SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1995
COMMISSION FILE NUMBER 1-9875
[Standard Logo Here]
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
<S> <C>
COMMON STOCK, $0.20 PAR VALUE NEW YORK STOCK EXCHANGE
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007 NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO
BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS. YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED TO THE BEST
OF REGISTRANT'S KNOWLEDGE IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K. [ ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT: $69,794,000.
AT MAY 31, 1995 THERE WERE 8,768,557 SHARES OF THE REGISTRANT'S COMMON STOCK
OUTSTANDING.
PORTIONS OF THE REGISTRANT'S (1) ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED MARCH 31, 1995 AND (2) PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON AUGUST 8, 1995 ARE INCORPORATED BY REFERENCE INTO
PARTS I, II, III AND IV.
<PAGE>
PART I
ITEM 1. BUSINESS.
The Registrant, Standard Commercial Corporation, ("Standard" or "the
Company") is engaged principally in the business of purchasing, processing and
selling leaf tobacco for sale to domestic and foreign manufacturers of
cigarettes and other tobacco products.
From its beginning in 1910 as a small dealer in oriental tobacco, the
Company has expanded through internal growth and acquisitions to become one of
the world's largest leaf tobacco dealers. The Company itself does not
manufacture cigarettes or other consumer tobacco products. For many years prior
to 1978, the Company's operations were conducted almost exclusively outside of
the United States. In fiscal 1995, tobacco operations accounted for 97.7% of
total revenues, and approximately 35.6% of tobacco revenues resulted from sales
by U.S. subsidiaries. The majority of tobacco sales consists of exports from
the country of origin.
Following a policy decision in January 1995 to divest its wool operations as
a part of the Company's strategy to deleverage its balance sheet and to enable
it to redeploy equity back into the tobacco business, the Company entered into
an agreement in principle to sell its entire wool business other than the small
specialty fibre unit to Chargeurs of Paris, France. The effective date of sale
will be as of April 1, 1995 and it is anticipated that the sale will be
completed in August 1995. Consequently, the wool business has been shown as
discontinued operations as described fully in the Management's Discussion and
Analysis of Results of Operations and Financial Condition and Note 2 to the
Notes to Consolidated Financial Statements which are incorporated herein by
reference.
Other than the agreement to sell the wool business there have been no
significant changes in business segments since April 1, 1994. Contributions to
restated gross revenue from businesses other than tobacco for the past three
years have not been material. See "Other Operations and Investments."
The Company's operations are subject to the usual international business
risks, including changing political conditions and currency fluctuations, and
exchange controls and import/export restrictions in some countries. The Company
takes these factors into account in making its business decisions.
TOBACCO OPERATIONS
TRENDS IN TOBACCO CONSUMPTION
In recent years, American-blend cigarettes have gained market share in
several major foreign markets, including Asia (particularly Japan and other
Pacific Rim countries), Europe and the Middle East. In Asia, local
manufacturers have imported increasing quantities of flue-cured and burley
tobacco in order to produce cigarettes to compete with the growing market for
imported American-or light-blend cigarettes. In addition, American-or
light-blend cigarettes have gained market share in Western Europe. In Eastern
Europe, several cigarette manufacturing facilities that were previously
state-owned have been sold to multinational cigarette manufacturers, thereby
creating new opportunities for leaf merchants.
Following a period in 1992 and 1993 of significantly increased consumer
demand for discount or value-priced cigarettes in the United States and certain
other major markets, the U.S. market has stabilized with premium brands having
regained market share. Price competition among cigarette manufacturers has
remained intense, forcing independent leaf tobacco dealers to expand their
ability to obtain less-expensive, foreign-grown tobacco of export quality.
Accordingly, sales of foreign grown tobaccos have increased in relation to sales
of United States tobaccos. The increased demand for light-blend cigarettes and
less expensive tobacco has caused cigarette manufacturers to place greater
reliance on the services of internationally strong leaf tobacco dealers that
have the ability to purchase, process and sell tobacco on a global basis.
While worldwide production of American-or light-blend cigarettes is
increasing as described above, consumption of cigarettes has declined in certain
countries in recent years, especially in the United States and certain other
industrialized countries.
<PAGE>
Worldwide cigarette production largely determines the level of demand for
leaf tobacco. In recent years, the consumption of cigarettes has stabilized or
declined in many industrialized nations but has continued to grow in most
developing countries. There has also been increased demand for higher quality
cigarettes in Eastern European countries, Turkey and Russia and the other states
of the former Soviet Union. Reports regarding the alleged harmful effects of
cigarette smoking have been publicized for many years and, together with
restrictions on cigarette advertising and smoking in public places, mandatory
warning statements and increased taxes on tobacco products, have had and
continue to have a negative impact on sales of tobacco products in certain
markets. However, the Company believes that its broad customer base and sources
of supply help to mitigate the effects of declines in consumption in particular
areas of the world, as it has a large amount of business in areas where
consumption is on the rise and with established customers who are catering to
the increasing demand for light-blend cigarettes by consumers in Asia, Europe
and the Middle East.
PURCHASING
The tobacco in which the Company deals is grown in approximately 30
countries. Management believes that its diversity in sources of supply,
combined with a relatively broad customer base, places it in a particularly
strong position worldwide within its industry. The Company relies primarily on
revolving lines of bank credit and internal resources to finance its purchases.
Quite often the tobacco serves as collateral for the credit. The period of
exposure, with some exceptions, generally is limited to a tobacco season lasting
only a few months.
Although most purchases of tobacco are made against specific customer orders
or indications of interest, the Company has from time to time purchased tobacco
for its own inventory when it believed there was a reasonable opportunity to
resell the tobacco at a profit, or when it anticipated its customers' needs
before receiving firm orders or indications of interest. Purchases for
inventory are generally made in foreign markets. The Company rarely purchases
tobacco in the United States without a firm order or indication of interest.
All tobacco purchases are being monitored closely with a goal of reducing the
Company's exposure to price fluctuations and to reducing its costs of carrying
inventory. For the most part, there are no formal contracts between the Company
and its various suppliers of tobacco.
The Company generally employs its own buyers to purchase tobacco on auction
markets, directly from growers and pursuant to marketing agreements with
government monopolies. Tobacco is generally sold in the United States to the
highest bidder at public auction. At present, the greatest amounts of tobacco
purchased by the Company outside the United States come from Argentina, Brazil,
China, Greece, Malawi, Thailand, Turkey and Zimbabwe.
Approximately 60-70% of the Company's tobacco purchases are made against
customer orders or indications of interest. This committed inventory should
normally total approximately $110-$150 million and the carrying costs are
normally reimbursed by the customer. The orders or indications of interest may
be written or oral. Historically, tobacco customers have been extremely
reliable in honoring these commitments, and the Company believes that its
position in respect of its committed tobacco inventories is adequately
protected. By the end of fiscal 1995 the Company's committed tobacco inventory
was $109 million which is consistent with somewhat lower carrying values and a
conscious effort to reduce inventories.
Argentina, Brazil, China, Greece, Turkey and Thailand are major tobacco
producers, but there are no tobacco auctions in these markets. In these
markets, with the exception of Brazil where the Company acts as export agent for
British-American Tobacco Company (BAT), the Company buys tobacco directly from
farmers or agricultural cooperatives in advance of firm orders or indications of
interest although such purchases are usually made with some knowledge of its
customers' requirements. The Company engages in this type of uncommitted
transaction because of the strategic importance of these markets in the tobacco
supply system. In order to serve its customers properly, the Company must have
a presence in these markets. During fiscal 1995 the Company substantially
reduced uncommitted tobacco inventories and its goal is to reduce them further.
The Company's uncommitted inventory at March 31, 1995 of $60 million (excluding
$25 million of unprocessed tobacco and packing material) was at the high end of
the estimated range of $30-$60 million (depending on prevailing market
conditions) needed to conduct normal business operations.
<PAGE>
PROCESSING
Tobacco purchased by the Company generally is perishable and must be
processed within a relatively short period of time to prevent deterioration in
quality. Consequently, processing facilities are usually located near the areas
where the tobacco is purchased. Prior to processing, steps are taken to ensure
consistent quality of the tobacco. These steps include regrading and removing
undesirable leaves, dirt and other foreign matter. Most of the tobacco is then
blended and threshed; however, some of it is processed in whole-leaf form.
Threshing involves mechanically separating the stem from the tissue portions of
the leaf, which are called strips, and sieving out small scrap. Considerable
expertise is required to produce strips of large particle size and to minimize
scrap.
Strips and stems are redried and packed separately. Redrying involves
further reducing the natural moisture left in the tobacco after it has been
cured by the growers. The objective is to pack tobacco at safe moisture levels
so that it can be held by the customer in storage for long periods of time.
Quality control checks are continually performed during processing to ensure
that the product meets customer specifications as to yield, particle size,
moisture content and chemistry. Customers are frequently in attendance at the
factory to monitor results while their tobacco is being processed.
Redried tobacco is packed in hogsheads, cartons, cases or bales for storage
and shipment. Packed tobacco generally is transported in the country of origin
by truck or rail, and exports are moved by ocean container vessels or
freighters.
As of the end of fiscal 1995, Standard processed its tobacco in three wholly
owned plants in the United States and 11 other facilities around the world owned
or leased by subsidiaries and affiliates. In addition, Standard has access to
other processing plants in which it has no ownership interest. In all cases,
tobacco processing is under the direct supervision of Company personnel. From
time to time the Company purchases and sells tobacco processed by others.
Modern laboratory facilities are maintained by the Company to assist in
selecting tobacco for purchase and to test tobacco during and after processing.
In addition, Standard does laboratory testing for a number of its customers and
others.
The Company believes that its plants are highly efficient and are adequate
for its purposes. The Company also believes that tobacco throughput could be
increased without major capital expenditures.
SELLING
Standard's customers include most of the world's leading manufacturers of
cigarettes and other consumer tobacco products. These customers are located in
some 85 countries throughout the world. Standard employs its own salesmen, who
travel extensively to visit customers and to attend tobacco markets worldwide
with these customers, and it also uses agents for sales to customers in certain
countries. Sales are made on open account to customers who qualify based on
experience or are made against letters of credit opened by the customer prior to
shipment. Virtually all sales are made in United States dollars. Payment for
most tobacco sold by the Company is received after the tobacco has been
processed and shipped. However, some customers pay the Company before the
tobacco has been processed and shipped.
In fiscal 1995, the Company's five largest customers accounted for
approximately 56% of total sales from continuing operations, of which Philip
Morris Companies, Inc. and Japan Tobacco, Inc. each accounted for more than 10%.
Also, in fiscal 1994, Japan Tobacco and Philip Morris Companies each accounted
for more than 10% of the Company's total restated sales. BAT was the Company's
largest customer in fiscal 1993, and accounted for more than 10% of total
restated sales.
Although there are no formal purchase contracts with any of these customers,
the Company has done business with most of them for many years. In the unlikely
event that the Company were to lose two or more of its larger customers, it
could have a material adverse effect on the Company's business.
At March 31, 1995 and 1994, the Company had outstanding orders of
approximately $109 million and $170 million, respectively, for tobacco in
inventory.
<PAGE>
REGULATION
Reports with respect to the allegedly harmful physical effects of cigarette
smoking have been publicized for many years and, together with restrictions on
cigarette advertisements, requirements that warning statements be placed on
cigarette packaging and in advertising, increased taxes on tobacco products and
controls in certain countries on imports, production and prices, have had and
continue to have an adverse impact on sales of tobacco products in many world
markets. In addition, litigation is pending against some of the leading United
States manufacturers of consumer tobacco products seeking damages for health
problems alleged to have resulted from the use of tobacco in various forms. It
is not possible to predict the outcome of such litigation or what effect adverse
developments in pending or future litigation against manufacturers might have on
the business of the Company.
Although the consumption of cigarettes has decreased in the United States
and some other countries in recent years, cigarette consumption in many
countries to which the Company makes considerable sales has increased during the
same period. In addition, the consumption of American-or light-blend
cigarettes has increased in both Western and Eastern Europe, even though total
cigarette consumption has not. Exports of cigarettes from the United States
have increased significantly in recent years as well. The Company believes that
any materially adverse effect on its business from a significant decrease in
consumption in any area in which it does business will be reduced by its
worldwide customer base though it is impossible to predict the extent to which
any such decrease will affect the Company's business. In addition, governments
in many countries continue to raise the excise tax on cigarettes and other
tobacco products.
During fiscal 1995 import quotas were introduced in the United States to aid
domestic producers of tobacco. This action coincided with the elimination of
the domestic content law enacted in the United States in July 1993 (effective
January 1, 1994) which was determined to be in violation of GATT. While in
effect, the domestic content law dramatically reduced the demand for tobaccos
grown outside of the United States and contributed to the decline in world
tobacco prices in 1993. Since foreign tobacco tends to be considerably cheaper
than tobacco grown in the United States, this law resulted in a significant cost
to domestic cigarette producers. It also disrupted the existing supply and
demand balance and resulted in an oversupply of foreign tobacco in the world.
In addition, there were several proposals before Congress to increase the
federal excise tax imposed on a pack of cigarettes as much as $2.00 per pack.
The likelihood of a tax increase of this magnitude in the near term now appears
remote.
COMPETITION
Competition among independent leaf tobacco dealers is based primarily on the
price charged for products and services, the ability to meet customer demands
and specifications in sourcing, purchasing, blending, processing and financing
tobacco and the ability to develop and maintain long-standing customer
relationships by demonstrating a knowledge of customer preferences and
requirements. Although most of the Company's principal customers also purchase
tobacco from the Company's major competitors, the Company's relationships with
its largest customers span many years and the Company believes that it has the
personnel, expertise, facilities and technology to remain successful in the
industry.
Competition for purchasing tobacco varies depending on the market involved.
Normally, there are from six to eight buyers at each of the United States
flue-cured and burley auctions, representing both leaf tobacco dealers and
buying staffs of certain cigarette manufacturers. The number of competitors in
foreign markets varies from country to country, but there is competition in all
areas to purchase the available tobacco. Among independent leaf tobacco
dealers, the principal competitors are Universal Corporation, DIMON Incorporated
(formed by the April 1, 1995 merger of Dibrell and Monk-Austin) and Intabex
Services Ltd. Of the independent leaf tobacco dealers, the Company believes it
ranks third in worldwide market share.
SEASONALITY
The Company's tobacco business is dependent on agricultural cycles and is
seasonal in nature. For example, the Company purchases flue-cured tobacco grown
in the United States during the five-month period beginning in July and ending
in November, while burley tobacco grown in the United States is purchased from
late November until January or February. Tobacco in Brazil is purchased from
January through May. Tobacco in Malawi and Zimbabwe is purchased from April
through October. Other markets around the world last for similar periods at
varying times of the year. Accordingly, while the leaf tobacco business is
seasonal in any given region and such seasonality may impact the Company's
quarterly results of operations, the global nature of the Company's business
enables it to be involved in purchasing, processing and selling tobacco
throughout the year and reduces the overall effect of seasonality on the
Company's business.
<PAGE>
The processing cycle for leaf tobacco is relatively short. Processing is
conducted throughout the tobacco purchasing season and is usually complete
within two to three months following purchase of the tobacco. Consequently, the
components of the Company's working capital relating to purchasing, processing
and selling leaf tobacco (for example, tobacco inventory, advances to suppliers
and current liabilities such as seasonal lines of credit and accounts payable)
reach their peak in the second and third fiscal quarters and accounts
receivable, revenues and operating income peak in the third and fourth fiscal
quarters. The Company customarily invoices tobacco when it is delivered in
accordance with the terms of the contract. Therefore, tobacco inventory will
vary from quarter to quarter depending on fluctuations in shipping schedules and
the seasonality of the Company's business.
OTHER OPERATIONS AND INVESTMENTS
The Company is engaged in several other smaller activities: Carolina Home
Center, a wholesale/retail building materials and home supply center located in
Wilson, North Carolina; and Bela Duty Free Import-Export (89% owned), which is
the principal supplier of goods to 50 duty free shops (in which it has interests
from 25% to 50%) catering to cross-border travelers in Eastern Europe.
EMPLOYEES
At March 31, 1995, the Company had a total of approximately 2,005 full-time
employees (including approximately 495 in the United States) and approximately
2,595 employed by affiliated tobacco companies. Of the Company's full-time
employees, approximately 1,275 are in the tobacco business, approximately 690
are in the wool business and approximately 40 have duties relating to other
operations. The tobacco business typically employs an additional 7,000 to 7,700
part-time employees during peak production periods.
The Company's principal subsidiary in the United States has a collective
bargaining agreement with a union covering the majority of its hourly employees,
many of whom are seasonal. The agreement expires on May 31, 1996. The Company
believes its relations with employees covered by this agreement are good.
Employees at the French wool plant are also represented by a labor union under
an agreement subject to renewal every December 31. The Company believes that
its relations with its employees in France are good.
GENERAL
The Company does not own any material patents, trademarks, licenses,
franchises or concessions, nor does it engage in any significant research
activity.
Compliance with federal, state and local provisions which have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment have not had, and are
not anticipated to have, any material effect upon the competitive position of
the Company. The Company has initiated programs to comply with regulations not
being enforced in certain foreign countries concerning effluent control at its
wool mills.
The Company's consolidated operations are conducted mainly by companies
registered in the United States and Europe. Segment information is shown in
Note 19 of the Notes to the Consolidated Financial Statements and is
incorporated herein by reference.
<PAGE>
ITEM 2. PROPERTIES.
Standard's principal corporate offices and the headquarters for its United
States tobacco operations are located in Wilson, North Carolina. It also has
administrative offices in Godalming (south of London), England.
The Company generally conducts its tobacco processing operations in
facilities near the area of production in the case of tobacco and near its
customers in the case of wool. In certain places, long-standing arrangements
exist with local companies to process tobacco in their plants under the
supervision of Company personnel.
The Company believes the properties it uses are generally well-maintained
and in good operating condition and are suitable and adequate for the normal
growth of its business.
A current summary showing the principal operating properties owned or leased
(as indicated by *) by the Company or its affiliates is shown below:
<TABLE>
AREA
TOBACCO OPERATIONS LOCATION USE (SQUARE FEET)
<S> <C> <C> <C>
United States Wilson, N.C. Factory/storage 1,008,000
Oxford, N.C. Factory/storage 624,700
Springfield, Ky. Factory/storage 292,000
Thailand Chiengmai Factory/storage 872,000
Banphai Factory/storage 377,000
Turkey Izmir Factory/storage 431,300
Izmir Storage 204,500*
Greece Alexandria Factory/storage 402,000
Salonica Factory/storage 772,700
Salonica Factory/storage 236,300*
Zimbabwe Harare Factory/storage 565,800*
Harare Storage 233,500
Malawi Limbe Factory/storage 414,000
Lilongwe Factory/storage 776,000
Spain Benavente Factory/storage 206,000
Benavente Storage 132,400*
Coria Buying Center 18,300*
Talayuela Buying Center 21,500
Italy Caserta Factory/storage 800,000*
DISCONTINUED WOOL OPERATIONS
Argentina Buenos Aires Factory/storage 82,500
Australia Fremantle Factory/storage 240,500
Chile Punta Arenas Factory/storage 57,000
France Tourcoing Factory/storage 964,900
Netherlands Dongen Storage 23,700
New Zealand Christchurch Factory/storage 100,300
South Africa Port Elizabeth Factory/storage 70,000*
United Kingdom Bradford Factory/storage 165,000
OTHER OPERATIONS
United States Wilson, N.C. Bldg. supply dealer 125,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
The Company has received notice of investigations by Canadian and United
States authorities into alleged violations of law relating to the importation,
exportation and taxation of tobacco, and has been notified that two of its
<PAGE>
employees have been charged with violations of Canadian law. The investigation
is ongoing and, although the Company has not been notified that it is a target,
it has been requested to provide certain documents relating to specified
transactions and it is cooperating fully in that regard. The Company does not
foresee any claim arising from the proceedings which would have a material
effect on its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the quarter
ended March 31, 1995.
EXECUTIVE OFFICERS OF THE COMPANY AT MARCH 31, 1995
NAME AGE POSITIONS
Ery W. Kehaya 71 Chairman of the Board
J. Alec G. Murray 58 President and Chief Executive Officer
and Acting Chief Financial Officer
Marvin W. Coghill 61 Chairman - Tobacco Division
J. Anthony Johnston 60 Chairman - Wool Division
Henry R. Grunzke 63 Commercial Director - Wool Division
Thomas M. Evins, Jr. 55 Regional Manager - North & Central
America Tobacco Operations
Guy M. Ross 62 Vice President and Secretary
Ery W. Kehaya II 42 Vice President and Operations Director
- Tobacco Division
Mark W. Kehaya 27 Vice President
Krishnamurthy Rangarajan 52 Vice President
Keith H. Merrick 41 Treasurer and Assistant Secretary
Hampton R. Poole, Jr. 43 Controller and Assistant Treasurer
Information concerning executive officers who are also directors is
contained in the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on August 8, 1995 which, except for the material under
the headings "Compensation Committee Report" and "Performance Graph" is
incorporated herein by reference and made a part hereof. Business experience
during the past five years of other executive officers is set forth below:
Mr. Johnston resigned as a director of the Company effective March 1995. He
continues to serve as Chairman and Chief Executive Officer of the Wool Division
pending completion of sale of the wool business.
Mr. Ross became Treasurer in 1980 and Secretary in 1981 following the
Company's purchase of the American leaf business of Imperial Tobacco Ltd. (UK).
He was employed by Imperial for 14 years including 10 as Vice President of
Finance and Administration. He became a Vice President of the Company in 1992.
Ery W. Kehaya II was appointed Vice President in 1992. He became Operations
Director - Tobacco Division in 1995 after being named Sales Director in 1993.
He has been an officer of Standard Commercial Tobacco Co., Inc., a subsidiary,
for more than five years, serving as Executive Vice President since 1992 and as
Senior Vice President-Sales before that. He is the son of Ery W. Kehaya,
Chairman of the Board.
Mark W. Kehaya was appointed Vice President in 1994. Prior to joining the
Company in 1993 he was employed at Bankers Trust Company and Fieldstone Private
Capital Group as an associate and attended Duke University Fuqua School of
Business. He is the son of Ery W. Kehaya, Chairman of the Board.
Mr. Rangarajan was employed by the Company in 1978 after qualifying as a
chartered accountant. He became Chief Accountant in 1981, an Assistant Vice
President in 1986 and Vice President in 1988.
<PAGE>
Mr. Merrick was employed by the Company in 1992 and became Treasurer in 1993
after being named Assistant Treasurer and Assistant Secretary in 1992. He is
also a Vice President of Standard Commercial Tobacco Co., Inc., a subsidiary.
He was formerly a Vice President of First Union National Bank of North Carolina.
Mr. Poole Jr. was appointed Controller and Assistant Treasurer in 1993. He
has been an officer of Standard Commercial Tobacco Co., Inc., a subsidiary, for
more than five years and is currently serving as Secretary-Treasurer.
The above persons will remain in office until the directors' meeting
following the annual meeting of shareholders on August 8, 1995.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
ITEM 6 - SELECTED FINANCIAL DATA
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information called for by Items 5, 6 and 7 is contained in the Company's
1995 Annual Report to Shareholders as detailed below and incorporated herein by
reference and made a part hereof.
ITEM CAPTION IN ANNUAL REPORT PAGE NO.
5 Quarterly Financial Data (Unaudited) 23
6 Selected Financial Data 23
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The data appearing on pages 11 through 21 of the Company's 1995 Annual
Report to Shareholders, and the Independent Auditors' Report on page 22, are
incorporated herein by reference and made a part hereof.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by items 10, 11, 12 and 13 is included in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on August 8, 1995 and is incorporated herein by reference, except for
the material under the heading "Compensation Committee Report" and "Performance
Graph." The information concerning executive officers of the Company follows
Item 4 of Part 1 of this Report.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements: See Item 8.
2. Financial Statement Schedules: The financial statement
schedules called for under Regulation S-X are either not
applicable or the information is included in the data mentioned
in Item 8 and incorporated herein by reference.
(b) Reports on Form 8-K: No report on Form 8-K was filed
during the quarter ended March 31, 1995.
(c) The following exhibits are filed as part of this Report:
3. (i) There is incorporated by reference herein the Company's
Restated Articles of Incorporation and the amendment
thereof designating the rights, preferences and
limitations of the Company's Series A Preferred Stock
filed as Exhibits 4(a)(i) and (ii) to the Company's
Registration on Form S-8 #33-59760.
(ii) There is incorporated by reference herein the Company's
amended Bylaws filed as Exhibit 3(ii) to the Company's
report on Form 10-K for the year ended March 31, 1994.
4. (i) There is incorporated by reference herein the Company's
Shareholder Protection Rights Agreement filed as
Exhibit (4) to the Company's Report on Form 8-K dated
April 5, 1994.
(ii) Master Facilities Agreement dated May 5, 1995 between
the Company and certain subsidiaries and Deutsche Bank
A.G. and a number of other banks.
(iii) Loan and Security Agreement dated as of May 2, 1995
between Standard Commercial Tobacco Co., Inc., a
subsidiary of the Company, and NationsBank of Georgia,
N.A.
(iv) Company Guaranty Agreement dated as of May 2, 1995 with
respect to the loan referred to in 4(iii) above.
10. Agreement dated May 2, 1995 between the Company and Ery W.
Kehaya.
11. Computation of Earnings per Common Share.
13. The Company's Annual Report to Shareholders for the year ended
March 31, 1995 which, except for information expressly
incorporated by reference into Items 1, 5, 6, 7 and 8 is not
deemed to be "filed" as a part of this Report.
21. List of subsidiaries.
23. Consent of Independent Public Accountants.
27. Financial Data Schedule.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Standard has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
STANDARD COMMERCIAL CORPORATION
June 16, 1995 By: /s/ J ALEC G MURRAY
J Alec G Murray, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on June 16, 1995 by the following persons on behalf of the
Registrant in the capacities indicated.
/s/ J ALEC G MURRAY President and Director
J Alec G Murray (Chief Executive Officer and Acting
Chief Financial Officer)
/s/ GUY M ROSS Vice President
Guy M Ross (Principal Accounting Officer)
/s/ ERY W KEHAYA
Ery W Kehaya Chairman of the Board of Directors
/s/ MARVIN W COGHILL
Marvin W Coghill Director
/s/ WILLIAM A ZIEGLER
William A Ziegler Director
Henry R Grunzke Director
/s/ WILLIAM S BARRACK JR
William S Barrack Jr Director
/s/ THOMAS M EVINS JR
Thomas M Evins Jr Director
/s/ CHARLES H MULLEN
Charles H Mullen Director
/s/ DANIEL M SULLIVAN
Daniel M Sullivan Director
<PAGE>
EXHIBIT 4(ii)
Conformed Copy
DATED 5th May 1995
TRANS-CONTINENTAL LEAF TOBACCO CORPORATION LIMITED, (1)
STANDARD COMMERCIAL TOBACCO COMPANY (UK) LIMITED,
- and -
SPIERER FRERES & CIE S.A.
WERKHOF GMBH (2)
- and -
STANDARD COMMERCIAL CORPORATION (3)
- and -
COMMERZBANK A.G., (4)
DEUTSCHE BANK A.G. IN HAMBURG,
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
MEESPIERSON N.V.,
NORDDEUTSCHE LANDESBANK GIROZENTRALE,
THE ROYAL BANK OF SCOTLAND PLC
- and -
DEUTSCHE BANK A.G. IN HAMBURG (5)
- and -
MEESPIERSON N.V. (6)
- and -
THE BANKS (7)
___________________________________________
MASTER FACILITIES AGREEMENT
___________________________________________
LOVELL WHITE DURRANT
65 Holborn Viaduct
London EC1A 2DY
A1/KB/GBY/19239-4
<PAGE>
CONTENTS
Heading Page
Parties
Recitals
PART I
1. Definitions and Interpretation 1
PART II
2. Master Facilities Arrangements 24
3. Position After Master Facilities
Termination Date 31
PART III
4. Review 32
PART IV
5. Conditions Precedent 34
PART V
6. Facilities 35
PART VI
7. Interest 38
PART VII
8. Repayment 40
PART VIII
9. No Deductions 42
10. Change in Law or Regulations 44
11. Cancellation 45
PART IX
12. Guarantee 46
PART X
13. Representations and Warranties 50
PART XI
14. General Covenants 57
15. Information Covenants 68
16. Financial Covenants 73
PART XII
17. Termination in Case of Default 75
PART XIII
18. Fees 81
19. Expenses 81
20. Stamp Duty 82
PART XIV
21. Assignments and Transfers 83
PART XV
22. Lead Bank, Security Agent and Steering Committee 86
23 Amendments and Decisions 94
24. Retirement of Lead Bank, Security Agent and Steering Committee 95
PART XVI
25. Enforcement of Security and Distribution of Recoveries 98
26. Equalisation 100
27. Interim Distributions of Recoveries and Creation of Reserves 101
28. Calculation of Outstandings 102
29 Further Security, Set-Off and Excess Cash Cover 103
30. Third Party Security 104
31. Closing out of Foreign Exchange Transactions 104
PART XVII
32. Notices 105
33. Indemnities 106
34. Certificates, Calculations and Evidence of Debt 107
35. Set-Off 107
36. Forbearance and Partial Invalidity 108
37. Authority of SCC 108
38. Counterparts 109
39. Governing Law and Jurisdiction 109
SCHEDULES
Schedule I : The Borrowers and the Covenantors 111
Schedule II : The Banks 112
Schedule III : The Charging Companies 116
Schedule IV : The Facility Agreements 117
Schedule V : Wool Group Companies 123
Schedule VI : Security Documents 124
Schedule VII : Form of Transfer Certificate 125
Schedule VIII : Group Structure 128
Schedule IX : Capital Expenditure Projections 129
Schedule X : Conditions Precedent and Subsequent 130
Schedule XI : Existing Security and Guarantees 135
Schedule XII : Non-Committed Banks 141
Schedule XIII : Reducing Banks 143
Schedule XIV : Litigation Details 144
Schedule XV : Details of Group Joint Ventures 145
Schedule XVI : Insurance Policies 146
Schedule XVII : First Tier Subsidiary Bank Accounts 149
Schedule XVIII : Distribution of Recoveries between
Finance Parties 150
Schedule XIX : Existing Intra-Group Indebtedness 153
Schedule XX : Security Programme 154
Signing Pages 155-161
Appendix A : The Budget Omitted
Appendix B : The Cash Flow Forecast Omitted
THIS AGREEMENT is made the 5th day of May 1995
BETWEEN:
(1) THE COMPANIES LISTED IN PART I OF SCHEDULE I (the "Borrowers");
(2) THE COMPANIES LISTED IN PART II OF SCHEDULE I (the "Covenantors");
(3) STANDARD COMMERCIAL CORPORATION (Federal Tax Identification Number
13/1337610) whose registered office is at 2201 Miller Road, P.O.
Box 450, Wilson NC 27894-0450, USA ("SCC");
(4) COMMERZBANK A.G, DEUTSCHE BANK A.G., MEESPIERSON N.V., WESTDEUTSCHE
LANDESBANK GIROZENTRALE, NORDDEUTSCHE LANDESBANK GIROZENTRALE AND
THE ROYAL BANK OF SCOTLAND PLC (the "Steering Committee");
(5) DEUTSCHE BANK A.G. in Hamburg (the "Lead Bank");
(6) MEESPIERSON N.V. (the "Security Agent");
(7) THE BANKS LISTED IN COLUMN 1 OF SCHEDULE II ("the Banks").
IT IS AGREED:
PART I
DEFINITIONS AND INTERPRETATION
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement terms defined in Clause 16 (Financial Covenants) shall
have the meanings set out in that Clause and in addition:--
"Accounting Reference Period" shall have the same meaning as
"accounting reference period" in Part
VII of the Act;
"Accounts Date" 31st March in each year;
"Accounts" (a) each of the Original Accounts; and
(b) each of the audited and unaudited,
consolidated and unconsolidated accounts
of the Group or any division of the Group
or any Group Company delivered to the
Agent pursuant to Clauses 15.5 (Monthly
Accounts) and 15.7 (Accounts);
"Act" the Companies Act 1985;
"Additional Costs Rate" in relation to any sum outstanding under
this Agreement, the cost to the Bank
which has made such sum available, of
compliance with any special deposit,
mandatory liquid asset or reserve
requirement of the central bank in
accordance with whose requirements or
directions such Bank is accustomed
to act;
"Agreed Terms" in relation to any document, means the
form of that document initialled by or
on behalf of the Lead Bank and SCC;
"Agreed Warehouse" a warehouse approved by the Security
Agent from time to time;
"Auditors" at any time the auditors of the Group,
being Deloitte & Touche or any other firm
of accountants approved by the Lead Bank
in writing;
"Auditors' Letter" a letter from the Auditors addressed to
the Lead Bank on behalf of the Banks
confirming that the Auditors will provide
all certificates and confirmations which
the Lead Bank is entitled to request and
from time to time requests from the
Auditors under the terms of this
Agreement;
"Available Commitment" in relation to a Bank and any Facility,
the Dollar Equivalent of that Bank's
Commitment in respect of such Facility,
less the Dollar Equivalent of all
Outstandings (including, in the case of
foreign exchange transactions, the amount
deemed to be outstanding by Clause 2.12
(Foreign Exchange) and, in the case of
any unmatured liability, the maximum
amount of such liability capable of
maturing into an actual liability) under
such Facility at that time;
"Availability Period" the period beginning on the date of this
Agreement and ending on the day which
falls 364 days after the date of this
Agreement or, if the initial term of the
Facilities is extended in accordance with
Clause 8.5 (Extension) for a further
term, the last day of such further term;
"Bank" each of the banks identified in Schedule
II and any additional or substitute bank
or financial institution at any time
hereafter designated as a Bank by
agreement between the Lead Bank (acting
with Majority Bank approval) and SCC
pursuant to this Agreement and each of
their respective successors in title (but
only for so long as such person has any
rights or obligations under the Finance
Documents);
"Bill" a bill of exchange or promissory note
presented to a Bank by a Group Company
for acceptance and discounting pursuant
to the terms of the Facility made
available by such Bank to a Borrower and
satisfactory in form and substance to
such Bank;
"Borrower" each of the companies listed in Part I of
Schedule I;
"Borrower Debentures" the debentures in the Agreed Terms
entered into or to be entered into by
each of the Borrowers in favour of the
Security Agent on behalf of the Finance
Parties;
"Borrowings" in relation to any Group Company, at any
time, any Indebtedness incurred by that
Group Company in respect of all or any of
the following (but without double
counting):-
(a) money borrowed or raised;
(b) any debentures, bonds, notes, loan
stock, commercial paper or similar
instruments or acceptance credit,
bill discounting or note purchase
facilities;
(c) counter-indemnity obligations of such
person in respect of letters of
credit, guarantees or similar
instruments issued by banks or
financial institutions;
(d) receivables sold, assigned or
discounted (unless the effect is that
no Group Company can be under any
obligation in any circumstances
to repurchase or make good any loss
relating to such receivable);
(e) money paid by a Group Company in
consideration for the supply of goods
and/or services to a Group Company
more than 30 days after the due date
for the supply;
(f) money received by a Group Company in
consideration for the supply of goods
and services by a Group Company to
the extent received more than 30 days
before the due date for the supply;
(g) the capital element of conditional
purchase, hire purchase and leases
which are defined as finance leases
in SSAP 21;
(h) any guarantee, indemnity or other
assurance against financial loss in
respect of any Indebtedness of any
other person of a kind referred to
in this definition;
(i) any interest rate or currency swap,
forward rate agreement, cap, floor
or collar transaction calculated by
reference to the net amount payable
under any such agreement if closed-
out or terminated at that time (but
ignoring any net amount receivable by
that Group Company); and
(j) any other transaction having
substantially the same commercial
effect as any of the foregoing,
including liabilities which are not
shown as borrowings on the balance
sheet of such person by reason of
being contingent, conditional or
otherwise;
"Budget" (a) the business plan for the Group
including the projections to 31 March
1995 and projections for 1996 and
1997 annexed as Appendix A to this
Agreement;
(b) the supplemental budget to be
delivered to the Security Agent
pursuant to Clause 14.53 (Conditions
Subsequent); and
(c) each budget now or hereafter
delivered or to be delivered to the
Security Agent pursuant to Clause
15.1 (Budget);
"Business Day" a day (other than a Saturday or Sunday)
on which the relevant financial markets
are open for dealings between banks (a)
in London, New York and Frankfurt and
(b) where a payment is to be made under
this Agreement in any currency other than
Sterling, Dollars or DM, the principal
financial centre of the currency
concerned;
"Cash Flow Forecast" (a) the rolling four quarter cash flow
forecast for the Group for the period
to 31 March 1996 attached as Appendix
B to this Agreement; and
(b) each cash flow forecast now or
hereafter delivered or to be
delivered to the Security Agent
pursuant to Clause 15.3 (Cash Flow
Forecast);
"Charging Company" at any time, each of SCC, the Companies
listed in Schedule III and any other
Group Company or Companies or other
person which shall have executed a
Security Document at that time and
"Charging Companies" shall be construed
accordingly;
"Commitment" in relation to a Bank and a Facility,
means the amount set opposite such Bank's
name in Schedule II under the heading
"Commitment" in relation to such Facility
as the same may be transferred (in whole
or in part), reduced, varied or
terminated in accordance with the terms
of this Agreement;
"Continuing" in the context of an Event of Default
shall be construed as follows:-
(a) so that where the underlying
circumstances which caused that Event
of Default are incapable of remedy,
that Event of Default is Continuing,
unless and until it has been
expressly waived in writing by the
Lead Bank (acting on the instructions
of the Majority Banks) and any
conditions of such waiver have all
been fulfilled to the satisfaction of
the Lead Bank (acting on the
instructions of Majority Banks); or
(b) in any other case, that Event of
Default is Continuing unless and
until either:-
(i) it has been expressly waived in
writing by the Lead Bank (acting
on the instructions of the
Majority Banks) and any
conditions of such waiver have
all been fulfilled to the
satisfaction of the Lead Bank
(acting on the instructions of
the Majority Banks); or
(ii) the underlying circumstances
which caused that Event of
Default have been remedied to
the satisfaction of the Lead
Bank (acting on the instructions
of the Majority Banks) and the
resulting position is what it
would have been if such Event of
Default had not occurred;
"Convertible Subordinated
Debentures" the $69,000,000 principal amount of
7 1/4% convertible debentures maturing
March 31, 2007 issued by SCC to refinance
certain working capital facilities;
"Covenantors" each of the Companies listed in Part II
of Schedule I;
"Debenture" the debenture in the Agreed Terms to be
granted by SCTC in favour of the Security
Agent as agent and trustee for the
Finance Parties;
"Disposal" (a) a Sale of a Wool Group Company;
and/or
(b) any sale or disposition of any of the
shares or the goodwill and/or assets
of the business of any Group Company
(but excluding stock in trade sold by
a Group Company in the normal course
of its business as carried on at the
date of this Agreement);
"DM" lawful currency of the Republic of
Germany;
"Dollar Equivalent" (a) on any date in relation to an amount
denominated in Dollars means the
amount thereof; and
(b) on any date in relation to an amount
denominated in a currency other than
Dollars means the amount of Dollars
which would be required to purchase
such sum at the spot rate of exchange
quoted by the Lead Bank at 11.00 a.m.
on that date for the purchase of the
relevant currency with Dollars;
"Dollars" and $ lawful currency of the United States;
"Effective Date" the Business Day on which the Lead Bank
notifies SCC (on behalf of SCC, the
Borrowers and the Covenantors) and the
Banks that the Conditions referred to in
Clause 5.1 (Conditions Precedent) have
been either satisfied in full or waived
by the Lead Bank (acting on the
instructions of the Majority Banks);
"Encumbrance" any mortgage, pledge, lien,
hypothecation, charge, security interest,
assignment or deposit by way of security
or any other agreement or arrangement
whatsoever (whether conditional or not
and whether relating to existing or to
future assets) having the effect of
providing a security or preferential
treatment to a creditor (including
set-off, title retention, defeasance or
reciprocal fee arrangements) or any
agreement or arrangement to give any form
of security or preferential treatment to
a creditor;
"Enforcement Date" the date on which the Security Agent
shall first enforce any part of the
security constituted by any Security
Document;
"Event of Default" any of the events specified in Clause
17.1 (Termination in Case of Default);
"Existing Security" Encumbrances over assets of members of
the Group which are in existence as at
the date of this Agreement and are
detailed in Part I of Schedule XI;
"Facility" (a) each facility made available pursuant
to a Facility Letter; and
(b) each facility made available by a
Bank as at the date of this Agreement
and detailed in Schedule II
(notwithstanding that such facility
may not be documented); and
"Facilities" shall be construed
accordingly; and
(c) each other facility at any time
hereafter designated as a Facility by
agreement between the Lead Bank
(acting with Majority Bank approval)
and SCC pursuant to this Agreement;
"Facility Agreements" (a) the Facility Letters;
(b) the security documents details of
which are set out in Part II of
Schedule IV;
(c) each other agreement, deed, document,
notice, guarantee, indemnity or
certificate entered into by any
Obligor in favour of any Bank
pursuant to any document referred to
in (a) or (b) in this definition or
otherwise in connection therewith;
and
(d) each other agreement or document at
any time hereafter designated as a
Facility Agreement by agreement
between the Lead Bank (acting with
Majority Bank approval) and SCC
pursuant to this Agreement;
and "Facility Agreement" shall be
construed accordingly;
"Facility Letters" (a) the facility letters and agreements,
details of which are set out in Part
I of Schedule IV;
(b) the NationsBank Facility Agreement;
and
(c) each other facility letter, agreement
or document at any time hereafter
designated as a Facility Letter by
agreement between the Lead Bank
(acting with Majority Bank approval)
and SCC pursuant to this Agreement,
and each is a "Facility Letter";
"Facility Office" in relation to a Bank or a Transferee,
means the office identified at the end of
this Agreement or in the relevant
Transfer Certificate, as the case may be,
or any replacement facility office
nominated in accordance with Clause 32
(Notices);
"Final Repayment Date" the date which falls 364 days after the
date of this Agreement or, if the initial
term of the Facilities is extended for a
further term in accordance with Clause
8.5 (Extension), the last day of such
further term or, if any such day is not a
Business Day, the preceding Business Day;
"Finance Documents" this Agreement, the Facility Agreements,
the Security Documents, the Negative
Pledge, any Transfer Certificate and any
other agreements or documents entered
into by any Group Company pursuant to the
terms of the Finance Documents or any of
them and any other agreement or document
now or in the future designated as a
Finance Document by agreement between the
Lead Bank (acting with Majority Bank
approval) and SCC and includes each such
Finance Document as extended,
supplemented, varied, restated and/or
replaced in any manner from time to time
(even if changes are made to the
composition of the Finance Parties and/or
the other parties to the Finance
Documents) and/or any document which
extends, supplements, varies, restates
and/or replaces such Finance Document and
also includes each or any such Finance
Document and each is a "Finance
Document";
"Finance Parties" the banks and financial institutions for
the time being comprising Finance Parties
pursuant to the terms of this Agreement
(including, without limitation, the Banks
and any additional or substitute bank or
financial institution at any time
hereafter designated as a Finance Party
to the extent and for the purpose(s) so
designated by agreement between the Lead
Bank (acting with Majority Bank approval)
and SCC pursuant to this Agreement) and
each of their respective successors in
title and permitted assignees or
transferees (but only for so long as such
person has any rights or obligations
under any Finance Document) and also
includes each or any of them and each is
a "Finance Party";
"First Tier Subsidiaries" the Borrowers, the Covenantors, Standard
Commercial Tobacco Services (UK) Limited,
Standard Commercial Tobacco Company of
Canada Ltd. and Transconti Srl and each
is a "First Tier Subsidiary";
"Greater Group" means at any time SCC and its
Subsidiaries at such time;
"Group" means (a) prior to the Sale of the Wool
Group, (i) SCC and the other companies
detailed in Schedule VIII and (ii) each
Wool Group Company (for so long as such
Company remains a direct or indirect
Subsidiary of SCC) and (b) following the
Sale of the Wool Group, SCC and the other
companies detailed in Schedule VIII, or
such other group of companies as SCC and
the Lead Bank (acting on the instructions
of the Majority Banks) may agree from
time to time and in each case "Group
Company" means any member of the Group;
"Indebtedness" at any time any obligation for the
payment or repayment of money, whether
present or future, actual or contingent;
"Interest Indebtedness" all accrued, but unpaid, amounts of
interest, commission, bank charges, costs
and expenses payable to a Finance Party
by an Obligor under a Facility which have
not been capitalised to become Principal
Indebtedness;
"Inventory" stocks of tobacco owned by a Borrower and
held in an Agreed Warehouse and pledged
to the Security Agent as agent and
trustee for the Finance Parties;
"Kehaya Loan" the facility to be provided by
NationsBank, N.A. (Carolinas) to Ery
Kehaya to fund his purchase of certain
senior promissory notes dated 1 July 1988
issued by SCC from each of Principal
Mutual Life Insurance Company, Nationwide
Life Insurance Company, West Coast Life
Insurance Company and Wisconsin Health
Care Liability Insurance Plan in an
aggregate amount of $3,833,500;
"Lead Bank" Deutsche Bank A.G. in Hamburg in its
capacity as lead bank to the Banks under
this Agreement and any successor thereto
appointed under the terms of this
Agreement;
"Lending Base" at any time the figure which is the
aggregate of (a) 85% of the value
attributable to trade receivables of the
Borrowers at that time; (b) 75% of the
Market Value of the Inventory at that
time; and (c) the value of the shares of
Standard Wool France S.A. (for so long
only as such shares remain charged to the
Security Agent). The Lending Base will be
suspended until further notice. After the
Sale of the Wool Group, and independent
of the result, the Steering Committee
will examine whether the Lending Base
clause can be brought into force, the
object being to limit financing to trade
deals;
"Lombard Facility Letter" a facility letter executed or to be
executed between Standard Wool (UK)
Limited and Lombard NatWest Discounting
Limited relating to the disposal by
Standard Wool (UK) Limited of certain
receivables to Lombard NatWest
Discounting Limited;
"Majority Banks" means at any time those Banks whose
Overall Commitments at such time are
equal to or exceed 67 per cent. of the
aggregate of all Overall Commitments at
such time;
"Margin" for the purposes of Clause 7.1 (Interest
Rate) means 1.25 per cent. per annum;
"Market Value" in relation to Inventory at any time,
means the value conclusively determined
by the Lead Bank, of such Inventory,
having regard to the sale and purchase
prices of tobacco similar to such
Inventory; such prices to be obtained
from such sources as the Lead Bank may
determine;
"Master Facilities the earlier of 5.00 p.m. on the Final
Termination Date" Repayment Date or the time when the Lead
Bank declares an Event of Default
pursuant to Clause 17 (Termination in
Case of Default);
"Master Wakala Agreement" the master wakala agreement executed or
to be executed between Standard Wool
(Chile) SA and Al Rahji Investment
Corporation;
"Material Adverse Change" an event or circumstance which (when
taken alone or together with any previous
event or circumstance) constitute(s) an
adverse change in the assets, financial
or trading position of any Group Company;
"Material Adverse Effect" an event or circumstance which (when
taken alone or together with any previous
event or circumstance) has, or could
reasonably be expected in the opinion of
the Majority Banks to have, a serious
effect on the assets, business or
financial condition or trading prospects
of any Group Company or of the Group as a
whole;
"Month" a period starting on one day in a
calendar month and ending on the
numerically corresponding day in the
next calendar month or, if that
corresponding day is not a Business Day,
ending on the next Business Day unless
that falls in another calendar month in
which case it shall end on the preceding
Business Day, save that if there is no
corresponding day in the month in which
the period ends, that period shall end on
the last Business Day in the later month;
"NationsBank Facility Agreement" the facility agreement dated 3 June 1993
pursuant to which NationsBank, N.A.
(Carolinas) agreed to make available to
TCLC a loan facility of up to $20,000,000
under which the current outstanding
balance is $10,000,000;
"NationsBank Loan" principal amounts outstanding from time
to time under the NationsBank Facility
Agreement;
"NationsBank Holding (a) the loan made by NationsBank of North
Company Loans" Carolina to W.A. Adams Company
Employee Stock Ownership Plan Trust
pursuant to the Loan and Guaranty
Agreement dated June 30, 1992 as
amended from time to time; and
(b) the loan made by NationsBank of North
Carolina pursuant to a Loan Agreement
dated July 1, 1992 as amended from
time to time;
"Negative Pledge" means the negative pledge dated 22 March
1995 executed by SCC in favour of the
Lead Bank on behalf of the Banks;
"Net Disposal Proceeds" the proceeds of any Disposal prior to the
Enforcement Date (less, in the case only
of a Wool Group Company, repayment of any
inter-company indebtedness of that Wool
Group Company to any Tobacco Group
Company);
"New Finance Documents" the Finance Documents other than the
Facility Agreements and each is a "New
Finance Document";
"Non-Committed Banks" the banks identified in Schedule XII;
"Obligors" collectively the Borrowers, the
Covenantors, SCC, the Charging Companies
and any other person now or in the future
designated in writing as an Obligor by
the Lead Bank (acting with Majority Bank
approval) and SCC pursuant to this
Agreement and each is an "Obligor";
"Original Accounts" each of the audited accounts of the
Greater Group and each member of the
Group (both consolidated and
unconsolidated) for their respective
Accounting Reference Periods ended
31st March 1994;
"Outstandings" at any time in respect of a Bank means
the aggregate of the Dollar Equivalent of
each amount which a Borrower may at any
time owe to such Bank under the terms of
its Facility or in respect of which such
Bank has recourse to a Borrower under its
Facility (but excluding, for the
avoidance of doubt, any amount for which
SCTC may from time to time be indebted to
RBS under or pursuant to the RBS
Guarantee);
"Overall Commitment" in relation to a Bank means the
aggregate of the Commitments of such
Bank;
"Permitted Borrowings" (a) Borrowings under the Facilities, the
NationsBank Holding Company Loans,
the Kehaya Loan, the US Facility and
the Wool Group Facility on the terms
and up to the limits applicable
therein as at the date of this
Agreement (as such limits may be
reduced from time to time in
accordance with the terms of the
respective agreement and/or this
Agreement);
(b) Borrowings by any Group Company other
than SCC or a First Tier Subsidiary
from a third party lender on arms
length terms to finance stock in
trade in the ordinary course of its
business as carried on at the date
of this Agreement, provided that if
security is given for such Borrowing,
such security shall be granted only
to such lender and only over stock in
trade financed by such lender;
(c) Borrowings pursuant to any
conditional purchase, hire purchase,
operating lease or finance lease
arrangements permitted under Clause
14.9 (Hire Purchase Restrictions);
(d) Borrowings pursuant to any Bankers
Automated Clearing System facility
provided by Lloyds Bank Plc to
Standard Commercial Tobacco Services
(UK) Limited from time to time; and
(e) Borrowings which constitute normal
trade credit and other agreed periods
for payment of Indebtedness (in each
case not exceeding 45 days in
duration), incurred by a Group
Company in the ordinary course of
carrying on its business as carried
on at the date of this Agreement;
(f) Indebtedness from time to time
incurred by any Subsidiary of a First
Tier Subsidiary to such First Tier
Subsidiary in connection with any
Borrowing by such Subsidiary from
such First Tier Subsidiary, provided
that the aggregate Indebtedness at
any time of all Subsidiaries of a
First Tier Subsidiary to such First
Tier Subsidiary shall not exceed
$3,000,000 (or its equivalent in any
other currency or currencies), and
provided that no First Tier
Subsidiary which is a Tobacco Group
Company shall make any loan or
advance any credit to any Wool Group
Company after the date of this
Agreement (save that SCTC may
advance an amount not exceeding
(Pounds)5,500,000 to Standard Wool
(UK) Limited by way of subordinated
loan pursuant to a credit agreement
to be dated on or about the date of
this Agreement between SCTC and
Standard Wool (UK) Limited);
(g) Indebtedness incurred by a Wool Group
Company pursuant to a ring fenced
financing arrangement approved by the
Lead Bank (acting on the instructions
of the Majority Banks);
(h) liabilities assumed under guarantees
given by a Wool Group Company or a
Tobacco Group Company prior to the
date of this Agreement or
Indebtedness incurred by a Wool
Group Company or a Tobacco Group
Company prior to the date of this
Agreement where, in each case, such
guarantee or Indebtedness is detailed
in Part II of Schedule XI;
(i) liabilities assumed under guarantees
given by SCC in respect of (i)
Borrowings of a subsidiary of SCC
which are Permitted Borrowings under
paragraph (b) above, or (ii) normal
commercial obligations of a
subsidiary of SCC incurred in the
ordinary course of carrying on its
business as carried on at the date of
this Agreement;
(j) Indebtedness of Spierer under the
existing term loan of $3,200,000 made
available by Bank Julius Baer & Co.
Limited (provided such Indebtedness
is not increased after the date of
this Agreement);
(k) Indebtedness of TCLC under the
existing term loan made available by
Norddeutsche Landesbank Girozentrale
(provided such Indebtedness is not
increased after the date of this
Agreement);
(l) Indebtedness of Tentler & Co B.V. in
respect of the subordinated loan to
be made available by SCC of up to
$1,700,000 and referred to in Clause
14.46(c) (Claims) (provided such
Indebtedness is not increased after
the date of this Agreement);
"Permitted Encumbrances" (a) Encumbrances granted with the prior
consent of the Lead Bank (acting on
the instructions of the Majority
Banks);
(b) any Existing Security provided that
such Existing Security is not
amended, extended or renewed and the
amounts secured thereby are not
increased;
(c) liens arising by operation of law in
the normal course of business as
conducted at the date of this
Agreement and not with a view to the
deliberate creation of an
encumbrance;
(d) Encumbrances comprised in the
Security Documents or arising under
any agreement existing at the date of
this Agreement in favour of any of
the Banks in connection with credit
balances held by that Bank which
permit the netting of credit
balances, or in connection with any
Bankers Automated Clearing System
facility or any conditional purchase,
hire purchase or finance lease
arrangement which, in each case, is
a Permitted Borrowing, to the extent
that it may otherwise constitute an
Encumbrance;
(e) the arrangements contemplated in this
Agreement in relation to the
Realisation Account;
(f) any Encumbrance arising in the
normal course of business of any
Group Company (except for a First
Tier Subsidiary) as carried on at the
date hereof over stock in trade of
such Group Company;
(g) any Encumbrance created by or over
the Wool Group Companies (but
excluding any Encumbrance over the
shares in, or assets or undertaking
of, Standard Wool France S.A.);
(h) any Encumbrance created by any Group
Company (except SCC or a First Tier
Subsidiary) in relation to any
Borrowing to finance tobacco and
which is granted to the relevant
lender only over tobacco financed by
such lender or the right to receive
such tobacco and/or the proceeds of
sale of such tobacco where such
tobacco and proceeds have not been
pledged and are not required to be
pledged to the Security Agent (or, if
they are so pledged or required to be
pledged, the Security Agent has given
a consent or release to enable such
Encumbrance to be created);
(i) any Encumbrance over any asset
acquired after the date of this
Agreement and created solely for the
purpose of securing indebtedness
incurred only to finance the payment
of (and where the principal amount of
such indebtedness does not exceed)
the purchase price at fair market
value of such asset, provided that
the acquisition of such asset was
approved in the Budget annexed as
Appendix A to this Agreement or the
most recent Budget produced pursuant
to Clause 15.1 (Budget) and such
acquisition was made on the terms
approved by the Lead Bank in
relation to such Budget;
(j) any Encumbrance (the "New
Encumbrance") created solely to
replace an existing Encumbrance (the
"Old Encumbrance"), provided that:
(i) the New Encumbrance subsists over
the same asset as had been secured by
the Old Encumbrance and is made
available on terms no more onerous
than the terms governing the Old
Encumbrance; (ii) the New Encumbrance
secures no greater amount of
Indebtedness than the Old
Encumbrance; and (iii) the Old
Encumbrance was a Permitted
Encumbrance;
(k) any Encumbrance arising in connection
with a Permitted Borrowing pursuant
to Clause 14.9 where such Encumbrance
arises solely by reason of entering
into the relevant hire purchase
agreement, finance lease or operating
lease and not by the creation of
specific security;
(l) any Encumbrance arising pursuant to a
title retention arrangement with a
supplier to the relevant Group
Company on such supplier's normal
business terms for supply of any
asset or product (other than tobacco
or wool) in the ordinary course of
the business of such Group Company as
carried on at the date of this
Agreement;
(m) the $15,000,000 subordinated note
receivable constituted by a
promissory note dated 29 July 1993
payable by SCT (US) to SCC;
(n) any Encumbrance which does not fall
within (a) to (m) inclusive above,
provided that the aggregate Dollar
Equivalent of the payment obligations
of all Group Companies secured by
such Indebtedness does not exceed
$500,000 (or its equivalent) at any
time;
"Permitted Share Issue" the issue by SCC of shares of its common
stock:-
(a) to satisfy any stock dividend
declared by SCC after the date of
this Agreement;
(b) pursuant to the Dividend Reinvestment
Plan under which the Shareholders of
SCC may acquire additional shares of
common stock at fair market value
through automatic reinvestment of
their cash dividends and/or optional
cash investments of up to $3,000 per
quarter without payment of brokerage
commissions or service fees;
(c) pursuant to the SCC 401(k) Savings
Incentive Plan under which SCC
contributes shares of common stock
with a fair market value not to
exceed $3,000 per annum under a 50%
matching programme;
(d) pursuant to the Performance
Improvement Compensation Plan under
which the Compensation Committee of
the SCC Board of Directors has
authority to grant a number of
different types of equity based
compensation vehicles designed to
benefit SCC by attracting, motivating
and retaining personnel of
exceptional ability;
(e) upon conversion of the Convertible
Subordinated Debentures or the
Preference Stock at a conversion
price of $32.35 or $35 per share,
respectively as may be adjusted from
time to time if shares of common
stock are issued at less than the
conversion prices;
(f) in a public offering where the
proceeds of such issue are used to
reduce indebtedness of SCC;
in each case provided no Event of Default
or Potential Event of Default has
occurred or would occur as a result of
such share issue;
"Potential Event of Default" (a) any event or the existence of any
circumstance which, with the giving
of notice, the lapse of time, any
determination of materiality, the
satisfaction of any applicable
condition, or any combination of them
might in the opinion of the Lead Bank
(acting on the instructions of the
Majority Banks) constitute or bring
about an Event of Default; or
(b) that financial circumstances exist,
such that (in the opinion of the Lead
Bank (acting on the instructions of
the Majority Banks)) on the
subsequent publication of any audited
or quarterly accounts by reference to
which the financial covenants in
Clause 16.1 (Financial Covenants) are
to be calculated, there would then be
a breach of one or more of those
financial covenants;
"Preference Stock" 92,005 authorised shares with a par value
of $1.65 each of Series A Cumulative
Convertible Preferred Stock entitled to
receive a dividend of $2 per share
payable quarterly, issued by SCC in
connection with the acquisition of W A
Adams and redeemable by SCC on or after 1
August 1996 at $100 per share plus any
dividend accrued thereon;
"Preferential Claim" means a claim by a Bank for sums advanced
to a Borrower to which Section 386 and
Schedule 6 of the Insolvency Act 1986 (or
any analogous provision in any other
applicable jurisdiction) applies;
"Principal Indebtedness" (a) means, in relation to a Facility
under which actual Indebtedness is
owing, the principal amount for the
time being owing thereunder
(including the face amount of any
outstanding Bills accepted and
discounted by a Bank under an
acceptance credit Facility and the
amount of any interest which has been
capitalised to become Principal
Indebtedness but excluding Interest
Indebtedness);
(b) means, in relation to a Facility
under which unmatured liabilities
exist, the maximum unmatured
liability from time to time capable
of maturing into an actual principal
liability thereunder or (if such
liability has matured) the principal
amount of it (excluding Interest
Indebtedness but including interest
which has been capitalised to become
Principal Indebtedness), except that
unmatured liabilities under spot and
forward foreign exchange currency
Facilities shall be valued in
accordance with Clause 2.12 (Foreign
Exchange) and matured liabilities
under all such Facilities shall be
valued at the net actual amount of
such liabilities;
"Properties" at any time, all interests in freehold
and leasehold property then owned by any
member of the Group;
"Proportion of Aggregate
Commitments" in relation to any Bank, means the
proportion which its Overall Commitment
bears to the aggregate of all Overall
Commitments on the Enforcement Date;
"Proportion of Aggregate
Outstandings" in relation to any Bank, means the
proportion which its Outstandings bear to
the aggregate of all Outstandings on the
Enforcement Date;
"Quarter Date" each of 31 March, 30 June, 30 September
and 31 December in any year;
"RBS" The Royal Bank of Scotland plc;
"RBS Guarantee" the two guarantees given by SCTC to RBS
in respect of the obligations of Standard
Wool (UK) Limited dated 12 February 1992
and 30 June 1994 respectively;
"RBS Legal Charge" the first legal charge dated 19 December
1991 granted by SCTC to RBS in respect of
land and buildings in Godalming, Surrey;
"Realisation Account" an interest-bearing Dollar account opened
in the books of Deutsche Bank A.G.
entitled "Deutsche Bank A.G. -
Realisation Account re [*Group Company*]"
into which Net Disposal Proceeds are to
be paid pursuant to Clause 14.6 (Net
Disposal Proceeds);
"Recoveries" the net amounts (after deducting and
retaining or paying all proper costs,
charges and expenses (including legal
expenses) and receivers and other costs
of enforcement) received, recovered or
realised by:-
(a) the Security Agent pursuant to the
Security Documents on or after the
Enforcement Date; and/or
(b) any Bank or the Lead Bank in respect
of the Indebtedness of the Obligors
or any of them under or pursuant to
the Facilities, this Agreement and/or
the Finance Documents or any of them
on or after the Enforcement Date
which are deemed to be Recoveries
under this Agreement,
and includes any proceeds derived on or
after the Enforcement Date from an
insurance claim in respect of any asset
or property charged under any Security
Document;
"Recoveries Account" shall bear the meaning attributed thereto
in Clause 25.3 (Recoveries to be held as
Trustee);
"Reducing Bank" each Bank identified in Schedule XIII;
"Reducing Outstandings" means, in relation to any Reducing Bank,
the amount of its Outstandings at the
Relevant Date in excess of its Overall
Commitment (up to the maximum figure set
opposite its name in Schedule XIII);
"Relevant Date" the date of this Agreement;
"Reserve" a reserve for unmatured liabilities made
in accordance with the provisions of this
Agreement;
"Sale of a Wool Group Company" means a sale of the shares or the
goodwill and/or assets of the business of
a Wool Group Company at arms length for a
cash consideration on terms acceptable to
the Steering Committee and "Sale of the
Wool Group" means the sale of all the
shares or the goodwill and/or assets of
the business of the Wool Group Companies
(other than Tentler & Co. B.V.) at arms
length for a cash consideration on terms
acceptable to the Steering Committee;
"SCC" Standard Commercial Corporation, a
company registered in the laws in the
State of North Carolina, USA, with
Federal Tax Identification Number
13/1337610;
"SCC Subordination Agreement" shall bear the meaning attributed thereto
in Clause 14.8(b) (Factoring and Loans);
"SCTC" Standard Commercial Tobacco Company (UK)
Limited, a company registered under the
laws of England and Wales with registered
number 1411968;
"SCT (US)" Standard Commercial Tobacco Company, Inc.
a company registered under the laws of
the State of North Carolina;
"Security Agent" MeesPierson N.V. in its capacity as
security agent for the Finance Parties
and any successor security agent
appointed under the terms of this
Agreement;
"Security Documents" each of the documents detailed in
Schedule VI and any new, substituted or
additional security entered into by any
person in favour of the Security Agent on
or after the date of this Agreement to
secure amounts now or hereafter due or
owing (actually or contingently) to any
Finance Party under or pursuant to the
Finance Documents or any of them;
"Share Charges" the charges granted or to be granted by
SCC in favour of the Security Agent as
agent and trustee for the Finance Parties
over the shareholding of SCC in each of
the Borrowers, the Covenantors, Standard
Commercial Tobacco Company of Canada Ltd
and Standard Commercial Tobacco Services
(UK) Limited;
"Spierer" Spierer Freres & Cie S.A., a company
registered under the laws of Switzerland
whose file reference at the Geneva
Companies Registry is 1464/1926;
"SSAP" a Standard Statement of Accounting
Practice issued by the Institute of
Chartered Accountants;
"Sterling" or "(Pound)" lawful currency of the United Kingdom;
"Subsidiary" (a) a subsidiary as defined in Section
736 of the Act; and
(b) for the purposes of Clause 15
(Information Covenants) and Clause 16
(Financial Covenants), a subsidiary
undertaking as defined in Section 258
of the Act;
"Surplus Cash" on any Quarter Date in respect of which
Surplus Cash is to be calculated, means
the aggregate of:-
(a) the aggregate cash balances standing
to the credit of the Borrowers on
accounts with any of the Banks as at
such date (save to the extent that
such balances constitute cash
collateral under the terms of a
Bank's Facility as at such date); and
(b) the aggregate Available Commitment as
at such date;
LESS
(i) the amount of any forecast funding
requirement of the Borrowers over
the four Trading Periods next
following such Quarter Date as shown
in the most recent Cash Flow
Forecast delivered pursuant to
Clause 15.3 (Cash Flow Forecast) and
(ii) a further amount agreed between the
Borrowers and the Steering Committee
(in consultation with Coopers &
Lybrand) to take account of
fluctuations in trading within each
Trading Period during the four
Trading Periods covered by that Cash
Flow Forecast;
"Taxes" all present and future taxes, levies,
imposts, duties, charges, fees,
deductions and withholdings imposed or
levied by any governmental, fiscal or
other competent authority (and includes
without limitation any penalty payable in
connection with any failure by any Group
Company to pay or delay by any Group
Company in paying any of the same) and
"Tax" and "Taxation" shall be construed
accordingly;
"Tax on Overall Net Income" of a Finance Party shall be construed as
a reference to tax (except tax deducted
or withheld from any amounts paid or
payable under this Agreement) imposed on
that Finance Party by the jurisdiction
under the laws of which it has been
incorporated or in which its Facility
Office is located on (a) the net income,
profits or gains of the Finance Party
worldwide or (b) such of the net income,
profits or gains of the Finance Party as
are considered to arise in or to relate
to or are taxable in that jurisdiction;
"TCLC" Trans-Continental Leaf Tobacco
Corporation Limited, a company registered
under the laws of Liechtenstein with
registered number H.LIV/14;
"Tobacco Group Company" SCC and each other body corporate
detailed in Schedule VIII and the
"Tobacco Group" means all the Tobacco
Group Companies;
"Trading Period" the three monthly periods by reference to
which SCC prepares:-
(a) the management accounts to be
delivered to the Lead Bank under
Clause 15.7(b) (Quarterly Management
Accounts); and
(b) the Cash Flow Forecasts to be
delivered to the Lead Bank under
Clause 15.3 (Cash Flow Forecast);
"Transferee" a bank or other financial institution to
which a Bank seeks to transfer or has
transferred all or part of its rights and
obligations under this Agreement and each
other Finance Document in accordance with
Clause 21.3 (Assignment and Transfer);
"Transfer Certificate" a certificate substantially in the form
set out in Schedule VII signed by a
Transferee and a Bank;
"United States" or "USA" the United States of America;
"unmatured liability" an unmatured, contingent or future
liability or any other liability which is
not immediately due and owing;
"US Facility" the $125,000,000 loan facility to SCT
(US) made or to be made available by
NationsBank of Georgia N.A. and Union
National Bank of North Carolina or its
affiliates substantially on the terms
contemplated in the term sheet dated 16th
December 1994;
"Werkhof" Werkhof GmbH, a company registered under
the laws of the Republic of Germany whose
registered number in the Handelsregister
is 16332;
"Wool Group Company" any of the Companies detailed in Schedule
V and "Wool Group Companies" shall be
construed accordingly;
"Wool Group Facility" the facility agreement entered into or to
be entered into between Standard Wool
(UK) Limited (1), Standard Commercial
Corporation (2), NatWest Capital Markets
Limited (3) the banks and financial
institutions listed therein (4) and
National Westminster Bank Plc (5);
"Wool Group Lenders" the banks and financial institutions
which are from time to time parties as
Banks to the Wool Group Facility.
1.2 INTERPRETATION
In this Agreement, save as otherwise expressly provided:-
(a) references in this Agreement to this Agreement or any other document
include references to this Agreement, its Recitals and its Schedules or
such other document as extended, varied, supplemented, restated and/or
replaced in any manner from time to time (even if changes are made to
the composition of the Finances Parties and/or the other parties to this
Agreement) and references to this Agreement shall also include any
document which extends, supplements, varies, restates or replaces this
Agreement;
(b) subject to Clause 21 (Assignments and Transfers), references to any
party shall, where relevant, be deemed to be references to or to
include, as appropriate, their respective lawful successors, assigns or
transferees;
(c) references to Clauses, paragraphs and Schedules are to be construed as
references to Clauses and paragraphs of, and Schedules to, this
Agreement;
(d) references to any enactment shall be deemed to include references to
such enactment as re-enacted, amended or extended;
(e) references to a "person" shall include any individual, company,
corporation, firm, partnership, joint venture association, organisation,
institution, trust or agency, whether or not having a separate legal
personality;
(f) references to the "assets" of any person shall be construed as a
reference to the whole or any part of its business, undertaking,
property, shareholdings, assets, rights and revenues (including any
right to receive revenues and uncalled capital);
(g) references to the one gender shall include all genders, and references
to the singular shall include the plural and vice versa;
(h) headings are inserted for convenience only and shall be ignored in
construing this Agreement;
(i) references to "including" and "in particular" shall not be construed
restrictively but shall be construed as meaning "including, without
prejudice to the generality of the foregoing" and "in particular, but
without prejudice to the generality of the foregoing" respectively;
(j) references to "law" shall be construed as including any present or
future common law, statute, statutory instrument, treaty, regulation,
directive, order, decree, other legislative measure, code, circular,
notice, demand, or injunction, including those with which it is
customary for persons to whom it is directed to comply, even if
compliance is not mandatory;
(k) references to "writing" include telex and facsimile transmission legibly
received, except in relation to any certificate, forecast, report,
notice, resolution or other document which is expressly required by this
Agreement to be signed, and "written" has a corresponding meaning;
(l) any consent or approval required from the Lead Bank, and/or any of the
Banks, to any Borrower under this Agreement must be obtained in writing
and shall be of no effect if it is not in writing;
(m) a reference to time is to London time; and
(n) a reference to the approval of the Steering Committee is a reference to
a unanimous approval by the members of the Steering Committee.
PART II
MASTER FACILITIES ARRANGEMENTS
2. MASTER FACILITIES ARRANGEMENTS
2.1 APPLICATION:
(a) The terms of the Facilities and the Facility Agreements shall be amended
and supplemented to the extent expressly provided in this Agreement.
(b) In the event of any conflict or inconsistency between the terms of this
Agreement and the terms of any existing or future agreement between a
Finance Party and one or more Group Companies, the terms of this
Agreement shall (unless otherwise expressly agreed by or on behalf of
all parties hereto) prevail for so long as required to give full effect
to the provisions of this Agreement (provided that, for the avoidance of
doubt, the provisions of this Clause 2.1(b) shall not apply to the terms
of the Wool Group Facility).
2.2 DEFAULTS: Save as otherwise expressly provided in this Agreement, each Bank
agrees that with effect from the Effective Date until the Master Facilities
Termination Date:-
(a) the entry into of any New Finance Document or anything done pursuant to
and in accordance with the terms of any New Finance Document shall not
constitute a breach of any term of or an event of default (however
described) under the terms of any Facility or any Facility Agreement or
otherwise render any Facility capable of acceleration; and
(b) such Bank will not (save as expressly permitted by this Agreement)
exercise any rights it may have to accelerate, terminate or amend the
terms of its Facility following the occurrence of any default and/or any
event of default (however described) under any Facility Agreement and
any right or remedy it may now have or become entitled to exercise as a
result of any such default or event of default.
2.3 FACILITIES, CONTINUING:
(a) Save as varied or supplemented by this Agreement, the terms of the
Facility Agreements and the Facilities and all of the rights, benefits,
commitments, obligations and liabilities of the Banks and each of the
Obligors thereunder or in respect thereof shall continue in full force
and effect and continue to be regulated by the terms applicable thereto.
(b) Nothing contained in or done or omitted to be done pursuant to this
Agreement shall discharge, release or otherwise adversely affect the
obligations of any person under any Encumbrance or guarantee granted or
created by such person in relation to or in connection with the
Facilities. References in any such guarantee or Encumbrance to any
Facility Agreement shall (where the terms of such guarantee or
Encumbrance so permit) apply as if the references were to such document
as varied and supplemented by the terms of this Agreement.
2.4 FACILITIES, AVAILABILITY:
(a) Save as expressly provided in this Agreement, the undrawn or unutilised
portion of any Facility from time to time shall, with effect from the
Effective Date and until the Master Facilities Termination Date,
continue to be available for drawing or utilisation up to the level of
the relevant Bank's Commitment in accordance with the terms of such
Bank's Facility (as expressly varied or supplemented by this Agreement)
and each Bank which at the Relevant Date provided to a Borrower a
Facility shall continue until the Master Facilities Termination Date to
provide such Facility to such Borrower upon the same terms (except as
expressly varied or supplemented by this Agreement) as were applicable
to such Facility at the Relevant Date and up to the level of its
Commitment.
(b) Without prejudice to paragraph (a) above, all overdue amounts
outstanding under any of the Facilities as at the Effective Date shall,
with effect from the Effective Date, be deemed to be outstanding by way
of overdraft repayable on demand at any time by the relevant Bank
following the Master Facilities Termination Date and shall bear interest
at the rate set out in Clause 7.1(a) (Interest Rate) and otherwise shall
be subject to the terms set out in this Agreement.
(c) Any Facilities which are expressed in Schedule IV to be revolving
facilities shall continue to revolve and remain available until the
Master Facilities Termination Date (save as expressly provided in this
Agreement).
(d) If any principal amount outstanding under any Facility which is
expressed in Schedule IV to be a term loan facility falls due for
repayment by expiration of time before the Master Facilities Termination
Date or if any Facility gives rise to a valid reimbursement obligation
to a Bank or any unmatured liability under a Facility matures into an
actual liability, then the amount becoming due shall be deemed to be
converted into an overdraft Facility repayable on demand at any time
after the Master Facilities Termination Date and shall bear interest at
the rate set out in Clause 7.1(a) (Interest Rate) and otherwise shall be
subject to the terms set out in this Agreement.
(e) For the avoidance of doubt, no Bank shall or shall be obliged to permit
any utilisation of a Facility which would cause its Outstandings to
exceed the level of its Commitment as reduced from time to time pursuant
to Clause 8.6 (Reductions).
(f) Following the declaration by the Lead Bank of an Event of Default under
Clause 17.1(a) (Termination in Case of Default) in relation to any
amount due to a Bank pursuant to the terms of its Facility (as amended
by the terms of this Agreement), such Bank shall not be obliged to
permit any further utilisation of its Facility unless such Bank
otherwise expressly agrees.
(g) Save as expressly permitted by Clause 8.6 and save for a payment to the
Non-Committed Banks or the Reducing Banks or a payment or dividend to
SCC which does not constitute a breach of the terms of this Agreement,
no Facility may be utilised, directly or indirectly, to prepay or repay
any borrowings or other indebtedness of any Group Company to any lender
or financial institution without the prior written consent of the Lead
Bank (acting with Majority Bank approval).
2.5 REPAYMENT, REDUCTION AND DISCHARGE:
(a) With effect from the Effective Date until the Master Facilities
Termination Date, any repayment, reduction or discharge of the amount of
any Facility provided for under a Facility Letter shall be effected
only in the manner provided in this Agreement.
(b) The Overall Commitment of a Bank shall be permanently reduced, pro
tanto, by the amount of any sum which it receives pursuant to Clauses
8.7 (Repayments) and/or 14.5(a)(v) (Restriction on Disposals) for
application against Outstandings under its Facility in accordance with
the terms of this Agreement.
2.6 SURVIVAL OF PROVISIONS OF MASTER FACILITIES AGREEMENT: Save as expressly
provided in this Agreement, the provisions of this Agreement shall remain in
full force and effect after the Master Facilities Termination Date and, in
particular, but without limitation, the provisions of Clauses 2.11
(Outstandings), 2.14 (Consents), 3 (Position After Master Facilities
Termination Date), 7.3 (Default Interest Rate), 7.6 (Payment of Interest
etc), 7.7 (Indemnity), 8.4 (Waiver), Part VIII (No Deductions), Part IX
(Guarantee), Part XIII (Fees, Expenses and Stamp Duties), Part XIV
(Assignments and Transfers), Part XV (Agency and Inter-Bank Provisions),
Part XVI (Enforcement), Part XVII (Notices, Etc.), Schedule I (Borrowers and
Covenantors), Schedule II (The Banks), Schedule VII (Form of Transfer
Certificate) and Schedule XVIII (Distribution of Recoveries between Finance
Parties) shall remain in force for so long as any amount is due or owing or
may be or become due or owing from any Obligor to any Finance Party under or
pursuant to any Finance Document and as otherwise required to give full
effect to the provisions of this Agreement.
2.7 AMENDMENTS:
(a) Save as expressly provided in this Agreement, with effect from the
Effective Date until the Master Facilities Termination Date, no Finance
Party shall, or shall agree to, vary, amend, waive or supplement the
terms of any of the Facilities or the Facility Agreements (save with the
prior written consent of the Lead Bank acting with Majority Bank
approval), provided that a Finance Party may amend, vary or waive in
writing any provision of a Facility or a Facility Agreement to the
extent that:-
(i) such amendment, waiver or variation is of a purely technical,
non-material and mechanical nature and is not inconsistent with the
terms of this Agreement and does not have the effect of conferring
on any Finance Party any priority over the rights of or otherwise
prejudicing or adversely affecting any other Finance Party; and
(ii) the Lead Bank receives at least 7 Business Days' prior written
notice of the full terms thereof and has not objected to such
amendment, waiver or variation in writing.
(b) In the case of a permitted amendment of the terms of any Facility, an
appropriate alteration shall be deemed to be made to the applicable
entries in Schedule IV (if applicable). Such alteration shall be
determined by the Lead Bank which shall notify the Banks and the
Borrowers thereof and such alteration shall (save for manifest error)
take effect from the date specified by the Lead Bank in such notice.
All the Banks and each Group Company shall be deemed to have irrevocably
agreed to the alteration and its effective date set forth in such notice
save for manifest error.
(c) In any case where, after the date of this Agreement, a Bank considers
that the entries in respect of itself in Clause 13.4 (Banks'
Representation) or in the Schedules to this Agreement are inaccurate, it
may request an appropriate amendment and, if the Lead Bank (acting with
Majority Bank approval) so agrees, such amendment shall be made and
shall take effect from the date determined by the Lead Bank (acting with
Majority Bank approval).
2.8 RESTRICTION: Save as expressly provided in this Agreement or authorised
hereby, no Bank-shall, after the Effective Date and prior to the Master
Facilities Termination Date:-
(a) take any steps to wind-up or appoint a receiver or administrative
receiver, administrator or liquidator to any Group Company or commence
any analogous insolvency proceedings in any jurisdiction, or exercise or
enforce any of its rights or remedies against or take, commence or
continue any legal action or proceedings against any Group Company in
each case under or in respect of any obligation or liability of any
Group Company under any Facility or Facility Agreement or permit any
such rights or remedies to be exercised or enforced or any such action,
suit or proceeding to be taken or commenced on its behalf, (provided
that nothing in this Agreement shall prevent RBS from making demand
under the RBS Guarantee or enforcing the RBS Legal Charge or enforcing
any other security held by it in respect of Indebtedness of any Group
Company to it under the Wool Group Facility, in each case subject to RBS
notifying the Lead Bank in writing as soon as reasonably practicable and
in any event no later than the date on which any action is taken to
declare an event of default (however called) under the Wool Group
Facility or to make demand under the RBS Guarantee or enforce the RBS
Legal Charge or enforce any security held by or for the benefit of RBS
in respect of Indebtedness of any Group Company to it under the Wool
Group Facility);
(b) (without prejudice to its rights in relation thereto and, following the
Master Facilities Termination Date, its rights to take action to recover
the same) accept or demand any payment or satisfaction, whether in money
or money's worth, from any Group Company in respect of any Outstandings
except as expressly authorised or contemplated by this Agreement;
(c) make any demand for or require (or enforce any provisions which require)
the acceleration of any Facility;
(d) take any security, cash collateral, guarantee, indemnity or other
security from any Group Company in respect of any Outstandings or any
other amount owed to it under any Finance Document, (except the Existing
Security or any security, cash collateral, guarantee, indemnity or other
security required to be provided by a Group Company to a Bank pursuant
to the terms of a Facility Letter which is in existence at the date of
this Agreement in the normal course of operating the relevant Facility)
or except as expressly permitted by the terms of this Agreement;
(e) call in, reduce, withdraw, cancel, close out or cease to make available
any of its Facilities save as expressly authorised by this Agreement;
(f) enforce any provision for the automatic or accelerated payment or
discharge of all or any part of the Indebtedness due or owing under any
Facility upon the occurrence of any event of default applicable under
the terms of such Facility; or
(g) require payment of any principal amount becoming repayable on its
maturity under any Facility; or
(h) enforce any guarantee or security held by such Bank for all or any part
of the Indebtedness due or owing under its Facilities, provided that the
foregoing shall not restrict or prevent such Bank from
(i) exercising any rights of set-off or consolidation of accounts in
the usual course of operating such Facilities or any netting or
other rights exercisable under a composite accounting system in
existence at the date of this Agreement or;
(ii) retaining any credit balances or other amounts as security for
actual or contingent liabilities of any Group Company and applying
the same in or towards satisfaction of such liabilities as and when
they mature if and insofar as such Bank is expressly permitted in
each case to do so by any agreement with the relevant Group Company
in existence at the date of this Agreement;
but without prejudice to any rights of the Lead Bank or the Security
Agent acting in such capacity in accordance with the other provisions of
this Agreement.
2.9 PRESERVATION OF RIGHTS: Nothing in this Agreement shall prevent a Finance
Party taking any action which it considers to be necessary:-
(a) to preserve any security constituted by any Existing Security granted
in its favour;
(b) to preserve the benefit of any guarantee or indemnity in relation to any
Facility granted in its favour;
(c) to defend any action or proceedings brought against it or to preserve or
clarify its contractual rights as amended, supplemented and/or varied
hereby if they are being disputed;
(d) to dispute any purported rescission or repudiation of any liability of
any Obligor; and/or
(e) to enforce any and all of its rights under other agreements which do not
constitute Finance Documents, provided that such agreements do not
constitute a breach of Clause 13.4 (Banks' Representation) and, in the
case only of RBS, and subject to compliance by RBS with Clause 2.8(a),
to make demand under the RBS Guarantee and enforce the RBS Legal Charge
in respect of amounts owed to RBS under the Wool Group Facility;
Provided that (a) the relevant Finance Party shall give written notice that
it proposes to take such action to the Lead Bank as soon as reasonably
practicable and in any event not later than the date upon which such Finance
Party takes such action; and (b) such action is taken only on the basis that
its purpose is to crystallise or preserve the rights of the relevant Bank
and such Bank will not receive any recovery or repayment or enforce any
security held by it without the prior written consent of the Lead Bank
(acting with Majority Bank approval) and no action shall be taken which
would breach any other provision of this Agreement.
2.10 PERMITTED ACTIONS: Nothing in this Agreement shall, during the
Availability Period, prevent:-
(a) any Bank permitting or being entitled to receive repayment of any money
or liability or receiving payment or permitting any money or liability
to be repaid in the normal course of operating an overdraft or other
revolving Facility, provided that such repayment or discharge shall not
of itself constitute a permanent reduction of the Commitment or Overall
Commitment of such Bank and the amounts repaid or discharged may
accordingly be reborrowed subject to the terms of this Agreement and the
relevant Facility;
(b) interest, commission and fees in respect of a Facility being paid on
their due date in accordance with the terms of such Facility (as amended
by this Agreement);
(c) in the case of any foreign exchange transaction, or other similar
agreement, any Borrower or any Bank continuing to make (and, if
applicable, receive) commission or other similar payments thereunder,
including payments on maturity thereof in accordance with the express
terms of the agreements relating thereto (as amended by this Agreement);
(d) any Indebtedness becoming due and payable (otherwise than by demand
under any revolving Facility ) and being paid in accordance with the
terms of any Facility;
(e) a Bank making a call for cash or other cover (or debiting the relevant
Borrower's account for such purpose) where such call or the making of
such debit is permitted by the terms of (and in the normal course of
operating) the relevant Facility and the Lead Bank (acting with Majority
Bank approval) has given its prior written consent thereto;
(f) a Bank requiring payment of commissions or fees due as a condition of
the utilisation of any Facility pursuant to the terms applicable to such
facility as at the date of this Agreement;
(g) any Bank making demand or serving notice of dishonour against any Group
Company in accordance with the terms of any Facility or pursuant to any
guarantee, security or right of recourse in respect of a Facility,
where:-
(i) such Bank gives at least two Business Days' prior written notice to
the Lead Bank specifying why such action is necessary or advisable
in order to preserve the rights of the relevant Bank (save in an
emergency when the obligation of such Bank shall be to so notify
the Lead Bank as soon as reasonably practicable); and
(ii) such demand or notice is only made on the basis that its purpose is
to crystallise or preserve the rights of the relevant Bank and the
Bank will not receive any recovery or repayment and no action shall
be taken which would breach any other provision of this Agreement.
2.11 OUTSTANDINGS: For the purpose of calculating any amount in any currency,
the Outstandings and the Commitments and the Overall Commitments shall
continue, as between the relevant Borrowers and the relevant Banks to be
calculated in accordance with the terms of the relevant Facility Agreements
(save as provided in Clause 2.12 (Foreign Exchange) and Clause 28
(Calculation of Outstandings)). Where it is necessary for the purpose of
this Agreement to calculate any such amount, then the Lead Bank shall make
such calculation after consultation with the relevant Bank and shall notify
the relevant Bank and the relevant Borrower of such amount and such
notification shall, save in the case of manifest error, be conclusive for
the purposes of this Agreement.
2.12 FOREIGN EXCHANGE: In determining the amount of any Outstandings from time
to time at any time prior to the Enforcement Date, each foreign exchange
transaction between a Bank and a Borrower shall be treated as follows:-
(a) with respect to any foreign exchange transaction whose initial term is
210 days or less, an amount equal to 10 per cent. of the gross amount
payable by the Borrower under such foreign exchange transaction shall be
deemed to be the amount outstanding under the relevant Facility for the
purpose of calculating such Bank's Outstandings;
(b) with respect to any foreign exchange transaction whose initial term is
greater than 210 days, an amount equal to 20 per cent. of the gross
amount payable by the Borrower under such foreign exchange transaction
shall be deemed to be the amount outstanding under the relevant Facility
for the purpose of calculating such Bank's Outstandings.
2.13 RULING OFF: If any Borrower shall have a petition presented against it for
its compulsory winding up under the Insolvency Act 1986 or any step having
a substantially similar effect is taken against it in any jurisdiction
outside England and Wales at any time during the Availability Period, then
each Bank providing any Facility to such Borrower shall, immediately on
receipt of notice of such occurrence:-
(a) rule off its account(s) with the relevant Borrower and open a new and
separate account for the collection of all credits thereafter received
by that Bank on behalf of the affected Borrower and if any Bank fails so
to rule off it shall, nonetheless, be deemed to have done so;
(b) refuse to allow the affected Borrower to utilise or draw against or
borrow any further amounts under its Facilities unless expressly
directed by the Lead Bank (acting with Majority Bank approval) and then
only in a case where:-
(i) a validating order is made under Section 127 of the Insolvency Act
1986 or any analogous provision under any other applicable law,
which permits the Facilities to be further utilised to the extent
directed by the Lead Bank (acting with Majority Bank approval); or
(ii) such petition is withdrawn by the petitioner (and no other creditor
is substituted for such petitioner) or an order is made by the
Court that the petition should be dismissed;
Provided that, if any such petition is presented or step taken in
relation to a Borrower under the NationsBank Facility Agreement,
NationsBank shall not be obliged to permit any further utilisation of
its Facility except in its sole discretion;
(c) rule off the relevant account(s) of any Borrower whose indebtedness the
affected Borrower has guaranteed (a "Principal Debtor") and (if and when
so directed by the Lead Bank (acting with Majority Bank approval))
permit a Principal Debtor to draw further upon its Facilities through a
new and separate account, except where a petition has also been
presented against such Principal Debtor for its compulsory winding-up
(in which case the foregoing provisions of this Clause shall also apply
to such Principal Debtor).
2.14 CONSENTS: Each party to this Agreement consents: (a) to the charges,
encumbrances and guarantees permitted, created or to be created at any time
pursuant to this Agreement and/or the Security Documents; and (b) to the
sale or disposal of any assets solely to such extent as may be necessary
for the purposes of any disposal approved by the Lead Bank pursuant to
Clause 14.4(b) or otherwise permitted by the terms of this Agreement; and
(c) any other matter or thing expressly permitted by the terms of this
Agreement.
2.15 NON-COMMITTED BANK, INVITATION: Each of the Non-Committed Banks will
receive a copy of this Agreement, together with a permanent open invitation
to participate in this Agreement on the same basis as the Banks and to
cease to be a Non- Committed Bank.
3. POSITION AFTER MASTER FACILITIES TERMINATION DATE
3.1 After the Master Facilities Termination Date:-
(a) any Bank may make any demand or give any notice for the payment or
discharge of any Indebtedness due or owing under or pursuant to any
Facility Agreement or Facility, provided that such Bank shall first have
given to all Banks a minimum of 7 Business Days' prior written notice of
its intention to make such demand or give such notice;
(b) the Facilities shall be repayable on demand and any Bank may, unless
hereafter it expressly agrees to the contrary with a Borrower, refuse to
allow further utilisation of, drawings against or borrowings under, any
Facilities it provides to such Borrower, or cancel, amend or withdraw
such Facilities at any time and/or demand the immediate repayment of any
indebtedness and/or any liabilities due, owing or incurred to it by any
Obligor, subject to first complying with the requirements for notice
applicable under paragraph (a) above;
(c) any Bank may take steps to enforce any Existing Security which it holds
(subject to the terms of that Existing Security and any agreements
relating thereto) whenever it so determines for the recovery of any
overdue amount outstanding under a Facility, subject to giving all of
the Banks not less than 14 Business Days' prior written notice of its
intention so to do;
(d) any Bank may require the Security Agent to enforce the Security for its
benefit as contemplated in Clause 25.1(b) (Enforcement);
(e) each Bank shall deliver all amounts received, recovered or realised by
it which fall to be treated under this Agreement as Recoveries (except
the proceeds of the enforcement of its Existing Security) forthwith to
the Security Agent to be applied in accordance with the provisions of
Clause 25.1 (Enforcement) and Schedule XVIII (Distribution of Recoveries
Between Finance Parties).
PART III
REVIEW
4. REVIEW
4.1 REVIEW: Unless notice has been previously given to cancel some or all of
the Commitments under Clause 17.1 (Demand on Event of Default), the
Steering Committee shall, within 14 Business Days after its receipt of the
report to be prepared by Coopers & Lybrand in relation to the affairs of
the Group, offer to meet representatives of SCC to review the financial and
trading position and prospects of the Group and its business plans in the
light of such report and to discuss what changes to the Facilities and the
terms of the Finance Documents are considered by the Steering Committee to
be appropriate. SCC shall ensure that all necessary co-operation is
provided by the Group to Coopers & Lybrand to enable them to complete their
report not later than 15 May 1995.
4.2 AMENDMENT: Notwithstanding any other provision of any Finance Document,
the Lead Bank (acting with Majority Bank approval) shall have the option,
exercisable at any time after allowing SCC an opportunity (not exceeding 10
Business Days) to discuss with Steering Committee representatives the
report referred to in Clause 4.1, to review the Facilities and to vary,
supplement and/or restate the terms and conditions (including, without
limitation, the conditions precedent) set out in this Agreement to such
extent as the Lead Bank (acting with Majority Bank approval) shall specify
in such notice, provided that the consent of all Banks shall be required in
relation to any variation which would:-
(a) alter the Commitment or Overall Commitment of any of the Banks under
this Agreement;
(b) reduce the Margin;
(c) extend the Availability Period;
(d) reduce the amount of principal, interest or other amounts payable under
this Agreement;
(e) change the definition of Majority Banks;
(f) amend the Events of Default in a material respect;
(g) amend the terms of this Clause 4.2 or of Clause 16 (Financial
Covenants);
(h) amend Schedule XVIII or Parts XV or XVI of this Agreement; or
(i) alter the definition of "Sale of a Wool Group Company" or the
provisions of Clauses 14.4 or 14.5 or 14.39 in relation to the
distribution or allocation of Net Disposal Proceeds.
4.3 The changes specified in such notice shall take effect on the date stated
by the Lead Bank in such notice and after such date this Agreement shall
apply and be binding on all parties as varied, supplemented and/or restated
by virtue of such notice. The parties to this Agreement shall (if
requested by the Lead Bank) sign for confirmatory purposes a restated
version of this Agreement incorporating such changes.
4.4 It is agreed that Coopers & Lybrand shall be instructed to deliver to each
Bank a copy of its report referred to in Clause 4.1 above as soon as such
report is ready for distribution to the Banks.
PART IV
CONDITIONS PRECEDENT
5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT: The provisions of Parts II, V, VI, VII, IX, X, XI,
XII, XIV and XVI of this Agreement shall not come into effect and the
Effective Date shall not occur unless the Lead Bank has confirmed to SCC
that it has received in form and substance satisfactory to it all of the
items referred to in Schedule X, Part I (Conditions Precedent) on or before
5 May 1995 (or such later date, if any, as the Lead Bank may agree on the
instructions of the Majority Banks) or (acting on the instructions of the
Majority Banks) has waived production of any conditions precedent not so
received by it.
PART V
FACILITIES
6. FACILITIES
6.1 SPIERER AND WERKHOF: Notwithstanding any other provision of this Agreement
or of any Facility or Facility Agreement, with effect from the Effective
Date until the Master Facilities Termination Date, neither Spierer nor
Werkhof shall be entitled to make any new drawing or utilisation of any
Facility. The provisions of this Clause 6.1 shall be without prejudice to
any obligations of Spierer or Werkhof (or any guarantor or surety of either
of them) to any Bank existing as at the Effective Date or arising after the
Effective Date pursuant to any obligations or liabilities incurred prior to
the Effective Date (in each case as such obligations may be amended by the
terms of this Agreement).
6.2 EXISTING FACILITIES, OTHER BORROWERS: If, under the terms of any Facility,
any person (an "Existing Borrower") other than the Borrowers, Spierer or
Werkhof would be entitled to utilise such Facility, such Facility shall,
with effect from the Effective Date, cease to be available to such Existing
Borrower and SCC shall ensure that all Outstandings of such Existing
Borrower shall be repaid in full (or cash cover provided for any unmatured
liabilities of such Existing Borrower) on the Effective Date. SCC hereby
agrees and confirms that it waives on behalf of each Existing Borrower all
rights of such Existing Borrower in relation to any Facility and irrevocably
releases each Bank from any obligations it may have to any Existing Borrower
under any Facility. SCC warrants and confirms to each Bank that it has
authority to grant this waiver and release on behalf of each Existing
Borrower. The provisions of this Clause 6.2 shall be without prejudice to
any obligations of any such Existing Borrower (or any guarantor or surety of
any such person) to any Bank existing as at the Effective Date or arising
after the Effective Date pursuant to any obligations or liabilities incurred
prior to the Effective Date.
6.3 COUNTER INDEMNITY: In consideration of a Bank (an "Issuing Bank") from time
to time agreeing to give and/or procure the giving by its correspondents of
such bonds, indemnities, guarantees or other obligations (the "Obligations")
as may be requested by a Borrower in accordance with the terms of the
Facility made available by such Bank, each of the Borrowers jointly and
severally:-
(a) agrees to keep each Issuing Bank indemnified from and against all
actions, proceedings, liabilities, claims, demands, damages, costs and
expenses in relation to or arising out of or appearing to such Issuing
Bank to arise out of the Obligations or any indemnity given by the
Issuing Bank in relation thereto and to pay to such Issuing Bank on
demand all payments, losses, costs, charges, damages and expenses
suffered or incurred by such Issuing Bank in consequence hereof or
arising in connection therewith, whether directly or indirectly;
(b) irrevocably authorises the Issuing Bank to debit to any account of a
Borrower with the Issuing Bank all such payments, losses, costs,
charges, damages and expenses and agrees that the Issuing Bank shall be
entitled at any time without notice to or consent from a Borrower to
apply or transfer any money at any time standing to the credit of any
account of such Borrower with such Issuing Bank in part payment or
payment of such sums of money as may now or hereafter from time to time
be or become due or arising from such Borrower pursuant to paragraph (a)
above;
(c) irrevocably authorises and directs the Issuing Bank to make any payments
and comply with any demands which may be claimed or appear to the
Issuing Bank to be claimed or made under or pursuant to any of the
Obligations or any indemnity given by the Issuing Bank in relation
thereto without any reference to or further authority from any Borrower
and agrees that any payment made by the Issuing Bank in accordance with
or appearing to the Issuing Bank to be in accordance with any of the
Obligations and/or any indemnities of the Issuing Bank in respect
thereof shall be binding upon each of the Borrowers and shall be
accepted by the Borrowers as conclusive evidence that the Issuing Bank
was liable to make such payment or comply with such demand and the
Issuing Bank may at any time determine or procure the determination of
any of the Obligations and/or any of the indemnities of the Issuing Bank
in respect thereof;
(d) agrees that the liability of the Borrowers under this Clause 6.3 shall
apply also to any extension or renewal of the Obligations (whether in
the same terms or otherwise and whether arising by agreement, operations
of law or otherwise howsoever) and the liabilities and obligations of
the Borrowers under this Clause 6.3 shall continue in respect of the
relevant Obligations as so extended or renewed;
(e) agrees to provide to the Issuing Bank on demand made at any time
following the declaration by the Lead Bank of an Event of Default in
accordance with Clause 17.1, cash cover for all liabilities of the
Issuing Bank under or pursuant to the Obligations or any of their
Outstandings at the time of such demand;
(f) agrees that nothing in this Clause 6.3 shall impose on a Bank a duty to
give or procure the giving of any Obligation requested by a Borrower and
each Bank shall be free to decide in each case whether or not to accept
the instructions contained in any such request, in whatever manner and
on whatever terms (in addition to those contained in this Clause 6.3);
and
(g) agrees that the indemnity contained in this Clause 6.3 shall be in
addition to and not in substitution for any other indemnity or
reimbursement right which any Bank may hold as at the date of this
Agreement.
6.4 BILLS:
(a) Following the acceptance of a Bill by a Bank (an "Accepting Bank")
pursuant to the terms of its Facility, such acceptance shall give rise
to a debt from the Borrower by whom or on whose behalf such Bill was
presented to the Accepting Bank for acceptance equal to the face value
of such Bill, which debt shall be due for payment on the maturity of
such Bill. An Accepting Bank may at any time following the declaration
by the Lead Bank of an Event of Default in accordance with Clause 17.1
demand full cash cover for the aggregate amount of all outstanding
Bills.
(b) The Borrowers will provide an Accepting Bank with such information with
respect to any Bill proposed to be discounted by it as such Accepting
Bank may reasonably request.
(c) Where a Facility has been utilised by way of acceptance credits, the
relevant Bank may, at its option after first obtaining the prior written
consent of the Lead Bank (acting with Majority Bank approval) and after
notifying the relevant Borrower of its intention, re-purchase the
relevant Bill in the market at any time during the Availability Period
and debit an account with that Bank in the name of the relevant Borrower
with the costs of such re-purchase and upon such re-purchase no further
drawings may be made by any Borrower by way of acceptance credits
without the prior written consent of the Lead Bank (acting with Majority
Bank approval).
(d) Where an acceptance credit Facility is suspended or withdrawn by any
Bank pursuant to Sub-clause 6.4(c), the relevant Facility shall be
deemed to be converted into an overdraft facility payable on demand at
any time after the Master Facilities Termination Date and chargeable to
interest at the rate per annum which is the aggregate of (i) 1.25 per
cent. (ii) the cost of funds to such Bank (as conclusively determined by
it) and (iii) the Additional Costs Rate (if any) applicable to such
Facility in respect of the amount from time to time outstanding under
such overdraft facility and such overdraft facility shall otherwise be
subject to the terms and conditions of this Agreement.
6.5 RBS:
With effect from the Effective Date:-
(a) the Facility made available by RBS shall be deemed to be converted into
a multi-option facility denominated in Dollars and all amounts payable
by a Borrower under that Facility shall be paid in Dollars. The Dollar
Equivalent of any amount to be paid by a Borrower pursuant to the terms
of such Facility shall be conclusively determined by RBS as if
references in the definition of "Dollar Equivalent" to the Lead Bank
were to RBS; and
(b) the facility limit applicable to such Facility shall be increased to
$5,000,000.
PART VI
INTEREST
7. INTEREST
7.1 INTEREST RATE:
(a) With effect from the Effective Date the interest rate per annum payable
by the Borrowers on any advance (including, for the avoidance of doubt,
any overdraft) under any of the Facilities shall be a rate per annum
equal to the aggregate of:-
(i) the Margin;
(ii) the funding rate as provided in the relevant Facility Agreement or
if no rate is specified or the relevant Facility is not
documented, the cost of funds to such Bank (as conclusively
determined by it) in respect of such advance; and
(iii) the Additional Costs Rate (if any) applicable to the relevant
Facility;
(b) All other interest, commission, fees and charges payable under each of
the Facilities shall be agreed between each Bank and the Borrowers and,
failing such agreement, shall be the rates prevailing under the relevant
Facility at the Relevant Date.
7.2 INTEREST PERIODS: The periods for which each interest rate is calculated
and by reference to which interest is to be paid, interest rests and
debiting intervals shall be determined by agreement between the relevant
Borrower(s) and the relevant Bank (and, failing such agreement, shall in
each case be 30 days), provided that the maximum duration of any such period
and of any advance under any Facility shall be 180 days and provided that
accrued interest shall be paid additionally on the Master Facilities
Termination Date.
7.3 DEFAULT INTEREST RATE:
(a) If any Borrower or SCC fails to pay any amount of principal, interest or
any other sum (each referred to in this Clause 7.3 as an "overdue sum")
when it is due under this Agreement and/or the terms of any Facility (as
amended by this Agreement), then the Borrower or SCC (as the case may
be) shall pay interest on such overdue sum for the period from the due
date to the date of actual payment, as well after as before judgment.
(b) Such interest shall be calculated and payable by reference to successive
interest periods which may be of variable durations. The first interest
period shall begin on the due date and each subsequent interest period
shall begin on the expiry of the previous one. Each such interest
period shall be of such duration as the relevant Finance Party may at
its absolute discretion select.
(c) The rate of interest applicable for each such interest period shall be
the rate per annum (as determined by the relevant Finance Party) equal
to the sum of (a) 3% and (b) the cost of funds to such Finance Party (as
conclusively determined by it) in respect of such overdue sum.
(d) Any interest payable under this Clause 7.3 which is not paid when due
shall be deemed an overdue sum and itself bear interest accordingly.
7.4 ALTERNATIVE INTEREST RATES: If it becomes impossible for any Finance Party
to determine any appropriate interest rate basis under the terms of any
Finance Document (as varied or supplemented by this Agreement) then:-
(a) the relevant Finance Party shall promptly notify the Lead Bank and the
Borrowers;
(b) the rate of interest applicable to the sum in respect of which interest
is to be determined from time to time during any period applicable to it
shall be the rate per annum which is the aggregate of (i) the Margin,
(ii) the Additional Costs Rate (if any) and (iii) the rate per annum
determined by the relevant Finance Party to be the cost to it of funding
such sum during such period from whatever sources it may select.
7.5 ACCRUAL: Interest shall accrue from day to day and be payable on the basis
of a 365 day year (in the case of Sterling) and a 360 day year or other
customary term in the case of any other currency.
7.6 PAYMENT OF INTEREST ETC: Any payments to be made by any Borrower or SCC
under or pursuant to any Finance Document shall be made in immediately
available funds before 11.00 a.m. on the day in question to the account
specified by the relevant Finance Party. Interest, principal and all other
amounts payable to any Finance Party under this Agreement or the terms of
any Facility shall be paid by the relevant Borrower or SCC (as the case may
be) directly to the relevant Finance Party on the date applicable under the
terms of the relevant Facility Agreement or if no such date is specified, on
the last Business Day of each month during the term of this Agreement and
additionally on the Master Facilities Termination Date. Each payment shall
be made in the manner provided under the terms of the relevant Facility or
otherwise as agreed between the relevant Borrower or SCC (as the case may
be) and the relevant Finance Party.
7.7 INDEMNITY: Each Borrower and SCC shall on demand indemnify any Finance
Party against any funding or other loss, cost or expense or liability
sustained or incurred by such Finance Party as a result of any sum payable
by any Obligor under any Finance Document not being paid when due; and the
occurrence and/or continuance of any other Event of Default and/or the
declaration of all the amounts outstanding to be due and payable as a result
thereof.
PART VII
REPAYMENT
8. REPAYMENT
8.1 REDUCTIONS: Reductions shall be made as provided in Clause 8.6 below.
8.2 REPAYMENTS: Repayments shall be made out of the proceeds of any Disposals
as provided in Clause 8.7.
8.3 FINAL REPAYMENT: Without prejudice to the other provisions of this Clause,
the Borrowers shall repay all outstanding amounts under (a) the Facilities
and (b) each Finance Document and provide cash cover for all unmatured
liabilities of the Banks under or pursuant to each of the Facilities on or
before the Final Repayment Date.
8.4 WAIVER: Each Group Company hereby expressly waives and agrees that it will
not assert any defence or make any claim in the nature of estoppel, waiver,
laches or delay by reason of compliance by any Bank with the terms of this
Agreement and it is expressly agreed that all limitation periods which may
be applicable to any claim, actions or proceeding which may be brought by
any Bank in connection with any of the Facilities are hereby stayed with
effect from the Relevant Date, such that the period from the Relevant Date
until the Master Facilities Termination Date shall not be included in the
computation of time for the purposes of any applicable statute of limitation
relating to any such claim, action or proceeding.
8.5 EXTENSION: The Facilities may be extended beyond the initial term of 364
days (the "Initial Term") for a further term of 364 days and shall be so
extended automatically (provided that the Steering Committee shall have
received a report of reporting accountants acceptable to them on, inter
alia, the business and financial condition of the Group and shall have
notified the Banks and the Borrowers prior to the expiry of the Initial Term
that they have found such report to be satisfactory in form and substance
for the purposes of this Clause 8.5), unless:-
(a) any Bank has served notice on the Borrowers and the Lead Bank not later
than three months prior to the expiry of the Initial Term stating that
it does not wish to extend its Facility whereupon such Facility shall
not be extended and:-
(i) such Bank shall be repaid in full on the expiry of the Initial
Term; and
(ii) such Bank shall, if expressly entitled under the terms applicable
to its Facility at the date of this Agreement, be provided on
expiry of the Initial Term with cash cover for unmatured
liabilities of such Bank pursuant to its Facility Agreement, but
without drawing any Facility of any other Finance Party directly
or indirectly for such purpose; and
(iii) such Bank shall be entitled on expiry of the Initial Term to
enforce any Existing Security which it holds but provided that
such Bank shall have given at least 10 Business Days' prior notice
to the Lead Bank of its intention so to enforce its Existing
Security; or
(b) the Lead Bank has served notice on the Borrowers not later than three
months prior to the expiry of the Initial Term stating that the Majority
Banks do not wish to extend the Facilities whereupon all of the
Facilities shall be repaid in full on the expiry of the Initial Term and
each Bank shall, on expiry of the Initial Term, be provided with cash
cover on terms satisfactory to such Bank in respect of all unmatured
liabilities of such Bank pursuant to its Facility Agreement.
8.6 REDUCTIONS:
(a) Each Reducing Bank shall be entitled to receive reductions in its
Outstandings to the level of its Overall Commitment and the Borrowers
shall procure that payments are made to each Reducing Bank in reduction
of its Outstandings in accordance with the terms of this Agreement.
(b) Payments to a Reducing Bank in accordance with Clause 8.6 (a) above or
to a Non-Committed Bank shall, subject to Clause 15.3(c) (Cash Flow
Forecast), be made 30 days after each Quarter Date during the term of
this Agreement commencing on 30 July 1995, (or, if any such day is not a
Business Day, on the next following Business Day). It is intended that
no more than 25 per cent. of (a) the Reducing Outstandings of a Reducing
Bank or (b) the Indebtedness of a Borrower to any Non-Committed Bank
shall be paid on any such date. If, as at any Quarter Date, there is
insufficient Surplus Cash (having regard to the provisions of Clause
15.3) to satisfy any payment due to a Reducing Bank or a Non-Committed
Bank, the payment to be made 30 days after such Quarter Date shall be
reduced accordingly, but any shortfall shall be carried forward into the
next quarter and shall be payable 30 days after the next following
Quarter Date, provided that, as at such next following Quarter Date,
there is sufficient Surplus Cash (having regard to the provisions of
Clause 15.3) to satisfy such payment.
8.7 REPAYMENTS: All Net Disposal Proceeds shall, following payment of such Net
Disposal Proceeds into the Realisation Account in accordance with Clause
14.6 (Net Disposal Proceeds), be distributed by the Lead Bank between the
Banks in accordance with Clause 14.5 (Distribution of Net Disposal Proceeds)
and any such amount received by a Bank shall reduce its Overall Commitment
accordingly.
PART VIII
NO DEDUCTIONS
9. NO DEDUCTIONS
9.1 PAYMENTS:
(a) Each payment to be made by any Borrower, Covenantor or SCC to any
Finance Party shall be made free and clear of and without any
withholding, deduction or set-off whatsoever, including for or on
account of Taxes, unless that Borrower, Covenantor or SCC (as the case
may be) is required by law to make such a payment subject to deduction
or withholding.
(b) If a Borrower, a Covenantor or SCC is required by law to make such a
deduction or withholding from such a payment, the relevant sum payable
by such Borrower, Covenantor or SCC (as the case may be) shall be
increased to the extent necessary to ensure that, after the making of
such deduction or withholding, the payee receives and retains (free from
any liability in respect of any such deduction or withholding) a net sum
equal to the sum which it would have received and so retained had no
such deduction or withholding been made or required to be made.
9.2 WITHHOLDINGS:
Each Borrower, each Covenantor and SCC shall:-
(a) pay the full amount of any deduction or withholding, which it is
required to make by law, to the relevant authority within the payment
period stipulated by the relevant law; and
(b) promptly after any such payment, deliver to the relevant Finance Party,
an original (or certified copy) official receipt issued by the relevant
authority in respect of the amount withheld or deducted or, if the
relevant authority does not issue such official receipts, such other
evidence of payment of the amount withheld or deducted as is reasonably
acceptable to such Finance Party.
9.3 INDEMNITY: Without prejudice to the provisions of Clause 9.1, if any
Finance Party is required by law to make any payment on account of Taxes
(other than Tax on Overall Net Income of such Finance Party) on or in
relation to any sum received or receivable by such Finance Party, or any
liability in respect of any such payment is imposed, levied or assessed
against such Finance Party, the relevant Borrower or SCC (as the case may
be) shall, on demand by such Finance Party, indemnify such Finance Party
against such payment or liability together with any interest, penalties and
expenses payable or incurred in connection with it.
9.4 TAX CREDITS:
(a) If a Finance Party in its sole discretion determines that it has
received the benefit of a Tax credit or an allowance resulting from a
payment which includes an amount paid by a Borrower or SCC under Clause
9.1 or Clause 9.3, it shall (to the extent that it can do so in its sole
discretion without prejudice to the retention of such credit or
allowance and to the extent that it is lawful and not contrary to any
official directive for it to do so) pay to the relevant Borrower or SCC
(as the case may be) such part of that benefit as is, in the opinion of
that Finance Party, attributable to the withholding or deduction giving
rise to payment of that additional amount, provided that such Finance
Party shall:-
(i) be the sole judge of the amount of any such benefit to be so paid
to the relevant Borrower or SCC and of the date on which it is
received;
(ii) have an absolute discretion as to the order and manner in which it
employs or claims tax credits and allowances available to it or
otherwise arranges its tax affairs; and
(iii) not be obliged to disclose to any person any information regarding
its tax affairs or tax computations.
(b) Any payment by a Finance Party under this Clause 9.4 shall be conclusive
evidence of the amounts due to a Borrower or SCC (as the case may be)
under this Clause.
9.5 READJUSTMENT: If any Finance Party makes any payment to a Borrower or SCC
pursuant to Clause 9.4 and such Finance Party subsequently determines, in
its opinion, that the credit, relief, remission or repayment in respect of
which such payment was made:-
(a) was not available to it; or
(b) has been withdrawn from it; or
(c) was unable to be used by it in full;
the relevant Borrower or SCC (as the case may be) shall reimburse such
Finance Party for the amount determined by such Finance Party, in its sole
opinion, to be necessary to place it in the same after-tax position in which
it would have been if such credit, relief, remission or repayment had been
obtained and had been fully used and retained by such Finance Party.
9.6 INCREASED COSTS: If after the date of this Agreement by reason of the
introduction of, or any change in, any law, treaty or directive (whether or
not having the force of law) or in its interpretation, application or
administration or compliance with any request from or requirement of any
central bank or other fiscal, monetary or other authority:-
(a) a Finance Party (or its holding company) incurs a cost (including the
cost of complying with any reserve, special deposit, liquidity, cash or
other requirement) as a result of its having entered into and/or
performing its obligations under this Agreement and/or its assuming or
maintaining a Commitment under any Facility and/or making any advances
and/or permitting any utilisations under a Facility and/or issuing any
guarantee, bond or letter of credit pursuant to a Facility or having
outstanding to it any unpaid sums under it; or
(b) there is any increase in the cost to a Finance Party (or its holding
company) of funding or maintaining all or any of the assets or
liabilities made or incurred or to be made or incurred by such Finance
Party under any Facility Agreement; or
(c) a Finance Party or its holding company is unable to obtain the rate of
return on its overall capital which it would have been able to obtain
but for such Finance Party having entered into and/or performing its
obligations under and/or assuming or maintaining a commitment under any
Finance Document; or
(d) a Finance Party (or its holding company) becomes liable to make any
payment on account of Tax (not being a Tax imposed on its overall net
income) on or calculated by reference to the amount of the advances
and/or drawings and/or utilisations made or any guarantee, bond or
letter of credit issued or to be issued under or pursuant to any Finance
Document and/or any sum received or receivable by it under this
Agreement;
then the Borrowers shall, to the extent that they have not already
indemnified the relevant Bank in respect of it pursuant to this Clause 9
from time to time on demand by the relevant Finance Party, pay to that
Finance Party such amount as it demonstrates to the reasonable satisfaction
of the Lead Bank (acting with Steering Committee approval) is equal to such
cost, such increased cost or such liability (or such proportion of such cost
as is, in the opinion of such Finance Party, attributable to its funding or
maintaining available such utilisations, Commitments or Facilities).
9.7 EXCEPTIONS: Notwithstanding Clause 9.6, no Bank shall be entitled to make
any claim in respect of any cost, increased cost or liability as is referred
to in Clause 9.1 to the extent that the same is compensated for by the
Additional Costs Rate and a recovery of such cost has been received in
relation thereto.
9.8 MARGIN AND FEES: The fees and other sums payable to the Banks under this
Agreement and the terms of each Facility and other Finance Document have
been agreed by each Bank having regard to the capital adequacy rules to
which each Bank is subject at the date of this Agreement, and to any changes
as may be made for the purpose of implementing in the jurisdiction to which
such Bank is subject any of the terms, proposals or recommendations of the
Basle Paper (being the paper titled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988 prepared by the Basle
Committee on Banking Regulations and Supervisory Practices), and upon the
assumption that, save for any such changes, there will be no change in, or
addition to, such capital adequacy rules during the term of this Agreement.
If, during the term of this Agreement, it becomes apparent to a Bank that
there has been or that there will be a change, or, as the case may be, a
further change, in the capital adequacy rules to which it is subject and
such Bank determines from time to time that the consequence of such change
has been, or may (depending upon the manner in which the Facilities are to
be utilised), be, to reduce its rate of return on capital for all or any
part of the remaining term of this Agreement, then such Bank may, with the
prior written consent of the Lead Bank (acting with Steering Committee
approval) by notice in writing to the Borrowers, certify the margin and/or
the fee which shall be payable by:-
(a) the Borrowers to such Bank pursuant to Clause 18 (Fees) (which will be
of an amount certified by that Bank as the minimum amount necessary to
maintain the value of its margin and the fees as if such change had not
occurred); and
(b) the date upon which such margin and/or the fee shall take effect.
10. CHANGE IN LAW OR REGULATIONS
10.1 CHANGE IN LAW OR REGULATIONS: If, as the result of the enactment or making
of or any change (after the date of this Agreement) in any applicable law,
or in its interpretation administration or application by any authority
charged with its administration, or compliance with any requests (whether
or not having the force of law, but if not having the force of law, being
requests with which banks generally (operating in the relevant
jurisdictions) are accustomed to comply) of any central bank or any
governmental, regulatory or comparable authority, any Finance Party
demonstrates to the reasonable satisfaction of the Lead Bank (acting with
Steering Committee approval) that it has or will become unlawful (or
contrary to any such directive or request) for it to maintain or give
effect to its obligations as contemplated by this Agreement, then such
Finance Party (the "affected party") shall so inform the Borrowers through
the Lead Bank and (while such circumstances are continuing) such Finance
Party shall not thereafter be obliged to permit any further drawings or
utilisations of its Facilities.
10.2 NOTICE TO REPAY: If no agreement to the contrary shall be reached before
the expiry of any grace period allowed by such enactment, change or
request, the affected party's Overall Commitment under this Agreement shall
reduce to zero, and the relevant Borrowers shall repay to such affected
party within 30 days or such earlier date (if any) as that affected party
shall certify to be necessary to comply with the relevant law all of the
amounts due or owing to such Finance Party under or pursuant to this
Agreement and the relevant Finance Documents.
11. CANCELLATION
The Borrowers may cancel all (but not part) of the Facilities at any time,
provided that:-
(a) no amount is on such date outstanding under or pursuant to any Finance
Document;
(b) the Borrowers shall have given not less than 14 days' prior written
notice to the Lead Bank of the date of cancellation; and
(c) the Borrowers have paid to the Lead Bank, for distribution amongst the
Banks pro rata to their respective Overall Commitments as at the
Relevant Date, the cancellation fee of $400,000.
PART IX
GUARANTEE
12. GUARANTEE
12.1 GUARANTEE: SCC irrevocably and unconditionally:-
(a) as principal obligor, guarantees to each Finance Party prompt
performance by each Obligor of all its payment obligations under each
Finance Document;
(b) undertakes to each Finance Party that whenever an Obligor does not pay
any amount when due under or in connection with any Finance Document,
SCC shall forthwith on demand by the Lead Bank (acting on the
instructions of the Majority Banks) pay that amount as if SCC instead
of the relevant Obligor were expressed to be the principal obligor; and
(c) indemnifies each Finance Party on demand against any loss or liability
suffered by such Finance Party if any obligation guaranteed by SCC
hereunder is or becomes unenforceable, void, voidable, invalid or
illegal (whether or not such defect was known to such Finance Party
prior to the date of this Agreement).
12.2 CONTINUING GUARANTEE: This guarantee is a continuing guarantee and will
extend to the ultimate balance of all sums payable by the Obligors under
the Finance Documents or any of them, regardless of any intermediate
payment or discharge in whole or in part and for the avoidance of doubt
will continue until the discharge of all sums hereby guaranteed
notwithstanding any termination or cancellation of all or any of the
Facilities or Facility Agreements or the occurrence of the Master
Facilities Termination Date.
12.3 REINSTATEMENT:
(a) Where any discharge (whether in respect of the obligations of an
Obligor or any security for those obligations or otherwise) is made in
whole or in part or any arrangement is made on the faith of any
payment, security or other disposition which is avoided or must be
restored on insolvency, liquidation or otherwise without limitation,
the liability of SCC under this Clause 12 shall continue as if the
discharge or arrangement had not occurred.
(b) A Finance Party may concede or compromise any claim that any payment,
security or other disposition is liable to avoidance or restoration.
12.4 WAIVER OF DEFENCES: The obligations of SCC under this Clause 12 will not
be affected by any act, omission, matter or thing which, but for this
provision, would reduce, release or prejudice any of its obligations under
this Clause 12 or prejudice or diminish those obligations in whole or in
part, including (whether or not known to it or any Finance Party):-
(a) any time or waiver granted to, or composition with, any Obligor or
other person;
(b) the taking, variation, compromise, exchange, renewal or release of, or
refusal or neglect to perfect, take up or enforce, any rights against,
or security over assets of, any Obligor or other person or any
non-presentation or non-observance of any formality or other
requirement in respect of any instrument or any failure to realise the
full value of any security;
(c) any incapacity or lack of powers, authority or legal personality of or
dissolution or change in the members or status of an Obligor or any
other person;
(d) any unenforceability, illegality or invalidity of any obligation of any
person under any Finance Document or any other document or security, to
the intent that the obligations of SCC under this Clause 12 shall
remain in full force and its guarantee be construed accordingly, as if
there were no unenforceability, illegality or invalidity;
(e) any postponement, discharge, reduction, non-provability or other
similar circumstance affecting any obligation of any Obligor under this
Agreement resulting from any insolvency, liquidation or dissolution
proceedings or from any law, regulation or order so that each such
obligation shall for the purposes of the obligations of SCC under this
Clause 12 be construed as if there were no such circumstance; and
(f) any variation or departure (however fundamental) of or from this
Agreement, and any such variation or departure shall, whatever its
nature, be binding upon SCC in all circumstances, notwithstanding that
it may increase or otherwise affect the liability of SCC.
12.5 IMMEDIATE RECOURSE: SCC waives any right it may have of first requiring
any Finance Party to proceed against or enforce any other rights or
security or claim for payment from any person before claiming from SCC
under this Clause 12.
12.6 APPROPRIATIONS: Until all amounts which may be or become payable to a
Finance Party under or in connection with the Finance Documents have been
irrevocably paid in full, such Finance Party may:-
(a) refrain from applying or enforcing any other money, security or rights
held or received by any such Finance Party (or any trustee or agent on
its behalf) in respect of those amounts, or apply and enforce the same
in such manner and order as it sees fit (whether against those amounts
or otherwise) and SCC shall not be entitled to the benefit of the same;
and
(b) hold in a suspense account (with full set-off against interest payable
under the Finance Documents) any money received from SCC or on account
of the liability of SCC under this Clause 12.
12.7 NON-COMPETITION: Subject to Clause 12.3 (Reinstatement), until all amounts
which may be or become payable by the Obligors under or in connection with
the Finance Documents have been irrevocably paid in full, SCC shall not,
after any failure by any Obligor to pay any sum in accordance with the
relevant Finance Documents or by virtue of any payment or performance by it
under this Clause 12:-
(a) be subrogated to any rights, security or moneys held, received or
receivable by any Finance Party or be entitled to any right of
contribution or indemnity in respect of any payment made or money
received on account of SCC's liability under this Clause 12;
(b) claim, rank, prove or vote as a creditor of any Obligor or its estate
in competition with any Finance Party; or
(c) receive, claim or have the benefit of any payment, distribution or
security from or on account of any Obligor, or exercise any right of
set-off as against any Obligor.
SCC shall hold in trust for and forthwith pay or transfer to the Lead Bank,
any payment or distribution or benefit of security received by it contrary
to this Clause 12.7.
12.8 ADDITIONAL SECURITY: This guarantee is in addition to and is not in any
way prejudiced by any other security now or hereafter held by the Finance
Parties or any of them or by any agent or trustee for their benefit.
12.9 PAYMENTS:
(a) All payments by SCC pursuant to this Clause 12 shall be made without
any set-off or counterclaim and free of any deduction or withholding
whatsoever (including, without prejudice to the generality of the
foregoing, for or on account of taxes) unless SCC is required by law to
make such a payment subject to deduction or withholding.
(b) If SCC is required to make such a deduction or withholding, the sum
payable by SCC in respect of which such deduction or withholding is
required to be made, shall be increased to the extent necessary to
ensure that, after the making of such deduction or withholding, the
relevant Finance Party receives and retains (free from any liability in
respect of any such deduction or withholding other than Tax On Overall
Net Income) a net sum equal to the sum which it would have received and
so retained had no such deduction or withholding been made or required
to be made.
(c) If SCC is required by law to make a deduction or withholding, SCC
shall:-
(i) pay the full amount of such deduction or withholding to the
relevant authority within the payment period specified by the
relevant law; and
(ii) deliver to the Lead Bank an original (or certified copy) of the
receipt issued by the authority or, if the relevant authority does
not issue such receipts, such other evidence of payment of the
amount withheld or deducted as is acceptable to the Lead Bank
(acting reasonably).
12.10 TAX CREDITS:
(a) If a Finance Party in its sole discretion determines that it has
received the benefit of a Tax credit or an allowance resulting from a
payment which includes an amount paid by SCC pursuant to Clause
12.9(b) it shall (to the extent that it can do so in its sole
discretion without prejudice to the retention of such credit or
allowance and to the extent that it is lawful and not contrary to any
official directive for it to do so) pay to SCC such part of that
benefit as is, in the opinion of that Finance Party, attributable to
the withholding or deduction giving rise to payment of that additional
amount, provided that such Finance Party shall:-
(i) be the sole judge of the amount of any such benefit to be so
paid to SCC and of the date on which it is received;
(ii) have an absolute discretion as to the order and manner in which
it employs or claims tax credits and allowances available to it
or otherwise arranges its tax affairs; and
(iii) not be obliged to disclose to any Obligor or any other person
any information regarding its tax affairs or tax computations.
(b) Any payment by a Finance Party under this Clause 12.10 shall be
conclusive evidence of the amounts due to SCC under this Clause.
12.11 READJUSTMENT: If any Finance Party makes any payment to SCC pursuant to
Clause 12.10 and such Finance Party subsequently determines, in its
opinion, that the credit, relief, remission or repayment in respect of
which such payment was made:-
(a) was not available to it; or
(b) has been withdrawn from it; or
(c) was unable to be used by it in full;
SCC shall reimburse such Finance Party such amount as such Finance Party
determines, in its sole opinion, is required to place it in the same
after-tax position in which it would have been if such credit, relief,
remission or repayment had been obtained and had been fully used and
retained by such Finance Party.
12.12 CURRENCY: The obligation of SCC hereunder shall be to make payment in the
same currency as that in which the principal obligation in respect of
which such payment is being made was incurred. If:-
(a) for any reason any amount payable by SCC under this Agreement is paid
to or is recovered by a Finance Party (in whatever manner) in a
currency (the "payment currency") other than that in which it is
required to be paid under the relevant Finance Document (the
"contractual currency"); and
(b) the payment made in the payment currency to the relevant Finance
Party, when converted at the applicable rate of exchange into the
contractual currency, is less than the relevant unpaid amount under
the relevant Finance Document;
then SCC shall, as a separate and independent obligation, fully indemnify
such Finance Party against the amount of the shortfall. If the payment
made in the payment currency to such Finance Party when converted at the
applicable rate of exchange into the contractual currency exceeds the
relevant unpaid amount under the relevant Finance Document, then the
relevant Finance Party shall promptly pay to SCC (or, after the
Enforcement Date, the Security Agent) an amount equal to the amount of
such excess. For the purposes of this Clause 12.12 the expression
"applicable rate of exchange" means a fair market rate at which the
relevant Finance Party is able, as soon as reasonably practicable after
receipt, to purchase the contractual currency with the payment currency,
taking into account any costs associated with the exchange.
PART X
REPRESENTATIONS AND WARRANTIES
13. REPRESENTATIONS AND WARRANTIES
13.1 REPRESENTATIONS AND WARRANTIES: SCC (in respect of itself and each Group
Company) and each Borrower (in respect of itself and each of its
Subsidiaries) and each Covenantor (in respect of itself and each of its
Subsidiaries) severally represents and warrants to each of the Finance
Parties that:-
(a) STATUS: each Obligor is a limited company duly incorporated, validly
existing and registered under the jurisdiction of its incorporation and
has the power and all necessary governmental and other consents,
approvals, licences and authorities under any applicable jurisdiction
to own its assets and carry on its business;
(b) POWERS: each Obligor is empowered to enter into, exercise its rights
and perform and comply with its obligations contained in the Finance
Documents to which it is a party and no limits on the powers of any
such Group Company will be exceeded as a result of the borrowings,
grant of security and giving of guarantees or the taking of any other
action contemplated by any Finance Document;
(c) DUE AUTHORISATION:
(i) all actions, conditions and things required to be taken, fulfilled
or done (including the obtaining of any necessary consents) in
order to enable each Obligor lawfully to enter into, exercise its
rights and perform and comply with its obligations contained in
any Finance Document to which it is a party, and to ensure that
those obligations are legally binding and enforceable (subject to
all necessary registrations of the Security Documents) have been
taken, fulfilled or done; and
(ii) the requisite resolutions of each Obligor's board of directors
have been duly and properly passed at a duly convened and
constituted meeting at which all statutory and other relevant
formalities were observed to authorise its execution and
performance of the Finance Documents to which it is a party (or,
in the case only of SCC, the requisite resolutions have been
passed by (aa) a written resolution of each of the directors of
SCC in accordance with the by-laws of SCC or (bb) the Executive
Committee of the board of directors of SCC in accordance with the
authorities granted to such Executive Committee) and such
resolutions are in full force and effect and have not been varied
or rescinded;
(d) OBLIGATIONS BINDING: each Finance Document and the borrowings, the
grant of security and the giving of guarantees contemplated by this
Agreement constitute the legal, valid and binding obligations of each
Obligor enforceable in accordance with its terms, except as such
enforceability may be limited by:-
(i) application of equitable principles;
(ii) the non-availability of the equitable remedies of specific
performance or injunctive relief; and
(iii) administration, bankruptcy, insolvency, liquidation and similar
laws generally affecting the rights of creditors;
(e) NON-CONTRAVENTION: neither the execution or delivery of any Finance
Document nor any borrowing under the Facilities by any Borrower nor the
grant of any security or the giving of any guarantees by any Borrower
or any other Obligor nor the carrying out of any transaction or the
exercise of any rights or the performance of any obligations
contemplated by any Finance Document by any Obligor will result in:-
(i) any violation of any law to which such persons are subject; or
(ii) any breach of any of the memorandum and articles of association
or other constitutional documents of any Obligor of any borrowing
limits contained in any such document; or
(iii) any breach of any deed, agreement or obligation of any such
persons made with or owed to any other person (including, without
limitation, any negative pledge or similar restriction); or
(iv) any breach of any limits on any powers of any Obligor;
(f) ENCUMBRANCES:
(i) there are no Encumbrances affecting any of its assets or the
assets of any Group Company except the Permitted Encumbrances; and
(ii) neither the execution of any Finance Document by any Obligor nor
the performance by or exercise of any rights of any Obligor under
the terms of any such Finance Document will result in the
existence of, or oblige any Group Company to create, any
Encumbrance in favour of any person (except the Finance Parties or
as contemplated by this Agreement) over the whole or any part of
the undertaking or assets (present or future) of such Group
Company;
(g) INVOICE DISCOUNTING: there are no invoice discounting, factoring or
similar goods or receivables sale or assignment arrangements in
existence relating to the receivables of any Tobacco Group Company,
(for the avoidance of doubt it is agreed that Standard Wool (UK)
Limited may enter into the Lombard Facility Letter and Standard Wool
(Chile) S.A. may enter into the Master Wakala Agreement);
(h) NO DEFAULT: no Event of Default has occurred which is Continuing;
(i) NO LITIGATION: details of all litigation, arbitration or other legal
proceedings in which any Group Company is involved are set out in
Schedule XIV. Save for the litigation involving Stancom Tobacco
Company (Malawi) Limited detailed in Schedule XIV, no Group Company is
involved in or engaged in any litigation, arbitration or other legal
proceedings of a litigious nature (whether as plaintiff or defendant
and whether civil, criminal or administrative) which, (alone or taken
together with any other litigation, arbitration or legal proceedings)
if adversely determined, would be likely to result in a liability
(including costs) to it of the greater of (i) $50,000 (or its foreign
currency equivalent from time to time) and (ii) 3 per cent. of the net
worth of such Group Company (as shown in its latest available monthly
management accounts delivered pursuant to Clause 15.5 (Monthly
Accounts)) nor are there any circumstances likely to give rise to any
such litigation, arbitration or proceedings, provided that this
representation shall not apply to any such litigation, arbitration or
proceedings where the whole of the actual or potential liability of the
relevant Group Company in respect of such litigation, arbitration or
proceedings is fully covered by insurance;
(j) SHARE CAPITAL INTERESTS: no Tobacco Group Company has any interest in
the share capital of any other body corporate, except as disclosed in
the group structure set out in Schedule VIII;
(k) NO MATERIAL ADVERSE CHANGE: since the last Accounts Date:-
(i) there has been no Material Adverse Change in the financial or
trading condition of any Group Company or of the Group taken as a
whole; and
(ii) the business of each of the Group Companies has been carried on in
the normal and usual course;
save to the extent disclosed in (aa) the Form 10Q filed by SCC on 15
February 1995 and (bb) any other written information provided by a
Group Company and circulated to all the Banks not later than 5 Business
Days prior to the date of this Agreement;
(l) PLANS AND REPORTS: each Budget, each Cash Flow Forecast and the report
of SCC presented to the Steering Committee Meeting on 31st January 1995
fairly present the business and financial condition of the Group and,
in particular:-
(i) all statements of fact relating to the Group and its business
contained in those documents were true and accurate in all
material respects at the date when such documents were issued and
no events have occurred since such date which make any such
statements of fact untrue or inaccurate or misleading in any
material respect, or mean that they have in any material way
ceased to represent the current position as at the date of this
Agreement;
(ii) all statements of opinion, intention and expectation expressed in
those documents which are those of the management of any Group
Company (hereafter "Managers") were honestly made after careful
consideration and none of the Managers disagree with any other
statements of opinion, intention and expectation expressed in
them;
(iii) the assumptions upon which the forecasts and projections
contained in those documents are based were and are reasonable
and made in good faith after careful consideration;
(iv) the forecasts and projections contained in those documents were
and are reasonable and consistent with the assumptions referred
to in (iii) above and none of the Managers disagrees with them;
and
(v) the Managers are not aware of any facts or matters not stated in
those documents the omission or failure to take into account of
which makes any factual statements contained in them misleading
or unlikely to be fulfilled in each case in any material respect;
save, in each case, to the extent disclosed in (aa) the Form 10Q filed
by SCC on 15 February 1995 and (bb) any other written information
provided by a Group Company and circulated to all the Banks not later
than 5 Business Days prior to the date of this Agreement;
(m) VALIDITY OF CONTRACTS AND LICENCES: all contracts, licences, consents
and authorisations (including licences of the appropriate governmental
and other authorities in the jurisdictions in which the Group Companies
carry on business) necessary for the carrying on by any Group Company
of its business as the same is currently carried on have been obtained
and all such contracts, licences, consents and authorisations are in
full force and effect and are not likely to be revoked or amended or
unavailable in whole or in part (whether in the ordinary course of
events, by virtue of completion of the Finance Documents or for any
other reason);
(n) SHARE CAPITAL: there are no agreements in force which call for the
present or future issue or allotment of, or grant to any person of the
right (whether conditional or otherwise) to call for the issue or
allotment of, any share or loan capital of any of the Group Companies
including any option or right of pre-emption or conversion (other than
employee share plans existing at the date of this Agreement relating to
the shares in SCC);
(o) AUDITED ACCOUNTS: the Original Accounts of the Greater Group and
(where these representations and warranties are repeated) the most
recent Accounts, including the notes to them, delivered to the Lead
Bank pursuant to Clause 15.7(a) (Audited Accounts) or Clause 15.7(b)
(Quarterly Management Accounts) give a true and fair view of the state
of affairs and financial position of the Greater Group or, as the case
may be, the relevant Borrower as at the date to which they were made
up. In particular, the Accounts either make adequate provision for or,
as appropriate, disclose all other material liabilities, whether
actual, contingent or disputed (including financial lease commitments,
pension liabilities and liabilities to Taxation) of the Greater Group
and each Borrower and all material capital commitments of the relevant
Borrower or, as the case may be, the Greater Group as at such date in
each case in accordance with, and if and to the extent required by,
generally accepted accounting principles in the United States (in the
case of the consolidated financial statements of the Greater Group) or
the jurisdiction of incorporation of the relevant Borrower (in the case
of any other financial statements) consistently applied;
(p) MONTHLY ACCOUNTS: each of the most recent accounts of the Group and of
each Obligor delivered to the Security Agent pursuant to Clause 15.5
(Monthly Accounts) give a true and fair view of the state of affairs
and financial position of the Group or, as the case may be, the
relevant Obligor as at the date to which they were made up. In
particular such accounts either made adequate provision for or, as
appropriate, disclose all other material liabilities, whether actual,
contingent or disputed (including financial lease commitments, pension
liabilities and liabilities to Taxation) of the Group and each Obligor
and all material capital commitments of the Group or, as the case may
be, each Obligor as at such date in accordance with, and if and to the
extent required by, generally accepted accounting principles in the
United States (in the case of the consolidated financial statements of
the Group) or the jurisdiction of incorporation of the relevant Obligor
(in the case of any other financial statement) consistently applied;
(q) NON-DISCLOSURE: the Borrowers have not failed to disclose to the Lead
Bank any facts or circumstances which are within their knowledge and
which could reasonably be expected, in the opinion of the Steering
Committee, to have a significant effect upon:-
(i) any Borrower's ability to pay or repay any Indebtedness under this
Agreement or any Obligor's ability to comply with the terms of any
of the Finance Documents; or
(ii) the validity or enforceability of any of the Finance Documents;
(r) INTELLECTUAL PROPERTY RIGHTS: each Group Company is entitled to use all
the intellectual property rights as are used at the date of this
Agreement in its business and, to the best of each Group Company's
knowledge, information and belief, there is no challenge or objection
by any third party to the use by any Group Company of any such
intellectual property rights, or infringement of them by any third
party;
(s) MINORITY INTERESTS: except in respect of interests:-
(i) held by the Finance Parties pursuant to the Security Documents;
(ii) detailed in the group structure set out in Schedule VIII; or
(iii) in the shares of SCC;
no person has any interest in the issued share capital of any Tobacco
Group Company (including an interest derived through an option over or
other agreement in relation to such shares);
(t) GROUP STRUCTURE: the structure of the Tobacco Group is as set out in
Schedule VIII and there are no Subsidiaries of any of the First Tier
Subsidiaries (other than Wool Group Companies) which are not detailed
in Schedule VIII;
(u) TAX LIABILITIES: no claims are being or are likely to be assessed
against any Group Company with respect to Taxes which, if adversely
determined, would have (either individually or collectively) a Material
Adverse Effect (other than the tax case with the Malawi tax authorities
described in Schedule XIV which, if adversely determined, would have a
Material Adverse Effect upon Stancom Tobacco Company (Malawi) Limited).
No Group Company is overdue in the filing of any Tax returns required
to be filed by it and to the extent the same have been finally settled
with the relevant taxation authority each Group Company has paid all
Taxes shown to be due on such returns or on any assessments made
against it;
(v) BORROWINGS: no Group Company has any Borrowings other than Permitted
Borrowings;
(w) JOINT VENTURES: no Group Company has entered into any partnership,
joint venture or other agreement, arrangement or understanding with any
person outside the Group for the joint development of any business or
the sharing of any assets or revenues derived from any business other
than as existing as at the date of this Agreement and set out in
Schedule XV;
(x) NO LIABILITIES: there are no matters of which any Group Company is
aware which might reasonably be considered by the Lead Bank to have a
Material Adverse Effect;
(y) BUDGET: the Budget for the Greater Group for the period from 1st April
1995 to 31st March 1996 annexed as Appendix A to this Agreement was
prepared on the basis of the information available to the directors of
SCC after making diligent enquiries and the directors of SCC consider
that as at the date of this Agreement such Budget is fair and
reasonable based on that information;
(z) INTRA-GROUP INDEBTEDNESS: no Tobacco Group Company owes any
Indebtedness to any member of the Greater Group (except indebtedness to
another Tobacco Group Company which is a Permitted Borrowing under the
terms of this Agreement) and no member of the Greater Group owes any
Indebtedness to any Tobacco Group Company save as set out in Schedule
XIX.
13.2 REPETITION: On each day during the term of this Agreement, each of the
representations and warranties contained in Clause 13.1 (other than the
warranty in Clause 13.1(y)) shall be deemed to be repeated by reference to
the then existing circumstances on such date.
13.3 ACKNOWLEDGEMENT BY BORROWERS AND SCC: Each Borrower and SCC acknowledges
that the Finance Parties are relying on the representations and warranties
and not on any other information contradictory to them or varying them of
which the Finance Parties or any of them or their respective agents or
advisers may have actual or constructive knowledge.
13.4 BANKS' REPRESENTATION: Each of the Banks represents and warrants in favour
of the Lead Bank, the Security Agent and the other Banks that as at the
Effective Date only:-
(a) the information provided by it to the Lead Bank in respect of its
Facilities as at the Relevant Date is true and complete in all material
respects; and
(b) save for indebtedness of a Borrower under the Facilities and/or this
Agreement or any other New Finance Document or as set out in Clause
13.5 and save for an existing guarantee of SCC in favour of each of the
Banks, it has no claims or rights against any member of the Group in
respect of Borrowings except those arising under or pursuant to the
Finance Documents.
13.5 BANKS' EXISTING CLAIMS AGAINST GROUP COMPANIES:
(a) RBS has made facilities available to Standard Wool (UK) Limited
pursuant to a facility agreement dated on or about the date of this
Agreement made between Standard Wool (UK) Limited as Borrower, Standard
Commercial Corporation as the Company, NatWest Capital Markets Limited
as the Arranger, the financial institutions listed in Schedule I to the
facility agreement as Banks and National Westminster Bank Plc as the
Agent. RBS also holds a guarantee of SCTC and a first legal charge
from SCTC over office premises in Godalming, Surrey, England. RBS
agrees that (a) the maximum amount recoverable from SCTC under the
guarantees referred to above is limited to (Pounds)3,500,000 plus
interest and expenses; and (b) it will give to the Lead Bank and the
Steering Committee written notice of its intention to enforce its
security or make a demand under its guarantee as soon as reasonably
practicable prior to taking any step to do so and shall consult with
the Lead Bank and the Steering Committee.
(b) NationsBank, N.A. (Carolinas) has made facilities available to SCC
pursuant to the NationsBank Holding Company Loans secured by a first
lien on the shares of the first tier subsidiaries of SCC and a second
lien on the fixed assets of SCC's principal United States tobacco
trading companies, Standard Commercial Tobacco Co., Inc, and W A Adams
Company.
(c) BHF Bank has made a committed facility available to Standard Wool GmbH,
Bremen and is also participating in the collateral pool managed by
Bremer Landesbank in favour of the banks financing Wool Group Companies
(including, in particular, pledges of deposits, goods financed and
receivables of Standard Wool GmbH, Bremen).
(d) Norddeutsche Landesbank Girozentrale made a long term loan available to
TCLC for the purchase of the equity in World Wide Tobacco Espana SA.
Norddeutsche Landesbank Girozentrale holds a negative pledge on the
shares of World Wide Tobacco Espana SA.
(e) Commerzbank AG has made facilities available to:
(i) Standard Wool (Deutschland) GmbH, Bremen;
(ii) Standard Wool (UK) Limited and Jacomb Hoare (Bradford) Limited as
joint debtors.
(f) MeesPierson N.V. has made facilities available to Spierer Tutun Ihracat
Ticaret S.A., secured by a mortgage over fixed assets of Spierer Tutun
Ihracat Ticaret S.A. in Turkey.
MeesPierson's general terms and conditions provide for a pledge on all
goods and documents of title which are in its possession or will come
into its possession or a third party on its behalf from or for the
benefit of the customer.
MeesPierson N.V. has made facilities available to Standard Wool
Argentina S.A..
(g) Westdeutsche Landesbank has made a committed facility to Standard Wool
(Deutschland) GmbH. Westdeutsche Landesbank also holds a
Sicherungsvertrag and Sicherheilenpodvertrag from Standard Wool
(Deutschland) GmbH.
PART XI
COVENANTS
14. GENERAL COVENANTS
For so long as any liability remains outstanding or any amount is capable
of being drawn down under the Finance Documents, SCC in respect of itself
and each Borrower and each Covenantor in respect of itself and its
Subsidiaries shall, and SCC shall also procure that each other Group
Company shall, save with the prior consent of the Lead Bank (acting on the
instructions of the Majority Banks):-
14.1 RANKING OF LIABILITIES: ensure that the liabilities (whether actual
or contingent) of:-
(a) each Obligor (except SCC) under the Finance Documents shall at all
times constitute the direct, unconditional obligations of such Obligor
and will rank in priority to all present and future Indebtedness
issued, created, assumed or guaranteed by such Obligor (except for such
Indebtedness as is entitled to priority solely by operation of law or
by reason of a Permitted Encumbrance); and
(b) SCC under each of the Share Charges shall at all times constitute the
direct, unconditional obligations of SCC and will rank in priority to
all interests of any other person over the shares the subject of the
Share Charges;
(c) SCC under this Agreement shall at all times constitute the
unconditional obligations of SCC and shall rank at least pari passu
with all present and future liabilities issued, created, assumed or
guaranteed by SCC (except for such Indebtedness as is entitled to
priority solely by operation of law or by reason of a Permitted
Encumbrance);
14.2 RESTRICTION ON ENCUMBRANCES: not create or agree to create or permit to
arise or subsist any Encumbrance on its present or future undertaking,
property, assets, rights or revenues or any part of them (except Permitted
Encumbrances) and not sell or otherwise dispose of its assets on terms
which would result in any such asset being leased to or re-acquired by a
Group Company;
14.3 RESTRICTION ON BORROWINGS: not incur or permit to subsist Borrowings,
except:-
(a) Permitted Borrowings (provided that no First Tier Subsidiary shall give
any guarantee, indemnity or other assurance against financial loss in
respect of Indebtedness of any person); or
(b) intra-group Indebtedness existing at the date of this Agreement as set
out in Schedule XIX (provided that the amounts of any such Indebtedness
is not increased after the date of this Agreement and that no security
is given for such Indebtedness) (subject always to Clause 14.7);
14.4 RESTRICTION ON DISPOSALS:
(a) not (save with the prior consent of the Lead Bank, acting on the
instructions of the Majority Banks) sell, transfer, lend, license,
lease, surrender or otherwise dispose of, whether by a single
transaction or a number of transactions and whether related or not, the
whole or any part of its undertaking, business or assets, except that
this Clause 14.4 shall not apply to:-
(i) disposals by a Group Company of tobacco, wool or other stock in
trade of such Group Company in the ordinary course of its day to
day trading activities on arm's length terms and for full
consideration and provided that the proceeds of any such disposal
by a Tobacco Group Company are paid into the account designated
by the Lead Bank from time to time; or
(ii) where no Event of Default or Potential Event of Default shall
have occurred which is Continuing, disposals of assets which are
not required in connection with the carrying on by the Group of
its business (as it is then being conducted) on arm's length
terms and for full consideration and where the disposal proceeds,
when aggregated with the proceeds of all other such disposals by
Group Companies in that Accounting Reference Period, do not
exceed $150,000, provided that all Net Disposal Proceeds of such
Disposals shall be applied in accordance with Clause 14.5 below;
or
(iii) a Sale of a Wool Group Company on terms acceptable to the
Steering Committee, provided that the Net Disposal Proceeds of
such Disposal shall be applied in accordance with Clause 14.5
below; or
(iv) any disposal which has been expressly approved in writing by the
Lead Bank acting on the instructions of the Majority Banks;
(b) Nothing in this Clause 14.4 shall enable any Group Company to dispose
of assets falling within the categories specified in Clauses 14.4(a)(i)
to (iii) which are subject to a fixed charge (including any floating
charge which has crystallised) in favour of the Security Agent on
behalf of the Finance Parties ("Fixed Charge Assets") without prior
written consent from the Lead Bank (acting on the instructions of the
Majority Banks). The Lead Bank (acting on the instructions of the
Majority Banks) shall have an absolute discretion to give or refuse any
such consent or to grant a consent subject to such conditions as it may
think fit, without assigning any reason for so doing. A Group Company
wishing to make a disposal of Fixed Charge Assets shall provide to the
Lead Bank such information as the Lead Bank may deem to be necessary to
enable the Lead Bank to reach a decision whether or not to permit such
disposal;
(c) If the Lead Bank consents to a sale or disposal of any Fixed Charge
Assets, then the Group Company selling or disposing of such Fixed
Charge Assets shall (unless otherwise specifically agreed by the Lead
Bank in a particular case) account to the Lead Bank in full for such
proceeds (less the amount of any costs and expenses of such sale or
disposal previously approved by the Lead Bank (acting on the
instructions of the Majority Banks));
14.5 DISTRIBUTION OF NET DISPOSAL PROCEEDS:
(a) All Net Disposal Proceeds shall be applied forthwith in the following
manner:-
(i) First: in reduction or discharge of any Indebtedness of the Group
Company which sold or disposed of the shares, goodwill and/or
assets giving rise to such Net Disposal Proceeds (the "Sold
Assets") to any person holding security over the Sold Assets (to
the extent such Indebtedness is secured by such security)
provided that details of such security and such Indebtedness have
been provided to the Lead Bank in writing;
(ii) Second: in payment of reasonable costs incurred to third parties
at arm's length in order to effect such disposal and solely
attributable to such disposal;
(iii) Third: in reduction or discharge of the NationsBank Loan up to a
maximum amount of $10,000,000;
(iv) Fourth: in reduction or discharge of up to 50 per cent. of the
outstandings under the NationsBank Holding Company Loans (up to a
maximum amount of $6,200,000) and up to 50 per cent. of the
Kehaya Loan (up to a maximum amount of $2,200,000);
(v) Fifth: in reduction or discharge of the Outstandings under the
Facilities pro rata pari passu to the Banks' Overall Commitments
on the Relevant Date and amounts so received by a Bank shall be
applied in permanent reduction of such Bank's Overall Commitment
accordingly. Where a Bank has more than one Facility, any
amounts received by it under this sub-clause (v) shall be applied
by it pari passu between each of those Facilities;
(b) In this Clause 14.5 "pro rata" means in the proportion which a Bank's
Overall Commitment as at the date on which such Net Disposal Proceeds
fall to be applied under this Clause 14.5 bears to the aggregate of all
the Overall Commitments of the Banks on such date;
(c) It is noted that, at the date of this Agreement, NationsBank, N.A.
(Carolinas) has received $2,500,000 which has been applied in reduction
of the outstandings under the NationsBank Holding Company Loans
referred to in Clause 14.5(a)(iv) above and the figure of $6,200,000
referred therein shall be reduced accordingly (NationsBank also agrees
that the figures set out in Clauses 14.5(a)(iii) and (iv) above shall
be reduced by any other amounts which are received by NationsBank for
credit against those figures);
(d) The proceeds of book or other debts generated by a Borrower in the
ordinary course of trading and paid to the designated bank in
accordance with the Borrower Debentures shall be deemed (but only for
the purposes of this Clause) not to constitute Net Disposal Proceeds,
notwithstanding that such book debts are subject to a fixed charge
under the Borrower Debentures;
(e) If a distribution to be made to a Bank under Clause 14.5(a)(v) exceeds
the amount of the actual liability of the Obligors to such Bank, such
distribution (or the balance of such distribution) shall be applied in
providing cash cover to such Bank for the unmatured liabilities of the
Obligors or any of them to such Bank or on such other basis as the Lead
Bank (acting with Steering Committee approval) may direct for the
purpose of achieving substantially the same result;
(f) If a distribution to be made to a Bank under Clause 14.5(a)(v) in
reduction of a Facility (which is not fully drawn at the time of such
distribution) would otherwise exceed the amount then outstanding under
such Facility, such Bank may require the Lead Bank to apply such excess
in creating a Reserve specifically for future amounts drawn under such
Facility (up to the level of its Overall Commitment as reduced in
accordance with Clause 14.5(a)(v)) or on such other basis as the Lead
Bank (acting with Steering Committee approval) may direct for the
purpose of achieving substantially the same result;
14.6 NET DISPOSAL PROCEEDS: provided that it is lawful to do so, deposit all
Net Disposal Proceeds (after payment of amounts, if any, due to any secured
lender under Clause 14.5(a)(i) above) immediately upon receipt into a
Realisation Account designated with reference to the name of the Group
Company to which such proceeds were payable, but so that proceeds derived
from Fixed Charge Assets (as defined in Clause 14.4(b)) shall be applied in
accordance with the terms applicable to the relevant fixed charges;
14.7 INTER-COMPANY INDEBTEDNESS:
(a) use all reasonable endeavours to:
(i) procure the repayment forthwith of all inter-company Indebtedness
of each Wool Group Company to any Tobacco Group Company (except
any such Indebtedness which is subordinated at the date of this
Agreement) as follows:
(aa) $6,760,000 on the Lombard Facility Letter coming into full
force and effect;
(bb) $7,320,000 on the Master Wakala Agreement coming into full
force and effect;
(cc) all other inter-company indebtedness owed by any Wool Group
Company to any Tobacco Group Company (other than any such
Indebtedness which is subordinated at the date of this
Agreement) as soon as practicable after the date of this
Agreement; and
(ii) procure the repayment forthwith of all subordinated indebtedness
of each Wool Group Company to a Tobacco Group Company following a
Sale of the Wool Group;
and in each case pay or procure the repayment forthwith of all such
inter-company indebtedness forthwith in reduction or discharge of
Outstandings under the Facilities pro rata pari passu to the Banks'
respective Overall Commitments. In this Clause 14.7 "pro rata" means
in the proportion which a Bank's Overall Commitment as at the date on
which a payment falls to be made to a Bank under this Clause bears to
the aggregate of all the Total Commitments of the Banks on such date;
14.8 FACTORING AND LOANS:
(a) not enter into or permit to subsist any arrangement to sell or dispose
of (or under which any person other than the Security Agent shall
otherwise acquire or gain the right to acquire) any right, title or
interest in any of the trade debts of that Group Company, whether on a
factoring basis or otherwise, provided that Standard Wool (UK) Limited
may enter into:
(i) the Lombard Facility Letter
(ii) the Master Wakala Agreement; and
(iii) the Security Deed to be entered into between Standard Wool (UK)
Limited and National Westminster Bank Plc pursuant to the Wool
Group Facility;
(b) not make any loans or gifts or grant any credit (other than normal
trade credit on arms length terms to customers not exceeding 45 days in
duration), or give any financial guarantee, bond or indemnity or
otherwise assume any liability or give any assurance against financial
loss in respect of any other person, other than pursuant to the
Security Documents, provided that:-
(i) a loan or advance may be made by a First Tier Subsidiary to a
Subsidiary of a Tobacco Group Company which is itself a Tobacco
Group Company where such loan or advance would be a Permitted
Borrowing on the part of the borrowing Subsidiary;
(ii) a loan or advance may be made by a Tobacco Group Company to a
supplier of such Tobacco Group Company in the ordinary course of
carrying on the business of such Tobacco Group Company as carried
on at the date of this Agreement, provided that the aggregate
amount of all loans and advances to suppliers by Tobacco Group
Companies does not at any time exceed $25,000,000;
(iii) SCC may enter into and perform its obligations under the
subordination agreement to be entered into between SCC and each
bank which is a party to the US Facility in the form or
substantially the form of the agreement dated as of 10 August
1994 entered into between SCC and NationsBank, N.A. (Carolinas)
(the "SCC Subordination Agreement") and under each guarantee
which is a Permitted Borrowing under paragraph (i) of the
definition of "Permitted Borrowings";
and each Tobacco Group Company shall procure that (save for the loan by
SCC which is the subject of the SCC Subordination Agreement) all such
lending referred to in paragraphs (i) and (ii) above shall be on arms
length terms and that the right of repayment shall not be subordinated
or postponed in any manner save that the loan to be made by SCTC to
Standard Wool (UK) Limited pursuant to an agreement dated on or about
the date of this Agreement may be subordinated in the manner provided
for in the inter-creditor agreement dated on or about the date of this
Agreement made between Standard Wool (UK) Limited (1), SCC (2), ING
Bank, National Westminster Bank Plc and RBS (3) and National
Westminster Bank plc (4);
14.9 HIRE PURCHASE RESTRICTIONS:
(i) not enter into any hire purchase or finance leasing agreements (within
the meaning of SSAP 21) such that the aggregate outstanding capital
value of such agreements entered into by any Group Company is in
excess of $100,000 at any time; and
(ii) not enter into operating leases which would lead to payments in excess
of $100,000 in aggregate being payable by any Group Company in any
Accounting Reference Period in respect of such leases;
14.10 ACQUISITIONS: without prejudice to Clause 14.11 below, not acquire any
business (or substantial part of a business) or shares in the capital of
any body corporate or other entity;
14.11 CAPITAL ASSETS: not acquire any capital assets of a value or aggregate
value (and for this purpose aggregating with the value of the asset
purchased the amount of any liability or Encumbrance assumed with or
secured on the asset purchased), or otherwise incur any capital
expenditure in any Accounting Reference Period, which, when aggregated
with the value of all other capital assets acquired and other capital
expenditure incurred by Group Companies in that Accounting Reference
Period exceeds the relevant budgeted amount specified in the most recent
Budget delivered to the Security Agent pursuant to the terms of this
Agreement and accepted by the Steering Committee, provided that the right
to spend or commit the Group or any Group Company to capital expenditure
under this Clause 14.11 shall be suspended for so long as a Potential
Event of Default has occurred and is continuing or an Event of Default has
occurred and is Continuing;
14.12 NATURE OF BUSINESS: carry on its business in the normal course in the
manner carried on by it at the date of this Agreement and not make any
material change to the nature or extent of any business carried on by it
at the date of this Agreement or discontinue any such business or (save
with the prior written consent of the Lead Bank acting on the instructions
of the Majority Banks) close, reorganise, transfer, hive-down or wind down
its business or operations or part with possession or ownership of its
undertaking or business or merge or amalgamate with any other company or
entity and, in particular, each Tobacco Group Company which sells tobacco
to or holds or processes tobacco for a First Tier Subsidiary shall use all
reasonable endeavours to continue to do so in the manner and to the extent
carried on by it at the date of this Agreement;
14.13 RESTRICTION ON ISSUE AND DISPOSALS OF SHARES:
(a) SCC shall not dispose of any of its legal or beneficial interest in
the share capital of any of the First Tier Subsidiaries without the
prior written consent of the Lead Bank (acting on the instructions of
the Majority Banks);
(b) Save for a Sale of the Wool Group or the Sale of a Wool Company, no
other Group Company shall dispose of any of its legal or beneficial
interest in the share capital of any other Group Company without the
prior written consent of the Lead Bank (acting on the instructions of
the Majority Banks);
(c) No Group Company shall issue any unissued shares for the time being in
its share capital or create or issue any new shares or alter the
rights attaching to any class of share without the prior written
consent of the Lead Bank (acting on the instructions of the Majority
Banks), provided that this Sub-clause 14.13(c) shall not apply to a
Permitted Share Issue by SCC;
14.14 LOAN STOCK, LOAN NOTES: not (without prior written consent of the Lead
Bank (acting on the instructions of the Majority Banks) issue any loan
stock or loan notes after the date of this Agreement or purchase or repay
(otherwise than on maturity) any outstanding loan stock or loan notes or
redeem or purchase any of its shares or otherwise reduce its share
capital;
14.15 DIVIDENDS AND PAYMENTS: deliver to the Lead Bank not less than ten
Business Days prior to the date on which a dividend or distribution is
proposed to be paid by a Group Company quarterly management accounts for
the relevant calendar quarter and a certificate from two directors of the
relevant Group Company addressed to the Lead Bank containing calculations
where necessary and to the effect that:-
(a) the directors are not aware, after reasonable enquiry, of the
occurrence of a Potential Event of Default or of an Event of Default
which is Continuing;
(b) so far as the directors are aware, after reasonable enquiry, if such
payment(s) were to be made, no Event of Default or Potential Event of
Default would occur; and
(c) the requirements of Clause 16 (Financial Covenants) (if then
applicable) will be satisfied notwithstanding the proposed payment of
dividends or interest;
14.16 INSURANCE: procure that each Group Company shall, either under a group
policy maintained by SCC or separately, maintain such policies of
insurance in relation to its business and assets as a reasonably prudent
person carrying on a similar business to that Group Company might be
expected to maintain over such assets and/or in respect of such
liabilities (including policies to cover public, product, environmental,
terrorism and third party liability) and from time to time upon request
supply the Security Agent with copies of all such insurance policies or
certificates of insurance or such other evidence of the existence of such
policies as may be acceptable to the Security Agent together with
confirmation of payment of premiums (a list of all insurance policies
maintained by each Group Company as at the date of this Agreement is set
out in Schedule XVI);
14.17 NEW SUBSIDIARIES AND JOINT VENTURES: not incorporate any new Subsidiary or
subscribe for shares or securities in any company intended to be a joint
venture or merge or consolidate with any other person or enter into or
incur any liability in connection with any partnership or joint venture or
enter into any partnership, joint venture or other arrangement agreement
or understanding with any person outside the Group for the joint
development of any business or the sharing of any assets or revenues
derived from such business (other than a joint venture identified in
Schedule XV and existing at the date of this Agreement and to the extent
of the liability hereunder or in respect thereof which is contemplated as
at the date of this Agreement);
14.18 TOBACCO INVENTORY: forthwith, upon demand by the Security Agent in
writing, transfer any stocks of tobacco owned by a Group Company and not
held in an Agreed Warehouse, into an Agreed Warehouse and deliver to the
Security Agent such documentation in connection therewith (including,
without limitation, warehouse warranties and executed pledges) as the
Security Agent may require;
14.19 REGISTRATIONS: effect all necessary registrations and notices to perfect
and protect the Security Documents from time to time and meet all proper
costs in connection with them;
14.20 CONSENTS AND FILINGS: ensure that:
(i) all consents, licences, approvals and authorisations shall be
obtained, complied with renewed and maintained;
(ii) all filings, recordings, registrations or enrolments shall be
effected; and
(iii) any stamp, registration or similar tax shall be promptly paid;
from, with or to any governmental authorities or agencies or courts to the
extent required under any applicable law or regulation to enable any Group
Company to perform its obligations under any Finance Document to which it
is a party or to ensure the legality, validity and enforceability of any
such Finance Document;
14.21 MAINTENANCE OF LICENCES: take all necessary action to protect and maintain
(and take no action which could foreseeably imperil the continuation of)
the licences and statutory authorisations, intellectual property, trade
names, franchises and contracts (referred to in this Clause 14.21 as the
"Authorisations") which are necessary for the conduct of the business of
each of the Group Companies substantially as it is presently conducted and
to enable such business to be carried on substantially as at present and
shall procure that all material conditions attaching to such things are at
all times complied with and that the business is carried on within the
permitted parameters stipulated in such Authorisations;
14.22 MAINTENANCE OF ACCOUNTS: with effect from the date of this Agreement, each
First Tier Subsidiary shall maintain only the current and deposit bank
accounts set out in Schedule XVII and shall not open any other accounts or
transmit any payments through any other account. All proceeds from a
transaction financed by a Bank entered into with or for the account of any
Borrower or Covenantor shall be paid into an account designated by the
Lead Bank;
14.23 ACCESS: permit any one or more representatives of the Lead Bank or its
advisers to have access to the property, assets, books and records of any
Group Companies and to inspect the same;
14.24 SUBSTANTIAL CONTRACTS: notify the Lead Bank if any contract entered into
by any Group Company which represents 2 per cent. or more of the gross
turnover of any Group Company or of the Group is terminated for any reason
(and for these purposes turnover shall be calculated by reference to the
then most recent audited consolidated accounts of the Group delivered to
the Lead Bank);
14.25 DERIVATIVES: not enter into any transaction in derivatives with any
person, except an interest rate or currency swap, a forward rate agreement
or a cap, floor or collar transaction entered into solely to hedge an
existing liability of such Group Company in the ordinary course of
business (as conducted at the date of this Agreement);
14.26 MATERIAL TRANSACTIONS: not enter into any material transaction or
arrangement with any person except on arm's length terms and for full
market value; the expression "material" shall mean a contract, transaction
or arrangement under which a Group Company can be expected to pay or to
receive an amount in excess of $80,000;
14.27 COMPLIANCE WITH LAWS: comply in all respects with all laws and
regulations binding upon it in connection with the carrying on of its
business where a failure so to comply would adversely affect the business
or financial condition of such company;
14.28 TAXES: pay all Taxes due and payable by it on the relevant due date;
14.29 DELIVERY OF DEEDS: if, and whenever required by the Security Agent,
execute and deliver to the Security Agent or procure the execution and
delivery to the Security Agent of all or any guarantees and/or debentures
and/or mortgages and/or charges and/or pledges and/or deeds, documents and
certificates required by the Security Agent to guarantee or (as may be
required) create security for all or any part of the money and liabilities
outstanding in respect of or pursuant to the Facilities and/or any of them
and/or to perfect and protect the Security Documents or any of them. Any
such guarantees and/or security and other documents referred to in this
Clause 14.29 shall be in such form as the Security Agent may require;
14.30 SECURITY: give to the Security Agent such assistance as it may require in
connection with obtaining security over stocks of tobacco or other assets
(including receivables) owned by any Group Company from time to time and
pay and discharge on demand all costs, charges and fees (including legal
fees) incurred by the Security Agent in connection with such security and
execute or cause to be executed in favour of the Security Agent such new
or additional guarantees, charges and/or other security over such of its
assets as the Security Agent may from time to time specify to secure all
money and liabilities for the time being due, owing or incurred to any
Finance Party whether outstanding under any Finance Document or otherwise;
14.31 ADDITIONAL DOCUMENTS: if required by the Lead Bank, execute and deliver
to the Lead Bank any additional documents required by the Lead Bank
following the review conducted pursuant to Clause 4;
14.32 WRITE OFFS: not make provisions or write-offs in its accounting records or
financial statements, except to the extent required to comply with the Act
(or other applicable legislation for companies incorporated outside
England) or good accounting practice and not compromise, discharge,
postpone, release, settle or subordinate any Significant Claim or waive
its rights of action in connection therewith, save in respect of normal
substitutions of tobacco in the ordinary course of the business of a
Tobacco Group Company or where the claim or debt concerned is fully
covered by insurance. In this Clause 14.32 "Significant Claim" means (a)
a claim or debt which is $20,000 or more or (b) any series of claims or
debts which in aggregate constitute $100,000 or more in any 12 month
period;
14.33 PRO RATA UTILISATION: use reasonable endeavours to ensure that the
proportion which the aggregate of the Outstandings from time to time under
the Facilities bears to the aggregate of the Banks' Overall Commitments is
the same as the proportion which each Bank's Outstandings at such time
bear to such Bank's Overall Commitment at such time;
14.34 NO PAYMENT: so far as reasonably practicable, procure that no bank,
financial institution or other lender is paid or repaid from a drawing
under any of the Facilities;
14.35 PROPERTY: maintain all Properties and all plant and machinery used in the
business of any Group Company in good repair;
14.36 REPORT: co-operate fully with any reporting accountants or consultants
(each a "Consultant") from time to time appointed at the request of the
Lead Bank, the Security Agent and the Steering Committee, to investigate
and report upon the Group and/or any Group Company and provide on demand
all information requested by any such Consultant and pay the fees of any
such Consultant promptly on demand;
14.37 ACCOUNTING REFERENCE PERIOD: ensure that the Accounting Reference Period
of each Group Company shall end on 31 March and that no Group Company
shall alter its Accounting Reference Period so as to end other than on 31
March without the prior approval of the Lead Bank and in giving any such
approval the Lead Bank may require such change in the financial covenants
contained in Clause 16 (Financial Covenants) as will reflect the change
notified to it), and procure that the Accounting Reference Date of each
Group Company shall be the same;
14.38 MAINTAIN AUDITORS: not change the Auditors;
14.39 SALE OF WOOL GROUP: procure that, upon the Sale of a Wool Group Company,
the Net Disposal Proceeds are applied forthwith in accordance with Clause
14.5;
14.40 LIMIT ON TERM: ensure that the maximum period for which any advance or
Bill is outstanding under any Facility is 180 days and the maximum period
for which any foreign exchange transaction, guarantee, bond, letter of
credit, indemnity or other contingent obligation entered into by a Bank
under a Facility is capable of being outstanding is 180 days;
14.41 BONUS: not pay any remuneration, benefits, bonus, incentive, commission
or profit sharing payment, pension contributions or other payments of any
kind (collectively the "benefits") unless such benefits are paid on
principles consistent with payments made in the past by such Group Company
and in the normal course of the business of such Group Company for good
commercial reasons;
14.42 CONTRACTS: not enter into any contract to employ any person which
provides for a fixed period of employment exceeding one year or which is
not determinable after the expiry of such period without compensation on
giving no more than 3 months notice;
14.43 CONSTITUTIVE DOCUMENTS: not alter its memorandum and articles of
association or other constitutive documents unless such alteration is
required by the law of its country of incorporation;
14.44 DORMANT COMPANIES:
(a) ensure that no Group Company which is a dormant company (as
that term is defined in Section 250 of the Act) shall commence
trading or acquire any assets or be put into liquidation,
without the prior written consent of the Lead Bank (acting on
the instructions of the Majority Banks); and
(b) ensure that no such dormant company will create or attempt to
create or allow to arise or subsist or have outstanding any
Encumbrance or anything in the nature of security on or over
its assets or undertaking (or any of them), except for (i)
liens arising solely by operation of law and (ii) any security
granted in favour of the Security Agent on behalf of the
Banks;
14.45 US FACILITY: SCC shall notify the Lead Bank forthwith of any
amendment to or variation of the terms of the US Facility, the
NationsBank Holding Company Loans or the Wool Group Facility;
14.46 CLAIMS: not during the period from the Effective Date of this
Agreement until the Master Facilities Termination Date,
compromise, discharge, postpone, release or subordinate claims or
debts in excess of a maximum aggregate amount of $200,000 or waive
its right of action in connection with any such claim or debt
provided that this Clause 14.46 shall not apply to:
(a) normal substitutions of tobacco in the ordinary course of
the business of a Tobacco Group Company as conducted at the
date of this Agreement;
(b) the subordination of the debt owed by Standard Wool (UK)
Limited to SCTC pursuant to a Subordination Agreement dated
on or about the date of this Agreement made between SCTC,
Standard Wool (UK) Limited, the Financial Institutions
identified therein and National Westminster Bank Plc; or
(c) the subordinated loan of up to 1,700,000 to be made by SCC
to Tentler & Co B.V. and subordinated pursuant to a Deed of
Subordination executed on or about the date of this
Agreement and made between Deutsche Bank de Bary N.V.,
MeesPierson N.V., SCC and Tentler & Co B.V.;
(d) the debt subordination pursuant to the SCC Subordination
Agreement;
14.47 ANNOUNCEMENT: SCC shall procure that any public announcement
which a Group Company proposes to make which directly refers
to the Banks, the Steering Committee, the Lead Bank or the
Security Agent (or any of them) or the arrangements contained
in any Finance Document, will not be made until the Lead Bank,
the Security Agent and any Bank named in such announcement
have been given ten Business Days to consider the form of such
announcement, provided that the restriction set out above
shall not apply to an announcement which is required to be
made pursuant to any regulatory requirement and which does not
identify any Finance Party by name and SCC shall deliver a
copy of each public announcement contemplated by this Clause
14.47 to the Lead Bank;
14.48 SECURITY: procure that security in form and substance
satisfactory to the Security Agent (acting on the instructions
of the Majority Banks) is granted in accordance with the
programme set out in Schedule XX;
14.49 CO-OPERATION: each Obligor shall co-operate with the Lead
Bank and the Security Agent and provide each of them with such
information as they may reasonably require in order to carry
out their functions hereunder;
14.50 COMPLIANCE: not pay or discharge or satisfy by set-off or
otherwise any amount of principal to any Bank or other lender,
save as expressly contemplated in this Agreement;
14.51 REVALUATION OF ASSETS: not revalue any assets of any Group
Company, save with the prior approval of the Steering
Committee;
14.52 BOOK DEBTS: in the case only of the Borrowers, Spierer and
Werkhof, pay all amounts received by it in respect of book and
other debts into the account(s) from time to time designated
by the Security Agent or the Lead Bank in writing;
14.53 CONDITIONS SUBSEQUENT: cause the conditions subsequent
specified in Part II of Schedule X to be delivered to the Lead
Bank (satisfactory in form and substance to the Lead Bank) on
or before 12 May 1995 (or such later date as the Lead Bank
(acting on the instructions of the Majority Banks) may
determine);
14.54 BUDGET COMPLIANCE: comply with the current Budget approved by
the Lead Bank, provided that:-
(a) variations in expenditure viewed by the Steering Committee as
non-material shall not constitute non- compliance;
(b) movement of items of expenditure from one quarter to another
quarter within the period covered by that Budget shall not
constitute non-compliance;
(c) variations caused by changes in the general rates, or
incidence, or taxation shall not constitute non- compliance.
15. INFORMATION COVENANTS
For so long as any liability remains outstanding or capable of being
drawn down under the Finance Documents, SCC shall:-
15.1 BUDGET: Submit, not later than 10 days before the beginning of
each Accounting Reference Period of SCC commencing with the
Accounting Reference Period beginning on 1 April 1995, to the Lead
Bank (in sufficient numbers for distribution to the Banks), for the
approval of the Lead Bank, copies of an itemised consolidated
budget in the format reasonably approved by the Lead Bank for the
forthcoming Accounting Reference Period for the Group and each such
budget shall contain (in such detail as is, in the reasonable
opinion of the Lead Bank, necessary):-
(a) the aggregate amount of capital expenditure (separately
specifying individual items of capital expenditure in excess
of $100,000) intended to be incurred by the Group during such
Accounting Reference Period and the expected timing of such
capital expenditure;
(b) details of the aggregate amount of hire purchase and the
finance lease payments intended to be incurred by the Group
during such Accounting Reference Period, specifying separately
details of payments in excess of $100,000 in aggregate in
respect of any one item; and
(c) proposed trading, inventory, revenue and cash flow forecasts
for such Accounting Reference Period prepared on a Month by
Month basis;
such budget to have been approved by the board of directors of SCC
and to include consolidated statements and statements, for each
Group Company which is trading in each case for each Trading
Period, of forecast profit and loss, revenue and cash flow
including a rolling four quarter cashflow in a format approved by
the Lead Bank and a balance sheet, to include a commentary on the
above and to be in such form and to contain such other information
as is, in the reasonable opinion of the Lead Bank, necessary.
15.2 REVIEW:
(a) The Steering Committee will conduct a review of each budget
provided in accordance with Clause 15.1.
(b) SCC will be notified of the date or dates of each such review,
will be given an opportunity to make a presentation at each
such review and will, if so previously requested on reasonable
notice by the Steering Committee, attend at such review.
(c) Promptly after the conclusion of each review, the Steering
Committee will write to all Banks with:-
(i) any changes to the relevant budget proposed by SCC in the
light of the review; and
(ii) the comments of the Steering Committee on the relevant
budget and review; and
(iii) the recommendations of the Steering Committee with
respect to acceptance or rejection of such budget for
the purposes of this Agreement, together with a request
for directions as to whether to accept or reject the
relevant budget.
(d) In taking part in such reviews and discussions and in
indicating whether such budget is acceptable to them (and, if
not to any extent, the reasons for such view), the Steering
Committee, the Banks and their respective officers and
advisers shall not seek to give directions to SCC or any other
Group Company or their respective officers; they shall,
however, make such comments as they consider fit in order to
protect their positions as creditors of, and holders of
security, from the Obligors (or advisers to such persons) and
to preserve the relative positions of the Banks amongst
themselves in relation to the Group Companies.
(e) The decision whether to accept or reject a Budget shall be
made by the Steering Committee acting on the instructions of
the Majority Banks given pursuant to paragraph (c) above. In
the event that the Majority Banks have not given directions
within 10 Business Days of the date of despatch of the request
for directions, the Steering Committee will accept or reject
the budget on the basis of its recommendations.
(f) In the event that the decision of the Steering Committee
pursuant to paragraph (c) or (e) above is to reject the
relevant Budget, then SCC remains free to adopt such budget,
but the Steering Committee shall notify the Banks in writing
of the position and may convene a meeting of the Banks to
consider whether an Event of Default should be called.
(g) In the event that a Budget is rejected and no replacement
agreed then, from the start of the period to which it relates
until any Event of Default is called or a replacement Budget
is agreed, the cash flow expenditure permitted will be
confined to payment of amounts representing contractual
obligations dating from before such rejection and any other
expenditure unavoidably incurred as the minimum reasonably
required to maintain an on-going business.
15.3 Cash Flow Forecast:
(a) Deliver to the Security Agent in sufficient numbers for
distribution to each of the Banks, no later than ten
Business Days following each Quarter Date commencing on 30
June 1995:
(i) a rolling four quarter Cashflow Forecast in the form
or substantially the form attached as Appendix A for
the Trading Periods next following such Quarter Date;
and
(ii) a calculation of Surplus Cash as at such Quarter Date
(a "Calculation") setting out all workings and
assumptions for such calculation in such detail as
the Security Agent (in consultation with Coopers &
Lybrand) shall require.
The Security Agent agrees to use reasonable endeavours to
distribute such Cash Flow Forecast to the Banks as soon as
reasonably practicable.
(b) Coopers & Lybrand will review such Cash Flow Forecast and
Calculation and will report to the Steering Committee within
ten days of the receipt by the Steering Committee of such
documents whether, in their opinion, such Cash Flow Forecast
and Calculation are satisfactory. Coopers & Lybrand shall
be instructed to deliver to each Bank a copy of its report
as soon as such report is ready for distribution to the
Banks. The Steering Committee (acting on the instructions
of the Majority Banks) will then determine whether to accept
or reject such Cash Flow Forecast and Calculation. If the
Steering Committee reject the Cash Flow Forecast and
Calculation, SCC shall be required to recast such Cash Flow
Forecast and/or Calculation (in consultation with Coopers &
Lybrand) and Coopers & Lybrand will then report to the
Steering Committee whether such recast Cash Flow Forecast
and Calculations are, in their opinion, satisfactory.
(c) If a Cash Flow Forecast and Calculation or a recast Cash
Flow Forecast and Calculation are determined by the Steering
Committee (acting on the instructions of the Majority Banks)
to be satisfactory, then, provided the Calculation shows
that there is sufficient Surplus Cash (taking into account
the Cash Flow Forecast), payments may be made to the
Non-Committed Banks and the Reducing Banks (in each case in
accordance with the repayment schedules agreed with those
Banks and acknowledged on behalf of the Steering Committee)
and by way of dividend to SCC subject to the other terms of
this Agreement and to the requirements of the Act and/or any
equivalent legislation applicable in Liechtenstein. All
such payments shall be made pro rata pari passu. In this
Clause 15.3 pro rata means the proportion which an amount to
be paid to a Reducing Bank, a Non-Committed Bank or by way
of dividend or distribution to SCC during any Trading Period
bears to the aggregate of all of the amounts to be paid to
the Reducing Banks, the Non-Committed Banks and SCC in that
Trading Period.
(d) If, but for the provisions of Clauses 17.1(r)(vi) and
17.1(s)(vi) (Termination in Case of Default), a payment
could be made to a Reducing Bank or a Non-Committed Bank
under Clause 15.3(c), the relevant Borrower may place to the
credit of a separate account of the Borrower with the Lead
Bank designated "[*name of Borrower*] re Reducing and
Non-Committed Banks" an amount equal to the amount of any
such payment which would otherwise be permitted under Clause
15.3(c) and, following the Sale of the Wool Group, the
balance on such account may be paid to the Non-Committed
Banks and the Reducing Banks. For the avoidance of doubt,
such account and the balance standing to the credit of such
account shall continue at all times to be subject to the
security granted by the Borrower Debentures and nothing in
this Clause 15.3(d) shall create a trust arrangement of any
kind.
(e) If the Master Facilities Termination Date occurs prior to
the Sale of the Wool Group, the balance standing to the
credit of the account referred to in paragraph (d) shall be
paid to the Security Agent and applied as Recoveries.
15.4 SECURITY DETAILS: Deliver to the Security Agent in sufficient
numbers for distribution to the Banks, not later than the last
Business Day in each month (commencing on or about 30th April 1995)
details of all Borrowings of each Group Company during the
preceding month and all Encumbrances created in respect thereof and
the value of all pledged assets, in such detail as the Lead Bank
(acting on the instructions of the Majority Banks) may require.
15.5 MONTHLY ACCOUNTS: Deliver to the Security Agent, not later than
the twentieth Business Day in each month (commencing on or about
20th May 1995) in sufficient numbers for distribution to the Banks
the consolidated profit and loss account and balance sheet of the
Group for the preceding month and profit and loss accounts and
balance sheets for each Obligor.
15.6 MONTHLY UPDATES: Deliver to the Security Agent, in sufficient
copies for each of the Banks, an update on the most recent budget
provided pursuant to Clause 15.1 (including cashflow) in such
detail as the Lead Bank (acting on the instructions of the Majority
Banks) may require.
15.7 ACCOUNTS: Deliver to all the Banks copies of:-
(a) AUDITED ACCOUNTS: the audited consolidated profit and loss
account and balance sheet of the Greater Group for each
Accounting Reference Period ending after the date of this
Agreement as soon as the same has been approved by the board
of directors of SCC (but in any event not later than 90 days
from the end of such Accounting Reference Period) and audited
profit and loss accounts and balance sheets for each operating
division of the Greater Group and each of the Group Companies
individually not later than 90 days from the end of such
Accounting Reference Period. SCC shall procure that there
shall simultaneously be delivered a certificate from the
Auditors confirming that the financial covenants set out in
Clause 16 (Financial Covenants) have been complied with in
respect of the Accounting Reference Period to which such
audited accounts relate, and on delivery of the audited
accounts a reconciliation by the Auditors between business
reporting and statutory reporting and a reconciliation between
the audited accounts and the financial covenant definitions
and calculations;
(b) Quarterly Management Accounts: copies of management accounts
for each of SCC and the Borrowers for each Trading Period and
cumulative management accounts for each Trading Period from
the beginning of the Accounting Reference Period of the
Greater Group, such accounts to include in each case, inter
alia:-
(i) a consolidated profit and loss account and balance
sheet for the Greater Group and each operating division
of the Greater Group and individual profit and loss
accounts for each of the Borrowers;
(ii) a consolidated statement of assets disposed of and
acquired and of capital expenditure on individual items
in excess of 2% of the approved budgeted capital
expenditure for the relevant Accounting Reference
Period;
(iii) a consolidated cash flow statement incorporating
details of revenues and, on a quarterly basis, a
rolling annual cash flow forecast;
(iv) a certificate signed by two directors on behalf of SCC
advising whether or not the financial covenants
contained in Clause 16 (Financial Covenants) have been
complied with and containing calculations demonstrating
in reasonable detail compliance (or otherwise) with
such financial covenants;
(v) a reference to any material matter occurring in or
relating to the Trading Period in question, including a
statement of any releases from provisions, material
variations from the appropriate budget for that Trading
Period and itemising all transactions referred to in
the capital budget entered into by such Borrower during
that period;
(vi) a comparison of current trading and actual performance
as indicated by the profit and loss accounts, balance
sheets and statements referred to in Clause 15.7(b)(i),
(ii) and (iii) against the performance indicated by the
monthly management accounts of twelve Months previously
and that forecast by the relevant budget together with
a commentary on any material variances;
(vii) at the time at which the management accounts for the
Trading Period ending on or about the last day of each
Accounting Reference Period are provided, a statement
of any proposed dividend to be made with respect to
such Trading Period;
such accounts to have been approved by the board of directors
of SCC and, in the case of accounts of a Borrower, the
relevant Borrower and submitted to the Lead Bank (with
sufficient copies for distribution to all the Banks) within 90
days from the end of each Trading Period;
(c) OTHER INFORMATION: any other information concerning the
business or financial condition of any Group Company or the
Group as a whole which the Lead Bank or the Security Agent may
require or any Bank may reasonably require from time to time.
15.8 CIRCULARS AND TRADE INFORMATION: Deliver to the Lead Bank copies
of all circulars issued to shareholders of any Group Company or any
class of them and copies of all reports and other works
commissioned by the Group concerning the trade of any of the Group
Companies and in particular their comparative market shares and
such other trade information as is available to the Group that the
Lead Bank may require from time to time.
15.9 INVENTORY PROGRAMME: Establish a programme to the satisfaction of
the Security Agent, as far as possible and no later than 30 May
1995, for the purpose of monitoring and reporting levels of
Inventory not sold to third parties and deliver such reports (in
form and substance satisfactory to the Security Agent) no later
than the fifth Business Day of each month with respect to the
preceding month.
15.10 CONSISTENT APPLICATION: Ensure that all accounts and other
financial information submitted to the Lead Bank have been
prepared using accounting bases, policies, practices and
procedures consistent with the policies applied in the Original
Accounts and in accordance with generally accepted accounting
principles consistently applied, except in any case as approved by
the Auditors in which event SCC shall notify such modifications to
the Lead Bank. In such circumstances the Lead Bank (in
consultation with SCC and the Auditors) may require such changes
to the financial covenants contained in this Agreement as shall
reflect such modifications. SCC shall ensure that such accounts
give a true and fair view of the results of its (and, where
consolidated, its Subsidiaries') operations for the period in
question and the state of its (and, where consolidated, its
Subsidiaries') affairs as at the date to which such accounts are
made and disclose or reserve against all of its (and, where
consolidated, its Subsidiaries') liabilities, actual and
contingent.
15.11 AUDITOR'S CERTIFICATE: Require the Auditors for the time being
(and at SCC's expense):-
(a) to verify to the Lead Bank's satisfaction any financial
information required by this Agreement to be provided to the
Lead Bank and/or the Banks;
(b) to verify any figures required to calculate any of the
financial covenants contained in Clause 16 (Financial
Covenants); or
(c) to hold discussions with SCC with a view to ascertaining the
manner in which SCC is collecting and preparing the
information stipulated in this Clause 15 with a view to
ascertaining the accuracy and reliability of such information
and to report to the Lead Bank as to their findings;
and if the Lead Bank (acting on the instructions of the Majority
Banks), is concerned as to the accuracy of such information
following receipt by it of such information under Clause 15.11(a)
or (b) above, the Lead Bank may (at its discretion) require that
an independent firm of accountants acceptable to the Lead Bank be
mandated to carry out an appropriate investigation and give a
certificate in form and content satisfactory to the Lead Bank
certifying any matter referred to in Clause 16 for the relevant
period or (as the case may be) as at the relevant date to the
intent that the covenants contained in Clause 16 (Financial
Covenants) shall require to be satisfied by the figures so
verified or certified even if (in respect of such covenants to be
tested as at or for a period ending on 31st March in any year) the
audited accounts for the same date or period have not yet been
published.
15.12 LITIGATION: Advise the Lead Bank immediately of the details of
any litigation, arbitration or administrative proceeding (to the
best of its knowledge and belief) pending or threatened against
any Group Company which could, if adversely determined, result in
a liability to the Group (including costs) in excess of $50,000
and detailing to what extent such liability is covered by
insurance.
15.13 CHANGES IN MARKETS: Discuss with the Steering Committee any
changes or proposed or possible changes in the markets in which
the Group operates which may have a material effect on its
business.
15.14 EVENT OF DEFAULT: Notify the Lead Bank in writing of any event
which is an Event of Default or Potential Event of Default
immediately upon becoming aware of such occurrence and, if so
requested by the Lead Bank at any time, promptly supply to the
Lead Bank a certificate signed by two directors, certifying that
so far as they are aware, after reasonable enquiry, no Event of
Default or Potential Event of Default has occurred and is
Continuing or, if it is, specifying it and the steps, if any,
being taken to remedy it.
15.15 NOTIFICATION: Notify the Lead Bank in writing immediately upon
becoming aware of any request received by a Group Company to give
any Encumbrance or guarantee or indemnity or of any demand by any
person for repayment of any principal amount or forthwith upon
becoming aware that any person is taking steps to recover any
principal amount from it.
15.16 PENSIONS: Deliver to the Lead Bank, at such time as those reports
are prepared in order to comply with then current statutory or
auditing requirements, actuarial reports in relation to the
pension schemes for the time being operated by Group Companies,
and shall procure that contributions to all such pension schemes
are made at a rate not less than that specified in such actuarial
reports.
16. FINANCIAL COVENANTS
16.1 As soon as reasonably practicable after the distribution by
Coopers & Lybrand of their report and recommendations (pursuant to
Clause 4), the Steering Committee shall consult SCC to determine
the financial covenants which shall be applicable to SCC and the
Borrowers under this Agreement. The terms of such financial
covenants shall be agreed between SCC (acting reasonably) on
behalf of itself, the Borrowers and the Covenantors and by the
Lead Bank (acting with all Bank approval) on behalf of the Finance
Parties, whereupon such financial covenants shall be deemed to be
incorporated in and form part of the terms of this Agreement. For
the avoidance of doubt, a breach of any such financial covenant
shall be deemed to constitute an Event of Default under Clause
17.1(c) (Breach of Agreement).
16.2 For the purpose of determining the financial covenants to be
incorporated in this Agreement (pursuant to Clause 16.1) but
without prejudice to the requirement that such financial covenants
must be approved by all Banks, the Lead Bank shall consult the
Steering Committee and both the Steering Committee and the Lead
Bank shall have due regard to the views expressed to them by Banks
in writing on the subject of such financial covenants within 21
days of the distribution by Coopers & Lybrand of the report and
recommendations referred to in Clause 16.1. In formulating their
views, the Banks shall have due regard to the recommendations of
Coopers & Lybrand as to the nature and scope of the financial
covenants which are appropriate in the circumstances.
16.3 SCC and each Borrower shall comply with such covenant (if any)
with respect to the Lending Base as the Lead Bank (after
consultation with SCC and the Steering Committee) may notify to
the Borrowers and SCC in writing following the Sale of the Wool
Group.
PART XII
EVENTS OF DEFAULT
17. TERMINATION IN CASE OF DEFAULT
17.1 DEMAND ON EVENT OF DEFAULT: Upon the occurrence of any of the
following events:-
(a) FAILURE TO PAY: failure by any Obligor to pay in full any
sum due under, and in the manner required by, this Agreement
or any other Finance Document on the due date (or, if such
failure is due solely to an administrative failure on the
part of such Obligor's bank and not to any default of such
Obligor, within two Business Days of the due date); or
(b) INCORRECT REPRESENTATION: any representation, warranty or
statement made by or in relation to any Group Company in
this Agreement or any other Finance Document or in any
document furnished under or in connection with such
documents being incorrect as at the date on which it is made
or deemed to be repeated; or
(c) BREACH OF AGREEMENT: failure by any Obligor to comply duly
and punctually, or to procure that any Group Company so
complies, with any other provision of any Finance Document;
or
(d) FAILURE TO DISCHARGE INDEBTEDNESS:
(i) failure by any Group Company to discharge on its
due date (but only on the expiry of any applicable
grace period contained in the original document
evidencing the same) any Indebtedness in excess of
an aggregate amount outstanding at any one time of
$1,000,000 unless the Indebtedness is being
disputed in good faith by the relevant Group
Company with (in the opinion of its legal advisers)
a good prospect of success; or
(ii) any Borrowings of any Group Company are declared
due and payable prior to their stated maturity or
are placed on demand by reason of an event of
default (however called) or any circumstances arise
as a result of which any Borrowings could be so
declared due and payable prior to their stated
maturity; or
(iii) any money repayable on demand by any Group Company
is not repaid on demand being made; or
(iv) any lender or other person in whose favour SCC has
granted a guarantee, makes demand under such
guarantee; or
(v) any lender or other person in whose favour any
Group Company has granted any guarantee or security
makes demand under such guarantee or enforces or
attempts to enforce such security; or
(e) SUSPENSION AND EXPROPRIATION:
(i) the suspension or the threatened suspension of all
or a substantial part of any Group Company's
operations; or
(ii) the expropriation of all or a substantial part of
any Group Company's assets by any governmental or
other competent authority; or
(f) INSOLVENCY:
(i) WINDING UP:
(aa) a meeting is convened; or
(bb) a petition is presented (unless (a) the
relevant Group Company is able to satisfy
the Steering Committee that such petition
is frivolous or vexatious and (b) such
petition is discharged within five Business
Days of the date of its presentation); or
(cc) an order is made; or
(dd) a resolution is passed;
for the winding-up of any Group Company (except for
the purposes of a reconstruction or amalgamation
while solvent on terms previously approved in
writing by the Lead Bank); or
(ii) ADMINISTRATION:
(aa) a meeting is convened; or
(bb) an application is made; or
(cc) a petition is presented;
for the appointment of an administrator in relation
to any Group Company; or
(iii) REQUEST BY DIRECTORS OR MEMBERS: the directors or a
member of a Group Company request the appointment
of a liquidator, receiver, administrative
receiver, administrator or similar official; or
(g) DISTRESS ETC.: a distress, execution or other legal process
is levied against any of the assets of any Group Company and
is not discharged or paid out within 5 days; or
(h) ENFORCEMENT PROCEEDINGS:
(i) an encumbrancer takes possession; or
(ii) a receiver or an administrative receiver,
administrator, liquidator, special manager,
trustee, supervisor or similar or equivalent
officer is appointed, of the whole or any part of
the assets or undertaking of any Group Company; or
(i) CEASING PAYMENT OF DEBTS: any Group Company:-
(i) becomes insolvent or bankrupt or ceases or suspends
generally payment of its debts (or announces an
intention to do so) or is unable to pay its debts
or is deemed unable to pay its debts within the
meaning of Section 123 of the Insolvency Act 1986;
or
(ii) commences, or announces an intention to commence,
negotiations with one or more of its creditors with
a view to the general readjustment or rescheduling
of all or any class of its Indebtedness or seeks
protection from its creditors; or
(iii) proposes or its directors make a proposal for a
voluntary arrangement under Part I of the
Insolvency Act 1986; or
(iv) enters into any composition or other arrangement
for the benefit of its creditors generally or any
class of creditors; or
(v) is the subject of any proceedings under any law,
regulation or procedure relating to reconstruction
or readjustment of its debts; or
(vi) has a moratorium declared in respect of its
Indebtedness; or
(j) UNLAWFUL PERFORMANCE:
(i) it becomes unlawful for any Group Company to
perform any of its obligations under any Finance
Document to which it is a party; or
(ii) any Finance Document is not or ceases to be legal,
valid and binding on and enforceable against any
Group Company which is a party thereto or is
materially impaired; or
(iii) SCC or any Group Company shall at any time give
notice purporting to determine its liability under
any guarantee or security securing the amounts from
time to time due under any Finance Document
(including further amounts which may be drawn down
under it); or
(k) MATERIAL ADVERSE CHANGE:
(i) there occurs a Material Adverse Change; or
(ii) litigation is brought against a Group Company which
is likely to succeed and which if successful would
result in a Material Adverse Change; or
(iii) following the receipt by the Steering Committee of
the report of Coopers & Lybrand referred to in
Clause 4.1 (Review) the Majority Banks consider
that, since the Effective Date, there has been a
Material Adverse Change;
(l) AUDITORS' REPORT: the Auditors qualify their report to the
audited Accounts; or
(m) US FACILITY: an event of default (however expressed) is
declared under the US Facility or the US Facility is
terminated or cancelled or further utilisation of the US
Facility is suspended; or
(n) CHANGE OF CONTROL:
(i) any person (whether acting alone or with any other
person) which does not have control at the date of
this Agreement becomes the beneficial owner of
shares in the share capital of SCC carrying the
right to exercise more than 25 per cent. of the
votes exercisable at a general meeting of SCC or
otherwise acquires the power to control the affairs
and policies of SCC; or
(ii) save with the prior consent of the Lead Bank (acting
on the instructions of the Majority Banks), there is
any change in the legal or beneficial ownership of
any Group Company (except pursuant to the provisions
of any Finance Document or except as a result of a
Sale of a Wool Group Company); or
(o) CEASING BUSINESS: any Group Company ceases or threatens to
cease to carry on any material part of the business it
carries on at the date of this Agreement, except as
expressly permitted under this Agreement; or
(p) REPUDIATES OBLIGATIONS: any of the Obligors repudiates any
of its obligations under any of the Finance Documents; or
(q) DIVIDENDS: any First Tier Subsidiary pays any dividends or
makes any other distributions of capital or income or pay
any management or other fees to any of its members, except:-
(i) at a time when no Event of Default has occurred and
is Continuing (or would occur as a consequence of
such action);
(ii) out of Surplus Cash of such First Tier Subsidiary
determined in accordance with Clause 15.3 (Cash Flow
Forecast) and not out of reserves;
(iii) on a date which falls 30 days after a Quarter Date
(or, if such date is not a Business Day, on the next
following Business Day); and
(iv) solely for the purpose of enabling SCC to make
payments of principal or interest in respect of
Borrowings of SCC; or
(r) any First Tier Subsidiary makes any payments to the
Non-Committed Banks, except:-
(i) at a time when no Event of Default has occurred and
is Continuing (or would occur as a consequence of
such action); and
(ii) in accordance with the schedule of repayment
negotiated between SCC and the Non-Committed Banks
and acknowledged on behalf of the Steering Committee;
and
(iii) out of Surplus Cash determined in accordance with
Clause 15.3 (Cash Flow Forecast); and
(iv) on a date which falls 30 days after a Quarter Date
(or, if such date is not a Business Day, on the next
following Business Day); and
(v) in accordance with Clause 8.6 (Reductions); and
(vi) after the Sale of the Wool Group; or
(s) REDUCING BANKS: any First Tier Subsidiary makes any payments
to a Reducing Bank, except:-
(i) at a time when no Event of Default has occurred and
is continuing (or would occur as a consequence of
such action); and
(ii) in accordance with the schedule of repayment
negotiated between SCC and the Reducing Banks and
acknowledged on behalf of the Steering Committee; and
(iii) out of Surplus Cash determined in accordance with
Clause 15.3 (Cash Flow Forecast); and
(iv) on a date which falls 30 days after a Quarter Date
(or, if such date is not a Business Day, on the next
following Business Day); and
(v) in accordance with Clause 8.6 (Reductions); and
(vi) after the Sale of the Wool Group; or
(t) OTHER GROUP COMPANIES: any Tobacco Group Company other than
a First Tier Subsidiary makes any payment to any
Non-Committed Bank or Reducing Bank; or
(u) ANALOGOUS EVENTS: any event occurs which, under the
applicable law of any relevant jurisdiction, has an
analogous or equivalent effect to any of the above events
mentioned in this Clause 17.1;
then and in any such event and at any time while it is
Continuing, the Lead Bank may, in its sole discretion, and at the
instruction of the Majority Banks shall, by notice in writing to
the Borrowers declare that an Event of Default has occurred and
such declaration shall constitute an event of default or any
analogous such event (however described) under each Facility
Agreement and each Bank (or the Lead Bank on its behalf) may
declare that each of its Commitments and its Overall Commitment
is cancelled and reduced to zero and all amounts outstanding to
such Bank under or in connection with any Facility and/or Finance
Document shall be repayable on demand whereupon they shall become
immediately due and payable together with all accrued interest
and other costs, commissions and charges owing under such
Facility and/or Finance Document forthwith upon demand being made
by such Bank (or the Lead Bank on its behalf). For the avoidance
of doubt, an Event of Default may be waived only with the consent
of the Majority Banks.
17.2 FOREIGN EXCHANGE AND CASH COVER: Upon the making of a declaration
by the Lead Bank of an Event of Default under Clause 17.1 above,
each Bank shall be entitled, in addition to any rights conferred
upon it under Clause 17.1 above:-
(a) to close out all or any foreign exchange contracts then
currently outstanding under or pursuant to the Facility; and
(b) to call for the immediate payment to it of full cash cover in
respect of all unmatured liabilities of any Obligor to such
Bank.
PART XIII
FEES, EXPENSES AND STAMP DUTIES
18. FEES
18.1 ARRANGEMENT FEES: SCC shall on the date of this Agreement pay to
the Lead Bank for the Banks a fee of an amount equal to 0.2 per
cent. of the aggregate of the Overall Commitments of the Banks on
the date of this Agreement and the Lead Bank shall distribute such
fee on the following basis: 0.05 per cent. for the Lead Bank, 0.05
per cent. for the Security Agent, the balance to be divided between
the Banks pro rata to their Commitments.
18.2 COMMITMENT FEE:
(a) The Borrowers shall, on the date of this Agreement, pay to the
Lead Bank a commitment fee of an amount equal to 0.25 per cent
of the aggregate of the Overall Commitments of the Banks on
the date of this Agreement and the Lead Bank shall distribute
such fee pro rata to the Bank's respective Overall Commitments
as detailed in Schedule II to this Agreement. In this Clause
18.2(a) "pro rata" means in the proportion which a Bank's
Overall Commitment as at the Relevant Date bears to the amount
of all the Overall Commitments as at the Relevant Date.
(b) If this Agreement is renewed beyond the Initial Term pursuant
to Clause 8.5 (Extension), the Borrowers shall pay a further
fee on the last day of the Initial Period, of an amount equal
to 0.25 per cent of the aggregate of all the Banks' Overall
Commitments on such date for distribution amongst the Banks in
the same proportions as applicable under Clause 18.2(a).
19. EXPENSES
The Borrowers shall reimburse the Lead Bank, the Security Agent,
the Steering Committee and the Banks on demand (on a full indemnity
basis and whether or not any of the Facilities are utilised after
the date of this Agreement) for all fees, costs and expenses in any
relevant jurisdiction (including, without limitation legal fees,
valuation, accountancy and consultancy fees and communication and
out-of-pocket expenses) and any value added or similar tax upon
such costs and expenses, incurred by:-
(a) the Lead Bank and the Security Agent in connection with the
carrying out of due diligence procedures, negotiation,
preparation, execution, and completion of the Finance
Documents or any of the documents referred to in any Finance
Documents or the transactions contemplated by them including,
for the avoidance of doubt, any such fees, costs and expenses
incurred by the Security Agent in connection with the taking
of any security from time to time as contemplated by this
Agreement; and
(b) the Lead Bank, the Security Agent and the Steering Committee
in connection with the operation of this Agreement and/or any
Finance Document and/or the performance of their duties under
any such agreement including, without limitation, legal fees
and reporting accountants fees; and
(c) the Lead Bank, the Security Agent and each Bank in connection
with the enforcement or preservation of any of their
respective rights under any of the Finance Documents or any of
the documents referred to in such Finance Documents in any
jurisdiction.
20. STAMP DUTY
The Borrowers jointly and severally agree to pay on demand all
present and future stamp, registration and similar taxes or charges
which may be payable or determined to be payable in any
jurisdiction in connection with the execution, delivery,
performance or enforcement of any of the Finance Documents or any
judgment given in connection with them and shall indemnify each of
the Lead Bank, the Security Agent, the Steering Committee and the
Banks against any and all liabilities, including penalties with
respect to or resulting from its delay or omission to pay any such
stamp, registration and similar taxes or charges (except for any
such stamp, registration and similar taxes or charges incurred in
connection with any assignment or transfer by a Bank in accordance
with Clause 21 (Assignments and Transfers)).
PART XIV
ASSIGNMENTS AND TRANSFERS
21. ASSIGNMENTS AND TRANSFERS
21.1 BORROWER: No Borrower may assign or transfer any of its rights
or obligations under any Finance Document.
21.2 BANKS: Any Finance Party may with the prior written consent of the
Lead Bank acting on the instructions of the Majority Banks (which
consent shall not be unreasonably withheld):-
(a) assign all or any part of its rights and benefits under its
Facilities and this Agreement and each other Finance Document
to which it is a party, or
(b) transfer in accordance with Clause 21.4 all or any part of its
obligations under this Agreement and each other Finance
Document.
21.3 ASSIGNMENT AND TRANSFER: If a Finance Party assigns all or any of
its rights and benefits under its Facilities and this Agreement and
each other Finance Document to which it is a party in accordance
with Clause 21.2, then, subject to the assignee delivering to the
Lead Bank a duly executed undertaking in writing to the Lead Bank
(on behalf of the Finance Parties) and SCC (on behalf of itself,
the Borrowers and the Covenantors) irrevocably undertaking that it
shall be under the same obligations towards each of them as if it
had been an original party to this Agreement and each such Finance
Document as a Finance Party:-
(a) the assignee shall be substituted for the assignor for all the
purposes and shall have the same rights against the other
parties to this Agreement and in respect of each Finance
Document to which it is a party as it would have had if it had
been an original party to this Agreement and each such Finance
Document as a Finance Party with the rights so assigned to it;
(b) the other parties shall execute such documents as are
reasonably necessary to release the assignor from its
obligations under this Agreement and each such Finance
Document to the extent of the assignment and join the assignee
as a party to this Agreement.
21.4 TRANSFER CERTIFICATE: Any permitted transfer of the obligations of
a Finance Party (a "Transferor") under this Agreement and each
other Finance Document to which it is a party may be made in whole
or in part and shall be effected by the delivery to the Lead Bank
of a Transfer Certificate duly completed and signed by the
Transferor and the Transferee and approved in writing by the Lead
Bank.
21.5 EFFECTIVE DATE: Each of the parties to this Agreement agrees that
following receipt by the Lead Bank of a completed and signed
Transfer Certificate and with effect from the date specified in
such certificate:-
(a) to the extent that the Transferor elects in such Transfer
Certificate to transfer its obligations under its Facilities
and this Agreement and each other Finance Document to which it
is a party, the Transferor shall be released from further
obligations to each Obligor and their respective rights
against each other (except for rights accrued prior to the
date on which such Transfer Certificate takes effect) shall be
cancelled;
(b) the Transferee shall assume obligations towards each Obligor
and each Obligor shall acquire rights against the Transferee
which differ from the rights and obligations so discharged
only insofar as each Obligor and the Transferee have assumed
and/or acquired the same in place of the Obligors and the
Transferor (as the case may be); and
(c) the Lead Bank, the Transferee and the other Finance Parties
(as the case may be) shall acquire towards each other the same
rights and assume the same obligations between themselves as
they would have acquired and assumed had such Transferee been
an original party to this Agreement and each other Finance
Document as a Finance Party with the obligations acquired
and/or assumed by it as a result of such transfer (and, to
that extent, the Lead Bank, the Transferor and the other
Finance Parties shall each be released from further
obligations to each other under this Agreement and such
Finance Documents).
21.6 LEAD BANK'S NOTIFICATION: The Lead Bank shall promptly notify SCC,
the Security Agent and the other Finance Parties for the time being
of the receipt of a Transfer Certificate and shall deliver a copy
of such Transfer Certificate to SCC.
21.7 SCC'S AND BORROWER'S AUTHORISATION: SCC, the Borrowers and the
Covenantors irrevocably authorise the Finance Parties to deliver,
and the Lead Bank to receive, Transfer Certificates in accordance
with this Clause 21.
21.8 FURTHER ASSURANCE: Each of SCC, the Borrowers and the Covenantors
agrees to enter into and to procure that the other Obligors shall
enter into such additional documentation (if any) as may be
required by the Lead Bank or the Security Agent to effect any
assignment or transfer in accordance with this Clause 21.
21.9 SUB-PARTICIPATIONS, etc: Nothing in this Agreement restricts the
ability of a Finance Party to sub-participate all or any of its
rights and/or obligations under the terms applicable to its
Facilities and this Agreement and each other Finance Document to
which it is a party.
21.10 TRANSFEREE ACKNOWLEDGEMENT: Each Transferee, by its execution of
a Transfer Certificate, acknowledges that none of the other Finance
Parties is responsible to it for:-
(a) the accuracy and/or completeness of any information supplied
to the Transferee in connection with the Finance Documents,
the matters referred to in those documents or the Group;
(b) the financial condition, creditworthiness, condition, affairs,
status and nature of any of the Group Companies or the
observance by any of the Obligors of any provisions of the
Finance Documents of any of its obligations under this
Agreement or any document so relating; or
(c) the legality, validity, effectiveness, adequacy or
enforceability of the Finance Documents or any document
relating to this Agreement or to those documents.
21.11 NO OBLIGATION: The Transferor shall not be obliged by any Finance
Document to:-
(a) accept a re-transfer from the Transferee of any of the rights
and/or obligations assigned or transferred under this Clause
21; or
(b) indemnify the Transferee for any losses arising by reason of
any Obligor's failure to perform its obligations under the
Finance Documents or otherwise.
21.12 FEE: On the date that a transfer becomes effective, the
Transferee shall pay to the Lead Bank a fee of $100 for its own
account.
21.13 INFORMATION
Each of SCC, the Borrowers and the Covenantors agrees that the
Finance Parties may at any time disclose such information relating
to it and each other Group Company as shall come into their
possession, whether or not in relation to the Facilities:-
(a) to any prospective assignee, Transferee or sub-participant;
(b) to their respective advisers, (professional or otherwise) and
to any reporting accountant, consultant or surveyor appointed
from time to time in relation to any Group Company and to the
Auditors;
(c) to the other Banks;
(d) if required to do so by an order of a court in any jurisdiction;
(e) pursuant to any law or regulation or to any applicable
regulatory authority (including, without limitation, the Bank
of England) in any jurisdiction; and
(f) where such information shall have already entered the public
domain,
and in the case of paragraph (a) above, subject to requiring and
receiving written confirmation from the recipient of the
information that it will treat in confidence any confidential
information so disclosed to it and not use it for any unauthorised
purpose.
PART XV
AGENCY AND INTER-BANK PROVISIONS
22. LEAD BANK, SECURITY AGENT AND STEERING COMMITTEE
22.1 APPOINTMENT:
(a) Each Finance Party appoints:-
(i) the Lead Bank to act as its agent in connection with
this Agreement and authorises the Lead Bank to exercise
such rights, powers and discretions as are specifically
delegated to it by the terms of this Agreement together
with all such rights, powers and discretions as are
reasonably incidental to them;
(ii) the Steering Committee to act on its behalf in
exercising such rights, powers and discretions as are
specifically delegated to it by the terms of this
Agreement together with all such rights, powers and
discretions as are reasonably incidental to them; and
(iii) the Security Agent to act as its agent and trustee in
relation to the Security Documents and authorises the
Security Agent to exercise such rights, powers and
discretions as are specifically delegated to it by the
terms of this Agreement and the Security Documents
together with all such rights, powers and discretions as
are reasonably incidental to them.
The Obligors shall be entitled to assume that the Lead Bank, the
Security Agent and the Steering Committee act with the approval of
all Banks or the Majority Banks (as the case may be), and that all
consents and notices given or decisions made, by the Lead Bank, the
Security Agent or the Steering Committee under or in connection
with the Finance Documents are validly given or made.
22.2 POWERS: Each of the Lead Bank, the Security Agent and each member
of the Steering Committee may:-
(a) assume that:-
(i) any representation made by the Obligors in or in
connection with the Finance Documents is true;
(ii) no Event of Default or Potential Event of Default has
occurred; and
(iii) no Obligor is in breach of or default under its
obligations under any Finance Document;
unless the Lead Bank or, as the case may be, the Security
Agent or the Steering Committee has in its capacity as such
received actual notice to the contrary, at its address for
communications under this Agreement from any other party to
this Agreement;
(b) assume that each Transferee's Facility Office is that
identified in the Transfer Certificate pursuant to which it
became a party to this Agreement until it has received from
such Transferee a notice designating some other office of such
Transferee as its Facility Office and act upon any such notice
until the same is superseded by a further such notice;
(c) (in the case only of the Lead Bank and the Security Agent)
engage and pay for the advice or services of any lawyers,
accountants or other advisers whose advice or services may to
it seem necessary, expedient or desirable and rely upon any
advice so obtained;
(d) rely as to matters of fact which might reasonably be expected
to be within the knowledge of an Obligor or any officer or
employee of an Obligor upon a certificate or statement signed
by or on behalf of that Obligor or that officer or employee;
(e) rely upon any communication or document believed by it to be
genuine and correct and to have been communicated or signed by
the person by whom it purports to be communicated or signed;
(f) refrain from exercising any right, power or discretion vested
in it under any Finance Document unless and until instructed
by the Majority Banks whether or not such right, power or
discretion is to be exercised and, if it is to be exercised,
the manner in which it should be exercised, and it shall not
be liable for acting or refraining from acting in accordance
with or in the absence of instructions from the Majority
Banks;
(g) refrain from taking any step to protect or enforce the rights
of any Finance Party under any Finance Document, or beginning
any legal action or proceeding arising out of or in connection
with any Finance Document until it shall have been indemnified
and/or secured as it may require (whether by way of payment in
advance or otherwise) against all costs, claims, expenses
(including legal fees) and liabilities which it will or may
expend or incur in complying with such instructions;
(h) refrain from doing anything which would or might in its
opinion be contrary to any applicable law or any requirements
(whether or not having the force of law) of any governmental,
judicial or regulatory body or otherwise render it liable to
any person and may do anything which is in its opinion
necessary to comply with any such applicable law or
requirement;
(i) do any act or thing in the exercise of any of its powers and
duties under this Agreement which may lawfully be done and
which in its absolute discretion it deems advisable for the
protection and benefit of the Finance Parties;
(j) perform any of its duties, obligations and responsibilities
under this Agreement by or through its personnel or agents;
(k) accept deposits from, lend money to and generally engage in
any kind of banking or other business with any Group Company
without any liability to account (and it is expressly agreed
that this will not be a breach of any of their duties to the
Finance Parties); and
(l) accept instant enquiry, requisition, objection or
investigation such title as any person may have to any
property or assets of such person which is the subject of any
Security Document;
(m) (in the case only of the Lead Bank and the Security Agent)
from time to time send to each Finance Party (other than
itself) a notice requesting such details of such Finance
Party's Facilities, Facility Agreements, Outstandings,
Commitment, Overall Commitment and other information relating
to the Facilities as it may require and each Finance Party
undertakes to complete and return promptly any such notice
which it receives.
22.3 DUTIES: Each of the Lead Bank, the Security Agent and Steering
Committee shall:
(a) (in the case only of the Lead Bank and the Security Agent)
except as regards purely administrative acts which do not have
a material effect upon any of the Banks, consult whenever
reasonably practicable with the Banks before doing or
refraining from doing any act or thing in the exercise of its
powers as such;
(b) (in the case only of the Lead Bank and the Security Agent)
promptly upon receipt inform each Bank of the contents of any
notice or document or other information received by it in its
capacity as Lead Bank under this Agreement from the Borrowers
or as Security Agent under the Security Documents from any
Obligor;
(c) (in the case only of the Lead Bank and the Security Agent)
promptly notify each Bank of the occurrence of any Potential
Event of Default or Event of Default or any material breach by
any Obligor in the due performance of its obligations under
this Agreement or any Security Document of which the Lead Bank
or, as the case may be, the Security Agent (in its capacity as
such) has received actual notice from any other party to this
Agreement;
(d) subject to the foregoing provisions of this Clause 22.3 and to
Clause 22.4, act in accordance with any instructions given to
it by the Majority Banks; and
(e) if so instructed by the Majority Banks, except (in the case
only of the Security Agent) in circumstances set out in Clause
25.1(b) (Enforcement), refrain from exercising any right,
power or discretion vested in it under the Finance Documents.
22.4 EMERGENCY POWERS: If it becomes necessary in the opinion of the
Lead Bank, the Security Agent or the Steering Committee to do any
act or thing in the exercise of any of its powers, trusts,
authorities and/or discretion under this Agreement or any other
Finance Document in any case where (in the opinion of the Lead
Bank, the Security Agent or the Steering Committee (as the case may
be)) it is not practicable to obtain the prior agreement of the
Majority Banks or all the Banks (as the case may require) before
doing so, then the Lead Bank, the Security Agent or the Steering
Committee (as the case may be) shall be at liberty to take such
steps as it shall in its absolute discretion deem advisable for the
protection and benefit of the Finance Parties or to refrain from
taking any steps and shall have no liability to any Finance Party
by reason of any exercise or failure to exercise such powers,
authorities and discretions.
22.5 WAIVERS AND DEEMED CONSENTS: Each Bank shall be deemed to consent
to the Lead Bank (i) granting such waivers as the Lead Bank
considers appropriate in relation to the Negative Pledge and Clause
14.2 (Restriction on Encumbrances) and/or any provision of a
similar nature applicable to any Facility to any proposed lender to
any subsidiary of a First Tier Subsidiary where the Borrowing by
such Subsidiary would be a Permitted Borrowing or (ii) agreeing the
terms of the financial covenants to be incorporated in this
Agreement (pursuant to Clause 16), where:-
(a) the Lead Bank shall have notified all Banks in writing by
facsimile of (i) details of the waiver requested and the terms
of the waiver proposed to be given by the Lead Bank or (ii) the
terms of the financial covenants proposed to be incorporated in
this Agreement, as the case may be; and
(b) the Banks shall have been given at least two clear Business
Days to respond to such notification (in the case of a waiver)
or five clear Business Days to respond to such notification (in
the case of financial covenants); and
(c) (in the case of a waiver) the Majority Banks shall have
expressly agreed to such waiver, or shall not have objected to
it prior to the time specified in such notification, or (in the
case of financial covenants) all Banks which have responded
prior to the time specified in such notification have expressly
agreed such financial covenants or have not objected to them.
22.6 EXONERATION: Notwithstanding anything to the contrary expressed or
implied in this Agreement, none of the Lead Bank, the Security
Agent nor any member of the Steering Committee shall:-
(a) be bound to enquire as to:-
(i) whether or not any representation or warranty made by any
Obligor under or in connection with any Finance Document
is true;
(ii) the occurrence or otherwise of any Event of Default or
Potential Event of Default;
(iii) the performance by any Obligor of its obligations under
any Finance Document;
(iv) any breach of or default by any Obligor of or under its
obligations under any Finance Document;
(b) be bound to account to any Finance Party for any fee or other
sum or the profit element of any sum received by it for its own
account;
(c) be bound to disclose to any other person any information
relating to any Group Company if such disclosure would or might
in its opinion constitute a breach of any law or regulation or
be otherwise actionable at the suit of any person;
(d) be under any fiduciary duty towards any Finance Party or under
any obligations other than those expressly provided for in this
Agreement and the Security Documents;
(e) be liable (in the absence of its own gross negligence or wilful
misconduct):-
(i) for any failure to obtain any licence, consent or other
authority or for any failure, omission, or defect in the
due execution, delivery, validity, legality, adequacy,
performance, enforceability, or admissibility in evidence
of any Finance Document or any communication, report or
other document delivered under this Agreement or under
any Finance Document; or
(ii) in respect of its exercise or failure to exercise any of
its powers, duties and discretions under this Agreement
or under any Finance Document; or
(iii) for any failure to effect or procure registration of or
otherwise protect all or part of the security created by
any Security Document or for any failure to take or
require any Group Company to take any steps to render the
Security created or purported to be created by or
pursuant to any Security Document effective or
enforceable or to perfect any such security or to secure
the creation of any ancillary charge under the laws of
any territory
(f) be under any obligations except those expressly provided for in
this Agreement and shall have no liability or responsibility of
whatever kind (in the absence of its own gross negligence or
wilful misconduct) to:-
(i) any Group Company arising out of or in relation to any
failure or delay in the performance or breach by any
Finance Party of any of its obligations under any Finance
Document; or
(ii) any Finance Party arising out of or in relation to any
failure or delay in the performance or breach by any
Group Company of any of its obligations under any Finance
Document.
22.7 THE SECURITY AGENT:
(a) The Security Agent shall receive and apply as trustee for the
Finance Parties all amounts paid to it by way of Recoveries
under or pursuant to this Agreement or any Finance Document
(except any amounts paid to it in respect of fees, costs or
expenses of the Security Agent, the Lead Bank, the Steering
Committee or any professional advisers appointed by the Lead
Bank or the Security Agent).
(b) Except as stated in Clause 22.6(a), amounts received by the
Security Agent in respect of Recoveries will be applied between
the Banks in accordance with the provisions of Part XVI
(Enforcement) and Schedule XVIII (Distribution of Recoveries
between Finance Parties).
(c) All interest earned on money held by the Security Agent in
respect of Recoveries pending application will be added to and
from part of the money held.
(d) The Security Agent will use reasonable endeavours to distribute
amounts received by it in respect of Recoveries as soon as
reasonably practicable following receipt.
(e) The Security Agent shall be at liberty to place any of the
Finance Documents and any other instruments documents or deeds
delivered to it pursuant to this Agreement or in connection
with any Finance Document and for the time being in its
possession in any safe deposit or safe selected by it with the
Lead Bank of any other bank or any company whose business
includes undertaking the safe custody of documents or any
lawyers and shall not be responsible for any loss thereby
incurred (otherwise than as a result of its gross negligence or
wilful misconduct).
(f) The Security Agent may, whenever it thinks fit, delegate by
power of attorney or otherwise to any person or persons all or
any of the rights, powers, authorities and discretions vested
in it by any of the Finance Documents and such delegation may
be made upon such terms and subject to such conditions as the
Security Agent shall think fit and it shall not be bound to
supervise or be in any way responsible for any loss incurred by
reason of any default or misconduct on the part of such person
or persons.
(g) The Security Agent may refrain from doing anything which would
or in its opinion might be contrary to any relevant law in any
jurisdiction or any relevant directive or regulation or which
would or might render it liable to any person and may do
anything which is, in its opinion, necessary to comply with any
such law, regulation or directive.
(h) The Security Agent and every attorney or other person appointed
by it under any of the Finance Documents may indemnify itself
out of the Security and/or the Recoveries against all claims,
demand, liabilities, claims, costs, proceedings, losses and
expenses incurred by any of them in relation to or arising out
of any Security Document or its enforcement or the exercise of
any of the rights, powers and discretions vested in them or any
other matter or thing done or omitted to be done in connection
with any of the Finance Documents (otherwise than as a result
of its gross negligence or wilful misconduct).
(i) The Security Agent may, take such security (if any) on behalf
of the Finance Parties after the date of this Agreement as the
Security Agent in its sole discretion may consider appropriate
provided that the Security Agent shall use reasonable
endeavours to notify the Banks from time to time of the
security taken or proposed to be taken by it. The Security
Agent shall have no liability to any Finance Party in respect
of any such security or any failure to take any such security
or any failure, omission or defect in the due execution,
delivery, validity, legality, adequacy, enforceability or
admissibility in evidence of any such security.
22.8 The Steering Committee, Duties:
(a) Except as regards purely administrative acts, whenever in its
reasonable opinion practicable, the Steering Committee shall
notify all the Banks of any proposal to do or refrain from
doing any act or thing in the exercise of its duties or, if it
is not, in the reasonable opinion of the Steering Committee,
practicable to so notify the Banks beforehand, it will so
notify the Banks promptly thereafter.
(b) In reaching any decision the Steering Committee shall be
unanimous. In any case where the Steering Committee cannot
reach a unanimous decision, the matter shall be determined by
the Majority Banks (save where some other or additional
majority is expressly specified in this Agreement).
(c) The Steering Committee shall promptly notify each Bank of the
occurrence of any Event of Default of which the Steering
Committee has actual knowledge or actual notice.
22.9 GROUP INDEMNITY: SCC and the Borrowers hereby jointly and
severally undertake to indemnify forthwith upon demand from time to
time on a full indemnity basis:-
(a) the Lead Bank, the Security Agent and each member of the
Steering Committee against all costs (including, but not
limited to, professional fees and reporting accountants' fees
and disbursements) claims, expenses, demands and liabilities
incurred or sustained by the Lead Bank and/or the Security
Agent and/or each member of the Steering Committee in the
performance of their duties as contemplated in this Agreement,
or by reason of any act or omission of the Lead Bank, the
Security Agent and/or the Steering Committee acting in its
capacity as such, together with value added tax and any other
applicable taxes and undertake not to challenge any costs so
incurred;
(b) each Finance Party against all actions, charges, claims, costs,
damages, demands, expenses, liabilities, losses or proceedings
(each a "Claim") which may be brought or threatened against
such Finance Party or incurred or sustained by such Finance
Party in connection with any Finance Document (save where such
Claim arises as a result of the gross negligence or wilful
misconduct of such Finance Party).
Each Finance Party agrees (without prejudice to the obligations of
SCC and the Borrowers under this Clause 22.9) to provide reasonable
details of any Claim in respect of which it makes demand under this
Clause 22.9.
22.10 BANKS' INDEMNITY: Each Bank shall, on demand by the Lead Bank,
the Security Agent or any member of the Steering Committee,
indemnify the Lead Bank, the Security Agent or such member of the
Steering Committee (as the case may be), against any and all fees
(to the extent properly chargeable by the Lead Bank, the Security
Agent or the Steering Committee (as the case may be) under this
Agreement or under any other Finance Document but not promptly
reimbursed by SCC and the Borrowers) and all costs, claims,
demands, expenses and liabilities which the Lead Bank, the Security
Agent or the Steering Committee (as the case may be) may pay or
incur (except by reason of its own gross negligence or wilful
misconduct) in acting in its capacity as such on behalf of the
Finance Parties or any of them or by reason of any act or omission
of the Lead Bank, the Security Agent and/or the Steering Committee
acting in its capacity as such. The cost of indemnifying the Lead
Bank, the Security Agent or the Steering Committee (as the case may
be) shall be borne by each Bank in the proportion which its Overall
Commitment on such date bears to the aggregate amount of the
Overall Commitments of all Banks on such date, provided that the
Lead Bank, the Security Agent or such member of the Steering
Committee shall make an appropriate refund to such Banks of any
amount subsequently received by it from SCC and/or the Borrowers or
any person in respect of such fee, cost, claim, expense and/or
liability.
If a Bank (referred to in this Clause 22.10 as a "defaulting Bank")
fails to pay its due contribution under this indemnity, then:-
(a) The Lead Bank, the Security Agent or the Steering Committee (as
the case may be) may (without prejudice to its other rights and
remedies) deduct the amount due from the defaulting Bank from
any sums which are then or afterwards in its possession or
control which would otherwise be payable to the defaulting
Bank;
(b) If the Lead Bank, the Security Agent or the Steering Committee
is at the relevant date unable to recover the full amount due
from the defaulting Bank from such Recoveries either because
the Security Documents have not been enforced or because there
are no or insufficient Recoveries then available for the
purpose, the other Banks liable to contribute under Clause
22.10 (the "non-defaulting Banks") shall pay to the Lead Bank,
the Security Agent or the Steering Committee (as the case may
be) the amount or balance of the contribution outstanding from
the defaulting Bank (to the extent that it has not been
satisfied out of Recoveries) in the proportion in which the
non-defaulting Banks would otherwise have been required to
indemnify to it if the defaulting Bank had not been a party to
this Agreement and in this event:-
(i) any money subsequently recovered from the defaulting
Bank; and/or
(ii) the proportion of any Recoveries subsequently received by
the Security Agent which would, in the normal course of
events, have been paid to the defaulting Bank up to an
amount not exceeding the aggregate amount of the payments
made by the non-defaulting Banks under this Clause; shall
be shared between the non-defaulting Banks in the
proportions that such non-defaulting Banks have paid the
outstanding contribution of the defaulting Bank.
22.11 DISCLAIMER: The Lead Bank, the Security Agent and the
Steering Committee accept no responsibility to any Finance
Party for the accuracy and/or completeness of any
information supplied in connection with any Finance
Document or for the legality, validity, effectiveness,
adequacy or enforceability of any Finance Document and the
Lead Bank, the Security Agent and the Steering Committee
shall be under no liability to any Finance Party as a
result of taking or omitting to take any action in
relation to any Finance Document (save in the case of the
gross negligence or wilful misconduct of the Lead Bank,
the Security Agent or the Steering Committee (as the case
may be)).
22.12 NO ACTIONS AGAINST INDIVIDUALS: Each Finance Party agrees that it
will not assert or seek to assert against any director, officer or
employee of the Lead Bank, the Security Agent or any member of the
Steering Committee any claim it may have against any of them in
respect of the matters referred to in this Clause 22.
22.13 CREDIT APPRAISALS: It is agreed by each Finance Party that it has
itself been, and will continue to be, solely responsible for making
its own independent appraisal of and investigations into the
financial condition, creditworthiness, condition, affairs, status
and nature of any Group Company, and, accordingly, each Finance
Party confirms to the Lead Bank, the Security Agent and each member
of the Steering Committee that it has not relied and will not
hereafter rely on the Lead Bank, the Security Agent, the Steering
Committee or any other Bank:-
(a) to check or enquire on its behalf into the adequacy, accuracy
or completeness of any representation, warranty, statement or
information provided by or on behalf of any Group Company in
connection with any Finance Document or any communication or
document delivered under any of them and/or the security
contemplated in such documents (whether or not such information
has been or is after the date of this Agreement circulated to
such Finance Party by the Lead Bank, the Security Agent or the
Steering Committee (as the case may be)); or
(b) to provide it with any information in relation to any Group
Company or (save as expressly provided in this Agreement)
assess or keep under review on its behalf the financial
condition, creditworthiness, condition, business affairs,
status or nature of any Group Company; or
(c) to advise it on the effect of or the implications of any
provisions of any Finance Document or any security rights or
obligations hereunder.
22.14 INFORMATION: Each Finance Party (other than the Security Agent)
agrees that it will deliver to the Security Agent no later than ten
Business Days following the end of each calendar month (commencing
on or about 13th May 1995) details of its Outstandings as at the
last Business Day of the preceding month in such detail as the Lead
Bank may require. If any Finance Party fails to provide details, a
calculation by the Lead Bank of the Outstandings of such Finance
Party shall be conclusive for the purposes of this Agreement.
22.15 SECURITY AGENT REPORT: The Security Agent shall report to the
Banks monthly in a format to be agreed between the Security Agent
and the Lead Bank (acting on the instructions of the Majority
Banks).
23. AMENDMENTS AND DECISIONS
23.1 MAJORITY BANK DECISIONS: Except as provided in Clause 23.2, with
the prior written consent of the Majority Banks, the Lead Bank and
SCC may from time to time enter into written amendments,
supplements or variations to this Agreement (however fundamental)
for the purpose of adding any provisions to the Finance Documents
or changing in any manner the rights and/or obligations of all or
any of the parties to this Agreement and the Lead Bank may execute
and deliver to any Borrower a written instrument waiving,
prospectively or retrospectively, on such terms and conditions as
the Lead Bank may specify in such instrument, any of the
requirements of any of the Finance Documents.
23.2 UNANIMOUS CONSENT:
(a) No waiver of and no amendment, supplement or modification to
any Finance Document shall, without the prior consent of all
the Banks:-
(i) amend the definitions of Borrowings, Encumbrance, Event
of Default, Majority Banks, Potential Event of Default,
Availability Period or Final Repayment Date;
(ii) amend or waive any provision of Clauses 5 (Conditions
Precedent), 7 (Interest), this Clause 23, Clause 25
(Enforcement of Security and Distribution of Recoveries),
26 (Equalisation) or 27 (Interim Distributions of
Recoveries and Creation of Reserves) or Schedule XVIII or
Clause 16 (Financial Covenants) or any financial
covenants incorporated in this Agreement pursuant to
Clause 16;
(iii) have the effect of changing the amount of any Facility or
any Bank's Commitment or Overall Commitment or the
principal or face amount or currency of any utilisation,
or extend the term of any Facility;
(iv) have the effect of decreasing the amount of, or change
the currency of or extend the date for any payment of
interest, fees or any other amount payable to all or any
of the Lead Bank and the Banks under any of the Finance
Documents; or
(v) have the effect of changing re-allocation of Net Disposal
Proceeds;
(b) not withstanding any other provision in this Agreement, the Lead
Bank, the Security Agent or the Steering Committee, as the case
may be, shall not be obliged to agree to any such waiver,
amendment or supplement if the same would:-
(i) amend or waive any provision of this Clause 23; or
(ii) otherwise amend or waive any rights of the Lead Bank, the
Security Agent or the Steering Committee under any of the
Finance Documents or subject the Lead Bank, the Security
Agent or the Steering Committee to any additional
obligations under such documents.
23.3 COSTS: If any Borrower requests any amendment, supplement,
modification or waiver in accordance with Clause 23.1, then the
Borrowers shall, within five Business Days of demand by the Lead
Bank or the Security Agent, reimburse the Lead Bank or the Security
Agent (as the case may be) for all costs and expenses (including,
without limitation, legal fees), together with any value added tax
on them, incurred by the Lead Bank or the Security Agent in the
negotiation, preparation and execution of any written instrument
contemplated by Clause 23.1.
23.4 RELEASE OF SECURITY: The Security Agent shall be entitled at its
sole discretion to release any asset or assets from the Security
Documents to the extent that their disposal or release is permitted
or required by the terms of this Agreement or any of the Security
Documents, without reference to the Banks. In addition, the
Security Agent shall be entitled to release:-
(a) any fixed security held by it over any stock in trade of a
Group Company at any time in order to permit a disposal of such
stock in trade by such Group Company in the ordinary course of
carrying on its business (but so that the proceeds of such
stock shall continue to be subject to such security);
(b) any fixed security held by it over the shares in any Subsidiary
or any First Tier Subsidiary where the Security Agent (acting
on the instructions of the Steering Committee) is satisfied
that such fixed security is preventing that subsidiary from
obtaining financing from sources other than the Banks; and
(c) any security held by it upon written instructions from the Lead
Bank (acting on the instructions of the Majority Banks).
23.5 ADMINISTRATIVE DETERMINATIONS: The Lead Bank shall be entitled to
determine purely administrative matters which do not materially
affect the position of any Finance Party without reference to the
Finance Parties.
23.6 PRIOR NOTICE: Where a Finance Document provides for any matter to
be determined by reference to the opinion of the Majority Banks or
to be subject to the consent or request of the Majority Banks or
for any action to be taken on the instructions of the Majority
Banks, such opinion, consent, request or instructions shall only be
regarded as having been validly given or issued by the Majority
Banks if all the Banks shall have received prior notice of the
matter on which such opinion, consent, request or instructions is
sought, but so that the Borrowers shall be entitled (and bound) if
so informed by the Lead Bank to assume that such notice shall have
been duly received by each Bank and that the relevant majority
shall have been obtained to constitute Majority Banks whether or
not this is the case.
24. RETIREMENT OF LEAD BANK, SECURITY AGENT AND STEERING COMMITTEE
24.1 NOTIFICATION OF INTENTION: If the Lead Bank or, as the case may
be, the Security Agent wishes at any time to retire, it shall
notify the Borrowers and the other Finance Parties (and in the case
of retirement of the Security Agent any other beneficiaries under
the Security Documents), of its intention to do so and upon receipt
of such notice the Majority Banks may in writing (after
consultation with SCC for a period not exceeding 7 days) appoint a
successor Lead Bank or, as the case may be, a successor Security
Agent. If such a successor has not been appointed and accepted
office in writing within thirty days after the Lead Bank's or, as
the case may be, the Security Agent's notice of proposed
retirement, the Lead Bank or, as the case may be, the Security
Agent may within a further fourteen days give to the Borrowers and
the other Finance Parties (and in the case of the retirement of the
Security Agent any other beneficiaries under the Security
Documents) fourteen days' prior written notice nominating an
alternative successor Lead Bank or, as the case may be, an
alternative successor Security Agent.
24.2 NOMINEE: Unless the Majority Banks shall have appointed a
successor which has accepted office within such notice period of
fourteen days, then, upon the expiry of such fourteen day period
and upon the written acceptance in such form as the Banks may
unanimously approve (such approval not to be unreasonably withheld
or delayed) of its nomination by the Lead Bank's or, as the case
may be, the Security Agent's nominee as successor Lead Bank or, as
the case may be, successor Security Agent and, in the case of a
successor Security Agent, due execution of such documentation as
may be necessary to transfer and vest in such successor Security
Agent all the rights and obligations of the retiring Security Agent
under the Security Documents, such nominee shall be deemed to have
been appointed to the office of Lead Bank or, as the case may be,
Security Agent.
24.3 PROVISIONS RELATING TO SUCCESSOR: With effect from the date that a
successor is appointed and accepts the office of Lead Bank or, as
the case may be, the Security Agent and executes such necessary
documentation in accordance with this Clause 24:-
(a) as regards the other Finance Parties, and the Obligors, such
successor shall become bound by all the obligations of the Lead
Bank or, as the case may be, the Security Agent and become
entitled to all the rights, privileges, powers, authorities and
discretions of the Lead Bank or, as the case may be, the
Security Agent under the Finance Documents;
(b) the agency of the retiring Lead Bank or, as the case may be,
the trusteeship of the Security Agent shall terminate and the
retiring Lead Bank or, as the case may be, the retiring
Security Agent shall be discharged from any further liability
or obligation under the Finance Documents, but without
prejudice to any liabilities which the retiring Lead Bank or,
as the case may be, the retiring Security Agent may have
incurred prior to the termination of its agency;
(c) the costs, charges and expenses of the retiring Lead Bank or, as the
case may be, the retiring Security Agent shall be discharged if
recoverable under the provisions of this Agreement; and
(d) the provisions of the Finance Documents shall continue in
effect for the benefit of any retiring Lead Bank or, as the
case may be, the retiring Security Agent in respect of any
actions taken or omitted to be taken by it or any event
occurring before the termination of its agency.
24.4 RETIREMENT OF STEERING COMMITTEE:
(a) The role of any Bank as a member of the Steering Committee may
be terminated at any time by:-
(i) that Bank giving at least 21 days' prior written notice to
all Finance Parties of its resignation; or
(ii) the Majority Banks (which shall be calculated by excluding
the Overall Commitment of the Bank which resignation is
sought) notifying the relevant Steering Committee member
of the proposed termination with effect from a date at
least 21 days after the date of delivery of such notice.
(b) As soon as practical after delivery of such notice, or in any
case where any Banks request the appointment of any additional
member or members, the Steering Committee shall consult with
the Finance Parties as to whether a successor (or additional
member or members) is considered necessary. If so, the
Steering Committee shall make arrangements for the Majority
Banks (voting on the basis of Overall Commitments) to appoint
a successor.
(c) With effect from the operative date of resignation/termination
of a Steering Committee member:-
(i) the role of the retiring Steering Committee member shall
terminate but without prejudice to any liabilities which
the retiring Steering Committee member may have incurred
or rights it may have acquired prior to its termination;
(ii) the retiring Steering Committee member shall be
discharged from any further liability or obligations as
a member of the Steering Committee under this Agreement;
and
(iii) the costs, charges and expenses of the retiring Steering
Committee member incurred in such capacity shall be paid
in full by the parties liable.
(d) With effect from the operative date of appointment of a new
Steering Committee member, such successor shall become bound
by all the obligations of a member of the Steering Committee
and become entitled to all the rights, privileges, powers,
authorities and discretions of a member of the Steering
Committee under this Agreement.
PART XVI
ENFORCEMENT
25. ENFORCEMENT OF SECURITY AND DISTRIBUTION OF RECOVERIES
25.1 ENFORCEMENT: The Security Agent shall enforce the security
constituted by the Security Documents:
(a) before the Final Repayment Date if the Majority
Banks so direct after the Lead Bank has declared an
Event of Default pursuant to Clause 17.1 (Demand on
Event of Default) of this Agreement and demand has
been made for the payment of all or part of the
Indebtedness owing under the Facilities; or
(b) If after the Final Repayment Date any Bank so
requests in writing not less than 90 days after the
Final Repayment Date in circumstances where the
Steering Committee shall not have received within
such period from SCC repayment proposals in form
and substance satisfactory to the Steering
Committee and where the relevant Borrower or
Obligor has failed to repay Indebtedness due and
owing to such Bank under its Facilities; or
(c) at any time, if requested to do so in writing by a
Charging Company.
25.2 DISTRIBUTION OF RECOVERIES: The Recoveries shall be
distributed between the Finance Parties in the order of
priority set out in Schedule XVIII. Distributions of
Recoveries shall be made in the manner set out in Clause
27.1 (Interim Distributions of Recoveries).
25.3 RECOVERIES TO BE HELD AS TRUSTEE: Each Finance Party
(other than the Security Agent) shall pay any Recoveries
received by it to the Security Agent forthwith upon
receipt. The Security Agent shall hold the Recoveries in
an interest bearing Dollar deposit account (the "Recoveries
Account") as trustee for distribution to the Finance
Parties in accordance with the provisions of Clause 27
(Interim Distributions of Recoveries and Creation of
Reserves) and Schedule XVIII of this Agreement and shall
hold the security constituted by the Security Documents as
agent and trustee for the Finance Parties to give effect to
this Agreement and shall exercise its rights, powers and
duties under the Security Documents (and particularly those
concerned with the protection and enforcement of the
security afforded by such documents) and/or under this
Agreement for the benefit of all Finance Parties. For the
avoidance of doubt, the Security Agent agrees that it will
not exercise or purport to exercise any right of set-off
over any amount from time to time standing to the credit of
the Recoveries Account.
25.4 PROCEEDS OF EXISTING SECURITY:
(a) Proceeds derived by a Bank from enforcement of or
sale or disposition of property subject to Existing
Security in favour of such Bank shall (after
providing for any claims ranking in priority and
save as provided in Clause 25.4(b)) be applied,
first, in or toward payment or discharge of the
money and liabilities due, owing or incurred
(actually or contingently) (including the provision
of cash cover for any contingent liabilities) to
the Bank in whose favour such Existing Security was
granted up to the limit of such Bank's Overall
Commitment (and shall reduce such Bank's claim on
any Recoveries accordingly) and, second, the
balance of such proceeds (including the amount of
any cash cover which proves to be excessive) shall
be deemed to be Recoveries where it is recovered
from any Group Company or other person from which
the Security Agent also holds a guarantee and/or
security, provided that the proceeds realised by
RBS from an enforcement of the RBS Legal Charge may
be applied in reduction or discharge of amounts
owing to RBS under the Wool Group Facility and/or
its Facility.
(b) For the avoidance of doubt, any proceeds derived by a Reducing
Bank from enforcement of or sale or disposition of property
subject to Existing Security in favour of such Reducing Bank
may only be applied in payment or discharge of the money and
liabilities due, owing or incurred to such Reducing Bank in
accordance with Clause 25.4(a) above up to the level of such
Reducing Bank's Overall Commitment and the balance of such
proceeds shall not be applied in reduction of such Reducing
Bank's Reducing Outstandings, but shall be deemed to be
Recoveries and shall be paid to the Security Agent in
accordance with Clause 25.3.
(c) It is agreed that the RBS Legal Charge will rank in priority to
the Borrower Debentures for all money thereby secured as a
continuing security in favour of RBS for the repayment of all
funds thereby secured, and so that the priority of RBS will not
be affected by any fluctuation in the money, obligations and
liabilities from time to time due, owing or incurred to RBS or
by the existence at any time of a credit balance on any account
or other account of a Group Company.
25.5 PROCEEDS OF LITIGATION: any amounts received by any Bank, the Lead
Bank or the Security Agent after the Enforcement Date pursuant to
any legal action or proceeding arising out of or in connection with
any Finance Document shall (after deduction of all costs and
expenses payable in connection therewith) be deemed to form part of
the Recoveries.
25.6 TREATMENT OF A BANK'S PREFERENTIAL CLAIMS: All Preferential Claims
recovered by a Bank on or after the Enforcement Date shall be
retained by the relevant Bank and its claim on any Recoveries
reduced accordingly.
25.7 CURRENCY CONVERSION:
(a) The Security Agent is authorised to make such currency
conversions as it considers necessary or appropriate in order
to convert into Dollars any Recoveries received by it in any
currency other than Dollars, provided that, where Recoveries
are available for distribution in the same currency as that of
the Indebtedness in respect of which a payment or Reserve is to
be made out of such Recoveries, then the amount of such payment
or Reserve shall be calculated in accordance with Clause
25.7(b) but paid or made in such currency.
(b) Where it is necessary to calculate the amount of Recoveries
distributable to a Bank, such Bank's Overall Commitment and the
amount outstanding to such Bank under any Finance Document in a
currency other than Dollars shall be deemed, for the purpose
only of such calculation, to be converted from such currency
into Dollars at the spot buying rate of the Lead Bank for the
purchase of that currency with Dollars in similar amounts at or
about 11.00 am on the date following receipt by the Security
Agent of the relevant Recoveries.
26. EQUALISATION
26.1 NOTIFICATION: Within five Business Days after the Enforcement
Date, each Bank shall notify the Lead Bank and the Security Agent
of the aggregate amount of Indebtedness incurred by each Group
Company to such Bank (actually or contingently) under its
Facilities as at the Enforcement Date.
26.2 CALCULATION: The Lead Bank shall calculate as at the Enforcement
Date (taking into account both actual Indebtedness and any
provisions made for unmatured liabilities): the balancing credit or
balancing payment (if any) due to or from each Bank, being the
amount required to be paid or received in order to equalise each
Bank's Proportion of Aggregate Outstandings with its Proportion of
Aggregate Commitments and shall notify each Bank of the amount (if
any) payable or receivable by such Bank accordingly.
26.3 PAYMENTS: Forthwith upon receipt of a written request from the
Lead Bank, each relevant Bank shall pay to the Lead Bank the amount
of the balancing payment shown as payable by it under Clause 26.2.
26.4 DISTRIBUTION OF BALANCING PAYMENTS: Out of the amounts paid to it
pursuant to Clause 26.3, the Lead Bank shall, as soon as
practicable, pay to each Bank to which a balancing credit is due
the amount of such credit, provided that where an amount is claimed
by a Bank as a Reserve for an unmatured liability, then the amount
of the Reserve (as determined pursuant to Clause 27.2) (Calculation
of Reserves) shall be paid into an interest-bearing deposit account
in accordance with Clause 27.6 (Account).
26.5 NO CHANGE IN INDEBTEDNESS: The provisions of Clauses 26.1, 26.2,
26.3, and 26.4 shall not operate to increase or reduce the
indebtedness of the Obligors to the Banks nor shall any amounts
received by a Bank pursuant to Clause 26.4 be applied in actual
reduction of any part of the indebtedness of any Obligor to the
Banks until the Lead Bank shall notify the Banks that no further
distributions of the Recoveries will be made; nor shall any such
payment be deemed to constitute an assignment to another Bank of a
debt due to one Bank.
26.6 INTEREST: Any payment made by any Bank under Sub-Clause 26.3 shall
be deemed as between the Banks for the purposes only of this
Agreement (including distribution of Recoveries) to bear interest
from the date of payment at the rate stated by the Lead Bank from
time to time. It is agreed, for the avoidance of doubt, that in
the case of any unmatured claim by a Bank against a Group Company,
interest thereon shall be calculated with effect from the date on
which it matures into an actual liability.
26.7 SUSPENSE ACCOUNT:
(a) Where any Bank receives funds pursuant to Clauses 25.2
(Distribution of Recoveries), 26.4 or 27.1 (Interim
Distribution of Recoveries) it shall not (unless required by
law) apply any part of such funds in or towards payment of the
relevant indebtedness but shall instead place the funds on an
interest bearing overnight suspense account until otherwise
agreed by all the Banks.
(b) If any estimate made by the Lead Bank (or any other Finance
Party) in order to calculate, directly or indirectly, the
distributions hereunder shall prove to be inaccurate when made
or becomes inaccurate through the passage of time or otherwise,
then the amounts received by each Bank shall be adjusted by the
Lead Bank to take account of such inaccuracy and such Bank
shall forthwith upon notice by the Lead Bank pay to the Lead
Bank any part of the funds standing to the credit of such
suspense account as may be required to achieve such a
correction.
26.8 CURRENCY CONVERSIONS: Where it is necessary to calculate the
amount of any payment to be made to or by any Bank pursuant to this
Clause 26, the amounts outstanding to a Bank in a currency other
than Dollars shall be deemed, for the purpose only of such
calculation, to be converted into Dollars at the spot buying rate
of the Lead Bank for the purchase of that currency with Dollars in
similar amounts at or about 11.00 am on the date on which the
calculation falls to be made.
27. INTERIM DISTRIBUTIONS OF RECOVERIES AND CREATION OF RESERVES
27.1 INTERIM DISTRIBUTION OF RECOVERIES: The Lead Bank shall as soon as
practicable following receipt of Recoveries and applying the order
of priority set out in Schedule XVIII:-
(a) pay to each Bank that part of its pro rata share (calculated
pursuant to paragraph 3 of Schedule XVIII) as is referable to
claims which have matured; and
(b) create a Reserve equal to that part of a Bank's pro rata share
(calculated pursuant to paragraph 3 of Schedule XVIII) as is
referable to the provision made for unmatured liabilities in
accordance with the following provisions of this Clause 27.
27.2 CALCULATION OF RESERVES:
(a) The Lead Bank shall, after consultation with the Banks, and
acting on the instructions of the Majority Banks, decide on the
amount of the provision which should be made in respect of
unmatured liabilities under the Facilities as soon as
practicable after the Enforcement Date for the purpose of
creating Reserves for such claims.
(b) Any provision made by the Lead Bank in respect of an unmatured
liability of a Bank shall be regarded as the amount of its
potential claim in respect of the relevant unmatured liability
solely for the purpose of creating a Reserve and shall not
prejudice the claim of a Bank under Clauses 25 (Enforcement of
Security and Distribution of Recoveries) or 26 (Equalisation)
if the amount of such provision proves to have been
insufficient.
27.3 RELEASE OF RESERVES: Subject to Clause 27.4, a Reserve shall be
released to the relevant Bank upon the maturity of the unmatured
liability in respect of which that Reserve had been created.
27.4 EXCESS RESERVES: If the provision for an unmatured liability proves to
have been excessive, then an amount equal to the difference between (i) the
amount of the Reserve actually made for such liability and (ii) the amount
of the Reserve which otherwise would have been made if the amount of the
provision had equalled the amount of the liability which actually arose at
maturity, shall form part of the Recoveries and shall be applied in
accordance with the provisions of Clause 25.2 (Distribution of Recoveries).
27.5 INSUFFICIENT RESERVES: If the amount of any Reserve proves to be
insufficient to meet the pro rata claim of the relevant Bank
intended to be covered by such Reserve, then such adjustment shall
be made between the Banks forthwith on demand by the Agent as shall
be necessary to ensure that such pro rata claim is met in full.
27.6 ACCOUNT: Pending distribution pursuant to this clause:-
(a) the Recoveries shall be placed in an interest bearing deposit
account in the joint names of the Security Agent and the
relevant Bank (or, if that Bank is the Security Agent, in the
name of the Security Agent acting as Security Agent);
(b) any Reserve may, at the option of the Security Agent, be paid
to the relevant Bank (whereupon such Reserve shall be held by
such Bank in an interest bearing deposit account until released
to the relevant Bank pursuant to Clause 27.3) or be placed in
an interest bearing deposit account in the name of the Security
Agent pending release pursuant to Clause 27.3. The interest
earned on any Reserves shall form part of such Reserve.
27.7 ALTERNATIVE METHOD: Notwithstanding the foregoing provisions of
this Clause 27, each Finance Party shall (if requested by the Lead
Bank) implement such alternative method as the Lead Bank may
reasonably require (on the basis of legal advice received by it) to
achieve the same result contemplated by Clauses 26, 27, 29 and 31
and Schedule XVIII without the creation of Reserves, having regard
to the law applicable in each relevant jurisdiction.
28. CALCULATION OF OUTSTANDINGS
For the purpose of calculating any payments due to a Bank under
Clause 26.3 (Payments), Equalisation Payments and amounts payable
to a Bank by way of distribution of Recoveries in accordance with
the terms of this Agreement, Outstandings shall be calculated as
follows:-
(a) OVERDRAFTS: the amount recorded in the relevant Bank's books
at the opening of business on the Enforcement Date (or, if that
is not a Business Day, the next following Business Day)
together with accrued interest thereon;
(b) ACCEPTANCE CREDITS: the face amount of the Bill(s) accepted
and discounted by such Bank as at the Enforcement Date, to the
extent that the relevant Bank has not already received cash
cover for such Bill(s);
(c) LOANS AND ADVANCES: the aggregate amount of principal and
accrued but unpaid interest outstanding from each of the
Borrowers to the relevant Bank at the opening of business of
the relevant Bank on the Enforcement Date;
(d) FOREIGN EXCHANGE: the amount of the loss which the relevant
Bank would have incurred on a foreign exchange transaction
entered into with a Borrower pursuant to a Facility prior to
Enforcement Date, if it had closed out that transaction on the
Enforcement Date or (if that is not a Business Day) the next
succeeding Business Day or on such other basis as may be
approved by the Steering Committee;
(e) APPLICATIONS: sums received by a Bank which it is free to
apply to reduce Indebtedness under any Finance Document and
cash collateral held by a Bank in respect of any Outstandings
as at the Enforcement Date shall, for the purposes of
calculations to be made under this Clause 28, be deemed to have
been applied to reduce the relevant indebtedness;
(f) DUAL CLAIMS: in any case where a Bank has claims against two
or more Group Companies in respect of the same Facility,
(including, but not limited to the case where a Bank makes a
Facility available to one Group Company and holds a guarantee
from another Group Company) calculation of its entitlement
under this Schedule shall be based on its Facility claim only
and no greater entitlement will be permitted by reason of its
having more than one claim in respect of the same Facility.
29. FURTHER SECURITY, SET-OFF AND EXCESS CASH COVER
29.1 SURETIES, SET-OFF AND EXCESS CASH COVER: Except as otherwise
expressly stated in this Agreement including, in particular Clause
25.4, if any Bank shall, on or after the Enforcement Date:-
(a) hold (otherwise than as the Security Agent pursuant to this
Agreement) from any Group Company or any other person, any
Encumbrance (which expression shall include any guarantee or
indemnity) of any nature in respect of any Facility granted by
it; or
(b) be otherwise entitled to have recourse to any of the assets of
any Group Company or of any other person in respect of
Facilities provided by it; or
(c) be entitled to any negotiable or other instruments, being
instruments on which any Group Company is or may be liable, but
excluding cheques, bills or notes which a Bank may have
purchased without recourse from a Group Company and in respect
of which the relevant Bank has already given value (such Bank
being entitled to retain for its own benefit any proceeds
recoverable from any third party in connection therewith); or
(d) shall receive any other money, whether by way of contractual or
voluntary payment or otherwise, from or on behalf of any Group
Company in respect of the liabilities of any Group Company to
the Banks;
then, in any such case, subject to Sub-Clause 29.2, such Bank shall
account to the Security Agent for the proceeds thereof and the
Security Agent shall (i) distribute such proceeds as Recoveries in
accordance with Schedule XVIII and (ii) pay any surplus after such
application to the Bank which received such proceeds for its sole
benefit.
29.2 PERMITTED EXCEPTION: The provisions of Sub-Clause 29.1(b) shall
not apply to any credit balance (in whatever currency denominated)
held by a Bank at the Enforcement Date to the extent that it is
capable of being set off against any accrued liability to that Bank
at the Enforcement Date, where:-
(a) the amount represents cash cover for an existing Facility which
the Bank is permitted to hold under this Agreement, in which
case the cash cover may be applied against the liability (if
any) under such Facility and any surplus from such cash cover
shall be distributed as Recoveries in accordance with Schedule
XVIII;
(b) the set-off arises from operation of a composite accounting or
similar scheme in existence at the date of this Agreement which
case the set-off may be operated and the Bank concerned may
retain the benefit of such set-off to the extent permitted by
the documentation for the existing Facility and any surplus
shall be distributed in accordance with Schedule XVIII.
In all other cases, the relevant amounts shall be distributed as
Recoveries in accordance with Schedule XVIII.
29.3 In the event that any distribution pursuant to Schedule XVIII
called for by Clause 29.2 is prevented by mandatory statutory
set-off, the Security Agent shall notify the relevant parties of
the adjustments which are required to their entitlements to
Recoveries and deemed indebtedness (and, if required, by way of
inter-bank payments) to produce the same result as if no such
mandatory statutory set-off had occurred and instead distribution
had been made pursuant to Schedule XVIII and (if required) such
parties shall promptly make such payments among themselves.
29.4 EXCESS CASH COVER: If, after the Enforcement Date, a Bank
is holding cash cover for a Facility (which it is permitted
to hold under this Agreement) but the liability in respect
of which the cash cover is held fails to arise or arises
for less than the amount of the cash cover, then that Bank
shall (if it is lawfully able to do so) pay such excess to
the Lead Bank who shall distribute the same as Recoveries.
30. THIRD PARTY SECURITY
THIRD PARTY SECURITY: Save as otherwise expressly provided
below, where any Third Party Security secures both the
liabilities of a Group Company under the Facilities and the
liabilities of a person (other than a Group Company) and
where the Bank holding such Third Party Security is
entitled to elect (at its discretion) how the recoveries or
benefit derived therefrom should be applied and
appropriated as between the Indebtedness thereby secured,
then such Bank shall bring into account as part of the
Recoveries any benefit derived therefrom to the extent that
such benefit is not actually appropriated and applied in or
towards the discharge of any Indebtedness incurred to such
Bank by such person.
31. CLOSING OUT OF FOREIGN EXCHANGE TRANSACTIONS
31.1 CLOSING OUT: Each Bank may at its option close out any
foreign exchange facilities forthwith upon the Security
Agent taking any steps to enforce the security constituted
by the Security Documents or any part of it or at any time
or times thereafter as it thinks fit and, in each case, all
costs, losses and liabilities resulting from such closing
out shall become immediately due and payable to such Bank
by the relevant Borrower.
31.2 RETENTION OF NET PROFIT: A Bank shall be entitled to
retain any net profit made on the closing out of any
foreign exchange transactions of a Borrower (having
deducted any losses arising from the closing out of any
such transactions) and shall apply the same against any
amounts owing to it by any Obligor in such manner as it
deems appropriate and such profits, to the extent they are
so applied, shall not be treated as forming part of the
Recoveries.
PART XVII
NOTICES, ETC.
32. NOTICES
32.1 COMMUNICATIONS THROUGH LEAD BANK: A copy of any
communication or document from or to any party to this
Agreement in connection with any Finance Document shall be
sent in writing to the Lead Bank.
32.2 ADDRESSES: Any notices, demands, proceedings or other
documents made in writing to be sent to any party to this
Agreement pursuant to this Agreement shall be addressed to
such party at the address or telex or fax number and marked
for the attention of the person (if any) from time to time
designated by that party in writing to the Lead Bank (or,
in the case of the Lead Bank, by it to each other party to
this Agreement) for the purpose of this Agreement. The
initial address, telex and fax numbers and person(s) (if
any) so designated by each party are set out under its name
at the end of this Agreement. The initial address, telex
and fax numbers and person(s) (if any) so designated by a
Transferee are those set out at the end of the relevant
Transfer Certificate.
32.3 TIME OF DELIVERY:
(a) Any communication to any Obligor or to any Bank
shall be deemed to have been received by that
Obligor or that Bank:-
(i) if delivered by hand, at the time of
actual delivery;
(ii) if transmitted by telex or facsimile, at
the time of transmission;
(iii) if sent by pre-paid first class post
within Great Britain, at noon on the next
Business Day following the day of posting
or, if sent by pre-paid first class air
mail post to or from an address outside
Great Britain, at noon on the fifth
Business Day following the day of posting
and in each case shall be effective
notwithstanding that it may be
misdelivered or returned undelivered.
In proving such service it shall be sufficient to
prove that personal delivery was made, or that the
envelope containing the communication was correctly
addressed and posted or that the telex was
transmitted with the correct answerback or that a
facsimile transmission report (or other appropriate
evidence) was obtained that the facsimile had been
transmitted to the addressee.
(b) Any communication by any Obligor to the Lead Bank,
the Security Agent, the Steering Committee or any
Bank shall be deemed to have been given only on
actual receipt by the Lead Bank, the Security
Agent, the Steering Committee or such Bank (as the
case may be).
32.4 LANGUAGE: all communications pursuant to this Agreement
shall be in the English language.
33. INDEMNITIES
33.1 CURRENCY OF ACCOUNT: Dollars are the currency of account
and payment for each sum due from any Group Company
hereunder, provided that:-
(a) each repayment of any of the Facilities or a part
thereof shall be made in the currency in which the
relevant obligation is denominated at the time of
that repayment;
(b) each payment of interest shall be made in the
currency in which the sum in respect of which such
interest is payable is denominated;
(c) each payment in respect of costs and expenses shall
be made in the currency in which the same were
incurred; and
(d) any amount expressed to be payable in a currency
other than Dollars shall be paid in that currency.
In the event that any Finance Party receives an amount in a
currency other than the currency payable as provided above,
it shall convert that currency (the "received currency") to
the relevant currency at its spot buying rate for the
relevant currency with the received currency as soon as
reasonably practicable after the date of receipt and, for
the purposes hereof, shall be deemed to have received that
amount of the relevant currency on the date of such
conversion.
33.2 CURRENCY INDEMNITY: If:-
(a) for any reason any amount payable under this
Agreement is paid or is recovered by any Finance
Party (in whatever manner) in a currency (referred
to in this Clause 33.2 as the "received currency")
other than that in which it is required to be paid
under any Finance Document (referred to in this
Clause 33.2 as the "contractual currency"); and
(b) the payment made in the received currency to the
Finance Party when converted at the applicable rate
of exchange into the contractual currency, is less
than the relevant unpaid amount under the
applicable Finance Document;
then, the Borrowers shall, as a separate and independent
obligation, fully indemnify the relevant Finance Party
against the amount of the shortfall. For the purposes of
this Clause 33.2 the expression "applicable rate of
exchange" means the rate at which the relevant Finance
Party is able, as soon as reasonably practicable after
receipt, to purchase the contractual currency in London
with the received currency, taking into account any costs
associated with the exchange.
33.3 MISCELLANEOUS INDEMNITIES: The relevant Borrower shall on
demand indemnify each Finance Party against any funding or
other costs, loss, expense or liability sustained by such
Finance Party as a consequence of:-
(a) a requested utilisation under a Facility not being
made for any reason (other than default by such
Finance Party in its obligations hereunder) on the
date specified in the relevant request by any
Borrower;
(b) the receipt by any Bank of any payment, or an
overdue sum, otherwise than on the due date for
payment thereof;
(c) any default or delay in payment by any Borrower of
any sums when due under any Finance Document; or
(d) the occurrence or continuance of any Event of
Default or Potential Event of Default and/or the
declaration of amounts outstanding to be due and
payable as a result.
34. CERTIFICATES, CALCULATIONS AND EVIDENCE OF DEBT
34.1 BASIS OF CALCULATION: Interest and fees shall accrue from
day to day and be calculated on the basis of the actual
number of days elapsed and a 365 day year in the case of
sums denominated in sterling and a 360 day year or other
customary period in the case of sums denominated in
Dollars, DM or any other currency. In determining the
number of days in a period from one day to another, the
first day shall be included but the last day shall not.
34.2 ACCOUNTS AS EVIDENCE: Evidence made in the accounts
maintained respectively by each Finance Party in connection
with this Agreement shall, in the absence of manifest
error, be conclusive evidence of sums owing to that Finance
Party.
34.3 CERTIFICATES FROM THE FINANCE PARTIES: A certificate of:-
(a) the Lead Bank as to (i) an interest rate payable
under Clause 7 (Interest) or (ii) the Additional
Cost Rate or (iii) any costs claimed under Clause
33.3 (Miscellaneous Indemnities); or any other
certificate, determination, notification or opinion
provided for in this Agreement; and
(b) a Bank as to (i) any amount by which a sum is to be
increased under Clause 9.1 (Payments) or 9.3
(Indemnity); (ii) any increased costs claimed under
Clause 9.6 (Increased Costs); (iii) any costs
claimed under Clause 33.3 (Miscellaneous
Indemnities);
shall constitute conclusive evidence in the absence of
manifest error.
34.4 CERTIFIED DOCUMENTS: Unless stated to the contrary, any
certified document to be delivered under the terms of this
Agreement or any other Finance Document shall be certified
as genuine and in full force and effect or, if a copy, as
a true, complete and up-to-date copy of the original by:-
(a) two directors of the party providing the document;
or
(b) such other persons as the party providing the
document may evidence to the satisfaction of the
Lead Bank to have at the relevant time the
requisite authority to provide such a certificate.
34.5 CERTIFICATES TO FINANCE PARTIES: Any certificate or
certification of any amount or financial matter to be
provided to any Finance Party under the terms of this
Agreement shall contain such detail as the Lead Bank may
consider necessary to determine how the amount or financial
matter was determined.
35. SET-OFF
Each Borrower authorises each Finance Party and without
notice to any Borrower to apply any credit balance to which
such Borrower shall be entitled on any account of such
Borrower (in whatever currency such credit balance may be
denominated and whether or not there are any restrictions
on the withdrawal of such credit balance with any office
anywhere of such Finance Party) against any amounts due
from such Borrower pursuant to a Finance Document but
unpaid. Each Finance Party is authorised by each Borrower
to purchase with the money standing to credit of any such
account such other currencies as may be necessary to effect
such application. Notwithstanding the provisions of this
Clause 35, no charge or proprietary or other security
interest shall be created by this Clause 35.
36. FORBEARANCE AND PARTIAL INVALIDITY
36.1 FORBEARANCE: No failure or delay in exercising any right,
power or privilege by any Finance Party under any Finance
Document shall operate as a waiver, nor shall any single or
partial exercise of any such right, power or privilege
preclude any other or further exercise of such right, power
or privilege, or the exercise of any other right, power or
privilege. The rights and remedies provided in any Finance
Document are cumulative and not exclusive of any rights or
remedies provided by law or under any other Finance
Document.
36.2 PARTIAL INVALIDITY: If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable
in any respect, the legality, validity or enforceability of
the remaining provisions of this Agreement shall not in any
way be affected or impaired.
36.3 WAIVER:
(a) Each Bank consents to the charges created or to be
created at any time pursuant to this Agreement or
any Security Document and for such purpose hereby
waives any rights exercisable by it during the
subsistence of any Security Document to prevent or
restrict any Obligor from creating such charges.
(b) Each Bank waives any restrictions on any Obligor
imposed by it under its Facility Agreement on (a)
the sale or disposal of the assets of any Group
Company or (b) changes in the business carried on
by any Group Company for so long and to such extent
as may be necessary to implement and enforce this
Agreement and the Security Documents.
37. AUTHORITY OF SCC
37.1 AMENDMENT: Each Group Company which is a party to this
Agreement (other than SCC) hereby irrevocably authorises
SCC to sign on its behalf any document extending the term
of this Agreement or otherwise extending, amending,
varying, supplementing, replacing and or restating this
Agreement or any Finance Document or any documents
ancillary or supplemental to it in any way (even if changes
are made to the composition of the Finance Parties and/or
the other parties to this Agreement) and further
irrevocably authorises SCC on its behalf:-
(a) by agreement with the Lead Bank (acting with
Majority Bank approval), to designate or cease to
designate any person as a Bank and/or a Finance
Party from time to time under this Agreement;
(b) by agreement with the Lead Bank (acting with
Majority Bank approval), to designate or cease to
designate any person as a Group Company or an
Obligor from time to time under this Agreement; and
(c) by agreement with the Lead Bank (acting with
Majority Bank approval), to designate or cease to
designate any agreement or document as a Facility
Letter or a Finance Document under this Agreement.
37.2 AGREEMENT: TCLC hereby irrevocably appoints SCC as its
agent to execute on its behalf an agreement for the purpose
of the re-execution before a Notary Public in London of the
agreement contained in Clause 39 (Governing Law and
Jurisdiction) for the submission by such company to the
non-exclusive general jurisdiction of the English Courts
and other matters dealt with therein to comply with the
relevant provisions of the Liechtenstein Law on Civil
Procedure.
38. COUNTERPARTS
This Agreement may be executed in any number of
counterparts, all of which when taken together shall
constitute a single instrument.
39. GOVERNING LAW AND JURISDICTION
39.1 This Agreement shall be governed by and construed in
accordance with English law.
39.2 (a) For the benefit of each other party, each party to this
Agreement irrevocably agrees that the English Courts are to
have jurisdiction to settle any disputes which may arise out of
or in connection with this Agreement or any other Finance
Document and that accordingly any proceedings (referred to in
this Clause 39 as the "Proceedings") arising out of or in
connection with this Agreement may be brought in the English
Courts.
(b) Each of the Borrowers and the Covenantors hereby
designates, appoints and empowers Standard
Commercial Tobacco Services (UK) Limited ("SCTS")
at its registered office at the date of this
Agreement (or such other address in England as SCTS
may notify to the Lead Bank in accordance with the
provisions of Clause 32 (Notices)) to accept
service of process in such jurisdiction in any
Proceedings and agrees that failure by such firm to
give notice of such service of process to the
Borrowers or the Covenantors shall not impair or
affect the validity of such service or any judgment
based on it.
(c) Each party to this Agreement irrevocably waives any
objection which it may have now or hereafter to the
laying of the venue of any Proceedings in the
English Courts and any claim that any such
Proceedings have been brought in an inconvenient
forum and further irrevocably agrees that a
judgment in any such Proceedings brought in the
English Courts shall be conclusive and binding upon
it and may be enforced in any other jurisdiction.
(d) Nothing contained in this Clause 39 shall limit the
right of any party to take action against any other
party in any court of competent jurisdiction, nor
shall the taking of Proceedings by any party
against another party in one or more jurisdictions
preclude the taking of Proceedings in any other
jurisdiction whether concurrently or not.
(e) Each party whose registered office is outside
England and Wales further irrevocably consents to
the service of process out of the English Courts in
any such Proceedings by the mailing to them of
copies by registered or certified airmail, postage
prepaid.
AS WITNESS the hands of the parties the day and year first above
written. By their signature of this Agreement in their capacities
as Lead Bank and Security Agent respectively, Deutsche Bank A.G. in
Hamburg and MeesPierson N.V. sign both in their capacities as Lead
Bank and Security Agent respectively and in their capacities as
Banks.
SCHEDULE I
PART I
THE BORROWERS
NAME COMPANY NUMBER
Trans-Continental Leaf Tobacco Corporation Limited H.LIV/14
Standard Commercial Tobacco Company (UK) Limited 1411968
PART II
THE COVENANTORS
NAME COMPANY NUMBER
Werkhof GmbH 16332
Spierer Freres & Cie S.A. 1464/1926 (file
reference number
at the Geneva
Companies
Registry)
SCHEDULE II
<TABLE>
<CAPTION>
Overall
BANK BORROWER TYPE OF FACILITY COMMITMENT COMMITMENT
<S> <C> <C> <C> <C>
Bank Julius Baer & Co. Ltd Trans-Continental Leaf Tobacco Overdrafts $5,000,000 $5,000,000
Corporation Limited
Bank of America NT & SA Standard Commercial Tobacco Company US Dollar Overdraft $8,000,000 $8,000,000
(UK) Limited and/or Trans-Continental
Leaf Tobacco Corporation Limited
BfG Bank Aktiengesellschaft Trans-Continental Leaf Tobacco Revolving - multi-purpose $13,000,000 $13,000,000
Corporation Limited and Spierer Freres For Euro-Fixed-loans,
Current account & Cie S.A facility, Letters of Credit
and guarantees
Berliner Handels-und Trans-Continental Leaf Tobacco Revolving $10,000,000 $10,000,000
Frankfurter Bank Corporation Limited and Spierer Freres
& Cie S.A.
Commerzbank Aktiengesellschaft Trans-Continental Leaf Tobacco Revolving $12,000,000 $12,000,000
Corporation Limited and Spierer Freres
& Cie S.A.
MeesPierson N.V. Standard Wool Argentina S.A., Tentler Revolving $10,000,000 $10,000,000
& Co. B.V., Lohmann & Company GmbH,
Standard Commercial Tobacco Company
(UK) Limited, Trans-Continental Leaf
Tobacco Corporation Limited, Spierer Foreign Exchange
Freres & Cie S.A., Standard Wool (UK)
Limited and Jacomb Hoare (Bradford)
Limited
NationsBank, N.A. (Carolinas) Trans-Continental Leaf Tobacco Revolving $10,000,000 $10,000,000
Corporation Limited
Norddeutsche Landesbank Standard Commercial Tobacco Company Revolving $17,000,000 $17,000,000
Girozentrale (UK) Limited, Trans-Continental Leaf Available for cash
Tobacco Corporation Limited and Spierer credits, short term loans,
Freres & Cie S.A L/Cs/bank guarantees
Schroder Munchmeyer Hengst & Trans-Continental Leaf Tobacco Revolving $10,000,000 $10,000,000
Co. Corporation Limited and Spierer Freres
& Cie S.A.
Westdeutsche Landesbank Trans-Continental Leaf Tobacco Revolving $22,000,000 $22,000,000
Girozentrale Corporation Limited
The Thai Farmers Bank Public Trans-Continental Leaf Tobacco Current account, import $ 9,000,000 $9,000,000
Company Limited Corporation Limited financing, letter of credit
Joh. Berenberg, Gossler & Co. Trans-Continental Leaf Tobacco internal credit facility $12,000,000 $12,000,000
Corporation Limited
Berliner Bank Werkhof GmbH, Trans-Continental Revolving $18,000,000 $18,000,000
Aktiengesellschaft Rohtabak A.G., Standard Commercial
Tobacco Company (UK) Limited and
Spierer Freres & Cie S.A
Deutsche Bank Werkhof GmbH, Spierer Freres & Cie Internal Credit Facilities $38,000,000 $38,000,000
Aktiengesellschaft S.A., Trans-Continental Leaf Tobacco (no credit facility agreement
Corporation and T.T. Trading but written confirmations of
rollover credit agreements)
of up to $38,000,000 with a
sub-limit of $12,000,000 for
the facilities available to
T.T. Trading and a sub-limit
of $26,000,000 for the
facilities available to Werkhof
GmbH, Spierer Freres & Cie S.A.
and Trans-Continental Leaf
Tobacco Corporation
The Royal Bank of Scotland plc Standard Commercial Tobacco Company Multi-Option Facility relating $5,000,000 $5,000,000
(UK) Limited to overdrafts, short term
fixtures, acceptance credits,
contingent obligations,
uncommitted foreign
exchange, letters of credit,
interest rate swaps, currency
swaps, forward rate agreements,
foreign currency and
interest rate options
</TABLE>
SCHEDULE III
THE CHARGING COMPANIES
PLACE OF
NAME INCORPORATION COMPANY NUMBER
Trans-Continental Leaf Tobacco
Corporation Limited Liechtenstein H. LIV/14
Standard Commercial Tobacco
Company (U.K.) Limited England 1411968
Standard Commercial
Corporation North Carolina Federal Tax
Identification
No. 13/1337610
Standard Wool Inc. Delaware 56-1546115
Advhus Gestion SNC France B855 780 874
SCHEDULE IV
THE FACILITY AGREEMENTS
PART I
THE FACILITY LETTERS AND FACILITIES
<TABLE>
<CAPTION>
DETAILS BANK
<S> <C>
(1) Facility Letter dated 25 March 1988 to Standard Bank Julius Baer & Co
Commercial Tobacco Company (UK) Limited Limited
relating to a term facility of up to $15,000,000
(as subsequently amended)
(2) Facility Letter dated 19 October 1993 to Standard Bank of America NT & SA
Commercial Tobacco Company (UK) Limited and
Trans-Continental Leaf Tobacco Corporation Limited
(as subsequently amended and supplemented)
constituting a US Dollar overdraft facility of up
to $8,000,000
(3) Facility Letter dated 2 October 1992 to Trans-Continental Banque Indosuez Belgique
S.A. Leaf Tobacco Corporation Limited, Standard Commercial
Tobacco Company (UK) Limited and Spierer Freres &
Cie S.A. relating to a revolving facility of up to
$8,000,000
(4) 1993 Facility Letter to Trans-Continental Leaf Tobacco BfG Bank A.G.
Corporation Limited and Spierer Freres & Cie S.A. relating
to a revolving facility of up to $25,000,000 for
Euro-Fixed-loans, Current account facility, Letters of
Credit and guarantees
(5) Facility Letter dated 17 February 1994 to Berliner Handels-und
Trans-Continental Leaf Tobacco Corporation Limited Frankfurter Bank
and Spierer Freres & Cie S.A. relating to a revolving
loan facility of up to $10,000,000
(6) Facility Letter dated 28 March 1995 to Commerzbank A.G.
Trans-Continental Leaf Tobacco Corporation Limited
and Spierer Freres & Cie S.A. relating to a revolving
loan facility of up to $12,000,000
(7) Facility Letter dated 29 June 1994 to Standard Wool MeesPierson N.V.
Argentina S.A., Tentler & Co B.V., Lohmann &
Company GmbH, Standard Commercial Tobacco
Company (UK) Limited, Trans-Continental Leaf
Tobacco Corporation Limited, Spierer Freres &
Cie S.A., Standard Wool (UK) Limited and Jacomb
Hoare (Bradford) Limited relating to a revolving
loan facility of up to $27,500,000 with a
$20,000,000 foreign exchange facility
(8) Facility Letter dated 3 June 1993 to Trans-Continental NationsBank, N.A.
(Carolinas) Leaf Tobacco Corporation Limited relating
to a revolving facility of up to $20,000,000
(9) Facility Letter dated 21 February 1993 to Standard Norddeutsche Landesbank
Commercial Tobacco Company (UK) Limited, Girozentrale
Trans-Continental Leaf Tobacco Corporation Limited
and Spierer Freres & Cie S.A. relating to a revolving
facility of up to $20,000,000 available for cash credits,
short term loans, letters of credit, bank guarantees
(10) Facility Letter dated 4 January 1994 to Trans-Continental Schroeder Munchmeyer
Leaf Tobacco Corporation Limited and Spierer Freres Hengst & Co
& Cie S.A. relating to a revolving facility of up to
DM20,000,000
(11) Facility Letter to be entered into with Trans-Continental Westdeutsche Landesbank
Leaf Tobacco Corporation Limited relating to a Girozentrale
revolving facility of up to $22,000,000. Westdeutsche
Landesbank to provide further details.
(12) Facility Letter to Standard Commercial Tobacco The Royal Bank of
Company (UK) Limited as amended relating Scotland plc
to a revolving loan facility of up to $5,000,000
(13) Facility Letter dated 6 February 1992 to Werkhof GmbH, Berliner Bank A.G.
Trans-Continental Rohtabak A.G., Standard Commercial
Tobacco Company (UK) Limited and Spierer Freres &
Cie S.A. relating to a revolving facility of up to
$20,000,000
(14) Internal credit facility (no written credit facility, but Deutsche Bank A.G.
written confirmations of Roll-over-credit-agreements)
of up to US$38,000,000.
A sublimit of US$12,000,000, is only to be used by
T.T. Trading.
US$26,000,000, available to
- Werkhof GmbH
- Spierer Freres et Cie SA
- Trans-Continental Leaf Tobacco Corporation
(15) Internal credit facility (no written credit facility, Joh. Berenberg, Gossler & Co.
but written confirmations of Roll-over-credit-
agreements) of up to $12,000,000 available
to Trans-Continental Leaf Tobacco
Corporation Limited
</TABLE>
PART II
EXISTING SECURITY DOCUMENTS AND OTHER RELATED DOCUMENTATION
HELD BY BANKS IN CONNECTION WITH THE FACILITIES
<TABLE>
<CAPTION>
DETAILS BANK
<S> <C>
(1) Unlimited guarantee of SCC regarding the Deutsche Bank A.G.
Outstandings of:
- Spierer Freres & Cie S.A.
- Trans-Continental Leaf Tobacco Corporation
Limited
- Werkhof GmbH
- T.T. Trading Company
(2) Import Finanzierung (Mantelvertrag) mit Deutsche Bank A.G.
Sicherheitenbestellung of Trans-Continental Leaf
Tobacco Corporation Limited
(3) (i) Two guarantees from Standard Commercial plc The Royal Bank of Scotland
Tobacco Company (UK) Limited dated
12 February 1992 and 30 June 1994 respectively
(ii) All money guarantee of Standard
Commercial Corporation dated 6 March 1981
(4) All money first legal charge by Standard Commercial plc The Royal Bank of Scotland
Company (UK) Limited over office
premises in Godalming, Surrey, England
(5) Unlimited Guarantee of Standard Commercial Bank of America NT & SA
Corporation
(6) Unlimited Guarantee of Standard Commercial Corporation Berliner Bank A.G.
regarding the outstandings of Trans-Continental Leaf
Tobacco Corporation Limited, Spierer Freres & Cie S.A.,
Standard Commercial Tobacco Company (UK) Limited
and Werkhof GmbH
(7) Guarantee of Standard Commercial Corporation up to BfG Bank A.G.
$25,000,000 together with interest and any and all legal
costs and expenses regarding the outstandings of
Spierer Freres & Cie S.A. and Trans-Continental
Leaf Tobacco Corporation Limited
(8) Unlimited Guarantee of Standard Commercial Corporation Commerzbank A.G.
regarding the Outstandings of:
- Trans-Continental Leaf Tobacco Corporation Limited
- Spierer Freres & Cie S.A.
(9) Guarantee of Standard Commercial Corporation MeesPierson N.V
limited to $27,500,000 plus accrued interest, commissions
and costs of the obligations of Standard Wool Deutschland
GmbH, Spierer Freres & Cie S.A., Standard Commercial
Tobacco Company (UK) Limited, Standard Wool
Argentina S.A., Tentler & Co. B.V., Trans-Continental
Leaf Tobacco Corporation and Standard Wool (UK)
Limited
(10) Unlimited Guarantee of Standard Commercial Corporation NationsBank, N.A.
(Carolinas)
(11) (i) Unlimited Guarantee of Standard Commercial Corporation Norddeutsche Landesbank
regarding outstandings of: Girozentrale
- Trans-Continental Leaf Tobacco Corporation Limited
- Spierer Freres & Cie S.A.
- Standard Commercial Tobacco Company (UK) Limited
- Werkhof GmbH
(ii) The Bank's general terms and conditions provide for a pledge
on all the Borrowers' assets (e.g. goods, money, securities, etc.)
which are in the possession of the Bank or will come into the
possession of the Bank
(12) Unlimited Guarantee of Standard Commercial Corporation Schroder Munchmeyer
Hengst & Co.
(13) Guarantee of Standard Commercial Corporation limited to Berliner Handels-Und
$10,000,000. Guarantee of Standard Commercial Corporation Frankfurter Bank
Limited to DM12,000,000. Import security agreement
to be entered into to cover import transactions of Trans-Continental
Leaf Tobacco Corporation Limited.
(14) (i) Unlimited guarantee dated July 1 1981 of SCC covering Bank Julius Baer
credit facilities granted to Standard Commercial Tobacco & Co. Ltd
Company (UK) Limited;
(ii) Guarantee limited to $8,000,000 dated 28 April 1988
of SCC covering credit facilities granted to Standard
Commercial Tobacco Company (UK) Limited
(iii) Unlimited guarantee dated 6 January 1988 of SCC
covering credit facilities granted to Trans-Continental
Leaf Tobacco Corporation Limited, Werkhof GmbH
and Spierer Freres & Cie S.A.
(15) The Bank's general terms and conditions provide for a pledge MeesPierson N.V.
on all goods and documents of title which are in the possession
or will come into the possession of the Bank or a third party
on the Bank's behalf from or for the benefit of the customer.
(16) Guarantee of Standard Commercial Corporation limited to Westdeutsche Landesbank
$30,000,000 covering Trans-Continental Leaf Corporation Girozentrale
Limited
(17) Importsicherungsvertrag in relation to TCLC Westdeutsche Landesbank
Girozentrale
(18) Importsicherungsvertrage mit Sicherheitenstellung Joh. Berenberg, Gossler
(Waren/Forderungen) of Trans-Continental & Co.
Leaf Tobacco Corporation
(19) Import security agreement to be entered into to cover import Berliner Handels-und
transactions of Trans-Continental Leaf Tobacco Corporation Frankfurter Bank
Limited
(20) Unlimited Guarantee of Standard Commercial Corporation Joh. Berenberg, Gossler
regarding the Outstandings of Trans-Continental Leaf & Co.
Tobacco Corporation Limited
</TABLE>
SCHEDULE V
WOOL GROUP COMPANIES
NAME OF COMPANY STATE OR COUNTRY
Standard Wool Inc Delaware
Standard Wool France S.A. France
Advhus Gestion SNC France
Tentler & Co B.V. Netherlands
Standard Wool S.A. Panama
Standard Wool Holdings S.A. Argentina
Roca SACIF Argentina
Standard Wool Argentina Argentina
Pole Fueguina S.A. Argentina
Standard Wool (UK) Limited United Kingdom
Jacomb Hoare (Bradford) Limited United Kingdom
Thomas Chadwick & Sons Limited United Kingdom
Standard Wool Chile S.A. Chile
Standard Wool Australia (Pty) Ltd Australia
Hulme Wool Scouring Co. (1983) Pty Ltd Australia
Standard Wool Faring Pty Ltd Australia
Mascot Wools Pty Ltd Australia
Stawool Brokers Pty Ltd Australia
Independent Wool Dumpers Pty Ltd Australia
Standard Wool South Africa (Propriety) Ltd S. Africa
Mosenthals Wool & Mohair S. Africa
S.A. Wool Exporters (Pty) Ltd S. Africa
Standard Wool Deutschland GmbH Germany
Lanimex Trading GmbH Germany
Prolaine Wollhandels Gesallschaft GmbH Germany
Lohmann & Company Wollhandel GmbH Germany
SCHEDULE VI
SECURITY DOCUMENTS
1. Debentures containing fixed and floating charges granted
by Standard Commercial Tobacco Company (UK) Limited in
favour of the Security Agent over all of its assets and
undertaking (except fixed charges over land and fixed
plant and machinery);
2. Debenture containing fixed and floating charges granted by
Trans-Continental Leaf Tobacco Corporation Limited in
favour of the Security Agent over all of its assets and
undertaking (except fixed charges over land and fixed
plant and machinery);
3. Charge by SCC of its shares in the First Tier Subsidiaries
(except Transconti Srl) in favour of the Security Agent;
4. Charge by Standard Wool Inc. of its shares in Standard
Wool France S.A. in favour of the Security Agent;
5. Charge by Advhus Gestion SNC of its shares in Standard
Wool France S.A. in favour of the Security Agent;
6. Charges by Trans-Continental Leaf Tobacco Corporation
Limited in favour of the Security Agent of its receivables
and its inventory.
SCHEDULE VII
FORM OF TRANSFER CERTIFICATE
To: (1) [The Lead Bank]
[*insert address*]
Attention:***
(2) [The Borrowers]
[*insert address*]
Attention:***
("the Borrowers") [Date]
TRANSFER CERTIFICATE
This Transfer Certificate relates to a Master Facilities Agreement ("the
Agreement" which expression shall include any amendments to it in force
from time to time) dated [*insert date*] between [* insert names of
parties*]. Terms defined in the Agreement shall have the same meanings
in this Transfer Certificate.
1. [insert name of Transferor Bank] (the "Transferor") (a) confirms
that the details appearing in the attached Schedule are correct and
(b) requests [*insert name of Transferee Bank*] (the "Transferee")
to accept and procure the transfer to the Transferee of the
obligations of the Transferor specified in the attached Schedule by
countersigning and delivering this Transfer Certificate to the Lead
Bank at its address for the service of notice specified in the
Agreement.
2. The Transferee requests the Lead Bank to accept this Transfer
Certificate as being delivered pursuant to and for the purposes of
Clauses 21.4 (Transfer Certificate) and 21.5 (Effective Date) of the
Agreement so as to take effect in accordance with the terms of such
clauses on [*insert date of transfer*] (the "Transfer Date") or if
applicable on such later date as may be determined in accordance
with the terms thereof.
3. The Transferee undertakes to the Lead Bank, the Transferor and each
of the other parties to the Agreement that it will:-
(a) perform in accordance with their terms all those obligations
which by the terms of the Agreement will be assumed by it
after delivery of this Transfer Certificate to the Lead Bank
and after satisfaction of the conditions (if any) subject to
which this Transfer Certificate is expressed to take effect;
and
(b) comply with and be bound by the terms of the Agreement and
each Finance Document to which the Transferor is a party as if
it had been an original party to such Agreement and each such
Finance Document in the capacity of [*specify capacities*].
4. The Transferee confirms that:-
(a) it has received copies of the Agreement and each such Finance
Document and each Security Document and all other
documentation and information required by the Transferee in
connection with the transactions contemplated by this Transfer
Certificate;
(b) it has made and will continue to make its own assessment of
the adequacy, legality, enforceability and validity of the
Finance Documents and this Transfer Certificate and has not
relied and will not rely on the Lead Bank, the Security Agent
or the Steering Committee or any statements made by any of
them in that respect;
(c) it has made and will continue to make its own credit
assessment of SCC, the Borrowers, the Covenantors and the
other parties to the Finance Documents and has not relied and
will not rely on the Lead Bank, the Security Agent or the
Steering Committee or any statements made by any of them in
that respect; and
(d) the Lead Bank, the Security Agent or the Steering Committee
shall not have any liability or responsibility to the
Transferee in respect of any of the foregoing matters.
5. The Transferor makes no representation or warranty and assumes no
responsibility with respect to the adequacy, legality,
enforceability or validity of any Finance Document and assumes no
responsibility for the financial condition of SCC, the Borrowers,
the Covenantors or any other party to any Finance Document or for
the performance and observance by SCC, the Borrowers, the
Covenantors or any other such party of any of its obligations under
any Finance Document and all such conditions and warranties, whether
expressed or implied by law or otherwise, are excluded.
6. Nothing in this Transfer Certificate or any Finance Document obliges
the Transferor to:-
(a) accept a re-transfer from the Transferee of any of the rights
and/or obligations assigned, transferred or novated under
Clause 21 (Assignments and Transfers) of the Agreement; or
(b) support any losses incurred by the Transferee by reason of the
non-performance by any Borrower of any of its obligations
under any Finance Document or otherwise.
7. This Transfer Certificate and the rights and obligations of the
parties under it shall be governed by and construed in accordance
with English law.
NOTE: This Transfer Certificate is not a security, bond, note,
debenture, investment or other similar instrument.
AS WITNESS the hands of the authorised signatories of the parties hereto
on the date appearing below.
SCHEDULE TO TRANSFER CERTIFICATE
DETAILS OF OBLIGATIONS TO BE TRANSFERRED
[All] obligations of the Transferor under or pursuant to each of the
Finance Documents including, without limitation, the obligations of the
Transferor in respect of its Commitment or Overall Commitment referred
to below.
Commitment Portion of or Overall
Transferor's Commitment under: Transferred
Commitment
[*details to ] Facility $[***] $[***]
[ be inserted*] Facility $[***] $[***]
ADMINISTRATIVE DETAILS OF TRANSFEREE
Name of Transferee:
Lending Office:
Address for service of
notices (if different):
Account for payments:
Telephone:
Telex:
Attention:
Dated: ...................... Dated: ......................
SIGNED by ................... SIGNED by ...................
for and on behalf of for and on behalf of
[Transferor Bank] [Transferee Bank]
SCHEDULE VIII
GROUP STRUCTURE
(Details Omitted)
SCHEDULE IX
CAPITAL EXPENDITURE PROJECTIONS
STANDARD COMMERCIAL CORPORATION
SUMMARY OF CAPITAL EXPENDITURE
DOLLARS IN THOUSANDS
1995/96
MAJOR ROUTINE TOTAL
$ $ $
Tobacco 6,972 4,021 10,993
Wool 1,563 1,816 3,379
Other 0 5 5
TOTAL 8,535 5,842 14,377
NOTE: Major capital expenditure for tobacco includes $5.5 million for
curing barns which will be financed locally in Turkey.
SCHEDULE X
PART I
CONDITIONS PRECEDENT
(a) AGREEMENT: this Agreement duly signed on behalf of each of
the parties.
(b) COMPANY DOCUMENTS
(i) CONSTITUTIONAL DOCUMENTS: certified copies of the
certificate of incorporation, certificate of
incorporation on change of name (if any) and
current memorandum and articles of association of
each Obligor;
(ii) MEMBERS' RESOLUTIONS: in respect of each of SCTC,
TCLC, Standard Wool Inc, Advhus Gestion SNC and
Werkhof GmbH, a certified copy of the minutes of
the meeting of its members or a written consent of
the beneficial owners of all shares of such company
approving the terms of the Finance Documents to
which it is a party, together with a certificate of
two of its directors confirming that (where a
meeting of members has been held) the resolutions
set out in the relevant minutes were duly and
properly passed and confirming that such
resolutions are still in effect and have not been
varied or rescinded unless local legal counsel to
the Lead Bank and the Security Agent advises that
this is not necessary.
(iii) CERTIFICATE OF AUTHORISATION: in relation to each
Obligor, a certificate of two of its directors to
the effect that the requisite resolution of its
board of directors, in the Agreed Terms, has been
duly and properly passed:-
(aa) authorising its execution, delivery and
performance of the Finance Documents to
which it is a party; and
(bb) authorising a named person or persons
specified in such documents and whose
specimen signatures appear there to sign
(where appropriate, as a Deed) the Finance
Documents to which it is a party and any
amendments and renewals thereof and to give
any notices or certificates required in
connection with such documents,
and confirming that such resolutions are still in
effect and have not been varied or rescinded or a
certificate in such other form as local legal
counsel to the Lead Bank and the Security Agent
considers to be satisfactory;
(iv) AUTHORISING BOARD RESOLUTIONS: a certified copy of
the resolutions of the board of directors of each
Obligor referred to in paragraph (b)(iii) above
unless local legal counsel to the Lead Bank and the
Security Agent advises that this is not necessary;
(v) AUTHORISED PERSONS: in respect of each Borrower, a
list of the persons authorised to operate each
Facility and enclosing specimen signatures;
(vi) CHANGE OF ARTICLES:
(aa) in respect of Trans-Continental Leaf Tobacco
Corporation Limited, a certified copy of the
resolutions of the members of such company adopting
new Articles in the Agreed Terms;
(bb) in respect of Standard Commercial Tobacco Company
(UK) Limited, a certified copy of the resolutions of
the members of such company adopting new articles of
association in the Agreed Terms;
(c) BUDGETS, ACCOUNTS AND REPORTS
(i) BUDGET: the Budget;
(ii) THE CASH FLOW FORECAST: The Cash Flow Forecast;
(D) SECURITY DOCUMENTS
(i) DEBENTURES: a full guarantee and debenture duly executed by
Trans-Continental Leaf Tobacco Corporation Limited and a
first guarantee and debenture duly executed by Standard
Commercial Tobacco Company (UK) Limited;
(ii) CHARGE: a duly executed charge by Standard Wool Inc. of its
shares in Standard Wool France S.A.;
(iii) CHARGE: a duly executed charge by Advhus Gestion SNC of its
shares in Standard Wool France S.A.;
(iv) CHARGE: a duly executed charge by SCC of its shares in each
of the First Tier Subsidiaries;
(e) INSURANCE ARRANGEMENTS: a letter from the Principal Borrower's
insurance brokers addressed to the Lead Bank (on behalf of itself
and the other Finance Parties) setting out in relation to each Group
Company the insurance arrangements which will be in effect as at
Completion and showing that the resulting level and extent of
insurance cover are sufficient to enable the Borrowers to comply
with the covenant in Clause 14.16 (Insurance);
(f) LEGAL OPINIONS: legal opinions of each of:-
Robinson, Bradshaw & Hinson, (North Carolina)
Narron, Holdford, Babb, Harrison & Rhodes, P.A. (North Carolina)
Lovell White Durrant, Paris, (France)
Dr Dr Batliner & Partner, (Liechtenstein)
Secretan Troyanov & Partners, (Switzerland)
Blake, Cassels & Graydon, (Canada)
Dr Nielsen of Deutsche Bank AG, (Germany)
Morris, Nichols, Arsht & Tunnell, (Delaware);
(g) US FACILITY: receipt by the Lead Bank of a facsimile addressed to
the Lead Bank from NationsBank of Georgia, N.A. as agent to the
providers of the US Facility stating:-
(i) that the US Facility and the security for that facility have
been entered into on the terms contemplated in the terms
sheet dated 16 December 1994; and
(ii) either the US Facility has become unconditionally available
to SCT (US) or that it will become so available upon
satisfaction (either by delivery or by waiver by the Lead
Bank (acting on the instructions of the Majority Banks)) of
the conditions precedent set out in Schedule X, Part I of
this Agreement;
(h) RELEASE: a release and discharge by the senior noteholders in SCC of
their pledge on the shares of the First Tier Subsidiaries;
(i) RELEASE: a release and discharge by the Banks participating in the
syndicated revolving credit facilities led by NationsBank, N.A.
(Carolinas) as agent, as described in the Loan Agreement and the
Reimbursement Agreement, both dated August 10,1994 by and among
Standard Commercial Tobacco Co., Inc., the Banks and NationsBank,
N.A., (Carolinas) as Agent of their lien on the fixed assets of
Standard Commercial Tobacco Co., Inc. and W.A. Adams Company;
(j) AUDITORS' LETTER: the Auditors' Letter duly signed by the Auditors;
(k) NEGATIVE PLEDGES: Consent from the Non-Committed Banks and (if
applicable) any US banks to the creation of the security
contemplated in this Agreement, unless local legal counsel to the
Lead Bank and the Security Agent advise that such consent is not
required;
(l) APPOINTMENT OF COOPERS & LYBRAND: the letter of appointment of
Coopers & Lybrand in the Agreed Terms;
(m) REPAYMENT SCHEDULES: copies of the letters setting out the new
repayment schedules agreed with the Non-Committed Banks and the
Reducing Banks and evidence that those repayment schedules have been
accepted by the relevant Banks as replacing or overriding any rights
of repayment they may have under their respective facility
documents;
(n) DIRECTORS' CERTIFICATES: a certificate (signed in each case by two
directors) of each of the Obligors certifying that, after making
diligent enquiry, the directors are not aware that the entry into or
performance by such company or any other Group Company of any
Finance Document will constitute a breach of any negative pledge or
other agreement binding on the relevant company and all requisite
consents and waivers had been obtained to enable the Finance
Documents to be executed, delivered and performed in accordance with
their terms;
(o) PAYMENT OF FEES: all fees payable to the Lead Bank, the Security
Agent and their respective legal advisers or any Consultant
(together with any disbursements and any applicable taxes) shall
have been paid in full no later than 5 days following the date of
execution of this Agreement;
(p) ACCOUNT DESIGNATION BANK, CONFIRMATION: a duly executed
confirmation from each Account Designation Bank in the Agreed Terms;
(q) SCC DIRECTORS' CERTIFICATE: a certificate signed by two directors
of SCC setting out details of each person who is an "Existing
Borrower" under Clause 6.2 (Existing Facilities, Other Borrowers)
and confirming that the requirements of Clause 6.2 (Existing
Facilities, Other Borrowers) have been fully complied with;
(r) New articles of Spierer Freres & Cie S.A. in the Agreed Terms;
(s) A certified copy of the resolutions of the members of Spierer Freres
& Cie S.A. adopting the new articles referred to in (r) above;
(t) New articles of Trans-Continental Leaf Tobacco Corporation Limited
in the Agreed Terms;
(u) A certified copy of the resolutions of the members of
Trans-Continental Leaf Tobacco Corporation Limited adopting the new
articles referred to in (t) above;
(v) New Articles of Standard Commercial Tobacco Company (UK) Limited in
the Agreed Terms;
(w) A certified copy of the resolutions of the members of Standard
Commercial Tobacco Company (UK) Limited adopting the new articles
referred to in (v) above;
(x) OTHER DOCUMENTATION: such other documentation as the Lead Bank may
specify in writing.
PART II
CONDITIONS SUBSEQUENT
(a) A second (full) Debenture duly executed by Standard
Commercial Tobacco Company (UK) Limited ("SCTC"),
accompanied either by documentary evidence (in form and
substance satisfactory to the Security Agent) demonstrating
that the creation by SCTC of the guarantee and security
constituted by such Debenture will not cause or contribute
to any breach of Section 151 of the Companies Act 1985, or
by the following alternative documents:-
(i) a certificate addressed to the Security Agent from
the Auditors in the Agreed Terms, confirming, inter
alia, that the requirements of Section 155(2) of
the Act are satisfied as at the date of the
creation of such Debenture;
(ii) a certified copy of a statutory declaration by all
of the directors of SCTC as required by Section
155(6) of the Act in relation to such financial
assistance, such statutory declaration to be in the
prescribed form and having attached thereto the
report addressed by the Auditors complying with the
provisions of Section 156(4) of the Act;
(iii) a certified copy of the resolutions of the board of
directors of SCTC approving the matters and things
required to be done by SCTC pursuant to this
paragraph (a) and in particular the giving of such
financial assistance and authorising the execution
of such Debenture on behalf of SCTC;
(iv) a certified copy of the resolutions of the members
of SCTC approving the execution of such Debenture
on behalf of SCTC and the matters and things
required to be done by SCTC pursuant to this
paragraph (a);
(v) such other documents (if any) as the Lead Bank may
request to demonstrate that SCTC has complied with
the requirements of Sections 155 to 158 of the Act
prior to the giving of such financial assistance.
(b) SUPPLEMENTAL AGREEMENT: the supplemental agreement
referred to in Clause 37.2 (Agreement) duly executed on
behalf of TCLC before a Notary Public;
(c) Evidence that Advhus Gestion SNC has received payment of a
fee in consideration of the grant by Advhus Gestion SNC to
the Security Agent for itself and as agent and trustee for
the Finance Parties of a charge over its shareholding in
Standard Wool France S.A. or that such fee has been left
outstanding on inter-company account but is payable upon
demand;
(d) Such other documentation or evidence as the Lead Bank may
specify in writing.
SCHEDULE XI
PART I
EXISTING SECURITY
BANK DETAILS
Deutsche Bank A.G. Import Finanzierung (Mantelvertrag)
mit Sicherheitenbestellung of Trans-
Continental Leaf Tobacco Corporation
Limited.
The Royal Bank of Scotland plc All money first legal charge by
Standard Commercial Tobacco Company
(UK) Limited over office premises in
Godalming, Surrey, England.
Joh. Berenberg, Gossler & Co Importsicherungsvertrage mit
Sicherheitenstellung
(Waren/Forderungen) of
Trans-Continental Leaf Tobacco
Corporation Limited
Berliner Handels-Und Import security agreement to be
Frankfurter Bank entered into to cover import
transactions of Trans-Continental Leaf
Tobacco Corporation Limited
MeesPierson N.V. The Bank's general terms and
conditions provide for a pledge on all
goods and documents of title which are
in the possession or will come into
possession of the Bank or a third
party on the Bank's behalf from or for
the benefit of the customer.
Westdeutsche Landesbank Importsicherungsvertrag of
Girozentrale Trans-Continental Leaf Tobacco
Corporation Limited.
Norddeutsche Landesbank The Bank's general terms and
Girozentrale conditions provide for a pledge on all
the Borrowers' assets (e.g. goods,
money, securities, etc.) which are in
the possession or will come into the
possession of the Bank
Thai Farmers Bank Public Sicherungsvereinbarung Import-Kredite
Company Limited of Trans-Continental Leaf Tobacco
Corporation Limited dated 18 May 1978
ABN Amrobank Charge over assets of Exelka Greece
ABN Amrobank Charge over assets of SPI Turkey
Barclays Charge over assets of Exelka Greece
Barclays Charge over assets of Stancom Malawi
Citibank Charge over assets of Exelka Greece
Egnatia Bank Charge over assets of Exelka Greece
Ioman Bank Charge over assets of Exelka Greece
Midland Bank Charge over assets of Exelka Greece
National Bank of Greece Charge over assets of Exelka Greece
Xkebank Charge over assets of Exelka Greece
Toronto Dominion Charge over assets of SCTC Canada
Chemical Bank Charge over assets of SPI Turkey
MeesPierson Charge over assets of SPI Turkey
T. Ekonomi Bank Charge over assets of SPI Turkey
UOB Geneva Charge over assets of SPI Turkey
Commercial Bank of Malawi Charge over assets of Stancom Malawi
Equator Bank Charge over assets of Stancom Malawi
Indebank Charge over assets of Stancom Malawi
Merchant Bank of C.A. Charge over assets of Stancom Zimbabwe
National Merchant Bank Charge over assets of Stancom Zimbabwe
Stanble Charge over assets of Stancom Zimbabwe
Syfrets Charge over assets of Stancom Zimbabwe
Thai Farmers Bank Charge over assets of Stec Thailand
Assic Edila Charge over assets of Transacatab Italy
Banco di Napoli Charge over assets of Transacatab Italy
Monte dei Paschi Charge over assets of Transacatab Italy
Asefa Charge over assets of WWY Spain
Banca Commerciale Italiana Charge over assets of WWY Spain
Banca Nazionale del Lavoro Charge over assets of WWY Spain
Banco Bilbao Vizcaya Charge over assets of WWY Spain
Banco Extrenadura Charge over assets of WWY Spain
Banco Centra Hispana Charge over assets of WWY Spain
Banco Popular Charge over assets of WWY Spain
Bancato Charge over assets of WWY Spain
Maofre Charge over assets of WWY Spain
NationsBank Charge over assets of Standard
Commercial Tobacco Inc.
National Bank of Australia Charge over assets of Standard Wool
Australia
Bank West Charge over assets of Standard Wool
Australia
BHF Bank Charge over assets of Standard Wool
Germany
Bremer Bank Charge over assets of Standard Wool
Germany
Bremer Landesbank Girozentrale Charge over assets of Standard Wool
Germany
Commerzbank A.G. Charge over assets of Standard Wood
Germany
Westdeutsche Landesbank Charge over assets of Standard Wool
Girozentrale Germany
PART II
EXISTING GUARANTEES
Deutsche Bank A.G. Unlimited guarantee of SCC regarding the
Outstandings of:-
- Spierer Freres & Cie S.A.;
- Trans-Continental Leaf Tobacco
Corporation Limited;
- Werkhof GmbH;
- T.T. Trading Company;
Commerzbank A.G. Unlimited guarantee of SCC regarding
the Outstandings of:-
- Trans-Continental Leaf Tobacco
Corporation Limited;
- Spierer Freres & Cie S.A.;
The Royal Bank of Scotland plc (i) Two guarantees from Standard
Commercial Tobacco Company (UK)
Limited dated respectively 12
February 1992 and 30 June 1994
(ii) All money guarantee of Standard
Commercial Corporation dated 6
March 1981
Bank of America NT & SA Unlimited Guarantee of Standard
Commercial Corporation
Berliner Bank A.G. Unlimited Guarantee of Standard
Commercial Corporation regarding the
outstandings of:
- Trans-Continental Leaf Tobacco
Corporation Limited;
- Spierer Freres & Cie S.A.;
- Standard Commercial Tobacco
Company (UK) Limited
- Werkhof GmbH;
BfG Bank A.G. Guarantee of Standard Commercial
Corporation Limited up to $25,000,000
together with interest and any and all
legal and other costs and expenses
regarding the outstandings of Spierer
Freres & Cie S.A. and Trans-Continental
Leaf Tobacco Corporation Limited
MeesPierson N.V. Guarantee of Standard Commercial
Corporation limited to $27,500,000.
NationsBank, N.A. (Carolinas) Unlimited Guarantee of Standard
Commercial Corporation
Norddeutsche Landesbank Unlimited Guarantee of Standard
Commercial GirozentraleCorporation
relating to the outstandings of
Trans-Continental Leaf Tobacco
Corporation Limited, Spierer Freres
& Cie S.A., Standard Commercial Tobacco
Company (UK) Limited and Werkhof GmbH.
Schroder Munchmeyer Unlimited Guarantee of Standard
Commercial Hengst & Co.Corporation
Joh. Berenberg Grossler & Co. Unlimited Guarantee of Standard
Commercial Corporation regarding
the Outstandings of Trans- Continental
Leaf Tobacco Corporation Limited
Berliner Handels-und Frankfurter Bank Guarantee of Standard Commercial
Corporation limited to $10,000,000.
Guarantee of Standard Commercial
Corporation limited to DM12,000,000.
Import security agreement to be entered
into to cover import transactions of
Trans-Continental Leaf Tobacco
Corporation Limited.
Bank Julius Baer & Co. Ltd (i) Unlimited guarantee dated 1 July
1981 of SCC covering credit
facilities granted to Standard
Commercial Tobacco Company (UK)
Limited
(ii) Guarantee limited to $8,000,000
dated 28 April 1988 of SCC
covering credit facilities granted
to Standard Commercial Tobacco
Company (UK) Limited;
(iii) Unlimited Guarantee of SCC
covering credit facilities granted
to Trans-Continental Leaf Tobacco
Corporation Limited, Werkhof GmbH
and Spierer Freres & Cie S.A. dated
6 January 1988;
Westdeutsche Landesbank Guarantee of Standard Commercial
Girozentrale Corporation Limited to $30,000,000
relating to TCLC
PART III
EXISTING INDEBTEDNESS
(As at 31 March 1995, expressed net of any cash balances)
(Details Omitted)
SCHEDULE XII
NON-COMMITTED BANKS
<TABLE>
<CAPTION>
BANK BORROWER TYPE OF FACILITY OUTSTANDINGS AS AT 25 APRIL 1995
<S> <C> <C> <C>
Banque Indosuez Belgique S.A. Trans-Continental Leaf Tobacco Current account 195,252 Pesetas CT
Corporation Limited
Advance Loan US$2,510,000 DT
Current Account 40,000,000 Pesetas CT
Standby Letter 250,000,000 Pesetas DT
of Credit
VAT Guarantee BEF 3,000,000 DT
Standard Commercial Tobacco (UK) VAT Guarantee BEF 3,000,000 DT
Ltd
Spierer Freres & Cie S.A. VAT Guarantee BEF 3,000,000 DT
Bank Borrower Type of facility Outstandings as at 21 April 1995
Trinkaus & Burkhardt Trans-Continental Leaf Tobacco Overdraft US$5,753,000
Corporation Limited
</TABLE>
N.B. "C/V" means the countervalue in US Dollars where the amount is
denominated in a different currency;
"DT" means debit balance; and
"CT" means credit balance.
SCHEDULE XIII
REDUCING BANKS
<TABLE>
<CAPTION>
MAXIMUM AMOUNT OF
BANK BORROWER REDUCING
OUTSTANDINGS $
<S> <C> <C>
BfG Bank AG Trans-Continental Leaf $1,700,000.00
Tobacco Corporation Limited
Bank Julius Baer & Co. Ltd Trans-Continental Leaf Tobacco $ 992,000.00
Corporation Limited
Westdeutsche Landesbank Trans-Continental Leaf Tobacco $ 940,487.00
Girozentrale Corporation Limited
Norddeutsche Landesbank Trans-Continental Leaf $3,000,000.00
Girozentrale Tobacco Corporation Limited
Bank of America NT & SA Standard Commercial Tobacco $1,482,403.67
Company (UK) Limited and
Trans-Continental Leaf Tobacco
Corporation Limited
Berliner Bank A.G. Trans-Continental Leaf Tobacco $1,320,000.00
Corporation Limited
Commerzbank A.G. Trans-Continental Leaf Tobacco $ 110,000.00
Corporation Limited
Schroeder Munchmeyer Hengst & Co Trans-Continental Leaf Tobacco $ 690,000.00
Corporation Limited
</TABLE>
N.B. If and insofar as Reducing Outstandings are denominated in a currency
or currencies other than US Dollars, the Lead Bank shall (prior to
allocating any funds distributable amongst Reducing Banks in respect
of Reducing Outstandings under this Agreement) adjust the amounts
stated above in order to allow for any exchange rate fluctuation since
the date on which the above figures were supplied to the Lead Bank.
SCHEDULE XIV
LITIGATION DETAILS
SCC is unaware of any current litigation proceedings against any company
in the group, other than a tax assessment demand on Stancom Tobacco
Company (Malawi) Limited of Malawi Kwacha 27,700,000 (US$1,819,770). The
assessment was challenged by the Company and the matter was subsequently
brought before a special arbitrator appointed by the High Court in Malawi.
The arbitrator issued his judgment on 2nd March 1995 and found against the
Company and in favour of the Commissioner of Taxes. The Company's counsel
advises the judgment is faulty in law and has filed notice of appeal.
SCHEDULE XV
DETAILS OF GROUP JOINT VENTURES
From time to time SCC has entered into joint venture transactions,
principally with other Leaf Dealers. Typically these joint ventures
last the length of a given transaction.
At the present time, the only joint ventures in existence are those with
Messrs Frana S.A. a wholly-owned subsidiary of SOCOTAB, an American
privately owned Leaf Tobacco Dealer, specialising in Oriental tobaccos.
The transactions are conducted through an independent company, SEAKENS
LIMITED, who finance, purchase and process quantities of Oriental
tobacco purchased from the Turkish Tobacco Monopoly (TEKEL). Frana and
Trans-Continental have entered into a Joint Venture Agreement which,
inter alia, provides for the following:-
(a) they have contracted to purchase all the tobaccos purchased by
Seakens;
(b) they have guaranteed the bank borrowings of Seakens on a 50:50
basis;
(c) they will pool the profits earned on the re-sale of the tobacco and
share such profits on a 50:50 basis.
The Joint Venture Agreement covers a series of transactions as follows:-
(a) the purchase in 1994 of approximately 45,000 tons of tobacco with a
purchase value of $80 million. This tobacco is all sold and is
currently being delivered;
(b) the purchase in 1995 of 6,000 tons of tobacco with a purchase value
of $11 million. This tobacco is all sold and is being delivered
between May and September 1995 (the profit split on this transaction
will be Frana 33_:Trans-Continental 66_);
(c) the purchase in 1995 of 18,300 tons of tobacco with a purchase value
of $32 million which will be delivered between October 1995 and
March 1996;
(d) the purchase in 1995 of 1,800 tons of tobacco with a purchase value
of $3,500,000 which will be delivered between October and December
1995;
(e) Negotiations are in progress to purchase an additional 60,000 tons
but these negotiations are not yet concluded. It is expected this
transaction will be a continuation of the existing joint venture.
SCHEDULE XVI
INSURANCE POLICIES
<TABLE>
<CAPTION>
COVERAGE CARRIER EFF. DATE LIMIT DESCRIPTION
<S> <C> <C> <C> <C>
Property Kemper 6-1-94 $122,782,438 All Risks Blanket Property insurance
for U.S. properties.
Aircraft Cigna 4-1-95 $200,000,000 Legal Liability on company aircraft.
General Hartford 4-1-95 $1,000,000 occurrence Comprehensive General Liability and
Liability/ $2,000,000 aggregate Auto Liability for U.S. operations.
Automobile Health Hazard exclusion on Products
Liability coverage.
Workers' Hartford 4-1-95 Statutory State Workers' Compensation coverage for
Compensation Benefits U.S. employees.
Excess Liability Hartford 4-1-95 $10,000,000 Excess limits over Primary U.S.
Liability coverages.
Excess Liability Pacific 4-1-95 $10,000,000 Excess of Hartford.
Insurance
Excess Liability Stonewall 4-1-95 $5,000,000 Excess of Pacific.
Marine Cigna 4-1-95 $10,000,000 Warehouse Legal Liability (U.S.
warehouses).
Directors & Chubb 4-1-95 $15,000,000 D&O cover for Standard Group.
Officers
Fiduciary Chubb 4-1-95 $1,000,000 Protects Pension Plans from E&O
Liability losses.
Crime Chubb 4-1-95 $10,000,000 Worldwide Corporation Crime
coverage.
Foreign
Property Hartford 4-1-95 $10,000,000 Foreign Difference-in-Conditions
cover over local placements. All
Risks cover.
Foreign Hartford 4-1-95 $5,000,000 Provides Difference-in-Conditions
General and Difference-in-Limits over local
Liability/Auto foreign placements.
Liability
Excess Foreign Cigna 4-1-95 $5,000,000 Excess Foreign Liability over
Liability Hartford.
Global Stock Pacific 4-1-95 $15,000,000 each loss All Risk Ocean Marine and Worldwide
Program Employers storages/transits. Covers wool and
Group tobacco.
Political Risk Lloyds and 6-1-94 $40,000,000 warehouse Political Risk exposures in Malawi.
London $ 3,000.000 bank
Companies $ 1,000,000 transit
Political Risk Lloyds and 11-1-94 $12,675,600 Contract Frustration in Argentina.
London
Companies
Political Risk Lloyds and 3-31-95 $24,519,993 Political Risk coverages on
London expiration cigarettes in Petersburg.
Companies
Export Credit Exporters 10-1-94 $6,000,000 some sublimits Supplements covers unavailable to
Insurance group Entities from their local
Company, Ltd Export Credit agencies.
Political Risk Lloyds and 2-1-95 $10,000,000 Political Risk coverages on leaf
London tobacco in Russia.
Companies
</TABLE>
Named Insured: Standard Commercial Corporation and all subsidiary companies
and/or all affiliated or joint venture or associated
companies that now exist or are hereafter constituted.
SCHEDULE XVII
FIRST TIER SUBSIDIARY BANK ACCOUNTS
<TABLE>
<S> <C>
TRANS-CONTINENTAL LEAF TOBACCO Bank Julius Baer, Zurich
CORPORATION/SPIERER FRERES & CIE S.A. Berliner Bank, Hamburg
Joh. Berenberg, Gossler & Co, Hamburg
BfG Bank, Hamburg
BHF Bank, Hamburg
Bank of America, New York/London
BFCE, London
Commerzbank, Hamburg
Deutsche Bank, Hamburg
Banque Indosuez Belgique, Brussels
MeesPierson N.V., Rotterdam
NationsBank, N.A. (Carolinas) Charlotte NC
Nord/LB, Hamburg
Schroder Munchmeye Hengst & Co, Hamburg
Thai Farmers Bank, Hamburg & London
Trinkaus & Burkhart, Hamburg
United Overseas Bank, Geneva
West/LB, Hamburg
STANDARD COMMERCIAL TOBACCO Bank Julius Baer, London
COMPANY (UK) LIMITED Bank of America, London
BFCE, London
Deutsche Bank, Hamburg
The Royal Bank of Scotland, London
Standard Chartered Bank, London
STANDARD COMMERCIAL TOBACCO Lloyds Bank, Godalming
SERVICES (UK) LIMITED
WERKHOF GMBH Deutsche Bank, Hamburg
Bank Julius Baer, Zurich
STANDARD COMMERCIAL TOBACCO Toronto Dominion Bank, Brantford
COMPANY (CANADA) LIMITED
TRANSCONTI SRL No bank accounts
</TABLE>
SCHEDULE XVIII
DISTRIBUTION OF RECOVERIES BETWEEN FINANCE PARTIES
1. The Security Agent shall hold the Recoveries received by it on trust
for distribution in accordance with the provision of this Schedule.
Each other Finance Party shall, promptly on request from the
Security Agent, pay to the Security Agent all Recoveries held by
such Finance Party or apply the same as the Security Agent may
direct.
2. Recoveries shall be distributed by the Security Agent between the
Finance Parties in the following order of priority:-
(a) FIRST, to pay to the Security Agent and the Lead Bank the
amount of any fees due from the Group Companies pursuant to
Clause 18 (Fees) of this Agreement and to reimburse each of
them for all costs (including legal costs) charges and
expenses incurred by it in connection with the Finance
Documents and in addition such sums as shall be sufficient to
indemnify the Security Agent, the Lead Bank and the Steering
Committee fully against any obligations or liabilities
incurred in their respective capacities as such (except if
and insofar as incurred as a result of their own gross
negligence or wilful misconduct);
(b) SECOND, to pay to the Banks the amount of any losses incurred
by them in respect of any foreign exchange transaction which
the relevant Bank has agreed not to close out on the
Enforcement Date at the request of a receiver of the relevant
Group Company and with the approval of the Lead Bank (acting
with the consent of all the Banks);
(c) THIRD, to pay to the Banks pro rata pari passu all Principal
Indebtedness then due, owing or incurred under the Facilities
(up to the level of each Bank's Overall Commitment) and to
create Reserves for any such indebtedness as is unmatured (as
adjusted, where applicable, to take into account any
Equalisation Payments made under Clause 26 (Equalisation)),
together with all Interest Indebtedness accrued thereon,
until all such matured indebtedness has been repaid and full
Reserves have been made for all such unmatured liabilities;
(d) FOURTH, to pay to the Banks pro rata pari passu all other
money and liabilities (if any) due, owing or incurred by the
Obligors to the Finance Parties under or in connection with
the Facilities and/or the Finance Documents and to create
Reserves for any such liabilities as are unmatured, until all
such matured liabilities have been paid in full and full
Reserves have been created for all such unmatured
liabilities;
(e) FIFTH, to pay to the Finance Parties pro rata pari passu all
other money and liabilities (if any) due, owing or incurred
by the Obligors to the Finance Parties not already provided
for in Clauses (a) to (d) above;
(f) SIXTH, to pay any surplus to whomsoever is entitled to it;
where the expression "pro rata" means: -
(i) in relation to paragraph 2(c) above, the proportion which a
Bank's Overall Commitment as at the Enforcement Date bears to
the aggregate amount of all Overall Commitments of the Banks
as at the Enforcement Date; and
(ii) in relation to paragraph 2(d) above, the proportion which the
amount of indebtedness of the Obligors to each Finance Party
under or in connection with the Facilities and/or the Finance
Documents at such time bears to the aggregate amount of
indebtedness of the Obligors to all Finance Parties under or
in connection with the Facilities and/or the Finance
Documents at such time; and
(iii) in relation to paragraph 2(e) above, the proportion which the
amount of the Indebtedness described in paragraph 2(e) above
of the Obligors to each Finance Party at such time bears to
the aggregate amount of such Indebtedness of the Obligors to
all Finance Parties at such time.
For the purpose of this Schedule there shall be no double counting.
Where there are two claims for the same debt (for example a
guarantee of a Facility) only one such claim shall be taken into
account.
3. For the purposes of calculating the claim of each Finance Party
under this Schedule and calculating the amount of Indebtedness
outstanding to each of them for the purposes of this Schedule:-
(a) the provisions of Clause 29 (Further Security, Set-Off and
Excess Cash Cover) shall be applied, where applicable,
before establishing Indebtedness for such purpose;
(b) any claim made by a Bank in respect of any foreign exchange
transaction shall be limited to the amount of the loss
which that Bank would have incurred on that transaction if
it had closed out that transaction on the Enforcement Date
or (if that is not a Business Day) on the next succeeding
Business Day, or on such other basis as may be approved by
the Lead Bank (acting with all Bank consent) if such Bank
is asked by a receiver of the relevant Group Company not to
close out the transaction or not to do so immediately;
(c) sums received by a Finance Party and passed or to be passed
to the Security Agent pursuant to Clauses 29.1 (Sureties,
Set-Off and Excess Cash Cover) or 30 (Third Party Security)
shall be disregarded, so that as between the Finance
Parties for such purpose, the outstanding Indebtedness of
the Group Companies to a Finance Party shall be deemed to
be the amount of the indebtedness of the Group Companies to
such Finance Party before the sums to be passed to the
Security Agent are received by such Finance Party.
4. Where any Finance Party receives funds pursuant to this Schedule it
shall (unless required by law) apply such funds in or towards
satisfaction of the relevant debt or liability or (if so directed by
the Security Agent with the consent of the Majority Banks) instead
place the funds on an interest-earning suspense account until
otherwise specified by the Security Agent.
5. If any calculation or estimate made by the Security Agent (or any
other person) in order to determine directly or indirectly the
distributions hereunder shall prove to be inaccurate when made or
becomes inaccurate, whether through the passage of time or
otherwise, then the amounts received by each Finance Party shall be
adjusted to take account of such inaccuracy and such Finance Party
shall forthwith upon notice by the Security Agent pay to the
Security Agent such funds as may be required to achieve such
correction.
6. If requested by the Security Agent, a Finance Party shall purchase
for cash such portion of the monetary amounts and claims owing to
one or more of the other Finance Parties from the Group Companies,
or to sell for cash such portion of the monetary amounts and claims
owing to it from Group Companies, or adopt such alternative method
as the Security Agent may reasonably require (on the basis of legal
advice received by it) to give effect to the provisions of Clauses
26 (Equalisation), 27 (Interim Distributions of Recoveries and
Creation of Reserves), 29 (Further Security, Set-Off and Excess Cash
Cover) or 30 (Third Party Security), having regard to the law
applicable in the relevant jurisdiction.
7. Where the amount of any unmatured liability is to be estimated for
the purpose of this Schedule, the Finance Party to which such
liability is owing shall provide such information to the Security
Agent as it may reasonably require to agree or determine the amount
of such estimate and the amount so agreed or determined by the
Security Agent shall apply for such purpose.
SCHEDULE XIX
EXISTING INTRA-GROUP INDEBTEDNESS
RECEIVABLES AS AT 28 FEBRUARY 1995
TRANS-CONTINENTAL LEAF TOBACCO CORPORATION LIMITED - FROM:
SCC 1,154,000
Std Wool (Aust.) Pty. Ltd 2,958,000
Std. Wool South Africa (Pty) Ltd 4,217,000
Std. Wool Argentina SA 1,496,000
Std Wool UK Ltd 6,555,000
Std Wool Inc. 1,126,000
SH Allen 443,000
STANDARD COMMERCIAL TOBACCO COMPANY (UK) LIMITED - FROM:
Std Wool (Aust.) Pty. Ltd 2,716,000
Mascot 1,322,000
Std Wool UK 5,300,000
SH Allen 1,180,000
SCHEDULE XX
SECURITY PROGRAMME
DATE FOR DELIVERY SECURITY
12 May 1995 Full Debenture of SCTC in the Agreed Terms
30 May 1995 (a) charges/pledges by TCLC over:-
(i) book and other debts receivable from
its most valuable debtors (as
notified by the Security Agent);
(ii) its tobacco held in warehouses in
Antwerp;
(iii)its shares in StanCom (Private) Ltd
and Tobacco Processors (Zimbabwe)
Limited and Trans Hellenic Tobacco
S.A.
(b) Acknowledgment Agreement by warehouses in
Antwerp relating to the pledge by TCLC
over its tobacco referred to in (a)(ii)
above;
(c) Charges by SCTC over its shares in
Siemssen Threshie (Malawi) Ltd, and
Stancom Tobacco Co. (Malawi) Ltd;
(d) Charge by StanCom Tobacco Co. (Malawi) Ltd
of its shares in Tobacco Processors
(Malawi) Ltd;
(e) Pledge by SCTC of its tobacco held in
warehouses in Antwerp;
(f) Acknowledgment Agreement by warehouses in
Antwerp relating to the pledge by SCTC
referred to in (e) above.
THE BORROWERS
TRANS-CONTINENTAL LEAF TOBACCO CORPORATION LIMITED
FL-9490 Vaduz,
Liechtenstein
Facsimile No: (0)75 236 5555
Attention: The Finance Director
By: Alec Murray and David Andrews
STANDARD COMMERCIAL TOBACCO COMPANY (UK) LIMITED
Standard House
Weyside Park
Godalming
Surrey GU7 1XE
England
Facsimile No: 01483 860176
Attention: The Finance Director
By: Alec Murray and David Andrews
THE COVENANTORS
SPIERER FR RES & CIE S.A.
7 Rue Versonnex, 1207
Geneva, Switzerland
Facsimile No: (0)75 236 5555
Attention: The Finance Director
By: Alec Murray and David Andrews
WERKHOF GMBH
An der Alster 18
2000 Hamburg
Germany
Facsimile No: 00 49 40 280 363
Attention: The Finance Director
By: Alec Murray and David Andrews
SCC
STANDARD COMMERCIAL CORPORATION
2201 Miller Road, P O Box 450,
Wilson NC 27894-0450, USA
Facsimile No: 00 1 919 237 1109
Attention: The Finance Director
By: Alec Murray and David Andrews
THE LEAD BANK
DEUTSCHE BANK A.G. IN HAMBURG
F/Kreditbearbeitung 3
Alter Wall 37
20457 Hamburg, Germany
Facsimile No: 00 49 40 3701 4784
Attention: Mrs Monika Nickel
By: Bernd Wilken and Nielsen
THE SECURITY AGENT
MEESPIERSON N.V.
Camomile Court
23 Camomile Street
London EC3A 7PP
Facsimile No: 0171 444 8810
Attention: Walter Gibson Esq
By: Walter Gibson and Iain Lappin-Smith
THE STEERING COMMITTEE
COMMERZBANK A.G.
Ness 7-9
20457 Hamburg, Germany
Facsimile No: 00 49 40 368 33305
Attention: Mr Weidner
By: Hermann Loeck
NORDDEUTSCHE LANDESBANK GIROZENTRALE
Brodschrangen 4
20457 Hamburg, Germany
Facsimile No: 00 49 40 3765 5304
Attention: Mrs Barbara Grammel
By: Feldhaus and Scheer
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Domstrasse 10, 20095 Hamburg,
Germany
Facsimile No: 00 49 40 339 68265
Attention: Mr T. Richter
By: T Richter and Stefan Hofman
DEUTSCHE BANK A.G. IN HAMBURG
F/Kreditbearbeitung 3
Alter Wall 37
20457 Hamburg, Germany
Facsimile No: 00 49 40 3701 4784
Attention: Mrs Monika Nickel
By: Bernd Wilken and Nielsen
MEESPIERSON N.V.
Coolsingel 93, P O Box 749
3000 AS Rotterdam
Netherlands
Facsimile No: 00 31 10 401 6929
Attention: Jaap van Beveren
By: Walter Gibson and Iain Lappin-Smith
THE ROYAL BANK OF SCOTLAND PLC
5-10 Great Tower Street
London EC3P 3HX
Facsimile No: 0171 626 5407
Attention: T J Smith Esq
Julia H Peasley
By: T J Smith
THE BANKS
JOH. BERENBERG, GOSSLER & CO.
Neuer Jungfernstieg 20
20354 Hamburg,
Germany
Facsimile No: 00 49 40 354 248
Attention: Mr Schroder
By: Klaus Schroeder
BFG BANK
Valentinskamp 89-90
20354 Hamburg, Germany
Facsimile No: 00 49 40 349 52308
Attention: Regionalburo
By: Stahler-Kantel and Hans-Peter Plass
BERLINER HANDELS-UND FRANKFURTER BANK
Paulstrasse 5
20095 Hamburg, Germany
Facsimile No: 00 49 40 324 014
Attention: Dr Saft
By: Keith Wallis
BERLINER BANK AKTIENGESELLSCHAFT
Niederlassung Hamburg
Domstrasse 21
20095 Hamburg, Germany
Facsimile No: 00 49 40 3020 5319
Attention: Mr v. Lobbecke
By: Vicky Hartley
COMMERZBANK A.G.
Ness 7-9
20457 Hamburg, Germany
Facsimile No: 00 49 40 368 33305
Attention: Mr Weidner
By: Hermann Loeck
NORDDEUTSCHE LANDESBANK GIROZENTRALE
Brodschrangen 4
20457 Hamburg, Germany
Facsimile No: 00 49 40 376 55304
Attention: Mrs Barbara Grammel
By: Feldhaus and Scheer
SCHRODER MUNCHMEYER HENGST & CO.
Ballindamm 33
20095 Hamburg, Germany
Facsimile No: 00 49 40 329 5275
Attention: Mr Stockmann
By: Hahlbrook
THE THAI FARMERS BANK PUBLIC COMPANY LIMITED
Gansemarkt 24
20354 Hamburg, Germany
Facsimile No: 00 49 40 346 206
Attention: Mr Heidebrecht
By: Pipat Visuttiporn
WESTDEUTSCHE LANDESBANK GIROZENTRALE
Domstrasse 10, 20095 Hamburg,
Germany
Facsimile No: 00 49 40 339 68265
Attention: Mr T Richter
By: T Richter and Stefan Hofman
BANK JULIUS BAER & CO. LIMITED
Bahnhofstrasse 36
8001 Zurich
Switzerland
Facsimile No: 00 411 202 1016
Attention: Dr Zollinger
By: Timothy Pereira
NATIONSBANK, N.A. (CAROLINAS)
Facsimile No: 00 1 704 386 1270
Attention: Mr Greg Powell
By: Richard G Parkhurst
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Bank of America House
1 Alie Street
London E1 8DE
Facsimile No: 0171 634 4707
Attention: Mr Keith Thomas
By: Keith Thomas
THE ROYAL BANK OF SCOTLAND PLC
5-10 Great Tower Street
London EC3P 3HX
Facsimile No: 0171 626 5407
Attention: T J Smith Esq
Julia H Peasley
By: T J Smith
EXHIBIT 4(iii)
LOAN AND SECURITY AGREEMENT
Dated as of May 2, 1995
Between
STANDARD COMMERCIAL TOBACCO CO., INC.
(the Borrower)
and
THE FINANCIAL INSTITUTIONS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
NATIONSBANK OF GEORGIA, N.A.
(the Agent)
<PAGE>
TABLE OF CONTENTS(1)
Page
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. General . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans . . . . . . . . . . . . . . . . . . 42
SECTION 2.2. Manner of Borrowing Revolving
Credit Loans . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 2.3. Repayment of Revolving Credit Loans . . . . . . . . . . . . 45
SECTION 2.4. Revolving Credit Note . . . . . . . . . . . . . . . . . . . 46
SECTION 2.5. Extension of Revolving Credit Facility . . . . . . . . . . 46
ARTICLE 3
REGULAR LETTER OF CREDIT FACILITY
SECTION 3.1. Agreement to Issue . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.2. Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.3. Conditions . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 3.4. Issuance of Regular Letters of Credit . . . . . . . . . . . 48
SECTION 3.5. Duties of NationsBank . . . . . . . . . . . . . . . . . . . 49
SECTION 3.6. Payment of Regular Reimbursement
Obligations . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 3.7. Participations . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 3.8. Indemnification, Exoneration . . . . . . . . . . . . . . . 52
SECTION 3.9. Supporting Regular Letter of Credit;
Cash Collateral . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 4
JTI LETTER OF CREDIT FACILITY
SECTION 4.1. Agreement to Issue . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.2. Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.3. Conditions . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.4. Issuance of JTI Letter of Credit . . . . . . . . . . . . . 57
SECTION 4.5. Duties of NationsBank . . . . . . . . . . . . . . . . . . . 58
SECTION 4.6. Payment of JTI Reimbursement
Obligations . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.7. Participations . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.8. Indemnification, Exoneration . . . . . . . . . . . . . . . 63
SECTION 4.9. Supporting JTI Letter of Credit; Cash Collateral . . . . . 63
ARTICLE 5
GENERAL LOAN PROVISIONS
SECTION 5.1. Interest . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 5.2. Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 5.3. Manner of Payment . . . . . . . . . . . . . . . . . . . . . 68
SECTION 5.4. General . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 5.5. Loan Accounts; Statements of Account . . . . . . . . . . . 69
SECTION 5.6. Termination of Agreement . . . . . . . . . . . . . . . . . 69
SECTION 5.7. Making of Loans . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 5.8. Settlement Among Lenders . . . . . . . . . . . . . . . . . 72
SECTION 5.9 Notice of Conversion or Continuation
of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 5.10. Conversion of Continuation . . . . . . . . . . . . . . . . 78
SECTION 5.11. Duration of Interest Periods;
Maximum Number of Eurodollar Rate Loans;
Minimum Increments . . . . . . . . . . . . . . . . . . . . 78
SECTION 5.12. Changed Circumstances . . . . . . . . . . . . . . . . . . . 79
SECTION 5.13 Payments Not at End of Interest
Period; Failure to Borrow . . . . . . . . . . . . . . . . . 81
SECTION 5.14. Prepayment Fee . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 5.15. Mandatory Prepayments . . . . . . . . . . . . . . . . . . .
SECTION 5.16. Prepayment Fee . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1. Conditions Precedent to Revolving
Credit Loans . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 6.2. All Loans; Letters of Credit . . . . . . . . . . . . . . . 88
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1. Representations and Warranties . . . . . . . . . . . . . . 89
SECTION 7.2. Survival of Representations and
Warranties, Etc. . . . . . . . . . . . . . . . . . . . . . 104
ARTICLE 8
SECURITY INTEREST
SECTION 8.1. Security Interest . . . . . . . . . . . . . . . . . . . . . 106
SECTION 8.2. Continued Priority of Security Interest . . . . . . . . . . 107
ARTICLE 9
COLLATERAL COVENANTS
SECTION 9.1. Collection of Receivables . . . . . . . . . . . . . . . . . 110
SECTION 9.2. Verification and Notification . . . . . . . . . . . . . . . 111
SECTION 9.3. Disputes, Returns and Adjustments . . . . . . . . . . . . . 112
SECTION 9.4. Invoices . . . . . . . . . . . . . . . . . . . . . . . . . 112
SECTION 9.5. Delivery of Instruments . . . . . . . . . . . . . . . . . . 113
SECTION 9.6. Sales of Inventory . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.7. Ownership and Defense of Title . . . . . . . . . . . . . . 113
SECTION 9.8. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 113
SECTION 9.9. Location of Offices and Collateral . . . . . . . . . . . . 114
SECTION 9.10. Records Relating to Collateral . . . . . . . . . . . . . . 115
SECTION 9.11. Inspection . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 9.12. Information and Reports . . . . . . . . . . . . . . . . . . 116
SECTION 9.13. Power of Attorney . . . . . . . . . . . . . . . . . . . . . 117
SECTION 9.14. Additional Real Estate and Leases . . . . . . . . . . . . . 118
SECTION 9.15. Assignment of Claims Act . . . . . . . . . . . . . . . . . 118
ARTICLE 10
AFFIRMATIVE COVENANTS
SECTION 10.1. Preservation of Corporate Existence
and Similar Matters . . . . . . . . . . . . . . . . . . . . 119
SECTION 10.2. Compliance with Applicable Law . . . . . . . . . . . . . . 119
SECTION 10.3. Maintenance of Property . . . . . . . . . . . . . . . . . . 119
SECTION 10.4. Conduct of Business . . . . . . . . . . . . . . . . . . . . 120
SECTION 10.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 10.6. Payment of Taxes and Claims . . . . . . . . . . . . . . . . 120
SECTION 10.7. Accounting Methods and Financial Records . . . . . . . . . 120
SECTION 10.8. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 10.9. Hazardous Waste and Substances;
Environmental Requirements . . . . . . . . . . . . . . . . 121
ARTICLE 11
INFORMATION
SECTION 11.1. Financial Statements . . . . . . . . . . . . . . . . . . . 123
SECTION 11.2. Accountants' Certificate . . . . . . . . . . . . . . . . . 124
SECTION 11.3. Officer's Certificate . . . . . . . . . . . . . . . . . . . 124
SECTION 11.4. Copies of Other Reports . . . . . . . . . . . . . . . . . . 124
SECTION 11.5. Notice of Litigation and Other Matters . . . . . . . . . . 125
SECTION 11.6. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
SECTION 11.7. Accuracy of Information . . . . . . . . . . . . . . . . . . 127
SECTION 11.8. Revisions or Updates to Schedules . . . . . . . . . . . . . 127
SECTION 11.9. Subordinated Indebtedness Certificate . . . . . . . . . . . 127
ARTICLE 12
NEGATIVE COVENANTS
SECTION 12.1. Financial Ratios . . . . . . . . . . . . . . . . . . . . . 129
SECTION 12.2. Indebtedness for Money Borrowed . . . . . . . . . . . . . . 130
SECTION 12.3. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . 130
SECTION 12.4. Investments . . . . . . . . . . . . . . . . . . . . . . . . 130
SECTION 12.5. Capital Expenditures . . . . . . . . . . . . . . . . . . . 130
SECTION 12.6. Restricted Dividend Payments and
Purchases, Etc . . . . . . . . . . . . . . . . . . . . . . 130
SECTION 12.7. Consolidation, Merger, Sale or
Purchase of Assets, etc. . . . . . . . . . . . . . . . . . 130
SECTION 12.8. Transactions with Affiliates . . . . . . . . . . . . . . . 131
SECTION 12.9. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
SECTION 12.10. Capitalized Lease Obligations . . . . . . . . . . . . . . . 131
SECTION 12.11. Operating Leases . . . . . . . . . . . . . . . . . . . . . 131
SECTION 12.12. Real Estate Leases . . . . . . . . . . . . . . . . . . . . 131
SECTION 12.13. Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
SECTION 12.14. Sales and Leasebacks . . . . . . . . . . . . . . . . . . . 131
SECTION 12.15. Advances, Investments and Loans . . . . . . . . . . . . . . 132
SECTION 12.16. Subordinated Indebtedness . . . . . . . . . . . . . . . . . 132
SECTION 12.17. Intercompany Transactions . . . . . . . . . . . . . . . . . 132
SECTION 12.18. Management Fees . . . . . . . . . . . . . . . . . . . . . . 132
SECTION 12.19. Uncommitted Inventory . . . . . . . . . . . . . . . . . . .
ARTICLE 13
DEFAULT
SECTION 13.1. Events of Default . . . . . . . . . . . . . . . . . . . . . 133
SECTION 13.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 137
SECTION 13.3. Application of Proceeds . . . . . . . . . . . . . . . . . . 141
SECTION 13.4. Power of Attorney . . . . . . . . . . . . . . . . . . . . . 141
SECTION 13.5. Miscellaneous Provisions Concerning Remedies . . . . . . . 143
ARTICLE 14
ASSIGNMENTS
SECTION 14.1. Successors and Assigns; Participations . . . . . . . . . . 145
SECTION 14.2. Representation of Lenders . . . . . . . . . . . . . . . . . 148
ARTICLE 15 (15-A CO-AGENT)
AGENT
SECTION 15.1. Appointment of Agent . . . . . . . . . . . . . . . . . . . 149
SECTION 15.2. Delegation of Duties . . . . . . . . . . . . . . . . . . . 149
SECTION 15.3. Exculpatory Provisions . . . . . . . . . . . . . . . . . . 149
SECTION 15.4. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . 150
SECTION 15.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . 150
SECTION 15.6. Non-Reliance on Agent and Other Lenders . . . . . . . . . . 151
SECTION 15.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . 151
SECTION 15.8. Agent in Its Individual Capacity . . . . . . . . . . . . . 152
SECTION 15.9. Successor Agent . . . . . . . . . . . . . . . . . . . . . . 152
SECTION 15.10. Notices from Agent to Lenders . . . . . . . . . . . . . . . 153
ARTICLE 16
MISCELLANEOUS
SECTION 16.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 158
SECTION 16.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 159
SECTION 16.3. Stamp and Other Taxes . . . . . . . . . . . . . . . . . . . 161
SECTION 16.4. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 161
SECTION 16.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . 161
SECTION 16.6. Waiver of Rights . . . . . . . . . . . . . . . . . . . . . 162
SECTION 16.7. Consent to Advertising and Publicity . . . . . . . . . . . 163
SECTION 16.8. Reversal of Payments . . . . . . . . . . . . . . . . . . . 163
SECTION 16.9. Injunctive Relief . . . . . . . . . . . . . . . . . . . . . 163
SECTION 16.10. Accounting Matters . . . . . . . . . . . . . . . . . . . . 164
SECTION 16.11. Amendments . . . . . . . . . . . . . . . . . . . . . . . . 164
SECTION 16.12. Assignment . . . . . . . . . . . . . . . . . . . . . . . . 164
SECTION 16.13. Performance of Borrower's Duties . . . . . . . . . . . . . 166
SECTION 16.14. Indemnification . . . . . . . . . . . . . . . . . . . . . . 166
SECTION 16.15. All Powers Coupled with Interest . . . . . . . . . . . . . 166
SECTION 16.16. Survival . . . . . . . . . . . . . . . . . . . . . . . . . 167
SECTION 16.17. Titles and Captions . . . . . . . . . . . . . . . . . . . . 167
SECTION 16.18. Severability of Provisions . . . . . . . . . . . . . . . . 167
SECTION 16.19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 168
SECTION 16.20. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 168
SECTION 16.21. Reproduction of Documents . . . . . . . . . . . . . . . . . 168
SECTION 16.22. Term of Agreement . . . . . . . . . . . . . . . . . . . . . 168
SECTION 16.23. Increased Capital . . . . . . . . . . . . . . . . . . . . . 168
SECTION 16.24. Pro-Rata Participation . . . . . . . . . . . . . . . . . . 169
EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE . . . . . . . . . . . Omitted
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE . . . . . . . . . . Omitted
EXHIBIT C FORM OF REVOLVING CREDIT NOTE . . . . . . . . . . . . . Omitted
EXHIBIT D FORM OF SETTLEMENT REPORT . . . . . . . . . . . . . . . Omitted
EXHIBIT E FORM OF NOTICE OF BORROWING . . . . . . . . . . . . . . Omitted
EXHIBIT F FORM OF NOTICE OF CONVERSION OR CONTINUATION . . . . . Omitted
EXHIBIT G FORM OF OPINION OF COUNSEL FOR BORROWER . . . . . . . . Omitted
Schedule 1.1A Subsidiaries/Affiliates of
Major Tobacco Companies . . . . . . . . . . . . . . . . Omitted
Schedule 1.1B Permitted Investments . . . . . . . . . . . . . . . . . Omitted
Schedule 1.1C Permitted Liens . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(a) Organization . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(b) Capitalization . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(d) Subsidiaries; Ownership of Stock . . . . . . . . . . . Omitted
Schedule 7.1(f) Compliance with Laws . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(h) Governmental Approvals . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(i) Title to Properties . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(j) Liens . . . . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(k) Indebtedness and Guaranties . . . . . . . . . . . . . . Omitted
Schedule 7.1(l) Litigation . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(m) Tax Matters . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(q) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(u) Location of Offices and Receivables . . . . . . . . . . Omitted
Schedule 7.1(v) Location of Inventory . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(w) Equipment . . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(x) Real Estate . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(y) Corporate and Fictitious Names . . . . . . . . . . . . Omitted
Schedule 7.1(bb) Employee Relations . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(cc) Proprietary Rights . . . . . . . . . . . . . . . . . . Omitted
Schedule 7.1(dd) Trade Names . . . . . . . . . . . . . . . . . . . . . . Omitted
Schedule 10.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . Omitted
(1) This Table of Contents is included for reference purposes only and does not
constitute part of the Loan and Security Agreement.
LOAN AND SECURITY AGREEMENT
Dated as of May 2, 1995
STANDARD COMMERCIAL TOBACCO CO., INC., a North Carolina
corporation, the financial institutions party to this Agreement from
time to time, NATIONSBANK OF GEORGIA, N.A., a national banking
association, as agent for the Lenders (as hereinafter defined), and
FIRST UNION COMMERCIAL CORPORATION, as co-agent for such Lenders, agree
as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions For the purpose of this Agreement:
"Account Debtor" means a Person who is obligated on a
Receivable.
"Acquire" or "Acquisition", as applied to any Business
Unit or Investment, means the acquiring or acquisition of
such Business Unit or Investment by purchase, exchange,
issuance of stock or other securities, or by merger,
reorganization or any other method.
"Advance" means an Advance or a Loan by a Lender to the
Borrower pursuant to ARTICLE 2, and refers to a Prime Rate
Advance and a Eurodollar Rate Advance.
"Affiliate" means, with respect to a Person, (a) any
partner, officer, shareholder (if holding more than ten
percent (10%) of the outstanding shares of capital stock of
such Person), director, employee or managing agent of such
Person, (b) any other Person (other than a Subsidiary)
that, (i) directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, such given Person, (ii) directly or
indirectly beneficially owns or holds ten percent (10%) or
more of any class of voting stock or partnership or other
voting interest of such Person or any Subsidiary of such
Person, or (iii) ten percent (10%) or more of the voting
stock or partnership or other voting interest of which is
directly or indirectly beneficially owned or held by such
Person or a Subsidiary of such Person. The term "control"
means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting
securities or partnership or other voting interest, by
contract or otherwise.
"Agency Account" means an account of the Borrower
maintained by it with a Clearing Bank pursuant to an Agency
Account Agreement.
"Agency Account Agreement" means an agreement among the
Borrower, the Agent and a Clearing Bank, in form and
substance satisfactory to the Agent, concerning the
collection of payments which represent the proceeds of
Receivables or of any other Collateral.
"Agent" means NationsBank of Georgia, N.A., a national
banking association, and any successor agent appointed
pursuant to SECTION 15.9 hereof.
"Agents" means the Agent and the Co-Agent.
"Agent's Office" means the office of the Agent
specified in or determined in accordance with the
provisions of SECTION 16.1.
"Agreement" means and includes this Agreement,
including all Schedules, Exhibits and other attachments
hereto, and all amendments, modifications and supplements
hereto and thereto.
"Agreement Date" means the date as of which this
Agreement is dated.
"Applicable Law" means all applicable provisions of
constitutions, statutes, rules, regulations and orders of
all governmental bodies and of all orders and decrees of
all courts and arbitrators, including, without limitation,
Environmental Laws.
"Assignment and Acceptance" means an assignment and
acceptance in the form attached hereto as EXHIBIT A
assigning all or a portion of a Lender's interests, rights
and obligations under this Agreement pursuant to SECTION
14.1.
"Availability" means at any time (a) the Borrowing Base
at such time minus (b) the aggregate principal amount of
Revolving Credit Loans outstanding at such time.
"Benefit Plan" means an "employee pension benefit plan"
as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) in respect of which the Borrower or any
Related Company is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of
ERISA, including such plans as may be established after the
Agreement Date.
"Borrower" means Standard Commercial Tobacco Co., Inc.,
a North Carolina corporation, and its successors and
assigns.
"Borrowing Base" means at any time an amount equal to
the lesser of:
(a) the Revolving Credit Facility MINUS the
Regular Letter of Credit Reserve, and
(b) an amount equal to
(i) 85% (or such lesser percentage as the
Agent may determine from time to time in its
absolute discretion exercised in good faith)
of the face value of Eligible Receivables due
and owing at such time, PLUS
(ii) 60% (or such lesser percentage as the
Agent may determine from time to time in its
absolute discretion exercised in good faith)
of the lesser of cost determined on a specific
identity accounting basis and fair market
value of Eligible Committed Leaf Inventory
less Customer Advances relating thereto, net
of the Borrower's reserve for obsolescence,
at such time; provided, however, the foregoing
percentage shall be increased from 60% to 80%
from August 1 of a calendar year to April 30
of the following calendar year; PLUS
(iii) THE LESSER OF
(A) the sum of (1) 60% (or such lesser
percentage as the Agent may determine from
time to time in its absolute discretion
exercised in good faith) of the lesser of
cost determined on a specific identity
accounting basis and fair market value of
Eligible Uncommitted Leaf Inventory, net
of the Borrower's reserve for
obsolescence, at such time PLUS (2) 60%
(or such lesser percentage as the Agent
may determine from time to time in its
absolute discretion exercised in good
faith) of the lesser of cost determined on
a specific identity accounting basis and
fair market value of Eligible Cut Rag
Inventory, net of the Borrower's reserve
for obsolescence, at such time; AND
(B) $12,000,000, MINUS
(iv) the sum of
(A) the Regular Letter of Credit
Reserve, PLUS
(B) the JTI Letter of Credit Reserve, PLUS
(C) such other reserves as the Agent
may establish from time to time in its
absolute discretion exercised in good
faith.
The Borrowing Base shall not include any assets of WAA.
"Borrowing Base Certificate" means a certificate in the
form attached hereto as EXHIBIT B (as such form is modified from
time to time by the Agent).
"Business Day" means (i) for all purposes other than as
set forth in CLAUSE (II) below, any day other than a Saturday,
Sunday or legal holiday on which banks in Atlanta, Georgia are
not open for the conduct of a substantial part of their
commercial banking business, and (ii) with respect to all
notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Rate Advances, any day
that is a Business Day described in CLAUSE (I) above and is also
a day of trading by and between banks dealing in Dollar deposits
in the applicable interbank market.
"Business Unit" means the assets constituting the business
or a division or operating unit thereof of any Person.
"Capital Expenditures" means, with respect to any Person,
all expenditures made and liabilities incurred for the
acquisition of assets (other than assets which constitute a
Business Unit) which are not, in accordance with GAAP, treated
as expense items for such Person in the year made or incurred as
a prepaid expense applicable to a future year or years.
"Capitalized Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with
GAAP.
"Capitalized Lease Obligation" means Indebtedness
represented by obligations under a Capitalized Lease, and the
amount of such Indebtedness shall be the capitalized amount of
such obligations determined in accordance with GAAP.
"Cash Collateral" means collateral consisting of cash or
Cash Equivalents on which the Agent, for the benefit of itself
as Agent and the Lenders, has a first priority Lien.
"Cash Equivalents" means
(a) marketable direct obligations issued or
unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by
the full faith and credit of the United States, in each
case maturing within one year from the date of
acquisition thereof;
(b) commercial paper maturing no more than one year
from the date issued and, at the time of acquisition
thereof, having a rating of at least A-1 from Standard &
Poor's Corporation or at least P-1 from Moody's Investors
Service, Inc.;
(c) certificates of deposit or bankers' acceptances
issued in Dollar denominations and maturing within one
year from the date of issuance thereof issued by any
commercial bank organized under the laws of the United
States of America or any state thereof or the District of
Columbia having a combined capital and surplus of not
less than $100,000,000 and, unless issued by the Agent
or a Lender, not subject to set-off or offset rights in
favor of such bank arising from any banking relationship
with such bank; and
(d) repurchase agreements in form and substance and
for amounts satisfactory to the Agent.
"Clearing Bank" means any banking institution with which
an Agency Account has been established pursuant to an Agency
Account Agreement.
"Co-Agent" means First Union Commercial Corporation.
"Collateral" means and includes all of the Borrower's
right, title and interest in and to each of the following,
wherever located and whether now or hereafter existing or now
owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Contract Rights,
(d) all General Intangibles,
(e) all goods and other property, whether or not delivered,
(i) the sale or lease of which gives or
purports to give rise to any Receivable, including,
but not limited to, all merchandise returned or
rejected by or repossessed from customers, or
(ii) securing any Receivable,
including, without limitation, all rights as an unpaid vendor or lienor
(including, without limitation, stoppage in transit, replevin and
reclamation) with respect to such goods and other property,
(f) all mortgages, deeds to secure debt and deeds of
trust on real or personal property, guaranties, leases,
security agreements, and other agreements and property
which secure or relate to any Receivable or other
Collateral, or are acquired for the purpose of securing
and enforcing any item thereof,
(g) all documents of title, policies and
certificates of insurance, securities, chattel paper and
other documents and instruments evidencing or pertaining
to any and all items of Collateral,
(h) all files, correspondence, computer programs,
tapes, discs and related data processing software which
contain information identifying or pertaining to any of
the Receivables or any Account Debtor, or showing the
amounts thereof or payments thereon or otherwise
necessary or helpful in the realization thereon or the
collection thereof,
(i) all cash deposited with the Agent or any Lender
or any Affiliate of the Agent or any Lender or which the
Agent, for the benefit of the Lenders, or any Lender or
such Affiliate is entitled to retain or otherwise possess
as collateral pursuant to the provisions of this
Agreement or any of the Security Documents or any
agreement relating to any Letters of Credit,
(j) any and all products and proceeds of the
foregoing (including, but not limited to, any claim to
any item referred to in this definition, and any claim
against any third party for loss of, damage to or
destruction of any or all of, the Collateral or for
proceeds payable under, or unearned premiums with respect
to, policies of insurance) in whatever form, including,
but not limited to, cash, negotiable instruments and
other instruments for the payment of money, chattel
paper, security agreements and other documents.
"Commitment" means, as to each Lender, the amount
set forth opposite such Lender's name on the signature
pages hereof, representing such Lender's obligation, upon
and subject to the terms and conditions of this Agreement
(including the applicable provisions of SECTION 14.1), to
make Revolving Credit Loans and to purchase
participations in Letters of Credit or, from and after
the date hereof, in the Register (as defined in SECTION
14.1) representing such Lender's obligation to make
Revolving Credit Loans and to purchase participations in
Letters of Credit.
"Commitment Percentage" means, as to any Lender, the
percentage of the Total Commitment obtained by dividing
such Lender's Commitment by the Total Commitment.
"Committed Leaf Inventory" means the aggregate book
value of all Leaf Inventory owned by the Borrower which
has been committed for sale to a customer of the Borrower
(for purposes of the foregoing definition, the term
"committed for sale" shall mean subject to a bona fide
arms-length verbal or written contract for sale the terms
of which the Borrower can reasonably be expected to
satisfy).
"Consolidated", when used with reference to Current
Assets, Current Liabilities, EBITDA, Interest Expense,
Indebtedness, Long-Term Liabilities, Liabilities, Net
Income, Net Loss or Tangible Net Worth, shall mean the
sum of Current Assets, Current Liabilities, EBITDA,
Interest Expenses, Indebtedness, Long-Term Liabilities,
Liabilities, Net Incomes, Net Losses or Tangible Net
Worths, as the case may be, of the Borrower and its
Consolidated Subsidiaries, as consolidated after the
elimination of intercompany items and, in the case of Net
Income and Tangible Net Worth, after appropriate
deductions for any minority interests in any
Subsidiaries, and, when used with reference to such
accounts of any other Person, shall mean the sum of such
accounts of such Person and its Consolidated Subsidiaries
as so modified.
"Consolidated Subsidiaries" means, as to the
Borrower, the Subsidiaries of the Borrower whose accounts
are at the time in question, in accordance with GAAP and
pursuant to the written consent of the Required Lenders,
which consent may be withheld in their absolute
discretion conditioned upon, inter alia, the execution
and delivery of guaranties, security agreements,
mortgages and other documents required by the Required
Lenders in their absolute discretion, consolidated with
those of the Borrower; provided, however, CRES Tobacco
Company, Inc. shall not be classified as a "Consoldiated
Subsidiary" of Borrower for purposes of this Agreement.
"Contaminant" means any waste, pollutant, hazardous
substance, toxic substance, hazardous waste, special
waste, petroleum or petroleum-derived substance or waste,
or any constituent of any such substance or waste.
"Contract Rights" means any rights under contracts
not yet earned by performance and not evidenced by an
instrument or chattel paper.
"Controlled Disbursement Account" means one or more
accounts maintained by and in the name of the Borrower
with a Disbursing Bank for the purposes of disbursing
Revolving Credit Loan proceeds and amounts deposited
thereto.
"Copyrights" means and includes, in each case whether
now existing or hereafter arising, all of the Borrower's
right, title and interest in and to
(a) all copyrights, rights and interests in copyrights,
works protectable by copyright, copyright registrations and
copyright applications;
(b) all renewals of any of the foregoing;
(c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing,
including, without limitation, damages or payments for past
or future infringements of any of the foregoing;
(d) the right to sue for past, present and future
infringements of any of the foregoing; and
(e) all rights corresponding to any of the foregoing
throughout the world.
"Current Assets" means, with respect to any Person,
the aggregate amount of assets of such Person which
should properly be classified as current assets in
accordance with GAAP, after deducting adequate reserves
in each case where a reserve is appropriate in accordance
with GAAP.
"Current Liabilities" means, with respect to any
Person, the aggregate amount of all Liabilities of such
Person which should properly be classified as current
liabilities in accordance with GAAP.
"Current Maturities" means, when used in connection
with Long-Term Liabilities, as of any date of determina-
tion, the principal amount of such Liabilities coming due
on such date or during the twelve-month period following
such date in accordance with the terms of any instrument
or agreement evidencing such Liabilities or relating
thereto; provided that for the purpose of this
definition, Long-Term Liabilities shall not include any
Liability that is by the terms of the instrument
evidencing such Liability or by the terms of an agreement
among the Borrower, the holder of such Long-Term
Liability and the Agent expressly subordinate to the
Secured Obligations on terms satisfactory to the Agent.
"Customer Advances" means amounts advanced to the
Borrower by customers of the Borrower in connection with
the purchase of Leaf Tobacco by such customer provided
the repayment obligation of the Borrower for such
advanced amounts is not backed by a letter of credit
issued on the application of the Borrower.
"Cut Rag Inventory" means the aggregate book value of
all tobacco inventory of the Borrower which has been or
is designed to be blended and cut into fine slivers that
can be introduced into tobacco products of customers of
the Borrower.
"Default" means any of the events specified in
SECTION 13.1 which with the passage of time or giving of
notice or both would constitute an Event of Default.
"Default Margin" means 3.0%.
"Disbursing Bank" means any commercial bank with
which a Controlled Disbursement Account is maintained
after the Effective Date.
"Dollar" and "$" means freely transferable United
States dollars.
"EBITDA" means for the period in question, Net Income plus
Required Interest Expense, income taxes, depreciation and
amortization.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"Effective Date" means the later of:
(a) the Agreement Date, and
(b) the first date on which all of the conditions set
forth in Article 6 shall have been fulfilled.
"Effective Interest Rate" means each rate of interest
per annum on the Revolving Credit Loans in effect from
time to time pursuant to the provisions of SECTIONS
5.1(a) and (b).
"Eligible Assignee" means (i) a commercial bank
organized under the laws of the United States, or any
State thereof, having total assets in excess of
$1,000,000,000 or any commercial finance or asset based
lending affiliate of any such commercial bank; (ii) a
savings and loan association or savings bank organized
under the laws of the United States, or any State
thereof, having a net worth of at least $250,000,000
calculated in accordance with GAAP; and (iii) any Lender
listed on the signature page of this Agreement; provided
in each case that the representation contained in SECTION
14.1(c)(i) hereof shall be applicable with respect to
such institution or Lender.
"Eligible Cut Rag Inventory" means the aggregate book
value of all Cut Rag Inventory owned by the Borrower, but
excluding in any event (a) Cut Rag Inventory which is not
subject to a perfected lien in favor of the Agent or
which is subject to a lien or encumbrance other than a
Permitted Lien, (b) Cut Rag Inventory which is not in
good condition or fails to meet standards for sale or use
imposed by governmental agencies, departments or
divisions having regulatory authority over such goods,
(c) Cut Rag Inventory which is not usable or salable at
prices approximating cost in the ordinary course of
business of the Borrower (including without duplication
the amount of any reserves for obsolescence, unsalability
or decline in value), (d) Cut Rag Inventory which is not
located in the United States and (e) Cut Rag Inventory
otherwise determined by the Agent to be ineligible in its
sole discretion exercised in good faith.
"Eligible Committed Leaf Inventory" means the
aggregate book value of all Committed Leaf Inventory
owned by the Borrower, but excluding in any event (a)
Committed Leaf Inventory which is not subject to a
perfected lien in favor of the Agent or which is subject
to a lien or encumbrance other than a Permitted Lien, (b)
Committed Leaf Inventory which is not in good condition
or fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having
regulatory authority over such goods, (c) Committed Leaf
Inventory which is not usable or salable at prices
approximating cost in the ordinary course of business of
the Borrower (including without duplication the amount of
any reserves for obsolescence, unsalability or decline in
value), (d) Committed Leaf Inventory which is not located
in the United States and (e) Committed Leaf Inventory
otherwise determined by the Agent to be ineligible in its
sole discretion exercised in good faith.
"Eligible Receivables" means the aggregate face value
of all Receivables owned by or owing to the Borrower, but
excluding in any event (a) Receivables subject to a lien
or encumbrance to any Person, (b) Receivables which fail
to represent a completed bona fide transaction or with
respect to which further acts are required on the part of
the Borrower to make such Receivable payable, (c)
Receivables which are more than 60 days past due, (d)
Receivables which are more than 150 days from the date of
sale, (e) Receivables owing to the Borrower from an
Account Debtor if more than 50% of such Receivables are
more than 60 days past due and the Agent in its sole
discretion (exercised in good faith) elects to exclude
all of such Receivables, (f) Receivables evidenced by
notes, chattel paper or other instruments, unless such
notes, chattel paper or instruments have been delivered
to and are in the possession of the Agent, (g)
Receivables the account debtor with respect to which is
not solvent or is the subject of any bankruptcy or
insolvency proceedings of any kind, (h) any Receivable
due from an account debtor organized under the laws of a
country other than the United States except for (i) any
Receivable due from the Subsidiaries or Affiliates listed
on Schedule 1.1A (or any update of such schedule pursuant
to SECTION 11.8) of British American Tobacco, RJR,
Phillip Morris, Imperial Tobacco, Rothman's
International, Reemtsma or American Brands, (ii) any
Receivable due from a tobacco monopoly owned by a
government (other than the governments of Thailand, Egypt
and Turkey) so long as either (A) such government has a
long-term debt rating of AA- or better by S&P or Aa3 or
better from Moody's or (B) such Receivable is backed by a
letter of credit confirmed by a major United States
domestic bank with a long-term credit rating of at least
AA or better by S&P or Aa2 or better by Moody's, (iii)
Receivables due from the tobacco monopoly owned by the
government of Thailand so long as the outstanding
principal balance of such Receivables at any time
outstanding does not exceed $2,200,000 and so long as no
presentment for payment has been dishonored by any entity
obligated with respect thereto, (iv) Receivables due from
the tobacco monopoly owned by the government of Turkey so
long as the outstanding principal balance of such
Receivables at any time outstanding does not exceed
$6,000,000 and so long as no presentment for payment has
been dishonored by any entity obligated with respect
thereto, (v) Receivables due from the tobacco monopoly
owned by the government of Egypt so long as the
outstanding principal balance of such Receivables at any
time outstanding does not exceed $5,000,000 and so long
as no presentment for payment has been dishonored by any
entity obligated with respect thereto, (vi) Receivables
due from the tobacco monopoly owned by the government of
Italy so long as the outstanding principal balance of
such Receivables at any time outstanding does not exceed
$10,000,000 and so long as no presentment for payment has
been dishonored by any entity obligated with respect
thereto, (vii) Receivables due from the tobacco monopoly
owned by the government of South Korea so long as the
outstanding principal balance of such Receivables at any
time outstanding does not exceed $3,000,000 and so long
as no presentment for payment has been dishonored by any
entity obligated with respect thereto or (viii)
Receivables due from the tobacco monopoly owned by the
government of Taiwan so long as the outstanding principal
balance of such Receivables at any time outstanding does
not exceed $3,000,000 and so long as no presentment for
payment has been dishonored by any entity obligated with
respect thereto, (i) Receivables which are presently, or
may be in the future, contingent or subject to offset,
deduction, counterclaim, dispute or other defense to
payment, (j) Receivables arising out of transactions with
Subsidiaries or Affiliates, (k) Receivables the goods
giving rise to which were subject at the time of sale, to
any lien or encumbrance and (l) Receivables otherwise
determined by the Agent to be ineligible in its sole
discretion exercised in good faith.
"Eligible Uncommitted Leaf Inventory" means the
aggregate book value of all Uncommitted Leaf Inventory
owned by the Borrower, but excluding in any event (a)
Uncommitted Leaf Inventory which is not subject to a
perfected lien in favor of the Agent or which is subject
to a lien or encumbrance other than a Permitted Lien, (b)
Uncommitted Leaf Inventory which is not in good condition
or fails to meet standards for sale or use imposed by
governmental agencies, departments or divisions having
regulatory authority over such goods, (c) Uncommitted
Leaf Inventory which is not usable or salable at prices
approximating cost in the ordinary course of business
of the Borrower (including without duplication the amount
of any reserves for obsolescence, unsalability or decline
in value), (d) Uncommitted Leaf Inventory which is not
located in the United States and (e) Uncommitted Leaf
Inventory otherwise determined by the Agent to be
ineligible in its sole discretion exercised in good
faith.
"Environmental Laws" means all federal, state, local
and foreign laws now or hereafter in effect relating to
pollution or protection of the environment, including
laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants,
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, removal, transport, or handling of pollutants,
Contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered,
promulgated or approved thereunder; such laws and
regulations include but are not limited to the Resource
Conservation and Recovery Act, 42 U.S.C.
(Section)(Section) 6901 et seq., as amended; the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (Section)(Section) 6901 et seq.,
as amended; the Toxic Substances Control Act, 15 U.S.C.
(Section)(Section) 2601 et seq., as amended; the Clean
Air Act, 46 U.S.C. (Section)(Section) 7401 et seq., as
amended; and state and federal lien and environmental
cleanup programs.
"Environmental Lien" means a Lien in favor of any
governmental entity for (a) any liability under
Environmental Laws or (b) damages arising from, or
costs incurred by such governmental entity in response
to, a Release or threatened Release of Contaminant into
the environment.
"Equipment" means and includes, all machinery,
apparatus, equipment, motor vehicles, tractors, trailers,
rolling stock, fittings, fixtures and other tangible
personal property (other than Inventory) of every kind
and description used in the Borrower's business
operations or owned by the Borrower or in which the
Borrower has an interest, and all parts, accessories and
special tools and all increases and accessions thereto
and substitutions and replacements therefor.
"Eurodollar Rate" means, with respect to any Interest
Period for any Eurodollar Rate Advance, a per annum
interest rate determined pursuant to the following
formula:
Eurodollar Rate = Interest Offered Rate
1 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of
the effective date of any change in the Eurodollar
Reserve Percentage.
"Eurodollar Rate Advance" means an Advance that bears
interest based upon the Eurodollar Rate.
"Eurodollar Reserve Percentage", means, for any day,
that percentage (expressed as a decimal) which is in
effect from time to time under Regulation D of the Board
of Governors of the Federal Reserve System, as such
regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement
(including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with
respect to "Eurocurrency liabilities" as that term is
defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which
the interest rate of Eurodollar Rate Advances is
determined), whether or not a Lender has any Eurocurrency
liabilities subject to such reserve requirement at that
time. Eurodollar Loans shall be deemed to constitute
Eurocurrency liabilities and as such shall be deemed
subject to reserve requirements without benefits of
credits for proration, exceptions or offsets.
"Event of Default" means any of the events specified
in SECTION 13.1, provided that any requirement for notice
or lapse of time or any other condition has been
satisfied.
"Federal Funds Effective Rate" means, for any period,
a fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates
on overnight federal funds transactions with members of
the Federal Reserve system arranged by federal funds
brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of Atlanta, or, if such rate
is not so published for any day which is a Business Day,
the average of the quotations for such day on such
transactions received by NationsBank from three federal
funds brokers of recognized standing selected by
NationsBank.
"Financial Officer" means the chief financial
officer, vice president - finance, treasurer, assistant
treasurer or controller of the Borrower.
"Financing Statements" means any and all Uniform
Commercial Code financing statements, in form and
substance satisfactory to the Agent, executed and
delivered by the Borrower and WAA to the Agent, naming
the Agent, for the benefit of the Lenders, as secured
party and the Borrower or WAA (as the case may be) as
debtor, in connection with this Agreement.
"GAAP" means generally accepted accounting principles
consistently applied and maintained throughout the period
indicated and, when used with reference to the Borrower
or any Subsidiary, consistent with the prior financial
practice of the Borrower, as reflected on the financial
statements referred to in SECTION 7.1(o); provided,
however, that, in the event that changes shall be
mandated by the Financial Accounting Standards Board or
any similar accounting authority of comparable standing,
or shall be recommended by the Borrower's independent
public accountants, such changes shall be included in
GAAP as applicable to the Borrower only from and after
such date as the Borrower, the Required Lenders and the
Agent shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial
covenants set forth in ARTICLE 12.
"General Intangibles" means all of the Borrower's now
owned or hereafter acquired general intangibles, choses
in action and causes of action and all other intangible
personal property of the Borrower of every kind and
nature (other than Accounts), including, without
limitation, all Proprietary Rights, corporate or other
business records, inventions, designs, blueprints, plans,
specifications, goodwill, computer software, customer
lists, registrations, licenses, franchises, tax refund
claims, reversions or any rights thereto and any other
amounts payable to the Borrower from any Plan or other
employee benefit plan, rights and claims against carriers
and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any
proceeds thereof, proceeds of insurance covering the
lives of key employees on which the Borrower is
beneficiary and any letter of credit, guarantee, claims,
security interest or other security held by or granted to
the Borrower to secure payment by an Account Debtor of
any of the Accounts.
"Governmental Approvals" means all authorizations,
consents, approvals, licenses and exemptions of,
registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local or
foreign national or provincial and all agencies
thereof.
"Guarantors" means a collective reference to the
Parent Guarantor, WAA and the Subsidiary Guarantors, and
their respective successors and assigns.
"Guaranty", "Guaranteed" or to "Guarantee" as applied
to any obligation of another Person shall mean and
include
(a) a guaranty (other than by endorsement of
negotiable instruments for collection in the ordinary
course of business), directly or indirectly, in any
manner, of any part or all of such obligation of such
other Person, and
(b) an agreement, direct or indirect,
contingent or otherwise, and whether or not
constituting a guaranty, the practical effect of
which is to assure the payment or performance (or
payment of damages in the event of nonperformance) of
any part or all of such obligation of such other
Person whether by
(i) the purchase of securities or
obligations,
(ii) the purchase, sale or lease (as lessee
or lessor) of property or the purchase or sale
of services primarily for the purpose of
enabling the obligor with respect to such
obligation to make any payment or performance
(or payment of damages in the event of
nonperformance) of or on account of any part
or all of such obligation, or to assure the
owner of such obligation against loss,
(iii) the supplying of funds to or in any
other manner investing in the obligor with
respect to such obligation,
(iv) repayment of amounts drawn down by
beneficiaries of letters of credit, or
(v) the supplying of funds to or investing
in a Person on account of all or any part of
such Person's obligation under a Guaranty of
any obligation or indemnifying or holding
harmless, in any way, such Person against any
part or all of such obligation.
"Guaranty Agreements" means the guaranty agreements
given by the Guarantors in favor of the Agent and the
Lenders in connection herewith to secure the obligations
of the Borrower hereunder.
"Indebtedness" of any Person means, without
duplication, all Liabilities of such Person, and to the
extent not otherwise included in Liabilities, the
following:
(a) all obligations for Money Borrowed or for
the deferred purchase price of property or services,
(b) all obligations (including, during the
noncancellable term of any lease in the nature of a
title retention agreement, all future payment
obligations under such lease discounted to their
present value in accordance with GAAP) secured by any
Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such
Person,
(c) all obligations of other Persons which
such Person has Guaranteed, including, but not
limited to, all obligations of such Person consisting
of recourse liability with respect to accounts
receivable sold or otherwise disposed of by such
Person,
(d) all obligations of such Person in respect
of Interest Rate Protection Agreements, and
(e) in the case of the Borrower (without
duplication) all obligations under the Revolving Credit
Loans.
"Interbank Offered Rate" means, with respect to any
Eurodollar Rate Advance for the Interest Period
applicable thereto, the average (rounded upward to the
nearest one-sixteenth (1/16) of one percent) per annum
rate of interest determined by the Agent (each such
determination to be conclusive and binding) as of two
Business Days prior to the first day of such Interest
Period from Telerate Page 3750 as the effective rate at
which deposits in immediately available funds in Dollars
are being offered or quoted to major banks in the
applicable interbank market for Eurodollar deposits for a
term comparable to such Interest Period and in the amount
of the Loan of which such Eurodollar Rate Advance is a
part. If such rate is unavailable on such service, then
such rate may be determined by the Agent from any other
interest rate reporting service of recognized standing
that the Agent shall select.
"Interest Payment Date" means the first day of each
calendar month commencing on May 1, 1995 and continuing
thereafter until the Secured Obligations have been
irrevocably paid in full.
"Interest Period" means with respect to each
Eurodollar Rate Advance, the period commencing on the
date of the making or continuation of or conversion to
such Eurodollar Rate Advance and ending one, two or three
months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing or Notice of Conversion or
Continuation; PROVIDED, that:
(i) any Interest Period that would otherwise
end on a day that is not a Business Day shall, subject to
the provisions of CLAUSE (iii) below, be extended to the
next succeeding Business Day unless such Business Day
falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to CLAUSE (iii) below, end on the last Business
Day of a calendar month;
(iii) any Interest Period that would otherwise
end after the Termination Date shall end on the
Termination Date; and
(iv) notwithstanding CLAUSE (iii) above, no
Interest Period shall have a duration of less than one
month and if any applicable Interest Period would be for
a shorter period, such Interest Period shall not be
available.
"Interest Rate Protection Agreement" shall mean an
interest rate swap, cap or collar agreement or similar
arrangement between any Person and a financial
institution providing for the transfer or mitigation of
interest risks either generally or under specific
contingencies.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended from time to time.
"Inventory" means all inventory as such term is
defined in the Uniform Commercial Code and shall include,
without limitation,
(a) all goods intended for sale or lease by the
Borrower, or for display or demonstration, including,
without limitation, tobacco and other tobacco related
products intended for sale by the Borrower to its
customers,
(b) all work in process,
(c) all raw materials and other materials and
supplies of every nature and description used or
which might be used in connection with the
manufacture, packing, shipping, advertising, selling,
leasing or furnishing of such goods or otherwise used
or consumed in the Borrower's business, and
(d) all documents evidencing and general
intangibles relating to any of the foregoing.
"Investment" means, with respect to any Person:
(a) the acquisition or ownership by such Person
of any share of capital stock, evidence of
Indebtedness or other security issued by any other
Person,
(b) any loan, advance or extension of credit to,
or contribution to the capital of, any other Person,
excluding advances to employees in the ordinary
course of business for business expenses,
(c) any Guaranty of the obligations of any other
Person,
(d) any other investment (other than the Acquisition
of a Business Unit) in any other Person, and
(e) any commitment or option to make any of the
investments listed in clauses (a) through (d) above
if, in the case of an option, the consideration
therefor exceeds $25,000.
"IRS" means the Internal Revenue Service.
"JTI" means Japan Tobacco IMEX Co., Ltd.
"JTI Letter of Credit" means the letters of credit
issued by NationsBank to JTI for the account of the
Borrower pursuant to ARTICLE 4 for the purpose of
guaranteeing the Borrower's performance under leaf
tobacco import contracts between the Borrower and JTI.
"JTI Letter of Credit Amount" means, with respect to
the JTI Letter of Credit, the aggregate maximum amount at
any time available for drawing under the JTI Letter of
Credit.
"JTI Letter of Credit Facility" means $50,000,000.00.
"JTI Letter of Credit Obligations" means, at any
time, the sum of (a) the JTI Reimbursement Obligations of
the Borrower at such time, plus (b) the aggregate JTI
Letter of Credit Amount of the JTI Letter of Credit
outstanding at such time.
"JTI Letter of Credit Reserve" means, at any time,
the aggregate JTI Letter of Credit Obligations at such
time, other than JTI Letter of Credit Obligations that
are fully secured by Cash Collateral.
"JTI Reimbursement Agreement" means, with respect to
the JTI Letter of Credit, such form of application
therefor and form of reimbursement agreement therefor
(whether in a single document or several documents) as
NationsBank may employ in the ordinary course of business
for its own account, with such modifications thereto as
may be agreed upon by NationsBank and the Borrower,
provided that such application and agreement and any
modifications thereto are not inconsistent with the terms
of this Agreement.
"JTI Reimbursement Obligations" means the
reimbursement or repayment obligations of the Borrower to
NationsBank pursuant to SECTION 4.6 or pursuant to a JTI
Reimbursement Agreement with respect to amounts that have
been drawn under the JTI Letter of Credit.
"Kehaya Debt" means the indebtedness of the Parent
Guarantor to the Kehaya Group having a current principal
balance of approximately $3,700,000, such indebtedness
having been acquired by the Kehaya Group from various
insurance company lenders of the Parent Guarantor.
"Kehaya Group" means Ery W. Kehaya.
"Leaf Inventory" means any form of leaf tobacco owned
by the Borrower for future sale and/or processing.
"Lender" means at any time any financial institution
party to this agreement at such time, including any such
Person becoming a party hereto pursuant to the provisions
of ARTICLE 14, and its successors and assigns, and
"Lenders" means at any time all of the financial
institutions party to this Agreement at such time,
including any such Persons becoming parties hereto
pursuant to the provisions of ARTICLE 14, and their
successors and assigns.
"Letter of Credit Amounts" means the sum of the
Regular Letter of Credit Amount and the JTI Letter of Credit
Amount.
"Letters of Credit" shall mean a collective reference
to the Regular Letters of Credit and the JTI Letters of Credit.
"Liabilities" of any Person means all items (except
for items of capital stock, additional paid-in capital or
retained earnings, or of general contingency or deferred
tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as at
the date as of which Liabilities are to be determined.
"Lien" as applied to the property of any Person means:
(a) any mortgage, deed to secure debt, deed of
trust, lien, pledge, charge, lease constituting a
Capitalized Lease Obligation, conditional sale or
other title retention agreement, or other security
interest, security title or encumbrance of any kind
in respect of any property of such Person, or upon
the income or profits therefrom,
(b) any arrangement, express or implied, under
which any property of such Person is transferred,
sequestered or otherwise identified for the purpose
of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to
the payment of the general, unsecured creditors of
such Person,
(c) any Indebtedness which is unpaid more than
30 days after the same shall have become due and
payable and which if unpaid might by law (including,
but not limited to, bankruptcy and insolvency laws),
or otherwise, be given any priority whatsoever over
the claims of general unsecured creditors of such
Person, and
(d) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code
or its equivalent in any jurisdiction, excluding
informational financing statements relating to
property leased by the Borrower.
"Loan" means any Revolving Credit Loan, as well as all such
loans collectively, as the context requires.
"Loan Account" and "Loan Accounts" shall have the meanings
ascribed thereto in Section 5.5.
"Loan Documents" means collectively this Agreement,
the Notes, the Security Documents and each other
instrument, agreement or document executed by the
Borrower, any Guarantor or any Affiliate or Subsidiary of
the Borrower or any Guarantor in connection with this
Agreement whether prior to, on or after the Effective
Date and each other instrument, agreement or document
referred to herein or contemplated hereby.
"Loan Year" means each period of twelve (12)
consecutive months commencing on the Effective Date and
on each anniversary thereof.
"Lockbox" means each U.S. Post Office Box specified in a
Lockbox Agreement.
"Lockbox Agreement" means each agreement between the
Borrower and a Clearing Bank concerning the establish-
ment of a Lockbox for the collection of Receivables.
"Long-Term Liabilities" means, with respect to any
Person, the aggregate amount of all Liabilities of such
Person other than Current Liabilities.
"Margin Stock" means margin stock as defined in
SECTION 221.1(h) of Regulation U, as the same may be
amended or supplemented from time to time.
"Materially Adverse Effect" means, with respect to
any Person, a materially adverse effect upon such
Person's business, assets, liabilities, condition
(financial or otherwise), results of operations or
business prospects, and in addition (i) with respect to
the Borrower, means a materially adverse effect upon the
Borrower's ability to perform its obligations hereunder
or under any other Loan Document to which it is a party
or upon the enforceability of such obligations against
the Borrower and (ii) with respect to any Guarantor,
means a materially adverse effect upon the Guarantor's
ability to perform its obligations under any Loan
Document to which it is a party or upon the
enforceability of such obligations against such
Guarantor.
"Minimum Commitment" means, on any date of
determination thereof, an amount equal to the Total
Commitment in effect on such date multiplied times and
rounded to the nearest integral multiple of $1,000,000,
provided that amounts that are equidistant to two
integral multiples of $1,000,000 shall be rounded
upwards.
"Money Borrowed" means, as applied to Indebtedness,
(a) Indebtedness for money borrowed,
(b) Indebtedness, whether or not in any such
case the same was for money borrowed,
(i) represented by notes payable, and
drafts accepted, that represent extensions
of credit,
(ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments,
or
(iii) upon which interest charges are
customarily paid or that was issued or assumed
as full or partial payment for property (other
than trade credit that is incurred in the
ordinary course of business),
(c) Indebtedness that constitutes a Capitalized
Lease Obligation, and
(d) Indebtedness that is such by virtue of
clause (c) of the definition thereof, but only to the
extent that the obligations Guaranteed are
obligations that would constitute Indebtedness for
Money Borrowed.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which the
Borrower or a Related Company is required to contribute
or has contributed within the immediately preceding six
(6) years.
"NationsBank" means NationsBank of Georgia, N.A., and
its successors and assigns.
"NationsBank (Carolinas)" means NationsBank, N.A.
(Carolinas), and its successors and assigns.
"NationsBank (Carolinas) Debt" means the indebtedness
of the Parent Guarantor to NationsBank (Carolinas) having
a current principal balance of approximately $5,000,000
and the indebtedness of the W.A. Adams Company Employee
Stock Ownership Plan Trust to NationsBank (Carolinas)
having a current principal balance of approximately
$7,000,000.
"Net Amount" means, with respect to any Investments
made by any Person, the gross amount of all such Invest-
ments minus the aggregate amount of all cash received and
the fair value, at the time of receipt by such Person, of
all property received as payments of principal or
premiums, returns of capital, liquidating dividends or
distributions, proceeds of sale or other dispositions
with respect to such Investments.
"Net Income" or "Net Loss" means, as applied to any
Person, the net income (or net loss) of such Person for
the period in question after giving effect to deduction
of or provision for all operating expenses including
management fees, all taxes and reserves (including
reserves for deferred taxes) and all other proper
deductions, all determined in accordance with GAAP,
provided that there shall be excluded:
(a) the net income (or net loss) of any Person
accrued prior to the date it becomes a Subsidiary of, or
is merged into or consolidated with, the Person whose Net
Income is being determined or a Subsidiary of such
Person,
(b) the net income (or net loss) of any Person
in which the Person whose Net Income is being determined
or any Subsidiary of such Person has an ownership
interest, except, in the case of net income, to the
extent that any such income has actually been received by
such Person or such Subsidiary in the form of cash
dividends or similar distributions,
(c) any restoration of any contingency reserve,
except to the extent that provision for such reserve was
made out of income during such period,
(d) any net gains or losses on the sale or other
disposition, not in the ordinary course of business, of
Investments, Business Units and other capital assets,
provided that there shall also be excluded any related
charges for taxes thereon,
(e) any net gain arising from the collection of
the proceeds of any insurance policy,
(f) any write-up of any asset, and
(g) any other extraordinary item.
"Net Outstandings" of any Lender means, at any time,
the sum of (a) all amounts paid by such Lender (other
than pursuant to SECTION 15.7) to the Agent in respect of
Revolving Credit Loans or otherwise under this Agreement,
minus (b) all amounts paid by the Agent to such Lender
which are received by the Agent and which, pursuant to
this Agreement, are paid over to such Lender for
application in reduction of the outstanding principal
balance of the Revolving Credit Loans.
"Net Worth" means, with respect to any Person, such
Person's total shareholder's equity (including capital
stock, additional paid-in capital and retained earnings,
after deducting treasury stock) which would appear as
such on a balance sheet of such Person prepared in
accordance with GAAP.
"Non-Ratable Loan" means a Revolving Credit Loan made
by NationsBank in accordance with the provisions of
SECTION 5.8(b).
"Note" means any of the Revolving Credit Notes and
"Notes" means more than one such Note.
"Notice of Borrowing" has the meaning specified in
SECTION 2.2(a)(i).
"Notice of Conversion or Continuation" has the
meaning specified in SECTION 5.9.
"Operating Lease" means any lease (other than a lease
constituting a Capitalized Lease Obligation) of real or
personal property.
"PBGC" means the Pension Benefit Guaranty Corporation
and any successor agency.
"Parent Guarantor" means Standard Commercial
Corporation, a North Carolina corporation.
"Patents" means and includes, in each case whether
now existing or hereafter arising, all of the Borrower's
right, title and interest in and to
(a) any and all patents and patent applications,
(b) inventions and improvements described and
claimed therein,
(c) reissues, divisions, continuations,
renewals, extensions and continuations-in-part
thereof,
(d) income, royalties, damages, claims and
payments now or hereafter due and/or payable under
and with respect thereto, including, without
limitation, damages and payments for past and future
infringements thereof,
(e) rights to sue for past, present and future
infringements thereof, and
(f) all rights corresponding to any of the
foregoing throughout the world.
"Permitted Investments" means Investments of the
Borrower in:
(a) negotiable certificates of deposit and time
deposits issued by NationsBank or by any United
States bank or trust company having capital, surplus
and undivided profits in excess of $100,000,000,
(b) any direct obligation of the United States
of America or any Agency or instrumentality thereof
which has a remaining maturity at the time of
purchase of not more than one year and repurchase
agreements relating to the same,
(c) sales of inventory on credit in the ordinary
course of business,
(d) shares of capital stock, evidence of
Indebtedness or other security acquired by the
Borrower in consideration for or as evidence of
past-due or restructured Receivables in an aggregate
face amount of such Receivables at any time not to
exceed $1,000,000,
(e) Guaranties permitted pursuant to SECTION 12.3,
(f) those items described on Schedule 1.1B - Permitted
Investments, and
(g) other Investments not in excess of $10,000
individually or $50,000 in the aggregate in any
fiscal year of the Borrower.
"Permitted Liens" means:
(a) Liens securing taxes, assessments and other
governmental charges or levies (excluding any Lien
imposed pursuant to any of the provisions of ERISA)
or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials,
supplies or rentals incurred in the ordinary course
of business, but (i) in all cases only if payment
shall not at the time be required to be made in
accordance with SECTION 10.6, and (ii) in the case of
warehousemen or landlords, only if such liens are
junior to the Security Interest in any of the
Collateral,
(b) Liens consisting of deposits or pledges made
in the ordinary course of business in connection
with, or to secure payment of, obligations under
workers' compensation, unemployment insurance or
similar legislation or under payment or performance
bonds,
(c) Liens constituting encumbrances in the
nature of zoning restrictions, easements, and rights
or restrictions of record on the use of real
property, which do not materially detract from the
value of such property or impair the use thereof in
the business of the Borrower,
(d) Purchase Money Liens,
(e) Liens shown on SCHEDULE 1.1C - Permitted Liens,
and
(f) Liens of the Agent, for the benefit of the
Lenders, arising under this Agreement and the other
Loan Documents.
"Permitted Purchase Money Indebtedness" means
Purchase Money Indebtedness of the Borrower incurred
after the Agreement Date
(a) which is secured by a Purchase Money Lien,
(b) the aggregate principal amount of which does
not exceed an amount equal to 100% of the lesser of
(i) the cost (including the principal
amount of such Indebtedness, whether or not
assumed) of the property (other than
Inventory) subject to such Lien, and
(ii) the fair value of such property (other
than Inventory) at the time of its
acquisition, and
(c) which, when aggregated with the principal
amount of all other such Indebtedness and Capitalized
Lease Obligations of the Borrower at the time
outstanding, does not exceed $250,000.
For the purposes of this definition, the principal amount of any
Purchase Money Indebtedness consisting of Capitalized Leases
shall be computed as a Capitalized Lease Obligation.
"Person" means an individual, corporation,
partnership, association, trust or unincorporated
organization, or a government or any agency or political
subdivision thereof.
"Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Borrower or
any Related Company is, or within the immediately
preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Prime Rate" means on any day the interest rate per
annum equal to the rate of interest publicly announced by
the Agent at its head office in Atlanta, Georgia as its
"prime" rate, as in effect on the last Business Day of
the calendar month immediately preceding the month in
which such day falls. The Agent lends at rates above and
below the Prime Rate.
"Prime Rate Advance" means an advance bearing interest at a
rate determined with reference to the Prime Rate.
"Proprietary Rights" means all of the Borrower's now
owned and hereafter arising or acquired: Patents, Copy-
rights, Trademarks, including, without limitation, those
Proprietary Rights set forth on SCHEDULE 7.1(cc) hereto,
and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations,
and continuations-in-part of any of the foregoing, and
all rights to sue for past, present and future
infringement of any of the foregoing.
"Purchase Money Indebtedness" means
(a) Indebtedness created to secure the payment
of all or any part of the purchase price of any
property (other than Inventory),
(b) any Indebtedness incurred at the time of or
within 30 days prior to or after the acquisition of any
property (other than Inventory) for the purpose of
financing all or any part of the purchase price thereof,
and
(c) any renewals, extensions or refinancings
thereof, but not any increases in the principal amounts
thereof outstanding at the time of any such renewal,
extension or refinancing.
"Purchase Money Lien" means any Lien securing
Purchase Money Indebtedness, but only if such Lien shall
at all times be confined solely to the property (other
than Inventory) the purchase price of which was financed
through the incurrence of the Purchase Money
Indebtedness secured by such Lien.
"Real Estate" means all of the Borrower's now or
hereafter owned or leased estates in real property,
including, without limitation, all fees, leaseholds and
future interests, together with all of the Borrower's now
or hereafter owned or leased interests in the
improvements and emblements thereon, the fixtures
attached thereto and the easements appurtenant thereto,
including, without limitation the real property described
on SCHEDULE 7.1(x).
"Receivables" means and includes
(a) any and all rights to the payment of money
or other forms of consideration of any kind (whether
classified under the Uniform Commercial Code as
accounts, contract rights, chattel paper, general
intangibles, or otherwise) including, but not limited
to, accounts receivable, letters of credit and the
right to receive payment thereunder, chattel paper,
tax refunds, insurance proceeds, Contract Rights,
notes, drafts, instruments, documents, acceptances,
and all other debts, obligations and liabilities in
whatever form from any Person,
(b) all guarantees, security and Liens for
payment thereof,
(c) all goods, whether now owned or hereafter
acquired, and whether sold, delivered, undelivered,
in transit or returned, which may be represented by,
or the sale or lease of which may have given rise to,
any such right to payment or other debt, obligation
or liability, and
(d) all proceeds of any of the foregoing.
"Regular Letter of Credit" means any letter of credit
issued by NationsBank for the account of the Borrower
pursuant to ARTICLE 3.
"Regular Letter of Credit Amount" means, with respect
to any Regular Letter of Credit, the aggregate maximum
amount at any time available for drawing under such
Regular Letter of Credit.
"Regular Letter of Credit Facility" means the amount
of $20,000,000.
"Regular Letter of Credit Obligations" means, at any
time, the sum of (a) the Regular Reimbursement Obliga-
tions of the Borrower at such time, plus (b) the
aggregate Regular Letter of Credit Amount of Regular
Letters of Credit outstanding at such time, plus (c) the
aggregate Regular Letter of Credit Amount of Regular
Letters of Credit the issuance of which has been
authorized by the Agent and NationsBank pursuant to
SECTION 3.4(b) but that have not yet been issued, in each
case as determined by the Agent.
"Regular Letter of Credit Reserve" means, at any
time, the aggregate Regular Letter of Credit Obligations
at such time, other than Regular Letter of Credit
Obligations that are fully secured by Cash Collateral.
"Regular Reimbursement Agreement" means, with respect
to a Regular Letter of Credit, such form of application
therefor and form of reimbursement agreement therefor
(whether in a single document or several documents) as
NationsBank may employ in the ordinary course of business
for its own account, with such modifications thereto as
may be agreed upon by NationsBank and the Borrower,
provided that such application and agreement and any
modifications thereto are not inconsistent with the terms
of this Agreement.
"Regular Reimbursement Obligations" means the
reimbursement or repayment obligations of the Borrower to
NationsBank pursuant to SECTION 3.6 or pursuant to a
Regular Reimbursement Agreement with respect to amounts
that have been drawn under Regular Letters of Credit.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System (or any
successor), as the same may be amended or supplemented
from time to time.
"Related Company" means any (i) corporation which is
a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal
Revenue Code) as any Borrower; (ii) partnership or other
trade or business (whether or not incorporated) under
common control (within the meaning of Section 414(c) of
the Internal Revenue Code) with any Borrower; or (iii)
member of the same affiliated service group (within the
meaning of Section 414(m) of the Internal Revenue Code)
as any Borrower, any corporation described in clause (i)
above or any partnership, trade or business described in
clause (ii) above.
"Release" means release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or
outdoor environment or into or out of any property,
including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"Remedial Action" means actions required to (i) clean
up, remove, treat or in any other way address Contami-
nants in the indoor or outdoor environment; (ii) prevent
the Release or threat of Release or minimize the further
Release of Contaminants so they do not migrate or
endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; or (iii) perform
pre-remedial studies and investigations and post-remedial
monitoring and care.
"Reportable Event" has the meaning set forth in
Section 4043(b) of ERISA, but shall not include a
Reportable Event as to which the provision for 30 days,
notice to the PBGC is waived under applicable
regulations.
"Required Interest Expense" means the amount of
interest paid or accrued according to GAAP by the
Borrower (on a Consolidated basis) on all of its
Indebtedness during the period in question.
"Required Lenders" means, at any time, any
combination of Lenders whose Commitment Percentages at
such time aggregate in excess of 66 _%.
"Restricted Dividend Payment" means any dividend,
distribution or payment on or with respect to (a) any
shares of a Person's capital stock (other than dividends
payable solely in shares of its capital stock) or (b) any
partnership interest in a Person, excluding, however, any
such dividend, distribution or payment to the Borrower by
any Subsidiary of the Borrower.
"Restricted Payment" means (a) any redemption or
prepayment or other retirement, prior to the stated
maturity thereof or prior to the due date of any
regularly scheduled installment or amortization payment
with respect thereto, of any Indebtedness for Borrowed
Money or of any Indebtedness that is junior and
subordinate to the Secured Obligations, (b) the payment
by any Person of the principal amount of or interest on
any Indebtedness (other than trade debt) owing to a
shareholder, partner or equity holder of such Person or
to any Affiliate of any such shareholder, partner or
equity holder and (c) the payment of any management,
consulting or similar fee by any Person to any Affiliate
of such Person.
"Restricted Purchase" means any payment on account of
the purchase, redemption or other acquisition or
retirement by a Person of any (a) shares of such Person's
capital stock (except shares acquired on the conversion
thereof into other shares of capital stock of such
Person) or (b) a partnership interest in such Person, if
such Person is a partnership.
"Revolving Credit Facility" means the principal
amount of $75,000,000.00 or such lesser or greater amount
as shall be agreed upon from time to time in writing by
the Agent, the Lenders and the Borrower.
"Revolving Credit Loans" means loans made to the
Borrower pursuant to SECTION 2.1.
"Revolving Credit Note" means each Revolving Credit
Note made by the Borrower payable to the order of a
Lender evidencing the obligation of the Borrower to pay
the aggregate unpaid principal amount of the Revolving
Credit Loans made to it by such Lender (and any
promissory note or notes that may be issued from time to
time in substitution, renewal, extension, replacement or
exchange therefor whether payable to such Lender or to a
different Lender in connection with a Person becoming a
Lender after the Effective Date or otherwise)
substantially in the form of EXHIBIT C hereto, with all
blanks properly completed, either as originally executed
or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"Schedule of Inventory" means a schedule delivered by
the Borrower to the Agent pursuant to the provisions of
SECTION 9.12(b).
"Schedule of Receivables" means a schedule delivered
by the Borrower to the Agent pursuant to the provisions
of SECTION 9.12(a).
"Secured Obligations" means, in each case whether now
in existence or hereafter arising,
(a) the principal of, and interest and premium,
if any, on, the Loans,
(b) the Reimbursement Obligations and all other
obligations of the Borrower to the Agent or any
Lender arising in connection with the issuance of
Letters of Credit,
(c) all indebtedness, liabilities, obligations,
covenants and duties of the Borrower to the Agent or
to the Lenders of every kind, nature and description
arising under or in respect of this Agreement, the
Notes or any of the other Loan Documents, whether
direct or indirect, absolute or contingent, due or
not due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any
note, and whether or not for the payment of money,
including without limitation, fees required to be
paid pursuant to ARTICLE 5 and expenses required to
be paid or reimbursed pursuant to SECTION 16.2.
"Security Documents" means each of the following:
(i) the WAA Security Agreement,
(a) the Financing Statements,
(b) the Guaranty Agreements, and
(c) each other writing executed and delivered by
the Borrower or any other Person securing the Secured
Obligations.
"Security Interest" means the Liens of the Agent, for
the benefit of the Lenders, on and in the Collateral
effected hereby or by any of the Security Documents or
pursuant to the terms hereof or thereof.
"Settlement Date" means each Business Day after the
Effective Date selected by the Agent in its sole
discretion subject to and in accordance with the
provisions of SECTION 5.8(b)(i) as of which a Settlement
Report is delivered by the Agent and on which settlement
is to be made among the Lenders in accordance with the
provisions of SECTION 5.8.
"Settlement Report" means each report, substantially
in the form attached hereto as EXHIBIT D (as such form is
modified from time to time by the Agent), prepared by the
Agent and delivered to each Lender and setting forth,
among other things, as of the Settlement Date indicated
thereon and as of the next preceding Settlement Date, the
aggregate principal balance of all Revolving Credit Loans
outstanding, each Lender's Commitment Percentage thereof,
each Lender's Net Outstandings and all Non-Ratable Loans
made, and all payments of principal, interest and fees
received by the Agent from the Borrower during the period
beginning on such next preceding Settlement Date and
ending on such Settlement Date.
"Subordinated Indebtedness" means Indebtedness of the
Borrower, the repayment of which has been subordinated to
the repayment of the Secured Obligations pursuant to
subordination agreements in form and substance
satisfactory to the Lenders.
"Subordination Agreement" means the subordination
agreement executed by the Parent Guarantor in favor of
the Agent and the Lenders whereby the Parent Guarantor
(i) subordinates the repayment of $15,000,000 of the
obligations of the Borrower to the Parent Guarantor to
the repayment of the Secured Obligations on a permanent
basis and (ii) subordinates the repayment of the
remaining obligations of the Borrower to the Parent
Guarantor to the repayment of the Secured Obligations
upon the occurrence of a Default hereunder.
"Subsidiary"
(a) when used to determine the relationship of a
Person to another Person, means a Person of which an
aggregate of 50% or more of the stock of any class or
classes or 50% or more of other ownership interests is
owned of record or beneficially by such other Person, or
by one or more Subsidiaries of such other Person, or by
such other Person and one or more Subsidiaries of such
Person,
(i) if the holders of such stock, or other
ownership interests, (A) are ordinarily, in the
absence of contingencies, entitled to vote for
the election of a majority of the directors (or
other individuals performing similar functions)
of such Person, even though the right so to vote
has been suspended by the happening of such a
contingency, or (B) are entitled, as such
holders, to vote for the election of a majority
of the directors (or individuals performing
similar functions) of such Person, whether or
not the right so to vote exists by reason of the
happening of a contingency, or
(ii) in the case of such other ownership
interests, if such ownership interests
constitute a majority voting interest, and
(b) when used with respect to a Plan, ERISA or a
provision of the Internal Revenue Code pertaining to
employee benefit plans, also means any corporation,
trade or business (whether or not incorporated) which
is under common control with the Borrower and is
treated as a single employer with the Borrower under
Section 414(b) or (c) of the Internal Revenue Code
and the regulations thereunder.
"Tangible Net Worth" means, as applied to the
Borrower, the Net Worth of the Borrower and its
Consolidated Subsidiaries at the time in question, after
excluding therefrom the amount of all intangible items
reflected therein, including, without limitation, all
unamortized debt discount and expense, unamortized
research and development expense, unamortized deferred
charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, unamortized excess cost of
investment in non-Consolidated Subsidiaries over equity
at dates of acquisition and all similar items which
should properly be treated as intangibles in accordance
with GAAP.
"Termination Date" means May 2, 1998, such earlier
date as all Secured Obligations shall have been
irrevocably paid in full and the Revolving Credit
Facility shall have been terminated, or such later date
as to which the same may be extended pursuant to the
provisions of SECTION 2.5.
"Termination Event" means
(a) a Reportable Event, or
(b) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment
as a termination under Section 4041 of ERISA, or
(c) the institution of proceedings to terminate
a Plan by the PBGC under Section 4042 of ERISA, or
the appointment of a trustee to administer any Plan.
"Total Commitment" means the sum of the Commitments.
"Trademarks" means and includes in each case whether
now existing or hereafter arising, all of the Borrower's
right, title and interest in and to
(a) trademarks (including service marks), trade
names and trade styles and the registrations and
applications for registration thereof and the goodwill of
the business symbolized by the trademarks,
(b) licenses of the foregoing, whether as
licensee or licensor,
(c) renewals thereof,
(d) income, royalties, damages and payments now
or hereafter due and/or payable with respect thereto,
including, without limitation, damages, claims and
payments for past and future infringements thereof,
(e) rights to sue for past, present and future
infringements thereof, including the right to settle
suits involving claims and demands for royalties owing,
and
(f) all rights corresponding to any of the
foregoing throughout the world.
"Type" means with respect to any Advance, a Prime
Rate Advance or a Eurodollar Rate Advance.
"Uncommitted Leaf Inventory" means the aggregate book
value of all Leaf Inventory owned by the Borrower which
has not been committed for sale to a customer of the
Borrower (for purposes of the foregoing definition, the
term "committed for sale" shall mean subject to a bona
fide verbal or written arms-length contract for sale the
terms of which the Borrower can reasonably be expected to
satisfy).
"Unfunded Vested Accrued Benefits" means with respect
to any Plan at any time, the amount (if any) by which
(a) the present value of all vested
nonforfeitable benefits under such Plan exceeds
(b) the fair market value of all Plan assets
allocable to such benefits, all determined as of
the then most recent valuation date for such Plan.
"Uniform Commercial Code" means the Uniform
Commercial Code as in effect from time to time in the
State of North Carolina.
"WAA" means W.A. Adams Company.
"WAA Security Agreement" means the Security Agreement
to be executed and delivered by WAA in favor of the
Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
"Wholly-Owned Subsidiary" when used to determine the
relationship of a Subsidiary to a Person means a
Subsidiary all of the issued and outstanding shares
(other than directors' qualifying shares) of the capital
stock of which shall at the time be owned by such Person
or one or more of such Person's Wholly-Owned Subsidiaries
or by such Person and one or more of such Person's
Wholly-Owned Subsidiaries.
SECTION 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meaning ascribed thereto by
GAAP. The terms accounts, chattel paper, contract rights, documents,
equipment, instruments, general intangibles and inventory, as and when
used in this Agreement or the Security Documents, shall have the
meanings given those terms in the Uniform Commercial Code. Unless
otherwise specified, a reference in this Agreement to a particular
section or subsection is a reference to that section or subsection of
this Agreement, and the words "hereof," "herein," "hereunder" and words
of similar import, when used in this Agreement, refer to this Agreement
as a whole and not to any particular provision, section or subsection of
this Agreement. Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular
and plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the masculine, the feminine and the neuter. Words
denoting individuals include corporations and vice versa. References to
any legislation or statute or code, or to any provisions of any
legislation or statute or code, shall include any modification or
reenactment of, or any legislative, statutory or code provision
substituted for, such legislation, statute or code or provision thereof.
References to any document or agreement (including this Agreement) shall
include references to such document or agreement as amended, novated,
supplemented, modified or replaced from time to time, so long as and to
the extent that such amendment, novation, supplement, modification or
replacement is either not prohibited by the terms of this Agreement or
is consented to by the Required Lenders and the Agent. References to
any Person include its successor or permitted substitutes and assigns.
ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. Upon the terms and
subject to the conditions of, and in reliance upon the representations
and warranties made under, this Agreement, each Lender agrees,
severally, but not jointly, to make Revolving Credit Loans to the
Borrower from time to time from the Effective Date to but not including
the Termination Date, as requested or deemed requested by the Borrower
in accordance with the terms of SECTION 2.2, in amounts equal to such
Lender's Commitment Percentage of each such Loan requested or deemed
requested hereunder up to an aggregate amount at any one time
outstanding equal to such Lender's Commitment Percentage of the
Borrowing Base; PROVIDED, HOWEVER, that the aggregate principal amount
of all outstanding Revolving Credit Loans (after giving effect to the
Loans requested) shall not exceed the Borrowing Base. It is expressly
understood and agreed that the Lenders may and at present intend to use
the Borrowing Base as a maximum ceiling on Revolving Credit Loans to the
Borrower; PROVIDED, HOWEVER, that it is agreed that should the Revolving
Credit Loans exceed the ceiling so determined or any other limitation
set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Secured Obligations and, as such, shall be
entitled to all benefits thereof and security therefor. The principal
amount of any Revolving Credit Loan which is repaid pursuant to SECTION
2.3(c) may be reborrowed by the Borrower, subject to the terms and
conditions of this Agreement, in accordance with the terms of this
SECTION 2.1. The Agent's and each Lender's books and records reflecting
the date and the amount of each Revolving Credit Loan and each repay-
ment of principal thereof shall constitute PRIMA FACIE evidence of the
accuracy of the information contained therein, subject to the provisions
of SECTION 5.8.
SECTION 2.2. Manner of Borrowing Revolving Credit Loans.
Borrowings under the Revolving Credit Facility shall be made as follows:
(a) Requests for Borrowing. A request for a
borrowing shall be made, or shall be deemed to be
made, in the following manner:
(i) with respect to the Prime Rate Advances
constituting any Revolving Credit Loan to be
made on the Effective Date, the Borrower shall
give the Agent at least two Business Days' prior
written notice of the Effective Date, which
notice shall be irrevocable, and, as to
subsequent Revolving Credit Loans, the Borrower
may give the Agent notice of their intention to
borrow by giving written notice in substantially
the form of EXHIBIT E (as such form is modified
from time to time by the Agent) properly
completed (each a "Notice of Borrowing"), or
telephonic notice confirmed by a Notice of
Borrowing, which notice shall be irrevocable (x)
as to Loans consisting of Prime Rate Advances,
before 11:30 a.m. on the proposed borrowing
date, specifying the Type of Advance, the
proposed amount of the requested Revolving
Credit Loan and the proposed borrowing date and
(y) as to Loans consisting of Eurodollar Rate
Advances, before 11:00 a.m. on the date that is
two Business Days prior to the proposed
borrowing date, specifying the Type of Advance,
the proposed amount of the requested Revolving
Credit Loan (which shall be at least $1,000,000
or an integral multiple of $500,000 in excess
thereof), the proposed borrowing date and the
duration of the Interest Period to be applicable
to such Eurodollar Rate Advances,
(ii) whenever a check or other item is
presented to a Disbursing Bank for payment
against a Controlled Disbursement Account in an
amount greater than the then available balance
in such account, such Disbursing Bank shall, and
is hereby irrevocably authorized by the Borrower
to, give the Agent notice thereof, which notice
shall be deemed to be a request for a Revolving
Credit Loan consisting of Prime Rate Advances on
the date of such notice in an amount equal to
the excess of such check or other item over such
available balance,
(iii) unless payment is otherwise made by the
Borrower, the becoming due of any amount
required to be paid under this Agreement or any
of the Notes as interest shall be deemed to be a
request for a Revolving Credit Loan on the due
date in the amount required to pay such interest,
(iv) unless payment is otherwise made by the
Borrower, the becoming due of any other Secured
Obligation shall be deemed to be a request for a
Revolving Credit Loan consisting of Prime Rate
Advances on the due date in the amount then so
due, and such request shall be irrevocable, and
(v) the receipt by the Agent of
notification from NationsBank to the effect that
a drawing has been made under a Letter of Credit
and that the Borrower has failed to reimburse
NationsBank therefor in accordance with the
terms of ARTICLE 3 OR ARTICLE 4 (as the case may
be), shall be deemed to be a request for a
Revolving Credit Loan consisting of Prime Rate
Advances on the date such notification is
received in the amount of such drawing which is
so unreimbursed;
PROVIDED that if any notice referred to in CLAUSE (i) above is
received after 12:00 noon (Atlanta time) on the proposed
borrowing date, the proposed borrowing will be postponed
automatically to the next Business Day. Unless the Agent has
elected periodic settlements pursuant to SECTION 5.8, the Agent
shall promptly notify the Lenders of any Notice of Borrowing
given or deemed given pursuant to this SECTION 2.2(a) and the
rate to be applicable to the Advances constituting such
borrowing. Not later than 1:30 p.m. (Atlanta time) on the
proposed borrowing date, each Lender will make available to the
Agent, for the account of the Borrower, at the Agent's Office in
funds immediately available to the Agent, an amount equal to such
Lender's Commitment Percentage of the Revolving Credit Loans to
be made on such borrowing date.
(b) Disbursement of Loans. The Borrower hereby
irrevocably authorizes the Agent to disburse the proceeds
of each borrowing requested, or deemed to be requested,
pursuant to this SECTION 2.2 as follows:
(i) the proceeds of each borrowing requested
under SECTIONS 2.2(a)(i) or (ii) shall be
disbursed by the Agent in Dollars in immediately
available funds, (A) in the case of the initial
borrowing, in accordance with the terms of the
letter from the Borrower to the Agent referred
to in SECTION 6.1(d)(xiii), and (B) in the case
of each subsequent borrowing, by wire transfer
to a Controlled Disbursement Account or, in the
absence of a Controlled Disbursement Account, by
wire transfer to such other account as may be
agreed upon by the Borrower and the Agent from
time to time,
(ii) the proceeds of each borrowing deemed
requested under SECTION 2.2(a)(iii) or (iv)
shall be disbursed by the Agent by way of direct
payment of the relevant interest or Secured
Obligation, as the case may be, and
(iii) the proceeds of each borrowing deemed
requested under SECTION 2.2(a)(v) shall be
disbursed by the Agent directly to NationsBank
on behalf of the Borrower.
SECTION 2.3. Repayment of Revolving Credit Loans. The Revolving
Credit Loans will be repaid as follows:
(a) Whether or not any Default or Event of
Default has occurred, the outstanding principal amount of
all the Revolving Credit Loans is due and payable, and
shall be repaid by the Borrower in full, not later than
the Termination Date;
(b) If at any time the aggregate outstanding
unpaid principal amount of the Revolving Credit Loans
exceeds the Borrowing Base in effect at such time, the
Borrower shall, upon the demand of the Agent, repay the
Revolving Credit Loans in an amount sufficient to reduce
the aggregate unpaid principal amount of such Revolving
Credit Loans by an amount equal to such excess, together
with accrued and unpaid interest on the amount so repaid
to the date of repayment; and
(c) The Borrower hereby instructs the Agent to
repay the Revolving Credit Loan consisting of Prime Rate
Advances outstanding on any day in an amount equal to the
amount received by the Agent on such day pursuant to
SECTION 9.1(a) or 9.1(c).
Application of funds to repayment of Revolving Credit Loans pursuant to
SUBSECTION (b) or, subject to the provisions of SECTION 9.1(a),
SUBSECTION (c) above shall be first to the Revolving Credit Loan
consisting of Prime Rate Advances and then to Revolving Credit Loans
consisting of Eurodollar Rate Advances.
SECTION 2.4. Revolving Credit Note Each Lender's Revolving Credit
Loans and the obligation of the Borrower to repay such Revolving Credit
Loans shall also be evidenced by a Revolving Credit Note payable to the
order of such Lender. Each Revolving Credit Note shall be dated the
Effective Date and be duly and validly executed and delivered by the
Borrower.
SECTION 2.5. Extension of Revolving Credit Facility. Upon the
request of the Borrower, the Lenders may, in their sole discretion,
effective as of any anniversary of the Effective Date, agree to extend
the Revolving Credit Facility for such a period of time such that the
Termination Date would fall on a date that is up to but not in excess of
five years from such anniversary date. Each such extension shall be
effected by the delivery to the Borrower of a written notice to that
effect by the Lenders, not less than 30 days prior to such anniversary date.
ARTICLE 3
REGULAR LETTER OF CREDIT FACILITY
SECTION 3.1. Agreement to Issue. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties
made under, this Agreement, NationsBank agrees to issue for the account
of the Borrower one or more standby and/or documentary letters of credit
in accordance with this ARTICLE 3, from time to time during the period
commencing on the Effective Date and ending on the Termination Date.
SECTION 3.2. Amounts. NationsBank shall not have any obligation to
issue any Regular Letter of Credit at any time:
(a) if, after giving effect to the issuance of
the requested Regular Letter of Credit, (i) the
aggregate Regular Letter of Credit Obligations of the
Borrower would exceed the Regular Letter of Credit
Facility then in effect or (ii) the aggregate
principal amount of the Revolving Credit Loans
outstanding would exceed the Borrowing Base (after
reduction for the Regular Letter of Credit Reserve in
respect of such Regular Letter of Credit); or
(b) which has a term longer than one (1)
calendar year or an expiration date after the last
Business Day that is more than thirty (30) days prior
to the Termination Date.
SECTION 3.3. Conditions. The obligation of NationsBank to issue any
Regular Letter of Credit is subject to the satisfaction of (i) the
conditions precedent contained in ARTICLE 6 and (ii) the following
additional conditions precedent in a manner satisfactory to the Agent
and NationsBank:
(a) the Borrower shall have delivered to
NationsBank and the Agent at such times and in such
manner as NationsBank or the Agent may prescribe an
application in form and substance satisfactory to
NationsBank and the Agent for the issuance of the
Regular Letter of Credit, a Regular Reimbursement
Agreement and such other documents as may be required
pursuant to the terms thereof, and the form and terms
of the proposed Regular Letter of Credit shall be
satisfactory to NationsBank and the Agent; and
(b) as of the date of issuance, no order of any
court, arbitrator or governmental authority having
jurisdiction or authority over NationsBank shall
purport by its terms to enjoin or restrain banks
generally from issuing letters of credit of the type
and in the amount of the proposed Regular Letter of
Credit, and no law, rule or regulation applicable to
banks generally and no request or directive (whether
or not having the force of law) from any governmental
authority with jurisdiction over banks generally
shall prohibit, or request that NationsBank refrain
from, the issuance of letters of credit generally or
the issuance of such Regular Letter of Credit.
SECTION 3.4. Issuance of Regular Letters of Credit.
(a) Request for Issuance. The Borrower shall
give NationsBank and the Agent written notice of the
Borrower's request for the issuance of a Regular
Letter of Credit no later than two (2) Business Days
prior to the proposed date of issuance of the Regular
Letter of Credit. Such notice shall be irrevocable
and shall specify the original face amount of the
Regular Letter of Credit requested, the effective
date (which date shall be a Business Day) of issuance
of such requested Regular Letter of Credit, whether
such Regular Letter of Credit may be drawn in a
single or in multiple draws, the date on which such
requested Regular Letter of Credit is to expire
(which date shall be a Business Day earlier than the
Business Day prior to the Termination Date), the
purpose for which such Regular Letter of Credit is to
be issued and the beneficiary of the requested
Regular Letter of Credit. The Borrower shall attach
to such notice the form of the Regular Letter of
Credit that the Borrower requests to be issued.
(b) Responsibilities of the Agent; Issuance. The Agent
shall determine, as of the Business Day immediately preceding
the requested effective date of issuance of the Regular
Letter of Credit set forth in the notice from the Borrower
pursuant to SECTION 3.4(a), the amount of the unused Regular
Letter of Credit Facility and the Borrowing Base. If (i) the
form of the Regular Letter of Credit delivered by the
Borrower to the Agent is acceptable to NationsBank and the
Agent in their sole discretion exercised in good faith, (ii)
the undrawn face amount of the requested Regular Letter of
Credit is less than or equal to the lesser of (A) the unused
Regular Letter of Credit Facility and (B) the unused
Borrowing Base and (iii) the Agent has received a certificate
from the Borrower stating that the applicable conditions set
forth in Article 6 have been satisfied, then NationsBank will
cause the Regular Letter of Credit to be issued.
(c) Notice of Issuance. Promptly after the issuance of
any Regular Letter of Credit, NationsBank shall give the
Agent written or facsimile notice, or telephonic notice
confirmed promptly thereafter in writing, of the issuance of
such Regular Letter of Credit, and the Agent shall give each
Lender written or facsimile notice, or telephonic notice
confirmed promptly thereafter in writing, of the issuance of
such Regular Letter of Credit.
(d) No Extension or Amendment. No Regular Letter of
Credit shall be extended or amended unless the requirements
of this SECTION 3.4 are met as though a new Regular Letter of
Credit were being requested and issued.
SECTION 3.5. Duties of NationsBank. Any action taken or omitted to
be taken by NationsBank under or in connection with any Regular Letter
of Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not result in any liability of NationsBank to
any Lender or relieve any Lender of its obligations hereunder to
NationsBank. In determining whether to pay under any Regular Letter
of Credit, NationsBank shall have no obligation to any Lender other than
to confirm that any documents required to be delivered under such
Regular Letter of Credit in connection with such drawing have been
presented and appear on their face to comply with the requirements of
such Regular Letter of Credit.
SECTION 3.6. Payment of Regular Reimbursement Obligations.
(a) Payment to Issuer. Notwithstanding any provisions
to the contrary in any Regular Reimbursement Agreement,
the Borrower agrees to reimburse NationsBank for any
drawings (whether partial or full) under each Regular
Letter of Credit issued by NationsBank and agrees to pay
to NationsBank the amount of all other Regular
Reimbursement Obligations and other amounts payable to
NationsBank under or in connection with such Regular
Letter of Credit immediately when due, irrespective of
any claim, set-off, defense or other right which the
Borrower may have at any time against NationsBank or any
other Person.
(b) Recovery or Avoidance of Payments. In the event
any payment by or on behalf of the Borrower with respect
to any Regular Letter of Credit (or any Regular
Reimbursement Obligation relating thereto) received by
NationsBank, or by the Agent and distributed by the Agent
to the Lenders on account of their respective
participations therein, is thereafter set aside, avoided
or recovered from NationsBank or the Agent in connection
with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by the Agent,
pay to the Agent, for the account of the Agent or
NationsBank, their respective Commitment Percentages of
such amount set aside, avoided or recovered together with
interest at the rate required to be paid by the Agent
upon the amount required to be repaid by it.
SECTION 3.7. Participations.
(a) Purchase of Participations. Immediately upon
issuance by NationsBank of a Regular Letter of Credit,
each Lender shall be deemed to have irrevocably and
unconditionally purchased and received without recourse
or warranty, an undivided interest and participation in
such Regular Letter of Credit, equal to such Lender's
Commitment Percentage of the face amount thereof
(including, without limitation, all obligations of the
Borrower with respect thereto, other than amounts owing
to NationsBank under SECTION 5.8(b), and any security
therefor or guaranty pertaining thereto).
(b) Sharing of Regular Letter of Credit Payments. In
the event that NationsBank makes a payment under any
Regular Letter of Credit and NationsBank shall not have
been repaid such amount pursuant to SECTION 3.6, then
NationsBank shall be deemed to have made a Non-Ratable
Loan in the amount of such payment, and notwithstanding
the occurrence or continuance of a Default or Event of
Default at the time of such payment, such Non-Ratable
Loan shall be subject to the provisions of SECTION 5.8(b)
and the absolute obligations of the Lenders to pay for
their respective participation interests therein.
(c) Sharing of Regular Reimbursement Obligation
Payments. Whenever NationsBank receives a payment from
or on behalf of the Borrower on account of a Regular
Reimbursement Obligation as to which the Agent has
previously received for the account of NationsBank
payment from a Lender pursuant to this SECTION 3.7,
NationsBank shall promptly pay to the Agent, for the
benefit of such Lender, such Lender's Commitment
Percentage of the amount of such payment from the
Borrower in Dollars. Each such payment shall be made by
NationsBank on the Business Day on which NationsBank
receives immediately available funds pursuant to the
immediately preceding sentence, if received prior to
11:00 a.m. (Atlanta time) on such Business Day and
otherwise on the next succeeding Business Day.
(d) Documentation. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any
Regular Letter of Credit, Regular Reimbursement Agreement
or application for any Regular Letter of Credit and such
other documentation as may reasonably be requested by
such Lender.
(e) Obligations Irrevocable. The obligations of each
Lender to make payments to the Agent with respect to any
Regular Letter of Credit and their participations therein
pursuant to the provisions of SECTION 5.8(b) hereof or
otherwise and the obligations of the Borrower to make
payments to NationsBank or to the Agent, for the account
of Lenders, shall be irrevocable, shall not be subject to
any qualification or exception whatsoever and shall be
made in accordance with the terms and conditions of this
Agreement (assuming, in the case of the obligations of
the Lenders to make such payments, that the Regular
Letter of Credit has been issued in accordance with
SECTION 3.4), including, without limitation, any of the
following circumstances:
(i) Any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense
or other right which the Borrower may have at any
time against a beneficiary named in a Regular Letter
of Credit or any transferee of any Regular Letter of
Credit (or any Person for whom any such transferee
may be acting), any Lender, NationsBank or any other
Person, whether in connection with this Agreement,
any Regular Letter of Credit, the transactions
contemplated herein or any unrelated transactions
(including any underlying transactions between the
Borrower or any other Person and the beneficiary
named in any Regular Letter of Credit);
(iii) Any draft, certificate or any other document
presented under the Regular Letter of Credit upon
which payment has been made in good faith and
according to its terms proving to be forged,
fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in
any respect;
(iv) The surrender or impairment of any
Collateral or any other security for the Secured
Obligations or the performance or observance of any
of the terms of any of the Loan Documents;
(v) The occurrence of any Default or Event of
Default; or
(vi) The Agent's failure to deliver to the
Lenders the notice PROVIDED for in SECTION 3.4(c).
SECTION 3.8. Indemnification, Exoneration.
(a) Indemnification. In addition to amounts payable
as elsewhere PROVIDED in this ARTICLE 3, the Borrower
agrees to protect, indemnify, pay and save the Lenders
and the Agent harmless from and against any and all
claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys'
fees) which any Lender or the Agent may incur or be
subject to as a consequence, directly or indirectly, of
(i) the issuance of any Regular Letter of
Credit, other than as a result of its gross
negligence or willful misconduct, as determined by a
court of competent jurisdiction, or
(ii) the failure of NationsBank to honor a
drawing under any Regular Letter of Credit as a
result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de
facto governmental authority (all such acts or
omissions being hereinafter referred to collectively
as "Government Acts").
(b) Assumption of Risk by the Borrower. As among the
Borrower, the Lenders and the Agent, the Borrower assumes
all risks of the acts and omissions of, or misuse of any
of the Regular Letters of Credit by, the respective
beneficiaries of such Regular Letters of Credit. In
furtherance and not in limitation of the foregoing,
subject to the provisions of the applications for the
issuance of Regular Letters of Credit, the Lenders and
the Agent shall not be responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by
any Person in connection with the application for and
issuance of and presentation of drafts with respect to
any of the Regular Letters of Credit, even if it should
prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to
transfer or assign any Regular Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or
ineffective for any reason;
(iii) the failure of the beneficiary of any
Regular Letter of Credit to comply duly with conditions
required in order to draw upon such Regular Letter of
Credit;
(iv) errors, omissions, interruptions or delays
in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they
be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or
otherwise of any document required in order to make a
drawing under any Regular Letter of Credit or of the
proceeds thereof;
(vii) the misapplication by the beneficiary of any
Regular Letter of Credit of the proceeds of any drawing
under such Regular Letter of Credit; or
(viii) any consequences arising from causes beyond
the control of the Lenders or the Agent, including,
without limitation, any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting
of any of the Agent's rights or powers under this SECTION 3.8.
(c) Exoneration. In furtherance and extension, and
not in limitation, of the specific provisions set forth
above, any action taken or omitted by the Agent,
NationsBank or any Lender under or in connection with any
of the Letters of Credit or any related certificates, if
taken or omitted in good faith, shall not result in any
liability of any Lender or the Agent to the Borrower or
relieve the Borrower of any of its obligations hereunder
to any such Person.
SECTION 3.9. Supporting Regular Letter of Credit; Cash Collateral.
If, notwithstanding the provisions of SECTION 3.2(b), any Regular Letter
of Credit is outstanding on the Termination Date, then on or prior to
such Termination Date, or in any case upon the occurrence of an Event of
Default, the Borrower shall, promptly on demand by the Agent, deposit
with the Agent, for the ratable benefit of the Lenders, with respect to
each Regular Letter of Credit then outstanding, as the Agent shall
specify, either (a) a standby letter of credit (a "Supporting Regular
Letter of Credit") in form and substance satisfactory to the Agent,
issued by an issuer reasonably satisfactory to the Agent in an amount
equal to the greatest amount for which such Regular Letter of Credit may
be drawn, under which Supporting Regular Letter of Credit the Agent is
entitled to draw amounts necessary to reimburse the Agent and the
Lenders for payments made by the Agent and the Lenders under such
Regular Letter of Credit or under any reimbursement or guaranty
agreement with respect thereto, or (b) Cash Collateral in an amount
necessary to reimburse the Agent and the Lenders for payments made by
the Agent and the Lenders under such Regular Letter of Credit or under
any reimbursement or guaranty agreement with respect thereto. Such
Supporting Regular Letter of Credit or Cash Collateral shall be held by
the Agent for the benefit of the Lenders, as security for, and to
provide for the payment of, the Regular Reimbursement Obligations. In
addition, the Agent may at any time after the Termination Date apply any
or all of such Cash Collateral to the payment of any or all of the
Secured Obligations then due and payable. At the Borrower's request,
but subject to the Agent's reasonable approval, the Agent shall invest
any Cash Collateral consisting of cash or any proceeds of Cash
Collateral consisting of cash in Cash Equivalents, and any commissions,
expenses and penalties incurred by the Agent in connection with any
investment and redemption of such Cash Collateral shall be Secured
Obligations hereunder secured by the Collateral, shall bear interest at
the rates provided herein for the Loans and shall be charged to the
Borrower's Loan Accounts, or, at the Agent's option, shall be paid out
of the proceeds of any earnings received by the Agent from the
investment of such Cash Collateral as provided herein or out of such
cash itself. The Agent makes no representation or warranty as to, and
shall not be responsible for, the rate of return, if any, earned on any
Cash Collateral. Any earnings on Cash Collateral shall be held as
additional Cash Collateral on the terms set forth in this SECTION 3.9.
ARTICLE 4
JTI LETTER OF CREDIT FACILITY
SECTION 4.1. Agreement to Issue. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties
made under, this Agreement, NationsBank agrees to issue for the account
of the Borrower one or more JTI Letters of Credit in accordance with
this ARTICLE 4, from time to time during the period commencing on the
Effective Date and ending on the Termination Date.
SECTION 4.2. Amounts. NationsBank shall not have any obligation to
issue any JTI Letter of Credit at any time:
(a) if, after giving effect to the issuance of the
requested JTI Letter of Credit, (i) the aggregate JTI
Letter of Credit Obligations of the Borrower would exceed
the JTI Letter of Credit Facility then in effect or (ii)
the aggregate principal amount of the Revolving Credit
Loans outstanding would exceed the Borrowing Base (after
reduction for the JTI Letter of Credit Reserve in respect
of such JTI Letter of Credit); or
(b) which has a term longer than one (1) calendar
year or an expiration date after the last Business Day
that is more than thirty (30) days prior to the
Termination Date.
SECTION 4.3. Conditions. The obligation of NationsBank to issue any
JTI Letter of Credit is subject to the satisfaction of (i) the
conditions precedent contained in ARTICLE 6 and (ii) the following
additional conditions precedent in a manner satisfactory to the Agent
and NationsBank:
(a) the Borrower shall have delivered to NationsBank
and the Agent at such times and in such manner as
NationsBank or the Agent may prescribe an application in
form and substance satisfactory to NationsBank and the
Agent for the issuance of the JTI Letter of Credit, a JTI
Reimbursement Agreement and such other documents as may
be required pursuant to the terms thereof, and the form
and terms of the proposed JTI Letter of Credit shall be
satisfactory to NationsBank and the Agent; and
(b) as of the date of issuance, no order of any
court, arbitrator or governmental authority having
jurisdiction or authority over NationsBank shall purport
by its terms to enjoin or restrain banks generally from
issuing letters of credit of the type and in the amount
of the proposed JTI Letter of Credit, and no law, rule or
regulation applicable to banks generally and no request
or directive (whether or not having the force of law)
from any governmental authority with jurisdiction over
banks generally shall prohibit, or request that
NationsBank refrain from, the issuance of letters of
credit generally or the issuance of such JTI Letter of
Credit.
SECTION 4.4. Issuance of JTI Letters of Credit.
(a) Request for Issuance. The Borrower shall give
NationsBank and the Agent written notice of the
Borrower's request for the issuance of a JTI Letter of
Credit no later than three (3) Business Days prior to the
proposed date of issuance of the JTI Letter of Credit.
Such notice shall be irrevocable and shall specify the
original face amount of the JTI Letter of Credit
requested, the effective date (which date shall be a
Business Day) of issuance of such requested JTI Letter of
Credit, whether such JTI Letter of Credit may be drawn in
a single or in multiple draws, the date on which such
requested JTI Letter of Credit is to expire (which date
shall be a Business Day earlier than the Business Day
prior to the Termination Date), the purpose for which
such JTI Letter of Credit is to be issued and the
beneficiary of the requested JTI Letter of Credit. The
Borrower shall attach to such notice the form of the JTI
Letter of Credit that the Borrower requests to be issued.
(b) Responsibilities of the Agent; Issuance. The
Agent shall determine, as of the Business Day immediately
preceding the requested effective date of issuance of the
JTI Letter of Credit set forth in the notice from the
Borrower pursuant to SECTION 4.4(a), the amount of the
unused JTI Letter of Credit Facility and the Borrowing
Base. If (i) the form of the JTI Letter of Credit
delivered by the Borrower to the Agent is acceptable to
NationsBank and the Agent in their sole, reasonable
discretion, (ii) the undrawn face amount of the requested
JTI Letter of Credit is less than or equal to the lesser of (A)
the unused JTI Letter of Credit Facility and (B) the unused
Borrowing Base and (iii) the Agent has received a certificate
from the Borrower stating that the applicable conditions set
forth in ARTICLE 6 have been satisfied, then NationsBank will
cause the JTI Letter of Credit to be issued.
(c) Notice of Issuance. Promptly after the issuance
of any JTI Letter of Credit, NationsBank shall give the
Agent written or facsimile notice, or telephonic notice
confirmed promptly thereafter in writing, of the issuance
of such JTI Letter of Credit, and the Agent shall give
each Lender written or facsimile notice, or telephonic
notice confirmed promptly thereafter in writing, of the
issuance of such JTI Letter of Credit.
(d) No Extension or Amendment. No JTI Letter of Credit
shall be extended or amended unless the requirements of this
SECTION 4.4 are met as though a new JTI Letter of Credit were
being requested and issued.
SECTION 4.5. Duties of NationsBank. Any action taken or omitted to
be taken by NationsBank under or in connection with any JTI Letter of
Credit, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not result in any liability of NationsBank to
any Lender or relieve any Lender of its obligations hereunder to
NationsBank. In determining whether to pay under any JTI Letter of
Credit, NationsBank shall have no obligation to any Lender other than to
confirm that any documents required to be delivered under such JTI
Letter of Credit in connection with such drawing have been presented and
appear on their face to comply with the requirements of such JTI Letter
of Credit.
SECTION 4.6. Payment of JTI Reimbursement Obligations.
(a) Payment to Issuer. Notwithstanding any provisions
to the contrary in any JTI Reimbursement Agreement, the
Borrower agrees to reimburse NationsBank for any drawings
(whether partial or full) under each JTI Letter of Credit
issued by NationsBank and agrees to pay to NationsBank
the amount of all other JTI Reimbursement Obligations and
other amounts payable to NationsBank under or in
connection with such JTI Letter of Credit immediately
when due, irrespective of any claim, set-off, defense or
other right which the Borrower may have at any time
against NationsBank or any other Person.
(b) Recovery or Avoidance of Payments. In the event
any payment by or on behalf of the Borrower with respect
to any JTI Letter of Credit (or any JTI Reimbursement
Obligation relating thereto) received by NationsBank, or
by the Agent and distributed by the Agent to the Lenders
on account of their respective participations therein, is
thereafter set aside, avoided or recovered from
NationsBank or the Agent in connection with any
receivership, liquidation or bankruptcy proceeding, the
Lenders shall, upon demand by the Agent, pay to the
Agent, for the account of the Agent or NationsBank, their
respective Commitment Percentages of such amount set
aside, avoided or recovered together with interest at the
rate required to be paid by the Agent upon the amount
required to be repaid by it.
SECTION 4.7. Participations.
(a) Purchase of Participations. Immediately upon
issuance by NationsBank of a JTI Letter of Credit, each
Lender shall be deemed to have irrevocably and
unconditionally purchased and received without recourse
or warranty, an undivided interest and participation in
such JTI Letter of Credit, equal to such Lender's
Commitment Percentage of the face amount thereof
(including, without limitation, all obligations of the
Borrower with respect thereto, other than amounts owing
to NationsBank under SECTION 5.8(b), and any security
therefor or guaranty pertaining thereto).
(b) Sharing of JTI Letter of Credit Payments. In the
event that NationsBank makes a payment under any JTI
Letter of Credit and NationsBank shall not have been
repaid such amount pursuant to SECTION 4.6, then
NationsBank shall be deemed to have made a Non-Ratable
Loan in the amount of such payment, and notwithstanding
the occurrence or continuance of a Default or Event of
Default at the time of such payment, such Non-Ratable
Loan shall be subject to the provisions of SECTION 5.8(b)
and the absolute obligations of the Lenders to pay for
their respective participation interests therein.
(c) Sharing of JTI Reimbursement Obligation Payments.
Whenever NationsBank receives a payment from or on behalf
of the Borrower on account of a JTI Reimbursement
Obligation as to which the Agent has previously received
for the account of NationsBank payment from a Lender
pursuant to this SECTION 4.7, NationsBank shall promptly
pay to the Agent, for the benefit of such Lender, such
Lender's Commitment Percentage of the amount of such
payment from the Borrower in Dollars. Each such payment
shall be made by NationsBank on the Business Day on which
NationsBank receives immediately available funds pursuant
to the immediately preceding sentence, if received prior
to 11:00 a.m. (Atlanta time) on such Business Day and
otherwise on the next succeeding Business Day.
(d) Documentation. Upon the request of any Lender,
the Agent shall furnish to such Lender copies of any JTI
Letter of Credit, JTI Reimbursement Agreement or
application for any JTI Letter of Credit and such other
documentation as may reasonably be requested by such
Lender.
(e) Obligations Irrevocable. The obligations of each
Lender to make payments to the Agent with respect to any
JTI Letter of Credit and their participations therein
pursuant to the provisions of SECTION 5.8(b) hereof or
otherwise and the obligations of the Borrower to make
payments to NationsBank or to the Agent, for the account
of Lenders, shall be irrevocable, shall not be subject to
any qualification or exception whatsoever and shall be
made in accordance with the terms and conditions of this
Agreement (assuming, in the case of the obligations of
the Lenders to make such payments, that the JTI Letter of
Credit has been issued in accordance with SECTION 4.4),
including, without limitation, any of the following
circumstances:
(i) Any lack of validity or enforceability of
this Agreement or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense
or other right which the Borrower may have at any
time against a beneficiary named in a JTI Letter of
Credit or any transferee of any JTI Letter of Credit
(or any Person for whom any such transferee may be
acting), any Lender, NationsBank or any other Person,
whether in connection with this Agreement, any JTI
Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any
underlying transactions between the Borrower or any
other Person and the beneficiary named in any JTI
Letter of Credit);
(iii) Any draft, certificate or any other document
presented under the JTI Letter of Credit upon which
payment has been made in good faith and according to
its terms proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) The surrender or impairment of any
Collateral or any other security for the Secured
Obligations or the performance or observance of any
of the terms of any of the Loan Documents;
(v) The occurrence of any Default or Event of
Default; or
(vi) The Agent's failure to deliver to the
Lenders the notice provided for in Section 4.4(c).
SECTION 4.8. Indemnification, Exoneration.
(a) Indemnification. In addition to amounts payable
as elsewhere provided in this ARTICLE 4, the Borrower
agrees to protect, indemnify, pay and save the Lenders
and the Agent harmless from and against any and all
claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys'
fees) which any Lender or the Agent may incur or be
subject to as a consequence, directly or indirectly, of
(i) the issuance of any JTI Letter of Credit,
other than as a result of its gross negligence or
willful misconduct, as determined by a court of
competent jurisdiction, or
(ii) the failure of NationsBank to honor a
drawing under any JTI Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto
governmental authority (all such acts or omissions
being hereinafter referred to collectively as
"Government Acts").
(b) Assumption of Risk by the Borrower. As among the
Borrower, the Lenders and the Agent, the Borrower assumes
all risks of the acts and omissions of, or misuse of any
of the JTI Letters of Credit by, the respective
beneficiaries of such JTI Letters of Credit. In
furtherance and not in limitation of the foregoing,
subject to the provisions of the applications for the
issuance of JTI Letters of Credit, the Lenders and the
Agent shall not be responsible for:
(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted
by any Person in connection with the application for
and issuance of and presentation of drafts with
respect to any of the JTI Letters of Credit, even if
it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign
any JTI Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason;
(iii) the failure of the beneficiary of any JTI Letter of
Credit to comply duly with conditions required in order to
draw upon such JTI Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in
cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any
JTI Letter of Credit or of the proceeds thereof;
(vii) the misapplication by the beneficiary of any JTI
Letter of Credit of the proceeds of any drawing under such
JTI Letter of Credit; or
(viii) any consequences arising from causes beyond the
control of the Lenders or the Agent, including, without
limitation, any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting
of any of the Agent's rights or powers under this SECTION 4.8.
(c) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any
action taken or omitted by the Agent, NationsBank or any Lender
under or in connection with any of the Letters of Credit or any
related certificates, if taken or omitted in good faith, shall
not result in any liability of any Lender or the Agent to the
Borrower or relieve the Borrower of any of its obligations
hereunder to any such Person.
SECTION 4.9. Supporting JTI Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of SECTION 4.2(b), any JTI Letter of Credit is
outstanding on the Termination Date, then on or prior to such Termination Date,
or in any case upon the occurrence of an Event of Default, the Borrower shall,
promptly on demand by the Agent, deposit with the Agent, for the ratable benefit
of the Lenders, with respect to each JTI Letter of Credit then outstanding, as
the Agent shall specify, either (a) a standby letter of credit (a "Supporting
JTI Letter of Credit") in form and substance satisfactory to the Agent, issued
by an issuer reasonably satisfactory to the Agent in an amount equal to the
greatest amount for which such JTI Letter of Credit may be drawn, under which
Supporting JTI Letter of Credit the Agent is entitled to draw amounts necessary
to reimburse the Agent and the Lenders for payments made by the Agent and the
Lenders under such JTI Letter of Credit or under any reimbursement or guaranty
agreement with respect thereto, or (b) Cash Collateral in an amount necessary to
reimburse the Agent and the Lenders for payments made by the Agent and the
Lenders under such JTI Letter of Credit or under any reimbursement or guaranty
agreement with respect thereto. Such Supporting JTI Letter of Credit or Cash
Collateral shall be held by the Agent for the benefit of the Lenders, as
security for, and to provide for the payment of, the JTI Reimbursement
Obligations. In addition, the Agent may at any time after the Termination Date
apply any or all of such Cash Collateral to the payment of any or all of the
Secured Obligations then due and payable. At the Borrower's request, but subject
to the Agent's reasonable approval, the Agent shall invest any Cash Collateral
consisting of cash or any proceeds of Cash Collateral consisting of cash in Cash
Equivalents, and any commissions, expenses and penalties incurred by the Agent
in connection with any investment and redemption of such Cash Collateral shall
be Secured Obligations hereunder secured by the Collateral, shall bear interest
at the rates provided herein for the Loans and shall be charged to the
Borrower's Loan Accounts, or, at the Agent's option, shall be paid out of the
proceeds of any earnings received by the Agent from the investment of such Cash
Collateral as provided herein or out of such cash itself. The Agent makes no
representation or warranty as to, and shall not be responsible for, the rate of
return, if any, earned on any Cash Collateral. Any earnings on Cash Collateral
shall be held as additional Cash Collateral on the terms set forth in this
SECTION 4.9.
ARTICLE 5
GENERAL LOAN PROVISIONS
SECTION 5.1. Interest.
(a) Revolving Credit Loans.
(i) Prime Rate Advances. The Borrower will pay
interest on the unpaid principal amount of each Prime
Rate Advance for each day from the day such Advance
was made until such Advance is due (whether at
maturity, by reason of acceleration or otherwise) at
a rate per annum equal to the sum of (A) 1/2% and (B)
the Prime Rate, payable monthly in arrears on each
Interest Payment Date.
(ii) Eurodollar Rate Advances. The Borrower will
pay interest on the unpaid principal amount of each
Eurodollar Rate Advance for each Interest Period
applicable thereto at a rate per annum equal to the
sum of (A) 2 1/2% and (B) the Eurodollar Rate,
payable in arrears on the last day of such Interest
Period and when such Eurodollar Rate Advance is due
(whether at maturity, by reason of acceleration or
otherwise).
(iii) Interest Rate Reductions. On June 30, 1996
and on each June 30 thereafter, the Lenders and the
Borrower may reduce the foregoing interest rates so
long as the Lenders and the Borrowers mutually agree
to such reductions.
(b) Other Secured Obligations. The Borrower will pay
interest on the unpaid principal amount of each Secured
Obligation other than an Advance for each day from the
day such Secured Obligation becomes due and payable until
such Secured Obligation is paid, at the rate per annum
applicable to Prime Rate Advances, payable on demand.
(c) Default Rate. If the Borrower shall fail to pay
when due (at maturity, by reason of acceleration or
otherwise) all or any portion of the principal amount of
any Advance or interest thereon or all or any portion of
the Secured Obligations, or if there shall occur and be
continuing any other Event of Default, the unpaid
principal amount of each Advance or other Secured
Obligation shall no longer bear interest in accordance
with the terms of SECTION 5.1(a) and (b), as the case may
be, but shall bear interest for each day from the date it
was so due or the date on which such other Event of
Default occurred until paid in full (or, if earlier,
until such Event of Default is cured or waived in writing
by the Required Lenders) at a rate per annum equal to the
Default Margin plus the rate otherwise in effect under
SECTION 5.1(a) or (b), payable on demand. The interest
rate provided for in this SECTION 5.1(c) shall to the
extent permitted by Applicable Law apply to and accrue on
the amount of any judgment entered with respect to any
Secured Obligation and shall continue to accrue at such
rate during any proceeding described in SECTION 13.1(g)
or (h).
(d) The interest rates provided for in SECTIONS
5.1(a), (b) and (c) shall be computed on the basis of a
year of 360 days and the actual number of days elapsed.
Interest rates determined with reference to the Prime
Rate shall be adjusted automatically as of the opening of
business on the effective date of each change in the
Prime Rate.
(e) It is not intended by the Lenders, and nothing
contained in this Agreement or the Notes shall be deemed,
to establish or require the payment of a rate of interest
in excess of the maximum rate permitted by Applicable Law
(the "Maximum Rate"). If, in any month, the Effective
Interest Rate, absent such limitation, would have
exceeded the Maximum Rate, then the Effective Interest
Rate for that month shall be the Maximum Rate, and, if in
future months, the Effective Interest Rate would
otherwise be less than the Maximum Rate, then the
Effective Interest Rate shall remain at the Maximum Rate
until such time as the amount of interest paid hereunder
equals the amount of interest which would have been paid
if the same had not been limited by the Maximum Rate. In
the event, upon payment in full of the Secured
Obligations, the total amount of interest paid or accrued
under the terms of this Agreement is less than the total
amount of interest which would have been paid or accrued
if the Effective Interest Rate had at all times been in
effect, then the Borrower shall, to the extent permitted
by Applicable Law, pay to the Lenders an amount equal to
the excess, if any, of (i) the lesser of (A) the amount
of interest which would have been charged if the Maximum
Rate had, at all times, been in effect and (B) the amount
of interest which would have accrued had the Effective
Interest Rate, at all times, been in effect and (ii) the
amount of interest actually paid or accrued under this
Agreement. In the event the Lenders receive, collect or
apply as interest any sum in excess of the Maximum Rate,
such excess amount shall be applied to the reduction of
the principal balance of the Secured Obligations, and if
no such principal is then outstanding, such excess or
part thereof remaining, shall be paid to the Borrower.
SECTION 5.2. Certain Fees.
(a) Commitment Fee. In connection with and as
consideration for the holding available for the use of
the Borrower hereunder the full amount of the Revolving
Credit Facility, the Borrower will pay a fee to the
Agent, for the ratable benefit of the Lenders, for each
day from the Effective Date until the Termination Date,
in an amount equal to 1/4% per annum of the unused
portion of the Revolving Credit Facility and JTI Letter
of Credit Facility for such day. Such fee shall be
payable monthly in arrears on each Interest Payment Date
and on the date of any permanent reduction in the
Revolving Credit Facility or the JTI Letter of Credit
Facility and shall be fully earned when due and payable
and shall not be subject to refund or rebate. Such fee
is not, and shall not be deemed to be, interest or a
charge for the use of money.
(b) Letter of Credit Fees.
(i) The Borrower agrees to pay to the Agent for
the ratable benefit of the Lenders letter of credit
fees equal to 1% per annum based on the average daily
aggregate Letter of Credit Amounts of all Letters of
Credit from time to time outstanding during the term
of this Agreement. Such fees shall be payable to the
Agent for the ratable benefit of the Lenders in
accordance with their respective Commitment
Percentages in arrears on the last day of each month,
shall be calculated according to the average daily
Letter of Credit Amount and shall be calculated based
on a year of 360 days and the actual number of days
elapsed.
(ii) The Borrower agrees to pay to the Agent for
its sole account letter of credit fees equal to 1/8%
per annum based on the average daily aggregate Letter
of Credit Amounts of all Letters of Credit from time
to time outstanding during the term of this
Agreement. Such fees shall be payable to the Agent
for its sole benefit in arrears on the last day of
each month, shall be calculated according to the
average daily Letter of Credit Amounts and shall be
calculated based on a year of 360 days and the actual
number of days elapsed.
(iii) The Borrower agrees to pay to the Agent, for
the account of NationsBank, the standard fees and
charges of NationsBank for issuing, administering,
amending, renewing, paying and cancelling letters of
credit, as and when assessed.
SECTION 5.3. Manner of Payment.
(a) Except as otherwise expressly provided in SECTION
9.1(b), each payment (including prepayments) by the
Borrower on account of the principal of or interest on
the Loans or of any other amounts payable to the Lenders
under this Agreement or any Note shall be made not later
than 12:00 noon (Atlanta time) on the date specified for
payment under this Agreement to the Agent, for the
account of the Lenders, at the Agent's Office, in
Dollars, in immediately available funds and shall be made
without any setoff, counterclaim or deduction whatsoever.
Any payment received after such time but before 1:00 p.m.
(Atlanta time) on such day shall be deemed a payment on
such date for the purposes of SECTION 13.1, but for all
other purposes shall be deemed to have been made on the
next succeeding Business Day.
(b) The Borrower hereby irrevocably authorizes each
Lender and each Affiliate of such Lender and each
participant herein to charge any account of the Borrower
maintained with such Lender or such Affiliate or
participant with such amounts as may be necessary from
time to time to pay any Secured Obligations (whether or
not owed to such Lender, Affiliate or participant) which
are not paid when due.
SECTION 5.4. General. If any payment under this Agreement or any
Note shall be specified to be made upon a day which is not a Business
Day, it shall be made on the next succeeding day which is a Business Day
and such extension of time shall in such case be included in computing
interest, if any, in accordance with such payment.
SECTION 5.5. Loan Accounts; Statements of Account.
(a) Each Lender shall open and maintain on its books
a loan account in the Borrower's name (each, a "Loan
Account" and collectively, the "Loan Accounts"). Each
such Loan Account shall show as debits thereto each Loan
made under this Agreement by such Lender to the Borrower
and as credits thereto all payments received by such
Lender and applied to principal of such Loan, so that the
balance of the loan account at all times reflects the
principal amount due such Lender from the Borrower.
(b) The Agent shall maintain on its books a control
account for the Borrower in which shall be recorded (i)
the amount of each disbursement made hereunder, (ii) the
amount of any principal or interest due or to become due
from the Borrower hereunder, and (iii) the amount of any
sum received by the Agent hereunder from the Borrower and
each Lender's ratable share therein.
(c) The entries made in the accounts pursuant to
SUBSECTIONS (a) and (b) shall be PRIMA FACIE evidence, in
the absence of manifest error, of the existence and
amounts of the obligations of the Borrower therein
recorded and in case of discrepancy between such
accounts, in the absence of manifest error, the accounts
maintained pursuant to SUBSECTION (b) shall be
controlling.
(d) The Agent will account separately to the Borrower
monthly with a statement of Loans, charges and payments
made to and by the Borrower pursuant to this Agreement,
and such accounts rendered by the Agent shall be deemed
final, binding and conclusive, save for manifest error,
unless the Agent is notified by the Borrower in writing
to the contrary within 30 days of the date the account to
the Borrower was so rendered. Such notice by the
Borrower shall be deemed an objection to only those items
specifically objected to therein. Failure of the Agent
to render such account shall in no way affect the rights
of the Agent or of the Lenders hereunder.
SECTION 5.6. Termination of Agreement. Subject to the provisions of
SECTION 5.14, the Borrower shall have the right, at any time, to
terminate this Agreement upon not less than 60 days' prior written
notice of its intention to terminate this Agreement, which notice shall
specify the effective date of such termination. Upon receipt of such
notice, the Agent shall promptly notify each Lender thereof. On the
date specific in such notice, such termination shall be effected,
PROVIDED, that the Borrower shall, on or prior to such date, pay to the
Agent, for the account of the Lenders, in same day funds, an amount
equal to all Secured Obligations then outstanding, including, without
limitation, all (i) accrued interest thereon, (ii) all accrued fees
provided for hereunder, and (iii) any amounts payable to the Lender
pursuant to SECTIONS 5.14, 16.2, 16.3 and 16.14, and, in addition
thereto, shall deliver to the Agent, in respect of each outstanding
Letter of Credit, either the applicable Supporting Letter of Credit or
the applicable Cash Collateral as provided in SECTION 3.9 or SECTION
4.9. Following a notice of termination as provided for in this SECTION
5.6 and upon payment in full of the amounts specified in this SECTION
5.6, this Agreement shall be terminated and the Agent, the Lenders and
the Borrower shall have no further obligations to any other party hereto
except for the obligations to the Agent and the Lenders pursuant to
SECTION 16.14 hereof.
SECTION 5.7. Making of Loans.
(a) Nature of Obligations of Lenders to Make Loans.
The obligations of the Lenders under this Agreement to
make the Loans are several and are not joint or joint and
several.
(b) Assumption by Agent. Subject to the provisions
of SECTION 5.8 and notwithstanding the occurrence or
continuance of a Default or Event of Default or other
failure of any condition to the making of Revolving
Credit Loans hereunder subsequent to the Revolving
Credit Loans to be made on the Effective Date, unless the
Agent shall have received notice from a Lender in
accordance with the provisions of SECTION 5.7(c) prior to
a proposed borrowing date that such Lender will not make
available to the Agent such Lender's ratable portion of
the amount to be borrowed on such date, the Agent may
assume that such Lender will make such portion available
to the Agent in accordance with SECTION 2.2(a), and the
Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding
amount. If and to the extent such Lender shall not make
such ratable portion available to the Agent, such Lender
and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount (the
"Make-Whole Amount"), together with interest thereon for
each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the
Agent at the Effective Interest Rate or, if lower,
subject to SECTION 5.1(e), the Maximum Rate; PROVIDED,
HOWEVER, if on the Interest Payment Date next following
the date on which any Lender pays interest to the Agent
at the Effective Rate or the Maximum Rate on a Make-Whole
Amount as aforesaid, the Borrower defaults in making the
interest payment due on such Interest Payment Date, then
the Agent shall reimburse such Lender for the excess, if
any, of the amount of interest so paid by such Lender on
the Make-Whole Amount and the amount of interest that
such Lender would have paid had the Lender been required
to pay interest on the Make-Whole Amount at the Federal
Funds Effective Rate. If such Lender shall repay to the
Agent such corresponding amount, the amount so repaid
shall constitute such Lender's Commitment Percentage of
the Loan made on such borrowing date for purposes of this
Agreement. The failure of any Lender to make its
Commitment Percentage of any Loan available shall not
(without regard to whether a Borrower shall have returned
the amount thereof to the Agent in accordance with this
SECTION 5.7) relieve it or any other Lender of its
obligation, if any, hereunder to make its Commitment
Percentage of such Loan available on such borrowing date,
but no Lender shall be responsible for the failure of any
other Lender to make its Commitment Percentage of such
Loan available on the borrowing date.
(c) Delegation of Authority to Agent. Without
limiting the generality of SECTION 15.1, each Lender
expressly authorizes the Agent to determine on behalf of
such Lender (i) any reduction or increase of advance
rates applicable to the Borrowing Base, so long as such
advance rates do not at any time exceed the rates set
forth in the Borrowing Base definition, (ii) the creation
or elimination of any reserves (other than the Regular
Letter of Credit Reserve and the JTI Letter of Credit
Reserve) against the Revolving Credit Facility and the
Borrowing Base and (iii) whether or not Inventory or
Receivables shall be deemed to constitute Eligible Cut
Rag Inventory, Eligible Committed Leaf Inventory,
Eligible Uncommitted Leaf Inventory or Eligible
Receivables. Such authorization may be withdrawn by the
Required Lenders by giving the Agent written notice of
such withdrawal signed by the Required Lenders; PROVIDED,
HOWEVER, that unless otherwise agreed by the Agent such
withdrawal of authorization shall not become effective
until the thirtieth Business Day after receipt of such
notice by the Agent. Thereafter, the Required Lenders
shall jointly instruct the Agent in writing regarding
such matters with such frequency as the Required Lenders
shall jointly determine. Unless and until the Agent
shall have received written notice from the Required
Lenders as to the existence of a Default, an Event of
Default or some other circumstance which would relieve
the Lenders of their respective obligations to make Loans
hereunder, which notice shall be in writing and shall be
signed by the Required Lenders and shall expressly state
that the Required Lenders do not intend to make available
to the Agent such Lenders, ratable share of Loans made
after the effective date of such notice, the Agent shall
be entitled to continue to make the assumptions described
in SECTION 5.7(b). After receipt of the notice described
in the preceding sentence, which notice shall become
effective on the third Business Day after receipt of such
notice by the Agent unless otherwise agreed by the Agent,
the Agent shall be entitled to make the assumptions
described in SECTION 5.7(b) as to any Loans as to which
it has not received a written notice to the contrary
prior to 11:00 a.m. (Atlanta time) on the Business Day
next preceding the day on which the Loan is to be made.
The Agent shall not be required to make any Loan as to
which it shall have received notice by a Lender of such
Lender's intention not to make its ratable portion of
such Loan available to the Agent. Any withdrawal of
authorization under this SECTION 5.7(c) shall not affect
the validity of any Loans made prior to the effectiveness
thereof.
SECTION 5.8. Settlement Among Lenders.
(a) Revolving Credit Loans. It is agreed that each
Lender's Net Outstandings are intended by the Lenders to
be equal at all times to such Lender's Commitment
Percentage of the aggregate principal amount of all
Revolving Credit Loans outstanding. Notwithstanding such
agreement, the several and not joint obligation of each
Lender to fund Revolving Credit Loans made in accordance
with the terms of this Agreement ratably in accordance
with such Lender's Commitment Percentage and each
Lender's right to receive its ratable share of principal
payments on Revolving Credit Loans in accordance with its
Commitment Percentage, the Lenders agree that in order to
facilitate the administration of this Agreement and the
Loan Documents that settlement among them may take place
on a periodic basis in accordance with the provisions of
this SECTION 5.8.
(b) Settlement Procedures as to Revolving Credit
Loans. To the extent and in the manner hereinafter
provided in this SECTION 5.8, settlement among the
Lenders as to Revolving Credit Loans may occur
periodically on Settlement Dates determined from time to
time by the Agent, which may occur before or after the
occurrence or during the continuance of a Default or
Event of Default and whether or not all of the conditions
set forth in SECTION 6.2 have been met. On each
Settlement Date payments shall be made by or to
NationsBank and the other Lenders in the manner provided
in this SECTION 5.8 in accordance with the Settlement
Report delivered by the Agent pursuant to the provisions
of this SECTION 5.8 in respect of such Settlement Date so
that as of each Settlement Date, and after giving effect
to the transactions to take place on such Settlement
Date, each Lender's Net Outstandings shall equal such
Lender's Commitment Percentage of the Revolving Credit
Loans outstanding.
(i) Selection of Settlement Dates. If the Agent
elects, in its discretion, but subject to the consent
of NationsBank, to settle accounts among the Lenders
with respect to principal amounts of Revolving Credit
Loans less frequently than each Business Day, then
the Agent shall designate periodic Settlement Dates
which may occur on any Business Day after the
Effective Date; PROVIDED, HOWEVER, that the Agent
shall designate as a Settlement Date any Business Day
which is an Interest Payment Date; and PROVIDED
FURTHER, that a Settlement Date shall occur at least
once during each seven-day period. The Agent shall
designate a Settlement Date by delivering to each
Lender a Settlement Report not later than 12:00 noon
(Atlanta time) on the proposed Settlement Date, which
Settlement Report will be in the form of EXHIBIT D
hereto and shall be with respect to the period
beginning on the next preceding Settlement Date and
ending on such designated Settlement Date.
(ii) Non-Ratable Loans and Payments. Between
Settlement Dates, the Agent shall request and
NationsBank may (but shall not be obligated to)
advance to the Borrower out of NationsBank's own
funds, the entire principal amount of any Revolving
Credit Loan requested or deemed requested pursuant to
SECTION 2.2(a) (any such Revolving Credit Loan being
referred to as a "Non-Ratable Loan"). The making of
each NonRatable Loan by NationsBank shall be deemed
to be a purchase by NationsBank of a 100%
participation in each other Lender's Commitment
Percentage of the amount of such Non-Ratable Loan.
All payments of principal, interest and any other
amount with respect to such NonRatable Loan shall be
payable to and received by the Agent for the account
of NationsBank. Upon demand by NationsBank, with
notice thereof to the Agent, each other Lender shall
pay to NationsBank, as the repurchase of such
participation, an amount equal to 100% of such
Lender's Commitment Percentage of the principal
amount of such Non-Ratable Loan. Any payments
received by the Agent between Settlement Dates which
in accordance with the terms of this Agreement are to
be applied to the reduction of the outstanding
principal balance of Revolving Credit Loans, shall be
paid over to and retained by NationsBank for such
application, and such payment to and retention by
NationsBank shall be deemed, to the extent of each
other Lender's Commitment Percentage of such payment,
to be a purchase by each such other Lender of a
participation in the Revolving Credit Loans
(including the repurchase of participations in
Non-Ratable Loans) held by NationsBank. Upon demand
by another Lender, with notice thereof to the Agent,
NationsBank shall pay to the Agent, for the account
of such other Lender, as a repurchase of such
participation, an amount equal to such other Lender's
Commitment Percentage of any such amounts (after
application thereof to the repurchase of any
participations of NationsBank in such other Lender's
Commitment Percentage of any Non-Ratable Loans) paid
only to NationsBank by the Agent.
(iii) Net Decrease in Outstandings. If on any
Settlement Date the increase, if any, in the dollar
amount of any Lender's Net Outstandings which is
required to comply with the first sentence of SECTION
5.8(a) is less than such Lender's Commitment
Percentage of amounts received by the Agent but paid
only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's
Commitment Percentage of such amounts to the increase
in such Lender's Net Outstandings, and NationsBank
shall pay to the Agent, for the account of such
Lender, the excess allocable to such Lender.
(iv) Net Increase in Outstandings. If on any
Settlement Date the increase, if any, in the dollar
amount of any Lender's Net outstandings which is
required to comply with the first sentence of SECTION
5.8(a) exceeds such Lender's Commitment Percentage of
amounts received by the Agent but paid only to
NationsBank since the next preceding Settlement Date,
such Lender and the Agent, in their respective
records, shall apply such Lender's Commitment
Percentage of such amounts to the increase in such
Lender's Net Outstandings, and such Lender shall pay
to the Agent, for the account of NationsBank, any
excess.
(v) No Change in Outstandings. If a Settlement
Report indicates that no Revolving Credit Loans have
been made during the period since the next preceding
Settlement Date, then such Lender's Commitment
Percentage of any amounts received by the Agent but
paid only to NationsBank shall be paid by NationsBank
to the Agent, for the account of such Lender. If a
Settlement Report indicates that the increase in the
dollar amount of a Lender's Net Outstandings which is
required to comply with the first sentence of SECTION
5.8(a) is exactly equal to such Lender's Commitment
Percentage of amounts received by the Agent but paid
only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's
Commitment Percentage of such amounts to the increase
in such Lender's Net Outstandings.
(vi) Return of Payments. If any amounts received
by NationsBank in respect of the Secured Obligations are
later required to be returned or repaid by NationsBank to
the Borrower or any other obligor or their respective
representatives or successors in interest, whether by
court order, settlement or otherwise, in excess of the
NationsBank's Commitment Percentage of all such amounts
required to be returned by all Lenders, each other Lender
shall, upon demand by NationsBank with notice to the
Agent, pay to the Agent for the account of NationsBank,
an amount equal to the excess of such Lender's Commitment
Percentage of all such amounts required to be returned by
all Lenders over the amount, if any, returned directly by
such Lender.
(vii) Payments to Agent, Lenders. (A) Payment by
any Lender to the Agent shall be made not later than 1:00
p.m. (Atlanta time) on the Business Day such payment is
due, PROVIDED that if such payment is due on demand by
another Lender, such demand is made on the paying Lender
not later than 10:00 a.m. (Atlanta time) on such Business
Day. Payment by the Agent to any Lender shall be made by
wire transfer, promptly following the Agent's receipt of
funds for the account of such Lender and in the type of
funds received by the Agent, PROVIDED that if the Agent
receives such funds at or prior to 1:00 p.m. (Atlanta
time), the Agent shall pay such funds to such Lender by
2:00 p.m. (Atlanta time) on such Business Day. If a
demand for payment is made after the applicable time set
forth above, the payment due shall be made by 2:00 p.m.
(Atlanta time) on the first Business Day following the
date of such demand.
(B) If a Lender shall, at any time, fail to
make any payment to the Agent required hereunder,
the Agent may, but shall not be required to,
retain payments that would otherwise be made to
such Lender hereunder and apply such payments to
such Lender's defaulted obligations hereunder, at
such time, and in such order, as the Agent may
elect in its sole discretion.
(C) With respect to the payment of any
funds under this SECTION 5.8(b), whether from the
Agent to a Lender or from a Lender to the Agent,
the party failing to make full payment when due
pursuant to the terms hereof shall, upon demand
by the other party, pay such amount together with
interest on such amount at the Federal Funds
Effective Rate.
(c) Settlement of Other Secured Obligations. All
other amounts received by the Agent on account of, or
applied by the Agent to the payment of, any Secured
Obligation owed to the Lenders (including, without
limitation, fees payable to the Lenders pursuant to
SECTIONS 5.2(a) and (b)(i) and proceeds from the sale of,
or other realization upon, all or any part of the
Collateral following an Event of Default) that are
received by the Agent on or prior to 1:00 p.m. (Atlanta
time) on a Business Day will be paid by the Agent to each
Lender on the same Business Day, and any such amounts
that are received by the Agent after 1:00 p.m. (Atlanta
time) will be paid by the Agent to each Lender on the
following Business Day. Unless otherwise stated herein,
the Agent shall distribute fees payable to the Lenders
pursuant to SECTIONS 5.2(a) and (b)(irratably to the
Lenders based on each Lender's Commitment Percentage and
shall distribute proceeds from the sale of, or other
realization upon, all or any part of the Collateral
following an Event of Default ratably to the Lenders
based on the amount of the Secured Obligations then owing
to each Lender.
SECTION 5.9. Notice of Conversion or Continuation of Loans.
Whenever the Borrower desires, subject to the provisions of SECTIONS
5.10 and 5.11, to convert an outstanding Revolving Credit Loan
consisting of Advances of one Type into a Revolving Credit Loan
consisting of Advances of a different Type provided for in this
Agreement or to continue an outstanding Revolving Credit Loan consisting
of Eurodollar Rate Advances for a subsequent Interest Period, the
Borrower shall notify the Agent in writing (which notice shall be
irrevocable) by telecopy not later than 11:00 a.m. on the date one
Business Day before the day on which a proposed conversion of a Loan
consisting of Eurodollar Rate Advances into a Loan consisting of Prime
Rate Advances is to be effective and two Business Days before the day on
which a proposed conversion of a Revolving Credit Loan consisting of
Prime Rate Advances into, or continuation of a Revolving Credit Loan
consisting of Eurodollar Rate Advances as, a Loan consisting of
Eurodollar Rate Advances is to be effective (and if the Loan to be
continued is a Loan consisting of Eurodollar Rate Advances, such
effective date shall be the last day of the Interest Period for the
Advances comprising such Loan). Each such notice (a "Notice of
Conversion or Continuation") shall (i) identify the Loan to be convert-
ed or continued, including the Type of Advances comprising such Loan,
the aggregate outstanding principal balance thereof and, in the case of
a Loan consisting of Eurodollar Rate Advances, the last day of the
Interest Period therefor, (ii) specify the effective date of such
conversion or continuation, (iii) specify the aggregate principal amount
of the Advances comprising such Loan to be converted or continued and,
if converted, the Type or Types of Advance into which conversion of such
principal amount or specified portions thereof is to be made, and (iv)
in the case of any conversion into or continuation as a Loan consisting
of Eurodollar Rate Advances, the Interest Period to be applicable
thereto, and shall be immediately followed by a written confirmation
thereof by the Borrower in substantially the form of EXHIBIT F (as such
form is modified from time to time by the Agent), properly completed or
otherwise in a form acceptable to the Agent, PROVIDED that if such
written confirmation differs in any respect from the action taken by
the Agent, the records of the Agent shall control absent manifest error.
SECTION 5.10. Conversion of Continuation. Provided that no Default
or Event of Default shall have occurred and be continuing (but subject
to the provisions of SECTIONS 5.9 and 5.11, the Borrower may request
that all or any part of any outstanding Advances of one Type comprising
a single Loan (a) be converted into Advances of any other Type provided
for in this Agreement, or (b) be continued as Advances of the same Type,
in the same aggregate principal amount, on any Business Day (which, in
the case of a conversion or continuation of a Loan comprised of
Eurodollar Rate Advances, shall be the last day of the Interest Period
applicable to such Advances), upon notice (which notice shall be
irrevocable) given in accordance with SECTION 5.9.
SECTION 5.11. Duration of Interest Periods; Maximum Number of
Eurodollar Rate Loans; Minimum Increments. Subject to the provisions of
the definition of Interest Period, the duration of each Interest Period
applicable to a Revolving Credit Loan comprised of Eurodollar Rate
Advances shall be as specified in the applicable Notice of Borrowing or
Notice of Conversion or Continuation. The Borrower may elect a
subsequent Interest Period to be applicable to the Eurodollar Rate
Advances comprising a Loan by giving a Notice of Conversion or
Continuation with respect to such Advances in accordance with SECTIONS
5.9 and 5.10. If the Agent does not receive a notice of election in
accordance with SECTION 5.9 with respect to the continuation of the
Eurodollar Rate Advances comprising a Loan within the applicable time
limits specified in said SECTION 5.9, or if, when such notice must be
given, a Default or Event of Default exists or Eurodollar Rate Advances
are not available, the Borrower shall be deemed to have elected to
convert such Eurodollar Rate Advances in whole into a Prime Rate
Advances on the last day of the then-current Interest Period therefor.
Notwithstanding the foregoing, the Borrower may not select an Interest
Period that would end, but for the provisions of the definition
"Interest Period," after the Termination Date. In no event shall the
total number of Loans consisting of Eurodollar Rate Advances outstanding
hereunder at any one time exceed six. Each Revolving Credit Loan
consisting of Eurodollar Rate Advances shall be in an amount of
$1,000,000 or an integral multiple of $500,000 in excess thereof.
SECTION 5.12. Changed Circumstances.
(a) Illegality. If the introduction of or any change in or in the
interpretation of (in each case, after the date hereof) any law or
regulation makes it unlawful, or any Governmental Authority asserts,
after the date hereof, that it is unlawful, for any Lender to perform
its obligations hereunder to make, fund or maintain Eurodollar Rate
Advances hereunder, the Agent shall so notify the Borrower of such event
and the right of the Borrower to select Eurodollar Rate Advances for any
subsequent Loan or in connection with any subsequent conversion or
continuation of Advances comprising any Loan shall be suspended until
the Agent shall notify the Borrower that the circumstances causing such
suspension no longer exist, and the Borrower shall forthwith prepay in
full all Eurodollar Rate Advances then outstanding, with interest
accrued thereon, unless the Borrower, within three Business Days of such
notice from the Agent, requests the conversion of all Eurodollar Rate
Advances then outstanding into Prime Rate Advances in accordance with
SECTIONS 5.9 and 5.11; PROVIDED, that if the date of such repayment or
proposed conversion is not the last day of the Interest Period
applicable to such Eurodollar Rate Advances, the Borrower shall also pay
any amount due pursuant to SECTION 5.13.
(b) Disruption in Market. If the Agent shall, at least one Business
Day before the date of any requested borrowing or the date of any
conversion or continuation of any existing Advances (each such requested
borrowing or Advances to be converted or continued, a "Pending Loan"),
notify the Borrower that the Eurodollar Rate for Eurodollar Rate
Advances comprising such Pending Loan will not adequately reflect the
cost to the Required Lenders of making or funding their Eurodollar
Rate Advances for such Pending Loan, the right of the Borrower to select
Eurodollar Rate Advances for such Pending Loan, any subsequent Loan or
in connection with any subsequent conversion or continuation of Advances
shall be suspended until the Agent shall notify the Borrower that the
circumstances causing such suspension no longer exist, and each Advance
comprising each Pending Loan and each such subsequent Loan requested to
be made, continued or converted shall be made or continued as or
converted into a Prime Rate Advance or a Loan consisting of Prime Rate
Advances.
(c) Increased Costs; Capital Adequacy. The Borrower agrees that if
any Applicable Law now or hereafter in effect and whether or not
presently applicable to any Lender or any request, guideline or
directive of any Governmental Authority (whether or not having the force
of law and whether or not failure to comply therewith would be lawful)
or the interpretation or administration thereof by any Governmental
Authority charged with administration thereof, shall (i)(A) impose,
affect, modify or deem applicable any reserve, special deposit, capital
maintenance or similar requirement against any Advance or Loan, (B)
impose on any Lender any other condition regarding any Advance or Loan,
this Agreement, any Note or the facilities provided hereunder or (C)
impose or increase a requirement by such Lender (or such Lender's
parent) to allocate capital resources to such Lender's Commitment to
make Advances hereunder which has or would have the effect of reducing
the return on such Lender's capital to a level below that which such
Lender could have achieved (taking into consideration such Lender's then
existing policies with respect to capital adequacy and assuming full
utilization of such Lender's capital) or (ii) subject to such Lender to
any taxes or similar charges (other than taxes on or measured by income
of such Lender) on the recording, registration, notarization or other
formalization of the Advances or Loans or the Notes, and the result of
any circumstance referred to in CLAUSE (i) or (ii) above shall be to
increase the cost to such Lender of making, funding or maintaining any
Advance or to reduce the amount of any sum receivable by such Lender or
such Lender's rate of return on capital with respect to any Loan to a
level below that which such Lender could have achieved but for such
imposition, modification or deemed applicability by an amount deemed
by such Lender (in the exercise of its reasonable judgment) to be
material, then, upon demand by such Lender, the Borrower shall
immediately pay to such Lender additional amounts which shall be suffi-
cient to compensate such Lender for such increased cost, tax or reduced
rate of return. The Borrower shall not be responsible to any Lender for
any such costs incurred by such Lender as a result of any of the
aforementioned events occurring more than 90 days prior to the
Borrower's receipt of notice of such claim from such Lender.
(d) Bank Certificate Conclusive. A certificate of a Lender claiming
compensation under SECTION 5.12(c) shall be conclusive in the absence of
manifest error. Such certificate shall set forth the nature of the
occurrence giving rise to such claim for compensation, the additional
amount or amounts to be paid to it hereunder and the method by which
such amounts were determined. In determining such amount, a Lender may
use any reasonable averaging and attribution methods, applied on a
non-discriminatory basis.
SECTION 5.13. Payments Not at End of Interest Period; Failure to
Borrow. If for any reason any payment of principal with respect to any
Eurodollar Rate Advance is made on any day other than the last day of
the Interest Period applicable to such Eurodollar Rate Advance or, after
having given a Notice of Borrowing pursuant to SECTION 2.2(a)(i) or a
Notice of Conversion or Continuation pursuant to SECTION 5.9 with
respect to any Loan to consist of Eurodollar Rate Advances, such Loan is
not made or is not converted or continued as a Loan consisting of
Eurodollar Advances due to the Borrower's failure to borrow or to
fulfill the applicable conditions set forth in ARTICLE 6, the Borrower
shall pay to the Agent, for the account of each Lender an amount
computed pursuant to the following formula:
L = (R - T) x P x D
360
L = amount payable to the Agent
R = interest rate on Eurodollar Rate Advance
T = effective interest rate per annum at which any readily
marketable bond or other obligation of the United States, selected at
the Agent's sole discretion, maturing on or near the last day of the
Interest Period applicable to such Advances and in approximately the
same amount as such Advance can be purchased by a Lender on the day of
such payment of principal or failure to borrow or convert or continue
P = the amount of principal prepaid or the amount of the requested Loan
D = the number of days remaining in the applicable Interest Period as of
the date of such payment or the number of days of the requested Interest
Period
The Borrower shall pay such amounts upon presentation by the Agent of a
statement setting forth the amount and the Agent's calculation thereof
pursuant hereto, which statement shall be deemed true and correct absent
manifest error.
SECTION 5.14. Prepayment Fee. In addition to the amounts, if any, payable
pursuant to SECTION 5.13, if the Borrower prepays the Loans in whole or in part
prior to May 2, 1998 for any reason with funds generated or received from
sources other than the internal generation of cash flow, the Borrower shall pay
to the Agent for the ratable benefit of the Lenders on such date of termination,
as liquidated damages and compensation for the costs of making funds available
to the Borrower under this Agreement, and not as a penalty, an amount equal to
$750,000 if such prepayment is made in Loan Year 1, $250,000 if such prepayment
is made in Loan Year 2 and $100,000 if such prepayment is made at any time after
Loan Year 2.
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1. Conditions Precedent to Revolving Credit Loans.
Notwithstanding any other provision of this Agreement, the initial
Revolving Credit Loan will not be made until the fulfillment of each of
the following conditions prior to or contemporaneously with the making
of the first to be made of such Loans:
(a) Financial Condition. Borrower shall have
delivered to Agent a balance sheet prepared in accordance
with GAAP and certified to by its Financial Officer in
form and substance satisfactory to Agent dated the
Effective Date, and setting forth valuations of the
Borrower's assets, together with a certificate executed
by Borrower's Financial Officer, in form and substance
satisfactory to Agent, certifying that as of the
Effective Date, after giving effect to the extension of
the initial Revolving Credit Loan and the payment of all
fees and expenses in connection with such transactions,
the fair saleable value of the Borrower's assets will
exceed the amount required to pay its debts as they
become absolute and matured (including contingent,
subordinated, unmatured and unliquidated liabilities),
that the Borrower is able and anticipates that it will be
able to meet its debts as they mature and has adequate
capital to conduct the business in which it is or
proposes to be engaged, together with attachments
demonstrating the basis of such conclusions.
(b) Fees. Borrower shall have paid all of the fees
payable on the Effective Date referred to herein.
(c) Security Interests. The Agent shall have
received satisfactory evidence that the Agent (for the
benefit of Lenders) has a valid and perfected first
priority security interest as of such date in all of the
Collateral, subject only to Permitted Liens.
(d) Closing Documents. The Agent shall have received
each of the following documents, all of which shall be
satisfactory in form and substance to the Agent and its
special counsel and to the Lenders:
(i) certified copies of the articles or
certificate of incorporation and bylaws of the
Borrower as in effect on the Effective Date,
(ii) certified copies of all corporate action,
including shareholder approval, if necessary, taken
by the Borrower to authorize the execution, delivery
and performance of this Agreement, the Loan Documents
and the borrowings under this Agreement,
(iii) certificates of incumbency and specimen
signatures with respect to each of the officers of
the Borrower authorized to execute and deliver this
Agreement and the Loan Documents on behalf of the
Borrower or other Person executing any document,
certificate or instrument to be delivered in
connection with this Agreement or the Loan Documents
and, in the case of the Borrower, to request
borrowings under this Agreement,
(iv) a certificate evidencing the good standing
of the Borrower in the jurisdiction of its
incorporation and in each other jurisdiction in which
it is required to be qualified as a foreign
corporation to transact its business as presently
conducted,
(v) copies of all financial statements referred
to in SECTION 7.1(o) and meeting the requirements
thereof,
(vi) a signed opinion of Narron, Holdford, Babb,
Harrison & Rhodes, P.A., counsel for the Borrower and
the Guarantors, substantially in the form of EXHIBIT
G, and of such local counsel for the Borrower as may
be required, opining as to such matters in connection
with the transactions contemplated by this Agreement
as the Agent or its special counsel may reasonably
request,
(vii) the Financing Statements duly executed and
delivered by the Borrower and acknowledgement copies
evidencing the filing of such Financing Statements in
each jurisdiction where such filing may be necessary
or appropriate to perfect the Security Interest,
(viii) a certification from the principal
officers of the Borrower as to such factual matters
as shall be requested by the Agent;
(ix) certificates or binders of insurance
relating to each of the policies of insurance
covering any of the Collateral together with loss
payable clauses which comply with the terms of
SECTION 9.8,
(x) a certificate of the President or a
Financial Officer of the Borrower stating that, to
the best of his knowledge and based on an examination
sufficient to enable him to make an informed
statement,
(A) all of the representations and
warranties made or deemed to be made under
this Agreement are true and correct as of the
Effective Date, after giving effect to the
Revolving Credit Loan to be made at such time
and the application of the proceeds thereof, and
(B) no Default or Event of Default exists,
(xi) a Borrowing Base Certificate, a Schedule of
Inventory and a Schedule of Receivables, prepared as
of the Effective Date,
(xii) landlord's or mortgagee's waiver and
consent agreements duly executed on behalf of each
landlord or mortgagee, as the case may be, of Real
Estate and any other real property on which any
Collateral is located,
(xiii) a letter, conforming to the requirements of
SECTION 10.8, from the Borrower to the Agent
requesting the initial Revolving Credit Loan and
specifying the method of disbursement,
(xiv) copies of each of the other Loan Documents
duly executed by the parties thereto, together with
evidence satisfactory to the Agent of the due
authorization and binding effect of each such Loan
Document on such party, and
(xv) such other documents and instruments as the
Agent or any Lender may reasonably request.
(e) Guarantor Documents. The Agent shall have
received each of the following documents, all of which
shall be satisfactory in form and substance to the Agent
and its special counsel and to the Lenders:
(i) certified copies of the articles or
certificate of incorporation and bylaws of each
Guarantor as in effect on the Effective Date,
(ii) certified copies of all corporate action,
including shareholder approval, if necessary,
taken by each Guarantor to authorize the
execution, delivery and performance of its
respective Guaranty Agreement,
(iii) certificates of incumbency and specimen
signatures with respect to each of the officers of
each Guarantor authorized to execute and deliver its
respective Guaranty Agreement on behalf of such
Guarantor,
(iv) a certificate evidencing the good standing
of each Guarantor in the jurisdiction of its
incorporation and in each other jurisdiction in
which it is required to be qualified as a foreign
corporation to transact its business as presently
conducted, and
(v) each Guaranty Agreement, duly executed and
delivered by each Guarantor,
(f) Notes. Each Lender shall have received a
Revolving Credit Note duly executed and delivered by the
Borrower, complying with the terms of Section 2.4.
(g) Subordination Agreement. The Agent shall have
received the Subordination Agreement, duly executed and
delivered by the Parent Guarantor.
(h) Other Security Documents. The Agent shall have
received each other Security Document, duly executed and
delivered by the Borrower.
(i) Availability. The Agent shall be provided with
evidence satisfactory to it, confirmed by a
certificate of a Financial Officer of the Borrower,
that as of the Effective Date the Availability is not
less than $7,000,000.
(j) Inventory Program. The Agent shall be satisfied
that the Borrower's inventory program to monitor and
report uncommitted inventory levels on a monthly basis is
in full force and effect.
(k) Non-U.S. Credit Facilities. The Agent shall have
received a certificate from the Parent Guarantor
certifying that the Parent Guarantor and its Subsidiaries
have credit facilities in place which are sufficient to
provide adequate funding and liquidity for the non-U.S.
tobacco business of the Parent Guarantor and its
Subsidiaries and the wool business of the Parent
Guarantor and its Subsidiaries. Such certificate shall
be satisfactory in form and substance to the Agents in
their sole discretion.
(l) NationsBank Debt/Kehaya Group Debt Agreements.
The Agent shall have received documents executed by
NationsBank (Carolinas) with respect to the NationsBank
(Carolinas) Debt and the Kehaya Group with respect to the
Kehaya Group Debt whereby NationsBank (Carolinas) and the
Kehaya Group (i) agree not to enforce their liens on the
property, plant and equipment of the Borrower for a
period of six (6) months after the receipt of written
notice by the Agent from NationsBank (Carolinas) or the
Kehaya Group of the occurrence of a default with respect
to the NationsBank Debt or the Kehaya Group Debt and (ii)
to subordinate the repayment of the NationsBank Debt and
the Kehaya Group Debt to the repayment of the Secured
Obligation except to the extent that the repayment of the
NationsBank Debt or the Kehaya Group Debt is paid from
the proceeds of the property, plant and equipment of the
Borrower.
(m) No Injunctions, Etc. No action, proceeding,
investigation, regulation or legislation shall have been
instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin,
restrain, or prohibit, or to obtain damages in respect
of, or which is related to or arises out of this
Agreement or the consummation of the transactions
contemplated hereby or which, in the Lenders' reasonable
discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement.
(n) Material Adverse Change. As of the Effective
Date, there shall not have occurred any change which is
materially adverse, in the Lenders' sole discretion, to
the assets, liabilities, businesses, operations,
condition (financial or otherwise) or prospects of the
Borrower from those presented by the unaudited financial
statements of the Borrower described in SECTION 7.1(o).
(o) Release of Security Interests. The Agent shall
have received evidence satisfactory to it of the release
and termination of all Liens other than Permitted Liens.
SECTION 6.2. All Loans; Letters of Credit. At the time of making
of each Loan, including the initial Revolving Credit Loan and all
subsequent Loans, and the issuance of each Letter of Credit:
(a) all of the representations and warranties made or
derived to be made under this Agreement shall be true and
correct at such time both with and without giving effect
to the Loan to be made at such time and the application
of the proceeds thereof,
(b) the corporate actions of the Borrower referred to
in SECTION 6.1(d)(ii) shall remain in full force and
effect and the incumbency of officers shall be as stated
in the certificates of incumbency delivered pursuant to
SECTION 6.1(d)(iii) or as subsequently modified and
reflected in a certificate of incumbency delivered to the
Agent, and
(c) each request or deemed request for any borrowing
hereunder shall be deemed to be a certification by the
Borrower to the Agent and the Lenders as to the matters
set forth in SECTION 6.2(a) and (b) and the Agent may,
without waiving either condition, consider the conditions
specified in SECTIONS 6.2(a) and (b) fulfilled and a
representation by the Borrower to such effect made, if no
written notice to the contrary is received by the Agent
prior to the making of the Loan then to be made.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1. Representations and Warranties. The Borrower
represents and warrants to the Agent and to the Lenders as follows:
(a) Organization; Power; Qualification. The Borrower
and each of its Subsidiaries is a corporation, duly
organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, having the
power and authority to own its properties and to carry on
its business as now being and hereafter proposed to be
conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of
its properties or the nature of its business requires
such qualification or authorization. The jurisdictions
in which each of the Borrower and each of its
Subsidiaries is qualified to do business as a foreign
corporation are listed on SCHEDULE 7.1(a).
(b) Capitalization. The outstanding capital stock of
the Borrower has been duly and validly issued and is
fully paid and nonassessable, and the number and owners
of such shares of capital stock of the Borrower are set
forth on SCHEDULE 7.1(b). The issuance and sale of the
Borrower's capital stock have been registered or
qualified under applicable federal and state securities
laws or are exempt therefrom.
(c) Subordinated Indebtedness. The Borrower has
delivered to the Agent a complete and correct copy of all
documents evidencing or relating to the Subordinated
Indebtedness, and each of the representations and
warranties given by the Borrower therein is true and
correct in all material respects. The subordination
provisions of the Subordination Agreement will be
enforceable against each party thereto. All of the
Secured Obligations constitute Senior Obligations (as
defined in the Subordination Agreement) entitled to the
benefits of subordination created under the Subordination
Agreement.
(d) Subsidiaries. SCHEDULE 7.1(d) correctly sets
forth the name of each Subsidiary of the Borrower, its
jurisdiction of incorporation, the name of its immediate
parent or parents, and the percentage of its issued and
outstanding securities owned by the Borrower or any other
Subsidiary of the Borrower and indicating whether such
Subsidiary is a Consolidated Subsidiary. Except as set
forth on SCHEDULE 7.1(d),
(i) no Subsidiary of the Borrower has issued any
securities convertible into shares of such
Subsidiary's capital stock or any options, warrants
or other rights to acquire any shares or securities
convertible into such shares, and
(ii) the outstanding stock and securities of each
Subsidiary of the Borrower are owned by the Borrower
or a Wholly-Owned Subsidiary of the Borrower, or by
the Borrower and one or more of its Wholly-Owned
Subsidiaries, free and clear of all Liens, warrants,
options and rights of others of any kind whatsoever.
The outstanding capital stock of each Subsidiary of the Borrower
has been duly and validly issued and is fully paid and nonassessable by
the issuer, and the number and owners of the shares of such capital
stock are set forth on SCHEDULE 7.1(d).
(e) Authorization of Agreement, Notes, Loan Documents
and Borrowing. The Borrower has the right and power, and
has taken all necessary action to authorize it, to
execute, deliver and perform this Agreement and each of
the Loan Documents in accordance with their respective
terms. This Agreement and each of the Loan Documents
have been duly executed and delivered by the duly
authorized officers of the Borrower and each is, or each
when executed and delivered in accordance with this
Agreement will be, a legal, valid and binding obligation
of the Borrower, enforceable in accordance with its
terms.
(f) Compliance of Agreement, Notes, Loan Documents
and Borrowing with Laws, Etc. Except as set forth on
SCHEDULE 7.1(f), the execution, delivery and performance
of this Agreement and each of the Loan Documents in
accordance with their respective terms and the borrowings
hereunder do not and will not, by the passage of time,
the giving of notice or otherwise,
(i) require any Governmental Approval or violate
any Applicable Law relating to the Borrower or any of
its Subsidiaries,
(ii) conflict with, result in a breach of or
constitute a default under the articles or
certificate of incorporation or by-laws of the
Borrower or any of its Subsidiaries,
(iii) conflict with, result in a breach of or
constitute a default under any material provisions
of any indenture, agreement or other instrument to
which the Borrower or any of its Subsidiaries is a
party or by which the Borrower, any of its
Subsidiaries or any of the Borrower's or such
Subsidiaries' property may be bound or any
Governmental Approval relating to the Borrower or
any of its Subsidiaries, or
(iv) result in or require the creation or
imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the
Borrower other than the Security Interest.
(g) Business. The Borrower is engaged principally in
the business of the sale of tobacco and tobacco related
products.
(h) Compliance with Law; Governmental Approvals.
(i) Except as set forth in SCHEDULE 7.1(h), the
Borrower and each of its Subsidiaries
(A) has all Governmental Approvals,
including permits relating to federal, state and
local Environmental Laws, ordinances and
regulations, required by any Applicable Law for
it to conduct its business, each of which is in
full force and effect, is final and not subject
to review on appeal and is not the subject of
any pending or, to the knowledge of the
Borrower, threatened attack by direct or
collateral proceeding, and
(B) is in compliance with each
Governmental Approval applicable to it and in
compliance with all other Applicable Laws
relating to it, including, without being limited
to, all Environmental Laws and all occupation-
al health and safety laws applicable to the
Borrower, any of its Subsidiaries or their
respective properties,
except for instances of noncompliance which would not,
singly or in the aggregate, cause a Default or Event of
Default or have a Materially Adverse Effect on the
Borrower or any of its Subsidiaries and in respect of
which reserves in respect of the Borrower's or such
Subsidiary's reasonably anticipated liability therefor
have been established on the books of the Borrower or
such Subsidiary, as applicable.
(ii) Without limiting the generality of the above,
except with respect to matters which could not reasonably
be expected to have, singly or in the aggregate, a
Materially Adverse Effect on the Borrower or any of its
Subsidiaries:
(A) the operations of the Borrower and each
of its Subsidiaries comply in all material
respects with all applicable environmental,
health and safety requirements of Applicable
Law;
(B) the Borrower and each of its
Subsidiaries has obtained all environmental,
health and safety permits necessary for its
operation, and all such permits are in good
standing and the Borrower and each of its
Subsidiaries is in compliance in all material
respects with all terms and conditions of such
permits;
(C) neither the Borrower nor any of its
Subsidiaries nor any of their respective present
or past property or operations are subject to
any order from or agreement with any public
authority or private party respecting (x) any
environmental, health or safety requirements of
Applicable Law, (y) any Remedial Action, or (z)
any liabilities and costs arising from the
Release or threatened Release of a Contaminant
into the environment;
(D) none of the operations of the Borrower
or of any of its Subsidiaries is subject to any
judicial or administrative proceeding alleging a
violation of any environmental, health or safety
requirement of Applicable Law;
(E) none of the present or past operations
of the Borrower or any of its Subsidiaries is
the subject of any investigation by any public
authority evaluating whether any Remedial Action
is needed to respond to a Release or threatened
Release of a Contaminant into the environment;
(F) neither the Borrower nor any of its
Subsidiaries has filed any notice under any
requirement of Applicable Law indicating past or
present treatment, storage or disposal of a
hazardous waste, as that term is defined under
40 CFR Part 261 or any state equivalent;
(G) neither the Borrower nor any of its
Subsidiaries has filed any notice under any
requirement of Applicable Law reporting a
Release of a Contaminant into the
environment;
(H) are in compliance in all material
respects with applicable Environmental Laws,
during the course of the Borrower's or any of
its Subsidiaries' ownership of or operations on
the Real Estate, there have been no (1)
generation, treatment, recycling, storage or
disposal of hazardous waste, as that term is
defined under 40 CFR Part 261 or any state
equivalent, (2) use of underground storage tanks
or surface impoundments, (3) use of
asbestos-containing materials, or (4) use of
polychlorinated biphenyls (PCB) used in
hydraulic oils, electrical transformers or other
equipment;
(I) neither the Borrower nor any of its
Subsidiaries has entered into any negotiations
or agreements with any Person (including,
without limitation, any prior owner of any of
the Real Estate or other property of the
Borrower or any of its Subsidiaries) relating to
any Remedial Action or environmental related
claim;
(J) neither the Borrower nor any of its
Subsidiaries has received any notice or claim to
the effect that it is or may be liable to any
Person as a result of the Release or threatened
Release of a Contaminant into the environment;
(K) neither the Borrower nor any of its
Subsidiaries has any material
contingent liability in connection with
any Release or threatened Release of
any Contaminant into the environment;
(L) no Environmental Lien has attached
to any of the Real Estate or other property of
the Borrower or of any of its Subsidiaries;
(M) the presence and condition of all
asbestos-containing material which is on or part
of the Real Estate (excluding any raw materials
used in the manufacture of products or products
themselves) do not violate in any material
respect any currently applicable requirement of
Applicable Law; and
(N) neither the Borrower nor any of
its Subsidiaries manufactures, distributes or
sells, and has never manufactured, distributed
or sold, products which contain
asbestos-containing material.
(iii) The Borrower has notified the Lenders of
the receipt by it or by any of its Subsidiaries of
any notice of a material violation of any
Environmental Laws and occupational health and safety
laws applicable to the Borrower, any of its
Subsidiaries or any of their respective properties.
(i) Title to Properties. Except as set forth in
SCHEDULE 7.1(i), the Borrower and each of its
Subsidiaries has valid and legal title to or leasehold
interest in all personal property, Real Estate owned and
other assets used in its business.
(j) Liens. Except as set forth in SCHEDULE 7.1(j),
none of the properties and assets of the Borrower or any
Subsidiary of the Borrower is subject to any Lien, except
Permitted Liens. Other than the Financing Statements, no
financing statement under the Uniform Commercial Code of
any State or other instrument evidencing a Lien which
names the Borrower or any Subsidiary of the Borrower as
debtor has been filed (and has not been terminated) in
any State or other jurisdiction, and neither the Borrower
nor any Subsidiary of the Borrower has signed any such
financing statement or other instrument or any security
agreement authorizing any secured party thereunder to
file any such financing statement or instrument, except
to perfect those Liens listed on SCHEDULE 7.1(j).
(k) Indebtedness and Guaranties. SCHEDULE 7.1(k) is a
complete and correct listing of all (i) Indebtedness for
Money Borrowed, and (ii) Guaranties of each of the
Borrower and each of its Subsidiaries. Each of the
Borrower and its Subsidiaries has performed and is in
compliance with all of the terms of such Indebtedness and
Guaranties and all instruments and agreements relating
thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both
would constitute such a default or event of default,
exists with respect to any such Indebtedness or Guaranty.
(l) Litigation. Except as set forth on SCHEDULE
7.1(l), there are no actions, suits or proceedings
pending (nor, to the knowledge of the Borrower, are there
any actions, suits or proceedings threatened, or any
reasonable basis therefor) against or in any other way
relating to or affecting the Borrower or such
Subsidiaries or any of the Borrower's or any of its
Subsidiaries, other properties in any court or before any
arbitrator of any kind or before or by any governmental
body, except actions, suits or proceedings of the
character normally incident to the kind of business
conducted by the Borrower or any of its Subsidiaries
which, if adversely determined, would not singly or in
the aggregate have a Materially Adverse Effect on the
Borrower or such Subsidiary, and there are no strikes or
walkouts in progress, pending or contemplated relating to
any labor contracts to which the Borrower or any of its
Subsidiaries is a party, relating to any labor contracts
being negotiated, or otherwise.
(m) Tax Returns and Payments. Except as set forth on
SCHEDULE 7.1(m), all United States federal, state and
local as well as foreign national, provincial and local
and other tax returns of the Borrower and each of its
Subsidiaries required by Applicable Law to be filed have
been duly filed, and all United States federal, state and
local and foreign national, provincial and local and
other taxes, assessments and other governmental charges
or levies upon the Borrower and each of its Subsidiaries
and the Borrower's and any of its Subsidiaries' property,
income, profits and assets which are due and payable have
been paid, except any such nonpayment which is at the
time permitted under SECTION 10.6. The charges,
accruals and reserves on the books of the Borrower and
each of its Subsidiaries in respect of United States
federal, state and local and foreign national, provincial
and local taxes for all fiscal years and portions thereof
since the organization of the Borrower are in the
judgment of the Borrower adequate, and the Borrower knows
of no reason to anticipate any additional assessments for
any of such years which, singly or in the aggregate,
might have a Materially Adverse Effect on the Borrower.
(n) Burdensome Provisions. Neither the Borrower nor
any of its Subsidiaries is a party to any indenture,
agreement, lease or other instrument, or subject to any
charter or corporate restriction, Governmental Approval
or Applicable Law compliance with the terms of which
might have a Materially Adverse Effect on the Borrower or
any of its Subsidiaries.
(o) Financial Condition. The financial statements and
financial information provided to the Lenders, consisting
of, among other things, (i) an audited consolidated
balance sheet of the Borrower 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
Borrower as of such date; such financial statements were
prepared in accordance with GAAP 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 Borrower and the financial statements referenced
above; and (ii) an internally prepared consolidated
balance sheet of the Borrower and WAA dated as of
December 31, 1994, together with related consolidated
statements of income, retained earnings and cash flows,
fairly represent the financial condition of the Borrower
and WAA as of such date; such financial statements were
prepared in accordance with GAAP applied on a consistent
basis; and since the dates 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 Borrower or WAA and the financial statements
referenced above.
(p) Adverse Change. Since the date of the last
financial statements of the Borrower delivered to the
Agent pursuant to SECTION 7.1(o)(i),
(i) no material adverse change has occurred in
the business, assets, liabilities, financial
condition, results of operations or business
prospects of the Borrower, and
(ii) no event has occurred or failed to occur
which has had, or may have, singly or in the
aggregate, a Materially Adverse Effect on the
Borrower.
(q) ERISA.
(i) Neither the Borrower nor any Related Company
maintains or contributes to any Benefit Plan other
than those listed on SCHEDULE 7.1(q).
(ii) No Benefit Plan has been terminated or
partially terminated, and no Multiemployer Plan is
insolvent or in reorganization, nor have any
proceedings been instituted to terminate any Benefit
Plan or to reorganize any Multiemployer Plan.
(iii) Neither the Borrower nor any Related Company
has withdrawn from any Benefit Plan or Multiemployer
Plan, nor has a condition occurred which if continued
would result in a withdrawal.
(iv) Neither the Borrower nor any Related Company
has incurred any withdrawal liability, including
contingent withdrawal liability, to any
Multiemployer Plan pursuant to Title IV of ERISA.
(v) Neither the Borrower nor any Related Company
has incurred any liability to the PBGC other than for
required insurance premiums which have been paid when
due.
(vi) No Reportable Event has occurred with
respect to a Plan.
(vii) No Benefit Plan has an "accumulated funding
deficiency" (whether or not waived) as defined in
Section 302 of ERISA or in Section 412 of the
Internal Revenue Code.
(viii) Each Plan is in substantial compliance with
ERISA, and neither the Borrower nor any Related
Company has received any communication from a
governmental agency asserting that a Plan is not in
compliance with ERISA.
(ix) Each Plan which is intended to be a
qualified Plan has been determined by the IRS to be
qualified under Section 401(a) of the Internal
Revenue Code as currently in effect or will be
submitted to the IRS for such determination prior to
the end of the remedial amendment period under
Section 401(b) of the Internal Revenue Code and the
regulations promulgated thereunder and neither the
Borrower nor any Related Company knows or has reason
to know why each such Plan should not continue to be
so qualified, and each trust related to such Plan
that has been submitted to the IRS for deter-
mination of exempt status has been determined to be
exempt from federal income tax under Section 501(a)
of the Internal Revenue Code or will be submitted to
the IRS for a determination of exempt status.
(x) Except as provided on SCHEDULE 7.1(q),
neither the Borrower nor any Related Company
maintains or contributes to any employer welfare
benefit plan within the meaning of Section 3(1) of
ERISA which provides benefits to employees after
termination of employment other than as required by
Section 601 of ERISA.
(xi) Schedule B to the most recent annual report
filed with the IRS with respect to each Benefit Plan
and furnished to the Lender is complete and accurate.
Since the date of each such Schedule B, there has
been no adverse change in funding status or financial
condition of the Benefit Plan relating to such
Schedule B.
(xii) Neither the Borrower nor any Related
Company has failed to make a required installment
under Subsection (m) of Section 412 of the Internal
Revenue Code or any other payment required under
Section 412 of the Internal Revenue Code on or before
the due date for such installment or other payment.
(xiii) Neither the Borrower nor any Related
Company is required to provide security to a Benefit
Plan under Section 401(a)(29) of the Internal Revenue
Code due to a Benefit Plan amendment that results in
an increase in current liability for the plan year.
(xiv) Neither the Borrower, nor any Related
Company, nor any other "party-in-interest" or
"disqualified person" has engaged in a nonexempt
"prohibited transaction," as such terms are defined in
Section 4975 of the Internal Revenue Code and Section
406 of ERISA, in connection with any Plan or has taken
or failed to take any action which would constitute or
result in a Termination Event.
(xv) Neither the Borrower nor any Related
Company has failed to comply with the health care
continuation coverage requirements of Section 4980B of
the Internal Revenue Code in respect of employees and
former employees of such Borrower or such Related
Company and their dependents and beneficiaries which
alone or in the aggregate would subject such Borrower
or such Related Company to any material liability.
(xvi) Neither the Borrower nor any Related
Company has (i) failed to make a required contribution
or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or
4205 of ERISA from a Multiemployer Plan. Except as
provided on SCHEDULE 7.1(q), to the best knowledge of
the Borrower after due inquiry, neither the Borrower
nor any Related Company shall have any obligation to
(A) make contributions to any Multiemployer Plan on or
after the Effective Date, or (B) pay withdrawal
liability to any Multiemployer Plan in an amount in
excess of a "de minimis amount" as such term is
defined in Section 4209 of ERISA.
(r) Absence of Defaults. Neither the Borrower nor
any of its Subsidiaries is in default under its articles
or certificate of incorporation or by-laws and no event
has occurred, which has not been remedied, cured or
waived,
(i) which constitutes a Default or an Event
of Default, or
(ii) which constitutes, or which with the
passage of time or giving of notice or both
would constitute, a default or event of default
by the Borrower or any of its Subsidiaries under
any material agreement (other than this
Agreement) or judgment, decree or order to which
the Borrower or any of its Subsidiaries is a
party or by which the Borrower, any of its
Subsidiaries or any of the Borrower's or any of
its Subsidiaries' properties may be bound or
which would require the Borrower or any of its
Subsidiaries to make any payment under any
thereof prior to the scheduled maturity date
therefor, except, in the case only of any such
agreement, for alleged defaults which are being
contested in good faith by appropriate
proceedings and with respect to which reserves
in respect of the Borrower's or such
Subsidiary's reasonably anticipated liability
have been established on the books of the
Borrower or such Subsidiary.
(s) Accuracy and Completeness of Information.
(i) All written information, reports and
other papers and data produced by or on behalf
of the Borrower and furnished to the Agent or
any Lender were, at the time the same were so
furnished, complete and correct in all material
respects, to the extent necessary to give the
recipient a true and accurate knowledge of the
subject matter. No fact is known to the
Borrower which has had, or may in the future
have (so far as the Borrower can foresee), a
Materially Adverse Effect upon the Borrower or
any of its Subsidiaries which has not been set
forth in the financial statements or disclosure
delivered prior to the Effective Date, in each
case referred to in SECTION 7.1(o), or in such
written information, reports or other papers or
data or otherwise disclosed in writing to the
Agent and the Lenders prior to the Agreement
Date. No document furnished or written
statement made to the Agent or any Lender by the
Borrower in connection with the negotiation,
preparation or execution of this Agreement or
any of the Loan Documents contains or will
contain any untrue statement of a fact material
to the creditworthiness of the Borrower or omits
or will omit to state a material fact necessary
in order to make the statements contained
therein not misleading.
(ii) The Borrower has no reason to believe
that any document furnished or written statement
made to the Agent or any Lender by any Person
other than the Borrower in connection with the
negotiation, preparation or execution of this
Agreement or any of the Loan Documents contained
any incorrect statement of a material fact or
omitted to state a material fact necessary in
order to make the statements made, in light of
the circumstances under which they were made,
not misleading.
(t) Solvency. In each case after giving effect to the
Indebtedness represented by the Loans outstanding and to
be incurred, the transactions contemplated by this
Agreement, the Borrower and each of its Subsidiaries is
solvent, having assets of a fair salable value which
exceeds the amount required to pay its debts as they
become absolute and matured (including contingent,
subordinated, unmatured and unliquidated liabilities),
and the Borrower and each of its Subsidiaries is able to
and anticipates that it will be able to meet its debts as
they mature and has adequate capital to conduct the
business in which it is or proposes to be engaged.
(u) Receivables.
(i) Status.
(A) Each Receivable reflected in the
computations included in any Borrowing Base
Certificate meets the criteria enumerated in the
definition of Eligible Receivables, except as
disclosed in such Borrowing Base Certificate or
as disclosed in a timely manner in a subsequent
Borrowing Base Certificate or otherwise in
writing to the Agent.
(B) The Borrower has no knowledge of any
fact or circumstance not disclosed to the Lender
in a Borrowing Base Certificate or otherwise in
writing which would impair the validity or
collectibility of any Receivable of $5,000 or
more or of Receivables which (regardless of the
individual amount thereof) aggregate $50,000 or
more.
(ii) Chief Executive Office. The chief executive
office of the Borrower and the books and records
relating to the Receivables are located at the
address or addresses set forth on SCHEDULE 7.1(u);
the Borrower has not maintained its chief executive
office or books and records relating to any
Receivables at any other address at any time during
the five years immediately preceding the Agreement
Date except as disclosed on SCHEDULE 7.1 (u).
(v) Inventory.
(i) Schedule of Inventory. All Inventory
included in any Schedule of Inventory or Borrowing
Base Certificate delivered to the Lender pursuant to
SECTION 9.12 meets the criteria enumerated in the
definitions of Eligible Committed Leaf Inventory,
Eligible Cut Rag Inventory and Eligible Uncommitted
Leaf Inventory, except as disclosed in such Schedule
of Inventory or Borrowing Base Certificate or in a
subsequent Schedule of Inventory or Borrowing Base
Certificate, or as otherwise specifically disclosed
in writing to the Agent.
(ii) Condition. All Inventory is in good
condition, meets all standards imposed by any
governmental agency, or department or division
thereof, having regulatory authority over such goods,
their use or sale, and is currently either usable or
salable in the normal course of the Borrower's
business, except to the extent reserved against in
the financial statements referred to in SECTION
7.1(o) or delivered pursuant to ARTICLE 11 or as
disclosed on a Schedule of Inventory delivered to the
Agent pursuant to SECTION 9.12(b).
(iii) Location. All Inventory is located on the
premises set forth on SCHEDULE 7.1(v) or is Inventory
in transit to one of such locations, except as
otherwise disclosed in writing to the Agent; the
Borrower has not, in the last year, located such
Inventory at premises other than those set forth on
SCHEDULE 7.1(v).
(w) Equipment. All Equipment is in good order and
repair in all material respects and is located on the
premises set forth on SCHEDULE 7.1(w).
(x) Real Property. The Borrower owns no Real Estate
and leases no Real Estate other than that described on
SCHEDULE 7.1(x) and other than Real Estate acquired or
leased after the Effective Date for which the Borrower
has complied with the requirements of SECTION 9.14.
(y) Corporate and Fictitious Names. Except as
otherwise disclosed on SCHEDULE 7.1(y), during the five-
year period preceding the Agreement Date, neither the
Borrower nor any predecessor thereof has been known as or
used any corporate or fictitious name other than the
corporate name of the Borrower on the Effective Date.
(z) Federal Reserve Regulations. Neither the
Borrower nor any of its Subsidiaries is engaged and none
will engage, principally or as one of its important
activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock"
(as each of the quoted terms is defined or used in
Regulations G and U of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any
of the Loans will be used for so purchasing or carrying
margin stock or, in any event, for any purpose which
violates, or which would be inconsistent with, the
provisions of Regulation G, T, U or X of such Board of
Governors. If requested by the Agent or any Lender, the
Borrower will furnish to the Agent and the Lenders a
statement or statements in conformity with the
requirements of said Regulation G, T, U or X to the
foregoing effect.
(aa) Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is
defined or used in the Investment Company Act of 1940, as
amended).
(bb) Employee Relations. The Borrower and each of
its Subsidiaries has a stable work force in place and is
not, except as set forth on SCHEDULE 7.1(bb), party to
any collective bargaining agreement nor has any labor
union been recognized as the representative of the
Borrower's or any of its Subsidiaries' employees, and the
Borrower knows of no pending, threatened or contemplated
strikes, work stoppage or other labor disputes involving
the Borrower's or any of its Subsidiaries' employees.
(cc) Proprietary Rights. SCHEDULE 7.1(cc) sets forth
a correct and complete list of all of the Proprietary
Rights. None of the Proprietary Rights is subject to any
licensing agreement or similar arrangement except as set
forth on SCHEDULE 7.1(cc) or as entered into in the sale
or distribution of the Borrower's Inventory in the
ordinary course of business. To the best of the
Borrower's knowledge, none of the Proprietary Rights
infringes on or conflicts with any other Person's
property, and no other Person's property infringes on or
conflicts with the Proprietary Rights. The Proprietary
Rights described on SCHEDULE 7.1(cc) constitute all of
the property of such type necessary to the current and
anticipated future conduct of the Borrower's business.
(dd) Trade Names. All trade names or styles under
which the Borrower sells Inventory or Equipment or
creates Receivables, or to which instruments in payment
of Receivables are made payable, are listed on SCHEDULE
7.1(dd).
SECTION 7.2. Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this ARTICLE 7 and all
statements contained in any certificate, financial statement, or other
instrument, delivered by or on behalf of the Borrower pursuant to or in
connection with this Agreement or any of the Loan Documents (including,
but not limited to, any such representation, warranty or statement made
in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All
representations and warranties made under this Agreement shall be made
or deemed to be made at and as of the Agreement Date, at and as of the
Effective Date and at and as of the date of each Loan, except that
representations' and warranties which, by their terms are applicable
only to one such date shall be deemed to be made only at and as of such
date. All representations and warranties made or deemed to be made
under this Agreement shall survive and not be waived by the execution
and delivery of this Agreement, any investigation made by or on behalf
of the Lender or any borrowing hereunder.
ARTICLE 8
SECURITY INTEREST
SECTION 8.1. Security Interest.
(a) To secure the payment, observance and performance of the
Secured Obligations, the Borrower hereby mortgages, pledges and assigns
all of the Collateral to the Agent, for the benefit of itself as Agent
and the Lenders, and grants to the Agent, for the benefit of itself as
Agent and the Lenders, a continuing security interest in, and a
continuing Lien upon, all of the Collateral.
(b) As additional security for all of the Secured Obligations, the
Borrower grants to the Agent, for the benefit of itself as Agent and the
Lenders, a security interest in, and assigns to the Agent, for the
benefit of itself as Agent and the Lenders, all of the Borrower's right,
title and interest in and to, any deposits or other sums, at any time
credited by or due from each Lender and each Affiliate of a Lender to
the Borrower, or credited by or due from any participant of any Lender
to the Borrower, with the same rights therein as if the deposits or
other sums were credited by or due from such Lender. The Borrower
hereby authorizes each Lender and each Affiliate of such Lender and each
participant to pay or deliver to the Agent, for the account of the
Lenders, without any necessity on the Agent's or any Lender's part to
resort to other security or sources of reimbursement for the Secured
Obligations, at any time during the continuation of any Event of Default
or in the event that the Agent, on behalf of the Lenders, should make
demand for payment hereunder and without further notice to the Borrower
(such notice being expressly waived), any of the aforesaid deposits
(general or special, time or demand, provisional or final) or other sums
for application to any Secured Obligation, irrespective of whether any
demand has been made or whether such Secured Obligation is mature, and
the rights given the Agent, the Lenders, their Affiliates and partici-
pants hereunder are cumulative with such Person's other rights and
remedies, including other rights of setoff. The Agent will promptly
notify the Borrower of its receipt of any such funds for application to
the Secured Obligations, but failure to do so will not affect the
validity or enforceability thereof. The Agent may give notice of the
above grant of a security interest in and assignment of the aforesaid
deposits and other sums, and authorization, to, and make any suitable
arrangements with, any Lender, any such Affiliate of any Lender or
participant for effectuation thereof, and the Borrower hereby
irrevocably appoints Agent as its attorney to collect any and all such
deposits or other sums to the extent any such payment is not made to the
Agent or any Lender by such Lender, Affiliate or participant.
(c) As additional security for all of the Secured Obligations, the
Borrower hereby assigns to the Agent for the ratable benefit of the
Lenders its rights to proceeds arising under any Foreign Receivable
Support Letter of Credit now existing or hereafter arising. The Borrower
shall deliver to the Agent all original Foreign Receivable Support
Letters of Credit. Immediately upon its receipt of any Foreign
Receivable Support Letter of Credit, and prior to the presentation of
any draw thereunder, the Borrower shall provide to the issuer of each
such Foreign Receivable Support Letter of Credit (i) written
notification, with a conformed copy to the Agent, that the Borrower has
assigned such Foreign Receivable Support Letter of Credit to the Agent,
providing such issuer sufficient information to identify reasonably the
credit so assigned, and (ii) requesting and directing the issuer to pay
the Agent as assignee upon any draw under such Foreign Receivable
Support Letter of Credit. For the purposes of this Agreement, the term
"Foreign Receivable Support Letter of Credit" shall mean any letter of
credit issued in favor of the Borrower as beneficiary to support the
payment of any receivable due from a foreign entity or person.
SECTION 8.2. Continued Priority of Security Interest.
(a) The Security Interest granted by the Borrower shall at all
times be valid, perfected and enforceable against the Borrower and all
third parties in accordance with the terms of this Agreement, as
security for the Secured Obligations, and the Collateral shall not at
any time be subject to any Liens that are prior to, on a parity with or
junior to the Security Interest, other than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Agent may
reasonably request, so as at all times to maintain the validity,
perfection, enforceability and rank of the Security Interest in the
Collateral in conformity with the requirements of SECTION 8.2(a), or to
enable the Agent and the Lenders to exercise or enforce their rights
hereunder, including, but not limited to:
(i) paying all taxes, assessments and other claims
lawfully levied or assessed on any of the Collateral,
except to the extent that such taxes, assessments and
other claims constitute Permitted Liens,
(ii) obtaining, after the Agreement Date, landlords'
and mortgagees, releases, subordinations or waivers, and
using all reasonable efforts to obtain mechanics'
releases, subordinations or waivers,
(iii) delivering to the Agent, for the benefit of the
Lenders, endorsed or accompanied by such instruments of
assignment as the Agent may specify, and stamping or
marking, in such manner as the Agent may specify, any and
all chattel paper, instruments, letters and advices of
guaranty and documents evidencing or forming a part of the
Collateral, and
(iv) executing and delivering financing statements,
pledges, designations, hypothecations, notices and
assignments in each case in form and substance
satisfactory to the Agent relating to the creation,
validity, perfection, maintenance or continuation of the
Security Interest under the Uniform Commercial Code or
other Applicable Law.
(c) The Agent is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of
or in the name of the Borrower for any purpose described in SECTION
8.2(b). The Agent will give the Borrower notice of the filing of any
such statements or amendments, which notice shall specify the locations
where such statements or amendments were filed. A carbon, photographic,
xerographic or other reproduction of this Agreement or of any of the
Security Documents or of any financing statement filed in connection
with this Agreement is insufficient as a financing statement.
(d) The Borrower shall mark its books and records as directed by
the Agent and as may be necessary or appropriate to evidence, protect
and perfect the Security Interest and shall cause its financial
statements to reflect the Security Interest.
ARTICLE 9
COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided in SECTION 16.11:
SECTION 9.1. Collection of Receivables.
(a) At the request of the Agent, the Borrower will
cause all monies, checks, notes, drafts and other
payments relating to or constituting proceeds of trade
accounts receivable to be forwarded to a Lockbox for
deposit in an Agency Account in accordance with the
procedures set out in the corresponding Agency Account
Agreement. The Borrower will promptly cause all monies,
checks, notes, drafts and other payments relating to or
constituting proceeds of other Receivables, of any other
Collateral and of any trade accounts receivable that are
not forwarded to a Lockbox, to be transferred to or
deposited in an Agency Account. In particular, the
Borrower will:
(i) advise each Account Debtor on trade accounts
receivable to address all remittances with respect to
amounts payable on account thereof to a specified
Lockbox,
(ii) advise each other Account Debtor that makes
payment to the Borrower by wire transfer, automated
clearinghouse transfer or similar means to make
payment directly to an Agency Account, and
(iii) stamp all invoices relating to trade
accounts receivable with a legend satisfactory to the
Agent indicating that payment is to be made to the
Borrower via a specified Lockbox.
(b) The Borrower and the Agent shall cause all
collected balances in each Agency Account to be
transmitted daily by wire transfer, depository transfer
check or other means in accordance with the procedures
set forth in the corresponding Agency Account Agreement,
to the Agent at the Agent's Office:
(i) for application, on account of the Secured
Obligations, as provided in SECTIONS 2.3(c), 13.2,
and 13.3, such credits to be entered as of the
Business Day they are received if they are received
prior to 1:30 p.m. (Atlanta time) and to be
conditioned upon final payment in cash or solvent
credits of the items giving rise to them, and
(ii) with respect to the balance, so long as no
Default or Event of Default has occurred and is
continuing, for transfer by wire transfer or
depository transfer check to a Controlled
Disbursement Account.
(c) Any monies, checks, notes, drafts or other
payments referred to in SUBSECTION (a) of this SECTION
9.1 which, notwithstanding the terms of such
subsection, are received by or on behalf of the
Borrower will be held in trust for the Agent and will
be delivered to the Agent or a Clearing Bank, as
promptly as possible, in the exact form received,
together with any necessary endorsements for
application by the Agent directly to the Secured
Obligations or, if applicable, for deposit in the
Agency Account maintained with a Clearing Bank and
processing in accordance with the terms of the
corresponding Agency Account Agreement.
SECTION 9.2. Verification and Notification. The Agent shall have
the right at any time and from time to time,
(a) in the name of the Agent, the Lenders or in the
name of the Borrower, to verify the validity, amount or
any other matter relating to any Receivables by mail,
telephone, telegraph or otherwise,
(b) to review, audit and make extracts from all
records and files related to any of the Receivables, and
(c) to notify the Account Debtors or obligors under
any Receivables of the assignment of such Receivables to
the Agent, for the benefit of the Lenders, and to direct
such Account Debtor or obligors to make payment of all
amounts due or to become due thereunder directly to the
Agent, for the account of the Lenders, and, upon such
notification and at the expense of the Borrower, to
enforce collection of any such Receivables and to adjust,
settle or compromise the amount or payment thereof, in
the same manner and to the same extent as the Borrower
might have done.
SECTION 9.3. Disputes, Returns and Adjustments.
(a) In the event any amounts due and owing under any
Receivable for an amount in excess of $1,000,000 are in
dispute between the Account Debtor and the Borrower, the
Borrower shall provide the Agent with prompt written
notice thereof.
(b) The Borrower shall notify the Agent promptly of
all returns and credits in excess of $50,000 in respect
of any Receivable, which notice shall specify the
Receivable affected.
(c) The Borrower may, in the ordinary course of
business unless a Default or an Event of Default has
occurred and is continuing, grant any extension of time
for payment of any Receivable or compromise, compound or
settle the same for less than the full amount thereof, or
release wholly or partly any Person liable for the
payment thereof, or allow any credit or discount
whatsoever therein; PROVIDED that (i) no such action
results in the reduction of more than $50,000 in the
amount payable with respect to any Receivable or of more
than $250,000 with respect to all Receivables in any
fiscal year of the Borrower (in each case, excluding the
allowance of credits or discounts generally available to
Account Debtors in the ordinary course of the Borrower's
business and appropriate adjustments to the accounts of
Account Debtors in the ordinary course of business), and
(ii) the Agent is promptly notified of the amount of such
adjustments and the Receivable(s) affected thereby.
SECTION 9.4. Invoices.
(a) The Borrower will not use any invoices other than
invoices in the form delivered to the Agent prior to the
Agreement Date without giving the Agent 30 days, prior
notice of the intended use of a different form of invoice
together with a copy of such different form.
(b) Upon the request of the Agent, the Borrower shall
deliver to the Agent, at the Borrower's expense, copies
of customers, invoices or the equivalent, original
shipping and delivery receipts or other proof of
delivery, customers' statements, customer address
lists, the original copy of all documents, including,
without limitation, repayment histories and present
status reports, relating to Receivables and such other
documents and information relating to the Receivables as
the Agent shall specify.
SECTION 9.5. Delivery of Instruments. In the event any Receivable
is at any time evidenced by a promissory note, trade acceptance or any
other instrument for the payment of money, the Borrower will immediately
thereafter deliver such instrument to the Agent, appropriately endorsed
to the Agent, for the benefit of the Lenders.
SECTION 9.6. Sales of Inventory. All sales of Inventory will be
made in compliance with all requirements of Applicable Law.
SECTION 9.7. Ownership and Defense of Title.
(a) Except for Permitted Liens, the Borrower shall at
all times be the sole owner or lessee of each and every
item of Collateral and shall not create any lien on, or
sell, lease, exchange, assign, transfer, pledge,
hypothecate, grant a security interest or security title
in or otherwise dispose of, any of the Collateral or any
interest therein, except for sales of Inventory in the
ordinary course of business, for cash or on open account
or on terms of payment ordinarily extended to its
customers, and except for dispositions that are otherwise
expressly permitted under this Agreement. The inclusion
of "proceeds" of the Collateral under the Security
Interest shall not be deemed a consent by the Agent or
the Lenders to any other sale or other disposition of any
part or all of the Collateral.
(b) The Borrower shall defend its title or leasehold
interest in and to, and the Security Interest in, the
Collateral against the claims and demands of all Persons.
SECTION 9.8. Insurance.
(a) The Borrower shall at all times maintain
insurance on the Inventory against loss or damage by
fire, theft (excluding theft by employees), burglary,
pilferage, loss in transit and such other hazards as the
Agent shall reasonably specify, in amounts not to
exceed those obtainable at commercially reasonable rates
and under policies issued by insurers acceptable to the
Agent in the exercise of its reasonable judgment. All
premiums on such insurance shall be paid by the Borrower
and copies of the policies delivered to the Agent. The
Borrower will not use or permit the Inventory to be used
in violation of Applicable Law or in any manner which
might render inapplicable any insurance coverage.
(b) All insurance policies required under SECTION
9.8(a) shall name the Agent, for the benefit of the
Lenders, as an additional insured and shall contain loss
payable clauses in the form submitted to the Borrower by
the Agent, or otherwise in form and substance
satisfactory to the Required Lenders, naming the Agent,
for the benefit of the Lenders, as loss payee, as its
interests may appear, and providing that
(i) all proceeds thereunder shall be
payable to the Agent, for the benefit of
the Lenders,
(ii) no such insurance shall be affected by
any act or neglect of the insurer or owner of
the property described in such policy, and
(iii) such policy and loss payable clauses
may be canceled, amended or terminated only upon
at least ten days, prior written notice given to
the Agent.
(c) Any proceeds of insurance referred to in this
SECTION 9.8 which are paid to the Agent, for the account
of the Lenders, shall be, at the option of the Required
Lenders in their sole discretion, either (i) applied to
replace the damaged or destroyed property, or (ii)
applied to the payment or prepayment of the Secured
Obligations.
SECTION 9.9. Location of Offices and Collateral.
(a) The Borrower will not change the location of its
chief executive office or the place where it keeps its
books and records relating to the Collateral or change
its name, its identity or corporate structure without
giving the Agent 60 days' prior written notice thereof.
(b) All Inventory, other than Inventory in transit to
any such location, will at all times be kept by the
Borrower at the locations set forth in SCHEDULE 7.1(v),
and shall not, without the prior written consent of the
Agent, be removed therefrom except pursuant to sales of
Inventory permitted under SECTION 9.7(a).
(c) If any Inventory is in the possession or control
of any of the Borrower's agents or processors, the
Borrower shall notify such agents or processors of the
Security Interest (and shall promptly provide copies of
any such notice to the Agent and the Lenders) and, upon
the occurrence of an Event of Default, shall instruct
them (and cause them to acknowledge such instruction)
to hold all such Inventory for the account of the account
of the Lenders, subject to the instructions of the Agent.
SECTION 9.10. Records Relating to Collateral.
(a) The Borrower will at all times
(i) keep complete and accurate records of
Inventory on a basis consistent with past practices
of the Borrower so as to permit comparison of
Inventory records relating to different time periods,
itemizing and describing the kind, type and quantity
of Inventory and the Borrower's cost therefor and a
current price list for such Inventory, and
(ii) keep complete and accurate records of all
other Collateral.
(b) The Borrower will prepare a physical listing of
all Inventory, wherever located, at least annually.
SECTION 9.11. Inspection. The Agent and each Lender (by any of
their officers, employees or agents) shall have the right, to the extent
that the exercise of such right shall be within the control of the
Borrower, at any time or times to
(a) visit the properties of the Borrower and its
Subsidiaries, inspect the Collateral and the other assets
of the Borrower and its Subsidiaries and inspect and make
extracts from the books and records of the Borrower and
its Subsidiaries, including but not limited to management
letters prepared by independent accounts, all during
customary business hours at such premises;
(b) discuss the Borrower's and its Subsidiaries'
business, assets, liabilities, financial condition,
results of operations and business prospects, insofar as
the same are reasonably related to the rights of the
Agent or the Lenders hereunder or under any of the Loan
Documents, with the Borrower's and its Subsidiaries, (i)
principal officers, (ii) independent accountants, and
(iii) any other Person (except that any such discussion
with any third parties shall be conducted only in
accordance with the Agent's or such Lender's standard
operating procedures relating to the maintenance of the
confidentiality of confidential information of
borrowers);
(c) verify the amount, quantity, value and condition
of, or any other matter relating to, any of the
Collateral (other than Receivables) and in this
connection to review, audit and make extracts from all
records and files related to any of the Collateral.
The Borrower will deliver to the Agent, for the benefit of the Lenders,
any instrument necessary for it to obtain records from any service
bureau maintaining records on behalf of the Borrower.
SECTION 9.12. Information and Reports.
(a) Schedule of Receivables. The Borrower shall
deliver to the Agent on or before the Effective Date and
not later than the 15th Business Day of each calendar
month thereafter a Schedule of Receivables which
(i) shall be as of the last Business Day of
the immediately preceding month,
(ii) shall be reconciled to the Borrowing
Base Certificate as of such last Business
Day, and
(iii) shall set forth a detailed aged trial balance
of all its then existing Receivables, specifying the
names, countries and balance due for each Account Debtor
obligated on a Receivable so listed.
(b) Schedule of Inventory. The Borrower shall deliver
to the Agent on or before the Effective Date and not
later than the 20th day of each calendar month thereafter
a Schedule of Inventory as of the last Business Day of
the immediately preceding month of the Borrower,
itemizing and describing the kind, type and quantity of
Inventory, the Borrower's cost thereof and the location
thereof.
(c) Borrowing Base Certificate. The Borrower shall
deliver to the Agent a Borrowing Base Certificate at
least weekly or less frequently at the discretion of the
Agent.
(d) Notice of Diminution of Value. The Borrower shall
give prompt notice to the Agent of any matter or event
which has resulted in, or may result in, the diminution
in excess of $200,000 in the value of any of its
Collateral, except for any such diminution in the value
of any Receivables or Inventory in the ordinary course of
business which has been appropriately reserved against,
as reflected in financial statements previously delivered
to the Agent and the Lenders pursuant to ARTICLE 11.
(e) Additional Information. The Agent may in its
discretion from time to time request that the Borrower
deliver the schedules, certificates described in SECTIONS
9.12(a), (b) and (c) more or less often and on different
schedules than specified in such Sections and the
Borrower will comply with such requests. The Borrower
will also furnish to the Agent and each Lender such other
information with respect to the Collateral as the Agent
or such Lender may from time to time reasonably request.
SECTION 9.13. Power of Attorney. The Borrower hereby appoints the
Agent as its attorney, with power
(a) to endorse the name of the Borrower on any
checks, notes, acceptances, money orders, drafts or other
forms of payment or security that may come into the
Agent's or any Lender's possession, and
(b) to sign the name of the Borrower on any invoice
or bill of lading relating to any Receivable, Inventory
or other Collateral, on any drafts against customers
related to letters of credit, on schedules and
assignments of Receivables furnished to the Agent or any
Lender by the Borrower, on notices of assignment,
financing statements and other public records relating to
the perfection or priority of the Security Interest,
verifications of account and notices to or from
customers.
SECTION 9.14. Additional Real Estate Leases. Promptly upon the
Borrower's entry into any lease of Real Estate (other than a lease
conveying an interest in Real Estate, which shall be subject to the
provisions of CLAUSE (a) above), the Borrower shall collaterally assign
to the Agent, for the benefit of itself and the Lenders, the Borrower's
interest in such lease, in form and substance satisfactory to the Agent.
The Borrower shall also deliver to the Agent an executed landlord's
waiver and consent with respect to such lease in form and substance
satisfactory to the Agent.
SECTION 9.15. Assignment of Claims Act. Upon the request of the
Agent, the Borrower shall execute any documents or instruments and shall
take such steps or actions reasonably required by the Agent so that all
monies due or to become due under any contract with the United States of
America, the District of Columbia or any state, county, municipality or
other domestic or foreign governmental entity, or any department, agency
or instrumentality thereof, will be assigned to the Agent, for the
benefit of itself and the Lenders, and notice given thereof in
accordance with the requirements of the Assignment of Claims Act of
1940, as amended, or any other laws, rules or regulations relating to
the assignment of any such contract and monies due to or to become due.
ARTICLE 10
AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided for in SECTION 16.11, the
Borrower will, and will cause each of its Subsidiaries to:
SECTION 10.1. Preservation of Corporate Existence and Similar
Matters. Preserve and maintain its corporate existence, rights,
franchises, licenses and privileges in the jurisdiction of its
incorporation and qualify and remain qualified as a foreign corporation
and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization.
SECTION 10.2. Compliance with Applicable Law. Comply with all
Applicable Law relating to the Borrower or such Subsidiary except to the
extent being contested in good faith by appropriate proceedings and for
which reserves in respect of the Borrower's or such Subsidiary's
reasonably anticipated liability therefor have been appropriately
established.
SECTION 10.3. Maintenance of Property. In addition to, and not
in derogation of, the requirements of Section 9.7 and of the Security
Documents,
(a) protect and preserve all properties material to
its business, including copyrights, patents, trade names
and trademarks, and maintain in good repair, working
order and condition in all material respects, with
reasonable allowance for wear and tear, all tangible
properties, and
(b) from time to time make or cause to be made all
needed and appropriate repairs, renewals, replacements
and additions to such properties necessary for the
conduct of its business, so that the business carried on
in connection therewith may be properly and
advantageously conducted at all times.
SECTION 10.4. Conduct of Business. At all times carry on its
business in an efficient manner and engage in only the business
described in SECTION 7.1(g).
SECTION 10.5. Insurance. Maintain, in addition to the coverage
required by SECTION 9.8 and the Security Documents, insurance with
responsible insurance companies against such risks and in such amounts
as is customarily maintained by similar businesses or as may be required
by Applicable Law, and from time to time deliver to the Agent or any
Lender upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of
the insurance, the dates of the expiration thereof and the properties
and risks covered thereby.
SECTION 10.6. Payment of Taxes and Claims. Pay or discharge when
due
(a) all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits
or upon any properties belonging to it, except that real
property ad VALOREM taxes shall be deemed to have been so
paid or discharged if the same are paid before they
become delinquent, and
(b) all lawful claims of materialmen, mechanics,
carriers, warehousemen and landlords for labor,
materials, supplies and rentals which, if unpaid, might
become a Lien on any properties of the Borrower;
except that this SECTION 10.6 shall not require the payment or discharge
of any such tax, assessment, charge, levy or claim which is being
contested in good faith by appropriate proceedings and for which
reserves in respect of the reasonably anticipated liability therefor
have been appropriately established.
SECTION 10.7. Accounting Methods and Financial Records. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP.
SECTION 10.8. Use of Proceeds.
(a) Use the proceeds of
(i) the initial Revolving Credit Loan to
pay amounts indicated on SCHEDULE 10.8 to the
Persons indicated thereon, and
(ii) all subsequent Loans only for working
capital and general business purposes, and
(b) not use any part of such proceeds to purchase or,
to carry or reduce or retire or refinance any credit
incurred to purchase or carry, any margin stock (within
the meaning of Regulation G or U of the Board of
Governors of the Federal Reserve System) or, in any
event, for any purpose which would involve a violation of
such Regulation G or U or of Regulation T or X of such
Board of Governors, or for any purpose prohibited by law
or by the terms and conditions of this Agreement.
SECTION 10.9. Hazardous Waste and Substances; Environmental Requirements.
(a) In addition to, and not in derogation of, the
requirements of SECTION 10.2 and of the Security
Documents, comply with all Environmental Laws and all
Applicable Laws relating to occupational health and
safety (except for instances of noncompliance that are
being contested in good faith by appropriate proceedings
if reserves in respect of the Borrower's or such
Subsidiary's reasonably anticipated liability therefor
have been appropriately established), promptly notify the
Agent of its receipt of any notice of a violation of any
such Environmental Laws or other such Applicable Laws and
indemnify and hold the Agent and the Lenders harmless
from all loss, cost, damage, liability, claim and expense
incurred by or imposed upon the Agent or any Lender on
account of the Borrower's failure to perform its
obligations under this SECTION 10.9.
(b) Whenever the Borrower gives notice to the Agent
pursuant to this SECTION 10.9 with respect to a matter
that reasonably could be expected to result in liability
to the Borrower in excess of $50,000.00 in the aggregate,
the Borrower shall, at the Agent's request and the
Borrower's expense (i) cause an independent environmental
engineer acceptable to the Agent to conduct an
assessment, including tests where necessary, of the site
where the noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver
to the Agent a report setting forth the results of such
assessment, a proposed plan to bring the Borrower into
compliance with such Environmental Laws (if such
assessment indicates noncompliance) and an estimate of
the costs thereof, and (ii) provide to the Agent a
supplemental report of such engineer whenever the scope
of the noncompliance, or the response thereto or the
estimated costs thereof, shall materially adversely
change.
ARTICLE 11
INFORMATION
Until the Revolving Credit Facility has been terminated and all the Secured
Obligations have been paid in full, unless the Required Lenders shall otherwise
consent in the manner set forth in SECTION 16.11, the Borrower will furnish to
the Agent and to each Lender at the offices then designated for such notices
pursuant to SECTION 16.1:
SECTION 11.1. Financial Statements.
(a) Audited Year-End Statements. As soon as
available, but in any event within 90 days after the end
of each fiscal year of the Borrower, copies of the
consolidating and Consolidated balance sheets of the
Borrower and its Consolidated Subsidiaries as at the
end of such fiscal year and the related statements of
earnings, shareholders' equity and statement of cash
flows for such fiscal year, in each case setting forth in
comparative form the figures for the previous fiscal year
of the Borrower, reported on, as to such Consolidated
statements, without qualification as to the scope of the
audit or the status of the Borrower as a "going concern",
by independent certified public accountants of nationally
recognized standing; and
(b) Monthly Financial Statements. As soon as
available after the end of each month, but in any event
within 45 days after the end of each month, copies of the
unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at the end of such month
and the related unaudited consolidated statements of
earnings and cash flows for the Borrower and its
Consolidated Subsidiaries for such month and for the
portion of the fiscal year of the Borrower through such
month, certified by a Financial Officer of the Borrower
as presenting fairly the financial condition and results
of operations of the Borrower (subject to normal year-end
audit adjustments);
all such financial statements to be complete and correct in all material
respects and prepared in accordance with GAAP (except, with respect to
interim financial statements, for the omission of footnotes and for the
effect of normal year-end audit adjustments) applied consistently
throughout the periods reflected therein.
SECTION 11.2. Accountants' Certificate. Together with the financial
statements referred to in SECTION 11.1(a), the Borrower shall deliver a
certificate of such accountants addressed to the Agent
(a) stating that in making the examination necessary
for the certification of such financial statements,
nothing has come to their attention to lead them to
believe that any Default or Event of Default exists and,
in particular, they have no knowledge of any Default or
Event of Default or, if such is not the case, specifying
such Default or Event of Default and its nature, and
(b) having attached the calculations, prepared by the
Borrower and reviewed by such accountants, required to
establish whether or not the Borrower is in compliance
with the covenants contained in SECTIONS 12.1, 12.2,
12.5, 12.10 and 12.11, as at the date of such financial
statements.
SECTION 11.3. Officer's Certificate. At the time that the Borrower
furnishes the financial statements pursuant to SECTION 11.1(c) for any
month that is the last month of a fiscal quarter of the Borrower, the
Borrower shall also furnish a certificate of its President or a
Financial Officer
(a) setting forth as at the end of such fiscal
quarter or fiscal year, as the case may be, the
calculations required to establish whether or not the
Borrower was in compliance with the requirements of
SECTIONS 12.1, 12.2, 12.5, 12.10 and 12.11, as at the end
of each respective period,
(b) stating that the information on the schedules to
this Agreement are complete and accurate as of the date
of such certificate or, if such is not the case,
attaching to such certificate updated schedules, and
(c) stating that, based on a reasonably diligent
examination, no Default or Event of Default exists, or,
if such is not the case, specifying such Default or Event
of Default and its nature, when it occurred, whether it
is continuing and the steps being taken by the Borrower
with respect to such Default or Event of Default.
SECTION 11.4. Copies of Other Reports.
(a) As soon as available, but in any event at least
60 days prior to the commencement of a fiscal year,
projections on a monthly basis of (i) anticipated
financial performance of the Parent Guarantor and the
Borrower for such fiscal year and (ii) projected
Availability for such fiscal year.
(b) Promptly upon receipt thereof, copies of all
reports, if any, submitted to the Borrower or its Board
of Directors by its independent public accountants,
including, without limitation, any management report.
(c) As soon as practicable, copies of all financial
statements and reports that the Borrower shall send to
its shareholders generally and of all registration
statements and all regular or periodic reports which the
Borrower shall file with the Securities and Exchange
Commission or any successor commission.
(d) From time to time and as soon as reasonably
practicable following each request, such forecasts, data,
certificates, reports, statements, opinions of counsel,
documents or further information regarding the business,
assets, liabilities, financial condition, results of
operations or business prospects of the Borrower or any
of its Subsidiaries as the Agent or any Lender may
reasonably request and that the Borrower has or (except
in the case of legal opinions relating to the perfection
or priority of the Security Interest) without
unreasonable expense can obtain; provided, however, that
the Lenders shall, to the extent reasonably practicable,
coordinate examinations of the Borrower's records by
their respective internal auditors. The rights of the
Agent and the Lenders under this Section 11.4 are in
addition to and not in derogation of their rights under
any other provision of this Agreement or of any other
Loan Document.
(e) If requested by the Agent or any Lender, the
Borrower will furnish to the Agent and the Lenders
statements in conformity with the requirements of Federal
Reserve Form G-3 or U-1 referred to in Regulation G and
U, respectively, of the Board of Governors of the
Federal Reserve System.
SECTION 11.5. Notice of Litigation and Other Matters. Prompt notice of:
(a) the commencement, to the extent the Borrower is
aware of the same, of all proceedings and investigations
by or before any governmental or nongovernmental body and
all actions and proceedings in any court or before any
arbitrator against or in any other way relating to or
affecting the Borrower, any of its Subsidiaries or any of
the Borrower's or any of its Subsidiaries, properties,
assets or businesses, which might, singly or in the
aggregate, result in the occurrence of a Default or an
Event of Default, or have a Materially Adverse Effect on
the Borrower or any of its Subsidiaries,
(b) any amendment of the articles of incorporation or
by-laws of the Borrower or any of its Subsidiaries,
(c) any change in the business, assets, liabilities,
financial condition, results of operations or business
prospects of the Borrower or any of its Subsidiaries
which has had or may have, singly or in the aggregate, a
Materially Adverse Effect on the Borrower or any of its
Subsidiaries and any change in the executive officers of
the Borrower, and
(d) any Default or Event of Default or any event
which constitutes or which with the passage of time or
giving of notice or both would constitute a default or
event of default by the Borrower or any of its
Subsidiaries under any material agreement (other than
this Agreement) to which the Borrower or any of its
Subsidiaries is a party or by which the Borrower, any of
its Subsidiaries or any of the Borrower's or any of its
Subsidiaries' properties may be bound.
SECTION 11.6. ERISA. As soon as possible and in any event within 30
days after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Plan has
occurred or will occur, or
(b) the aggregate present value of the Unfunded
Vested Accrued Benefits under all Plans is equal to an
amount in excess of $0, or
(c) the Borrower or any of its Subsidiaries is in
"default" (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan required
by reason of the Borrower's or such Subsidiary's complete
or partial withdrawal (as described in Section 4203 or
4205 of ERISA) from such Multiemployer Plan,
a certificate of the President or a Financial Officer of the Borrower
setting forth the details of such event and the action which is proposed
to be taken with respect thereto, together with any notice or filing
which may be required by the PBGC or other agency of the United States
government with respect to such event.
SECTION 11.7. Accuracy of Information. All written information,
reports, statements and other papers and data furnished to the Agent or
any Lender, whether pursuant to this ARTICLE 11 or any other provision
of this Agreement or of any other Loan Document, shall be, at the time
the same is so furnished, complete and correct in all material respects
to the extent necessary to give the Agent and the Lenders true and
accurate knowledge of the subject matter.
SECTION 11.8. Revisions or Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules originally
attached hereto become outdated or incorrect in any material respect,
the Borrower shall deliver to the Agent and the Lenders as part of the
officer's certificate required pursuant to SECTION 11.3(b) such
revisions or updates to such Schedule(s) as may be necessary or
appropriate to update or correct such Schedule(s), PROVIDED that no such
revisions or updates to any Schedule(s) shall be deemed to have amended,
modified or superseded such Schedule(s) as originally attached hereto,
or to have cured any breach of warranty or representation resulting from
the inaccuracy or incompleteness of any such Schedule(s), unless and
until the Required Lenders in their sole and absolute discretion, shall
have accepted in writing such revisions or updates to such Schedule(s).
SECTION 11.9. Subordinated Indebtedness Certificate. Not less than
five Business Days prior to any scheduled payment of any principal of,
or interest or other amounts on, the Subordinated Indebtedness, and as a
condition precedent to making such payment, the Borrower shall furnish a
certificate of its President or a Financial Officer stating:
(a) that no Default or Event of Default is in
existence as of the date of the certificate or will be in
existence as of the date of such payment, both with and
without giving effect to the making of such payment, and
(b) the amount of principal and interest to be paid.
ARTICLE 12
NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner set forth in SECTION 16.11, the
Borrower will not directly or indirectly and, in the case of SECTIONS
12.2 through 12.16, will not permit its Subsidiaries to:
SECTION 12.1. Financial Ratios. Permit:
(a) Minimum Tangible Net Worth. Tangible Net Worth as
of the last day of any fiscal year (commencing with the
fiscal year ending March 31, 1995) to be less than an
amount equal to the sum of (i) Tangible Net Worth as of
the first day of such fiscal year plus (ii) an amount
equal to the greater of (A) 100% of Net Income of the
Borrower and its Subsidiaries for such fiscal year or (B)
$2,000,000.00.
(b) Ratio of Consolidated Total Liabilities to
Tangible Net Worth. The ratio of (x) total Consolidated
Liabilities of the Borrower and its Consolidated
Subsidiaries minus Subordinated Indebtedness to (y)
Tangible Net Worth of the Borrower and its Consolidated
Subsidiaries plus Subordinated Debt at any time to be
equal to or greater than 3.0 to 1.0.
(c) Coverage Ratio. As of the end of any fiscal
quarter (commencing with the fiscal quarter ending
December 31, 1994), the ratio of (x) Consolidated EBITDA
of the Borrower and its Consolidated Subsidiaries for the
four fiscal quarterly periods ending on such fiscal
quarter end minus Capital Expenditures of the Borrower
and its Consolidated Subsidiaries for such four fiscal
quarterly periods to (y) the sum of the Current
Maturities of the Consolidated Long-Term Liabilities of
the Borrower and its Consolidated Subsidiaries plus
Required Interest Expense of the Borrower and its
Subsidiaries for the four fiscal quarterly periods
ending on such fiscal quarter end to be less than 1.75 to
1, in each case determined in accordance with GAAP.
(d) Losses. Cumulative year-to-date Losses in any
fiscal year to exceed $1,750,000.
SECTION 12.2. Indebtedness for Money Borrowed. Create, assume, or
otherwise become or remain obligated in respect of, or permit or suffer
to exist or to be created, assumed or incurred or to be outstanding any
Indebtedness for Money Borrowed, except that this Section 12.2 shall not
apply to:
(a) Indebtedness of the Borrower for Money Borrowed
represented by the Loans and the Notes,
(b) Indebtedness for Money Borrowed reflected on
Schedule 7.1(k), excluding any such Indebtedness that is
to be paid in full on the Effective Date,
(c) Permitted Purchase Money Indebtedness, and
(d) inter-company Indebtedness among the Borrower and
its Subsidiaries.
SECTION 12.3. Guaranties. Become or remain liable with respect to
any Guaranty of any obligation of any other Person (excluding
specifically therefrom (i) endorsements in the ordinary course of
business of negotiable instruments for deposit or collection, or (ii)
guarantees by the Borrower of the NationsBank (Carolinas) Debt provided
the obligations of the Borrower under such guarantees are subordinated
to the Secured Obligations pursuant to subordination agreements in form
and substance satisfactory to the Lenders).
SECTION 12.4. Investments. Acquire, after the Agreement Date, any
Business Unit or Investment or, after such date, maintain any Investment
other than Permitted Investments and any of the intercompany
transactions permitted by Section 12.18.
SECTION 12.5. Capital Expenditures. Make or incur any Capital
Expenditures in the aggregate in excess of $2,500,000.00 during any
fiscal year (computed on a non-cumulative basis).
SECTION 12.6. Restricted Dividend Payments and Purchases, Etc.
Declare or make any Restricted Dividend Payment, Restricted Payment or
Restricted Purchase.
SECTION 12.7. Consolidation, Merger, Sale or Purchase of Assets,
etc. Dissolve, liquidate, or wind up its or any Subsidiary's affairs,
or enter into any transaction of merger or consolidation, or enter into
any receivables sale program, or sell, transfer, lease or otherwise
dispose of all or any part of its or any Subsidiary's property or assets
(other than in the ordinary course of business for fair consideration).
SECTION 12.8. Transactions with Affiliates. Effect any transaction
with any Affiliate on a basis less favorable to the Borrower or any of
its Subsidiaries than would be the case if such transaction had been
effected with a Person not an Affiliate.
SECTION 12.9. Liens. Create, assume or permit or suffer to exist
or to be created or assumed any Lien on any of the Collateral or its
other assets, other than Permitted Liens.
SECTION 12.10. Capitalized Lease Obligations. Incur or permit to
exist any Capitalized Lease Obligations if such Capitalized Lease
Obligation when added to existing Capitalized Lease Obligations and
Permitted Purchase Money Indebtedness of the Borrower would exceed
$250,000 in the aggregate.
SECTION 12.11. Operating Leases. Enter into any operating Lease if
the aggregate annual rental payable under all Operating Leases of the
Borrower and its Subsidiaries would exceed $400,000 in the aggregate at
any time after the Effective Date.
SECTION 12.12. Real Estate Leases. Enter into any real property
lease, including a lease relating to the Real Estate occupied by the
Borrower or any of its Subsidiaries on the Effective Date, without the
prior written consent of the Agent.
SECTION 12.13. Plans. Permit any condition to exist in connection
with any Plan which might constitute grounds for the PBGC to institute
proceedings to have such Plan terminated or a trustee appointed to
administer such Plan, and any other condition, event or transaction with
respect to any Plan which could result in the incurrence by the Borrower
of any material liability, fine or penalty.
SECTION 12.14. Sales and Leasebacks. Enter into any arrangement
with any Person providing for the Borrower's or any Subsidiary's
leasing from such Person any real or personal property which has been or
is to be sold or transferred, directly or indirectly, by the Borrower or
such Subsidiary to such Person.
SECTION 12.15. Subordinated Indebtedness. (i) Amend or modify (or
permit the amendment or modification of) any of the terms of any
Subordinated Indebtedness to the extent any such amendment or
modification would be adverse to the issuer thereof or to the interests
of the Lenders, (ii) make (or give any notice with respect thereto) any
voluntary or optional payment or prepayment or redemption or acquisition
for value of (including without limitation, by way of depositing money
or securities with the trustee with respect thereto before due for the
purpose of paying when due) or exchange of any Subordinated Indebtedness
or (iii) make any payment, prepayment, redemption, acquisition for value
of (including without limitation, by way of depositing money or
securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any
Subordinated Indebtedness other than in accordance with the terms of the
Subordination Agreement.
SECTION 12.16. Management Fees. Pay management fees to the Parent
Guarantor in an aggregate amount exceeding (i) 55% of the Adjusted Net
Income of the Borrower before taxes for any fiscal year or (ii) 25% of
the Adjusted Net Income of the Borrower before taxes for the first and
second fiscal quarters or any fiscal year; provided, however, the
accrued management fee of $3,500,000.00 as of March 31, 1995 shall not
be paid without the consent of the Agents. For purposes hereof,
"Adjusted Net Income" for any fiscal year shall mean Net Income for such
fiscal year plus any management fees paid to the Parent Guarantor for
such fiscal year.
SECTION 12.17. Uncommitted Leaf Inventory. Permit Uncommitted Leaf
Inventory to exceed $10,000,000 at any time.
SECTION 12.18. Intercompany Transactions. (i) Permit Subordinated
Indebtedness to the Parent Guarantor to be less than $15,000,000 at any
time outstanding, (ii) make any payments after the occurrence of a
Default or Event of Default to any Affiliate on account of any trade
payables to such Affiliate and (iii) permit receivables from Affiliates
less payables to Affiliates to be greater than $11,000,000 at any time;
provided, however, so long as no Default or Event of Default then
exists, the Agents may in their sole discretion approve an increase in
such $11,000,000 amount to an amount up to $18,000,000 on account of
prepayments of tobacco purchased from its Affiliates and on account of
other short term arms-length transactions with its Affiliates.
ARTICLE 13
DEFAULT
SECTION 13.1. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and
whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment or order of any court or any order,
rule or regulation of any governmental or nongovernmental body:
(a) Default in Payment. The Borrower shall default in
any payment of principal of or interest on any Loan or
any Note when and as due (whether at maturity, by reason
of acceleration or otherwise).
(b) Other Payment Default. The Borrower shall default
in the payment, as and when due, of principal of or
interest on, any other Secured Obligation.
(c) Misrepresentation. Any representation or
warranty made or deemed to be made by the Borrower under
this Agreement or any Loan Document, or any amendment
hereto or thereto, shall at any time prove to have been
incorrect or misleading in any material respect when
made.
(d) Default in Performance. The Borrower shall
default in the performance or observance of any term,
covenant, condition or agreement to be performed by the
Borrower, contained in this Agreement (other than as
specifically provided for otherwise in this Section
13.1).
(e) Indebtedness Cross-Default.
(i) The Borrower or any Subsidiary of the
Borrower shall fail to pay when due and payable
the principal of or interest on any Indebtedness
for Money Borrowed (other than the Loans) in an
amount in excess of $250,000.00, or
(ii) the maturity of any such Indebtedness
shall have (A) been accelerated in accordance
with the provisions of any indenture, contract
or instrument providing for the creation of or
concerning such Indebtedness, or (B) been
required to be prepaid prior to the stated
maturity thereof, or
(iii) any event shall have occurred and be
continuing which would permit any holder or
holders of such Indebtedness, any trustee or
agent acting on behalf of such holder or holders
or any other Person so to accelerate such
maturity, and the Borrower shall have failed to
cure such default prior to the expiration of any
applicable cure or grace period.
(f) Other Cross-Defaults. The Borrower or any of its
Subsidiaries shall default in the payment when due, or in
the performance or observance, of any obligation or
condition of any agreement, contract or lease (other than
this Agreement, the Security Documents or any such
agreement, contract or lease relating to Indebtedness for
Money Borrowed) if the existence of any such defaults,
singly or in the aggregate, could in the sole judgment of
the Agent (to be exercised in good faith) have a
Materially Adverse Effect on the Borrower or any of its
Subsidiaries; provided, however, that for the purposes of
this provision where such a default could result only in
a monetary loss, a Material Adverse Effect shall not be
deemed to have occurred unless the aggregate of such
losses would exceed $250,000.00.
(g) Voluntary Bankruptcy Proceeding. The Borrower,
the Parent Guarantor or any of their respective
Subsidiaries shall
(i) commence a voluntary case under the
federal bankruptcy laws (as now or hereafter in
effect),
(ii) file a petition seeking to take
advantage of any other laws, domestic or
foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for
adjustment of debts,
(iii) consent to or fail to contest in a
timely and appropriate manner any petition filed
against it in an involuntary case under such
bankruptcy laws or other laws,
(iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the
appointment of, or the taking of possession by,
a receiver, custodian, trustee, or liquidator of
itself or of a substantial part of its property,
domestic or foreign,
(v) admit in writing its inability to pay
its debts as they become due,
(vi) make a general assignment for the
benefit of creditors, or
(vii) take any corporate action for the
purpose of authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or
other proceeding shall be commenced against the Borrower,
the Parent Guarantor or any of their respective
Subsidiaries in any court of competent jurisdiction
seeking
(i) relief under the federal bankruptcy
laws (as now or hereafter in effect) or under
any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding
up or adjustment of debts,
(ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of
the Borrower, the Parent Guarantor or any of
their respective Subsidiaries or of all or any
substantial part of the assets, domestic or
foreign, of the Borrower, the Parent Guarantor
or any of their respective Subsidiaries,
and such case or proceeding shall continue undismissed or unstayed for a
period of 60 consecutive calendar days, or an order granting the relief
requested in such case or proceeding against the Borrower, the Parent
Guarantor or any of their respective Subsidiaries (including, but not
limited to, an order for relief under such federal bankruptcy laws)
shall be entered.
(i) Failure of Agreements. The Borrower or any
Guarantor shall challenge the validity and binding effect
of any provision of any Loan Document after delivery
thereof hereunder or shall state its intention to make
such a challenge in writing, or any Loan Document, after
delivery thereof hereunder, shall for any reason (except
to the extent permitted by the terms thereof) cease to
create a valid and perfected first priority Lien (except
for Permitted Liens) on, or security interest in, any of
the Collateral purported to be covered thereby.
(j) Judgment. A final, unappealable judgment or order
for the payment of money in an amount that exceeds the
uncontested insurance available therefor by $250,000.00
or more shall be entered against the Borrower or any
Guarantor by any court and such judgment or order shall
continue undischarged or unstayed for 10 days.
(k) Attachment. A warrant or writ of attachment or
execution or similar process which exceeds $250,000.00
in value shall be issued against any property of the
Borrower or any Guarantor and such warrant or process
shall continue undischarged or unstayed for 10 days.
(l) Loan Documents. Any event of default under any
Loan Document shall occur or the Borrower or any
Guarantor shall default in the performance or observance
of any term, covenant, condition or agreement contained
in, or the payment of any other sum covenanted to be paid
by the Borrower or any Guarantor under, any Loan
Document; provided, however that no event of default
under any Loan Document shall be deemed to have occurred
until any notice required under such Loan Document has
been given and any grace period granted under such Loan
Document has expired.
(m) ERISA.
(i) Any Termination Event with respect to a
Plan shall occur that, after taking into account
the excess, if any, of (A) the fair market value
of the assets of any other Plan with respect to
which a Termination Event occurs on the same day
(but only to the extent that such excess if the
property of the Borrower) over (B) the present
value on such day of all vested nonforfeitable
benefits under such other Plan, results in an
Unfunded Vested Accrued Benefit in excess of $0,
or
(ii) any Plan shall incur an "accumulated
funding deficiency" (as defined in Section 412
of the Internal Revenue Code or Section 302 of
ERISA) for which a waiver has not been obtained
in accordance with the applicable provisions
of the Internal Revenue Code and ERISA, or
(iii) the Borrower is in "default" (as
defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan
resulting from the Borrower's complete or
partial withdrawal (as described in Section 4203
or 4205 of ERISA) from such Multiemployer Plan.
(n) Change in Ownership/Control/Key Management. (i)
There shall occur a change of ownership of the Borrower
or any Subsidiary Guarantor or (ii) any Person other than
Ery W. Kehaya (or his estate or heirs) 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 Parent Guarantor or (B)
direct or cause direction of the management and policies
of the Parent Guarantor, whether through the ownership of
voting securities, by contract or otherwise.
(o) General Insecurity. The occurrence of any event
or condition which, in the Lender's discretion,
constitute a material adverse change in the business,
condition (financial or otherwise) or results of
operation of the Borrower which materially and adversely
affects the ability of the Borrower to perform its
obligations to the Lender under this Agreement or the
Loan Documents.
(p) Non-U.S. Credit Facilities. The failure of the
Parent Guarantor and its Subsidiaries to have credit
facilities in place to adequately finance the non-U.S.
tobacco business of the Parent Guarantor and its
Subsidiaries or the wool business of the Parent Guarantor
and its Subsidiaries, in either case as determined by the
Agents in their sole discretion excerised in good
faith.
SECTION 13.2. Remedies.
(a) Automatic Acceleration and Termination of
Facilities. Upon the occurrence of an Event of Default
specified in SECTION 13.1(G) or (H), (i) the principal of
and the interest on the Loans and any Note at the time
outstanding, and all other amounts owed to the Agent or
the Lenders under this Agreement or any of the Loan
Documents and all other Secured Obligations, shall
thereupon become due and payable without presentment,
demand, protest, or other notice of any kind, all of
which are expressly waived, anything in this Agreement or
any of the Loan Documents to the contrary
notwithstanding, and (ii) the Revolving Credit Facility
and the right of the Borrower to request borrowings under
this Agreement shall immediately terminate.
(b) Other Remedies. If any Event of Default shall
have occurred, and during the continuance of any such
Event of Default, the Agent may, and at the direction of
the Required Lenders in their sole and absolute
discretion shall, do any of the following:
(i) declare the principal of and interest
on the Loans and any Note at the time out-
standing, and all other amounts owed to the
Agent or the Lenders under this Agreement or any
of the Loan Documents and all other Secured
Obligations, to be forthwith due and payable,
whereupon the same shall immediately become due
and payable without presentment, demand, protest
or other notice of any kind, all of which are
expressly waived, anything in this Agreement
or the Loan Documents to the contrary
notwithstanding;
(ii) terminate the Revolving Credit Facility
and any other right of the Borrower to request
borrowings hereunder;
(iii) notify, or request the Borrower to
notify, in writing or otherwise, any Account
Debtor or obligor with respect to any one or
more of the Receivables to make payment to the
Agent, for the benefit of the Lenders, or any
agent or designee of the Agent, at such address
as may be specified by the Agent and if,
notwithstanding the giving of any notice, any
Account Debtor or other such obligor shall make
payments to the Borrower, the Borrower shall
hold all such payments it receives in trust for
the Agent, for the account of the Lenders,
without commingling the same with other funds or
property of, or held by, the Borrower, and shall
deliver the same to the Agent or any such agent
or designee of the Agent immediately upon
receipt by the Borrower in the identical form
received, together with any necessary
endorsements;
(iv) settle or adjust disputes and claims
directly with Account Debtors and other obligors
on Receivables for amounts and on terms which
the Agent considers advisable and in all such
cases only the net amounts received by the
Agent, for the account of the Lenders, in
payment of such amounts, after deductions of
costs and attorneys, fees, shall constitute
Collateral and the Borrower shall have no
further right to make any such settlements or
adjustments or to accept any returns of
merchandise;
(v) enter upon any premises in which
Inventory may be located and, without resistance
or interference by the Borrower, take physical
possession of any or all thereof and maintain
such possession on such premises or move the
same or any part thereof to such other place or
places as the Agent shall choose, without being
liable to the Borrower on account of any loss,
damage or depreciation that may occur as a
result thereof, so long as the Agent shall act
reasonably and in good faith;
(vi) require the Borrower to and the Borrower
shall, without charge to the Agent or any
Lender, assemble the Inventory and maintain or
deliver it into the possession of the Agent or
any agent or representative of the Agent at such
place or places as the Agent may designate and
as are reasonably convenient to both the Agent
and the Borrower;
(vii) at the expense of the Borrower, cause
any of the Inventory to be placed in a public or
field warehouse, and the Agent shall not be
liable to the Borrower on account of any loss,
damage or depreciation that may occur as a
result thereof, so long as the Agent shall act
reasonably and in good faith;
(viii) without notice, demand or other
process, and without payment of any rent or any
other charge, enter any of the Borrower's
premises and, without breach of the peace, until
the Agent, on behalf of the Lenders, completes
the enforcement of its rights in the Collateral,
take possession of such premises or place
custodians in exclusive control thereof, remain
on such premises and use the same and any of the
Borrower's Equipment, for the purpose of (A)
completing any work in process, preparing any
Inventory for disposition and disposing thereof,
and (B) collecting any Receivable, and the Agent
for the benefit of the Lenders is hereby granted
a license or sublicense and all other rights as
may be necessary, appropriate or desirable to
use the Proprietary Rights in connection with
the foregoing, and the rights of the Borrower
under all licenses, sublicenses and franchise
agreements shall inure to the Agent for the
benefit of the Lenders (PROVIDED, HOWEVER, that
any use of any federally registered trademarks
as to any goods shall be subject to the control
as to the quality of such goods of the owner of
such trademarks and the goodwill of the business
symbolized thereby);
(ix) exercise any and all of its rights
under any and all of the Security
Documents;
(x) apply any Collateral consisting of
cash to the payment of the Secured Obligations
in any order in which the Agent, on behalf of
the Lenders, may elect or use such cash in
connection with the exercise of any of its other
rights hereunder or under any of the Security
Documents;
(xi) establish or cause to be established
one or more Lockboxes or other arrangement for
the deposit of proceeds of Receivables, and, in
such case, the Borrower shall cause to be
forwarded to the Agent at the Agent's Office, on
a daily basis, copies of all checks and other
items of payment and deposit slips related
thereto deposited in such Lockboxes, together
with collection reports in form and substance
satisfactory to the Agent; and
(xii) exercise all of the rights and
remedies of a secured party under the Uniform
Commercial Code and under any other Applicable
Law, including, without limitation, the right,
without notice except as specified below and
with or without taking the possession thereof,
to sell the Collateral or any part thereof in
one or more parcels at public or private sale,
at any location chosen by the Agent, for cash,
on credit or for future delivery, and at such
price or prices and upon such other terms as the
Agent may deem commercially reasonable. The
Borrower agrees that, to the extent notice of
sale shall be required by law, at least ten
days' notice to the Borrower of the time and
place of any public sale or the time after which
any private sale is to be made shall constitute
reasonable notification, but notice given in any
other reasonable manner or at any other
reasonable time shall constitute reasonable
notification. The Agent shall not be obligated
to make any sale of Collateral regardless of
notice of sale having been given. The Agent may
adjourn any public or private sale from time to
time by announcement at the time and place fixed
therefor, and such sale may, without further
notice, be made at the time and place to which
it was so adjourned.
SECTION 13.3. Application of Proceeds. All proceeds from each sale
of, or other realization upon, all or any part of the Collateral
following an Event of Default shall be applied or paid over as follows:
(a) First: to the payment of all costs and expenses
incurred in connection with such sale or other
realization, including reasonable attorneys' fees,
(b) Second: to the payment of the Secured
Obligations (with the Borrower remaining liable for any
deficiency) as the Agent may elect,
(c) Third: the balance (if any) of such proceeds
shall be paid to the Borrower, subject to any duty imposed
by law, or otherwise to whomsoever shall be entitled
thereto.
THE BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY
REMAINING IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH
INTEREST THEREON AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN
PAYABLE HEREUNDER ON SUCH SECURED OBLIGATIONS, WHICH INTEREST SHALL
CONSTITUTE PART OF THE SECURED OBLIGATIONS.
SECTION 13.4. Power of Attorney. In addition to the authorizations
granted to the Agent under Section 9.13 or under any other provision of
this Agreement or of any other Loan Document, during the continuance of
an Event of Default, the Borrower hereby irrevocably designates, makes,
constitutes and appoints the Agent (and all Persons designated by the
Agent from time to time) as the Borrower's true and lawful attorney, and
agent in fact, and the Agent, or any agent of the Agent, may, without
notice to the Borrower, and at such time or times as the Agent or any
such agent in its sole discretion may determine, in the name of the
Borrower, the Agent or the Lenders,
(i) demand payment of the Receivables,
(ii) enforce payment of the Receivables by
legal proceedings or otherwise,
(iii) exercise all of the Borrower's rights
and remedies with respect to the collection of
Receivables,
(iv) settle, adjust, compromise, extend or
renew any or all of the Receivables,
(v) settle, adjust or compromise any legal
proceedings brought to collect the
Receivables,
(vi) discharge and release the Receivables
or any of them,
(vii) prepare, file and sign the name of the
Borrower on any proof of claim in bankruptcy or
any similar document against any Account Debtor,
(viii) prepare, file and sign the name of the
Borrower on any notice of Lien, assignment or
satisfaction of Lien, or similar document in
connection with any of the Collateral,
(ix) endorse the name of the Borrower upon
any chattel paper, document, instrument, notice,
freight bill, bill of lading or similar document
or agreement relating to the Receivables, the
Inventory or any other Collateral,
(x) use the stationery of the Borrower and
sign the name of the Borrower to
verifications of the Receivables and on any
notice to the Account Debtors,
(xi) open the Borrower's mail,
(xii) notify the post office authorities to
change the address for delivery of the
Borrower's mail to an address designated by the
Agent, and
(xiii) use the information recorded on or
contained in any data processing equipment and
computer hardware and software relating to the
Receivables, Inventory or other Collateral to
which the Borrower has access.
SECTION 13.5. Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of the
Agent and the Lenders under this Agreement, the Notes and
each of the Loan Documents shall be cumulative and not
exclusive of any rights or remedies which it or they
would otherwise have. In exercising such rights and
remedies the Agent and the Lenders may be selective and
no failure or delay by the Agent or any Lender in
exercising any right shall operate as a waiver of it, nor
shall any single or partial exercise of any power or
right preclude its other or further exercise or the
exercise of any other power or right.
(b) Waiver of Marshalling. The Borrower hereby waives
any right to require any marshalling of assets and any
similar right.
(c) Limitation of Liability. Nothing contained in
this ARTICLE 13 or elsewhere in this Agreement or in any
of the Loan Documents shall be construed as requiring or
obligating the Agent, any Lender or any agent or designee
of the Agent or any Lender to make any demand, or to make
any inquiry as to the nature or sufficiency of any
payment received by it, or to present or file any claim
or notice or take any action, with respect to any
Receivable or any other Collateral or the monies due or
to become due thereunder or in connection therewith, or
to take any steps necessary to preserve any rights
against prior parties, and the Agent, the Lenders and
their agents or designees shall have no liability to the
Borrower for actions taken pursuant to this ARTICLE 13,
any other provision of this Agreement or any of the Loan
Documents so long as the Agent or such Lender shall act
reasonably and in good faith.
(d) Appointment of Receiver. In any action under this
ARTICLE 13, the Agent shall be entitled during the
continuance of an Event of Default to the appointment of
a receiver, without notice of any kind whatsoever, to
take possession of all or any portion of the Collateral
and to exercise such power as the court shall confer upon
such receiver.
ARTICLE 14
ASSIGNMENTS
SECTION 14.1. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Lenders, the Agent, all future holders of the
Notes, and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender.
(b) Each Lender may assign to one or more Eligible Assignees all or
a portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Loans at the
time owing to it and the Notes held by it); PROVIDED, HOWEVER, that (i)
the Agents consent to each such assignment, (ii) each such assignment
shall be of a constant, and not a varying, percentage of all the
assigning Lender's rights and obligations under this Agreement, (iii)
the amount of the Commitment of the assigning Lender that is subject to
each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent)
shall in no event be less than the Minimum Commitment, (iv) in the case
of a partial assignment, the amount of the Commitment that is retained
by the assigning Lender (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent)
shall in no event be less than the Minimum Commitment, (v) the parties
to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as hereinafter defined) an
Assignment and Acceptance, together with any Note or Notes subject to
such assignment and such assignee's pro rata share of the Agent's
syndication expenses, (vi) such assignment shall not, without the
consent of the Borrower, require the Borrower to file a registration
statement with the Securities and Exchange Commission or apply to or
qualify the Loans or the Notes under the blue sky laws of any state, and
(vii) the representation contained in SECTION 14.2 hereof shall be true
with respect to any such proposed assignee. Upon such execution,
delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall
be at least five Business Days after the execution thereof, (x) the
assignee thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder, and (y) the Lender assignor thereunder shall, to the
extent provided in such assignment, be released from its obligations
under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i)
other than the representation and warranty that it is the legal and
beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, such Lender assignor makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such Lender
assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower
or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in SECTION 7.1(o) and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such
Lender assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Agent by the terms
hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform
in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the
names and addresses of the Lenders and the Commitment Percentage of, and
principal amount of the Loans owing to, each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent and the
Lenders may treat each person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee together with any Note or
Notes subject to such assignment and the written consent to such
assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in the form of EXHIBIT A, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the
Register, (iii) give prompt notice thereof to the Lenders and the
Borrower, and (iv) promptly deliver a copy of such Acceptance and
Assignment to the Borrower. Within five Business Days after receipt of
notice, the Borrower shall execute and deliver to the Agent in exchange
for the surrendered Note or Notes a new Note or Notes to the order of
such Eligible Assignee in amounts equal to the Commitment Percentage
assumed by such Eligible Assignee pursuant to such Assignment and
Acceptance and a new Note or Notes to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new
Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be
dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the assigned Notes delivered
to the assignor Lender. Each surrendered Note or Notes shall be
cancelled and returned to the Borrower.
(f) The Lenders may not sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under
this Agreement.
(g) Any Lender may, in connection with any assignment or proposed
assignment pursuant to this SECTION 14.1, disclose to the assignee or
proposed assignee any information relating to the Borrower furnished to
such Lender by or on behalf of the Borrower; PROVIDED that, prior to any
such disclosure, each such assignee or proposed assignee shall agree
with the Borrower or such Lender (which in the case of an agreement with
only such Lender, the Borrower shall be recognized as a third party
beneficiary thereof) to preserve the confidentiality of any confidential
information relating to the Borrower received from such Lender.
SECTION 14.2. Representation of Lenders. Each Lender hereby
represents that it will make each Loan hereunder as a commercial loan
for its own account in the ordinary course of its business; PROVIDED,
HOWEVER, that subject to SECTION 13.1 hereof, the disposition of the
Notes or other evidence of the Secured Obligations held by any Lender
shall at all times be within its exclusive control.
ARTICLE 15
AGENT
SECTION 15.1. Appointment of Agent. Each of the Lenders hereby
irrevocably designates and appoints NationsBank of Georgia, N.A. as the
Agent of such Lender under this Agreement and the other Loan Documents,
and each such Lender irrevocably authorizes Agent, as the Agent for such
Lender to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms
of this Agreement and such other Loan Documents, including, without
limitation, to make determinations as to the eligibility of Inventory
and Receivables and to adjust the advance ratios contained in the
definition of "Borrowing Base" (so long as such advance ratios, as
adjusted, do not exceed those set forth in the definition of "Borrowing
Base"), together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Agent shall not have
any duties or responsibilities, except those expressly set forth
herein and therein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Agent.
SECTION 15.2. Delegation of Duties. The Agent may execute any of
its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent
shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
SECTION 15.3. Exculpatory Provisions. Neither the Agent nor any of
its trustees, officers, directors, employees, agents, attorneys-in-fact
or Affiliates shall be (i) liable to any Lender (or any Lender's
participants) for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or the other
Loan Documents (except for its or such Person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any Lender (or
any Lender's participants) for any recitals, statements, representations
or warranties made by the Borrower or any officer thereof contained in
this Agreement or the other Loan Documents or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement or the
other Loan Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the
other Loan Documents or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be under an
obligation to any Lender to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of
the Borrower.
SECTION 15.4. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation,
counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless such Note shall have
been transferred in accordance with SECTION 14.1. The Agent shall be
fully justified in failing or refusing to take any action under this
Agreement and the other Loan Documents unless it shall first receive
such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement and the Notes in accordance with a
request of the Required Lenders, and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders
and all future holders of the Notes.
SECTION 15.5. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of de-
fault". In the event that the Agent receives such a notice, the Agent
shall promptly give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; PROVIDED that unless and
until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) continue making Revolving Credit Loans to the
Borrower on behalf of the Lenders in reliance on the provisions of
SECTION 5.7 and take such other action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
SECTION 15.6. Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder or by the other Loan Documents, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and
other condition or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
SECTION 15.7. Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages, from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed
on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or
omitted by the Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from
the Agent's gross negligence or willful misconduct or resulting solely
from transactions or occurrences that occur at a time after such Lender
has assigned all of its interests, rights and obligations under this
Agreement pursuant to SECTION 14.1 or, in the case of a Lender to which
an assignment is made hereunder pursuant to SECTION 14.1, at a time
before such assignment. The agreements in this subsection shall
survive the payment of the Notes, the Secured Obligations and all other
amounts payable hereunder and the termination of this Agreement.
SECTION 15.8. Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with the Borrower and any Guarantor and their
respective Subsidiaries as if the Agent were not the Agent hereunder.
With respect to its Commitment, the Loans made or renewed by it and any
Note issued to it and any Letter of Credit issued by it, the Agent shall
have and may exercise the same rights and powers under this Agreement
and the other Loan Documents and is subject to the same obligations and
liabilities as and to the extent set forth herein and in the other Loan
Documents for any other Lender. The terms "Lenders" or "Required
Lenders" or any other term shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity as a Lender or
one of the Required Lenders.
SECTION 15.9. Successor Agent. The Agent may resign as Agent upon
ten days' notice to the Lenders. If the Agent shall resign as Agent
under this Agreement, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders which successor agent
shall be approved by the Borrower (which approval shall not be unreason-
ably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean
such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. After any
retiring Agent's resignation hereunder as Agent, the provisions of
SECTION 15.7 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
SECTION 15.10. Notices from Agent to Lenders. The Agent shall
promptly, upon receipt thereof, forward to each Lender copies of any
written notices, reports or other information supplied to it by the
Borrower (but which the Borrower is not required to supply directly to
the Lenders).
ARTICLE 15-A
Co-Agent
SECTION 15-A.1. Appointment of Co-Agent. Each of the Lenders hereby
irrevocably designates and appoints First Union Commercial Corporation
as the Co-Agent of such Lender under this Agreement and the other Loan
Documents, and each such Lender irrevocably authorizes Co-Agent, as the
Co-Agent for such Lender to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated
to the Co-Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Co-Agent shall not have
any duties or responsibilities, except those expressly set forth herein
and therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or the other Loan
Documents or otherwise exist against the Co-Agent.
SECTION 15-A.2. Delegation of Duties. The Co-Agent may execute any
of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Co-Agent
shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
SECTION 15-A.3. Exculpatory Provisions. Neither the Co-Agent nor
any of its trustees, officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (i) liable to any Lender (or
any Lender's participants) for any action lawfully taken or omitted to
be taken by it or such Person under or in connection with this Agreement
or the other Loan Documents (except for its or such Person's own gross
negligence or willful misconduct), or (ii) responsible in any manner to
any Lender (or any Lender's participants) for any recitals, statements,
representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or the other Loan Documents or in
any certificate, report, statement or other document referred to or
provided for in, or received by the Co-Agent under or in connection
with, this Agreement or the other Loan Documents or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or the other Loan Documents or for any failure of the
Borrower to perform its obligations hereunder or thereunder. The
Co-Agent shall not be under an obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower.
SECTION 15-A.4. Reliance by Co-Agent. The Co-Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Co-Agent. The Co-Agent
may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance
with SECTION 14.1. The Co-Agent shall be fully justified in failing or
refusing to take any action under this Agreement and the other Loan
Documents unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Co-Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Agreement and the Notes in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
SECTION 15-A.5. Non-Reliance on Co-Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Co-Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Co-Agent hereinafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty
by the Co-Agent to any Lender. Each Lender represents to the Co-Agent
that it has, independently and without reliance upon the Co-Agent or any
other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Borrower and made its own decision to make its
Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Co-Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit analysis, appraisals and decisions in taking or not
taking action under this Agreement and the other Loan Documents, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. The Co-Agent shall not have any duty
or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and
other condition or creditworthiness of the Borrower which may come into
the possession of the Co-Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
SECTION 15-A.6. Indemnification. The Lenders agree to indemnify the
Co-Agent in its capacity as such (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages, from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed
on, incurred by or asserted against the Co-Agent in any way relating to
or arising out of this Agreement or the other Loan Documents, or any
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or
omitted by the Co-Agent under or in connection with any of the
foregoing; PROVIDED that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Co-Agent's gross negligence or willful
misconduct or resulting solely from transactions or occurrences that
occur at a time after such Lender has assigned all of its interests,
rights and obligations under this Agreement pursuant to SECTION 14.1 or,
in the case of a Lender to which an assignment is made hereunder
pursuant to SECTION 14.1, at a time before such assignment. The
agreements in this subsection shall survive the payment of the Notes,
the Secured Obligations and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 15-A.7. Co-Agent in Its Individual Capacity. The Co-Agent
and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower and any Guarantor and
their respective Subsidiaries as if the Co-Agent were not the Co-Agent
hereunder. With respect to its Commitment, the Loans made or renewed by
it and any Note issued to it and any Letter of Credit issued by it, the
Co-Agent shall have and may exercise the same rights and powers under
this Agreement and the other Loan Documents and is subject to the same
obligations and liabilities as and to the extent set forth herein and in
the other Loan Documents for any other Lender. The terms "Lenders" or
"Required Lenders" or any other term shall, unless the context clearly
otherwise indicates, include the Co-Agent in its individual capacity as
a Lender or one of the Required Lenders.
SECTION 15-A.8. Successor Co-Agent. The Co-Agent may resign as
Co-Agent upon ten days' notice to the Lenders. If the Co-Agent shall
resign as Co-Agent under this Agreement, then the Required Lenders shall
appoint from among the Lenders a successor co-agent for the Lenders
which successor co-agent shall be approved by the Borrower (which
approval shall not be unreasonably withheld), whereupon such successor
co-agent shall succeed to the rights, powers and duties of the Co-Agent,
and the term "Co-Agent" shall mean such successor agent effective upon
its appointment, and the former Co-Agent's rights, powers and duties as
Co-Agent shall be terminated, without any other or further act or deed
on the part of such former Co-Agent or any of the parties to this
Agreement or any holders of the Notes. After any retiring Co-Agent's
resignation hereunder as Co-Agent, the provisions of SECTION 15-A.6
shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Co-Agent under this Agreement.
ARTICLE 16
MISCELLANEOUS
SECTION 16.1. Notices.
(a) Method of Communication. Except as specifically
provided in this Agreement or in any of the Loan
Documents, all notices and the communications hereunder
and thereunder shall be in writing or by telephone,
subsequently confirmed in writing. Notices in writing
shall be delivered personally or sent by certified or
registered mail, postage pre-paid, or by overnight
courier, telex or facsimile transmission and shall be
deemed received in the case of personal delivery, when
delivered, in the case of mailing, when receipted for, in
the case of overnight delivery, on the next Business Day
after delivery to the courier, and in the case of telex
and facsimile transmission, upon transmittal, provided
that in the case of notices to the Agent, notice shall be
deemed to have been given only when such notice is
actually received by the Agent. A telephonic notice to
the Agent, as understood by the Agent, will be deemed to
be the controlling and proper notice in the event of a
discrepancy with or failure to receive a confirming
written notice.
(b) Addresses for Notices. Notices to any party shall
be sent to it at the following addresses, or any other
address of which all the other parties are notified in
writing
If to the Borrower: Standard Commercial Tobacco
Co., Inc.
2201 Miller Road
Wilson, North Carolina 27893
Attn: Keith H. Merrick
Facsimile No.: 919-237-1109
If to the Agent: NationsBank of Georgia, N.A.
Business Credit Division
600 Peachtree Street
13 Plaza
Atlanta, Georgia 30308
Attn: James H. Cooper
Facsimile No.: 404-607-6439
If to a Lender: At the address of such Lender
set forth on the signature
page hereof.
(c) Agent's Office. The Agent hereby designates its
office located at 600 Peachtree Street, Atlanta, Georgia
30308, or any subsequent office which shall have been
specified for such purpose by written notice to the
Borrower, as the office to which payments due are to be
made and at which Loans will be disbursed.
SECTION 16.2. Expenses. The Borrower agrees to pay or reimburse on
demand all costs and expenses incurred by the Agent or any Lender,
including, without limitation, the reasonable fees and disbursements of
counsel, in connection with
(a) the negotiation, preparation, execution,
delivery, administration, enforcement and termination of
this Agreement and each of the other Loan Documents,
whenever the same shall be executed and delivered,
including, without limitation
(i) the out-of-pocket costs and expenses
incurred in connection with the administration
and interpretation of this Agreement and the
other Loan Documents;
(ii) the costs and expenses of appraisals
of the Collateral;
(iii) the costs and expenses of lien and
title searches and title insurance;
(iv) the costs and expenses of
environmental reports with respect to the
Real Estate;
(v) taxes, fees and other charges for
filing the Financing Statements and
continuations and the costs and expenses of
taking other actions to perfect, protect, and
continue the Security Interests;
PROVIDED, HOWEVER, that the Borrower shall not be
required to pay the expenses of any Person which becomes
a Lender more than ninety (90) days after the
Effective Date incurred in connection with such
Person's so becoming a Lender;
(b) the preparation, execution and delivery of any
waiver, amendment, supplement or consent by the Agent and
the Lenders relating to this Agreement or any of the Loan
Documents;
(c) sums paid or incurred to pay any amount or take
any action required of the Borrower under the Loan
Documents that the Borrower fails to pay or take;
(d) costs of inspections and verifications of the
Collateral, the Borrower's operations and the books and
records of the Borrower by the Agent and/or the Lenders
or their respective agents, such costs to include,
without limitation, standard per diem fees charged by the
Agent or the Lenders and costs for travel, lodging, and
meals;
(e) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and
establishing and maintaining each Controlled Disbursement
Account, Agency Account and Lockbox;
(f) costs and expenses of preserving and protecting
the Collateral;
(g) consulting, after the occurrence of a Default,
with one or more Persons, including appraisers,
accountants and lawyers, concerning the value of any
Collateral for the Secured Obligations or related to the
nature, scope or value of any right or remedy of the
Agent or any Lender hereunder or under any of the Loan
Documents, including any review of factual matters in
connection therewith, which expenses shall include the
fees and disbursements of such Persons;
(h) reasonable costs and expenses paid or incurred to
obtain payment of the Secured Obligations, enforce the
Security Interests, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the
Loan Documents, or to prosecute or defend any claim in
any way arising out of, related to or connected with,
this Agreement or any of the Loan Documents, which
expenses shall include the reasonable fees and
disbursements of counsel and of experts and other
consultants retained by the Agent or any Lender.
The foregoing shall not be construed to limit any other provisions of
the Loan Documents regarding costs and expenses to be paid by the
Borrower. The Borrower hereby authorizes the Agent and the Lenders to
debit the Borrower's Loan Accounts (by increasing the principal amount
of the Revolving Credit Loan) in the amount of any such costs and
expenses owed by the Borrower when due.
SECTION 16.3. Stamp and Other Taxes. The Borrower will pay any and
all stamp, registration, recordation and similar taxes, fees or charges
and shall indemnify the Agent and the Lenders against any and all
liabilities with respect to or resulting from any delay in the payment
or omission to pay any such taxes, fees or charges, which may be payable
or determined to be payable in connection with the execution, delivery,
performance or enforcement of this Agreement and any of the Loan
Documents or the perfection of any rights or security interest
thereunder, including, without limitation, the Security Interest.
SECTION 16.4. Setoff. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such
rights, during the continuance of any Event of Default, each Lender, any
participant with such Lender in the Loans and each Affiliate of each
Lender are hereby authorized by the Borrower at any time or from time to
time, without notice to the Borrower or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and
to apply any and all deposits (general or special, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held or
owing by any Lender or any Affiliate of any Lender or any participant to
or for the credit or the account of the Borrower against and on account
of the Secured Obligations irrespective or whether or not
(a) Agent or such Lender shall have made any demand
under this Agreement or any of the Loan Documents, or
(b) the Agent or such Lender shall have declared any
or all of the Secured Obligations to be due and payable
as permitted by SECTION 13.2 and although such Secured
Obligations shall be contingent or unmatured.
SECTION 16.5. Litigation. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN
ACTION MAY BE COMMENCED BY OR AGAINST THE BORROWER, THE AGENT AND SUCH
LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT
THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN
THE BORROWER AND THE AGENT OR ANY LENDER OF ANY KIND OR NATURE. THE
BORROWER, THE AGENT AND THE LENDERS HEREBY AGREE THAT THE FEDERAL COURT
OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE AGENT OR
ANY LENDER, ANY COURT IN WHICH THE AGENT OR SUCH LENDER SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION
OVER THE MATTER IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER AND THE
AGENT OR SUCH LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. THE
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY WAIVING
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR
PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND
COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO THE BORROWER AT THE ADDRESS OF THE BORROWER
SET FORTH IN SECTION 16.1. SHOULD THE BORROWER FAIL TO APPEAR OR ANSWER
ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30)
DAYS AFTER THE MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN
ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED
FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE NONEXCLUSIVE
CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
APPROPRIATE JURISDICTION.
SECTION 16.6. Waiver of Rights. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH BORROWER HAS UNDER
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY
SIMILAR PROVISION OF APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING
PRIOR TO THE ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE AGENT OR ANY
LENDER, OR THE SUCCESSORS AND ASSIGNS OF THE AGENT OR SUCH LENDER TO
POSSESSION OF THE COLLATERAL UPON EVENT OF DEFAULT. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT WHICH
THE AGENT OR THE LENDERS MAY HAVE, THE BORROWER CONSENTS THAT IF LENDER
FILES A PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH
SECTIONS 44-14-261 AND 44-14-262 OF THE OFFICIAL CODE OF GEORGIA OR
UNDER ANY SIMILAR PROVISION OF APPLICABLE LAW, AND THIS WAIVER OR A COPY
HEREOF IS ALLEGED IN SUCH PETITION AND ATTACHED THERETO, THE COURT
BEFORE WHICH SUCH PETITION IS FILED MAY DISPENSE WITH ALL RIGHTS AND
PROCEDURES HEREIN WAIVED AND MAY ISSUE FORTHWITH AN IMMEDIATE WRIT OF
POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE 44 OF THE OFFICIAL
CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF
APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS
OTHERWISE REQUIRED BY SECTION 44-14-263 OF THE OFFICIAL CODE OF GEORGIA
OR BY ANY SIMILAR PROVISION UNDER APPLICABLE LAW. THE BORROWER HEREBY
ACKNOWLEDGES THAT IT HAS READ AND FULLY UNDERSTANDS THE TERMS OF THIS
WAIVER AND THE EFFECT HEREOF.
SECTION 16.7. Consent to Advertising and Publicity. With the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, the Agent, on behalf of the Lenders, may issue and disseminate
to the public information describing the credit accommodation entered
into pursuant to this Agreement, including the name and address of the
Borrower, the amount, interest rate, maturity, collateral and a general
description of the Borrower's business.
SECTION 16.8. Reversal of Payments. The Agent and each Lender shall
have the continuing and exclusive right to apply, reverse and reapply
any and all payments to any portion of the Secured Obligations in a
manner consistent with the terms of this Agreement. To the extent the
Borrower makes a payment or payments to the Agent, for the account of
the Lenders, or any Lender receives any payment or proceeds of the
Collateral for the Borrower's benefit, which payment(s) or proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside and/or required to be repaid to 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 payment
or proceeds received, the Secured Obligations or part thereof intended
to be satisfied shall be revived and continued in full force and effect,
as if such payment or proceeds had not been received by the Agent or
such Lender.
SECTION 16.9. Injunctive Relief. The Borrower recognizes that, in
the event the Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law may
prove to be inadequate relief to the Agent and the Lenders; therefore,
the Borrower agrees that if any Event of Default shall have occurred and
be continuing, the Agent and the Lenders, if the Agent or any Lender so
requests, shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damages.
SECTION 16.10. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose
relating to this Agreement, including, without limitation, all
computations utilized by the Borrower to determine whether it is in
compliance with any covenant contained herein, shall, unless this
Agreement otherwise provides or unless Required Lenders shall otherwise
consent in writing, be performed in accordance with GAAP.
SECTION 16.11. Amendments.
(a) Except as set forth in SUBSECTION (b) below, any
term, covenant, agreement or condition of this Agreement
or any of the Loan Documents may be amended or waived,
and any departure therefrom may be consented to by the
Required Lenders, if, but only if, such amendment, waiver
or consent is in writing signed by the Required Lenders
and, in the case of an amendment (other than an amendment
described in SECTION 16.11(d)), by the Borrower, and in
any such event, the failure to observe, perform or
discharge any such term, covenant, agreement or condition
(whether such amendment is executed or such waiver or
consent is given before or after such, failure) shall not
be construed as a breach of such term, covenant,
agreement or condition or as a Default or an Event of
Default. Unless otherwise specified in such waiver or
consent, a waiver or consent given hereunder shall be
effective only in the specific instance and for the
specific purpose for which given. In the event that any
such waiver or amendment is requested by the Borrower,
the Agent and the Lenders may require and charge a fee in
connection therewith and consideration thereof in such
amount as shall be determined by the Agent and the
Required Lenders in their discretion.
(b) Except as otherwise set forth in this Agreement,
without the prior unanimous written consent of the
Lenders,
(i) no amendment, consent or waiver shall
affect the amount or extend the time of the
obligation of the Lenders to make Loans or
extend the originally scheduled time or times of
payment of the principal of any Loan or alter
the time or times of payment of interest on any
Loan or the amount of the principal thereof or
the rate of interest thereon or the amount of
any commitment fee payable hereunder or permit
any subordination of the principal or interest
on such Loan, permit the subordination of the
Security Interests in any material Collateral or
amend the provisions of ARTICLE 13 or of this
SECTION 16.11(b),
(ii) no material Collateral shall be
released by the Agent other than as specifically
permitted in this Agreement,
(iii) except to the extent expressly provided
herein, the definition "Borrowing Base" shall
not be amended, and
(iv) neither the Agent nor any Lender shall
consent to any amendment to or waiver of the
provisions of the Subordinated Agreements or any
other instrument or agreement evidencing or
relating to obligations of the Borrower that are
expressly subordinate to any of the Secured
Obligations if such amendment or waiver would be
adverse to the Lenders in their capacities as
Lenders hereunder;
PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, Required Lenders shall have the right to
waive any Default or Event of Default and the consequences
hereunder of such Default or Event of Default and shall
have the right to enter into an agreement with the
Borrower or any Guarantor providing for the forbearance
from the exercise of any remedies provided hereunder or
under the other Loan Documents without waiving any Default
or Event of Default.
(c) The making of Loans hereunder by the Lenders
during the existence of a Default or Event of Default
shall not be deemed to constitute a waiver of such
Default or Event of Default.
(d) Notwithstanding any provision of this Agreement
or the other loan documents to the contrary, no consent,
written or otherwise, of the Borrower shall be necessary
or required in connection with any amendment to Article
or required in connection with any amendment to ARTICLE
15 or SECTION 5.7, and any amendment to such provisions
shall be effected solely by and among the Agent and the
Lenders, provided that no such amendment shall impose any
obligation on the Borrower.
SECTION 16.12. Assignment. All the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that the Borrower may
not assign or transfer any of its rights under this Agreement.
SECTION 16.13. Performance of Borrower's Duties.
(a) The Borrower's obligations under this Agreement
and each of the Loan Documents shall be performed by the
Borrower at its sole cost and expense.
(b) If the Borrower shall fail to do any act or thing
which it has covenanted to do under this Agreement or any
of the Loan Documents, the Agent, on behalf of the
Lenders, may (but shall not be obligated to) do the same
or cause it to be done either in the name of the Agent or
the Lenders or in the name and on behalf of the Borrower,
and the Borrower hereby irrevocably authorizes the Agent
so to act.
SECTION 16.14. Indemnification. The Borrower agrees to reimburse
the Agent and the Lenders for all costs and expenses, including,
reasonable counsel fees and disbursements, incurred, and to indemnify
and hold the Agent and the Lenders harmless from and against all losses
suffered by, the Agent or any Lender in connection with
(i) the exercise by the Agent or any Lender
of any right or remedy granted to it under this
Agreement or any of the Loan Documents,
(ii) any claim, and the prosecution or
defense thereof, arising out of or in any way
connected with this Agreement or any of the Loan
Documents, and
(iii) the collection or enforcement of the
Secured Obligations or any of them,
other than such costs, expenses and liabilities
arising out of the Agent's or any Lender's gross
negligence or willful misconduct.
SECTION 16.15. All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Agent and the Lenders
and any Persons designated by the Agent or the Lenders pursuant to any
provisions of this Agreement or any of the Loan Documents shall be
deemed coupled with an interest and shall be irrevocable so long as any
of the Secured Obligations remain unpaid or unsatisfied.
SECTION 16.16. Survival. Notwithstanding any termination of this Agreement,
(a) until all Secured Obligations have been
irrevocably paid in full or otherwise satisfied, the
Agent, for the benefit of the Lenders, shall retain its
Security Interest and shall retain all rights under this
Agreement and each of the Security Documents with respect
to such Collateral as fully as though this Agreement had
not been terminated,
(b) the indemnities to which the Agent and the Lenders
are entitled under the provisions of this Article 16 and
any other provision of this Agreement and the Loan
Documents shall continue in full force and effect and
shall protect the Agent and the Lenders against events
arising after such termination as well as before, and
(c) in connection with the termination of this
Agreement and the release and termination of the Security
Interests, the Agent, on behalf of itself as agent and
the Lenders, may require such assurances and indemnities
as it shall reasonably deem necessary or appropriate to
protect the Agent and the Lenders against loss on account
of such release and termination, including, without
limitation, with respect to credits previously applied to
the Secured Obligations that may subsequently be reversed
or revoked.
SECTION 16.17. Titles and Captions. Titles and captions of
Articles, Sections and subsections in this Agreement are for convenience
only, and neither limit nor amplify the provisions of this Agreement.
SECTION 16.18. Severability of Provisions. Any provision of this
Agreement or any Loan Document which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to
the extent of such prohibition or unenforceability without invalidating
the remainder of such provision or the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in
any other jurisdiction.
SECTION 16.19. Governing Law. This Agreement and the Notes shall
be construed in accordance with and governed by the law of the State of
Georgia.
SECTION 16.20. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and shall be binding upon all parties, their successors and
assigns, and all of which taken together shall constitute one and the
same agreement.
SECTION 16.21. Reproduction of Documents. This Agreement, each of
the Loan Documents and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by the Agent or any
Lender, and (c) financial statements, certificates and other information
previously or hereafter furnished to the Agent or any Lender, may be
reproduced by the Agent or such Lender by any photographic, photostat-
ic, microfilm, microcard, miniature photographic or other similar
process and such Person may destroy any original document so produced.
Each party hereto stipulates that, to the extent permitted by Applicable
Law, any such reproduction shall be as admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or
not the original shall be in existence and whether or not such
reproduction was made by the Agent or such Lender in the regular course
of business), and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence.
SECTION 16.22. Term of Agreement. This Agreement shall remain in
effect from the Agreement Date through the Termination Date and
thereafter until all Secured Obligations shall have been irrevocably
paid and satisfied in full. No termination of this Agreement shall
affect the rights and obligations of the parties hereto arising prior to
such termination.
SECTION 16.23. Increased Capital. If any Lender shall have
determined that the adoption of any applicable law, rule, regulation,
guideline, directive or request (whether or not having force of law)
regarding capital requirements for banks or bank holding companies, or
any change therein or in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by such
Lender with any of the foregoing imposes or increases a requirement by
such Lender to allocate capital resources to such Lender's Commitment to
make Loans hereunder which has or would have the effect of reducing the
return on such Lender's capital to a level below that which such Lender
could have achieved (taking into consideration such Lender's then
existing policies with respect to capital adequacy and assuming full
utilization of such Lender's capital) but for such adoption, change or
compliance by any amount deemed by such Lender to be material: (i) such
Lender shall promptly after its determination of such occurrence give
notice thereof to the Borrower; and (ii) the Borrower shall pay to such
Lender as an additional fee from time to time on demand such amount as
such Lender certifies to be the amount that will compensate it for such
reduction. A certificate of such Lender claiming compensation under
this SECTION 16.23 shall be conclusive in the absence of manifest error.
Such certificate shall set forth the nature of the occurrence giving
rise to such compensation, the additional amount or amounts to be paid
to it hereunder and the method by which such amounts were determined.
In determining such amount, such Lender may use any reasonable averaging
and attribution methods.
SECTION 16.24. Pro-Rata Participation.
(a) Each Lender agrees that
(i) if it or any of its Affiliates shall
exercise any right of counterclaim, set-off,
banker's lien or similar right, or if under any
applicable bankruptcy, insolvency or other
similar law it receives a secured claim the
security for which is a debt owed by it to the
Borrower, it shall apportion the amount thereof,
on a pro rata basis, between (A) amounts at the
time owed to it by the Borrower under this
Agreement, and (B) amounts otherwise owed to it
by the Borrower, and
(ii) if, as a result of the exercise of a
right or the receipt of a secured claim and the
apportionment thereof described in CLAUSE (i) of
this SECTION 16.24(a) or otherwise, it shall
receive payment of a proportion of the aggregate
amount of principal and interest due with
respect to the Secured Obligations owed to it
under this Agreement greater than the proportion
of such amounts then received by any other
Lender, such Lender shall purchase a
participation (which it shall be deemed to have
purchased simultaneously upon the receipt of
such payment) in the Secured Obligations then
held by the other Lenders so that all such
recoveries of principal and interest with
respect to all Secured Obligations owed to each
Lender shall be pro rata on the basis of its
respective amount of the Secured Obligations
owed to all Lenders, PROVIDED that if all or
part of such proportionately greater payment
received by such purchasing Lender is thereafter
recovered by or on behalf of the Borrower from
such Lender, such purchase shall be rescinded
and the purchase price paid for such
participation shall be returned to such Lender
to the extent of such recovery, but without
interest.
(b) Each Lender which receives such a secured claim
shall exercise its rights in respect of such secured
claim in a manner consistent with the rights of the
Lenders entitled under this SECTION 16.24 to share in the
benefits of any recovery on such secured claim.
(c) The Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a
participation in any Secured Obligation so purchased or
otherwise acquired may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to
any and all monies owing by the Borrower to such holder
as fully as if such holder were a holder of such Secured
Obligation in the amount of the participation held by
such holder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized officers in several counterparts
all as of the day and year first written above.
BORROWER:
[Corporate Seal] STANDARD COMMERCIAL TOBACCO CO. INC.
Attest: By:___________________________
Name:______________________
By:_______________________ Title:_____________________
Name:___________________
Title:__________________
LENDERS:
Commitment: $62,500,000 NATIONSBANK OF GEORGIA, N.A.
By:___________________________
Name:______________________
Title:_____________________
Address: 600 Peachtree Street
13 Plaza
Atlanta, Georgia 30308
Attn: Business Credit
Facsimile No.: 404-607-6437
FIRST UNION COMMERCIAL CORPORATION
Commitment: $62,500,000
By:____________________________
Name:_______________________
Title:______________________
Address: One First Union Center
Charlotte, North Carolina
28288-0737
Attn: Bernard Banks
Facsimile No.: 704-374-2703
AGENT:
NATIONSBANK OF GEORGIA, N.A.
By:____________________________
Name:_______________________
Title:______________________
Address: 600 Peachtree Street
13 Plaza
Atlanta, Georgia 30308
Attn: Business Credit
Facsimile No.: 404-607-6437
CO-AGENT:
FIRST UNION COMMERCIAL CORPORATION
By:____________________________
Name:_______________________
Title:______________________
Address: One First Union Center
Charlotte, North Carolina
28288-0737
Attn: Bernard Banks
Facsimile No.: 704-374-2703
- 93 -
EXHIBIT 4(iv)
PARENT GUARANTY AGREEMENT
THIS PARENT GUARANTY AGREEMENT, dated as of May 2, 1995 (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 GEORGIA, N.A., as agent for the Banks (the "Agent"),
for the benefit of STANDARD COMMERCIAL TOBACCO CO., INC. ("SCTC"), a wholly
owned subsidiary of SCC.
PRELIMINARY STATEMENT. SCTC entered into that certain Loan and Security
Agreement, of even date herewith (the "Loan Agreement") with NationsBank of
Georgia, N.A., First Union National Bank of North Carolina, the other lenders
signatory thereto from time to time (collectively and including their successors
and assigns, the "Banks"), and the Agent, pursuant to which Loan Agreement the
Lenders have agreed to provide SCTC credit facilities aggregating up to
$125,000,000. 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 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 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.
"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 obliga- tions 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 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.
"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, SCC, or any of their Affiliates or Subsidiaries in connection with the
obligations under the Loan Agreement and delivered to any Holder including,
without limitation, any letter of credit applications executed in connection
with the Letters of Credit.
"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 revolving credit facilities
of approximately $195,000,000 to be extended by various European financial
institutions to SCC and/or its Subsidiaries on a committed basis for at least
364 days from the date hereof.
"Event of Default" has the meaning specified in Article VI.
"Generally Accepted Accounting Principles" or "generally
accepted accounting principles" means generally ac cepted 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 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 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.
"Kehaya Loans" means the existing indebtedness of SCC to Ery W.
Kehaya in the aggregate outstanding principal amount of approximately
$3,700,000.00, which loans are made pursuant to the terms of those certain note
agreements dated July 1, 1988, by and among the Parent Guarantor and the
Insurance Companies, purchased by Ery W. Kehaya as of the date hereof, as the
same may be amended or restated from time to time.
"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.
"Letter of Credit Obligations" means the sum of all Regular
Letter of Credit Obligations and all JTI Letter of Credit Obligations, as such
terms are defined in the Loan Agreement.
"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 Notes and the
Letter of Credit Obligations, or if no amounts are outstanding under the Notes
and there are no Letter of Credit Obligations or, then such determination shall
be made on the basis of Holders having an aggregate Commitment Percentage of at
least 66 2/3%.
"Master Facilities Agreement" means that certain loan document,
including all exhibits and schedules thereto, executed by SCC and certain of its
European subsidiaries with various financial institutions, providing for the
renewal and extension of the European Credit Facilities.
"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 (Carolinas) Debt" means the indebtedness of SCC to
NationsBank, N.A. (Carolinas) having a current principal balance of
approximately $2,500,000.00 and the indebtedness of the W.A. Adams Company
Employee Stock Ownership Plan Trust to NationsBank, N.A. (Carolinas), having a
current principal balance of approximately $6,600,000.00, as guaranteed by SCC.
"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, or (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).
"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 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 the capital stock of each of the Subsidiaries identified on Exhibit B to
secure repayment of the European Credit Facilities; (ix) Liens on the capital
stock of W.A. Adams Company to secure the NationsBank (Carolinas) Debt; (x)
Liens on the SCTC Note securing the Kehaya Loans and the NationsBank Debt; and
(xi) Liens permitted 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.
"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.
"Sale of the Wool Group" means the sale or sales of the capital
stock, substantially all assets or business of a Wool Group Company at
arms-length terms for cash consideration.
"Subordinated Indebtedness" means indebtedness of SCC the
repayment of which has been subordinated to the repayment of the obligations of
SCC 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 the SCTC Note to the repayment of the Guaranteed Obligations on
a permanent basis, 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.
"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. SCC
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 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. (section)
101 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; 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.
The undersigned hereby transfers and conveys to the Agent, for the ratable
benefit of the Holders, any and all balances, credits, deposits, accounts, items
and monies of the undersigned now or hereafter in the possession or control of
the Agent or any Holder, and the Agent and each Holder is hereby given a lien
upon, security title to, and a security interest in all property of the
undersigned of every kind and description now or hereafter in the possession or
control of the Agent and each Holder for any reason, including without
limitation all dividends and distributions on or other rights in connection
there- with. The Agent and each Holder may, without demand or notice of any
kind, at any time and from time to time when any amount shall be due and payable
hereunder, appropriate and apply toward the payment of such amount, and in such
order of application as the Agent may from to time to time determine, any
property, balances, credits, deposits, accounts, items or monies of SCC in the
possession or control of the Agent or any Holder for any purpose.
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. 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 the creation or existence of the Guaranteed Indebtedness,
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 any and all requirements of
diligence in collection or protection of realization upon the Guaranteed
Indebtedness or any collateral granted to the Agent or any Holder pursuant to
the Loan Documents or in enforcing any remedy available to the Agent or any
Holder under any of the Loan Documents. The undersigned waives the benefit of
Section 10-7-24 of the Official Code of Georgia Annotated, and any similar
provisions under the applicable law of any jurisdiction, relating to the
undersigned's right to discharge upon the undersigned's giving notice to the
Agent or any Holder to proceed against SCTC for collection after the Guaranteed
Indebtedness is due and payable, and the failure or refusal of the Agent or any
Holder to commence an action or foreclose any collateral within any specific
time period or at any time.
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 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:
Section 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.
Section 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.
Section 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 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.
Section 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.
Section 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.
Section 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. The undersigned has also
furnished to the Holders its internally prepared and unaudited financial
projections dated as of March 31, 1995. Such financial projections were
prepared based on the best information available to the undersigned and, where
applicable, were prepared in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis. Such financial projections are
accurate, to the best knowledge of the undersigned, in all material respects,
and since the date of such financial projections 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 or such March 31, 1995 financial
statements.
Section 3.07 No Default. No Default or Event of Default presently exists.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 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.
Section 3.15 ERISA. (i) No Reportable Event (as defined in ERISA) has
occurred and is continuing with respect to any Plan; (ii) no 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.
Section 3.16 Subsidiaries. The undersigned has no Subsidiaries except as
set forth in Exhibit E.
Section 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.
Section 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. (Section)(Section) 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. (Section)763.3),
underground storage tanks, "asbestos" (as defined in 40 C.F.R. (Section)763.63)
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.
Section 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.
Section 3.20 Solvency. The undersigned is, and after consummation of this
Guaranty and after giving effect to all Indebtedness incurred hereunder, will be
solvent.
Section 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, all obligations in respect of
Letters of Credit, and other obligations arising under the Documents, together
with interest, fees and other charges thereunder, have been paid in full and the
Commitments thereunder shall have terminated:
Section 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 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 Agent and the
Majority Holders. It is specifically understood and agreed that failure of the
annual financial statements to be accompanied by an opinion and certificate of
such accountants in form and substance as provided herein shall constitute a
Default hereunder.
(b) Monthly Financial Statements. As soon as available
and in any event within 45 days after the end of each calendar month, a
consolidated and consolidating balance sheet of the undersigned and its
Subsidiaries as at the end of such period together with related statements of
income and retained earnings and of cash flows for such month and for the
portion of the fiscal year ending with such month, 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 Agent and 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.
(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 Agent or 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, including without
limitation any default in respect of the European Credit Facilities, (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 regulation, including but
not limited to, regulations promulgated under the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. (Section)(Section) 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.
Section 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.
Section 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.
Section 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, 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.
Section 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.
Section 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.
Section 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 extent and in the manner
customary for companies in similar businesses.
Section 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.
Section 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.
Section 4.10 Tangible Net Worth. The undersigned shall maintain Tangible
Net Worth at all times of at least $85,000,000.00.
Section 4.11 Chief Financial Officer. The undersigned shall hire within 90
days of date of this Guaranty, and retain at all times thereafter, a chief
financial officer, whose qualifications shall be reasonably satisfactory to the
Agent, and who shall undertake such duties and functions as chief financial
officer as are customary for a business of the size and type as the
undersigned's business.
ARTICLE V. NEGATIVE COVENANTS
The undersigned hereby covenants and agrees that so long as the Loan
Agreement is in effect and until the Loans, all obligations in respect of the
Letters of Credit, and all other obligations arising under the Documents,
together with interest, fees and other charges thereunder, have been paid in
full and the Commitments thereunder shall have terminated:
Section 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.
Section 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); provided, however,
notwithstanding the foregoing, SCC may permit its applicable Subsidiaries to
conclude the Sale of the Wool Group so long as the net proceeds of such sale are
used and applied in accordance with the terms of the Master Facilities
Agreement; and provided, further, that SCC may, or permit its applicable
Subsidiaries to, the capital stock or assets of Bela Duty Free Import-Export
GmbH and Stancom Building Supplies, Inc. in arms'-length transactions for fair
consideration.
Section 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.
Section 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.
Section 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 12.6 of the Loan
Agreement and the limitation on the payment of dividends set forth in Section
17.1(q) of the Master Facilities Agreement.
Section 5.06 Leverage Ratio. The undersigned will not permit its
Leverage Ratio (i) to exceed 4.25 to 1.0 at any time prior to the Sale of the
Wool Group, and (ii) to exceed 3.5 to 1.0 at any time after the Sale of the Wool
Group.
Section 5.07 Liens. The undersigned will not permit any of its
Subsidiaries located outside of the United States to pledge their respective
assets to secure their respective credit facilities, except (i) pursuant to the
terms and conditions of, or as disclosed in, the Master Facilities Agreement,
(ii) pursuant to or in connection with the Wool Group Facility (as defined in
the Master Facilities Agreement), or (iii) in connection with securing lines of
credit in individual countries where the assets of a particular subsidiary are
pledged to secure local facilities used by such subsidiary for general working
capital purposes.
Section 5.08 Negative Pledge of Capital Stock. Except with respect to any
Permitted Liens, the undersigned shall not pledge or otherwise grant a Lien upon
any of the capital stock of any of its Subsidiaries.
ARTICLE VI. EVENTS OF DEFAULT
Section 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 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
(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 30 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 30 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 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 or his
immediate family members 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.
(j) European Facility. Without limiting the generality of the
foregoing, any default or event of default shall occur (and continues beyond any
applicable grace period) under or with respect to the European Credit Facilities
or the Master Facilities Agreement, or any loan or security documents executed
in connection therewith or governed or affected thereby; or the outstanding
commitments of the European lenders parties to the Master Facilities Agreement
shall be less than $100,000,000.00 at any time.
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 16.11 of the Loan Agreement,
this Guaranty may be amended, and the 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 Georgia. The undersigned hereby submits to the nonexclusive
jurisdiction of the United States District Courts located in the State of
Georgia and of any Georgia State court sitting in Atlanta 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.
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.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the undersigned
as of the 2nd day of May, 1995.
ATTEST: STANDARD COMMERCIAL CORPORATION
By:___________________ By:____________________________
Title:________________ Title:_________________________
(Corporate Seal)
EXHIBIT 10
Agreement made this 2nd day of May, 1995 between ERY W. KEHAYA
of Parkway Plaza #22, 810 Saturn Street, Jupiter, Florida 33477 ("Kehaya") and
STANDARD COMMERCIAL CORPORATION, a North Carolina corporation of 2201 Miller
Road, Wilson, North Carolina 27893 ("Standard").
WHEREAS, Standard entered into four certain identical Note
Agreements with certain insurance companies ("Senior Noteholders") dated July 1,
1988 ("Senior Note Agreements") with respect to indebtedness represented by four
promissory notes ("Senior Notes") in the original aggregate amount of
$25,000,000; and
WHEREAS, Standard violated various provisions of the Senior
Note Agreements; and
WHEREAS, as a result of said violations, Standard was required
to enter into a Forebearance Agreement with the Senior Noteholders dated August
10, 1994 ("Forbearance Agreement") pursuant to which Standard entered into a
Pledge and Security Agreement ("Pledge Agreement") dated that date with
NationsBank N.A. (Carolinas) ("NBNC") whereby it pledged the stock of certain
subsidiaries and certain subsidiaries liened assets to secure indebtedness to
NBNC and the Senior Noteholders, the relative rights of the Senior Noteholders
and NBNC to said security being governed by an Intercreditor and Agency
Agreement dated August 10, 1994 ("Intercreditor Agreement") and
WHEREAS, Standard cannot comply with the terms of the
Forbearance Agreement and the Senior Notes are due and payable and Standard is
not in a position to make payment; and
WHEREAS, Kehaya is willing to purchase the Senior Notes, extend
the maturity thereof and release or subordinate certain of the security
deposited under the Pledge Agreement; and
WHEREAS, Kehaya is borrowing the monies needed to purchase the
Senior Notes from NBNC; and
WHEREAS, as a condition of such borrowing Kehaya must pledge
with NBNC a substantial portion of the Common Stock of Standard owned by him and
the Senior Notes being purchased by him;
NOW, THEREFORE, it is agreed as follows:
1. Simultaneous with the acquisition by Kehaya of the
Senior Notes, the four Senior Note Agreements shall be consolidated into a
single agreement and amended by deleting Sections 5.6, 5.7, 5.8, 5.9, 5.10,
5.11, 5.12, 5.14 and 5.15 and by incorporating therein by reference in the same
manner and with the same effect as if set forth at length therein the negative
covenants contained in Article V of a certain Parent Guaranty Agreement made
this date by Standard in favor of NationsBank of Georgia, N.A., as agent for
certain banks.
2. Standard will deliver to Kehaya a promissory note in
the form of Exhibit A attached hereto as an amended and restated Senior Note.
The principal amount of said note represents the amount being paid by Kehaya to
purchase the Senior Notes, which amount includes the principal amount of the
Senior Notes and interest and expenses owed by Standard to the Senior
Noteholders. In addition, Standard will reimburse Kehaya for the expenses
actually incurred by him in connection with the transaction upon his
presentation to Standard of an itemization of such expenses.
3. Kehaya will consent to allow the following security
now subject to the Pledge Agreement: the stock of Standard Commercial Tobacco
Company of Canada Ltd., Trans-Continental Leaf Tobacco Corporation, Standard
Commercial Tobacco Company (UK) Ltd., Spierer Freres et Cie S.A., Standard
Commercial Tobacco Services (UK) Limited and Werkhof GmbH to be pledged by
Standard as security pursuant to a certain Master Facilities Agreement among
Trans-Continental Leaf Tobacco Corporation, Deutsche Bank A.G. in Hamburg and
certain other parties ("Master Facilities Agreement"). If in the future NBNC
agrees to release any other stock subject to the Pledge Agreement, Kehaya will
consent to such release.
4. Kehaya will consent to the subordination of the
indebtedness due pursuant to the Senior Notes as provided in a certain
Subordination Agreement dated this date between him and Nationsbank of Georgia,
N.A. ("Nationsbank of Georgia Agreement").
5. Standard agrees that in the event of any asset sales
outside the normal course of business by it, Transcontinental Leaf Tobacco
Corporation or any of their respective affiliates or subsidiaries, any proceeds
of such sales not required to be applied to reduce other indebtedness of
Standard in accord with existing credit agreements, including the Master
Facilities Agreement and the Nationsbank of Georgia Agreement, shall be paid to
Kehaya to the extent permitted by such existing credit agreements and applied in
reduction of each amortization payment still due at the time under Exhibit A in
an equal amount.
6. Until otherwise instructed, Standard shall make all
payments due under Exhibit A to an account opened by Kehaya with NBNC at its
office at Charlotte, North Carolina. The interest payable pursuant to Exhibit A
shall be at the same rate as the interest payable from time to time under the
Term Loan Promissory Note executed this day by Kehaya in favor of NBNC.
Standard is hereby appointed the agent of Kehaya to elect the interest rate
payable pursuant to such Term Loan Promissory Note.
7. All notices and other communications hereunder shall
be sufficiently given and shall be deemed given when delivered or upon receipt
when mailed by registered or certified mail, postage prepaid, addressed to
Kehaya at his address listed above and to Standard at its address listed above,
attention of Keith Merrick, Treasurer, or to such other address as either party
might hereafter designate by notice in accord with this paragraph.
IN WITNESS WHEREOF, the parties hereto have executed this
document as of the day and year first above written.
Ery W. Kehaya by Mark Kehaya,
attorney-in-fact
Standard Commercial Corporation
By
Keith H. Merrick, Treasurer
EXHIBIT A
PROMISSORY NOTE
$3,668,000 May 2, 1995
FOR VALUE RECEIVED Standard Commercial Corporation, 2201 Miller Road,
Wilson, North Carolina 27893 (the "Borrower"), hereby promises to pay to the
order of Ery W. Kehaya (the "Holder") at the offices of NATIONSBANK, N.A.
(Carolinas) at Charlotte, North Carolina (or at such other place or places as
the Holder may designate) the principal sum of Three Million Six Hundred
Sixty-Eight Thousand Dollars ($3,668,000) under the terms and conditions of four
Senior Note Agreements between the Borrower and certain insurance companies
dated July 1, 1988 and an Agreement of even date herewith between the Borrower
and Holder (together the "Loan Agreements"). The defined terms in the Loan
Agreements are used herein with the same meaning. All of the terms, conditions
and covenants of the Loan Agreements are expressly made a part of this
promissory note (the "Promissory Note") by reference in the same manner and with
the same effect as if set forth herein at length and any holder of this
Promissory Note is entitled to the benefits of and remedies provided in the Loan
Agreements and any other agreements by and between the Borrower and the Holder.
The principal amount of this Promissory Note shall be payable in
fourteen (14) consecutive quarterly installments, such installments being due on
the last day of each March, June, September and December, with the first such
installment payable December 31, 1995. All such principal payments shall be in
the same amount as the principal payments due under the note of even date
herewith executed by the Holder in favor of NationsBank N.A. (Carolinas).
This Promissory Note shall bear interest on the outstanding balance
from time to time at the rates provided in the Agreement of even date herewith
between NationsBank, N.A. (Carolinas) and Holder until such principal and
interest have been paid in full. Installments of interest on the outstanding
balance shall be due and payable in arrears quarterly commencing with June 30,
1995.
If payment of all sums due hereunder is accelerated under the terms of
the Loan Agreements, the then remaining principal amount and accrued but unpaid
interest shall bear interest at a rate equal to 3% above the rate payable before
such acceleration until such principal and interest have been paid in full.
Further, in the event of such acceleration, this Promissory Note shall become
immediately due and payable, without presentation, demand, protest or notice of
any kind, all of which are hereby waived by the Borrower.
In the event this Promissory Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
IN WITNESS WHEREOF, the Borrower has caused this Promissory Note to be
executed under seal as of the day and year first above written.
CORPORATE SEAL STANDARD COMMERCIAL CORPORATION
By:
Keith H. Merrick, Treasurer
<TABLE>
STANDARD COMMERCIAL CORPORATION EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except share information; unaudited)
Twelve months ended March 31
<S> <C> <C> <C>
1995* 1994* 1993
PRIMARY EARNINGS PER COMMON SHARE
Income (loss) from continuing operations . . . . . . . . $(27,917) $(38,864) $22,016
Less - ESOP preferred stock dividends net of tax . . . . 485 486 364
Income (loss) from continuing operations
applicable to common stock . . . . . . . . . . . . . . (28,402) (39,350) 21,652
Income (loss) from discontinued operations . . . . . . . (2,627) 3,055 (1,049)
Extraordinary items . . . . . . . . . . . . . . . . . . . -- -- 209
Cumulative effect of accounting changes . . . . . . . . . -- 23 --
Net earnings (loss) applicable to common stock . . . . . $(31,029) $(36,272) $20,812
Average number of common shares outstanding . . . . . . . 8,618,505 8,535,858 8,447,564
Increase applicable to restricted stock awards . . . . . -- 16,955 --
Primary average shares outstanding . . . . . . . . . . . 8,618,505 8,552,813 8,447,564
Earnings (loss) per common share
- from continuing operations . . . . . . . . . . . . . $(3.30) $(4.60) $2.56
- from discontinued operations . . . . . . . . . . . . (0.30) 0.36 (0.12)
- extraordinary items. . . . . . . . . . . . . . . . . -- -- 0.02
- cumulative accounting changes . . . . . . . . . . . -- -- --
- net . . . . . . . . . . . . . . . . . . . . . . . . $(3.60) $(4.24) $2.46
FULLY DILUTED EARNINGS PER COMMON SHARE*
Income (loss) from continuing operations
applicable to common stock . . . . . . . . . . . . . . $(28,402) $(39,350) $21,652
Add - after-tax interest expense on 7 1/4%
convertible subordinated debentures . . . . . . 3,300 3,300 3,300
- dividends payable to ESOP assuming
conversion to common stock . . . . . . . . . . 26 117 107
Adjusted income (loss) from continuing operations . . . . (25,076) (35,933) 25,059
Income (loss) from discontinued operations . . . . . . . (2,627) 3,055 (1,049)
Extraordinary items . . . . . . . . . . . . . . . . . . . -- -- 209
Cumulative effect of accounting changes . . . . . . . . . -- 23 --
Net earnings (loss) applicable to common stock . . . . . $(27,703) $(32,855) $24,219
Primary average shares outstanding . . . . . . . . . . . 8,618,505 8,552,813 8,447,564
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
- conversion of ESOP convertible
preferred stock at July 1, 1993 . . . . . . . . . 262,871 262,871 197,153
Fully diluted average shares outstanding . . . . . . . . 11,007,724 10,942,032 10,771,065
Earnings (loss) per common share
- from continuing operations . . . . . . . . . . . . . $(2.28) $(3.28) $2.33
- from discontinued operations . . . . . . . . . . . . (0.24) 0.28 (0.10)
- extraordinary items . . . . . . . . . . . . . . . . . -- -- 0.02
- cumulative accounting changes . . . . . . . . . . . -- -- --
- net . . . . . . . . . . . . . . . . . . . . . . . . $(2.52) $(3.00) $2.25
</TABLE>
*The calculations of fully diluted earnings per share for 1995 and 1994
include adjustments which are antidilutive. Therefore, fully diluted
earnings per share as shown on the face of the income statement for 1995
and 1994 are equal to primary earnings per share.
<PAGE>
BUSINESS DESCRIPTION, STRATEGY AND GOALS
The Company is principally engaged in the international, service-related
business of purchasing, value-added processing and selling leaf tobacco.
Standard Commercial was founded in 1910 by the father of our present
chairman. The Company is headquartered in Wilson, North Carolina.
The Company is continuing to focus on the following strategic initiatives:
(bullet) improving risk management,
(bullet) reducing leverage, and
(bullet) strengthening the management structure.
The Company's immediate goal is to concentrate on improving the financial
performance of the tobacco business. This includes examination of all aspects of
our operations with the objective of increasing the value of our shareholders'
investment, while fulfilling our responsibilities to our employees, customers
and suppliers.
<PAGE>
FINANCIAL HIGHLIGHTS AND CONTENTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE INFORMATION
For years ended March 31 1995 1994 1993
<S> <C> <C> <C>
Sales $773,453 $695,594 $887,446
Income (loss) before taxes (23) (28,883) 35,732
Income (loss) from continuing operations (27,917) (38,864) 22,016
Income (loss) from discontinued operations (2,627) 3,055 (1,049)
Net income (loss) (30,544) (35,786) 21,176
Earnings (loss) per share from continuing operations
Primary (3.30) (4.60) 2.56
Fully diluted * * 2.33
Earnings (loss) per share from discontinued operations
Primary (0.30) 0.36 (0.12)
Fully diluted * * (0.10)
Net earnings (loss) per share
Primary (3.60) (4.24) 2.46
Fully diluted * * 2.25
Income (loss) as a percentage of sales
Pretax - (4.15%) 4.03%
From continuing operations (3.61%) (5.59%) 2.48%
Net (3.95%) (5.14%) 2.39%
Return on average shareholders' equity (34.8%) (28.2%) 14.9%
</TABLE>
* Not applicable because fully diluted calculations include adjustments
which are antidilutive.
At year-end
<TABLE>
<S> <C> <C> <C>
Working capital $ 72,872 $ 70,484 $ 167,295
Working capital ratio** 1.19:1.00 1.11:1.00 1.28:1.00
Book value per share $ 8.34 $ 11.98 $ 17.74
Market price per share 13 3/8 15 5/8 26 1/4
Shares outstanding 8,766,811 8,567,141 8,516,705
</TABLE>
** Includes discontinued wool operations in 1994 and 1993.
CONTENTS
Business Description, Strategy and Goals........................... IFC
Financial Highlights................................................. 1
Letter to Shareholders............................................... 2
Tobacco Business..................................................... 4
Wool Operations...................................................... 6
Other Businesses..................................................... 6
Management's Discussion and Analysis of Results
of Operations and Financial Condition................................ 7
Consolidated Financial Statements................................... 11
Notes to Consolidated Financial Statements.......................... 14
Independent Auditors' Report........................................ 22
Company Report on Financial Statements.............................. 22
Selected Financial Data............................................. 23
Quarterly Financial Data............................................ 23
Corporate Directors and Officers,
Tobacco Division Management and
Principal Trading Companies....................................... 24
Investor Information................................................ 25
LETTER TO SHAREHOLDERS
DEAR FELLOW INVESTOR
Last year we outlined the circumstances which led to the rapid
deterioration of market conditions in the leaf tobacco industry. The
result was a worldwide surplus of tobacco, falling prices and an erosion
of margins. These events caused the Company's Tobacco Division to incur
substantial losses in fiscal 1994. The imbalance between supply and
demand began to gradually correct itself in the latter part of fiscal
1995. Positive developments, which are explained more fully in the tobacco
business section, came too late for the Tobacco Division to return a
satisfactory operating profit for the year. A significant part of the difficulty
related to the lack of immediate offset between losses incurred in jurisdictions
where there was no relief for taxes and profits earned in other jurisdictions
subject to taxes. This resulted in a large tax charge for the year on a small
pretax profit.
On the other hand, market conditions in the wool industry continued
to improve, with sharply rising prices occurring in the third quarter.
Wool Division profitability was better than budgeted and nearly our best
year ever.
In our other businesses segment, the building supply company in
Wilson, North Carolina did well, but the duty free shops in Eastern
Europe did not achieve budget.
Several significant and unusual items, explained in the Management's
Discussion and Analysis section of this report, contributed to our net
loss for fiscal 1995.
The losses of our tobacco business in the early part of fiscal 1995
and the sharp rise in wool prices during the year placed severe strains
on our liquidity and short-term financing capacity, and our balance
sheet leverage ratios became too high. Strategic initiatives relevant to
these problems, set out in our last annual report, included steps to
reduce leverage and improve liquidity by reducing tobacco inventories,
arranging committed facilities for short-term financing requirements and
issuing a substantial element of long-term debt.
During fiscal 1995 we did substantially reduce uncommitted tobacco
inventories and our goal is to reduce them further.
The restructuring of our short-term financing was accomplished in May
1995 and consists of a revolving, three-year asset-backed facility of
$125 million for our U.S. tobacco business, and a one-year secured
facility of $200 million for our European tobacco operations. We have
other local bank lines totaling $245 million to finance our
operations in certain tobacco producing areas. These combined facilities
are expected to be sufficient for our short-term financing needs.
We did not issue long-term debt because of unfavorable market
conditions at the time. The need to replenish our long-term
capitalization remains so we decided to sell our wool business to
Chargeurs, a major French public company and the world's largest primary
wool processor. Due diligence procedures by the purchaser are in
process, and we expect to sign a definitive agreement and to complete
the transaction by the end of August. Under the terms of the agreement,
the price will be based on the net value of the wool assets on the date
of completion, and Chargeurs will repay all intercompany debt and assume
all short-term wool borrowings. At March 31, 1995 the estimated realizable
value of the companies to be disposed of was approximately $56 million
and the intercompany debt and short-term borrowings were approximately
$131 million. The sale is thus expected to enable us to reduce total
debt by approximately $187 million, and to redeploy equity back into the
tobacco business. In addition our current ratio has improved from
1.11:1.0 at March 31, 1994 to 1.19:1.0 at March 31, 1995.
Progress is being made on other elements of our strategic
initiatives. We have continued to dispose of nonessential assets, and
have sold our interests in the dark tobacco business and our Korean and
Canadian properties.
Our restructured Tobacco Division Management Board, in place since
November 1994, has improved decision making and is exercising enhanced
controls over the procurement of uncommitted tobacco inventory.
We are continuing with plans to move certain key corporate functions
from Europe to the Company's headquarters in Wilson, North Carolina.
The prospects for the tobacco business are improving. The imbalance
between supply and demand has reversed and there are now shortages in
some markets. Orders for current crop Brazilian tobacco have reached
record levels and have strengthened in key African markets. We have been
able to negotiate several large special orders for stocks of oriental
tobacco held by the Turkish monopoly. Our ability to handle this
additional volume of business was made possible because of our new plant
in Turkey. Some of the sales occurred in fiscal 1995 and the rest are
committed for delivery and will be recorded in fiscal 1996 and 1997. We
are optimistic about the future.
The recently completed formation of DiMon by the merger of Dibrell
Brothers and Monk-Austin leaves only four major international leaf
tobacco dealers, of which we will be the third largest in terms of
tobacco sales. Since the DiMon merger was announced, we have been much
encouraged by the support we have received from our major customers.
Since last year, R Anthony Garrett, A. Winniett Peters, J. Anthony
Johnston and Anthony A.D. Arrowsmith have retired from our Board. Mr
Garrett, a former Chairman of Imperial Tobacco (UK) Limited, served on
the Board for 15 years. His valuable contribution to our affairs,
following a lifetime experience in the tobacco industry, will be greatly
missed. Mr Peters, a retired executive of the Company, continues to be
associated with us as a consultant. Mr Johnston served on the Board and
on its Executive Committee, in his capacity as Chief Executive of the
Wool Division. He decided to retire and return to Australia. Mr
Arrowsmith was our Chief Financial Officer. Our grateful thanks are due
to all of them for their contributions and we wish them well.
Two new nonemployee directors have joined the Board of Directors and
will stand for election by the shareholders at the Annual Meeting in
August. Charles H. Mullen is the retired Chairman and Chief Executive
Officer of The American Tobacco Company and a former Vice President and
director of American Brands, Inc. He has had 42 years experience in the
industry. Daniel M. Sullivan is the founder and retired Chief Executive
Officer of Frost & Sullivan, Inc., market research publishers. He
currently serves as Chairman of a public company and is on the board of
four private companies. We welcome them both to our Board.
Robert E Harrison will join us in July as Chief Financial Officer. Mr
Harrison has 17 years experience in the tobacco industry. His
international experience will serve him well in the contribution we
expect him to make to our financial affairs.
Our shareholders and employees have had a challenging year requiring
loyalty and dedication. Our thanks are extended to each and everyone of
them.
Sincerely
/s/ ALEC G. MURRAY
J. Alec G. Murray
President and Chief Executive Officer
TOBACCO BUSINESS
The emerging signs of a recovery in the balance between
supply and demand mentioned in last years report became a reality in
fiscal 1995. As a matter of fact,demand has exceeded supply in certain
areas for both flue-cured and burley tobacco.
Worldwide crop reductions in 1994 in response to
overproduction in 1993 and adverse weather conditions resulted in an
estimated 25% decline in flue-cured (1994 - 3,470 thousand tons vs 1993
- - 4,642 thousand tons) production, and an estimated 24% decline in
burley (1994 - 757 thousand tons vs 1993 - 998 thousand tons)
production. Concurrent with reduced production, demand for American- or
light-blend cigarettes has continued to grow and international
manufacturers are no longer reducing inventory levels.
These conditions led to firmer pricing and the volume of
tobacco sold by the Company in fiscal 1995 was up 17.8% from fiscal
1994. Operating results in our tobacco business improved in the latter
part of fiscal 1995. We are optimistic this trend will continue in
fiscal 1996. Nevertheless, the problems we experienced in fiscal 1994
with excess inventories, over ambitious expansion in Russia and losses
and provisions related to our Italian affiliate continued in fiscal
1995.
Management changes and controls have been implemented to
correct these conditions and we are optimistic the tobacco business will
operate profitably in fiscal 1996, although we are still carrying some
stocks on which thin or no margins may be realized.
Surprisingly, tobacco production in the United States will be
increased this year as the result of larger commitments by U.S.
manufacturers for current crop purchases and a buy out program for
surplus stocks in the stabilization pools. Flue- cured auction sales for
the 1995 crop are estimated at 420 thousand tons, up 16% from 362
thousand tons in 1994 (1993 - 405 thousand tons), and burley tobacco
sales for the same crop years are expected to increase to 259 thousand
tons from 258 thousand tons (1993 - 284 thousand tons). Despite
anticipated 1995 crop production increases, we foresee a downward trend
over the longer term unless positive steps are taken to make U.S.
tobacco more competitive in foreign markets.
The dealer industry packed 12.1% of the 1994 flue-cured crop
for the stabilization pool (1993 - 23.1%) and 9.5% for the burley pool
(1993 - 37.1%). Tobacco packed by the Company for the stabilization
pools changed by similar ratios. However, increased 1995 crop packing
for the flue-cured pool is expected for both the industry and the
Company as a result of the larger crop size.
Exports of 1994 crop tobacco by the Company from Central and
South America were up from 1993 by 8% in volume and down 3% in value.
The Company's new export agency agreement with Souza Cruz enhanced our
financial performance in this region. The Company has limited exposure
on advances to growers for burley tobacco in Honduras, where tobacco
production has been reduced.
For the 1994 crop, purchases by the Company in Zimbabwe were
down 17% in volume but up 15% in value compared to 1993. Improved demand
has resulted in auction price increases of 40% for the current 1995 crop
following a similar increase in 1994.
In Malawi, 1994 crop purchases by the Company were down 30%
in volume due to a smaller crop. However, higher auction prices led
growers to increase 1995 crop production by 15%. Stronger demand has
resulted in auction prices for the 1995 burley crop being up by
approximately 25% and flue-cured by 15%.
The oversupply situation in Turkish oriental tobacco has
created opportunities for the Company to supplement its regular business
with some large special orders for old stocks being held by the Turkish
government monopoly. This business would not have been possible without
our new plant in Turkey. We continue to benefit from increased interest
in other types of European tobacco in Spain, Italy and Greece.
The Company's leadership position in Thailand is undisputed.
Prices were stable for the 1994 crop and increased 10% in 1995. Poor
growing conditions for the 1995 crop limited our ability to fully
realize the increased sales potential.
In China, our 1994 exports were up 8% and we sold all the
exportable tobacco available to us. We continue to view China as an
important source of supply with great future potential and are examining
various options to capitalize on this opportunity.
WOOL OPERATIONS
The Company entered the wool business in 1985 through a
series of acquisitions to diversify into a line of business that would
complement its traditional operations. The Company does not raise sheep
or produce textile products. Like the tobacco business, the wool
business involves the worldwide purchase, value-added processing and
sale of an agricultural commodity. The Company believes that it has
become one of the largest dealers and processors, handling wool from 10
major producing areas, of which the most significant are Australia, New
Zealand, South Africa, South America and the United Kingdom. Standard
owns and operates processing facilities in seven countries, including
scouring mills in Argentina, Australia, New Zealand, South Africa and
the United Kingdom and combing mills in Chile and France. The Company
also uses the services of commission processors in Argentina, Australia,
Belgium, Germany and Italy.
Wool trading conditions continued to improve in fiscal 1995,
wool sales by the Company increased 27.0% versus fiscal 1994 and pretax
operating profits doubled.
Nevertheless, the need to deleverage the Company's balance
sheet as the result of difficult conditions in the tobacco business in
the past two years, led to a strategic decision by the Company's Board
of Directors to dispose of the wool business which resulted in $10.1
million nonrecurring loss and has been accounted for as "discontinued
operations". (See Note 2 to Consolidated Financial Statements.) An
agreement in principle to sell the business was executed and announced
in April 1995 and completion of the transaction is expected to take
place in August 1995. The anticipated sale of the wool business will
enable the Company to significantly reduce its debt and redeploy equity
into the tobacco business.
OTHER BUSINESSES
Carolina Home Center produced a small profit in line with
expectations, however, Bela Duty Free Import-Export incurred losses with
the result that a small, net operating loss was reported for other
businesses in fiscal 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the Selected
Financial Data, Consolidated Financial Statements and their related
Notes.
GENERAL
Standard is principally engaged in purchasing, processing and selling
leaf tobacco to international cigarette manufacturers. Most of its
tobacco purchasing is done on the basis of firm orders or indications of
interest. The ability to obtain raw materials at favorable prices is an
important element of profitability; however, some customers pay Standard
to purchase and process tobacco on a cost-plus basis. Obtaining raw
materials at favorable prices must be coupled with a thorough knowledge
of the types and grades of raw materials to assure the profitability of
processing and blending to a customer's specifications. Processing is
capital intensive and profit therefrom depends upon the volume of
material processed and the efficiency of the factory operations.
The cost of Standard's raw material and processing typically
exceeds 85% of revenues. The cost of raw materials, interest expense and
certain processing and freight costs are variable and thus are related
to the level of sales. Most procurement costs (other than raw
materials), certain processing costs, and most selling, general and
administrative expenses ("SG&A") are fixed. The major elements of SG&A
are employee costs, including salaries and marketing expenses.
Tobacco sales are generally denominated in United States
dollars. The Company regularly monitors its foreign exchange position
and has not experienced material gains or losses on foreign exchange
fluctuations. The Company enters into forward contracts solely for the
purpose of limiting its exposure to short-term changes in foreign
exchange rates.
Assets and liabilities of foreign subsidiaries are translated
at year-end exchange rates. The effects of these translation adjustments
are reported in a separate component of shareholders' equity. Exchange
gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved and
translation adjustments in countries with highly inflationary economies
are included in net income.
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
A decision to sell the wool business has resulted in this segment being
reported separately as discontinued operations in 1995 and the
restatement of corresponding results for prior years.
CONTINUING OPERATIONS sales for 1995 of $773.5 million were
up 11.2% from $695.6 million in fiscal 1994. Tobacco sales of $756.0
million in 1995 were up 12.6% from $671.5 million in 1994. Tobacco sales
represented 97.7% of total sales in 1995 and 96.5% in 1994, and other
business accounted for the remainder of $17.5 million and $24.1 million,
respectively. The increase in tobacco sales resulted from a 17.8% increase
in volume, partly offset by a 4.8% decrease in unit prices. Lower prices
reflected the lagging effect of the worldwide surplus that began in 1993
and only began to be corrected in fiscal 1995. Sales volume increased
throughout 1995 compared to depressed levels in 1994.
The tobacco business showed an operating profit of $2.7
million (after interest expenses of $35.2 million) in 1995, including
provisions against receivables from an Italian affiliate of $6.5
million, redundancy and debt restructuring costs of $2.5 million,
provision against receivables of $2.8 million and profit on sale of
properties of $13.5 million, versus an operating loss of $26.7 million
(including interest expenses of $29.5 million) in 1994.
Other businesses showed an operating loss of $145,000 in 1995
compared to an operating profit of $1.6 million the previous year.
SG&A expense increased to $61.3 million in 1995 from $60.3
million a year earlier. Significant items included in 1995 SG&A totaled
$11.8 million, as described above, versus $6.8 million identified in
1994.
Other income increased to $8.8 million in 1995 is a $13.5
million pretax gain on the sale of proper- ties which netted $1.6
million after income taxes ($4.9 million) and minority interests of $7.0
million. A pretax gain of $3.2 million in 1994 on sale of land and
buildings netted $1.6 million after minimal income taxes and minority
interests ($1.6 million).
After corporate expenses of $2.6 million in 1995 (1994 - $3.8
million) the Company incurred a pretax loss of $23,000 compared to $28.9
million in 1994.
Income taxes in 1995 totaled $13.6 million compared to $2.8 million
in 1994. Income taxes in 1995 included a provision of $1.8 million for an
assessment under appeal and a nonrecurring charge of $1.6 million on dividends
remitted by a foreign subsidiary that cannot be offset by foreign tax credits.
In both years, tax provisions were required for certain jurisdictions where
profits were earned despite overall pretax losses. Tax charges or credits 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.
The portion of income attributable to minority interests
increased to $9.6 million in 1995 from $3.7 million in 1994 due
primarily to the gain on sale of property discussed above. The Company's
share of losses in affiliates increased to $4.7 million in 1995 from
$3.5 million in 1994 because of the further operating losses of our
Italian affiliate.
DISCONTINUED OPERATIONS sales of wool totaled $440.1 million
in 1995, up 27.0% compared to $346.4 million in 1994. Discontinued
nursery operations sales in 1994 totaled $5.0 million. The rise in wool
sales was attributable to a 25.7% increase in average unit prices and a
2.5% increase in volume.
Loss from discontinued operations in 1995 of $2.6 million
includes an estimated net loss of $10.1 million on the pending sale of
the wool business and income from wool operations of $7.4 million net of
$2.8 million income taxes. Restated results of discontinued operations
for 1994 include income from wool operations of $2.4 million net of
income taxes of $2.2 million. In addition, 1994 discontinued operations
include an after-tax gain on the sale of the nursery business of
$630,000 and net operating profit on nursery operations of $59,000. More
detailed information about discontinued operations is included in Note 2
to Consolidated Financial Statements.
The overall net loss recorded in 1995 of $30.5 million or
$3.60 per share compared to a net loss of $35.8 million or $4.24 per
share in 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
These narrative comments have been restated to reflect the results of
the wool business as discontinued operations.
Sales from continuing operations for 1994 of $695.6 million
were down by 21.6% from $887.4 million achieved in 1993. Tobacco sales
of $671.5 million were down by 22.9% as the result of a 14.2% decrease
in volume attributed to pervasive slow demand throughout the industry,
lower unit prices resulting from current market conditions and a change
in the sales mix. The demand for tobacco has been adversely affected by
a worldwide surplus, recent federal legislation that limits the amount
of foreign tobacco that can be used in cigarettes manufactured in the
United States and uncertainty created by proposed higher federal excise
taxes in the United States. Tobacco and other businesses accounted for
96.5% and 3.5% of total fiscal 1994 sales, respectively.
Severely depressed tobacco prices affected the entire
industry during 1994 and deferrals of purchases by many manufacturers
resulted in the Company having a much higher level of uncommitted
inventory than planned. As a result, the Company recorded inventory
provisions totaling $23.2 million in 1994 of which $14 million was
carried forward against year-end inventories. The inventory writedown
plus the reduced volume of sales and pressure on margins led to a $26.7
million operating loss (including interest expense of $29.5 million) for
the tobacco business in 1994 versus a comparable profit of $37.3 million
(after interest expense of $30.5 million) in 1993.
Other businesses showed an operating profit of $1.6 million
in 1994 versus $1.0 million in 1993.
SG&A expense increased by $6.1 million to $60.3 million in
1994 from $54.2 million in the prior year. Unusual factors affecting
1994 SG&A included $1.8 million of nonrecurring costs associated with
restructuring and a terminated merger agreement, and a reserve of $5
million against a contingency reported in the Company's December 31,
1993 Form 10-Q. The contingency involves the collectibility of a $17
million receivable owed to a 50% owned Italian tobacco affiliate by a
former employee, and its potential impact on the affiliate's ability to
repay a liability of $34 million due to the Company. Full recovery of
the affiliate's receivable is being pursued through the combination of secured
assets and legal action against the debtor and certain other parties. In view of
the uncertainties and the timescale of the recovery efforts, management deemed
it prudent to record the reserve after reviewing a range of potential outcomes.
During 1994, the Company realized a pretax gain of
approximately $3.2 million on the sale of land and buildings in Izmir,
Turkey. The gain is included in other income and $1.6 million has been
allocated to the minority shareholder.
In total, after corporate expenses of $3.8 million, the
Company incurred a pretax loss from continuing operations of $28.9
million in 1994 compared to pretax income from continuing operations
income of $35.7 million in 1993, including corporate expenses of $2.6
million. Income taxes totaled $2.8 million in 1994 compared to $11.1
million in 1993. Tax charges or credits 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. In 1994, a tax
provision was required for certain jurisdictions where profits were
earned despite an overall pretax loss.
The portion of income attributable to minority interests
increased to $3.7 million in 1994 from $2.4 million in 1993 due to the
$1.6 million gain on the sale of the Turkish property mentioned above
partly offset by net operating losses of subsidiaries in which there are
minority shareholders. The Company's share of losses in affiliates
increased to $3.5 in 1994 from $270,000 in 1993, primarily because of
operating losses in the 50% owned Italian affiliate.
Discontinued operations include an operating profit of $2.4
million net of tax and an after-tax gain of $630,000 on the sale of
Caro-Green Nursery in 1994 compared to an after-tax operating loss of
$1.0 million (including an extraordinary credit of $294,000 for
realization of a tax-loss carry forward on the wool business) in 1993.
(Refer to Note 2 of the Consolidated Financial Statements for further
details.)
For 1994, the Company recorded a net loss of $35.8 million or
$4.24 per share compared to net income of $21.2 million or $2.46 per
share ($2.25 fully diluted) achieved in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Standard's tobacco purchasing and processing activities and the
receivables resulting from the marketing of its products are seasonal.
The seasons vary from country to country. However, this seasonality is
mitigated by Standard's presence in virtually all tobacco exporting
countries.
In 1995, the Company's total short-term loans and contingent
debt for continuing operations ranged from a low of $377 million (1994
$464 million) to a peak of $544 million (1994 $595 million). The Company
intends to reduce its total borrowings even more with proceeds from the
pending sale of discontinued wool operations (see Note 2 to Consolidated
Financial Statements) and by further reducing its inventory levels.
Standard normally uses short-term bank facilities to provide its working
capital, with borrowing typically peaking in the Company's third
quarter.
The Company's successful efforts to reduce the level of its
tobacco inventories and current receivables, partially offset by a
reduction in current payables and an increase in net trading assets of
the discontinued wool operations were the principal reasons for the
increase of $54 million in cash generated by operating activities from
$48 million in 1994 to $102 million in 1995. Cash employed in investing
activities decreased from $20 million in 1994 to $5 million in 1995 due
primarily to an $11 million reduction in capital expenditures and a $6
million increase in asset sales and disposals. The reduction in
short-term borrowings and lower long-term borrowings were the principal
reasons for the $114 million increase in cash used for financing
activities.
Working capital at March 31, 1995 totaled $72.9 million
compared to $70.5 million at March 31, 1994. The increase is primarily
due to the classification of net assets of discontinued wool operations
as current assets in the current year.
At the beginning of fiscal 1995, availability under
short-term credit facilities was conditional upon the closing of a $100
million private placement of long-term, senior secured notes. Plans to
issue such notes were eventually abandoned by the Company because of
unfavorable conditions in the financial markets at that time. During the
preparation of the notes offering and subsequent exploration of other
financing alternatives, the Company's banks in the United States and
Europe continued funding and amended their loan agreements so that the
Company was not in default of its financial covenants.
In May 1995 the Company completed a major restructuring of
its short-term credit facilities. The new facilities consist of a $125
million, three-year, asset-backed facility for U.S. tobacco operations,
a $200 million secured facility for European tobacco operations, and
secured and unsecured local lines totaling approximately $245 million
extended in various tobacco producing areas. In addition, the Company
has separate, secured facilities totaling $145 million in place for the
discontinued wool operations.
The new U.S. and European loan agreements contain certain
financial and reporting covenants with which the Company would have been
in compliance at March 31, 1995. Under its most restrictive covenant,
the Company had approximately $3.0 million of retained earnings
available for distribution as dividends at March 31, 1995. The loan
agreements also include restrictions on the amount of dividends,
management fees or other distributions of capital or income that can be
upstreamed to the Company by its subsidiaries. As the Company's
subsidiaries are its principal source of cash, depending on their
operating results, these restrictions could further limit the Company's
ability to pay dividends to its shareholders.
Efforts to strengthen the Company's balance sheet are
continuing. Based on the improving outlook for its business, management
anticipates that it will be able to service the interest and principal
on its indebtedness, maintain adequate working capital and provide for
capital expenditures out of operating cash flow and available borrowings
under its new credit facilities. The Company's future operating
performance will be subject to economic conditions and to financial,
business, political and other factors, many of which are beyond its
control.
There were no significant changes in accounting policies
during fiscal 1995.
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Standard Commercial Corporation MARCH 31
1995 1994
IN THOUSANDS
<S> <C> <C>
ASSETS
Cash $ 46,753 $ 69,802
Receivables (Note 3) 154,241 264,511
Inventories (Note 4) 196,037 369,332
Net assets of discontinued operations (Note 2) 56,027 -
Prepaid expenses 2,903 5,991
Marketable securites at cost (approximate market) 453 828
Current assets 456,414 710,464
Property, plant and equipment (Note 5) 99,102 128,024
Investment in affiliates (Note 6) 11,844 14,601
Other assets (Note 7) 41,067 37,682
Total assets $608,427 $890,771
LIABILITIES
Short-term borrowings (Note 8) $275,429 $465,361
Current portion of long-term debt (Note 10) 11,216 33,632
Accounts payable (Note 9) 79,373 123,285
Taxes accrued (Note 16) 17,524 17,702
Current liabilities 383,542 639,980
Long-term debt (Note 10) 26,927 29,169
Convertible subordinated debentures (Note 10) 69,000 69,000
Retirement and other benefits (Notes 11 and 13) 13,005 17,182
Deferred taxes (Note 16) 9,028 10,640
Commitments and contingencies (Note 12) - -
Total liabilities 501,502 765,971
MINORITY INTERESTS 31,299 20,773
ESOP redeemable preferred stock (Note 13) 9,132 9,200
Unearned ESOP compensation (Note 13) (6,600) (7,822)
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value (Note 13)
Authorized shares 1,000,000; issued 91,319 to ESOP
(1994 - 92,005)
Common stock, $0.20 par value (Note 13)
Authorized shares 20,000,000
Issued 11,160,289 shares (1994 - 10,913,459) 2,232 2,183
Additional paid-in capital (Note 13) 38,288 34,875
Unearned restricted stock plan compensation (Note 13) (515) (649)
Treasury stock at cost, 2,393,478 shares
(1994 - 2,346,318) (Note 13) (1,233) (583)
Retained earnings 50,530 84,807
Cumulative translation adjustments (Note 14) (16,208) (17,984)
Total shareholders' equity 73,094 102,649
Total liabilities and equity $608,427 $890,771
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Standard Commercial Corporation YEAR ENDED MARCH 31
1995 1994 1993
IN THOUSANDS, EXCEPT SHARE INFORMATION
<S> <C> <C> <C>
Sales $ 773,453 $ 695,594 $ 887,446
Cost of sales (Note 4) 720,942 667,222 795,805
Selling, general and administrative expenses 61,343 60,342 54,210
Other income (expense) - net (Note 15) 8,809 3,087 (1,699)
Income (loss) before taxes (23) (28,883) 35,732
Income taxes (Notes 12 and 16) 13,601 2,822 11,083
Income (loss) after taxes (13,624) (31,705) 24,649
Minority interests (9,634) (3,687) (2,363)
Equity in losses of affiliates (Note 6) (4,659) (3,472) (270)
Income (loss) from continuing operations (27,917) (38,864) 22,016
Discontinued operations, net of income taxes (Note 2)
Income (loss) from operations 7,423 2,425 (1,049)
Gain (loss) on disposal (10,050) 630 -
(2,627) 3,055 (1,049)
Income (loss) before extraordinary items (30,544) (35,809) 20,967
Extraordinary items (Note 16) - - 209
Cumulative effect of accounting changes (Notes 11 and 16) - 23 -
Net income (loss) (30,544) (35,786) 21,176
ESOP preferred stock dividends net of tax (485) (486) (364)
Income (loss) applicable to common stock (31,029) (36,272) 20,812
Retained earnings at beginning of year 84,807 125,139 108,890
Common stock dividends (3,248) (4,060) (4,563)
Retained earnings at end of year $ 50,530 $ 84,807 $ 125,139
Earnings (loss) per common share
Primary - from continuing operations $(3.30) $(4.60) $2.56
- from discontinued operations $(0.30) $0.36 $(0.12)
- extraordinary items - - $0.02
- cumulative accounting changes - - -
- net $(3.60) $(4.24) $2.46
- average shares outstanding 8,618,505 8,552,813 8,447,564
Fully diluted - from continuing operations * * $2.33
- from discontinued operations * * $(0.10)
- extraordinary items - - $0.02
- cumulative accounting changes - - -
- net * * $2.25
- average shares outstanding * * 10,771,065
Dividends paid per share $0.20 $0.50 $0.54
</TABLE>
*Not applicable because fully diluted calculations include adjustments
which are antidilutive.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Standard Commercial Corporation YEAR ENDED MARCH 31
1995 1994 1993
IN THOUSANDS
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (30,544) $ (35,786) $ 21,176
Depreciation and amortization 11,310 11,388 10,834
Minority interests 9,634 3,686 2,363
Deferred income taxes (486) (1,315) 5,391
Undistributed losses of affiliates,
net of dividends received 4,725 4,204 672
Gain on disposition of property, plant and equipment (13,227) (4,349) (410)
Loss (gain) on disposal of discontinued operations 10,050 (630) -
Other 3,356 2,614 (2,996)
(5,182) (20,188) 37,030
Net changes in working capital other than cash
Receivables 31,337 53,152 (69,226)
Inventories 77,848 29,847 (102,616)
Current payables (6,260) 12,691 33,510
Discontinued operations - noncash charges
and working capital changes 3,922 (27,845) 20,336
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 101,665 47,657 (80,966)
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment - additions (11,295) (22,561) (17,675)
- dispositions 14,342 8,524 1,044
Payment for business acquisitions (4,698) (2,427) (5,174)*
Investing activities of discontinued operations (3,435) (3,760) (7,828)
CASH USED FOR INVESTING ACTIVITIES (5,086) (20,224) (29,633)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 4,758 14,332 32,820
Repayment of long-term borrowings (29,033) (21,012) (9,039)
Net change in short-term borrowings (79,953) (17,295) 100,272
Dividends paid, net of tax (1,913) (4,546) (4,927)
Other 1,641 229 232
Financing activities of discontinued operations (15,128) 23,109 (22,488)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (119,628) (5,183) 96,870
Increase (decrease) in cash for year (23,049) 22,250 (13,729)
Cash at beginning of year 69,802 47,552 61,281
CASH AT END OF YEAR $ 46,753 $ 69,802 $ 47,552
Cash payments for - interest $ 37,339 $ 29,936 $ 33,031
- income taxes $ 7,493 $ 8,300 $ 8,324
*Total price for acquisitions less $694 cash received $ 23,900
Deduct noncash items
Series A Preferred Stock 9,200
Common Stock 7,390
Net cash cost of acquisitions (including $2,136 for
discontinued wool operations) $ 7,310
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
a) CONSOLIDATION. The accounts of all subsidiary companies
are included in the consolidated financial statements and all
intercompany transactions have been eliminated.
Investments in affiliated companies are accounted for by
the equity method of accounting.
b) FOREIGN CURRENCY. Assets and liabilities of foreign
subsidiaries are translated at year-end exchange rates. The effects of
these translation adjustments are reported in a separate component of
shareholders' equity. Exchange gains and losses arising from
transactions denominated in a currency other than the functional
currency of the entity involved and translation adjustments in countries
with highly inflationary economies are included in net income.
c) INTANGIBLE ASSETS. The Company's policy is to amortize
goodwill on a straight line basis over its estimated useful life not to
exceed 40 years.
d) PROPERTY, PLANT AND EQUIPMENT. The cost of significant
improvements to property, plant and equipment is capitalized.
Maintenance and repairs are expensed as incurred. Provision for
depreciation is charged to operations over the estimated useful lives,
primarily 3-30 years, of the assets on a straight-line basis.
e) INVENTORIES. Inventories, which are primarily packed
leaf tobacco, are stated at the lower of specific cost or estimated net
realizable value. Cost of tobacco includes a proportion of interest,
buying commission charges and factory overheads which can be related
directly to specific items of inventory.
f) REVENUE RECOGNITION. Sales and revenue are recognized on
the passage of title.
g) INCOME TAXES. Certain policies used for financial
statement purpose differ from those used for income tax purposes,
thereby causing a deferral of taxes on income.
h) MINORITY INTERESTS. Minority interests represent the
interest of third parties in the net assets of certain subsidiary
companies.
i) COMPUTATION OF EARNINGS PER COMMON SHARE. Primary
earnings per share are computed by dividing earnings, less preferred
stock dividends payable to ESOP net of tax, by the weighted average
number of shares outstanding during each year. Fully diluted earnings
per share assumes the conversion into common stock of all the 7 1/4%
Convertible Subordinated Debentures and ESOP preferred stock at the
dates of issue, thereby increasing the weighted average number of shares
deemed to be outstanding during each period, and adding back to primary
earnings the after-tax interest expense.
j) RECLASSIFICATION. Certain amounts in prior year
statements have been reclassified for conformity with current statement
presentation.
2. DISCONTINUED OPERATIONS
In April 1995, the Company entered into an agreement in
principle to sell its wool operations to Chargeurs of Paris, France.
The Company is also seeking to dispose of its small speciality
fibre unit. Therefore, fiscal 1995 results of the entire wool
business, which showed net operating income of $7.4 million
and an estimated loss on disposal of $10.1 million, have been
reported as discontinued operations and prior periods have been
restated accordingly. Because the sales price of the wool
business is subject to completion of due diligence procedures by
the purchaser and changes in net asset value prior to closing,
certain assumptions and estimates were necessary in arriving at
the estimated loss on disposal shown below.
Also, at March 31, 1995, there were foreign exchange
contracts totaling $73 million with an unrealized loss of
$607,000 related to the wool business.
In December 1993 the Company completed the sale of its
nursery operations and reported its 1994 operating results and
gain on disposal as discontinued operations and prior periods
were accordingly restated. At March 31, 1995, the
consolidated balance sheet includes receivables from the
purchaser of the nursery operations totaling $2.2 million.
A summary of discontinued operations follows:
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Sales
Wool $ 440,112 $346,420 $ 348,638
Nursery - 4,993 3,394
$ 440,112 $351,413 $ 352,032
Pretax operating
income (loss)
Wool $ 10,002 $ 4,446 $ 1,561
Nursery - 89 (2,340)
Income tax (expense) 10,002 4,535 (779)
benefit from operations
Wool (2,769) (2,248) (1,463)
Nursery - (30) 793
(2,769) (2,278) (670)
Minority interests - wool - (78) (60)
Equity in earnings of
affiliates - wool 190 246 166
Extraordinary items
(realization of tax-loss
carryforwards) - wool - - 294
Operating income (loss)
Wool 7,423 2,366 498
Nursery - 59 (1,547)
7,423 2,425 (1,049)
Gain (loss) on disposal
Wool net of $-0-
income taxes (10,050) - -
Nursery, net of $325
income taxes - 630 -
(10,050) 630 -
Income (loss) from
discontinued operations
Wool (2,627) 2,366 498
Nursery - 689 (1,547)
$ (2,627) $ 3,055 $ (1,049)
Sale of the wool business is expected to be completed in
August 1995. A summary of net assets of the discontinued
wool operations included in the March 31, 1995 balance sheet
as a single line item follows. The $10.1 million estimated loss
on disposal was determined by deducting the $56 million
estimated net asset value of discontinued wool operations
(sales price) from the $66.1 million value of net assets held for
sale.
IN THOUSANDS MARCH 31, 1995
Assets
Cash $ 9,461
Receivables 89,822
Inventories 149,373
Other 1,109
Total current assets 249,765
Net property, plant and equipment 35,306
Other noncurrent assets 9,219
Total Assets 294,290
Less - Current liabilities 202,502
- Noncurrent liabilities 13,824
- Cumulative translation adjustment 11,887
Net assets held for sale 66,077
Less - provision for estimated loss on disposal (10,050)
Estimated asset value of discontinued
wool operations $ 56,027
3. RECEIVABLES
IN THOUSANDS 1995 1994
Trade accounts $ 69,562 $ 95,429
Advances to suppliers 15,820 32,441
Affiliated companies 50,391 45,562
Other 22,896 18,571
158,669 192,003
Allowances for doubtful accounts (4,428) (6,399)
$ 154,241 185,604
Discontinued wool operations 78,907
$ 264,511
4. INVENTORIES
IN THOUSANDS 1995 1994
Tobacco $ 194,344 $ 268,948
Other 1,693 1,888
$ 196,037 270,836
Discontinued wool operations 98,496
$ 369,332
Tobacco inventories at March 31, 1995 and 1994 included
capitalized interest, totaling $7.8 million and $7.4 million, and
valuation reserves of $11.1 million and $14.0 million,
respectively. Interest included in cost of sales totaled $25.8
million, $22.9 million and $23.3 million in 1995, 1994 and 1993,
respectively. Inventory valuation provisions included in cost of
sales totaled $5.3 million, $23.8 million and $1.8 million in
1995, 1994 and 1993, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
IN THOUSANDS 1995 1994
Land $ 10,468 $ 10,743
Buildings 61,600 54,995
Machinery and equipment 71,331 68,527
Furniture and fixtures 6,139 5,565
Construction in progress 1,161 1,249
150,699 141,079
Accumulated depreciation (51,597) (45,878)
$ 99,102 95,201
Discontinued wool operations 32,823
$ 128,024
Depreciation expense for continuing operations was $10.1
million, $9.6 million and $10.1 million in 1995, 1994 and 1993,
respectively.
6. AFFILIATED COMPANIES
a) Net investments in affiliated companies are represented
by the following:
IN THOUSANDS 1995 1994
Net current assets $(8,289) $(12,569)
Fixed assets 43,161 53,444
Long-term liabilities (7,513) (6,407)
Interests of other shareholders (15,206) (20,915)
Company's interest 12,153 13,553
Provision for withholding taxes (309) (405)
$11,844 13,148
Discontinued wool operations 1,453
$14,601
b) The results of affiliated companies were:
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Sales $77,869 $94,280 $89,117
Income (loss) before taxes $(4,342) (5,844) 1,712
Income taxes 446 492 1,087
Net income (loss) $(4,788) $(6,336) $ 625
Company's share $(4,756) $(3,408) $ (170)
Amortization of goodwill - (40) (40)
Withholding taxes 97 (24) (60)
Equity in losses $(4,659) $(3,472) $ (270)
Dividends received $ 65 $ 672 $ 400
7. OTHER ASSETS
IN THOUSANDS 1995 1994
Cash surrender value of life insurance
policies (face amount $42,723) $ 12,313 $10,586
Policy loans (6,550) (2,901)
5,763 7,685
Bank deposits 114 541
Receivables 10,372 10,609
Due from Transcatab - net of
$11,240 reserve 15,478 -
Investments 3,572 3,571
Excess of purchase price of subsidiaries
over net assets acquired - net of
accumulated amortization of
$1,089 (1994 - $1,072) 1,348 2,196
Other 4,420 4,961
$ 41,067 29,563
Discontinued wool operations 8,119
$37,682
A total of $26.7 million is due from Transcatab SpA ("Transcatab"), a 50%
owned tobacco affiliate. A reserve of $5 million was recorded in 1994 against a
contingency related to this receivable.
The contingency involves the collectibility of a $17 million
receivable due to Transcatab from the other 50% owner and
his affiliates and the potential impact on Transcatab's ability to
repay the amounts owed to the Company. Full recovery of the
$17 million receivable is being pursued through the
combination of secured assets and legal action against the
debtor and certain other parties. During the year $5.5 million
was received under the Company's fidelity insurance. An
additional reserve of $6.2 million has been made against non-
recovery of the other 50% owner's share of trading losses to
March 31, 1995.
8. SHORT-TERM BORROWINGS
IN THOUSANDS 1995 1994 1993
Weighted average rate on
borrowings at end of year(1) 11.1% 6.7% 6.9%
Weighted average rate
on borrowings
during the year(1) 10.0% 6.7% 8.4%
Maximum outstanding
at any month-end $338,665(2) $487,046 $457,250
Average month-end
amount outstanding $312,305(2) $453,214 $390,083
Amount outstanding
at year-end $275,429(2) $465,361 $457,250
(1) Computed by dividing short-term interest expense and amortized
financing costs by average short-term debt outstanding.
(2) Excludes discontinued wool operations maximum, average and year-
end outstandings of $112 million, $90 million and $103 million,
respectively.
At March 31, 1995, under agreements with various banks,
total short-term credit facilities for continuing operations of
$504 million (1994 - $734 million) were available to the
Company of which $91 million (1994 - $199 million) were
being utilized for letters of credit and guarantees and $138
million (1994 - $180 million) were unused. Also, at March 31,
1995, similar facilities totaling $140 million (1994 - $170
million) were available for the discontinued wool operations of
which $8 million (1994 - $17 million) were being utilized for
letters of credit and guarantees and $29 million (1994 - $43
million) were unused.
Since year end, the Company has completed the restructuring of
certain of its credit facilities. Restructured credit facilities include
a $125 million, three-year, asset-backed revolving facility for U.S.
tobacco operations and a $200 million secured, master credit facility
for European tobacco operations in addition to local lines of
approximately $245 million. Also, separate facilities totaling $145
million have been arranged for discontinued wool operations.
The new U.S. and European loan agreements contain certain
financial and reporting covenants with which the Company would have been
in compliance at March 31, 1995. Under its most restrictive covenant,
the Company had approximately $3.0 million of retained earnings
available for distribution as dividends at March 31, 1995. The loan
agreements also include restrictions on the amount of dividends,
management fees or other distributions of capital or income that can be
upstreamed to the Company by its subsidiaries.
9. ACCOUNTS PAYABLE
IN THOUSANDS 1995 1994
Trade accounts $60,980 $ 65,003
Affiliated companies 1,098 870
Other accruals and payables 17,295 19,407
$79,373 85,280
Discontinued wool operations 38,005
$ 123,285
10. LONG-TERM DEBT
IN THOUSANDS 1995 1994
Senior notes, at 1.75% above LIBOR,
repayable quarterly beginning December
1995 through March 1999 $ 3,835 $ 10,000
Floating rate loan, at 1.75% above
three-month negotiable CD rate,
repayable quarterly through March 2002 6,600 7,725
Floating rate loan, at 1.75% above LIBOR,
repayable quarterly through March 1999 4,927 6,500
Floating rate note, at 82% of prime,
repayable in 2001 2,940 2,940
6.48% fixed rate loans repayable annually
through 1998 10,308 12,144
Floating rate loan at 1.5% above LIBOR
repayable annually through 1998 1,762 2,350
9.25% fixed rate repayable annually
through 1997 1,640 2,460
9.82% fixed rate loan repayable annually
through 2005 3,823 -
Floating rate note, at 1% above LIBOR
transferred to short-term borrowings
in fiscal 1995 - 15,000
12.25% loan repayable annually through 1995 - 742
Other 2,308 2,467
38,143 62,328
Current portion (11,216) (33,632)
$ 26,927 28,696
Discontinued wool operations 473
$ 29,169
Long-term debt maturing after one year is as follows: 1997 -
$8,034,000; 1998 - $7,683,000; 1999 - $2,502,000; 2000 - $1,686,000; and
thereafter - $7,022,000.
CONVERTIBLE SUBORDINATED DEBENTURES
On November 13, 1991 the Company issued $69.0 million of 7 1/4%
Convertible Subordinated Debentures due March 31, 2007. The debentures
are convertible into shares of common stock of the Company at a
conversion price of $31.81 after adjustments for stock dividends. The
debentures are subordinated in right of payment to all senior
indebtedness, as defined, of the Company, and as of March 31, 1995
became redeemable in whole or in part at the option of the Company any
time. Beginning March 31, 2005 the Company will make annual payments to
a sinking fund which will be sufficient to retire at least 5% of the
principal amount of issued Debentures reduced by earlier conversions,
redemptions and repurchases.
11. BENEFITS
The Company has a noncontributory defined benefit pension plan
covering substantially all full-time salaried employees in the United
States. Various other pension plans are sponsored by foreign
subsidiaries. Benefits under the plans are based on employees' years of
service and eligible compensation. Foreign plans which are significant
and considered to be defined benefit pension plans have adopted
Statement of Financial Accounting Standards No. 87, EMPLOYERS'
ACCOUNTING FOR PENSIONS. The Company's policy is to contribute amounts
to the U.S. plan sufficient to meet or exceed funding requirements of
federal benefit and tax laws. A summary of pension costs for 1995, 1994,
and 1993 follows:
IN THOUSANDS 1995 1994 1993
Benefit cost for service
during the year $ 1,566 $ 1,513 $ 1,442
Interest cost on projected
benefit obligation 1,908 1,803 1,640
Recognized return on plan
assets (1,948) (1,906) (1,674)
Net amortization 107 99 101
Net pension cost $ 1,633 $ 1,509 $ 1,509
The assumed long-term rate of return on plan assets used in
determining net pension costs was 8%, and projected benefit obligations
were determined using assumed discount rates of 7.25% for all of the
plans. Assumed rates of increase in future compensation levels were
5.25% for the U.S. plan and from 6.5% to 7% for foreign plans. The
following table sets forth the funded status and amounts recorded in the
consolidated balance sheet for the Company's defined benefit pension
plans:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
U.S. Plan Foreign Plans
IN THOUSANDS 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
- vested benefits $ 5,884 $ 6,131 $ 11,858 $ 9,576
- nonvested benefits 46 40 285 264
Accumulated benefit obligation 5,930 6,171 12,143 9,840
Effect of projected salary increases 1,835 1,604 6,808 7,484
Projected benefit obligation 7,765 7,775 18,951 17,324
Plan assets at fair value (8,372) (7,991) (17,070) (14,836)
Deficiency (excess) of assets
over projected obligation (607) (216) 1,881 2,488
Unamortized net transition
asset (obligation) 428 489 (668) (733)
Unrecognized prior service cost (9) (149) (994) (1,002)
Unrecognized experience gain (782) (992) (546) (507)
Accrued (prepaid) pension cost $ (970) $ (868) $ (327) $ 246
</TABLE>
In addition to amounts in the table above, long-term benefit
liabilities include $5.9 million and $9.8 million shown in the balance
sheet at March 31, 1995 and 1994, respectively, for the actuarially
determined obligations of other benefits.
Assets of the U.S. and some foreign plans consist of pooled
equity and fixed income funds managed by independent trustees.
Obligations of other foreign plans are provided for by purchasing
insurance policies or establishing book reserves .
The Company also sponsors a 401(k) savings incentive plan for
most full-time salaried employees in the United States. The expense for
this plan was $125,000 for 1995, $143,000 in 1994 and $129,000 in 1993.
Effective April 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 106 EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, with respect to benefits
provided under U.S. plans. The Company provides certain health care and
life insurance benefits for substantially all of its retired salaried
employees. SFAS 106 requires the Company to accrue the estimated cost of
retiree benefit payments during the years the employee provides
services. The Company previously expensed the cost of these benefits,
which are principally health care, as premiums were paid or claims were
incurred. SFAS 106 allows recognition of the cumulative effect of the
liability in the year of adoption or the amortization of the obligation
over a period of up to twenty years. The Company has elected to
recognize the cumulative effect of this obligation on the immediate
recognition basis. The cumulative, noncash effect of adopting SFAS 106
as of April 1, 1993 was an increase in accrued postretirement health
care costs of $6.0 million and a decrease in net earnings of $3.7
million or $0.43 per share.
The effect of adopting SFAS 106 was to decrease after- tax
income from continuing operations by $542,000 or $0.06 per share. In
1993, the Company recognized $96,000, as an expense for postretirement
benefits which were not funded. The components of the net periodic cost
of postretirement benefits for 1995 are as follows:
Service cost $ 168,613
Interest cost on accumulated benefit obligation 405,299
Amortization of plan amendments (138,904)
$ 435,008
The components of the liability included in the consolidated
balance sheet at March 31, 1995 of the actuarial present value of
benefits for services rendered to date were:
Current retirees $ 286,798
Active employees eligible to retire 2,182,208
Active employees not eligible to retire 2,857,240
Total 5,326,246
Unrecognized net gain 495,368
Unrecognized prior service cost 1,250,131
Accumulated postretirement benefit obligation $ 7,071,745
The accumulated postretirement benefit obligation (APBO) was
determined using an 8.0% weighted-average discount rate. The medical
cost trend rate used in determining the APBO was assumed to be 14% in
1995. This rate was assumed to gradually decline to 6.5% in 2003, and
remain at that level thereafter.
Assuming a one percent increase in the medical cost trend rates,
the aggregate of the service and interest cost components of the net
periodic pension cost for 1995 would increase by $103,000 and the APBO
as of March 31, 1995 would increase by $713,000. In general,
postretirement benefit costs are paid as claims are incurred. The
Company decided to exercise the option, under SFAS 106, to recognize the
entire net transition obligation during 1994. Accordingly, the related
amortization is not included in the net periodic cost.
The impact of SFAS 106 as it relates to employees of foreign
subsidiaries has not been determined, however the Company does not
believe the effects will be material. The Company currently expenses the
cost of these benefits as incurred and plans to adopt SFAS 106
accounting in fiscal 1996.
The impact of SFAS 112, EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT
BENEFITS, has not been determined but is not believed to be material.
12. COMMITMENTS AND CONTINGENCIES
The Company is obligated under operating leases for equipment,
office and warehouse space with minimum annual rentals as follows: 1996
- - $1,122,000; 1997 - $531,000; 1998 - $429,000; 1999 - $408,000; 2000 -
$296,000 and thereafter $370,000. Some of the leases are subject to
escalation. Expenses under operating leases for continuing operations in
1995, 1994 and 1993 were $963,000, $788,000 and $877,000, respectively.
The Company has commitments for capital expenditures for its
tobacco business of approximately $10 million all of which are expected
to be incurred in fiscal 1996.
The Company has received notice of investigations by
Canadian and United States authorities into alleged violations of
law relating to the importation, exportation and taxation of
tobacco, and has been notified that two of its employees have
been charged with violations of Canadian law. The investigation
is ongoing and, although the Company has not been notified
that it is a target, it has been requested to provide certain
documents relating to specified transactions and it is
cooperating fully in that regard. The Company does not foresee
any claim arising from the proceedings which would have a
material effect on its consolidated financial position and the
results of operations.
Third-party borrowings guaranteed by the Company at March
31, 1995 totaled approximately $30 million.
On May 1, 1993 a foreign subsidiary of the Company received
notices of proposed tax adjustments to its returns for the years 1985
through 1992. A special arbitrator ruled that the Company was liable for
taxes of $1.8 million for the years under review. Although the assessed
taxes were accrued in the current year, the Company has found fault with
and appealed the ruling. The Company believes the assessments are
without merit and intends to vigorously contest the proposed
deficiencies, and that any adjustment which might result would not have
a material effect on the consolidated financial position and the results
of operations.
Other contingencies, consisting of guarantees, pending
litigation and other claims, in the opinion of management, are not
considered to be material in relation to the Company's financial
position.
At March 31, 1995 and 1994 assets of approximately $200
million, including $68 million of the tobacco business and $132 million
of the discontinued wool operations, and $51 million, including $5
million of the tobacco business and $46 million of the discontinued wool
operations, respectively, were pledged against current and long-term
borrowings.
CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET RISKS
Financial instruments that potentially subject the Company
to a concentration of credit risks consist principally of cash and trade
receivables relating to customers in the tobacco industry. Cash is
deposited with high-credit-quality financial institutions. Concentration
of credit risks related to receivables is limited because of the
diversity of customers and locations.
13. COMMON STOCK, PREFERRED STOCK AND
ADDITIONAL PAID-IN CAPITAL
<TABLE>
<CAPTION>
Common Additional
Number of Shares Stock Paid in
of Common Stock Par Value Capital
Issued Treasury In thousands
<S> <C> <C> <C> <C>
March 31, 1992 10,595,638 2,346,318 $2,119 $26,360
401(k) contributions 4,407 - 1 128
Dividends reinvested 3,680 - 1 101
Business acquisition 259,298 - 51 7,339
March 31, 1993 10,863,023 2,346,318 2,172 33,928
401(k) contributions 8,591 - 2 143
Dividends reinvested 5,565 - 1 89
RSP shares issued 36,280 - 8 715
March 31, 1994 10,913,459 2,346,318 2,183 34,875
401(k) contributions 8,585 - 2 125
Dividends reinvested 19,391 - 4 302
RSP shares forfeited (435) - - -
Stock dividends 219,289 47,160 43 2,986
MARCH 31, 1995 11,160,289 2,393,478 $2,232 $38,288
</TABLE>
In August 1992, the Company's shareholders approved a
Performance Improvement Compensation Plan, which authorized the
Company's Board of Directors to effect an incentive plan for designated
employees. In June 1993, the Board adopted a Restricted Stock Plan
("RSP") as a means of awarding those employees to the extent that
certain performance objectives were met, restricted shares of the
Company's common stock pursuant to the RSP. the Compensation Committee
of the Board awarded 36,454 shares of Restricted Stock in fiscal 1994,
of which 36,280 were issued as of March 31, 1994. The shares were issued
subject to a seven-year restriction period.
The Company has a 401(k) savings incentive plan in the United
States to which the employer contributes shares of common stock under a
matching program, and a dividend reinvestment plan.
Treasury stock represents shares in the Company acquired by a
foreign affiliate prior to its becoming a wholly-owned subsidiary.
An employee stock ownership plan (the "ESOP") established by W A
Adams Company ("Adams") prior to its acquisition, exchanged the Adams
common stock held by the ESOP for 92,005 shares of Series A Cumulative
Preferred Stock (the "ESOP Stock"), issued by the Company, of which 686
shares were redeemed in 1995. The ESOP stock has a stated value of $100
per share and a par value of $1.65 per share. In return the Company
guaranteed a bank loan taken out by the ESOP to acquire the Adams stock.
The loan is included in long-term debt and a related reduction is offset
by the ESOP Stock as "unearned ESOP compensation". The ESOP Stock is
convertible into 260,911 shares of Standard Commercial Common Stock,
subject to adjustment under certain conditions, and bears cumulative
dividends at a rate of 8% of stated value per annum payable quarterly in
arrears when, as and if declared by the Company's Board of Directors.
The ESOP Stock is redeemable at the option of the Company, in whole or
in part, on or after August 1, 1996 at a price of $100 per share plus
accrued and unpaid dividends, and ESOP participants have a put option at
the stated value on any Preferred Stock received. Holders of the ESOP
Stock have voting rights with respect to certain matters that may be
submitted to a vote of holders of the Company's Common Stock.
14. FOREIGN CURRENCY
Changes in the translation adjustment component of
shareholders' equity are shown below:
IN THOUSANDS 1995 1994 1993
Beginning balance April 1
Continuing operations $ (21,154) $ (14,979) $ (9,446)
Discontinued wool
operations - 5,433 5,657
(21,154) (9,546) (3,789)
Net change in translation of
foreign financial
statements
Continuing operations 4,946 (6,175) (5,533)
Discontinued wool
operations - (2,263) (224)
4,946 (8,438) (5,757)
Ending balance March 31
Continuing operations (16,208) (21,154) (14,979)
Discontinued wool
operations - 3,170 5,433
$ (16,208) $ (17,984) $ (9,546)
Net amounts included in the income statement relating to
foreign currency gains and (losses) from continuing operations were
$(552), $(56), and $280 in 1995, 1994 and 1993, respectively.
15. OTHER INCOME (EXPENSE) - NET
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Other income
Interest $ 3,889 $ 4,722 $ 4,377
Gain on asset dispositions 14,536 4,198 967
Rents received 201 545 79
Other 1,903 1,043 1,047
20,529 10,508 6,470
Other expense
Interest (9,802) (7,051) (7,799)
Amortization of goodwill (84) (87) (29)
Other (1,834) (283) (341)
(11,720) (7,421) (8,169)
$ 8,809 $ 3,087 $(1,699)
16. INCOME TAXES
Effective April 1, 1993 the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109, ACCOUNTING
FOR INCOME TAXES, which required a change in the method of
accounting for income taxes from the deferred method to the
liability method. The cumulative effect of adopting SFAS 109
was to increase income by $3.7 million. Deferred income taxes
reflect the net tax effect of (a) temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax
purposes, and (b) operating-loss carryforwards.
a) Significant components of the Company's deferred tax
liabilities and assets are as follows:
IN THOUSANDS MARCH 31, 1995 March 31, 1994
Deferred tax liabilities:
Depreciation $ 9,763 $ 9,196
Capitalized interest 1,010 1,024
Differences in timing of income
recognition in foreign subsidiaries 5,064 5,393
Prepaid pension assets 1,178 1,118
DISC income - 89
Discontinued wool operations - 9,156
Total deferred tax liabilities 17,015 25,976
Deferred tax assets:
NOL carried forward 1,147 506
Valuation allowance (822) (44)
Postretirement benefits other
than pensions 2,786 2,712
Other accrued liabilities - 256
Uniform capitalization 292 412
All other - net 638 203
Total deferred tax assets 4,041 4,045
Net deferred tax liabilities $12,974 $21,931
The net deferred tax liabilities include approximately $3.9
million and $11.3 million of current liabilities at March 31, 1995
and 1994, respectively.
b) Income tax provisions are detailed below:
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Current
Federal $ 3,721 $ (333) $ 596
Foreign 9,945 3,836 4,326
State and local 421 634 770
14,087 4,137 5,692
Deferred
Federal (1,158) 102 2,080
Foreign 663 (1,418) 3,246
State and local 9 1 65
(486) (1,315) 5,391
INCOME TAX PROVISION $13,601 $ 2,822 $11,083
c) Components of deferred taxes follow:
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Tax on differences in timing
of income recognition in
foreign subsidiaries $ (40) $ (1,404) $ 3,246
Utilization of NOL
carried forward - 31 2,025
Capitalized interest (29) 366 (104)
DISC income (89) (89) (77)
Other (328) (219) 301
$ (486) $ (1,315) $ 5,391
d) The provision for income taxes is determined on the
basis of the jurisdiction imposing the tax liability. As some of
the income of foreign companies may also be currently subject
to U.S. tax, the U.S. and foreign income taxes shown do not
compare directly with the segregation of pretax income
between domestic and foreign companies that follows:
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Pretax income
Domestic $ 89 $ 146 $ 7,048
Foreign (112) (29,029) 28,684
$ (23) $ (28,883) $35,732
e) The following is a reconciliation of the income tax
provision to the expense (benefit) calculated at the U.S.
federal statutory rate.
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
Expense (benefit) at U.S.
federal statutory tax rate $ (8) $ (9,820) $12,149
Foreign tax losses for which
there is no relief available 9,750 13,621 454
U.S. tax on foreign income 2,912 408 1,000
Different tax rates in foreign
subsidiaries (1,073) (1,372) (2,856)
Other - net 2,020 (15) 336
$13,601 $ 2,822 $11,083
f) Prior to the adoption of SFAS 109, realization of tax-loss
carryforwards was accounted for as an extraordinary item.
Accordingly, the consolidated statement of income for 1993
includes $209,000 of such benefits.
17. ACQUISITIONS
The total cost of acquisitions and investments during
1995, 1994 and 1993, net of cash acquired, was $4.7 million,
$2.4 million and $23.9 million, respectively. Included in the
totals for 1993 is the acquisition of W A Adams Company
which was acquired for consideration which included preferred
stock, common stock and cash. The acquisition was accounted
for as a purchase, with no resulting goodwill. The Company
made no other significant business acquisitions during these
years.
The results of operations for fiscal 1993 would not have
been materially different if the acquisitions had been
consummated at the beginning of the year.
18. DISCLOSURES OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial
instruments as of March 31, 1995 is provided below in
accordance with Statement of Financial Accounting Standards
No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS.
Certain estimates and judgments were required to develop the
fair value amounts, which are not necessarily indicative of the
amounts that would be realized upon disposition, nor do they
indicate the Company's intent or ability to dispose of such
instruments.
CASH AND CASH EQUIVALENTS: The estimated fair value of
cash and cash equivalents approximates carrying value.
OTHER ASSETS: Included in other assets are certain long- term
investments, amounting to $3.6 million, which are carried on a cost
basis. The estimated fair values of these investments is $4.0 million,
based on quoted market prices for publicly traded companies and other
valuation techniques for other investments.
SHORT-TERM AND LONG-TERM DEBT: The fair value of the Company's
short-term borrowings, which primarily consists of bank borrowings,
approximates its carrying value. The estimated fair value of long-term
debt, including the current portion, is approximately $89 million,
compared with a carrying value of $107 million, based on discounted cash
flows for fixed rate borrowings, with the fair value of floating rate
borrowings considered to approximate carrying value.
19. SEGMENT INFORMATION
The Company will be engaged primarily in purchasing, processing
and selling leaf tobacco after the pending sale of its wool operations
is completed. Its activities other than these are minimal. Geographic
information is determined by the areas in which the companies conducting
these activities are registered. Generally, sales between segments are
made at prevailing market prices.
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
GEOGRAPHIC AREAS
Sales
United States $277,871 $ 288,914 $ 324,176
Europe 482,622 407,985 625,416
Other areas 55,896 44,143 80,251
Intersegment
eliminations (42,936) (45,448) (142,397)
$773,453* $ 695,594* $ 887,446*
Operating income net
of interest
United States $ 2,726 $ 3,789 $ 9,658
Europe (18,307) (29,890) 24,116
Other areas 18,195 986 4,569
Corporate expenses (2,637) (3,768) (2,611)
Income (loss) before
taxes $ (23) $ (28,883) $ 35,732
Assets
United States $140,489 $ 178,110 $ 240,586
Europe 345,708 427,441 430,436
Other areas 48,324 31,850 33,437
Investment in affiliates 11,844 13,147 17,263
Corporate assets 6,035 7,958 5,963
Discontinued wool
operations (net
in 1995) 56,027 232,265 198,682
$608,427 $ 890,771 $ 926,367
U.S. Exports
Europe $ 69,348 $ 79,105 $ 94,047
Far East 80,474 92,407 79,951
Other areas 12,369 1,775 13,396
$162,191 $ 173,287 $ 187,394
YEAR ENDED MARCH 31
IN THOUSANDS 1995 1994 1993
BUSINESS SEGMENTS
Sales
Tobacco $755,971 $ 671,495 $ 871,364
Other businesses 17,482 24,099 16,082
$773,453* $ 695,594* $ 887,446*
Operating income net
of interest
Tobacco $ 2,759 $ (26,699) $ 37,316
Other businesses (145) 1,584 1,027
Corporate expenses (2,637) (3,768) (2,611)
Income (loss) before
taxes $ (23) $ (28,883) $ 35,732
Interest expense
included above
Tobacco $ 35,207 $ 29,487 $ 30,466
Other businesses 384 448 256
$ 35,591 $ 29,935 $ 30,722
Depreciation and
amortization expense
Tobacco $ 10,524 $ 9,398 $ 9,630
Other businesses 170 158 514
$ 10,694 $ 9,556 $ 10,144
Equity in earnings
of affiliates
Tobacco $ (4,489) $ (3,514) $ (361)
Other businesses (170) 42 91
$ (4,659) $ (3,472) $ (270)
Tobacco $522,000 $ 618,367 $ 688,309
Other businesses 12,521 19,034 16,150
Investments
in affiliates
- Tobacco 10,787 12,125 16,330
- Other 1,057 1,022 933
Corporate assets 6,035 7,958 5,963
Discontinued wool
operations
(1995 net) 56,027 232,265 198,682
$608,427 $ 890,771 $ 926,367
Capital expenditures
Tobacco $ 11,177 $ 21,981 $ 17,484
Other businesses 118 580 191
$ 11,295 $ 22,561 $ 17,675
* Includes sales in excess of 10% of total sales to two customers in
1995 and 1994, and to another customer in 1993.
INDEPENDENT
AUDITORS' REPORT
To The Board of Directors and Shareholders of Standard
Commercial Corporation.
We have audited the accompanying consolidated balance sheets of
Standard Commercial Corporation as of March 31, 1995 and 1994 and the
related consolidated statements of income and retained earnings and of
cash flows for each of the three years in the period ended March 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by the management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the Company
at March 31, 1995 and 1994 and the results of its operations and its
cash flows for each of the three years in the period ended March 31,
1995 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE, LLP
DELOITTE & TOUCHE, LLP
Raleigh, North Carolina
June 29, 1995
COMPANY REPORT ON FINANCIAL
STATEMENTS
Standard Commercial Corporation is responsible for the
preparation of the financial statements, related financial data and
other information in this annual report. The financial statements are
prepared in accordance with generally accepted accounting principles and
include amounts based on estimates and judgment where appropriate.
In meeting its responsibility for both the integrity and
fairness of these statements and information, the Company depends on the
accounting system and related internal controls that are designed to
provide reasonable assurance that transactions are authorized and
recorded in accordance with established procedures, that assets are
safeguarded and that proper and reliable records are maintained.
The concept of reasonable assurance is based on the recognition
that the cost of an internal control system should not exceed the
related benefits. Because of inherent limitations in any system of
controls, there can be no absolute assurance that errors or
irregularities will not occur. Nevertheless, we believe that our
internal controls provide reasonable assurance as to the integrity and
reliability of our financial records.
As an integral part of the internal control system, the Company
maintains a professional staff of internal auditors who monitor
compliance with and assess the effectiveness of the internal controls
and recommend improvements thereto. The Audit Committee of the Board of
Directors, composed solely of independent directors, meets quarterly
with the Company's management and internal auditors, and at least
annually with its independent auditors, to review matters relating to
financial reporting, internal controls and the extent and results of the
audit effort. The internal auditors and independent auditors have direct
access to the Audit Committee with or without management present.
The financial statements have been examined by Deloitte &
Touche, LLP, independent auditors, who render an independent
professional report on the Company's financial statements. Their
appointment was recommended by the Audit Committee, approved by the
Board of Directors and ratified by the shareholders. Their report on the
financial statements is based on auditing procedures which include
reviewing internal control and performing selected tests of transactions
and records as they deem appropriate. These auditing procedures are
designed to provide reasonable assurance that the financial statements
are fairly presented in all material respects.
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
IN THOUSANDS, EXCEPT SHARE DATA 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Sales $ 773,453 $ 695,594 $ 887,446 $ 839,546 $ 694,191 $ 423.114
Income taxes 13,601 2,822 11,083 9,259 7,935 4,212
Income (loss) from continuing operations (27,917) (38,864) 22,016 20,027 16,983 6,966
Income (loss) from discontinued operations (2,627) 3,055 (1,049) 2,165 (7,041) (11,849)
Extraordinary items - - 209 59 (19,592) -
Cumulative effect of accounting changes - 23 - - - -
Net income (loss) (30,544) (35,786) 21,176 22,251 (9,650) (4,883)
Current assets 456,414 710,464 759,802 590,832 469,077 444,586
Total assets 608,427 890,771 926,367 723,819 581,979 541,470
Current liabilities 383,542 639,980 592,507 445,183 394,723 336,084
Long-term debt 95,927 98,169 128,762 100,896 30,902 36,906
Average number of shares outstanding 8,618,505 8,552,813 8,447,564 8,245,501 8,233,048 8,217,786
Per share
Earnings (loss) from continuing operations $ (3.30) $ (4.60) $ 2.56 $ 2.43 $ 2.02 $ 0.85
Income (loss) from discontinued operations (0.30) 0.36 (0.12) 0.26 (0.86) (1.44)
Extraordinary items - - 0.02 0.01 (2.33) -
Net earnings (loss) (3.60) (4.24) 2.46 2.70 (1.17) (0.59)
Dividends paid 0.20 0.50 0.54 0.52 0.52 0.51
Book value at year end 8.34 11.98 17.74 16.12 14.20 16.14
Market price at year end 13 3/8 15 5/8 26 1/4 29 3/8 13 5/8 11 1/4
</TABLE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly results, dividends and stock prices for the years ended March
31, 1995 and 1994 follow:
<TABLE>
<CAPTION>
IN THOUSAND, EXCEPT SHARE DATA June 30 Sept 30 Dec 31 March 31 Year
<S> <C> <C> <C> <C> <C> <C>
1995 Sales
Gross profit $153,344 $142,174 $200,483 $277,452 $773,453
Income (loss) from continuing operations 9,872 9,943 15,710 16,986 52,511
Income (loss) from discontinued operations (2,369) (4,085) (2,442) (19,021) (27,917)
Net income (loss) 1,198 8 2,738 (6,571) (2,627)
Earnings (loss) per share (1,171) (4,077) 296 (25,592) (30,544)
Primary - from continuing operations (0.29) (0.49) (0.30) (2.20) (3.30)
- from discontinued operations 0.14 - 0.32 (0.75) (0.30)
- net (0.15) (0.49) 0.02 (2.95) (3.60)
Fully diluted * * * * *
Dividends paid per share 0.10 0.10 - - 0.20
Market price - high 18 7/8 16 1/8 15 7/8 15 1/8 18 7/8
- low 14 3/4 13 1/8 11 1/8 12 1/8 12 1/8
1994 Sales $153,350 $165,016 $154,314 $222,914 $695,594
Gross profit (5,924) 12,078 15,413 6,805 28,372
Income (loss) from continuing operations (19,149) (906) (1,534) (17,275) (38,864)
Income (loss) from discontinued operations (816) 383 1,753 1,735 3,055
Net income (loss) (19,942) (523) 219 (15,540) (35,786)
Earnings (loss) per share
Primary - from continuing operations (2.26) (0.12) (0.19) (2.03) (4.60)
- from discontinued operations (0.10) 0.05 0.20 0.20 0.36
- net (2.36) (0.07) 0.01 (1.83) (4.24)
Fully diluted * * * * *
Dividends paid per share 0.15 0.15 0.10 0.10 0.50
Market price - high 27 19 7/8 17 18 1/2 27
- low 17 1/4 13 14 3/8 14 13
</TABLE>
* Not applicable because fully diluted calculations include adjustments
which are antidilutive.
Standard's common stock is traded on the New York Stock Exchange
under the symbol STW. Market prices shown above are the high and low
prices as reported by the NYSE. At June 12, 1995 there were 705
shareholders of record.
It is the policy of the Company to pay quarterly cash dividends on
its common stock as business conditions permit. However, to conserve
cash, one percent stock dividends were distributed in lieu of cash for
the quarters ended December 31, 1994 and March 31, 1995. One percent
stock dividends also have been declared for the quarter ended June 30
and September 30, 1995. At this time it is uncertain when cash dividends
will be resumed.
Prior periods have been restated to conform with the current period
presentation of the discontinued wool operation.
<PAGE>
CORPORATE DIRECTORS AND OFFICERS
CORPORATE DIRECTORS
Ery W. Kehaya, CHAIRMAN OF THE BOARD
Marvin W. Coghill, (1)(4) CHAIRMAN
- TOBACCO DIVISION
J. Alec G. Murray, (1)(4) PRESIDENT AND
CHIEF EXECUTIVE OFFICER
William A. Ziegler, (2)(3)(4) FORMERLY PARTNER AND
PRESENTLY CONSULTANT SULLIVAN & CROMWELL,
ATTORNEYS
Henry R. Grunzke, COMMERCIAL DIRECTOR
- WOOL DIVISION
William S. Barrack, Jr., (2)(3) RETIRED SENIOR VICE
PRESIDENT - TEXACO INC. AND DIRECTOR CALTEX
PETROLEUM CORPORATION
Thomas M Evins, Jr. REGIONAL MANAGER -
NORTH AND CENTRAL AMERICA TOBACCO OPERATIONS
Charles H. Mullen, (2)(3) RETIRED CHAIRMAN AND CHIEF
EXECUTIVE OFFICER - THE AMERICAN TOBACCO
COMPANY
Daniel M. Sullivan, (2)(3) FOUNDER AND RETIRED FORMER
CHIEF EXECUTIVE OFFICER - FROST & SULLIVAN INC.
(1) Denotes member of Executive Committee
(2) Denotes member of Audit Committee
(3) Denotes member of Compensation Committee
(4) Denotes member of Nominating Committee
CORPORATE OFFICERS
J. Alec G. Murray, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Robert E. Harrison, SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER (EFFECTIVE JULY 1995)
Guy M. Ross, VICE PRESIDENT AND SECRETARY
Ery W. Kehaya II, VICE PRESIDENT
Mark W. Kehaya, VICE PRESIDENT
Krishnamurthy Rangarajan, VICE PRESIDENT
Keith H. Merrick, TREASURER AND
ASSISTANT SECRETARY
Hampton R. Poole, Jr., CONTROLLER AND
ASSISTANT TREASURER
TOBACCO DIVISION MANAGEMENT
Marvin W. Coghill, (1) CHAIRMAN AND CHIEF EXECUTIVE
Ery W. Kehaya II, (1) OPERATIONS DIRECTOR
Alfred R. Rehm, (1) SALES DIRECTOR
David L. Williams, (1) ACTING FINANCIAL DIRECTOR
Thomas M. Evins, Jr., REGIONAL MANAGER - NORTH AND
CENTRAL AMERICA
Simon J.P. Green, EUROPEAN SALES MANAGER
Edward A. Majeski, REGIONAL MANAGER - SOUTH AMERICA
Duncan B. Meech, REGIONAL MANAGER - FAR EAST
Jophn H. Saunders, REGIONAL MANAGER - AFRICA
Constantin J.W. Von Esebeck, REGIONAL MANAGER
- - EUROPE
(1) Denotes member of Executive Committee
PRINCIPAL TRADING COMPANIES
* Standard Commercial Tobacco Co Inc
WILSON, NORTH CAROLINA
* W A Adams Company, WILSON, NORTH CAROLINA
* CRES Tobacco Company Inc, KING, NORTH CAROLINA
* Adams International Ltd, BANGKOK, THAILAND
* Exelka SA, SALONICA, GREECE
* Siam Tobacco Export Corporation Limited
CHIENGMAI, THAILAND
* Spierer Freres & Cie SA, GENEVA, SWITZERLAND
* Spierer Tutun Ihracat Sanayi Ticaret AS
IZMIR, TURKEY
* Stancom Tobacco Company (Malawi) Limited
LILONGWE, MALAWI
* Stancom Tobacco (Private) Limited
HARARE, ZIMBABWE
* Standard Commercial Tobacco Co of
Canada Ltd, TILLSONBURG, ONTARIO, CANADA
* Standard Commercial Tobacco Company
(UK) Ltd, GODALMING, SURREY, ENGLAND
* Tobacco Processors Lilongwe Ltd
LILONGWE, MALAWI
* Tobacco Processors (Malawi) Ltd,
LIMBE, MALAWI
* Transcatab SpA, CASERTA, ITALY
* Trans-Continental Leaf Tobacco Corporation
VADUZ, LIECHTENSTEIN
* Transhellenic Tobacco SA, SALONICA, GREECE
* Werkhof GmbH, HAMBURG, GERMANY
* World Wide Tobacco Espana, BENAVENTE, SPAIN
<PAGE>
INVESTOR INFORMATION
SHAREHOLDERS
Inquiries and information requests should be directed to:
Corporate Secretary
Standard Commercial Corporation
P.O. Box 450
Wilson NC 27894-0450
Contact: Guy M. Ross
Telephone: 919-291-5507
Fax: 919-237-1109
DIVIDEND POLICY
It is the policy of the Company to pay quarterly cash dividends on its common
stock as business conditions permit. However, to conserve cash, one per cent
stock dividends have been distributed in lieu of cash for several quarters. At
this time it is uncertain when cash dividends will be resumed.
Dividends are paid near the middle of June, September, December and March to
shareholders of record at the beginning of the month in which paid.
DIVIDEND REINVESTMENT PLAN
Shareholders may acquire additional shares of common stock through automatic
reinvestment of cash dividends and/or optional cash investments without
payment of brokerage commissions or service fees.
For information about dividend reinvestment or optional cash investments,
write to the Corporate Secretary or Dividend Disbursing Agent.
COMMON STOCK TRANSFER AGENT AND REGISTRAR, AND DIVIDEND DISBURSING AGENT
Listed: NYSE Symbol: STW
First Union National Bank
Shareholder Services Group
230 S. Tryon Street, 10th Floor
Charlotte NC 28288-1154
Contact: Frances S. Beam
Telephone: 704-383-0112 or
1-800-829-8432
Fax: 704-374-6114
TRUSTEE FOR CONVERTIBLE SUBORDINATED DEBENTURES
Listed: NYSE Symbol: STW H
First Union National Bank
Bond Administration Department
230 S. Tryon Street, 8th Floor
Charlotte NC 28288-1179
Contact: Ted Wiener
Telephone: 704-374-2075
Fax: 704-383-7316
STANDARD COMMERCIAL CORPORATION
Mailing Address
P.O. Box 450
Wilson NC 27894-0450
Street address
2201 Miller Road
Wilson NC 27893
Telephone: 919-291-5507
Fax: 919-237-1109
Telex: 802840 (STANCOM WISN)
Cable: STANDARDCOM WILSON
1995 ANNUAL MEETING
August 8, 1995, 12 noon
Wilson Country Club
West Nash Road
Wilson, North Carolina
10-K REPORT
A copy of the Company's annual report to the Securities and Exchange
Commission on Form 10-K is available without charge to shareholders upon
written request to the Corporate Secretary.
INDEPENDENT AUDITORS
Deloitte & Touche, LLP
150 Fayetteville Street Mall
P.O. Box 2778
Raleigh NC 27602
GENERAL COUNSEL
Rosenman & Colin
575 Madison Avenue
New York NY 10022-2585
Contact: William M. Kaplan
Telephone: 212-940-8810
Fax: 212-940-8776
STANDARD COMMERCIAL (UK)
Standard House, Weyside Park,
Godalming, Surrey GU7 1XE
England
Telephone: 011-44-1483-860171
Fax: 011-44-1483-860176
Telex: 858369 SCTCUK G
STANDARD COMMERCIAL CORPORATION
SUBSIDIARIES AND AFFILIATES at March 31, 1995 EXHIBIT 21
State or Country
Name of Company of Organization
Standard Commercial Corporation North Carolina
W A Adams Company North Carolina
General Processors Inc. North Carolina
Middle Belt Suppliers Inc. North Carolina
P.M.A. Tobaccos Inc. North Carolina
The Tobacco Trading Corporation Virginia
Adams International Ltd. Thailand
Exportadora de Tobaco de Honduras S.A. de C.V. Honduras
Carolina Home Center Inc. North Carolina
Jas. I. Miller Tobacco Company Inc. North Carolina
Standard Commercial Tobacco Co. Inc. North Carolina
Carolina Trading Corporation North Carolina
CRES Tobacco Company Inc North Carolina
Leaftob Export Inc. North Carolina
Quality Export Inc. North Carolina
Trans-World Trading Inc. North Carolina
Jas. I. Miller Tobacco Co. Ltd. Jamaica
Standard Commercial Services Inc. North Carolina
Standard Wool Inc. Delaware
Standard Wool France S.A. France
Peignage de la Tossee S.A. France
Eusebe Carpentier S.A. France
Advhus Gestion Societe Civile France
Dotra B.V. Netherlands
Tentler & Co. B.V. Netherlands
Haarwasserij en Lijmuleeshandel A.F.
Verharen B.V. Netherlands
F Whitley (NZ) Limited New Zealand
De Spa & Co Ltd. New Zealand
Industex Ltd. New Zealand
S H Allen & Sons (Pty) Ltd. Australia
Spierer Freres & Cie S.A. Switzerland
Exelka S.A. Greece
Translanta S.A. Greece
Eryka International S.A. Liechtenstein
Spierer Tutun Ihracat Sanayi Ticaret A.S. Turkey
Hermes Tutun Ihracat A.S. Turkey
Standard Commercial Tobacco Company of Canada Ltd. Canada
British Leaf Tobacco Company of Canada Ltd. Canada
Transconti Srl Italy
Werkhof GmbH Germany
Bela Duty Free Import-Export GmbH Germany
Trans-Continental Leaf Tobacco Corporation Liechtenstein
AOZT Transcontinental Leaf Tobacco Corporation Russia
Burnacon Holdings Inc. Panama
Eryka Mediterranee S.A.R.L. Greece
Esaltab (Zimbabwe) (Pvt.) Ltd Zimbabwe
Inter-Rural Development Corporation Ltd. Liechtenstein
Trans-Continental Farming Ltd. Canada
Kortec Ltd. South Korea
Overseas Properties S.A. Luxembourg
Siam Tobacco Export Corporation Ltd. Thailand
Stancan Corporation Panama
Stancom Tobacco (Private) Ltd Zimbabwe
Combined Tobacco Buyers (Private) Ltd Zimbabwe
Tobacco Development Company of Africa
(Private) Ltd Zimbabwe
Tobacco Processors (Zimbabwe) (Private) Ltd Zimbabwe
Standard Wool S.A. Panama
Standard Wool Deutschland GmbH Germany
Lanimex Trading GmbH Germany
Lohman & Company Wollhandel GmbH Germany
Prolaine Wollhandels GmbH Germany
Standard Wool South Africa (Pty) Ltd South Africa
Mosenthals Wool & Mohair South Africa
(Pty) Ltd South Africa
Standard Wool Australia (Pty.) Ltd. Australia
Hulme Wool Scouring Co. (1938) Pty. Ltd. Australia
Standard Wool Farming Pty. Ltd. Australia
Mascot Wools Pty. Ltd. Australia
Stawool Brokers Pty. Ltd. Australia
Independent Wool Dumpers Pty. Ltd. Australia
Standard Wool Holdings S.A. Argentina
Roca SACIF Argentina
Standard Wool Argentina Argentina
Pole Fueguina S.A. Argentina
Transcatab SpA Italy
Trans-Continental Participacoese
Empreendimentos Ltda. Brazil
Transhellenic Tobacco S.A. Greece
World Wide Tobacco Espana S.A. Spain
Standard Commercial Tobacco Company (UK) Ltd. United Kingdom
Andrew Chalmers (India) Ltd. United Kingdom
N.G. Fleming Ltd. United Kingdom
George S. Ladas & Son. Ltd. Cyprus
Saloman Bros. Tobacco Company Ltd. United Kingdom
Leoni & Dent Ltd. United Kingdom
P.L. Leverson Ltd. United Kingdom
Siemssen Threshie (Jamaica) Ltd. Jamaica
Siemssen Threshie (Malawi) Ltd. Malawi
Stancom Tobacco Company (Malawi) Ltd. Malawi
Tobacco Processors (Malawi) Ltd. Malawi
Limbe Properties Limited Malawi
Standard Commercial Tobacco Co. (Overseas) Ltd. United Kingdom
Tobacco Processors (Lilongwe) Ltd. Malawi
Stancom Zambia (Pvt) Ltd Zambia
Standard Wool (UK) Ltd. United Kingdom
Jacomb Hoare (Bradford) Ltd. United Kingdom
Thomas Chadwick & Sons Ltd. United Kingdom
Standard Wool Chile S.A. Chile
Standard Commercial Tobacco Services (UK) Ltd. United Kingdom
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23
We hereby consent to the incorporation by reference in Registration
Statement 33-25499 on Form S-3 and in Registration Statement 33-59760 on
Form S-8 of our report dated June 29, 1995 included in this report on Form
10-K of Standard Commercial Corporation for the year ended March 31, 1995.
Deloitte & Touche, LLP
Raleigh, North Carolina
June 29, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 46,753
<SECURITIES> 453
<RECEIVABLES> 69,562
<ALLOWANCES> (4,428)
<INVENTORY> 196,037
<CURRENT-ASSETS> 456,414
<PP&E> 150,699
<DEPRECIATION> (51,597)
<TOTAL-ASSETS> 608,427
<CURRENT-LIABILITIES> 383,542
<BONDS> 95,927
<COMMON> 2,232
9,132
0
<OTHER-SE> 70,862
<TOTAL-LIABILITY-AND-EQUITY> 608,427
<SALES> 773,453
<TOTAL-REVENUES> 773,453
<CGS> 720,942
<TOTAL-COSTS> 720,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,889
<INCOME-PRETAX> (23)
<INCOME-TAX> 13,601
<INCOME-CONTINUING> (27,917)
<DISCONTINUED> (2,627)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,554)
<EPS-PRIMARY> (3.60)
<EPS-DILUTED> (3.60)
</TABLE>
