<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994
Commission file number 1-9875
(LOGO)
STANDARD COMMERCIAL CORPORATION
Incorporated under the laws of I.R.S. Employer
North Carolina Identification No. 13-1337610
2201 Miller Road, Wilson, North Carolina 27893
Telephone Number (919) 291-5507
Former name, former address and former fiscal year, if changed since last
report - Not applicable
On November 1, 1994 the registrant had outstanding 8,590,552 shares of Common
Stock ($.20 par value).
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 and (2) had been subject to such
filing requirements for the past 90 days.
YES X NO
---
<PAGE> 2
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands; unaudited)
<TABLE>
<CAPTION>
September 30 March 31
1994 1993 1994
<S> <C> <C> <C>
ASSETS
Cash............................ $ 31,677 $ 33,125 $ 69,802
Current receivables............. 235,179 245,160 264,511
Inventories..................... 382,294 401,230 369,332
Prepaid expenses................ 8,213 6,134 5,991
Marketable securities at cost
(approximate market)........... 932 2,337 828
----------------------------------------
Current assets.............. 658,295 687,986 710,464
Property, plant and equipment... 133,432 126,617 128,024
Investment in affiliates........ 15,133 18,499 14,601
Other assets.................... 34,043 37,240 37,682
----------------------------------------
Total assets ............... $840,903 $870,342 $890,771
========================================
LIABILITIES
Short-term borrowings........... $441,162 $465,269 $465,361
Accounts payable................ 122,270 93,114 156,917
Taxes accrueD................... 19,780 14,863 17,702
----------------------------------------
Current liabilities......... 583,212 573,246 639,980
Long-term debt.................. 30,291 56,827 29,169
Convertible subordinated
debentures.................... 69,000 69,000 69,000
Retirement and other benefits... 17,515 18,149 17,182
Deferred taxes.................. 11,176 9,943 10,640
Commitments and contingencies... - - -
----------------------------------------
Total liabilities........... 711,194 727,165 765,971
----------------------------------------
MINORITY INTERESTS.............. 25,307 18,132 20,773
----------------------------------------
ESOP redeemable preferred stock 9,200 9,200 9,200
Unearned ESOP compensation.... (7,404) (8,226) (7,822)
----------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value
Authorized shares 1,000,000;
issued 92,005 to ESOP......... - - -
Common stock, $0.20 par value
Authorized shares 100,000,000;
issued 10,936,160
September 1993 - 10,869,759;
March 1994 - 10,913,459).... 2,187 2,174 2,183
Unearned restricted stock
plan compensation............. (592) - (649)
Additional paid-in capital...... 35,235 34,047 34,875
Treasury stock 2,346,318 shares (583) (583) (583)
Retained earnings............... 78,395 101,960 84,807
Cumulative translation adjustments (12,036) (13,527) (17,984)
---------------------------------------
Total shareholders' equity 102,606 124,071 102,649
---------------------------------------
Total liabilities and equity $840,903 $870,342 $890,771
=======================================
</TABLE>
The accompanying notes on page 5 are an integral part of these financial
statements.
<PAGE> 3
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands, except share information; unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended Six months ended
September 30 September 30
-------------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales - tobacco............. $137,002 $158,708 $283,472 $306,683
- wool................ 82,875 68,009 185,145 146,861
- other............... 5,172 6,307 9,681 11,682
---------------------------------------
Total sales............... 225,049 233,024 478,298 465,226
Cost of sales............... 210,059 216,150 447,233 449,921
Selling, general and
administrative expenses... 17,813 17,670 35,036 39,491
Other income (expense)
- net................... 7,478 3,874 7,250 3,734
---------------------------------------
Income (loss) before taxes.. 4,655 3,078 3,279 (20,452)
Income taxes................ (4,963) (1,916) (4,938) 1,501
---------------------------------------
Income (loss) after taxes. (308) 1,162 (1,659) (18,951)
Minority interests.......... (3,938) (1,105) (3,927) (984)
Equity in earnings
of affiliates............. 169 (655) 338 (514)
---------------------------------------
Loss from continuing
operations.............. (4,077) (598) (5,248) (20,449)
Income (loss) from
discontinued operations... - 75 - (39)
Loss before extraordinary ---------------------------------------
items and cumulative effect
of accounting changes..... (4,077) (523) (5,248) (20,488)
Cumulative effect of
accounting changes........ - - - 23
---------------------------------------
Net loss.................. (4,077) (523) (5,248) (20,465)
ESOP preferred stock
dividends net of tax...... (121) (121) (242) (242)
---------------------------------------
Net loss applicable to
common stock........... (4,198) (644) (5,490) (20,707)
Retained earnings at
beginning of period....... 82,593 103,589 84,807 125,139
Dividends declared.......... - (985) (922) (2,472)
----------------------------------------
Retained earnings at end
of period............... $78,395 $101,960 $78,395 $101,960
========================================
Earnings (loss) per common
share
Primary
- from continuing
operations.............. $(0.49) $(0.08) $(0.64) $(2.42)
- from discontinued
operations.............. - $0.01 - -
- net....................... $(0.49) $(0.07) $(0.64) $(2.42)
- average shares outstanding 8,577,139 8,558,489 8,572,908 8,541,687
Fully diluted
- - from continuing operations. * * * *
- - from discontinued operations * * * *
- - net........................ * * * *
- - average shares outstanding. * * * *
Dividends paid per common share $0.10 $0.15 $0.20 $0.30
</TABLE>
*Not applicable because fully diluted calculations include adjustments which
are antidilutive.The accompanying notes on page 5 are an integral part of
these financial statements.
<PAGE> 4
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands; unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30
----------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................ $(5,248) $(20,465)
Depreciation and amortization....... 7,909 7,406
Minority interests.................. 3,927 984
Deferred income taxes............... - 80
Undistributed earnings of affiliates (276) 632
Gain on disposition of property,
plant and equipment............... (8,017) (3,366)
Other............................... 2,373 4
-------------------
668 (14,725)
Net changes in working capital
Receivables....................... 36,739 64,483
Inventories....................... (6,477) (25,956)
Current payables.................. (33,693) (27,479)
----------------------------
CASH USED FOR OPERATING ACTIVITIES.. (2,763) (3,677)
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment
- additions..................... (9,956) (16,434)
- dispositions.................. 8,774 3,962
Payment for business acquisitions (662) (1,042)
----------------------------
CASH USED FOR INVESTING ACTIVITIES.. (1,844) (13,514)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings.. 3,988 9,954
Repayment of long-term borrowings... (12,509) (12,616)
Net change in short-term borrowings. (24,198) 8,018
Dividends paid*..................... (1,164) (2,714)
Other............................... 365 122
----------------------------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES.............. (33,518) 2,764
----------------------------
Decrease in cash for period......... (38,125) (14,427)
Cash at beginning of period......... 69,802 47,552
----------------------------
CASH AT END OF PERIOD............... $31,677 $33,125
============================
*Excludes value of dividends
paid in kind..................... $ 294 $ 44
</TABLE>
The accompanying notes on page 5 are an integral part of these financial
statements.
<PAGE> 5
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<BULLET>Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to SEC rules and regulations. These
interim financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report on
Form 10-K.
<BULLET>The interim period financial statements presented herein have been
prepared by the Company without audit and contain all of the adjustments which
are, in the opinion of management, necessary for a fair statement of the
results of operations. All such adjustments are of a normal, recurring
nature. Because of the nature of the Company's businesses, fluctuations in
results for interim periods are not necessarily indicative of business trends
or results to be expected for a full year.
<BULLET>Inventories for the periods shown were comprised of tobacco, wool and
other as follows:
<TABLE>
<CAPTION>
September 30 March 31
-------------
1994 1993 1994
---- ---- ----
<S> <C> <C> <C>
(In thousands)
Tobacco $274,684 $332,532 $268,948
Wool 106,109 66,723 98,496
Other 1,501 1,975 1,888
------- ------ -------
Total $382,294 $401,230 $369,332
======= ======= =======
</TABLE>
<BULLET>Adoption of Statements of Financial Accounting Standards (SFAS) No
106, Employer's Accounting for Postretirement Benefits other than Pensions,
and No 109, Accounting for Income Taxes, effective April 1, 1993 resulted in a
net benefit of $23,000 in the six months ended September 30, 1993. Adoption
of SFAS 109 resulted in a cumulative credit of $3,653,000 and adoption of SFAS
106 resulted in a cumulative charge of $3,630,000.
<BULLET>In December 1993, the Company completed the sale of its Caro-Green
Nursery business to Zelenka Nursery Inc. Accordingly, results for the quarter
and six months ended September 30, 1993 reflect the nursery business as a
discontinued operation. These results included sales of $2,594,000, pretax
income of $113,000 and income taxes of $38,000 for the quarter; and sales of
$3,446,000, a pretax loss of $59,000 and income tax relief of $20,000 for the
six months.
<BULLET>In December 1993, the Company completed the sale of its Caro-Green
Nursery business to Zelenka Nursery Inc. Accordingly, results for the quarter
and six months ended September 30, 1993 reflect the nursery business as a
discontinued operation. These results included sales of $2,594,000, pretax
income of $113,000 and income taxes of $38,000 for the quarter; and sales of
$3,446,000, a pretax loss of $59,000 and income tax relief of $20,000 for the
six months.
<BULLET>As discussed in Note 10 to the March 31, 1994 consolidated financial
statements, availability beyond September 15, 1994 under credit facilities
with various United States and European Banks for a total of up to $400
million had been subject to the closing of a $100 million private placement of
long-term, senior secured notes. This was subsequently extended to November
15, 1994.
<BULLET>Because of market conditions, the Company has decided to postpone a
debt offering at this time. Instead, arrangements to put in place a three-
year, asset-based credit facility to replace the existing U.S. bank syndicate
are being finalized. Meanwhile, the agreement with the U.S. banks has been
amended to continue availability under the existing U.S. facilities through
February 15, 1995, by which time management expects the new asset-based credit
facility to be in place, and the European banks are expected to maintain their
facilities at adequate levels. Management expects its negotiations to
restructure the credit facilities to be concluded soon and believes that these
arrangements will provide sufficient liquidity for the Company's business
needs.
<BULLET>There were no changes in accounting policies during the period ended
September 30, 1994.
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION - continued
Results of Operations
Sales of $225.0 million for the quarter ended September 30, 1994 decreased by
3.4% from $233.0 million for the same quarter in 1993. For the current six
months, sales increased by 2.8% to $478.3 million from $465.2 million. Net
losses of $4.1 million and $5.2 million were incurred for the 1994 September
quarter and first half compared with losses of $523,000 and $20.5 million for
the same 1993 periods.
Tobacco sales in 1994 declined 13.7% for the quarter and 7.6% for the six
months compared to the same periods in 1993 despite volume increases of 10.0%
for the quarter and 15.0% for the six months compared to the same 1993
periods. The volume increases reflect continued improvement in customer
demand relative to the depressed levels in 1993. Average unit prices declined
by 21.6% for the quarter and 19.4% for the six months compared to 1993 as a
result of product mix, the worldwide surplus of tobacco and the Company's
emphasis on inventory reduction.
Wool sales for the quarter ended September 30, 1994 increased by 21.9% from
the same 1993 quarter as firmer wool prices more than offset a 7.3% decline in
volume sold. Firmer prices and a 3.3% increase in wool volume resulted in a
26.1% increase in wool sales for the current six months compared to the same
period for 1993.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION - continued
Sales for the 1994 second quarter were comprised of 60.9% tobacco, 36.8% wool
and 2.3% other businesses compared with 68.1%, 29.2% and 2.7% for the
respective components in the same 1993 quarter. For the 1994 six months,
sales consisted of 59.3% tobacco, 38.7% wool and 2.0% other businesses versus
65.9%, 31.6% and 2.5%, respectively, in the 1993 first half.
The positive effect of efforts to reduce selling, general and administrative
expenses, primarily in the tobacco business, were largely offset by increases
attributable to the higher level of business activity in the wool division and
conversion of certain expenses incurred in foreign currencies into weaker U.S.
dollars for reporting purposes.
During the current quarter, other income included a gain of approximately $7.9
million on the sale of land and buildings in Korea. In the same quarter of
the prior year, the Company realized a gain of approximately $3.2 million on
the sale of land and buildings in Turkey. The resulting effect on net income
after taxation and the allocation to minority shareholders was $1.1 million in
1994 and $1.5 million in 1993.
A pretax profit of $4.7 was recorded in the current quarter and $3.3 million
for the six months ended September 30, 1994, compared to a $3.1 million pretax
profit for the prior year second quarter and a $20.5 million pretax loss for
the six months ended September 30, 1993. The 1993 six month loss included
inventory provisions in cost of sales of $15.6 million and nonrecurring
selling, general and administrative expenses of $1.8 million. Interest of
$9.6 million and $17.6 million was expensed during the current year second
quarter and six months, respectively, compared with $7.7 million and $16.4
million in the same prior year periods. Income taxes for the current quarter
and six months included a nonrecurring charge of $1.6 million on dividends
remitted by a foreign subsidiary that cannot be offset by foreign tax credits.
Also, tax charges or credits for the periods vary as a percentage of pretax
income or loss due to differences in tax rates and relief available in areas
where profits are earned or losses are incurred.
Subsequent to September 30, 1994, a one percent stock dividend was declared in
lieu of a cash dividend. The stock dividend will be distributed on December
29 to shareholders of record on December 2, 1994.
Because of the seasonal nature of the Company's businesses, results for
interim periods are not necessarily indicative of results for a full year.
The recovery in demand for tobacco is improving and business should
progressively get back to satisfactory levels. Substantial orders have been
received for uncommitted tobacco stocks, albeit at thin margins, for delivery
in the December and March quarters. Wool prices and orders have firmed, and
the recovery is continuing.
Financial Condition
Working capital of $75.1 million at September 30, 1994 was down by $39.7
million from September 30, 1993, primarily because of net losses,
reclassification of $20.0 million of long-term debt to current and net long-
term debt repayments of $14.8 million. Net additions to property, plant and
equipment of $1.2 million for the six months ended September 30, 1994 included
expenditures of $10.0 million mainly for the tobacco business in the United
States and Turkey, and asset disposals in Korea of approximately $8.4 million.
The Company is continuing to deleverage by reducing its tobacco inventories
and the related borrowings. Tobacco inventories at September 30, 1994 were
down by $57.8 million from September 30, 1993 and were only $5.7 million
higher than the level at March 31, 1994 which normally is the low point in the
seasonal cycle. For the same periods, uncommitted tobacco stocks were reduced
by $48 million and $16 million, respectively. Wool inventories at September
30, 1994 were up $7.6 million from March 31, 1994 and $39.4 million from
September 30, 1993 primarily due to increases in wool prices.
As discussed in Note 10 to the March 31, 1994 consolidated financial
statements, availability beyond September 15, 1994 under credit facilities
with various United States and European Banks for a total of up to $400
million had been subject to the closing of a $100 million private placement of
long-term, senior secured notes. This was subsequently extended to November
15, 1994.
Because of market conditions, the Company has decided to postpone a debt
offering at this time. Instead, arrangements to put in place a three-year,
asset-based credit facility to replace the existing U.S. bank syndicate are
being finalized. Meanwhile, the agreement with the U.S. banks has been
amended to continue availability under the existing U.S. facilities through
February 15, 1995, by which time management expects the new asset-based credit
facility to be in place, and the European banks are expected to maintain their
facilities at adequate levels. Management expects its negotiations to
restructure the credit facilities to be concluded soon and believes that these
arrangements will provide sufficient liquidity for the Company's business
needs.
<PAGE> 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Not applicable
Item 2. Changes in Securities
a. Not applicable.
b. Under date of August 10, 1994 the Company delivered guarantees of
obligations of a subsidiary. The guarantees provide that the Company will
maintain (i) a consolidated tangible net worth of at least $105,000,000 to be
increased at the end of each quarter by an amount equal to 50% of consolidated
net income for the quarter and by 80% of any equity raised by a public
offering of stock and (ii) a consolidated current ratio (ratio of current
assets to current liabilities) of at least 1.0 to 1.0 until December 30, 1994
and 1.2 to 1.0 thereafter. These provisions could limit the ability of the
Company to pay dividends on its capital stock.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
a. An annual meeting of shareholders was held on August 9, 1994.
b. Not required.
c. 1. Three directors nominated by management were re-elected for three year
terms expiring in 1997 with no opposition. Voting results were as follows:
Nominee Votes For Votes Withheld Broker Nonvotes
------- --------- -------------- ---------------
R Anthony Garrett 7,841,890 155,760 393,605
Henry R Grunzke 7,841,940 155,710 393,605
Ery W Kehaya 7,841,940 155,710 393,605
2. An amendment to the Company's Restated Articles of Incorporation to
increase the authorized Common Stock to 100,000,000 shares was approved by the
following vote: 6,401,471 shares in favor, 1,588,188 shares against, 7,991
shares abstained and 393,605 shares were broker nonvotes.
3. The appointment of Deloitte & Touche as the Company's independent
auditors for fiscal 1995 was approved by a vote of 7,990,532 shares in favor,
4,277 shares against and 2,841 shares abstaining.
d. Not applicable.
Item 5. OTHER INFORMATION - Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
(3) i Restated Articles of Incorporation, as currently amended
(4) v Guarantee Agreement dated August 10, 1994 in favor of NationsBank
of North Carolina, N.A. (A substantially identical guaranty was executed the
same date relating to a different indebtedness.)
(11) Computation of Earnings Per Common Share.b. The Company did not
file any reports on Form 8-K during the quarter.
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.
Dated: November 21, 1994 STANDARD COMMERCIAL CORPORATION
(Registrant)
By /s/ Guy M Ross
-------------------------------
Guy M Ross
Vice President and
Chief Accounting Officer
<PAGE> 9
STANDARD COMMERCIAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE EXHIBIT 11
(In thousands, except share information; unaudited)
<TABLE>
<CAPTION>
Second quarter ended Six months ended
September 30 September 30
-------------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER
COMMON SHARE
Loss from continuing
operations............... $(4,077) $(598) $(5,248) $(20,449)
Less - ESOP preferred
stock dividends
net of tax............... 121 121 242 242
----------------------------------------------
Loss from continuing
operations applicable
to common stock.......... (4,198) (719) (5,490) (20,691)
Income (loss) from
discontinued operations.. - 75 - (39)
Cumulative effect of
accounting changes....... - - - 23
----------------------------------------------
Net loss applicable to
common stock............. $(4,198) $(644) $5,490 $(20,707)
==============================================
Average number of
common shares
outstanding.............8,577,139 8,521,903 8,572,908 8,520,162
Increase applicable to
restricted stock awards - 36,586 - 21,525
-----------------------------------------------
Primary average shares
outstanding.............8,577,139 8,558,489 8,572,908 8,541,687
----------------------------------------------
Loss per common share
- from continuing
operations........... $(0.49) $(0.08) $(0.64) $(2.42)
- from discontinued
operations........... - 0.01 - -
- - cumulative accounting
changes............... - - - -
----------------------------------------------
- - net..................... $(0.49) $(0.07) $(0.64) $(2.42)
==============================================
FULLY DILUTED EARNINGS PER COMMON SHARE*
Loss from continuing operations
applicable to
common stock............ $(4,198) $(719) $(5,490) $(20,691)
Add - after-tax interest expense
on 7 1/4% convertible subordinated
debentures.............. 825 825 1,650 1,650
- dividends payable to ESOP
assuming conversion to
common stock...... - 26 26 65
Adjusted loss from ----------------------------------------------
continuing operations... (3,373) 132 (3,814) (18,976)
Income (loss) from
discontinued operations. - 75 - (39)
Cumulative effect of
accounting changes...... - - - 23
----------------------------------------------
Net earnings (loss) applicable
to common stock......... $(3,373) $207 $(3,814) $(18,992)
==============================================
Primary average shares
outstanding.............8,577,139 8,558,489 8,572,908 8,541,687
Increase in shares
outstanding assuming
- conversion of 7 1/4%
convertible subordinated
debentures
at November 13, 1991..2,126,348 2,126,348 2,126,348 2,126,348
- - conversion of ESOP
convertible preferred
stock at July 1, 1992.. 262,871 262,871 262,871 262,871
----------------------------------------------
Fully diluted average
shares outstanding.....10,966,358 10,947,708 10,962,127 10,930,906
===============================================
Earnings (loss) per common share
- - from continuing
operations........... $(0.31) $0.01 $(0.35) $(1.74)
- - from discontinued
operations........... - 0.01 - -
- - cumulative accounting
changes.............. - - - -
-----------------------------------------------
- - net.................... $(0.31) $0.02 $(0.35) $(1.74)
===============================================
</TABLE>
*The calculations of fully diluted earnings per share for all periods are
antidilutive. Therefore, no fully diluted earnings per share are shown on the
face of the income statement.
GUARANTY AGREEMENT
THIS GUARANTY, dated as of August 10, 1994 (the "Guaranty"),
is made by STANDARD COMMERCIAL CORPORATION, a North Carolina
corporation ("SCC"), in favor of the Banks (the "Banks") parties
to the Loan Agreement (as defined below), and NATIONSBANK OF NORTH
CAROLINA, N.A., as agent for the Banks (the "Agent"), for the
benefit of STANDARD COMMERCIAL TOBACCO CO., INC., a wholly owned
subsidiary of SCC ("SCTC").
PRELIMINARY STATEMENT. SCTC, the Agent and the Banks
entered into that certain Loan Agreement, dated August 10, 1994
(the "Loan Agreement"). In order to induce the Agent and each
Bank to accept the terms of the Loan Agreement and because of the
direct benefit to SCC of loans made from time to time hereafter by
the Banks to SCTC and letters of credit issued and bankers'
acceptances accepted by the Banks, SCC has agreed to guarantee the
payment and performance of the Guaranteed Indebtedness
(hereinafter as defined).
NOW, THEREFORE, for value received and to induce the Agent
and each Bank to accept the terms of the Loan Agreement and
because of the direct benefit to SCC of loans made from time to
time hereafter by the Banks to SCTC and letters of credit issued
and bankers' acceptances accepted by the Banks, SCC agrees as
follows:
ARTICLE I. DEFINITIONS
Section 1.01 Definitions. (a) The following capitalized
terms that are used herein have the following meanings,
respectively:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not
limited to all directors and officers of such Person), controlled
by or under direct or indirect common control with such Person. A
Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power (i) to vote 10% or
more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or
cause direction of the management and policies of such
corporation, whether through the ownership of voting securities,
by contract or otherwise.
"Assignee" means any assignee acquiring all or a portion of
a Bank's interest in the Loan Agreement, and such Bank's Notes in
accordance with the terms and provisions of the Loan Agreement.
<PAGE> 2
"Business Day" means any day other than a Saturday, a
Sunday, a legal holiday in Charlotte, North Carolina, and New
York, New York, or a day on which banking institutions in
Charlotte, North Carolina, or New York, New York, are authorized
by law or other governmental action to close.
"Cash Equivalents" means (i) securities issued or directly
and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the full
faith and credit of the United States of America is pledged in
support thereof) having maturities of not more than six months
from the date of acquisition, (ii) U.S. dollar denominated (or
foreign currency fully hedged by U.S. Dollars) time deposits,
certificates of deposit, Eurodollar time deposits, Eurodollar
certificates of deposit of (x) any domestic commercial bank
organized or licensed under the laws of the United States or any
State thereof including the District of Columbia of recognized
standing having capital and surplus in excess of $400,000,000 or
(y) any bank whose short-term commercial paper rating from S&P is
at least A-1 or the equivalent thereof or from Moody's is at least
P-1 or the equivalent thereof (any such bank being an "Approved
Bank"), in each case with maturities of not more than six months
from the date of acquisition, (iii) commercial paper and variable
or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or
guaranteed by any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent
thereof) or better by Moody's and maturing within six months of
the date of acquisition and (iv) repurchase agreements with a bank
or trust company (including any Bank) or recognized securities
dealer having capital and surplus in excess of $400,000,000 for
direct obligations issued by or fully guaranteed by the United
States of America in which SCTC shall have a perfected first
priority security interest (subject to no other liens or
encumbrances) and having, on the date of purchase thereof, a fair
market value of at least 100% of the amount of the repurchase
obligations.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Consistent Basis" or "consistent basis" means, with regard
to the application of United States accounting principles, United
States accounting principles consistent in all material respects
with the United States accounting principles used and applied in
<PAGE> 3
preparation of the financial statements previously delivered to
the Banks and referred to in Section 3.06 hereof.
"Controlled Group" means (i) the controlled group of
corporations as defined in Section 414(b) of the Code and the
applicable regulations thereunder, or (ii) the group of trades or
businesses under common control as defined in Section 414(c) of
the Code and the applicable regulations thereunder, of which SCTC
is a part or may become a part.
"Coverage Ratio" means, for the period of computation, with
respect to the undersigned and its Subsidiaries, the ratio of (a)
EBIT to (b) Interest Expense.
"Current Assets" means all items which, in accordance with
Generally Accepted Accounting Principles, would be classified as
current assets on a consolidated balance sheet of the undersigned
and its Subsidiaries.
"Current Liabilities" means all items which, in accordance
with Generally Accepted Accounting Principles, would be classified
as current liabilities on a balance sheet of the undersigned and
its Subsidiaries.
"Current Ratio" means the ratio of Current Assets to Current
Liabilities.
"Default" means any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of
Default.
"Documents" shall mean the Loan Agreement, the Notes and any
agreement, instrument, certificate or document now or hereafter
executed by SCTC in connection with the obligations under the Loan
Agreement and delivered to any Holder including, without
limitation, the Acceptance Documents and any letter of credit
applications executed in connection with the Letters of Credit.
"EBIT" means the undersigned's and its Subsidiaries' net
income before Interest Expense and taxes of the undersigned (but
excluding extraordinary gains or losses) as computed in accordance
with Generally Accepted Accounting Principles applied on a
Consistent Basis.
<PAGE> 4
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, rules,
regulations, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions or policies including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Superfund Amendments and Reauthorization Act, the
Resource Conservation and Recovery Act, the Toxic Substances
Control Act, the Clean Air Act and the Clean Water Act relating to
the environment or to emissions, discharges or releases of
pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air,
surface water, ground water or land) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants,
petroleum or petroleum products, chemicals or industrial, toxic or
hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations
promulgated and the rulings issued thereunder.
"ERISA Affiliate" means each person (as defined in Section
3(9) of ERISA) which together with SCTC, the undersigned or any of
their respective Affiliates would be deemed to be a member of the
same "controlled group" within the meaning of Section 414(b), (c),
(m) and (o) of the Code.
"European Credit Facilities" means committed revolving
credit facilities of no less than $250,000,000 to be extended by
various European financial institutions to SCC and/or its
Subsidiaries.
"Event of Default" has the meaning specified in Article VI.
"Generally Accepted Accounting Principles" or "generally
accepted accounting principles" means generally accepted
accounting principles in the United States in effect as of the
date of this Loan Agreement.
"Guaranteed Indebtedness" shall mean without duplication all
of the indebtedness, obligations and liabilities (in each case,
whether or not existing on the date hereof or arising from time to
time
<PAGE> 4
thereafter, direct or indirect, joint or several, actual, absolute
or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or
otherwise) of SCTC to the Holders under or in respect of any one
or more of the Documents, including, without limitation, the
principal of, and interest on the Notes.
"Guaranty Obligations" means any obligations (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other obligations
of any other Person in any manner, whether direct or indirect, and
including without limitation any obligation, whether or not
contingent, (i) to purchase any such Indebtedness or other
obligation or any property constituting security therefor, (ii) to
advance or provide funds or other support for the payment or
purchase of such indebtedness or obligation or to maintain working
capital, solvency or other balance sheet condition of such other
Person (including without limitation keep well agreements,
maintenance agreements, comfort letters or similar agreement or
arrangement), (iii) to lease or purchase property, securities or
services primarily for the purpose of assuring the owner of such
Indebtedness or obligation, or (iv) otherwise assure or hold
harmless the owner of such Indebtedness or obligation against loss
in respect thereof. The amount of Guaranty Obligations hereunder
shall be deemed to be an amount equal to the stated or
determinable amount of the Indebtedness or obligation in respect
of which such Guaranty Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated amount in respect
thereof (assuming such other Person is required to perform
thereunder) as determined in good faith.
"Holder" shall mean each Bank and any other Assignee.
"Indebtedness" means without duplication, (i) all
indebtedness for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with generally accepted
accounting principles would be shown to be a liability (or on the
liability side of a balance sheet), (iii) all Guaranty
Obligations, (iv) the maximum amount of all letters of credit
issued or acceptance facilities established for the account of
such Person and, without duplication, all drafts drawn thereunder
(other than letters of credit (x) supporting other Indebtedness of
the undersigned and its
<PAGE> 6
Subsidiaries or (y) offset by a like amount of cash or government
securities held in escrow to secure such letter of credit and
draws thereunder), (v) all capitalized lease obligations, (vi) all
Indebtedness of another Person secured by any lien or any property
of the undersigned or any of its Subsidiaries, whether or not such
indebtedness has been assumed, (vii) all obligations under take-
or-pay or similar arrangements or under interest rate, currency,
or commodities agreements, (viii) indebtedness created or arising
under any conditional sale or title retention agreement, and (ix)
withdrawal liability or insufficiency under ERISA or under any
qualified plan or related trust; but specifically excluding from
the foregoing trade payables and accrued expenses arising or
incurred in the ordinary course of business.
"Insurance Companies" means Principal Mutual Life Insurance
Company, Nationwide Life Insurance Company, West Coast Life
Insurance Company and Wisconsin Health Care Liability Insurance
Plan.
"Insurance Company Debt" means the existing indebtedness of
SCC to the Insurance Companies pursuant to the terms of those
certain note agreements dated July 1, 1988, by and among the
Parent Guarantor and the Insurance Companies, the outstanding
principal balance of which is $10,000,000 as of the date hereof.
"Intangible Assets" shall mean, as of the date of any
determination thereof, the total amount of all assets of the
undersigned and its Subsidiaries consisting of goodwill, patents,
tradenames, trademarks, copyrights, franchises, experimental
expense, organization expense, unamortized debt discount and
expense, deferred assets other than prepaid insurance and prepaid
taxes, the excess of cost of shares acquired over book value of
related assets and such other assets as are properly classified as
"intangible assets" in accordance with Generally Accepted
Accounting Principles.
"Interest Expense" means the aggregate amount of interest
accruing on Indebtedness and all amortization of debt discount and
expense on Indebtedness (including, without limitation, any
obligation to pay rent in respect of leases required to be
capitalized in accordance with Generally Accepted Accounting
Principles) of the undersigned or any of its Subsidiaries in the
twelve-month period ending on the date such discount or expense is
calculated.
<PAGE> 7
"Leverage Ratio" means the ratio of (a) Total Liabilities
minus Subordinated Indebtedness to (b) Tangible Net Worth plus
Subordinated Indebtedness.
"Lien" means any mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance,
lien (statutory or otherwise), preference, priority or charge of
any kind (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform
Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute, and any
lease in the nature thereof).
"Majority Holders" means, at a particular time, the holders
of at least 66 2/3% of the aggregate unpaid principal amount of
the Revolving Notes, the Letter of Credit Obligations and the
Bankers' Acceptances Outstanding, or if no amounts are outstanding
under the Revolving Notes, there are no Letter of Credit
Obligations and no Bankers' Acceptances Outstanding, Holders
having an aggregate Commitment Percentage of at least 66 2/3%.
"Material Adverse Effect" means a material adverse effect on
(i) the operations or financial condition of the undersigned and
its Subsidiaries, taken as a whole, (ii) the ability of the
undersigned to perform its obligations under this Guaranty, or
(iii) the validity or enforceability of this Guaranty, or the
rights and remedies of the Holders hereunder.
"Moody's" means Moody's Investors Service, Inc., and any
successor thereof.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the Controlled Group is then making or
accruing an obligation to make contributions or has within the
preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the Controlled
Group during such five year period.
"NationsBank Debt" means the indebtedness of SCC to
NationsBank of North Carolina, N.A. having a current principal
balance of approximately $6,500,000 and the indebtedness of the
W.A. Adams Company Employee Stock Ownership Plan Trust to
NationsBank of North Carolina,
<PAGE> 8
N.A. having a current principal balance of approximately
$7,800,000.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, and any successor thereto.
"Permitted Investments" means (i) cash and Cash Equivalents,
(ii) receivables owing to the undersigned from any of its
customers and/or suppliers, in each case if created, acquired or
made in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, (iii)
Indebtedness to the undersigned incurred in the ordinary course of
business, (iv) loans and advances to employees for business-
related travel expenses, moving expenses and other similar
expenses, in each case incurred in the ordinary course of
business) in an aggregate amount not to exceed $500,000 at any
time outstanding, (v) investments (including debt obligations)
received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business, (vi) equity securities
listed on the New York Stock Exchange ("NYSE"), provided that the
long-term credit rating of the corporation issuing such securities
shall be at least AA from S&P or AA2 from Moody's, (vii)
investments owned by the undersigned on the date hereof and set
forth in Exhibit A (but without additional acquisitions thereof
except as otherwise permitted hereby or with prior written consent
of the Holders) or (viii) investments made in the ordinary course
of business in tobacco leaf processors or wool processors.
"Permitted Liens" means (i) Liens described on Exhibit B
attached hereto; (ii) Liens for taxes not yet due or Liens for
taxes being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with generally
accepted accounting principles have been established (and as to
which the property subject to such lien is not yet subject to
foreclosure, sale or loss on account thereof); (iii) Liens in
respect of property imposed by law arising in the ordinary course
of business such as materialmen's, mechanics', warehousemen's and
other like Liens provided that such Liens secure only amounts not
yet due and payable; (iv) pledges or deposits made to secure
payment of worker's compensation insurance, unemployment
insurance, pensions or social security programs; (v) Liens arising
from good faith deposits in
<PAGE> 9
connection with or to secure performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (other
than obligations in respect of the payment of borrowed money);
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect,
impairing the use of such property for its intended purposes or
interfering with the ordinary conduct of business of the
undersigned or any of its Subsidiaries; (vii) purchase money Liens
on assets other than inventory securing purchase money
indebtedness of up to $5,000,000 at any time outstanding; (viii)
Liens on 100% of the capital stock of each of its United States
Subsidiaries, Liens on 66 2/3% of the capital stock of each of its
non-United States Subsidiaries and Liens on the SCTC Note granted
to the Insurance Companies and NationsBank of North Carolina, N.A.
to secure the Insurance Company Debt and the NationsBank Debt; and
(ix) Liens granted pursuant to Section 5.07 hereof.
"Person" means any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise (whether
or not incorporated), or any government or political subdivision
or any agency, department or instrumentality thereof.
"Plan" means any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained, or at any
time during the five calendar years preceding the date of this
Guaranty was maintained, for employees of the undersigned, any of
its Subsidiaries or an ERISA Affiliate.
"Regulation D" means Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor to all or a portion thereof establishing reserve
requirements.
"Regulation G" means Regulation G of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor to all or a portion thereof establishing margin
requirements.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor to all or a portion thereof establishing margin
requirements.
<PAGE> 10
"Regulation X" means Regulation X of the Board of Governors
of the Federal Reserve System as from time to time in effect and
any successor to all or a portion of establishing margin
requirements.
"S&P" means Standard & Poors Corporation, and any successor
thereof.
"SCTC Note" means that certain promissory note executed by
SCTC in favor of SCC in the original principal amount of
$15,000,000.
"Subordinated Indebtedness" means indebtedness of the
undersigned the repayment of which has been subordinated to the
repayment of the obligations of the undersigned hereunder pursuant
to subordination agreements in form and substance satisfactory to
the Banks.
"Subordination Agreement" means the subordination agreement
executed by SCC in favor of the Agent and the Banks whereby SCC
(i) subordinates the repayment of $15,000,000 of the obligations
of SCTC to SCC to the repayment of the Guaranteed Obligations upon
a permanent basis prior to the Senior Note Closing Date (as
defined in the Loan Agreement) and $23,000,000 of the obligations
of SCTC to SCC to the repayment of the Guaranteed Obligations
thereafter and (ii) subordinates the repayment of the remaining
obligations of SCTC to SCC to the repayment of the Guaranteed
Obligations upon the occurrence of a Default under the Loan
Agreement.
"Subsidiary" means (i) any corporation more than 50% of
whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the
time owned by such Person directly or indirectly through
Subsidiaries, and (ii) any partnership, association, joint venture
or other entity in which such person directly or indirectly
through Subsidiaries has more than 50% equity interest at any
time.
"Tangible Net Worth" means, at any time, consolidated net
shareholders' equity of the undersigned and its Subsidiaries,
determined in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis, with no upward
adjustments due to a revaluation of assets, minus all Intangible
Assets of the undersigned and its Subsidiaries and excluding
cumulative translation adjustments.
<PAGE> 11
"Total Liabilities" means all items which, in accordance
with Generally Accepted Accounting Principles, would be classified
as liabilities on a consolidated balance sheet of the undersigned
and its Subsidiaries.
(b) Capitalized terms that are used herein and are not
defined herein shall have the meanings ascribed to them in the
Loan Agreement.
ARTICLE II. THE GUARANTY
Section 2.01 Guaranty of Payment and Performance of
Obligations. The undersigned unconditionally guarantees to each
Holder the full and prompt payment when due, whether at maturity,
at any stated prepayment date or earlier by reason of acceleration
or otherwise, and at all times thereafter, of all of the
Guaranteed Indebtedness; and the undersigned further agrees to pay
all costs and expenses, including, without limitation, all court
costs and reasonable attorneys' fees and expenses, paid or
incurred in endeavoring to collect all or any part of the
Guaranteed Indebtedness from, or in prosecuting any action
against, SCTC or the undersigned of all or any part of the
Guaranteed Indebtedness. This is a continuing guaranty of payment
and not of collection.
The undersigned covenants that it will not be discharged
except by complete performance of the obligations contained
herein. Upon an Event of Default under the Loan Agreement, any
Holder may, at its sole election and without notice, proceed
directly and at once against the undersigned to collect and
recover the full amount of any portion of the liability of the
undersigned hereunder, without first proceeding against SCTC, any
other Person, or any security or collateral for the Guaranteed
Indebtedness or for the liability of the undersigned under this
Guaranty. Each Holder shall have the exclusive right to determine
the application of payments and credits, if any, from the
undersigned, SCTC or from any other Person on account of the
Guaranteed Indebtedness owed to such Holder.
Section 2.02 Obligations Unconditional. The undersigned
hereby agrees that the obligations of the undersigned under this
Guaranty shall be continuing, absolute and unconditional,
irrespective of (i) the invalidity or unenforceability of any part
or all of the Guaranteed Indebtedness or any Document; (ii) the
absence of any attempt to collect the Guaranteed Indebtedness from
SCTC or from any other guarantor of the Guaranteed Indebtedness or
any other action to enforce the same or to realize upon any
security for any thereof; (iii) the waiver or consent by the Agent
or any Holder with respect to any provision of any Document or
applicable law; (iv) any failure by the Agent or any Holder to
acquire, perfect or maintain a security interest in, or take any
steps to preserve its rights to, any security or
<PAGE> 12
collateral for the Guaranteed Indebtedness, this Guaranty or any
other guaranty of the Guaranteed Indebtedness; (v) any defense
arising by reason of any disability or other defense (other than a
defense of payment, unless the payment on which such defense is
based was or is subsequently invalidated, declared to be
fraudulent or preferential, otherwise, avoided and/or required to
be repaid to or for the benefit of SCTC, in which case there shall
be no defense of payment with respect to such payment) of SCTC or
any endorser, guarantor, comaker or any other Person; (vi) the
Agent's or a Holder's election, in any proceeding instituted under
Chapter 11 of Title 11 of the Bankruptcy Code (11 U.S.C. S101 et
seq.), of the application of Section 1111(b)(2) of the Bankruptcy
Code; (vii) any borrowing or grant of a security interest by SCTC,
as a debtor-in-possession, under Section 364 of the Bankruptcy
Code; (viii) the disallowance or avoidance of all or any portion
of a Holder's claim(s) for repayment of the Guaranteed
Indebtedness under the Bankruptcy Code or the avoidance of any
security for the Guaranteed Indebtedness; (ix) any errors or
omissions by a Holder with respect to the administration of the
Guaranteed Indebtedness or any security therefor or which might
change the scope of the undersigned's rights hereunder; (x) the
acceptance of additional parties primarily or secondarily liable
on the Guaranteed Indebtedness; or (xi) any other circumstance
which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
Section 2.03 Freedom to Act. The Agent or any Holder is
hereby authorized, without notice and without affecting the
liability of the undersigned hereunder to the Agent or such Holder
or any other Holder, from time to time to (i) renew, extend,
accelerate or otherwise change the time for payment of, or other
terms relating to, the Guaranteed Indebtedness, or otherwise
modify, amend or change the terms of any of the Documents; (ii)
accept partial payments on the Guaranteed Indebtedness; (iii) take
and hold security or collateral for the Guaranteed Indebtedness or
any other liabilities of SCTC, the obligations of the undersigned
under this Guaranty and the obligations under any other guaranties
of the Guaranteed Indebtedness, and exchange, enforce, waive,
release, sell, transfer, assign or otherwise deal with any such
security or collateral; (iv) apply such security or collateral and
direct the order or manner of sale thereof as each Holder may
determine in its discretion; (v) settle, release, compromise,
collect or otherwise liquidate the Guaranteed Indebtedness or any
portion thereof and any security or collateral therefor in any
manner; (vi) extend additional loans, credit and financial
accommodations and otherwise create additional Guaranteed
Indebtedness; (vii) waive strict compliance with the terms of the
Documents and otherwise forbear from asserting the Agent's or such
Holder's rights and remedies thereunder; (viii) enforce or forbear
from enforcing the guaranty of any other guarantor of all or any
part of the Guaranteed Indebtedness or release any such guarantor;
(ix) assign this Guaranty in part or in whole in connection with
any assignment of any part or all of the Guaranteed Indebtedness;
<PAGE> 13
or (x) release any obligor with respect to the Guaranteed
Indebtedness.
No delay on the part of the Agent or any Holder in the
exercise of any right or remedy shall operate as a waiver thereof,
and no single or partial exercise by the Agent or any Holder of
any right or remedy shall preclude any further exercise thereof by
the Agent or such Holder or any other Holder nor shall any
modification or waiver of any of the provisions of this Guaranty
be binding upon the Agent or any Holder except as expressly set
forth in a writing duly signed and delivered on the Agent's or
such Holder's behalf by any authorized officer of the Agent or
such Holder. The Agent's or such Holder's failure at any time or
times hereafter to require strict performance by the undersigned
of any of the covenants, provisions, warranties, terms and
conditions contained in this Guaranty or any other promissory
note, loan agreement, lease, security agreement, mortgage,
agreement, instrument or other document now or at any time or
times hereafter executed by the undersigned and delivered to the
Agent or such Holder shall not waive, affect or diminish any right
of the Agent or such Holder at any time or times hereafter to
demand strict performance therewith and no waiver of any such
right shall be deemed to occur by any act or knowledge of the
Agent or such Holder, its agents, officers or employees or be
binding against the Agent or such Holder, except as expressly set
forth in a writing duly signed and delivered on the Agent's or
such Holder's behalf by an officer of the Agent or such Holder,
respectively. No waiver by the Agent or such Holder of any
default shall operate as a waiver of any other default or the same
default on a future occasion, and no action by the Agent or such
Holder permitted hereunder shall in any way affect or impair the
Agent's or such Holder's rights or the obligations of the
undersigned under this Guaranty. No modification or waiver of any
of the provisions of this Guaranty by the Agent or any Holder nor
any action by the Agent or any Holder permitted hereunder shall
affect or impair any other Holder's rights or the obligations of
the undersigned under this Guaranty unless such modification,
waiver or action is consented to in a writing duly signed and
delivered on such Holder's behalf by an officer of such Holder.
Section 2.04 Waivers of Undersigned. The undersigned shall
have no right of subrogation, reimbursement or indemnity
whatsoever and no right of recourse to or with respect to any
assets or property of SCTC or to any collateral for said debts and
obligations of SCTC to the Holders. In addition, the undersigned
waives and renounces any and all rights the undersigned has or may
have for subrogation, indemnity, reimbursement or contribution
against SCTC for amounts paid under this Guaranty. This waiver is
expressly intended to prevent the existence of any claim in
respect to such reimbursement by the undersigned against the
estate of SCTC within the meaning of Section 101 of the
Bankruptcy Code, and to prevent the undersigned from constituting
a creditor of SCTC in respect of such reimbursement within the
meaning of Section 547(b) of the Bankruptcy Code in the event of
<PAGE> 14
a subsequent case involving SCTC. Without limiting the generality
of the foregoing, the undersigned hereby specifically waives any
right to enforce any remedy which any Holder now has or may
hereafter have against SCTC, any endorser or any other guarantor
of all or any part of the Guaranteed Indebtedness. The
undersigned further waives any right to demand security from SCTC
and any benefit of, and any right to participate in, any security
or collateral given to any Holder, including, without limitation,
security given to any Holder to secure payment of the Guaranteed
Indebtedness or any other liability of SCTC to any Holder. The
undersigned also waives all set-offs and counterclaims and all
presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor, and diligence
with respect to the Guaranteed Indebtedness and the obligations of
the undersigned hereunder, the filing of any claims with a court
in the event of receivership or bankruptcy of SCTC, and notices of
acceptance of this Guaranty. The undersigned further waives all
notices that the principal amount, any payment or any portion
thereof, any interest and/or premium on all or any part of the
Guaranteed Indebtedness is due, notices of any and all proceedings
to collect from SCTC, any endorser or any other guarantor of all
or any part of the Guaranteed Indebtedness, or from anyone else,
and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to
any Holder to secure payment of the Guaranteed Indebtedness. The
undersigned consents and agrees that no Holder shall be under any
obligation to marshall any assets in favor of the undersigned or
against or in payment of any or all of the Guaranteed
Indebtedness. The undersigned waives the benefit of N.C. Gen.
Stat. Sections 26-7 through 26-9 inclusive.
Section 2.05 Revival. The undersigned further agrees that
to the extent that SCTC or the undersigned make a payment or a
transfer of an interest in any property to any Holder, which
payment or transfer or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, or
otherwise is avoided, and/or required to be repaid to SCTC or the
undersigned, the estate of SCTC or the undersigned, a trustee,
receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of
such avoidance or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full
force and effect as if said payment had not been made.
Section 2.06 Subordination; Bankruptcy. The undersigned
further agrees that any and all present and future debts and
obligations of SCTC to the undersigned and any and all claims of
the undersigned against SCTC, or any of its properties, howsoever
arising, shall be subordinate and subject in right of payment to
the prior payment, in full, of the Guaranteed Indebtedness and as
security for this Guaranty, the undersigned hereby assigns to each
Holder all claims of any nature which the undersigned may now or
hereafter have against SCTC. If SCTC or the undersigned should at
any time become insolvent or make a general assignment
<PAGE> 15
for the benefit of creditors, or if a proceeding in bankruptcy or
any insolvency or reorganization proceedings shall be filed or
commenced by, against or in respect of SCTC or the undersigned,
any and all obligations of the undersigned shall, at the option of
any Holder, become due and payable, and the undersigned shall
forthwith pay to the Holders the full amount which would be
payable hereunder by the undersigned if all Guaranteed
Indebtedness was then due and payable.
Section 2.07 Obligation to Keep Informed. The undersigned
hereby assumes responsibility for keeping itself informed of the
financial condition of SCTC and any and all endorsers and/or other
guarantor of all or any part of the Guaranteed Indebtedness and of
all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Indebtedness or any part thereof, and the undersigned
hereby agrees that no Holder shall have a duty to advise the
undersigned of information known to any Holder regarding such
condition or any such circumstance. In the event that any Holder,
in its sole discretion, undertakes at any time or from time to
time to provide any such information to the undersigned, that
Holder or other Holders shall not be under any obligation (i) to
undertake any investigation, whether or not a part of their
regular business routine, (ii) to disclose any information which
any Holder wishes to maintain confidential, or (iii) to make any
other or future disclosures of such information or any other
information to the undersigned.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
The undersigned hereby represents and warrants to the Agent
and the Holders that:
3.01 Organization and Good Standing. The undersigned and
each of its Subsidiaries are corporations duly incorporated,
validly existing and in good standing under the laws of the
respective states of their incorporation, are duly qualified and
in good standing as foreign corporations authorized to do business
in every jurisdiction where the failure to so qualify would have a
Material Adverse Effect on the undersigned or any of such
Subsidiaries and have the requisite corporate power and authority
to own their respective properties and to carry on their
respective businesses as now conducted and as proposed to be
conducted.
3.02 Due Authorization. The undersigned (i) has the
corporate power and requisite authority to execute, deliver and
perform this Guaranty and the Subordination Agreement and (ii) is
duly authorized to, and has been authorized by all necessary
corporate action, to execute, deliver and perform this Guaranty
and the Subordination Agreement.
3.03 No Conflicts or Consents. Neither the execution and
delivery of this Guaranty or the Subordination Agreement, nor the
consummation of the transactions contemplated therein, nor
<PAGE> 16
performance of and compliance with the terms and provisions
thereof will (i) violate or conflict with any provision of its
articles of incorporation or bylaws, (ii) violate, contravene or
materially conflict with any law, regulation (including without
limitation Regulation U or Regulation X), order, writ, judgment,
injunction, decree or permit applicable to it, (iii) violate,
contravene or materially conflict with contractual provisions of,
or cause an event of default under, any indenture, loan agreement,
mortgage, deed of trust, contract or other agreement or instrument
to which it is a party or by which it may be bound or (iv) result
in or require the creation of any lien, security interest or other
charge or encumbrance (other than those contemplated in or in
connection with this Guaranty) upon or with respect its
properties.
3.04 Consents. No consent, approval, authorization or
order of, or filing, registration or qualification with, any court
or governmental authority or third party is required in connection
with the execution, delivery or performance of this Guaranty or
the Subordination Agreement.
3.05 Enforceable Obligations. This Guaranty and the
Subordination Agreement have been duly executed and delivered by
the undersigned and constitute the legal, valid and binding
obligations of the undersigned enforceable in accordance with
their respective terms, except as may be limited by bankruptcy or
insolvency laws or similar laws affecting creditors' rights
generally.
3.06 Financial Condition. The financial statements and
financial information provided to the Holders, consisting of,
among other things, an audited consolidated balance sheet of the
undersigned and its Subsidiaries dated as of March 31, 1994,
together with related consolidated statements of income, retained
earnings and cash flows certified by Deloitte & Touche, certified
public accountants, as true and correct, fairly represent the
financial condition of the undersigned and its Subsidiaries as of
such date; such financial statements were prepared in accordance
with generally accepted accounting principles applied on a
consistent basis; and since the date of such financial statements
there have occurred no changes or circumstances which have had or
are likely to have a Material Adverse Effect on the undersigned or
its Subsidiaries and the financial statements referenced above.
3.07 No Default. No Default or Event of Default presently
exists.
3.08 Liens. Except for Permitted Liens, the undersigned
and its Subsidiaries have good and marketable title to all of
their respective properties and assets free and clear of all
liens, encumbrances, mortgages, pledges, security interests and
other adverse claims of any nature.
<PAGE> 17
3.09 Indebtedness. The undersigned and its Subsidiaries
have no Indebtedness (including without limitation reimbursement
or other contingent obligations) except as disclosed in the
financial statements referenced in Section 3.06 and as set forth
in Exhibit C.
3.10 Litigation. Except as disclosed in Exhibit D, there
are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of the
undersigned threatened, against the undersigned or any of its
Subsidiaries which, if adversely determined, could have a Material
Adverse Effect on the enforceability of this Guaranty.
3.11 Material Agreements. Neither the undersigned nor any
of its Subsidiaries, is in default in any material respect under
any contract, lease, loan agreement, indenture, mortgage, security
agreement or other material agreement or obligation to which it is
a party or by which any of its properties is bound.
3.12 Burdensome Contracts. Neither the undersigned nor any
of its Subsidiaries is a party to, or bound by, any contract,
lease, indenture, loan agreement or other agreement or arrangement
the performance of which would have a Material Adverse Effect on
the business, condition (financial or otherwise), operations or
properties of the undersigned or any such Subsidiary or on the
ability of the undersigned to perform its obligations under this
Guaranty or the Subordination Agreement.
3.13 Taxes. The undersigned and its Subsidiaries have
filed, or caused to be filed, all material tax returns (federal,
state, local and foreign) required to be filed and paid all
amounts of taxes shown thereon to be due (including interest and
penalties) and have paid all other taxes, fees, assessments and
other governmental charges (including mortgage recording taxes,
documentary stamp taxes and intangibles taxes) owing by it and its
Subsidiaries, except for such taxes (i) which are not yet
delinquent or (ii) as are being contested in good faith and by
proper proceedings, and against which adequate reserves are being
maintained in accordance with generally accepted accounting
principles. The undersigned is not aware of any proposed material
tax assessments against it or any of its Subsidiaries. No
extension of time for assessment or payment by the undersigned of
any federal, state or local tax in effect other than extensions
granted in the ordinary course of business which do not have a
Material Adverse Effect.
3.14 Compliance with Law. The undersigned and its
Subsidiaries are in compliance with all laws, rules, regulations,
orders and decrees (including without limitation environmental
laws) applicable to it and its Subsidiaries, or to its and its
Subsidiaries' properties.
3.15 ERISA. (i) No Reportable Event (as defined in ERISA)
has occurred and is continuing with respect to any Plan; (ii) no
<PAGE> 18
Plan has an unfunded current liability (determined under Section
412 of the Code) or an accumulated funding deficiency, (iii) no
proceedings have been instituted, or, to the knowledge of the
undersigned, planned, to terminate any Plan, (iv) neither the
undersigned, any member of a Controlled Group, nor any duly-
appointed administrator of a Plan (A) has instituted or intends to
institute proceedings to withdraw from any Multi-Employer Pension
Plan (as defined in Section 3(37) or ERISA); and (v) each Plan has
been maintained and funded in all material respects with its terms
and with the provisions of ERISA applicable thereto.
3.16 Subsidiaries. The undersigned has no Subsidiaries
except as set forth in Exhibit E.
3.17 Government Regulation. Neither the undersigned nor
any of its Subsidiaries is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 or the Interstate Commerce Act,
each as amended. In addition, neither the undersigned nor any of
its Subsidiaries is (i) an "investment company" registered or
required to be registered under the Investment Company Act of
1940, as amended, and is not controlled by such a company, or (ii)
a "holding company," or a "Subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a
"Subsidiary" or a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
3.18 Hazardous Substances. The real property owned or
leased by the undersigned or any of its Subsidiaries or on which
the undersigned or any of its Subsidiaries operates (the "Subject
Property") is free from "hazardous substances" as defined in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. SS 9601 et seq., as amended, and the
regulations promulgated thereunder; no portion of the Subject
Property is subject to federal, state or local regulation or
liability because of the presence of stored, leaked or spilled
petroleum products, waste materials or debris, "PCB's" or PCB
items (as defined in 40 C.F.R. S763.3), underground storage tanks,
"asbestos" (as defined in 40 C.F.R. S763.63) or the past or
present accumulation, spillage or leakage of any such substance;
and the undersigned and each of its Subsidiaries is in substantial
compliance with all Environmental Laws and the undersigned knows
of no complaint or investigation regarding real property which it
or any of its Subsidiaries' owns or leases or on which it or any
of its Subsidiaries' operates.
3.19 Patents, etc. The undersigned and its Subsidiaries
possess all material patents, trademarks, service marks, trade
names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary for the operation of its and its
Subsidiaries' businesses as presently conducted and as proposed to
be conducted.
<PAGE> 19
3.20 Solvency. The undersigned is, and after consummation
of this Guaranty and after giving effect to all Indebtedness
incurred hereunder, will be solvent.
3.21 Investments. Set forth on Exhibit F is a complete and
accurate list as of the date hereof of all investments by the
undersigned other than Permitted Investments.
ARTICLE IV. AFFIRMATIVE COVENANTS
The undersigned hereby covenants and agrees that so long as
the Loan Agreement is in effect and until the Loans, Bankers'
Acceptances Outstanding and Letter of Credit Obligations, together
with interest, fees and other obligations thereunder, have been
paid in full and the Commitments thereunder shall have terminated:
4.01 Information Covenants. The undersigned will furnish,
or cause to be furnished, to the Agent and each Holder:
(a) Annual Financial Statements. As soon as available and
in any event within 90 days after the close of each fiscal year of
the undersigned, a consolidated and consolidating balance sheet of
the undersigned and its Subsidiaries as at the end of such fiscal
year together with related statements of income and retained
earnings and of cash flows for such fiscal year, setting forth in
comparative form figures for the preceding fiscal year, all in
reasonable detail and examined by Deloitte & Touche, or other
independent certified public accountants of recognized national
standing acceptable to the Agent and whose opinion shall be to the
effect that such financial statements have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis and shall not be qualified as to the scope
of the audit or as to the status of the undersigned as a going
concern, and which shall be accompanied by a certificate of such
accountants stating that in the course of its regular audit of the
business of the undersigned which audit was conducted in
accordance with generally accepted auditing standards (including
tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances) they have
obtained no knowledge of any Default or Event of Default which has
occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred
and is continuing, a statement as to the nature thereof, all of
the foregoing to be in reasonable detail and in form and substance
satisfactory to the Majority Holders. It is specifically
understood and agreed that failure of the annual financial
statements
<PAGE> 20
to be accompanied by an opinion and certificate of such
accountants in form and substance as provided herein shall
constitute a Default hereunder.
(b) Quarterly Financial Statements. As soon as available
and in any event within 45 days after the end of each fiscal
quarter of each fiscal year of the undersigned, a consolidated and
consolidating balance sheet of the undersigned and its
Subsidiaries as at the end of such quarterly period together with
related statements of income and retained earnings and of cash
flows for such quarterly period and for the portion of the fiscal
year ending with such period, in each case setting forth in
comparative form figures for the corresponding period of the
preceding fiscal year, all in reasonable form and detail
acceptable to the Majority Holders, subject to changes resulting
from audit and normal year-end adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 4.01(a) and (b)
hereof, a certificate of an authorized financial officer of the
undersigned, substantially in the form of Exhibit G to the effect
that such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a
consistent basis and that the undersigned is in compliance with
the terms of this Guaranty and no Default or Event of Default
exists, or if any Default or Event of Default does exist
specifying the nature and extent thereof and what action the
undersigned proposes to take with respect thereto. In addition,
such officer's certificate shall demonstrate compliance of the
financial covenants contained in Sections 4.10, 4.11, 4.12 and
5.06 by calculation thereof as of the end of each such fiscal
period.
(d) Accountant's Certificate. Within the period for
delivery of the annual financial statements provided in Section
4.01(a), a certificate of the accountants conducting the annual
audit stating that they have reviewed this Guaranty and stating
further whether, in the course of their audit, they have become
aware of any Default or Event of Default (insofar as any such
terms or provisions pertain to accounting matters) and, if any
such Default or Event of Default exists, specifying the nature and
extent thereof.
(e) Auditor's Reports. Promptly upon receipt thereof, a
copy of any other report submitted by independent accountants to
the undersigned in connection with any annual, interim or special
audit of the books of the undersigned including any management
letter.
<PAGE> 21
(f) SEC and Other Reports. Promptly upon
transmission thereof, copies of any filings and registrations
with, and reports to, (i) the Securities and Exchange Commission,
or any successor agency, by the undersigned, and copies of all
financial statements, proxy statements, notices and reports as the
undersigned shall send to its shareholders or to the holders of
any other Indebtedness (including specifically without limitation,
any Subordinated Indebtedness or the indebtedness under the Senior
Notes) in their capacity as such holders and (ii) the United
States Environmental Protection Agency, or any state or local
agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or
local agency responsible for health and safety matters, or any
successor agencies or authorities concerning environmental, health
or safety matters.
(g) Other Information. With reasonable promptness upon
any such request, such other information regarding the business,
properties or financial condition of the undersigned as the
Majority Holders may reasonably request.
(h) Notice of Default or Litigation. Upon the undersigned
obtaining knowledge thereof, it will give written notice to the
Agent and the Holders (i) immediately, of the occurrence of an
event or condition consisting of a Default or Event of Default,
specifying the nature and existence thereof and what action the
undersigned proposes to take with respect thereto, and (ii)
promptly, but in any event within 5 Business Days, of the
occurrence of any of the following with respect to the undersigned
or any of its Subsidiaries: (A) the pendency or commencement of
any litigation, arbitral or governmental proceeding against the
undersigned or any of its Subsidiaries which is likely to have, or
could have, a Material Adverse Effect on the business, properties,
assets, condition (financial or otherwise) or prospects of the
undersigned or any of its Subsidiaries or of the undersigned to
perform its obligations hereunder, (B) any levy of an attachment,
execution or other process against its or any of its Subsidiaries'
assets having a value of $250,000 or more, (C) the occurrence of
an event or condition which shall constitute a default or event of
default under any other agreement for borrowed money, (D) any
development in its or any Subsidiary's business or affairs which
has resulted in, or which the undersigned reasonably believes may
result in, a Material Adverse Effect or (E) the institution of any
proceedings against, or the receipt of notice of potential
liability or responsibility for violation, or alleged violation of
any federal, state or local law, rule or
<PAGE> 22
regulation, including but not limited to, regulations promulgated
under the Resource Conservation and Recovery Act of 1976, 42
U.S.C. SS 6901 et seq., regulating the generation, handling or
disposal of any toxic or hazardous waste or substance or the
release into the environment or storage of any toxic or hazardous
waste or substance, the violation of which could give rise to a
material liability on the business, assets, properties condition
(financial or otherwise) or prospects of the undersigned (F) any
notice or determination concerning the imposition of any
withdrawal liability by a multiemployer Plan on the undersigned or
any of its ERISA Affiliates, the determination that a
multiemployer Plan is, or is expected to be, in reorganization
within the meaning of Title IV or ERISA, the termination of any
Plan, and the amount of liability incurred or which may be
incurred in connection with any such event.
4.02 Preservation of Existence and Franchises. The
undersigned will do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence, rights,
franchises and authority and the existence, rights, franchises and
authority of each of its Subsidiaries.
4.03 Books, Records and Inspections. The undersigned will
keep, and will cause each of its Subsidiaries to keep, complete
and accurate books and records of its and each Subsidiary's
transactions in accordance with good accounting practices on the
basis of generally accepted accounting principles applied on a
consistent basis (including the establishment and maintenance of
appropriate reserves). The undersigned will permit, and will
cause each of its Subsidiaries to permit, on reasonable notice
officers or designated representatives of any Holder to visit and
inspect its and any of its Subsidiary's books of account and
records and any of its and any Subsidiary's properties or assets
(in whomever's possession) and to discuss the affairs, finances
and accounts of the undersigned or any of its Subsidiaries with,
and be advised as to the same by its or any Subsidiary's officers,
directors and independent accountants.
4.04 Compliance with Law. The undersigned will comply, and
will cause each of its Subsidiaries to comply, with all applicable
laws, rules, regulations and orders of, and all applicable
restrictions imposed by all applicable governmental bodies,
foreign or domestic, or authorities and agencies thereof
(including quasi-governmental authorities and agencies), in
respect of the conduct of its or any Subsidiary's business and the
ownership of its or any Subsidiary's property (including all
Environmental Laws and controls), except where any such
noncompliance would not have a Material Adverse Effect on the
business, assets,
<PAGE> 23
properties or condition (financial or otherwise) of the
undersigned or any of its Subsidiaries or on the ability of the
undersigned or any of its Subsidiaries to perform its obligations
hereunder.
4.05 Payment of Taxes and Other Indebtedness. The
undersigned will pay and discharge, and will cause its
Subsidiaries to pay and discharge, (i) all taxes, assessments and
governmental charges or levies imposed upon it or its
Subsidiaries, or upon its or its Subsidiaries' income or profits,
or upon any of its properties, before they shall become
delinquent, (ii) all lawful claims (including claims for labor,
materials and supplies) which, if unpaid, might give rise to a
Lien or charge upon any of its or any of its Subsidiaries'
properties, and (iii) except as prohibited hereunder, all of its
or its Subsidiaries' other Indebtedness as they shall become due;
provided, however, that neither the undersigned nor any of its
Subsidiaries shall be required to pay any such tax, assessment,
charge, levy, claim or Indebtedness which is being contested in
good faith by appropriate proceedings and as to which adequate
reserves therefor have been established in accordance with
generally accepted accounting principles, unless the failure to
make any such payment shall give rise to an immediate right to
foreclosure on a lien securing such amounts, in which case the
undersigned or any such Subsidiary shall make immediate payment of
or shall otherwise satisfy such tax, assessment, charge, levy,
claim or Indebtedness upon commencement of proceedings to
foreclose on any such lien.
4.06 Insurance. The undersigned will at all times
maintain, and will cause its Subsidiaries to maintain in full
force and effect insurance (including worker's compensation
insurance, liability insurance, casualty insurance and business
interruption insurance) in such amounts, covering such risks and
liabilities and with such deductibles or self-insurance retentions
as are in accordance with normal industry practice. The
undersigned will promptly provide evidence of the foregoing
insurance upon the request of any Bank. If the undersigned fails
to maintain any of the foregoing insurance, the Agent shall have
the right to obtain such insurance at the undersigned's expense.
4.07 Maintenance of Property. The undersigned will
maintain and preserve, and will cause its Subsidiaries to maintain
and preserve, its and its Subsidiaries' properties and equipment
used or useful in its or its Subsidiaries' business (in
whomsoever's possession as they may be) in good repair, working
order and condition, normal wear and tear excepted, and will make,
or cause to be made, in such properties and equipment from time to
time all repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto as may be needed or proper,
to the
<PAGE> 24
extent and in the manner customary for companies in similar
businesses.
4.08 Performance of Obligations. The undersigned will
perform in all material respects, and will cause its Subsidiaries
to perform in all material respects, all of its and its
Subsidiaries' obligations (including, except as may be otherwise
prohibited or contemplated hereunder, payment of Indebtedness in
accordance with its terms) under the terms of all material
agreements, indentures, mortgages, security agreements or other
debt instruments to which it or any Subsidiary is a party or by
which it or any Subsidiary is bound.
4.09 ERISA. The undersigned will (a) at all times, make
prompt payment of all contributions required under all employee
pension benefit plans ("Plans") and required to meet the minimum
funding standard set forth in ERISA with respect to its Plans; (b)
promptly upon request, furnish the Agent and the Holders copies of
each annual report/return (Form 5500 Series), as well as all
schedules and attachments required to be filed with the Department
of Labor and/or the Internal Revenue Service pursuant to ERISA,
and the regulations promulgated thereunder, in connection with
each of its Plans for each Plan Year; (c) notify the Agent
immediately of any fact, including, but not limited to, any
Reportable Event (as defined in ERISA) arising in connection with
any of its Plans, which might constitute grounds for termination
thereof by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Plan,
together with a statement, if requested by the Agent, as to the
reason therefor and the action, if any, proposed to be taken with
respect thereof; and (d) furnish to the Agent, upon its request,
such additional information concerning any of its Plans as may be
reasonably requested. The undersigned will not, nor will it
permit any of its ERISA Affiliates to (I) terminate a Plan if any
such termination would give rise to or result in any material
liability, or (II) cause or permit to exist any Termination Event
under ERISA or other event or condition which presents a material
risk of termination at the request of the PBGC.
4.10 Coverage Ratio. The undersigned will maintain a
Coverage Ratio of at least (i) 1.0 to 1.0 for the fiscal quarter
ending September 30, 1994 (computed for the two fiscal quarterly
periods then ending), (ii) 1.0 to 1.0 for the fiscal quarter
ending December 31, 1994 (computed for the three fiscal quarterly
periods then ending) and (iii) 1.2 to 1.0 for the fiscal quarters
ending March 31, 1995 and June 30, 1995 (computed for the four
fiscal quarterly periods then ending).
4.11 Current Ratio. The undersigned will maintain, on a
consolidated basis for the undersigned and its
<PAGE> 25
Subsidiaries, a Current Ratio of at least (i) 1.0 to 1.0 at all
times during the period commencing on June 30, 1994 through and
including December 30, 1994 and (ii) 1.2 to 1.0 at all times
during the period commencing on December 31, 1994 and thereafter.
4.12 Tangible Net Worth. The undersigned shall maintain
Tangible Net Worth at all times of at least $105,000,000.00;
provided, however, such amount shall be increased at the end of
each fiscal quarter (commencing with the fiscal quarter ending
June 30, 1994) by an amount equal to 50% of net income after taxes
of the undersigned and its Subsidiaries for such fiscal quarter
(but in no event decreased by losses for such fiscal quarter);
provided further, such amount shall be further increased by an
amount equal to 80% of all equity contributions made to the
undersigned in connection with the sale, issuance and/or exchange
of the capital stock of the undersigned pursuant to public
offerings of such stock.
ARTICLE V. NEGATIVE COVENANTS
The undersigned hereby covenants and agrees that so long as
the Loan Agreement is in effect and until the Loans, Bankers'
Acceptances Outstanding and Letter of Credit Obligations, together
with interest, fees and other obligations thereunder, have been
paid in full and the Commitments thereunder shall have terminated:
5.01 Nature of Business. The undersigned will not, nor
will it permit any of its Subsidiaries to, substantively alter the
character or conduct of its or any Subsidiary's business from that
conducted as of the Closing Date.
5.02 Consolidation, Merger, Sale of Assets, etc. The
undersigned will not, nor will it permit any of its Subsidiaries
to, dissolve, liquidate, or wind up its or any Subsidiary's
affairs, or enter into any transaction of merger or consolidation,
sell, transfer, lease or otherwise dispose of all or any
substantial part of its or any Subsidiary's property or assets
(other than in the ordinary course of business for fair
consideration).
5.03 Fiscal Year. The undersigned will not, nor will it
permit any Subsidiary to, change, or permit a change, in its or
any Subsidiary's fiscal year.
5.04 Articles and Bylaws. The undersigned will not, nor
will it permit any Subsidiary to, amend, modify or change in any
respect its or any Subsidiary's articles of incorporation
(corporate charter or other similar organizational document) or
bylaws if such amendment, modification or change would have a
Material Adverse Effect.
<PAGE> 26
5.05 No Dividend Restriction . The undersigned will not,
nor will it permit any Subsidiary to, enter into, assume or become
subject to any agreement prohibiting or otherwise restricting or
limiting the ability of any Subsidiary of the undersigned to pay
dividends to the undersigned except for the limitation on the
payment of dividends set forth in Section 7.07 of the Loan
Agreement.
5.06 Leverage Ratio. The undersigned will not permit its
Leverage Ratio to exceed 3.99 to 1.0 at any time.
5.07 Liens. The undersigned will not permit any of its
Subsidiaries located in Europe to pledge their respective assets
to secure their respective credit facilities unless and until
such credit facilities are on a committed basis with a termination
date no earlier than the Termination Date; provided, however, the
foregoing shall not apply to the existing secured credit
facilities of such Subsidiaries as described in the undersigned's
March 31, 1994 audited financial statements.
ARTICLE VI. EVENTS OF DEFAULT
6.01 Events of Default. The occurrence of any of the
following events shall constitute an "Event of Default" hereunder:
(a) Payment. The undersigned shall default in the payment
when due of any of any of its obligations hereunder; or
(b) Representations. Any representation, warranty or
statement made or deemed to be made by the undersigned herein, in
any statement or certificate delivered or required to be delivered
pursuant hereto or thereto shall prove untrue in any material
respect on the date as of which it was deemed to have been made;
or
(c) Covenants. The undersigned shall (i) default in the
due performance or observance of any term, covenant or agreement
contained in Section 4.10, 4.11, 4.12 or 5.06 hereof,(ii) default
in the due performance or observance of any term, covenant or
agreement contained in Section 5.01, 5.02, 5.03, 5.04 or 5.05
hereof or (iii) default in the due performance or observance by it
of any term, covenant or agreement (other than those referred to
in subsection (a), (b), (c)(i) or (c)(ii) of this Section 6.01)
contained in this Guaranty and such default shall continue
unremedied for a period of at least 30 days after notice thereof
by the Agent or any Bank to the undersigned; or
<PAGE> 27
(d) Guaranty. This Guaranty or any provision thereof
shall cease to be in full force and effect, or the undersigned or
any Person acting by or on behalf of the undersigned shall deny or
disaffirm the undersigned's obligations under this Guaranty, or
the undersigned shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or
observed pursuant to this Guaranty; or
(e) Bankruptcy, etc. The undersigned or any of its
Subsidiaries shall commence a voluntary case concerning itself
under the Bankruptcy Code in Title 11 of the United States Code
(as amended, modified, succeeded or replaced, from time to time,
the "Bankruptcy Code"); or an involuntary case is commenced
against the undersigned or any of its Subsidiaries under the
Bankruptcy Code and the petition is not dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of all or
substantially all of the property of the undersigned or any of its
Subsidiaries; or the undersigned or any of its Subsidiaries
commences any other proceeding under any reorganization,
arrangement, adjustment of the debt, relief of creditors,
dissolution, insolvency or similar law of any jurisdiction whether
now or hereafter in effect relating to the undersigned or any of
its Subsidiaries; or there is commenced against the undersigned or
any of its Subsidiaries any such proceeding which remains
undismissed for a period of 60 days; or the undersigned or any of
its Subsidiaries is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or
proceeding is entered; or the undersigned or any of its
Subsidiaries suffers appointment of any custodian or the like for
it or for any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or the
undersigned or any of its Subsidiaries makes a general assignment
for the benefit of creditors; or any corporate action is taken by
the undersigned or any of its Subsidiaries for the purpose of
effecting any of the foregoing; or
(f) Defaults under Other Agreements. (i) The undersigned
shall (x) default in any payment (beyond the applicable grace
period with respect thereto, if any) with respect to any
Indebtedness in excess of $100,000 or (y) default in the
observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other
event or condition shall occur or condition exist, the effect of
which default or other event or condition is to cause, or permit,
the holder or holders
<PAGE> 28
of such Indebtedness (or trustee or agent on behalf of such
holders) to cause (determined without regard to whether any notice
or lapse of time is required), any such Indebtedness to become due
prior to its stated maturity; or (ii) any such Indebtedness of the
undersigned shall be declared due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof; or
(g) Judgments. One or more judgments or decrees shall be
entered against the undersigned involving a liability of $500,000
or more in any instance, or $1,000,000 or more in the aggregate
for all such judgments and decrees for the undersigned (not paid
or fully covered by insurance provided by a carrier who has
acknowledged coverage) and any such judgments or decrees shall not
have been vacated, discharged or stayed or bonded pending appeal
within 60 days from the entry thereof; or
(h) Ownership. Any Person other than Ery W. Kehaya shall
possess, directly or indirectly, the power to (A) vote 25% or more
of the securities having ordinary voting power for the election of
directors of the undersigned or (B) direct or cause direction of
the management and policies of the undersigned, whether through
the ownership of voting securities, by contract or otherwise.
(i) ERISA. (i) The undersigned or any member of the
Controlled Group shall fail to pay when due an amount or amounts
aggregating in excess of $100,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans which in the aggregate have unfunded
liabilities in excess of $1,000,000 (individually and
collectively, a "Material Plan") shall be filed under Title IV of
ERISA by the undersigned or any member of the Controlled Group,
any plan administrator or any combination of the foregoing; or the
PBGC shall institute proceedings under Title IV of ERISA to
terminate, to impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could cause one
or more members of the Controlled Group to incur a current payment
obligation in excess of $500,000.
<PAGE> 29
Section 6.02 Limitations on Events of Default.
(a) Notwithstanding anything to the contrary contained in
Section 6.01(b) above, the misrepresentation in any material
respect of any representation or warranty contained in Section
3.01, 3.08, 3.09, 3.10, 3.11, 3.12, 3.13, 3.14, 3.17, 3.18 or 3.19
on account of the business operations or activities of any
Subsidiary of the undersigned shall not constitute an Event of
Default unless such misrepresentation has a Material Adverse
Effect.
(b) Notwithstanding anything to the contrary contained in
Section 6.01(c)(ii) or (iii) above, the default in the performance
of any covenant contained in Section 4.02, 4.03, 4.04, 4.05, 4.06,
4.07, 4.08, 5.01, 5.02, 5.03, 5.04, or 5.05 on account of the
business operations or activities of any Subsidiary of the
undersigned shall not constitute an Event of Default unless such
default has a Material Adverse Effect.
ARTICLE VII. MISCELLANEOUS
Section 7.01 Successors and Assigns. This Guaranty shall
be binding upon the undersigned and upon the trustees, successors
and assigns of the undersigned, and shall inure to the benefit of
each Holder's successors and assigns; all references herein to
SCTC and to the undersigned shall be deemed to include their
respective trustees, successors and assigns.
Section 7.02 Notices. All written communications provided
for hereunder shall be sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to a
Holder, addressed to such Holder at the address specified for such
communications as the signature pages of the Loan Agreement, or at
such other address as such Holder shall have specified to the
undersigned in writing, (ii) if to any other Holder, addressed to
such other Holder at such address as such other Holder shall have
specified to the undersigned in writing, (iii) if to the
undersigned, addressed to it at 2201 Miller Road, Wilson, North
Carolina 27893, Attention: Keith H. Merrick, or at such other
address as the undersigned shall have specified to each Holder in
writing; provided, however, that any such communication to the
undersigned may also, at the option of any Holder, be delivered by
any other means either to the undersigned at its address specified
above or to any of its officers.
Section 7.03 Amendment. Subject to Section 10.06 of the
Loan Agreement, this Guaranty may be amended, and the
<PAGE> 30
undersigned may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the
undersigned shall obtain the written consent to such amendment,
action or omission to act, of each of the Holders. No course of
dealing between the undersigned and any Holder nor any delay in
exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any Holder. As used herein, the term
"this Guaranty" and references thereto shall mean this Guaranty as
it may from time to time be amended or supplemented.
Section 7.04 Survival of Representations and Warranties;
Entire Agreement. All representations and warranties contained
herein or made in writing by or on behalf of the undersigned in
connection herewith shall survive the execution and delivery of
this Guaranty, the transfer by any Holder of any Note or portion
thereof or interest therein and the payment of any Note, and may
be relied upon by any Assignee, regardless of any investigation
made at any time by or on behalf of any Bank or any transferee.
Subject to the preceding sentence, this Guaranty embodies the
entire agreement and understanding between the Banks and the
undersigned and supersedes all prior agreements and understandings
relating to the subject matter hereof.
Section 7.05 Satisfaction Requirement. If any agreement,
certificate or other writing, or any action taken or to be taken,
is by the terms of this Guaranty required to be satisfactory to
any Holder, the determination of such satisfaction shall be made
by such Holder, in the sole and exclusive judgment (exercised in
good faith) of the Holder making such determination.
Section 7.06 Governing Law. This Guaranty shall be
construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of North
Carolina. The undersigned hereby submits to the nonexclusive
jurisdiction of the United States District Court of the Western
District of North Carolina and of any North Carolina State court
sitting in Charlotte for purposes of all legal proceedings arising
out of or relating to this Guaranty or the transactions
contemplated hereby. The undersigned irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient
forum.
Section 7.07 WAIVER OF JURY TRIAL. THE UNDERSIGNED, HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER
FINANCING DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 31
Section 7.08 Miscellaneous. Wherever possible each
provision of this Guaranty shall be interpreted in such manner as
to be effective and valid under applicable law, but if any
provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this Guaranty.
The descriptive headings of the sections of this Guaranty are
inserted for convenience only and do not constitute a part of this
Guaranty.
<PAGE> 32
IN WITNESS WHEREOF, this Guaranty has been duly executed by
the undersigned as of the 10th day of August, 1994.
ATTEST: STANDARD COMMERCIAL CORPORATION
By: By:
------------------- ----------------------------
Title: Title:
---------------- -------------------------
(Corporate Seal)
<PAGE> 1
Standard Commercial Corporation
RESTATED ARTICLES OF INCORPORATION
1. The name of the Corporation is Standard Commercial
Corporation.
2. The purposes for which the Corporation is organized
are:
(a) To engage in all aspects of businesses relating
to tobacco and wool.
(b) To engage in any lawful act or activity for
which corporations may be organized under Chapter 55 of the
General Statutes of North Carolina.
(c) The business and purposes specified in the
foregoing clauses shall, except where otherwise expressed, be in
nowise limited or restricted by reference to, or inference from,
the terms of any other clause in these Articles of Incorporation,
but the business and purposes specified in each of the foregoing
clauses of this Article shall be regarded as independent business
and purposes.
3. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 101,000,000
shares, of which 1,000,000 shares of the par value of $1.65 per
share are to be Preferred Stock (hereinafter called Preferred
Stock) and 100,000,000 shares of the par value of $.20 per share
are to be Common Stock (hereinafter called Common Stock).
(a) The Preferred Stock may be issued in such one or
more series as shall from time to time be created and authorized
to be issued by the Board of Directors as hereinafter provided.*
The Board of Directors is hereby expressly authorized, by
resolution or resolutions from time to time adopted providing for
the issuance of Preferred Stock, to fix and state, to the extent
not fixed by the provisions hereinafter set forth, the
designations, powers, preferences and relative, participating,
optional and other special rights of the shares of each series of
Preferred Stock, and the qualifications, limitations and
restrictions thereof, including (but without limiting the
generality of the foregoing) any of the following with respect to
which the Board of Directors shall determine to make affirmative
provisions:
(i) the distinctive name and serial designation.
(ii) the annual dividend rate or rates and the
dividend payment dates.
(iii) whether dividends are to be cumulative or
noncumulative and the participating or other special rights, if
any, with respect to the payment of dividends.
(iv) whether any series shall be subject to
redemption and, if so, the manner of redemption and the redemption
price or prices.
(v) the amount or amounts of preferential or other
payment to which any series is entitled over any other series or
over the Common Stock on voluntary or involuntary liquidation,
dissolution or winding up.
(vi) any sinking fund or other retirement provisions
and the extent to which the charges therefor are to have priority
over the payment of dividends on or the making of sinking fund or
other like retirement provisions for shares of any other series or
over dividends on the Common Stock.
(vii) any conversion, exchange, purchase or other
privileges to acquire shares of any other series or of the Common
Stock.
(viii) the number of shares of such series.
(ix) the voting rights, if any, of such series.
*By an amendment to paragraph 3 filed July 1, 1992, the
designations, powers, preferences and rights of a class of 92,005
shares of Series A Preferred Stock were fixed.
This document was filed as Exhibit 4(a)(ii) to the Company's
Registration on Form S-8, #33-59760.
<PAGE> 2
Each share of each series of Preferred Stock shall have the
same relative rights and be identical in all respects with all the
other shares of the same series.
Before the Corporation shall issue any shares of Preferred
Stock of any series authorized as hereinbefore provided, a
certificate setting forth a copy of the resolution or resolutions
with respect to such series adopted by the Board of Directors of
the Corporation pursuant to the foregoing authority vested in said
Board shall be made, filed and recorded in accordance with the
then applicable requirements, if any, of the laws of the State of
North Carolina, or, if no certificate is then so required, such
certificate shall be signed and acknowledged on behalf of the
Corporation by its President or a Vice President and its corporate
seal shall be affixed thereto and attested by its Secretary or an
Assistant Secretary and such certificate shall be filed and kept
on file at the principal office of the Corporation in the State of
North Carolina and in such other place or places as the Board of
Directors shall designate.
Shares of any series of Preferred Stock which shall be
issued and thereafter acquired by the Corporation through
purchase, redemption, conversion or otherwise, may by resolution
or resolutions of the Board of Directors be returned to the status
of authorized but unissued Preferred Stock of the same series.
Unless otherwise provided in the resolution or resolutions of the
Board of Directors providing for the issue thereof, the number of
authorized shares of stock of any such series may be increased or
decreased (but not below the number of shares thereof then
outstanding) by resolution or resolutions of the Board of
Directors and the filing of a certificate complying with the
foregoing requirements. In case the number of shares of any such
series of Preferred Stock shall be decreased, the shares
representing such decrease shall, unless otherwise provided in the
resolution or resolutions of the Board of Directors providing for
the issuance thereof, resume the status of authorized but unissued
Preferred Stock, undesignated as to series.
(b) Dividends on any stock of the Corporation shall
be payable only out of earnings or assets of the Corporation
legally available for the payment of such dividends and only as
and when declared by the Board of Directors.
(c) The holders of each series of the Preferred
Stock shall have only such voting rights, as may be fixed by the
resolution or resolutions of the Board of Directors providing for
the issue of such series, and such voting rights, if any, may be
superior, equal or subordinate to the voting rights of the holders
of any other series of the Preferred Stock, or of the Common
Stock, as such resolution or resolutions shall provide, but in no
event shall the Preferred Stock be entitled to more than one vote
in respect of each share of stock.
(d) Commencing with the annual meeting of
shareholders in 1987, the number of Directors shall be not less
than nine nor more than fifteen, the exact number to be fixed from
time to time by resolution of the Board of Directors. The
Directors shall be divided into three Classes: Class I, Class II
and Class III. All classes shall be as nearly equal in number as
possible, and no class shall include less than three Directors.
The initial Class I Directors shall serve until the annual meeting
of shareholders in 1988; the initial Class II Directors shall
serve until the annual meeting of shareholders in 1989; and the
initial Class III Directors shall serve until the annual meeting
of shareholders in 1990, or in the case of each of Class I, Class
II and Class III, until their respective successors are duly
elected and have qualified. At each annual meeting after such
initial classification, Directors to replace those whose terms
expire at such annual meeting shall be elected to hold office
until the third succeeding annual meeting or until their
respective successors in each case are duly elected and have
qualified. If the number of Directors is changed, any newly
created directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly
equal in number as possible. When the number of Directors is
increased by the Board of Directors and any newly created
directorships are filled by the Board, there shall be no
classification of the additional Directors until the next annual
meeting of shareholders.
4. The present stated capital of the Corporation is
$1,498,856.40.
5. No holder of capital stock of the Corporation shall be
entitled, as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of capital stock
of any class whatsoever, whether now or hereafter authorized, and
whether issued for cash or other consideration, or by way of
dividend.
6. The private property of the shareholders shall not be
subject to the payment of corporate debts to any extent whatever.
7. In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized:
To make, alter, amend and rescind the Bylaws of the
Corporation, to fix the amount to be reserved as working capital,
to fix the time for the declaration and payment of dividends, to
authorize and cause to be executed mortgages and
<PAGE> 3
liens upon the real and personal property of the Corporation,
provided always, that a majority of the whole Board concur therein.
Bylaws made by Directors under power so conferred may be altered
or repealed by the shareholders.
Pursuant to the affirmative vote of the holders of two-
thirds of the stock issued and outstanding, at a shareholders'
meeting duly called for that purpose, to sell, assign, transfer or
otherwise dispose of the property of the Corporation as an
entirety, provided always, that a majority of the whole Board
concur therein.
By a resolution passed by a majority vote of the whole
Board, under suitable provisions of the Bylaws to designate two or
more of their number to constitute an executive committee, which
committee shall, for the time being, as provided in said
resolution, or in the Bylaws, have and exercise any or all the
powers of the Board of Directors which may be lawfully delegated
in the management of the business and affairs of the Corporation,
and shall have power to authorize the seal of the Corporation to
be affixed to all papers which may require it.
From time to time to determine whether and to what extent,
and at what times and places and under what conditions and
regulations, the accounts and books of this Corporation, or any of
them, shall be open to the inspection of the shareholders; and no
shareholder shall have any right of inspecting any account or book
or document of this Corporation except as conferred by statute or
authorized by the Directors, or by a resolution of the
shareholders.
Both shareholders and Directors shall have power, if the
Bylaws so provide, to hold their meetings either within or without
the State of North Carolina, to have one or more offices in
addition to the principal office in North Carolina, and to keep
the books of this Corporation (subject to the provisions of the
statutes) outside of the State of North Carolina at such places as
may be from time to time designated by them.
This Corporation may in its Bylaws confer powers additional
to the foregoing upon the Directors, in addition to the powers and
authorities expressly conferred upon them by the statutes.
This Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred on shareholders herein are
granted subject to this reservation.
8. The address of the present registered office of the
Corporation is c/o C T Corporation System, 3101 Petty Road, City
and County of Durham, North Carolina 27707, and the name of the
present registered agent at such address is C T Corporation
System.
9. The present Board of Directors of the Corporation
consists of eleven members and the name (address omitted) of each
person who is to serve as Director until his successor be elected
and qualified is as follows:
Class I Directors Class II Directors Class III Directors
Term Expiring in 1991 Term Expiring in 1989 Term Expiring in 1990
R. Anthony Garrett Graham D. Evans Donald C. Dow
Henry R. Grunzke J. Alec G. Murray Marvin W. Coghill
Ery W. Kehaya Sir James Wilson Peter K. Grunebaum
A. Winniett Peters William A. Ziegler
10. No Director of the Corporation shall have personal
liability arising out of an action whether by or in the right of
the Corporation or otherwise for monetary damages for breach of
his duty as a Director, provided that nothing contained in this
Article 10 shall be effective with respect to (i) acts or
omissions not made in good faith that the Director at the time of
such breach knew or believed were in conflict with the best
interests of the Corporation, (ii) any liability under Section 55-
32 of the General Statutes of North Carolina, (iii) any
transaction from which the Director derived an improper personal
benefit, or (iv) acts or omissions occurring prior to the date
this Article becomes effective. If the laws of North Carolina are
hereafter amended to authorize corporate action further
eliminating or limiting the personal liability of a Director, then
the liability of a Director of the Corporation shall be eliminated
or limited to the fullest extent permitted by law.
11. The original charter of the Corporation was filed by
the Department of State on the 3rd day of August 1982.
This restated charter purports merely to restate but not to
change the provisions of the original Articles of Incorporation,
as supplemented and amended, and there is no discrepancy other
than as expressly permitted by law between the said provisions and
the provisions of the restated charter.
