Note 10 - Subsequent Event.

3 Months Ended

Sep. 30, 2011

Subsequent Events [Text Block]

Note 10.  Subsequent Events.

Acquisition of Lawrenceburg Distillers Indiana, LLC

On October 20, 2011, MGPI of Indiana, LLC ("Purchaser” or “MGPII"), a Delaware limited liability company and wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the "Agreement") with Lawrenceburg Distillers Indiana, LLC ("Seller" or “LDI”). LDI is an Indiana limited liability company and a subsidiary of Angostura US Holdings Limited, a Delaware corporation ("Parent"), which is also a party to the Agreement.

Under the Agreement, MGPII is to acquire (the "Acquisition") substantially all of the assets ("Assets") of LDI used or held for use by it in its alcohol beverage distillery business, which produces customized and premium grade whiskeys, gin, and grain neutral spirits, and related bulk barrel storage facilities, blending operations and a tank farm, all located in Greendale and Lawrenceburg, Indiana, and a grain elevator operation in Rushville, Indiana (the "Distillery Business"). MGPII will also assume certain specified liabilities described in the Agreement.

LDI also operates a business engaged in the packaging, bottling and finished goods warehousing of alcoholic beverages in Greendale and Lawrenceburg, Indiana (the "Bottling and Packaging Business"). The Agreement excludes transfer of the assets relating to the Bottling and Packaging Business; those assets are to be sold by LDI to a third party unaffiliated with the Company or MGPII simultaneously with the closing of the sale of the Assets of the Distillery Business to MGPII (the "Closing"). The sale of the assets of the Bottling and Packaging Business to such third party is a material condition to the Closing of the sale of the Assets to MGPII and vice versa.

Closing of the Acquisition is also subject to the satisfaction of customary closing conditions, including, without limitation, obtaining various consents, transfer of permits and licenses, obtaining governmental authorizations relating to the Distillery Business and execution and delivery of specified ancillary agreements. Further, the Agreement includes customary representations, warranties and covenants of MGPII, Seller and Parent. The Closing is conditioned on the accuracy of the representations and warranties and compliance with the covenants set forth in the Agreement, in each case in all material respects.

The Agreement is subject to termination by either party if the Closing has not occurred by January 31, 2012, unless required governmental approvals have not been obtained by such date, in which case the last day to close the transaction is extended until April 30, 2012, unless otherwise agreed by the parties. There are no termination fees payable upon the termination of the Agreement. The Closing is anticipated to occur in the fourth quarter of calendar year 2011 or first quarter of calendar year 2012, subject to the satisfaction of the closing conditions.

MGPII is to pay LDI an amount in cash equal to the current assets minus current liabilities of the distillery assets, currently estimated at $15,000, as of the Closing date. A portion of the purchase price will be paid at Closing into two escrow amounts, one to fund a working capital true-up and one to fund possible future indemnification claims. Registrant expects to fund the purchase price through its financing with Wells Fargo Bank, National Association ("Wells Fargo"). Reference is made to the refinancing discussed below under Third Amendment to Credit Agreements.

Third Amendment to Credit Agreement

Effective October 20, 2011, the Company entered into a Third Amendment to Credit Agreement ("Third Amendment") with Wells Fargo. The Third Amendment modifies the Company’s existing revolving credit facility under the Credit and Security Agreement between the Company and Wells Fargo dated July 21, 2009 (as amended from time to time, the "Credit Agreement") in several material respects, and summarized as follows:

·   the maximum line of borrowings outstanding at any one time was increased from $25,000 to $45,000;

·   the Maturity Date of the loans were extended to from July 20, 2012 to October 20, 2014;

·   the floating interest rate applicable to outstanding borrowings was changed from the daily three month LIBOR plus an applicable margin ranging from 1.75% to 3.00%, based on the Company’s Debt Coverage Ratio, to an annual rate equal to the sum of Daily One Month LIBOR plus an applicable margin ranging from 1.50% to 2.00%, based on the Company’s balance sheet leverage ratio, adjustable on a quarterly basis;

·   the annual minimum interest payment and prepayment fees have been removed;

·   the Company and its subsidiaries have entered into various Guaranties and Security Agreements in favor of Wells Fargo;

·   a new provision was added that requires the Company’s balance sheet leverage ratio (meaning total liabilities divided by tangible net worth) to be no be greater than 1.75 to 1.0 as of each December 31, March 31, June 30 and September 30;

·   a new adjusted net income provision ( net income, adjusted for the following if not already accounted for in the calculation of net income: unrealized hedging gain/(loss), non-cash joint venture gain/(loss), and gain/(loss) from the sale or disposition of assets) provision has been added to replace the former stop loss provision; this net income provision requires adjusted net income to be no less than one dollar ($1.00), as of each December 31, March 31, June 30 and September 30, as determined based on the 12-month period then ending;

·   a new provision was added that requires the fixed charge coverage ratio (as defined below) to not be less than 2.00 to 1.00, as of each December 31, March 31, June 30 and September 30, as determined based on the 12-month period then ending.  The ratio is calculated as follows:

(a)   the sum of:

(i)	net profit
(ii)	plus taxes
(iii)	plus interest expense
(iv)	plus depreciation and amortization expense
(v)	minus dividends
(vi)	minus non-cash joint venture gain/(loss)
(vii)	minus non-cash unrealized hedging gain/(loss)
(viii)	minus cash contributions to Joint Ventures
(ix)	minus $7,000 in deemed per annum maintenance capital expenditures

divided by

(b)   the sum of:

(i)	current maturities of long term deb
(ii)	plus capitalized lease payments and interest expense

·   the provisions restricting the payment of dividends have been modified to provide that the Company will not declare or pay any dividends (other than dividends payable solely in stock of the Company) on any class of its stock in any fiscal year in an amount in excess of $2,000;

·   the $8,000 limit on annual capital expenditures, which excludes capital expenditures made for the replacement and or upgrade of the water cooling system, has been  removed;

·   a new provision was added to restrict operating lease expenses in any fiscal year to not exceed  $4,000;

·   a new provision was added that  requires the Company to hedge the input costs of 100 percent  of all contracted sales of inventory, and not less than 40 percent of the input costs of inventory which will be sold on the spot market;

·   a new provision was added to restrict the Company from pledging the fixed and real property assets to be acquired under the LDI transaction described above; and

·   a new provision was added whereby the Company agreed not to undertake an acquisition unless the aggregate cash and non-cash consideration to be paid by the Company, excluding the acquisition described above, does not exceed $5,000 in the aggregate for all such permitted acquisitions. In all cases, after giving effect to any acquisition, including after the acquisition described above, the Company must have Availability (as defined in the Credit Agreement) of at least $10,000.

Under the Third Amendment, MGPII is required to guarantee a portion of the Company’s debt under the credit facility.