-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PKWiVdN8rbStx3UZ16DA9ynzvoL7yNqncqyEmpfb6fDzvp/cTOeGEIio9KvXl6sF cAeZ9i1VHNYNDNFJYR+rmQ== 0001157523-04-001506.txt : 20040217 0001157523-04-001506.hdr.sgml : 20040216 20040217140700 ACCESSION NUMBER: 0001157523-04-001506 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONDAVI ROBERT CORP CENTRAL INDEX KEY: 0000902276 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 942765451 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21624 FILM NUMBER: 04607027 BUSINESS ADDRESS: STREET 1: 7801 ST HELENA HWY STREET 2: PO BOX 106 CITY: OAKVILLE STATE: CA ZIP: 94562 BUSINESS PHONE: 7072599463 MAIL ADDRESS: STREET 1: 7801 ST HELENA HWY CITY: OAKVILLE STATE: CA ZIP: 94562 10-Q 1 a4572106.txt ROBERT MONDAVI 10-Q ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________ FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 2003 _________________________ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number: 33-61516 __________________ THE ROBERT MONDAVI CORPORATION Incorporated under the laws I.R.S. Employer Identification: of the State of California 94-2765451 Principal Executive Offices: 7801 St. Helena Highway Oakville, CA 94562 Telephone: (707) 259-9463 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------------ ------------ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No ------------ ------------ As of January 31, 2004, there were issued and outstanding 10,351,629 shares of the issuer's Class A Common Stock and 6,065,718 share of the issuer's Class B Common Stock. ================================================================================ 1
PART I Item 1. Financial Statements. CONSOLIDATED BALANCE SHEETS December 31, June 30, ---------------------------------- (In thousands, except share data) 2003 2003 ---------------------------------- Unaudited ASSETS Current assets: Cash.......................................................................... $ 4,808 $ 1,339 Accounts receivable, net...................................................... 110,467 96,111 Inventories................................................................... 421,921 392,635 Prepaid expenses and other current assets..................................... 7,819 12,545 ---------- ---------- Total current assets........................................................ 545,015 502,630 Property, plant and equipment, net.............................................. 406,359 416,110 Investments in joint ventures................................................... 33,098 30,763 Other assets, net............................................................... 11,222 11,674 ---------- ---------- Total assets............................................................ $ 995,694 $ 961,177 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings......................................................... $ - - $ 5,000 Accounts payable.............................................................. 54,262 28,727 Employee compensation and related costs....................................... 13,258 13,987 Accrued interest.............................................................. 6,792 7,115 Other accrued expenses........................................................ 14,820 7,317 Current portion of long-term debt............................................. 17,888 9,837 ---------- ---------- Total current liabilities................................................... 107,020 71,983 Long-term debt, less current portion............................................ 367,022 397,889 Deferred income taxes........................................................... 36,640 30,610 Deferred executive compensation................................................. 7,374 6,508 Other liabilities............................................................... 3,031 3,193 ---------- ---------- Total liabilities........................................................... 521,087 510,183 ---------- ---------- Commitment and contingencies Shareholders' equity Preferred Stock: authorized - 5,000,000 shares; issued and outstanding - no shares.......................................... - - - - Class A Common Stock, without par value: authorized - 25,000,000 shares; issued and outstanding - 10,083,970 and 9,734,645 shares.................... 97,280 95,909 Class B Common Stock, without par value: authorized - 12,000,000 shares; issued and outstanding - 6,325,767 and 6,621,734 shares..................... 10,157 10,636 Paid in capital............................................................... 11,930 11,579 Retained earnings............................................................. 353,132 333,852 Accumulated other comprehensive income (loss): Cumulative translation adjustment........................................... 2,027 (1,269) Forward contracts........................................................... 81 287 ---------- ---------- Total shareholders' equity................................................ 474,607 450,994 ---------- ---------- Total liabilities and shareholders' equity.............................. $ 995,694 $ 961,177 ========== ==========
See Notes to Consolidated Financial Statements. 2
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended December 31, December 31, ------------- -------------- -------------- ------------- (In thousands, except share data) 2003 2002 2003 2002 ------------- -------------- -------------- ------------- Revenues............................................................. $ 154,890 $ 148,288 $ 263,676 $ 251,748 Less excise taxes.................................................... 7,549 7,194 12,398 12,048 ------------ ------------- ------------- ------------ Net revenues......................................................... 147,341 141,094 251,278 239,700 Cost of goods sold................................................... 87,802 81,759 149,726 139,716 ------------ ------------- ------------- ------------ Gross profit......................................................... 59,539 59,335 101,552 99,984 Selling, general and administrative expenses......................... 35,904 36,716 64,634 66,622 Special charges...................................................... - - 3,110 - - 3,110 ------------ ------------- ------------- ------------ Operating income..................................................... 23,635 19,509 36,918 30,252 Other (income) expense: Interest........................................................... 5,660 5,534 11,200 10,826 Equity (income) loss from joint ventures........................... 3,549 (1,074) (4,457) (8,395) Other.............................................................. (427) (408) (187) (424) ------------ ------------- ------------- ------------ Income before income taxes........................................... 14,853 15,457 30,362 28,245 Provision for income taxes........................................... 5,421 5,718 11,082 10,450 ============ ============= ============= ============ Net income........................................................... $ 9,432 $ 9,739 $ 19,280 $ 17,795 ============ ============= ============= ============ Earnings per share - basic........................................... $ 0.58 $ 0.60 $ 1.18 $ 1.10 ============ ============= ============= ============ Earnings per share - diluted......................................... $ 0.57 $ 0.59 $ 1.17 $ 1.09 ============ ============= ============= ============ Weighted average number of shares outstanding - basic................ 16,365 16,235 16,361 16,225 ============ ============= ============= ============ Weighted average number of shares outstanding - diluted.............. 16,513 16,383 16,447 16,372 ============ ============= ============= ============ See Notes to Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended December 31, ---------------------------------- (In thousands) 2003 2002 ---------------------------------- Cash flows from operating activities: Net income............................................................................ $ 19,280 $ 17,795 Adjustments to reconcile net income to net cash flows from operating activities: Deferred income taxes............................................................... 3,158 (61) Depreciation and amortization....................................................... 12,207 12,391 Equity income from joint ventures................................................... (4,457) (8,395) Distributions of earnings from joint ventures....................................... 4,892 7,619 Special charges, net................................................................ - - 3,110 Net gain on sale of assets.......................................................... (1,493) - - Other............................................................................... - - 1,099 Change in assets and liabilities, net of acquisitions: Accounts receivable, net.......................................................... (14,356) (2,359) Inventories....................................................................... (26,746) (52,039) Other assets...................................................................... 5,387 (625) Accounts payable and accrued expenses............................................. 32,375 48,605 Deferred executive compensation................................................... 866 671 Other liabilities................................................................. (162) (186) ---------- ---------- Net cash flows from operating activities.............................................. 30,951 27,625 ---------- ---------- Cash flows from investing activities: Acquisitions of property, plant and equipment......................................... (10,472) (18,241) Proceeds from sale of assets.......................................................... 2,027 77 Contributions of capital to joint ventures............................................ - - (1,468) Increase in restricted cash........................................................... (20) (42) ---------- ---------- Net cash flows from investing activities.............................................. (8,465) (19,674) ---------- ---------- Cash flows from financing activities: Book overdraft........................................................................ - - 689 Net repayments under credit lines..................................................... (19,000) (6,500) Proceeds from issuance of long-term debt.............................................. 4,375 6,822 Principal repayments of long-term debt................................................ (5,360) (9,368) Proceeds of issuance of Class A Common Stock.......................................... - - 260 Exercise of Class A Common Stock options.............................................. 892 462 Other................................................................................. 76 (316) ---------- ---------- Net cash flows from financing activities.............................................. (19,017) (7,951) ---------- ----------- Net change in cash.................................................................... 3,469 - - Cash at the beginning of the period................................................... 1,339 - - ---------- ---------- Cash at the end of the period......................................................... $ 4,808 $ - - ========== ========== See Notes to Consolidated Financial Statements.
4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, dollars in thousands, except share data) NOTE 1 SIGNIFICANT ACCOUNTING POLICIES Basis of presentation In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company's financial position at December 31, 2003, its results of operations for the three and six month periods ended December 31, 2003 and 2002 and its cash flows for the six month periods ended December 31, 2003 and 2002. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the accompanying consolidated financial statements. In addition, certain fiscal 2003 balances have been reclassified to conform with the current year presentation. For further information, reference should be made to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, on file at the Securities and Exchange Commission. In January 2003, the Financial Accounting Standards Board (FASB) issued Financial Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities", an interpretation of Accounting Research Bulletin No. 51 "Consolidated Financial Statements". Interpretation No. 46 establishes accounting guidance for the consolidation of variable interest entities that function to support the activities of the primary beneficiary and applies to any business enterprise, both public and private, that has a controlling interest, contractual relationship or other business relationship with a variable interest entity. The Company maintains master lease facilities that enable the leasing of certain real property (predominantly vineyards) to be constructed or acquired and that qualify as variable interest entities with the Company as the primary beneficiary. Accordingly, the Company has adopted the provisions of FIN 46, effective July 1, 2003, and has included in its consolidated financial statements the assets, and related liabilities, leased under its master lease facilities. As a result, property, plant, and equipment and long-term debt were increased by $114,095 and $114,557, respectively, and inventory, deferred income tax liabilities and retained earnings were decreased by $1,754, $826, and $1,390, respectively, at June 30, 2003. Also, as encouraged by the Interpretation, the Company has restated prior period financial statements back to July 1, 2001. As a result, property, plant, and equipment and long-term debt were increased by $111,484 and $111,431, respectively, and inventory, deferred income tax liabilities and retained earnings were decreased by $1,611, $583, and $975, respectively, at December 31, 2002. Net income for the quarter ended December 31, 2002, was reduced by $98. On July 1, 2001, property, plant, and equipment and long-term debt were increased by $88,292. In December 2003, the FASB issued a revised Interpretation No. 46, ("FIN 46R"), which clarified and enhanced the provisions of FIN 46. The Company is required to adopt FIN 46R in the three months ending March 31, 2004. The Company has carried out a preliminary evaluation of FIN 46R and, based on this evaluation, does not believe that the adoption will have a significant impact on it's financial condition, results of operations or cash flows. Earnings per share Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of Class A and Class B common shares outstanding plus the dilutive effect, if any, of common share equivalents for stock option awards. Potentially dilutive securities are excluded from the computation of diluted earnings per share if their inclusion would have an antidilutive effect. These antidilutive securities, which consisted solely of stock options, stated as equivalent shares of common stock, amounted to 868,000 and 943,000, respectively, for the three months ended December 31, 2003 and 2002, and 1,160,000 and 1,005,000, respectively, for the six months ended December 31, 2003 and 2002, respectively. In computing basic earnings per share for all periods presented, no adjustments have been made to net income (numerator) or weighted-average shares outstanding (denominator). The computation of diluted earnings per share for all periods is identical to the computation of basic earnings per share except that the weighted-average shares outstanding (denominator) has been increased by 148,000 for the three months ended December 31, 2003 and 2002, and by 86,000 and 147,000, respectively, for the six months ended December 31, 2003 and 2002, to include the dilutive effect of stock options outstanding. Derivative instruments and hedging activities The Company has only a limited involvement with derivative instruments and does not use them for trading purposes. Forward exchange contracts, generally with average maturities of less than one year, are used as protection against the risk that the eventual U.S. dollar cash flows resulting from certain unrecognized firm purchase commitments and forecasted transactions denominated in foreign currencies will be adversely affected by changes in exchange rates. The derivative financial instruments associated with unrecognized firm purchase commitments are designated as fair-value hedges. The derivative financial instruments associated with forecasted transactions are designated as cash-flow hedges. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, dollars in thousands) At December 31, 2003, the Company had outstanding forward exchange contracts, hedging primarily Australian dollar purchases of software, with notional amounts totaling $659. Using exchange rates outstanding as of December 31, 2003, the U.S. dollar equivalent of the contracts totaled $888. During the second quarter of fiscal 2004, the Company entered into two interest rate swap agreements, with a total notional amount of $95,000, with the objective to both take advantage of the current low interest rate environment and to protect against further increases in the fair value of the Company's debt due to further declines in rates. These swap agreements have been designated as fair-value hedges of certain of the Company's fixed rate debt, effectively converting them to variable rate obligations indexed to LIBOR. The variable rate interest to be paid by the Company will be based on 6-month LIBOR plus a spread of 2.1%. The swap has been marked to fair value at December 31, 2003, in the Consolidated Balance Sheets, resulting in the recording of a swap liability of $229. Stock-based compensation The Company measures compensation cost for employee stock options and similar equity instruments using the intrinsic value method described in Accounting Principles Board Opinion No. 25 (APB No. 25), "Accounting for Stock Issued to Employees," and related interpretations. In accordance with APB No. 25, the compensation cost for stock options is recognized in income based on the excess, if any, of the quoted market price of the stock at the grant date of the award or other measurement date over the amount an employee must pay to acquire the stock. No stock-based employee compensation cost is reflected in net income for the three and six month periods ended December 31, 2003 or 2002 as all options granted had an exercise price equal to or greater than the fair market value of the underlying common stock on the date of grant. The Company utilizes the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," as amended by Statement 148. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of Statement 123 to stock-based employee compensation.
Three Months Ended Six Months Ended December 31, December 31, ------------- ------------ ------------ ------------ 2003 2002 2003 2002 ------------- ------------ ------------ ------------ Net income, as reported............................................ $ 9,432 $ 9,739 $ 19,280 $ 17,795 Less total stock-based compensation expense determined under fair value based method for all awards, net of tax effects...... (667) (736) (1,421) (1,563) ------- ------- --------- --------- Pro forma net income............................................... $ 8,765 $ 9,003 $ 17,859 $ 16,232 ======= ======= ========= ========= Earnings per share: Basic, as reported............................................... $ 0.58 $ 0.60 $ 1.18 $ 1.10 ======= ======= ========= ========= Basic, pro forma................................................. $ 0.54 $ 0.55 $ 1.09 $ 1.00 ======= ======= ========= ========= Diluted, as reported............................................. $ 0.57 $ 0.59 $ 1.17 $ 1.09 ======= ======= ========= ========= Diluted, pro forma............................................... $ 0.53 $ 0.55 $ 1.09 $ 0.99 ======= ======= ========= =========
For purposes of calculating compensation cost using the fair value-based method, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in fiscal 2004 and 2003, respectively: dividend yield of 0% for all periods; expected volatility of 42% and 43%; risk-free interest rates of 3.08% and 3.18%; and expected lives of three to five years for all periods. The weighted-average grant-date fair value of options granted during fiscal 2004 and 2003, respectively, was $11.27 and $13.54 per share. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, dollars in thousands) NOTE 2 INVENTORIES Inventories consist of the following: December 31, June 30, --------------------------- 2003 2003 --------------------------- Wine in production......................... $ 265,662 $ 224,064 Bottled wine............................... 146,817 145,842 Crop costs and supplies.................... 9,442 22,729 ----------- ----------- $ 421,921 $ 392,635 =========== =========== Inventories are valued at the lower of cost or market. Inventory and cost of goods sold are determined using the first-in, first-out (FIFO) method. Costs associated with growing crops, winemaking and other costs associated with the manufacturing of product for resale are recorded as inventory. The Company's acquisition of Arrowood Vineyards and Winery in fiscal 2001 resulted in the allocation of purchase price to inventories in excess of book value. This difference between the original book value and the fair market value of the inventory upon acquisition is referred to as inventory step-up. Included in inventory at December 31, 2003 and June 30, 2003, respectively, was $1,129 and $2,837 of inventory step-up remaining from the acquisition. NOTE 3 INVESTMENTS IN JOINT VENTURES December 31, June 30, --------------------------- Investments in joint ventures are as follows: 2003 2003 --------------------------- Opus One................................... $ 13,509 $ 10,695 Chile...................................... 2,261 6,160 Italy...................................... 7,641 6,662 Ornellaia.................................. 6,705 4,334 Australia.................................. 2,642 2,295 Other...................................... 340 617 ---------- ---------- $ 33,098 $ 30,763 ========== ========== The Company's interest in income and losses for each joint venture is equal to its ownership percentage. The Opus One joint venture is a general partnership, of which the Company has a 50% general partnership interest. The Ornellaia joint venture is a C-Corporation, of which the Company has a 50% interest. The Italy joint venture is a limited liability company, of which the Company has a 50% interest. The Australia joint venture operates through two entities: a limited liability company, of which the Company owns a 50% interest; and a general partnership, of which the Company has a 50% general partnership interest. Prior to September 2003, the Chile joint venture was a single corporation, of which the Company owned a 50% interest. During September 2003, the joint venture was split into two new corporations in order to separate the Sena and Arboleda brands and assets from the Caliterra brand and assets. The Company had a 50% interest in each of the new corporations. In January 2004, the Company sold its 50% interest in the corporation holding the Caliterra brand and assets ("Vina Caliterra") to its joint venture partner for $1,673 (see Assets Held for Sale below). The Company's investment in each joint venture increases or decreases each period for its share of income and losses (equity income) from each joint venture and for any contributions of capital to or distributions of earnings from the joint ventures. During the quarter ended December 31, 2003, total distributions of $4,892 were made from the Company's joint ventures; however, there were no contributions of capital. The condensed combined statements of operations of the joint ventures are summarized below. The Company's equity income from joint ventures differs from the amount that would be obtained by applying the Company's ownership interest to the net income of these entities due to the elimination of intercompany profit in inventory. 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, dollars in thousands) Statements of Operations Three Months Ended Six Months Ended December 31, December 31, ------------- ------------ ------------ --------- 2003 2002 2003 2002 ------------- ------------ ------------ --------- Net revenues..................................................... $ 24,523 $ 15,043 $ 51,015 $ 52,396 Cost of goods sold............................................... 11,227 6,982 16,992 16,932 -------- -------- --------- --------- Gross profit..................................................... 13,296 8,061 34,023 35,464 Other expenses................................................... 10,323 6,194 17,143 17,869 -------- -------- --------- --------- Net income....................................................... $ 2,973 $ 1,867 $ 16,880 $ 17,595 ======== ======== ========= =========
NOTE 4 ASSETS HELD FOR SALE During the second quarter of fiscal 2004, the Company decided to sell its joint venture investment in Vina Caliterra. As a result, the Company recorded an impairment loss of $6,075 for the difference between the carrying value and fair value less costs to sell at December 31, 2003. The loss is included in Equity Income (Loss) from Joint Ventures in the Consolidated Statement of Income. The sale of Vina Caliterra was completed on January 22, 2004, for an amount equal to the impaired value. During fiscal 2003, the Company determined that certain of its vineyard and other assets were no longer expected to fit its long-term grape sourcing needs or meet its long-term financial objectives. At that time, assets with a combined book value of $57,752 were identified for potential future sale. These assets are expected to be held and used while the Company pursues the sale of the assets. At December 31, 2003, the net book value of the remaining assets held for sale totaled $42,178. The Company believes that this value is recoverable and it does not exceed fair value. As of December 31, 2002, the Company had agreed to sell one of its vineyard properties for an amount lower than its book value, less costs required to sell the property. As a result, the Company recorded an asset impairment charge of $3,110 during the second quarter of fiscal 2003, which is included in Special Charges in the Consolidated Statements of Income. The sale of the property was completed in the third quarter of fiscal 2003. During the first quarter of fiscal 2004, the Company sold a non-strategic asset to a related party at a price determined using independent appraisers. The transaction resulted in a gain of $1,965 and was included in Selling, General and Administrative Expenses in the Consolidated Statements of Income. NOTE 5 COMPREHENSIVE INCOME Comprehensive income includes revenues, expenses, gains and losses that are excluded from net income, including foreign currency translation adjustments and unrealized gains and losses on certain derivative financial instruments designated as cash-flow hedges. Comprehensive income for the three and six months ended December 31, 2003 and 2002 was as follows:
Three Months Ended Six Months Ended December 31, December 31, ------------- ------------ ------------ -------- 2003 2002 2003 2002 ------------- ------------ ------------ -------- Net income................................................. $ 9,432 $ 9,739 $ 19,280 $ 17,795 Foreign currency translation adjustment, net of tax........ 2,387 355 3,296 (96) Forward contracts, net of tax.............................. 117 (19) (206) 132 -------- -------- --------- --------- Comprehensive income....................................... $ 11,936 $ 10,075 $ 22,370 $ 17,831 ======== ======== ========= =========
8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, dollars in thousands) NOTE 6 COMMITMENTS AND CONTINGENCIES The Company has contracted with various growers and certain wineries to supply a large portion of its future grape requirements and a smaller portion of its future bulk wine requirements. These contracts range from one-year spot market purchases to longer-term agreements. While most of these contracts call for prices to be determined by market conditions, many long-term contracts also provide minimum grape or bulk wine purchase prices. The ultimate amount due under any of these contracts cannot be determined until the end of each year's harvest because the contracted amount varies based on vineyard grape yields, grape quality and grape market conditions. The Company is subject to litigation in the ordinary course of business. In the opinion of management, the ultimate outcome of existing litigation will not have a material adverse effect on the Company's consolidated financial condition, results of its operations, or cash flows. NOTE 7 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest, net of amounts capitalized, was $11,523 and $11,393 for the six month periods ended December 31, 2003 and 2002, respectively. Cash paid for income taxes was $58 and $4,258 for the six month periods ended December 31, 2003 and 2002, respectively. During the six months ended December 31, 2003, the Company completed the sale and subsequent leaseback of certain equipment. Proceeds from the sale totaled $7,712, which resulted in a loss on disposition of $434. The new lease has been accounted for as an operating lease, has a term of approximately five years, and has lease payments totaling $621 per year. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. INTRODUCTION The Company is a leading producer and marketer of premium table wines. The Company operates in one business segment (premium table wine). Its core brands include Robert Mondavi Winery, Robert Mondavi Private Selection and Woodbridge. The Company's smaller wineries include Byron in Santa Maria and Arrowood in Sonoma, as well as four international joint ventures. The Company produces Opus One in partnership with the Baron Philippe de Rothschild of Chateau Mouton Rothschild of Bordeaux, France; Luce, Lucente, Danzante and Ornellaia in partnership with Marchesi de'Frescobaldi of Tuscany, Italy; Sena and Arboleda in partnership with the Eduardo Chadwick family of Vina Errazuriz in Chile; and Talomas and Kirralaa in partnership with the Robert Oatley family and Southcorp Limited. Sales volume for the second quarter ended December 31, 2003, increased by 3.5% to 3.1 million cases and net revenues increased by 4.4% to $147.3 million. The Company reported net income of $9.4 million, or $0.57 per share-diluted, for the period ended December 31, 2003, compared to net income of $9.7 million, or $0.59 per share-diluted, a year ago. Sales volume for the six months ended December 31, 2003, increased by 2.9% to 5.3 million cases and net revenues increased by 4.8% to $251.3 million. The Company reported net income of $19.3 million, or $1.17 per share-diluted, versus $17.8 million, or $1.10 per share-diluted, a year ago. The year to date change in net revenues and net income from the same period last year is detailed below in the Results of Operations discussion, but can be primarily linked to the Company's increased investment in its core brands, continued development of new products, the positive impact from the streamlining of the Company's operations and organization structure in the second half of fiscal 2003. The Company's current year-to-date results include a net gain of $1.5 million related to the sale of certain non-strategic assets during the first quarter and an asset impairment loss of $6.1 million during the second quarter related to the Company's joint venture investment in Chile. Refer to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, for further discussion of the operations and organizational changes. RESULTS OF OPERATIONS Second Quarter of Fiscal 2004 Compared to Second Quarter of Fiscal 2003 Net Revenues - Net revenues increased by 4.4% to $147.3 million and shipments rose 3.5% to 3.1 million cases. The increase in volume is driven by growth in the Robert Mondavi Winery brand, Robert Mondavi Private Selection brand and the Company's import portfolio, which increased 13.8%, 7.3% and 38.0%, respectively, and from the introduction of several new products, including Papio and Woodbridge Select Vineyard Series. The increase in net revenues, incremental to volume, is a result of positive sales mix towards brands with higher net revenues per case, which increased to $46.98 in the current quarter from $46.55 in the prior year's quarter, offset by increased promotional spending. Net revenues also includes revenue from the sale of grapes and surplus bulk wines, which increased by $2.4 million from the prior year. Cost of Goods Sold - Cost of goods sold increased by 7.4% to $87.8 million, reflecting a $2.8 million increase from incremental sales volume of 3.5%, an increase of $2.5 million due to the shift in product mix toward brands with both higher net revenues per case and higher costs per case, and an increase of $0.8 million from the prior year quarter in the cost associated with sales of grapes and surplus bulk wine. Gross Profit - As a result of the above factors, the gross profit percentage decreased to 40.4% from 42.1% in the same period last year. Selling, General and Administrative Expenses - Selling, general and administrative expenses decreased by $0.8 million, or 2.2% and the ratio of selling, general and administrative expenses to net revenues decreased to 24.4% from 26.0% a year ago, reflecting general and administrative cost savings resulting from the fiscal 2003 organization changes coupled with volume leverage. Special Charges - During the second quarter of fiscal 2003, the Company recorded $3.1 million in special charges related to the impairment of certain vineyard assets that no longer met the Company's long-term financial or sourcing objectives. Interest - Interest expense increased by $0.1 million or 2.3%, primarily reflecting a $0.4 million decrease in capitalized interest resulting from the completion of certain capital and vineyard development projects that was partially offset by a decrease in average borrowings outstanding and lower interest rates. 10 Equity Income from Joint Ventures - The Company reported an equity loss from joint ventures of $3.5 million compared to income of $1.1 million in the prior year quarter, primarily reflecting a $6.1 million asset impairment charge recorded in connection with the Company's decision to sell its investment in the brand and assets of its Caliterra joint venture. The sale was completed on January 22, 2004. The loss was offset by increased income from Opus One and Ornellaia of $1.4 million and $0.2 million, respectively, compared to prior year's quarter. Income Tax Provision - The Company's effective tax rate was 36.5% compared to 37.0% last year. Net Income and Earnings Per Share - As a result of the above factors, the Company reported net income of $9.4 million, or $0.57 per share-diluted, compared to net income of $9.7 million, or $0.59 per share-diluted, a year ago. First Six Months of Fiscal 2004 Compared to the First Six Months of Fiscal 2003 Net Revenues - Net revenues increased by 4.8% to $251.3 million and shipments rose 2.9% to 5.3 million cases. The increase in volume is driven by growth in the Robert Mondavi Winery brand, Robert Mondavi Private Selection brand and the Company's import portfolio, which increased 16.0%, 7.9% and 32.0%, respectively, and from the introduction of several new products, including Papio and Woodbridge Select Vineyard Series. The increase in net revenues, incremental to volume, is a result of positive sales mix towards brands with higher net revenues per case, which increased to $47.72 in the current quarter from $46.82 in prior year. Net revenues also includes revenue from the sale of surplus bulk wines and grapes, which increased by $2.1 million from the prior year. The increase was partially offset by a $6.3 million increase in promotional allowances compared to prior year. Cost of Goods Sold - Cost of goods sold increased by 7.2% to $149.7 million, reflecting a $3.9 million increase from incremental sales volume of 2.9%, an increase of $5.2 million due to the shift in product mix toward brands with both higher net revenues per case and higher costs per case, and an increase of $0.9 million from the prior year in the cost associated with sales of grapes and surplus bulk wines. Gross Profit - As a result of the above factors, the gross profit percentage decreased to 40.4% from 41.7% in the same period last year. Selling, General and Administrative Expenses - Selling, general and administrative expenses decreased by $2.0 million, or 3.0%, reflecting a net gain of $1.5 million related to the sale of certain non-strategic assets offset by additional sales and marketing spending in support of the increase in sales which occurred in the first quarter of the current fiscal year. The ratio of selling, general and administrative expenses to net revenues decreased to 25.7% from 27.8% a year ago, reflecting the net gain noted above coupled with general and administrative cost savings resulting from the fiscal 2003 organization changes. Special Charges - As noted earlier, the Company recorded $3.1 million in special charges related to the impairment of certain vineyard assets held for sale during the second quarter of fiscal 2003. Interest - Interest expense increased by $0.4 million or 3.5%, primarily reflecting a $0.8 million decrease in capitalized interest resulting from the completion of certain capital and vineyard development projects that was partially offset by a decrease in average borrowings outstanding due to cash generated from operations and lower interest rates. Equity Income from Joint Ventures - The Company reported equity income from joint ventures of $4.5 million compared to income of $8.4 million in the prior year. The decrease is primarily a result of the $6.1 million impairment charge noted above offset by increased income from Opus One and the Company's Italian joint ventures of $0.5 million and $1.7 million, respectively, compared to prior year. Income Tax Provision - The Company's effective tax rate was 36.5% compared to 37.0% last year. Net Income and Earnings Per Share - As a result of the above factors, the Company reported net income of $19.3 million, or $1.17 per share-diluted, compared to net income of $17.8 million, or $1.09 per share-diluted, a year ago. LIQUIDITY AND CAPITAL RESOURCES Working capital as of December 31, 2003, was $438.0 million compared to $430.6 million at June 30, 2003. The $7.4 million increase in working capital was primarily attributable to a $14.4 million seasonal increase in accounts receivable and a $29.3 million increase in inventories, which is a result of the harvest. This is offset by an increase of $35.0 million in current liabilities, primarily financing grower payables. 11 Cash provided by operations totaled $31.0 million, primarily reflecting net income of $19.3 million, $10.7 million of non-cash items (depreciation, amortization, and net gain on sale of assets), an increase in deferred tax liabilities of $3.2 million, $0.4 million of equity income from joint ventures (net of distributions from joint ventures during the period) offset by a $2.6 million net change in current and other assets and liabilities. Cash used in investing activities totaled $8.5 million, primarily reflecting $10.5 million of capital purchases offset by proceeds of $2.0 million from the sale of certain assets. Cash used in financing activities totaled $19.0 million, primarily reflecting net repayments of debt. As a result of these activities, the Company increased cash on hand from $1.3 million at June 30, 2003 to $4.8 million at December 31, 2003. The Company has an unsecured credit line that has maximum credit availability of $150.0 million and expires on December 14, 2004. The Company had no amounts outstanding under this facility at December 31, 2003. The Company also has $384.9 million of fixed rate debt and capital lease obligations outstanding at December 31, 2003, of which $17.9 million is classified as current at quarter end. The Company maintains master lease facilities that provide the capacity to fund up to $129.4 million, of which $111.1 million had been utilized as of December 31, 2003. The facilities enable the Company to lease certain real property to be constructed or acquired. The leases have initial terms of three to seven years, after a construction period, with options to renew. The Company may, at its option, purchase the property under lease during or at the end of the lease term. If the Company does not exercise the purchase option, the Company will guarantee a residual value of the property under lease, which was approximately $92.2 million as of December 31, 2003. Effective July 1, 2003, the Company adopted the provisions of FIN 46, and included in its consolidated financial statements the assets, and related liabilities, leased under the master lease facilities. Also, as encouraged by the FIN 46, the Company has restated prior period financial statements. The assets leased under these facilities have historically been included in the financial covenants of the Company's debt agreements and in the evaluation of the Company's creditworthiness by its banks. The premium wine industry is a capital intensive business, due primarily to the lengthy aging and processing cycles involved in premium wine production. Historically, the Company has financed its operations and capital spending principally through borrowings, as well as through internally generated funds. The Company projects continued capital spending over the next several years to expand production capacity, purchase barrels and complete its vineyard development. The Company currently expects its capital spending requirements to be between $25 million and $30 million for fiscal 2004. Management believes that the Company will support its operating and capital needs and its debt service requirements through internally generated funds for the foreseeable future, but will utilize available short-term borrowings to support seasonal and quarterly fluctuations in cash requirements. 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk. There were no material changes from the items disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, on file at the Securities and Exchange Commission. Item 4. Controls and Procedures. The Registrant carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Registrant's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Registrant's disclosure controls and procedures as of December 31, 2003 were effective to ensure that information required to be disclosed by the Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission's rules and forms. The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected. There were no changes in the Registrant's internal control over financial reporting that occurred during the quarter ended December 31, 2003 that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. PART II Item 1. Legal Proceedings. The Company is subject to litigation in the ordinary course of its business. In the opinion of management, the ultimate outcome of existing litigation will not have a material adverse effect on the Company's consolidated financial condition, the results of its operations or its cash flows. Item 4. Submission of Matters to a Vote of Security Holders. The Company's Annual Meeting of Shareholders was held on December 12, 2003, at the Napa Valley Marriott, Napa, California. Three matters were submitted to a vote of shareholders: election of directors; ratification of PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal year ending June 30, 2004; and an amendment of the 1993 Equity Incentive Plan to reserve an additional 900,000 shares of Class A Common Stock for issuance under that plan. Philip Greer, Anthony Greener and John Thompson were nominated as Class A directors. 6,856,883 Class A shares were voted for Mr. Greer and 799,742 shares were withheld. 6,724,610 Class A shares were voted for Mr. Greener and 932,015 shares were withheld. 6,735,758 Class A shares were voted for Mr. Thompson and 920,867 shares were withheld. Accordingly, Mssrs. Greer, Greener and Thompson were re-elected as Class A directors. R. Michael Mondavi, Marcia Mondavi Borger, Timothy J. Mondavi, Frank E. Farella, Gregory M. Evans, Adrian Bellamy and Ted W. Hall were nominated as Class B directors. 6,498,195 Class B shares were voted for each of them. Accordingly, Mr. Hall was elected and each of the other Class B nominees was re-elected to the Board. 13 72,480,053 votes were cast in favor of the ratification of PricewaterhouseCoopers LLP, 153,382 votes were cast against and 5,140 votes abstained. Accordingly, the selection of PricewaterhouseCoopers LLP as independent auditors was ratified. 66,563,709 votes were cast in favor of the ratification of the amendment to the 1993 Equity Incentive Plan, 4,792,796 votes were cast against and 1,282,070 votes abstained. Accordingly, the amendment of the plan was adopted as proposed. Item 5. Other Information. On January 9, 2004 Ted Hall was appointed the Company's non-executive Chairman of the Board. Mr. Hall has a contract with the Company pursuant to which the Company will pay (i) to Long Meadow Ranch a one-time payment of $750,000 to compensate Long Meadow Ranch for the loss of Mr. Hall's full-time services, and (ii) to Mr. Hall a monthly fee of $50,000 and a minimum annual cash bonus of $400,000 for his services as Chairman. He is expected to devote about 40% of his professional time to the Company. Mr. Hall's contract was approved by the Nominating and Governance Committee, based on its evaluation of Mr. Hall's strategic expertise, his experience in advising other entrepreneurial companies whose founding families retain a significant ownership position, his commitment of time above and beyond that typically expected from a non-executive chairman, and the value of his services, compared to market rates for similar services, to the Company.
Item 6. Exhibits and Reports on Form 8-K. 1) Exhibits: Exhibit 10.57 Second Amendment, dated as of October 30, 2003, to $150,000,000 Syndicated Senior Credit Facility dated as of December 14, 2001. Exhibit 10.58 Agreement, dated January 8, 2004 between Registrant and Ted Hall. Exhibit 10.59 ISDA Master Agreement and Schedule to the Master Agreement, dated December 15, 2003 between Registrant and BNP Paribas. Exhibit 10.60 ISDA Master Agreement and Schedule to the Master Agreement, dated December 23, 2003 between Registrant and Harris Trust and Savings Bank. Exhibit 31.1 Certification by Gregory M. Evans pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 Exhibit 31.2 Certification by Henry J. Salvo, Jr. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 Exhibit 32.1 Certification by Gregory M. Evans pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 32.2 Certification by Henry J. Salvo, Jr. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
2) Form 8-K: A Current Report on Form 8-K was filed on January 22, 2004, in which the Company announced changes to its Chilean joint venture. A Current Report on Form 8-K was filed on January 29, 2004, in which the Company announced results for its second quarter of fiscal 2004. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE ROBERT MONDAVI CORPORATION Dated: February 17, 2004 By /s/ HENRY J. SALVO, JR. __________________________ Henry J. Salvo, Jr. Chief Financial Officer Forward-looking Statements __________________________ This announcement and other information provided from time to time by the Company contain historical information as well as forward-looking statements about the Company, the premium wine industry and general business and economic conditions. Such forward-looking statements include, for example, projections or predictions about the Company's future growth, consumer demand for its wines, including new brands and brand extensions, margin trends, anticipated future investment in vineyards and other capital projects, the premium wine grape market and the premium wine industry generally. Actual results may differ materially from the Company's present expectations. Among other things, a soft economy, a downturn in the travel and entertainment sector, risk associated with continued worldwide conflict, reduced consumer spending, or changes in consumer preferences could reduce demand for the Company's wines. Similarly, increased competition or changes in tourism to the Company's California properties could affect the Company's volume and revenue growth outlook. The supply and price of grapes, the Company's most important raw material, is beyond the Company's control. A shortage of grapes might constrict the supply of wine available for sale and cause higher grape costs that put more pressure on gross profit margins. A surplus of grapes might allow for greater sales and lower grape costs, but it might also result in more competition and pressure on selling prices or marketing spending. Interest rates and other business and economic conditions could increase significantly the cost and risks of projected capital spending, which in turn could impact the Company's profit margins. For additional cautionary statements identifying important factors that could cause actual results to differ materially from such forward-looking information, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, on file with the Securities and Exchange Commission. For these and other reasons, no forward-looking statement by the Company can nor should be taken as a guarantee of what will happen in the future. 15 EX-10.57 3 a4572106_ex1057.txt ROBERT MONDAVI EXHIBIT 10.57 SECOND AMENDMENT This SECOND AMENDMENT (this "Amendment") dated as of October 20, 2003 is among THE ROBERT MONDAVI CORPORATION and R.M.E., INC. (each a "Borrower" and together the "Borrowers"), various Lenders (as defined in the Credit Agreement referred to below) and BANK OF AMERICA, N.A., as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), Swing Line Lender and L/C Issuer. WHEREAS, the Borrowers, the Lenders, the Swing Line Lender, the L/C Issuer and the Administrative Agent are parties to a Credit Agreement dated as of December 14, 2001, as amended (the "Credit Agreement"); and WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth below; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINED TERMS Unless otherwise defined in this Amendment, capitalized terms used herein shall have the respective meanings assigned to such terms in the Credit Agreement. ARTICLE II AMENDMENT TO CREDIT AGREEMENT Upon the effectiveness of this Amendment pursuant to Article III, Section 7.14.1 of the Credit Agreement shall be amended in its entirety to read as follows: "7.14.1. Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio at the end of any Computation Period to be less than (a) 1.50 to 1.00 as of the end of any Computation Period ending prior to June 30, 2004 and (b) 1.75 to 1.00 as of the end of any Computation Period on or after June 30, 2004." ARTICLE III EFFECTIVENESS This Amendment shall become effective when the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers and the Required Lenders (it being understood that the Administrative Agent may rely on a facsimile counterpart signature page hereof for purposes of determining whether a party hereto has executed a counterpart hereof). 1 ARTICLE IV MISCELLANEOUS 4.1 Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 4.2 Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of California. 4.3 References to Agreement. Upon the effectiveness of this Amendment, (a) each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Amended Agreement and (b) each reference to the "Credit Agreement" in any other Loan Document shall mean and be a reference to the Amended Agreement. [Signatures Follow] 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective duly authorized officers, effective as of the date first above written. THE ROBERT MONDAVI CORPORATION By: ___________________ Name: ___________________ Title: ___________________ R.M.E, INC. By: ___________________ Name: ___________________ Title: ___________________ BANK OF AMERICA, N.A., as Administrative Agent By: ___________________ Name: ___________________ Title: ___________________ BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender By: ___________________ Name: ___________________ Title: ___________________ COOPERATIEVE CENTRALE RAIFFEISEN - BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL," NEW YORK BRANCH, as Documentation Agent and as a Lender By: ___________________ Name: ___________________ Title: ___________________ By: ___________________ Name: ___________________ Title: ___________________ BANK OF THE WEST (successor in interest to United California Bank) By: ___________________ Name: ___________________ Title: ___________________ U.S. BANK NATIONAL ASSOCIATION By: ___________________ Name: ___________________ Title: ___________________ BNP PARIBAS By: ___________________ Name: ___________________ Title: ___________________ EX-10.58 4 a4572106_ex1058.txt ROBERT MONDAVI EXHIBIT 10.58 AGREEMENT BETWEEN THE ROBERT MONDAVI CORPORATION AND TED HALL This Agreement is entered into by and between The Robert Mondavi Corporation, a California corporation ("Company") and Ted Hall ("Hall"). Recitals of Fact . Hall was elected to Company's Board of Directors ("Board") at its Annual Shareholders Meeting on December 12, 2003; the Company wishes to engage Hall to serve as Chairman of the Board. NOW, THEREFORE, IT IS AGREED: 1. Appointment: Effective January 8, 2004, Hall shall become Chairman of the Board, subject to the condition precedent in favor of Hall that the Board unanimously approves such appointment and the terms of this Agreement. 2. Non-Employee Status: As Chairman, Hall will not be an employee of Company and will not have certification responsibilities under Sarbanes- Oxley. 3. Term: It is anticipated that the term of this Agreement will run through Company's fiscal year-end, 2007, subject to an extension of the term as may be agreed upon by the parties; also, after December 31, 2004, the Board of Directors, following a recommendation of the Board's Nominating and Governance Committee ("N&G Committee") shall have the right to terminate this Agreement, as will Hall, any such termination right shall be without cause on no less than sixty (60) days notice in advance. 4. Duties and Authority: Attached hereto as Exhibit 1 is a description of the principal duties and authority of the Chairman of the Board, subject to such modifications as the N&G Committee and Hall may agree, subject to approval by the Board. 5. Time Commitment - Non Exclusive: The parties anticipate that over each 12-month period during the term of this Agreement, Hall will devote approximately 40 percent of his professional time, it being understood that during the initial and certain other periods, a greater or lesser amount of time may be utilized for the performance of the services engaged hereunder. Hall shall be free to perform consulting services for third parties, and Hall may serve on other boards of directors, provided such clients or companies are not engaged in businesses in competition with Company or whose interests conflict with those of Company. Company hereby agrees that Hall's financial interest and managerial activities in connection with Long Meadow Ranch and Long Meadow Ranch Winery, a producer of small quantities of Napa Valley fine wines, and Hall's minority equity interest in Frog's Leap Winery do not violate the terms of this engagement or Hall's fiduciary responsibility to the Company. 6. Consultants and Advisors: Company recognizes that for Hall to perform effectively his responsibilities hereunder, consultants and advisors may have to be retained by Company as the parties may agree. 7. Compensation and Other Consideration: (a) Upon execution of this Agreement, Company shall make a one-time payment of $750,000 in consideration of the additional staffing and other costs Hall will experience at Long Meadow Ranch as a result of the loss of the full-time services of Hall as a consequence of his responsibilities under this Agreement. Hall shall forego the retainer and cash meeting fees payable to members of the Board, but will retain stock option grants to Board members. (b) Hall shall be paid a monthly fee of $50,000 and a minimum annual cash bonus payment of $400,000, with any higher amounts of stock or cash incentives as may be determined in the discretion of Board, acting upon recommendations of the Board's Compensation Committee. (c) Hall shall have an office and full-time executive assistant at one of the Company's offices as Company and Hall jointly designate. (d) Hall will not be a participant in Company's health, insurance, profit sharing or other employee benefit plans. (e) All travel by Hall will be by first class, commercial or private aircraft as appropriate to the travel itinerary. (f) Hall shall be reimbursed for any business expenses incurred in the performance of their duties in keeping with Company policies and as approved by the Board. This Agreement shall be governed by California law and has been executed by the parties this 8th day of January, 2004. The Robert Mondavi Corporation Ted Hall By: _________________________________ ______________________________ By: _________________________________ EX-10.59 5 a4572106_ex1059.txt ROBERT MONDAVI EXHIBIT 10.59 (Multicurrency--Cross Border) ISDA(R) International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of December 15, 2003 _________________ (d) BNP Paribas and The Robert Mondavi Corporation and R.M.E., Inc. each, jointly and severally _________________________ __________________________________ have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: 1. Interpretation (a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. Obligations (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. 1 (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise be payable: (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party' s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph(ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) Deduction or Withholding for Tax. (i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will: (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for: (A) the failure by Y to comply with or perform any agreement contained Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. 2 (ii) Liability. If: (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. Representations Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that: (a) Basic Representations. (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) Powers. It has the power to execute this Agreement and any other documentation relating this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgement of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and 3 (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 4. Agreements Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: (a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs: (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. 4 (c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. Events of Default and Termination Events (a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party: (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been or repeated; (v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); 5 (vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party: (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver. trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or 6 (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:-- (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party): (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X'), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or 7 (v) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. Early Termination (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect if the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) Right to Terminate. If: (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or 8 (2) an Illegality under Section 5(b)(i) (2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) Effect of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) Calculations (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) Events of Default. If the Early Termination Date results from an Event of Default: (1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. 9 (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this agreement. (3) Second Method and Market Quotations. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an mount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) Termination Events. If the Early Termination Date results from a Termination Event: (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (of, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ('Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). 10 (iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. Transfer Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement maybe transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. Contractual Currency (a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) Judgements. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payments is owed and will not be affected by judgement being obtained or claim or proof being made for any other sums payable in respect of this Agreement. 11 (d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. 12 (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) Counterparts and Confirmations. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. Offices; Multibranch Parties (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 13 11. Expenses A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated: (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given it. 13. Governing Law and Jurisdiction (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably: (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other Jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgements Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. 14 (c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. Definitions As used in this Agreement: "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate" means: (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date, (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "Burdened Party" has the meaning specified in Section 5(b). "Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. 15 "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case my be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1)(3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. 16 "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a). "Office" means a branch or office of a party, which may be such party's head or home office. "Potential Event of Default' means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to an make extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of: 17 (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Stamp Tax" means any stamp, registration, documentation or similar tax. "Tax" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "Tax Event" has the meaning specified in Section 5(b). "Tax Event Upon Merger" has the meaning specified in Section 5(b). "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Currency" has the meaning specified in the Schedule. "Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. 18 "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became Payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.
Part 2 BNP Paribas Securities Corp. The Robert Mondavi Corporation Part 3 on behalf of BNP Paribas .................................................... ................................................ (Name of Party) (Name of Party) By: By: .......................................... .......................................... Name: Christine Smith Howard Name: Robert Philipps Title: Authorized Signatory Title: VP, Treasury & Investor Relations Date: December 31, 2003 Date: R.M.E., Inc. By: By: .......................................... .......................................... Name: Mindy Sperling Name: Robert Philipps Title: Authorized Signatory Title: VP, Treasury & Investor Relations Date: December 31, 2003 Date: Each of the foregoing on a joint and several basis and each such party being referred to as "Party B" in this agreement
19 EX-10.59A 6 a4572106_ex1059a.txt ROBERT MONDAVI EXHIBIT 10.59A SCHEDULE to the Master Agreement dated as of December 15, 2003 between BNP Paribas ("Party A") and The Robert Mondavi Corporation and R.M.E., Inc. each, jointly and severally ("Party B") Part 1 Termination Provisions (a) "Specified Entity" means in relation to Party A for the purpose of:- Section 5(a)(v), None Section 5(a)(vi), None Section 5(a)(vii), None Section 5(b)(iv), None and in relation to Party B for the purpose of:- Section 5(a)(v), Affiliates Section 5(a)(vi), Affiliates Section 5(a)(vii), Affiliates Section 5(b)(iv), Affiliates (b) "Specified Transaction" will have the meaning specified in Section 14 of this Agreement. (c) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A and will apply to Party B. If such provisions apply:- "Specified Indebtedness" will have the meaning specified in Section 14 of this Agreement but will exclude deposits received by a party in the ordinary course of its banking business. "Threshold Amount" means USD 5,000,000 with respect to Party B and 3% of Shareholder's Equity of Party A (as defined in Party A's published financial reports) with respect to Party A or the equivalent thereof in any other currency or currencies with respect to the relevant party. (d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply to Party A and will apply to Party B. 19 (e) The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A and will not apply to Party B. (f) Payments on Early Termination. For the purpose of Section 6(e) of this Agreement:- (i) Loss will apply. (ii) The Second Method, incorporating the set-off provisions set out in paragraph (a) of Part 5 hereof, will apply. (g) "Termination Currency" means United States Dollars. (h) "Additional Termination Event" will not apply. Part 2 Tax Representations (a) Payer Representations. For the purpose of Section 3(e) of this Agreement, Party A will make the following representation and Party B will make the following representation:- It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on:- (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement; (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) Payee Tax Representations. For the purpose of Section 3(f) of this Agreement, Party A and Party B will not make any representations. Part 3 Agreement to Deliver Documents For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:- (a) Tax forms, documents or certificates to be delivered are:- None 20
Party required to Form / Document / Certificate Date by which Covered by Section deliver document to be delivered 3(d) Representation Party A such proof as Party B may reasonably upon execution Yes request of the names, true signatures and and delivery of authority of persons signing this this Agreement Agreement on its behalf and any other document referred to herein to which it is a party; Party B Certified copies of all corporate upon execution Yes authorizations and any other documents and delivery of with respect to the execution, delivery this Agreement and performance of this Agreement; together with a certificate of authority and specimen signatures of the persons executing this Agreement; Party B A copy of its most recently available promptly after a Yes annual report containing audited financial request by Party statements for its most recently ended A fiscal year certified by its independent public accountants as fairly presenting its financial condition and results of operations for and as at the close of such fiscal year; Party B A copy of its most recently available promptly after unaudited financial statements for its a request by most recently ended fiscal quarter Party A certified by its chief financial officer as fairly presenting its financial condition and results of operations for and as at the close of such quarter; Party B Each regular financial and/or business promptly after Yes reporting document that is distributed or a request by is generally available to its partners, Party A shareholders, creditors or investors or is filed with any regulatory authorities and is publicly available or relates to its financial condition; Party B Such other information respecting Party promptly after Yes B's condition or operations, financial or a request by otherwise, as Party A may reasonably Party A request from time to time; and Party B Opinion of independent counsel for Party B upon execution Yes in the form of Exhibit I; and delivery of this Agreement
21 Notwithstanding anything to the contrary contained herein, if the financial reports of Party B are available to Party A on the website www.sec.gov; Party B's obligation to deliver such reports to Party A hereunder shall be deemed to have been satisfied. Part 4 Miscellaneous (a) Addresses for Notices. For the purpose of Section 12(a) of this Agreement:- Address for notices or communications to Party A:- Address: BNP Paribas, 16 Boulevard des Italiens, 75009 Paris, France Attention: BFI/BOLTIT Telex No. 282919 Answerback: BNP 282919F copy to: BNP Paribas, 10 Harewood Avenue, London NW1 6AA, England Attention: Legal and Transaction Management Group Telex No: 296723 Answerback: PARCAP Electronic Messaging System Details: BPCMGB2X (For all purposes) Address for notices or communications to Party B:- Address: Robert Mondavi Corporation 901 Kaiser Road Napa, CA 94558 Attention: Robert Philipps Party A may rely on notices or communications from The Robert Mondavi Corporation alone as a notice from Party B and notices or communication to The Robert Mondavi Corporation alone shall be deemed effective notice to Party B. (b) "Process Agent". For the purpose of Section 13(c) of this Agreement:- Party A appoints as its Process Agent: its New York Branch at 787 Seventh Avenue, New York, New York 10019. Party B appoints as its Process Agent: Robert Mondavi Corporation William J. Peterson 841 Latour Court Napa, CA 94558 (c) Offices. The provisions of Section 10(a) will apply to this Agreement. (d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:- 22
Party A is a Multibranch Party and may act through the following Offices:- BNP Paribas Head Office Its New York Branch at Its other United States 16, Boulevard des Italiens The Equitable Tower Branches 75009 Paris 31st Floor France 787 Seventh Avenue New York, NY 10019 USA Its Tokyo Branch at Its London Branch at Its Hong Kong Branch at 11th Sankei Building 22F 10 Harewood Avenue Floor 1-7-2, Otemachi, London NW1 6AA Central Tower Chiyoda-ku England 28 Queen's Road Central Tokyo 100-0004 Hong Kong Japan Its Singapore Branch Its Dublin Branch Its Sydney Branch Tung Centre 5 George's Dock 12 Castlereagh Street 20 Collyer Quay IFSC Sydney NSW 2001 Singapore 0104 Dublin 1 Australia Ireland
Its Grand Cayman Branch Party B is not a Multibranch Party. (e) Calculation Agent. The Calculation Agent is Party A. The failure by Party A to perform its obligations as Calculation Agent hereunder shall not be construed as an Event of Default or Termination Event. (f) Credit Support Document. Not Applicable (g) Credit Support Provider. Not Applicable (h) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to choice of law doctrine. (i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement will apply unless otherwise stated in any Confirmation. (j) "Affiliate" will have the meaning specified in Section 14 of this Agreement. Part 5 Other Provisions (a) Set-off. Any amount (the "Early Termination Amount") payable to one party (the "Payee") by the other party (the "Payer") under Section 6(e), in circumstances where there is a Defaulting Party or an Affected Party where a Termination Event under Section 5(b)(iv) has occurred, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any amount(s) (the "Other Agreement Amount") payable (whether at such time or in the future or upon the occurrence of the contingency) by the Payee to the Payer irrespective of the currency, place of payment or booking office of the obligation under any other agreement(s) between the Payee and the Payer (and the Other Agreement Amount will be discharged pro tanto). X will give notice to the other party of any set-off so effected. For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant part of such amounts) may be converted at the applicable prevailing exchange rate into the currency in which the other is denominated. If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. 23 Nothing in this paragraph shall be effective to create a charge or other security interest. This Section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (b) Tax Event Section 5(b)(ii) is amended by deleting the words ", or there is a substantial likelihood that it will", from line four thereof. (b) ISDA Definitions. The definitions and provisions contained in the 2000 ISDA Definitions, the 2003 ISDA Credit Derivatives Definitions, the 1998 ISDA FX and Currency Option Definitions, the 2002 ISDA Equity Derivatives Definitions, the 1993 ISDA Commodity Definitions, each as published by the International Swaps and Derivatives Association, Inc. (collectively, the "Definitions", as such Definitions may be further amended or supplemented) are incorporated into any Confirmation which supplements and forms part of this Agreement, and all capitalized terms used in a Confirmation shall have the meaning set forth in the Definitions, unless otherwise defined in a Confirmation. In the event of any conflict between the provisions of this Agreement and the provisions of the Definitions, the provisions of the Agreement shall apply, and in the event of any conflict between the provisions of this Agreement and a Confirmation, the provisions of the Confirmation shall apply. (c) Confirmations. A new Section 1(d) is hereby added to the Agreement as follows: "(d) Confirmations. Any transaction entered into by the parties, whether or not prior to the date hereof, which would otherwise constitute a "Specified Transaction" under this Agreement shall be deemed to be a Transaction for the purposes of this Agreement, even where not so specified in the documentation for such transaction. Any document or other writing (including telexes, faxes and electronic messages) evidencing the terms of such a Transaction shall, unless otherwise specified in such writing, be deemed to be a Confirmation for the purposes of this Agreement and, unless otherwise agreed by the parties, each such Confirmation shall supplement, form a part of, and be subject to this Agreement and all provisions in the Agreement will govern the Confirmation except as modified therein." (d) Representations. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): (i) Non-Reliance. It is acting for its own account and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgement and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. It has not received from the other party any assurance or guarantee as to the expected results of the Transaction. (ii) Evaluations and Understanding. It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the financial and other risks of that Transaction. (iii) Status of Parties. The other party is not acting as a fiduciary or an adviser for it in respect of that Transaction. (iv) Acting as Principal. It is acting as principal and not as agent or in any other capacity, fiduciary or otherwise. (v) Beneficial Owner. With respect to any physically settled Transactions, it shall at the time of delivery be the legal and beneficial owner free of liens and other encumbrances of any securities or commodities it delivers to the other party. (vi) Eligible Contract Participant. It is an "eligible contract participant" within the meaning of the Commodity Exchange Act." 24 (e) Additional Representation by Party B. Party B represents and warrants that its obligations hereunder shall at all times rank at least pari passu with all other unsecured indebtedness of Party B. (f) Default Caused by Illegality. An Event of Default pursuant to Section 5(a)(vi) shall not be deemed to have occurred if it is caused by an event that would constitute an Illegality if it occurred in connection with this Agreement. (g) Events of Default. Section 5 (a) of the Agreement is amended by inserting the following at the end of subsection (vii) (3) thereof: "or a notice is sent convening a meeting to propose a voluntary arrangement of its creditors" (h) Waiver of Jury Trial. Each party waives to the fullest extent permitted by applicable law any right it may have to have a trial by jury in respect of any Proceedings and acknowledges that it and the other party have been induced to enter into this Agreement (and provide for any Credit Support Document, as applicable) by, among other things, the mutual waivers in this Section. (i) Notification of the Recording of Telephone Conversations. Each Party (i) consents to the recording of telephone conversations of trading and marketing personnel of the parties in connection with this Agreement and any Transactions hereunder and to the submission of such recordings in evidence in any Proceedings and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel. PART 6 FX AND CURRENCY OPTION TRANSACTIONS (a) Payment of Premiums for Currency Options. (i) Unless otherwise agreed in writing by the parties, the Premium for any Currency Option shall be paid on its Premium Payment Date. (ii) If the Premium is not paid on its Premium Payment Date, the Seller may elect: (A) to accept a late payment of such Premium; (B) to give written notice of such non-payment and, if such payment shall not be received within two (2) Local Business Days of such notice, treat the related Currency Option as void; or (C) to give written notice of such non-payment and, if such payment shall not be received within two (2) Local Business Days of such notice, treat such non-payment as an Event of Default under Section 5 (a) (i) of the Agreement. (iii) If the Seller elects to act under either (A) or (B) above, the Buyer shall pay all out-of-pocket costs and actual damages incurred in connection with such unpaid or late Premium or void Currency Option, including, without limitation, interest on such Premium from and including the Premium Payment Date to but excluding the late payment date in the same currency as such Premium at the prevailing market rate and any other losses, costs or expenses incurred by the Seller in connection with such terminated Currency Option, for the loss of its bargain, its cost of funding, or the loss incurred as a result of terminating, liquidating, obtaining or re-establishing a delta hedge or related trading position with respect to such Currency Option. 25 (b) Netting Discharge and Termination of Currency Options. From a date to be mutually agreed by the parties, any Call Option or any Put Option written by a party will automatically be terminated and discharged, in whole or in part, as applicable, and unless otherwise agreed, against a Call Option or a Put Option, respectively written by the other party, such discharge and termination to occur automatically upon the payment in full of the last Premium payable in respect of such Currency Options in accordance with standard payment instructions; provided that such discharge and termination may only occur in respect of Currency Options: (i) each being with respect to the same Put Currency and the same Call Currency; (ii) each having the same Expiration Date and Expiration Time; (iii) each being of the same style i.e. either both being American Style Options or both being European Style Options; (iv) each having the same Strike Price; (v) each having being transacted by the same offices of Party A and Party B; and (vi) neither of which shall have been exercised by delivery of a Notice of Exercise; and upon the occurrence of such discharge and termination, neither Party shall have any obligation to the other Party in respect of the relevant Currency Options or, as the case may be, parts thereof so discharged and terminated. Such discharge and termination shall be effective notwithstanding that either party may fail to record such discharge and termination in its books. In the case of a partial discharge and termination (i.e. where the relevant Currency Options are for different amounts of the Currency Pair), the remaining portion of the Currency Options which is partially discharged and terminated shall continue to be a Currency Option for the purposes of the Agreement, including this provision. IN WITNESS WHEREOF the parties have executed this Schedule to the Agreement with effect from the date specified on the first page of this document. BNP PARIBAS SECURITIES CORP. THE ROBERT MONDAVI CORPORATION ON BEHALF OF BNP PARIBAS By: _____________________ By: ________________________ Name: Christine Smith Howard Name: ________________________ Title: Authorized Signatory Title: ________________________ R.M.E., INC. By: _____________________ By: _______________________ Name: Mindy Sperling Name: _______________________ Title: Authorized Signatory Title: _______________________ Each of the foregoing on a joint and several basis and each such party being referred to as "Party B" in this Agreement both individually and jointly. 26 Exhibit I Opinion of Counsel for the Counterparty ______, 2003 BNP Paribas 16 Boulevard des Italiens 75009 Paris France Dear Sirs I have acted as counsel for _____________________________ (the "Counterparty") in connection with the ISDA Master Agreement (the "Agreement") dated as of __________________ between the Counterparty and BNP Paribas ("BNP Paribas"), pursuant to which this opinion is furnished. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. I express no opinion as to any laws other than the laws and regulations of _____________________ as currently in effect. In addition, I have assumed that the Agreement has been, and any Confirmation exchanged between the parties confirming the Transaction which supplements and is subject to the Agreement (a "Confirmation") will be, duly authorized, executed and delivered (or, in the case of a Confirmation, entered into, as provided for therein) by BNP Paribas [and that the Agreement constitutes, and when confirmed, as provided for therein, any Confirmation will constitute, a valid and binding obligation under the laws of the State of New York. Upon the basis of the foregoing, I am of the opinion that: 1. The Counterparty is a _______________ duly incorporated, validly existing and in good standing under the laws of ________________ and has full power and authority to execute, deliver and perform the Agreement and to confirm, as provided for therein, and perform any Confirmation. 2. The execution, delivery and performance by the Counterparty of the Agreement and the entering into, as provided for therein, and performance of any Confirmation have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Counterparty or of any agreement, judgement, injunction, order, decree or other instrument binding upon the Counterparty. 3. The Agreement constitutes and, when confirmed, as provided for therein, any Confirmation, together with the Agreement, will constitute, a valid and binding obligation of the Counterparty enforceable in accordance with its terms except as enforcement may be limited by the provisions of any applicable bankruptcy, liquidation, insolvency and reorganization or other laws, relating to or affecting, generally the enforcement of creditor's rights. 4. No authorizations, approvals or consents are required under the laws of ____________ to permit the purchase by the Counterparty of any currency which may be needed to make payment pursuant to the Agreement. 27 5. The submission to the non exclusive jurisdiction of the State and Federal courts in New York City for all purposes in connection with, and the consent to service of process in, the Agreement are valid and binding upon the Counterparty and not subject to revocation. If any final and conclusive judgement of a State or Federal court sitting in New York City is rendered against the Counterparty in connection with any action arising out of or relating to the Agreement, such judgement would be recognized and enforced by the courts of __________________ without any re-trial or re-examination of the merits of action; provided that the ________________ court in which enforcement is sought determines that: [brief description of the grounds under which such judgement would be recognized without a re-examination of the merits] Very truly yours, EX-10.60 7 a4572106_ex1060.txt ROBERT MONDAVI EXHIBIT 10.60 Exhibit 10.60 (Multicurrency - Cross Border) ISDA SCHEDULE to the MASTER AGREEMENT dated as of December 23, 2003 between THE ROBERT MONDAVI CORPORATION ("Party A") and HARRIS TRUST AND SAVINGS BANK ("Party B") Part 1 Termination Provisions (a) "Specified Entity" means in relation to Party A for the purpose of: Section 5(a)(v), Affiliates Section 5(a)(vi), Affiliates Section 5(a)(vii), Affiliates Section 5(b)(iv), Affiliates and in relation to Party B for the purpose of: Section 5(a)(v), Not Applicable Section 5(a)(vi), Not Applicable Section 5(a)(vii), Not Applicable Section 5(b)(iv), Not Applicable (b) "Specified Transaction" will have the meaning specified in Section 14 of this Agreement. (c) The "Cross Default" provision of Section 5(a)(vi) will apply to Party A and Party B. "Specified Indebtedness" will have the meaning specified in Section 14, provided that it will also include any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of any Derivative Transaction and will not include (i) indebtedness in respect of deposits received or (ii) any payment not made because of an intervening change in law making such payment illegal, Force Majeure or act of state, provided that the party had available sufficient funds to make such payment at the time of non-payment. 19 "Threshold Amount" shall have the meaning set forth below; for purposes of "Threshold Amount", "Equity" means the stockholders' equity including retained earnings, total partnership capital, net assets, or total capital and reserves, as the case may be, of the Party or its Credit Support Provider. "Threshold Amount" means, in relation to Party A or any Credit Support Provider of Party A, (i) zero with respect to (x) Specified Indebtedness to Party B or any Affiliate of Party B and (y) Specified Indebtedness under the Revolving Credit Agreement, and (ii) $5,000,000 with respect to other Specified Indebtedness. "Threshold Amount" means, with respect to Party B, 2% of the Equity of Party B. (d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply to Party A and Party B. (e) The "Automatic Early Termination" provisions of Section 6(a) will not apply to Party A and will not apply to Party B. (f) Payments on Early Termination. For the purpose of Section 6(e) of this Agreement: (i) Market Quotation will apply. (ii) The Second Method will apply. Notwithstanding the above, with respect to FX Transactions and Currency Option Transactions, Loss and Second Method shall apply. (g) "Termination Currency" means U.S. Dollars. (h) Additional Termination Event will apply. An Additional Termination Event shall have occurred, for the purposes of Section 5(b)(v) of this Agreement, with Party A as the Affected Party, if the Revolving Credit Agreement is cancelled, terminated, repaid or otherwise ceases to be in full force and effect, or if the Revolving Credit Agreement is replaced, extended, restated or otherwise modified in a manner not approved by Party B acting in its sole discretion. 20
Part 2 Tax Representations NOT APPLICABLE Part Agreement to Deliver Documents For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable: Party required to deliver document Form/Document/Certificate Date by which to be Covered by Section 3(d) delivered Representation _____________________________________________________________________________________________________________________ Party A and Party Certificate of incumbency containing Upon execution of this Yes B specimen signatures of each person Agreement, and if executing the Agreement and if requested, requested, each Confirmation any Confirmation _____________________________________________________________________________________________________________________ Party A Legal opinion substantially in the form Upon execution of this No of Exhibit I attached hereto Agreement _____________________________________________________________________________________________________________________ Party A Each Credit Support Document listed in Promptly upon request Yes Part 4(f) of this Schedule, and any amendment thereto. _____________________________________________________________________________________________________________________ Party A A copy of any notice required pursuant to Promptly upon the issuance Yes the Revolving Credit Agreement in thereof. connection with any event of default thereunder or any event that, with the giving of notice, lapse of time or both, would become an event of default thereunder.
21 Part 4 Miscellaneous (a) Addresses for Notices. For the purpose of Section 12(a) of this Agreement: Address for notices or communications to Party A: Address: Robert Mondavi Corporation 901 Kaiser Road Napa, CA 94558 Attention: Mr. Robert Philipps Vice-President, Treasury and Investor Relations Email: bob.philipps@robertmondavi.com Telephone: 707.251.4853 Addresses for notices or communications to Party B: With respect to Transactions, excluding FX Transactions and Currency Options: Address: Harris Trust and Savings Bank c/o Bank of Montreal 130 Adelaide Street West Suite 500 Toronto, Ontario M5H 4E1 Canada Attention: Manager, Confirmations Facsimile: (416) 867-4778/6827 Telephone: (416) 867-7173 Swift ID NO.: BOFMCAM3 With respect to FX Transactions and Currency Options: Address: Harris Trust and Savings Bank c/o Bank of Montreal FX/MM Operations 129 St. Jacques St. W. 11th Floor, H.O. Montreal, Quebec, H2Y 1L6 Canada Attention: Manager, FX Operations Facsimile: (514) 877-2223 Telephone: (514) 877-2203/9186 Swift ID NO: BOFMCAM3 22 Any notice sent to Party B in connection with Sections 5, 6 or 9(b) shall be sent to the following address: Address: Harris Trust and Savings Bank Global Financial Products 115 South LaSalle Street 19th Floor West Chicago, Illinois 60603 Attention: Managing Director, Derivative Sales Telephone: (312) 845-4010 (b) Process Agent. For purposes of Section 13(c) of this Agreement: Party A appoints as its Process Agent: Address: Robert Mondavi Corporation 831 Latour Court Napa, CA 94558 Attention: William J. Peterson, Esq. Party B appoints as its Process Agent: Not Applicable (c) Offices. The provisions of Section 10(a) will apply to this Agreement. (d) Multibranch Party. For the purpose of Section 10(c) of this Agreement: Party A is not a Multibranch Party. Party B is not a Multibranch Party and will transact through Harris Trust and Savings Bank, 115 South LaSalle Street, 19th Floor West, Chicago, Illinois 60603. (e) Calculation Agent. The Calculation Agent is Party B, unless otherwise specified in a Confirmation in relation to the relevant Transaction. (f) Credit Support Document. With respect to Party A, the Revolving Credit Agreement and any related security documents. With respect to Party B: Not applicable. 23 (g) Credit Support Provider: With respect to Party A, R.M.E., Inc. With respect to Party B: Not applicable. (h) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine). (i) Netting of Payments. Section 2(c) shall apply to all Transactions except FX Transactions and Currency Option Transactions; Part 6 of this Schedule addresses the payment netting for such Transactions. Subparagraph (ii) of Section 2(c) of this Agreement (x) will not apply to any Transactions identified as or otherwise deemed Commodity Transactions, and (y) will apply to all other Transactions, except as set forth above. (j) "Affiliate" will have the meaning specified in Section 14 of this Agreement. Part 5 Other Provisions (a) 2000 ISDA Definitions. The provisions of the 2000 ISDA Definitions (the "Definitions"), published by the International Swaps and Derivatives Association, Inc., are incorporated by reference in, and will be deemed to be part of, this Agreement and each Confirmation as if set forth in full in this Agreement or in such Confirmation, without regard to any revision or subsequent edition thereof. In the event of any inconsistency between the provisions of this Agreement and the Definitions, this Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Agreement or the Definitions, such Confirmation will prevail for the purpose of the relevant transaction. (b) Illegality or Force Majeure. As contemplated by Section 6 of this Agreement, while neither party shall be obligated to violate any applicable law by reason of Section 6 or this Part 5(b), each party shall retain its right to payment pursuant to Section 6(e) if the other party does not perform because of Illegality or Force Majeure. (c) Set-off. Any amount (the "Early Termination Amount") payable to one party (the "Payee") by the other party (the "Payer") under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section 5(b)(iv) or 5(b)(v) has occurred, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any amount(s) (the "Other Agreement Amount") payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or instrument(s) or undertaking(s) issued or executed by one party to, or in favour of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section. 24 For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section shall be effective to create a charge or other security interest. This Section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (d) Conditions to Certain Payments. Notwithstanding the provision of Section 6(e)(i)(3) and (4), as applicable, if the amount referred to therein is a positive number, the Defaulting Party will pay such amount to the Non-defaulting Party, and if the amount referred to therein is a negative number, except to the extent set out below, the Non-defaulting Party shall have no obligation to pay any amount thereunder to the Defaulting Party unless and until the conditions set forth in (i) and (ii) below have been satisfied, at which time there shall arise an obligation of the Non-defaulting Party to pay to the Defaulting Party an amount equal to the absolute value of such negative number less any and all amounts which the Defaulting Party may be obligated to pay under Section 11 (the "Conditional Payment Amount"): (i) the Non-defaulting Party shall have received confirmation satisfactory to it in its sole discretion (which may include an unqualified opinion of its counsel) that (x) no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of Terminated Transactions will be required to be made in accordance with Section 6(c)(ii) and (y) each Specified Transaction shall have terminated pursuant to its specified termination date or through the exercise by a party of a right to terminate and all obligations owing under each such Specified Transaction shall have been fully and finally performed; (ii) all obligations (contingent or absolute, matured or unmatured) of the Defaulting Party and any Affiliate of the Defaulting Party to make any payment or delivery to the Non-defaulting Party or any Affiliate of the Non-defaulting Party shall have been fully and finally performed; 25 provided that if the Conditional Payment Amount exceeds the aggregate amount of the obligations owing to the Non-defaulting Party and Affiliates of the Non-defaulting Party by the Defaulting Party and Affiliates of the Defaulting Party (including without limitation all obligations owing under each Specified Transactions), the Non-defaulting Party shall pay the amount of the excess to the Defaulting Party. (e) Relationship between the Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction): (i) Non-Reliance. It is acting for its own account, and it has made its own independent decision to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other Party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. (iii) Status of Parties. The other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction. (f) Bankruptcy Code. The parties hereto intend that this Agreement shall be a "master agreement" for purposes of 11 U.S.C. ss.101(53B) and 12U.S.C. ss.1821(e)(8)(D)(vii), or any successor provisions. (g) Commodity Exchange Act. Each party represents to the other party on and as of the date hereof and on each date on which a Transaction is entered into among them that: (i) such party is an "eligible contract participant" as defined in the U.S. Commodity Exchange Act, as amended (the "CEA"); (ii) neither this Agreement nor any Transaction has been executed or traded on a "trading facility" as such term is defined in the CEA; and (iii) the terms of this Agreement and each Transaction have been subject to individual negotiation. 26 (h) Escrow. If by reason of the time difference between the cities in which payments are to be made or otherwise, it is not possible for simultaneous payments to be made on any date on which both parties are required to make payments hereunder, either party may at its option and in its sole discretion notify the other party that payments on that date are to be made in escrow. In this case deposit of the payment due earlier on that date shall be made by 2:00 p.m. (local time at the place for the earlier payment) on that date with an escrow agent selected by the party giving the notice and reasonably acceptable to the other party, accompanied by irrevocable payment instructions (a) to release the deposited payment to the intended recipient upon receipt by the escrow agent of the required deposit of the corresponding payment from the other party on the same date accompanied by irrevocable payment instructions to the same effect or (b) if the required deposit of the corresponding payment is not made on that same date, to return the payment deposited to the party that paid it into escrow. The party that elects to have payments made in escrow shall pay the costs of the escrow arrangements and shall cause those arrangements to provide that the intended recipient of the payment due to be deposited first shall be entitled to interest on that deposited payment for each day in the period of its deposit at the rate offered by the escrow agent for that day for overnight deposits in the relevant currency in the office where it holds that deposited payment (at 11:00 a.m. local time on that day) if that payment is not released by 5:00 p.m. local time on the date it is deposited for any reason other than the intended recipient's failure to make the escrow deposit it is required to make hereunder in a timely fashion. (i) WAIVER OF JURY TRIAL: EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR ANY TRANSACTION. EACH PARTY ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE ENTERED INTO THIS AGREEMENT AND ANY CREDIT SUPPORT DOCUMENT, AS APPLICABLE, IN RELIANCE ON, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION. (j) Telephone Recording. Each party (i) consents to the recording of telephone conversations of trading and marketing personnel of the parties in connection with this Agreement or any potential or actual Transaction hereunder; (ii) agrees to obtain any necessary consent of and give notice of such recording to its trading and marketing personnel; and (iii) agrees that such recordings may be submitted in evidence in any proceeding relating to this Agreement, subject to applicable rules of discovery and evidence. (k) Pari Passu. Party A hereby covenants that if, at any time during the currency of this Agreement, Party A secures any loan, debt, guarantee or other obligation, now or hereafter existing (including, without limitation, any obligation pursuant to the Revolving Credit Agreement or any Derivative Transaction, an "Obligation") by any mortgage, lien, pledge or other charge upon any of its present or future assets or revenues (a "Lien"), it shall immediately take the necessary steps to ensure that its obligations under this Agreement shall share in and be secured by such Lien equally and rateably with such other Obligation and that in the creation of such Lien express provision shall be made to such effect. 27 (l) Right to Terminate. Either party may, provided that no Event of Default or Potential Event of Default exists with respect to that party, elect to terminate any Transaction under this Agreement on the third (3rd) anniversary of the Effective Date of such Transaction or every three (3) years thereafter, (the "Optional Termination Date"), by providing at least five (5) days' prior notice to the other party (the "Other Party"). Notice may be provided by telephone but is to be followed up with a written notice to be received by the Other Party prior to the Optional Termination Date. In the event a party, (the "Terminating Party") elects to terminate a Transaction pursuant to the foregoing, Party B shall at or prior to 2:00 p.m. Toronto time on the Optional Termination Date, determine the amount payable in respect of the terminated Transaction (the "Market Value") by making the calculations required by Section 6(e)(i) of the Agreement as if the Optional Termination Date were an Early Termination Date designated as a result of the occurrence of an Event of Default with respect to the Terminating Party and the parties had specified Loss and the Second Method for that purpose. The Market Value will be paid by the relevant party on the second Business Day following the Optional Termination Date. If there is a dispute between the parties as to the calculation of the Market Value, (a) the parties will consult with each other in an attempt to resolve the dispute; and (b) if the parties fail to resolve the dispute prior to 3:00 p.m. Toronto time on the Optional Termination Date, then Party B shall recalculate the Market Value by making calculations required by Section 6(e)(i) of the Agreement as if the Optional Termination Date were an Early Termination Date designated as a result of the occurrence of an Event of Default with respect to the Terminating Party and the parties had specified Market Quotation and the Second Method for that purpose. Promptly following a resolution pursuant to this paragraph, the Market Value will be paid by the relevant party on the second Business Day following the Optional Termination Date. Upon payment of such sum as provided herein, the obligations of both parties with respect to this Transaction shall be discharged in full. (m) Additional Definitions. The following definition shall be added to Section 14 in its appropriate alphabetical place: "Derivative Transaction" means (a) any transaction which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) and (b) any combination of these transactions. 28 "Force Majeure" is a natural or man-made disaster, armed conflict, riot, civil disturbance, or similar event that materially disrupts transportation or communication facilities in the relevant city where the party is to make payment, or otherwise prevents the personnel of the party from performing their duties in connection with such payment, and is beyond the control of the party. "Revolving Credit Agreement" means the credit agreement dated as of December 14, 2001 between, among others, Party A and R.M.E., Inc., as Borrowers, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, and various agents, managers and lenders from time to time party thereto, as amended by the amending agreement dated as of June 16, 2003. Part 6 Additional Terms for FX Transactions and Currency Option Transactions (a) Standard Terms and Conditions Applicable to FX Transactions and Currency Option Transactions. Each FX Transaction or Currency Option Transaction outstanding at or entered into after the date hereof between the parties shall be governed by this Agreement irrespective of any references in a Confirmation to any other master agreements (e.g. IFEMA, ICOM, or any specified terms and conditions). (b) Incorporation of and Amendments to ISDA FX Definitions. The 1998 ISDA FX and Currency Option Definitions (the "FX and Currency Option Definitions"), published by the International Swaps and Derivatives Association, Inc., et. al., are hereby incorporated by reference with respect to any "FX Transactions" and "Currency Option Transactions" as defined by the FX and Currency Option Definitions, except as otherwise specifically provided herein or in a Confirmation. (c) Amendments to ISDA FX Definitions. The following amendments are hereby made to the FX and Currency Option Definitions: (i) Section 2.1 of the FX and Currency Option Definitions is amended by the addition of the following definitions with respect to FX Transactions: "Currency Obligation" means the obligation of a party hereunder to deliver or take delivery of an amount of currency, whether pursuant to the terms of an FX Transaction or Currency Option Transaction or resulting from the netting of currency amounts due under FX Transactions and/or Currency Option Transactions. 29 "Value Date" means, in respect of a Transaction, the Settlement Date. (ii) Section 3.6(a) of the FX and Currency Option Definitions is hereby amended by deleting in its entirety the final sentence thereof and adding the following two sentences at the end thereof: "A Currency Option Transaction may be exercised in whole or in part. If a Currency Option Transaction is exercised in part, the unexercised portion shall not be extinguished thereby but shall remain a Currency Option Transaction to the extent of such unexercised portion until the earlier of (A) the expiration of the Currency Option Transaction or (B) an exercise of the Currency Option Transaction that leaves no remaining unexercised portion thereof." (iii) The term "Deliverable" as applied to Currency Option Transactions is hereby modified by the following amendment: Section 1.7, "Deliverable", is modified by replacing the words "except as otherwise provided in Section 3.6 (c) and Article 5" with "except as otherwise provided in Section 3.6 (c), Section 3.7 (d) and Article 5". (d) Section 3.7 is amended by adding the following subsection (d): "(d) Potential Event of Default. If an Event of Default or a Potential Event of Default has occurred and is continuing and an Early Termination Date has not been designated by the Non-defaulting Party, the Non-defaulting Party may, by written notice, specify that any or all Deliverable Currency Option Transactions being settled while such an Event of Default or Potential Event of Default is continuing shall be settled as Non-Deliverable Currency Option Transaction in accordance with Section 3.7(b) unless and until the Event of Default or Potential Event of Default is no longer continuing." (e) Article 3 of the FX and Currency Option Definitions is hereby amended by the addition of the following as a new Section 3.9: "Section 3.9 Terms Relating to Payment of Premium (a) Unless otherwise agreed in writing by the parties, the Premium related to a Currency Option Transaction shall be paid on its Premium Payment Date in immediately available funds. 30 (b) If a Premium is not received on the Premium Payment Date, the Seller may elect: (i) to accept a late payment of such Premium; (ii) to give written notice of such non-payment and, if such payment shall not be received within three Local Business Days of such notice, treat the related Currency Option Transaction as void; or (iii) to give written notice of such non-payment and, if such payment shall not be received within three Local Business Days of such notice, treat such non-payment as an Event of Default under Section 5(a)(i). If the Seller elects to act under clause (i) of the preceding sentence, the Buyer shall pay interest on such Premium in the same currency as such Premium from the day such Premium was due until the day paid at the Default Rate, as determined in good faith by the Seller, if the Seller elects to act under clause (ii) of the preceding sentence, the Buyer shall pay all out-of-pocket costs and actual damages incurred in connection with such unpaid or late Premium or void Currency Option Transaction, including without limitation, interest on such Premium in the same currency as such Premium at the then prevailing market rate and any other costs or expenses incurred by the Seller in covering its obligations (including, without limitation, a delta hedge) with respect to such Currency Option Transaction." (f) Confirmations. FX Transactions and Currency Option Transactions shall be promptly confirmed by the parties by Confirmations exchanged by mail, telex, facsimile or other electronic means. Unless either party objects to the terms of an FX Transaction or Currency Option Transaction contained in any Confirmation within three Local Business Days of receipt thereof, the terms of such Confirmation shall be deemed correct and accepted absent manifest error, unless a corrected Confirmation is sent by a party within such three day period, in which case the party receiving such corrected Confirmation shall have three Local Business Days after receipt thereof to object to the terms contained in such Confirmation. Where an FX Transaction or Currency Option Transaction is confirmed by means of mail or an electronic messaging system that the parties have elected to use to confirm such Transaction: (i) such confirmation will constitute a "Confirmation" as referred to in this Agreement even where not so specified in the confirmation, (ii) such Confirmation will supplement, form part of, and be subject to this Agreement and all provisions in this Agreement will govern the Confirmation, and (iii) the definitions and provisions contained in the FX and Currency Option Definitions and this Agreement will govern for the purposes of the relevant FX Transaction or Currency Option Transaction. (g) Netting, Offset and Discharge with Respect to Currency Option Transactions. The following provisions shall apply to Currency Option Transactions: (i) If, on any date, and unless otherwise mutually agreed by the parties, a Premium would otherwise be payable hereunder in the same currency between a pair of Offices of the parties, then, on such date, each party's obligation to make payment of any such Premium will be automatically satisfied and discharged and, if the aggregate Premium(s) that would otherwise have been payable by such Office of one party exceeds the aggregate Premium(s) that would otherwise have been payable by such Office of the other party, replaced by an obligation upon the party by whom the larger aggregate Premium(s) would have been payable to pay the other party the excess of the larger aggregate Premium(s) over the smaller aggregate Premiums(s). 31 (ii) Unless otherwise agreed, any Call Option or any Put Option written by a party will automatically be terminated and discharged, in whole or in part, as applicable, against a Call Option or a Put Option, respectively, written by the other party, such termination and discharge to occur automatically upon the payment in full of the last Premium payable in respect of such Currency Option Transactions; provided that such termination and discharge may only occur in respect of Currency Option Transactions: (1) each being with respect to the same Put Currency and the same Call Currency; (2) each having the same Expiration Date and Expiration Time; (3) each being the same style, i.e. either both being American Style Options or both being European Style Options; (4) each having the same Strike Price; (5) neither of which shall have been exercised by delivery of a Notice of Exercise; (6) which are entered into by the same Offices of the parties; and (7) which are otherwise identical in all respects relevant to termination and discharge; and upon the occurrence of such termination and discharge, neither party shall have any further obligation to the other party in respect of the relevant Currency Option Transactions or, as the case may be, parts thereof so terminated and discharged. In the case of a partial termination and discharge (i.e. where the Currency Option Transactions are for different amounts of the Currency Pair), the remaining portion of the Currency Option Transaction which is partially discharged and terminated shall continue to be a Currency Option Transaction for all purposes of this Agreement. (h) Netting, Discharge and Termination of FX Transactions. Notwithstanding Part 4(i) herein, if on any Value Date, and unless otherwise agreed, Currency Obligations for the delivery of the same currency shall exist between a pair of Offices of the parties, then on such Value Date, each party's Currency Obligation will be automatically satisfied and discharged, if the aggregate amount that should otherwise have been delivered by such Office of one party exceeds the aggregate amount that would otherwise have been delivered by such Office of the other party, and replaced by a Currency Obligation upon the party by whom the larger aggregate amount would have been deliverable to deliver to the other party the excess of the larger aggregate amount over the smaller aggregate amount. 32 Part 7 Additional Terms for Commodity Derivative Transactions (a) Commodity Definitions. This Agreement, each Transaction which is a commodity swap, commodity option, commodity swaption or commodity cap, collar or floor (each a "Commodity Transaction") and each Confirmation with respect to a Commodity Transaction are subject to, in addition to the Definitions, the 1993 Commodity Derivatives Definitions, as published by ISDA (the "Commodity Definitions"), and each Commodity Transaction and each Confirmation with respect thereto shall, in addition to the Definitions, be governed in all respects by the provisions set forth in the Commodity Definitions; but in the event of any inconsistency or conflict between the Commodity Definitions and the Definitions, the Commodity Definitions shall prevail with respect to all Commodity Transactions. The provisions of the Commodity Definitions are incorporated by reference in, and made part of, this Agreement and each Confirmation with respect to a Commodity Transaction as if set forth in full in this Agreement and each such Confirmation. In the event of any inconsistency between the provisions of this Agreement and the Commodity Definitions, this Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation with respect to a Commodity Transaction and the Agreement or the Commodity Definitions, such Confirmation shall prevail for the purpose of the relevant Commodity Transaction. (b) Disruption Fallbacks. The following "Disruption Fallbacks" specified in Section 7.5(c) of the Commodity Definitions shall apply, in the following order, except as otherwise specifically provided in the Confirmation: (i) Postponement, provided that the Maximum Days of Disruption shall be three (3) Commodity Business Days; (ii) Negotiated Fallback; and (iv) No Fault Termination. [The balance of this page is intentionally left blank; execution page follows.] 33 IN WITNESS WHEREOF, this Agreement is entered into by the parties hereto as of the date first written above. THE ROBERT MONDAVI CORPORATION HARRIS TRUST AND SAVINGS BANK By: _________________________________ By: __________________________ Name: Robert Philipps Name: Title: VP, Treasury & Investor Relations Title: 34 Exhibit I Letterhead of Counterparty's Counsel Date Harris Trust and Savings Bank 115 South LaSalle Street Chicago, Illinois 60603 Dear Sirs: This opinion is furnished to you in connection with the ISDA Master Agreement dated as of December 23, 2003 (the "Agreement") and the Confirmation dated as of December 23, 2003 between The Robert Mondavi Corporation (the "Counterparty") and Harris Trust and Savings Bank (the "Bank"). Terms defined in the Agreement and used but not defined herein have the meanings given to them in the Agreement. We have acted as counsel to the Counterparty in connection with the execution and delivery of the Agreement. We have examined the Agreement, the Counterparty's constating documents and such other documents as we have deemed necessary or appropriate for purposes of the opinions expressed herein. We have also made such investigations and considered such questions of law as we have considered necessary for the purpose of rendering this opinion. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, certified or otherwise. We express no opinion with respect to the laws of any jurisdiction other than the laws of [jurisdiction of organization/incorporation] and the laws of [federal jurisdiction] applicable therein. Based on the foregoing we are of the opinion that: 1. The Counterparty has been duly [organized/incorporated] and is validly existing and in good standing under the laws of [jurisdiction of organization/incorporation]. 2. The execution and delivery of the Agreement and each Confirmation entered into by the parties on or prior to the date hereof and the performance by the Counterparty of its obligations thereunder have been duly authorized by the Counterparty, are within the corporate power of the Counterparty and do not conflict with, or result in a breach of, (i) the constating documents of the Counterparty, (ii) any law or regulation, or (iii) any agreement, decree, order, judgment, injunction or other instrument binding on or affecting the Counterparty. 35 3. The Agreement and each Confirmation entered into by the parties on or prior to the date hereof [has/have] been duly authorized, executed and delivered by the Counterparty to the Bank. 4. No action by, notice to or filing with, or consent, authorization or approval of, any governmental authority or regulatory body is required in connection with the Counterparty's execution, delivery and performance of the Agreement or any Confirmation entered into by the parties on or prior to the date hereof. 5. The governing law clause, subjecting the Agreement to the laws of the State of New York, is valid under the laws of [jurisdiction of organization/incorporation]. Under the laws of [jurisdiction of organization/incorporation], the laws of the State of New York will be applied to the Agreement, provided that such choice of law is bona fide and provided that such choice of law is not contrary to public policy, as that term is understood under the laws of [jurisdiction of organization/incorporation]. To the best of our knowledge, having made due inquiry, the public policy of [jurisdiction of organization/incorporation] would not be breached by application of the chosen law. 6. A final and conclusive judgment for sum certain in personam and rendered by a court of competent jurisdiction in the State of New York with respect to the obligations of the Counterparty under the Agreement would be recognized and enforceable by the [jurisdiction of organization/incorporation] courts. 7. Assuming that the Agreement is legal, valid, binding and enforceable under the laws of the State of New York, the Agreement and each Transaction evidenced by a Confirmation outstanding as of the date of execution of the Master Agreement constitutes a legal, valid and binding obligation of the Counterparty enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws and equitable principles of general application affecting the rights of creditors or limiting the availability of specific performance, injunctive relief or any other equitable remedy. This opinion is provided solely for your benefit and is not to be relied upon for any purpose other than in respect of the Agreement or by any other person. Yours very truly, 36 EX-10.60A 8 a4572106_ex1060a.txt ROBERT MONDAVI EXHIBIT 10.60A Exhibit 10.60a (Multicurrency--Cross Border) ISDA(R) International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of December 23, 2003 THE ROBERT MONDAVI CORPORATION and HARRIS TRUST AND SAVINGS BANK have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: 1. Interpretation (a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) S ingle Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. Obligations (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. 1 Copyright(C)1992 by International Swap Dealers Association, Inc. (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise be payable: (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party' s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph(ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) Deduction or Withholding for Tax. (i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will: (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for: (A) the failure by Y to comply with or perform any agreement contained Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. 2 (ii) Liability. If: (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. Representations Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that: (a) Basic Representations. (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) Powers. It has the power to execute this Agreement and any other documentation relating this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgement of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and 3 (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 4. Agreements Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: (a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs: (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. 4 (c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. Events of Default and Termination Events (a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party: (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been or repeated; (v ) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); 5 (vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party: (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver. trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or 6 (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:-- (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party): (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X'), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or 7 (v) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. Early Termination (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect if the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) Right to Terminate. If: (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, 8 either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) Effect of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) Calculations (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) Events of Default. If the Early Termination Date results from an Event of Default: (1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. 9 (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this agreement. (3) Second Method and Market Quotations. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an mount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) Termination Events. If the Early Termination Date results from a Termination Event: (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (of, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ('Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). 10 (iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. Transfer Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement maybe transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. Contractual Currency (a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) Judgements. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payments is owed and will not be affected by judgement being obtained or claim or proof being made for any other sums payable in respect of this Agreement. 11 (d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) Counterparts and Confirmations. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. Offices; Multibranch Parties (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 12 11. Expenses A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated: (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given it. 13. Governing Law and Jurisdiction (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably: (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. 13 Nothing in this Agreement precludes either party from bringing Proceedings in any other Jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgements Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. Definitions As used in this Agreement: "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate" means: (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date, (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "Burdened Party" has the meaning specified in Section 5(b). "Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. 14 "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case my be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1)(3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. 15 "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a). "Office" means a branch or office of a party, which may be such party's head or home office. "Potential Event of Default' means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to an make extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of: 16 (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Stamp Tax" means any stamp, registration, documentation or similar tax. "Tax" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "Tax Event" has the meaning specified in Section 5(b). "Tax Event Upon Merger" has the meaning specified in Section 5(b). "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Currency" has the meaning specified in the Schedule. "Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. 17 "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became Payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. THE ROBERT MONDAVI CORPORATION HARRIS TRUST AND SAVINGS BANK By: .................................. By:................................ Name: Name: Title: Title: Date: Date: 18 EX-31.1 9 a4572106_ex311.txt ROBERT MONDAVI EXHIBIT 31.1 EXHIBIT 31.1 Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 I, GREGORY M. EVANS, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The Robert Mondavi Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Reserved. c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 17, 2004 ___________________ /s/ GREGORY M. EVANS ____________________ Gregory M. Evans President / CEO EX-31.2 10 a4572106_ex312.txt ROBERT MONDAVI EXHIBIT 31.2 EXHIBIT 31.2 ____________ Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 I, HENRY J. SALVO, JR., certify that: 1. I have reviewed this quarterly report on Form 10-Q of The Robert Mondavi Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Reserved. c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 17, 2004 ___________________ /s/ HENRY J. SALVO, JR. _________________________________ Henry J. Salvo, Jr. Executive Vice President / CFO EX-32.1 11 a4572106_ex321.txt ROBERT MONDAVI EXHIBIT 32.1 EXHIBIT 32.1 ____________ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the quarterly report of The Robert Mondavi Corporation (the Company) on Form 10-Q for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Gregory M. Evans, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. Date: February 17, 2004 __________________ /s/ GREGORY M. EVANS __________________________ Gregory M. Evans President / CEO The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to 18 U.S.C. Section 1350 as an exhibit to the Report and is not being filed as part of the Report or as a separate disclosure document. EX-32.2 12 a4572106_ex322.txt ROBERT MONDAVI EXHIBIT 32.2 EXHIBIT 32.2 ____________ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the quarterly report of The Robert Mondavi Corporation (the Company) on Form 10-Q for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Henry J. Salvo, Jr., Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. Date: February 17, 2004 ___________________ /s/ HENRY J. SALVO, JR. __________________________________ Henry J. Salvo, Jr. Executive Vice President / CFO The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to 18 U.S.C. Section 1350 as an exhibit to the Report and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----