed as Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 1995 and incorporated herein by reference).
*10.23 Letter agreement, effective as of October 7, 1995, as amended,
addressing compensation, between the Registrant and Daniel Barnett
(filed as Exhibit 10.23 to the Registrant's Transition Report on Form
10-K for the fiscal period ended February 29, 1996 and incorporated
herein by reference).
*10.24 Amendment No. 3, dated as of May 17, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (National Association) acts as Administrative Agent
(filed as Exhibit 10.24 to the Registrant's Transition Report on Form
10-K for the fiscal period ended February 29, 1996 and incorporated
herein by reference).
*10.25 Amendment No. 4, dated as of May 17, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)
act as Administrative Agent (filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended May 31,
1996 and incorporated herein by reference).
*10.26 Amendment No. 5, dated as of October 10, 1996, to Third Amended and
Restated Credit Agreement between the Registrant, its principal
operating subsidiaries, and certain banks for which The Chase
Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.)
acts as administrative agent.
*10.27 Amendment No. 8 to the Canandaigua Wine Company, Inc. Stock Option and
Stock Appreciation Right Plan.
11.1 Statement regarding Computation of Per Share Earnings.
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Price Waterhouse LLP.
*23.3 Consent of McDermott, Will & Emery (included in Exhibit 5.1).
*24.1 Powers of Attorney (included on signature page).
*25.1 Statement of Eligibility of Trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
*99.4 Form of Letter to Clients.
- --------
*Previously Filed.
(b) Financial Statement Schedules:
All schedules haveThe exhibits listed are pursuant to Regulation S-K Item 601 exhibit table
footnote 3: "an exhibit need not be provided about a company if (1) with respect
to such company an election has been omitted either as inapplicablemade under Forms S-4 or becauseF-4 to provide
information about such company at a level prescribed by Forms S-2, S-3, F-2 or
F-3 and (2) the required information is included inform, the financial statementslevel of which has been elected under Forms S-4 or
notes thereto.
II-5
F-4, would not require such company to provide such exhibit if it were
registering a primary offering."
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required
by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any
facts or events arising after the
effective date of the registration
statement (or the most recent
post-effective amendment thereof)
which, individually or in the
aggregate, represent a fundamental
change in the information set forth
in the registration statement.
Notwithstanding the foregoing, any
increase or decrease in volume of
securities offered (if the total
dollar amount of securities offered
would not exceed that which was
registered) and any deviation from
the low or high end of the estimated
offering range may be reflected in
the form of prospectus filed with
the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in
volume and price represent no more
than a 20 percent change in the
maximum aggregate offering price set
forth in the "Calculation of
Registration Fee" table in the
effective registration statement;
(iii) To include any material information
with respect to the plan of
distribution not previously
disclosed in the registration
statement or any material change to
such information in the registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a
new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities
being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrant's annual report pursuant to Sectionsection
13(a) or Sectionsection 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Sectionsection 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at thatthe time shall be deemed to be the
initial bona fide offering thereof.
(b)(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrantregistrant pursuant to the
foregoing provisions, or otherwise, the Registrantregistrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities
Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant forregistrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrantregistrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrantregistrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(c)(d) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
(d)(e) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
II-6
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Canandaigua Wine Company,Brands, Inc.
By: /s/ Richard Sands
By: _____________________________________
Richard SandsThomas S. Summer
------------------------------------------
Thomas S. Summer
Senior Vice President and Chief
ExecutiveFinancial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
Chairman of the Board of January 31, 1997
________________________________________ Directors
Marvin Sands
/s/ Richard Sands- ----------------------------------------- President, Chief Executive January 31, 1997
________________________________________ Officer and a February 14, 2000
Richard E. Sands Director (Principal Richard Sands Executive Officer and Principal
Financial Officer)
*
- ----------------------------------------- Executive Vice President, General January 31, 1997
________________________________________ Counsel SecretaryFebruary 14, 2000
Robert S. Sands and a Director
Robert Sands
*/s/ Thomas S. Summer
- ----------------------------------------- Senior Vice President and a January 31, 1997
________________________________________Chief Financial February 14, 2000
Thomas S. Summer Officer (Principal Financial Officer and
Principal Accounting Officer)
*
- ----------------------------------------- Director Bertram E. SilkFebruary 14, 2000
Thomas C. McDermott
*
- ----------------------------------------- Director January 31, 1997
________________________________________February 14, 2000
James A. Locke, III
*
- ----------------------------------------- Director January 31, 1997
________________________________________February 14, 2000
Paul L. Smith
*
- ----------------------------------------- Director February 14, 2000
George Bresler
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
George Bresler
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Batavia Wine Cellars, Inc.
By: /s/ Richard Sands
*By: ___________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
CANANDAIGUA WINE COMPANY, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-
EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND
TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.Thomas S. Summer
------------------------------------------
Thomas S. Summer, Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ----------------------------------------- President (Principal Executive Officer) February 14, 2000
Ned Cooper
/s/ Thomas F. HoweS. Summer
- ----------------------------------------- Treasurer (Principal Financial Officer and February 14, 2000
Thomas S. Summer Principal Accounting Officer)
*
- ----------------------------------------- Vice President and Controller January 31, 1997
________________________________________ (Principal Accounting Officer)a Director February 14, 2000
Richard E. Sands
*
- ----------------------------------------- Secretary and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas F. HoweS. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
II-7
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
Batavia Wine Cellars, Inc.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Incorporated
By: /s/ Ned Cooper
By: _________________________________
Ned Cooper,Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands Vice*
- ----------------------------------------- President, Chief Executive Officer and a January 31, 1997
____________________________________February 14, 2000
Alexander L. Berk Director (Principal
Richard Sands Financial Officer)
* Secretary and a Director January 31, 1997
____________________________________
Robert Sands
/s/ Ned Cooper President (Principal January 31, 1997
____________________________________ Executive Officer)
Ned Cooper
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
BATAVIA WINE CELLARS, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-
EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND
TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe Controller (Principal January 31, 1997
____________________________________ Accounting Officer)
Thomas F. Howe
II-8
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
Bisceglia Brothers Wine Co.
/s/ Richard Sands
By: _________________________________
Richard Sands, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands President and a Director January 31, 1997
____________________________________ (Principal Executive Officer
Richard Sands and Principal Financial
Officer)
* Secretary and a Director January 31, 1997
____________________________________
Robert Sands
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
BISCEGLIA BROTHERS WINE CO.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-
EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND
TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe Controller (Principal January 31, 1997
____________________________________ Accounting Officer)
Thomas F. Howe
II-9
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
California Products Company
/s/ Richard Sands
By: _________________________________
Richard Sands, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands President and a Director January 31, 1997
____________________________________ (Principal Executive Officer
Richard Sands and Principal Financial
Officer)
* Secretary and a Director January 31, 1997
____________________________________
Robert Sands
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
CALIFORNIA PRODUCTS COMPANY) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-
EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND
TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe Controller (Principal January 31, 1997
___________________________________ Accounting Officer)
Thomas F. Howe
II-10
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
Guild Wineries & Distilleries, Inc.
/s/ Richard Sands
By: _________________________________
Richard Sands, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands President and a Director January 31, 1997
____________________________________ (Principal Executive Officer
Richard Sands and Principal Financial
Officer)
* Secretary and a Director January 31, 1997
____________________________________
Robert Sands
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
GUILD WINERIES & DISTILLERIES, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING
PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT,
AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN
CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND
PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING
ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS
SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe Controller (Principal January 31, 1997
____________________________________ Accounting Officer)
Thomas F. Howe
II-11
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
Tenner Brothers, Inc.
/s/ Richard Sands
By: _________________________________
Richard Sands, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands President and a Director January 31, 1997
____________________________________ (Principal Executive Officer
Richard Sands and Principal Financial
Officer)
* Secretary and a Director January 31, 1997
____________________________________
Robert Sands
/s/ Richard Sands
*By: __________________________
Richard Sands Attorney-in-
Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
TENNER BROTHERS, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-EFFECTIVE
AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE
SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH,
WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-
FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM
EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT
THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe Controller (Principal January 31, 1997
____________________________________ Accounting Officer)
Thomas F. Howe
II-12
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
Widmer's Wine Cellars, Inc.
/s/ Richard Sands
By: _________________________________
Richard Sands, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands President and a Director January 31, 1997
____________________________________ (Principal Executive Officer
Richard Sands and Principal Financial
Officer)
* Secretary and a Director January 31, 1997
____________________________________
Robert Sands
/s/ Richard Sands
By_____________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
WIDMER'S WINE CELLARS, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-
EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND
TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe Controller (Principal January 31, 1997
____________________________________ Accounting Officer)
Thomas F. Howe
II-13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.
Barton Incorporated
/s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman
Chairman of the Board of
Directors and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman Chairman of the Board of January 31, 1997
____________________________________ Directors and Chief
Ellis M. Goodman Executive Officer (Principal Executive Officer)
*
President and a Director January 31, 1997
____________________________________
Alexander L. Berk
* Vice President and a January 31, 1997
____________________________________ Director
Edward L. Golden
*- ----------------------------------------- Executive Vice President, January 31, 1997
____________________________________ Treasurer, Assistant February 14, 2000
Raymond E. Powers Secretary and a Director (Principal Financial
Officer and Principal Accounting Officer)
*
- ----------------------------------------- Vice President and a Director January 31, 1997
____________________________________February 14, 2000
Edward L. Golden
*
- ----------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ----------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*
- ----------------------------------------- Director February 14, 2000
William F. Hackett
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
William F. Hackett
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-14
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Brands, Ltd.
By: /s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman, ChairmanThomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
Pursuant to the requirements of the Board of Directors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman Chairman of the Board of January 31, 1997
____________________________________ Directors (Principal
Ellis M. Goodman Executive Officer)
*
- ----------------------------------------- President and a Director January 31, 1997
____________________________________(Principal February 14, 2000
Edward L. Golden Executive Officer)
*
- ----------------------------------------- Executive Vice President, January 31, 1997
____________________________________ Treasurer, and AssistantFebruary 14, 2000
Raymond E. Powers Assistant Secretary and a Director
(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- Executive Vice President and January 31, 1997
____________________________________ a Director February 14, 2000
Alexander L. Berk
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-15
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Beers, Ltd.
By: /s/ Ellis M. Goodman
By: ____________________________
Ellis M. Goodman, ChairmanThomas S. Summer
------------------------------------------
Thomas S. Summer,
Vice President
Pursuant to the requirements of the Board of Directors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman Chairman of the Board of January 31, 1997
____________________________________ Directors*
- ----------------------------------------- Chief Executive Officer and a Director February 14, 2000
Richard E. Sands (Principal
Ellis M. Goodman Executive Officer)
*
- ----------------------------------------- Executive Vice President, January 31, 1997
____________________________________ Treasurer, and AssistantFebruary 14, 2000
Raymond E. Powers Assistant Secretary and a Director
(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- Executive Vice President and January 31, 1997
____________________________________ a Director February 14, 2000
Alexander L. Berk
*
- ----------------------------------------- President and a Director January 31, 1997
____________________________________February 14, 2000
William F. Hackett
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-16
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Brands of California, Inc.
By: /s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman,Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman*
- ----------------------------------------- President and a Director January 31, 1997
____________________________________ (Principal February 14, 2000
Alexander L. Berk Executive
Ellis M. Goodman Officer)
*
- ----------------------------------------- Executive Vice President, Treasurer, February 14, 2000
Raymond E. Powers Assistant Secretary and a Director
(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- Vice President and a January 31, 1997
____________________________________ Director February 14, 2000
Edward L. Golden
* Executive Vice President and January 31, 1997
____________________________________ a Director
Alexander L. Berk
* Executive Vice President, January 31, 1997
____________________________________ Treasurer, Assistant
Raymond E. Powers Secretary and a Director
(Principal Financial Officer
and Principal Accounting
Officer)*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-17
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Brands of Georgia, Inc.
By: /s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman,Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman*
- ----------------------------------------- President and a Director January 31, 1997
____________________________________ (Principal February 14, 2000
Alexander L. Berk Executive
Ellis M. Goodman Officer)
*
- ----------------------------------------- Executive Vice President, Treasurer, February 14, 2000
Raymond E. Powers Assistant Secretary and a Director
(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- Vice President and a January 31, 1997
____________________________________ Director February 14, 2000
Edward L. Golden
* Executive Vice President and January 31, 1997
____________________________________ a Director
Alexander L. Berk
* Executive Vice President, January 31, 1997
____________________________________ Treasurer and Assistant
Raymond E. Powers Secretary (Principal
Financial Officer and
Principal Accounting
Officer)*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-18
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Distillers Import Corp.
By: /s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman,Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman*
- ----------------------------------------- President and a Director January 31, 1997
____________________________________ (Principal February 14, 2000
Alexander L. Berk Executive
Ellis M. Goodman Officer)
*
- ----------------------------------------- Executive Vice President, and January 31, 1997
____________________________________ a Director
Alexander L. Berk
* Executive Vice President, January 31, 1997
____________________________________ Treasurer, AssistantFebruary 14, 2000
Raymond E. Powers Assistant Secretary and a Director
(Principal Financial Officer and aPrincipal
Accounting Officer)
*
- ----------------------------------------- Director (Principal Financial Officer
and Principal Accounting
Officer)February 14, 2000
Edward L. Golden
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By:___________________________
Richard Sands
Attorney-in-Fact
II-19
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Financial Corporation
By: /s/ Raymond E. Powers
By: _________________________________
Raymond E. Powers,Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/*
- ----------------------------------------- President, Secretary and a Director February 14, 2000
Raymond E. Powers President and Secretary January 31, 1997
____________________________________ (Principal Executive Raymond E. Powers Officer)
*
- ----------------------------------------- Treasurer and a Director January 31, 1997
____________________________________February 14, 2000
Charles T. Schlau (Principal Financial Officer
Charles T. Schlau and Principal
Accounting Officer)
*
- ----------------------------------------- Vice President and a Director January 31, 1997
____________________________________February 14, 2000
Charles B. Campbell, Jr.
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Stevens Point Beverage Co.
By: /s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman, ChairmanThomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President
Pursuant to the requirements of the Board of Directors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman Chairman of the Board of January 31, 1997
____________________________________ Directors
Ellis M. Goodman
*
- ----------------------------------------- President, Chief Executive Officer January 31, 1997
____________________________________and a February 14, 2000
James P. Ryan Director (Principal Executive Officer)
*
- ----------------------------------------- Executive Vice President, Treasurer, February 14, 2000
Raymond E. Powers Assistant Secretary, and a Director
(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- Executive Vice President and a Director James P. Ryan (Principal Executive
Officer)
* Executive Vice President and January 31, 1997
____________________________________ a DirectorFebruary 14, 2000
Alexander L. Berk
*
Executive Vice President, January 31, 1997
____________________________________ Treasurer, Assistant
Raymond E. Powers Secretary and a- ----------------------------------------- Director (Principal Financial Officer
and Principal Accounting
Officer)February 14, 2000
William F. Hackett
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-21
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.
Monarch Wine Company, Limited
Partnership
/s/ Ellis M. Goodman
By: ____________________________
Ellis M. Goodman, President and
ChairmanPursuant to the requirements of the BoardSecurities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of DirectorsChicago,
State of Barton Management, Inc., its
general partner
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Illinois on February 14, 2000.
Monarch Import Company
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman President and Chairman of January 31, 1997
____________________________________ the Board of Directors of
Ellis M. Goodman Barton Management, Inc.*
- ----------------------------------------- Chief Executive Officer (Principal February 14, 2000
James P. Ryan Executive Officer)
*
- ----------------------------------------- Executive Vice President, and January 31, 1997
____________________________________ a Director of Barton
Alexander L. Berk Management, Inc.
* Executive Vice President, January 31, 1997
____________________________________ Treasurer, AssistantFebruary 14, 2000
Raymond E. Powers Assistant Secretary, and a Director
of
Barton Management, Inc.
(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- President and Principal Accounting
Officer)a Director February 14, 2000
Alexander L. Berk
*
- ----------------------------------------- Vice President and a Director February 14, 2000
William F. Hackett
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-22
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.
Barton Management, Inc.
/s/ Ellis M. Goodman
By:__________________________________
Ellis M. Goodman, President and
ChairmanPursuant to the requirements of the BoardSecurities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Directors
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Fairport,
State of New York on February 14, 2000.
Canandaigua Wine Company, Inc.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer
Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Ellis M. Goodman*
- ----------------------------------------- President and Chairman of January 31, 1997
____________________________________ the Board of Directors
Ellis M. GoodmanChief Executive Officer February 14, 2000
Jon Moramarco (Principal Executive Officer)
* Executive Vice President and January 31, 1997
____________________________________ a Director
Alexander L. Berk
* Executive Vice President, January 31, 1997
____________________________________/s/ Thomas S. Summer
- ----------------------------------------- Treasurer Assistant
Raymond E. Powers Secretary and a Director (Principal Financial Officer and February 14, 2000
Thomas S. Summer Principal Accounting Officer)
*
- ----------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*
- ----------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-23
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.
Vintners International Company,Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
The Viking Distillery, Inc.
By: /s/ Richard Sands
By: _________________________________
Richard Sands,Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Richard Sands*
- ----------------------------------------- President and a Director January 31, 1997
____________________________________ (Principal February 14, 2000
Alexander L. Berk Executive Officer
Richard Sands and Principal Financial Officer)
*
- ----------------------------------------- Executive Vice President, and Treasurer, February 14, 2000
Raymond E. Powers Assistant Secretary, and a Director
January 31, 1997
____________________________________
Robert Sands(Principal Financial Officer and Principal
Accounting Officer)
*
- ----------------------------------------- Vice President and a Director February 14, 2000
Edward L. Golden
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Canandaigua Europe Limited
By: /s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
VINTNERS INTERNATIONAL COMPANY, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING
PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT,
AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN
CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND
PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING
ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS
SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.Thomas S. Summer
------------------------------------------
Thomas S. Summer, Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ----------------------------------------- President (Principal Executive Officer) February 14, 2000
Douglas Kahle
/s/ Thomas S. Summer
- ----------------------------------------- Treasurer (Principal Financial Officer and February 14, 2000
Thomas S. Summer Principal Accounting Officer)
*
- ----------------------------------------- Vice President and Director February 14, 2000
Richard E. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Roberts Trading Corp.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer,
President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe ControllerS. Summer
- ------------------------------------------ President and Treasurer (Principal
January 31, 1997
____________________________________Thomas S. Summer Executive Officer, Principal Financial February 14, 2000
Officer and Principal Accounting Officer)
*
- ----------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ----------------------------------------- Vice President, Secretary and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas F. HoweS. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
II-24
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CANANDAIGUA, STATE OF NEW YORK ON JANUARY 31, 1997.Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Canandaigua West, Inc.Limited
By: /s/ Richard Sands
By: _________________________________
Richard Sands, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.Thomas S. Summer
------------------------------------------
Thomas S. Summer, Finance Director
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- --------------------------------------- Chief Executive Officer and a Director
Robert S. Sands (Principal Executive Officer and February 14, 2000
Authorized Representative in the United
States)
/s/ Thomas S. Summer
- --------------------------------------- Finance Director (Principal Financial February 14, 2000
Thomas S. Summer Officer and Principal Accounting Officer)
*
- --------------------------------------- Director February 14, 2000
Richard E. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Polyphenolics, Inc.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer,
Vice President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ----------------------------------------- President and Director (Principal February 14, 2000
Richard Keeley Executive Officer)
/s/ Thomas S. Summer
- ----------------------------------------- Vice President and Treasurer (Principal February 14, 2000
Thomas S. Summer Financial Officer and Principal Accounting
Officer)
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 14, 2000.
Barton Canada, Ltd.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer, Vice President
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- President and a Director January 31, 1997
____________________________________ (Principal
Alexander L. Berk Executive Officer
Richard Sands and Principal Financial
Officer) February 14, 2000
*
- ------------------------------------------- Executive Vice President, Treasurer, February 14, 2000
Raymond E. Powers Assistant Secretary January 31, 1997
____________________________________ and a Director
Robert Sands(Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Edward L. Golden
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fairport,
State of New York on February 14, 2000.
Simi Winery, Inc.
By: /s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD SANDS AND ROBERT SANDS AND EACH OF
THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES (INCLUDING HIS CAPACITY AS A DIRECTOR AND/OR OFFICER OF
CANANDAIGUA WEST, INC.) TO SIGN ANY OR ALL AMENDMENTS (INCLUDING PRE-EFFECTIVE
AND POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE
SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH,
WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-
FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM
EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT
THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY
THE FOLLOWING PERSON IN THE CAPACITY AND ON THE DATE INDICATED.Thomas S. Summer
------------------------------------------
Thomas S. Summer, President and
Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Thomas F. Howe ControllerS. Summer
- ------------------------------------------- President, Treasurer and a Director February 14, 2000
Thomas S. Summer (Principal January 31, 1997
____________________________________Executive Officer, Principal
Financial Officer and Principal Accounting
Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas F. HoweS. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
II-25
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT ON FORM S-4 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF CHICAGO, STATE OF ILLINOIS ON JANUARY 31, 1997.
The Viking Distillery,Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Helena,
State of California on February 14, 2000.
SCV-EPI Vineyards, Inc.
By: /s/ Ellis M. Goodman
By: _________________________________
Ellis M. Goodman,Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- -------------------------------------------- President and Chief Executive Officer February 14, 2000
Jean-Michel Valette (Principal Executive Officer)
/s/ Ellis M. GoodmanThomas S. Summer
- ------------------------------------------- Vice President and Treasurer February 14, 2000
Thomas S. Summer (Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director January 31, 1997
____________________________________ (Principal Executive
Ellis M. Goodman Officer)February 14, 2000
Richard E. Sands
*
Executive Vice President and January 31, 1997
____________________________________ a Director
Alexander L. Berk
*- ------------------------------------------- Vice President and a January 31, 1997
____________________________________ Director Edward L. GoldenFebruary 14, 2000
Robert S. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Helena,
State of California on February 14, 2000.
Franciscan Vineyards, Inc.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- President and Chief Executive Officer February 14, 2000
Jean-Michel Valette (Principal Executive Officer)
/s/ Thomas S. Summer
- ------------------------------------------- Vice President January 31, 1997
____________________________________and Treasurer Assistant
RaymondFebruary 14, 2000
Thomas S. Summer (Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Richard E. Powers SecretarySands
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Helena,
State of California on February 14, 2000.
Allberry, Inc.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- President and Chief Executive Officer February 14, 2000
Jean-Michel Valette (Principal Executive Officer)
/s/ Thomas S. Summer
- ------------------------------------------- Vice President and Treasurer February 14, 2000
Thomas S. Summer (Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Helena,
State of California on February 14, 2000.
Cloud Peak Corporation
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- President and Chief Executive Officer February 14, 2000
Jean-Michel Valette (Principal Executive Officer)
/s/ Thomas S. Summer
- ------------------------------------------- Vice President and Treasurer February 14, 2000
Thomas S. Summer (Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Helena,
State of California on February 14, 2000.
M.J. Lewis Corp.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- President and Chief Executive Officer February 14, 2000
Jean-Michel Valette (Principal Executive Officer)
/s/ Thomas S. Summer
- ------------------------------------------- Vice President and Treasurer February 14, 2000
Thomas S. Summer (Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of St. Helena,
State of California on February 14, 2000.
Mt. Veeder Corporation
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer
Vice President and Treasurer
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- President and Chief Executive Officer February 14, 2000
Jean-Michel Valette (Principal Executive Officer)
/s/ Thomas S. Summer
- ------------------------------------------- Vice President and Treasurer February 14, 2000
Thomas S. Summer (Principal Financial Officer and Principal
Accounting Officer)
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Richard E. Sands
*
- ------------------------------------------- Vice President and a Director February 14, 2000
Robert S. Sands
*By: /s/ Thomas S. Summer
-------------------------------------
Thomas S. Summer
Attorney-in-fact
SIGNATURES
Pursuant to the requirements of the Securities Act the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Amsterdam,
the Netherlands on February 14, 2000.
Canandaigua B.V.
By: /s/ Thomas S. Summer
------------------------------------------
Thomas S. Summer,
Authorized Representative
Pursuant to the requirements of the Securities Act this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
*
- ------------------------------------------- Managing Director (Principal Executive February 14, 2000
G.A.L.R. Diepenhorst Officer)
*
- ------------------------------------------- Managing Director (Principal Financial February 14, 2000
E.F. Switters Officer and Principal Accounting Officer)
/s/ Thomas S. Summer
- ------------------------------------------- Authorized Representative in the United February 14, 2000
Thomas S. Summer States
(Principal Financial Officer and
*By: /s/ Thomas S. Summer Principal Accounting Officer)
-------------------------------------
Thomas S. Summer
Attorney-in-fact
/s/ Richard Sands
*By: __________________________
Richard Sands
Attorney-in-Fact
II-26
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit
- ------ ----------------------
4.1 Indenture, dated as of November 17, 1999, by and among the
Company, certain subsidiaries and Harris Trust and Savings Bank,
as Trustee*
4.2 Registration Rights Agreement, dated as of November 17, 1999, by
and among the Company, the guarantors named therein, and J.P.
Morgan Securities Ltd.*
4.3 Form of new notes (included in Exhibit 4.1)*
5 Opinion of McDermott, Will & Emery*
12 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG LLP
23.3 Consent of McDermott, Will & Emery (included in Exhibit 5)*
24 Powers of Attorney (included on the signature pages of the
registration statement)*
25 Statement of Eligibility of Trustee on Form T-1*
99.1 Form of Letter of Transmittal*
99.2 Form of Letter to Registered Holders*
99.3 Form of Letter to Clients and Instruction to Registered Holder
from Beneficial Owner*
* previously filed