Note 12 - Amendment to Credit Agreement

6 Months Ended

Jun. 30, 2012

Note 12. Amendment to Credit Agreement

Effective May 31, 2012, the Company entered into a Fifth Amendment to Credit Agreement (“Fifth Amendment”) with Wells Fargo. The Fifth 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 definition of “Adjusted Net Income” was amended to mean Net Income, adjusted by excluding from such calculation all cash and non-cash gains, losses, income and expenses related to the following: (a) Equity method investments (though cash gains, losses, income and expenses related thereto shall not be excluded), (b) Swap Contracts and hedging activities, (c) corporate reorganization and restructuring activities or subsidiary start-up operations, and (d) the sale, disposition, purchase or acquisition of assets, other than in the ordinary course of business;

·	Adjusted Net Income is measured quarterly for the quarters ended June 30, 2012, September 30, 2012 and December 31, 2012. Thereafter, Adjusted Net Income is based on a rolling 12-month period at the end of each quarterly reporting period;

·	For the quarters ended June 30, 2012, September 30, 2012 and December 31, 2012, Adjusted Net Income shall not be less than $(1,000), $(500) and $1.00 (one dollar), respectively. For the 12-month periods thereafter, Adjusted Net Income shall not be less than $1.00 (one dollar);

·	Fixed Charge Coverage Ratio is measured quarterly on a rolling 12-month period beginning with the 12-month period ending on March 31, 2013, and each quarter thereafter;

Eligible Barreled Alcohol Inventory Advance Rate is a factor applied to Eligible Barreled Alcohol Inventory used in determining Borrowing Base (described below). For Eligible Barreled Alcohol Inventory that is less than two years old, the factor is 50 percent and for Eligible Barreled Alcohol Inventory that is two years old or greater, the factor is 70 percent; and

The definition of Borrowing Base was amended so that: (a) the sum of the products of Eligible Barreled Alcohol Inventory times the applicable Eligible Barreled Alcohol Inventory Advance Rate included in the Borrowing Base is capped at $7,500, (b) total Rail Inventory included in the Borrowing Base is capped at $3,000, and (c) Distilled Spirits Tax Reserve and Rail Reserve are excluded from the Borrowing Base.

At June 30, 2012, the Company was in compliance with all its debt covenants. The Company’s debt covenants become more restrictive with regard to reported losses in future periods, and as currently specified, require the Company to report adjusted net earnings, as defined, for periods after September 30, 2012.