<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
STANDARD COMMERCIAL TOBACCO CO., INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 5150 56-0323420
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CO-REGISTRANTS:
<TABLE>
<S> <C>
STANDARD COMMERCIAL CORPORATION NORTH CAROLINA
STANDARD WOOL, INC. DELAWARE
(Exact name of co-registrant (State or other jurisdiction
as specified in its charter) of incorporation or organization)
</TABLE>
2201 MILLER ROAD
WILSON, NORTH CAROLINA 27893
(919) 291-5507
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
ROBERT E. HARRISON
CHIEF EXECUTIVE OFFICER
STANDARD COMMERCIAL TOBACCO CO., INC.
2201 MILLER ROAD
WILSON, NORTH CAROLINA 27893
(919) 291-5507
(Name, address, including zip code, and telephone number, including
area code, of agent for service of process)
COPIES TO:
DONALD R. REYNOLDS, ESQ.
WYRICK ROBBINS YATES & PONTON LLP
4101 LAKE BOONE TRAIL, SUITE 300
RALEIGH, NORTH CAROLINA 27619
(919) 781-4000
FAX: (919) 781-4865
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED DISTRIBUTION TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER-
BE REGISTERED REGISTERED (1) PER NOTE ING PRICE
<S> <C> <C> <C>
8 7/8% Senior Notes
due 2005.................. $115,000,000 100% $115,000,000
Standard Commercial
Corporation Guarantees of
8 7/8% Senior Notes due
2005...................... $115,000,000 None(2) None(2)
Standard Wool, Inc. Guarantees
of 8 7/8% Senior Notes
due 2005.................. $115,000,000 None(2) None(2)
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO REGISTRATION
BE REGISTERED FEE
<S> <C>
8 7/8% Senior Notes
due 2005.................. $34,848.49
Standard Commercial
Corporation Guarantees of
8 7/8% Senior Notes due
2005...................... None
Standard Wool, Inc. Guarantees
of 8 7/8% Senior Notes
due 2005.................. None
</TABLE>
(1) Equals the aggregate principal amount of the securities being registered.
(2) No separate consideration will be received for these Guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1997
PROSPECTUS
STANDARD COMMERCIAL TOBACCO CO., INC.
OFFER TO EXCHANGE ITS
8 7/8% SENIOR NOTES DUE 2005 THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("EXCHANGE NOTES")
FOR ANY AND ALL OF ITS OUTSTANDING
8 7/8% SENIOR NOTES DUE 2005 ("INITIAL NOTES")
EACH GUARANTEED ON A SENIOR BASIS BY STANDARD COMMERCIAL CORPORATION AND
STANDARD WOOL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
------------------------
Standard Commercial Tobacco Co., Inc. (the "Issuer" or "SCTC, Inc."), a
wholly owned subsidiary of Standard Commercial Corporation ("Standard" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), which together with the Prospectus
constitute the "Exchange Offer", to exchange up to an aggregate principal amount
of $115,000,000 of its 8 7/8% Senior Notes Due 2005 (the "Exchange Notes") that
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for an equal amount of its outstanding 8 7/8% Senior Notes Due 2005
(the "Initial Notes"). The terms of the Exchange Notes are identical in all
material respects to those of the Initial Notes, except for certain transfer
restrictions and registration rights relating to the Initial Notes. The Exchange
Notes will be issued pursuant to, and entitled to the benefits of, the Indenture
(as defined) governing the Initial Notes. The Exchange Notes and the Initial
Notes are sometimes referred to collectively as the "Notes".
The Exchange Notes will bear interest from August 1, 1997, the date of
issuance of the Initial Notes that are tendered in exchange for the Exchange
Notes (or the most recent Interest Payment Date (as defined) to which interest
on such Notes has been paid), at the rate of 8 7/8% per annum and will be
payable semi-annually in arrears on each February 1 and August 1, commencing on
February 1, 1998.
The Exchange Notes will be senior obligations of the Issuer and will rank
PARI PASSU in right of payment with all existing and future indebtedness of the
Issuer other than indebtedness that is expressly subordinate to the Notes. The
Exchange Notes will also be fully and unconditionally guaranteed on a joint and
several basis (the "Guarantees") by the Company and Standard Wool, Inc.
("Standard Wool"), a wholly owned subsidiary of the Company (the "Guarantors").
The Guarantee of Standard Wool will be a general unsecured obligation of
Standard Wool and will rank PARI PASSU in right of payment with all existing and
future indebtedness of Standard Wool other than indebtedness that is expressly
subordinate to such Guarantee. The Guarantee of the Company will be a senior
obligation of the Company and will rank PARI PASSU in right of payment with all
existing and future indebtedness of the Company other than indebtedness that is
expressly subordinate to such Guarantee. In addition, all of the outstanding
capital stock of the Issuer and Standard Wool will be pledged to the Trustee (as
defined) for the benefit of the holders of the Exchange Notes. The Issuer and
Standard Wool are partially dependent on the earnings of their subsidiaries, and
the Company, as a result of its holding company structure, is wholly dependent
on the earnings of its subsidiaries. The Exchange Notes and the Guarantee of
Standard Wool will be effectively subordinated to all secured indebtedness of
the Issuer and Standard Wool, as the case may be, with respect to the assets
securing such indebtedness and will be effectively subordinated in right of
payment to all liabilities, including trade payables, of all subsidiaries of the
Issuer or Standard Wool, as the case may be. The Guarantee of the Company will
be effectively subordinated in right of payment to all liabilities, including
trade payables, of all subsidiaries of the Company (other than the Issuer and
Standard Wool). As of June 30, 1997, on a pro forma basis, after giving effect
to the Refinancing Plan, the Issuer and the Guarantors would have had an
aggregate of approximately $176.9 million of secured and other indebtedness to
which the Notes and the Guarantees would have been effectively subordinated in
right of payment. See "Description of Notes -- Guarantees; Security" and
" -- Ranking".
Upon a Change of Control (as defined), each holder of the Exchange Notes
will have the right to require the Issuer to repurchase such holder's Exchange
Notes at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest and Additional Interest, if any, to the date of repurchase.
There can be no assurance that the Issuer and the Guarantors will have
sufficient funds to repurchase the Exchange Notes in the event of a Change of
Control. In addition, under certain circumstances the Issuer will be obligated
to offer to repurchase the Exchange Notes at 100% of the principal amount
thereof plus accrued and unpaid interest and Additional Interest, if any, to the
date of repurchase with the net proceeds from certain Asset Sales (as defined).
See "Description of Notes".
On August 1, 1997, the Issuer entered into a three-year, $200.0 million,
credit facility (the "Global Bank Facility") among the Issuer and two of its
subsidiaries, (as borrowers), the lenders thereunder, Deutsche Bank A.G. (as
agent) and Bankers Trust Company (as co-agent), replacing the Company's Master
Facilities Agreement (the "MFA") and its U.S. Revolving Credit Facility. See
"Prospectus Summary -- The Refinancing Plan".
IT IS EXPECTED THAT THE EXCHANGE NOTES WILL BE ELIGIBLE FOR TRADING IN THE
PRIVATE OFFERINGS, RESALE AND TRADING THROUGH AUTOMATED LINKAGES ("PORTAL")
MARKET OF THE NASDAQ STOCK MARKET, INC.
BT Securities Corporation and Wheat, First Securities, Inc. (the "Initial
Purchasers") have agreed that one or both of them will act as market makers for
the Exchange Notes. However, the Initial Purchasers are not obligated to so act
and they may discontinue any such market-making at any time without notice. The
Company will not receive any proceeds from this Exchange Offer. The Company has
agreed to pay the expenses of the Exchange Offer. No underwriter is being used
in connection with the Exchange Offer.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE>
STANDARD COMMERCIAL CORPORATION
Gatefold cover consists of an initial page with the Company's logo at the
top and four photographs representing various components of the Company's
tobacco division operations, including (i) Tobacco Auction, (ii) Inspection
Line, (iii) Threshing Conveyor and (iv) Production Control, followed by a
two-page world map identifying 30 and 8 locations thereon where the Company has
a tobacco or wool buying presence, respectively. The heading above the map is
entitled "When You Deal With Standard You Get The Buying Strength of Our Entire
Worldwide Network." The back cover consists of the Company's logo at the top
and four photographs representing various components of the Company's wool
division operations, including (i) First-Stage Scouring, (ii) Scoured Wool,
(iii) Wool Combing and (iv) Combed Wool for Spinners.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS THE CONTEXT REQUIRES OTHERWISE, "STANDARD" OR THE "COMPANY" REFERS TO
STANDARD COMMERCIAL CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES. INVESTORS
SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK
FACTORS".
THE COMPANY
Standard is one of the three global independent leaf tobacco merchants
serving the large multinational cigarette manufacturers and is one of the
largest independent merchants of oriental leaf tobacco, a key component of
American-blend cigarettes. The Company also has a leading market presence in a
number of the emerging and low-cost flue-cured and burley tobacco growing
regions, including China, India, Malawi and Tanzania. Founded in 1910, the
Company purchases, processes, stores, sells and ships tobacco grown in over 30
countries, servicing cigarette manufacturers from 20 processing facilities
strategically located throughout the world. The Company is also engaged in
purchasing, processing and selling various types of wool and is a world leader
in the trading of scoured wool. In fiscal 1997, the Company had sales and
Adjusted EBITDA (as defined herein) of $1,354.3 million and $88.5 million,
respectively.
The Company recently achieved substantial improvement in its operating and
financial performance in part as a result of the implementation of a four-point
strategic plan and the enhancement of the Company's senior management team,
including the appointment of the Company's current Chief Executive Officer. The
key areas addressed by the strategic plan include: (i) information systems; (ii)
financial controls; (iii) risk management; and (iv) asset management. The
Company has improved sales from $1.0 billion in fiscal 1994 to $1.4 billion for
fiscal 1997, reduced SG&A expenses as a percentage of sales from 7.6% to 5.4%
and increased operating income net of interest from $12.2 million to $74.4
million. The Company's tobacco division has driven this return to profitability,
increasing sales from $671.5 million in fiscal 1994 to $997.4 million for fiscal
1997, improving operating income net of interest from a loss of $1.0 million to
income of $62.6 million and increasing average tobacco inventory turnover from
2.1 turns for fiscal 1994 to 4.0 turns for fiscal 1997.
In addition to the benefits which have resulted from the implementation of
the strategic plan, the Company's operating and financial performance has also
been enhanced by substantial improvements in the global leaf tobacco industry as
a result of strong worldwide demand for tobacco products and the decrease in
worldwide tobacco inventories. The global leaf tobacco industry is currently
recovering from a disruption in demand and a reduction in pricing during
calendar 1993 and 1994, which was primarily the result of legislation (the
"75/25 Rule") intended to limit the importation of tobacco into the United
States. This legislation, which was later repealed principally because it was
inconsistent with the General Agreement on Tariffs and Trade ("GATT"), required
that all cigarettes manufactured in the United States, including those
manufactured for export, contain at least 75.0% domestically grown tobacco.
Increased demand and strong brand growth have resulted in increased
production of American-blend cigarettes. American-blend cigarettes contain
flue-cured, burley and oriental tobacco ("American-blend tobacco"), contain less
tar and nicotine, and taste milder than locally produced cigarettes containing
dark and semioriental tobacco historically consumed in certain parts of the
world. According to the Tobacco Merchants Association (the "TMA"),
American-blend cigarette consumption (excluding China) has increased from 1.7
trillion units in calendar 1990 to 1.9 trillion units in calendar 1996, an
increase of 10.8%. The TMA estimates that worldwide American-blend cigarette
consumption (excluding China) will increase an additional 5.5% to more than 2.0
trillion units by the year 2000. The TMA also estimates that worldwide
American-blend cigarette consumption (excluding China), as a percentage of total
consumption, has also experienced substantial growth, increasing from 47.9% in
1990 to 52.5% in 1996, and is projected to reach 54.3% by the year 2000. As
American-blend cigarettes have continued to gain global market share, the demand
for export quality flue-cured, burley and oriental tobacco sourced and processed
by leaf tobacco merchants has grown accordingly. Large multinational cigarette
manufacturers, with one principal exception, rely primarily on the three global
independent leaf tobacco merchants, including the Company, to supply the
majority of their leaf tobacco needs.
The Company sells tobacco to cigarette manufacturers worldwide, including
Philip Morris Companies, Inc., B.A.T. Industries PLC ("B.A.T."), RJR Tobacco
Company, Inc., Rothmans International PLC, Japan Tobacco, Inc. and Reemstma
Cigarettenfabriken GmbH. The Company processes tobacco for these manufacturers
at facilities that are strategically located in the major sourcing areas of
American-blend tobacco, such as Argentina, China, Greece, Italy, Malawi, Spain,
Thailand, Turkey, the United States and Zimbabwe. In addition, the Company has
contracts, joint ventures and other arrangements for the purchase and/or
processing of tobacco grown in substantially all other countries that produce
export quality tobacco.
1
<PAGE>
The Company's wool division, following the termination of an agreement to
sell the division in 1995, was restructured under the leadership of a new
divisional management team which has consolidated operations, increased
operating efficiencies and returned the division to profitability. The business
strategy of the wool division includes: (i) enhancing its global sourcing and
trading network; (ii) developing unified operations; (iii) expanding its Asian
sales efforts; and (iv) integrating proprietary worldwide information systems
and financial controls.
GROWTH STRATEGY
The Company's primary business objective is to expand its position as one
of the leading global suppliers of American-blend tobacco to the major cigarette
manufacturers while increasing profitability through enhanced financial
management and controls. The key elements of the Company's growth strategy
include:
INCREASING PRESENCE IN SOUTH AMERICA AND AFRICA. The Company believes that
its presence in all the major leaf tobacco markets worldwide is critical to
capitalizing on the global expansion of the large multinational cigarette
manufacturers, the recent consolidation of the leaf tobacco merchants and the
anticipated growth in demand for tobacco sourced internationally. A key element
of the Company's growth strategy is to increase its ability to directly source
and process tobacco in South America and Africa, key growing regions for
American-blend tobacco. A trust established by the Company recently acquired
74.9% of the fourth largest tobacco processor in Brazil.
INCREASING PENETRATION OF LOW-COST FILLER TOBACCO AND EMERGING
TOBACCO-GROWING REGIONS. To meet the increasing demand by cigarette
manufacturers throughout the world for low-cost American-blend tobacco, the
Company plans to expand its operations in regions particularly suited for
producing such tobacco. The Company has targeted China, India and Tanzania,
countries in which it has a leading tobacco export position, for expansion and
increased tobacco production. The Company has executed letters of intent for the
construction of new processing facilities in China and India.
STRENGTHENING PRESENCE IN ORIENTAL MARKETS. Demand for oriental tobacco,
which comprises approximately 15.0% of American-blend cigarettes, is rapidly
increasing due to the strong growth in consumption of American-blend cigarettes.
The Company intends to strengthen its position as one of the world's largest
merchants of oriental tobacco through acquisitions and continued strategic
investments in China and Thailand (emerging oriental tobacco markets), and in
Greece and Turkey (leading oriental tobacco markets based on volume).
CAPITALIZING ON ACQUISITION AND OUTSOURCING OPPORTUNITIES. Recent
consolidation within the leaf tobacco industry has been driven by the need to
cost-effectively service multinational cigarette manufacturers on a global
basis. Management believes that there will be increasing opportunities for
acquisitions of smaller independent local leaf tobacco merchants in various
strategic locations throughout the world. In addition, the Company anticipates
further outsourcing of leaf tobacco purchasing and processing by cigarette
manufacturers. This outsourcing trend is driven by the: (i) higher margins in
cigarette production; (ii) increasing sophistication required in sourcing leaf
tobacco on a global basis; and (iii) continued privatization of tobacco and
cigarette production operations in certain countries.
RECENT DEVELOPMENTS
INDUSTRY CONSOLIDATION. On April 1, 1997, the second largest leaf tobacco
dealer in the world announced that it had completed the acquisition of the
fourth largest leaf tobacco dealer in the world. As a result of this
transaction, there are only three global independent leaf tobacco merchants,
including the Company. Management believes that this industry consolidation
should lead to increased sales for the Company as the large multinational
cigarette manufacturers seek to maintain diversity of their sources of
American-blend tobacco.
COMMON STOCK OFFERING. During the first quarter of fiscal 1998, the Company
sold 3,022,500 shares of Common Stock in an offering (the "Equity Offering")
with net proceeds to the Company of approximately $47.0 million after deducting
the underwriting discount and estimated offering expenses. The net proceeds of
the Equity Offering were used to repay short-term indebtedness outstanding under
the Master Facilities Agreement (the "MFA") among the Company and certain of its
subsidiaries and Deutsche Bank A.G. and a number of other banks. See " -- The
Refinancing Plan".
ACQUISITION OF BRAZILIAN LEAF TOBACCO PROCESSING FACILITY. On September 12,
1997, a trust established by the Company acquired 74.9% of Meridional de Tabacos
Ltda. ("Meridional"), the fourth largest leaf tobacco processor in Brazil. This
strategic acquisition complements the Company's 26-year partnership in Brazil
with Souza Cruz S.A. ("Souza Cruz"), a subsidiary of B.A.T., and will provide
the Company with direct ownership of a processing facility in the second largest
leaf tobacco growing region in the world (excluding China).
NOTES OFFERING AND GLOBAL BANK FACILITY. On August 1, 1997, the Issuer
completed a private offering, pursuant to Rule 144A promulgated under the
Securities Act, of $115,000,000 principal amount of Initial Notes (the "Notes
Offering"). Simultaneously with the closing of the Notes Offering, the Issuer
and two of its subsidiaries entered into the Global Bank Facility.
2
<PAGE>
The Company used the net proceeds of the Notes Offering, along with borrowings
under the Global Credit Facility, to repay all outstanding indebtedness under
and replace the MFA, repay all outstanding indebtedness under and terminate the
Company's U.S. Revolving Credit Facility, and to repay certain other long-term
debt.
THE REFINANCING PLAN
The Company has undertaken a series of related financing transactions (the
"Refinancing Plan") that are designed to reduce its financial leverage, decrease
its reliance on short-term indebtedness, diversify its sources of debt financing
and provide the Company with greater financial flexibility.
(Bullet) The Equity Offering, the proceeds of which were used to repay
approximately $47.0 million of short-term indebtedness outstanding
under the MFA;
(Bullet) The Notes Offering, the proceeds of which were used to retire the
Company's existing U.S. Revolving Credit Facility, to repay
certain long-term bank loans in the United States, and to reduce
indebtedness under the MFA; and
(Bullet) The establishment, concurrent with the Notes Offering, of the
Global Bank Facility replacing the MFA and repaying and
terminating the Company's $100.0 million U.S. Revolving Credit
Facility.
CORPORATE STRUCTURE
In connection with the Refinancing Plan, the Company reorganized the
ownership of its subsidiaries such that all of its tobacco operating
subsidiaries are direct or indirect subsidiaries of the Issuer and all of its
wool operating subsidiaries (other than Standard Wool (UK) Limited, which is a
subsidiary of the Issuer) are direct or indirect subsidiaries of Standard Wool.
The following chart summarizes the Company's corporate structure after giving
effect to such restructuring.
Standard
Commercial
Corporation
(Guarantor of Notes)
Standard Commercial Standard
Tobacco Co., Inc. Wool, Inc.
(Issuer) (Guarantor of Notes)
Tobacco Wool
Operating Operating
Subsidiaries* Subsidiaries*
The Company and Standard Wool have guaranteed, on a senior basis, the
obligations of the Issuer under the Notes. In addition, all of the issued and
outstanding capital stock of the Issuer and Standard Wool has been pledged by
the Company to the Trustee for the benefit of the holders of the Notes as
security for the Company's Guarantee. See "Description of Notes -- Guarantees;
Security".
- ---------------
* All of the capital stock of Standard Wool (UK) Limited is owned by the Issuer
and 19.6% of the capital stock of Standard Wool France is indirectly owned by
the Issuer.
3
<PAGE>
THE INITIAL NOTES OFFERING
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The Initial Notes..................................... $115,000,000 aggregate principal amount of 8 7/8% Senior Notes due
2005. The Initial Notes were sold by the Issuer on August 1, 1997 to
the Initial Purchasers pursuant to a Purchase Agreement, dated July
25, 1997 (the "Purchase Agreement"). The Initial Purchasers
subsequently resold the Initial Notes to qualified institutional
buyers pursuant to Rule 144A under the Securities Act and to a
limited number of Accredited Investors.
Registration Rights Agreement......................... Pursuant to the Purchase Agreement, the Issuer, the Guarantors and
the Initial Purchasers entered into a Registration Rights Agreement,
dated as of August 1, 1997 (the "Registration Rights Agreement"),
which grants the holders of the Initial Notes certain exchange and
registration rights. The Exchange Offer is intended to satisfy such
exchange rights, which terminate upon the consummation of the
Exchange Offer.
</TABLE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Notes.................................... The forms and terms of the Exchange Notes are identical in all
material respects to the terms of the Initial Notes for which they
may be exchanged pursuant to the Exchange Offer, except for certain
transfer restrictions and registration rights relating to the Initial
Notes and except for certain penalty interest provisions relating to
the Initial Notes described below under " -- Terms of the Exchange
Notes".
The Exchange Offer.................................... The Issuer is offering to exchange $1,000 principal amount of
Exchange Notes for each $1,000 principal amount of Initial Notes. As
of the date hereof, $115,000,000 aggregate principal amount of
Initial Notes are outstanding. The Issuer will issue the Exchange
Notes to holders on or promptly after the Expiration Date.
Based on an interpretation by the staff of the Commission set forth
in no-action letters issued to third parties, the Issuer believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Initial Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than any such holder which
is an "affiliate" of the Issuer within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided that
such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder does not intend to participate
and has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Each holder
accepting the Exchange Offer is required to represent to the Issuer
in the Letter of Transmittal that, among other things, (i) the
Exchange Notes will be acquired by the holder in the ordinary course
of business, (ii) the holder is not an "affiliate" (as defined in
Rule 405 under the Securities Act) of the Issuer, and (iii) the
holder is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in
the distribution of such Exchange Notes.
Each Participating Broker-Dealer (as defined) that receives Exchange
Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resale of Exchange
Notes received in exchange for Initial Notes where such Initial Notes
were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuer has agreed that,
for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale; provided that the Issuer has no
obligation to amend or supplement this Prospectus unless it has
received written notice from a Participating Broker-Dealer of its
prospectus delivery requirements under the Securities Act within five
business days following consummation of the Exchange Offer. See "Plan
of Distribution".
Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution
of the Exchange Notes could not rely on the position of the staff of
the Commission enunciated in no-action letters and, in the absence of
an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection
with any resale transaction. Failure to comply with such requirements
in such instance may result in such holder incurring liability under
the Securities Act for which the holder is not indemnified by the
Issuer.
Expiration Date; Withdrawal of Tender................. The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997, or such later date and time to which it is
extended by the Issuer (the "Expiration Date"). The tender of Initial
Notes pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Initial Notes not accepted for
exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Certain Conditions to the Note Exchange Offer......... The Exchange Offer is subject to certain customary conditions, which
may be waived by the Issuer. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer".
Procedures for Tendering Initial Notes................ Each holder of Initial Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Initial Notes and
any other required documentation to the Exchange Agent (as defined)
at the address set forth herein.
Special Procedures for Beneficial Owners.............. Any beneficial owner whose Initial Notes are registered in the name
of a broker, dealer, commercial bank, trust or other nominee and who
wishes to tender such Initial Notes in the Exchange Offer should
contact such registered holder and promptly instruct such registered
holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the Letter of
Transmittal and delivering his Initial Notes, either make appropriate
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
arrangements to register ownership of the Initial Notes in such
owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the
Expiration Date.
Registration Requirements............................. The Issuer and the Guarantors have agreed to use their best efforts
to consummate, by December 29, 1997, the registered Exchange Offer
pursuant to which holders of the Initial Notes will be offered an
opportunity to exchange their Initial Notes for the Exchange Notes
that will be issued without legends restricting the transfer thereof.
In the event that applicable interpretations of the staff of the
Commission do not permit the Issuer to effect the Exchange Offer or
in certain other circumstances, the Issuer and the Guarantors have
agreed to file a Shelf Registration Statement covering resales of the
Initial Notes and to use their best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities
Act and, subject to certain exceptions, keep such Shelf Registration
Statement effective until two years after the original issuance of
the Initial Notes.
Certain Federal Income Tax Considerations............. There should be no U.S. federal income tax consequences to holders
exchanging Initial Notes for Exchange Notes pursuant to the Exchange
Offer. See "Certain U.S. Federal Income Tax Considerations".
Use of Proceeds....................................... There will be no cash proceeds to the Issuer from the exchange of
Notes pursuant to the Exchange Offer.
Consequences of Exchanging Initial Notes.............. As a result of the making of this Exchange Offer, the Issuer and the
Guarantors will have fulfilled certain of their obligations under the
Registration Rights Agreement, and holders of Initial Notes who do
not tender their Notes will generally not have any further
registration rights under the Registration Rights Agreement or
otherwise. Such holders will continue to hold the untendered Initial
Notes and will be entitled to all the rights and subject to all the
limitations applicable thereto under the Indentures, except to the
extent such rights or limitations, by their terms, terminate or cease
to have further effectiveness as a result of the Exchange Offer. All
untendered Initial Notes will continue to be subject to certain
restrictions on transfer. Accordingly, if any Initial Notes are
tendered and accepted in the Exchange Offer, the trading market for
the untendered Initial Notes could be adversely affected.
Exchange Agent........................................ Crestar Bank is the Exchange Agent. The address and telephone number
of the Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent".
</TABLE>
TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
General............................................... The form and terms of the Exchange Notes are the same as the form and
terms of the Initial Notes (which they replace) except that (i) the
Exchange Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof,
and (ii) the holders of Exchange Notes will not be entitled to
certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the
Initial Notes in certain circumstances relating to the timing of the
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Exchange Offer, which rights will terminate when the Exchange Offer
is consummated. See "The Exchange Offer -- Consequences of Failure to
Exchange". The Exchange Notes will evidence the same debt as the
Initial Notes and will be entitled to the benefits of the Indenture.
See "Description of the Notes".
Issuer................................................ Standard Commercial Tobacco Co., Inc., a wholly owned subsidiary of
Standard Commercial Corporation, a North Carolina corporation (the
"Company").
Guarantors............................................ The Company and Standard Wool (the "Guarantors").
Maturity Date......................................... August 1, 2005.
Interest.............................................. The Exchange Notes will bear interest at the rate of 8 7/8% per annum
from August 1, 1997, the date of issuance of the Initial Notes that
are tendered in exchange for the Exchange Notes (or the most recent
Interest Payment Date to which interest on such Notes has been paid).
Accordingly, holders of Initial Notes that are accepted for exchange
will not receive interest on the Initial Notes that is accrued but
unpaid at the time of tender, but such interest will be payable on
the first Interest Payment Date after the Expiration Date. Interest
on the Exchange Notes will be payable semi-annually in arrears on
each February 1 and August 1, commencing February 1, 1998.
Ranking............................................... The Exchange Notes and the Guarantees will be senior obligations of
the Issuer and the Guarantors, and will rank PARI PASSU in right of
payment with all existing and future indebtedness of the Issuer or
such Guarantor, as the case may be, other than indebtedness that is
expressly subordinate to the Exchange Notes or the Guarantee of such
Guarantor. The Exchange Notes and the Guarantee of Standard Wool will
be effectively subordinated to all secured indebtedness of the Issuer
and Standard Wool, as the case may be, with respect to the assets
securing such indebtedness and will be effectively subordinated in
right of payment to all liabilities, including trade payables, of all
subsidiaries of the Issuer or Standard Wool, as the case may be. The
Guarantee of the Company will be effectively subordinated in right of
payment to all liabilities, including trade payables, of all
subsidiaries of the Company (other than the Issuer and Standard
Wool). As of June 30, 1997, on a pro forma basis, after giving effect
to the Refinancing Plan, the Issuer and the Guarantors would have had
an aggregate of approximately $176.9 million of secured and other
indebtedness to which the Exchange Notes and the Guarantees would
have been effectively subordinated in right of payment. See
"Description of Notes -- Guarantees; Security".
Guarantees............................................ The Exchange Notes will be fully and unconditionally guaranteed on a
joint and several basis by each of the Guarantors. The Guarantees
will be general senior obligations of the Guarantors and will rank
PARI PASSU in right of payment with all existing and future
indebtedness of the Guarantors other than indebtedness that is
expressly subordinate to the Guarantees. Under certain circumstances,
Standard Wool may be released from liability under its Guarantee in
connection with certain sales or dispositions of its capital stock or
assets. See "Description of Notes -- Guarantees; Security".
Security.............................................. All of the issued and outstanding capital stock of the Issuer and
Standard Wool has been pledged by the Company to the Trustee for
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
the benefit of holders of the Notes as security for the Company's
Guarantee. See "Description of Notes -- Guarantees; Security".
Optional Redemption................................... On or after August 1, 2001, the Issuer may redeem the Exchange Notes,
in whole or in part, at the redemption prices set forth herein, plus
accrued and unpaid interest, if any, and Additional Interest (as
defined), if any, to the date of redemption. See "Description of
Notes -- Redemption".
Change of Control..................................... Upon the occurrence of a Change of Control (as defined), each holder
will have the right to require the Issuer to repurchase such holder's
Exchange Notes at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest and Additional
Interest, if any, to the date of repurchase. There can be no
assurance that the Issuer and the Guarantors will have sufficient
funds to repurchase the Exchange Notes in the event of a Change of
Control.
Certain Covenants..................................... The Indenture (as defined herein) contains certain covenants that,
among other things, limit the ability of the Company and its
subsidiaries to: (i) transfer or issue shares of capital stock of
Restricted Subsidiaries to third parties; (ii) pay dividends or make
certain other payments; (iii) incur additional indebtedness; (iv)
issue preferred stock; (v) incur liens to secure indebtedness of the
Issuer and the Restricted Subsidiaries; (vi) apply net proceeds from
certain asset sales; (vii) enter into certain transactions with
affiliates; or (viii) merge with or into any other person. See
"Description of Notes -- Certain Covenants".
</TABLE>
For additional information regarding the Exchange Notes, see "Description
of Notes".
USE OF PROCEEDS
The Issuer will not receive any cash proceeds from the exchange of Notes
pursuant to the Exchange Offer.
RISK FACTORS
See "Risk Factors" beginning on page 10 for a discussion of certain factors
that should be considered by participants in the Exchange Offer.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical financial data have been derived from the
financial statements of the Company. The data as of and for the years ended
March 31, 1993, 1994, 1995, 1996 and 1997 are derived from the financial
statements of the Company audited by Deloitte & Touche LLP. The selected
financial data for the three months ended June 30, 1997 and 1996 are derived
from consolidated financial statements that have not been audited. In the
opinion of management, the unaudited consolidated financial data include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the consolidated financial position and results of
operations for that period. The results of operations for the three months ended
June 30, 1997 and 1996 are not necessarily indicative of the results of
operations for any other period. The unaudited pro forma financial data for the
year and three months ended March 31 and June 30, 1997, respectively, includes
the historical results of the Company and gives effect to the Refinancing Plan
as if it had occurred on April 1, 1996 and April 1, 1997, respectively. See
" -- The Refinancing Plan". The information contained in this table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and accompanying notes thereto, which are included elsewhere in this Offering
Memorandum.
<TABLE>
<CAPTION>
PRO
FORMA
THREE
MONTHS PRO FORMA
ENDED THREE MONTHS ENDED YEAR ENDED
JUNE 30, JUNE 30, MARCH 31, YEAR ENDED MARCH 31,
-------- ------------------- ---------- -------------------------------------------------
1997 1997 1996 1997 1997 1996 1995 1994
-------- -------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (IN THOUSANDS, EXCEPT RATIO DATA)
STATEMENT OF OPERATIONS
DATA:
Sales..................... $300,315 $300,315 $310,391 $1,354,270 $1,354,270 $1,359,450 $1,213,565 $1,042,014
Gross profit.............. 19,538 19,860 21,886 109,482 104,693 90,513 81,465 50,682
Total net interest expense
(1)..................... 8,923 8,601 8,635 33,185 37,624 46,498 40,284 30,705
Restructuring charges..... -- -- -- -- -- 12,500 -- --
Income (loss) before
taxes................... 2,054 2,376 4,338 36,890 32,245 2,258 9,980 (24,437)
Income (loss) from
continuing operations
(2)..................... 1,641 1,853 1,508 21,428 16,937 (9,442) (20,494) (36,498)
OTHER DATA:
Gross profit, net of
interest (3)............ $ 27,126 $ 27,126 $ 29,497 $ 136,890 $ 136,890 $ 131,882 $ 116,446 $ 80,098
Gross margin, net of
interest................ 9.0% 9.0% 9.5% 10.1% 10.1% 9.7% 9.6% 7.7%
EBITDA (4)................ 15,928 15,928 17,368 90,735 90,735 82,030 66,677 22,528
Adjusted EBITDA (4)....... 15,036 15,036 16,393 88,483 88,483 80,937 59,896 52,399
Depreciation and
amortization............ 4,951 4,951 4,395 20,660 20,866 24,393 16,413 16,260
Tobacco inventory......... $255,991 $255,991 $206,675 $ 181,349 $ 181,349 $ 160,721 $ 194,344 $ 268,948
Ratio of adjusted EBITDA
to total net interest
expense................. 1.7x 1.7x 1.9x 2.7x 2.4x 1.7x 1.5x 1.7x
<CAPTION>
1993
----------
<S> <C>
STATEMENT OF OPERATIONS
DATA:
Sales..................... $1,236,084
Gross profit.............. 111,896
Total net interest expense
(1)..................... 33,987
Restructuring charges..... --
Income (loss) before
taxes................... 37,291
Income (loss) from
continuing operations
(2)..................... 22,220
OTHER DATA:
Gross profit, net of
interest (3)............ $ 143,529
Gross margin, net of
interest................ 11.6%
EBITDA (4)................ 87,802
Adjusted EBITDA (4)....... 87,392
Depreciation and
amortization............ 16,524
Tobacco inventory......... $ 305,258
Ratio of adjusted EBITDA
to total net interest
expense................. 2.6x
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------------------
HISTORICAL (5) AS ADJUSTED (6)
-------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................................................. $238,910 $ 227,030
Total assets................................................................................. 784,336 789,549
Total debt................................................................................... 355,696 360,909
Shareholders' equity......................................................................... 139,492 139,492
</TABLE>
- ---------------
(1) Includes interest included in cost of sales and interest expense, net of
interest income.
(2) Before extraordinary items in 1993 of $503,000 and cumulative effect of
change in accounting principles in 1994 of $23,000.
(3) Excludes interest included in cost of sales.
(4) "EBITDA" represents income (loss) before income taxes, minority interests,
total net interest expense, depreciation and amortization and restructuring
charges. "Adjusted EBITDA" excludes tobacco inventory write-offs, charges
associated with terminations of certain joint ventures, gain on asset sales,
costs associated with the terminated sale of the wool division and
redundancy and debt restructuring charges. Neither EBITDA nor Adjusted
EBITDA is intended to represent cash flow from operations as defined by
generally accepted accounting principles ("GAAP") and should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. EBITDA is
presented because the Company believes it is customarily used by certain
investors together with net income and cash flow from operations as defined
by GAAP in evaluating a company's ability to service its debt. Adjusted
EBITDA is presented because the Company believes that it may allow certain
investors to evaluate the Company's ability to service its debt on a more
consistent basis than EBITDA alone.
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------ ----------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA................................................ 15,928 17,368 $90,735 $82,030 $ 66,677 $22,528 $87,802
Adjustments -- Increase (Decrease):
Tobacco inventory write-offs........................ -- -- -- -- -- 23,000 --
Charges associated with terminations of certain
joint ventures.................................... -- -- -- -- 4,300 10,000 --
Gain on asset sales................................. $ 892 $ 975 (2,252) (1,093) (13,581) (4,729) (410)
Costs associated with the terminated sale of the
wool division..................................... -- -- -- -- -- 1,600 --
Redundancy and debt restructuring charges........... -- -- -- -- 2,500 -- --
------- ------- ------- ------- -------- ------- -------
Adjusted EBITDA....................................... 15,036 16,393 $88,483 $80,937 $ 59,896 $52,399 $87,392
------- ------- ------- ------- -------- ------- -------
------- ------- ------- ------- -------- ------- -------
</TABLE>
(5) Includes the reclassification of $115.0 million of short-term borrowings to
long-term debt.
(6) Gives effect to the Refinancing Plan. See " -- The Refinancing Plan".
10
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PARTICIPATING IN THE EXCHANGE OFFER. THIS PROSPECTUS
CONTAINS CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A
OF THE U.S. SECURITIES ACT WHICH REPRESENT THE COMPANY'S EXPECTATIONS OR
BELIEFS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONCERNING: INDUSTRY
PERFORMANCE; THE COMPANY'S OPERATIONS, PERFORMANCE, FINANCIAL CONDITION, GROWTH
AND ACQUISITION STRATEGIES, MARGINS; AND GROWTH IN SALES OF THE COMPANY'S
PRODUCTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE
NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND ACTUAL
RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS,
INCLUDING THOSE DESCRIBED IN THIS "RISK FACTORS" SECTION.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Initial Notes as set forth in the legend
thereon as a consequence of the issuance of the Initial Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Initial Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Issuer does not currently anticipate that it will register the Initial Notes
under the Securities Act. Based on interpretations by the staff of the
Commission, as set forth in no-action letters to third parties, the Issuer
believes that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Initial Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the issuer within the mean of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act provided that such notes are acquired in the ordinary course
of such holder's business and such holders are not engaged in, and do not intend
to engage in, a distribution of such Exchange Notes and have an arrangement or
understanding with any person to participate in a distribution of such Exchange
Notes. The staff of the Commission has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuer has agreed that, starting on the Expiration
Date and ending on the close of business 180 days after the Expiration Date, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution". However, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange Notes may
not be offered or sold unless they have been registered or qualified for sale in
such jurisdictions or an exemption from registration or qualification is
available and is complied with. To the extent that Initial Notes are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Initial Notes could be adversely affected.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT
The Company is leveraged. As of June 30, 1997 on a pro forma basis, after
giving effect to the Refinancing Plan, the Company's total indebtedness would
have been approximately $360.9 million and its shareholders' equity would have
been approximately $139.5 million. In addition, subject to the restrictions in
the Global Bank Facility and the Indenture, the Company may incur additional
indebtedness from time to time to finance acquisitions or capital expenditures
or for other purposes. See "Description of Global Bank Facility" and
"Description of Notes".
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to service debt and will not be
available for other purposes; (ii) the Company's ability to obtain additional
debt financing in the future for working capital, capital expenditures or
acquisitions may be limited; and (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in the industry sectors in which it
competes and economic conditions in general. Certain of the Company's
competitors currently have greater operating and financing flexibility than the
Company.
11
<PAGE>
The Issuer's ability to pay interest on the Notes, to repay portions of its
long-term indebtedness (including the Notes and the Global Bank Facility) and to
satisfy its other debt obligations will depend upon its future operating
performance and the availability of refinancing indebtedness, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control. The Issuer
anticipates that its operating cash flow, together with proceeds from
divestitures and borrowings under the Global Bank Facility, will be sufficient
to meet its operating needs and to meet its debt service requirements as they
become due. However, if the Issuer is unable to service its indebtedness it will
be forced to adopt an alternative strategy that may include reducing or delaying
capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any such strategy could be effected on satisfactory terms, if at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".
RESTRICTIONS IMPOSED BY TERMS OF THE ISSUER'S INDEBTEDNESS
The Indenture and the Global Bank Facility restrict, among other things,
the Issuer's and the Guarantors' ability to incur additional indebtedness, incur
liens, pay dividends or make certain other restricted payments, consummate
certain asset sales, enter into certain transactions with affiliates, merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company. In
addition, the Global Bank Facility contains additional and more restrictive
covenants. The Global Bank Facility also requires the Company to maintain
specified financial ratios and satisfy certain financial tests. The Company's
ability to meet such financial ratios and tests may be affected by events beyond
its control, and there can be no assurance that the Company will meet such
ratios and tests. See "Description of Notes -- Certain Covenants" and
"Description of Global Bank Facility". A breach of any of these covenants could
result in a default under the Indenture and/or the Global Bank Facility. Upon
the occurrence of an event of default under the Global Bank Facility, the
lenders thereunder could elect to declare all amounts outstanding under the
Global Bank Facility, together with accrued interest, to be immediately due and
payable. If the Issuer or the Guarantors were unable to repay those amounts,
such lenders could proceed against the collateral granted to them to secure that
indebtedness. If the lenders under the Global Bank Facility accelerate the
payment of such indebtedness, there can be no assurance that the assets of the
Issuer and the Guarantors would be sufficient to repay in full such indebtedness
and the other indebtedness of the Issuer and the Guarantors, including the
Notes.
ADVERSE CONSEQUENCES OF HOLDING COMPANY STRUCTURE
The Issuer and Standard Wool are partially dependent on the earnings of
their subsidiaries, and the Company, as a holding company, is wholly dependent
on the earnings of its subsidiaries. Generally, claims of creditors of a
subsidiary, including trade creditors, secured creditors and creditors holding
indebtedness and guarantees issued by such subsidiary, and claims of preferred
stockholders (if any) of such subsidiary, will have priority with respect to the
assets and earnings of such subsidiary over the claims of the creditors of its
parent company, except to the extent the claims of creditors of the parent
company are guaranteed by such subsidiary. Therefore, the Notes and the
Guarantee of Standard Wool are effectively subordinated to all secured
indebtedness of the Issuer and Standard Wool, as the case may be, with respect
to the assets securing such indebtedness and is effectively subordinate in right
of payment to all liabilities, including trade payables, of all subsidiaries of
the Issuer or Standard Wool, as the case may be. The Guarantee of the Company is
effectively subordinated in right of payment to all liabilities, including trade
payables, of all subsidiaries of the Company (other than the Issuer and Standard
Wool). As of June 30, 1997, on a pro forma basis, after giving effect to the
Refinancing Plan, the Issuer and the Guarantors would have had an aggregate of
approximately $176.9 million of secured and other indebtedness to which the
Notes and the Guarantees would have been effectively subordinate in right of
payment.
SMOKING AND HEALTH ISSUES; LITIGATION AND GOVERNMENTAL REGULATION
In recent years, governmental entities in the United States at all levels
have taken or have proposed actions that may have the effect of reducing
consumption of cigarettes. These activities have included: (i) the U.S.
Environmental Protection Agency's classification of tobacco environmental smoke
as a "Group A" (known human) carcinogen; (ii) restrictions on the use of tobacco
products in public places and places of employment including a proposal by the
U.S. Occupational Safety and Health Administration to ban smoking in the work
place; (iii) proposals by the U.S. Food and Drug Administration ("FDA") to
sharply restrict cigarette advertising and promotion and to regulate nicotine as
a drug; (iv) increases in tariffs on imported tobacco; (v) proposals to increase
sales and excise taxes on cigarettes; (vi) the recently announced policy of the
U.S. government to link certain federal grants to the enforcement of state laws
banning the sale of tobacco products to minors; (vii) lawsuits against cigarette
manufacturers by several U.S. states seeking reimbursement of Medicaid and other
expenditures claimed to have been made by such states to treat diseases
allegedly caused by cigarette smoking; (viii) the recent enactment
12
<PAGE>
of stricter regulations designed to prohibit sales of cigarettes to minors; and
(ix) the ruling by a Federal District Court in North Carolina, which is
currently under appeal, that the FDA has the authority to regulate nicotine as a
drug and cigarettes as a drug delivery device, but lacks the authority to
control cigarette advertising directed at children. It is not possible to
predict the outcome of such actions or litigation or the effect adverse
determinations against the manufacturers might have on leaf merchants, like the
Company, or the extent to which governmental activities and litigation might
adversely affect the Company's business directly.
In addition, civil litigation on behalf of individuals and purported
classes is pending against the leading U.S. manufacturers of consumer tobacco
products alleging damages for health problems resulting 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 might have
on the business of the Company, either directly or indirectly.
The Attorneys General of 40 states recently reached a proposed settlement
with certain U.S. cigarette manufacturers regarding claims for reimbursement of
health care costs associated with smoking-related illnesses. The settlement
would, among other things, give the FDA the authority to regulate tobacco
products, curtail the advertising of tobacco products and mandate new and larger
warning labels on cigarette packages. It is not possible to predict whether the
settlement will be approved by Congress or what the effect of such a settlement
will be on pending and future actions brought by private litigants or the impact
the settlement will have on sales of tobacco products and the Company's
business.
In calendar 1993, Congress enacted the 75/25 Rule, intended to limit the
importation of tobacco into the United States by requiring that all cigarettes
manufactured in the United States, including those manufactured for export,
contain at least 75.0% domestically grown tobacco. Although the 75/25 Rule was
repealed in 1995, principally because it was inconsistent with GATT, and was
replaced with import quotas designed to assist domestic tobacco growers, it had
the effect in calendar 1993 and 1994 of drastically decreasing demand for
imports of foreign tobacco for use in the domestic production of cigarettes. It
is not possible to predict the extent to which future governmental or
third-party actions might adversely affect the Company's business.
A number of foreign countries have also taken steps to restrict or prohibit
cigarette advertising and promotion, to increase taxes on cigarettes and to
discourage cigarette smoking. In some cases, such restrictions are more onerous
than those in the United States. For example, advertising and promotion of
cigarettes has been banned or severely restricted for a number of years in
Australia, Canada, Finland, France, Italy, Singapore and a number of other
countries. It is impossible to predict the extent to which these actions might
adversely affect the Company's business. See "Business -- Governmental
Regulation and Environmental Compliance".
VARIABILITY OF ANNUAL AND QUARTERLY FINANCIAL RESULTS
The purchasing and processing of tobacco and wool are dependent on
agricultural cycles and are seasonal in nature. These cycles and this
seasonality, together with the timing of shipments and variations in the mix of
sales, cause quarterly fluctuations in financial results. Sales and revenue
recognition by the Company is based upon the passage of title, which typically
occurs on the date of shipment. The nature of the Company's businesses is such
that it is not possible to predict the timing of shipments or orders with a high
degree of precision, and advances or delays in either are not unusual.
Therefore, the comparability of the Company's financial results, particularly
quarter-to-quarter comparisons, which may be significantly affected by these
factors, should be considered when evaluating the Company's performance. In
addition, the Company's business may be adversely affected by poor weather or
other agricultural factors, many of which are beyond the control of the Company.
For example, the tobacco leaf industry in the United States was disrupted in
calendar 1993 by below average quality tobacco crops.
Total tobacco inventories normally peak in the Company's third fiscal
quarter as large volumes of tobacco grown in the northern hemisphere are
purchased and held in various conditions of processing prior to shipment to
customers. Receivables typically peak in the fourth quarter as those tobaccos
are shipped and invoiced. Revolving credit borrowings and trade payables
normally peak with inventories.
Wool is generally purchased over a greater portion of the year than
tobacco, and wool growing seasons occur at different times of the year in
different countries. Wool trading is generally lower during the first and second
fiscal quarters as a result of reduced demand for wool products during the
summer in the northern hemisphere, when processors and users close down for
holidays and vacations in Europe. Generally, wool revenues reach high levels in
the third fiscal quarter and peak in the fourth fiscal quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality and Quarterly Results".
13
<PAGE>
GLOBAL FINANCIAL AND MANAGEMENT CONTROL RISKS
The broad scope of the Company's worldwide business units has placed
considerable demands on management's ability to oversee the Company's financial
accounting controls, risk management and asset management. While the Company has
implemented and continues to refine a strategic plan specifically addressing
these areas, there can be no assurance that the Company will be successful in
establishing and maintaining the centralized management oversight necessary to
ensure adequate controls of its global operations.
Part of the Company's strategic plan is to focus on tobacco inventory
management. In certain markets where there is no auction system in place, the
Company prefinances and/or buys tobacco directly from growers prior to receipt
of firm orders or indications of interest from customers in amounts based
largely upon past purchasing trends of such customers ("uncommitted inventory").
Because of the strategic importance of these markets to the Company's customers,
the Company desires to maintain a presence in these locations. In addition, the
Company has, from time to time, purchased uncommitted inventory at auction when,
in its opinion, there was a reasonable opportunity to resell the tobacco at a
profit or when it anticipated its customer's needs before receiving firm
indications or orders of interest. As a result, in periods of unexpectedly low
demand, the Company's uncommitted inventory has exceeded desired levels.
Purchases of uncommitted inventory expose the Company to potential losses if the
price of the tobacco it purchases falls prior to receiving a firm order from a
buyer. There is no tobacco futures market to hedge this risk. See
"Business -- Tobacco -- Business Strategy" and " -- Operations -- Purchasing".
RELIANCE ON SIGNIFICANT TOBACCO CUSTOMERS
The Company's tobacco customers are manufacturers of cigarette and tobacco
products located in approximately 85 countries around the world. Several of
these customers individually account for a significant portion of the Company's
sales in a normal year, and the loss of any one or more of such customers could
have a material adverse effect on the Company's results of operations.
Approximately 67.3% of the Company's tobacco sales (49.6% of total sales) for
fiscal 1997 were made to the Company's five largest customers, with its largest
customer representing 32.7% of tobacco sales (24.1% of total sales). See
"Business -- Tobacco -- Operations -- Selling".
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the continued services of certain members of
senior management, in particular those of its current Chief Executive Officer.
Currently, the Company does not have any long-term employment agreements with
its executive officers, with the exception of its Chief Executive Officer. The
Company believes the loss of the services of key members of senior management
could have a material adverse effect on the Company. In addition, the Company
believes that its future success will depend in large part upon its continued
ability to attract, retain and motivate additional employees. There can be no
assurance that the Company will be able to attract and retain sufficient
qualified personnel to meet its business needs. See "Business -- Employees" and
"Management".
INTERNATIONAL BUSINESS RISKS
The Company's international operations are subject to a number of political
and economic risks, including unsettled social and political conditions,
nationalization, expropriation, import and export restrictions, confiscatory
taxation, exchange controls, renegotiation or nullification of existing
contracts, inflationary economies and currency risks, strikes and risks related
to the restrictions of repatriation of earnings or proceeds from liquidated
assets of foreign subsidiaries. In certain countries, the Company has advanced
funds or guaranteed local loans or lines of credit for the purchase of tobacco
from growers, and expects to continue such practices in the future. Risk of
repayment is normally limited to the tobacco season, and the maximum exposure
occurs within a shorter period.
The Company's tobacco business is generally conducted in U.S. dollars, as
is the business of the industry as a whole. However, local country operating
costs, including the purchasing and processing costs for tobaccos, are subject
to the effects of exchange fluctuations of the local currency against the U.S.
dollar. The Company attempts to minimize such currency risks by matching the
timing of its working capital borrowing needs against the tobacco purchasing and
processing funds requirements in the currency of the country of tobacco origin.
Fluctuations in the value of foreign currencies can significantly affect the
Company's operating results.
Wool purchases and sales are typically denominated in the currency of the
source country and destination country, respectively. The Company typically pays
for its wool purchases in the currency of the country of origin, and generally
hedges the currencies of its purchase and sale commitments with forward
transactions.
14
<PAGE>
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. The Company does not
engage in currency transactions for the purpose of speculation.
COMPETITION
The leaf tobacco industry is highly competitive. Competition among 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. Most of the Company's
principal customers also purchase tobacco from the Company's major competitors,
Universal Corporation ("Universal") and Dimon, Incorporated ("Dimon"). On April
1, 1997, Dimon announced that it had completed the acquisition of Intabex
Holdings Worldwide S.A. As a result of this transaction, there are only three
global independent leaf tobacco merchants, including the Company. There can be
no assurance that the Company will be able to successfully compete against
Universal or Dimon, which have greater financial resources than the Company.
Industry consolidation may also have an adverse impact on the Company's efforts
to establish and maintain itself as a reliable and preferred supplier of leaf
tobacco to the major multinational cigarette manufacturers. See
"Business -- Tobacco -- Competition".
The wool industry is highly fragmented, with substantially more competitors
than the leaf tobacco industry. The Company's major competitors, some of which
have greater financial resources than the Company, include Chargeurs S.A., a
publicly traded French company; Anselme Dewavrin et Fils S.A., a private French
company ("ADF"); Bremer Woll-Kaemmerei, A.G., a publicly traded German company
("BWK"); and a number of Japanese trading firms. There can be no assurance that
the Company will be able to successfully compete in the wool industry. See
"Business -- Wool -- Competition".
POOR MARKET CONDITIONS IN THE WOOL INDUSTRY
The wool industry has suffered from poor market conditions in recent years.
Following record high prices for wool in 1988, the demand for wool decreased
dramatically beginning in 1989 as a result of a number of factors, including the
withdrawal of China from international wool markets, economic and political
turmoil in Eastern Europe and the states of the Former Soviet Union, and
recessionary conditions in Western Europe. The resulting oversupply of wool led
to a decision by the Australian government in 1991 to abandon its price support
program. Consequently, under these free market conditions, wool prices fell
immediately and substantially, creating difficult trading conditions for the
wool industry, and establishing the market conditions necessary for a correction
in what had become a major imbalance between supply and demand. Prior to
abandonment of the price support program in 1991, the Australian government
accumulated a large stockpile of wool, equivalent to approximately one year's
Australian production. Wool International, an organization established by the
Australian government to manage and market the stockpile, disposed of 23,625
metric tons of wool per quarter until June 30, 1997, at which time the disposal
rate was to be adjusted to a minimum of 15,750 metric tons per quarter. Although
the demand for wool has strengthened since the late 1980s and the stockpile
maintained by Wool International has been significantly reduced since 1991,
there can be no assurance that the supply/demand imbalance of wool
characterizing such periods will not return. If they do, or if the rate of
liquidation of the stockpile were increased, the Company's wool business could
be materially adversely affected. See "Business -- Wool -- The Wool Industry".
FRAUDULENT CONVEYANCE CONSIDERATIONS
The incurrence by the Issuer and the Guarantors of indebtedness such as the
Notes and the Guarantees may be subject to review under relevant state and
federal fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced
by or on behalf of unpaid creditors of the Issuer or the Guarantors. Under these
laws, if a court were to find that, after giving effect to the sale of the Notes
and the application of the net proceeds therefrom, either (a) the Issuer or the
Guarantors incurred such indebtedness with the intent of hindering, delaying or
defrauding creditors or (b) the Issuer or the Guarantors received less than
reasonably equivalent value or consideration for incurring such indebtedness and
(i) was insolvent or was rendered insolvent by reason of such transactions, (ii)
was engaged in a business or transaction for which the assets remaining with the
Issuer or the Guarantors constituted unreasonably small capital or (iii)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, such court may subordinate such indebtedness to
existing and future indebtedness of the Issuer or such Guarantor, as the case
may be, avoid the issuance of such indebtedness and direct the repayment of any
amounts paid thereunder to the Issuer's or the Guarantors' creditors, as the
case may be, or take other action detrimental to the holders of such
indebtedness.
15
<PAGE>
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair saleable value of the debtor's assets were
less than the amount required to repay its probable liabilities on its debts,
including contingent liabilities, as they become absolute and matured.
LACK OF PUBLIC MARKET FOR THE NOTES
Although the Initial Purchasers have received approval for trading of the
Notes on the PORTAL Market of the Nasdaq Stock Market, Inc. and intend to make a
market in the Notes, and if issued, the Exchange Notes, they are not obligated
to do so, and any such market making may be discontinued at any time without
notice. The Initial Notes have not been registered under the Securities Act and
are subject to restrictions on transferability. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Issuer does not intend to list the Exchange Notes on any national securities
exchange or seek approval for quotation on the National Association of
Securities Dealers Automated Quotation System. No assurance can be given that an
active public or other market will develop for the Exchange Notes or as to the
liquidity of the trading market for the Exchange Notes. If a trading market does
not develop or is not maintained, holders of the Exchange Notes may experience
difficulty in reselling the Exchange Notes or may be unable to sell them at all.
If a market for the Exchange Notes develops, any such market may be discontinued
at any time. If a public trading market develops for the Exchange Notes, future
trading prices of such securities will depend on many factors including, among
other things, prevailing interest rates, the Issuer's results of operations and
the market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Issuer, the Exchange Notes may trade at a discount from their
principal amount. Historically, the market for securities similar to the
Exchange Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the Exchange Notes, if
such market develops, will not be subject to similar disruptions.
16
<PAGE>
USE OF PROCEEDS OF THE EXCHANGE NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Issuer and the Guarantors under the Registration Rights Agreement. The Issuer
will not receive any cash proceeds from the issuance of the Exchange Notes
offered hereby. In consideration for issuing the Exchange Notes as contemplated
in this Prospectus, the Issuer will receive, in exchange, Initial Notes in like
principal amount. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Initial Notes, except as
otherwise described herein under "The Exchange Offer -- Terms of the Exchange
Offer". The Initial Notes surrendered in exchange for the Exchange Notes will be
retired and cancelled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding debt of the
Issuer or the Guarantors.
17
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash, short-term debt and
capitalization of the Company as of June 30, 1997 on an actual basis and as
adjusted to give effect to the Refinancing Plan. The information in the table
below is qualified in its entirety by, and should be read in conjunction with,
the Consolidated Financial Statements (including the Notes thereto) of the
Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
ACTUAL
(1) AS ADJUSTED
-------- -----------
<S> <C> <C>
(IN THOUSANDS)
Cash................................................................................................ $ 40,037 $ 40,037
-------- -----------
-------- -----------
Short-term debt:
Short-term borrowings............................................................................... $144,306 $ 158,186
Current portion of long-term debt................................................................... 7,831 5,831
-------- -----------
Total short-term debt.......................................................................... 152,137 164,017
-------- -----------
Long-term debt:
Senior Notes........................................................................................ -- 115,000
Long-term debt...................................................................................... 134,559 12,892
Convertible subordinated debentures................................................................. 69,000 69,000
-------- -----------
Total long-term debt........................................................................... 203,559 196,892
-------- -----------
Minority interests.................................................................................. 30,110 30,110
Total shareholders' equity.......................................................................... 139,492 139,492
-------- -----------
Total capitalization and short-term debt....................................................... $525,298 $ 530,511
-------- -----------
-------- -----------
</TABLE>
- ---------------
(1) Includes the reclassification of $115.0 million of short-term borrowings to
long-term debt.
18
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for the Company for the periods and at the dates indicated. The selected
financial data, at or for each of the full fiscal years presented below was
derived from, and is qualified by reference to, the Consolidated Financial
Statements of the Company, which have been audited by Deloitte & Touche LLP,
independent auditors. The selected financial data for the three months ended
June 30, 1997 and 1996 are derived from consolidated financial statements that
have not been audited. In the opinion of management, the unaudited consolidated
financial data include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the consolidated financial
position and results of operations for that period. The results of operations
for the three months ended June 30, 1997 and 1996 are not necessarily indicative
of the results of operations for any other period. The table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Consolidated Financial Statements
(including the Notes thereto) appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------- --------------------------------------------------------------
1997 (1) 1996 1997 1996 1995 1994 1993
-------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (IN THOUSANDS, EXCEPT RATIO DATA)
STATEMENT OF OPERATIONS DATA:
Sales............................. $300,315 $310,391 $1,354,270 $1,359,450 $1,213,565 $1,042,014 $1,236,084
Cost
-- Materials, services and
supplies...................... 273,189 280,894 1,217,380 1,227,568 1,097,119 961,916 1,092,555
-- Interest.................... 7,266 7,611 32,197 41,369 34,981 29,416 31,633
-------- -------- ---------- ---------- ---------- ---------- ----------
Gross profit...................... 19,860 21,886 104,693 90,513 81,465 50,682 111,896
Selling, general and
administrative expenses......... 17,659 17,996 72,782 77,608 80,509 78,731 73,925
Restructuring charges............. -- -- -- 12,500 -- -- --
Interest expense.................. 2,216 2,387 9,920 9,559 9,947 7,173 8,183
Interest income................... 881 1,363 4,493 4,430 4,644 5,884 5,829
Other income (expenses) - net..... 1,510 1,472 5,761 6,982 14,372 4,901 1,674
-------- -------- ---------- ---------- ---------- ---------- ----------
Income (loss) before taxes........ 2,376 4,338 32,245 2,258 9,980 (24,437) 37,291
Income taxes...................... 358 1,112 12,782 6,836 16,370 5,070 12,546
-------- -------- ---------- ---------- ---------- ---------- ----------
Income (loss) after taxes......... 2,018 3,226 19,463 (4,578) (6,390) (29,507) 24,745
Minority interests................ (291) (1,936) (3,938) (4,795) (9,634) (3,765) (2,421)
Equity in earnings (losses) of
affiliates...................... 126 218 1,412 (69) (4,470) (3,226) (104)
-------- -------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations (2).................. 1,853 1,508 16,937 (9,442) (20,494) (36,498) 22,220
Income (loss) from discontinued
operations...................... -- -- -- 10,050 (10,050) 689 (1,547)
Extraordinary items............... -- -- -- -- -- -- 503
Cumulative effect of accounting
changes......................... -- -- -- -- -- 23 --
ESOP preferred stock dividends,
net of tax...................... -- (115) (347) (474) (485) (486) (364)
-------- -------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to
common stock.................... $ 1,853 $ 1,393 $ 16,590 $ 134 $ (31,029) $ (36,272) $ 20,812
-------- -------- ---------- ---------- ---------- ---------- ----------
-------- -------- ---------- ---------- ---------- ---------- ----------
OTHER DATA:
Gross profit, net of interest
(3)............................. $ 27,126 $ 29,497 $ 136,890 $ 131,882 $ 116,446 $ 80,098 $ 143,529
Gross margin, net of interest..... 9.0% 9.5% 10.1% 9.7% 9.6% 7.7% 11.6%
Operating income, net of interest
(4)............................. 11,858 14,336 74,362 53,186 54,908 12,152 77,107
EBITDA (5)........................ 15,928 17,368 90,735 82,030 66,677 22,528 87,802
Adjusted EBITDA (5)............... 15,036 16,393 88,483 80,937 59,896 52,399 87,392
Depreciation and amortization..... 4,951 4,395 20,866 24,393 16,413 16,260 16,524
Tobacco inventory................. 255,991 206,675 181,349 160,721 194,344 268,948 305,256
Capital expenditures.............. 2,909 2,265 12,816 12,211 17,328 27,257 24,096
Ratio of earnings to fixed
charges -- the Company (6)...... 1.2x 1.4x 1.9x 1.0x 1.2x 0.4x 1.8x
Ratio of earnings to fixed
charges -- the Issuer (6)....... 0.3x 0.2x 1.8x 2.0x 2.0x 3.5x 3.7x
BALANCE SHEET DATA:
Working capital................... $238,910 $ 55,782 $ 120,105 $ 55,798 $ 53,187 $ 70,484 $ 167,295
Total assets...................... 784,336 814,378 735,685 782,824 813,489 890,771 926,367
Total debt........................ 355,696 457,369 420,562 486,108 492,257 597,232 598,609
Shareholders' equity.............. 139,492 81,186 89,962 80,172 84,950 102,649 151,110
</TABLE>
- ---------------
(1) Includes the reclassification of $115.0 million of short-term borrowings to
long-term debt.
19
<PAGE>
(2) Before extraordinary items in 1993 of $503,000 and cumulative effect of
change in accounting principles in 1994 of $23,000.
(3) Excludes interest included in cost of sales.
(4) Defined as income (loss) before taxes, net of interest included in cost of
sales and other interest expense.
(5) "EBITDA" represents income (loss) before income taxes, minority interests,
total net interest expense, depreciation and amortization and restructuring
charges. "Adjusted EBITDA" excludes tobacco inventory write-offs, charges
associated with terminations of certain joint ventures, gain on asset sales,
costs associated with the terminated sale of the wool division and
redundancy and debt restructuring charges. Neither EBITDA nor Adjusted
EBITDA is intended to represent cash flow from operations as defined by GAAP
and should not be considered as an alternative to net income as an indicator
of the Company's operating performance or to cash flows as a measure of
liquidity. EBITDA is presented because the Company believes it is
customarily used by certain investors together with net income and cash flow
from operations as defined by GAAP in evaluating a company's ability to
service its debt. Adjusted EBITDA is presented because the Company believes
that it may allow certain investors to evaluate the Company's ability to
service its debt on a more consistent basis than EBITDA alone.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
-------------------- -------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA......................... $15,928 $17,368 $ 90,735 $ 82,030 $ 66,677 $ 22,528 $ 87,802
Adjustments -- Increase
(Decrease):
Tobacco inventory write-
offs...................... -- -- -- -- -- 23,000 --
Changes associated with
terminations of certain
joint ventures............ -- -- -- -- 4,300 10,000 --
Gains on asset sales......... 892 975 (2,252) (1,093) (13,581) (4,729) (410)
Costs associated with the
terminated sale of
the wool division......... -- -- -- -- -- 1,600 --
Redundancy and debt
restructuring charges..... -- -- -- -- 2,500 -- --
------- ------- --------- --------- --------- --------- ---------
Adjusted EBITDA................ $15,036 $16,393 $ 88,483 $ 80,937 $ 59,896 $ 52,399 $ 87,392
------- ------- --------- --------- --------- --------- ---------
------- ------- --------- --------- --------- --------- ---------
</TABLE>
(6) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes, plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs), and a portion of operating lease rental
expense that is estimated by the Company to be representative of the
interest factor.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is principally engaged in purchasing, processing, storing,
selling and shipping leaf tobacco. The Company also purchases, processes and
sells various types of wool. For both the tobacco and wool business, the ability
to obtain raw materials at favorable prices is an important element of
profitability although it is generally more important for wool than for tobacco
because some customers pay the Company 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. Due to the much
larger number of dealers and customers for wool and the far more numerous trades
involved, wool revenue tends to be more susceptible to market price fluctuations
than tobacco.
Historically, the cost of the Company's materials, services and supplies
has exceeded 85.0% of revenues. In the wool business, freight charges are also a
significant element of the cost of sales. 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 U.S. dollars whereas wool
purchases and sales are typically denominated in the currency of the source
country and destination country, respectively. 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 period-end
exchange rates. The effects of these translation adjustments are reported as 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. See "Risk
Factors -- International Business Risks".
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items in the Company's Consolidated
Statements of Income as a percentage of sales for the three most recent fiscal
years and for the three months ended June 30, 1996 and 1997. Any reference in
the table and the following discussion to any given year is a reference to the
Company's fiscal year ended March 31.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30, YEAR ENDED MARCH 31,
----------------- -----------------------------
1997 1996 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales........................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales
-- Materials, services and supplies....................... 91.0 90.5 89.9 90.3 90.4
-- Interest............................................... 2.4 2.5 2.4 3.0 2.9
----- ----- ----- ----- -----
Gross profit............................................ 6.6 7.1 7.7 6.7 6.7
Selling, general and administrative expenses................. 5.9 5.8 5.4 5.7 6.6
Restructuring charges........................................ -- -- -- 0.9 --
Interest expense............................................. 0.7 0.8 0.7 0.7 0.8
Interest income.............................................. 0.3 0.4 0.4 0.3 0.4
Other income (expense), net.................................. 0.5 0.5 0.4 0.5 1.2
----- ----- ----- ----- -----
Income (loss) before taxes.............................. 0.8 1.4 2.4 0.2 0.8
Income taxes................................................. 0.1 0.4 0.9 0.5 1.3
Minority interests........................................... 0.1 0.6 0.3 0.4 0.8
Equity in earnings (losses) of affiliates.................... -- 0.1 0.1 0.0 (0.4)
----- ----- ----- ----- -----
Income (loss) from continuing operations................ 0.6% 0.5% 1.3% (0.7)% (1.7)%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 TO THE THREE MONTHS ENDED
JUNE 30, 1996
SALES. Sales for the quarter ended June 30, 1997 were $300.3 million, a
decrease of 3.2% from a year earlier. Sales of $212.8 million for the tobacco
division were down 1.1% from the corresponding period in 1996. Tobacco sales
from the U.S. and South America increased while sales from Turkey were down due
to the timing of shipments in the June 1996 quarter. Overall, tobacco volume was
down 5.6% and average prices were higher as a result of market conditions and
the change in mix.
Nontobacco sales of $87.5 million were down 8.1% primarily as the result of
a 10.9% decrease in the volume of wool sold which was attributable to focusing
on the more profitable processing elements of the business.
GROSS PROFIT AND COST OF SALES. Gross profit for the quarter of $19.9
million was down 9.3% from the 1996 quarter due primarily to the reduced level
of sales and a change in the tobacco business mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses decreased by
1.9% to $17.7 million as the Company continued to focus on operating
efficiencies. Reductions in personnel-related costs and lower legal and
professional fees contributed to the favorable variance.
INTEREST EXPENSE, INTEREST INCOME AND OTHER INCOME (EXPENSE), NET. A
decrease in other interest expense and in the interest income element of other
income (net) were both attributed to improved application of cash to reduce
borrowings.
INCOME TAXES, MINORITY INTERESTS AND EQUITY IN EARNINGS (LOSSES) OF
AFFILIATES. The effect on net income of changes in sales mix and other factors
contributing to a reduction in income before taxes was offset by a lower
effective tax rate and reduced earnings applicable to minority interests. The
variation in income tax charges or credits as a percentage of pretax income due
to differences in tax rates and relief available in areas where profits are
earned or losses are incurred resulted in an effective rate tax rate of 15.1% in
the current quarter compared to 25.6% a year earlier.
Earnings attributed to minority interests were $1.6 million lower than a
year ago because of a change in business mix. Equity in earnings of affiliates
were down slightly from a year earlier.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations
was $1.9 million, or $0.17 per share on 11.1 million average shares outstanding,
versus $1.5 million, or $0.15 per share on 9.5 million shares outstanding for
the June 1996 quarter adjusted for subsequent stock dividends. The
quarter-to-quarter increase in shares outstanding was primarily attributable to
the issuance of 3.0 million shares of Common Stock in the Equity Offering during
the June 1997 quarter.
COMPARISON OF THE YEAR ENDED MARCH 31, 1997 TO THE YEAR ENDED MARCH 31, 1996
SALES. Sales for 1997 were $1,354.3 million, a decrease of 0.4% from the
prior year. Sales for the tobacco division were $997.4 million, an increase of
7.8% from 1996. The increase in tobacco division sales was due to higher average
prices and improved sales mix. Tobacco volumes sold decreased by 4.8% from the
prior year, which included sales of old crop tobacco. Volume increases in the
United States partially offset declines in other areas.
22
<PAGE>
Nontobacco sales for 1997 were $356.8 million, a decrease of 17.8% from the
prior year. The decrease in nontobacco sales was primarily due to lower average
wool prices. Wool volumes were lower than the prior year as volume increases in
Argentina, South Africa and the United Kingdom were offset by declines in other
markets as the Company focused its efforts on its scouring and topmaking
operations.
GROSS PROFIT AND COST OF SALES. Gross profit for 1997 increased by $14.2
million from $90.5 million in the prior year to $104.7 million and increased as
a percentage of sales. Gross profit for the tobacco division increased by $4.8
million from $80.5 million, or 8.7% of tobacco division sales, in the prior year
to $85.3 million, or 8.6% of tobacco division sales. The increase in tobacco
division gross profit was due primarily to the 7.8% increase in tobacco division
sales and a 22.2% decrease in interest.
Nontobacco gross profit for 1997 increased by $9.4 million from $10.0
million, or 2.3% of nontobacco sales, in the prior year to $19.4 million, or
5.4% of nontobacco sales. The increase in gross profit was due to a 24.7%
decrease in interest for the wool division.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1997 decreased by $4.8 million and were lower as a
percentage of sales. Selling, general and administrative expenses for the
tobacco division decreased by $1.9 million from $53.5 million, or 5.8% of
tobacco division sales, in the prior year to $51.6 million, or 5.2% of tobacco
division sales.
Nontobacco selling, general and administrative expenses for 1997 decreased
by $2.9 million from $24.1 million, or 5.6% of nontobacco sales, in the prior
year to $21.2 million, or 5.9% of nontobacco sales. The increase in nontobacco
selling, general and administrative expenses as a percentage of sales was due to
the 17.8% reduction in nontobacco sales.
RESTRUCTURING CHARGES. Restructuring charges for 1996 of $12.5 million
($11.0 million after tax) reflect a provision made for the restructuring of the
nontobacco operations. The major components of the restructuring charges relate
to the wool division and include: (i) approximately $2.1 million associated with
the closure of the wool processing facility in Argentina; (ii) approximately
$3.6 million for the write-off of goodwill; (iii) approximately $2.8 million
associated with the write-off of export incentive allowances; and (iv)
approximately $2.5 million of expenses related to the terminated sale of the
wool division and other miscellaneous restructuring costs. To date in Argentina,
the wool processing operations have been discontinued, the factory has been
leased to a third party, 181 employees have been terminated and certain impaired
assets have been written down. In Australia, operations have been consolidated
under one management team to better and more efficiently serve this market. The
wool tops departments in the German and French companies have been reorganized
to streamline their marketing efforts. The Company has undertaken a feasibility
study to improve operational efficiencies in the French topmaking factory. For
1997, the restructuring resulted in lower overhead costs of approximately $1.1
million. With the exception of the export incentive issue, which is expected to
be resolved in fiscal 1998, substantially all incurred amounts relating to the
restructuring had been expended at March 31, 1997.
INTEREST EXPENSE, INTEREST INCOME AND OTHER INCOME (EXPENSE), NET. Interest
expense and interest income for 1997 remained essentially constant with the
prior year. Other income (expense), net for 1997 decreased by $1.2 million.
INCOME TAXES, MINORITY INTERESTS AND EQUITY IN EARNINGS (LOSSES) OF
AFFILIATES. Income taxes increased $6.0 million for 1997 compared to the prior
year. Prior year income tax provisions were required for certain jurisdictions
where profits were earned despite overall pretax losses. Income 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.
Minority interests for 1997 decreased by $0.9 million due to sales and
earning decreases in the Company's 51.0% owned oriental tobacco businesses in
Greece and Turkey.
Equity in earnings (losses) of affiliates for 1997 increased $1.5 million
from the prior year both in absolute dollars and as a percentage of sales.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations
for 1997 increased by $26.3 million from a loss of $9.4 million in the prior
year to $16.9 million. Income (loss) from discontinued operations in 1996
reflects the reversal of a $10.1 million provision for the loss on the disposal
of the wool division. An agreement to sell this division expired by its terms in
December 1995. Net income for 1997 was $16.9 million, or $1.78 per share,
compared to net income of $0.6 million, or $0.01 per share, for the prior year.
COMPARISON OF THE YEAR ENDED MARCH 31, 1996 TO THE YEAR ENDED MARCH 31, 1995
SALES. Sales for 1996 were $1,359.5 million, an increase of 12.5% from the
prior year. Sales for the tobacco division were $925.5 million, an increase of
22.4% from 1995. The increase in tobacco division sales was due to a 10.4%
increase in volumes, higher average prices and a change in sales mix. Tobacco
sales in the United States achieved record volumes despite lower processing for
stabilization pools. Gains in Turkey resulted largely from sales of old crop
tobacco purchased from the local monopoly. Increased demand in Greece combined
with the timing of shipments led to substantial increases in sales. Volume
growth continued in Malawi and Zimbabwe and the Company is continuing to expand
in certain secondary markets in Africa.
23
<PAGE>
Nontobacco sales for 1996 were $434.0 million, a decrease of 5.2% from the
prior year. The decrease in nontobacco sales was primarily due to lower wool
volumes, which decreased 13.6% from the prior year. Various factors resulted in
difficult trading conditions in the wool industry. The lowering of worldwide
inventory levels, a drop in European apparel sales, and tighter controls on
imports in China were major factors in the 33.3% year-to-year drop in the
Australian market price indicator. Sales of merino wool for the apparel industry
were affected most drastically. The Company believes that wool prices will
slowly rise over the next few years as the Australian stockpile is further
reduced.
GROSS PROFIT AND COST OF SALES. Gross profit for 1996 increased by $9.0
million from $81.5 million in the prior year to $90.5 million and remained
constant as a percentage of sales. Gross profit for the tobacco division
increased by $31.3 million from $49.2 million, or 6.5% of tobacco division
sales, in the prior year to $80.5 million, or 8.7% of tobacco division sales.
The increase in tobacco division gross profit was primarily due to the 22.4%
increase in the tobacco division sales.
Nontobacco gross profit for 1996 decreased by $22.2 million from $32.2
million, or 7.0% of nontobacco sales, in the prior year to $10.0 million, or
2.3% of nontobacco sales. The decrease in nontobacco gross profit was due to the
5.2% decrease in sales and a 21.3% increase in interest.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1996 decreased by $2.9 million and decreased as a
percentage of sales. Selling, general and administrative expenses for the
tobacco division decreased by $3.8 million from $57.3 million, or 7.6% of
tobacco division sales, in the prior year to $53.5 million, or 5.8% of tobacco
division sales. The decrease in tobacco division selling, general and
administrative expenses as a percentage of sales in 1996 was due to significant
provisions for receivables, debt restructuring and redundancy costs of $6.5
million, $2.0 million and $0.5 million, respectively, that were taken in 1995.
Nontobacco selling, general and administrative expenses for 1996 increased
by $0.8 million from $23.3 million, or 5.1% of nontobacco sales, in the prior
year to $24.1 million, or 5.6% of nontobacco sales. The increase in nontobacco
selling, general and administrative expenses as a percentage of sales was
primarily due to the effect of lower prices on sales.
RESTRUCTURING CHARGES. Restructuring charges for 1996 of $12.5 million
($11.0 million after tax) reflect a provision made for the restructuring of the
nontobacco operations. The major components of the restructuring charges relate
to the wool division and include: (i) approximately $2.1 million for closure of
a wool processing facility in Argentina; (ii) approximately $3.6 million for the
write-off of goodwill; (iii) approximately $2.8 million associated with the
write-off of export incentive allowances; and (iv) approximately $2.5 million
for expenses related to the terminated sale of the wool division and other
miscellaneous restructuring costs.
INTEREST EXPENSE, INTEREST INCOME AND OTHER INCOME (EXPENSE), NET. Interest
expense and interest income for 1996 remained essentially constant with the
prior year. Other income (expense), net for 1996 decreased by $7.3 million from
1995, as a $13.5 million pretax gain on the disposal of assets in Korea in 1995
more than offset a 1996 gain on the sale of marketable securities in Turkey and
proceeds from staff training subsidies in Greece.
INCOME TAXES, MINORITY INTERESTS AND EQUITY IN EARNINGS (LOSSES) OF
AFFILIATES. Income taxes for 1996 totaled $6.8 million compared to $16.4 million
the prior year. Income taxes in 1995 included a provision of $1.8 million for an
income tax assessment under appeal and a nonrecurring charge of $1.6 million on
dividends remitted by a foreign subsidiary that could not be offset by foreign
tax credits. In both years, income 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.
Minority interests for 1996 decreased by $4.8 million from the prior year.
The portion of income attributable to minority interest of $9.6 million in 1995
included the gain on the sale of property in Korea discussed above.
Equity in earnings (losses) of affiliates for 1996 decreased by $4.4
million from the prior year. The Company's share of losses in affiliates
decreased to $69,000 in 1996 from $4.5 million in 1995 primarily because the
prior year included losses by an Italian affiliate which became a consolidated
subsidiary in December 1996.
INCOME (LOSS) FROM CONTINUING OPERATIONS. The loss from continuing
operations for 1996 decreased by $11.1 million from the prior year. Income
(loss) from discontinued operations reflects the $10.1 million provision made in
1995 for a loss on the disposal of the wool division. When the sales agreement
lapsed in December 1995 due principally to difficulty in obtaining certain
regulatory approvals and declining market conditions, the provision was reversed
in 1996 and overall net income in 1996 was $608,000, or $0.01 per share,
compared to a net loss of $30.5 million, or $3.34 per share, in 1995.
24
<PAGE>
SEASONALITY AND QUARTERLY RESULTS
The purchasing and processing of tobacco and wool are dependent on
agricultural cycles and are seasonal in nature. These cycles and this
seasonality, together with the timing of shipments and variations in the mix of
sales, causes quarterly fluctuations in financial results. See "Risk
Factors -- Variability of Annual and Quarterly Results". The following table
sets forth items from the Company's interim Consolidated Statements of Income
for the quarterly periods indicated and does not take account of certain
reconciliations and adjustments made at year end.
<TABLE>
<CAPTION>
1998 1997 1996 1995
-------- -------------------------------------- -------------------------------------- ------------------
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales.............. $300,315 $420,744 $374,130 $249,005 $310,391 $402,735 $377,555 $282,196 $296,964 $433,387 $301,880
Cost of sales
-- Materials,
services and
supplies....... 273,189 379,451 338,154 218,881 280,894 354,758 341,799 258,311 272,700 394,400 269,159
-- Interest....... 7,266 8,402 8,032 8,152 7,611 13,011 9,445 9,123 9,790 11,837 9,471
Gross profit, net
of interest...... 19,860 41,293 35,976 30,124 29,497 47,977 35,756 23,885 24,264 38,987 32,721
Operating income,
net of
interest (1)..... 11,858 26,164 19,282 14,580 14,336 32,222 5,898 7,587 7,479 17,607 16,445
Income (loss) from
continuing
operations....... 1,853 8,038 4,480 2,911 1,508 9,028 (9,040) (3,175) (6,225) (15,542) 296
<CAPTION>
Q2 Q1
-------- --------
<S> <C> <C>
Sales.............. $225,049 $253,249
Cost of sales
-- Materials,
services and
supplies....... 202,599 230,961
-- Interest....... 7,460 6,213
Gross profit, net
of interest...... 22,450 22,288
Operating income,
net of
interest (1)..... 14,221 6,635
Income (loss) from
continuing
operations....... (4,077) (1,171)
</TABLE>
- ---------------
(1) Defined as income (loss) before taxes, net of interest included in cost of
sales and other interest expense.
LIQUIDITY AND CAPITAL EXPENDITURES
Working capital at June 30, 1997 was $123.9 million, up from $55.8 million
at March 31, 1996 and $120.1 million at March 31, 1997. Most of the increase was
due to the application of the $47.0 million of net proceeds of the Equity
Offering to reduce short-term borrowings. The remaining increase was due to
contributions from operating activities, which further reduced short-term
borrowings. Subsequent to June 30, 1997, working capital improved as a result of
the Notes Offering.
Capital expenditures were $17.3 million, $12.2 million and $12.8 million
for the fiscal years ended March 31, 1995, 1996, and 1997, and $2.9 million for
the three months ended June 30, 1997. The Company expects capital expenditures
to total approximately $17.4 million for the fiscal year ending March 31, 1998.
Capital expenditures for 1997 related mostly to expansion of warehouse
facilities in Greece and routine expenditures in the U.S. tobacco division.
Capital expenditures for the three months ended June 30, 1997 consisted
primarily of routine expenditures in the tobacco and wool divisions, expansion
of warehouse facilities in Greece and Turkey, and new machinery for the French
topmaking facility. The Company continues to closely monitor its inventories
which fluctuate depending on seasonal factors and business conditions.
For 1997, cash provided by operating activities totaled $34.7 million
primarily due to improved operating earnings and a $22.7 million increase in
payables, which more than offset a $22.8 million increase of receivables related
to higher sales. Cash employed in investing activities of $4.4 million for 1997
included capital expenditures of $12.8 million mostly for tobacco activities of
$11.0 million, including $4.4 million in Greece, $3.0 million in the United
States, $1.8 million for the nontobacco segment and $0.5 million in Turkey, net
of asset dispositions of $8.4 million.
FINANCING ARRANGEMENTS. On August 1, 1997, the Issuer consummated the sale
and issuance of the Initial Notes in aggregate principal amount of $115.0
million. See "Description of the Notes". Simultaneously, the Issuer and two of
the Company's subsidiaries (the "Borrowing Subsidiaries") entered into the
Global Bank Facility. The Global Bank Facility provides for borrowings of $200.0
million for working capital and other general corporate purposes, and bears
interest initially at LIBOR plus 1.0%. The borrowings under the Global Bank
Facility are guaranteed by the Company and certain of its tobacco subsidiaries
and secured by substantially all of the assets of the Issuer and the Borrowing
Subsidiaries and a pledge of all of the capital stock of the Company's
subsidiaries not otherwise pledged to secure other obligations. The Issuer has
guaranteed the obligations of each of the Borrowing Subsidiaries and each of the
Borrowing Subsidiaries will guarantee the obligations of one another under this
facility. The Global Bank Facility will mature on the third anniversary of the
Refinancing Plan. See "Description of Global Bank Facility".
The Company incurs short-term debt to finance its seasonally adjusted
working capital needs, which typically peak in the third quarter, under
unsecured lines of credit with several banks. At June 30, 1997, under agreements
with various banks, total short-term credit facilties for continuing operations
was $703.9 million, of which $357.9 million was unused.
Based on the improving outlook for the 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 credit facilities. The
Company's future operating performance will be subject to economic conditions
and to financial, political, agricultural and other factors, many of which are
beyond the Company's control. See "Risk Factors -- Significant Leverage and
Ability to Service Debt".
25
<PAGE>
On November 13, 1991, the Company issued $69.0 million of its 7 1/4%
Convertible Subordinated Debentures due March 31, 2007 (the "Debentures"). The
Debentures are currently convertible into shares of the Company's Common Stock
at a conversion prices (as adjusted for subsequent stock dividends) of $29.38.
The Debentures are subordinated in right of payment to all senior indebtedness,
as defined, of the Company. As of March 31, 1995, the Debentures became
redeemable in whole or in part at the option of the Company at any time.
Beginning March 31, 2003, the Company will be obligated to make annual sinking
fund payments sufficient to retire at least 5% of the principal amount of issued
Debentures reduced by earlier conversions, redemptions, and repurchases. Holders
of the Debentures have the right to demand redemption under certain conditions,
including a change in control of the Company, certain mergers and consolidations
and certain distributions with respect to the Company's capital stock. The
Company may elect to redeem Debentures under these circumstances in Common Stock
in lieu of cash.
As a result of the recent Equity Offering, which appreciably broadened the
Company's shareholder base, the Board of Directors has voted to discontinue
issuing quarterly stock dividends. Certain debt agreements to which the Company
and its subsidiaries are parties contain financial covenants which could
restrict the payment of cash dividends. Under its most restrictive covenant, the
Company had approximately $57.9 million ($27.3 million under new covenants) of
retained earnings available for distribution as dividends at June 30, 1997. At
this time, it is uncertain when the Board will resume the payment of cash
dividends, if ever.
On January 31, 1997, the Company terminated the Employee Stock Ownership
Plan (the "ESOP") established by W A Adams Company prior to that company's
acquisition by the Company. This termination involved the redemption by the
Company of 24,602 shares of ESOP Preferred Stock for an aggregate price of
approximately $2.5 million in cash and the issuance of 14,075 shares of Common
Stock. The remaining 62,875 shares of unallocated ESOP Preferred Stock were
cancelled.
TAX AND REPATRIATION MATTERS
The Company and its subsidiaries are subject to income tax laws in each of
the countries in which they do business through wholly-owned subsidiaries and
through affiliates. The Company makes a comprehensive review of the income tax
requirements of each of its operations, files appropriate returns and makes
appropriate income tax planning analyses directed toward the minimization of its
income tax obligations in these countries. Appropriate income tax provisions are
determined on an individual subsidiary level and at the corporate level on both
an interim and annual basis. These processes are followed using an appropriate
combination of internal staff at both the subsidiary and corporate levels as
well as independent outside advisors in review of the various tax laws and in
compliance reporting for the various operations.
The undistributed earnings of certain foreign subsidiaries are not subject
to additional foreign income taxes nor considered to be subject to U.S. income
taxes unless remitted as dividends. The Company intends to reinvest such
undistributed earnings indefinitely; accordingly, no provision has been made for
U.S. taxes on those earnings. The Company regularly reviews the status of the
accumulated earnings of each of its U.S. and foreign subsidiaries as part of its
overall financing plans.
26
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement by and among the Issuer, the
Guarantors and the Initial Purchasers, the Issuer and the Guarantors have agreed
(i) to file a registration statement with respect to an offer to exchange the
Initial Notes for senior debt securities of the Issuer with terms substantially
identical to the Initial Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions) within 45 days after the date of
original issuance of the Initial Notes and (ii) to use best efforts to cause
such registration statement to become effective under the Securities Act within
120 days after such issue date. In the event that applicable law or
interpretations of the staff of the Commission do not permit the Issuer and the
Guarantors to file the registration statement containing this Prospectus or to
effect the Exchange Offer, or if certain holders of the Initial Notes notify the
Issuer and the Guarantors that they are not permitted to participate in, or
would not receive freely tradeable Exchange Notes pursuant to, the Exchange
Offer, the Issuer will use its best efforts to cause to become effective the
Shelf Registration Statement with respect to the resale of the Initial Notes and
to keep the Shelf Registration Statement effective until two years after the
original issuance of the Initial Notes. The interest rate on the Initial Notes
is subject to increase under certain circumstances if the Issuer is not in
compliance with its obligations under the Registration Rights Agreement.
Each holder of the Initial Notes who wishes to exchange such Initial Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations in the Letter of Transmittal, including representations that (i)
any Exchange Notes to be received by it will be acquired in the ordinary course
of its business, (ii) it is not participating, does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, and (iii) it is not an "affiliate" as
defined in Rule 405 of the Securities Act, of the Issuer or the Guarantors or,
if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. See
"Initial Notes Registration Rights".
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes that, except as
described below, Exchange Notes issued pursuant to the Exchange Offer in
exchange for Initial Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a holder which is an "affiliate"
of the Issuer within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act; provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer with the intention or for the purpose of participating in a distribution
of the Exchange Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Unless an exemption from registration is otherwise available, any
such resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K under the Securities Act. This Prospectus may be used for an
offer to resell, resale or other retransfer of Exchange Notes only as
specifically set forth herein. Each broker-dealer that receives Exchange Notes
for its own account in exchange for Initial Notes, where such Initial Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution".
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuer will accept for exchange any and
all Initial Notes properly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Issuer will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
outstanding Initial Notes surrendered pursuant to the Exchange Offer. Initial
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Initial Notes except the Exchange Notes will be registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof. The Exchange Notes will evidence the same debt as the Initial Notes.
The Exchange Notes will be issued under and entitled to the benefits of the
Indenture, which also authorized the issuance of the Initial Notes, such that
both series will be treated as a single class of debt securities under the
Indenture.
27
<PAGE>
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
As of the date of this Prospectus, $115.0 million aggregate principal
amount of the Initial Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Initial Notes.
There will be no fixed record date for determining registered holders of Initial
Notes entitled to participate in the Exchange Offer.
The Issuer and the Guarantors intend to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement and the
applicable requirements of the Exchange Act, and the rules and regulations of
the Commission thereunder. Initial Notes which are not tendered for exchange in
the Exchange Offer will remain outstanding and continue to accrue interest and
will be entitled to the rights and benefits such holders have under the
Indenture.
The Issuer shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Issuer shall have given oral or written notice thereof
to the Exchange Agent and complied with the relevant provisions of the
Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the Exchange Notes from the
Issuer. The Issuer expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Initial Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under " -- Certain Conditions to the Exchange Offer".
Holders who tender Initial Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Initial
Notes pursuant to the Exchange Offer. The Issuer will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See " -- Fees and Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1997, unless the Issuer, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuer will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Initial Notes an announcement thereof, each prior to 9:00 a.m., New
York City time, on the next business day after the then effective Expiration
Date.
The Issuer reserves the right, in its sole discretion, to (i) delay
accepting for exchange any Initial Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
" -- Certain Conditions of the Exchange Offer" shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) amend the terms of the Exchange Offer in any manner. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof to the registered
holders of Initial Notes. If the Exchange Offer is amended in a manner
determined by the Issuer to constitute a material change, the Issuer will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders, and the Issuer will extend the
Exchange Offer, depending upon the significance of the amendment and the manner
of disclosure to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 8 7/8% per annum from
August 1, 1997, the date of issuance of the Initial Notes that are tendered in
exchange for the Exchange Notes (or the most recent Interest Payment Date (as
defined) to which interest on such Notes has been paid). Accordingly, Holders of
Initial Notes that are accepted for exchange will not receive interest on the
Initial Notes that is accrued but unpaid at the time of tender, but such
interest will be payable on the first Interest Payment Date after the Expiration
Date. Interest on the Exchange Notes will be payable semi-annually in arrears on
each February 1 and August 1, commencing February 1, 1998.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Issuer will not
be required to accept for exchange, or exchange any Exchange Notes for, any
Initial Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of any Initial Notes for exchange, if:
28
<PAGE>
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Issuer's sole judgment, might materially impair the ability
of the Issuer to proceed with the Exchange Offer;
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Issuer's sole judgment, might
materially impair the ability of the Issuer to proceed with the Exchange
Offer; or
(c) any governmental approval has not been obtained, which approval
the Issuer shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Issuer expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Initial Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Initial Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Issuer. Any Initial Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Issuer expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Initial Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above. The Issuer will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the Initial Notes as
promptly as practicable, such notice in the case of any extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Issuer and may be
asserted by the Issuer regardless of the circumstances giving rise to any such
condition or may be waived by the Issuer in whole or in part at any time and
from time to time in its reasonable judgment. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Issuer will not accept for exchange any Initial Notes
tendered, and no Exchange Notes will be issued in exchange for any such Initial
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of 1939
(the "TIA").
PROCEDURES FOR TENDERING
Only a holder of Initial Notes may tender such Initial Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signature
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) Initial Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of book-entry
transfer (a "Book-Entry Confirmation") of such Initial Notes, if such procedure
is available, into the Exchange Agent's account at The Depository Trust Issuer
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under " -- Exchange Agent" prior to 5:00 p.m.,
New York City time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Issuer in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Initial Notes to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Initial Notes, either
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<PAGE>
make appropriate arrangements to register ownership of the Initial Notes in such
owner's name or obtain a properly completed bond power from the registered
holder of Initial Notes. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the Expiration
Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Initial Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust Issuer having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Initial Notes listed therein, such Initial Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Initial Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Initial Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuer,
evidence satisfactory to the Issuer of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Initial Notes and withdrawal of tendered
Initial Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the absolute right
to reject any and all Initial Notes not properly tendered or any Initial Notes
the Issuer's acceptance of which would, in the opinion of counsel for the
Issuer, be unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Initial Notes. The
Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Initial Notes must be cured within such time as the
Issuer shall determine. Although the Issuer intends to notify holders of defects
or irregularities with respect to tenders of Initial Notes, neither the Issuer,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Initial Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Initial
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holder, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In all cases, issuance of Exchange Notes for Initial Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of the Initial Notes or a timely Book-Entry
Confirmation of such Initial Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Initial Notes are
not accepted for exchange for any reason set forth in the terms and conditions
of the Exchange Offer or if Initial Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Initial Notes will be returned without expense to the tendering holder thereof
(or, in the case of Initial Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Initial Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Initial Notes by causing the
Book-Entry Transfer Facility to transfer such Initial Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal or facsimile thereof, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the Exchange Agent at the address set
forth below under " -- Exchange Agent" on or prior
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to the Expiration Date or, if the guaranteed delivery procedures described below
are to be complied with, within the time period provided under such procedures.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available or (ii) who cannot deliver their Initial Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Dates, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Initial Notes and the principal amount of Initial Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Initial
Notes or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Initial Notes in proper form
for transfer or a Book-Entry Confirmation, as the case may be, and all
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Initial Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
" -- Exchange Agent". Any such notice of withdrawal must specify the name of the
person having tendered the Initial Notes to be withdrawn, identify the Initial
Notes to be withdrawn (including the principal amount of such Initial Notes) and
(where certificates for Initial Notes have been transmitted) specify the name in
which such Initial Notes were registered, if different from that of the
withdrawing holder. If certificates for Initial Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Initial Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Initial Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuer, whose determination shall be final and binding on all parties. Any
Initial Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Initial Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Initial Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Initial Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Initial Notes) as soon
as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Initial Notes may be retendered by following
one of the procedures described under " -- Procedures for Tendering" above at
any time on or prior to the Expiration Date.
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EXCHANGE AGENT
Crestar Bank has been appointed as Exchange Agent of the Exchange Offer.
Questions and request for assistance, request for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery should be directed to the Exchange Agent addressed as follows:
FOR INFORMATION BY TELEPHONE:
(804) 782-5726
<TABLE>
<S> <C>
BY FACSIMILE TRANSMISSION BY HAND OR OVERNIGHT
(FOR ELIGIBLE INSTITUTIONS ONLY): DELIVERY SERVICE OR BY MAIL:
(804) 782-7855 919 East Main Street
Richmond, Virginia 23219
Attention: Kelly Pickerel
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuer. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile, telephone, in person or otherwise by officers and
regular employees of the Issuer and its affiliates.
The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuer. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, and related fees and expenses.
TRANSFER TAXES
The Issuer will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
Initial Notes for principal amounts not tendered or accepted for exchange are to
be delivered to, or are to be issued in the name of, any person other than the
registered holder of Initial Notes tendered, or if tendered Initial Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Notes pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Initial Notes, as set forth (i) in the legend
thereon as a consequence of the issuance of the Initial Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws and (ii)
otherwise set forth under "Transfer Restrictions" in the Offering Memorandum
dated July 25, 1997 distributed in connection with the Initial Offering. In
general, the Initial Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Issuer does not currently anticipate that it will register the Initial Notes
under the Securities Act. Based on interpretations by the staff of the
Commission set forth in no-action letters issued to third parties, Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than any such holder which is an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act; provided that such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no arrangement
or understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
(i) could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Notes may not be offered or sold
unless they have been registered or such securities laws have been complied
with. The Issuer has agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the
Exchange Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Notes reasonably requests in
writing.
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BUSINESS
Standard is principally engaged in purchasing, processing, storing, selling
and shipping leaf tobacco. The Company also purchases, processes and sells
various types of wool. For fiscal 1997, the Company derived approximately 75.0%
of its revenue from its tobacco division.
TOBACCO
The Company is one of the three global independent leaf tobacco merchants
serving the large multinational cigarette manufacturers and is one of the
largest independent merchants of oriental leaf tobacco, a key component of
Amercan-blend cigarettes. The Company also has a leading market presence in a
number of the emerging and low-cost flue-cured and burley tobacco growing
regions, including China, India, Malawi and Tanzania. Founded in 1910, the
Company purchases, processes, stores, sells and ships tobacco grown in over 30
countries, servicing cigarette manufacturers from 20 processing facilities
strategically located throughout the world.
THE LEAF TOBACCO INDUSTRY
Multinational cigarette manufacturers, with one principal exception, rely
primarily on global independent leaf tobacco merchants, such as the Company, to
process and supply leaf tobacco used in the manufacturing process. Leaf tobacco
merchants select, purchase, process, store, pack, ship and, in a growing number
of emerging markets, provide agronomy expertise and financing for growing leaf
tobacco. Presently, there are three global independent leaf tobacco merchants,
including the Company. Important trends in the leaf tobacco industry include:
GROWTH OF AMERICAN-BLEND CIGARETTES. American-blend cigarettes have gained
market share in several major foreign markets, including Asia (particularly
Pacific Rim countries), Europe and the Middle East in recent years.
American-blend cigarettes contain approximately 50.0% flue-cured, 35.0% burley
and 15.0% oriental tobacco, contain less tar and nicotine, and taste milder than
locally produced cigarettes containing dark and semioriental tobacco
historically consumed in certain parts of the world. According to the TMA,
American-blend cigarette consumption (excluding China) has increased from 1.7
trillion units in calendar 1990 to 1.9 trillion units in calendar 1996, an
increase of 10.8%. The TMA estimates that worldwide American-blend tobacco
consumption (excluding China) will increase an additional 5.5% to more than 2.0
trillion units by the year 2000. The TMA also estimates that worldwide
American-blend cigarette consumption (excluding China), as a percentage of total
consumption, has also experienced substantial growth, increasing from 47.9% in
1990 to 52.5% in 1996, and is projected to reach 54.3% by the year 2000. As
American-blend cigarettes have continued to gain global market share, the demand
for export quality flue-cured, burley and oriental tobacco sourced and processed
by leaf tobacco merchants has grown accordingly. Several multinational cigarette
manufacturers have made significant investments in the Former Soviet Union,
which the Company believes may lead to increased demand for and sale of
American-blend tobacco. As American-blend cigarettes have gained market share,
the demand for export quality American-blend tobacco sourced and processed by
the three global independent leaf tobacco merchants, including the Company, has
grown accordingly.
GROWTH IN FOREIGN OPERATIONS OF MULTINATIONAL CIGARETTE MANUFACTURERS.
Several multinational cigarette manufacturers have expanded their operations
throughout the world, including in Africa, Asia, Central and Eastern Europe and
the Former Soviet Union, in order to increase their access to and penetration of
these markets. As cigarette manufacturers expand their global operations, the
Company believes there will be increased demand for local sources of leaf
tobacco and local tobacco processing facilities, primarily due to the
semiperishable nature of unprocessed leaf tobacco and the existence of domestic
tobacco content laws in certain countries. The Company also believes that the
international expansion of cigarette manufacturers will cause these
manufacturers to place greater reliance on the services of financially strong
leaf tobacco merchants with the ability to source and process tobacco on a
global basis and to help develop higher quality local tobacco sources.
GROWTH IN FOREIGN SOURCED TOBACCO. In an effort to respond to cigarette
manufacturers' increasing demand for lower cost American-blend tobacco, the
major leaf tobacco merchants have made significant investments in Africa, Asia,
Europe and South America, the principal sources of flue-cured, burley and
oriental tobacco outside the United States. The Company expects this trend to
continue in the foreseeable future as the quality of foreign grown tobacco
continues to improve.
IMPROVED MARKET CONDITIONS. The global leaf tobacco industry is currently
recovering after experiencing a disruption in demand and reduction in pricing
during calendar 1993 and 1994. The disruption of the industry in the United
States during these years arose from a convergence of adverse factors,
including: (i) enactment of the 75/25 Rule, which was later repealed; (ii) a
below average quality 1993 tobacco crop in the United States; and (iii) the
proposal of legislation in the summer of 1993 to increase significantly the
federal excise tax on cigarettes (although such legislation was never enacted),
that resulted
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in reluctance by manufacturers to build inventories. Concurrent with the
reduction in demand for imported tobacco related to the 75/25 Rule and lower
than expected initial demand for tobacco in Africa, Asia, Central and Eastern
Europe and the Former Soviet Union, the worldwide price of tobacco declined due
to oversupply attributable to record foreign tobacco crops. This combination of
reduced demand and lower prices had a negative impact on the financial
performance of the leaf tobacco merchants and resulted in significant increases
in uncommitted tobacco inventories held by merchants.
In calendar 1994 and 1995, the demand and supply imbalance in the worldwide
tobacco market began to improve. Leaf tobacco production outside the United
States was curtailed in response to the lower prices and high levels of
uncommited inventories. The 75/25 Rule was repealed principally because it was
inconsistent with GATT, and was replaced by a series of less stringent import
quotas. This resulted in cigarette manufacturers in the United States resuming
traditional purchases of foreign sourced tobacco. The combination of lower
levels of tobacco production and increased demand had a positive impact on
worldwide tobacco prices and a corresponding positive impact on the
profitability of the industry, and resulted in significant reductions in
uncommitted tobacco inventories.
CONSOLIDATION OF TOBACCO MERCHANTS. Leaf tobacco merchants continue to
consolidate through worldwide acquisitions and mergers. As recently as 1989,
there were eight major international merchants. Presently, there are three
global independent leaf tobacco merchants, including the Company, which
purchase, process, store, sell and ship leaf tobacco worldwide. The Company
believes that it has experienced growth in tobacco revenue as a result of this
industry consolidation as the multinational cigarette manufacturers diversify
their sourcing partners of quality leaf tobacco.
BUSINESS STRATEGY
The Company recently achieved substantial improvement in its operating and
financial performance in part as a result of the implementation of a four-point
strategic plan and the enhancement of the Company's senior management team,
including the appointment of the Company's current Chief Executive Officer. The
key areas addressed by the strategic plan include: (i) information systems; (ii)
financial controls; (iii) risk management; and (iv) asset management. The
Company has improved sales from $1.0 billion in fiscal 1994 to $1.4 billion for
fiscal 1997, reduced SG&A expenses as a percentage of sales from 7.6% to 5.4%
and increased operating income net of interest from $12.2 million to $74.4
million. The Company's tobacco division has driven this return to profitability,
increasing sales from $671.5 million in fiscal 1994 to $997.4 million for fiscal
1997, improving operating income net of interest from a loss of $1.0 million to
income of $62.6 million and increasing average tobacco inventory turnover from
2.1 turns for fiscal 1994 to 4.0 turns for fiscal 1997.
INFORMATION SYSTEMS
In order to manage financial performance more effectively, the Company has
designed and developed, and is implementing worldwide, proprietary information
systems. These systems provide rapid access to critical operational, financial
and risk management information.
WORLDWIDE AVAILABLE FOR SALE ("WAFS"). WAFS provides management with daily
updates of tobacco inventories and allows management to more closely align
customer demand with the supply of tobacco on a global basis. The Company
believes it has significantly improved its ability to control and manage its
tobacco inventory risks and increase profitability through the implementation of
WAFS.
INTEGRATED ACCOUNTING. The Company has developed a fully integrated
proprietary system to monitor the flow of leaf tobacco from the date of purchase
through factory processing and shipment. The system has been implemented in the
United States, and management believes it will be installed for use in
approximately 80.0% of the tobacco division by early fiscal 1998 and will be
installed worldwide by fiscal 2000. The integrated accounting system provides
divisional, regional and area managers better methods to track and measure their
performance under corporate accountability programs.
WORLDWIDE STRATEGIC PLANNING. In fiscal 1996, the Company initiated a major
project focused on matching anticipated leaf tobacco supply with customer's
projected needs over a rolling three-year period. The Company's strategic
planning now involves review and analysis of the various grades of leaf tobacco
that will be required by customers and the Company's ability to supply them. The
strategic planning initiatives assist management in planning capital expenditure
and investment projects and in controlling inventory levels by evaluating supply
and demand on a country-by-country, customer-by-customer basis.
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FINANCIAL CONTROLS
The Company's worldwide operations include subsidiaries and affiliates
organized under local laws and structured to minimize, to the extent possible,
the adverse impact of international taxation of its global earnings. In certain
instances, the Company elected foreign organizational structures focused on
local issues rather than a centralized approach to financial and corporate
governance. Recent initiatives taken by the Company focus on shifting control
over critical decision-making from the area level to the corporate level.
ORGANIZATIONAL STRUCTURE. For operational and financial control purposes,
the tobacco division is divided into five regions (North America, South America,
Africa, Asia and Europe) and each region is subdivided into areas (usually by
country). In each division, region and area, the Company has controllers
dedicated to monitoring operational and financial performance in relation to the
Company's core corporate objectives. To ensure compliance with these objectives,
the Company has also created a five-member tobacco division executive committee,
comprised of the Company's Chief Executive Officer, and the tobacco division's
Chairman, Operations Director, Financial Director and Sales Director. Decisions
made at each level are now reviewed by the executive committee to ensure
consistency and compliance with the Company's corporate operational and
financial parameters.
CASH FLOW MANAGEMENT. The Company believes that rapid access to information
regarding divisional, regional and area level cash flow results in better
corporate decision-making. Awareness of the Company's cash flow is important to
improving risk and asset management.
BUSINESS UNIT ACCOUNTABILITY. As the Company refines its divisional,
regional and area level controls and information systems, its managers at each
level are given more specific performance objectives to achieve. These managers
have ready access to financial information in order to measure their performance
against budget. The Company believes that improved access to information will
permit the Company to make adjustments more quickly in response to performance
that may not be consistent with corporate financial objectives or budgets.
PERFORMANCE MEASUREMENT SYSTEMS. In order to more closely align divisional,
regional and area level decision-making with the corporate level objective of
significantly improving the Company's profitability, the Company's
performance-based incentive compensation plan has been restructured. Because the
leaf tobacco business requires short-term financing of relatively large
inventory positions, the Company has instituted a plan based on return on assets
designed to focus divisional, regional and area managers on optimizing working
capital utilization through the reduction of uncommitted inventory levels and
the short-term financing required to make tobacco purchases.
RISK MANAGEMENT
Historically, the Company's operating units have been given responsibility
for managing risks and making certain financial decisions. Recently, the Company
has instituted a centralized risk management system to manage uncommitted
inventory levels, customer exposure limits, capital expenditures and investment
projects to maximize profitability while maintaining an acceptable level of
corporate risk.
UNCOMMITTED INVENTORY. The Company continues to centralize its inventory
monitoring functions and believes that it is achieving levels of inventory which
are more closely aligned with current customer demand and market conditions. The
Company distinguishes between "committed" inventories, which consist of packed
tobacco for which customer orders or indications of interest have been received,
and "uncommitted" inventories, which are not designated by the Company to fill a
specific customer order or indication of interest. While the Company believes it
must purchase a certain amount of uncommitted inventory to maintain its presence
in certain strategic tobacco growing regions or to capitalize on favorable
prices, the Company's business strategy has emphasized the need to reduce risks
associated with tobacco price fluctuations by generally reducing its uncommitted
inventory levels. The tobacco division executive committee has set a limit on
the amount of uncommitted tobacco inventory, which may not be exceeded without
its prior approval.
CUSTOMER EXPOSURE LIMITS. In response to the cancellation of tobacco
contracts totaling approximately $23.0 million by customers in the Former Soviet
Union and financial problems of certain cigarette manufacturers in fiscal 1994,
the Company instituted credit risk procedures which are monitored by the tobacco
division executive committee. Pursuant to these procedures, the total exposure
to, and payment history of, each customer is reviewed monthly. Since instituting
these procedures, the Company has not experienced any material losses due to
contract cancellations or over-extended credit.
CAPITAL EXPENDITURES AND INVESTMENTS. The tobacco division executive
committee now evaluates all significant capital expenditures and investments
pursuant to strict criteria. These criteria include projected cash flows,
required capital expenditures, sources of financing, internal rates of return
and the impact on profitability. In centralizing the analysis underlying
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capital expenditure and investment proposals, the Company believes that a more
rational approach will be achieved and that a sharper focus on return on assets
will permit the Company to continue its trend of improved profitability, growth
and cash flow management.
ASSET MANAGEMENT
The Company believes that it is positioned to continue to improve its
financial performance as a result of several asset management initiatives. These
initiatives include a comprehensive analysis of inventory levels, noncore assets
and accounts receivable.
INVENTORY. The Company has increased average tobacco inventory turnover
from a low of approximately 2.1 turns for fiscal 1994 to approximately 4.0 turns
for fiscal 1997. Increased inventory turnover, which is in part attributable to
management more closely aligning customer demand with the supply of tobacco, has
resulted in savings due to reduced interest, insurance and warehousing costs
associated with holding tobacco inventory.
RECEIVABLES COLLECTION. The Company has instituted revised policies
relating to the collection of receivables, including centralized review of
credit extended to each customer. Although individual subsidiaries have
historically monitored collections, in certain cases current information was not
available to managers, and in certain circumstances local relationships
precluded the institution of strict adherence to corporate collection policies.
NONCORE AND NONSTRATEGIC ASSETS. The Company has sold substantially all of
its noncore and nonstrategic assets. Management believes that these assets have
historically required a disproportionate amount of administrative services.
Selling these assets and the consequent reduction in associated costs has been
fundamental to focusing management's attention on maximizing the profitability
of core assets. See "Risk Factors -- Global Financial and Management Control
Risks".
GROWTH STRATEGY
The Company's primary business objective is to expand its position as one
of the leading global suppliers of American-blend tobacco to the major cigarette
manufacturers while increasing profitability through enhanced financial
management and control. The key elements of the Company's growth strategy
include:
INCREASING PRESENCE IN SOUTH AMERICA AND AFRICA. The Company believes that
its presence in all the major leaf tobacco markets worldwide is critical to
capitalizing on the global expansion of the large multinational cigarette
manufacturers, the recent consolidation of the leaf tobacco merchants and the
anticipated growth in demand for tobacco sourced internationally. A key element
of the Company's growth strategy is to increase its ability to directly source
and process tobacco in South America and Africa, key growing regions for
American-blend tobacco. A trust established by the Company recently acquired
74.9% of the fourth largest tobacco processor in Brazil. See
"Business -- Tobacco -- Worldwide Tobacco Presence -- Brazil".
INCREASING PENETRATION OF LOW-COST FILLER TOBACCO AND EMERGING
TOBACCO-GROWING REGIONS. To meet the increasing demand by cigarette
manufacturers throughout the world for low-cost American-blend tobacco, the
Company plans to expand its operations in regions particularly suited for
producing such tobacco. The Company has targeted China, India and Tanzania,
countries in which it has a leading tobacco export position, for expansion and
increased tobacco production. The Company has executed letters of intent for the
construction of new processing facilities in China and India.
STRENGTHENING PRESENCE IN ORIENTAL MARKETS. Demand for oriental tobacco,
which comprises approximately 15.0% of American-blend cigarettes, is rapidly
increasing due to the strong growth in consumption of American-blend cigarettes.
The Company intends to strengthen its position as one of the world's largest
merchants of oriental tobacco through acquisitions and continued strategic
investments in China and Thailand (emerging oriental tobacco markets), and in
Greece and Turkey (leading oriental tobacco markets based on volume).
CAPITALIZING ON ACQUISITION AND OUTSOURCING OPPORTUNITIES. Recent
consolidation within the leaf tobacco industry has been driven by the need to
cost-effectively service multinational cigarette manufacturers on a global
basis. Management believes that there will be increasing opportunities for
acquisitions of smaller independent local leaf tobacco merchants in various
strategic locations throughout the world. In addition, the Company anticipates
further outsourcing of leaf tobacco purchasing and processing by cigarette
manufacturers. This outsourcing trend is driven by the: (i) higher margins in
cigarette production; (ii) increasing sophistication required in sourcing leaf
tobacco on a global basis; and (iii) continued privatization of tobacco and
cigarette production operations in certain countries.
36
<PAGE>
OPERATIONS
The Company has developed an extensive international network through which
it purchases, processes and sells tobacco. In addition to processing facilities
in North Carolina and Kentucky, the Company owns or has an interest in
processing facilities in Zimbabwe, a significant exporter of flue-cured tobacco;
Malawi, a leading exporter of burley tobacco; and Greece and Turkey, the leading
exporters of oriental tobacco. The Company also has processing facilities in
Italy, Spain and Thailand. In addition, the Company has entered into contracts,
joint ventures and other arrangements for the purchase and processing of tobacco
grown in substantially all countries that produce export-quality flue-cured,
burley and oriental tobacco, including Argentina, Brazil, Canada, China, India,
Kenya, Kyrgyzstan, Tanzania and Ukraine.
PURCHASING. The tobacco in which the Company deals is grown in over 30
countries. Management believes that its diversity in sources of supply, combined
with a broad customer base, helps shield the Company from seasonal fluctuations
in quality, yield or price of tobacco crops grown in any one region. 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 and the maximum exposure is limited to a shorter period.
Tobacco is generally purchased at auction or directly from growers. Tobacco
grown in the United States, Canada, India, Malawi and Zimbabwe is purchased at
auction. The Company generally employs its own buyers to purchase tobacco on
auction markets, directly from growers and pursuant to marketing agreements with
government monopolies. At present, the largest amounts of tobacco purchased by
the Company outside the United States come from Argentina, Brazil, China,
Greece, India, Italy, Malawi, Spain, Thailand, Turkey and Zimbabwe.
FISCAL 1997 PURCHASES AND SALES IN DOLLARS
[Pie chart appears below with the following data:]
Purchases by Origin Sales by Destination
United States............ 39% Europe..................... 44%
Central & South America.. 19% United States.............. 35%
Africa................... 19% Far East................... 16%
Europe................... 12% South America.............. 3%
Far East................. 11% Africa & Others............ 2%
Although Argentina, Brazil, China, Greece, Italy, Spain, Turkey and
Thailand are major tobacco producers, there are no tobacco auctions in these
markets. In these markets, the Company buys (or, in Brazil, intends to buy
through Meridional) tobacco directly from farmers, agricultural cooperatives or
government agencies in advance of firm orders or indications of interest
although such purchases are usually made with some knowledge of its customers'
requirements. In certain of these markets the Company advances or finances the
purchase of fertilizer and other supplies to assist farmers in growing the crop.
These advances generally are repaid with deliveries of tobacco by the farmers.
During fiscal 1997, the maximum aggregate amount of such advances by the Company
was $43.6 million. See "Risks Factors -- Global Financial and Management Control
Risks".
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, the Company has located its processing
facilities near the areas where it purchases tobacco. Prior to and during
processing, the Company takes a number of steps 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 to meet customer
specifications and threshed; however, some of it is processed in whole-leaf form
and sold to certain customers of the Company. 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
37
<PAGE>
ensure that the product meets customer specifications as to yield, particle
size, moisture content and chemistry. Customers are frequently present 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 ship.
The Company processes its tobacco in four wholly-owned plants in the United
States and 12 other facilities around the world owned or leased by subsidiaries
and affiliates. In addition, the Company has access to four other processing
plants in which it has no ownership interest. In all cases, tobacco processing
is under the direct supervision of Company personnel. Modern laboratory
facilities are maintained by the Company to assist in selecting tobacco for
purchase and to test tobacco during and after processing.
The Company believes that its plants are highly efficient and are adequate
for its purposes. The Company also believes that tobacco throughput at its
existing facilities could be increased without major capital expenditures.
SELLING. The Company's customers include all of the world's leading
manufacturers of cigarettes and other consumer tobacco products. These customers
are located in approximately 85 countries throughout the world. The Company
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 U.S.
dollars. Payment for most tobacco sold by the Company is received after the
tobacco has been processed and shipped.
The consumer tobacco business in most markets is dominated by a small
number of large multinational cigarette manufacturers and by government
controlled entities. In fiscal 1997, the Company's five largest customers
accounted for approximately 49.6% of total sales (67.3% of tobacco sales). In
fiscal years 1997, 1996 and 1995, one customer accounted for 24.1%, 17.4% and
14.2% of total sales, respectively. The Company believes that formal purchase
contracts are not customary in the global leaf tobacco industry and agreements
to purchase tobacco generally result from the supplier's course of dealings with
its customers. The Company has done business with most of its customers for many
years. The Company believes that it has good relationships with its large
customers. See "Risk Factors -- Reliance on Significant Tobacco Customers".
As of June 30, 1997, the Company had tobacco inventory of $256.0 million
compared to $206.7 million at June 30, 1996. The level of tobacco fluctuates
from period to period and is significant only to the extent it reflects
short-term changes in demand for leaf tobacco.
COMPETITION
The leaf tobacco industry is highly competitive. 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, Universal and Dimon, 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. In addition, the Company believes that the consolidation of the leaf
tobacco industry may provide opportunities for it to enhance its relationship
with and increase sales to certain cigarette manufacturers. See "Risk
Factors -- Competition".
WORLDWIDE TOBACCO PRESENCE
UNITED STATES. The Company owns and operates a total of four processing
facilities located in North Carolina and Kentucky and purchases tobacco at all
major markets in the United States, including flue-cured tobacco markets in
North Carolina, South Carolina, Virginia, Georgia and Florida; burley tobacco
markets in Kentucky, Tennessee, Virginia and North Carolina; and light air-cured
tobacco markets in Maryland and Pennsylvania. In the United States, flue-cured
and burley tobacco are generally sold at public auction to the highest bidder.
The price of such tobacco is supported under an industry-funded federal program
that also restricts tobacco production through a quota system. U.S. grown
tobacco is more expensive than most non-U.S. tobacco, resulting in a declining
trend in exports, which management believes should be offset by increased demand
for foreign tobacco.
38
<PAGE>
BRAZIL. The Company currently purchases leaf tobacco in Brazil as the agent
for Souza Cruz, a subsidiary of B.A.T. which has approximately 80.0% of the
domestic cigarette market in Brazil. The Company fills orders and earns a
commission from Souza Cruz based upon the sales price of the tobacco. On
September 12, 1997, a trust established by the Company acquired 74.9% of
Meridional, the fourth largest leaf tobacco processor in Brazil. This strategic
acquisition complements the Company's continuing 26-year partnership in Brazil
with Souza Cruz, and will provide the Company with direct ownership of a
processing facility in the second largest leaf tobacco growing region in the
world (excluding China).
TURKEY AND GREECE. The Company is one of the largest merchants of
flue-cured, burley and oriental tobacco in Turkey. In both Turkey and Greece,
the oriental tobacco markets are more fragmented than the major flue-cured and
burley tobacco markets in other parts of the world. The Company believes that
the fragmented nature of the oriental tobacco markets and its leading presence
in these markets provides it with an excellent opportunity to expand revenues
through acquisitions and continued strategic investments. The Company also
purchases and processes flue-cured and burley tobacco in Greece. The Company
processes tobacco in Turkey and Greece in two 51.0% owned facilities.
MALAWI, ZIMBABWE AND TANZANIA. In Malawi, the largest exporter of low-cost
burley tobacco in the world, the Company has a leading market position and
services the large multinational cigarette manufacturers from its 51.9% owned
facility in Lilongwe and its 50.0% owned facility in Limbe. The Company also is
a leader in the purchase and processing of flue-cured and dark-fired tobacco,
which are also processed in the Company's facilities. In Zimbabwe, the Company
purchases flue-cured tobacco and to a lesser extent burley tobacco, which it
processes in its minority-owned facility. In Tanzania, one of the key emerging
growing regions of low-cost filler tobacco, the Company has historically been
one of the largest exporters of flue-cured tobacco. The Company supervised the
processing of this tobacco in a government-owned facility, which was privatized
in calendar 1995. The Company is currently exploring other alternatives,
including investment in a privately-owned and -operated processing facility.
CHINA, THAILAND AND INDIA. The Company has provided agronomy services and
funded a variety of projects in China since 1981 and believes that it is the
largest independent exporter of Chinese leaf tobacco. The Company currently
operates two government-owned tobacco processing facilities in China. The
Company is expanding its presence in China and expects to increase its
production in the area through strategic alliances with the Chinese government.
The Company has an executed letter of intent (subject to certain conditions) to
build its third processing facility in China, which will process low-cost filler
tobacco in the Guizhou province. The Company is also one of the leading
exporters of flue-cured, burley and oriental leaf tobacco from Thailand, which
it purchases directly from farmers or in some cases from a middlemen or curers.
Flue-cured tobacco is grown mainly in Northern Thailand, burley tobacco is grown
in Central Thailand and oriental leaf tobacco is grown in Northeast Thailand.
The Company currently processes tobacco in Thailand in two facilities in which
the Company owns a minority interest. In India, an emerging source of low-cost
filler tobacco, the Company purchases primarily flue-cured tobacco. The Company
has executed a letter of intent with a local partner, who has started
construction of a new processing facility in Guntur.
OTHER FOREIGN OPERATIONS. The Company also has foreign subsidiaries, joint
ventures and affiliates that purchase, process and sell tobacco grown in other
countries throughout the world, including Italy, Kenya, Spain and Zaire.
39
<PAGE>
PROPERTIES
The Company generally conducts its tobacco processing operations in
facilities near the area of production. In certain places, long-standing
arrangements exist with local companies to process tobacco in their plants under
the supervision of Company personnel. A current summary showing the principal
tobacco operating properties of the Company or its affiliates is shown below:
<TABLE>
<CAPTION>
AREA
LOCATION PRINCIPAL USE (SQUARE FEET)
- ---------------------- ---------------------- -------------------
<S> <C> <C>
UNITED STATES
Wilson, NC Factory/storage 1,008,000
Oxford, NC Factory/storage 624,700
King, NC Factory 134,600
Springfield, KY Factory/storage 292,000
TURKEY
Izmir Factories (2)/storage 431,300
Izmir Storage 204,500*
GREECE
Alexandria Factory/storage 402,000
Salonica Factory/storage 772,700
Salonica Factory/storage 236,300*
MALAWI
Limbe Factory/storage 414,000
Lilongwe Factory/storage 776,000
ZIMBABWE
Harare Factory/storage 565,800*
Harare Storage 233,500
THAILAND
Chiengmai Factory/storage 872,000
Banphai Factory/storage 377,000
ITALY
Caserta Factory/storage 800,000*
SPAIN
Benavente Factory/storage 206,000
Benavente Storage 132,400*
Coria Buying center 18,300*
Talayuela Buying center 21,500
</TABLE>
- ---------------
* Leased facility.
The Company believes its tobacco properties are generally well-maintained,
in good operating condition and are suitable and adequate for the normal growth
of its business.
WOOL
The Company is a world leader in the trading of scoured wool and a major
trader and processor of wool tops. As a result of a series of acquisitions
commencing in 1985, the Company owns and operates an integrated group of wool
companies which purchase, process and sell wool to other wool processors,
felting companies, knitters and spinners of yarn, and manufacturers of worsted
and woolen products. The Company does not raise sheep or produce textile
products. For fiscal 1997, the Company derived approximately 25.0% of its
revenue from its wool division.
THE WOOL INDUSTRY
The wool industry is highly fragmented, with a large number of small
dealers handling wool, often from limited origins. There are two broad
categories of wool fibers: fine wool from merino sheep and coarse wool from
crossbred sheep. Merino wool is used to make products for the apparel trade such
as fine sweaters and worsted fabrics for high quality suits. Crossbred wool is
used to make carpets, coarser worsted fabrics such as upholstery and draperies,
and woolens used in knitwear and hand-knitting yarns. Most merino wool for
export is produced in Australia followed by South Africa and South America. The
main sources of crossbred wool for export are New Zealand, the United Kingdom
and South America.
Following record high prices in 1988, the wool industry experienced a
severe downturn beginning in 1989 that was triggered by the withdrawal of China
from international wool markets, economic turmoil in Eastern Europe and the
states of the Former Soviet Union and recessionary conditions in Western Europe.
These events led to a decrease in demand for wool
40
<PAGE>
on the world market. At the same time a worldwide oversupply of wool had
developed, largely due to artificially high prices caused by the Australian
support program.
Prior to 1991, Australian wool growers operated under a government price
support program. Under this program, the Australian government accumulated a
stockpile of 827,000 metric tons (raw weight) of wool. In 1991 the Australian
government abandoned its price support program, effectively creating a free
market for wool. Under free market conditions, prices fell substantially and
immediately, creating difficult trading conditions for the wool industry, and
leading to the development of market conditions necessary for a correction in
what had become a major imbalance between supply and demand. At present, Wool
International, an organization created by the Australian government, is
responsible for the reduction of the stockpile, which on March 31, 1997 totaled
319,000 metric tons (the equivalent of approximately 50% of one year's current
Australian production). At the present rate of reduction, it is forecast that
the stockpile will be liquidated by the year 2000.
Worldwide wool production during the Company's 1997 fiscal year was below
current demand for the third consecutive year, and production by the five major
wool exporting countries has declined by 15.0% over the past five years. As a
result, since 1992, all surplus stocks around the world have been sold with the
exception of the remaining stockpile in Australia. See "Risk Factors -- Poor
Market Conditions in the Wool Industry".
BUSINESS STRATEGY
In January 1995, the Company made the strategic decision to focus on the
tobacco division due to existing conditions in the wool industry and the
Company's desire to reduce its financial leverage. In September 1995, the
Company signed an agreement to sell its wool division to Chargeurs of France.
Due to difficulty in obtaining certain regulatory approvals and declining market
conditions, the parties agreed in December 1995 to allow the agreement to lapse.
Following the lapse of the Company's agreement to sell the wool division in
December 1995, the Company instituted, and continues to refine, measures
designed to streamline its wool division. Since December 1995, the Company has:
(i) installed a new wool division management team, including appointment of a
new Managing Director reporting directly to the Company's Chief Executive
Officer, and a Financial Director solely responsible for the wool division; (ii)
closed an unprofitable scouring mill in Argentina; (iii) reorganized the
management teams for Eastern and Western Australia into one unit; (iv)
consolidated two European topmaking units, which had been competing against one
another, under a unified management team with a jointly staffed office in Italy,
the Company's single largest market for wool tops; (v) installed new management
to run operations in France; (vi) restructured the majority of the wool division
under a single holding company; and (vii) begun implementing a proprietary
management information system designed to significantly improve its control over
its wool trading position. Primarily as a result of these initiatives, the
Company believes that the wool division is positioned to return to
profitability, although no assurance can be given to this effect.
The Company believes that it will be able to implement in the wool division
its information systems, financial controls and risk and asset management
strategies similar to those implemented by the tobacco division in order to
continue to improve its operating and financial performance. As part of the wool
division restructuring, many wool units were recently recapitalized, thereby
solidifying their banking facilities. The Company's primary business objectives
for the wool division are to increase profitability and to strengthen the
Company's competitive position.
EXPANDING SALES EFFORTS IN THE ASIAN MARKET. The Company plans to
capitalize on the increasing demand for wool in the Asian market, primarily
through an increased and focused selling effort in China and the Pacific Rim.
The Company believes that by opening a new sales office in China's Shanghai
province and by improving coordination of the efforts of its local
representatives in the Company's two existing Chinese offices with those of its
experienced wool traders from various origin countries, the Company will be able
to increase its market share in China. The Company believes that its expansion
efforts in China will increase wool sales from its Australian and New Zealand
sourcing bases to meet the anticipated growth in demand.
IMPLEMENTING WOOL TRADING SYSTEM. The Company plans for the wool division
to implement many information system initiatives similar to those employed in
the tobacco division. The Company has developed a proprietary software system
known as the Wool Trading System that enables users to: (i) determine the most
cost-efficient means of processing particular blends of wool to meet customer
specifications; and (ii) monitor the Company's trading position on a daily
basis. Because this system is integrated into the units' accounting systems, the
Company expects it to improve administrative and reporting efficiencies. This
system is currently used by the Company in the United Kingdom and the Company
intends to deploy it throughout its worldwide operations as rapidly as
practicable.
ENHANCING CUSTOMER RELATIONSHIPS. The Company intends to improve its
relationship with major customers by improving the coordination of sales
efforts, logistics and intergroup communications. This approach is designed to
eliminate customer confusion from arising when a particular customer is served
by or has relationships with multiple units within the
41
<PAGE>
Company's wool division. The Company believes this approach will allow it to
present itself to its customers in a more unified and global manner than it has
in the past.
OBTAINING ISO 9002 CERTIFICATIONS. The Company intends to obtain ISO 9002
certification for each of its wool operating facilities in an effort to enhance
its image as an international supplier of quality wool. ISO 9002 certification
is available to wool operators that comply with high consistency and quality
standards. The Company's wool processing operations in the United Kingdom have
already obtained certification, and its French and South African operations are
in the process of obtaining certification. The Company believes that the
measures implemented to qualify for ISO 9002 certification will increase
operating efficiencies, reduce costs and strengthen marketing efforts while
enhancing the division's reputation as a preferred and reliable supplier of
quality wool.
OPERATIONS
From the outset, the Company's strategy has been to build a large
international wool network, primarily through the acquisition of
well-established traders and processors. The Company believes that as a result
of its acquisitions and the continuing consolidation of the wool industry, it
has become one of the world's largest traders and processors of wool. The
Company owns and operates processing facilities in five countries, including
scouring mills in New Zealand, South Africa and the United Kingdom and combing
mills in Chile and France. The Company is participating in negotiations with the
Western Australian government to set up a joint venture scouring facility. The
Company also uses the services of commission processors in Argentina, Australia,
Belgium, Germany and Italy.
PURCHASING. The Company deals in wool from all of the major producing
areas, the most significant of which are Argentina, Australia, Chile, New
Zealand, South Africa and the United Kingdom. The Company has buying offices in
all of these areas. The Company's employees buy wool at auctions and through
negotiations with wool growers. Although most wool is shorn before it is
purchased, some wool is purchased "on the back" before shearing. As in its
tobacco business, most of the Company's purchases are made against specific
customer orders. Australia is by far the largest producer of wool in the world
and its wool prices generally influence world prices. The Company typically pays
for its wool purchases in the currency of the country of origin, and usually
hedges the currencies of its purchase and sale commitments with forward
transactions. The Company does not engage in currency transactions for the
purpose of speculation.
FISCAL 1997 PURCHASES AND SALES IN DOLLARS
[Pie chart appears below with the following data:]
Purchases by Origin Sales by Destination
Australia................ 49% Europe..................... 66%
South America............ 15% Far East................... 24%
New Zealand.............. 14% United States.............. 7%
Europe................... 11% Africa & Others............ 3%
South Africa............. 6%
Far East & Others........ 5%
PROCESSING. Wool is purchased in its raw or naturally greasy state, and
must be scoured (washed) before it can be further processed. The Company sells
some greasy wool to topmakers, but most of the wool is blended and scoured
and/or further processed into tops, to meet customer specifications. The
scouring is done at the Company's plants in New Zealand, South Africa and the
United Kingdom or by commission scourers in Argentina, Australia and Belgium.
Similarly, tops are produced in the Company's plants in Chile and France and by
commission combers in Argentina, Australia, Italy and Germany. The Company's
French plant also refines wool grease removed during the scouring process into a
variety of types of lanolin, a marketable byproduct.
A top is a continuous strand of straightened and combed, longer wool fibers
that have been separated from the short fibers. Topmaking involves seven
processes: blending, scouring, carding, gilling, combing, finishing and packing
to quality standards specified by the customer. Carding machines align the
fibers to produce a "sliver" of parallel fibers while removing foreign matter.
Slivers are combined to produce a stronger, more parallel sliver which is combed
to make a top suitable for spinning. Tops are wound into bobbins weighing
approximately 22.0 pounds which are packed and shipped to customers in the
apparel industry for further manufacturing. The Company maintains laboratory
facilities for analyzing and testing wool and lanolin.
42
<PAGE>
SELLING. The Company currently derives approximately 66.0% of its wool
revenues from sales to customers in Europe, with sales to the Far East, North
America and other areas making up the balance. In fiscal 1997, processed wool
(i.e., scoured and tops) accounted for approximately 67.0% of the Company's wool
revenues, followed by greasy wool (25.0%), specialty fibers (6.0%) and lanolin
(2.0%). Greasy wool is sold primarily to customers in Western Europe, the Far
East and the United States. Scoured wool is shipped to carpet, woolen, felting,
quilt and mattress manufacturers located in Europe, the Far East and the United
States. Tops are sold primarily to Western European yarn spinners for processing
and sale to manufactures of worsted fabrics. Lanolin is sold primarily to
manufacturers of cosmetics and pharmaceutical products. The Company's largest
wool customer accounted for less than 2.0% of total sales and 5.0% of total wool
sales for fiscal 1997. Sales are typically made in local currencies of the
customers.
The Company relies primarily on short-term bank credit and internal
resources to finance its wool purchases. The period of exposure generally is
limited to only a few months. At March 31, 1997 and 1996, the Company had
outstanding orders for wool of approximately $109.0 million and $136.0 million,
respectively.
COMPETITION
The wool industry is more fragmented than the leaf tobacco industry. Major
competitors include Chargeurs, ADF, BWK, and a number of Japanese trading firms,
the largest of which is Itochu. Key factors for success in the wool business are
broad market coverage, a full range of wool types, technical expertise in buying
and processing and high quality customer service. The Company believes that its
processing and marketing capabilities and buying and trading expertise enable it
to compete effectively, and that its broad geographical trading base enables it
to react quickly to price changes and to supply wool of similar types and
blending quality from different countries or areas while keeping the highest
quality standards. See "Risk Factors -- Competition".
PROPERTIES
The Company generally conducts its scoured wool operations in the country
of origin, and processes wool tops in France and Chile. A current summary
showing the principal wool operating properties of the Company or its affiliates
is shown below:
<TABLE>
<CAPTION>
AREA
LOCATION PRINCIPAL USE (SQUARE FEET)
- ------------------------------ ---------------- -------------
<S> <C> <C>
Australia (FREMANTLE) Storage 200,000
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
</TABLE>
- ---------------
* Leased facility.
The Company believes its wool properties are generally well-maintained, in
good operating condition and are suitable and adequate for the normal growth of
its business.
EMPLOYEES
At June 30, 1997, the Company had a total of approximately 2,200 full-time
employees (including approximately 530 in the United States). As of that date,
of the Company's full-time employees, approximately 1,560 were in the tobacco
business, approximately 610 were in the wool business and approximately 30 had
duties relating to other operations. The tobacco business typically employs an
additional 6,700 to 6,800 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, 1999. The Company
believes its relations with employees covered by this agreement are good.
Employees at the French wool plant are also represented by labor unions under an
agreement subject to renewal every December 31. The Company believes that its
relations with its employees in France are good. See "Risk Factors -- Dependence
on Key Personnel".
GOVERNMENT REGULATION AND ENVIRONMENTAL COMPLIANCE
In recent years, governmental entities in the United States at all levels
have taken or have proposed actions that may have the effect of reducing
consumption of cigarettes. These activities have included: (i) the U.S.
Environmental Protection Agency's classification of tobacco environmental smoke
as a "Group A" (known human) carcinogen; (ii) restrictions on the use of tobacco
products in public places and places of employment including a proposal by the
U.S. Occupational Safety and
43
<PAGE>
Health Administration to ban smoking in the work place; (iii) proposals by the
U.S. Food and Drug Administration to sharply restrict cigarette advertising and
promotion and to regulate nicotine as a drug; (iv) increases in tariffs on
imported tobacco; (v) proposals to increase sales and excise taxes on
cigarettes; (vi) the recently announced policy of the U.S. government to link
certain federal grants to the enforcement of state laws banning the sale of
tobacco products to minors; (vii) lawsuits against cigarette manufacturers by
several U.S. states seeking reimbursement of Medicaid and other expenditures by
such states claimed to have been made to treat diseases allegedly caused by
cigarette smoking; and (viii) the recent enactment of stricter regulations
designed to prohibit sales of cigarettes to minors. It is not possible to
predict the outcome of such actions or litigation or the effect adverse
determinations against the manufacturers might have on leaf merchants, like the
Company, or the extent to which governmental activities and litigation might
adversely affect the Company's business directly.
The Attorneys General of 40 states recently reached a proposed settlement
with certain U.S. cigarette manufacturers regarding claims for reimbursement of
health care costs associated with smoking-related illnesses. The settlement
would, among other things, give the FDA the authority to regulate tobacco
products, curtail the advertising of tobacco products and mandate new and larger
warning labels on cigarette packages. It is not possible to predict whether the
settlement will be approved by Congress or what the effect of such a settlement
will be on pending and future actions brought by private litigants or the impact
the settlement will have on sales of tobacco products and the Company's
business.
In calendar 1993, Congress enacted the 75/25 Rule, intended to limit the
importation of tobacco into the United States by requiring that all cigarettes
manufactured in the United States, including those manufactured for export,
contain at least 75.0% domestically grown tobacco. Although the 75/25 Rule was
repealed in 1995, principally because it was inconsistent with GATT, and was
replaced with import quotas designed to assist domestic tobacco growers, it had
the effect in calendar 1993 and 1994 of drastically decreasing demand for
imports of foreign tobacco for use in the domestic production of cigarettes. It
is not possible to predict the extent to which future governmental or third
party actions might adversly affect the Company's business.
A number of foreign countries have also taken steps to restrict or prohibit
cigarette advertising and promotion, to increase taxes on cigarettes and to
discourage cigarette smoking. In some cases, such restrictions are more onerous
than those in the U.S. For example, advertising and promotion of cigarettes has
been banned or severely restricted for a number of years in Australia, Canada,
Finland, France, Italy, Singapore and a number of other countries. It is not
possible to predict the extent to which these actions might adversely affect the
Company's business.
Although the Company's wool scouring and top making operations involve
discharges of significant amounts of effluent waste, the Company believes that
it is currently in compliance with applicable foreign laws which have been
enacted or adopted regulating the discharge of such materials into the
environment or otherwise relating to the protection of the environment. Such
compliance has not had, and is not anticipated to have, any material effect upon
the competitive position of the Company. See "Risk Factors -- Smoking and Health
Issues and Governmental Regulation".
LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is currently involved in
any litigation that the Company believes would, individually or in the
aggregate, have a material adverse effect on the Company's consolidated
financial position, consolidated results of operation or liquidity nor, to the
Company's knowledge, is any such litigation currently threatened against the
Company.
44
<PAGE>
MANAGEMENT
The executive officers, certain key employees and directors of the Company
as of August 31, 1997 were as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- --------------------------------------------
<S> <C> <C>
CORPORATE
Robert E. Harrison (1)(4) 43 President, Chief Executive Officer,
Chief Financial Officer and Director
Mark W. Kehaya 29 Vice President-Planning and
Financial Director-Tobacco Division
Michael K. McDaniel 47 Vice President-Human Resources
Keith H. Merrick 43 Vice President and Treasurer
Hampton R. Poole, Jr. 45 Vice President and Controller
Krishnamurthy Rangarajan 54 Vice President and Assistant Secretary
Guy M. Ross 64 Vice President and Secretary
TOBACCO DIVISION
Marvin W. Coghill (1) 63 Chairman and Director
Thomas M. Evins, Jr. 57 Regional Manager-North and
Central America, and Director
Ery W. Kehaya II 45 Vice President-Operations and
Corporate Vice President
Alfred F. Rehm 49 Vice President-Sales
John H. Saunders 46 Senior Vice President and Regional
Manager-Africa
WOOL DIVISION
Paul H. Bicque 53 Managing Director
Timothy S. Price 38 Financial Director
OTHER DIRECTORS
Ery W. Kehaya 73 Chairman Emeritus
J. Alec G. Murray (1) 60 Chairman of the Board
William S. Barrack, Jr. (2)(3)(4) 67 Director
Henry R. Grunzke 66 Director
Charles H. Mullen (2)(3)(4) 69 Director
Daniel M. Sullivan (2)(3)(4) 73 Director
William A. Ziegler (2)(3)(4) 73 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Finance Committee
ROBERT E. HARRISON has served as the President and Chief Executive Officer
of the Company since August 1996 and as Chief Financial Officer since July 1995.
Prior to joining the Company, Mr. Harrison was employed by RJR Nabisco for 17
years in various financial and management positions, including responsibilities
as General Manager for the tobacco business in the Philippines and Indochina,
Vice President for the food business in the Asia Pacific region, and Vice
President of Finance in Southeast Asia. Mr. Harrison has been a director of the
Company since November 1995.
MARK W. KEHAYA was appointed Financial Director of the tobacco division in
August 1996 after being named Vice President-Planning in August 1994. Prior to
joining the Company in 1993, he was employed as an associate of Fieldstone
Private Capital Group from 1990 to 1992 and as an analyst at Bankers Trust
Company from 1989 to 1990. He is the son of Ery W. Kehaya, Chairman Emeritus.
MICHAEL K. MCDANIEL joined the Company as Director-Human Resources in
November 1996 and was elected Vice President-Human Resources in June 1997. From
1995 to November 1996 he was a partner in a human resources consulting firm, and
from 1978 to 1995 he was Director of Human Resources and Organizational
Development for the City of Wilson, North Carolina.
45
<PAGE>
KEITH H. MERRICK has served as Treasurer of the Company since 1993 and was
elected a Vice President in 1996. Prior to joining the Company, he was employed
as a Vice President of First Union National Bank of North Carolina.
HAMPTON R. POOLE, JR. was appointed Vice President in 1996 and has served
as Controller and Assistant Treasurer of the Company since 1993. He joined the
Company in 1984 and has been an officer of Standard Commercial Tobacco Co.,
Inc., a subsidiary, for more than five years. Mr. Poole is a Certified Public
Accountant.
KRISHNAMURTHY RANGARAJAN was employed by the Company in 1978 after
qualifying as a Chartered Accountant. He was elected a Vice President in 1988
after being named Assistant Vice President in 1986 and Chief Accountant in 1981.
GUY M. ROSS was Treasurer from 1980 to 1993 and became 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 years
as Vice President of Finance and Administration. He became a Vice President of
the Company in 1992.
MARVIN W. COGHILL has served as the Chairman of the Company's tobacco
division since April 1994. From 1981 to April 1994, he served as President and
Chief Operating Officer of the Company with responsibility for tobacco
operations. Mr. Coghill has been a director since 1974.
THOMAS M. EVINS, JR., a director since December 1992, served as President
of W.A. Adams Company prior to its acquisition by the Company in June 1992. He
has served as Regional Manager -- North and Central America Tobacco Operations
since 1993.
ERY W. KEHAYA II was appointed Vice President-Operations of the tobacco
division in 1995 after being named Sales Director in 1993 and a Corporate Vice
President in 1992. 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. He is the son of Ery W. Kehaya, Chairman Emeritus.
ALFRED F. REHM was appointed Vice President-Sales of the tobacco division
in February 1995. He joined the Company in 1978 and his 29-year career in the
tobacco industry includes experience in leaf buying, leaf supervision and sales.
JOHN H. SAUNDERS was appointed Senior Vice President of the tobacco
division in August 1995. He has served as Regional Manager-Africa since 1994 and
was Area Manager-Malawi from 1984 to 1994. Mr. Saunders has been employed by the
Company since 1974.
PAUL H. BICQUE has served as Managing Director of the wool division since
December 1995. From 1992 to December 1995, he served as a Commercial Director of
the wool division. From 1990 until he joined the Company, Mr. Bicque worked as
an international senior management consultant.
TIMOTHY S. PRICE was appointed Financial Director of the wool division in
December 1995. Previously, he served as Vice President and Controller of W A
Adams Company from the time it was acquired by the Company in June 1992. Mr.
Price is a Certified Public Accountant.
ERY W. KEHAYA joined the Company in 1945, and served as President from 1955
until 1981 and as Chief Executive Officer from 1955 until 1990. He served as
Chairman of the Board of Directors from 1955 until he was appointed Chairman
Emeritus in August 1996.
J. ALEC G. MURRAY has served as Chairman of the Board since August 1996.
Prior thereto he served as Vice Chairman and Chief Executive Officer of the
Company from January 1991 to August 1996 and as President from April 1994 to
August 1996. Mr. Murray joined the Company in 1969 and has been a director since
1977.
WILLIAM S. BARRACK, JR. has been a director of the Company since his
retirement in 1992 from his position as Senior Vice President of Texaco, Inc. He
is a director of Consolidated Natural Gas Company, a public company.
HENRY R. GRUNZKE served as the Chairman of the wool division from January
1996 to August 1996. Prior thereto he served as Commercial Director of the wool
division since the Company's acquisition of Lohmann and Co. GmbH in 1985. He has
been in the wool industry for over 40 years and is currently President of the
International Wool and Textile Organization. He has been a director since 1987.
CHARLES H. MULLEN, a director of the Company since June 1995, is the
retired Chairman and Chief Executive Officer of The American Tobacco Company and
formerly served as a Vice President and director of American Brands, Inc. He is
a director of Swisher International Group Inc., a public company.
46
<PAGE>
DANIEL M. SULLIVAN has been a director of the Company since June 1995. He
founded and served as the Chief Executive Officer of Frost & Sullivan, Inc. from
1961 to 1989. He is Chairman of Jim Hjelms Private Collections, Ltd. and serves
as a director of four private companies.
WILLIAM A. ZIEGLER is a retired partner of the law firm of Sullivan &
Cromwell and has been a director of the Company since 1985. He is currently a
consultant and also serves as a director and chairman of the executive committee
of a private company and a director of another private company.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Six meetings of the Company's Board of Directors were held during the
fiscal year ended March 31, 1997. No Director attended less than 75.0% of the
total number of meetings held by (i) the Board of Directors and (ii) all
committees of the Board on which the Director served.
The business of the Company is under the general management of a Board of
Directors as provided by the laws of North Carolina, the Company's state of
incorporation. The Company's Articles of Incorporation divide the Board of
Directors into three classes as nearly equal in number as possible, each of
which class of directors serves for three years. The term of office of one class
of directors expires each year in rotation so that one class is elected at each
annual meeting of shareholders for a full three-year term. The Proxy Statement
for the Annual Meeting of Shareholders to be held on August 12, 1997 includes
three of the present directors (Henry R. Grunzke, Ery W. Kehaya and Daniel M.
Sullivan), whose terms expire this year, as nominees for three-year terms
expiring in 2000. The Company's seven other directors are: William S. Barrack,
Jr., Charles H. Mullen and J. Alec G. Murray, whose terms expire in 1998; and
Marvin W. Coghill, Thomas M. Evins, Jr., Robert E. Harrison and William A.
Ziegler, whose terms expire in 1999.
The Committees established by the Board of Directors to assist it in the
discharge of its responsibilities are an Executive Committee, an Audit
Committee, a Compensation Committee, a Nominating Committee and a Finance
Committee.
The Executive Committee consists of Mr. Murray, Mr. Coghill and Mr.
Harrison. This committee meets on call and has authority to act on most matters
during the intervals between Board meetings. During the last fiscal year, the
committee acted on various matters by unanimous written consent.
The Audit Committee consists of Mr. Barrack, Mr. Mullen, Mr. Sullivan and
Mr. Ziegler, none of whom have been employees of the Company. This committee is
primarily concerned with assisting the Board in fulfilling its fiduciary
responsibilities relating to accounting policies and auditing and reporting
practices, and assuring the independence of the Company's public accountants,
the integrity of management and the adequacy of disclosure to shareholders. Its
duties include recommending the selection of independent accountants, reviewing
the scope of the audits and the results thereof, and reviewing the organization
and scope of the Company's internal systems of financial control and accounting
policies followed by the Company.
The Compensation Committee consists of Mr. Ziegler, Mr. Barrack, Mr. Mullen
and Mr. Sullivan. No current officer of the Company serves on the Committee and
there are no interlocking relationships. This committee is primarily concerned
with administering the Performance Improvement Compensation Plan, determining
compensation of officers and oversight of the Company's pension plans.
The Nominating Committee consists of Mr. Ziegler, Mr. Harrison, Mr. Mullen
and Mr. Murray. This committee is primarily concerned with recommending to the
full Board of Directors candidates for election as directors.
In April 1997, the Board established a Finance Committee, comprising Mr.
Sullivan, Mr. Barrack, Mr. Harrison, Mr. Mullen and Mr. Ziegler. This committee
is primarily concerned with the financial condition of the Company and
recommendations with respect to financial planning and policies.
EXECUTIVE COMPENSATION
In March 1997, the Company entered into a three-year Employment Agreement
with Robert E. Harrison, its President, Chief Executive Officer and Chief
Financial Officer. The agreement provides for an initial base salary, which is
$350,000 per year as of April 1, 1997, annual cash bonuses upon achievement of
performance goals, as determined by the Compensation Committee of the Board of
Directors of the Company, and other employee benefits. In addition, the
agreement provides for the grant to Mr. Harrison of nonqualified options to
purchase 100,000 shares of Common Stock of the Company at an exercise price
equal to fair market value as of the date of the grant. These options will
become exercisable, based on Mr. Harrison's continued employment with the
Company, in equal annual installments over a three-year period.
47
<PAGE>
Mr. Harrison's employment agreement is renewable for successive two-year periods
after its initial three-year term. The agreement also contains a covenant by Mr.
Harrison not to compete with the Company until one year after his termination,
except if he is terminated by the Company without cause. The agreement also
provides that in the event Mr. Harrison's employment is terminated by the
Company without cause he shall receive termination pay in a lump sum equal to
two years' base salary and one year's bonus. See "Risk Factors -- Dependence on
Key Personnel".
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of shares of the Common Stock as of June 11, 1997 by: (i) each person
(including any "group" as that term is used in Section 13(d) of the Exchange
Act) who is known by the Company to own beneficially more than five percent of
the outstanding shares of the Common Stock; (ii) each of the Company's
directors; and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME SHARES PERCENT
- -------------------------------------------------------------------------------------------------- --------- -------
<S> <C> <C>
Ery W. Kehaya (1)................................................................................. 2,847,024 22.7%
810 Saturn Street
Jupiter, Florida 33477-4456
Marvin W. Coghill (2)............................................................................. 260,857 2.1%
J. Alec G. Murray (3)............................................................................. 202,006 1.6%
Thomas M. Evins, Jr. (4).......................................................................... 107,989 *
William A. Ziegler................................................................................ 5,746 *
Henry R. Grunzke.................................................................................. 2,318 *
William S. Barrack, Jr. (5)....................................................................... 2,148 *
Charles H. Mullen................................................................................. 1,782 *
Robert E. Harrison (6)............................................................................ 1,210 *
Daniel M. Sullivan................................................................................ 1,148 *
All directors and executive officers
as a group (7).................................................................................. 3,971,011 31.6%
</TABLE>
- ---------------
* Less than one percent
(1) Includes (i) 609,075 shares held by Mr. Kehaya as trustee for the benefit of
his children; (ii) 3,404 shares underlying $100,000 principal amount of the
Company's 7 1/4% Convertible Subordinated Debentures held by his wife
assuming conversion thereof at the current conversion price of $29.38 per
share; and (iii) 42,917 shares held by his wife. Excludes 110,459 shares
held by a charitable remainder trust established by Mr. Kehaya as to which
shares he disclaims beneficial ownership.
(2) Includes 3,208 shares held for Mr. Coghill's account by the trustee of the
Company's 401(k) Savings Plan.
(3) Includes 11,452 shares owned by Mr. Murray's wife.
(4) Includes 1,055 shares held for Mr. Evins' account by the trustee of the
Company's 401(k) Savings Plan.
(5) Includes 550 shares owned by Mr. Barrack's wife.
(6) Includes 166 shares held for Mr. Harrison's account by the trustee of the
Company's 401(k) Savings Plan.
(7) Includes the shares discussed in footnotes (1)-(6). Also includes 542,034
outstanding shares held beneficially by other executive officers.
48
<PAGE>
DESCRIPTION OF GLOBAL BANK FACILITY
GENERAL
The Issuer and two of its subsidiaries (the "Borrowing Subsidiaries") have
entered into a new revolving global bank facility (the "Global Bank Facility")
on August 1, 1997 with Deutsche Bank A.G., as lead bank, Bankers Trust Company,
as co-lead bank, documentation agent and U.S. security agent, Mees Pierson, N.V.
as international security agent and the lenders named therein (together the
"Lenders"). The Global Bank Facility provides a commitment of $200.0 million and
amends the Company's MFA and replaces the U.S. Revolving Credit Facility. The
Global Bank Facility is unconditionally guaranteed by the Company and certain of
its tobacco subsidiaries (the "Guarantor Subsidiaries"). The Issuer guarantees
the obligations of each of the Borrowing Subsidiaries and each of the Borrowing
Subsidiaries guarantees the obligations of one another under this facility. The
proceeds of the loans will be used for general corporate purposes.
Total commitments under the Global Bank Facility (subject to the borrowing
base limitations set forth below) are $200.0 million. The amount from time to
time available under the Global Bank Facility (for revolving loans and letters
of credit) will not be permitted to exceed an amount equal to the sum of (x) up
to 80% of the sum of "eligible inventory," "eligible accounts receivable" and
"eligible advances" less "trade payables" (all as defined in the Global Bank
Facility) and (y) up to 50% of the book value of certain fixed assets. The
Global Bank Facility expires August 1, 2000; however, mandatory prepayments of
revolving credit facilities are required in certain events (which include
certain sales of assets which exceed a threshold limit).
Interest will accrue on amounts borrowed under the Global Bank Facility at
an annual rate of LIBOR plus a margin (ranging from 0.625% to 2.0% over the
lenders' cost of funds). The interest margin, initially set at 1.0%, will be
reviewed on March 31, 1998 and every six months thereafter and adjusted
depending upon the EBITDA/Interest Coverage Ratio of the Company's tobacco
division as defined in the Global Bank Facility.
The obligations of the Issuer and the Borrowing Subsidiaries under the
Global Bank Facility rank PARI PASSU in right of payment with the Notes, except
that the obligations under the Global Bank Facility are secured by a first
priority lien on, among other things, all of the assets of the Issuer and the
Borrowing Subsidiaries. The Notes and the Guarantees are effectively
subordinated to the obligations under the Global Bank Facility and to any other
secured debt of the Company's subsidiaries, to the extent of the assets serving
as security therefor. See "Risk Factors -- Adverse Consequences of Holding
Company Structure".
CERTAIN COVENANTS
The Global Bank Facility contains various covenants that restrict the
Company and its subsidiaries from taking various actions and that require that
the Company and its tobacco division achieve and maintain certain financial
covenants. The Global Bank Facility contains covenants relating to minimum net
worth, minimum interest coverage ratio, limitations on capital expenditures,
investments, uncommitted tobacco inventory, indebtedness, advances, liens,
dividends, acquisitions and sales of assets. The Global Bank Facility also
restricts the ability of the Issuer to prepay the Notes and also prohibits
certain changes in control of the Company and its subsidiaries.
49
<PAGE>
DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Initial Notes were issued under
an indenture (the "Indenture"), dated as of August 1, 1997 by and among the
Issuer, as issuer, and the Guarantors and Crestar Bank, as Trustee (the
"Trustee"). For purposes of the following summary, the Initial Notes and the
Exchange Notes are collectively referred to as the "Notes". The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Trust
Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of
the Indenture, including the definitions of certain terms therein and those
terms made a part of the Indenture by reference to the TIA as in effect on the
date of the Indenture. A copy of the Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The definitions of
certain capitalized terms used in the following summary are set forth below
under " -- Certain Definitions". For purposes of this section, references to the
"Company" include the Company and not its consolidated subsidiaries.
The Notes are eligible for trading in the PORTAL Market of the Nasdaq Stock
Market, Inc. The Notes will be payable both as to principal and interest either
(A) if Global Notes are issued, then (i) to DTC as the holder of the Global
Notes at an office of an agent of the Issuer (the "Paying Agent") or (B) in the
event Certificated Securities are issued at an office of the Paying Agent
maintained for such purpose. Upon and after the issuance of Certificated
Securities, Holders will be able to receive principal and interest on the Notes
and will be able to transfer Certificated Securities at the office of such
paying and transfer agent, subject to the right of the Issuer to mail payments
in accordance with the terms of the Indenture. Any Initial Notes that remain
outstanding after the completion of the Exchange Offer, together with the
Exchange Notes issued in connection with the Exchange Offer, will be treated as
a single class of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $115.0 million and
will mature at par on August 1, 2005. Interest on the Notes will accrue at the
rate of 8 7/8% per annum and will be payable semiannually in cash in arrears on
each February 1 and August 1 commencing on February 1, 1998, to the persons who
are Holders at the close of business on the January 15 and July 15 immediately
preceding the applicable interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from and including the date of issuance. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
The Notes are not entitled to the benefit of any mandatory redemptions or
any sinking fund payments prior to the maturity of the Notes.
GUARANTEES; SECURITY
The Company and Standard Wool, jointly and severally, guarantee on a senior
basis to each Holder and the Trustee, the full and prompt performance of the
Issuer's obligations under the Indenture and the Notes, including the payment of
principal of and interest and Additional Interest, if any, on the Notes (the
Company and Standard Wool being referred to herein as "Guarantors" and their
guarantees being referred to respectively as the "Parent Guarantee" and the
"Standard Wool Guarantee," and together, the "Guarantees"). In addition, all of
the issued and outstanding capital stock of the Issuer and Standard Wool has
been pledged by the Company to the Trustee for the benefit of the Holders of the
Notes.
Each Guarantor that makes a payment or distribution shall be entitled to a
contribution from each other Guarantor in an amount PRO RATA, based on the net
assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Issuer, or with other Persons upon the terms and conditions set forth in the
Indenture. See "Certain Covenants -- Merger, Consolidation and Sale of Assets".
In the event (A) more than 49% of the Capital Stock of Standard Wool is sold by
the Company or (B) more than 49% of the consolidated assets of Standard Wool are
sold in compliance with all of the terms of the Indenture, the Standard Wool
Guarantee will be released.
RANKING
The indebtedness of the Issuer and the Guarantors evidenced by the Notes
and the Guarantees ranks PARI PASSU in right of payment with all existing and
future indebtedness of the Issuer or such Guarantor, as the case may be, other
than Indebtedness that is expressly subordinate to the Notes or the Guarantee of
such Guarantor. The Notes and the Standard Wool Guarantee are effectively
subordinated to all secured indebtedness of the Issuer and Standard Wool, as the
case may be, with respect to the assets securing such indebtedness and are
effectively subordinated in right of payment to all liabilities, including trade
50
<PAGE>
payables, of all subsidiaries of the Issuer or Standard Wool, as the case may
be. The Parent Guarantee is effectively subordinate in right of payment to all
liabilities, including trade payables, of all subsidiaries of the Company (other
than the Issuer and Standard Wool). As of June 30, 1997, on a pro forma basis,
after giving effect to the Refinancing Plan, the Issuer and the Guarantors would
have had an aggregate of approximately $ million of secured and other
Indebtedness to which the Notes and the Guarantees would have been effectively
subordinate in right of payment.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable, at the option of the
Issuer, in whole at any time or in part from time to time, on and after August
1, 2001, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on August 1 of the year set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------------ ----------
<S> <C>
2001.......................................................................... 104.438%
2002.......................................................................... 102.958%
2003.......................................................................... 101.479%
2004 and thereafter........................................................... 100.000%
</TABLE>
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange
or market, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange or market, on a PRO RATA basis, by lot
or by such method as the Trustee shall deem fair and appropriate; PROVIDED that
no Notes of a principal amount of $1,000 or less shall be redeemed in part.
Notice of redemption will be mailed by first-class mail at least 30 but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued and delivered to the Book-Entry
Depositary or, in the case of Certificated Securities, issued in the name of the
Holder thereof in each case upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption as long as the Issuer has deposited with the Paying Agent
funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control,
each Holder will have the right to require that the Issuer purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price (the "Change of Control
Payment") equal to 101% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of purchase.
Within 30 days following the date upon which a Change of Control occurs,
the Issuer will send, by first class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law (the "Change of Control Payment
Date"). Holders electing to have Notes purchased pursuant to a Change of Control
Offer will be required to surrender such Notes, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the third business day prior to the Change of Control Payment Date.
The Indenture provides that on the Change of Control Payment Date, the
Issuer will, to the extent permitted by law, (i) accept for payment all Notes or
portions thereof properly tendered pursuant to the Change of Control Offer, (ii)
deposit with the Paying Agent an amount equal to the aggregate Change of Control
Payment in respect of all Notes or portions thereof so tendered and (iii)
deliver, or cause to be delivered, to the Trustee for cancellation the Notes so
accepted together with an Officers' Certificate stating that such Notes or
portions thereof have been tendered to and purchased by the Issuer. The
Indenture provides that the Paying Agent will promptly either (x) pay to the
Holder against presentation and surrender (or, in the case of partial payment,
endorsement) of the Global Notes or (y) in the case of Certificated Securities,
mail to each Holder of Notes the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and deliver to the
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Holder of the Global Notes a new Global Note or Notes or, in the case of
Definitive Notes, mail to each Holder new Certificated Securities, as
applicable, equal in principal amount to any unpurchased portion of the Notes
surrendered, if any, provided that each new Certificated Security will be in a
principal amount of $1,000 or an integral multiple thereof. The Issuer will
notify the Trustee and the Holders of the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Issuer will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer, as well as any repayment of other debt
triggered by the Change in Control. In the event the Issuer is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Issuer
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase and other repayment obligations. However,
there can be no assurance that the Issuer would be able to obtain such financing
on favorable terms or at all.
Neither the Board of Directors of the Issuer nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on
their property, to make Restricted Payments and to make Asset Sales may also
make more difficult or discourage a takeover of the Company, whether favored or
opposed by the Holders, or shareholders or management of the Company.
Consummation of any such transaction in certain circumstances may require
redemption or repurchase of the Notes, and there can be no assurance that the
Company or the acquiring party will have sufficient financial resources to
effect such redemption or repurchase. Such restrictions and the restrictions on
transactions with Affiliates may, in certain circumstances, make more difficult
or discourage any leveraged buyout of the Company or any of its Subsidiaries by
the management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction. The Issuer will
comply with the requirements of Rule 14e-1 promulgated under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of Notes
pursuant to a Change of Control Offer.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); PROVIDED that if no Default or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the incurrence
of any such Indebtedness, the Company or any of its Restricted Subsidiaries may
incur Indebtedness (including, without limitation, Acquired Indebtedness), in
each case if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio
of the Company is greater than 2.25 to 1.0 on or prior to the second anniversary
of the Issue Date and greater than 2.75 to 1.0 thereafter.
The Issuer will not, and will not permit any Guarantor to, directly or
indirectly, in any event incur any Indebtedness that by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated to any other
Indebtedness of the Issuer or of such Guarantor, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such indebtedness) made expressly subordinate in right of payment to the Notes
or the Guarantee of such Guarantor, as the case may be, to the same extent and
in the same manner as such Indebtedness is subordinated pursuant to
subordination provisions that are most favorable to the holders of any other
Indebtedness of the Issuer or such Guarantor, as the case may be.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable solely in Qualified Capital Stock of the Company) on or in
respect of shares of the Capital Stock of the Company or any of its
Subsidiaries, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any of its Subsidiaries or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock,
other than (i) the exchange of such Capital Stock or any warrants, rights or
options to acquire shares of any class of such Capital Stock for Qualified
Capital Stock of the Issuer or warrants, rights or options to acquire Qualified
Capital Stock of the Company or (ii) in the case of any purchase, redemption or
other acquisition or retirement for value of Disqualified Capital Stock or any
warrants, rights or options to purchase or acquire shares of any class of such
Disqualified Capital Stock, for Capital
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Stock or warrants, rights or options to acquire Capital Stock of the Company;
PROVIDED that if such Capital Stock is Disqualified Capital Stock, such
Disqualified Capital Stock does not have a liquidation preference greater than
the liquidation preference of the Disqualified Capital Stock being purchased,
redeemed or acquired or retired or contain provisions pursuant to which such
Disqualified Capital Stock matures or is mandatorily redeemable or is redeemable
at the sole option of the holder thereof, in whole or in part, prior to the
Disqualified Capital Stock being purchased, redeemed or acquired or retired, (c)
make any principal payment on, purchase, decrease, redeem, prepay or otherwise
acquire or retire or decrease for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, any Indebtedness that is
subordinate or junior in right of payment to the Notes or the Guarantees as the
case may be or (d) make any Investment (other than Permitted Investments) (each
of the foregoing actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto, (i) a Default or an Event of
Default shall have occurred and be continuing or (ii) the Company is not able to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant or (iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment) made subsequent to the Issue Date
(the amount expended for such purposes if other than in cash, being the Fair
Market Value of such property) shall exceed the sum of: (x) 50% of the
cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Company earned subsequent to
June 30, 1997 and on or prior to the date the Restricted Payment occurs (the
"Reference Date") (treating for such purposes such period as a single accounting
period); PLUS (y) 100% of the aggregate net cash proceeds received by the
Company (including the Fair Market Value of marketable securities) from any
Person (other than a Restricted Subsidiary of the Company) from the Issue and
sale subsequent to the Issue Date and on or prior to the Reference Date of
Qualified Capital Stock of the Company (including pursuant to a capital
contribution and excluding any Qualified Capital Stock issued upon conversion of
the Company's outstanding 7 1/4% Convertible Subordinated Debentures due 2007
(the "Debentures") and any Qualified Capital Stock issued pursuant to clause (b)
of this paragraph); PLUS (z) without duplication of any amounts included in
clause (iii) (y) above, an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, interest payments,
repayments of loans or advances, or other transfers of cash, in each case to the
Company or to any Wholly Owned Restricted Subsidiary of the Company from
Unrestricted Subsidiaries (but without duplication of any such amount included
in calculating cumulative Consolidated Net Income of the Issuer), or from
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (in each
case valued as provided in the definition of "Investments"), not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary
and which was treated as a Restricted Payment under the Indenture.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph shall not prohibit: (1) the payment of any dividend within
60 days after the date of declaration of such dividend if the dividend would
have been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the payment, purchase,
defeasance, redemption, prepayment, acquisition or retirement or decrease of any
shares of Capital Stock of the Company, either (i) solely in exchange for shares
of Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Restricted
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
(3) if no Default or Event of Default shall have occurred and be continuing, the
payment, purchase, defeasance, redemption, prepayment, acquisition or retirement
or decrease of any Indebtedness of the Issuer that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or Indebtedness that is subordinated or
junior in right of payment to the Notes and has a Weighted Average Life to
Maturity and final maturity not sooner than the Weighted Average Life to
Maturity and final maturity prior to such exchange, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Restricted Subsidiary of the Company) of (A) shares of Qualified
Capital Stock of the Company or (B) Refinancing Indebtedness; (4) if no Default
or Event of Default shall have occurred and be continuing, repurchases by the
Company of Common Stock of the Company from employees of the Company or any of
its Subsidiaries or their authorized representatives upon the death, disability
or termination of employment of such employees, in an aggregate amount not to
exceed the sum of (x) $2 million in any calendar year and (y) proceeds received
by the Company or any of its Subsidiaries in connection with any "key-man" life
insurance policies which are used to make such repurchases; and PROVIDED that
the cancellation of Indebtedness owing to the Company from members of management
of the Company in connection with a repurchase of Common Stock of the Company
pursuant to this clause 4 will not be deemed to constitute a Restricted Payment
under the Indenture; (5) repurchases of Capital Stock deemed to occur upon the
exercise of stock options if such Capital Stock represents a portion of the
exercise price thereof; (6) if no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, other
Restricted Payments in an aggregate amount not to exceed $15 million (including,
with respect to Investments (other than Permitted Investments), amounts then
outstanding); and (7)
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any payments made in respect of Capital Stock of a Restricted Subsidiary paid to
minority holders thereof in connection with pro rata distributions on such
Capital Stock to the Company or a Wholly Owned Restricted Subsidiary of the
Company. In determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of the immediately
preceding paragraph, amounts expended pursuant to clauses (1) (to the extent the
declaration thereof has not previously been included in such aggregate amount),
(2)(ii), (4) and (6) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless: (i) the Company
or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of; (ii) at least 75% of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, from such Asset Sale shall be in the form of cash or Cash Equivalents or
Replacement Assets and is received at the time of such disposition, PROVIDED
that the amount of (a) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet) of the Company or any such
Restricted Subsidiary (other than liabilities that are by their terms
subordinated in right of payment to the Notes) that are assumed by the
transferee of any such assets, and (b) any notes or other obligations received
by the Company or any such Restricted Subsidiary from such transferee that are
immediately converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for the purposes of
this provision; and (iii) upon the consummation of an Asset Sale, the Company
shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 270 days of receipt thereof either (A) to (x)
repay and permanently reduce the availability of credit under the Global Bank
Facility or (y) repay and elect to reduce the amount of outstanding Indebtedness
permitted to be incurred pursuant to clauses (x) and/or (xv) of the definition
of Permitted Indebtedness, (B) to make an investment in properties and assets
that replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the same or a similar line of
business as the Company or the Restricted Subsidiary, as the case may be, as
existing on the date of the Indenture or in businesses reasonably related
thereto ("Replacement Assets"); PROVIDED that the Net Cash Proceeds from an
Asset Sale relating to the Company's tobacco business are used to make an
investment in Replacement Assets relating to the tobacco business; PROVIDED
FURTHER that the Net Cash Proceeds of an Asset Sale relating to assets owned
directly by the Issuer or a Guarantor are used to make an investment in
Replacement Assets owned directly by the Issuer or a Guarantor, (C) to
permanently reduce any outstanding Indebtedness of such Restricted Subsidiary
(and to correspondingly reduce the commitments, if any, with respect thereto),
or (D) a combination of prepayment and investment permitted by the foregoing
clauses (iii)(A), (iii)(B) and (iii)(C). On the 271st day after an Asset Sale or
such earlier date, if any, as the Board of Directors of the Company or of such
Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to
such Asset Sale as set forth in clauses (iii)(A), (iii)(B), (iii)(C) and
(iii)(D) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B), (iii)(C) and (iii)(D) of the next preceding sentence (each,
a "Net Proceeds Offer Amount") shall be applied by the Company or such
Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on
a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45
days following the applicable Net Proceeds Offer Trigger Date, from all Holders
on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided that if at any time any non-cash consideration received by the Company
or any Restricted Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or dissolution shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. The Company or such Restricted Subsidiary, as the case may be,
may defer the Net Proceeds Offer until there is an aggregate unutilized Net
Proceeds Offer Amount equal to or in excess of $10 million resulting from one or
more Asset Sales (at which time, the entire unutilized Net Proceeds Offer
Amount, and not just the amount in excess of $10 million shall be applied as
required pursuant to this paragraph).
Notwithstanding the foregoing, the restriction contained in clause (ii) of
the preceding paragraph shall not apply if more than 49% of the Capital Stock or
more than 49% of the consolidated assets of Standard Wool are sold in a single
transaction in compliance with all of the terms of the Indenture.
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In connection with each Net Proceeds Offer, the Issuer will send, by first
class mail, a notice to each Holder, with a copy to the Trustee, notice of such,
within 25 days following the Net Proceeds Offer Trigger Date, and shall comply
with the procedures set forth in the Indenture. Upon receiving notice of the Net
Proceeds Offer, Holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders will be purchased on a pro rata basis (based on
amounts tendered). A Net Proceeds Offer shall remain open for a period of 20
business days or such longer Period as may be required by law.
Notwithstanding the foregoing, all of the outstanding Capital Stock of the
Issuer shall at all times be owned by the Company free and clear of all Liens
other than the Liens held by the Trustee for the benefit of the Holders of the
Notes. The Company and any such Restricted Subsidiaries will comply with the
requirements of Rule 14e-1 under the Exchange Act and the regulations thereunder
and any other securities laws to the extent such laws and regulations are
applicable in connection with the repurchase of Notes pursuant to a Net Proceeds
Offer.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or the
Issuer; (c) guarantee any Obligation arising under or in respect of the Notes or
the Indenture of the Company or any Restricted Subsidiary; or (d) transfer any
of its property or assets to the Company or any Restricted Subsidiary of the
Company, except, in each case, for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) the Indenture; (3) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired or any of its
subsidiaries; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (6) any encumbrance or
restriction with respect to a Restricted Subsidiary that is not a Restricted
Subsidiary on the date of the Indenture, which encumbrance or restriction is in
existence at the time such person becomes a Restricted Subsidiary or is created
on the date it becomes a Restricted Subsidiary; (7) restrictions on the transfer
of assets subject to any Lien permitted under the Indenture imposed by the
holder of such Lien; (8) any agreement or instrument governing the payment of
dividends or other distributions on or in respect of Capital Stock of any Person
that is acquired; (9) restrictions under the Global Bank Facility; (10) other
Indebtedness permitted to be incurred subsequent to the Issue Date pursuant to
the provisions of the covenant described under "Limitation on Incurrence of
Additional Indebtedness"; PROVIDED that any such restrictions are ordinary and
customary with respect to the type of Indebtedness being incurred (under the
relevant circumstances); (11) restrictions on cash or other deposits or net
worth imposed by the customers under contacts entered into in the ordinary
course of business; or (12) an agreement governing Indebtedness incurred to
refinance the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (4), (5), (9) or (10) above; PROVIDED that the
provisions relating to such encumbrance or restriction contained in any such
Indebtedness are no less favorable to the Company in any material respect as
determined by the Board of Directors of the Company in their reasonable and good
faith judgment than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5).
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company (other than any Preferred Stock outstanding
as of the Issue Date).
LIMITATION ON LIENS. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly create, incur or assume any
Lien (other than Permitted Liens) that secures obligations under any
Indebtedness on any asset or property of the Company or such Restricted
Subsidiary, or any income or profits therefrom, or assign or convey any right to
receive income therefrom, unless the Notes are equally and ratably secured with
the obligations so secured until such time as such obligations are no longer
secured by a Lien.
MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary of the Company to sell, assign,
transfer, lease, convey or otherwise dispose of) all or substantially all of the
Company's assets (determined on a consolidated basis for the Company and the
Company's Restricted Subsidiaries) whether as an entirety or substantially as an
entirety to any Person unless at the time of and after giving effect
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thereto: (i) either (a) the Company or the Issuer shall be the surviving or
continuing corporation or (b) the Person (if other than the Company or the
Issuer) formed by such consolidation or into which the Company or the Issuer is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and of
the Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of every covenant of the Notes,
the Indenture, and the Registration Rights Agreement on the part of the Company
or such Restricted Subsidiary to be performed or observed; (ii) immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(b)(y) above (including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction), the Company or such Surviving Entity, as the case
may be, (1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the "Limitation on Incurrence of Additional
Indebtedness" covenant; (iii) immediately before and immediately after giving
effect to such transaction and the assumption contemplated by clause (i) (b) (y)
above (including, without limitation giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred and be continuing; and (iv) the Company or
the Surviving Entity shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger, sale, assignment, transfer, lease, conveyance or other disposition and,
if a supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with the applicable provisions of the
Indenture and that all conditions precedent in the Indenture relating to such
transaction have been satisfied; PROVIDED, HOWEVER, that the foregoing
restrictions shall not apply to (i) any consolidation or merger of a Restricted
Subsidiary with or into (or sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the properties, assets or
Capital Stock of a Restricted Subsidiary to) the Company, the Issuer or another
Restricted Subsidiary which is a Guarantor, or (ii) a consolidation or merger of
Standard Wool with or into, or sale, assignment, transfer, lease, conveyance or
other disposition of the properties, assets or Capital Stock of Standard Wool to
any Person, PROVIDED that the Company shall, prior to the consummation thereof,
obtain a favorable opinion as to the fairness of such transaction or series of
related transactions to Standard Wool or the Company, as the case may be, from a
financial point of view, from an Independent Financial Advisor and shall provide
such opinion to the Trustee together with an Officer's Certificate setting forth
in reasonable detail the facts and circumstances of such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions (or those relating
to a Change of Control) are applicable.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Issuer or the Company, as the case may
be, in accordance with the foregoing, in which the Issuer or the Company, as the
case may be, is not the continuing corporation, the successor Person formed by
such consolidation or into which the Issuer or the Company, as the case may be,
is merged or to which such conveyance, lease or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer or the Company, as the case may be, under the Indenture and either the
Notes or the Parent Guarantee, as the case may be, with the same effect as if
such surviving entity had been named as such.
For all purposes of the Indenture, the Notes and the Parent Guarantee
(including the provisions of this covenant and the covenants described under
"Limitation on Incurrence of Additional Indebtedness," "Limitation on Liens" and
the definition of "Unrestricted Subsidiaries"), Subsidiaries of any Surviving
Entity will, upon such transaction or series of transactions, become Restricted
Subsidiaries and all Indebtedness, and all Liens on property or assets, of the
Company and the Restricted Subsidiaries immediately prior to such transaction or
series of transactions will be deemed to have been incurred upon such
transaction or series of transactions.
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Notwithstanding the foregoing, all of the outstanding Capital Stock of the
Issuer shall at all times be owned by the Company free and clear of all Liens
(other than the Lien held by the Trustee for the benefit of the Holders of the
Notes).
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each, an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are fair and reasonable to the Company or such Restricted
Subsidiary and are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis from
a Person that is not an Affiliate of the Company or such Restricted Subsidiary.
All Affiliate Transactions (and each series of related Affiliate Transactions
which are similar or part of a common plan) involving aggregate payments or
other property in excess of $2.5 million shall be approved by the Board of
Directors of the Company, such approval to be evidenced by a Board Resolution
stating that such Board of Directors has determined that such transaction
complies with the foregoing provisions. If the Company or any Restricted
Subsidiary of the Company enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate payment or other property in excess of $5 million, the Company or such
Restricted Subsidiary, as the case may be, shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant Restricted
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and shall provide such opinion to the Trustee
together with an Officer's Certificate setting forth in reasonable detail the
facts and circumstances of such transaction or series of related transactions.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Restricted Subsidiaries or exclusively between or
among such Restricted Subsidiaries, provided such transactions are not otherwise
prohibited by the Indenture; (iii) any agreement as in effect as of the Issue
Date (as set forth in a list to be provided to the Initial Purchasers on the
Issue Date) or any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) or any replacement agreement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Issue Date; (iv) Restricted Payments permitted by
the Indenture; and (v) transactions permitted by, and complying with, the
provisions of the covenant described under "Merger, Consolidation and Sale of
Assets."
ADDITIONAL SUBSIDIARY GUARANTEES. The Company will not permit any of its
Restricted Subsidiaries to guarantee or secure through the granting of Liens the
payment of any Indebtedness (other than Indebtedness secured by Permitted Liens)
of the Company or the Issuer, unless such Restricted Subsidiary is the Issuer or
a Guarantor. Any Restricted Subsidiary (other than the Issuer or any existing
Guarantor) may execute and deliver a supplemental indenture (and shall deliver
such legal opinions and other documents as are required by the Indenture)
evidencing its Guarantee of the Notes in order to facilitate a transaction which
would otherwise be prohibited by the foregoing restriction.
REPORTS TO HOLDERS. The Company shall furnish to the Trustee and Holders of
the Notes all annual and quarterly financial information that the Issuer or the
Company is required to file with the Commission under the Exchange Act (or
similar reports in the event that the Issuer or the Company is not at the time
required to file such reports with the Commission). In addition, even if the
Issuer or the Company is entitled under the Exchange Act not to furnish such
information to the Commission or the Holders of the Notes, it will nonetheless
continue to furnish such information to the Commission (to the extent the
Commission is accepting such reports) and Holders of the Notes. The Company will
also comply with the other provisions of TIA (section mark) 314(a). The Issuer
and the Guarantors will also make available to the Trustee, Holders of the Notes
and any prospective purchaser of Notes designated by any Holder of Notes, the
information set forth in Rule 144A(d)(4) under the U.S. Securities Act for so
long as any Transfer Restricted Notes are outstanding.
LIMITATION ON STATUS AS INVESTMENT COMPANY. The Company will not become and
will not permit the Issuer or any Guarantor to conduct its business in a fashion
that would cause the Company, the Issuer or any Guarantor to be required to
register as an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act")), or otherwise
become subject to regulation under the Investment Company Act.
LIMITATION ON LINE OF BUSINESS. The Company and its Subsidiaries will not
engage in the manufacture or marketing of cigarettes, cigars or smokeless
tobacco products for retail consumption.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest or Additional Interest, if any, on any
Notes when the same becomes due and payable and the default continues for a
period of 30 days;
(ii) the failure to pay the principal or premium on any Notes, when
such principal or premium becomes due and payable, at maturity, upon
redemption or otherwise (including the failure to make a payment to
purchase Notes tendered pursuant to a Change of Control Offer or a Net
Proceeds Offer);
(iii) a default in the observance or performance of the covenants
described under "Certain Covenants -- Limitations on Preferred Stock of
Restricted Subsidiaries," " -- Merger, Consolidation and Sale of Assets,"
and " -- Limitation on Line of Business";
(iv) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days after the Company receives written notice specifying the
default (and demanding that such default be remedied) from the Trustee or
the Holders of at least 25% of the outstanding principal amount of the
Notes;
(v) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Issuer, the Company or any Restricted Subsidiary
of the Company, with respect to such Indebtedness, or the acceleration of
the final stated maturity of any such Indebtedness if the aggregate
principal amount of such Indebtedness, together with the principal amount
of any other such Indebtedness in default for failure to pay principal at
final maturity or which has been accelerated, aggregates $10 million or
more at any time;
(vi) one or more judgments in an aggregate amount in excess of $10
million (unless covered by insurance by a reputable insurer as to which the
insurer has acknowledged coverage or as to which the Issuer, the Company or
such Restricted Subsidiary is fully indemnified and the indemnifying party
has acknowledged its obligations in respect of such indemnity) shall have
been rendered against the Issuer, the Company or any of its Restricted
Subsidiaries and such judgments remain undischarged, unpaid or unstayed for
a period of 60 days after such judgment or judgments become final and
non-appealable;
(vii) certain events of bankruptcy affecting the Issuer, the Company
or any of its Significant Subsidiaries;
(viii) any of the Guarantees ceases to be in full force and effect or
any of the Guarantees is declared to be null and void and unenforceable or
any of such Guarantees is found to be invalid or any of the Guarantors
denies its liability under its Guarantee (other than by reason of release
of a Guarantor in accordance with the terms of the Indenture); or
(ix) any of the pledges of capital stock of the Issuer or Standard
Wool ceases to be in full force and effect or any such pledge is declared
to be null and void and unenforceable or any such pledge is found to be
invalid.
If an Event of Default (other than an Event of Default specified in clause
(vii) above with respect to the Issuer or the Company) shall occur and be
continuing, the Trustee or the Holders of at least 25% in principal amount of
outstanding Notes may declare the principal of and accrued interest, premium, if
any, interest and any other monetary obligations on all the Notes to be due and
payable by notice in writing to the Issuer and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same shall become immediately due and payable;
PROVIDED that if prior to the delivery of any such "Notice of Acceleration" with
respect to an Event of Default specified in clause (iv) above, any such payment
default or acceleration relating to such other Indebtedness shall have been
cured or rescinded, as the case may be, or such Indebtedness has been discharged
in a manner consistent with the terms of the Indenture within 30 days of such
default or acceleration, as the case may be, then such Event of Default
specified in clause (iv) shall be deemed cured for all purposes of the
Indenture. If an Event of Default with respect to the Issuer or the Company
specified in clause (vii) above occurs and is continuing, then all unpaid
principal of, and premium, if any, and accrued and unpaid interest on all of the
outstanding Notes shall IPSO FACTO become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal,
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which has become due otherwise than by such declaration of acceleration, has
been paid, (iv) if the Issuer has paid the Trustee its reasonable compensation
and reimbursed the Trustee for its expenses, disbursements and advances and (v)
in the event of the cure or waiver of an Event of Default of the type described
in clause (vii) of the description above of Events of Default, the Trustee shall
have received an officers' certificate and an opinion of counsel that such Event
of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest or Additional
Interest, if any, on any such Note held by a non-consenting Holder.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Issuer is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuer may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Issuer shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (ii) the Issuer's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payments, (iii) the rights, powers, trust, duties and immunities of
the Trustee and the Issuer's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Issuer may, at
its option and at any time, elect to have the obligations of the Issuer released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, reorganization and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable U.S. government obligations,
or a combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be; (ii)
in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than any Default or Event of Default with respect to
the Indenture resulting from the incurrence of Indebtedness, all or a portion of
which will be used to defease the Notes concurrently with such incurrence) or
insofar as Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 181st day after the date of deposit; (v)
such Legal Defeasance or Covenant Defeasance shall not
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result in a breach or violation of, or constitute a default under the Indenture
or any other material agreement or instrument to which the Issuer or any of its
Subsidiaries is a Party or by which the Issuer or any of its Subsidiaries is
bound; (vi) the Issuer shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Issuer with the intent
of preferring the Holders over any other creditors of the Issuer or any of the
Guarantors or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Issuer or any of the Guarantors or others; (vii) the
Issuer shall have delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with; (viii) the Issuer shall have delivered to the Trustee an opinion of
counsel in the United States (subject to customary exceptions) to the effect
that (A) the trust funds will not be subject to any rights of holders of
Indebtedness, including, without limitation, those arising under the Indenture
and (B) after the 181st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally under any applicable U.S.
federal or state law, and that the Trustee has a perfected security interest in
such trust funds for the ratable benefit of the Holders; and (ix) certain other
customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the Issuer
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Issuer directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Issuer has paid all other sums payable under the Indenture by the Issuer;
and (iii) the Issuer has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
MODIFICATION OF THE INDENTURE
From time to time, the Issuer, the Guarantors and the Trustee, without the
consent of the Holders, may amend the Indenture for certain specified purposes,
including, without limitation, (i) curing ambiguities, defects or
inconsistencies and (ii) other changes so long as any such change does not
adversely affect the rights of any of the Holders in any material respect. Other
modifications and amendments of the Indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose Holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of premium, if any, and interest,
including defaulted interest, on any Notes; (iii) reduce the principal of or
change or have the effect of changing the fixed maturity of any Notes, or change
the date on which any Notes may be subject to redemption or repurchase, or
reduce the redemption or repurchase price therefore; (iv) make any Notes payable
in money other than that stated in the Notes; (v) make any change in provisions
of the Indenture protecting the right of each Holder to receive payment of
premium, if any, principal of and interest on such Note on or after the due date
thereof or to bring suit to enforce such payment, or permitting Holders of a
majority in principal amount of Notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of the
Issuer to make and consummate a Change of Control Offer in the event of a Change
of Control or make and consummate a Net Proceeds Offer with respect to any Asset
Sale that has been consummated or modify any of the provisions or definitions
with respect thereto after a Change of Control has occurred or the subject Asset
Sale has been consummated; (vii) modify or change any provision of the Indenture
or the related definitions affecting the ranking of the Notes or any Guarantee
in a manner which adversely affects the Holders or (viii) release any Guarantor
from any of its obligations under its Guarantee or the Indenture otherwise than
in accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and the Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the
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application of the law of another jurisdiction would be required thereby;
PROVIDED that matters relating to the due authorization of the Notes by the
Issuer and the due authorization of each Guarantee by each Guarantor will be
governed by the laws of the state of North Carolina.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Issuer, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below are certain of the defined terms used in the Indenture.
Reference is made to the Indenture, for the full definition of all such terms,
as well as any other terms used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified 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 the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of the Company of
(a) any Capital Stock of any Restricted Subsidiary of the Company, (b) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary or (c) any other property
or assets of the Company or any Restricted Subsidiary of the Company, other than
in the ordinary course of business; provided that Asset Sales shall not include
(i) a transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $5 million,
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "Merger,
Consolidation and Sale of Assets," (iii) any disposition of assets or property
not in the ordinary course of business to the extent such property or assets are
obsolete, worn out or no longer useful in the Company's or any Restricted
Subsidiary's business, (iv) the surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of any kind,
(v) the sale or discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection with the
compromise or collection thereof, (vi) the factoring of accounts receivable
arising in the ordinary course of business pursuant to arrangements customary in
the region, (vii) the grant in the ordinary course of business of any non-
exclusive license of patents, trademarks, registrations therefor and other
similar intellectual property and (viii) any dividend, distribution, investment
or payment made pursuant to the first or second paragraph of the covenant
described under " -- Limitation on Restricted Payments".
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"BOARD OF DIRECTORS" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the secretary, an assistant secretary or director of
such Person to have been duly adopted by the Board of Directors of such Person
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as finance lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"CAPITAL STOCK" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"CASH EQUIVALENTS" means: (i) marketable direct obligations issued by, 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; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poors Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank; (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(iv) above; (vi) in the case of any foreign Restricted Subsidiary, Investments
(a) in direct obligations of the sovereign nation (or any agency thereof) in
which such foreign Restricted Subsidiary is organized or is conducting a
substantial amount of business or in obligations fully and unconditionally
guaranteed by such sovereign nation (or any agency thereof), (b) of the type and
maturity described in clauses (i) through (v) above of foreign obligors, which
Investments or obligors (or the parents of such obligors) have ratings described
in such clauses or equivalent ratings from comparable foreign rating agencies or
(c) of the type and maturity described in clauses (i) through (v) above of
foreign obligors (or the parents of such obligors), which Investments or
obligors (or the parents of such obligors), are not rated as provided in such
clauses or in clause (vi)(b) but which are, in the reasonable judgment of the
Issuer, comparable in investment quality to such Investments and obligors (or
the parents of such obligors); and (vii) investments in money market funds which
invest substantially all their assets in securities of the types described in
clauses (i) through (vi) above.
"CERTIFICATED SECURITIES" means Notes in definitive registered form.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture) (other than
to a Wholly Owned Restricted Subsidiary); (ii) the approval by the holders of
the Capital Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of the Indenture); (iii) the acquisition in one or more transactions,
of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) by (x) any Person or Group (other than Permitted Holders), of any
securities of the Company such that, as a result of such acquisition, such
Person, or Group either (A) beneficially owns (within the meaning of Rule 13d-3
under the Exchange Act), directly or indirectly, at least 30% of the Company's
then outstanding voting securities entitled to vote on a regular basis for the
Board of Directors of the Company, or (B) otherwise has the ability to elect,
directly or indirectly, a majority of the members of the Company's Board of
Directors, including without limitation by the acquisition of proxies for the
election of directors; or (iv) the replacement of a majority of the Board of
Directors of the Company over a two-year period from the directors who
constituted the Board of Directors of the Company at the beginning of such
period, and such replacement shall not have been approved by a vote of at least
a majority of the Board of Directors of the Company then still in office who
either were members of such Board of Directors at the beginning of such period
or whose election as a member of such Board of Directors was previously so
approved.
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"COMMON STOCK" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes of
such Person and its Restricted Subsidiaries accrued in accordance with GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses or taxes attributable to sales or dispositions
outside the ordinary course of business), (B) Consolidated Interest Expense and
(C) Consolidated Non-cash Charges less (x) any non-cash items increasing
Consolidated Net Income for such period and (y) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period, all as determined on a consolidated
basis for such Person and its Restricted Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to the incurrence or repayment of
any Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if such Person or any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to have accrued at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date, (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period, and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, PLUS
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period TIMES
(y) a fraction, the numerator of which is one and the denominator of which is
one MINUS the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense with respect to all outstanding Indebtedness of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation, (a) any amortization of debt
discount and amortization or write-off of deferred financing costs, (b) the net
costs under Interest Swap Obligations, (c) all capitalized interest included in
cost of goods sold (but excluding capitalized interest included in inventory
held by the Person at the end of the period) and (d) the interest portion of any
deferred payment obligation; plus (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP; minus (iii) interest income received
by such Person and its Restricted Subsidiaries during such period as determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP;
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PROVIDED that there shall be excluded therefrom (a) after-tax gains and losses
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains and losses or classified
as exceptional gains and losses to the extent they would be classified as
extraordinary or nonrecurring under GAAP, (c) the net income (or loss) of any
Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a Wholly
Owned Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets and (i) one time non-cash compensation charges, including any
arising from existing stock options resulting from any merger or
recapitalization transaction.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Capital Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups subsequent
to the date of the Indenture in the book value of any asset owned by such Person
or a consolidated Subsidiary of such Person (other than purchase accounting
adjustments made, in connection with any acquisition of any entity that becomes
a consolidated Subsidiary of such Person after the date of the Indenture, to the
book value of the assets of such entity), (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"CONSOLIDATED TANGIBLE NET WORTH" means, with respect to any Person as of
any date, the sum of (i) Consolidated Net Worth, MINUS (ii) the amount of such
Person's intangible assets at such date, including, without limitation, goodwill
(whether representing the excess of cost over book value of assets acquired or
otherwise), capitalized expenses (excluding capitalized interest included in
inventory held by the Person as of that date), patents, trademarks, trade names,
copyrights, franchises, licenses and deferred charges (such as, without
limitation, unamortized costs and costs of research and development), all
determined for such Person on a consolidated basis in accordance with GAAP, PLUS
(iii) translation adjustments as determined under FASB 52.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Issuer or any Restricted Subsidiary of the Issuer against fluctuations in
currency values.
"DEFAULT" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof (except, in each case,
upon the occurrence of a customarily defined change of control), in whole or in
part, on or prior to the final maturity date of the Notes.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
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"FAIR MARKET VALUE" means, with respect to any asset or property or the
rendering of any service, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. Fair market value shall be determined (A) by a
responsible senior officer of the Company in the case of Fair Market Value not
in excess of $10 million, (B) by the Board of Directors of the Company acting
reasonably and in good faith and evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee in the case of Fair Market
Value of greater than $10 million and less than $15 million and (C) by the Board
of Directors of the Company acting reasonably and in good faith and evidenced by
a Board Resolution of the Board of Directors of the Company and an opinion of an
Independent Financial Advisor as to the fairness of such transaction from a
financial point of view delivered to the Trustee in the case of Fair Market
Value of $15 million or greater.
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the Issue Date, including without limitation, those set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"GLOBAL BANK FACILITY" means, collectively, the Credit Agreement, which was
entered into on the Issue Date, among the Issuer and two of its subsidiaries as
borrowers thereunder, Deutsche Bank A.G. as agent and Bankers Trust Company as
co-agent and the lenders thereunder (including any guarantee agreements and
related security documents), in each case as such agreements or documents may be
amended (including any amendment, restatement or restructuring thereof),
supplemented or otherwise modified or replaced from time to time, including any
agreement extending the maturity of, refunding, refinancing, increasing the
amount available under or replacing such agreement or document or any successor
or replacement agreement or document and whether by the same or any other agent,
lender or group of lenders.
"GUARANTORS" means the Company, Standard Wool and any Restricted Subsidiary
of the Company executing a supplemental indenture evidencing its guarantee of
the Notes subsequent to the Issue Date; PROVIDED that any Person constituting a
Guarantor as described above shall cease to constitute a Guarantor when its
respective Guarantee is released in accordance with the terms of the Indenture.
"HOLDER" means a holder of Notes.
"INDEBTEDNESS" means (without duplication) with respect to any Person, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business), (v) all Obligations for the
reimbursement of any obligor on any letter of credit, bankers' acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations in
respect of Indebtedness of any other Person of the type referred to in clauses
(i) through (v) above and clause (viii) below, (vii) all Obligations of any
other Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured, (viii) all
Obligations under currency agreements and interest swap agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed redemption price or repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized firm which,
in the judgment of the Board of Directors of the Company, is independent and
qualified to perform the task for which it is to be engaged.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other
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Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"INVENTORY" means, as of any date, all inventory of the Company and any of
its Restricted Subsidiaries, wherever located, valued in accordance with GAAP
and shown on the balance sheet of the Company for the quarterly period most
recently ended prior to such date for which financial statements of the Company
are available.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan, advance or other extension of credit (including, without limitation, a
guarantee (other than any guarantee which is made in compliance with the
provisions of "Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness" above) or capital contribution (by means of any transfer of cash
or other property (valued at the Fair Market Value thereof as of the date of
transfer)) to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person, and all other items that would be classified as
investments on a balance sheet of such Person prepared in accordance with GAAP.
Notwithstanding the foregoing, "Investment" shall exclude extensions of trade
credit by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For the purposes of the "Limitation
on Restricted Payments" covenant, (i) "Investment" shall include and be valued
at the Fair Market Value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
and shall exclude the Fair Market Value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment PLUS the cost of all additional Investments by
the Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, but reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment, provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, at least 50% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means the date of original issuance of the Notes.
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
the Company or any of its Restricted Subsidiaries from such Asset Sale net of
(a) out-of-pocket expenses and fees relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees and sales
commissions and relocation expenses) and transmission costs (including foreign
exchange costs) in transferring money from the disposing entity) to an entity
making a prepayment required under the Indenture, (b) taxes paid or payable
after taking into account any reduction in consolidated tax liability due to
available tax credits or deductions and any tax sharing arrangements, (c)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (d) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such Asset Sale and retained by
the Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PERMITTED ADVANCES ON PURCHASES OF TOBACCO AND WOOL" means loans,
advances, extensions of credit and guarantees made by the Company or any or its
Restricted Subsidiaries to growers and other suppliers of tobacco and wool
(including Affiliates) and tobacco growers' cooperatives, whether short-term or
long-term, in the ordinary course of business to finance
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the growing or processing of tobacco or wool only to the extent that the
aggregate principal amount of such loans, advances, extensions of credit and
guarantees outstanding at any time to any Person and such Person's Affiliates
does not exceed 20% (40% with respect to Meridional) of the Consolidated
Tangible Net Worth of the Company for the most recently ended fiscal quarter for
which internal financial statements are available.
"PERMITTED HOLDERS" means Mr. Ery W. Kehaya, his immediate family
(including grandchildren) and their spouses, as well as trusts or similar
entities for the benefit of any of the foregoing.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and the Guarantees;
(ii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under the Global Bank Facility (and the
incurrence by Restricted Subsidiaries of the Company of guarantees thereof)
in an aggregate principal amount at any time outstanding (with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries
thereunder) not to exceed $200 million, less the aggregate amount of all
Net Proceeds of Asset Sales applied to permanently reduce the outstanding
amount of such Indebtedness (and to correspondingly reduce the commitments,
if any, with respect thereto) pursuant to the covenant described above
under the caption " -- Certain Covenants -- Limitation on Asset Sales";
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in an aggregate principal amount at any time
outstanding (excluding the amount then outstanding under the Company's
outstanding 7 1/4% Convertible Subordinated Debentures due 2007) not to
exceed the sum of (A) 85% of Inventory, PLUS (B) 85% of Receivables, PLUS
(C) 85% of outstanding Permitted Advances on Purchases of Tobacco and Wool,
less the sum of any amounts then outstanding under clauses (i), (ii) and
(iii) of this definition;
(v) Interest Swap Obligations of the Company and its Restricted
Subsidiaries, provided that such Interest Swap Obligations are entered into
to protect the Issuer and its Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest Swap Obligation
does not exceed the principal amount of the Indebtedness to which such
interest Swap Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that (x) in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder and (y) in the case of Currency Agreements
which do not relate to Indebtedness, such Currency Agreements are entered
into for the purpose of hedging currency fluctuation risks associated with
the operation of the businesses of the Company and its Restricted
Subsidiaries are not entered into for speculative purposes;
(vii) Indebtedness of a Restricted Subsidiary of the Company to the
Issuer, the Company or a Guarantor for so long as such Indebtedness is held
by the Issuer, the Company or a Guarantor, in each case, subject to no Lien
held by a Person other than the Issuer, the Company, a Guarantor, the
lenders under the Global Bank Facility or the Holders of the Notes;
provided that if as of any date any Person other than the Issuer, the
Company or a Guarantor owns or holds any such Indebtedness or any Person
other than the Issuer, the Company, a Guarantor, the lenders under the
Global Bank Facility or the Holders of the Notes holds a Lien in respect of
such Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to the Issuer or a Guarantor for so
long as such Indebtedness is held by the Issuer or a Guarantor, in each
case subject to no Lien; PROVIDED that (a) any Indebtedness of the Company
to the Issuer or a Guarantor is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under the Indenture and the
Parent Guarantee and (b) if as of any date any Person other than the Issuer
or a Guarantor owns or holds any such Indebtedness or any Person (other
than the lenders under the Global Bank Facility) holds a Lien in respect of
such Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the Company;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers'
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compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;
(x) Indebtedness in respect of Capitalized Lease Obligations and/or
Purchase Money Indebtedness in an aggregate principal amount for all such
Indebtedness incurred pursuant to this clause (x) not to exceed $15 million
at any one time outstanding;
(xi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in
each case incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Company, other than
guarantees of indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition; PROVIDED that the maximum assumable
liability in respect of all such indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(xii) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(xiii) Refinancing Indebtedness;
(xiv) guarantees by the Company and its Restricted Subsidiaries of
each other's Indebtedness; PROVIDED that such Indebtedness is permitted to
be incurred under the Indenture and such guarantee is permitted to be
incurred under the covenant described under "Certain
Covenants -- Additional Subsidiary Guarantees";
(xv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15 million at
any one time outstanding; and
(xvi) Indebtedness incurred in connection with clause (xiii) of the
definition of "Permitted Investments."
"PERMITTED INVESTMENTS" means without duplication, each of the following:
(i) Investments existing on the Issue Date; (ii) Investments by the Company or
any Restricted Subsidiary of the Company in the Company or in any Person that is
or will become (as soon as practicable) after such Investment a Wholly Owned
Restricted Subsidiary of the Company or that will merge or consolidate into the
Company or a Wholly Owned Restricted Subsidiary of the Company; (iii)
Investments in the Issuer by the Company or any Restricted Subsidiary of the
Company; PROVIDED that any Indebtedness evidencing such Investment is unsecured
and subordinated, pursuant to a written agreement, to the Issuer's obligations
under the Notes and the Indenture; (iv) Investments in cash and Cash
Equivalents; (v) loans and advances to employees and officers of the Company and
its Restricted Subsidiaries in the ordinary course of business not in excess of
$2 million at any one time outstanding; (vi) Currency Agreements and Interest
Swap Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with the
Indenture; (vii) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (viii)
Investments made by the Company or its Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
the "Limitation on Asset Sales" covenant; (ix) Investments made in the ordinary
course of business in export notes, trade credit assignments, bankers'
acceptances, guarantees and instruments of a similar nature issued in connection
with the financing of international trading transactions by (a) any commercial
bank or trust company (or any Affiliate thereof) organized under the laws of the
United States of America, any state thereof, or the District of Columbia having
capital and surplus in excess of $100,000,000 or (b) any international bank of
recognized standing ranking among the world's 300 largest commercial banks in
terms of total assets; (x) any Permitted Advances on Purchases of Tobacco and
Wool; (xi) Investments made in any Person, not to exceed 10% of Consolidated
Tangible Net Worth for the most recently ended fiscal quarter for which internal
financial statements are available, engaged in the business of distributing
and/or processing of leaf tobacco or wool or a business reasonably related
thereto (excluding the manufacture or marketing of cigarettes, cigars or
smokeless tobacco products intended for retail consumption) in which the Company
(either directly or through one or more Restricted Subsidiaries) owns at least
10% of the equity interests of such Person and the Company (or a Restricted
Subsidiary, as applicable), and has the contractual right to purchase or process
tobacco or wool from such Person; (xii) an amount not to exceed $25 million for
the acquisition of the capital stock of a non Wholly Owned Restricted Subsidiary
of the Company engaged in the business of distributing and/or processing of leaf
tobacco; and (xiii) the acquisition, directly or indirectly, of at least 74.9%
of Meridional, for an aggregate purchase price of no more than $30 million.
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"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate proceedings and
as to which the Company or its Restricted Subsidiaries shall have set aside on
its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance, pensions and
other types of social security;
(iv) judgment Liens not giving rise to an Event of Default so long as such
Lien is adequately bonded;
(v) easements, rights-of-way, zoning restrictions and other similar charges
or encumbrances in respect of real property not interfering in any material
respect with the ordinary conduct of the business of the Company and its
Restricted Subsidiaries, taken as a whole;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation permitted under the definition of "Permitted Indebtedness", provided
that such Liens do not extend to any property or assets which is not leased
property subject to such Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of the Company or
any Restricted Subsidiary of the Company acquired in the ordinary course of
business; provided, however, that (A) the related purchase money Indebtedness is
permitted under the definition of "Permitted Indebtedness" and shall not exceed
the cost of such property or assets and shall not be secured by any property or
assets of the Company or any Restricted Subsidiary of the Company other than the
property and assets so acquired and additions and accessions thereto and
proceeds therefrom and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens given to secure Permitted Indebtedness described under clauses
(ii), (iii) or (iv) of the definition of "Permitted Indebtedness";
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits, including operating lease deposits made to
secure obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Subsidiaries, including rights of
offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance with the
"Limitation on Incurrence of Additional Indebtedness" covenant; provided that
(A) such Liens secured such Acquired Indebtedness at the time of and prior to
the incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company or
a Restricted Subsidiary of the Company and (B) such Liens do not extend to or
cover any property or assets of the Company or of any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of
the Company or a Restricted Subsidiary of the Company and are no more favorable
to the lienholders than those securing the Acquired Indebtedness prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary of the Company;
(xiv) Leases or subleases granted to others not interfering in any material
respect with the business of the Company or any Restricted Subsidiary;
(xv) Any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating, other than any such
interest or title resulting from or arising out of a default by the Company or
any Restricted Subsidiary of its obligations under such lease;
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(xvi) Liens arising from filing UCC financing statements for precautionary
purposes in connection with true leases of personal property that are otherwise
permitted under the Indenture and under which the Company or any Restricted
Subsidiary is lessee; and
(xvii) Liens in favor of the Trustee and any substantially equivalent Lien
granted to any trustee or similar institution under any indenture governing
Indebtedness permitted to be Incurred or outstanding under the Indenture.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Issuer or its
Restricted Subsidiaries incurred for the purpose of financing all or any part of
the purchase price or the cost of installation, construction or improvement of
any property.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"RECEIVABLES" means, as of any date, all accounts receivable of the Company
and any of its Restricted Subsidiaries arising out of the sale of inventory in
the ordinary course of business, valued in accordance with GAAP and shown on the
balance sheet of the Company for the quarterly period most recently ended prior
to such date for which financial statements of the Company are available.
"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant (other than
pursuant to clause (iii), (iv), (v), (vi), (vii), (viii), (ix), (xiv) or (xv) of
the definition of Permitted Indebtedness), in each case that does not (1) result
in an increase in the aggregate principal amount of Indebtedness of such Person
as of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) in any case where Indebtedness that
is being Refinanced was long-term Indebtedness, create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B), in the case of
Indebtedness, a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
Refinanced is Indebtedness of the Issuer, then such Refinancing Indebtedness
shall be Indebtedness solely of the Issuer and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary and shall
include, on the Issue Date, every Subsidiary of the Company, including in the
case of Restricted Subsidiaries of the Company, the Issuer.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"SIGNIFICANT SUBSIDIARY" shall have the meaning set forth in Rule 1.02 (w)
of Regulation S-X under the Securities Act.
"SUBSIDIARY" of any Person means (i) any corporation of which the
outstanding Capital Stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such Person or (ii) any other Person of
which at least a majority of the voting interest under ordinary circumstances is
at the time, directly or indirectly, owned by such Person.
"TOTAL CAPITALIZATION" means the sum of (i) the total consolidated
indebtedness of the Company and (ii) the Company's consolidated shareholders'
equity (excluding any goodwill reserve).
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"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with the "Limitation on Restricted
Payments" covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the lender
has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Issuer is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant, (y) such
designation is at that time permitted under "Limitation on Restricted Payments"
above and (z) immediately before and immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an officers' certificate certifying that
such designation complied with the foregoing provisions.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities (other
than in the case of a foreign Restricted Subsidiary, directors' qualifying
shares or an immaterial amount of shares required to be owned by other Persons
pursuant to applicable law) are owned by such Person or any Wholly Owned
Restricted Subsidiary of such Person.
INITIAL NOTES REGISTRATION RIGHTS
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Issuer contained in the Registration Rights Agreement, dated
August 1, 1997 (the "Registration Rights Agreement") between the Issuer and BT
Securities Corporation and Wheat First Securities, Inc. (the "Initial
Purchasers"), with respect to the sale of the Initial Notes. Upon the Exchange
Offer Registration Statement being declared effective, the Issuer and the
Guarantors will offer the Exchange Notes in exchange for surrender of the Notes.
The Issuer and the Guarantors will keep the Exchange Offer open for not less
than 30 days (or longer if required by applicable law) after the date of notice
of the Exchange Offer is mailed to the Holders of the Initial Notes. For each of
the Initial Notes surrendered to the Issuer pursuant to the Exchange Offer, the
Holder who surrendered such Initial Notes will receive an Exchange Note having a
principal amount equal to that of the surrendered Initial Notes. Interest on
each Exchange Note will accrue (A) from the later of (i) the last interest
payment date on which interest was paid on the Initial Note surrendered in
exchange therefor or (ii) if the Initial Note is surrendered for exchange on a
date in a period which includes the record date for an interest payment date to
occur on or after the date of such exchange and as to which interest will be
paid, the date of such interest payment date or (B) if no interest has been paid
on the Initial Notes, from the Issue Date.
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Exchange Notes will be freely
transferable by holders thereof (other than affiliates of any of the Issuer or
the Guarantors) after the Exchange Offer without further registration under the
U.S. Securities Act; PROVIDED, HOWEVER, that each Holder that wishes to exchange
its Initial Notes for Exchange Notes will be required to represent (i) that any
Exchange Notes to be received by it will be acquired in the ordinary course of
its business, (ii) that at the time of the commencement of the Exchange Offer it
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the U.S. Securities Act) of the Exchange
Notes in violation of the U.S. Securities Act, (iii) that it is not an
"affiliate" (as defined in Rule 405 promulgated under the U.S. Securities Act)
of any of the Issuer or the Guarantors, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of Exchange Notes and (v) if such Holder is a broker-dealer (a
"Participating Broker-Dealer") that will receive Exchange Notes for its own
account in exchange for Initial
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Notes that were acquired as a result of market-making or other trading
activities, that it will deliver a prospectus in connection with any resale of
such Exchange Notes. Each of the Issuer and the Guarantors has agreed to make
available, during the period required by the U.S. Securities Act, a prospectus
meeting the requirements of the U.S. Securities Act for use by Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of Exchange Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Issuer and the Guarantors
are not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not
consummated within 165 days of the Issue Date, (iii) in certain circumstances,
certain holders of unregistered Exchange Notes so request or (iv) in the case of
any Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of any of the Issuer or the Guarantors within the
meaning of the U.S. Securities Act), then in each case, each of the Issuer and
the Guarantors will (x) promptly deliver to the Holders and the Trustee written
notice thereof and (y) at their sole expense, (a) as promptly as practicable,
file a shelf registration statement covering resales of the Initial Notes (the
"Shelf Registration Statement"), (b) use their best efforts to cause the Shelf
Registration Statement to be declared effective under the U.S. Securities Act
and (c) use their best efforts to keep effective the Shelf Registration
Statement until the earlier of two years after its effective date or such time
as all of the applicable Initial Notes have been sold thereunder; PROVIDED, that
the Company may suspend the effectiveness of the Shelf Registration Statement
for a period (a "Black-out Period") not to exceed 60 days in any calendar year
if (i) an event occurs and is continuing as a result of which the Shelf
Registration Statement would, in the Issuer's good faith judgment, contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading and (ii) (a) the Company determines in its
good faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (b) the disclosure otherwise relates to a pending material business
transaction which has not yet been publicly disclosed. Each of the Issuer and
the Guarantors will, in the event that a Shelf Registration Statement is filed
and is not then subject to a Black-out Period, provide to each Holder copies of
the prospectus that is a part of the Shelf Registration Statement, notify each
such Holder when the Shelf Registration Statement for the Initial Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Initial Notes. A Holder that sells Initial Notes
pursuant to the Shelf Registration Statement will be required to be named as a
selling security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the U.S. Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such a
Holder (including certain indemnification rights and obligations).
If the Issuer and the Guarantors fail to comply with the above provision or
if the Exchange Offer Registration Statement or the Shelf Registration Statement
fails to become or remain effective as required, then, as liquidated damages,
additional interest (the "Additional Interest") shall become payable in respect
of the Initial Notes as follows:
(i) if (A) neither the Exchange Offer Registration Statement nor
Shelf Registration Statement is filed with the Commission on or prior to
the Filing Date or (B) notwithstanding that the Issuer and the Guarantors
have consummated or will consummate an Exchange Offer, the Issuer and the
Guarantors are required to file a Shelf Registration Statement and such
Shelf Registration Statement is not filed on or prior to the date required
by the Registration Rights Agreement, then commencing on the day after
either such required filing date, Additional Interest shall accrue on the
principal amount of the Initial Notes at a rate of 0.50% per annum for the
first 90 days immediately following each such filing date, such Additional
Interest rate increasing by an additional 0.50% per annum at the beginning
of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor a
Shelf Registration Statement is declared effective by the Commission on or
prior to the date required by the Registration Rights Agreement or (B)
notwithstanding that the Issuer and the Guarantors have consummated or will
consummate an Exchange Offer, the Issuer and the Guarantors are required to
file a Shelf Registration Statement and such Shelf Registration Statement
is not declared effective by the Commission on or prior to the 60th day
following the date such Shelf Registration statement was filed, then,
commencing on the day after the required effectiveness date, Additional
Interest shall accrue on the principal amount of the Initial Notes at a
rate of 0.50% per annum for the first 90 days immediately following such
date, such Additional Interest rate increasing by an additional 0.50% per
annum at the beginning of each subsequent 90-day period; or
(iii) if (A) the Issuer and the Guarantors have not exchanged Exchange
Notes for all Initial Notes validly tendered in accordance with the terms
of the Exchange Offer on or prior to the 45th day after the date on which
the Exchange
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Offer Registration Statement was declared effective or (B) if applicable,
the Shelf Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of its effective date (other than after such time as all
Notes have been disposed of thereunder), then Additional Interest shall
accrue on the principal amount of the Initial Notes at a rate of 0.50% per
annum for the first 90 days commencing on (x) the 46th day after such
effective date, in the case of (A) above, or (y) the day such Shelf
Registration Statement ceases to be effective in the case of (B) above,
such Additional Interest rate increasing by an additional 0.50% per annum
at the beginning of each subsequent 90-day period;
PROVIDED, HOWEVER, that the Additional Interest rate on the Initial Notes may
not exceed in the aggregate 2.0% per annum; PROVIDED, FURTHER, HOWEVER, that (1)
upon the filing of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Exchange Offer Registration Statement or a Shelf
Registration Statement (in the case of clause (ii) above), or (3) upon the
exchange of Exchange Notes for all Initial Notes tendered (in the case of clause
(iii) (A) above), or upon the effectiveness of the Shelf Registration Statement
which had ceased to remain effective (in the case of clause (iii) (B) above),
Additional Interest on the Initial Notes as a result of such clause (or the
relevant subclause thereof) as the case may be, shall cease to accrue.
Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) above will be payable in cash on February 1 and August 1 of each year to
the Holders of record on the preceding January 15 or July 15, respectively.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is available upon request to the Company.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Exchange Notes initially
will be represented by one or more permanent global certificates in definitive,
fully registered form (each a "Global Note"). Upon issuance, each Global Note
will be deposited with, or on behalf of, The Depository Trust Company, New York,
New York ("DTC") and registered in the name of a nominee of DTC.
If a holder tendering Initial Notes so requests, such holder's Exchange
Notes will be issued as described below under "Certificated Securities" in
registered form without coupons (each a "Certificated Security").
GLOBAL NOTES. The Company expects that pursuant to procedures established
by DTC (i) upon the issuance of a Global Note, DTC or its custodian will credit,
on its internal system, the principal amount of Exchange Notes of the individual
beneficial interests represented by such Global Note to the respective accounts
of persons who have accounts with such depository and (ii) ownership of
beneficial interests in the Global Note will be shown on, and the transfer of
such ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of Participants (as defined herein)) and the
records of Participants (with respect to interests of persons other than
Participants). Ownership of beneficial interests in the Global Note will be
limited to persons who have accounts with DTC ("Participants") or persons who
hold interests through Participants. QIBs may hold their interests in the Global
Note directly through DTC, if they are participants in such system, or
indirectly through organizations which are Participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture. No beneficial owner of an interest in the
Global Note will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the Indenture with
respect to the Notes.
Payments of the principal of, premium (if any), and interest (including
Additional Interest) on any Exchange Note represented by a Global Note will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest (including Additional Interest) on any
Exchange Note represented by a Global Note, will credit Participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the Global Note as shown on the records of DTC or its
nominee. The Company also expects that payments by Participants to owners of
beneficial interests in the Global Note held through such Participants will be
governed by standing instructions and customary
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practice, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Note are credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Note
for Certificated Securities, which it will distribute to its Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations. Neither the Issuer nor the Trustee shall be liable
for any delay by DTC or any participant or indirect participant in identifying
the beneficial owners of the related Exchange Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
DTC for all purposes (including with respect to registration and delivery, and
the respective principal amounts, of the Exchange Notes to be issued).
CERTIFICATED SECURITIES. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The Issuer believes, based upon the opinion of Wyrick Robbins Yates &
Ponton LLP ("Counsel"), that the following summary fairly describes the material
United States federal income tax consequences expected to apply to the exchange
of Initial Notes for Exchange Notes and the ownership and disposition of
Exchange Notes under currently applicable federal income tax law. The following
summary of the material anticipated federal income tax consequences of the
issuance of Exchange Notes and the Exchange Offer is based upon the provisions
of the Internal Revenue Code of 1986, as amended, the final, temporary and
proposed regulations promulgated thereunder, and administrative rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. The following summary is
not binding on the Internal Revenue Service ("IRS") and there can be no
assurance that the IRS will take a similar view with respect to the tax
consequences described below. No ruling has been or will be requested by the
Issuer from the IRS on any tax matters relating to the Exchange Notes or the
Exchange Offer. This discussion is for general information only and does not
purport to address all of the possible federal income tax consequences or any
state, local or foreign tax consequences of the acquisition, ownership and
disposition of the Initial Notes, the Exchange Notes or the Exchange Offer. It
is limited to investors who will hold the Initial Notes and the Exchange Notes
as capital assets and does not address the federal income tax consequences that
may be relevant to particular investors in light of their unique circumstances
or to certain types of investors (such as dealers in securities, insurance
companies, financial institutions, foreign corporations, partnerships, trusts,
nonresident individuals and tax-exempt entities) who may be subject to special
treatment under federal income tax laws. PERSONS CONSIDERING THE PURCHASE,
OWNERSHIP OR DISPOSITION OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR INTERNATIONAL TAXING JURISDICTION.
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INDEBTEDNESS
The Initial Notes and the Exchange Notes should be treated as indebtedness
of the Issuer. In the unlikely event the Initial Notes or the Exchange Notes
were treated as equity, the amount treated as a distribution on any such Initial
Note or Exchange Note would first be taxable to the Holder as dividend income to
the extent of the Issuer's current and accumulated earnings and profits, and
would next be treated as a return of capital to the extent of the Holder's tax
basis in the Initial Notes or Exchange Notes, with any remaining amount treated
as a gain from the sale of an Initial Note or an Exchange Note. In addition, in
the event of equity treatment, amounts received in retirement of an Initial Note
or an Exchange Note might in certain circumstances be treated as a dividend, and
the Issuer could not deduct amounts paid as interest on such Initial Notes or
Exchange Notes. The remainder of this discussion assumes that the Initial Notes
and the Exchange Notes will constitute indebtedness.
EXCHANGE OFFER
The exchange of the Initial Notes for Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" because the Exchange Notes
should not be considered to differ materially in kind or extent from the Initial
Notes. Rather, the Exchange Notes received by a Holder of the Initial Notes
should be treated as a continuation of the Initial Notes in the hands of such
Holder. Accordingly, Counsel has given to the Issuer its opinion that there
should be no federal income tax consequences to Holders exchanging the Initial
Notes for the Exchange Notes pursuant to the Exchange Offer. The holding period
of Exchange Notes in the hands of a Holder should include the holding period of
the Initial Notes exchanged for such Exchange Notes.
INTEREST
A Holder of an Initial Note or an Exchange Note will be required to report
stated interest on the Initial Note and the Exchange Note as interest income in
accordance with the Holder's method of accounting for tax purposes. Because the
Initial Notes were issued at par there is no original issue discount pursuant to
the de minimis exception to the "original issue discount" rules.
TAX BASIS IN INITIAL NOTES AND EXCHANGE NOTES
A Holder's tax basis in an Initial Note will generally be the Holder's
purchase price for the Initial Note. If a Holder of an Initial Note exchanges
the Initial Note for an Exchange Note pursuant to the Exchange Offer, the tax
basis of the Exchange Note immediately after such exchange should equal the
Holder's tax basis in the Initial Note immediately prior to the exchange.
DISPOSITION OF INITIAL NOTES OR EXCHANGE NOTES
The sale, exchange, redemption or other disposition of an Initial Note or
an Exchange Note, except in the case of an exchange pursuant to the Exchange
Offer (see the above discussion), generally will be a taxable event. A Holder
generally will recognize gain or loss equal to the difference between (i) the
amount of cash plus the fair market value of any property received upon such
sale, exchange, redemption or other taxable disposition of the Initial Note or
the Exchange Note (except to the extent attributable to accrued interest) and
(ii) the Holder's adjusted tax basis in such debt instrument. Such gain or loss
will be capital gain or loss, and will be long term if the Initial Notes or the
Exchange Notes have been held for more than one year at the time of the sale or
other disposition.
PURCHASERS OF INITIAL NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquired Initial Notes other than at par, including those
provisions of the Internal Revenue Code relating to the treatment of "market
discount" and "amortizable bond premium." Any such purchaser should consult its
tax advisor as to the consequences to it of the acquisition, ownership and
disposition of Initial Notes.
BACKUP WITHHOLDING
Unless a Holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Issuer and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Initial Notes and
the Exchange Notes, and (2) proceeds of sale of the Initial Notes and the
Exchange Notes, must be withheld and remitted to the United States Treasury.
Therefore, each Holder should complete and sign the Substitute Form W-9 included
with the Letter of Transmittal so as to provide the information and
certification necessary to avoid backup withholding. However, certain Holders
(including, among others, certain foreign individuals) are not subject to these
backup withholding and reporting requirements. For a foreign individual Holder
to qualify as an exempt foreign recipient, that Holder must submit a statement,
signed under penalties of perjury, attesting to that individual's
75
<PAGE>
exempt foreign status. Such statements can be obtained from the Issuer. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if the Initial Notes are held in more than one name), contact the
Issuer's Secretary, 2201 Miller Road, Wilson, North Carolina, or telephone
number (919) 291-5507.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission (the "Staff") set
forth in no-action letters issued to third parties, the Issuer believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Initial
Notes may be offered for resale, resold and otherwise transferred by Holders
thereof (other than any Holder which is (i) an "affiliate" of the Issuer within
the meaning of Rule 405 under the Securities Act, (ii) a broker-dealer who
acquired Notes directly from the Issuer, or (iii) broker-dealers who acquired
Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such Holders' business, and such Holders are not engaged in, and do
not intend to engage in, and have no arrangement or understanding with any
person to participate in, a distribution of such Exchange Notes; provided that
broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the
Exchange Offer will be subject to a prospectus delivery requirement with respect
to resales of such Exchange Notes. To date, the Staff has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Initial Notes to the Initial Purchaser)
with the Prospectus contained in the Exchange Offer Registration Statement.
Pursuant to the Registration Rights Agreement, the Issuer has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Issuer has agreed that, for a period of 180
days after the Expiration Date, it will make this Prospectus, and any amendment
or supplement to this Prospectus, available to any broker-dealer that requests
such documents.
Each Holder of the Initial Notes who wishes to exchange its Initial Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Issuer as set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer". In addition, each Holder who is a broker-dealer
and who receives Exchange Notes for its own account in exchange for Initial
Notes that were acquired by it as a result of market-making activities or other
trading activities, will be required to acknowledge that it will deliver a
prospectus in connection with any resale by it of such Exchange Notes.
The Issuer will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
a prospectus, and by delivering a prospectus a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Issuer has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Initial Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
LEGAL MATTERS
Certain legal matters regarding the Exchange Notes will be passed upon for
the Company by Wyrick Robbins Yates & Ponton LLP, Raleigh, North Carolina.
76
<PAGE>
EXPERTS
The Financial Statements of Standard Commercial Corporation, Standard
Commercial Tobacco Co., Inc. and Standard Wool, Inc. as of March 31, 1997 and
1996 and for each of the three years in the period ended March 31, 1997 included
in this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein and in the Registration
Statement, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed that, so long as any Notes remain outstanding, it
will file with the Commission and distribute to holders of the Initial Notes or
the Exchange Notes, as applicable, copies of the financial information that
would have been contained in such annual reports and quarterly reports,
including management's discussion and analysis of financial condition and
results of operations, that would have been required to be filed with the
Commission pursuant to the Exchange Act. See "Description of the
Notes -- Certain Covenants -- Reports to Holders".
The Issuer has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act with respect to the
Exchange Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. Items of information
omitted from this Prospectus but contained in the Registration Statement can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Such reports, proxy
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, Inc. at 20 Broad Street, New York,
New York 10005.
The Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of the Commission's web-site is
http:\\www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Parent Guarantor with the Commission
are hereby incorporated by reference in this Prospectus: the Annual Report on
Form 10-K for the year ended March 31, 1997; definitive proxy solicitation
materials dated June 25, 1997; Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997; and Current Reports on Form 8-K filed July 10 and August 4,
1997.
All reports and other documents subsequently filed by the Company or the
Guarantors with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the termination
of this offering shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing of such reports and documents. Any
statement contained or incorporated or deemed to be incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated herein by
reference into such documents). Requests for such documents should be submitted
in writing to the Company's Corporate Secretary at its principal executive
offices at 2201 Miller Road, Wilson, North Carolina 27893 or by telephone at
919-291-5507.
77
<PAGE>
STANDARD COMMERCIAL CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STANDARD COMMERCIAL CORPORATION AND SUBSIDIARIES (the "Company")
Report of Independent Auditors....................................................................................... F-2
Consolidated Balance Sheets as of June 30, 1997 (unaudited), and March 31, 1997 and 1996............................. F-3
Consolidated Statements of Income and Retained Earnings
for the three months ended June 30, 1997 and 1996 (unaudited), and for the years ended March 31, 1997, 1996 and
1995.............................................................................................................. F-4
Consolidated Statements of Cash Flows for the three months ended June 30, 1997 and 1996 (unaudited), and for the
years ended March 31, 1997, 1996 and 1995......................................................................... F-5
Notes to Consolidated Financial Statements........................................................................... F-6
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES (the "Issuer")
Report of Independent Auditors....................................................................................... F-39
Consolidated Balance Sheets as of June 30, 1997 (unaudited), and March 31, 1997 and 1996............................. F-40
Consolidated Statements of Income and Retained Earnings
for the three months ended June 30, 1997 and 1996 (unaudited), and for the years ended March 31, 1997, 1996 and
1995.............................................................................................................. F-41
Consolidated Statements of Cash Flows for the three months ended June 30, 1997 and 1996 (unaudited), and for the
years ended March 31, 1997, 1996 and 1995......................................................................... F-42
Notes to Consolidated Financial Statements........................................................................... F-43
STANDARD COMMERCIAL CORPORATION (the "Parent Guarantor")
Report of Independent Auditors....................................................................................... F-50
Condensed Balance Sheets as of June 30, 1997 (unaudited), and March 31, 1997 and 1996................................ F-51
Condensed Statements of Income and Retained Earnings
for the three months ended June 30, 1997 and 1996 (unaudited), and for the years ended March 31, 1997, 1996 and
1995.............................................................................................................. F-52
Condensed Statements of Cash Flows for the three months ended June 30, 1997 and 1996 (unaudited), and for the years
ended March 31, 1997, 1996 and 1995............................................................................... F-53
STANDARD WOOL, INC. (the "Subsidiary Guarantor")
Report of Independent Auditors....................................................................................... F-54
Balance Sheets as of June 30, 1997 (unaudited), and March 31, 1997 and 1996.......................................... F-55
Statements of Income and Retained Earnings
for the three months ended June 30, 1997 and 1996 (unaudited), and for the years ended March 31, 1997, 1996 and
1995.............................................................................................................. F-56
Statements of Cash Flows for the three months ended June 30, 1997 and 1996 (unaudited), and for the years ended
March 31, 1997, 1996 and 1995..................................................................................... F-57
Notes to Financial Statements........................................................................................ F-58
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders of
Standard Commercial Corporation
We consent to the use in this Registration Statement of Standard Commercial
Tobacco Company, Inc. on Form S-4 of our reports dated June 18, 1997 on the
consolidated financial statements of Standard Commercial Corporation and on
the financial statement schedule of Standard Commercial Corporation, and to
the incorporation by reference in this Registration Statement on Form S-4 of
our reports dated June 18, 1997 incorporated by reference and appearing
in the Annual Report on Form 10-K of Standard Commercial Corporation for the
year ended March 31, 1997.
We also consent to the use of our reports dated June 18, 1997, on the
consolidated financial statements of Standard Commercial Tobacco Co., Inc.
and subsidiaries and on the financial statements of Standard Wool, Inc.,
both of which appear in the Prospectus which is a part of this Registration
Statement.
We also consent to the reference to us under the headings "Summary Historical
and Pro Forma Financial Data," "Selected Historical Consolidated Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Raleigh, North Carolina
September 15, 1997
F-2
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
----------- --------------------
1997 1997 1996
----------- -------- --------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Cash..................................................................................... $ 40,037 $ 41,117 $ 78,688
Receivables (Note 3)..................................................................... 240,694 266,560 252,117
Inventories (Notes 1 and 4).............................................................. 334,550 256,519 259,781
Prepaid expenses......................................................................... 8,286 6,285 3,690
Marketable securities (Note 1)........................................................... 798 837 5,325
----------- -------- --------
Current assets......................................................................... 624,365 571,318 599,601
Property, plant and equipment (Notes 1 and 5)............................................ 118,956 122,013 134,498
Investment in affiliates (Notes 1 and 6)................................................. 12,252 12,533 11,442
Other assets (Notes 1, 7 and 11)......................................................... 28,763 29,821 37,283
----------- -------- --------
Total assets........................................................................... $ 784,336 $735,685 $782,824
----------- -------- --------
----------- -------- --------
LIABILITIES
Short-term borrowings (Note 8)........................................................... $ 144,306 $272,325 $373,625
Current portion of long-term debt (Note 10).............................................. 7,831 8,985 11,665
Accounts payable (Note 9)................................................................ 208,681 141,145 133,737
Taxes accrued (Note 16).................................................................. 24,637 28,758 24,776
----------- -------- --------
Current liabilities.................................................................... 385,455 451,213 543,803
Long-term debt (Note 10)................................................................. 134,559 70,252 31,818
Convertible subordinated debentures (Note 10)............................................ 69,000 69,000 69,000
Retirement and other benefits (Note 11).................................................. 19,048 19,127 18,498
Deferred taxes (Notes 1 and 16).......................................................... 6,672 5,819 9,632
Commitments and contingencies (Note 12).................................................. -- -- --
----------- -------- --------
Total liabilities...................................................................... 614,734 615,411 672,751
----------- -------- --------
MINORITY INTERESTS (Note 1).............................................................. 30,110 30,312 27,473
----------- -------- --------
ESOP redeemable preferred stock (Note 13)................................................ -- -- 8,748
Unearned ESOP compensation (Note 13)..................................................... -- -- (6,320)
----------- -------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $1.65 par value (Note 13)
Authorized shares 1,000,000; Issued none (1996 -- 87,477 to ESOP)
Common stock, $0.20 par value (Note 13)
Authorized shares 100,000,000; 15,300,862, 12,126,270 and 11,624,275 shares issued at
June 30, 1997 and March 31, 1997 and 1996 respectively................................. 3,060 2,425 2,325
Additional paid-in capital (Note 13)..................................................... 100,102 50,324 43,660
Unearned restricted stock plan compensation (Note 13).................................... (297) (321) (435)
Treasury stock at cost (Note 13), 2,617,707, 2,591,790 and 2,490,661 shares at June 30,
1997, March 31, 1997 and 1996, respectively............................................ (4,250) (3,799) (2,384)
Retained earnings........................................................................ 57,869 58,089 46,450
Cumulative translation adjustments (Notes 1 and 14)...................................... (16,992) (16,756) (9,444)
----------- -------- --------
Total shareholders' equity............................................................. 139,492 89,962 80,172
----------- -------- --------
Total liabilities and equity........................................................... $ 784,336 $735,685 $782,824
----------- -------- --------
----------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
--------------------- --------------------------------------
1997 1996 1997 1996 1995
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales.................................................... $300,315 $310,391 $1,354,270 $1,359,450 $1,213,565
Cost of sales
-- Materials, services and supplies (Note 4)............ 273,189 280,894 1,217,380 1,227,568 1,097,119
-- Interest............................................. 7,266 7,611 32,197 41,369 34,981
-------- -------- ---------- ---------- ----------
Gross Profit........................................ 19,860 21,886 104,693 90,513 81,465
Selling, general and administrative expenses............. 17,659 17,996 72,782 77,608 80,509
Restructuring charges (Note 2)........................... -- -- -- 12,500 --
Other interest expense................................... 2,216 2,387 9,920 9,559 9,947
Other income (expense), net (Note 15).................... 2,391 2,835 10,254 11,412 18,971
-------- -------- ---------- ---------- ----------
Income (loss) before taxes.......................... 2,376 4,338 32,245 2,258 9,980
Income taxes (Notes 1 and 16)............................ 358 1,112 12,782 6,836 16,370
-------- -------- ---------- ---------- ----------
Income (loss) after taxes........................... 2,018 3,226 19,463 (4,578) (6,390)
Minority interests (Note 1).............................. (291) (1,936) (3,938) (4,795) (9,634)
Equity in earnings (losses) of affiliates (Note 6)....... 126 218 1,412 (69) (4,470)
-------- -------- ---------- ---------- ----------
Income (loss) from continuing operations............ 1,853 1,508 16,937 (9,442) (20,494)
Income (loss) from discontinued operations
(Note 2)............................................... -- -- -- 10,050 (10,050)
-------- -------- ---------- ---------- ----------
Net income (loss)................................... 1,853 1,508 16,937 608 (30,544)
ESOP preferred stock dividends, net of tax............... -- (115) (347) (474) (485)
-------- -------- ---------- ---------- ----------
Net income (loss) applicable to common stock........ 1,853 1,393 16,590 134 (31,029)
Retained earnings at beginning of year................... 58,089 46,450 46,450 50,530 84,807
Common stock dividends................................... (2,073) (792) (4,951) (4,214) (3,248)
-------- -------- ---------- ---------- ----------
Retained earnings at end of year.................... $ 57,869 $ 47,051 $ 58,089 $ 46,450 $ 50,530
-------- -------- ---------- ---------- ----------
-------- -------- ---------- ---------- ----------
Earnings (loss) per common share (Note 1):
Primary -- from continuing operations.................... $ 0.17 $ 0.15 $ 1.78 $ (1.07) $ (2.25)
-- from discontinued operations................. -- -- -- $ 1.08 $ (1.09)
-- net.......................................... $ 0.17 $ 0.15 $ 1.78 $ 0.01 $ (3.34)
-- average shares outstanding................... 11,103 9,493 9,314 9,307 9,288
Fully diluted -- net..................................... * * $ 1.69 * *
-- average shares outstanding.............. * * 11,793 * *
</TABLE>
- ---------------
* Not applicable because fully diluted calculations included adjustments which
are antidilutive.
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
STANDARD COMMERCIAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
-------------------- ---------------------------------
1997 1996 1997 1996 1995
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................ $ 1,853 $ 1,508 $ 16,937 $ 608 $ (30,544)
Depreciation and amortization.................................. 4,951 4,395 20,866 24,393 16,413
Minority interests............................................. 291 1,936 3,938 4,795 9,634
Deferred income taxes.......................................... 969 -- (484) (968) 793
Undistributed losses of affiliates net of dividends received... (126) (218) (1,268) 166 4,626
Gain on disposition of property, plant and equipment........... (1,177) (185) (2,252) (1,093) (13,581)
Loss (income) from discontinued operations..................... -- -- -- (10,050) 10,050
Other.......................................................... (1,075) 2,421 2,483 (5,244) 3,404
-------- -------- -------- -------- ---------
5,686 9,857 40,220 12,607 795
Net changes in working capital other than cash
Receivables.................................................... 21,043 43,114 (22,807) (24,752) 59,665
Inventories.................................................... (80,641) (27,498) (5,475) 85,901 38,342
Current payables............................................... 71,082 58,967 22,721 (23,909) (3,382)
-------- -------- -------- -------- ---------
CASH PROVIDED BY OPERATING ACTIVITIES............................ 17,170 84,440 34,659 49,847 95,420
-------- -------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment
-- additions................................................... (2,909) (2,265) (12,816) (12,211) (17,328)
-- dispositions............................................... 1,516 247 5,072 3,151 16,274
Minority interest................................................ -- -- -- (7,740) --
Business (acquisitions) dispositions............................. -- -- 3,304 440 (2,605)
-------- -------- -------- -------- ---------
CASH USED FOR INVESTING ACTIVITIES............................... (1,393) (2,018) (4,440) (16,360) (3,659)
-------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings............................... 10,405 9,645 10,442
Repayment of long-term borrowings................................ (4,639) (4,076) (21,131) (14,968) (29,113)
Net change in short-term borrowings.............................. (60,061) (24,731) (54,257) (5,330) (86,406)
Net proceeds of equity offering.................................. 47,043 -- -- -- --
Dividends paid, net of tax....................................... (115) (347) (474) (485)
Purchase and retirement of ESOP Preferred Stock.................. -- -- (2,460) -- --
Other............................................................ 800 -- 114 213
-------- -------- -------- -------- ---------
CASH USED FOR FINANCING ACTIVITIES............................... (16,857) (28,922) (67,790) (11,013) (105,349)
-------- -------- -------- -------- ---------
Increase/(decrease) in cash for period........................... (1,080) 53,500 (37,571) 22,474 (13,588)
Cash at beginning of period...................................... 41,117 78,688 78,688 56,214 69,802
-------- -------- -------- -------- ---------
CASH AT END OF PERIOD............................................ $ 40,037 $132,188 $ 41,117 $ 78,688 $ 56,214
-------- -------- -------- -------- ---------
-------- -------- -------- -------- ---------
Cash payments for
-- interest.................................................... -- -- $ 42,790 $ 44,426 $ 47,588
-- income taxes............................................... -- -- $ 9,057 $ 6,433 $ 8,441
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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) MARKETABLE SECURITIES. Marketable securities are classified as available
for sale and consist of liquid equity securities. The specific identification
method is used to determine gains and losses when securities are sold.
d) 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. The
Company assesses recoverability of goodwill based on management's projections of
future cash flows of acquired businesses.
e) 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.
f) INVENTORIES. Inventories, which are primarily packed leaf tobacco and
wool, 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. Cost of wool includes all direct costs except interest. Items are
removed from inventory on an actual cost basis.
g) REVENUE RECOGNITION. Sales and revenue are recognized on the passage of
title.
h) INCOME TAXES. The Company provides deferred income taxes on differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes and operating loss carryforwards.
i) MINORITY INTERESTS. Minority interests represent the interest of third
parties in the net assets of certain subsidiary companies.
j) 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. Earnings per share and weighted average number of shares outstanding for
all prior periods have been restated to give effect to the increase in number of
shares outstanding resulting from quarterly stock dividends. 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 date 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.
k) NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS. In February 1997, Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE, was issued. This
Statement establishes standards for computing and presenting earnings per share
(EPS) and applies to entities with publicly held common stock or potential
common stock. This Statement simplifies the standards for computing earnings per
share previously found in APB No. 15, EARNINGS PER SHARE, and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. This Statement is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. This Statement requires
restatement of all prior-period EPS data presented. The adoption of this
Statement will not have a material impact on the Company's financial statements.
In October 1995, Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, was issued. Statement No. 123, which
was effective for the Company beginning April 1, 1996, requires expanded
disclosure
F-6
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES -- Continued
of stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply APB No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will apply APB No. 25 to its
stock-based compensation awards to employees and will disclose the pro forma
effect on net income and earnings per share.
l) LONG-LIVED ASSETS. As required, the Company adopted Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Accordingly,
long-lived assets are reviewed for impairment on a market-by-market basis
whenever events or changes in the circumstances indicate that the carrying
amount of an asset may not be recoverable. If an evaluation is required, the
projected future undiscounted future cash flows attributable to each market
would be compared to the carrying value of the long-lived assets (including an
allocation of goodwill, if appropriate) of that market if a write-down to fair
value is required. The Company also evaluates the remaining useful lives to
determine whether events and circumstances warrant revised estimates of such
lives.
m) USE OF ESTIMATES AND ASSUMPTIONS. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
n) RECLASSIFICATION. Certain amounts in prior year statements have been
reclassified for conformity with current statement presentation.
NOTE 2 -- DISCONTINUED OPERATIONS AND RESTRUCTURING CHARGES
a) DISCONTINUED OPERATIONS. In fiscal 1995, the Company entered into an
agreement to sell its wool operations. During the third quarter of fiscal 1996,
the proposed sale was terminated. Accordingly, the results of operations of the
wool business for the prior periods have been reclassified from discontinued
operations to continuing operations. The estimated loss on disposal of $10.1
million in 1995 was reversed in 1996. The estimated loss was determined by
deducting the $56 million estimated net asset value of discontinued wool
operations (i.e., sales price) from the $66.1 million value of net assets held
for sale.
Assets, liabilities, revenues and operating profits (losses) for the fiscal
year ending 1995, the year the wool operations were reported as discontinued
operations, were as follows:
<TABLE>
<CAPTION>
1995
--------------
<S> <C>
(IN THOUSANDS)
Total assets....................................................................................... $294,290
Total liabilities.................................................................................. 216,326
Revenues........................................................................................... 440,112
Pretax operating income............................................................................ 10,002
</TABLE>
In December 1993, the Company completed the sale of its Caro-Green Nursery
business to Zelenka Nursery Inc. At March 31, 1997, the consolidated balance
sheet includes notes receivable from the purchaser totaling approximately $2.7
million.
b) RESTRUCTURING CHARGES. As a result of the termination of the sale of the
wool operations, the Company implemented a reorganization plan for its
nontobacco business and determined that a pretax restructuring charge of $12.5
million ($11.0 million after-tax) was appropriate. The major components of the
restructuring charges relate to the wool division and include: (i) approximately
$2.1 million associated with the closure of the wool processing facility in
Argentina; (ii) approximately $3.6 million for the write-off of goodwill; (iii)
approximately $2.8 million associated with the write-off of export incentive
allowances; and (iv) approximately $2.5 million of expenses related to the
terminated sale of the wool division and other miscellaneous restructuring
costs. To date in Argentina, the wool processing operations have been
discontinued, the factory has been leased to a third party, 181 employees have
been terminated and certain impaired assets have
F-7
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 2 -- DISCONTINUED OPERATIONS AND RESTRUCTURING CHARGES -- Continued
been written down. In Australia, operations have been consolidated under one
management team to better and more efficiently serve this market. The wool tops
departments in the German and French companies have been reorganized to
streamline their marketing efforts. The Company has undertaken a feasibility
study to improve operational efficiencies in the French topmaking factory. For
the year ended March 31, 1997, the restructuring resulted in lower depreciation,
amortization and personnel costs of approximately $1.1 million. With the
exception of the export incentive issue, which is expected to be resolved in
fiscal 1998, substantially all incurred amounts related to the restructuring had
been expended at March 31, 1997.
NOTE 3 -- RECEIVABLES
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Trade accounts........................................................................................ $180,926 $173,413
Advances to suppliers................................................................................. 48,349 36,701
Affiliated companies.................................................................................. 9,773 17,357
Other................................................................................................. 31,113 30,196
-------- --------
270,161 257,667
Allowances for doubtful accounts...................................................................... (3,601) (5,550)
-------- --------
$266,560 $252,117
-------- --------
-------- --------
</TABLE>
NOTE 4 -- INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, --------------------
1997 (UNAUDITED) 1997 1996
---------------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Tobacco............................................................................. $255,991 $181,349 $160,721
Nontobacco.......................................................................... 78,559 75,170 99,060
---------------- -------- --------
$334,550 $256,519 $259,781
---------------- -------- --------
---------------- -------- --------
</TABLE>
Tobacco inventories at March 31, 1997 and 1996 included capitalized
interest, totaling $4.3 million and $4.2 million, and valuation reserves for
tobacco and wool of $4.9 million and $5.2 million, respectively. Inventory
valuation provisions included in cost of sales totaled approximately $0.9
million, $1.4 million and $5.3 million in 1997, 1996 and 1995, respectively.
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Land.................................................................................................. $ 14,063 $ 15,318
Buildings............................................................................................. 77,116 76,464
Machinery and equipment............................................................................... 131,124 133,959
Furniture and fixtures................................................................................ 13,157 12,023
Construction in progress.............................................................................. 2,322 1,210
-------- --------
237,782 238,974
Accumulated depreciation.............................................................................. (115,769) (104,476)
-------- --------
$122,013 $134,498
-------- --------
-------- --------
</TABLE>
Depreciation expense was $18.1 million, $18.1 million and $14.7 million in
1997, 1996 and 1995, respectively.
F-8
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6 -- AFFILIATED COMPANIES
a) Net investment in affiliated companies are represented by the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Net current assets (liabilities)................................................................... $ 4,421 $ 4,445
Property, plant and equipment...................................................................... 29,446 24,156
Other long-term assets (liabilities)............................................................... (132) 1,977
Interests of other shareholders.................................................................... (21,033) (19,018)
-------- --------
Company's interest................................................................................. 12,702 11,560
Provision for withholding taxes.................................................................... (169) (118)
-------- --------
Net investments.................................................................................... $ 12,533 $ 11,442
-------- --------
-------- --------
</TABLE>
b) The results of operations of affiliated companies were:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Sales................................................................................. $119,022 $ 82,527 $ 99,236
-------- -------- --------
Income (loss) before taxes............................................................ $ 5,627 $ 2,493 (2,468)
Income taxes.......................................................................... 2,104 2,259 1,074
-------- -------- --------
Net income (loss)..................................................................... $ 3,523 $ 234 $ (3,542)
-------- -------- --------
Company's share....................................................................... $ 1,463 $ (260) $ (4,567)
Withholding taxes..................................................................... (51) 191 97
-------- -------- --------
Equity in earnings (losses)........................................................... $ 1,412 $ (69) $ (4,470)
-------- -------- --------
Dividends received.................................................................... $ 148 $ 96 $ 154
-------- -------- --------
-------- -------- --------
</TABLE>
The Company's significant affiliates and percentage of ownership at March 31,
1997 follow: Adams International Ltd, 49.0% (Thailand), Siam Tobacco Export
Corporation Ltd, 49.0% (Thailand), Tobacco Processors (Lilongwe) Ltd, 51.9%
(Malawi) and Independent Wool Dumpers Pty Ltd, 16.8% (Australia). Audited
financial statements of affiliates are obtained annually.
NOTE 7 -- OTHER ASSETS
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
Cash surrender value of life insurance policies (face amount $42,765)................................... $12,775 $12,567
Policy loans............................................................................................ 6,246 6,780
------- -------
6,529 5,787
Bank deposits........................................................................................... 418 118
Receivables............................................................................................. 14,588 17,851
Due from affiliates..................................................................................... 39 823
Investments............................................................................................. 2 3,294
Excess of purchase price of subsidiaries over net assets acquired -- net of accumulated amortization of
$7,354 (1996 -- $7,231)............................................................................... 4,224 4,347
Other................................................................................................... 4,021 5,063
------- -------
$29,821 $37,283
------- -------
------- -------
</TABLE>
F-9
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8 -- SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Weighted average interest on borrowings at end of year................................... 8.0% 8.5% 9.8%
Weighted average interest rate on borrowings during the year (1)......................... 8.0% 9.0% 9.2%
Maximum amount outstanding at any month-end.............................................. $372,747 $433,646 $450,590
Average month-end amount outstanding..................................................... $337,178 $388,875 $401,923
Amount outstanding at year-end (2)....................................................... $272,325 $373,625 $378,955
</TABLE>
- ---------------
(1) Computed by dividing short-term interest expense and amortized financing
costs by average short-term debt outstanding.
(2) During the first quarter of fiscal 1998 the Company completed a secondary
issue of 3,022,500 shares, from which the $47.0 million proceeds have been
classified as long-term debt for accounting purposes and applied as a
reduction of short-term borrowings at March 31, 1997. At June 30, 1997 the
$47.0 million will be reclassified from long-term debt to shareholders'
equity. This amount has been excluded from the calculation of average
month-end amounts outstanding.
At March 31, 1997, under agreements with various banks, total short-term
credit facilities for continuing operations of $646.9 million (1996 -- $694.0
million) were available to the Company of which $71.0 million (1996 -- $53.0
million) were being utilized for letters of credit and guarantees and $299.0
million (1996 -- $287.0 million) were unused.
The Company's revolving credit facilities at March 31, 1997 included a
$100.0 million facility for U.S. tobacco operations and a $155.0 million master
credit facility for non-U.S. tobacco operations, both expiring in June 1998, in
addition to local lines of approximately $265.0 million. Also, separate
facilities totaling $127.0 million are in place for wool operations.
At March 31, 1997 substantially all of the Company's assets were pledged
against current and long-term borrowings.
NOTE 9 -- ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Trade accounts........................................................................................ $108,476 $100,286
Affiliated companies.................................................................................. 3,449 18
Other accruals and payables........................................................................... 29,220 33,433
-------- --------
$141,145 $133,737
-------- --------
-------- --------
</TABLE>
F-10
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 10 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
6.48% fixed rate loans repayable annually through 1998.................................................. $ 3,637 $ 6,472
Floating rate loan at prime through March 1999 (1997 average 8.25%)..................................... 8,667 --
10.4% loan repayable annually through 2000.............................................................. 4,900 6,000
Floating rate note, at 82% of prime, repayable in 2001 (1997 average 8.25%)............................. 2,940 2,940
11.95% loan repayable through 2001...................................................................... 2,346 3,129
Italian prime + 1/8% payable through 2002 (1997 average 10.6%).......................................... 3,458 4,273
9.82% fixed rate loan repayable annually through 2005................................................... 3,282 3,566
9.25% note repayable through 2005....................................................................... 1,762 1,978
9.25% fixed rate loan repayable annually through 1997................................................... -- 820
Floating rate loan at 1.5% above LIBOR repayable annually through 1998.................................. -- 1,175
Floating rate loan, at 1.75% above LIBOR, repayable quarterly through March 1999........................ -- 1,535
Senior notes, at 1.75% above LIBOR repayable quarterly through March 1999............................... -- 3,103
Floating rate loan, at 1.75% above three-month negotiable CD rate, repayable quarterly through March
2002.................................................................................................. -- 6,533
Other................................................................................................... 1,202 1,959
------- -------
32,194 43,483
Current portion......................................................................................... (8,985) (11,665)
Revolving credit facilities (See Note 8)................................................................ 47,043 --
------- -------
$70,252 $31,818
------- -------
------- -------
</TABLE>
Long-term debt maturing after one year is as follows: 1999 -- $11,537;
2000 -- $3,963; 2001 -- $4,760; 2002 -- $716; and thereafter -- $2,233.
At June 30, 1997 and March 31, 1997, the Company reclassified $115.0 and
$47.0 million, respectively, of borrowings under its revolving credit facilities
as long-term debt. The Company had both the intent and ability to refinance
these amounts on a long-term basis.
CONVERTIBLE SUBORDINATED DEBENTURES
On November 13, 1991 the Company issued $69.0 million of 7 1/4% Convertible
Subordinated Debentures due March 31, 2007. Adjusted for subsequent stock
dividends, the debentures currently are convertible into shares of common stock
of the Company at a conversion price of $29.38. 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, 2003 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.
At March 31, 1997, substantially all of the Company's assets were pledged
against current and long-term borrowings.
NOTE 11 -- BENEFITS
The Company has a noncontributory defined benefit pension plan covering
substantially all full-time salaried employees in the United States and a
Supplemental Executive Retirement Plan ("SERP") covering benefits otherwise
limited by Section 401(a)(17) (Compensation Limitation) and Section 415
(Benefits Limitation) of the Internal Revenue Code. 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.
F-11
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11 -- BENEFITS -- Continued
U.S. PLAN
A summary of pension costs follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost -- benefits earned during the year..................................................... $ 498 $ 433 $ 421
Interest cost on projected benefit obligation....................................................... 649 549 501
Recognized return on plan assets (832) (670) (583)
Net amortization.................................................................................... (29) (72) (37)
----- ----- -----
Net pension cost.................................................................................... $ 286 $ 240 $ 302
----- ----- -----
----- ----- -----
</TABLE>
The funded status of the U.S. plans, which include a book-reserve SERP, at
March 31 is shown below:
<TABLE>
<CAPTION>
ABO EXCEEDS
ASSETS EXCEED ABO ASSETS
------------------- -----------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------- ------- ------ ------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
-- vested............................................................... $ 7,265 $ 6,429 $ -- $ --
-- nonvested benefits 44 56 486 334
------- ------- ------ ------
Accumulated benefit obligation................................................ 7,309 6,485 486 334
Benefits attributable to projected salaries................................... 2,142 1,989 51 152
------- ------- ------ ------
Projected benefit obligation.................................................. 9,451 8,474 537 486
Plan assets at fair value..................................................... 11,505 10,391 -- --
------- ------- ------ ------
Assets in excess of (less than) projected obligation.......................... 2,054 1,917 (537) (486)
Unamortized net transition gain............................................... (306) (367)
Unrecognized prior service cost............................................... (44) (55) 44 88
Unrecognized experience gain.................................................. (693) (389) (6) (6)
------- ------- ------ ------
Prepaid (accrued) pension costs............................................... $ 1,011 $ 1,106 $ (499) $ (404)
------- ------- ------ ------
------- ------- ------ ------
</TABLE>
The projected benefit obligation at March 31, 1997, 1996 and 1995 was
determined using an assumed discount rate of 7.375%, 7.25% and 7.25%,
respectively, and assumed future compensation increases of 5.00%, 5.25% and
5.25%, respectively. The assumed long-term rate of return on plan assets was
8.0%, 8.0% and 8.0% at March 31, 1997, 1996 and 1995, respectively. Assets
consist of pooled equity and fixed income funds managed by an independent
trustee.
NON-U.S. PLANS
A summary of pension costs follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost -- benefits earned during the year............................................... $ 1,367 $ 1,507 $ 1,428
Interest cost on projected benefit obligation................................................. 2,310 2,646 2,414
Recognized return on plan assets (2,348) (2,004) (1,655)
Net amortization.............................................................................. 49 222 147
------- ------- -------
Net pension cost.............................................................................. $ 1,378 $ 2,371 $ 2,334
------- ------- -------
------- ------- -------
</TABLE>
F-12
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11 -- BENEFITS -- Continued
The funded status of non-U.S. plans, which include book-reserve plans, at
March 31 is shown below:
<TABLE>
<CAPTION>
ASSETS EXCEED ABO ABO EXCEEDS ASSETS
------------------ --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
------- ------- -------- --------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
-- vested.................................................................. $18,455 $11,575 $ 7,857 $ 12,945
-- nonvested benefits...................................................... 120 454 -- 48
------- ------- -------- --------
Accumulated benefit obligation................................................... 18,575 12,029 7,857 12,993
Benefits attributable to projected salaries...................................... 5,255 4,394 517 1,200
------- ------- -------- --------
Projected benefit obligation..................................................... 23,830 16,423 8,374 14,193
Plan assets at fair value........................................................ 26,150 17,402 -- 4,484
------- ------- -------- --------
Assets in excess of (less than) projected obligation............................. 2,320 979 (8,374) (9,709)
Unamortized net transition loss.................................................. 679 854 927 943
Unrecognized prior service cost.................................................. (2,094) (113) -- 913
Unrecognized experience gain..................................................... 566 (1,193) 56 (817)
Additional minimum liability..................................................... -- -- (1,031) (914)
------- ------- -------- --------
Prepaid (accrued) pension costs.................................................. $ 1,471 $ 527 $ (8,422) $ (9,584)
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
The assumptions used in 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- -------------- -------------
<S> <C> <C> <C>
Discount rates.............................................................. 7.375% to 8.5% 7.75% to 8.5% 7.5% to 8.5%
Compensation increases...................................................... 5.50% to 7.0% 3.25% to 6.5% 5.5% to 7.0%
Long-term rates of return on plan assets.................................... 10.0% 10.0% 10.0%
</TABLE>
Plan assets consist primarily of common stocks, pooled equity and fixed
income funds. The pension costs and obligations for non-U.S. plans shown above
also include certain unfunded book-reserve plans.
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
$196,000 in 1997, $144,000 in 1996 and $127,000 in 1995.
The Company provides health care and life insurance benefits for
substantially all of its retired salaried employees in the U.S. These benefits
are accounted for in accordance with Statement of Financial Accounting Standards
No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS,
which requires the accrual of the estimated cost of retiree benefit payments
during the years the employee provides services.
The components of the net periodic cost of postretirement benefits for
1997, 1996 and 1995 were:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................................................. $193,942 $176,148 $168,613
Interest cost on accumulated benefit obligation.......................................... 493,527 522,164 405,299
Amortization of plan amendments.......................................................... (138,904) (136,649) (138,904)
-------- -------- --------
Net periodic cost........................................................................ $548,565 $561,663 $435,008
-------- -------- --------
-------- -------- --------
</TABLE>
The components of the liability included in the consolidated balance sheet
at March 31, 1997 and 1996 of the actuarial present value of benefits for
services rendered to date were:
F-13
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 11 -- BENEFITS -- Continued
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current retirees.................................................................................. $ 489,487 $ 504,723
Active employees eligible to retire............................................................... 2,731,768 2,423,723
Active employees not eligible to retire........................................................... 3,343,157 4,041,795
---------- ----------
Total............................................................................................. 6,564,412 6,970,241
Unrecognized net gain (loss)...................................................................... 259,872 (672,154)
Unrecognized prior service cost................................................................... 972,323 1,111,227
---------- ----------
Accumulated postretirement benefit obligation..................................................... $7,796,607 $7,409,314
---------- ----------
---------- ----------
</TABLE>
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 12.5% in 1997. This rate was assumed
to gradually decline to 6.5% in 2004, 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 1997 would increase by $126,000 and the APBO as of March 31,
1997 would increase by $915,000. In general, postretirement benefit costs are
insured or paid as claims are incurred.
The ongoing impact of Statement 106 as it relates to employees of foreign
subsidiaries is immaterial. The Company expenses the cost of these benefits as
incurred.
EMPLOYEE STOCK OPTIONS
In March 1997, the Company entered into a three-year employment agreement
with its Chief Executive Officer. The agreement, which was ratified by the Board
of Directors on April 14, 1997, provides for the grant of nonqualified options
to purchase 100,000 shares of the Company's common stock at an exercise price
equal to the fair market value as of the date of grant. These options will
become exercisable (contingent on continued employment with the Company) in
equal annual installments over a three-year period. No options are currently
exercisable.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
The Company is obligated under operating leases for equipment, office and
warehouse space with minimum annual rentals as follows: 1998 -- $3,601,757;
1999 -- $2,650,260; 2000 -- $1,964,891; 2001 -- $54,720; 2002 -- $24,203 and
thereafter $143,364. Some of the leases are subject to escalation.
Expenses under operating leases for continuing operations in 1997, 1996 and
1995 were $3,049,100, $3,811,000 and $963,000, respectively.
The Company operates a processing facility under a service agreement which
guarantees reimbursement of all of the facility's costs including operating
expenses and management fees. This lease is not considered a commitment of the
Company.
The Company has commitments for capital expenditures of approximately $17.4
million, all of which are expected to be incurred in fiscal 1998.
The previously reported joint Canadian-U.S. criminal investigation into
alleged violations of law relating to the importation, exportation and taxation
of tobacco has been discontinued. The Canadian investigation is continuing as to
individual Canadian and U.S. citizens. Management does not believe that it will
have a material adverse effect on the Company's financial position.
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.
F-14
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 12 -- COMMITMENTS AND CONTINGENCIES -- Continued
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 and wool industries. 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.
NOTE 13 -- COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK COMMON ADDITIONAL
---------------------- STOCK PAID IN
ISSUED TREASURY PAR VALUE CAPITAL
---------- --------- --------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
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
401(k) contributions......................................................... 12,283 3 141
Dividends reinvested......................................................... 729 -- 8
RSP shares forfeited......................................................... (1,359) -- (37)
Stock dividends.............................................................. 452,333 97,183 90 5,260
---------- --------- --------- ------------
March 31, 1996............................................................... 11,624,275 2,490,661 2,325 43,660
401(k) contribution.......................................................... 16,122 3 196
Dividends reinvested......................................................... 662 -- 10
RSP shares forfeited......................................................... (557) -- (10)
Stock dividends.............................................................. 471,693 101,129 94 6,226
ESOP conversion.............................................................. 14,075 3 242
---------- --------- --------- ------------
March 31, 1997............................................................... 12,126,270 2,591,790 $ 2,425 $ 50,324
---------- --------- --------- ------------
---------- --------- --------- ------------
</TABLE>
The Company maintains a Performance Improvement Compensation Plan
administered by the Compensation Committee of the Board of Directors as an
incentive 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.
On January 31, 1997, the Company terminated the Employee Stock Ownership
Plan (the "ESOP") established by W A Adams Company prior to that company's
acquisition by the Company. This termination involved the redemption by the
Company of 24,602 shares of ESOP Preferred Stock for an aggregate price of
$2,460,287 in cash and the issuance of 14,075 shares of Common Stock. The
remaining 62,875 shares of unallocated ESOP Preferred Stock were canceled.
Subsequent to March 31, 1997 the Company completed the registration and
sale of 3,022,500 shares of common stock, priced at $16.75 per share. Assuming
that the net proceeds to the Company from the offering were used to repay
short-term borrowings as of April 1, 1996, primary and fully diluted earnings
per share would have been $1.78 and $1.71, respectively,
F-15
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 13 -- COMMON STOCK -- Continued
and the corresponding weighted-average shares outstanding for purposes of these
computations would have been 12,383,000 and 14,861,000.
NOTE 14 -- FOREIGN CURRENCY
Changes in the translation adjustment component of shareholders' equity are
shown below:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Beginning balance April 1.................................................................. $ (9,444) $(4,319) $(17,984)
Net change in translation of foreign financial statements.................................. (7,312) (5,125) 13,665
-------- ------- --------
Ending Balance March 31.................................................................... $(16,756) $(9,444) $ (4,319)
-------- ------- --------
-------- ------- --------
</TABLE>
Net amounts included in the income statement relating to foreign currency
losses from continuing operations were $920,000, $276,000, and $756,000 in 1997,
1996 and 1995, respectively.
NOTE 15 -- OTHER INCOME (EXPENSE) -- NET
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Other income
Interest................................................................................... $ 4,493 $ 4,430 $ 4,644
Gain on asset sales and dispositions....................................................... 4,668 4,476 14,650
Rents received............................................................................. 610 441 233
Other...................................................................................... 3,520 4,976 2,162
------- ------- -------
13,291 14,323 21,689
------- ------- -------
Other expense
Amortization of goodwill................................................................... (132) (197) (582)
Other...................................................................................... (2,905) (2,714) (2,136)
------- ------- -------
(3,037) (2,911) (2,718)
------- ------- -------
$10,254 $11,412 $18,971
------- ------- -------
------- ------- -------
</TABLE>
F-16
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 16 -- INCOME TAXES
a) Significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax liabilities:
Depreciation.......................................................................................... $10,528 $11,377
Capitalized interest.................................................................................. 1,183 763
Income recognition in foreign subsidiaries............................................................ 14,983 16,673
Prepaid pension assets................................................................................ 1,232 898
------- -------
Total deferred tax liabilities........................................................................ 27,926 29,711
------- -------
Deferred tax assets:
NOL carried forward................................................................................... 7,138 8,766
Valuation allowance................................................................................... (5,503) (7,021)
Postretirement benefits other than pensions........................................................... 3,071 2,919
Uniform capitalization................................................................................ 143 186
All other, net........................................................................................ 1,963 1,925
------- -------
Total deferred tax assets............................................................................... 6,812 6,775
------- -------
Net deferred tax liabilities............................................................................ $21,114 $22,936
------- -------
------- -------
</TABLE>
The net deferred tax liabilities include approximately $15,295 and $13,304
of current liabilities at March 31, 1997 and 1996, respectively.
b) Income tax provisions are detailed below:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Current
Federal.................................................................................... $ 445 $ 130 $ 3,686
Foreign.................................................................................... 12,793 7,455 11,470
State and local............................................................................ 28 219 421
------- ------- -------
13,266 7,804 15,577
------- ------- -------
Deferred
Federal.................................................................................... 707 (1,131) (1,154)
Foreign.................................................................................... (1,194) 160 1,938
State and local............................................................................ 3 3 9
------- ------- -------
(484) (968) 793
------- ------- -------
Income tax provision......................................................................... $12,782 $ 6,836 $16,370
------- ------- -------
------- ------- -------
</TABLE>
F-17
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 16 -- INCOME TAXES -- Continued
c) Components of deferred taxes follow:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Tax on differences in timing of income recognition in foreign subsidiaries.................... $ (353) $(2,565) $ 2,055
Utilization of NOL carried forward............................................................ -- 185 --
Capitalized interest.......................................................................... 420 (248) (29)
DISC income................................................................................... -- -- (89)
Other......................................................................................... (551) 1,660 (1,144)
------- ------- -------
$ (484) $ (968) $ 793
------- ------- -------
------- ------- -------
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Pretax income
Domestic................................................................................... $ 3,663 $ 264 $ (89)
Foreign.................................................................................... 28,582 1,994 10,069
------- ------- -------
$32,245 $ 2,258 $ 9,980
------- ------- -------
------- ------- -------
</TABLE>
e) The following is a reconciliation of the income tax provision to the
expense calculated at the U.S. federal statutory rate.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Expense (benefit) at U.S. federal statutory tax rate......................................... $11,286 $ 768 $ 3,393
Foreign tax losses for which there is no relief available.................................... 321 4,359 9,750
U.S. tax on foreign income................................................................... 500 200 2,912
Different tax rates in foreign subsidiaries.................................................. 680 (177) (1,073)
Other -- net................................................................................. (5) 1,686 1,388
------- ------- -------
$12,782 $ 6,836 $16,370
------- ------- -------
------- ------- -------
</TABLE>
F-18
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 17 -- DISCLOSURES OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments as of March
31, 1997 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: For purposes of the Consolidated Statement of
Cash Flows, the Company considers all highly liquid investments with a maturity
of three months or less to be cash equivalents. The estimated fair value of cash
and cash equivalents approximates carrying value.
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 $90.7 million, compared with a carrying value
of $101.2 million, based on discounted cash flows for fixed-rate borrowings,
with the fair value of floating-rate borrowings considered to approximate
carrying value. Amounts reclassified from short-term borrowings to long-term
debt have been excluded for fair value computations (See Note 8).
F-19
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18 -- SEGMENT INFORMATION
The Company is engaged primarily in purchasing, processing and selling leaf
tobacco and wool. 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.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
GEOGRAPHIC AREAS
Sales
United States...................................................................... $ 466,066 $ 375,842 $ 288,143
Europe............................................................................. 737,346 781,910 702,606
Other areas........................................................................ 273,728 319,428 355,529
Intersegment eliminations.......................................................... (122,870) (117,730) (132,713)
---------- ---------- ----------
$1,354,270* $1,359,450* $1,213,565*
---------- ---------- ----------
---------- ---------- ----------
Operating income, net of interest
United States...................................................................... $ 5,748 $ 3,576 $ 2,598
Europe............................................................................. 26,926 10,616 (9,406)
Other areas........................................................................ 2,906 (8,609) 20,425
Corporate expenses................................................................. (3,335) (3,325) (3,637)
---------- ---------- ----------
Income before taxes..................................................................... $ 32,245 $ 2,258 $ 9,980
---------- ---------- ----------
---------- ---------- ----------
Assets
United States...................................................................... $ 150,555 $ 163,002 $ 142,793
Europe............................................................................. 445,085 469,247 503,397
Other areas........................................................................ 120,683 133,075 148,359
Investment in affiliates........................................................... 12,533 11,442 12,905
Corporate assets................................................................... 6,829 6,058 6,035
---------- ---------- ----------
$ 735,685 $ 782,824 $ 813,489
---------- ---------- ----------
---------- ---------- ----------
U.S. Exports
Europe............................................................................. $ 87,531 $ 103,526 $ 69,348
Far East........................................................................... 42,908 46,726 80,474
Other areas........................................................................ 6,000 5,007 12,369
---------- ---------- ----------
$ 136,439 $ 155,259 $ 162,191
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ---------------
* One tobacco customer accounted for 24.1%, 17.4% and 14.2% of total sales in
1997, 1996 and 1995, respectively.
F-20
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 18 -- SEGMENT INFORMATION -- Continued
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
BUSINESS SEGMENTS
Sales
Tobacco............................................................................ $ 997,449 $ 925,549 $ 755,971
Nontobacco......................................................................... 356,821 433,901 457,594
---------- ---------- ----------
$1,354,270* $1,359,450* $1,213,565*
---------- ---------- ----------
---------- ---------- ----------
Operating income, net of interest
Tobacco............................................................................ $ 32,421 $ 28,373 $ 2,759
Nontobacco......................................................................... 3,159 (22,790) 10,858
Corporate expenses................................................................. (3,335) (3,325) (3,637)
---------- ---------- ----------
Income before taxes..................................................................... $ 32,245 $ 2,258 $ 9,880
---------- ---------- ----------
---------- ---------- ----------
Interest expense included above
Tobacco............................................................................ $ 32,288 39,381 $ 35,207
Nontobacco......................................................................... 9,829 11,547 9,721
---------- ---------- ----------
$ 42,117 $ 50,928 $ 44,928
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization expense
Tobacco............................................................................ $ 14,528 $ 12,914 $ 11,004
Nontobacco......................................................................... 4,253 9,778 5,135
---------- ---------- ----------
$ 18,781 $ 22,692 $ 16,139
---------- ---------- ----------
---------- ---------- ----------
Equity in earnings of affiliates
Tobacco............................................................................ $ 1,242 $ (217) $ (4,489)
Nontobacco......................................................................... 170 148 19
---------- ---------- ----------
$ 1,412 $ (69) $ (4,470)
---------- ---------- ----------
---------- ---------- ----------
Assets
Tobacco............................................................................ $ 521,202 $ 532,627 $ 499,587
Nontobacco......................................................................... 207,654 244,139 307,867
Corporate assets................................................................... 6,829 6,058 6,035
---------- ---------- ----------
$ 735,685 $ 782,824 $ 813,489
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures
Tobacco............................................................................ $ 10,981 $ 10,398 $ 11,177
Nontobacco......................................................................... 1,835 1,813 6,151
---------- ---------- ----------
$ 12,816 $ 12,211 $ 17,328
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- ---------------
* One tobacco customer accounted for 24.1%, 17.4% and 14.2% of total sales in
1997, 1996 and 1995, respectively.
F-21
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 19 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for 1997 and 1996:
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------
1ST 2ND 3RD 4TH ANNUAL
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1997 Sales.................................................. $310,391 $249,005 $374,130 $420,744 $1,354,270
Gross profit........................................... 21,887 21,972 27,944 32,890 104,693
Income from continuing operations...................... 1,508 2,911 4,480 8,038 16,937
Net income............................................. 1,508 2,911 4,480 8,038 16,937
Earnings per share
Primary -- from continuing operations............. 0.15 0.30 0.47 0.85 1.78
-- net................................... 0.15 0.30 0.47 0.85 1.78
Fully diluted..................................... * * * 0.75 1.69
Dividends paid per share............................... ** ** ** **
Market price -- high................................... 12.00 15.00 20.75 21.50 21.50
-- low.................................... 8.25 11.25 11.75 17.38 8.25
1996 Sales.................................................. $296,965 $282,196 $377,555 $402,734 $1,359,450
Gross profit........................................... 14,473 14,762 26,311 34,967 90,513
Income (loss) from continuing operations............... (6,255) (3,175) (9,040) 9,028 (9,442)
Income (loss) from discontinued operations............. (4,500) 3,751 10,799 -- 10,050
Net income (loss)...................................... (10,755) 576 1,759 9,028 608
Earnings (loss) per share
Primary -- from continuing operations............. (0.69) (0.35) (0.99) 0.96 (1.07)
-- from discontinued operations.......... (0.48) 0.40 1.16 -- 1.08
-- net................................... (1.17) 0.05 0.17 0.96 0.01
Fully diluted..................................... * * * 0.82 *
Dividends paid per share............................... ** ** ** **
Market price -- high................................... 15.13 14.38 12.25 10.38 15.13
-- low.................................... 13.25 10.50 9.25 7.50 7.50
</TABLE>
- ---------------
* Not applicable because fully diluted calculations include adjustments which
are antidilutive.
** Distributed one percent stock dividend.
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION
Standard Commercial Corporation (the "Company") and Standard Wool, jointly
and severally, guarantee on a senior basis to each Holder and the Trustee, the
full and prompt performance of the Issuer's obligations under the Indenture and
the Notes, including the payment of the principal of and interest and Additional
Interest, if any, on the Notes (the Company and Standard Wool being referred to
herein as "Guarantors" and the guarantees being referred to respectively as the
"Parent Guarantee" and the "Standard Wool Guarantee," and together, the
"Guarantees"). In addition, all of the issued and outstanding capital stock of
the Issuer and Standard Wool is pledged by the Company to the Trustee for the
benefit of the Holders of the Notes as security for the Parent Guarantee.
F-22
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING BALANCE SHEETS
JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash............................ $ 384 $ 36 $ 30,359 $ 81 $ 9,177 $ --
Receivables..................... 3,226 23,797 154,901 1,352 57,418 --
Intercompany receivable......... 64,498 136,314 50,373 -- 27,000 (278,185)
Inventories..................... -- 52,910 209,877 1,248 57,205 13,310
Prepaids and other.............. -- 403 6,779 39 1,065 --
Marketable securities........... -- -- 784 -- 14 --
----------- ----------- ----------- ----------- ----------- -------------
Current assets................ 68,108 213,460 453,073 2,720 151,879 (264,875)
----------- ----------- ----------- ----------- ----------- -------------
Property, plant
and equipment................. -- 21,371 82,434 62 15,089 --
Investment in subsidiaries...... 161,914 -- 66,586 37,006 33,900 (299,406)
Investment in affiliates........ -- -- 11,097 -- 1,155 --
Other noncurrent assets......... 12,916 1,692 8,452 -- 2,022 3,681
----------- ----------- ----------- ----------- ----------- -------------
Total assets.................. $ 242,938 $ 236,523 $ 621,642 $39,788 $ 204,045 $(560,600)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
LIABILITIES
Short-term borrowings........... $ -- $ 11,028 $ 75,536 $ -- $ 57,742 $ --
Current portion of
long-term debt................ -- 2,320 5,311 -- 200 --
Accounts payable................ 2,023 12,437 183,734 131 24,807 (14,451)
Intercompany accounts payable... 31,608 23,908 176,058 4,889 19,270 (255,733)
Taxes accrued................... -- 3,205 16,680 -- 4,752 --
----------- ----------- ----------- ----------- ----------- -------------
Current liabilities........... 33,631 52,898 457,319 5,020 106,771 (270,184)
----------- ----------- ----------- ----------- ----------- -------------
Long-term debt.................. -- 126,993 5,445 -- 2,121 --
Convertible subordinated
debentures.................... 69,000 -- -- -- -- --
Retirement and
other benefits................ 529 7,896 6,636 -- 3,987 --
Deferred taxes.................. -- 82 4,473 -- 2,117 --
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities............. 103,160 187,869 473,873 5,020 114,996 (270,184)
----------- ----------- ----------- ----------- ----------- -------------
Minority interests.............. -- -- 30,077 -- 33 --
SHAREHOLDERS' EQUITY
Common stock.................... 3,060 993 29,346 22,604 35,893 (88,836)
Additional paid-in capital...... 100,102 4,010 15,097 -- 55,710 (74,817)
Unearned restricted stock plan
compensation.................. (11) (87) (182) -- (17) --
Treasury stock at cost.......... (4,250) -- -- -- -- --
Retained earnings............... 57,869 43,738 90,132 7,727 (4,785) (136,812)
Cumulative translation
adjustments................... (16,992) -- (16,701) 4,437 2,215 10,049
----------- ----------- ----------- ----------- ----------- -------------
Total shareholders' equity.... 139,778 48,654 117,692 34,768 89,016 (290,416)
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities and
shareholders' equity........ $ 242,938 $ 236,523 $ 621,642 $39,788 $ 204,045 $(560,600)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
<CAPTION>
TOTAL
--------
<S> <C>
ASSETS
Cash............................ $ 40,037
Receivables..................... 240,694
Intercompany receivable......... --
Inventories..................... 334,550
Prepaids and other.............. 8,286
Marketable securities........... 798
--------
Current assets................ 624,365
--------
Property, plant
and equipment................. 118,956
Investment in subsidiaries...... --
Investment in affiliates........ 12,252
Other noncurrent assets......... 28,763
--------
Total assets.................. $784,336
--------
--------
LIABILITIES
Short-term borrowings........... $144,306
Current portion of
long-term debt................ 7,831
Accounts payable................ 208,681
Intercompany accounts payable... --
Taxes accrued................... 24,637
--------
Current liabilities........... 385,455
--------
Long-term debt.................. 134,559
Convertible subordinated
debentures.................... 69,000
Retirement and
other benefits................ 19,048
Deferred taxes.................. 6,672
--------
Total liabilities............. 614,734
--------
Minority interests.............. 30,110
SHAREHOLDERS' EQUITY
Common stock.................... 3,060
Additional paid-in capital...... 100,102
Unearned restricted stock plan
compensation.................. (297)
Treasury stock at cost.......... (4,250)
Retained earnings............... 57,869
Cumulative translation
adjustments................... (16,992)
--------
Total shareholders' equity.... 139,492
--------
Total liabilities and
shareholders' equity........ $784,336
--------
--------
</TABLE>
F-23
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING BALANCE SHEETS
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash............................ $ 327 $ 1,102 $ 28,956 $ 119 $ 10,613 $ --
Receivables..................... 1,648 35,737 174,535 1,258 53,382 --
Intercompany accounts
receivable.................... 16,606 15,083 26,040 -- 36,545 (94,274)
Inventories..................... -- 74,309 139,386 1,256 52,675 (11,107)
Prepaid expenses................ 155 4,190 4,790 5 1,173 (4,028)
Marketable securities........... -- -- 823 -- 14 --
----------- ----------- ----------- ----------- ----------- -------------
Current assets................ 18,736 130,421 374,530 2,638 154,402 (109,409)
----------- ----------- ----------- ----------- ----------- -------------
Property, plant
and equipment................. -- 22,513 83,255 35 16,210 --
Investment in subsidiaries...... 159,014 -- 63,714 36,946 34,261 (293,935)
Investment in affiliates........ -- -- 11,321 -- 1,212 --
Other assets.................... 12,897 1,878 12,373 -- 2,673 --
----------- ----------- ----------- ----------- ----------- -------------
Total assets.................. $ 190,647 $ 154,812 $ 545,193 $39,619 $ 208,758 $(403,344)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
LIABILITIES
Short-term borrowings........... $ -- $ 36,277 $ 178,317 $ -- $ 57,731 $ --
Current portion of
long-term debt................ -- 2,312 5,633 -- 1,040 --
Accounts payable................ 982 14,123 110,675 127 15,238 --
Intercompany accounts payable... 29,895 28,757 15,393 4,734 31,740 (110,519)
Taxes accrued................... -- 2,470 19,723 -- 6,565 --
----------- ----------- ----------- ----------- ----------- -------------
Current liabilities........... 30,877 83,939 329,741 4,861 112,314 (110,519)
----------- ----------- ----------- ----------- ----------- -------------
Long-term debt.................. -- 12,576 57,195 -- 3,451 (2,970)
Convertible subordinated
debentures.................... 69,000 -- -- -- -- --
Retirement and
other benefits................ 499 7,797 6,734 -- 4,097 --
Deferred taxes.................. -- 1,064 7,136 -- 783 (3,164)
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities............. 100,376 105,376 400,806 4,861 120,645 (116,653)
----------- ----------- ----------- ----------- ----------- -------------
Minority interests.............. -- -- 30,278 -- 34 --
SHAREHOLDERS' EQUITY
Common stock.................... 2,425 993 29,681 22,604 35,893 (89,171)
Additional paid-in capital...... 50,324 4,010 15,414 -- 55,710 (75,134)
Unearned restricted stock plan
compensation.................. (12) (94) (198) -- (14) (3)
Treasury stock.................. (3,799) -- -- -- -- --
Retained earnings............... 58,089 44,527 86,441 6,803 (5,776) (131,995)
Cumulative translation
adjustments................... (16,756) -- (17,229) 5,351 2,266 9,612
----------- ----------- ----------- ----------- ----------- -------------
Total shareholders' equity.... 90,271 49,436 114,109 34,758 88,079 (286,691)
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities and
shareholders' equity........ $ 190,647 $ 154,812 $ 545,193 $39,619 $ 208,758 $(403,344)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
<CAPTION>
TOTAL
--------
<S> <C>
ASSETS
Cash............................ $ 41,117
Receivables..................... 266,560
Intercompany accounts
receivable.................... --
Inventories..................... 256,519
Prepaid expenses................ 6,285
Marketable securities........... 837
--------
Current assets................ 571,318
--------
Property, plant
and equipment................. 122,013
Investment in subsidiaries...... --
Investment in affiliates........ 12,533
Other assets.................... 29,821
--------
Total assets.................. $735,685
--------
--------
LIABILITIES
Short-term borrowings........... $272,325
Current portion of
long-term debt................ 8,985
Accounts payable................ 141,145
Intercompany accounts payable... --
Taxes accrued................... 28,758
--------
Current liabilities........... 451,213
--------
Long-term debt.................. 70,252
Convertible subordinated
debentures.................... 69,000
Retirement and
other benefits................ 19,127
Deferred taxes.................. 5,819
--------
Total liabilities............. 615,411
--------
Minority interests.............. 30,312
SHAREHOLDERS' EQUITY
Common stock.................... 2,425
Additional paid-in capital...... 50,324
Unearned restricted stock plan
compensation.................. (321)
Treasury stock.................. (3,799)
Retained earnings............... 58,089
Cumulative translation
adjustments................... (16,756)
--------
Total shareholders' equity.... 89,962
--------
Total liabilities and
shareholders' equity........ $735,685
--------
--------
</TABLE>
F-24
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING BALANCE SHEETS
JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash............................ $ 1,308 $ 3,465 $ 108,409 $ 97 $ 18,909 $ --
Receivables..................... 5,603 17,652 122,457 1,739 58,893 --
Intercompany receivable......... 16,705 8,015 42,804 -- 4,063 (71,587)
Inventories..................... -- 45,671 179,294 1,590 59,898 --
Prepaids and other.............. 368 2,819 1,592 39 703 --
Marketable securities........... -- -- 1,298 -- 13 --
----------- ----------- ----------- ----------- ----------- -------------
Current assets................ 23,984 77,622 455,854 3,465 142,479 (71,587)
----------- ----------- ----------- ----------- ----------- -------------
Property, plant
and equipment................. -- 22,650 91,549 43 18,813 --
Investment in subsidiaries...... 152,143 -- 61,268 39,015 45,093 (297,519)
Investment in affiliates........ -- -- 10,463 -- 1,194 --
Other noncurrent assets......... 10,575 2,050 19,324 -- 5,900 --
----------- ----------- ----------- ----------- ----------- -------------
Total assets.................. $ 186,702 $ 102,322 $ 638,458 $42,523 $ 213,479 $(369,106)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
LIABILITIES
Short-term borrowings........... $ -- $ 13,301 273,428 $ -- 62,165 --
Current portion of
long-term debt................ 3,159 291 6,178 -- 825 --
Accounts payable................ 1,762 8,167 158,393 106 19,732 --
Intercompany accounts payable... 21,519 17,797 3,450 5,058 16,602 (64,426)
Taxes accrued................... -- 3,308 17,183 -- 8,037 --
----------- ----------- ----------- ----------- ----------- -------------
Current liabilities........... 26,440 42,864 458,632 5,164 107,361 (64,426)
----------- ----------- ----------- ----------- ----------- -------------
Long-term debt.................. 6,802 6,147 11,388 -- 4,685 --
Convertible subordinated
debentures.................... 69,000 -- -- -- -- --
Retirement and
other benefits................ 453 7,478 6,309 -- 4,411 --
Deferred taxes.................. -- 410 7,283 -- 1,021 --
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities............. 102,695 56,899 483,612 5,164 117,478 (64,426)
----------- ----------- ----------- ----------- ----------- -------------
Minority interests.............. -- -- 29,310 -- 32 --
ESOP redeemable
preferred stock............... 8,748 -- -- -- -- --
Unearned ESOP compensation...... (6,320) -- -- -- -- --
SHAREHOLDERS' EQUITY
Common stock.................... 2,349 993 47,848 22,604 27,492 (98,937)
Additional paid-in capital...... 44,722 4,010 16,645 -- 66,716 (87,371)
Unearned restricted stock plan
compensation.................. (15) (116) (255) -- (22) --
Treasury stock at cost.......... (2,633) -- -- -- -- --
Retained earnings............... 47,051 40,536 77,484 6,818 (7,202) (117,636)
Cumulative translation
adjustments................... (9,895) -- (16,186) 7,937 8,985 (736)
----------- ----------- ----------- ----------- ----------- -------------
Total shareholders' equity.... 81,579 45,423 125,536 37,359 95,969 (304,680)
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities and
shareholders' equity........ $ 186,702 $ 102,322 $ 638,458 $42,523 $ 213,479 $(369,106)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
<CAPTION>
TOTAL
--------
<S> <C>
ASSETS
Cash............................ $132,188
Receivables..................... 206,344
Intercompany receivable......... --
Inventories..................... 286,453
Prepaids and other.............. 5,521
Marketable securities........... 1,311
--------
Current assets................ 631,817
--------
Property, plant
and equipment................. 133,055
Investment in subsidiaries...... --
Investment in affiliates........ 11,657
Other noncurrent assets......... 37,849
--------
Total assets.................. $814,378
--------
--------
LIABILITIES
Short-term borrowings........... $348,894
Current portion of
long-term debt................ 10,453
Accounts payable................ 188,160
Intercompany accounts payable... --
Taxes accrued................... 28,528
--------
Current liabilities........... 576,035
--------
Long-term debt.................. 29,022
Convertible subordinated
debentures.................... 69,000
Retirement and
other benefits................ 18,651
Deferred taxes.................. 8,714
--------
Total liabilities............. 701,422
--------
Minority interests.............. 29,342
ESOP redeemable
preferred stock............... 8,748
Unearned ESOP compensation...... (6,320)
SHAREHOLDERS' EQUITY
Common stock.................... 2,349
Additional paid-in capital...... 44,722
Unearned restricted stock plan
compensation.................. (408)
Treasury stock at cost.......... (2,633)
Retained earnings............... 47,051
Cumulative translation
adjustments................... (9,895)
--------
Total shareholders' equity.... 81,186
--------
Total liabilities and
shareholders' equity........ $814,378
--------
--------
</TABLE>
F-25
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING BALANCE SHEETS
MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash............................ $ 3,851 $ 6,021 $ 50,441 $ 70 $ 18,305 $ --
Receivables..................... 6,237 40,605 133,994 2,092 69,189 --
Intercompany accounts
receivable.................... 16,617 8,409 45,958 -- 733 (71,717)
Inventories..................... -- 65,500 120,991 1,467 76,592 (4,769)
Prepaid expenses................ 617 1,741 2,723 12 328 (1,731)
Marketable securities........... -- -- 5,311 -- 14 --
----------- ----------- ----------- ----------- ----------- -------------
Current assets................ 27,322 122,276 359,418 3,641 165,161 (78,217)
----------- ----------- ----------- ----------- ----------- -------------
Property, plant
and equipment................. -- 22,410 92,092 47 19,949 --
Investment in subsidiaries...... 149,469 -- 69,430 39,676 45,268 (303,843)
Investment in affiliates........ -- -- 10,255 -- 1,187 --
Other assets.................... 10,632 2,181 21,583 -- 2,887 --
----------- ----------- ----------- ----------- ----------- -------------
Total assets.................. $ 187,423 $ 146,867 $ 552,778 $43,364 $ 234,452 $(382,060)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
LIABILITIES
Short-term borrowings........... $ -- $ 50,416 $ 250,135 $ -- $ 73,074 $ --
Current portion of
long-term debt................ 3,765 284 6,793 -- 823 --
Accounts payable................ 3,072 10,188 86,211 5,267 28,999 --
Intercompany accounts payable... 20,756 22,356 13,433 -- 18,520 (75,065)
Taxes accrued................... -- 2,808 16,866 -- 8,230 (3,128)
----------- ----------- ----------- ----------- ----------- -------------
Current liabilities........... 27,593 86,052 373,438 5,267 129,646 (78,193)
----------- ----------- ----------- ----------- ----------- -------------
Long-term debt.................. 7,407 6,222 13,463 -- 4,726 --
Convertible subordinated
debentures.................... 69,000 -- -- -- -- --
Retirement and
other benefits................ 404 7,409 6,164 -- 4,521 --
Deferred taxes.................. -- 1,316 8,189 -- 1,171 (1,044)
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities............. 104,404 100,999 401,254 5,267 140,064 (79,237)
----------- ----------- ----------- ----------- ----------- -------------
Minority interests.............. -- -- 27,436 -- 37 --
ESOP redeemable
preferred stock............... 8,748 -- -- -- -- --
Unearned ESOP compensation...... (6,320) -- -- -- -- --
SHAREHOLDERS' EQUITY
Preferred stock................. -- -- -- -- -- --
Common stock.................... 2,325 993 47,848 22,604 27,492 (98,937)
Additonal paid-in capital....... 43,660 4,010 16,893 -- 66,716 (87,619)
Unearned restricted stock plan
compensation.................. (16) (123) (269) -- (23) (4)
Treasury stock.................. (2,384) -- -- -- -- --
Retained earnings............... 46,450 40,988 73,651 7,075 (7,025) (114,689)
Cumulative translation
adjustments................... (9,444) -- (14,035) 8,418 7,191 (1,574)
----------- ----------- ----------- ----------- ----------- -------------
Total shareholders' equity.... 80,591 45,868 124,088 38,097 94,351 (302,823)
----------- ----------- ----------- ----------- ----------- -------------
Total liabilities and
shareholders' equity........ $ 187,423 $ 146,867 $ 552,778 $43,364 $ 234,452 $(382,060)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
<CAPTION>
TOTAL
--------
<S> <C>
ASSETS
Cash............................ $ 78,688
Receivables..................... 252,117
Intercompany accounts
receivable.................... --
Inventories..................... 259,781
Prepaid expenses................ 3,690
Marketable securities........... 5,325
--------
Current assets................ 599,601
--------
Property, plant
and equipment................. 134,498
Investment in subsidiaries...... --
Investment in affiliates........ 11,442
Other assets.................... 37,283
--------
Total assets.................. $782,824
--------
--------
LIABILITIES
Short-term borrowings........... $373,625
Current portion of
long-term debt................ 11,665
Accounts payable................ 133,737
Intercompany accounts payable... --
Taxes accrued................... 24,776
--------
Current liabilities........... 543,803
--------
Long-term debt.................. 31,818
Convertible subordinated
debentures.................... 69,000
Retirement and
other benefits................ 18,498
Deferred taxes.................. 9,632
--------
Total liabilities............. 672,751
--------
Minority interests.............. 27,473
ESOP redeemable
preferred stock............... 8,748
Unearned ESOP compensation...... (6,320)
SHAREHOLDERS' EQUITY
Preferred stock................. --
Common stock.................... 2,325
Additonal paid-in capital....... 43,660
Unearned restricted stock plan
compensation.................. (435)
Treasury stock.................. (2,384)
Retained earnings............... 46,450
Cumulative translation
adjustments................... (9,444)
--------
Total shareholders' equity.... 80,172
--------
Total liabilities and
shareholders' equity........ $782,824
--------
--------
</TABLE>
F-26
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales............................ $ -- $67,784 $ 196,360 $ 1,305 $82,583 $ (47,717)
Cost of sales:
-- Materials, services
and supplies............... -- 64,663 177,403 1,212 77,628 (47,717)
-- Interest................... -- 1,115 4,851 -- 1,300 --
----------- ----------- ----------- ----------- ----------- ------------
Gross profit..................... -- 2,006 14,106 93 3,655 (0)
Selling, general and
administrative expenses........ 738 2,887 10,123 67 3,694 150
Restructuring Charges............ -- -- -- -- -- --
Other interest expense........... 1,367 299 467 -- 83 --
Other income (expense),
net............................ 484 (17) 340 (75) 1,509 150
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) before taxes..... (1,621) (1,197) 3,856 (49) 1,387 (0)
Income taxes..................... (695) (408) -- -- 396 1,065
----------- ----------- ----------- ----------- ----------- ------------
Income (loss)
after taxes.................. (926) (789) 3,856 (49) 991 (1,065)
Minority interest................ -- -- (291) -- -- --
Equity in earnings (losses) of
affiliates..................... -- -- 126 -- -- --
Equity in earnings (losses) of
subsidiaries................... 2,779 -- -- 973 -- (3,752)
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) from continuing
operations................... 1,853 (789) 3,691 924 991 (4,817)
Income (loss) from discontinued
operations................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss).............. 1,853 (789) 3,691 924 991 (4,817)
ESOP preferred stock dividends,
net of tax..................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss) applicable to
common stock................. 1,853 (789) 3,691 924 991 (4,817)
Retained earnings at beginning of
period......................... 58,089 44,527 86,441 6,803 (5,776) (131,995)
Common stock
dividends.................... (2,073) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Retained earnings
at end of period............... $57,869 $43,738 $ 90,132 $ 7,727 $(4,785) $ (136,812)
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
<CAPTION>
TOTAL
--------
<S> <C>
Sales............................ $300,315
Cost of sales:
-- Materials, services
and supplies............... 273,189
-- Interest................... 7,266
--------
Gross profit..................... 19,860
Selling, general and
administrative expenses........ 17,659
Restructuring Charges............ --
Other interest expense........... 2,216
Other income (expense),
net............................ 2,391
--------
Income (loss) before taxes..... 2,376
Income taxes..................... 358
--------
Income (loss)
after taxes.................. 2,018
Minority interest................ (291)
Equity in earnings (losses) of
affiliates..................... 126
Equity in earnings (losses) of
subsidiaries................... --
--------
Income (loss) from continuing
operations................... 1,853
Income (loss) from discontinued
operations................... --
--------
Net income (loss).............. 1,853
ESOP preferred stock dividends,
net of tax..................... --
--------
Net income (loss) applicable to
common stock................. 1,853
Retained earnings at beginning of
period......................... 58,089
Common stock
dividends.................... (2,073)
--------
Retained earnings
at end of period............... $ 57,869
--------
--------
</TABLE>
F-27
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENTS OF INCOME AND RETAINED EARNINGS
YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales.......................... $ 9,379 $ 450,542 $ 757,426 $ 7,958 $ 341,258 $ (212,293)
Cost of sales:
-- Materials, services
and supplies............. -- 419,787 668,232 7,438 321,982 (200,059)
-- Interest................. -- 3,154 22,748 352 5,943 --
----------- ----------- ----------- ----------- ----------- ------------
Gross profit................... 9,379 27,601 66,446 168 13,333 (12,234)
Selling, general and adminis-
trative expenses............. 2,951 22,273 42,871 768 14,058 (10,139)
Other interest expense......... 5,472 1,188 2,187 -- 1,073 --
Other income (expense),
net.......................... (491) 255 4,971 (10) 3,434 2,095
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) before income
taxes...................... 465 4,395 26,359 (610) 1,636 --
Income tax expense (benefit)... 496 856 10,873 -- 557 --
----------- ----------- ----------- ----------- ----------- ------------
Income (loss)
after taxes................ (31) 3,539 15,486 (610) 1,079 --
Minority interests............. -- -- (3,938) -- -- --
Equity in earnings (losses) of
affiliates................... -- -- 1,242 -- 170 --
Equity in earnings (losses) of
subsidiaries................. 16,968 -- -- 338 -- (17,306)
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) from continuing
operations................. 16,937 3,539 12,790 (272) 1,249 (17,306)
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss)............ 16,937 3,539 12,790 (272) 1,249 (17,306)
ESOP preferred stock dividends,
net of tax................... (347) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) applicable to
common stock............... 16,590 3,539 12,790 (272) 1,249 (17,306)
Retained earnings at beginning
of year...................... 46,450 40,988 73,651 7,075 (7,025) (114,689)
Common stock
dividends.................. (4,951) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Retained earnings
at end of year............... $58,089 $ 44,527 $ 86,441 $ 6,803 $ (5,776) $ (131,995)
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
<CAPTION>
TOTAL
----------
<S> <C>
Sales.......................... $1,354,270
Cost of sales:
-- Materials, services
and supplies............. 1,217,380
-- Interest................. 32,197
----------
Gross profit................... 104,693
Selling, general and adminis-
trative expenses............. 72,782
Other interest expense......... 9,920
Other income (expense),
net.......................... 10,254
----------
Income (loss) before income
taxes...................... 32,245
Income tax expense (benefit)... 12,782
----------
Income (loss)
after taxes................ 19,463
Minority interests............. (3,938)
Equity in earnings (losses) of
affiliates................... 1,412
Equity in earnings (losses) of
subsidiaries................. --
----------
Income (loss) from continuing
operations................. 16,937
----------
Net income (loss)............ 16,937
ESOP preferred stock dividends,
net of tax................... (347)
----------
Income (loss) applicable to
common stock............... 16,590
Retained earnings at beginning
of year...................... 46,450
Common stock
dividends.................. (4,951)
----------
Retained earnings
at end of year............... $ 58,089
----------
----------
</TABLE>
F-28
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENTS OF INCOME AND RETAINED EARNINGS
THREE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sales........................... $ -- $35,700 $ 213,826 $ 1,880 $89,790 $ (30,805)
Cost of sales:
-Materials, services and
supplies.................... -- 32,929 191,834 1,772 85,164 (30,805)
-Interest..................... -- 577 5,356 -- 1,678 --
----------- ----------- ----------- ----------- ----------- -------------
Gross profit.................... -- 2,194 16,636 108 2,948 --
Selling, general and adminis-
trative expenses.............. 841 2,803 10,375 115 3,692 170
Restructuring charges........... -- -- -- -- -- --
Other interest expense.......... 1,451 84 682 -- 170 --
Other income (expense), net..... (161) 10 2,318 (70) 568 170
----------- ----------- ----------- ----------- ----------- -------------
Income (loss) before income
taxes......................... (2,453) (683) 7,897 (77) (346) --
Income taxes.................... (834) (231) 2,346 -- (169) --
----------- ----------- ----------- ----------- ----------- -------------
Income (loss)
after taxes................. (1,619) (452) 5,551 (77) (177) --
Minority interest............... -- -- (1,936) -- -- --
Equity in earnings (losses) of
affiliates.................... -- -- 218 -- -- --
Equity in earnings (losses) of
subsidiaries.................. 3,127 -- -- (180) -- (2,947)
----------- ----------- ----------- ----------- ----------- -------------
Income (loss) from continuing
operations.................. 1,508 (452) 3,833 (257) (177) (2,947)
Income (loss) from discontinued
operations.................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -------------
Net income.................... 1,508 (452) 3,833 (257) (177) (2,947)
ESOP preferred stock dividends,
net of tax.................... (115) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -------------
Net income (loss) applicable
to common stock............. 1,393 (452) 3,833 (257) (177) (2,947)
Retained earnings at beginning
of period..................... 46,450 40,988 73,651 7,075 (7,025) (114,689)
Common stock dividends........ (792) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -------------
Retained earnings at
end of period................. $47,051 $40,536 $ 77,484 $ 6,818 $(7,202) $(117,636)
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
<CAPTION>
TOTAL
--------
<S> <C>
Sales........................... $310,391
Cost of sales:
-Materials, services and
supplies.................... 280,894
-Interest..................... 7,611
--------
Gross profit.................... 21,886
Selling, general and adminis-
trative expenses.............. 17,996
Restructuring charges........... --
Other interest expense.......... 2,387
Other income (expense), net..... 2,835
--------
Income (loss) before income
taxes......................... 4,338
Income taxes.................... 1,112
--------
Income (loss)
after taxes................. 3,226
Minority interest............... (1,936)
Equity in earnings (losses) of
affiliates.................... 218
Equity in earnings (losses) of
subsidiaries.................. --
--------
Income (loss) from continuing
operations.................. 1,508
Income (loss) from discontinued
operations.................... --
--------
Net income.................... 1,508
ESOP preferred stock dividends,
net of tax.................... (115)
--------
Net income (loss) applicable
to common stock............. 1,393
Retained earnings at beginning
of period..................... 46,450
Common stock dividends........ (792)
--------
Retained earnings at
end of period................. $ 47,051
--------
--------
</TABLE>
F-29
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales.......................... $ 4,725 $ 263,306 $ 662,165 $10,272 $ 469,906 $ (196,809)
Cost of sales:
-- Materials, services and
supplies................... -- 236,663 602,432 9,844 439,854 (191,674)
-- Interest................. -- 4,600 23,406 -- 6,975 --
----------- ----------- ----------- ----------- ----------- ------------
Gross profit................... 4,725 22,043 36,327 428 23,077 (5,135)
Selling, general and adminis-
trative expenses............. 3,460 13,905 48,250 495 14,893 (494)
Restructuring charges..........
Other interest expense......... 6,209 2,398 1,195 -- 145 --
Other income (expense),
net.......................... (638) 1,457 13,396 (61) 176 4,641
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) before income
taxes........................ (5,582) 7,197 278 (128) 8,215 --
Income tax expense (benefit)... 1,103 2,278 10,940 -- 2,049 --
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) after taxes.... (6,685) 4,919 (10,662) (128) 6,166 --
Minority interests............. -- -- (9,634) -- -- --
Equity in earnings (losses) of
affiliates................... -- -- (4,660) -- 190 --
Equity in earnings (losses) of
subsidiaries................. (23,859) -- -- 3,293 -- 20,566
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) from continuing
operations................. (30,544) 4,919 (24,956) 3,165 6,356 20,566
Income (loss) from discontinued
operations................... -- -- -- -- (10,050) --
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss)............ (30,544) 4,919 (24,956) 3,165 (3,694) 20,566
ESOP preferred stock dividends,
net of tax................... (485) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) applicable to
common stock............... (31,029) 4,919 (24,956) 3,165 (3,694) 20,566
Retained earnings at beginning
of year...................... 84,807 32,513 94,538 11,759 3,770 (142,580)
Common stock dividends....... (3,248) -- -- (4,595) -- 4,595
----------- ----------- ----------- ----------- ----------- ------------
Retained earnings at
end of year.................. $ 50,530 $ 37,432 $ 69,582 $10,329 $ 76 $ (117,419)
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
<CAPTION>
TOTAL
----------
<S> <C>
Sales.......................... $1,213,565
Cost of sales:
-- Materials, services and
supplies................... 1,097,119
-- Interest................. 34,981
----------
Gross profit................... 81,465
Selling, general and adminis-
trative expenses............. 80,509
Restructuring charges.......... --
Other interest expense......... 9,947
Other income (expense),
net.......................... 18,971
----------
Income (loss) before income
taxes........................ 9,980
Income tax expense (benefit)... 16,370
----------
Income (loss) after taxes.... (6,390)
Minority interests............. (9,634)
Equity in earnings (losses) of
affiliates................... (4,470)
Equity in earnings (losses) of
subsidiaries................. --
----------
Income (loss) from continuing
operations................. (20,494)
Income (loss) from discontinued
operations................... (10,050)
----------
Net income (loss)............ (30,544)
ESOP preferred stock dividends,
net of tax................... (485)
----------
Income (loss) applicable to
common stock............... (31,029)
Retained earnings at beginning
of year...................... 84,807
Common stock dividends....... (3,248)
----------
Retained earnings at
end of year.................. $ 50,530
----------
----------
</TABLE>
F-30
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES..................... $ (46,986) $ 30,674 $ (16,721) $ (7) $ 42 $ 50,168
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and
equipment -- additions......... -- (264) (2,078) (31) (697) 161
-- disposals......... -- 4 57 -- 1,488 (33)
Minority interest................ -- -- 201 -- -- (201)
Net advances from (to) group
companies...................... -- (6,231) 6,231 -- -- --
Collections of note receivable... -- -- -- -- -- --
Business (acquisitions)
dispositions................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ------------
CASH PROVIDED BY INVESTING
ACTIVITIES..................... -- (6,491) 4,411 (31) 791 (73)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings..................... -- -- 584 -- -- (584)
Repayment of long-term
borrowings..................... -- -- -- -- (2,170) (2,469)
Net change in short-term
borrowings..................... -- (25,249) 12,219 -- 11 (47,042)
Dividends paid,
net of tax..................... -- -- -- -- -- --
Purchase and retirement of ESOP.. -- -- -- -- -- --
Net proceeds of equity
offering....................... 47,043 -- -- -- -- --
Other............................ -- -- 910 -- (110) --
----------- ----------- ----------- ----------- ----------- ------------
CASH USED FOR FINANCING
ACTIVITIES..................... 47,043 (25,249) 13,713 -- (2,269) (50,095)
Net increase (decrease) in
cash........................... 57 (1,066) 1,403 (38) (1,436) --
Cash at beginning of period...... 327 1,102 28,956 119 10,613 --
----------- ----------- ----------- ----------- ----------- ------------
CASH AT END OF PERIOD............ $ 384 $ 36 $ 30,359 $ 81 $ 9,177 --
----------- ----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ----------- ------------
<CAPTION>
TOTAL
--------
<S> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES..................... $ 17,170
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and
equipment -- additions......... (2,909)
-- disposals......... 1,516
Minority interest................ --
Net advances from (to) group
companies...................... --
Collections of note receivable... --
Business (acquisitions)
dispositions................... --
--------
CASH PROVIDED BY INVESTING
ACTIVITIES..................... (1,393)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings..................... --
Repayment of long-term
borrowings..................... (4,639)
Net change in short-term
borrowings..................... (60,061)
Dividends paid,
net of tax..................... --
Purchase and retirement of ESOP.. --
Net proceeds of equity
offering....................... 47,043
Other............................ 800
--------
CASH USED FOR FINANCING
ACTIVITIES..................... (16,857)
Net increase (decrease) in
cash........................... (1,080)
Cash at beginning of period...... 41,117
--------
CASH AT END OF PERIOD............ $ 40,037
--------
--------
</TABLE>
F-31
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES.................... $ 9,954 $ 10,380 $ 3,881 $ 53 $ 6,245 $ 4,146
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and
equipment -- additions........ -- (3,024) (8,691) (22) (1,085) 6
-- disposals........ -- 156 2,193 18 462 2,243
Minority interest............... -- -- (2,842) -- 3 2,839
Net advances from (to) group
companies..................... -- (6,674) 6,674 -- -- --
Collections of note
receivable.................... 500 -- -- -- -- (500)
Business (acquisitions)
dispositions.................. -- -- 3,148 -- 1,392 (1,236)
----------- ----------- ----------- ----------- ----------- -------------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES.......... 500 (9,542) 482 (4) 772 3,352
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings.................... -- 10,000 405 -- -- --
Repayment of long-term
borrowings.................... (11,171) (1,618) (4,876) -- 1,058 (4,524)
Net change in short-term
borrowings.................... -- (14,139) (21,948) -- (15,343) (2,827)
Dividends paid,
net of tax.................... (347) -- -- -- -- --
Purchase and retirement of
ESOP Preferred Stock.......... (2,460) -- -- -- -- --
Other........................... -- -- 571 -- (424) (147)
----------- ----------- ----------- ----------- ----------- -------------
CASH USED FOR FINANCING
ACTIVITIES.................... (13,978) (5,757) (25,848) -- (14,709) (7,498)
Net increase (decrease) in cash
for year...................... (3,524) (4,919) (21,485) 49 (7,692) --
Cash at beginning of year....... 3,851 6,021 50,441 70 18,305 --
----------- ----------- ----------- ----------- ----------- -------------
CASH AT END OF YEAR............. $ 327 $ 1,102 $ 28,956 $ 119 $ 10,613 $ --
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest.................... $ 8,105 $ 951 $ 17,691 $ -- $ 16,043 $ --
Income taxes................ 660 1,365 6,935 -- 97 --
<CAPTION>
TOTAL
--------
<S> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES.................... $ 34,659
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and
equipment -- additions........ (12,816)
-- disposals........ 5,072
Minority interest............... --
Net advances from (to) group
companies..................... --
Collections of note
receivable.................... --
Business (acquisitions)
dispositions.................. 3,304
--------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES.......... (4,440)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings.................... 10,405
Repayment of long-term
borrowings.................... (21,131)
Net change in short-term
borrowings.................... (54,257)
Dividends paid,
net of tax.................... (347)
Purchase and retirement of
ESOP Preferred Stock.......... (2,460)
Other........................... --
--------
CASH USED FOR FINANCING
ACTIVITIES.................... (67,790)
Net increase (decrease) in cash
for year...................... (37,571)
Cash at beginning of year....... 78,688
--------
CASH AT END OF YEAR............. $ 41,117
--------
--------
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest.................... $ 42,790
Income taxes................ 9,057
</TABLE>
F-32
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES.................... $(1,217) $ 35,045 $ 40,664 $27 $ 11,805 $(1,884)
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and equipment
-additions... -- (885) (1,183) -- (197) --
-disposals........... -- 5 7 -- 49 186
Minority interest............... -- -- (1,874) -- 5 1,869
Net advances from (to) group
companies..................... -- 394 (394) -- -- --
Collections of note
receivable.................... -- -- -- -- -- --
Business (acquisitions)
dispositions.................. -- -- -- -- -- --
----------- ----------- ----------- --- ----------- -------------
CASH PROVIDED BY INVESTING
ACTIVITIES.................... -- (486) (3,444) -- (143) 2,055
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings.................... -- -- -- -- -- --
Repayment of long-term
borrowings.................... (1,211) -- (2,690) -- (39) (136)
Net change in short-term
borrowings.................... -- (37,115) 23,293 -- (10,909) --
Dividends paid, net of tax...... (115) -- -- -- -- --
Purchase and retirement of
ESOP.......................... -- -- -- -- -- --
Preferred stock................. -- -- -- -- -- --
Other........................... -- -- 145 -- (110) (35)
----------- ----------- ----------- --- ----------- -------------
CASH USED IN FINANCING
ACTIVITIES.................... (1,326) (37,115) 20,748 -- (11,058) (171)
Net increase (decrease) in
cash.......................... (2,543) (2,556) 57,968 27 604 --
Cash at beginning of period..... 3,851 6,021 50,441 70 18,305 --
----------- ----------- ----------- --- ----------- -------------
CASH AT END OF PERIOD........... $ 1,308 $ 3,465 $ 108,409 $97 $ 18,909 $ --
----------- ----------- ----------- --- ----------- -------------
----------- ----------- ----------- --- ----------- -------------
<CAPTION>
TOTAL
--------
<S> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES.................... $ 84,440
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and equipment
-additions... (2,265)
-disposals........... 247
Minority interest............... --
Net advances from (to) group
companies..................... --
Collections of note
receivable.................... --
Business (acquisitions)
dispositions.................. --
--------
CASH PROVIDED BY INVESTING
ACTIVITIES.................... (2,018)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings.................... --
Repayment of long-term
borrowings.................... (4,076)
Net change in short-term
borrowings.................... (24,731)
Dividends paid, net of tax...... (115)
Purchase and retirement of
ESOP.......................... --
Preferred stock................. --
Other........................... --
--------
CASH USED IN FINANCING
ACTIVITIES.................... (28,922)
Net increase (decrease) in
cash.......................... 53,500
Cash at beginning of period..... 78,688
--------
CASH AT END OF PERIOD........... $132,188
--------
--------
</TABLE>
F-33
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES.......... $ 7,548 $ (2,913) $ 7,750 $ 969 $ 23,822 $ 12,671
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and
equipment -- additions........ -- (1,120) (10,397) -- (603) (91)
-- disposals........ 340 1,268 2,115 (572)
Minority interest............... -- -- 3,863 -- 1 (11,604)
Net advances from (to) group
companies..................... -- (2,292) 2,292 -- -- --
Collections of note
receivable.................... 620 -- -- -- -- (620)
Business (acquisitions)
dispositions.................. -- -- (1,000) (35) 468 1,007
----------- ----------- ----------- ----------- ----------- -------------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES.......... 620 (3,072) (3,974) (35) 1,981 (11,880)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings.................... 3,662 -- 6,000 -- -- (17)
Repayment of long-term
borrowings.................... (7,858) (257) (1,762) -- (611) (4,480)
Net change in short-term
borrowings.................... -- 10,446 (3,281) (1,000) (15,323) (3,828)
Dividends paid, net of tax...... (474) -- -- -- -- --
Other........................... -- -- 502 -- (266) (122)
----------- ----------- ----------- ----------- ----------- -------------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES.......... (4,670) 10,189 1,459 (1,000) (16,200) (791)
Net increase (decrease) in cash
for year...................... 3,498 4,204 5,235 (66) 9,603 --
Cash at beginning of year....... 353 1,817 45,206 136 8,702 --
----------- ----------- ----------- ----------- ----------- -------------
CASH AT END OF YEAR............. $ 3,851 $ 6,021 $ 50,441 $ 70 $ 18,305 $ --
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest.................... $ 2,962 $ 772 $ 24,992 $ -- $ 15,700 $ --
Income taxes................ 575 799 4,537 -- 522 --
<CAPTION>
TOTAL
--------
<S> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES.......... $ 49,847
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and
equipment -- additions........ (12,211)
-- disposals........ 3,151
Minority interest............... (7,740)
Net advances from (to) group
companies..................... --
Collections of note
receivable.................... --
Business (acquisitions)
dispositions.................. 440
--------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES.......... (16,360)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings.................... 9,645
Repayment of long-term
borrowings.................... (14,968)
Net change in short-term
borrowings.................... (5,330)
Dividends paid, net of tax...... (474)
Other........................... 114
--------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES.......... (11,013)
Net increase (decrease) in cash
for year...................... 22,474
Cash at beginning of year....... 56,214
--------
CASH AT END OF YEAR............. $ 78,688
--------
--------
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest.................... $ 44,426
Income taxes................ 6,433
</TABLE>
F-34
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL CORPORATION (THE "COMPANY")
CONDENSED FINANCIAL INFORMATION
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
STANDARD TOBACCO WOOL
STANDARD COMMERCIAL OPERATING OPERATING
COMMERCIAL TOBACCO CO. SUBSIDIARIES STANDARD SUBSIDIARIES
CORPORATION INC. (NON- WOOL, INC. (NON-
(GUARANTOR) (ISSUER) GUARANTORS) (GUARANTOR) GUARANTORS) ELIMINATIONS
----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES......... $ 7,082 $ 27,093 $ 76,042 $ 7,428 $ (19,172) $ (3,053)
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and equipment
-- additions... -- (4,566) (9,839) -- (2,923) --
-- disposals....... -- 30 14,073 -- 2,171 --
Net advances from (to) group
companies.................... -- 6,114 (6,114) -- -- --
Business (acquisitions)
dispositions................. 1,217 -- 807 -- -- (4,629)
----------- ----------- ----------- ----------- ----------- -------------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES......... 1,217 1,578 (1,073) -- (752) (4,629)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings................... -- 3,943 815 -- 5,683 1
Repayment of long-term
borrowings................... (8,857) (120) (20,050) -- (79) (7)
Net change in short-term
borrowings................... -- (33,203) (66,099) (2,952) 12,024 3,824
Dividends paid, net of tax..... (485) -- -- (4,595) -- 4,595
Other.......................... -- -- (84) -- 1,028 (731)
----------- ----------- ----------- ----------- ----------- -------------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES......... (9,342) (29,380) (85,418) (7,547) 18,656 7,682
Net increase (decrease) in cash
for year..................... (1,043) (709) (10,449) (119) (1,268) --
Cash at beginning of year...... 1,396 2,526 55,655 255 9,970 --
----------- ----------- ----------- ----------- ----------- -------------
CASH AT END OF YEAR............ $ 353 $ 1,817 $ 45,206 $ 136 $ 8,702 $ --
----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- -------------
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest................... $ 6,563 $ 2,415 $ 23,965 $ -- $ 14,645 $ --
Income taxes............... 1,052 4,645 2,139 -- 605 --
<CAPTION>
TOTAL
----------
<S> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES......... $ 95,420
CASH FLOWS FROM INVESTING
ACTIVITIES
Property, plant and equipment
-- additions... (17,328)
-- disposals....... 16,274
Net advances from (to) group
companies.................... --
Business (acquisitions)
dispositions................. (2,605)
----------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES......... (3,659)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
borrowings................... 10,442
Repayment of long-term
borrowings................... (29,113)
Net change in short-term
borrowings................... (86,406)
Dividends paid, net of tax..... (485)
Other.......................... 213
----------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES......... (105,349)
Net increase (decrease) in cash
for year..................... (13,588)
Cash at beginning of year...... 69,802
----------
CASH AT END OF YEAR............ $ 56,214
----------
----------
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest................... $ 47,588
Income taxes............... 8,441
</TABLE>
F-35
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
(a) Each of the Guarantors, the Parent and Standard Wool, Inc. has fully
and unconditionally guaranteed on a joint and several basis the performance and
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all of the Company's obligations under the Notes and the related
indenture, including its obligations to pay principal, premium, if any, and
interest with respect to the Notes. The obligations of each Guarantor is limited
to the maximum amount which, after giving effect to all other contingent and
fixed liabilities of such Guarantor and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, can be guaranteed by the relevant
Guarantor without resulting in the obligations of such Guarantor under its
Guarantee constituting a fraudulent conveyance or fraudulent transfer under
applicable federal or state law. Each of the Guarantees is a guarantee of
payment and not collection. Each Guarantor that makes a payment or distribution
under a Guarantee shall be entitled to a contribution from each other Guarantor
in an amount PRO RATA, based on the assets less liabilities of each Guarantor
determined in accordance with generally accepted accounting principles (GAAP).
Each Guarantor that makes a payment or distribution shall be entitled to a
contribution from each other Guarantor in an amount PRO RATA, based on the net
assets of each Guarantor, determined in accordance with GAAP.
Each Guarantor may consolidate with or merge into or sell its assets to the
Issuer, or with other Persons upon the terms and conditions set forth in the
Indenture. See "Certain Covenants -- Merger, Consolidation and Sale of Assets."
In the event (A) more than 49% of the Capital Stock of Standard Wool is sold by
the Company or (B) more than 49% of the consolidated assets of Standard Wool are
sold in compliance with all of the terms of the Indenture, the Standard Wool
Guarantee will be released.
Management has determined that separate, full financial statements of the
Guarantors would not be material to investors and therefore such financial
statements are not provided.
(b) Each of the Guarantors has accounted for their respective subsidiaries
on the equity basis.
(c) Certain reclassifications were made to conform all of the financial
information to the financial presentation on a consolidated basis. The principal
eliminating entries eliminate investments in subsidiaries and intercompany
balances.
(d) Included in the above balance sheets are certain related party balances
among borrower, the guarantors and non-guarantors. Due to the Company's
world-wide operations, related party activity is included in most balance sheet
accounts. The tables below set forth the significant intercompany balances for
each of the periods presented.
The Company and Standard Wool, jointly and severally, guarantee on a senior
basis to each Holder and the Trustee, the full and prompt performance of the
Issuer's obligations under the Indenture and the Notes, including the payment of
the principal of and interest and Additional Interest, if any, on the Notes (the
Company and Standard Wool being referred to herein as "Guarantors" and the
guarantees being referred to respectively as the "Parent Guarantee" and the
"Standard Wool Guarantee," and together , the "Guarantees"). In addition, all of
the issued and outstanding capital stock of the Issuer and Standard Wool is
pledged by the Company to the Trustee for the benefit of the Holders of the
Notes as security for the Parent Guarantee.
F-36
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
The Company has reorganized the ownership of its subsidiaries such that all
of its tobacco operating subsidiaries (as well as Standard Wool (UK) Limited)
are direct or indirect subsidiaries of the Issuer. The following pro forma
supplemental financial statements present the financial information of the
Issuer after giving effect to the reorganization.
STANDARD COMMERCIAL TOBACCO CO., INC. (THE "ISSUER")
CONDENSED FINANCIAL INFORMATION
PRO FORMA SUPPLEMENTAL BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
----------- ---------
<S> <C> <C>
(UNAUDITED)
ASSETS
Cash................................................................................................. $ 30,395 $ 30,058
Receivables.......................................................................................... 178,698 210,272
Intercompany accounts receivable..................................................................... 186,687 41,123
Inventories.......................................................................................... 262,787 213,695
Prepaid expenses..................................................................................... 7,182 8,980
Marketable securities................................................................................ 784 823
----------- ---------
Current assets..................................................................................... 666,533 504,951
----------- ---------
Property, plant and equipment........................................................................ 103,805 105,768
Investment in affiliates............................................................................. 11,097 11,321
Other assets......................................................................................... 10,144 14,251
----------- ---------
Total assets....................................................................................... $ 791,579 $ 636,291
----------- ---------
----------- ---------
LIABILITIES
Short-term borrowings................................................................................ 86,564 $ 214,594
Current portion of long-term debt.................................................................... 7,631 7,945
Accounts payable..................................................................................... 196,171 124,798
Intercompany accounts payable........................................................................ 199,966 44,150
Taxes accrued........................................................................................ 19,885 22,193
----------- ---------
Current liabilities................................................................................ 510,217 413,680
----------- ---------
Long-term debt....................................................................................... 132,438 69,771
Retirement and other benefits........................................................................ 14,532 14,531
Deferred taxes....................................................................................... 4,555 8,200
----------- ---------
Total liabilities.................................................................................. 661,742 506,182
----------- ---------
Minority interests................................................................................... 30,077 30,278
SHAREHOLDERS' EQUITY
Common stock......................................................................................... 993 993
Additional paid-in capital........................................................................... 55,116 54,405
Unearned restricted stock plan compensation.......................................................... (87) (94)
Retained earnings.................................................................................... 43,738 44,527
----------- ---------
Total shareholders' equity......................................................................... 99,760 99,831
----------- ---------
Total liabilities and shareholders' equity......................................................... $ 791,579 $ 636,291
----------- ---------
----------- ---------
</TABLE>
F-37
<PAGE>
STANDARD COMMERCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION -- Continued
STANDARD COMMERCIAL TOBACCO CO., INC. (THE "ISSUER")
CONDENSED FINANCIAL INFORMATION
PRO FORMA SUPPLEMENTAL COMBINING STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEARS ENDED MARCH 31,
-------------------- --------------------------------------
1997 1996 1997 1996 1995
-------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales........................................................... $264,144 $249,526 $1,162,593 $1,099,482 $ 908,794
Cost of sales:
-Materials, services and supplies............................. 242,066 224,763 1,042,644 978,168 822,418
-Interest..................................................... 5,966 5,933 25,902 32,698 28,006
-------- -------- ---------- ---------- ----------
Gross profit.................................................... 16,112 18,830 94,047 88,616 58,370
Selling, general and administrative expenses.................... 13,010 13,178 65,144 67,079 62,155
Restructuring charges........................................... -- -- -- 5,028 --
Other interest expense.......................................... 766 766 3,375 3,370 3,593
Other income (expense), net..................................... 323 2,328 5,226 8,751 14,853
-------- -------- ---------- ---------- ----------
Income (loss) before income taxes............................... 2,659 7,214 30,754 21,890 7,475
Income tax expense (benefit).................................... 408 2,115 11,729 9,254 13,218
-------- -------- ---------- ---------- ----------
Income (loss) after taxes..................................... 3,067 5,099 19,025 12,636 (5,743)
Minority interests.............................................. (291) (1,936) (3,938) (4,795) (9,634)
Equity in earnings (losses) of affiliates....................... 126 218 1,242 (216) (4,660)
-------- -------- ---------- ---------- ----------
Net income (loss)............................................... $ 2,902 $ 3,381 $ 16,329 $ 7,625 $ 20,037
-------- -------- ---------- ---------- ----------
-------- -------- ---------- ---------- ----------
</TABLE>
F-38
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of Standard
Commercial Tobacco Co., Inc. and Subsidiaries as of March 31, 1997 and 1996 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, 1997. 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, 1997
and 1996 and the results of its operations and its cash flows for each of the
three years in the period ended March 31, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE, LLP
Raleigh, North Carolina
June 18, 1997
F-39
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, --------------------
1997 1997 1996
----------- -------- --------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Cash..................................................................................... $ 36 $ 1,102 $ 6,021
Receivables (Note 2)..................................................................... 23,797 35,737 40,605
Due from group and affiliated companies (Note 5)......................................... 136,314 15,083 8,409
Inventories (Notes 1 and 3).............................................................. 52,910 74,309 65,500
Prepaid expenses......................................................................... 403 4,190 1,741
-----------
Current assets......................................................................... 213,460 130,421 122,276
Property, plant and equipment (Notes 1 and 4)............................................ 21,371 22,513 22,410
Other assets (Notes 1 and 9)............................................................. 1,692 1,878 2,181
-----------
Total assets........................................................................... $ 236,523 $154,812 $146,867
----------- -------- --------
----------- -------- --------
LIABILITIES
Short-term borrowings (Note 6)........................................................... $ 11,028 $ 36,277 $ 50,416
Current portion of long-term debt (Note 8)............................................... 2,320 2,312 284
Due to group and affiliated companies (Note 5)........................................... 23,908 28,757 22,356
Accounts payable (Note 7)................................................................ 12,437 14,123 10,188
Taxes accrued (Note 11).................................................................. 3,205 2,470 2,808
----------- -------- --------
Current liabilities.................................................................... 52,898 83,939 86,052
Long-term debt (Note 8).................................................................. 126,993 12,576 6,222
Retirement and other benefits (Note 9)................................................... 7,896 7,797 7,409
Deferred taxes (Notes 1 and 11).......................................................... 82 1,064 1,316
Commitments and contingencies (Note 10).................................................. -- -- --
----------- -------- --------
Total liabilities...................................................................... 187,869 105,376 100,999
SHAREHOLDERS' EQUITY
Common stock, $25 par value
Authorized shares 75,000;
39,700 shares issued................................................................ 993 993 993
Additional paid-in capital............................................................... 4,010 4,010 4,010
Unearned restricted stock plan compensation.............................................. (87) (94) (123)
Retained earnings........................................................................ 43,738 44,527 40,988
----------- -------- --------
Total shareholders' equity............................................................. 48,654 49,436 45,868
----------- -------- --------
Total liabilities and shareholders' equity............................................. $ 236,523 $154,812 $146,867
----------- -------- --------
----------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------ --------------------------------
1997 1996 1997 1996 1995
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales (Note 13).................................................... $67,784 $35,700 $450,542 $358,037 $263,306
Cost of sales
-- Materials, services and supplies (Note 3).................... 64,663 32,929 419,787 330,813 236,663
-- Interest..................................................... 1,115 577 3,154 3,971 4,600
------- ------- -------- -------- --------
Gross Profit..................................................... 2,006 2,194 27,601 23,253 22,043
Selling, general and administrative expenses....................... 2,887 2,803 22,273 18,447 13,905
Other interest expense............................................. 299 84 1,188 648 2,398
Other income (expense), net........................................ (17) 10 255 1,049 1,457
------- ------- -------- -------- --------
Income (loss) before taxes....................................... (1,197) (683) 4,395 5,207 7,197
Income taxes (Notes 1 and 11)...................................... 408 231 856 1,651 2,278
------- ------- -------- -------- --------
Net income (loss)................................................ (789) (452) 3,539 3,556 4,919
Retained earnings at beginning of year............................. 44,527 40,988 40,988 37,432 32,513
------- ------- -------- -------- --------
Retained earnings at end of year................................... $43,738 $40,536 $ 44,527 $ 40,988 $ 37,432
------- ------- -------- -------- --------
------- ------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------- --------------------------------
1997 1996 1997 1996 1995
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................... $ (789) $ (452) $ 3,539 $ 3,556 $ 4,919
Depreciation and amortization..................................... 840 754 2,769 2,769 2,725
Deferred income taxes............................................. (982) (906) (252) 177 32
Loss (gain) on disposition of property, plant and equipment....... (2) -- (4) (253) 5
Other............................................................. 4,803 (553) (2,067) (1,274) (1,557)
------- -------- -------- -------- --------
3,985 4,975 6,124
Net changes in working capital other than cash
Receivables....................................................... 11,940 22,953 4,868 (16,523) 1,045
Inventories....................................................... 21,399 19,829 (8,809) (1,254) 29,026
Current payables.................................................. (1,686) (2,021) 3,935 3,165 (1,107)
Due to group and affiliated companies............................. (4,849) (4,559) 6,401 6,724 (7,995)
------- -------- -------- -------- --------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES.................... 30,674 35,045 10,380 (2,913) 27,093
------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment -- additions.......................... (264) (885) (3,024) (1,120) (4,566)
-- dispositions..................... 4 5 156 340 30
Net advances from (to) group company................................ (6,231) 394 (6,674) (2,292) 6,114
------- -------- -------- -------- --------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES.................... (6,491) (486) (9,542) (3,072) 1,578
------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings.................................. -- -- 10,000 3,943
Repayment of long-term borrowings................................... -- -- (1,618) (257) (120)
Net change in short-term borrowings................................. (25,249) (37,115) (14,139) 10,446 (33,203)
------- -------- -------- -------- --------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES.................... (25,249) (37,115) (5,757) 10,189 (29,380)
------- -------- -------- -------- --------
Increase (decrease) in cash for year................................ (1,066) (2,556) (4,919) 4,204 (709)
Cash at beginning of year........................................... 1,102 6,021 6,021 1,817 2,526
------- -------- -------- -------- --------
CASH AT END OF YEAR................................................. $ 36 $ 3,465 $ 1,102 $ 6,021 $ 1,817
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Cash payments for -- interest....................................... -- -- $ 951 $ 772 $ 2,415
-- income taxes................................. -- -- $ 1,365 $ 799 $ 4,645
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION AND CONSOLIDATION. Standard Commercial Tobacco
Co., Inc. (the "Company"), a leaf tobacco dealer located in Wilson, North
Carolina, is a wholly-owned subsidiary of Standard Commercial Corporation (the
"Parent"). The accounts of all subsidiary companies are included in the
consolidated financial statements and all intercompany transactions have been
eliminated. The Parent and its other subsidiaries are herein referred to as
"group companies."
CRES Tobacco Company, Inc. ("CRES"), a wholly-owned subsidiary of the
Company located in King, North Carolina, began operations during fiscal year
1995.
CRES utilizes its facility to provide nonexclusive processing services to a
major cigarette manufacturer pursuant to a services agreement (the "Services
Agreement"). As specified in the Services Agreement, the cigarette manufacturer
reimburses CRES for its (i) actual processing costs which includes salaries,
benefits, utilities, and other direct costs (i.e., "processing revenue") and
(ii) debt service on permanent financing (i.e., term note payable) and an
obligation under an operating lease commitment. The cigarette manufacturer also
pays CRES a management fee based on processed through-put. The Services
Agreement expires in September 2004 and is guaranteed by the cigarette
manufacturer's parent company. Such Services Agreement is assigned to a lessor
as security for the Company's operating lease and term note payable.
B) 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 3-25 years, of the assets on a
straight-line basis.
C) 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. Other
inventories are valued at cost.
D) ADVANCES. The Company advances funds to vendors to be used as credits
against future tobacco purchases. These amounts are included in prepaid expenses
in the consolidated financial statements.
E) REVENUE RECOGNITION. Sales and revenue are recognized on the passage of
title.
F) DEFERRED REVENUES. The Company has received customer advances to be used
for tobacco purchases. These amounts are included in accounts payable in the
consolidated financial statements.
G) INCOME TAXES. The Company provides deferred income taxes on differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes and operating loss carryforwards.
H) LONG-LIVED ASSETS. As required, the Company adopted Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Accordingly,
long-lived assets are reviewed for impairment on a market-by-market basis
whenever events or changes in the circumstances indicate that the carrying
amount of an asset may not be recoverable. If an evaluation is required, the
projected future undiscounted future cash flows attributable to each market
would be compared to the carrying value of the long-lived assets (including an
allocation of goodwill, if appropriate) of that market if a write-down to fair
value is required. The Company also evaluates the remaining useful lives to
determine whether events and circumstances warrant revised estimates of such
lives.
I) USE OF ESTIMATES AND ASSUMPTIONS. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
J) RECLASSIFICATION. Certain amounts in prior year statements have been
reclassified for conformity with current statement presentation.
F-43
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
2. RECEIVABLES
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
Trade accounts.................................................................. $34,528 $39,351
Other........................................................................... 1,209 1,254
------- -------
$35,737 $40,605
------- -------
------- -------
</TABLE>
3. INVENTORIES
<TABLE>
<CAPTION>
JUNE 30,
1997 (UNAUDITED) 1997 1996
---------------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Tobacco........................................................ $ 52,618 $74,049 $65,256
Nontobacco..................................................... 292 260 244
---------------- -------
$ 52,910 $74,309 $65,500
---------------- -------
---------------- -------
</TABLE>
Tobacco inventories at March 31, 1997 and 1996 included capitalized
interest, totaling $3.0 million and $2.7 million, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
Land............................................................................ $ 1,008 $ 985
Buildings....................................................................... 19,954 19,586
Machinery and equipment......................................................... 30,701 28,644
Furniture and fixtures.......................................................... 567 550
Construction in progress........................................................ 33 56
------- -------
52,263 49,821
Accumulated depreciation........................................................ (29,750) (27,411)
------- -------
$22,513 $22,410
------- -------
------- -------
</TABLE>
Depreciation expense was $2.8 million, $2.8 million and $2.7 million in
1997, 1996 and 1995, respectively.
5. AFFILIATED COMPANIES
The accompanying consolidated financial statements include the following
transactions and balances with group and affiliated companies for the years
ended March 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales............................................................ $ -- $ 519 $ 609
Purchases of tobacco................................................. 45,375 34,524 16,677
Management fee paid to Parent........................................ 9,380 6,275 4,600
Other purchases, rent, rehandling, and storage expense............... 2,524 1,849 1,003
Computer and consulting fees......................................... 972 847 651
Due from affiliates.................................................. 15,083 8,409 --
Due to affiliates.................................................... 28,757 22,356 --
</TABLE>
In addition, the Company pays salaries and other operating expenses on
behalf of various domestic group companies and charges those companies for
expenses paid on a reimbursement basis. Amounts paid on behalf of these
companies totaled $4.7 million and $6.7 million in 1997 and 1996, respectively.
F-44
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
6. SHORT-TERM BORROWINGS
At March 31, 1997, the Company had a $100.0 million, three-year credit
facility expiring May 1998. Included in the $100.0 million credit facility is a
facility for letters of credit. The interest on the credit facility is based on
a floating rate, and the facility is guaranteed by the Parent and an affiliated
company. At March 31, 1997, borrowings of approximately $35.6 million ($50.0
million at March 31, 1996), with interest at 7.8% to 9.0%, were outstanding
under the Company's credit facility. At March 31, 1997 substantially all of the
Company's assets were pledged against current and long-term borrowings.
7. ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
Trade accounts.................................................................. $ 2,172 $ 5,616
Advances from customers......................................................... 8,088 1,540
Interest........................................................................ 405 287
Other accruals and payables..................................................... 3,458 2,745
------- -------
$14,123 $10,188
------- -------
------- -------
</TABLE>
8. LONG-TERM DEBT
Long-term debt of approximately $2.9 million at March 31, 1997 and 1996,
consisted of floating rate notes, interest at 81% of prime (minimum rate of
6.5%), which are repayable in June 2000. The notes are guaranteed by the Parent
and are collateralized by property with a net book value of approximately $1.0
million at March 31, 1997.
During 1997, the Company entered into a $10.0 million term loan with a
financial institution. This term loan matures in May 1998 and bears interest at
the prime rate (8.5% at March 31, 1997). At March 31, 1997, approximately $8.7
million was outstanding under this term loan.
At March 31, 1997 and 1996, the Company had outstanding approximately $3.3
million and $3.6 million, respectively, under a term note. The note, dated
September 30, 1994, requires quarterly principal and interest payments of
approximately $156,000, bears interest at the stated rate of 9.82% per annum,
and matures in September 2004. The note is collateralized by property, plant and
equipment with a net book value of approximately $3.3 million at March 31, 1997.
Pursuant to the Services Agreement, a major cigarette manufacturer reimburses
the Company for debt service under the term note, and such reimbursement is
included in net sales in the 1997 consolidated statement of income and retained
earnings. The note is guaranteed by the parent company of a major cigarette
manufacturer.
At March 31, 1997, substantially all of the Company's assets were pledged
against current and long-term borrowings.
Long-term debt maturing in the next five years and thereafter is as follows
(in thousands): 1998-$2,312; 1999-$7,011; 2000-$379; 2001-$3,358; 2002-$461;
thereafter-$1,368.
9. BENEFITS
The Company participates in a noncontributory defined benefit pension plan
covering substantially all full-time salaried employees. The pension plan is
sponsored by the Parent and also covers certain group companies' employees. The
group companies reimburse the Parent for their share of the cost. Benefits under
the plan are based on employees' years of service and eligible compensation. The
Company's policy is to contribute amounts to the plan sufficient to meet or
exceed minimum funding requirements of federal benefit and tax laws.
F-45
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
9. BENEFITS -- Continued
A summary of pension costs follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost -- benefits earned during the year....................................................... $484 $433 $421
Interest cost on projected benefit obligation......................................................... 612 549 501
Recognized return on plan assets...................................................................... (832) (670) (583)
Net amortization...................................................................................... (72) (72) (37)
---- ---- ----
Net pension cost...................................................................................... $192 $240 $302
---- ---- ----
---- ---- ----
</TABLE>
The funded status of the plan at March 31 is shown below:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
(IN THOUSANDS)
Actuarial present value of benefit obligations:
-- vested................................................................. $ 7,265 $ 6,429
-- nonvested benefits..................................................... 44 56
------- -------
Accumulated benefit obligation.................................................. 7,309 6,485
Benefits attributable to projected salaries..................................... 2,142 1,989
------- -------
Projected benefit obligation.................................................... 9,451 8,474
Plan assets at fair value....................................................... 11,505 10,391
------- -------
Assets in excess of projected obligation........................................ 2,054 1,917
Unamortized net transition gain................................................. (306) (367)
Unrecognized prior service cost................................................. (44) (55)
Unrecognized experience gain.................................................... (693) (389)
------- -------
Prepaid pension costs........................................................... $ 1,011 $ 1,106
------- -------
------- -------
</TABLE>
The projected benefit obligation at March 31, 1997, 1996 and 1995 was
determined using an assumed discount rate of 7.375%, 7.25% and 7.25%,
respectively, and assumed future compensation increases of 5.00%, 5.25% and
5.25%, respectively. The assumed long-term rate of return on plan assets was
8.0%, 8.0% and 8.0% at March 31, 1997, 1996 and 1995, respectively. Assets
consist of pooled equity and fixed income funds managed by an independent
trustee.
The Company also participates in a 401(k) savings incentive plan for most
full-time salaried employees in the United States. The plan is sponsored by the
Parent. The plan provides participants an opportunity for tax-deferred savings
of up to 18% of their basic annual compensation or $9,240, whichever is less.
The Company makes a 50% matching contribution, in the form of common stock of
the Parent, up to the first 4% of basic annual compensation saved by each
participant. The expense for this plan was $196,000 in 1997, $144,000 in 1996
and $127,000 in 1995.
In addition to providing pension benefits, the Company participates in a
postretirement health care and life insurance benefit plan sponsored by the
Parent. Generally, the benefits are provided to employees who retire after the
age of 60, and whose sum of age and service equal at least 75. SFAS No. 106
requires the Company to accrue the estimated cost of retiree benefit payments
during the years the employee provides services.
The components of the net periodic cost of postretirement benefits for
1997, 1996 and 1995 were:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost..................................................... $193,942 $176,148 $168,613
Interest cost on accumulated benefit obligation.................. 493,527 522,164 405,299
Amortization of plan amendments.................................. (138,904) (136,649) (138,904)
-------- -------- --------
Net periodic cost................................................ $548,565 $561,663 $435,008
-------- -------- --------
-------- -------- --------
</TABLE>
F-46
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
9. BENEFITS -- Continued
The components of the liability included in the consolidated balance sheet
at March 31, 1997 and 1996 of the actuarial present value of benefits for
services rendered to date were:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
(IN THOUSANDS)
Current retirees................................................................... $ 490 $ 505
Active employees eligible to retire................................................ 2,732 2,424
Active employees not eligible to retire............................................ 3,343 4,041
------ ------
Total......................................................................... 6,565 6,970
Unrecognized net gain (loss)....................................................... 260 (672)
Unrecognized prior service cost.................................................... 972 1,111
------ ------
Accumulated postretirement benefit obligation...................................... $7,797 $7,409
------ ------
------ ------
</TABLE>
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 12.5% in 1997. This rate was assumed
to gradually decline to 6.5% in 2004, 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 1997 would increase by $126,000 and the APBO as of March 31,
1997 would increase by $915,000. In general, postretirement benefit costs are
insured or paid as claims are incurred.
10. COMMITMENTS AND CONTINGENCIES
The Company is obligated under operating leases for warehouse space with
minimum annual rentals as follows: 1998-$734,757; and 1999-$293,464.
Expenses under operating leases for continuing operations in 1997, 1996 and
1995 were $2,549,000, $2,356,000 and $1,816,000, respectively.
The Company operates a processing facility under a service agreement which
guarantees reimbursement of all of the facility's costs including operating
expenses and management fees. This lease is not considered a commitment of the
Company.
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.
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.
F-47
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
11. INCOME TAXES
a) Significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
(IN THOUSANDS)
Deferred tax liabilities:
Depreciation................................................................................. $2,672 $2,796
Capitalized interest......................................................................... 1,168 1,054
Prepaid pension assets....................................................................... 399 436
Other........................................................................................ 99 110
------ ------
Total deferred tax liabilities............................................................... $4,338 $4,396
------ ------
Deferred tax assets:
Postretirement benefits other than pensions.................................................. 3,071 2,919
Uniform capitalization....................................................................... 118 161
All other, net............................................................................... 85
------ ------
Total deferred tax assets...................................................................... 3,274 3,080
------ ------
Net deferred tax liabilities................................................................... $1,064 $1,316
------ ------
------ ------
</TABLE>
The net deferred tax liabilities include approximately $965 and $893 of
current liabilities at March 31, 1997 and 1996, respectively.
b) Income tax provisions are detailed below:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
Current
Federal............................................................................ $1,028 $1,167 $1,829
State and local.................................................................... 80 307 417
Deferred............................................................................. (252) 177 32
------ ------ ------
Income tax provision................................................................. $ 856 $1,651 $2,278
------ ------ ------
------ ------ ------
</TABLE>
c) The following is a reconciliation of the income tax provision to the
expense calculated at the U.S. federal statutory rate.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
Expense at U.S. federal statutory tax rate........................................... $1,494 $1,770 $2,447
State income taxes, net of federal benefit........................................... 27 221 282
Foreign Sales Corporation benefits................................................... (272) (476) (598)
Other -- net......................................................................... (393) 136 147
------ ------ ------
$ 856 $1,651 $2,278
------ ------ ------
------ ------ ------
</TABLE>
12. DISCLOSURES OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments as of March
31, 1997 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.
F-48
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
12. DISCLOSURES OF FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
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 $14.0 million, compared with a carrying value
of $14.9 million, based on discounted cash flows for fixed-rate borrowings, with
the fair value of floating-rate borrowings considered to approximate carrying
value.
13. MAJOR CUSTOMERS
Two customers each accounted for approximately 55% and 10%, respectively,
of the Company's net sales for the year ended March 31, 1997, two customers each
accounted for approximately 45% and 12%, respectively, of the Company's net
sales for the year ended March 31, 1996, and two customers each accounted for
approximately 22% and 21%, respectively, of the Company's net sales for the year
ended March 31, 1995.
F-49
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF STANDARD COMMERCIAL CORPORATION
We have audited the consolidated financial statements of Standard
Commercial Corporation (the "Company") as of March 31, 1997 and 1996, and for
each of the three years in the period ended March 31, 1997, and have issued our
report thereon dated June 18, 1997; such financial statements and report are
included in your 1997 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of the
Company. The financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Raleigh, North Carolina
June 18, 1997
F-50
<PAGE>
STANDARD COMMERCIAL CORPORATION (THE "PARENT GUARANTOR")
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, --------------------
1997 1997 1996
----------- -------- --------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Cash and cash equivalents........................................................... $ 384 $ 327 $ 3,851
Intercompany accounts receivable.................................................... 64,498 16,606 16,617
Current portion of notes receivable from Zelenka Nursery, Inc. ..................... 500 500 500
Income taxes receivable............................................................. 1,850 153 3,086
Other receivables................................................................... 876 995 2,651
Prepaids and other.................................................................. -- 155 617
----------- -------- --------
Current assets.................................................................... 68,108 18,736 27,322
Investment in subsidiaries.......................................................... 161,914 159,014 149,469
Long-term notes receivable from Zelenka Nursery, Inc. .............................. 2,183 2,183 2,683
Cash surrender value of life insurance policies
(net of policy loans (1997-$6,780; 1996-$6,550)................................... 6,479 6,529 5,758
Deferred loan costs................................................................. 1,581 1,585 1,744
Deferred income taxes............................................................... 2,260 2,260 86
Other noncurrent assets............................................................. 413 340 361
----------- -------- --------
Total assets...................................................................... $ 242,938 $190,647 $187,423
----------- -------- --------
----------- -------- --------
LIABILITIES
Intercompany accounts payable....................................................... $ 31,608 $ 29,895 $ 20,756
Current portion of long-term debt................................................... -- -- 3,765
Other payables and accrued expenses................................................. 2,023 982 3,072
----------- -------- --------
Current liabilities............................................................... 33,631 30,877 27,593
Long-term debt...................................................................... -- -- 7,407
Convertible subordinated debt....................................................... 69,000 69,000 69,000
Retirement and other benefits....................................................... 529 499 404
----------- -------- --------
Total liabilities................................................................. 103,160 100,376 104,404
----------- -------- --------
ESOP redeemable preferred stock..................................................... -- -- 8,748
Unearned ESOP compensation.......................................................... -- -- (6,320)
----------- -------- --------
SHAREHOLDERS' EQUITY
Preferred stock $1.65 par value; shares authorized-1,000,000; shares issued and
outstanding: 1997-0; 1996-87,477 to ESOP........................................... -- --
Common stock, $0.20 par value
Authorized shares 100,000,000; 15,300,862, 12,126,270 and 11,624,275 shares issued
at June 30, 1997 and March 31, 1997 and 1996, respectively......................... 3,060 2,425 2,325
Additional paid-in capital.......................................................... 100,102 50,324 43,660
Unearned restricted stock plan compensation......................................... (11) (12) (16)
Treasury stock at cost, 2,617,707, 2,591,790 and 2,490,661 shares at June 30, 1997
and March 31, 1997 and 1996, respectively.......................................... (4,250) (3,799) (2,384)
Retained earnings................................................................... 57,869 58,089 46,450
Cumulative translation adjustments.................................................. (16,992) (16,756) (9,444)
----------- -------- --------
Total shareholders' equity........................................................ 139,778 90,271 80,591
----------- -------- --------
Total liabilities and shareholders' equity........................................ $ 242,938 $190,647 $187,423
----------- -------- --------
----------- -------- --------
</TABLE>
NOTE: These condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of
Standard Commercial Corporation.
F-51
<PAGE>
STANDARD COMMERCIAL CORPORATION (THE "PARENT GUARANTOR")
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------ -------------------------------
1997 1996 1997 1996 1995
------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Management fee income................................................ $ -- $ -- $ 9,379 $ 6,340 $ 4,725
------- ------- -------- ------- --------
Selling, general and administrative expenses......................... 738 841 2,951 3,151 3,460
Interest expense..................................................... 1,367 1,451 5,472 6,092 6,209
Other (income) expense, net.......................................... (484) 161 491 (1,504) 638
------- ------- -------- ------- --------
Income (loss) before taxes...................................... (1,621) (2,453) 465 (1,399) (5,582)
Income tax expense (benefit)......................................... (695) (834) 496 (1,665) 1,103
------- ------- -------- ------- --------
Net income (loss) after taxes................................... (926) (1,619) (31) 266 (6,685)
Equity in earnings (losses) of subsidiaries.......................... 2,779 3,127 16,968 342 (23,859)
------- ------- -------- ------- --------
Net income (loss)............................................... 1,853 1,508 16,937 608 (30,544)
ESOP preferred stock dividends, net of tax........................... -- (115) (347) (474) (485)
------- ------- -------- ------- --------
Net income (loss) applicable to common stock.................... 1,853 1,393 16,590 134 (31,029)
Retained earnings, beginning of period............................... 58,089 46,450 46,450 50,530 84,807
Common stock dividends............................................... (2,073) (792) (4,951) (4,214) (3,248)
------- ------- -------- ------- --------
Retained earnings, end of period..................................... $57,869 $47,051 $ 58,089 $46,450 $ 50,530
------- ------- -------- ------- --------
------- ------- -------- ------- --------
</TABLE>
NOTE: These condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of
Standard Commercial Corporation.
F-52
<PAGE>
STANDARD COMMERCIAL CORPORATION (THE "PARENT GUARANTOR")
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------- ------------------------------
1997 1996 1997 1996 1995
-------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH PROVIDED BY OPERATING ACTIVITIES................................. $(46,986) $(1,217) $ 9,954 $ 7,548 $ 7,082*
CASH FLOWS FROM INVESTING ACTIVITIES
Collections of note receivable................................... -- -- 500 620 --
Business dispositions............................................ -- -- -- -- 1,217
-------- ------- --------
CASH PROVIDED BY INVESTING ACTIVITIES............................ -- -- 500 620 1,217
-------- ------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of equity offering.................................. 47,043 -- -- -- --
Proceeds from long-term borrowings............................... -- -- -- 3,662 --
Repayment of long-term borrowings................................ -- (1,211) (11,171) (7,858) (8,857)
Dividends paid, net of tax....................................... -- (115) (347) (474) (485)
Purchase and retirement of ESOP Preferred Stock.................. -- -- (2,460) -- --
-------- ------- -------- ------- -------
CASH USED IN FINANCING ACTIVITIES..................................... 47,043 (1,326) (13,978) (4,670) (9,342)
-------- ------- -------- ------- -------
Increase (decrease) in cash and cash equivalents................. 57 (2,543) (3,524) 3,498 (1,043)
Cash and cash equivalents, beginning of period........................ 327 3,851 3,851 353 1,396
-------- ------- -------- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................. $ 384 $ 1,308 $ 327 $ 3,851 $ 353
-------- ------- -------- ------- -------
-------- ------- -------- ------- -------
Cash paid during the year for -interest............................... -- -- $ 8,105 $ 2,962 $ 6,563
-income taxes.......................... -- -- $ 660 $ 575 $ 1,052
</TABLE>
* Includes cash dividends of $4,595,000 paid by Standard Wool France SA, a
wholly-owned subsidiary.
NOTE: These condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of
Standard Commercial Corporation.
F-53
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND
SHAREHOLDER OF STANDARD WOOL, INC.
We have audited the accompanying consolidated financial statements of
Standard Commercial Corporation (the "Company") as of March 31, 1997 and 1996,
and for each of the three years in the period ended March 31, 1997, and have
issued our report thereon dated June 18, 1997; such financial statements and
report are included in your 1997 Annual Report to Shareholders and are
incorporated herein by reference.
We have also audited the accompanying separate balance sheets of Standard
Wool, Inc. (the "Guarantor"), a wholly-owned subsidiary of Standard Commercial
Corporation, as of March 31, 1997 and 1996, and the related statements of income
(loss) and retained earnings and of cash flows for the each of the three years
in the period ended March 31, 1997. These financial statements are the
responsibility of the Guarantor'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
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 financial statements present fairly, in all material
respects, the financial position of the Guarantor at March 31, 1997 and 1996,
and the results of its operations and its cash flows for each of the three years
in the period ended March 31, 1997 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Raleigh, North Carolina
June 18, 1997
F-54
<PAGE>
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, ------------------
1997 1997 1996
----------- ------- -------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Cash..................................................................................... $ 81 $ 119 $ 70
Trade receivables........................................................................ 1,352 1,258 2,092
Inventories.............................................................................. 1,248 1,256 1,467
Prepaids and other....................................................................... 39 5 12
----------- ------- -------
Current assets........................................................................ 2,720 2,638 3,641
Equipment, furniture and fixtures, net................................................... 62 35 47
Investment in subsidiaries............................................................... 37,006 36,946 39,676
----------- ------- -------
Total assets.......................................................................... $39,788 $39,619 $43,364
----------- ------- -------
----------- ------- -------
LIABILITIES
Payables to affiliates................................................................... $ 4,889 $ 4,734 $ 5,140
Other payables and accrued expenses...................................................... 131 127 127
----------- ------- -------
Total liabilities..................................................................... 5,020 4,861 5,267
----------- ------- -------
SHAREHOLDER'S EQUITY
Common stock, $1 par value; shares authorized --
100,000,000; shares issued: 1997 and 1996 -- 22,604,000............................... 22,604 22,604 22,604
Retained earnings........................................................................ 7,727 6,803 7,075
Cumulative translation adjustment........................................................ 4,437 5,351 8,418
----------- ------- -------
Total shareholder's equity............................................................ 34,768 34,758 38,097
----------- ------- -------
Total liabilities and shareholder's equity............................................ $39,788 $39,619 $43,364
----------- ------- -------
----------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE>
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS
YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30, YEAR ENDED MARCH 31,
---------------- ----------------------------
1997 1996 1997 1996 1995
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Sales...................................................................... $1,305 $1,880 $7,958 $ 9,324 $10,272
------ ------ ------ ------- -------
Cost of sales
Materials............................................................. 1,212 1,772 7,438 9,087 9,844
Interest expense...................................................... -- -- 352 -- --
------ ------ ------ ------- -------
Gross profit.......................................................... 93 108 168 237 428
------ ------ ------ ------- -------
Selling, general and administrative expenses............................... 67 115 768 472 495
Other income (expense), net................................................ (75) (70) (10) 53 (61)
Earnings (losses) of subsidiaries.......................................... 973 (180) 338 (3,072) 3,293
------ ------ ------ ------- -------
Net income (loss)................................................... $ 924 $ (257) $ (272) $( 3,254) $ 3,165
------ ------ ------ ------- -------
Retained earnings, beginning of period..................................... 6,803 7,075 7,075 10,329 11,759
Dividends paid............................................................. -- -- -- -- (4,595)
------ ------ ------ ------- -------
Retained earnings, end of period........................................... $7,727 $6,818 $6,803 $ 7,075 $10,329
------ ------ ------ ------- -------
------ ------ ------ ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE>
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30, YEAR ENDED MARCH 31,
-------------- ---------------------------
1997 1996 1997 1996 1995
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................................. $ 924 $(257) $(272) $(3,254) $ 3,165
Depreciation............................................................. 4 4 16 20 19
Earnings (losses) of subsidiaries........................................ (973) 180 (338) 3,072 (3,293)
Changes in operating assets and liabilities.............................. 38 100 647 1,131 7,537
----- ----- ----- ------- -------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES............................... (7) 27 53 969 7,428
----- ----- ----- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment:
Additions.............................................................. (31) -- (22) -- --
Disposals.............................................................. -- -- 18 -- --
Collections of note receivable........................................... -- -- -- (35) --
----- ----- ----- ------- -------
CASH USED IN INVESTING ACTIVITIES............................................. (31) -- (4) (35) --
----- ----- ----- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term borrowings....................................... -- -- -- (1,000) (2,952)
Dividends paid........................................................... -- -- -- -- (4,595)
----- ----- ----- ------- -------
CASH USED IN FINANCING ACTIVITIES............................................. -- -- -- (1,000) (7,547)
----- ----- ----- ------- -------
Increase (decrease) in cash................................................. (38) 27 49 (66) (119)
Cash:
Beginning of period...................................................... 119 70 70 136 255
----- ----- ----- ------- -------
End of period............................................................ $ 81 $ 97 $ 119 $ 70 $ 136
----- ----- ----- ------- -------
----- ----- ----- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE>
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1997, 1996 AND 1995
NOTE 1 -- BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION -- Standard Wool, Inc. (the "Subsidiary
Guarantor"), a wool dealer and holding company of international wool processors,
is a wholly-owned subsidiary of Standard Commercial Corporation (the "Company").
The separate financial statements of the Subsidiary Guarantor are presented
herein because the Subsidiary Guarantor is a guarantor of the $115,000,000
Senior Notes due 2005 (the "Initial Notes"), together with the notes
exchangeable therefor in the identical principal amount and under substantially
the same terms (the "Exchange Notes", together with the Initial Notes, the
"Notes") of Standard Commercial Tobacco Co., Inc. (the "Issuer"), a wholly-owned
subsidiary of the Company. The Company and the Subsidiary Guarantor, jointly and
severally, guarantee on a senior basis to each Holder and the Trustee, the full
and prompt performance of the Issuer's obligations under the Indenture and the
Notes, including the payment of the principal of and interest and Additional
Interest, if any, on the Notes (the Company and Standard Wool, Inc. being
referred to herein as "Guarantors" and the guarantees being referred to
respectively as the "Parent Guarantee" and the "Standard Wool Guarantee," and
together, the "Guarantees"). In addition, all of the issued and outstanding
capital stock of the Issuer and the Subsidiary Guarantor is pledged by the
Company to the Trustee for the benefit of the Holders of the Notes as security
for the Parent Guarantee.
Each of the Guarantors has fully and unconditionally guaranteed on a joint
and several basis the performance and punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of all the Issuer's obligations
under the Notes and the related indenture, including its obligations to pay
principal, premium, if any, and interest with respect to the Notes. The
obligations of each Guarantor is limited to the maximum amount which, after
giving effect to all other contingent and fixed liabilities of such Guarantor
and after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under its Guarantee or pursuant to its contribution obligations under the
Indenture, can be guaranteed by the relevant Guarantor without resulting in the
obligations of such Guarantor under its Guarantee constituting a fraudulent
conveyance or fraudulent transfer under applicable federal or state law. Each of
the Guarantees is a guarantee of payment and not collection. Each Guarantor that
makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in an amount PRO RATA, based on the
assets less liabilities of each Guarantor determined in accordance with
generally accepted accounting principles ("GAAP").
Each Guarantor may consolidate with or merge into or sell its assets to the
Issuer, or with other Persons upon the terms and conditions set forth in the
Indenture. In the event (a) more than 49% of the Capital Stock of the Subsidiary
Guarantor is sold by the Company or (b) more than 49% of the consolidated assets
of the Subsidiary Guarantor are sold in compliance with all of the terms of the
Indenture, the Subsidiary Guarantor's Guarantee will be released.
Included in the above balance sheets are certain related party balances
among the Issuer, the Guarantors and non-guarantors. Due to the Company's
world-wide operations, related party activity is included in most balance sheet
accounts.
B. EQUIPMENT, FURNITURE AND FIXTURES -- The cost of significant
improvements to equipment, furniture and fixtures is capitalized. Maintenance
and repairs are expensed as incurred. Provision for depreciation is charged to
operations over the estimated useful lives, primarily 3 to 7 years, of the
assets on a straight-line basis.
C. INVENTORIES -- Inventories, which are primarily stated at the lower of
specific-cost or estimated net realizable value, consist primarily of scoured,
top and carbonized wools. Cost of wool includes all direct costs which can be
related directly to specific items of inventory.
D. REVENUE RECOGNITION -- Sales and revenue are recognized on the passage
of title.
E. LONG-LIVED ASSETS -- As required, the Company adopted Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Accordingly,
long-lived assets are reviewed for impairment on a market-by-market basis
whenever events or changes in the circumstances indicate that the carrying
amount of an asset may not be recoverable. If an evaluation is required, the
projected future undiscounted future cash flows attributable to each market
would be compared to the carrying value of the long-lived assets (including an
allocation of goodwill, if appropriate) of that market if a write-down to fair
value is required. The Company also evaluates the remaining useful lives to
determine whether events and circumstances warrant revised estimates of such
lives.
F-58
<PAGE>
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 1 -- BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES -- Continued
F. INVESTMENTS IN SUBSIDIARIES -- Investments in all majority-owned
subsidiaries are recorded under the equity method of accounting.
G. USE OF ESTIMATES AND ASSUMPTIONS -- The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
H. INCOME TAXES -- Pursuant to Statement of Financial Accounting Standards
No. 109, ACCOUNTING FOR INCOME TAXES, deferred tax assets and liabilities are
computed based on temporary differences between the financial statement and
income tax bases of assets and liabilities using the enacted tax rate. Deferred
income tax expenses or benefits are based on the change in the deferred tax
assets and liabilities from period-to-period, subject to on-going assessment of
realization. For each of the periods presented, there were no deferred tax
assets or liabilities and, accordingly, no deferred expenses or benefits.
The Subsidiary Guarantor is a member of a group that files a consolidated
federal income tax return. The Company allocates its consolidated income tax
liability or benefit to the Subsidiary Guarantor based on an agreement under
which the tax liability or benefit is apportioned among the members of an
affiliated group in accordance with the ratio which that portion of the
consolidated income attributable to each member of the group having taxable
income bears to the consolidated taxable income. The Subsidiary Guarantor did
not have taxable income for any period in the three years ended March 31, 1997,
and no allocation of the consolidated income tax liability or benefit was made.
For federal income tax purposes, net operating losses incurred by the Subsidiary
Guarantor are available to offset taxable income of the consolidated group.
However, for financial accounting purposes, any net operating losses incurred by
individual members of the consolidated group are not considered for offset of
other members' taxable income.
NOTE 2 -- EQUIPMENT, FURNITURE AND FIXTURES, NET
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
(IN THOUSANDS)
Equipment............................................................. $ 32 $ 52
Furniture and fixtures................................................ 49 32
---- ----
81 84
Accumulated depreciation.............................................. 46 37
---- ----
Total............................................................ $ 35 $ 47
---- ----
---- ----
</TABLE>
Depreciation expense was $16,000, $20,000 and $19,000 in 1997, 1996 and
1995, respectively.
NOTE 3 -- AFFILIATED COMPANIES
The accompanying financial statements include the following transactions
and balances with group and affiliated companies for the years ended March 31,
1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
Net sales.................................................... $ 168 $ -- $ --
Purchases of wool............................................ 5,485 4,863 7,682
Commissions income........................................... 23 43 37
Commissions expense.......................................... -- -- 5
Computer and consulting fees................................. 63 51 55
Payables, interest bearing................................... 4,734 5,140 3,950
</TABLE>
F-59
<PAGE>
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
NOTE 4 -- COMMITMENTS AND CONTINGENCIES
The Subsidiary Guarantor leases office and warehouse facilities from its
President under a month-to-month lease arrangement. Expenses under operating
leases for continuing operations in 1997, 1996 and 1995 were $15,000, $18,000
and $18,000, respectively.
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.
CONCENTRATION OF CREDIT AND OFF-BALANCE SHEET RISKS
Financial instruments that potentially subject the Subsidiary Guarantor to
a concentration of credit risks consist principally of cash and trade
receivables relating to customers in the wool industry. Cash is deposited with
high-credit-quality financial institutions. Concentration of credit risks
related to trade receivables is limited because of the diversity of customers
and locations.
NOTE 5 -- BENEFITS
The Subsidiary Guarantor participates in a noncontributory defined benefit
pension plan covering substantially all full-time salaried employees. The
pension plan is sponsored by the Company and also covers certain group
companies' employees. The group companies reimburse the Company for their share
of the cost. Benefits under the Plan are based on employees' years of service
and eligible compensation. The Company's policy is to contribute amounts to the
Plan sufficient to meet or exceed minimum funding requirements of federal
benefit and tax laws.
F-60
<PAGE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER, THE GUARANTORS OR THE INITIAL PURCHASERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE
AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUER OR THE GUARANTORS SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................... 1
Risk Factors......................................... 11
Use of Proceeds of the Exchange Notes................ 17
Capitalization....................................... 18
Selected Historical Consolidated Financial Data...... 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 21
The Exchange Offer................................... 27
Business............................................. 33
Management........................................... 45
Principal Shareholders............................... 48
Description of Global Bank Facility.................. 49
Description of Notes................................. 50
Initial Notes Registration Rights.................... 71
Book-Entry; Delivery and Form........................ 73
Certain U.S. Federal Income Tax Consequences......... 74
Plan of Distribution................................. 76
Legal Matters........................................ 76
Experts.............................................. 77
Available Information................................ 77
Incorporation of Certain Documents by Reference...... 77
Index to Consolidated Financial Statements........... F-1
</TABLE>
UNTIL , 199 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING
EXCHANGE NOTES RECEIVED IN EXCHANGE FOR INITIAL NOTES HELD FOR THEIR OWN
ACCOUNT.
------------------------------------------
PROSPECTUS
------------------------------------------
STANDARD COMMERCIAL
TOBACCO CO., INC.
OFFER TO EXCHANGE ITS
8 7/8% SENIOR NOTES DUE 2005
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
("EXCHANGE NOTES")
FOR ANY AND ALL
8 7/8% SENIOR NOTES DUE 2005
("INITIAL NOTES")
EACH GUARANTEED ON A SENIOR BASIS BY STANDARD COMMERCIAL CORPORATION AND
STANDARD WOOL, INC.
, 1997
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation and Bylaws include provisions to
(i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the fullest extent permitted
by Section 55-8-30(e) of the North Carolina Business Corporation Act (the "North
Carolina Law"), and (ii) require the Registrant to indemnify its directors and
officers to the fullest extent permitted by Sections 55-8-50 through 55-8-58 of
the North Carolina Law, including circumstances in which indemnification is
otherwise discretionary. Pursuant to Sections 55-8-51 and 55-8-57 of the North
Carolina Law, a corporation generally has the power to indemnify its present and
former directors, officers, employees and agents against expenses incurred by
them in connection with any suit to which they are, or are threatened to be
made, a party by reason of their serving in such positions so long as they acted
in good faith and in a manner they reasonably believed to be in, or not opposed
to, the best interests of the corporation, and with respect to any criminal
action, they had no reasonable cause to believe their conduct was unlawful. The
Registrant believes that these provisions are necessary to attract and retain
qualified persons as directors and officers. These provisions do not eliminate
the directors' duty of care, and, in appropriate circumstances, equitable
remedies such as injunctive or other forms of non-monetary relief will remain
available under North Carolina Law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for acts or omissions that the director
believes to be contrary to the best interests of the Registrant or its
shareholders, for any transaction from which the director derived an improper
personal benefit, for acts or omissions involving a reckless disregard for the
director's duty to the Registrant or its shareholders when the director was
aware or should have been aware of a risk of serious injury to the Registrant or
its shareholders, for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
Registrant or its shareholders, for improper transactions between the director
and the Registrant and for improper distributions to shareholders and loans to
directors and officers. These provisions do not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
The Registrant's Bylaws require the Registrant to indemnify in directors
and officers against expenses, judgments, fines, settlement and other amounts
actually and reasonably incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any such
person may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interest of the Registrant and,
with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. The Registrant's Bylaws also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The Purchase Agreement filed as Exhibit 1.1 to this Registration Statement
provides for indemnification by the Initial Purchasers of the Registrant and its
directors and officers, and by the Registrant of the Initial Purchasers, for
certain liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), or otherwise.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated July 25, 1997 among the Issuer, the Guarantors and the Initial Purchasers.
3.1 * Restated Articles of Incorporation, as amended, of the Company.
3.2 ** Amended Bylaws of the Company.
4.1 Indenture dated August 1, 1997 among the Issuer, the Guarantors and Crestar Bank.
5.1 Opinion of Wyrick Robbins Yates & Ponton LLP.
8.1 Tax Opinion of Wyrick Robbins Yates & Ponton LLP (to be filed by amendment).
10.1 *** Performance Improvement Compensation Plan.
10.2 + Agreement dated May 2, 1995 between the Company and Ery W. Kehaya.
10.3 ++ Employment Agreement dated March 21, 1997 with Robert E. Harrison.
10.4 Registration Rights Agreement dated August 1, 1997 among the Issuer, the Guarantors and the Initial
Purchasers.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Wyrick Robbins Yates & Ponton LLP (contained in Exhibit 5.1).
24.1 Power of attorney (See pages II-4 through II-7).
25.1 Statement of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* Incorporated by reference to Standard Commercial Corporation's Registration
Statement on Form S-8 (File No. 33-59760).
** Incorporated by reference to Standard Commercial Corporation's Annual Report
on Form 10-K for the year ended March 31, 1994.
*** Incorporated by reference to Standard Commercial Corporation's Annual Report
on Form 10-K for the year ended March 31, 1993.
+ Incorporated by reference to Standard Commercial Corporation's Annual Report
on Form 10-K for the year ended March 31, 1995.
++ Incorporated by reference to Standard Commercial Corporation's Registration
Statement on Form S-3 (File No. 333-23835).
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act, each filling of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(g)(1) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of
II-2
<PAGE>
Rule 145(c) the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the applicable
form.
(2) That every prospectus (i) that is filed pursuant to paragraph
(1) immediately preceding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a part of an amendment
to the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the Registrant pursuant of provisions described in
Item 15 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certified that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wilson, State of North Carolina, on the 10th day of
September, 1997.
STANDARD COMMERCIAL TOBACCO CO., INC.
By: /s/ THOMAS M. EVINS, JR.___________
THOMAS M. EVINS, JR., President
POWER OF ATTORNEY
Each persons whose signature appears below constitutes and appoints Robert
E. Harrison and Guy M. Ross, and each of them, his true and lawful
attorney-in-fact and agent, with full powers of substitution, for him and his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
related Registration Statements filed pursuant to Rule 462(b) promulgated under
the Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ THOMAS M. EVINS, JR. Director and President (Principal September 10, 1997
THOMAS M. EVINS, JR. Executive Officer)
/s/ DAVID L. WILLIAMS Director and Principal Financial September 10, 1997
DAVID L. WILLIAMS Officer
/s/ RICK N. HARDY Principal Accounting Officer September 10, 1997
RICK N. HARDY
/s/ B. DALE WELLS Director September 10, 1997
B. DALE WELLS
Director September , 1997
JAMES A. JOHNSON
/s/ EDWARD C. DILDA Director September 11, 1997
EDWARD C. DILDA
/s/ JAMES R. DAVIDSON Director September 11, 1997
JAMES R. DAVIDSON
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certified that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wilson, State of North Carolina, on the 11th day of
September, 1997.
STANDARD COMMERCIAL CORPORATION
By: /s/ ROBERT E. HARRISON_____________
ROBERT E. HARRISON,
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHIEF FINANCIAL OFFICER
POWER OF ATTORNEY
Each persons whose signature appears below constitutes and appoints Robert
E. Harrison and Guy M. Ross, and each of them, his true and lawful
attorney-in-fact and agent, with full powers of substitution, for him and his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
related Registration Statements filed pursuant to Rule 462(b) promulgated under
the Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ ROBERT E. HARRISON Director and President, Chief Executive September 11, 1997
ROBERT E. HARRISON Officer and Chief Financial Officer
(Principal Executive and Financial
Officer)
/s/ GUY M. ROSS Vice President (Principal Accounting September 10, 1997
GUY M. ROSS Officer)
/s/ MARVIN W. COGHILL Director September 10, 1997
MARVIN W. COGHILL
/s/ THOMAS M. EVINS, JR. Director September 10, 1997
THOMAS M. EVINS, JR.
Director September , 1997
ERY W. KEHAYA
/s/ J. ALEC G. MURRAY Director September 12, 1997
J. ALEC G. MURRAY
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
Director September , 1997
WILLIAM S. BARRACK, JR.
Director September , 1997
HENRY R. GRUNZKE
/s/ CHARLES H. MULLEN Director September 10, 1997
CHARLES H. MULLEN
Director September , 1997
DANIEL M. SULLIVAN
/s/ WILLIAM A. ZIEGLER Director September 10, 1997
WILLIAM A. ZIEGLER
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certified that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wilson, State of North Carolina, on the 12th day of
September, 1997.
STANDARD WOOL, INC.
By: /s/ PETER A. MUNRO_________________
PETER A. MUNRO, President
POWER OF ATTORNEY
Each persons whose signature appears below constitutes and appoints Robert
E. Harrison and Guy M. Ross, and each of them, his true and lawful
attorney-in-fact and agent, with full powers of substitution, for him and his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
related Registration Statements filed pursuant to Rule 462(b) promulgated under
the Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ PETER A. MUNRO Director and President (Principal Executive September 12, 1997
PETER A. MUNRO Officer)
/s/ TIMOTHY S. PRICE Director and Principal Financial Officer September 12, 1997
TIMOTHY S. PRICE
/s/ DEBORAH H. MCCANN Principal Accounting Officer September 12, 1997
DEBORAH H. MCCANN
/s/ GUY M. ROSS Director September 10, 1997
GUY M. ROSS
/s/ PAUL H. BICQUE Director September 10, 1997
PAUL H. BICQUE
/s/ RICK N. HARDY Director September 10, 1997
RICK N. HARDY
</TABLE>
II-7
<PAGE>
STANDARD COMMERCIAL TOBACCO CO., INC.
$115,000,000
8-7/8% SENIOR NOTES DUE 2005
PURCHASE AGREEMENT
July 25, 1997
BT SECURITIES CORPORATION
WHEAT, FIRST SECURITIES, INC.
c/o BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
Standard Commercial Tobacco Co., Inc., a North Carolina
corporation (the "Issuer"), Standard Commercial Corporation (the "Parent") and
Standard Wool, Inc., a wholly owned subsidiary of the Parent (the "Subsidiary
Guarantor" and, together with the Parent, the "Guarantors") hereby confirm their
joint and several agreement with you (the "Initial Purchasers") as set forth
below.
1. The Securities. Subject to the terms and conditions herein
contained, the Issuer proposes to issue and sell to the Initial Purchasers
$115,000,000 aggregate principal amount of its 8-7/8% Senior Notes due 2005 (the
"Notes"). The Notes will be guaranteed (collectively, the "Guarantees") on a
senior basis by the Parent and on a senior basis by the Subsidiary Guarantor.
The Notes and the Guarantees are collectively referred to herein as the
"Securities". The Securities are to be issued under an indenture (the
"Indenture") to be dated as of August 1, 1997 by and among the Issuer, the
Guarantors and Crestar Bank, as Trustee (the "Trustee"). All of the issued and
outstanding capital stock of the Issuer and the Subsidiary Guarantor will be
pledged by the Company to the Trustee for the benefit of holders of the Notes.
On or prior to the Closing Date (as defined below), the Issuer
will execute a new credit facility with a commitment of not less than $170
million among the Issuer and two of its subsidiaries, as borrowers, Deutsche
Bank A.G. as agent and
<PAGE>
-2-
Bankers Trust Commercial Corporation as co-agent (the "Global Bank Facility").
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "Act"), in reliance on exemptions therefrom.
In connection with the sale of the Securities, the Issuer and
the Guarantors have prepared a preliminary offering memorandum dated July 10,
1997 (the "Preliminary Memorandum"), and a final offering memorandum dated July
25, 1997 (the "Final Memorandum"; the Preliminary Memorandum and the Final
Memorandum each herein being referred to as a "Memorandum") setting forth or
including a description of the terms of the Securities, the terms of the
offering of the Securities, a description of the Global Bank Facility, a
description of the Issuer and the Guarantors and any material development
relating to the Issuer and the Guarantors occurring after the date of the most
recent historical financial statements included therein.
The Issuer and the Guarantors understand that the Initial
Purchasers propose to make an offering of the Notes only on the terms and in the
manner set forth in the Final Memorandum and Section 8 hereof as soon as the
Initial Purchasers deem advisable after this Agreement has been executed and
delivered, to persons in the United States whom the Initial Purchasers
reasonably believe to be qualified institutional buyers ("QIBs") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, and to a limited number of other
institutional "accredited investors" ("Accredited Investors") as defined in Rule
501(a)(1), (2), (3) and (7) under Regulation D of the Act in private sales
exempt from registration under the Act, and outside the United States to certain
persons in reliance on Regulation S under the Act.
The Initial Purchasers and their direct and indirect
transferees of the Securities will be entitled to the benefits of the
Registration Rights Agreement to be dated as of the Closing Date (as defined)
(the "Registration Rights Agreement"), pursuant to which the Issuer and the
Guarantors will agree, among other things, (i) to file with the Securities and
Exchange Commission (the "Commission"), under the circumstances set forth
therein, a registration statement under the Act (the "Exchange Offer
Registration Statement"), relating to Senior Notes due 2005 of the Issuer (the
"Exchange Notes") to be offered in exchange (the "Exchange Offer") for the
Notes, (ii) as
<PAGE>
-3-
and to the extent required by the Registration Rights Agreement, to file with
the Commission a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, the "Registration Statements"), relating to the resale
by certain holders of the Notes, and to use its best efforts to cause such
Registration Statements to be declared effective and (iii) to issue and deliver
Private Exchange Notes (as defined in the Registration Rights Agreement)
pursuant to the Private Exchange (as defined in the Registration Rights
Agreement) to any Initial Purchaser holding Notes having the status of an unsold
allotment. This Purchase Agreement (this "Agreement"), the Notes, the
Guarantees, the Exchange Notes, the Private Exchange Notes, the Indenture and
the Registration Rights Agreement are hereinafter referred to collectively as
the "Operative Documents."
2. Representations and Warranties. The Issuer and each of the
Guarantors, jointly and severally, represent and warrant to and agree with each
of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of its date nor the
Final Memorandum nor any amendment or supplement thereto as of the date
thereof and at all times subsequent thereto up to the Closing Date (as
defined in Section 3 below) contained or contains any untrue statement
of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 2(a) do
not apply to statements or omissions made in reliance upon and in
conformity with information relating to any of the Initial Purchasers
furnished to the Issuer in writing by the Initial Purchasers expressly
for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto.
(b) As of the Closing Date, the Parent will have the
authorized, issued and outstanding capitalization set forth in the
Final Memorandum; all of the outstanding shares of capital stock of the
Parent and each of its subsidiaries, a complete and correct list of
which is attached as Schedule I hereto (each, a "Subsidiary" and
collectively, the "Subsidiaries"), have been, and as of the Closing
Date will be, duly authorized and validly issued, are fully paid and
nonassessable and were not issued in violation of any preemptive or
similar rights; and except as set forth in the Final Memorandum, there
are no mate-
<PAGE>
-4-
rial (i) options, warrants or other rights to purchase, (ii) agreements
or other obligations of the Issuer to issue or (iii) other rights to
convert any obligation into, or exchange any securities for, shares of
capital stock of or ownership interests in the Parent or any of the
Subsidiaries outstanding. Except for the Subsidiaries and as disclosed
in the Final Memorandum, none of the Parent or the Subsidiaries owns,
directly or indirectly, any shares of capital stock or any other equity
or long-term debt securities or have any equity interest in any firm,
partnership, joint venture or other entity.
(c) Each of the Parent and the Subsidiaries is duly
incorporated, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation and has all requisite
corporate power and authority to own its properties and conduct its
business as now conducted and as described in the Final Memorandum;
each of the Parent and the Subsidiaries is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a material adverse effect on the general affairs, business,
condition (financial or otherwise), prospects or results of operations
of the Parent and the Subsidiaries taken as a whole (any such event, a
"Material Adverse Effect").
(d) Each of the Issuer and the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
respective obligations under this Agreement and the other Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the
power and authority to issue, sell and deliver the Securities as
contemplated by this Agreement.
(e) This Agreement has been duly and validly authorized,
executed and delivered by the Issuer and the Guarantors.
(f) The Indenture has been duly and validly authorized by the
Issuer and the Guarantors and, when duly executed and delivered in
accordance with its terms (assuming the due execution and delivery
thereof by the Trustee), will be the legally valid and binding
agreement of each of the Issuer and the Guarantors, enforceable against
each of
<PAGE>
-5-
them in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by the discretion of the court
before which any proceeding therefor may be brought; and the Indenture
meets the requirements for qualification under the Trust Indenture Act
of 1939, as amended (the "TIA").
(g) The Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Issuer pursuant to
this Agreement and, when issued and authenticated in accordance with
the terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof, will be the legally valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance
with their terms and entitled to the benefits of the Indenture, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by the discretion of
the court before which any proceeding therefor may be brought.
(h) The Exchange Notes and the Private Exchange Notes have
each been duly and validly authorized for issuance by the Issuer and,
when issued and authenticated in accordance with the terms of the
Indenture, the Registration Rights Agreement, the Exchange Offer and
the Private Exchange, will be the legally valid and binding obligations
of the Issuer, enforceable against the Issuer in accordance with their
terms and entitled to the benefits of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by the discretion of
the court before which any proceeding therefor may be brought.
(i) The Guarantees have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Guarantors and, when
the Notes are duly and validly
<PAGE>
-6-
authorized, executed, issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof, will be the legally valid and binding
obligations of each of the Guarantors, enforceable against each of the
Guarantors in accordance with their terms and entitled to the benefits
of the Indenture, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at law) or by the discretion of the court before which any proceeding
therefor may be brought.
(j) The Registration Rights Agreement has been duly authorized
by the Issuer and the Guarantors and, when duly executed and delivered
by the Issuer and the Guarantors (assuming the due execution and
delivery thereof by you), will be the legally valid and binding
obligation of the Issuer and the Guarantors, enforceable against each
of them in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by the discretion of the court
before which any proceeding therefor may be brought and, as to rights
of indemnification and contribution, by principles of public policy or
U.S. federal or state securities laws relating thereto.
(k) The Global Bank Facility, substantially in the form most
recently delivered to the Initial Purchasers prior to the date of this
Agreement, has been duly authorized by the Issuer and the guarantors
thereof and, when duly executed and delivered by the Issuer and the
guarantors thereof, will be the legally valid and binding obligation of
the Issuer and the guarantors thereof, enforceable against each of them
in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by the
<PAGE>
-7-
discretion of the court before which any proceeding therefor may be
brought.
(l) No consent, waiver, approval, authorization or order of or
filing, registration, qualification, license or permit of or with any
court or governmental agency or body, or third party is required for
(i) the issuance and sale by the Issuer of the Notes to the Initial
Purchasers or the consummation by the Issuer of each of the other
transactions contemplated hereby or by any of the other Operative
Documents, (ii) the issuance by the Guarantors of the Guarantees or the
consummation by the Guarantors of the other transactions contemplated
hereby or by any of the Operative Documents, and (iii) the execution by
the Issuer and the guarantors thereof of the Global Bank Facility and
the consummation by the Issuer and the guarantors of each of the
transactions contemplated by the Global Bank Facility, except, in each
case, such as have been or, prior to the Closing Date, will be obtained
and such as may be required under applicable state securities or "Blue
Sky" laws in connection with the purchase and resale of the Securities
by the Initial Purchasers, and with respect to the Registration
Statements, such as are required under the Act and applicable state
securities "Blue Sky" laws. None of the Parent or any of the
Subsidiaries is (A) in violation of its charter or bylaws (or similar
organizational document), (B) in breach or violation of any statute,
judgment, decree, order, rule or regulation applicable to any of them
or any of their respective properties or assets, except for any such
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect, or (C) in breach of or default under
(nor has any event occurred which, with notice or passage of time or
both, would constitute a default under) or in violation of any of the
terms or provisions of any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, permit, certificate, contract or other
agreement or instrument to which any of them is a party or to which any
of them or their respective properties or assets is subject
(collectively, "Contracts"), except for any such breach, default,
violation or event which would not, individually or in the aggregate,
have a Material Adverse Effect.
(m) The execution, delivery and performance by the Issuer and
the Guarantors of this Agreement and each of the other Operative
Documents (to the extent a party thereto) and the consummation of the
transactions contem-
<PAGE>
-8-
plated hereby and thereby (including, without limitation, the issuance
and sale of the Securities to the Initial Purchasers and the issuance
of the Exchange Notes or Private Exchange Notes in the Exchange Offer
or the Private Exchange, as the case may be) do not and will not
violate, conflict with or constitute or result in a breach of or a
default under (or constitute an event which with notice or passage of
time or both would constitute a default under) or cause an acceleration
of any obligation under, or result in the imposition or creation of (or
the obligation to create or impose) a Lien (as defined in the Final
Memorandum) on any properties or assets of the Parent or any Subsidiary
with respect to (A) the terms or provisions of any Contract, except for
any such conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect, (B)
the charter or bylaws (or similar organizational document) of the
Issuer, the Parent or any of the Subsidiaries, or (C) (assuming
compliance by the Initial Purchasers with the Act and all applicable
state securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchasers in Section 8
hereof) any statute, judgment, decree, order, rule or regulation
applicable to the Issuer, the Parent or any of the Subsidiaries or any
of their respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(n) Deloitte & Touche LLP, who is reporting on certain
financial statements of the Parent (on both a consolidated and
unconsolidated basis), the Issuer and the Subsidiary Guarantor in the
Final Memorandum, is an independent public accounting firm within the
meaning of the Act. The financial statements of the Parent (on both a
consolidated and unconsolidated basis), the Issuer and the Subsidiary
Guarantor and related notes thereto included in the Final Memorandum
(i) comply as to form in all material respects with the applicable
requirements of Regulation S-X promulgated under the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), (ii) have been
prepared in all material respects in accordance with the Commission's
published rules and guidelines with respect to pro forma financial
statements and (iii) present fairly in all material respects the
financial position of the Parent (on both a consolidated and
unconsolidated basis), the Issuer and the Subsidiary Guarantor as of
the dates indicated and the results of
<PAGE>
-9-
their respective operations and the changes in the financial position
for the periods specified, in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout such
periods, except as otherwise stated therein. The summary and selected
financial and statistical data included in the Final Memorandum present
fairly in all material respects the information shown therein and have
been prepared and compiled on a basis consistent with the audited
financial statements included therein, except as stated therein.
(o) The pro forma financial statements (including the notes
thereto) and the other pro forma financial information included in the
Final Memorandum (i) comply as to form in all material respects with
the applicable requirements of Regulation S-X promulgated under the
Exchange Act, (ii) have been prepared in all material respects in
accordance with the Commission's published rules and guidelines with
respect to pro forma financial statements, and (iii) have been properly
computed on the bases described therein; the assumptions used in the
preparation of the pro forma financial data and other pro forma
financial information included in the Final Memorandum are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(p) Other than as described in the Final Memorandum, there is
not pending or, to the knowledge of the Issuer or the Guarantors,
threatened any action, suit, proceeding, inquiry or investigation to
which the Parent or any of the Subsidiaries is a party, or to which the
property or assets of the Parent or any of the Subsidiaries is subject,
before or brought by any court, arbitrator or governmental agency or
body which, if determined adversely to the Parent or any such
Subsidiary, as the case may be, would, individually or in the
aggregate, have a Material Adverse Effect or which seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance
or sale of the Securities to be sold hereunder or the consummation of
the other transactions described in the Final Memorandum.
(q) Each of the Parent and the Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and has made all declarations and filings with,
all federal, state, foreign, local and other governmental authorities,
<PAGE>
-10-
all self-regulatory organizations and all courts and other tribunals,
presently required or necessary to own or lease, as the case may be,
and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final
Memorandum ("Permits"), except where the failure to obtain such Permits
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; each of the Parent and the Subsidiaries
has fulfilled and performed all of its obligations with respect to such
Permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results
in any other material impairment of the rights of the holder of any
such Permit, except where the failure to perform such obligations or
the occurrence of such event would not have a Material Adverse Effect;
and none of the Parent or the Subsidiaries has received any notice of
any proceeding relating to revocation or modification of any such
Permit, except as described in the Final Memorandum and except where
such revocation or modification would not, individually or in the
aggregate, have a Material Adverse Effect.
(r) Since the respective dates as to which information is
given in the Final Memorandum, except as described therein, (i) none of
the Parent or the Subsidiaries has incurred any liabilities or
obligations, direct or contingent, or entered into or agreed to enter
into any transactions or contracts (written or oral) not in the
ordinary course of business, or which liabilities, obligations,
transactions or contracts would, individually or in the aggregate, be
material to the business, condition (financial or otherwise), prospects
or results of operations of the Parent and the Subsidiaries, taken as a
whole, (ii) none of the Parent or the Subsidiaries has purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock (other than
the Parent's regularly scheduled 1% Common Stock dividend on its Common
Stock in the ordinary course of business) and (iii) there shall not
have been any material change in the capital stock or long-term
indebtedness of the Parent or the Subsidiaries.
(s) Each of the Parent and the Subsidiaries has filed all
necessary federal or state and foreign income and franchise tax
returns, except where the failure to so file such returns would not,
individually or in the aggre-
<PAGE>
-11-
gate, have a Material Adverse Effect, and has paid all taxes shown as
due thereon except as to taxes being contested in good faith and for
which adequate reserves in accordance with GAAP have been provided, or
where the failure to pay any such taxes would not, individually or in
the aggregate, have a Material Adverse Effect; and other than tax
deficiencies which the Parent or any of the Subsidiaries is contesting
in good faith and for which the Parent or such Subsidiary has provided
adequate reserves in accordance with GAAP, there is no tax deficiency
that has been asserted against the Parent or any Subsidiary that would
have, individually or in the aggregate, a Material Adverse Effect.
(t) The statistical and market-related data included in the
Final Memorandum are based on or derived from sources which the Issuer
and the Parent believe to be reliable and accurate in all material
respects.
(u) None of the Issuer or the Guarantors or any agent acting
on its behalf has taken or will take any action that might cause this
Agreement or the sale of the Securities to violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, in each
case as in effect, or as the same may hereafter be in effect, on the
Closing Date.
(v) Each of the Parent and the Subsidiaries has good and
marketable title in fee simple to all real property and good and
marketable title to all personal property described in the Final
Memorandum as being owned by it and good and marketable title to the
leasehold estates in the real and personal property described in the
Final Memorandum as being leased by it free and clear of all liens,
charges, encumbrances or restrictions, except as described in the Final
Memorandum or to the extent the failure to have such title or the
existence of such liens, charges, encumbrances or restrictions would
not, individually or in the aggregate, have a Material Adverse Effect.
All leases, contracts and agreements to which any of the Parent or the
Subsidiaries is a party or by which any of them is bound are valid and
enforceable against each of the Parent or such Subsidiary, as the case
may be, and are valid and enforceable against the other party or
parties thereto and are in full force and effect with only such
exceptions as would not, individually or in the aggregate, have a
Material Adverse Effect, except as such enforceability may be limited
by bankruptcy, insolvency, reor-
<PAGE>
-12-
ganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally, by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by the discretion of
the court before which any proceeding therefor may be brought. The
Parent and the Subsidiaries own or possess adequate licenses or other
rights to use all patents, trademarks, service marks, trade names,
copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by them as described in the Final Memorandum,
and none of the Parent or any of the Subsidiaries has received any
notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how which, if such assertion of infringement or
conflict were sustained, would have a Material Adverse Effect.
(w) There are no legal or governmental proceedings involving
or affecting any of the Parent or any Subsidiary or any of their
respective properties or assets which would be required to be described
in a prospectus pursuant to the Act that are not so described in the
Final Memorandum, nor are there any material contracts or other
documents which would be required to be described in a prospectus
pursuant to the Act that are not so described in the Final Memorandum.
(x) Except as described in the Final Memorandum or as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (A) each of the Parent and the Subsidiaries is
in compliance with and not subject to any known liability under
applicable Environmental Laws (as defined below), (B) each of the
Parent and the Subsidiaries has made all filings and provided all
notices required under any applicable Environmental Law, and has, and
is in compliance with, all Permits required under any applicable
Environmental Laws and each of them is in full force and effect, (C)
there is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation or investigation, proceeding,
notice or demand letter or request for information pending or
threatened against the Parent or any of the Subsidiaries under any
Environmental Law, (D) no lien, charge, encumbrance or restriction has
been recorded under any Environmental Law with respect to any assets,
facility or property owned, operated, leased or controlled by any of
<PAGE>
-13-
the Parent or any Subsidiary, (E) none of the Parent or any
Subsidiaries has received notice that it has been identified as a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state law, (F) no property or facility of
the Parent or any Subsidiary is (i) listed or proposed for listing on
the National Priorities List under CERCLA or (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal or state and local laws or
regulations, codes, orders, decrees, judgments or injunctions issued,
promulgated, approved or entered thereunder, relating to pollution or
protection of public or employee health and safety or the environment,
including, without limitation, laws relating to (i) emissions,
discharges, releases or threatened releases of hazardous materials into
the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of hazardous materials, and
(iii) underground and above ground storage tanks and related piping,
and emissions, discharges, releases or threatened releases therefrom.
(y) There is no strike, labor dispute, slowdown or work
stoppage with the employees of any of the Parent or the Subsidiaries
which is pending or to the knowledge of the Parent or the Subsidiaries
threatened.
(z) Each of the Parent and the Subsidiaries carries insurance
in such amounts and covering such risks as is adequate for the conduct
of its business and the value of its properties except where the
failure to carry such insurance would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(aa) Except as described in the Final Memorandum, none of the
Issuer, the Parent or any of the Subsidiaries has incurred any
liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee
Retire-
<PAGE>
-14-
ment Income Security Act of 1974, as amended ("ERISA"), to which any of
the Issuer, the Parent or the Subsidiaries makes or ever has made a
contribution and in which any employee of any of the Issuer, the Parent
or any such Subsidiary is or has ever been a participant, which in the
aggregate could have a Material Adverse Effect. With respect to such
plans, each of the Issuer, the Parent and the Subsidiaries is in
compliance in all respects with all applicable provisions of ERISA,
except where the failure to so comply would not, individually or in the
aggregate, have a Material Adverse Effect.
(bb) Each of the Parent and the Subsidiaries (i) makes and
keeps accurate books and records and (ii) maintains internal accounting
controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation of its
financial statements and to maintain accountability for its assets, (C)
access to its assets is permitted only in accordance with management's
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(cc) None of the Parent or the Subsidiaries is or will be an
"investment company" or "promoter" or "principal underwriter" for an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended, and the rules and regulations
thereunder.
(dd) None of the Parent or the Subsidiaries has taken,
directly or indirectly, any action designed, or which might reasonably
be expected to cause or result, under the Exchange Act, in, or which
has constituted, stabilization or manipulation of the price of any
security of the Parent or the Subsidiaries to facilitate the sale or
resale of the Securities.
(ee) The Notes, the Guarantees, the Indenture, the
Registration Rights Agreement, this Agreement and the Global Bank
Facility conform in all material respects to the descriptions thereof
contained in the Final Memorandum.
(ff) No holder of securities of the Issuer or the Guarantors
will be entitled to have such securities registered under the
registration statements required to be
<PAGE>
-15-
filed by the Issuer and the Guarantors pursuant to the Registration
Rights Agreement, other than as expressly permitted thereby.
(gg) Immediately after the consummation of the transactions
contemplated by this Agreement and the Indenture, the present fair
value of the assets of each of the Issuer and the Guarantors will
exceed the sum of its stated liabilities and identified contingent
liabilities; none of the Issuer or the Guarantors (each on a
consolidated basis) is, or will be (each on a consolidated basis),
after giving effect to the execution, delivery and performance of the
Notes, the Guarantees, this Agreement and the Indenture, and the
consummation of the transactions contemplated hereby and thereby, (a)
left with unreasonably small capital with which to carry on its
business as it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise insolvent.
(hh) None of the Parent or the Subsidiaries or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under
the Act) has directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any "security" (as defined in the Act) which is or could be integrated
with the sale of the Securities in a manner that would require the
registration under the Act of the Securities or (ii) engaged in any
form of general solicitation or general advertising (as those terms are
used in Regulation D under the Act) in connection with the offering of
the Securities or in any manner involving a public offering within the
meaning of Section 4(2) of the Act.
(ii) No securities of the same class (within the meaning of
Rule 144A under the Act) as the Notes are listed on a national
securities exchange registered under Section 6 of the Exchange Act or
are quoted in a U.S. automated inter-dealer quotation system.
(jj) None of the Parent, the Subsidiaries, any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under
the Act) or any person acting on any of their behalf (other than the
Initial Purchasers) has engaged in any directed selling efforts (as
that term is defined in Regulation S under the Act ("Regulation S"))
with respect to the Securities; the Issuer and its respective
Affiliates and any person acting on any of its behalf
<PAGE>
-16-
(other than the Initial Purchasers) have complied with the offering
restrictions requirement of Regulation S.
(kk) Assuming that the representations and warranties of the
Initial Purchasers contained in Section 8 are true and correct, it is
not necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers or the reoffer and resale by the
Initial Purchasers in the manner contemplated by this Agreement to
register the Securities under the Act or to qualify the Indenture in
respect of the Securities under the TIA.
(ll) On the Closing Date, a valid and enforceable security
interest in the Collateral (as defined in the Indenture) will be
created in favor of the Trustee for the benefit of the Holders, subject
to no other lien, charge, encumbrance or interest.
(mm) On the Closing Date, the ownership of the Parent's
subsidiaries, will be such that all of its tobacco operating
subsidiaries will be direct or indirect subsidiaries of the Issuer and
all of its wool operating subsidiaries will be direct or indirect
subsidiaries of the Subsidiary Guarantor; PROVIDED that Standard Wool
(UK) Limited will be wholly owned by the Issuer and approximately 19.6%
of the capital stock of Standard Wool France will be owned by the
Issuer.
Any certificate signed by any officer of the Issuer or any
Guarantor and delivered to any Initial Purchaser or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Issuer or such
Guarantor, as the case may be, to each Initial Purchaser as to the matters
covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, the Issuer and the
Guarantors agree to issue and sell to the Initial Purchasers, and the Initial
Purchasers, acting severally and not jointly, agree to purchase $115,000,000
aggregate principal amount of the Notes (including the related Guarantees) in
the respective amounts set forth opposite their respective names on Schedule II
attached hereto at 97.25% of their principal amount. One or more certificates in
definitive form for the Notes and Guarantees that the Initial Purchasers have
agreed to purchase hereunder, and in such denomination or denominations and
registered in such name or
<PAGE>
-17-
names as the Initial Purchasers request upon notice to the Issuer at least 36
hours prior to the Closing Date, shall be delivered by or on behalf of the
Issuer to the Initial Purchasers, against payment by or on behalf of the Initial
Purchasers of the purchase price therefor by wire transfer (same day funds) to
such account or accounts as the Issuer shall specify prior to the Closing Date,
or by such means as the parties hereto shall agree prior to the Closing Date.
Such delivery of and payment for the Securities shall be made at the offices of
Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New
York time, on August 1, 1997, or at such other place, time or date as the
Initial Purchasers, on the one hand, and the Issuer, on the other hand, may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date." The Issuer will make such certificate or certificates
for the Securities available for checking and packaging by the Initial
Purchasers at the offices of BT Securities Corporation in New York, New York, or
at such other place as BT Securities Corporation may designate, at least 24
hours prior to the Closing Date.
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchasers is advisable.
5. Covenants of the Issuer and the Guarantors. The Issuer and
the Guarantors covenant and agree with each of the Initial Purchasers that:
(a) The Issuer will not amend or supplement the Final
Memorandum or make any amendment or supplement thereto of which the
Initial Purchasers shall not previously have been advised and furnished
a copy for a reasonable period of time prior to the proposed amendment
or supplement and as to which the Initial Purchasers shall not have
given their consent, which consent shall not unreasonably be withheld.
The Issuer will promptly, upon the reasonable request of the Initial
Purchasers or counsel for the Initial Purchasers, make any amendments
or supplements to the Preliminary Memorandum or the Final Memorandum
that may be necessary or advisable in connection with the resale of the
Securities by the Initial Purchasers.
(b) The Issuer and the Guarantors will cooperate with the
Initial Purchasers in arranging for the qualification of the Securities
for offering and sale under the
<PAGE>
-18-
securities or "Blue Sky" laws of such jurisdictions as the Initial
Purchasers may designate and will continue such qualifications in
effect for as long as may be necessary to complete the resale of the
Securities; provided, however, that in connection therewith, the Issuer
and the Guarantors shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in
any jurisdiction or subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the initial resale by the Initial
Purchasers of the Notes, the Exchange Notes or the Private Exchange
Notes, any event occurs or information becomes known as a result of
which the Final Memorandum as then amended or supplemented would
include any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if for
any other reason it is necessary at any time to amend or supplement the
Final Memorandum to comply with applicable law, the Issuer and the
Guarantors will promptly notify the Initial Purchasers thereof and will
prepare, at the expense of the Issuer, an amendment or supplement to
the Final Memorandum that corrects such statement or omission or
effects such compliance.
(d) The Issuer will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of
the Preliminary Memorandum and the Final Memorandum or any amendment or
supplement thereto as the Initial Purchasers may reasonably request.
(e) The Issuer will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Final
Memorandum.
(f) For so long as any of the Securities remain outstanding,
the Parent will furnish to the Initial Purchasers upon request copies
of all reports and other communications (financial or otherwise)
furnished by the Issuer to the Trustee or to the holders of the Notes
and, as soon as available, copies of any reports or financial
statements furnished to or filed by the Parent or the Issuer with the
Commission or any national securities exchange on which any class of
securities of the Parent may be listed.
<PAGE>
-19-
(g) None of the Issuer, the Guarantors or any of their
Affiliates will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any "security" (as defined in the
Act) which could be integrated with the sale of the Securities in a
manner which would require the registration under the Act of the
Securities.
(h) None of the Issuer or any Guarantor will, nor will the
Parent permit any of the Subsidiaries to, engage in any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the
Securities or in any manner involving a public offering within the
meaning of Section 4(2) of the Act.
(i) For so long as any of the Securities remain outstanding,
the Parent will make available at its expense, upon request, to any
holder of such Securities and any prospective purchasers thereof, the
information specified in Rule 144A(d)(4) under the Act, unless the
Parent is then subject to Section 13 or 15(d) of the Exchange Act.
(j) The Issuer and the Guarantors will use their best efforts
to (i) permit the Securities to be designated for trading in the
Private Offerings, Resales and Trading through Automated Linkages
market (the "PORTAL Market") of the NASD and (ii) permit the Securities
to be eligible for clearance and settlement through The Depository
Trust Company.
(k) In connection with Securities offered and sold in an
off-shore transaction (as defined in Regulation S) the Issuer will not
register any transfer of such Notes not made in accordance with the
provisions of Regulation S and will not, except in accordance with the
provisions of Regulation S, if applicable, issue any such Notes in the
form of definitive securities.
6. Expenses. The Parent and the Issuer agree, jointly and
severally, to pay all costs and expenses incident to the performance of their
obligations under this Agreement, whether or not the transactions contemplated
herein are consummated or this Agreement is terminated pursuant to Section 11
hereof, including all costs and expenses incident to (i) the printing, word
processing or other production of documents with respect to the transactions
contemplated hereby, including any costs of printing the Preliminary Memorandum
and the Final
<PAGE>
-20-
Memorandum and any amendment or supplement thereto, and any "Blue
Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial
Purchasers of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Parent or the Issuer, (iv) preparation (including printing),
issuance and delivery to the Initial Purchasers of the Securities, (v) the
qualification of the Securities under state securities and "Blue Sky" laws,
including filing fees and reasonable fees and disbursements of counsel for the
Initial Purchasers relating thereto, (vi) expenses in connection with any
meetings with prospective investors in the Securities, (vii) fees and expenses
of the Trustee including reasonable fees and expenses of its counsel, (viii) all
expenses and listing fees incurred in connection with the application for
quotation of the Securities on the PORTAL Market, (ix) any fees charged by
investment rating agencies for the rating of the Securities and (x) all
reasonable out-of-pocket expenses of the Initial Purchasers. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Initial Purchasers set forth in Section 7 hereof is not
satisfied, because this Agreement is terminated or because of any failure,
refusal or inability on the part of the Issuer or the Guarantors to perform all
obligations and satisfy all conditions on their part to be performed or
satisfied hereunder (other than solely by reason of a default by the Initial
Purchasers of their obligations hereunder after all conditions hereunder have
been satisfied in accordance herewith), the Parent and Issuer agree, jointly and
severally, to promptly reimburse the Initial Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees, disbursements and charges of
Cahill Gordon & Reindel, counsel for the Initial Purchasers) that shall have
been incurred by the Initial Purchasers in connection with the proposed purchase
and sale of the Securities.
7. Conditions of the Initial Purchasers' Obligations. The
obligation of the Initial Purchasers to purchase and pay for the Securities
shall, in their sole discretion, be subject to the satisfaction or waiver of the
following conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and addressed to the
Initial Purchasers, of Wyrick Robbins Yates & Ponton LLP, counsel for
the Issuer and the Guarantors, in form and substance satisfactory to
counsel for the Initial Purchasers, to the effect that:
<PAGE>
-21-
(i) Each of the Issuer and the Guarantors is duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and is duly
qualified to do business as a foreign corporation in good
standing in each jurisdiction in the United States in which
they own or lease properties, or conduct any business, so as
to require such qualification, except where the failure to so
qualify would not, individually or in the aggregate, have a
Material Adverse Effect.
(ii) All of the outstanding shares of capital stock
of the Issuer and the Guarantors have been duly authorized and
validly issued, are fully paid and nonassessable and all of
the capital stock of the Issuer and the Subsidiary Guarantor
is owned by the Parent.
(iii) Each of Issuer and the Guarantors has the
requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement and each of
the other Operative Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby,
including, without limitation, the corporate power and
authority to issue, sell and deliver the Notes and the
Guarantees, as applicable, as contemplated by this Agreement.
(iv) This Agreement has been duly and validly
authorized, executed and delivered by the Issuer and the
Guarantors.
(v) The Indenture has been duly and validly
authorized by the Issuer and the Guarantors and, when duly
executed and delivered in accordance with its terms (assuming
the due execution and delivery thereof by the Trustee), will
be the valid and legally binding agreement of each of the
Issuer and the Guarantors, enforceable against each of the
Issuer and the Guarantors in accordance with its terms, except
as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors'
rights generally, by general equitable principles (regardless
of whether such enforceability is considered in a proceeding
in equity or at law) or by the discretion of the court
<PAGE>
-22-
before which any proceeding therefor may be brought; and the
Indenture meets the requirements for qualification under the
TIA.
(vi) When issued and authenticated in accordance with
the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof, the Notes will
be the legally valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their terms
and entitled to the benefits of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at law) or by the discretion of the court before
which any proceeding therefor may be brought.
(vii) When issued and authenticated in accordance with
the terms of the Indenture, the Registration Rights Agreement,
the Exchange Offer and the Private Exchange, the Exchange
Notes and the Private Exchange Notes will be the legally valid
and binding obligations of the Issuer, enforceable against the
Issuer in accordance with their terms and entitled to the
benefits of the Indenture, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, by
general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
law) or by the discretion of the court before which any
proceeding therefor may be brought.
(viii) The Guarantees have been duly and validly
authorized for issuance and sale to the Initial Purchasers by
the Guarantors and, when the Notes are duly and validly
authorized, executed, issued and authenticated in accordance
with the terms of the Indenture and delivered against payment
therefor in accordance with the terms hereof, will be the
legally valid and binding obligations of each of the
Guarantors, enforceable against each of the Guarantors in
accordance with their terms and entitled to the benefits of
the Indenture, except as such enforceability
<PAGE>
-23-
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect
relating to one affecting creditors' rights generally, by
general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at
law) or by the discretion of the court before which any
proceeding therefor may be brought.
(ix) The Registration Rights Agreement has been duly
authorized by the Issuer and the Guarantors and, when duly
executed and delivered by the Issuer and the Guarantors in
accordance with its terms (assuming the due execution and
delivery thereof by the other parties thereto), will be the
legally valid and binding obligation of the Issuer and each of
the Guarantors, enforceable against each of them in accordance
with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and
other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by the
discretion of the court before which any proceeding therefor
may be brought.
(x) The Global Bank Facility has been duly
authorized by the Issuer and the guarantors thereof and, when
duly executed and delivered by the Issuer and the guarantors
thereof in accordance with its terms (assuming the due
execution and delivery thereof by the other parties thereto),
will be the legally valid and binding obligation of the Issuer
and each of the guarantors thereof, enforceable against each
of them in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at law) or by the discretion of the court before
which any proceeding therefor may be brought.
(xi) The statements set forth in the Final Memorandum
under the captions "Principal Shareholders,"
"Business--Tobacco-Properties," "Business--Wool--
<PAGE>
-24-
Properties, "Business-Legal Proceedings" and "Private
Placement," insofar as they purport to summarize matters of
United States law or other legal matters, fairly and
accurately summarize such laws and regulations in all material
respects.
(xii) The statements in the Final Memorandum under the
headings "Description of the Global Bank Facility," "The
Refinancing Plan," "Description of the Notes" and "Exchange
Offer and Registration Rights," insofar as such statements
purport to summarize certain provisions of the Indenture, the
Notes, the Guarantees, the Exchange Notes, the Registration
Rights Agreement and the Global Bank Facility and subject to
the limitations contained in such statements, provide a fair
and accurate summary in all material respects of such
provisions of such agreements.
(xiii) The execution, delivery and performance by the
Issuer and each of the Guarantors of the Purchase Agreement,
each of the other Operative Documents and the Global Bank
Facility (to the extent a party thereto) and the consummation
of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the
Securities to the Initial Purchasers) do not and will not
conflict with or constitute or result in a breach or a default
under (or an event which with notice or passage of time or
both would constitute a default under) or violation of or
cause an acceleration of any obligation under, or result in
the imposition or creation of (or the obligation to create or
impose) a Lien (other than any Lien imposed or created under
the Global Bank Facility or disclosed in the Offering
Memorandum) on any properties or assets of the Issuer or any
Guarantor with respect to (i) the terms or provisions of any
Contract (which, based solely on representations of the Issuer
and the Guarantors are the only Contracts the termination of
which would result in a Material Adverse Effect) known to such
counsel to which the Issuer or any Guarantor is a party,
except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have
a Material Adverse Effect, (ii) the certificate of
incorporation or bylaws (or similar organizational document)
of the Issuer or any Guarantor, or (iii) (assuming compliance
by the Ini-
<PAGE>
-25-
tial Purchasers with the Act and all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchasers in
Section 8 hereof) any statute, rule or regulation known to
such counsel to be of general applicability to, or any
judgment, decree or order known to such counsel to be
applicable to, the Issuer or any Guarantor or any of their
respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xiv) To the knowledge of such counsel, no consent,
waiver, approval, authorization or order of or filing,
registration, qualification, license or permit of or with any
court or governmental agency or body of the United States or
the State of North Carolina or any third party is required for
the issuance and sale by the Issuer and the Guarantors of the
Securities to the Initial Purchasers or the consummation by
the Issuer and the Guarantors of the other transactions
contemplated hereby, including the creation and perfection of
the contemplated security interest in the Collateral, except
(i) in connection with the registration under the Act of the
Exchange Notes and the Guarantees of the Exchange Notes
pursuant to the Registration Rights Agreement, (ii) the
qualification of the Indenture under the TIA in connection
with the registration of the Exchange Notes, (iii) such as may
be required under Blue Sky laws, as to which such counsel need
express no opinion and (iv) those which have previously been
obtained.
(xv) To the knowledge of such counsel, there are no
legal or governmental proceedings involving or affecting any
of the Issuer or any of the Guarantors or any of their
respective properties or assets which would be required to be
described in a prospectus pursuant to the Act that are not so
described in the Final Memorandum, nor are there any material
contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not so
described in the Final Memorandum.
(xvi) None of the Issuer or any of the Guarantors is,
or (assuming that the Securities are sold on the date hereof
as provided in the Purchase Agreement and proceeds from such
sale are applied as described in
<PAGE>
-26-
the Final Memorandum under the caption "Use of Proceeds") will
on the date of such opinion be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as
amended.
(xvii) No registration under the Act of the Securities
is required in connection with the sale of the Securities to
the Initial Purchasers as contemplated by this Agreement and
the Final Memorandum or in connection with the initial resale
of the Securities by the Initial Purchasers in accordance with
Section 8 of this Agreement, and prior to the commencement of
the Exchange Offer or the effectiveness of the Shelf
Registration Statement, the Indenture is not required to be
qualified under the TIA, in each case assuming (i) that the
purchasers who buy such Securities in the initial resale
thereof are (x) qualified institutional buyers as defined in
Rule 144A promulgated under the Act or (v) accredited
investors as defined in Rule 501(a) (1), (2), (3) or (7)
promulgated under the Act or (z) reasonably believed by the
Initial Purchasers to be persons other than U.S. Persons (as
such term is defined in Regulation S under the Act) to whom
such sale may be made in reliance on the exemption from
registration provided by Regulation S under the Act, (ii) the
accuracy and completeness of the Initial Purchasers'
representations in Section 8 and those of the Issuers and the
Guarantors contained in this Agreement regarding the absence
of a general solicitation in connection with the sale of such
Securities to the Initial Purchasers and the initial resale
thereof and (iii) the due performance by the Initial
Purchasers of the agreements set forth in Section 8 hereof.
(xviii) No securities of the same class (within the
meaning of Rule 144A under the Act) as the Notes are listed on
a national securities exchange registered under Section 6 of
the Exchange Act or are quoted in a United States automated
inter-dealer quotation system.
(xix) Neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance,
execution or delivery of the Securities will violate
Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System.
<PAGE>
-27-
(xx) On the Closing Date, the ownership of the
Parent's subsidiaries, will be such that all of its tobacco
operating subsidiaries will be direct or indirect subsidiaries
of the Issuer and all of its wool operating subsidiaries will
be direct or indirect subsidiaries of the Subsidiary
Guarantor; PROVIDED that Standard Wool (UK) Limited will be
wholly owned by the Issuer and approximately 19.6% of the
capital stock of Standard Wool France will be owned by the
Issuer.
At the time the foregoing opinion is delivered, Wyrick Robbins
Yates & Ponton LLP shall additionally state that it has participated in
conferences with officers and other representatives of the Issuer and
the Guarantors, representatives of the independent public accountants
for the Issuers representatives of the Initial Purchasers and counsel
for the Initial Purchasers, at which conferences the contents of the
Final Memorandum and related matters were discussed, and, although it
has not independently verified and is not passing upon and assumes no
responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (except to the extent
specified in subsections (xi) and (xii), no facts have come to its
attention which lead it to believe that the Final Memorandum, on the
date thereof or on the Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements contained therein, in light
of the circumstances under which they were made, not misleading (it
being understood that such firm need express no opinion with respect to
the financial statements and related notes thereto and the other
financial, statistical and accounting data included in the Final
Memorandum).
In rendering the foregoing opinions, Wyrick Robbins Yates &
Ponton LLP may rely, to the extent such counsel deems proper, upon the
representations and certifications of officers of the Parent, the
Issuer and the Subsidiaries or of public officials.
References to the Final Memorandum in this subsection (a)
shall include any amendment or supplement thereto prepared by the
Issuer in accordance with the provisions of this Agreement at the
Closing Date.
<PAGE>
-28-
(b) On the Closing date, the Initial Purchasers shall have
received the opinion, dated as of the Closing Date and addressed to the
Initial Purchasers, of Rosenman & Colin LLP, New York counsel for the
Issuer and the Guarantors, in form and substance satisfactory to
counsel for the Initial Purchasers, to the effect that:
(i) Assuming due authorization of the Indenture by
the Issuer and the Guarantors, when duly executed and
delivered by the Issuer and the Guarantors in accordance with
its terms (assuming the Indenture has been duly authorized,
executed and delivered by the Trustee), the Indenture will be
the valid and legally binding agreement of each of the Issuer
and the Guarantors, enforceable against each of the Issuer and
the Guarantors in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at law) or by the discretion of the court before
which any proceeding therefor may be brought.
(ii) Assuming due authorization of the Notes by the
Issuer, when issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor
in accordance with the terms hereof, the Notes will be the
legally valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their terms
and entitled to the benefits of the Indenture, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at law) or by the discretion of the court before
which any proceeding therefor may be brought.
(iii) Assuming due authorization of the Exchange Notes
and the Private Exchange Notes by the Issuer, when issued and
authenticated in accordance with the terms of the Indenture,
the Registration Rights Agreement, the Exchange Offer and the
Private Exchange, the Exchange Notes and the Private Exchange
<PAGE>
-29-
Notes will be the legally valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with
their terms and entitled to the benefits of the Indenture,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting creditors'
rights generally, by general equitable principles (regardless
of whether such enforceability is considered in a proceeding
in equity or at law) or by the discretion of the court before
which any proceeding therefor may be brought.
(iv) Under New York law, a valid and enforceable
security interest in the Collateral has been created in favor
of the Trustee for the benefit of the Holders, subject to no
other lien, charge, encumbrance or interest.
(c) On the Closing Date, the Initial Purchasers shall have
received opinions in form and substance satisfactory to the Initial
Purchasers, dated as of the Closing Date, from such foreign counsel of
the Issuer and the Guarantors as are reasonably requested by the
Initial Purchasers and addressed to the Initial Purchasers with respect
to certain matters that the Initial Purchasers may reasonably require.
(d) On the Closing Date, the Initial Purchasers shall have
received the opinion, in form and substance satisfactory to the Initial
Purchasers, dated as of the Closing Date and addressed to the Initial
Purchasers, of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, with respect to certain legal matters relating to this
Agreement and such other related matters as the Initial Purchasers may
reasonably require. In rendering such opinion, Cahill Gordon & Reindel
shall have received and may rely upon such certificates, opinions and
other documents and information as it may reasonably request to pass
upon such matters.
(e) The Initial Purchasers shall have received from Deloitte &
Touche LLP a comfort letter or letters dated the date hereof and the
Closing Date, in form and substance satisfactory to counsel for the
Initial Purchasers.
(f) The representations and warranties of the Issuer and the
Guarantors contained in this Agreement shall be
<PAGE>
-30-
true and correct in all material respects on and as of the date hereof
and on and as of the Closing Date as if made on and as of the Closing
Date; the statements of the officers of the Issuer and the Guarantors
made pursuant to any certificate delivered in accordance with the
provisions hereof shall be true and correct in all material respects on
and as of the date made and on and as of the Closing Date; the Issuer
and the Guarantors shall have performed all covenants and agreements
and satisfied all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date; and, except as described in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), subsequent to the date of the most recent
financial statements in such Final Memorandum, there shall have been no
event or development, and no information shall have become known, that,
individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect.
(g) The sale of the Securities hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(h) Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), none of the Parent or any
Subsidiary shall have sustained any loss or interference with respect
to its business or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any
strike, labor dispute, slow down or work stoppage or from any legal or
governmental proceeding, order or decree, which loss or interference,
individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect.
(i) The Initial Purchasers shall have received a certificate
of each of the Issuer and the Guarantors, each dated the Closing Date,
signed on behalf of each of the Issuer and the Guarantors by its
Chairman of the Board, President or Chief Executive Officer and any
Vice President or the Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Issuer
and the Guarantors contained in this Agreement are true and
correct in all material respects on and as of the date hereof
and on and as of the Closing Date, and the Issuer and the
Guarantors have per-
<PAGE>
-31-
formed all covenants and agreements and satisfied all
conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or
since the date of the most recent financial statements in the
Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), no event or development has
occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect; and
(iii) The sale of the Securities hereunder has not
been enjoined (temporarily or permanently).
(j) On the Closing Date, the Initial Purchasers shall have
received the Registration Rights Agreement executed by the Issuer and
the Guarantors and such agreement shall be in full force and effect at
all times from and after the Closing Date.
(k) The Issuer shall have delivered to the Initial Purchasers
a true, correct and complete copy of the Global Bank Facility, the
Issuer and the other parties thereto shall have executed and delivered
the Global Bank Facility; and the Global Bank Facility shall be in full
force and effect, subject only to the Closing hereunder.
(l) On the Closing Date, the ownership of the Parent's
subsidiaries, will be such that all of its tobacco operating
subsidiaries will be direct or indirect subsidiaries of the Issuer and
all of its wool operating subsidiaries will be direct or indirect
subsidiaries of the Subsidiary Guarantor; PROVIDED that Standard Wool
(UK) Limited will be wholly owned by the Issuer and approximately 19.6%
of the capital stock of Standard Wool France will be owned by the
Issuer.
All such documents, opinions, certificates, letters, schedules
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Initial Purchasers and counsel for the Initial Purchasers. The
Issuer shall furnish to the Initial Purchasers such conformed copies of such
documents, opinions, certificates, letters, schedules and instruments in such
quantities as the Initial Purchasers shall reasonably request.
<PAGE>
-32-
8. Offering of Securities; Restrictions on Transfer. (a) Each
of the Initial Purchasers represents and warrants (as to itself only) that it is
a QIB. Each of the Initial Purchasers agrees with the Issuer (as to itself only)
that (i) it has not and will not solicit offers for, or offer or sell, the
Securities by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; and (ii) it has
and will solicit offers for the Securities only from, and will offer the
Securities only to (A) in the case of offers inside the United States, (x)
persons whom the Initial Purchasers reasonably believe to be QIBs or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by the Initial Purchasers to be
Accredited Investors that, prior to their purchase of the Securities, deliver to
the Initial Purchasers a letter containing the representations and agreements
set forth in Annex A to the Final Memorandum and (B) in the case of offers
outside the United States, to persons other than U.S. persons ("foreign
purchasers," which term shall include dealers or other professional fiduciaries
in the United States acting on a discretionary basis for foreign beneficial
owners (other than an estate or trust)); provided, however, that, in the case of
this clause (B), in purchasing such Securities such persons are deemed to have
represented and agreed as provided under the caption "Transfer Restrictions"
contained in the Final Memorandum (or, if the Final Memorandum is not in
existence, in the most recent Memorandum).
(b) Each of the Initial Purchasers represents and warrants (as
to itself only) with respect to offers and sales outside the United States that
(i) it has complied and will comply with all applicable laws and regulations in
each jurisdiction in which it acquires, offers, sells or delivers Securities or
has in its possession or distributes any Memorandum or any such other material,
in all cases at its own expense; (ii) the Securities have not been and will not
be offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S under the Act or
pursuant to an exemption from the registration requirements of the Act; (iii) it
has offered the Securities and will offer and sell the Securities (A) as part of
its dis-
<PAGE>
-33-
tribution at any time and (B) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, only in accordance with
Rule 903 of Regulation S and, accordingly, neither it nor any persons acting on
its behalf have engaged or will engage in any directed selling efforts (within
the meaning of Regulation S) with respect to the Securities, and any such
persons have complied and will comply with the offering restrictions requirement
of Regulation S; and (iv) it agrees that, at or prior to confirmation of sales
of the Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may not
be offered and sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of the distribution of the
Securities at any time or (ii) otherwise until 40 days after the later
of the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above have
the meaning given to them in Regulation S."
Terms used in this Section 8(b) and not defined in this Agreement have the
meanings given to them in Regulation S.
(c) Each of the Initial Purchasers represents and warrants (as
to itself only) that the source of funds being used by it to acquire the
Securities does not include the assets of any "employee benefit plan" (within
the meaning of Section 3 of ERISA) or any "plan" (within the meaning of Section
4975 of the Code).
9. Indemnification and Contribution. (a) The Issuer and the
Guarantors agree, jointly and severally, to indemnify and hold harmless the
Initial Purchasers, their affiliates and each person, if any, who controls any
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, against any losses, claims, damages or liabilities to which
any Initial Purchaser or such controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon:
<PAGE>
-34-
(i) any untrue statement or alleged untrue statement of any
material fact contained in any Memorandum or any amendment or
supplement thereto or any application or other document, or any
amendment or supplement thereto, executed by the Issuer or any
Guarantor or based upon written information furnished by or on behalf
of the Issuer or any Guarantor filed in any jurisdiction in order to
qualify the Securities under the securities or "Blue Sky" laws thereof
or filed with any securities association or securities exchange (each
an "Application"); or
(ii) the omission or alleged omission to state, in any
Memorandum or any amendment or supplement thereto or any Application, a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading,
and will reimburse, as incurred, the Initial Purchasers, each such affiliate and
each such controlling person for any reasonable legal or other reasonable
expenses incurred by the Initial Purchasers, such affiliate or such controlling
person in connection with investigating, defending against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, that the Issuer and the Guarantors will not be
liable (i) in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum or any
amendment or supplement thereto or any Application in reliance upon and in
conformity with written information concerning the Initial Purchasers furnished
to the Issuer or any Guarantor by the Initial Purchasers specifically for use
therein or (ii) with respect to the Preliminary Memorandum, to the extent that
any such loss, claim, damage or liability arises solely from the fact that the
Initial Purchasers sold Securities to a person to whom there was not sent or
given, on or prior to the written confirmation of such sale, a copy of the Final
Memorandum, as amended and supplemented, if the Issuer or any Guarantor shall
have previously furnished copies thereof to the Initial Purchasers in accordance
with this Agreement and the Final Memorandum, as amended and supplemented, would
have corrected any such untrue statement or omission. This indemnity agreement
will be in addition to any liability that the Issuer and the Guarantors may
otherwise have to the indemnified parties. The Issuer and the Guarantors shall
not be liable under this Section 9 for any settlement of
<PAGE>
-35-
any claim or action effected without their prior written consent, which shall
not be unreasonably withheld.
The Initial Purchasers shall not, without the prior written
consent of the Issuer, effect any settlement or compromise of any pending or
threatened proceeding in respect of which the Issuer and the Guarantors are or
could have been a party, or indemnity could have been sought hereunder by the
Issuer and the Guarantors, unless such settlement (A) included an unconditional
written release of the Issuer and the Guarantors, in form and substance
reasonably satisfactory to the Issuer, from all liability on claims that are the
subject matter of such proceeding and (B) does not include any statement as to
an admission of fault, culpability or failure to act by or on behalf of the
Issuer or the Guarantors.
(b) The Initial Purchasers agree, severally and not jointly,
to indemnify and hold harmless the Issuer and the Guarantors, their respective
directors, officers and each person, if any, who controls the Issuer and the
Guarantors within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Issuer or any of the Guarantors or any such director, officer or controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum or any amendment or
supplement thereto or any Application, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in any
Memorandum or any amendment or supplement thereto or any Application, or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information concerning such Initial Purchaser, furnished to the Issuer
or any Guarantor by such Initial Purchaser specifically for use therein; and
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any reasonable legal or other expenses incurred by the
Issuer or any of the Guarantors or any such director, officer or controlling
person in connection with investigating or defending against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action in respect thereof. This indemnity agreement will be in addition to
any liability that the Initial Purchasers may otherwise
<PAGE>
-36-
have to the indemnified parties. The Initial Purchasers shall not be liable
under this Section 9 for any settlement of any claim or action effected without
their consent, which shall not be unreasonably withheld.
Neither the Issuer nor the Guarantors shall, without the prior
written consent of the Initial Purchasers, effect any settlement or compromise
of any pending or threatened proceeding in respect of which any Initial
Purchaser is or could have been a party, or indemnity could have been sought
hereunder by any Initial Purchaser, unless such settlement (A) includes an
unconditional written release of the Initial Purchasers, in form and substance
reasonably satisfactory to the Initial Purchasers, from all liability on claims
that are the subject matter of such proceeding and (B) does not include any
statement as to an admission of fault, culpability or failure to act by or on
behalf of any Initial Purchaser.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party (i)
will not relieve the indemnifying party from any liability under paragraph (a)
or (b) above unless and to the extent such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraphs (a) and (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel
<PAGE>
-37-
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after receipt by the indemnifying party of notice
of the institution of such action, then, in each such case, the indemnifying
party shall not have the right to direct the defense of such action on behalf of
such indemnified party or parties and such indemnified party or parties shall
have the right to select separate counsel to defend such action on behalf of
such indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the Initial Purchasers
in the case of paragraph (a) of this Section 9 or the Issuer in the case of
paragraph (b) of this Section 9, representing the indemnified parties under such
paragraph (a) or paragraph (b), as the case may be, who are parties to such
action or actions) or (ii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 9 is unavailable to, or
insufficient to hold harmless, an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or li-
<PAGE>
-38-
abilities (or actions in respect thereof) in such proportion as is appropriate
to reflect (i) the relative benefits received by the indemnifying party or
parties on the one hand and the indemnified party on the other from the offering
of the Securities or (ii) if the allocation provided by the foregoing clause (i)
is not permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative benefits received by
the Issuer and the Guarantors on the one hand and any Initial Purchaser on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (before deducting expenses) received by the Issuer bear to the
total discounts and commissions received by such Initial Purchaser. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer or the Guarantors on the one hand, or such Initial
Purchaser on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. The Issuer, the Guarantors and the Initial
Purchasers agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), no Initial Purchaser
shall be obligated to make contributions hereunder that in the aggregate exceed
the total discounts, commissions and other compensation received by such Initial
Purchaser under this Agreement, less the aggregate amount of any damages that
such Initial Purchaser has otherwise been required to pay by reason of the
untrue or alleged untrue statements or the omissions or alleged omissions to
state a material fact, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each affiliate of an
Initial Purchaser, each person, if any, who controls an Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall
have the same rights to contribution as the Initial Purchasers, and each
director of the Issuer or any Guarantor, each officer
<PAGE>
-39-
of the Issuer or any Guarantor and each person, if any, who controls the Issuer
or any Guarantor within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, shall have the same rights to contribution as the Issuer and
the Guarantors.
10. Survival Clause. The representations, warranties,
agreements, covenants, indemnities and other statements of the Issuer, the
Guarantors, their officers and the Initial Purchasers set forth in this
Agreement or made by or on behalf of them pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Issuer, the Guarantors, any of their officers or directors, the
Initial Purchasers or any controlling person referred to in Section 9 hereof and
(ii) delivery of and payment for the Securities. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 9, 13 and
15 hereof shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchasers by notice to the Issuer given prior to
the Closing Date in the event that the Issuer or any of the Guarantors shall
have failed, refused or been unable to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Closing Date:
(i) either the Issuer or the Guarantors shall have sustained
any loss or interference with respect to its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any strike, labor dispute, slow down or
work stoppage or any legal or governmental proceeding, which loss or
interference, in the reasonable judgment of the Initial Purchasers, has
had or has a Material Adverse Effect, or there shall have been, in the
reasonable judgment of the Initial Purchasers, any event or development
that, individually or in the aggregate, has or could be reasonably
likely to have a Material Adverse Effect (including without limitation
a change in control of any of the Parent or the Guarantors), except in
each case as described in the Final Memorandum (exclusive of any
amendment or supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, American Stock Exchange or the NASDAQ National Market shall
have been suspended or minimum or
<PAGE>
-40-
maximum prices shall have been established on any such exchange or
market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the reasonable judgment of the Initial Purchasers, makes
it impracticable or inadvisable to proceed with the offering or the
delivery of the Securities as contemplated by the Final Memorandum; or
(v) any securities of the Issuer or the Parent shall have
been downgraded or placed on any "watch list" for possible downgrading
by any nationally recognized statistical rating organization or trading
in any such securities shall have been suspended by any stock exchange
on which any such securities are listed.
(b) Termination of this Agreement pursuant to this Section 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the front cover page and in the
second, fourth, fifth and sixth paragraphs under the heading "Private Placement"
in the Final Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to the Issuer for the purposes of Sections 2(a) and 9 hereof and the Initial
Purchasers confirm that such statements are correct as of the date hereof and as
of the Closing Date.
13. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed or delivered to BT
Securities Corporation, 130 Liberty Street, New York, New York 10006, Attention:
Corporate Finance Department, with a copy to Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, Attention: Stephen A. Greene; if sent to the
Issuer or the Guarantors, shall be mailed or delivered to the Issuer at 2201
Miller Road, P.O. Box
<PAGE>
-41-
450, Wilson, North Carolina 27894-0450, Attention: Robert E. Harrison, with a
copy to Wyrick Robbins Yates & Ponton L.L.P., 4101 Lake Boone Trail, Suite 300,
Raleigh, North Carolina 27607, Attention: Larry E. Robbins.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; and one
business day after being timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Issuer and the Guarantors and
their respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuer and the Guarantors contained in Section 9 of this
Agreement shall also be for the benefit of any person or persons who control an
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act and (ii) the indemnities of the Initial Purchasers contained in
Section 9 of this Agreement shall also be for the benefit of the directors of
the Issuer and the Guarantors, their respective officers and any person or
persons who control the Issuer within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Securities from the Initial
Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Remainder of Page Intentionally Left Blank
<PAGE>
-42-
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Issuer, the Guarantors and the Initial Purchasers.
Very truly yours,
STANDARD COMMERCIAL TOBACCO CO., INC.
By: /s/Hampton R. Poole, Jr.
---------------------------
Name: Hampton R. Poole, Jr.
Title: Vice President
STANDARD COMMERCIAL CORPORATION
By: /s/G.M. Ross
----------------------------
Name: G.M. Ross
Title: Vice President & Secretary
STANDARD WOOL, INC.
By: /s/Rick Hardy
---------------------------
Name: Rick Hardy
Title: Secretary
<PAGE>
-43-
The foregoing Agreement is
hereby confirmed and accepted
as of the date first
above written.
BT SECURITIES CORPORATION
By: /s/Michael Apfel
-----------------------
Name: Michael Apfel
Title: Vice President
WHEAT, FIRST SECURITIES, INC.
By: /s/R. Walter Jones IV
-----------------------
Name: R. Walter Jones IV
Title: Managing Director
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
SUBSIDIARIES
OF STANDARD COMMERCIAL CORPORATION
Name of Subsidiary Jurisdiction of Incorporation Percentage of Subsidiary's Stock
Owned by the Company
<S> <C>
Standard Commercial Tobacco Co. Inc. North Carolina 100%
Trans-Continental Leaf Tobacco Lichtenstein 100%
Corporation
Standard Wool Australia (PTY) Ltd. Australia 100%
Lohmann & Co.(a/k/a Standard Wool Germany 100%
Germany)
Standard Commercial Tobacco Company United Kingdom 100%
(UK) Ltd.
Exelka S.A. Greece 51%
Standard Wool France S.A. France 100%
Spierer Freres & CIE S.A. Switzerland 51%
Spierer Tutun Iharacat Sanayi Turkey 51%
Ticaret AS (a/k/a Izmir)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Standard Wool, Inc. Delaware 100%
Stancom Tobacco (Private) Ltd. Zimbabwe 100%
Standard Commercial Tobacco Company Canada 100%
(Canada)
Sena Investments (Private) Ltd. Zimbabwe 100%
Tobacco Processors (Zimbabwe) (PVT) Zimbabwe 18%
Ltd.
Transhellenic Tobacco S.A. Greece 51%
Transacatab Spa Italy 100%
World Wide Tobacco Espana S.A. Spain 67%
Standard Commercial Services, Inc. North Carolina 100%
Standard Commercial Tobacco Services United Kingdom 100%
UK
W.A. Adams Company North Carolina 100%
Werkhof Gmbh Germany 100%
Tobacco Processors (Malawi) Ltd. Malawi 50%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Tobacco Processors (Lilongwe) Ltd. Malawi 51.92%
Adams International, Ltd. Thailand 49%
Herme Tutun Ihracat AS Turkey 50%
AOZT Transcontinental Leaf Tobacco St. Petersburg (Russia) 100%
Corporation
Stancom Zambia (PVT) Ltd. Zambia 100%
Stanfrie (PVT) Ltd. Zimbabwe 100%
Stancom Malawi Malawi 100%
Siemssen Threshie Jamaica 100%
Siemssen Threshie (Malawi) Ltd. Malawi 100%
Standard Wool of New Zealand New Zealand 100%
Tentler & Co BV Netherlands 100%
Bela Import-Export GmbH Germany 100%
Eusebe Carpentier S.A. France 100%
Hulme Wool Scouring Co. Australia 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
CRES Tobacco Company North Carolina 100%
Peignage De La Tosse France 100%
Stawool Brokers PTY Ltd. Australia 100%
Standard Wool (Chile) S.A. Chile 100%
S.H. Allen Pty Ltd. Australia 100%
Independent Wool Dumpers PTY Ltd. Australia 16%
Standard Wool South Africa South Africa 100%
(Propriety) Ltd.
Standard Wool Argentina Argentina 100%
K.Kileff Zimbabwe (PVT) Ltd. Zimbabwe 18%
Mascot Wools PTY Ltd. Australia 100%
Transcontinental Participacues E Brazil 100%
Emprecendimentos LTDA
Epasa Exportadora de Productos Argentina 50%
Agrarios S.A.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Trans-Continental Farming Ltd. Canada 100%
Roca Sacif Argentina 100%
Standard Wool Holdings S.A Argentina 100%
Advhus Gestion France 100%
Eryka Mediterranee SARL Greece 100%
Andre Chalmers India 100%
Esaltab (Zimbabwe) (PVT) Ltd. Zimbabwe 100%
Interrural Development Corporation Liechtenstein 100%
Siam Tobacco Export Corporation Ltd. Thailand 49%
Standard Wool Farming PTY Ltd. Australia 100%
</TABLE>
<PAGE>
SCHEDULE II
Principal
Amount of
Initial Purchaser Notes
BT Securities Corporation................................... $ 61,250,000
Wheat, First Securities, Inc................................ $ 53,750,000
Total.................................................. $115,000,000
================================================================================
STANDARD COMMERCIAL TOBACCO CO., INC.,
as Issuer
and
STANDARD COMMERCIAL CORPORATION
and
STANDARD WOOL, INC.,
as Guarantors
and
CRESTAR BANK,
as Trustee
INDENTURE
Dated as of August 1, 1997
up to $115,000,000
8 7/8% Senior Notes due 2005, Series A
8 7/8% Senior Notes due 2005, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
<S> <C> <C>
310 (a)(1)......................................................................... 7.10
(a)(2)......................................................................... 7.10
(a)(3)......................................................................... N.A.
(a)(4)......................................................................... N.A.
(a)(5)......................................................................... 7.10
(b)............................................................................ 7.08; 7.10;
10.02
(c)............................................................................ N.A.
311 (a)............................................................................ 7.11
(b)............................................................................ 7.11
(c)............................................................................ N.A.
312 (a)............................................................................ 2.05
(b)............................................................................ 10.03
(c)............................................................................ 10.03
313 (a)............................................................................ 7.06
(b)(1)......................................................................... N.A.
(b)(2)......................................................................... 7.06
(c)............................................................................ 7.06; 10.02
(d)............................................................................ 7.06
314 (a)............................................................................ 4.06; 4.08;
10.02
(b)............................................................................ N.A.
(c)(1)......................................................................... 10.04
(c)(2)......................................................................... 10.04
(c)(3)......................................................................... N.A.
(d)............................................................................ N.A.
(e)............................................................................ 10.05
(f)............................................................................ N.A.
315 (a)............................................................................ 7.01(b)
(b)............................................................................ 7.05; 10.02
(c)............................................................................ 7.01(a)
(d)............................................................................ 7.01(c)
(e)............................................................................ 6.11
316 (a)(last sentence)............................................................. 2.09
(a)(1)(A)...................................................................... 6.05
(a)(1)(B)...................................................................... 6.04
(a)(2)......................................................................... N.A.
(b)............................................................................ 6.07
(c)............................................................................ 9.04
317 (a)(1)......................................................................... 6.08
(a)(2)......................................................................... 6.09
(b)............................................................................ 2.04
318 (a)............................................................................ 10.01
(c)............................................................................ 10.01
</TABLE>
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TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions............................................................... 1
SECTION 1.02. Incorporation by Reference of TIA......................................... 28
SECTION 1.03. Rules of Construction..................................................... 28
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating........................................................... 29
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount.................. 30
SECTION 2.03. Registrar and Paying Agent................................................ 31
SECTION 2.04. Paying Agent To Hold Assets in Trust...................................... 32
SECTION 2.05. Holder Lists.............................................................. 33
SECTION 2.06. Transfer and Exchange..................................................... 33
SECTION 2.07. Replacement Notes......................................................... 34
SECTION 2.08. Outstanding Notes......................................................... 34
SECTION 2.09. Treasury Notes............................................................ 34
SECTION 2.10. Temporary Notes........................................................... 35
SECTION 2.11. Cancellation.............................................................. 35
SECTION 2.12. Defaulted Interest........................................................ 35
SECTION 2.13. CUSIP Number.............................................................. 36
SECTION 2.14. Deposit of Monies......................................................... 37
SECTION 2.15. Restrictive Legends....................................................... 37
SECTION 2.16. Book-Entry Provisions for Global Security................................. 39
SECTION 2.17. Special Transfer Provisions............................................... 40
SECTION 2.18. Additional Interest Under Registration Rights Agreement................... 43
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee........................................................ 43
SECTION 3.02. Selection of Notes To Be Redeemed......................................... 44
SECTION 3.03. Optional Redemption....................................................... 44
SECTION 3.04. Notice of Redemption...................................................... 44
SECTION 3.05. Effect of Notice of Redemption............................................ 46
SECTION 3.06. Deposit of Redemption Price............................................... 46
SECTION 3.07. Notes Redeemed in Part.................................................... 46
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.......................................................... 47
SECTION 4.02. Maintenance of Office or Agency........................................... 47
SECTION 4.03. Corporate Existence....................................................... 47
SECTION 4.04. Payment of Taxes and Other Claims......................................... 48
SECTION 4.05. Maintenance of Properties and Insurance................................... 48
SECTION 4.06. Compliance Certificate; Notice of Default................................. 49
SECTION 4.07. Compliance with Laws...................................................... 50
SECTION 4.08. Reports to Holders........................................................ 50
SECTION 4.09. Waiver of Stay, Extension or Usury Laws................................... 51
SECTION 4.10. Limitation on Restricted Payments......................................... 51
SECTION 4.11. Limitations on Transactions with Affiliates............................... 54
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness....................... 55
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries........................................................... 56
SECTION 4.14. Change of Control......................................................... 57
SECTION 4.15. Limitation on Asset Sales................................................. 59
SECTION 4.16. Limitation on Preferred Stock of Restricted Subsidiaries.................. 61
SECTION 4.17. Limitation on Liens....................................................... 61
SECTION 4.18. Additional Subsidiary Guarantees.......................................... 62
SECTION 4.19. Limitation on Status as Investment Company................................ 62
SECTION 4.20. Limitation on Line of Business............................................ 62
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.................................. 62
SECTION 5.02. Successor Corporation Substituted......................................... 64
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default......................................................... 64
SECTION 6.02. Acceleration.............................................................. 66
SECTION 6.03. Other Remedies............................................................ 67
SECTION 6.04. Waiver of Past Defaults................................................... 68
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SECTION 6.05. Control by Majority....................................................... 68
SECTION 6.06. Limitation on Suits....................................................... 69
SECTION 6.07. Right of Holders To Receive Payment....................................... 69
SECTION 6.08. Collection Suit by Trustee................................................ 69
SECTION 6.09. Trustee May File Proofs of Claim.......................................... 70
SECTION 6.10. Priorities................................................................ 70
SECTION 6.11. Undertaking for Costs..................................................... 71
SECTION 6.12. Restoration of Rights and Remedies........................................ 71
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee......................................................... 71
SECTION 7.02. Rights of Trustee......................................................... 72
SECTION 7.03. Individual Rights of Trustee.............................................. 74
SECTION 7.04. Trustee's Disclaimer...................................................... 74
SECTION 7.05. Notice of Default......................................................... 74
SECTION 7.06. Reports by Trustee to Holders............................................. 75
SECTION 7.07. Compensation and Indemnity................................................ 75
SECTION 7.08. Replacement of Trustee.................................................... 76
SECTION 7.09. Successor Trustee by Merger, Etc.......................................... 77
SECTION 7.10. Eligibility; Disqualification............................................. 77
SECTION 7.11. Preferential Collection of Claims Against Issuer.......................... 78
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Issuer's Obligations....................................... 78
SECTION 8.02. Application of Trust Money................................................ 81
SECTION 8.03. Repayment to the Issuer................................................... 81
SECTION 8.04. Reinstatement............................................................. 82
SECTION 8.05. Acknowledgment of Discharge by Trustee.................................... 82
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders................................................ 82
SECTION 9.02. With Consent of Holders................................................... 83
SECTION 9.03. Compliance with TIA....................................................... 84
SECTION 9.04. Revocation and Effect of Consents......................................... 84
SECTION 9.05. Notation on or Exchange of Notes.......................................... 84
SECTION 9.06. Trustee To Sign Amendments, Etc........................................... 85
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ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls.............................................................. 85
SECTION 10.02. Notices................................................................... 85
SECTION 10.03. Communications by Holders with Other Holders.............................. 86
SECTION 10.04. Certificate and Opinion as to Conditions Precedent........................ 87
SECTION 10.05. Statements Required in Certificate or Opinion............................. 87
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar................................. 87
SECTION 10.07. Legal Holidays............................................................ 88
SECTION 10.08. Governing Law............................................................. 88
SECTION 10.09. No Adverse Interpretation of Other Agreements............................. 88
SECTION 10.10. No Personal Liability..................................................... 88
SECTION 10.11. Successors................................................................ 89
SECTION 10.12. Duplicate Originals....................................................... 89
SECTION 10.13. Severability.............................................................. 89
SECTION 10.14. Independence of Covenants................................................. 89
ARTICLE ELEVEN
GUARANTEE OF NOTES
SECTION 11.01. Unconditional Guarantee................................................... 89
SECTION 11.02. Limitations on Guarantees................................................. 91
SECTION 11.03. Execution and Delivery of Guarantee....................................... 91
SECTION 11.04. Release of the Subsidiary Guarantor....................................... 92
SECTION 11.05. Waiver of Subrogation..................................................... 93
SECTION 11.06. Immediate Payment......................................................... 93
SECTION 11.07. Obligations Continuing.................................................... 94
SECTION 11.08. Obligations Reinstated.................................................... 94
SECTION 11.09. Obligations Not Affected.................................................. 94
SECTION 11.10. Waiver.................................................................... 94
SECTION 11.11. No Obligation To Take Action Against the Issuer........................... 95
SECTION 11.12. Dealing with the Issuer and Others........................................ 95
SECTION 11.13. Default and Enforcement................................................... 95
SECTION 11.14. Amendment, Etc............................................................ 96
SECTION 11.15. Acknowledgment............................................................ 96
SECTION 11.16. Costs and Expenses........................................................ 96
SECTION 11.17. No Waiver; Cumulative Remedies............................................ 96
SECTION 11.18. Survival of Obligations................................................... 96
SECTION 11.19. Guarantee in Addition to Other Obligations................................ 97
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SECTION 11.20. Severability.............................................................. 97
SECTION 11.21. Successors and Assigns.................................................... 97
ARTICLE TWELVE
COLLATERAL
SECTION 12.01. Collateral Documents...................................................... 97
SECTION 12.02. Recording and Opinions.................................................... 98
SECTION 12.03. Release of Collateral..................................................... 99
SECTION 12.04. Specified Releases of Collateral.......................................... 99
SECTION 12.05. Authorization of Actions To Be Taken by the Trustee....................... 99
Exhibit A - Form of Initial Note......................................................... A-1
Exhibit B - Form of Exchange Note........................................................ B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to
Non-QIB Accredited Investors............................................. C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers
Pursuant to Regulation S................................................. D-1
Exhibit E - Form of Guarantee............................................................ E-1
Note: This Table of Contents shall not, for any purpose, be deemed to be part of this Indenture
</TABLE>
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INDENTURE, dated as of August 1, 1997, among STANDARD COMMERCIAL
TOBACCO CO., INC., a North Carolina corporation (the "Issuer"), STANDARD
COMMERCIAL CORPORATION (the "Company" or the "Parent Guarantor") and STANDARD
WOOL, INC. ("Standard Wool" or the "Subsidiary Guarantor" and together with the
Parent Guarantor, the "Guarantors"), as guarantors, and CRESTAR BANK, as Trustee
(the "Trustee").
The Issuer has duly authorized the creation of an issue of 8 7/8%
Senior Notes due 2005, Series A (the "Initial Notes") and 8 7/8% Senior Notes
due 2005, Series B to be issued in exchange for the Initial Notes pursuant to
the Registration Rights Agreement (as defined herein) (the "Exchange Notes" and,
together with the Private Exchange Notes (as defined herein) and the Initial
Notes, the "Notes") and, to provide therefor, the Issuer has duly authorized the
execution and delivery of this Indenture. The Notes will be guaranteed on a
senior basis by the Guarantors. All things necessary to make the Notes, when
duly issued and executed by the Issuers, and authenticated and delivered
hereunder, the valid obligations of the Issuer, and to make this Indenture a
valid and binding agreement of the Issuer, have been done.
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of
the Company or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
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"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified 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 the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.16.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other than
a Restricted Subsidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or line of business
of such Person or any other properties or assets of such Person other than in
the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of the Company of
(a) any Capital Stock of any Restricted Subsidiary of the Company, (b) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary or (c) any other property
or assets of the Company or any Restricted Subsidiary of the Company, other than
in the ordinary course of business; provided that Asset Sales shall not include
(i) a transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $5 million,
(ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under Section 5.01,
(iii) any disposition of assets or property not in the
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ordinary course of business to the extent such property or assets are obsolete,
worn out or no longer useful in the Company's or any Restricted Subsidiary's
business, (iv) the surrender or waiver of contract rights or the settlement,
release or surrender of contract, tort or other claims of any kind, (v) the sale
or discount, in each case without recourse, of accounts receivable arising in
the ordinary course of business, but only in connection with the compromise or
collection thereof, (vi) the factoring of accounts receivable arising in the
ordinary course of business pursuant to arrangements customary in the region,
(vii) the grant in the ordinary course of business of any non-exclusive license
of patents, trademarks, registrations therefor and other similar intellectual
property and (viii) any dividend, distribution, investment or payment made
pursuant to the first or second paragraph of the covenant described under
Section 4.10.
"Authenticating Agent" has the meaning provided in Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the secretary, an assistant secretary or a director of
such Person to have been duly adopted by the Board of Directors of such Person
and to be in full force and effect on the date of such certification and
delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in the City of New York are required or
authorized by law or other governmental action to be closed.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as finance lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or
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not voting) of corporate stock, including each class of Common Stock and
Preferred Stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
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; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poors Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by any bank organized under the laws of the United
States of America or any state thereof or the District of Columbia or any U.S.
branch of a foreign bank; (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(iv) above; (vi) in the case of any foreign Restricted Subsidiary, Investments
(a) in direct obligations of the sovereign nation (or any agency thereof) in
which such foreign Restricted Subsidiary is organized or is conducting a
substantial amount of business or in obligations fully and unconditionally
guaranteed by such sovereign nation (or any agency thereof), (b) of the type and
maturity described in clauses (i) through (v) above of foreign obligors, which
Investments or obligors (or the parents of such obligors) have ratings described
in such clauses or equivalent ratings from comparable foreign rating agencies or
(c) of the type and maturity described in clauses (i) through (v) above of
foreign obligors (or the parents of such obligors), which Investments or
obligors (or the parents of such obligors), are not rated as provided in such
clauses or in clause (vi)(b) but which are, in the reasonable judgment of the
Issuer, comparable in investment quality to such Investments and obligors (or
the parents of such obligors); and (vii) investments in money market funds which
invest substantially all their assets in securities of the types described in
clauses (i) through (vi) above.
"Certificated Securities" means Notes in definitive registered form.
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"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of this
Indenture) (other than to a Wholly Owned Restricted Subsidiary); (ii) the
approval by the holders of the Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of this Indenture); (iii) the
acquisition in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) by (x) any Person or Group (other
than Permitted Holders), of any securities of the Company such that, as a result
of such acquisition, such Person, or Group either (A) beneficially owns (within
the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, at
least 30% of the Company's then outstanding voting securities entitled to vote
on a regular basis for the Board of Directors of the Company, or (B) otherwise
has the ability to elect, directly or indirectly, a majority of the members of
the Company's Board of Directors, including without limitation by the
acquisition of proxies for the election of directors; or (iv) the replacement of
a majority of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least a majority of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"Change of Control Offer" has the meaning provided in Section 4.14.
"Change of Control Payment Date" has the meaning provided in Section
4.14.
"Collateral" means all of the outstanding capital stock of the Issuer
and the Subsidiary Guarantor.
"Collateral Account" means the collateral account established by the
Trustee pursuant to Section 12.01.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equiva-
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lents (however designated and whether voting or non-voting) of such Person's
common stock, whether outstanding on the Issue Date or issued after the Issue
Date, and includes, without limitation, all series and classes of such common
stock.
"Company" has the meaning provided in the preamble to this Indenture.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to
the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Restricted Subsidiaries accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions outside the ordinary course of business), (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges less (x) any non-cash items
increasing Consolidated Net Income for such period and (y) all cash payments
during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to the incurrence or repayment of
any Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give ef-
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fect to the incurrence of such guaranteed Indebtedness as if such Person or any
Restricted Subsidiary of such Person had directly incurred or otherwise assumed
such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date, (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period, and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid, accrued or scheduled to be paid or accrued during such period times
(y) a fraction, the numerator of which is one and the denominator of which is
one minus the then current effective consolidated federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication: (i) the aggregate of the interest
expense with respect to all outstanding Indebtedness of such Person and its
Restricted Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, including without limitation, (a) any amortization of debt
discount and amortization or write-off of deferred financing costs, (b) the net
costs under Interest Swap Obligations, (c) all capitalized interest included in
cost of goods sold (but excluding capitalized interest included in inventory
held by the person at the end of the period) and (d) the interest portion of any
deferred payment obligation; plus (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Re-
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stricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP; minus (iii) interest income received by such Person and
its Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
after-tax items classified as extraordinary or nonrecurring gains and losses or
classified as exceptional gains and losses to the extent they would be
classified as extraordinary or nonrecurring under GAAP, (c) the net income (or
loss) of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it becomes a Restricted Subsidiary of the referent Person or
is merged or consolidated with the referent Person or any Restricted Subsidiary
of the referent Person, (d) the net income (but not loss) of any Restricted
Subsidiary of the referent Person to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by a contract, operation of law or otherwise, (e) the net income
of any Person, other than a Restricted Subsidiary of the referent Person, except
to the extent of cash dividends or distributions paid to the referent Person or
to a Wholly Owned Restricted Subsidiary of the referent Person by such Person,
(f) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets and (i) one time non-cash compensation charges, including any
arising from existing stock options resulting from any merger or
recapitalization transaction.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Capital Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock,
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less (x) all write-ups subsequent to the date of this Indenture in the book
value of any asset owned by such Person or a consolidated Subsidiary of such
Person (other than purchase accounting adjustments made, in connection with any
acquisition of any entity that becomes a consolidated Subsidiary of such Person
after the date of this Indenture, to the book value of the assets of such
entity), (y) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined on a
consolidated basis in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person, for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net Income
of such person and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such charges
constituting an extraordinary item or loss or any such charge which requires an
accrual of or a reserve for cash charges for any future period).
"Consolidated Tangible Net Worth" means, with respect to any Person as
of any date, the sum of (i) Consolidated Net Worth, minus (ii) the amount of
such Person's intangible assets at such date, including, without limitation,
goodwill (whether representing the excess of cost over book value of assets
acquired or otherwise), capitalized expenses (excluding capitalized interest
included in inventory held by the Person as of that date), patents, trademarks,
trade names, copyrights, franchises, licenses and deferred charges (such as,
without limitation, unamortized costs and costs of research and development),
all determined for such Person on a consolidated basis in accordance with GAAP,
plus (iii) translation adjustments as determined under FASB 52.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 919 East Main Street, Richmond, Virginia 23219.
"Covenant Defeasance" has the meaning set forth in Section 8.01.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Issuer or any Restricted Subsidiary of the Issuer against fluctuations in
currency values.
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"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or
with the lapse of time or the giving of notice or both would be, an Event of
Default.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a customarily defined
change of control), in whole or in part, on or prior to the final maturity date
of the Notes.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"Exchange Notes" means the 8 7/8% Senior Notes due 2005 to be issued in
exchange for the Initial Notes pursuant to the Registration Rights Agreement or,
with respect to Initial Notes issued under this Indenture subsequent to the
Issue Date pursuant to Section 2.02, a registration rights agreement
substantially identical to the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or property or the
rendering of any service, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. Fair Market Value shall be determined (A) by a
responsible senior officer of the Company in the case of Fair Market Value not
in excess of $10 million, (B) by the Board of Directors of the Company acting
reasonably and in good faith and evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee in the case of Fair Market
Value of greater than $10 million and less than $15 million and (C) by the Board
of Directors of the Company acting reasonably and in good faith and evidenced by
a Board Resolution of the Board of Directors of the Company and an opinion of an
Independent Financial Advisor as to the fairness of such transaction from a
financial point of view delivered to
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the Trustee in the case of Fair Market Value of $15 million or greater.
"GAAP" means generally accepted accounting principles in the United
States as in effect as of the Issue Date, including without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Global Bank Facility" means, collectively, the Credit Agreement, which
is intended to be entered into on the Issue Date, among the Issuer and two of
its subsidiaries as borrowers thereunder, Deutsche Bank A.G. as agent and
Bankers Trust Company as co-agent and the lenders thereunder (including any
guarantee agreements and related security documents), in each case as such
agreements or documents may be amended (including any amendment, restatement or
restructuring thereof), supplemented or otherwise modified or replaced from time
to time, including any agreement extending the maturity of, refunding,
refinancing, increasing the amount available under or replacing such agreement
or document or any successor or replacement agreement or document and whether by
the same or any other agent, lender or group of lenders.
"Global Note" has the meaning provided in Section 2.01.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantors" means the Company, Standard Wool and any Restricted
Subsidiary of the Company executing a supplemental indenture evidencing its
guarantee of the Notes subsequent to the Issue Date; provided that any Person
constituting a Guarantor as described above shall cease to constitute a
Guarantor when its respective Guarantee is released in accordance with the terms
of this Indenture.
"Holder" means a holder of Notes.
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"incur" has the meaning set forth in Section 4.12.
"Indebtedness" means (without duplication) with respect to any Person,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business), (v) all Obligations for the
reimbursement of any obligor on any letter of credit, bankers' acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations in
respect of Indebtedness of any other Person of the type referred to in clauses
(i) through (v) above and clause (viii) below, (vii) all Obligations of any
other Person of the type referred to in clauses (i) through (vi) which are
secured by any lien on any property or asset of such Person, the amount of such
Obligation being deemed to be the lesser of the fair market value of such
property or asset or the amount of the Obligation so secured, (viii) all
Obligations under currency agreements and interest swap agreements of such
Person and (ix) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed redemption price or repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Independent Financial Advisor" means a nationally recognized firm
which, in the judgment of the Board of Directors of the Company, is independent
and qualified to perform the task for which it is to be engaged.
"Initial Notes" means, collectively, (i) the 8 7/8% Senior Notes due
2005 of the Issuer issued on the Issue Date
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and (ii) one or more series of 8 7/8% Senior Notes due 2005 that are issued
under this Indenture subsequent to the Issue Date pursuant to Section 2.02, in
each case for so long as such securities constitute Restricted Securities.
"Initial Purchasers" means, collectively, BT Securities Corporation and
Wheat, First Securities Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest" when used with respect to any Note means the amount of all
interest accruing on such Note, including any applicable defaulted interest
pursuant to Section 2.12 and any Additional Interest pursuant to the
Registration Rights Agreement.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Inventory" means, as of any date, all inventory of the Company and any
of its Restricted Subsidiaries, wherever located, valued in accordance with GAAP
and shown on the balance sheet of the Company for the quarterly period most
recently ended prior to such date for which financial statements of the Company
are available.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance or other extension of credit (including, without limitation, a
guarantee (other than any guarantee which is made in compliance with the
provisions of Section 4.12) or capital contribution (by means of any transfer of
cash or other property (valued at the Fair Market Value thereof as of the date
of transfer)) to others or any payment for property or services for the account
or use of others), or
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any purchase or acquisition by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by, any
Person, and all other items that would be classified as investments on a balance
sheet of such Person prepared in accordance with GAAP. Notwithstanding the
foregoing, "Investment" shall exclude extensions of trade credit by the Company
and its Restricted Subsidiaries on commercially reasonable terms in accordance
with normal trade practices of the Company or such Restricted Subsidiary, as the
case may be. For the purposes of Section 4.10, (i) "Investment" shall include
and be valued at the Fair Market Value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the Fair Market Value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, but reduced by the
payment of dividends or distributions in connection with such Investment or any
other amounts received in respect of such Investment, provided that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Common Stock of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, at least 50% of
the outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Issuer" means Standard Commercial Tobacco Co., Inc.
"Legal Defeasance" has the meaning set forth in Section 8.01.
"Legal Holiday" has the meaning provided in Section 10.07.
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"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"Maturity Date" means August 1, 2005.
"Meridional" means Meridional de Tabacos Ltda.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of (a) out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions and relocation expenses) and transmission
costs (including foreign exchange costs) in transferring money from the
disposing entity) to an entity making a prepayment required under this
Indenture, (b) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Indebtedness that is required to be
repaid in connection with such Asset Sale and (d) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Net Proceeds Offer" has the meaning set forth in Section 4.15.
"Net Proceeds Offer Amount" has the meaning set forth in Section 4.15.
"Net Proceeds Offer Payment Date" has the meaning set forth in Section
4.15.
"Net Proceeds Offer Trigger Date" has the meaning set forth in Section
4.15.
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"Notes" means, collectively, the Initial Notes, the Private Exchange
Notes, if any, and the Unrestricted Notes, treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offering Memorandum" means the confidential Offering Memorandum dated
July 25, 1997 of the Issuer relating to the offering of the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board
of Directors, the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of
such Person, or any other officer designated by the Board of Directors serving
in a similar capacity.
"Officers' Certificate" means a certificate signed by two Officers of
the Issuer.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
10.04 and 10.05, as they relate to the giving of an Opinion of Counsel.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Advances On Purchases Of Tobacco And Wool" means loans,
advances, extensions of credit and guarantees made by the Company or any or its
Restricted Subsidiaries to growers and other suppliers of tobacco and wool
(including Affiliates) and tobacco growers' cooperatives, whether short-term or
long-term, in the ordinary course of business to finance the growing or
processing of tobacco or wool only to the extent that the aggregate principal
amount of such loans, advances, extensions of credit and guarantees outstanding
at any time to any Person and such Person's Affiliates does not exceed 20% (40%
with respect to Meridional) of the Consolidated Tangible Net Worth of the
Company for the most recently ended fiscal quarter for which internal financial
statements are available.
"Permitted Holders" means Mr. Ery W. Kehaya, his immediate family
(including grandchildren) and their spouses, as well as trusts or similar
entities for the benefit of any of the foregoing.
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"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Notes, this Indenture and the Guarantees;
(ii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness under the Global Bank Facility (and the
incurrence by Restricted Subsidiaries of the Company of guarantees
thereof) in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Restricted
Subsidiaries thereunder) not to exceed $200 million, less the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently reduce
the outstanding amount of such Indebtedness (and to correspondingly
reduce the commitments, if any, with respect thereto) pursuant to
Section 4.15;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in an aggregate principal amount at any
time outstanding (excluding the amount then outstanding under the
Company's outstanding 7 1/4% Convertible Subordinated Debentures due
2007) not to exceed the sum of (A) 85% of Inventory, plus (B) 85% of
Receivables, plus (C) 85% of outstanding Permitted Advances on
Purchases of Tobacco and Wool, less the sum of any amounts then
outstanding under clauses (i), (ii) and (iii) above;
(v) Interest Swap Obligations of the Company and its Restricted
Subsidiaries, provided that such Interest Swap Obligations are entered
into to protect the Issuer and its Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance
with this Indenture to the extent the notional principal amount of such
Interest Swap Obligation does not exceed the principal amount of the
Indebtedness to which such interest Swap Obligation relates;
(vi) Indebtedness under Currency Agreements; provided that (x) in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and its
Restricted Sub-
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sidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder and (y) in the case of Currency
Agreements which do not relate to Indebtedness, such Currency
Agreements are entered into for the purpose of hedging currency
fluctuation risks associated with the operation of the businesses of
the Company and its Restricted Subsidiaries and are not entered into
for speculative purposes;
(vii) Indebtedness of a Restricted Subsidiary of the Company to the
Issuer, the Company or a Guarantor for so long as such Indebtedness is
held by the Issuer, the Company or a Guarantor, in each case, subject
to no Lien held by a Person other than the Issuer, the Company, a
Guarantor, the lenders under the Global Bank Facility or the Holders of
the Notes; provided that if as of any date any Person other than the
Issuer, the Company or a Guarantor owns or holds any such Indebtedness
or any Person other than the Issuer, the Company, a Guarantor, the
lenders under the Global Bank Facility or the Holders of the Notes
holds a Lien in respect of such Indebtedness, such date shall be deemed
the incurrence of Indebtedness not constituting Permitted Indebtedness
by the issuer of such Indebtedness;
(viii) Indebtedness of the Company to the Issuer or a Guarantor for so
long as such Indebtedness is held by the Issuer or a Guarantor, in each
case subject to no Lien; provided that (a) any Indebtedness of the
Company to the Issuer or a Guarantor is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under
this Indenture and the Parent Guarantee and (b) if as of any date any
Person other than the Issuer or a Guarantor owns or holds any such
Indebtedness or any Person (other than the lenders under the Global
Bank Facility) holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security
for workers' compensation claims, payment obligations in connection
with self-insurance or similar requirements in the ordinary course of
business;
(x) Indebtedness in respect of Capitalized Lease Obligations and/or
Purchase Money Indebtedness in an aggregate principal amount for all
such Indebtedness incurred
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pursuant to this clause (x) not to exceed $15 million at any one time
outstanding;
(xi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price, earn out or other similar obligations, in
each case incurred or assumed in connection with the disposition of any
business, assets or a Restricted Subsidiary of the Company, other than
guarantees of indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition; provided that the maximum
assumable liability in respect of all such indebtedness shall at no
time exceed the gross proceeds actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(xii) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary of the Company in the ordinary course of business;
(xiii) Refinancing Indebtedness;
(xiv) guarantees by the Company and its Restricted Subsidiaries of each
other's Indebtedness; provided that such Indebtedness is permitted to
be incurred under this Indenture and such guarantee is permitted to be
incurred under the covenant described under Section 4.18;
(xv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15 million
at any one time outstanding; and
(xvi) Indebtedness incurred in connection with clause (xiii) of the
definition of "Permitted Investments."
"Permitted Investments" means without duplication, each of the
following: (i) Investments existing on the Issue Date; (ii) Investments by the
Company or any Restricted Subsidiary of the Company in the Company or in any
Person that is or will become (as soon as practicable) after such Investment a
Wholly Owned Restricted Subsidiary of the Company or that will merge or
consolidate into the Company or a Wholly Owned Restricted Subsidiary of the
Company; (iii) Investments in the Issuer by the Company or any Restricted
Subsidiary of the Company; provided that any Indebtedness evidencing such
Investment is unsecured and subordinated, pursuant to a written agreement, to
the Issuer's obligations under the Notes and this Indenture; (iv) Investments in
cash and Cash Equivalents; (v) loans and
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advances to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business not in excess of $2 million at
any one time outstanding; (vi) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Company's or its Restricted
Subsidiaries' businesses and otherwise in compliance with this Indenture; (vii)
Investments in securities of trade creditors or customers received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (viii) Investments made by the
Company or its Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with the "Limitation on Asset
Sales" covenant; (ix) Investments made in the ordinary course of business in
export notes, trade credit assignments, bankers' acceptances, guarantees and
instruments of a similar nature issued in connection with the financing of
international trading transactions by (a) any commercial bank or trust company
(or any Affiliate thereof) organized under the laws of the United States of
America, any state thereof, or the District of Columbia having capital and
surplus in excess of $100,000,000 or (b) any international bank of recognized
standing ranking among the world's 300 largest commercial banks in terms of
total assets; (x) any Permitted Advances on Purchases of Tobacco and Wool; (xi)
Investments made in any Person, not to exceed 10% of Consolidated Tangible Net
Worth for the most recently ended fiscal quarter for which internal financial
statements are available, engaged in the business of distributing and/or
processing of leaf tobacco or wool or a business reasonably related thereto
(excluding the manufacture or marketing of cigarettes, cigars or smokeless
tobacco products intended for retail consumption) in which the Company (either
directly or through one or more Restricted Subsidiaries) owns at least 10% of
the equity interests of such Person and the Company (or a Restricted Subsidiary,
as applicable), and has the contractual right to purchase or process tobacco or
wool from such Person; (xii) an amount not to exceed $25 million for the
acquisition of the capital stock of a non Wholly Owned Restricted Subsidiary of
the Company engaged in the business of distributing and/or processing of leaf
tobacco; and (xiii) the acquisition, directly or indirectly, of at least 74.9%
of Meridional, for an aggregate purchase price of no more than $30 million.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
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(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by
law incurred in the ordinary course of business;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance, pensions and other types of social security;
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company and its Restricted Subsidiaries, taken as a whole;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation permitted under the definition of "Permitted Indebtedness",
provided that such Liens do not extend to any property or assets which
is not leased property subject to such Capitalized Lease Obligation;
(vii) purchase money Liens to finance property or assets of the Company
or any Restricted Subsidiary of the Company acquired in the ordinary
course of business; provided, however, that (A) the related purchase
money Indebtedness is permitted under the definition of "Permitted
Indebtedness" and shall not exceed the cost of such property or assets
and shall not be secured by any property or assets of the Company or
any Restricted Subsidiary of the Company other than the property and
assets so acquired and additions and accessions thereto and proceeds
therefrom and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens given to secure Permitted Indebtedness described under
clauses (ii), (iii) or (iv) of the definition of "Permitted
Indebtedness";
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and proceeds
thereof;
(x) Liens encumbering deposits, including operating lease deposits made
to secure obligations arising from statutory, regulatory, contractual
or warranty require-
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ments of the Company or any of its Subsidiaries, including rights of
offset and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under
this Indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the
time of and prior to the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company and were not
granted in connection with, or in anticipation of, the incurrence of
such Acquired Indebtedness by the Company or a Restricted Subsidiary of
the Company and (B) such Liens do not extend to or cover any property
or assets of the Company or of any of its Restricted Subsidiaries other
than the property or assets that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary of the Company and are no more
favorable to the lienholders than those securing the Acquired
Indebtedness prior to the incurrence of such Acquired Indebtedness by
the Company or a Restricted Subsidiary of the Company;
(xiv) Leases or subleases granted to others not interfering in any
material respect with the business of the Company or any Restricted
Subsidiary;
(xv) Any interest or title of a lessor in the property subject to any
lease, whether characterized as capitalized or operating, other than
any such interest or title resulting from or arising out of a default
by the Company or any Restricted Subsidiary of its obligations under
such lease;
(xvi) Liens arising from filing UCC financing statements for
precautionary purposes in connection with true leases of personal
property that are otherwise permitted under this Indenture and under
which the Company or any Restricted Subsidiary is lessee; and
(xvii) Liens in favor of the Trustee and any substantially equivalent
Lien granted to any trustee or similar institution under any indenture
governing Indebtedness
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permitted to be Incurred or outstanding under this Indenture.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"plan of liquidation" means, with respect to any Person, a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (a) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such Person otherwise
than as an entirety or substantially as an entirety and (b) the distribution of
all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of such
Person to holders of Capital Stock of such Person.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes) means the
principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"Private Exchange Notes" has the meaning set forth in the Registration
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.
"Purchase Money Indebtedness" means Indebtedness of the Issuer or its
Restricted Subsidiaries incurred for the purpose of financing all or any part of
the purchase price or the cost of installation, construction or improvement of
any property.
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"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Receivables" means, as of any date, all accounts receivable of the
Company and any of its Restricted Subsidiaries arising out of the sale of
inventory in the ordinary course of business, valued in accordance with GAAP and
shown on the balance sheet of the Company for the quarterly period most recently
ended prior to such date for which financial statements of the Company are
available.
"Record Date" means the Record Date specified in the Notes.
"Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.
"redemption price," when used with respect to any Note to be redeemed,
means the price fixed for such redemption, including principal and premium, if
any, pursuant to this Indenture and the Notes.
"Reference Date" has the meaning set forth in Section 4.10.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance with
Section 4.12 (other than pursuant to clause (iii), (iv), (v), (vi), (vii),
(viii), (ix), (xiv) or (xv) of the definition of Permitted Indebtedness), in
each case that does not (1) result in an increase in the aggregate principal
amount of Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid under the terms
of the instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing) or (2) in
any case where Indebtedness that is being Refinanced was long-term Indebtedness,
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being Re-
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financed or (B), in the case of Indebtedness, a final maturity earlier than the
final maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of the Issuer, then such
Refinancing Indebtedness shall be Indebtedness solely of the Issuer and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes, then
such Refinancing Indebtedness shall be subordinate to the Notes at least to the
same extent and in the same manner as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the Issue Date among the Issuer, the Guarantors and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" shall have the meaning set forth in Section 4.15.
"Restricted Payment" shall have the meaning set forth in Section 4.10.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Note constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Subsidiary of such
Person which at the time of determination is not an Unrestricted Subsidiary and
shall include, on the Issue Date, every Subsidiary of the Company, including in
the case of Restricted Subsidiaries of the Company, the Issuer.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Rating Services, a division of The McGraw
Hill Companies, Inc., and its successors.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such Property.
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"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule
1.02(w) of Regulation S-X under the Securities Act.
"Subsidiary" of any Person means (i) any corporation of which the
outstanding Capital Stock having at least a majority of the votes entitled to be
cast in the election of directors under ordinary circumstances shall at the time
be owned, directly or indirectly, by such Person or (ii) any other Person of
which at least a majority of the voting interest under ordinary circumstances is
at the time, directly or indirectly, owned by such Person.
"Surviving Entity" shall have the meaning set forth in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as
otherwise provided in Section 9.03.
"Total Capitalization" means the sum of (i) the total consolidated
indebtedness of the Company and (ii) the Company's consolidated shareholders'
equity (excluding any goodwill reserve).
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer this Indenture, or in the case of a
successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Notes" means one or more Notes that are not required to
bear the Private Placement Legend in the form set forth in Section 2.15,
including, without limitation, the Exchange Notes.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such Person
in the manner pro-
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vided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the Company
or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided that (x) the Company certifies to the
Trustee that such designation complies with Section 4.10 and (y) each Subsidiary
to be so designated and each of its Subsidiaries has not at the time of
designation, and does not thereafter, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable with respect to any Indebtedness
pursuant to which the lender has recourse to any of the assets of the Company or
any of its Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Issuer is able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12, (y) such designation is at that time permitted
under Section 4.10 and (z) immediately before and immediately after giving
effect to such designation, no Default or Event of Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
evidenced to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" mean direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the
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outstanding voting securities (other than in the case of a foreign Restricted
Subsidiary, directors' qualifying shares or an immaterial amount of shares
required to be owned by other Persons pursuant to applicable law) are owned by
such Person or any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on this Indenture securities means the Issuer or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP as of any date of determination;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or
other subdivision; and
(6) any reference to a statute, law or regulation means that statute,
law or regulation as amended and in
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effect from time to time and includes any successor statute, law or
regulation; provided, however, that any reference to the Bankruptcy Law
shall mean the Bankruptcy Law as applicable to the relevant case.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of Exhibit A hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit B hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Issuer and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. If required, the
Notes may bear the appropriate legend regarding any original issue discount for
federal income tax purposes. Each Note shall be dated the date of its issuance
and shall show the date of its authentication. Each Note shall have an executed
Guarantee from each of the Guarantors endorsed thereon substantially in the form
of Exhibit E hereto.
The terms and provisions contained in the Notes, annexed hereto as
Exhibits A and B, shall constitute, and are hereby expressly made, a part of
this Indenture and, to the extent applicable, the Issuer, the Guarantors and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A, Notes offered and sold
to institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act) and Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form, substantially in the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for the
Depository, duly executed by the Issuer (and having an executed Guarantee
endorsed thereon) and authenticated by the Trustee as hereinafter provided and
shall bear the legend set forth in Section 2.15. The aggregate principal amount
of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depository,
as hereinafter provided.
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Notes issued in exchange for interests in a Global Note pursuant to
Section 2.16 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "Physical
Notes"). All Notes offered and sold in reliance on Regulation S shall remain in
the form of a Global Note until the consummation of the Exchange Offer pursuant
to the Registration Rights Agreement; provided, however, that all of the time
periods specified in the Registration Rights Agreement to be complied with by
the Issuer have been so complied with.
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount.
Two Officers, or an Officer and an Assistant Secretary of the Issuer
and each Guarantor, shall sign, or one Officer shall sign and one Officer or an
Assistant Secretary (each of whom shall, in each case, have been duly authorized
by all requisite corporate actions) shall attest to, the Notes for the Issuer
and the Guarantees for the Guarantors by manual or facsimile signature.
If an Officer or Assistant Secretary whose signature is on a Note or a
Guarantee was an Officer or Assistant Secretary at the time of such execution
but no longer holds that office or position at the time the Trustee
authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in
the aggregate principal amount not to exceed $115,000,000 in one or more series,
(ii) Private Exchange Notes from time to time only in exchange for a like
principal amount of Initial Notes and (iii) Unrestricted Notes from time to time
only (x) in exchange for a like principal amount of Initial Notes or (y) in an
aggregate principal amount of not more than the excess of $115,000,000 over the
sum of the aggregate principal amount of (A) Initial Notes then outstanding, (B)
Private Exchange Notes then outstanding and (C) Unrestricted Notes issued in
accordance with (iii)(x) above, in each case upon a written order of the Issuer
in the form of an Officers' Certificate of the Issuer. Each such written order
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes,
Private Exchange Notes or Unrestricted Notes and whether the Notes are to be
issued as Physical Notes or Global Notes or such other information as the
Trustee may reasonably
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request. In addition, with respect to authentication pursuant to clauses (ii) or
(iii) of the first sentence of this paragraph, the first such written order from
the Issuer shall be accompanied by an Opinion of Counsel of the Issuer in a form
reasonably satisfactory to the Trustee stating that the issuance of the Private
Exchange Notes or the Unrestricted Notes, as the case may be, does not give rise
to an Event of Default, complies with this Indenture and has been duly
authorized by the Issuer. The aggregate principal amount of Notes outstanding at
any time may not exceed $115,000,000, except as provided in Sections 2.07 and
2.08.
In the event that the Issuer shall issue and the Trustee shall
authenticate any Notes issued under this Indenture subsequent to the Issue Date
pursuant to clauses (i) and (iii) of the first sentence of the immediately
preceding paragraph, the Issuer shall use its best efforts to obtain the same
"CUSIP" number for such Notes as is printed on the Notes outstanding at such
time; provided, however, that if any series of Notes issued under this Indenture
subsequent to the Issue Date is determined, pursuant to an Opinion of Counsel of
the Issuer in a form reasonably satisfactory to the Trustee to be a different
class of security than the Notes outstanding at such time for federal income tax
purposes, the Issuer may obtain a "CUSIP" number for such Notes that is
different than the "CUSIP" number printed on the Notes then outstanding.
Notwithstanding the foregoing, all Notes issued under this Indenture shall vote
and consent together on all matters as one class and no series of Notes will
have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Issuer to authenticate Notes. Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Issuer or with any Affiliate of the Issuer.
The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Issuer shall maintain an office or agency (which shall be located
in the Borough of Manhattan in the City of New York, State of New York) where
(a) Notes may be presented or surrendered for registration of transfer or for
exchange ("Reg-
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istrar"), (b) Notes may be presented or surrendered for payment ("Paying Agent")
and (c) notices and demands to or upon the Issuer in respect of the Notes and
this Indenture may be served. The Registrar shall keep a register of the Notes
and of their transfer and exchange. The Issuer, upon prior written notice to the
Trustee, may have one or more co-Registrars and one or more additional paying
agents reasonably acceptable to the Trustee. The term "Paying Agent" includes
any additional Paying Agent. The Issuer may act as its own Paying Agent, except
that for the purposes of payments on the Notes pursuant to Sections 4.14 and
4.15, neither the Issuer nor any Affiliate of the Issuer may act as Paying
Agent.
The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that relate
to such Agent. The Issuer shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Issuer fails to maintain a Registrar or Paying
Agent, or fails to give the foregoing notice, the Trustee shall act as such.
The Issuer initially appoints the Trustee as Registrar, Paying Agent
and agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. Any of
the Registrar, the Paying Agent or any other agent may resign upon 30 days'
notice to the Issuer.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on, the Notes (whether such assets
have been distributed to it by the Issuer or any other obligor on the Notes),
and the Issuer and the Paying Agent shall notify the Trustee of any Default by
the Issuer (or any other obligor on the Notes) in making any such payment. The
Issuer at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Issuer to the Paying
Agent, the Paying Agent shall have no further liability for such assets.
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SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Issuer shall furnish or
cause the Registrar to furnish to the Trustee before each Record Date and at
such other times as the Trustee may request in writing a list as of such date
and in such form as the Trustee may reasonably require of the names and
addresses of the Holders, which list may be conclusively relied upon by the
Trustee.
SECTION 2.06. Transfer and Exchange.
When Notes are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Notes or to exchange such Notes for an
equal principal amount of Notes or other authorized denominations, the Registrar
or co-Registrar shall register the transfer or make the exchange as requested if
its requirements for such transaction are met; provided, however, that the Notes
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Issuer, the Trustee and the Registrar or co-Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
registration of transfers and exchanges, the Issuer shall execute and the
Trustee shall authenticate Notes and each of the Guarantors shall execute a
Guarantee thereon at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or exchange, but the
Issuer may require payment of a sum sufficient to cover any transfer tax, fee or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.10, 3.04, 4.14, 4.15 or 9.05, in which event
the Issuer shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the
transfer of or exchange of any Note (i) during a period beginning at the opening
of business 15 days before the mailing of a notice of redemption of Notes and
ending at the close of business on the day of such mailing and (ii) selected for
redemption in whole or in part pursuant to Article Three, except the unredeemed
portion of any Note being redeemed in part.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book entry system maintained by
the Holder of
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such Global Note (or its agent), and that ownership of a beneficial interest in
the Note shall be required to be reflected in a book entry system.
SECTION 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of a
Note claims that the Note has been lost, destroyed or wrongfully taken, the
Issuer shall issue and the Trustee shall authenticate a replacement Note and
each of the Guarantors shall execute a Guarantee thereon if the Trustee's
requirements are met. If required by the Trustee or the Issuer, such Holder must
provide an indemnity bond or other indemnity of reasonable tenor, sufficient in
the reasonable judgment of the Issuer, the Guarantors and the Trustee, to
protect the Issuer, the Guarantors, the Trustee or any Agent from any loss which
any of them may suffer if a Note is replaced. Every replacement Note shall
constitute an additional obligation of the Issuer and the Guarantors.
SECTION 2.08. Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation and those described in this Section as not outstanding. Subject
to the provisions of Section 2.09, a Note does not cease to be outstanding
because an Issuer or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal, premium, if any, and interest due on the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes shall be
deemed not to be outstanding and interest on them shall cease to accrue.
SECTION 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned by
the Issuer or an Af-
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filiate of the Issuer shall be considered as though they are not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes which
a Trust Officer of the Trustee actually knows are so owned shall be so
considered. The Issuer shall notify the Trustee, in writing, when it or, to its
knowledge, any of its Affiliates repurchases or otherwise acquires Notes, of the
aggregate principal amount of such Notes so repurchased or otherwise acquired
and such other information as the Trustee may reasonably request and the Trustee
shall be entitled to rely thereon.
SECTION 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Issuer may prepare
and the Trustee shall authenticate temporary Notes upon receipt of a written
order of the Issuer in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Issuer considers appropriate for temporary Notes and so indicate in the
Officers' Certificate. Without unreasonable delay, the Issuer shall prepare, the
Trustee shall authenticate and the Guarantors shall execute Guarantees on, upon
receipt of a written order of the Issuer pursuant to Section 2.02, definitive
Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent, and no one
else, shall cancel and, at the written direction of the Issuer, shall dispose,
in its customary manner, of all Notes surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Issuer may not issue new
Notes to replace Notes that they have paid or delivered to the Trustee for
cancellation. If the Issuer shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Issuer will pay interest on overdue principal from time to time on
demand at the rate of interest then borne
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by the Notes. The Issuer shall, to the extent lawful, pay interest on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the rate of interest then borne by the Notes. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months, and, in the case of a partial month, the actual number of days elapsed.
If the Issuer defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest, to the Persons who are Holders on a subsequent special
record date, which special record date shall be the fifteenth day next preceding
the date fixed by the Issuer for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. The Issuer shall
notify the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Note and the date of the proposed payment (a "Default Interest
Payment Date"), and at the same time the Issuer shall deposit with the Trustee
an amount of money equal to the aggregate amount proposed to be paid in respect
of such defaulted interest or shall make arrangements satisfactory to the
Trustee for such deposit on or prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such defaulted interest as provided in this Section; provided, however, that
in no event shall the Issuer deposit monies proposed to be paid in respect of
defaulted interest later than 11:00 a.m. New York City time of the proposed
Default Interest Payment Date. At least 15 days before the subsequent special
record date, the Issuer shall mail (or cause to be mailed) to each Holder, as of
a recent date selected by the Issuer, with a copy to the Trustee, a notice that
states the subsequent special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid. Notwithstanding the foregoing, any interest which is paid prior to the
expiration of the 30-day period set forth in Section 6.01(a) shall be paid to
Holders as of the regular record date for the Interest Payment Date for which
interest has not been paid. Notwithstanding the foregoing, the Issuer may make
payment of any defaulted interest in any other lawful manner not inconsistent
with the requirements of any securities exchange or market on which the Notes
may be listed, and upon such notice as may be required by such exchange.
SECTION 2.13. CUSIP Number.
The Issuer in issuing the Notes may use a "CUSIP" number, and, if so,
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided, however, that no representation is hereby
deemed to
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be made by the Trustee as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Issuer shall promptly
notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Monies.
Prior to 11:00 a.m. New York City time on each Interest Payment Date,
Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds
Offer Payment Date, the Issuer shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Maturity Date, Redemption Date, Change of Control
Payment Date and Net Proceeds Offer Payment Date, as the case may be.
SECTION 2.15. Restrictive Legends.
Each Global Note and Physical Note that constitutes a Restricted
Security or is sold in compliance with Regulation S shall bear the following
legend (the "Private Placement Legend") on the face thereof until after the
second anniversary of the later of the Issue Date and the last date on which the
Issuer or any Affiliate of the Issuer was the owner of such Note (or any
predecessor security) (or such shorter period of time as permitted by Rule
144(k) under the Securities Act or any successor provision thereunder) (or such
longer period of time as may be required under the Securities Act or applicable
state securities laws in the opinion of counsel for the Issuer, unless otherwise
agreed by the Issuer and the Holder thereof):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT), (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 903 OR
904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO
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YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER
THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS
AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE
TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR
BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE
OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO AN ISSUER
OR ITS AGENT FOR
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REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THIS
INDENTURE.
SECTION 2.16. Book-Entry Provisions for Global Security.
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Notes, and the Depository may be treated by the Issuer, the Trustee and
any Agent of the Issuer or the Trustee as the absolute owner of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Issuer, the Trustee or any Agent of the Issuer or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in a Global Note may be transferred or exchanged
for Physical Notes in accordance with the rules and procedures of the Depository
and the provisions of Section 2.17. In addition, Physical Notes shall be
transferred to all beneficial owners in exchange for their beneficial interests
in a Global
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Note if (i) the Depository notifies the Issuer that it is unwilling or unable to
continue as Depository for the Global Notes and a successor depositary is not
appointed by the Issuer within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a written
request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in the Global Note to be transferred, and the Issuer shall execute, the
Guarantors shall execute Guarantees on, and the Trustee shall authenticate and
deliver, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of an entire Global Note to
beneficial owners pursuant to paragraph (b), such Global Note shall be deemed to
be surrendered to the Trustee for cancellation, and the Issuer shall execute,
the Guarantors shall execute Guarantees on and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depository in exchange
for its beneficial interest in the Global Note, an equal aggregate principal
amount of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.
(f) The Holder of a Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
SECTION 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
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(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after the
second anniversary of the Issue Date (provided, however, that neither
the Issuer nor any Affiliate of the Issuer has held any beneficial
interest in such Note, or portion thereof, at any time on or prior to
the second anniversary of the Issue Date) or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to
the Registrar a certificate substantially in the form of Exhibit C
hereto and any legal opinions and certifications required thereby or
(2) in the case of a transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar
of (x) the certificate, if any, required by paragraph (i) above and (y)
written instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of such Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Issuer shall execute, the Guarantors shall execute the
Guarantees on and the Trustee shall authenticate and deliver one or more
Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Note stating, or has otherwise advised the
Issuer and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Issuer and the Registrar in writing, that it
is purchasing the Note for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such ac-
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count is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Issuer as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in a Global Note, upon receipt by
the Registrar of written instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of such Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless (i) the requested transfer is after the second anniversary of the Issue
Date (provided, however, that neither the Issuer nor any Affiliate of the Issuer
has held any beneficial interest in such Note, or portion thereof, at any time
prior to or on the second anniversary of the Issue Date), or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Issuer and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Issuer shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time during
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the Registrar's normal business hours upon the giving of reasonable written
notice to the Registrar.
(e) Transfers of Notes Held by Affiliates. Any certificate (i)
evidencing a Note that has been transferred to an Affiliate of an Issuer within
two years after the Issue Date, as evidenced by a notation on the Assignment
Form for such transfer or in the representation letter delivered in respect
thereof or (ii) evidencing a Note that has been acquired from an Affiliate
(other than by an Affiliate) in a transaction or a chain of transactions not
involving any public offering, shall, until two years after the last date on
which either the Issuer or any Affiliate of the Issuer was an owner of such
Note, in each case, bear a legend in substantially the form set forth in Section
2.15 hereof, unless otherwise agreed by the Issuer (with written notice thereof
to the Trustee).
SECTION 2.18. Additional Interest Under Registration Rights Agreement.
Under certain circumstances, the Issuer shall be obligated to pay
Additional Interest to the Holders, all as set forth in Section 4 of the
Registration Rights Agreement. The terms thereof are hereby incorporated herein
by reference. Notwithstanding such incorporation by reference, the Trustee shall
have no duties or obligations under the Registration Rights Agreement. The
Issuer shall notify the Trustee if any Additional Interest is payable on the
Notes.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Issuer elects to redeem Notes pursuant to Paragraph 6 of the
Notes and Section 3.03, it shall notify the Trustee and the Paying Agent in
writing of the Redemption Date and the principal amount of the Notes to be
redeemed.
The Issuer shall give each notice provided for in this Section 3.01 60
days before the Redemption Date (unless a shorter notice period shall be
satisfactory to the Trustee, as evidenced in a writing signed on behalf of the
Trustee), together with an Officers' Certificate stating that such redemption
shall comply with the conditions contained herein and in the Notes.
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SECTION 3.02. Selection of Notes To Be Redeemed.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange
or market, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange or market, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of U.S. $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued and
delivered to the Book-Entry Depositary or, in the case of Certificated
Securities, issued in the name of the Holder thereof in each case upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as the Issuer has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to this Indenture.
SECTION 3.03. Optional Redemption.
The Notes will be redeemable, at the Issuer's option, in whole at any
time or in part from time to time, on and after August 1, 2001, upon not less
than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if redeemed during
the twelve-month period commencing on August 1 of the year set forth below,
plus, in each case, accrued and unpaid interest thereon, if any, to the date of
redemption:
Year Percentage
2001..................................................104.438%
2002..................................................102.958%
2003..................................................101.479%
2004 and thereafter...................................100.000%
SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before the Redemption Date,
the Issuer shall mail or cause to be mailed a notice of redemption by first
class mail to each Holder of Notes to be redeemed at its registered address,
with a copy to
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the Trustee and any Paying Agent. At the Issuer's request, the Trustee shall
give the notice of redemption in the Issuer's name and at the Issuer's expense.
The Issuer shall provide such notices of redemption to the Trustee at least five
days before the intended mailing date.
Each notice of redemption shall identify (including the CUSIP number)
the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest,
if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which such
redemption is being made;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price plus accrued interest,
if any;
(6) that, unless the Issuer defaults in making the redemption
payment, interest on Notes or applicable portions thereof called for
redemption ceases to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Notes is to receive payment
of the redemption price plus accrued and unpaid interest as of the
Redemption Date, if any, upon surrender to the Paying Agent of the
Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes.
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SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04,
such notice of redemption shall be irrevocable and Notes called for redemption
become due and payable on the Redemption Date and at the redemption price plus
accrued and unpaid interest as of such date, if any. Upon surrender to the
Trustee or Paying Agent, such Notes called for redemption shall be paid at the
redemption price plus accrued and unpaid interest, if any, thereon to the
Redemption Date, but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant record dates referred to in the Notes. Interest
shall accrue on or after the Redemption Date and shall be payable only if the
Issuer defaults in payment of the redemption price.
SECTION 3.06. Deposit of Redemption Price.
On or before the Redemption Date and in accordance with Section 2.14,
the Issuer shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the redemption price plus accrued and unpaid interest, if any, of all Notes
to be redeemed on that date. The Paying Agent shall promptly return to the
Issuer any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
Unless the Issuer fails to comply with the preceding paragraph and
defaults in the payment of such redemption price plus accrued and unpaid
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.07. Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Note or Notes equal in principal amount
to the unredeemed portion of the Note surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
(a) The Issuer shall pay the principal of, premium, if any, and
interest on the Notes on the dates and in the manner provided in the Notes and
in this Indenture.
(b) An installment of principal of or interest on the Notes shall be
considered paid on the date it is due if the Trustee or Paying Agent (other than
the Issuer or any of its Affiliates) holds, prior to 11:00 a.m. New York City
time on that date, U.S. Legal Tender designated for and sufficient to pay the
installment in full and is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Issuer may, to the extent they are required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States of
America from principal or interest payments hereunder.
SECTION 4.02. Maintenance of Office or Agency.
The Issuer shall maintain the office or agency required under Section
2.03. The Issuer shall give prior written notice to the Trustee of the location,
and any change in the location, of such office or agency. If at any time the
Issuer shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 10.02.
SECTION 4.03. Corporate Existence.
Except as provided in Article Five and Section 11.04, the Company shall
do or shall cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of each of the Issuer and the Subsidiary Guarantor in accordance with
the respective organizational documents of the Company, the Issuer and the
Subsidiary Guarantor and the rights (charter and statutory) and material
franchises of the Company, the Issuer and the Subsidiary Guarantor.
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SECTION 4.04. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company, the Issuer or any of
the Subsidiaries or properties of any of the Company, the Issuer or any of the
Subsidiaries and (ii) all material lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of any of
the Company, the Issuer or any of the Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate negotiations or
proceedings properly instituted and diligently conducted for which adequate
reserves, to the extent required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties and Insurance.
(a) Each of the Company, the Issuer and each of their Restricted
Subsidiaries shall cause all material properties owned by or leased to it and
used or useful in the conduct of its business to be maintained and kept in
normal condition, repair and working order and supplied with all necessary
equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company, the Issuer or such Restricted Subsidiary may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section shall prevent any of the Company, the Issuer or any of their Restricted
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or of the Board of
Directors of the Restricted Subsidiary concerned, or of an officer (or other
agent employed by the Company or of any of its Subsidiaries) of the Issuer or
such Restricted Subsidiary having managerial responsibility for any such
property, desirable in the conduct of the business of the Company or any of its
Restricted Subsidiaries, and if such discontinuance or disposal is not adverse
in any material respect to the Holders.
(b) Each of the Company, the Issuer and the Restricted Subsidiaries
shall cause to be provided insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
respective
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Boards of Directors or other governing body of the Company, the Issuer or such
Restricted Subsidiaries, as the case may be, are adequate and appropriate for
the conduct of the business of the Company, the Issuer or such Restricted
Subsidiaries, as the case may be, with reputable insurers or with the government
of the United States of America or an agency or instrumentality thereof, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the good faith judgment of the respective Boards of Directors or other governing
body of the Company, the Issuer or such Restricted Subsidiary, as the case may
be, for companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate; Notice of Default.
(a) The Issuer and the Guarantors shall deliver to the Trustee, within
90 days after the end of their fiscal quarters and fiscal years, an Officers'
Certificate of the Issuer or such Guarantor (as applicable) (provided, however,
that one of the signatories to each such Officers' Certificate shall be the
Issuer's or such Guarantor's (as applicable) principal executive officer,
principal financial officer or principal accounting officer), as to such
Officers' knowledge of the Issuer's, the Company's or such other Guarantor's (as
applicable) compliance with all conditions and covenants under this Indenture
(without regard to any period of grace or requirement of notice provided
hereunder) and in the event any Default of the Issuer or any Guarantor (as
applicable) exists, such Officers shall specify the nature of such Default. Each
such Officers' Certificate shall also notify the Trustee should such Issuer or
the Company (as applicable) elect to change the manner in which it fixes its
fiscal year end.
(b) So long as not contrary to the then generally accepted auditing and
accounting standards, the annual financial statements delivered pursuant to
Section 4.08 shall be accompanied by a written report of the Company's
independent public accountants (who shall be a firm of established national
reputation) stating (A) that their audit examination has included a review of
the terms of this Indenture and the form of the Notes as they relate to
accounting matters, and (B) whether, in connection with their audit examination,
any Default or Event of Default has come to their attention and if such a
Default or Event of Default has come to their attention, specifying the nature
and period of existence thereof; provided, however, that, without any
restriction as to the scope of the audit examination, such independent public
accountants shall not be liable by reason of any failure to obtain knowledge of
any such Default or Event of Default that would not be disclosed in the course
of an audit examination conducted in accordance with generally accepted auditing
standards.
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(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Issuer shall
deliver to the Trustee, at its address set forth in Section 10.02 hereof, by
registered or certified mail or by facsimile transmission followed by hard copy
by registered or certified mail an Officers' Certificate specifying such event,
notice or other action within 10 days of its becoming aware of such occurrence.
SECTION 4.07. Compliance with Laws.
The Company shall comply, and shall cause each of its Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
thereof and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their respective
properties, except for such noncompliances as could not singly or in the
aggregate reasonably be expected to have a material adverse effect on the
financial condition, business, prospects or results of operations of the Company
and its Subsidiaries taken as a whole.
SECTION 4.08. Reports to Holders.
The Company shall furnish to the Trustee and Holders of the Notes all
annual and quarterly financial information that the Issuer or the Company is
required to file with the Commission under the Exchange Act (or similar reports
in the event that the Issuer or the Company is not at the time required to file
such reports with the Commission) which reports shall include a statement of the
Consolidated EBITDA of the Company for each period reported. In addition, even
if the Issuer or the Company is entitled under the Exchange Act not to furnish
such information to the Commission or the Holders of the Notes, it shall
nonetheless continue to furnish such information to the Commission (to the
extent the Commission is accepting such reports) and Holders of the Notes. The
Company will also comply with the other provisions of TIA ss. 314(a). The Issuer
and the Guarantors shall also make available to the Trustee, Holders of the
Notes and any prospective purchaser of Notes designated by any Holder of Notes,
the information set forth in Rule 144A(d)(4) under the Securities Act for so
long as any Transfer Restricted Notes are outstanding.
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SECTION 4.09. Waiver of Stay, Extension or Usury Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Issuer from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that they may
lawfully do so) the Issuer hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
solely in Qualified Capital Stock of the Company) on or in respect of shares of
the Capital Stock of the Company or any of its Restricted Subsidiaries, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any of its Restricted Subsidiaries or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock, other
than (i) the exchange of such Capital Stock or any warrants, rights or options
to acquire shares of any class of such Capital Stock for Qualified Capital Stock
of the Issuer or warrants, rights or options to acquire Qualified Capital Stock
of the Company or (ii) in the case of any purchase, redemption or other
acquisition or retirement for value of Disqualified Capital Stock or any
warrants, rights or options to purchase or acquire shares of any class of such
Disqualified Capital Stock, for Capital Stock or warrants, rights or options to
acquire Capital Stock of the Company; provided that if such Capital Stock is
Disqualified Capital Stock, such Disqualified Capital Stock does not have a
liquidation preference greater than the liquidation preference of the
Disqualified Capital Stock being purchased, redeemed or acquired or retired or
contain provisions pursuant to which such Disqualified Capital Stock matures or
is mandatorily redeemable or is redeemable at the sole option of the holder
thereof, in whole or in part, prior to the Disqualified Capital Stock being
purchased, redeemed or acquired or retired, (c) make any principal payment on,
purchase, decrease, redeem,
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prepay or otherwise acquire or retire or decrease for value, prior to any
scheduled final maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness that is subordinate or junior in right of payment to the Notes
or the Guarantees as the case may be or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses (a),
(b), (c) and (d) being referred to as a "Restricted Payment"), if at the time of
such Restricted Payment or immediately after giving effect thereto, (i) a
Default or an Event of Default shall have occurred and be continuing or (ii) the
Company is not able to incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) in compliance with Section 4.12 or (iii) the
aggregate amount of Restricted Payments (including such proposed Restricted
Payment) made subsequent to the Issue Date (the amount expended for such
purposes if other than in cash, being the Fair Market Value of such property)
shall exceed the sum of: (x) 50% of the cumulative Consolidated Net Income (or
if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss)
of the Company earned subsequent to June 30, 1997 and on or prior to the date
the Restricted Payment occurs (the "Reference Date") (treating for such purposes
such period as a single accounting period); plus (y) 100% of the aggregate net
cash proceeds received by the Company (including the Fair Market Value of
marketable securities) from any Person (other than a Restricted Subsidiary of
the Company) from the issue and sale subsequent to the Issue Date and on or
prior to the Reference Date of Qualified Capital Stock of the Company (including
pursuant to a capital contribution and excluding any Qualified Capital Stock
issued upon conversion of the Company's outstanding 7 1/4% Convertible
Subordinated Debentures due 2007 (the "Debentures") and any Qualified Capital
Stock issued pursuant to clause (b) of this paragraph); plus (z) without
duplication of any amounts included in clause (iii) (y) above, an amount equal
to the net reduction in Investments in Unrestricted Subsidiaries resulting from
dividends, interest payments, repayments of loans or advances, or other
transfers of cash, in each case to the Company or to any Wholly Owned Restricted
Subsidiary of the Company from Unrestricted Subsidiaries (but without
duplication of any such amount included in calculating cumulative Consolidated
Net Income of the Issuer), or from redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (in each case valued as provided in the definition of
"Investments"), not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary and which was treated as a Restricted
Payment under this Indenture.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph shall not prohibit: (1) the payment of any
dividend within 60 days after the
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date of declaration of such dividend if the dividend would have been permitted
on the date of declaration; (2) if no Default or Event of Default shall have
occurred and be continuing, the payment, purchase, defeasance, redemption,
prepayment, acquisition or retirement or decrease of any shares of Capital Stock
of the Company, either (i) solely in exchange for shares of Qualified Capital
Stock of the Company or (ii) through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Restricted Subsidiary of
the Company) of shares of Qualified Capital Stock of the Company; (3) if no
Default or Event of Default shall have occurred and be continuing, the payment,
purchase, defeasance, redemption, prepayment, acquisition or retirement or
decrease of any Indebtedness of the Issuer that is subordinate or junior in
right of payment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or Indebtedness that is subordinated or
junior in right of payment to the Notes and has a Weighted Average Life to
Maturity and final maturity not sooner than the Weighted Average Life to
Maturity and final maturity prior to such exchange, or (ii) through the
application of net proceeds of a substantially concurrent sale for cash (other
than to a Restricted Subsidiary of the Company) of (A) shares of Qualified
Capital Stock of the Company or (B) Refinancing Indebtedness; (4) if no Default
or Event of Default shall have occurred and be continuing, repurchases by the
Company of Common Stock of the Company from employees of the Company or any of
its Subsidiaries or their authorized representatives upon the death, disability
or termination of employment of such employees, in an aggregate amount not to
exceed the sum of (x) $2 million in any calendar year and (y) proceeds received
by the Company or any of its Subsidiaries in connection with any "key-man" life
insurance policies which are used to make such repurchases; and provided that
the cancellation of Indebtedness owing to the Company from members of management
of the Company in connection with a repurchase of Common Stock of the Company
pursuant to this clause 4 will not be deemed to constitute a Restricted Payment
under this Indenture; (5) repurchases of Capital Stock deemed to occur upon the
exercise of stock options if such Capital Stock represents a portion of the
exercise price thereof; (6) if no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, other
Restricted Payments in an aggregate amount not to exceed $15 million (including,
with respect to Investments (other than Permitted Investments), amounts then
outstanding); and (7) any payments made in respect of Capital Stock of a
Restricted Subsidiary paid to minority holders thereof in connection with pro
rata distributions on such Capital Stock to the Company or a Wholly Owned
Restricted Subsidiary of the Company. In determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date in accordance with clause
(iii) of the immediately preceding paragraph, amounts expended pursuant
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to clauses (1) (to the extent the declaration thereof has not previously been
included in such aggregate amount), (2)(ii), (4) and (6) shall be included in
such calculation.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal quarterly
financial statements.
SECTION 4.11. Limitations on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each, an "Affiliate
Transaction"), other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions on terms that are fair and reasonable
to the Company or such Restricted Subsidiary and are no less favorable than
those that might reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate of the
Company or such Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property in excess of $2.5 million
shall be approved by the Board of Directors of the Company, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If the
Company or any Restricted Subsidiary of the Company enters into an Affiliate
Transaction (or a series of related Affiliate Transactions related to a common
plan) that involves an aggregate payment or other property in excess of $5
million, the Company or such Restricted Subsidiary, as the case may be, shall,
prior to the consummation thereof, obtain a favorable opinion as to the fairness
of such transaction or series of related transactions to the Company or the
relevant Restricted Subsidiary, as the case may be, from a financial point of
view, from an Independent Financial Advisor and shall provide such opinion to
the Trustee together with an Officers' Certificate setting forth in reasonable
detail the facts and circumstances of such transaction or series of related
transactions.
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(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management; (ii) transactions exclusively between or among
the Company and any of its Subsidiaries or exclusively between or among such
Subsidiaries, provided such transactions are not otherwise prohibited by this
Indenture; (iii) any agreement as in effect as of the Issue Date (as set forth
in a list to be provided to the Initial Purchasers on the Issue Date) or any
amendment thereto or any transaction contemplated thereby (including pursuant to
any amendment thereto) or any replacement agreement thereto so long as any such
amendment or replacement agreement is not more disadvantageous to the Holders in
any material respect than the original agreement as in effect on the Issue Date;
(iv) Restricted Payments permitted by this Indenture; and (v) transactions
permitted by, and complying with, the provisions of the covenant described in
Section 5.01.
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or otherwise
become responsible for payment of (collectively, "incur") any Indebtedness
(other than Permitted Indebtedness); provided that if no Default or Event of
Default shall have occurred and be continuing at the time of or as a consequence
of the incurrence of any such Indebtedness, the Company or any of its Restricted
Subsidiaries may incur Indebtedness (including, without limitation, Acquired
Indebtedness), in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.25 to 1.0 on or
prior to the second anniversary of the Issue Date and greater than 2.75 to 1.0
thereafter.
The Issuer shall not, and shall not permit any Guarantor to, directly
or indirectly, in any event incur any Indebtedness that by its terms (or by the
terms of any agreement governing such Indebtedness) is subordinated to any other
Indebtedness of the Issuer or of such Guarantor, as the case may be, unless such
Indebtedness is also by its terms (or by the terms of any agreement governing
such indebtedness) made expressly subordinate in right of payment to the Notes
or the Guarantee of such Guarantor, as the case may be, to the same extent and
in the same manner as such Indebtedness is subordinated pursuant to
subordi-
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nation provisions that are most favorable to the holders of any other
Indebtedness of the Issuer or such Guarantor, as the case may be.
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to: (a) pay dividends or make any other
distributions on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or the
Issuer; (c) guarantee any Obligation arising under or in respect of the Notes or
this Indenture of the Company or any Restricted Subsidiary; or (d) transfer any
of its property or assets to the Company or any Restricted Subsidiary of the
Company, except, in each case, for such encumbrances or restrictions existing
under or by reason of: (1) applicable law; (2) this Indenture; (3) customary
non-assignment provisions of any contract or any lease governing a leasehold
interest of any Restricted Subsidiary of the Company; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired or any of its
subsidiaries; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (6) any encumbrance or
restriction with respect to a Restricted Subsidiary that is not a Restricted
Subsidiary on the date of this Indenture, which encumbrance or restriction is in
existence at the time such person becomes a Restricted Subsidiary or is created
on the date it becomes a Restricted Subsidiary; (7) restrictions on the transfer
of assets subject to any Lien permitted under this Indenture imposed by the
holder of such Lien; (8) any agreement or instrument governing the payment of
dividends or other distributions on or in respect of Capital Stock of any Person
that is acquired; (9) restrictions under the Global Bank Facility; (10) other
Indebtedness permitted to be incurred subsequent to the Issue Date pursuant to
Section 4.12, provided that any such restrictions are ordinary and customary
with respect to the type of Indebtedness being incurred (under the relevant
circumstances); (11) restrictions on cash or other deposits or net worth imposed
by the customers under contracts entered into in the ordinary course of
business; or (12) an agreement governing Indebtedness incurred to Refinance the
Indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (2), (4), (5), (9) or (10) above; provided that the provisions relating
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to such encumbrance or restriction contained in any such Indebtedness are no
less favorable to the Company in any material respect as determined by the Board
of Directors of the Company in their reasonable and good faith judgment than the
provisions relating to such encumbrance or restriction contained in agreements
referred to in such clause (2), (4) or (5).
SECTION 4.14. Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall have
the right to require that the Issuer purchase all or a portion of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer"), at
a purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase.
(b) Within 30 days following the date upon which the Change of Control
occurred, the Issuer shall send, by first class mail, a notice to each Holder at
such Holder's last registered address, with a copy to the Trustee, which notice
shall govern the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer. Such notice shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Notes tendered and not withdrawn shall
be accepted for payment;
(ii) the purchase price (including the amount of accrued and
unpaid interest, if any) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law) (the "Change of
Control Payment Date");
(iii) that any Note not tendered shall continue to accrue
interest;
(iv) that, unless the Issuer defaults in making payment
therefor, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders electing to have a Note purchased pursuant to
a Change of Control Offer shall be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified in
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the notice prior to the close of business on the third business day
prior to the Change of Control Payment Date;
(vi) that Holders shall be entitled to withdraw their election
if the Paying Agent receives, not later than the second business day
prior to the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Notes the Holder delivered for purchase and
a statement that such Holder is withdrawing his election to have such
Notes purchased;
(vii) that Holders whose Notes are purchased only in part
shall be issued new Notes in a principal amount equal to the
unpurchased portion of the Notes surrendered; provided, however, that
each Note purchased and each new Note issued shall be in an original
principal amount of $1,000 or integral multiples thereof; and
(viii) the circumstances and relevant facts regarding such
Change of Control.
On the Change of Control Payment Date, the Issuer shall, to the extent
permitted by law, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (iii) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating that such Notes or portions thereof have been
tendered to and purchased by the Issuer. The Indenture will provide that the
Paying Agent will promptly either (x) pay to the Holder against presentation and
surrender (or, in the case of partial payment, endorsement) of the Global Notes
or (y) in the case of Certificated Securities, mail to each Holder of Notes the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and deliver to the Holder of the Global Notes a new Global Note or
Notes or, in the case of Definitive Notes, mail to each Holder new Certificated
Securities, as applicable, equal in principal amount to any unpurchased portion
of the Notes surrendered, if any, provided that each new Certificated Security
will be in a principal amount of $1,000 or an integral multiple thereof. The
Issuer will notify the Trustee and the Holders of the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Issuer shall not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer at the
Change of Control Purchase
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Price, at the same times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Issuer and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Neither the Board of Directors of the Issuer nor the Trustee may waive
the provisions of this Section 4.14 relating to the Issuer's obligation to make
a Change of Control Offer or a Holder's right to redemption upon a Change of
Control.
The Issuer shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Issuer shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached their
obligations under the provisions of this Section 4.14 by virtue thereof.
SECTION 4.15. Limitation on Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless: (i) the Company or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or otherwise disposed of; (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents or Replacement
Assets and is received at the time of such disposition, provided that the amount
of (a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any such Restricted
Subsidiary (other than liabilities that are by their terms subordinated in right
of payment to the Notes) that are assumed by the transferee of any such assets,
and (b) any notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are immediately converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for the purposes of this provision; and
(iii) upon the consummation of an Asset Sale, the Company shall apply, or cause
such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such
Asset Sale within 270 days of receipt thereof either (A) to (x) repay and
permanently reduce the availability of credit under the Global Bank Facility or
(y) repay and elect to reduce the amount of outstanding Indebtedness permitted
to be incurred pursuant to clauses (x) and/or (xv) of the definition of
Permitted Indebt-
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edness, (B) to make an investment in properties and assets that replace the
properties and assets that were the subject of such Asset Sale or in properties
and assets that will be used in the same or a similar line of business as the
Company or the Restricted Subsidiary, as the case may be, as existing on the
date of this Indenture or in businesses reasonably related thereto ("Replacement
Assets"); provided that the Net Cash Proceeds from an Asset Sale relating to the
Company's tobacco business are used to make an investment in Replacement Assets
relating to the tobacco business; provided further that the Net Cash Proceeds of
an Asset Sale relating to assets owned directly by the Issuer or a Guarantor are
used to make an investment in Replacement Assets owned directly by the Issuer or
a Guarantor, (C) to permanently reduce any outstanding Indebtedness of such
Restricted Subsidiary (and to correspondingly reduce the commitments, if any,
with respect thereto), or (D) a combination of prepayment and investment
permitted by the foregoing clauses (iii)(A), (iii)(B) and (iii)(C). On the 271st
day after an Asset Sale or such earlier date, if any, as the Board of Directors
of the Company or of such Restricted Subsidiary determines not to apply the Net
Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(A),
(iii)(B), (iii)(C) and (iii)(D) of the next preceding sentence (each, a "Net
Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which
have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B), (iii)(C) and (iii)(D) of the next
preceding sentence (each, a "Net Proceeds Offer Amount") shall be applied by the
Company or such Restricted Subsidiary to make an offer to purchase (the "Net
Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than
30 nor more than 45 days following the applicable Net Proceeds Offer Trigger
Date, from all Holders on a pro rata basis, that amount of Notes equal to the
Net Proceeds Offer Amount at a price equal to 100% of the principal amount of
the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to
the date of purchase; provided that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary of the Company, as the case
may be, in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then such conversion or dissolution shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company or such Restricted
Subsidiary, as the case may be, may defer the Net Proceeds Offer until there is
an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $10
million resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of $10
million shall be applied as required pursuant to this paragraph).
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Notwithstanding the foregoing, the restriction contained in clause (ii)
of the preceding paragraph shall not apply if more than 49% of the Capital Stock
or more than 49% of the consolidated assets of Standard Wool are sold in a
single transaction in compliance with all of the terms of this Indenture.
In connection with each Net Proceeds Offer, the Issuer shall send, by
first class mail, a notice to each Holder, with a copy to the Trustee, notice of
such, within 25 days following the Net Proceeds Offer Trigger Date, and shall
comply with the procedures set forth in this Indenture. Upon receiving notice of
the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 in exchange for cash. To the extent Holders
properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders shall be purchased on a pro rata basis (based on
amounts tendered). A Net Proceeds Offer shall remain open for a period of 20
business days or such longer Period as may be required by law.
Notwithstanding the foregoing, all of the outstanding Capital Stock of
the Issuer shall at all times be owned by the Company free and clear of all
Liens other than the Liens held by the Trustee for the benefit of the Holders of
the Notes. The Company and any such Restricted Subsidiaries will comply with the
requirements of Rule 14e-1 under the Exchange Act and the regulations thereunder
and any other securities laws to the extent such laws and regulations are
applicable in connection with the repurchase of Notes pursuant to a Net Proceeds
Offer.
SECTION 4.16. Limitation on Preferred Stock of Restricted Subsidiaries.
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company (other than any
Preferred Stock outstanding as of the Issue Date).
SECTION 4.17. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur or assume or suffer to
exist any Lien (other than Permitted Liens) that secures obligations under any
Indebtedness on any asset or property of the Company or such Restricted
Subsidiary, or any income or profits therefrom, or assign or convey any right to
receive income therefrom, unless the Notes are
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equally and ratably secured with the obligations so secured until such time as
such obligations are no longer secured by a Lien.
SECTION 4.18. Additional Subsidiary Guarantees.
The Company shall not permit any of its Restricted Subsidiaries to
guarantee or secure through the granting of Liens the payment of any
Indebtedness (other than Indebtedness secured by Permitted Liens) of the Company
or the Issuer, unless such Restricted Subsidiary is the Issuer or a Guarantor.
Any Restricted Subsidiary (other than the Issuer or any existing Guarantor) may
execute and deliver a supplemental indenture (and shall deliver such legal
opinions and other documents as are required by this Indenture) evidencing its
Guarantee of the Notes in order to facilitate a transaction which would
otherwise be prohibited by the foregoing restriction.
SECTION 4.19. Limitation on Status as Investment Company.
The Company shall not become and shall not permit the Issuer or any
Guarantor to conduct its business in a fashion that would cause the Company, the
Issuer or any Guarantor to be required to register as an "investment company"
(as that term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act")), or otherwise become subject to regulation under the
Investment Company Act.
SECTION 4.20. Limitation on Line of Business.
The Company and its Subsidiaries shall not engage in the manufacture or
marketing of cigarettes, cigars or smokeless tobacco products for retail
consumption.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation and Sale of Assets.
The Company shall not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and
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the Company's Restricted Subsidiaries) whether as an entirety or substantially
as an entirety to any Person unless at the time of and after giving effect
thereto; (i) either (a) the Company or the Issuer shall be the surviving or
continuing corporation or (b) the Person (if other than the Company or the
Issuer) formed by such consolidation or into which the Company or the Issuer is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and of
the Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and (y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of every covenant of the Notes,
this Indenture, and the Registration Rights Agreement on the part of the Company
or such Restricted Subsidiary to be performed or observed; (ii) immediately
after giving effect to such transaction and the assumption contemplated by
clause (i)(b)(y) above (including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction), the Company or such Surviving Entity, as the case
may be, (1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction and
(2) shall be able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.12; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(b)(y) above (including, without limitation giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to
be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred and be
continuing; and (iv) the Company or the Surviving Entity shall have delivered to
the Trustee an Officers' Certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of this Indenture and that all conditions precedent in this Indenture
relating to such transaction have been satisfied; provided, however, that the
foregoing restrictions shall not apply to (i) any consolidation or merger of a
Restricted Subsidiary with or into (or sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the properties,
assets or Capital Stock of a Restricted Subsidiary to) the Company, the Issuer
or another Re-
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stricted Subsidiary which is a Guarantor, or (ii) a consolidation or merger of
Standard Wool with or into, or sale, assignment, transfer, lease, conveyance or
other disposition of the properties, assets or Capital Stock of Standard Wool to
any Person, provided that the Company shall, prior to the consummation thereof,
obtain a favorable opinion as to the fairness of such transaction or series of
related transactions to Standard Wool or the Company, as the case may be, from a
financial point of view, from an Independent Financial Advisor and shall provide
such opinion to the Trustee together with an Officer's Certificate setting forth
in reasonable detail the facts and circumstances of such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
SECTION 5.02. Successor Corporation Substituted.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Issuer or the Company, as the case may
be, in accordance with Section 5.01, in which the Issuer or the Company, as the
case may be, is not the continuing corporation, the successor Person formed by
such consolidation or into which the Issuer or the Company, as the case may be,
is merged or to which such conveyance, lease or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer or the Company, as the case may be, under this Indenture and either the
Notes or the Parent Guarantee, as the case may be, with the same effect as if
such surviving entity had been named as such.
ARTICLE SIX
REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" means any of the following events:
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(a) the failure to pay interest or Additional Interest, if
any, on any Notes when the same becomes due and payable and the default
continues for a period of 30 days;
(b) the failure to pay the principal or premium on any Notes,
when such principal becomes due and payable, at maturity, upon
acceleration, upon redemption or otherwise (including the failure to
make a payment to purchase Notes tendered pursuant to a Change of
Control Offer or a Net Proceeds Offer);
(c) a default in the observance or performance of terms or
provisions of Section 4.16, 4,20 or 5.01;
(d) a default in the observance or performance of any other
covenant or agreement contained in this Indenture which default
continues for a period of 30 days after the Issuer receives written
notice specifying the default (and demanding that such default be
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes;
(e) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Issuer, the Company or any Restricted
Subsidiary of the Company with respect to such indebtedness, or the
acceleration of the final stated maturity of any such Indebtedness if
the aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure
to pay principal at final maturity or which has been accelerated,
aggregates U.S. $10,000,000 or more at any time;
(f) one or more judgments in an aggregate amount in excess of
U.S. $10,000,000 (unless covered by insurance by a reputable insurer as
to which the insurer has acknowledged coverage or as to which the
Issuer, the Company or such Restricted Subsidiary is fully indemnified
and the indemnifying party has acknowledged its obligations in respect
of such indemnity) shall have been rendered against the Company or any
of its Restricted Subsidiaries and such judgments remain undischarged,
unpaid or unstayed for a period of 60 days after such judgment or
judgments become final and non-appealable;
(g) the Company, the Issuer or any of their Significant
Subsidiaries pursuant to or under or within the meaning of any
Bankruptcy Law:
(i) commences a voluntary case or proceeding;
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(ii) consents to the entry of an order for relief
against it in an involuntary case or proceeding;
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property;
(iv) makes a general assignment for the benefit of
its creditors; or
(v) shall generally not pay its debts when such debts
become due or shall admit in writing its inability to pay its
debts generally;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company, the Issuer or
any of their Significant Subsidiaries in an involuntary case
or proceeding,
(ii) appoints a Custodian of the Company, the Issuer
or any of their Significant Subsidiaries for all or
substantially all of their properties taken as a whole, or
(iii) orders the liquidation of the Company the
Issuer or any of their Significant Subsidiaries,
and in each case the order or decree remains unstayed and in effect for
60 days; or
(i) any of the Guarantees ceases to be in full force and
effect or any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid, in each
case by a court of competent jurisdiction in a final non-appealable
judgment, or any of the Guarantors denies its liability under its
Guarantee (other than by reason of release of a Guarantor in accordance
with the terms of this Indenture); or
(j) any of the pledges of capital stock of the Issuer or
Standard Wool ceases to be in full force and effect or any such pledge
is declared to be null and void and unenforceable or any such pledge is
found to be invalid.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01 (g) or (h) with respect to the
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Company or the Issuer) shall occur and be continuing, the Trustee or the Holders
of at least 25% in principal amount of outstanding Notes may declare the
principal of and accrued interest on all the Notes to be due and payable by
notice in writing to the Issuer and the Trustee specifying the respective Event
of Default and that it is a "notice of acceleration" (the "Acceleration
Notice"), and the same shall become immediately due and payable; provided that
if prior to the delivery of any such "Notice of Acceleration" with respect to an
Event of Default specified in Section 6.01(d), any such payment default or
acceleration relating to such other Indebtedness shall have been cured or
rescinded, as the case may be, or such Indebtedness has been discharged in a
manner consistent with the terms of the Indenture within 30 days of such default
or acceleration, as the case may be, then such Event of Default specified in
Section 6.01(d) shall be deemed cured for all purposes of the Indenture. If an
Event of Default specified in Section 6.01 (g) or (h) with respect to the Issuer
or the Company occurs and is continuing, then all unpaid principal of, and
premium, if any, and accrued and unpaid interest on all of the outstanding Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Notes as described in the preceding paragraph, the Holders of a majority in
principal amount of the Notes may rescind and cancel such declaration and its
consequences (a) if the rescission would not conflict with any judgment or
decree, (b) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration, (c) to the extent the payment of such interest is lawful, interest
on overdue installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (d) if the
Issuer has paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances and (e) in the event of the
cure or waiver of an Event of Default of the type described in Section 6.01, the
Trustee shall have received an Officers' Certificate and an opinion of counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
(a) If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of the principal of, premium, if any, or interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
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(b) All rights of action and claims under this Indenture or the Notes
may be enforced by the Trustee even if it does not possess any of the Notes or
does not produce any of them in the proceeding. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
Prior to the acceleration of the Notes, the Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may, on behalf of the Holders of all the Notes, waive any existing
Default or Event of Default and its consequences under this Indenture, except a
Default or Event of Default specified in Section 6.01(a) or (b) or in respect of
any provision hereof which cannot be modified or amended without the consent of
the Holder so affected pursuant to Section 9.02. When a Default or Event of
Default is so waived, it shall be deemed cured and shall cease to exist. This
Section 6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA and such ss.
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the
Notes, as permitted by the TIA.
SECTION 6.05. Control by Majority.
Holders of the Notes may not enforce this Indenture or the Notes except
as provided in this Article Six and under the TIA. The Holders of a majority in
aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee, provided, however, that the Trustee may refuse to follow any direction
(a) that conflicts with any rule of law or this Indenture, (b) that the Trustee
determines may be unduly prejudicial to the rights of another Holder, or (c)
that may expose the Trustee to personal liability for which adequate indemnity
provided to the Trustee against such liability is not reasonably assured to it;
provided, further, however, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction or this
Indenture. This Section 6.05 shall be in lieu of ss. 316(a)(1)(A) of the TIA,
and such ss. 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
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SECTION 6.06. Limitation on Suits.
No Holder of any Notes shall have any right to institute any proceeding
with respect to this Indenture or the Notes or any remedy hereunder, unless the
Holders of at least 25% in aggregate principal amount of the outstanding Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee under the Notes and this Indenture, the
Trustee has failed to institute such proceeding within 30 days after receipt of
such notice, request and offer of indemnity and the Trustee, within such 30-day
period, has not received directions inconsistent with such written request by
Holders of a majority in aggregate principal amount of the outstanding Notes.
The foregoing limitations shall not apply to a suit instituted by a
Holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed or provided for in such Note.
A Holder may not use this Indenture to prejudice the rights of any
other Holders or to obtain priority or preference over such other Holders.
SECTION 6.07. Right of Holders To Receive Payment.
Notwithstanding any other provision in this Indenture, the right of any
Holder of a Note to receive payment of the principal of, premium, if any, and
interest on such Note, on or after the respective due dates expressed or
provided for in such Note, or to bring suit for the enforcement of any such
payment on or after the respective due dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Issuer, or any other obligor on the
Notes for the whole amount of the principal of, premium, if any, and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate per annum provided for by the
Notes and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents, counsel, accountants and experts) and
the Holders allowed in any judicial proceedings relative to the Company, the
Issuer or Subsidiary Guarantor (or any other obligor upon the Notes), their
creditors or their property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article Six it shall
pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for interest accrued on the Notes, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Notes for interest;
Third: to Holders for the principal amounts (including any
premium) owing under the Notes, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Notes for
the principal (including any premium); and
Fourth: the balance, if any, to the Issuer.
The Trustee, upon prior written notice to the Issuer, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court may in its discretion require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to any suit by the Trustee, any suit by a
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Note and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Issuer, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise thereof as a prudent
person would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to the
Trustee.
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(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and
Section 7.02.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Issuer.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
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(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to Sections
10.04 and 10.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Issuer, to examine the books,
records, and premises of the Issuer, personally or by agent or attorney
and to consult with the officers and representatives of the Issuer,
including the Issuer's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any
of its rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders have offered to the Trustee
reasonable indemnity satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
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(h) Delivery of reports, information and documents to the
Trustee under Section 4.08 is for informational purposes only and the
Trustee's receipt of the foregoing shall not constitute constructive
notice of any information contained therein or determinable from
information contained therein, including the Issuer's compliance with
any of their covenants hereunder (as to which the Trustee is entitled
to rely exclusively on Officers' Certificates).
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, the Issuer,
or any of the Subsidiaries, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be accountable for the Issuer's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Issuer in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after obtaining knowledge
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, or interest on, any Note, including an accelerated payment, a
Default in payment on the Change of Control Payment Date pursuant to a Change of
Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net
Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee
may withhold the notice if and so long as its Board of Directors, the executive
committee of its Board of Directors or a committee of its directors and/or Trust
Officers in good faith determines that withholding the notice is in the interest
of the Holders. The foregoing sentence of this Section 7.05 shall be in lieu of
the proviso to ss. 315(b) of the TIA and such proviso to ss. 315(b) of the TIA
is hereby expressly excluded from this Indenture and the Notes, as permitted by
the TIA.
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SECTION 7.06. Reports by Trustee to Holders.
Within 60 days after November 1 of each year beginning with 1997, the
Trustee shall, to the extent that any of the events described in TIA ss. 313(a)
occurred within the previous twelve months, but not otherwise, mail to each
Holder a brief report dated as of such date that complies with TIA ss. 313(a).
The Trustee also shall comply with TIA ss.ss. 313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Issuer and filed with the Commission and each stock exchange or
market, if any, on which the Notes are listed.
The Issuer shall promptly notify the Trustee if the Notes become listed
on any stock exchange or market and the Trustee shall comply with TIA ss.
313(d).
SECTION 7.07. Compensation and Indemnity.
The Issuer shall pay to the Trustee from time to time such compensation
for its services as has been agreed to in writing signed by the Issuer and the
Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it in connection with the performance of its duties under this Indenture.
Such expenses shall include the reasonable fees and expenses of the Trustee's
agents, counsel, accountants and experts.
The Issuer shall indemnify each of the Trustee (or any predecessor
Trustee) and its agents, employees, stockholders, Affiliates and directors and
officers for, and hold them each harmless against, any and all loss, liability,
damage, claim or expense (including reasonable fees and expenses of counsel),
including taxes (other than taxes based on the income of the Trustee) incurred
by them except for such actions to the extent caused by any negligence, bad
faith or willful misconduct on their part, arising out of or in connection with
the acceptance or administration of this trust including the reasonable costs
and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their rights, powers or
duties hereunder. The Trustee shall notify the Issuer promptly of any claim
asserted against the Trustee for which it may seek indemnity. At the Trustee's
sole discretion, the Issuer shall defend the claim and the Trustee shall
cooperate and may participate in the defense; provided, however, that any
settlement of a claim shall be approved in writing by the Trustee if such
settlement would
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result in an admission of liability by the Trustee or if such settlement would
not be accompanied by a full release of the Trustee for all liability arising
out of the events giving rise to such claim. Alternatively, the Trustee may at
its option have separate counsel of its own choosing and the Issuer shall pay
the reasonable fees and expenses of such counsel.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or premium, if any, or interest on particular
Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(f) occurs, such expenses and the compensation
for such services are intended to constitute expenses of administration under
any Bankruptcy Law.
The provisions of this Section 7.07 shall survive the termination of
this Indenture.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuer. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee and appoint a successor Trustee with the Issuer's consent, by so
notifying the Issuer and the Trustee. The Issuer may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in aggregate principal
amount of the outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Issuer.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Is-
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suer. Immediately after that, the retiring Trustee shall transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The Issuer shall mail notice of such
successor Trustee's appointment to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of at least 10% in aggregate principal amount of the outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee pursuant
to this Section 7.08, the Issuer's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided, however, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirement of TIA ss.ss. 310(a)(1), (2) and (5). The Trustee (or, in the case
of a Trustee that is a subsidiary of another Bank or a corporation included in a
bank holding company system, the related bank or bank holding company) shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition, and have an office in the City
of New York. In addition, if the Trustee is a subsidiary of another Bank or a
corporation included in a bank holding company system, the Trustee,
independently of such bank or bank holding company, shall meet the capital
requirements of TIA ss. 310(a)(2). The Trustee shall
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comply with TIA ss. 310(b); provided, however, that there shall be excluded from
the operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Issuer or a Guarantor are outstanding, if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met. The provisions of TIA ss. 310
shall apply to the Issuer and the Guarantors, as obligors of the Notes.
SECTION 7.11. Preferential Collection of Claims Against Issuer.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of Issuer's Obligations.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange of
the Notes, as expressly provided for in this Indenture) as to all outstanding
Notes when (a) either (i) all Notes, theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the Issuer
or discharged from such trust) have been delivered to the Trustee for
cancellation or (ii) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuer has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Issuer directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (b)
the Issuer has paid all other sums payable under this Indenture by the Issuer;
and (c) the Issuer has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel stating that all conditions precedent under this Indenture
relating to the satisfaction and discharge of this Indenture have been complied
with; provided,
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however, that such counsel may rely, as to matters of fact, on a certificate or
certificates of officers of the Issuer.
The Issuer may, at its option and at any time, elect to have its
obligations and the corresponding obligations of the Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance
means that the Issuer shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, and satisfied all of its
obligations with respect to the Notes, except for (a) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (b) the Issuer's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payments, (c) the rights, powers, trust, duties and immunities of the
Trustee and the Issuer's obligations in connection therewith and (d) the Legal
Defeasance provisions of this Section 8.01. In addition, the Issuer may, at its
option and at any time, elect to have the obligations of the Issuer released
with respect to covenants contained in Sections 4.04, 4.08 and 4.10 through 4.18
and Article Five ("Covenant Defeasance") and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to the Notes. In the event of Covenant Defeasance, those events
described under Section 6.01 (except those events described in Section
6.01(a),(b),(f) and (g)) will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuer must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders cash in United States dollars,
non-callable U.S. Government Obligations, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the Notes on the stated date for
payment thereof or on the applicable Redemption Date, as the case may
be;
(b) in the case of Legal Defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Issuer has
received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such
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opinion of counsel shall confirm that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and in either case, and (iii) the Holders will be
subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than any Default or Event
of Default with respect to the Indenture resulting from the incurrence
of Indebtedness, all or a portion of which will be used to defease the
Notes concurrently with such incurrence);
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument to which the
Issuer or any of its Subsidiaries is a party or by which the Issuer or
any of its Subsidiaries is bound;
(f) the Issuer shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Issuer with the intent of preferring the Holders over any other
creditors of the Issuer or any of the Guarantors or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Issuer or any of the Guarantors or others;
(g) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied
with; provided, however, that such counsel may rely, as to matters of
fact, on a certificate or certificates of officers of the Issuer; and
(h) the Issuer shall have delivered to the Trustee an Opinion
of Counsel (subject to customary exceptions) to
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the effect that (i) the trust funds will not be subject to any rights
of holders of Indebtedness, including, without limitation, those
arising under the Indenture and (ii) after the 181st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally under any applicable U.S. federal
or state law, and that the Trustee has a perfected security interest in
such trust funds for the ratable benefit of the Holders.
SECTION 8.02. Application of Trust Money.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Section 8.01, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of the principal of
and interest on the Notes. The Trustee shall be under no obligation to invest
said U.S. Legal Tender or U.S. Government Obligations.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Legal Tender or U.S. Government
Obligations deposited pursuant to Section 8.01 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of outstanding Notes.
SECTION 8.03. Repayment to the Issuer.
Subject to Section 8.01, the Trustee and the Paying Agent shall
promptly pay to the Issuer upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Issuer upon request any money held by them for the payment of
principal or interest that remains unclaimed for one year; provided, however,
that the Trustee or such Paying Agent, before being required to make any
payment, may at the expense of the Issuer cause to be published once in a
newspaper of general circulation in the City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that after a
date specified therein which shall be at least 30 days from the date of such
publication or mailing any unclaimed balance of such money then remaining will
be repaid to the Issuer. After payment to the Issuer, Holders entitled to such
money must look to the Issuer for payment as general creditors unless an
applicable law designates another Person.
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SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender
or U.S. Government Obligations in accordance with Section 8.01 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuer's obligations under this Indenture and the Notes shall
be revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply all
such U.S. Legal Tender or U.S. Government Obligations in accordance with Section
8.01; provided, however, that if the Issuer has made any payment of interest on
or principal of any Notes because of the reinstatement of its obligations, the
Issuer shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the U.S. Legal Tender or U.S. Government Obligations held by
the Trustee or Paying Agent.
SECTION 8.05. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 8.01 have been satisfied, (ii) the
Issuer has paid or caused to be paid all other sums payable hereunder by the
Issuer and (iii) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent referred to in clause (i) above relating to the satisfaction and
discharge of this Indenture have been complied with, the Trustee upon request
shall acknowledge in writing the discharge of the Issuer's obligations under
this Indenture except for those surviving obligations specified in Section 8.01,
provided the legal counsel delivering such Opinion of Counsel may rely as to
matters of fact on one or more Officers' Certificates of the Issuer.
ARTICLE NINE
MODIFICATION OF THE INDENTURE
SECTION 9.01. Without Consent of Holders.
Subject to the provisions of Section 9.02, the Issuer, the Guarantors
and the Trustee may amend, waive or supplement this Indenture without notice to
or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Section 5.01 of this Indenture; (c) to provide for
uncertificated Notes in addition to certificated Notes; (d) to comply with any
requirements of the Commission in
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order to effect or maintain the qualification of this Indenture under the TIA;
or (e) to make any change that would provide any additional benefit or rights to
the Holders or that does not adversely affect the rights of any Holder.
Notwithstanding the foregoing, the Trustee and the Issuer may not make any
change pursuant to this Section 9.01 that adversely affects the rights of any
Holder under this Indenture without the consent of such Holder. In formulating
its opinion on such matters, the Trustee will be entitled to rely on such
evidence as it deems appropriate, including, without limitation, solely on an
Opinion of Counsel; provided, however, that in delivering such Opinion of
Counsel, such counsel may rely as to matters of fact, on a certificate or
certificates of officers of the Issuer.
SECTION 9.02. With Consent of Holders.
All other modifications and amendments of this Indenture may be made
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes, except that, without the consent of each Holder of the Notes
affected thereby, no amendment may, directly or indirectly: (i) reduce the
amount of Notes whose Holders must consent to an amendment; (ii) reduce the rate
of or change or have the effect of changing the time for payment of premium, if
any, and interest, including defaulted interest, on any Notes; (iii) reduce the
principal of or change or have the effect of changing the fixed maturity of any
Notes, or change the date on which any Notes may be subject to redemption or
repurchase, or reduce the redemption or repurchase price therefor; (iv) make any
Notes payable in money other than that stated in the Notes; (v) make any change
in provisions of this Indenture protecting the right of each Holder to receive
payment of premium, if any, principal of and interest on such Note on or after
the due date thereof or to bring suit to enforce such payment, or permitting
Holders of a majority in principal amount of the Notes to waive Defaults or
Events of Default; (vi) amend, change or modify in any material respect the
obligation of the Issuer to make and consummate a Change of Control Offer in the
event of a Change of Control or make and consummate a Net Proceeds Offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto after a Change of Control has
occurred or the subject Asset Sale has been consummated; (vii) modify or change
any provision of this Indenture or the related definitions affecting the ranking
of the Notes or any Guarantee in a manner which adversely affects the Holders;
or (viii) release any Guarantor from any of its obligations under its Guarantee
or this Indenture otherwise than in accordance with the terms of this Indenture.
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SECTION 9.03. Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect; provided, however, that this
Section 9.03 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Issuer received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Issuer may, but shall not be obligated to, fix a Record Date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which Record Date shall be at least 30 days prior to the
first solicitation of such consent. If a Record Date is fixed, then
notwithstanding the second sentence of the immediately preceding paragraph,
those Persons who were Holders at such Record Date (or their duly designated
proxies), and only those Persons, shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
Record Date. No such consent shall be valid or effective for more than 90 days
after such Record Date unless consents from Holders of the requisite percentage
in principal amount of outstanding Notes required hereunder for the
effectiveness of such consents shall have also been given and not revoked within
such 90 day period.
SECTION 9.05. Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of such Note to deliver it to the Trustee. The
Trustee may place an
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appropriate notation on the Note about the changed terms and return it to the
Holder. Alternatively, if the Issuer or the Trustee so determine, the Issuer in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. In executing such amendment, supplement or waiver the Trustee shall
be entitled to receive indemnity reasonably satisfactory to it, and shall be
fully protected in relying upon an Opinion of Counsel and an Officers'
Certificate of the Issuer, stating that no Event of Default shall occur as a
result of such amendment, supplement or waiver and that the execution of such
amendment, supplement or waiver is authorized or permitted by this Indenture,
provided, however, that the legal counsel delivering such Opinion of Counsel may
rely as to matters of fact on one or more Officers' Certificates of the Issuer.
Such Opinion of Counsel shall not be an expense of the Trustee.
ARTICLE TEN
MISCELLANEOUS
SECTION 10.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control; provided, however, that this Section 10.01
shall not of itself require that this Indenture or the Trustee be qualified
under the TIA or constitute any admission or acknowledgment by any party hereto
that any such qualification is required prior to the time this Indenture and the
Trustee are required by the TIA to be so qualified.
SECTION 10.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
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if to the Issuer or any Guarantor:
Standard Commercial Tobacco Co., Inc.
2201 Miller Road
P.O. Box 450
Wilson, North Carolina 27894-0450
Facsimile No. (919) 237-1109
Attention: Robert E. Harrison
if to the Trustee:
Crestar Bank-Corporate Trust
10th Floor
919 East Main Street
Richmond, Virginia 23219
Telecopier Number: (804) 782-7855
Attention: Kelly Pickerel
The Issuer, the Guarantors and the Trustee by written notice to the
other may designate additional or different addresses for notices to such
Person. Any notice or communication to the Issuer or the Trustee shall be deemed
to have been given or made as of the date so delivered if hand delivered; when
answered back, if telexed; when receipt is acknowledged, if faxed; and five (5)
calendar days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar ten (10) days prior to such mailing and
shall be sufficiently given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 10.03. Communications by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Issuer, the
Trustee, the Registrar and any other Person shall have the protection of TIA ss.
312(c).
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SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuer or the Guarantors to the
Trustee to take any action under this Indenture, the Issuer shall furnish to the
Trustee:
(1) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Issuer, if
any, provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent to be performed by the Issuer,
if any, provided for in this Indenture relating to the proposed action
have been complied with (which counsel, as to factual matters, may rely
on an Officers' Certificate).
SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is reasonably necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with.
SECTION 10.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a
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meeting of Holders. The Paying Agent or Registrar may make reasonable rules for
its functions.
SECTION 10.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment is
a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 10.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY; PROVIDED THAT MATTERS
RELATING TO THE DUE AUTHORIZATION OF THE NOTES BY THE ISSUER AND THE DUE
AUTHORIZATION OF EACH GUARANTEE BY EACH GUARANTOR WILL BE GOVERNED BY THE LAWS
OF THE STATE OF NORTH CAROLINA. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Indenture, the Notes or the
Guarantees.
SECTION 10.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Issuer or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.10. No Personal Liability.
No director, officer, employee or stockholder, as such, of the Issuer
or any Guarantor, as such, shall have any liability for any obligations of the
Issuer or any Guarantor under the Notes, this Indenture, the Guarantees or the
Registration Rights Agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
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SECTION 10.11. Successors.
All agreements of the Issuer in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 10.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together shall represent the
same agreement.
SECTION 10.13. Severability.
In case any one or more of the provisions in this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
SECTION 10.14. Independence of Covenants.
All covenants and agreements in this Indenture and the Notes shall be
given independent effect so that if any particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or otherwise be within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
ARTICLE ELEVEN
GUARANTEE OF NOTES
SECTION 11.01. Unconditional Guarantee.
Subject to the provisions of this Article Eleven, each of the Company
and the Subsidiary Guarantor hereby, jointly and severally, unconditionally and
irrevocably guarantees, on a senior basis (such guarantee to be referred to
herein as a "Guarantee") to each Holder of a Note authenticated and delivered by
the Trustee and to the Trustee and its successors and assigns, irrespective of
the validity and enforceability of this Indenture, the Notes or the obligations
of the Issuer or any other Guarantor to the Holders or the Trustee hereunder or
thereunder, that: (a) the principal of, premium,
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if any, and interest on the Notes (and any Additional Interest payable thereon)
shall be duly and punctually paid in full when due, whether at maturity, upon
redemption at the option of Holders pursuant to the provisions of the Notes
relating thereto, by acceleration or otherwise, and interest on the overdue
principal and (to the extent permitted by law) interest, if any, on the Notes
and all other obligations of the Issuer or the Guarantors to the Holders or the
Trustee hereunder or thereunder (including amounts due the Trustee under Section
7.07 hereof) and all other obligations shall be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at maturity, by
acceleration or otherwise. In addition, all of the issued and outstanding
capital stock of the Issuer and Standard Wool will be pledged by the Company to
the Trustee for the benefit of the Holders of the Notes. Failing payment when
due of any amount so guaranteed, or failing performance of any other obligation
of the Issuer to the Holders under this Indenture or under the Notes, for
whatever reason, each Guarantor shall be obligated to pay, or to perform or
cause the performance of, the same immediately. An Event of Default under this
Indenture or the Notes shall constitute an event of default under this
Guarantee, and shall entitle the Holders of Notes to accelerate the obligations
of the Guarantors hereunder in the same manner and to the same extent as the
obligations of the Issuer.
Each of the Guarantors hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Guarantor, the
recovery of any judgment against the Issuer, any action to enforce the same,
whether or not a Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Guarantor. Each of the Guarantors hereby waives the benefit of
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Issuer, any right to require a
proceeding first against the Issuer, protest, notice and all demands whatsoever
and covenants that its Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and this
Guarantee. This Guarantee is a guarantee of payment and not of collection. If
any Holder or the Trustee is required by any court or otherwise to return to the
Issuer or to any Guarantor, or any custodian, trustee, liq-
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uidator or other similar official acting in relation to the Issuer or such
Guarantor, any amount paid by the Issuer or such Guarantor to the Trustee or
such Holder, this Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor further agrees that, as
between it, on the one hand, and the Holders of Notes and the Trustee, on the
other hand, (a) subject to this Article Eleven, the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Six hereof for the
purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such obligations
as provided in Article Six hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Guarantee.
No stockholder, officer, director, employee or incorporator, past,
present or future, or any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Each Guarantor that makes a payment or distribution under its Guarantee
shall be entitled to a contribution from each other Guarantor, determined in
accordance with GAAP.
SECTION 11.02. Limitations on Guarantees.
The obligations of the Subsidiary Guarantor under its Guarantee are
limited to the maximum amount which, after giving effect to all other contingent
and fixed liabilities of the Subsidiary Guarantor will result in the obligations
of the Subsidiary Guarantor under the Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under any laws of the United States, any state
of the United States or the District of Columbia.
SECTION 11.03. Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit E herein, shall be endorsed on each Note authenticated and
delivered by the Trustee. Such Guarantee shall be executed on behalf of each
Guarantor by either manual or facsimile signature of two Officers of the
Guarantor, each of whom, in each case, shall have been duly authorized to so
execute by all requisite corporate action. The validity and enforceability of
any Guarantee
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shall not be affected by the fact that it is not affixed to any particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of each Guarantor.
SECTION 11.04. Release of the Subsidiary Guarantor.
(a) If no Default exists or would exist under this Indenture, upon (i)
the sale or disposition of more than 49% of the Capital Stock of the Subsidiary
Guarantor by the Company, or (ii) the sale or disposition of more than 49% of
the consolidated assets of the Subsidiary Guarantor in compliance with all of
the terms of this Indenture, the Subsidiary Guarantor's Guarantee shall be
released, and the Subsidiary Guarantor shall be deemed released from all
obligations under this Article Eleven without any further action required on the
part of the Trustee or any Holder. If the Subsidiary Guarantor is not so
released the Subsidiary Guarantor or the entity surviving the Subsidiary
Guarantor, as applicable, shall remain or be liable under its Guarantee as
provided in this Article Eleven.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of the Subsidiary Guarantor upon receipt of a request by the Issuer or
the Subsidiary Guarantor accompanied by an Officers' Certificate and an Opinion
of Counsel certifying as to the compliance with this Section 11.04, provided the
legal counsel delivering such Opinion of Counsel may rely as to matters of fact
on one or more Officers Certificates of the Issuer.
The Trustee shall execute any documents reasonably requested by the
Issuer or the Subsidiary Guarantor in order to evidence the release of the
Subsidiary Guarantor from its obligations under its Guarantee endorsed on the
Notes and under this Article Eleven.
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Except as set forth in Articles Four and Five and this Section 11.04,
nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of the Subsidiary Guarantor with or into the Issuer or
shall prevent any sale or conveyance of the property of the Subsidiary Guarantor
as an entirety or substantially as an entirety to the Issuer.
SECTION 11.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged
and paid in full, each Guarantor hereby irrevocably waives and agrees not to
exercise any claim or other rights which it may now or hereafter acquire against
the Issuer that arise from the existence, payment, performance or enforcement of
the Issuer's obligations under the Notes or this Indenture and such Guarantor's
obligations under this Guarantee and this Indenture, in any such instance
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders against the Issuer, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Issuer,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Guarantor in violation of the preceding sentence and
any amounts owing to the Trustee or the Holders of Notes under the Notes, this
Indenture, or any other document or instrument delivered under or in connection
with such agreements or instruments, shall not have been paid in full, such
amount shall have been deemed to have been paid to such Guarantor for the
benefit of, and held in trust for the benefit of, the Trustee or the Holders and
shall forthwith be paid to the Trustee for the benefit of itself or such Holders
to be credited and applied to the obligations in favor of the Trustee or the
Holders, as the case may be, whether matured or unmatured, in accordance with
the terms of this Indenture. Each Guarantor acknowledges that it will receive
direct and indirect benefits from the financing arrangements contemplated by
this Indenture and that the waiver set forth in this Section 11.05 is knowingly
made in contemplation of such benefits.
SECTION 11.06. Immediate Payment.
Each Guarantor agrees to make immediate payment to the Trustee on
behalf of the Holders of all Obligations owing or payable to the respective
Holders upon receipt of a demand for payment therefor by the Trustee to such
Guarantor in writing.
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SECTION 11.07. Obligations Continuing.
The obligations of each Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the obligations have been paid
and satisfied in full. Each Guarantor agrees with the Trustee that it will from
time to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder.
SECTION 11.08. Obligations Reinstated.
The obligations of each Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of any Guarantor hereunder
(whether such payment shall have been made by or on behalf of the Issuer or by
or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders
upon the insolvency, bankruptcy, liquidation or reorganization of the Issuer or
any Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by the Issuer is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of the Issuer,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by each Guarantor as provided herein.
SECTION 11.09. Obligations Not Affected.
The obligations of each Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by any Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against any Guarantor hereunder or might operate to release
or otherwise exonerate any Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders or otherwise.
SECTION 11.10. Waiver.
Without in any way limiting the provisions of Section 11.01 hereof,
each Guarantor hereby waives notice or proof of reliance by the Holders upon the
obligations of any Guarantor hereunder, and diligence, presentment, demand for
payment on the Issuer, protest or notice of dishonor of any of the Obligations,
or other notice or formalities to the Issuer of any kind whatsoever.
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SECTION 11.11. No Obligation To Take Action Against the Issuer.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the Obligations or against the Issuer or any other Person or any
property of the Issuer or any other Person before the Trustee is entitled to
demand payment and performance by any or all Guarantors of their liabilities and
obligations under their Guarantees or under this Indenture.
SECTION 11.12. Dealing with the Issuer and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of any Guarantor
hereunder and without the consent of or notice to any Guarantor, may
(a) grant time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Issuer or any other Person;
(b) take or abstain from taking security or collateral from
the Issuer or from perfecting security or collateral of the Issuer;
(c) release, discharge, compromise, realize, enforce or
otherwise deal with or do any act or thing in respect of (with or
without consideration) any and all collateral, mortgages or other
security given by the Issuer or any third party with respect to the
obligations or matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from the Issuer;
(e) apply all monies at any time received from the Issuer or
from any security upon such part of the Obligations as the Holders may
see fit or change any such application in whole or in part from time to
time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to
deal with, the Issuer and all other Persons and any security as the
Holders or the Trustee may see fit.
SECTION 11.13. Default and Enforcement.
If any Guarantor fails to pay in accordance with Section 11.06 hereof,
the Trustee may proceed in its name as trus-
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tee hereunder in the enforcement of the Guarantee of any such Guarantor and such
Guarantor's obligations thereunder and hereunder by any remedy provided by law,
whether by legal proceedings or otherwise, and to recover from such Guarantor
the obligations.
SECTION 11.14. Amendment, Etc.
No amendment, modification or waiver of any provision of this Indenture
relating to any Guarantor or consent to any departure by any Guarantor or any
other Person from any such provision will in any event be effective unless it is
signed by such Guarantor and the Trustee.
SECTION 11.15. Acknowledgment.
Each Guarantor hereby acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
SECTION 11.16. Costs and Expenses.
Each Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees) incurred by the
Trustee, its agents, advisors and counsel or any of the Holders in enforcing any
of their rights under any Guarantee.
SECTION 11.17. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, remedy, power or privilege hereunder or under
this Indenture or the Notes, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under this Indenture or the Notes preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges in the Guarantee and under this Indenture, the
Notes and any other document or instrument between a Guarantor and/or the Issuer
and the Trustee are cumulative and not exclusive of any rights, remedies, powers
and privilege provided by law.
SECTION 11.18. Survival of Obligations.
Without prejudice to the survival of any of the other obligations of
each Guarantor hereunder, the obligations of each Guarantor under Section 11.01
and shall be enforceable against such Guarantor without regard to and without
giving ef-
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fect to any right of offset or counterclaim available to or which may be
asserted by the Issuer or any Guarantor.
SECTION 11.19. Guarantee in Addition to Other Obligations.
The obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Notes (including the Purchase Agreement and the Registration Rights Agreement).
SECTION 11.20. Severability.
Any provision of this Article Eleven which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Eleven.
SECTION 11.21. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of each
Guarantor and the Trustee and the other Holders and their respective successors
and permitted assigns, except that no Guarantor may assign any of its
obligations hereunder or thereunder.
ARTICLE TWELVE
COLLATERAL
SECTION 12.01. Collateral Documents.
In order to secure the due and punctual payment of the principal of and
interest on the Notes when and as the same shall be due and payable, whether on
an interest payment date, at maturity, by acceleration, purchase, repurchase,
redemption or otherwise, and interest on the overdue principal of and interest
(to the extent permitted by law), if any, on the Notes and the performance of
all other obligations of the Issuer to the Holders or the Trustee under this
Indenture and the Notes, the Company hereby grants to the Trustee for the
benefit of the Holders a Lien on and security interest in the Collateral. The
Trustee and the Company hereby agree that the Trustee holds the Collateral in
trust for the benefit of the Holders pursuant to the terms of this Indenture.
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SECTION 12.02. Recording and Opinions.
(a) The Company shall take or cause to be taken all action required to
perfect, maintain, preserve and protect the Lien on and security interest in the
Collateral, including, without limitation, the filing of financing statements,
continuation statements and any instruments of further assurance, in such manner
and in such places as may be required by law fully to preserve and protect the
rights of the Holders and the Trustee under this Indenture to the Collateral.
The Company shall from time to time promptly pay all financing and continuation
statement recording and/or filing fees, charges and taxes relating to this
Indenture, any amendments thereto and any other instruments of further assurance
required.
(b) The company shall furnish to the Trustee, at such time as required
by Section 314(b) of the TIA, Opinion(s) of Counsel either (a) substantially to
the effect that, in the opinion of such counsel, this Indenture and the grant of
a security interest in the Collateral and all other instruments of further
assurance, including, without limitation, financing statements, have been
properly recorded and filed to the extent necessary to perfect the security
interests in the Collateral and reciting the details of such action, and stating
that as to the security interests created, such recordings and filings are the
only recordings and filings necessary to give notice thereof and that no
re-recordings or refilings are necessary to maintain such notice (other than as
stated in such opinion), or (b) to the effect that, in the opinion of such
counsel, no such action is necessary to perfect such security interests.
(c) To the extent required by the TIA, the Company shall furnish to the
Trustee on August 15 in each year, beginning with August 15, 1998, an Opinion of
Counsel, dated as of such date, either (i)(A) stating that, in the opinion of
such counsel, action has been taken with respect to the recording, filing,
re-recording and refiling of all supplemental indentures, financing statements,
continuation statements and other documents as is necessary to maintain the Lien
and reciting with respect to the security interests in the Collateral the
details of such action or referring to prior Opinions of Counsel in which such
details are given, and (B) stating that, based on relevant laws as in effect on
the date of such Opinion of Counsel, all financing statements, continuation
statements and other documents have been executed and filed that are necessary
as of such date and during the succeeding 24 months fully to maintain the
security interest of the Holders and the Trustee hereunder with respect to the
Collateral, or (ii) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Lien.
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SECTION 12.03. Release of Collateral.
(a) The Trustee shall not at any time release Collateral from the
security interest created by this Indenture unless such release is in accordance
with the provisions of this Indenture.
(b) At any time when an Event of Default shall have occurred and be
continuing, no release of Collateral pursuant to the provisions of this
Indenture shall be effective as against the Holders.
SECTION 12.04. Specified Releases of Collateral.
Satisfaction and Discharge; Defeasance. The Company shall be entitled
to obtain a full release of all of the Collateral from the Liens of this
Indenture upon compliance with the conditions precedent set forth in Section
8.01 for satisfaction and discharge of this Indenture or for defeasance pursuant
to Section 8.01(a). Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel, each to the effect that such conditions
precedent have been complied with (and which may be the same Officers'
Certificate and Opinion of Counsel required by Article Ten), the Trustee shall
forthwith take all necessary action (at the request of and the expense of the
Company) to release and reconvey to the Company all of the Collateral, and shall
deliver such Collateral in its possession to the Company including, without
limitation, the execution and delivery of releases and satisfactions wherever
required.
Upon compliance by the Company with the condition precedent set forth
above, the Trustee shall cause to be released and reconveyed to the Company, the
aforementioned items of Collateral.
SECTION 12.05. Authorization of Actions To Be Taken by the Trustee.
(a) The Trustee may, in its sole discretion and without the consent of
the Holders, take all actions it deems necessary or appropriate in order to (i)
enforce any of the terms of this Indenture with respect to the Collateral and
(ii) collect and receive any and all amounts payable in respect of the
obligations of the Company hereunder.
(b) The Trustee shall have power to institute and to maintain such
suits and proceedings as it may deem expedient to prevent any impairment of the
Collateral by any act that may be unlawful or in violation of this Indenture
with respect to the Collateral, and such suits and proceedings as the Trustee
may
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deem expedient to preserve or protect its interests and the interests of the
Holders in the Collateral (including the power to institute and maintain suits
or proceedings to restrain the enforcement of or compliance with any legislative
or other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest thereunder or be prejudicial to
the interests of the Holders or of the Trustee).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
STANDARD COMMERCIAL TOBACCO CO., INC., Issuer
By:_________________________________
Name:
Title:
STANDARD COMMERCIAL CORPORATION, as Guarantor
By:_________________________________
Name:
Title:
STANDARD WOOL, INC., as Guarantor
By:_________________________________
Name:
Title:
CRESTAR BANK, as Trustee
By:_________________________________
Name:
Title:
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EXHIBIT A
CUSIP No.: [ ]
STANDARD COMMERCIAL TOBACCO CO., INC.
8 7/8% SENIOR NOTE DUE 2005
No. [ ] $[ ]
STANDARD COMMERCIAL TOBACCO CO., INC., a North Carolina corporation
(the "Issuer", which term includes any successor entities), for value received
promises to pay to Cede & Co. or registered assigns the principal sum of [ ] ($[
]) Dollars on August 1, 2005.
Interest Payment Dates: February 1 and August 1, commencing February 1,
1998
Record Dates: January 15 and July 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
STANDARD COMMERCIAL TOBACCO CO., INC.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
Dated: August 1, 1997
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Certificate of Authentication
This is one of the 8 7/8% Senior Notes due 2005 referred to in
the within-mentioned Indenture.
CRESTAR BANK, as Trustee
By:
Authorized Signatory
Date of Authentication:
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<PAGE>
(REVERSE OF SECURITY)
8 7/8% Senior Note due 2005
1. Interest. STANDARD COMMERCIAL TOBACCO CO., INC., a North Carolina
corporation (the "Issuer"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from August 1, 1997. The Issuer will pay interest semi-annually in
arrears on each Interest Payment Date, commencing February 1, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months and, in
the case of a partial month, the actual number of days elapsed.
The Issuer shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Issuer shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange (including pursuant to an Exchange Offer (as defined in the
Registration Rights Agreement)) after such Record Date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Issuer shall pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Issuer may pay principal and interest by its check payable in such
U.S. Legal Tender. The Issuer may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, (the "Trustee") will act as
Paying Agent and Registrar. The Issuer may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders.
4. Indenture. The Issuer issued the Notes under an Indenture, dated as
of August 1, 1997 (the "Indenture"), among the Issuer, the Guarantors and the
Trustee. This Note is one of a duly authorized issue of Initial Notes of the
Issuer designated as its 8 7/8% Senior Notes due 2005 (the "Initial Notes"). The
Notes are limited in aggregate principal amount to $115,000,000. The Notes
include the Initial Notes, the Pri-
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vate Exchange Notes (as defined in the Indenture) and the Unrestricted Notes, as
defined below, issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement or, with respect to Initial Notes issued under the
Indenture subsequent to the Issue Date, a registration rights agreement
substantially identical to the Registration Rights Agreement. The Initial Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the TIA for a statement of them. The Notes are
general unsecured obligations of the Issuer.
5. Indenture. Each Holder, by accepting a Note, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
6. Redemption. The Notes will be redeemable, at the Issuer's option, in
whole at any time or in part from time to time, on and after August 1, 2001,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on January 15 of the year set forth
below, plus, in each case, accrued and unpaid interest thereon, if any, to the
date of redemption:
Year Percentage
2001........................................................ 104.438%
2002........................................................ 102.958%
2003........................................................ 101.479%
2004 and thereafter......................................... 100.000%
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in denominations
larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Issuer defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from
A-4
<PAGE>
and after such Redemption Date and the only right of the Holders of such Notes
will be to receive payment of the redemption price plus accrued interest, if
any.
8. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture provide
that, after certain Asset Sales (as defined in the Indenture) and upon the
occurrence of a Change of Control (as defined in the Indenture), and subject to
further limitations contained therein, the Issuer will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
9. Registration Rights. Pursuant to a registration rights agreement
among the Issuer, the Guarantors and the Initial Purchasers, the Issuer and the
Guarantors will be obligated to consummate an exchange offer pursuant to which
the Holder of this Note shall have the right to exchange this Note for the
Issuer's 8 7/8% Senior Notes due 2005, Series B (the "Unrestricted Notes"),
which have been registered under the Securities Act, in like principal amount
and having terms identical in all material respects as the Initial Notes. The
Holders of the Initial Notes shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the registration rights agreement.
10. Denominations; Transfer; Exchange. The Notes are in registered
form, without coupons, and in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
11. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Issuer at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the
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<PAGE>
principal of and interest on the Notes to redemption or maturity and complies
with the other provisions of the Indenture relating thereto, the Issuer will be
discharged from certain provisions of the Indenture and the Notes (including
certain covenants, including, under certain circumstances, its obligation to pay
the principal of and interest on the Notes but without affecting the rights of
the Holders to receive such amounts from such deposits).
14. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, provide for uncertificated
Notes in addition to or in place of certificated Notes, comply with any
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the TIA or comply with Article Five of the Indenture or
make any other change that does not adversely affect the rights of any Holder of
a Note.
15. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, create dividend or other payment
restrictions affecting any Restricted Subsidiaries of the Company, issue
Preferred Stock of any Subsidiaries of the Company, and on the ability of the
Company to merge or consolidate with any other Person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the Company's
or its Restricted Subsidiaries' assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions.
Pursuant to Section 4.06 of the Indenture, the Issuer must annually report to
the Trustee on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
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<PAGE>
17. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article Five of the Indenture) if it determines that
withholding notice is in their interest.
18. Trustee Dealings with the Company and Its Subsidiaries. The Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company, its
Subsidiaries or their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No partner, director, officer, employee
or stockholder, as such, of the Issuer or any Guarantor, as such, shall have any
liability for any obligations of the Issuer or any Guarantor under the Notes,
the Indenture, the Guarantees or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
20. Guarantees. This Note will be entitled to the benefits of certain
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
21. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
22. Governing Law. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
princi-
A-7
<PAGE>
ples of conflict of laws to the extent that the application of the law of
another jurisdiction would be required thereby; PROVIDED that matters relating
to the due authorization hereof by the Issuer shall be governed by the laws of
the State of North Carolina. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Note.
23. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
The Issuer will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to: Standard Commercial Tobacco Co., Inc., 2201 Miller
Road, P.O. Box 450, Wilson, North Carolina 27894-0450.
A-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint________________________________________________________,
agent to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
Dated: Signed: _________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:____________________________________________________________
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of the declaration by the Commission
of the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) or (ii) August 1, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer:
[Check One]
<TABLE>
<CAPTION>
<S> <C> <C>
(1) __ to the Issuer or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under the Securities Act; or
(3) __ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act) that has furnished to the Trustee a signed letter containing
certain representations and agree-
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<PAGE>
ments (the form of which letter can be obtained from the Trustee); or
(4) __ outside the United states to a "foreign person" in compliance with Rule 904 of Regulation S
under the Securities Act; or
(5) __ pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or
(6) __ pursuant to an effective registration statement under the Securities Act; or
(7) __ pursuant to another available exemption from the registration requirements of the Securities
Act.
</TABLE>
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Issuer as defined in Rule 144
under the Securities Act (an "Affiliate"):
|_| The transferee is an Affiliate of the Issuer.
Unless one of the items is checked, the Trustee will refuse to register
any of the Notes evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if item (3), (4),
(5) or (7) is checked, the Issuer or the Trustee may require, prior to
registering any such transfer of the Notes, in their sole discretion, such
written legal opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or the Issuer has
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: ____________________ Signed:
(Sign exactly as name appears on the other
side of this Note)
Signature Guarantee: __________________________________________
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<PAGE>
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: ______________ ___________________________________________
NOTICE: To be executed by an executive
officer
A-11
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Issuer pursuant
to Section 4.14 or Section 4.15 of the Indenture, check the appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Issuer pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$___________________
Dated: ________________ _____________________________________
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular
without alteration or enlargement
or any change whatsoever and be
guaranteed.
Signature Guarantee: ________________________________________
A-12
<PAGE>
EXHIBIT B
CUSIP No.: [ ]
STANDARD COMMERCIAL TOBACCO CO., INC.
8 7/8% SENIOR NOTE DUE 2005, SERIES B
No. [ ] $[ ]
STANDARD COMMERCIAL TOBACCO CO., INC., a North Carolina corporation
(the "Issuer", which term includes any successor entities), for value received
promises to pay to Cede & Co. or registered assigns the principal sum of [ ]
($[ ]) Dollars on August 1, 2005.
Interest Payment Dates: February 1 and August 1, commencing February 1,
1998
Record Dates: January 15 and July 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
STANDARD COMMERCIAL TOBACCO CO., INC.
By:__________________________________
Name:
Title:
By:__________________________________
Name:
Title:
Dated: August 1, 1997
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<PAGE>
Certificate of Authentication
This is one of the 8 7/8% Senior Notes due 2005, Series B referred to
in the within-mentioned Indenture.
CRESTAR BANK, as Trustee
By:________________________________
Authorized Signatory
Date of Authentication:
B-2
<PAGE>
(REVERSE OF SECURITY)
8 7/8% Senior Note due 2005, Series B
1. Interest. STANDARD COMMERCIAL TOBACCO CO., INC., a North Carolina
corporation (the "Issuer"), promises to pay interest on the principal amount of
this Note at the rate per annum shown above. Interest on the Notes will accrue
from the most recent date on which interest has been paid or, if no interest has
been paid, from August 1, 1997. The Issuer will pay interest semi-annually in
arrears on each Interest Payment Date, commencing February 1, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months and, in
the case of a partial month, the actual number of days elapsed.
The Issuer shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Issuer shall pay interest on the Notes
(except defaulted interest) to the Persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date even if the Notes are cancelled on registration of transfer or registration
of exchange after such Record Date. Holders must surrender Notes to a Paying
Agent to collect principal payments. The Issuer shall pay principal and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Issuer
may pay principal and interest by its check payable in such U.S. Legal Tender.
The Issuer may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, (the "Trustee") will act as
Paying Agent and Registrar. The Issuer may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders.
4. Indenture. The Issuer issued the Notes under an Indenture, dated as
of August 1, 1997 (the "Indenture"), among the Issuer, the Guarantors and the
Trustee. This Note is one of a duly authorized issue of Unrestricted Notes of
the Issuer designated as its 8 7/8% Senior Notes due 2005, Series B (the
"Unrestricted Notes"). The Notes are limited in aggregate principal amount to
$115,000,000. The Notes include the 8 7/8% Notes due 2005 (the "Initial Notes")
and the Unrestricted Notes, issued in exchange for the Initial Notes pursuant to
a registration rights agreement. The Initial Notes, the Private
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<PAGE>
Exchange Notes (as defined in the Indenture) and the Unrestricted Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and the TIA for a
statement of them. The Notes are general unsecured obligations of the Issuer.
5. Indenture. Each Holder, by accepting a Note, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time in accordance with its terms.
6. Redemption. The Notes will be redeemable, at the Issuer's option, in
whole at any time or in part from time to time, on and after August 1, 2001,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period commencing on January 15 of the years set forth
below, plus, in each case, accrued and unpaid interest, if any, thereon to the
date of redemption:
Year Percentage
2001........................................................ 104.438%
2002........................................................ 102.958%
2003........................................................ 101.479%
2004 and thereafter......................................... 100.000%
7. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in denominations
larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Issuer defaults in the
payment of such redemption price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the redemption price plus accrued interest, if any.
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<PAGE>
8. Offers to Purchase. Sections 4.14 and 4.15 of the Indenture provide
that, after certain Asset Sales (as defined in the Indenture) and upon the
occurrence of a Change of Control (as defined in the Indenture), and subject to
further limitations contained therein, the Issuer will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered form,
without coupons, and in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for one year, the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Issuer at any
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Issuer will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, including, under certain
circumstances, its obligation to pay the principal of and interest on the Notes
but without affecting the rights of the Holders to receive such amounts from
such deposits).
13. Amendment; Supplement; Waiver. Subject to certain exceptions set
forth in the Indenture, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of a majority in aggregate
principal amount of the Notes then outstanding, and any past Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the Notes
then outstanding. Without notice to or consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Notes to, among other
things,
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<PAGE>
cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in
addition to or in place of certificated Notes, comply with any requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the TIA or comply with Article Five of the Indenture or make any other
change that does not adversely affect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations on
the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of their Capital Stock or
certain Indebtedness, make certain Investments, create or incur liens, enter
into transactions with Affiliates, create dividend or other payment restrictions
affecting any Subsidiaries of the Company, issue Preferred Stock of any
Subsidiaries of the Company, and on the ability of the Company to merge or
consolidate with any other Person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the Company's or its
Subsidiaries' assets or adopt a plan of liquidation. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to
Section 4.06 of the Indenture, the Issuer must annually report to the Trustee on
compliance with such limitations.
15. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article Five of the Indenture) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with the Company and Its Subsidiaries. The Trustee
under the Indenture, in its individual
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<PAGE>
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company, its Subsidiaries or their respective Affiliates
as if it were not the Trustee.
18. No Recourse Against Others. No partner, director, officer, employee
or stockholder, as such, of the Issuer or any Guarantor, as such, shall have any
liability for any obligations of the Issuer or any Guarantor under the Notes,
the Indenture, the Guarantees or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. Guarantees. This Note will be entitled to the benefits of certain
Guarantees, if any, made for the benefit of the Holders. Reference is hereby
made to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
20. Authentication. This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.
21. Governing Law. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws to the extent that the application of the law of
another jurisdiction would be required thereby; PROVIDED that matters relating
to the due authorization hereof by the Issuer shall be governed by the laws of
the state of North Carolina. Each of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of New York in any action or proceeding
arising out of or relating to this Note.
22. Abbreviations and Defined Terms. Customary abbreviations may be
used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as
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<PAGE>
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Issuer will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture, which has the text of this Note.
Requests may be made to: Standard Commercial Tobacco Co., Inc., 2201 Miller
Road, P.O. Box 450, Wilson, North Carolina 27894-0450.
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and social security or tax ID number
of assignee)
and irrevocably appoint________________________________________________________,
agent to transfer this Note on the books of the Issuer. The agent may
substitute another to act for him.
Dated:__________________ Signed:___________________________________________
(Sign exactly as name appears on the other side of
this Note)
Signature Guarantee:____________________________________________________________
B-9
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Issuer pursuant
to Section 4.14 or Section 4.15 of the Indenture, check the appropriate box:
Section 4.14 [ ]
Section 4.15 [ ]
If you want to elect to have only part of this Note purchased by the
Issuer pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$_____________________
Dated: _______________ _________________________________________
NOTICE: The signature on
this assignment must
correspond with the name as
it appears upon the face of
the within Note in every
particular without
alteration or enlargement
or any change whatsoever
and be guaranteed.
Signature Guarantee:____________________________________________________________
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<PAGE>
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Standard Commercial Tobacco Co., Inc.
2201 Miller Road
P.O. Box 450
Wilson, North Carolina 27894-0450
Ladies and Gentlemen:
In connection with our proposed purchase of 8 7/8% Senior Notes due
2005 (the "Notes") of Standard Commercial Tobacco Co., Inc., a North Carolina
corporation (the "Issuer"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated July 25, 1997, relating to the Notes and
such other information as we deem necessary in order to make our
investment decision. We acknowledge that we have read and agreed to the
matters stated in the section entitled "Transfer Restrictions" of such
Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture relating to the Notes (the "Indenture") as described in the
Offering Memorandum and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Notes except in compliance
with, such restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act"), and all applicable State securities
laws.
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell any Notes, we
will do so only (i) to the Issuer or any subsidiary thereof, (ii)
inside the United States in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined in Rule
144A promulgated under the Securities Act), (iii) inside the United
States to an institutional "ac-
C-1
<PAGE>
credited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee (as defined in the Indenture) a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of the Notes (the form of which letter can be obtained from
the Trustee), (iv) outside the United States in accordance with Rule
904 of Regulation S promulgated under the Securities Act to non-U.S.
persons, (v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (vi) pursuant to
an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Notes from
us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
4. We understand that, on any proposed resale of any Notes, we
will be required to furnish to the Trustee and the Issuer such
certification, legal opinions and other information as the Trustee and
the Issuer may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Notes purchased by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or their
investment, as the case may be.
6. We are acquiring the Notes purchased by us for our account
or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
C-2
<PAGE>
You, the Issuer, the Trustee and others are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
By:____________________________________
Name:
Title:
C-3
<PAGE>
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
Standard Commercial Tobacco Co., Inc.
2201 Miller Road
P.O. Box 450
Wilson, North Carolina 27894-0450
Re: Standard Commercial Tobacco Co., Inc.
(the "Issuer") 8 7/8% Senior Notes due
2005 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $115,000,000 aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
D-1
<PAGE>
You, the Issuer and counsel for the Issuer are entitled to rely upon
this letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
By:___________________________________
Authorized Signature
D-2
<PAGE>
EXHIBIT E
GUARANTEE
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in the
amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Issuer under the Indenture (as
defined below) or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Eleven of the Indenture and this Guarantee. This Guarantee will become effective
in accordance with Article Eleven of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Note. Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Indenture dated as of August 1, 1997, among Standard Commercial Tobacco Co.,
Inc., a North Carolina corporation, as issuer (the "Issuer"), Standard
Commercial Corporation, a North Carolina corporation and Standard Wool, Inc., a
Delaware corporation, as guarantors (the "Guarantors"), and Crestar Bank, as
trustee (the "Trustee"), as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Eleven of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY; PROVIDED THAT MATTERS RELATING TO THE
DUE AUTHORIZATION OF THE NOTES BY THE ISSUER AND THE DUE AUTHORIZATION OF EACH
GUARANTEE BY EACH GUARANTOR WILL BE GOVERNED BY THE LAWS OF THE STATE OF NORTH
CAROLINA. Each Guarantor hereby agrees to submit to the jurisdiction of the
courts of the State of New York in any action or proceeding arising out of or
relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
E-1
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused its Guarantee to be duly
executed.
Date:____________________
[NAME OF GUARANTOR], as Guarantor
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
E-2
Exhibit 5.1
September 15, 1997
Standard Commercial Tobacco Co., Inc.
2201 Miller Road
Wilson, North Carolina 27893
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 to be filed by
Standard Commercial Tobacco Co., Inc., a North Carolina corporation (the
"Company"), with the Securities and Exchange Commission on or about the date
hereof (the "Registration Statement"), in connection with the registration under
the Securities Act of 1933, as amended, of $115,000,000 principal amount of
8 7/8% Senior Notes of the Company and Guarantees thereof by Standard
Commercial Corporation and Standard Wool, Inc. (collectively, together with the
Company, the "Issuers"). Such Notes and Guarantees are referred to herein as the
"Securities". The Securities are to be exchanged as described in the
Registration Statement and pursuant to the Indenture filed as an exhibit thereto
(the "Indenture"). In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with the original of all documents submitted to us as copies
thereof.
As your legal counsel, we have examined the proceedings taken, and are
familiar with the proceedings proposed to be taken, in connection with the sale
and issuance of the Securities.
It is our opinion, subject to the assumptions and qualifications
contained herein, that:
1. The Indenture has been duly authorized, executed and delivered
and constitutes a valid and legally binding instrument of the Issuers.
2. Upon completion of the proceedings being taken or contemplated by
us, as your counsel, to be taken prior to the issuance of the Securities,
including the proceedings being taken in order to permit such transaction to be
carried out in accordance with applicable state securities laws, the Securities
when issued and sold in the manner referred to in the Registration Statement and
in accordance with the resolutions adopted by the Board of Directors of the
Issuers, will be duly issued, valid and binding obligations of the respective
Issuers, and will be entitled to the benefits of the Indenture.
The opinions set forth above are subject to the following
qualifications and limitations:
<PAGE>
A. The enforceability of any obligation of the Issuers is subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity);
B. We express no opinion as to any provision of the Indenture
purporting to relieve the trustee thereunder of the exercise of reasonable
diligence, or with respect to the enforceability of any provision of the
Indenture pursuant to which any party is indemnified against a liability arising
under applicable securities laws; and
C. In rendering the opinions set forth herein we have relieved
solely on the opinion of Rosenman & Colin in so far as such opinions relate to
the laws of the State of New York.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
/s/WYRICK ROBBINS YATES & PONTON LLP
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 1, 1997
By and Among
STANDARD COMMERCIAL TOBACCO CO., INC.
as Issuer
and
STANDARD COMMERCIAL CORPORATION (THE "PARENT")
and
STANDARD WOOL, INC. (THE "SUBSIDIARY GUARANTOR")
as Guarantors
and
BT SECURITIES CORPORATION
and
WHEAT, FIRST SECURITIES, INC.
as Initial Purchasers
8 7/8% Senior Notes due 2005
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions.............................................................1
2. Exchange Offer..........................................................5
3. Shelf Registration......................................................9
4. Additional Interest....................................................11
5. Registration Procedures................................................13
6. Registration Expenses..................................................24
7. Indemnification........................................................25
8. Rules 144 and 144A.....................................................29
9. Underwritten Registrations.............................................30
10. Miscellaneous.........................................................30
(a) No Inconsistent Agreements..................................30
(b) Adjustments Affecting Registrable Notes.....................30
(c) Amendments and Waivers......................................30
(d) Notices.....................................................31
(e) Successors and Assigns......................................32
(f) Release of Guarantors.......................................32
(g) Counterparts................................................33
(h) Headings....................................................33
(i) GOVERNING LAW...............................................33
(j) Severability................................................33
(k) Securities Held by the Issuer or Its Affiliates.............33
(l) Third-Party Beneficiaries...................................33
-i-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is dated
as of August 1, 1997, by and among STANDARD COMMERCIAL TOBACCO CO., INC., a
North Carolina corporation (the "Issuer"), as issuer, STANDARD COMMERCIAL
CORPORATION (the "Parent") and STANDARD WOOL, INC. (the "Subsidiary Guarantor"
and together with the Parent, the "Guarantors") as guarantors, and BT SECURITIES
CORPORATION and WHEAT, FIRST SECURITIES, INC., as initial purchasers (the
"Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of July 25, 1997, by and among the Issuer, the Guarantors
and the Initial Purchasers (the "Purchase Agreement"), which provides for the
sale by the Issuer to the Initial Purchasers of $115,000,000 aggregate principal
amount of the Issuer's 8 7/8% Senior Notes due 2005 (the "Notes"), guaranteed on
a senior basis by each of the Guarantors. The Guarantee of the Parent will be
secured by all of the outstanding capital stock of the Issuer and the Subsidiary
Guarantor. In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Issuer and the Guarantors have agreed to provide the registration
rights set forth in this Agreement for the benefit of the Initial Purchasers and
any subsequent holder or holders of the Notes. The execution and delivery of
this Agreement is a condition to the Initial Purchasers' obligation to purchase
the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4 hereof.
Advice: See Section 5 hereof.
Agreement: See the introductory paragraphs hereto.
Applicable Period: See Section 2 hereof.
Effectiveness Date: The 120th day after the Issue Date;
provided, however, that with respect to any Shelf Regis-
<PAGE>
-2-
tration, the Effectiveness Date shall be the 60th day after the Filing Date with
respect thereto.
Effectiveness Period: See Section 3 hereof.
Event Date: See Section 4 hereof.
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2 hereof.
Exchange Offer: See Section 2 hereof.
Exchange Offer Registration Statement: See Section 2 hereof.
Filing Date: (A) If no Registration Statement has been filed
by the Issuer pursuant to this Agreement, the 45th day after the Issue Date; and
(B) in each other case (which may be applicable notwithstanding the consummation
of the Exchange Offer), the 30th day after the delivery of a Shelf Notice.
Guarantors: See the introductory paragraphs hereto.
Holder: Any holder of a Registrable Note or Registrable
Notes.
Indemnified Person: See Section 7(c) hereof.
Indemnifying Person: See Section 7(c) hereof.
Indenture: The Indenture, dated as of August 1, 1997, by and
among the Issuer, the Guarantors and Crestar Bank, as trustee, pursuant to which
the Notes are being issued, as the same may be amended or supplemented from time
to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs hereto.
Initial Shelf Registration: See Section 3(a) hereof.
Inspectors: See Section 5(o) hereof.
Issue Date: August 1, 1997, the date of original issuance of
the Notes.
<PAGE>
-3-
Issuer: See the introductory paragraphs hereto.
NASD: See Section 5(t) hereof.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2 hereof.
Person: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
Private Exchange: See Section 2 hereof.
Private Exchange Notes: See Section 2 hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
Records: See Section 5(o) hereof.
Registrable Notes: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange
<PAGE>
-4-
Notes that may be resold without restriction under state and federal
securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the
case may be, ceases to be outstanding for purposes of the Indenture or (iv) such
Note, Exchange Note or Private Exchange Note, as the case may be, may be resold
without restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of the
Issuer and the Guarantors that covers any of the Notes, the Exchange Notes or
the Private Exchange Notes filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2 hereof.
Shelf Registration: See Section 3(b) hereof.
Subsequent Shelf Registration: See Section 3(b) hereof.
<PAGE>
-5-
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and the trustee (if
any) under any indenture governing the Exchange Notes and Private Exchange Notes
(if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Issuer, guaranteed by the Guarantors,
are sold to an underwriter for reoffering to the public.
2. Exchange Offer
(a) The Issuer shall file with the SEC, no later than the
Filing Date, a Registration Statement (the "Exchange Offer Registration
Statement") on an appropriate registration form with respect to a registered
offer (the "Exchange Offer") to exchange any and all of the Registrable Notes
for a like aggregate principal amount of notes (the "Exchange Notes") of the
Issuer (guaranteed by the Guarantors) that are identical in all material
respects to the Notes except that the Exchange Notes (and the Guarantors'
guarantees thereof) shall contain no restrictive legend thereon. The Exchange
Offer shall comply with all applicable tender offer rules and regulations under
the Exchange Act and other applicable law. The Issuer shall use its best efforts
to (x) cause the Exchange Offer Registration Statement to be declared effective
under the Securities Act on or before the Effectiveness Date; (y) keep the
Exchange Offer open for at least 30 days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is mailed to Holders; and
(z) consummate the Exchange Offer on or prior to the 30th day following the date
on which the Exchange Offer Registration Statement is declared effective by the
SEC. If, after the Exchange Offer Registration Statement is initially declared
effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, the Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be
required, as a condition to its participation in the Exchange Offer, to
represent to the Issuer in writing (which may be contained in the applicable
letter of transmittal) that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no ar-
<PAGE>
-6-
rangement or understanding with any Person to participate in the distribution of
the Exchange Notes in violation of the provisions of the Securities Act, and
that such Holder is not an affiliate of the Issuer within the meaning of the
Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers (as defined), and the Issuer
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes and other than in respect of any Exchange Notes as to
which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement.
(b) The Issuer shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Holders, which shall contain a
summary statement of the positions taken or policies made by the staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer that
is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Notes received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including, to the extent permitted by applicable policies and regulations of the
SEC, all Participating Broker-Dealers, and include a statement describing the
means by which Participating Broker-Dealers may resell the Exchange Notes in
compliance with the Securities Act.
The Issuer shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applica-
<PAGE>
-7-
ble law in connection with any resale of the Exchange Notes covered thereby;
provided, however, that such period shall not exceed 180 days after such
Exchange Offer Registration Statement is declared effective (or such longer
period if extended pursuant to the last paragraph of Section 5 hereof) (the
"Applicable Period").
If, prior to consummation of the Exchange Offer, any Holder
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, the Issuer upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
any such Holder, in exchange (the "Private Exchange") for such Notes held by any
such Holder, a like principal amount of notes (the "Private Exchange Notes") of
the Issuer that are identical in all material respects to the Exchange Notes and
shall be guaranteed by the Guarantors. The Private Exchange Notes shall be
issued pursuant to the same indenture as the Exchange Notes and bear the same
CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date subsequent to the record date for
an interest payment date to occur on or after the date of such exchange and as
to which interest will be paid, the date of such interest payment or (B) if no
interest has been paid on the Notes, from the date of the original issuance of
the Notes.
In connection with the Exchange Offer, the Issuer shall:
(1) mail, or cause to be mailed, to each Holder
entitled to participate in the Exchange Offer a copy of the Prospectus
forming part of the Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30
days after the date that notice of the Exchange Offer is mailed to
Holders (or longer if required by applicable law);
<PAGE>
-8-
(3) utilize the services of a depositary for the
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
(4) permit Holders to withdraw tendered Notes at any
time prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects
with all applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Issuer shall:
(1) accept for exchange all Registrable Notes
validly tendered and not validly withdrawn pursuant to the Exchange
Offer and the Private Exchange, if any;
(2) deliver to the Trustee for cancellation all
Registrable Notes so accepted for exchange; and
(3) cause the Trustee to authenticate and deliver
promptly to each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of
such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuer to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuer and
(iii) all governmental approvals shall have been obtained, which approvals the
Issuer deems necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the TIA or is exempt from such qualification and shall provide that the Exchange
<PAGE>
-9-
Notes shall not be subject to the transfer restrictions set forth in the
Indenture. The Indenture or such indenture shall provide that the Exchange
Notes, the Private Exchange Notes and the Notes shall vote and consent together
on all matters as one class and that none of the Exchange Notes, the Private
Exchange Notes or the Notes will have the right to vote or consent as a separate
class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuer is not permitted
to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within
165 days of the Issue Date, (iii) any holder of Private Exchange Notes so
requests in writing to the Issuer within 60 days after the consummation of the
Exchange Offer, or (iv) in the case of any Holder that participates in the
Exchange Offer, such Holder does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such Holder as an affiliate of the
Issuer or the Guarantors within the meaning of the Securities Act), then in the
case of each of clauses (i) to and including (iv) of this sentence, the Issuer
shall promptly deliver to the Holders and the Trustee written notice thereof
(the "Shelf Notice") and shall file a Shelf Registration pursuant to Section 3
hereof.
3. Shelf Registration
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. The Issuer shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "Initial Shelf Registration"). The Issuer shall use its best
efforts to file with the SEC the Initial Shelf Registration on or before the
applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuer shall not
permit any securities other than the Registrable Notes to be included in the
Initial Shelf Registration or any Subsequent Shelf Registration (as defined
below).
<PAGE>
-10-
The Issuer shall use its best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is two
years from the Effectiveness Date, subject to extension pursuant to the last
paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter
period ending when (i) all Registrable Notes covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration or (ii) a Subsequent Shelf Registration covering all
of the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration has been declared
effective under the Securities Act; provided, however, that the Effectiveness
Period in respect of the Initial Shelf Registration shall be extended to the
extent required to permit dealers to comply with the applicable prospectus
delivery requirements of Rule 174 under the Securities Act and as otherwise
provided herein.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Issuer shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 30 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent
Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuer
shall use its best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such Subsequent Shelf Registration continuously effective for
a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuer shall promptly
supplement and amend any Shelf Registration if re-
<PAGE>
-11-
quired by the rules, regulations or instructions applicable to the registration
form used for such Shelf Registration, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Notes covered by such Registration Statement or by any
underwriter of such Registrable Notes.
4. Additional Interest
(a) The Issuer and the Initial Purchasers agree that the
Holders will suffer damages if the Issuer fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, the Issuer agrees to pay, as
liquidated damages, additional interest on the Notes ("Additional Interest")
under the circumstances and to the extent set forth below (each of which shall
be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration has been filed on or prior to the
applicable Filing Date or (B) notwithstanding that the Issuer has
consummated or will consummate the Exchange Offer, the Issuer is
required to file a Shelf Registration and such Shelf Registration is
not filed on or prior to the Filing Date applicable thereto, then,
commencing on the day after any such Filing Date, Additional Interest
shall accrue on the principal amount of the Notes at a rate of 0.50%
per annum for the first 90 days immediately following each such Filing
Date, and such Additional Interest rate shall increase by an additional
0.50% per annum at the beginning of each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement
nor the Initial Shelf Registration is declared effective by the SEC on
or prior to the relevant Effectiveness Date or (B) notwithstanding that
the Issuer has consummated or will consummate the Exchange Offer, the
Issuer is required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date in respect of such Shelf Registration, then,
commencing on the day after such Effectiveness Date, Additional
Interest shall accrue on the principal amount of the Notes at a rate of
0.50% per annum for the first 90 days immediately following the day
after such Effectiveness Date, and such Additional Interest rate shall
increase by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
<PAGE>
-12-
(iii) if (A) the Issuer has not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 45th day after the date on which the Exchange
Offer Registration Statement relating thereto was declared effective or
(B) if applicable, a Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days commencing on the (x) 46th day after such effective date,
in the case of (A) above, or (y) the day such Shelf Registration ceases
to be effective in the case of (B) above, and such Additional Interest
rate shall increase by an additional 0.50% per annum at the beginning
of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 2.0% per annum; provided, further, however,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the applicable Exchange Notes for all Notes tendered (in the
case of clause (iii)(A) of this Section 4), or upon the effectiveness of the
applicable Shelf Registration Statement which had ceased to remain effective (in
the case of (iii)(B) of this Section 4), Additional Interest on the Notes in
respect of which such events relate as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Issuer shall notify the Trustee within three business
days after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 will be payable in cash semiannually on each February 1 and August 1 (to the
holders of record on the January 15 and July 15 immediately preceding such
dates), commencing with the first such date occurring after any such Ad-
ditional Interest commences to accrue. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Ad-
<PAGE>
-13-
ditional Interest rate was applicable during such period (determined
on the basis of a 360-day year comprised of twelve 30-day months
and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuer shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Issuer hereunder the
Issuer shall:
(a) Prepare and file with the SEC prior to the applicable
Filing Date, a Registration Statement or Registration Statements as
prescribed by Sections 2 or 3 hereof, and use its best efforts to cause
each such Registration Statement to become effective and remain
effective as provided herein; provided, however, that, if (1) such
filing is pursuant to Section 3 hereof, or (2) a Prospectus contained
in the Exchange Offer Registration Statement filed pursuant to Section
2 hereof is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period relating thereto, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto, the
Issuer shall furnish to and afford the Holders of the Registrable Notes
covered by such Registration Statement or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in
each case at least five days prior to such filing, or such later date
as is reasonable under the circumstances). The Issuer shall not file
any Registration Statement or Prospectus or any amendments or
supplements thereto if the Holders of a majority in aggregate principal
amount of the Registrable Notes covered by such Registration Statement,
or any such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration
<PAGE>
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Statement or Exchange Offer Registration Statement, as the case may be,
as may be necessary to keep such Registration Statement continuously
effective for the Effectiveness Period or the Applicable Period, as the
case may be; cause the related Prospectus to be supplemented by any
Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar
provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act
applicable to each of them with respect to the disposition of all
securities covered by such Registration Statement as so amended or in
such Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. The Issuer shall be deemed not to have
used its best efforts to keep a Registration Statement effective during
the Effective Period or the Applicable Period, as the case may be,
relating thereto if the Issuer voluntarily takes any action that would
result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being
able to sell such Registrable Notes or such Exchange Notes during that
period unless such action is required by applicable law or permitted by
this Agreement.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto from whom the Company has received written
notice that it will be a Participating Broker-Dealer in the Exchange
Offer, notify the selling Holders of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriters, if any, promptly (but in any event within one
day), and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may, upon
request, obtain, at the sole expense of the Issuer, one conformed copy
of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to
be in-
<PAGE>
-15-
corporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuer
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(m) hereof cease to be true and correct in all
material respects, (iv) of the receipt by the Issuer of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening
of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, and (vi) of the Issuer's determination that
a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus
<PAGE>
-16-
or suspending the qualification (or exemption from qualification) of
any of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any
such order is issued, to use its best efforts to obtain the withdrawal
of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter or underwriters (if any), the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering or any
Participating Broker-Dealer, (i) as promptly as practicable incorporate
in a prospectus supplement or post-effective amendment such information
as the managing underwriter or underwriters (if any), such Holders, any
Participating Broker-Dealer or counsel for any of them reasonably
request to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as
practicable after the Issuer has received notification of the matters
to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, furnish to each selling Holder of Registrable Notes and to each
such Participating Broker-Dealer who so requests and to their
respective counsel and each managing underwriter, if any, at the sole
expense of the Issuer, one conformed copy of the Registration Statement
or Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested, all
documents incorporated or deemed to be incorporated therein by
reference and all exhibits thereto.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, deliver to each selling Holder of Registrable Notes, or each
such
<PAGE>
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Participating Broker-Dealer, as the case may be, their respective
counsel, and the underwriters, if any, at the sole expense of the
Issuer, as many copies of the Prospectus or Prospectuses (including
each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of
this Section 5, the Issuer hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if
any, and dealers (if any), in connection with the offering and sale of
the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes
or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Notes for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request in writing; provided, however, that
where Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an underwritten
offering, the Issuer agrees to cause its counsel to perform Blue Sky
investigations and file registrations and qualifications required to be
filed pursuant to this Section 5(h), keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and
all other acts or things reasonably necessary or advisable to enable
the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided, however, that the Issuer
shall not be required to (A) qualify generally to do business in any
<PAGE>
-18-
jurisdiction where it is not then so qualified, (B) take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may request.
(j) Use its best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be reasonably
necessary to enable the seller or sellers thereof or the underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case the Issuer will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, upon the occurrence of any event contemplated by paragraph
5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and
(subject to Section 5(a) hereof) file with the SEC, at the sole expense
of the Issuer, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating
<PAGE>
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Broker-Dealer, any such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, the Issuer shall not be required to
amend or supplement a Registration Statement, any related Prospectus or
any document incorporated therein by reference, in the event that, and
for a period not to exceed an aggregate of 60 days in any calendar year
if, (i) an event occurs and is continuing as a result of which the
Shelf Registration would, in the Issuer's good faith judgment, contain
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (ii) (a)
the Issuer determines in its good faith judgment that the disclosure of
such event at such time would have a material adverse effect on the
business, operations or prospects of the Issuer or (b) the disclosure
otherwise relates to a pending material business transaction that has
not yet been publicly disclosed.
(l) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(m) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes in form and substance reasonably
satisfactory to the Issuer and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or the disposition of
such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters
with respect to the business of the Issuer, the Parent and any of the
subsidiaries of the Issuer or Parent (including any acquired business,
properties or entity, if applicable) and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings of debt
securities similar to
<PAGE>
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the Notes, and confirm the same in writing if and when requested in
form and substance reasonably satisfactory to the Issuer; (ii) obtain
the written opinions of counsel to the Issuer and written updates
thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters, addressed to the underwriters
covering the matters customarily covered in opinions reasonably
requested in underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters; (iii)
use its best efforts to obtain "cold comfort" letters and updates
thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent public
accountants of the Issuer (and, if necessary, any other independent
public accountants of the Parent, the Subsidiary Guarantor and any
subsidiary of the Issuer or Parent or of any business acquired by the
Issuer, the Parent or the Subsidiary Guarantor for which financial
statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings of debt securities
similar to the Notes and such other matters as reasonably requested by
the managing underwriter or underwriters as permitted by the Statement
on Auditing Standards No. 72; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable to the sellers and underwriters, if any,
than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Registrable Notes covered by such Registration Statement and
the managing underwriter or underwriters or agents, if any). The above
shall be done at each closing under such underwriting agreement, or as
and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer,
as the case may be, any underwriter par-
<PAGE>
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ticipating in any such disposition of Registrable Notes, if any, and
any attorney, accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer, as the case may be, or
underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and instruments of the
Issuer, the Parent and any of the subsidiaries of either the Issuer or
the Parent (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of
each of the Issuer, the Parent and any of their respective subsidiaries
to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement and Prospectus. Each
Inspector shall agree in writing that it will keep the Records
confidential and that it will not disclose any of the Records that the
Issuer determines, in good faith, to be confidential and notifies the
Inspectors in writing are confidential unless (i) the disclosure of
such Records is necessary to avoid or correct a material misstatement
or material omission in such Registration Statement or Prospectus, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, (iii) disclosure of such
information is necessary, in the opinion of counsel for any Inspector,
in connection with any action, claim, suit or proceeding, directly or
indirectly, involving or potentially involving such Inspector and
arising out of, based upon, relating to, or involving this Agreement or
the Purchase Agreement, or any transactions contemplated hereby or
thereby or arising hereunder or thereunder, or (iv) the information in
such Records has been made generally available to the public; provided,
however, that prior notice shall be provided as soon as practicable to
the Issuer of the potential disclosure of any information by such
Inspector pursuant to clauses (i), (ii) or (iii) of this sentence to
permit the Issuer to obtain a protective order (or waive the provisions
of this paragraph (n)) and that such Inspector shall take such actions
as are reasonably necessary to protect the confidentiality of such
information (if practicable) to the extent such action is otherwise not
inconsistent with, an impairment of or in derogation of the rights and
interests of the Holder or any Inspector.
<PAGE>
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(o) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may
be, to be qualified under the TIA not later than the effective date of
the first Registration Statement relating to the Registrable Notes;
and in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA; and execute, and
use its best efforts to cause such trustee to execute, all documents
as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture
to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 60 days after the end of any fiscal
quarter (or 120 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Issuer after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods.
(q) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuer, in a form
customary for underwritten transactions, addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, that the
Exchange Notes or Private Exchange Notes, as the case may be, and the
related indenture constitute legal, valid and binding obligations of
the Issuer, enforceable against the Issuer in accordance with its
respective terms, subject to customary exceptions and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Issuer (or to such other Person as di-
<PAGE>
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rected by the Issuer) in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be, the Issuer shall mark, or cause to
be marked, on such Registrable Notes that such Registrable Notes are
being cancelled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
(s) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(t) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Exchange Notes and/or
Registrable Notes covered by a Registration Statement contemplated
hereby.
If the Issuer is not required to file periodic reports under
the Exchange Act because the Parent is filing such reports, then, where
appropriate, references hereunder to the Issuer shall mean the Parent.
The Issuer may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Issuer such
information regarding such seller and the distribution of such Registrable Notes
as the Issuer may, from time to time, reasonably request. The Issuer may exclude
from such registration the Registrable Notes of any seller so long as such
seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Issuer all information required to be
disclosed in order to make the information previously furnished to the Issuer by
such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes to be sold by such Holder or Participating Broker-Dealer, as the case may
be, that, upon actual receipt of any notice from the Issuer of the happening of
any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or
5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such
Registrable Notes covered by such Registration Statement or Prospectus or
Exchange Notes to be
<PAGE>
-24-
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Issuer that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Issuer shall give any such notice,
each of the Effectiveness Period and the Applicable Period shall be extended by
the number of days during such periods from and including the date of the giving
of such notice to and including the date when each seller of Registrable Notes
covered by such Registration Statement or Exchange Notes to be sold by such
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k)
hereof or (y) the Advice.
6. Registration Expenses
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer shall be borne by the Issuer
whether or not the Exchange Offer Registration Statement or any Shelf
Registration is filed or becomes effective or the Exchange Offer is consummated,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Notes or Exchange Notes and determination of
the eligibility of the Registrable Notes or Exchange Notes for investment under
the laws of such jurisdictions (x) where the holders of Registrable Notes are
located, in the case of the Exchange Notes, or (y) as provided in Section 5(h)
hereof, in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses, including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriter or underwriters, if any,
by the Holders of a majority in aggregate principal amount of the Registrable
Notes included in any Registration Statement or in respect of Registrable Notes
or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disburse-
<PAGE>
-25-
ments of counsel for the Issuer and reasonable fees and disbursements of one
special counsel for all of the sellers of Registrable Notes (exclusive of any
counsel retained pursuant to Section 7 hereof), (v) fees and disbursements of
all independent certified public accountants referred to in Section 5(m)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (vi)
Securities Act liability insurance, if the Issuer desires such insurance, (vii)
fees and expenses of all other Persons retained by the Issuer, (viii) internal
expenses of the Issuer (including, without limitation, all salaries and expenses
of officers and employees of the Issuer performing legal or accounting duties),
(ix) the expense of any annual audit, (x) any fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and the obtaining of a rating of the securities, in each case, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, indentures
and any other documents necessary in order to comply with this Agreement.
7. Indemnification
(a) The Issuer and the Guarantors agree, jointly and
severally, to indemnify and hold harmless each Holder of Registrable Notes and
each Participating Broker-Dealer selling Exchange Notes during the Applicable
Period, the officers, directors, employees and agents of each such Person, and
each Person, if any, who controls any such Person within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a
"Participant"), from and against any and all losses, claims, damages, judgments,
liabilities and expenses (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if the Issuer shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the case of
the Prospectus in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement
<PAGE>
-26-
or omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Issuer in writing by such Participant expressly
for use therein.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuer, its directors, its officers and each
Person who controls the Issuer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent (but on a
several, and not joint, basis) as the foregoing indemnity from the Issuer to
each Participant, but only with reference to information relating to such
Participant furnished to the Issuer in writing by such Participant expressly for
use in any Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. The liability of any Participant under
this paragraph shall in no event exceed the proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes giving rise to
such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "Indemnified
Person") shall promptly notify the Persons against whom such indemnity may be
sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Persons may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses actually incurred by such counsel
related to such proceeding; provided, however, that the failure to so notify the
Indemnifying Persons shall not relieve any of them of any obligation or
liability which any of them may have hereunder or otherwise. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Persons
shall have failed within a reasonable period of time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both any
Indemnifying Person and the Indemnified Person or any affiliate thereof and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that,
unless there exists a con-
<PAGE>
-27-
flict among Indemnified Persons, the Indemnifying Persons shall not, in
connection with such proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same general allegations,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any such separate
firm for the Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in interest of
Registrable Notes and Exchange Notes sold by all such Participants and shall be
reasonably acceptable to the Issuer, and any such separate firm for the Issuer,
its directors, its officers and such control Persons of the Issuer shall be
designated in writing by the Issuer and shall be reasonably acceptable to the
Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, or indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by
<PAGE>
-28-
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative benefits received by the Issuer on the
one hand and the Participants on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) of the Notes received by the Issuer
bears to the total proceeds received by such Participant from the sale of
Registrable Notes or Exchange Notes, as the case may be, in each case as set
forth in the table on the cover page of the Offering Memorandum in respect of
the sale of the Notes. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuer on the one hand or such
Participant or such other Indemnified Person, as the case may be, on the other,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, judgments, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Reg-
<PAGE>
-29-
istrable Notes or Exchange Notes, as the case may be, exceeds the amount of any
damages that such Participant has otherwise been required to pay or has paid by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the Indemnifying Party to the Indemnified Party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Issuer set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Holder or any person who controls a
Holder, the Issuer, its directors, officers, employees or agents or any person
controlling the Issuer, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
The Issuer covenants and agrees that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner in
accordance with the requirements of the Securities Act and the Exchange Act and,
if at any time the Issuer is not required to file such reports, such Issuer
will, upon the request of any Holder or beneficial owner of Registrable Notes,
make available such information necessary to permit sales pursuant to Rule 144A
under the Securities Act. The Issuer further covenants and agrees, for so long
as any Registrable Notes remain outstanding that it will take such further
action as any Holder of Registrable Notes may reasonably request, all to the
extent required from time to time to enable such holder to sell Registrable
Notes without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act,
as such Rules may be amended from time to
<PAGE>
-30-
time, or (b) any similar rule or regulation hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Issuer.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuer has not, as of the
date hereof, and the Issuer shall not, after the date of this Agreement, enter
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Issuer's other issued and outstanding
securities under any such agreements. The Issuer has not entered and will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back registration rights with respect to any Registration
Statement.
(b) Adjustments Affecting Registrable Notes. The Issuer shall
not, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof
<PAGE>
-31-
may not be given, otherwise than with the prior written consent of (I) the
Issuer and the Guarantors, if any, and (II)(A) the Holders of not less than a
majority in aggregate principal amount of the then outstanding Registrable Notes
and (B) in circumstances that would adversely affect the Participating
Broker-Dealers, the Participating Broker-Dealers holding not less than a
majority in aggregate principal amount of the Exchange Notes held by all
Participating Broker-Dealers; provided, however, that Section 7 and this Section
10(c) may not be amended, modified or supplemented without the prior written
consent of each Holder and each Participating Broker-Dealer (including any
person who was a Holder or Participating Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Registrable Notes whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Notes may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Notes being sold pursuant to such Registration Statement.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such Holder
or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture with a copy in like manner
to the Initial Purchasers as follows:
BT Securities Corporation
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No.: (212) 250-7200
Attention: Corporate Finance
with a copy to:
<PAGE>
-32-
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No.: (212) 269-5420
Attention: Stephen A. Greene, Esq.
(ii) if to the Initial Purchasers, at the address
specified in Section 10(d)(1);
(iii) if to the Issuer or any of the Guarantors, at the
address as follows:
2201 Miller Road
P.O. Box 450
Wilson, North Carolina 27894-0450
Facsimile No.: (919) 237-1109
Attention: Robert E. Harrison
with a copy to:
Wyrick Robbins Yates & Ponton L.L.P.
4101 Lake Boone Trail
Suite 300
Raleigh, North Carolina 27607
Facsimile No.: (919) 781-4865
Attention: Larry E. Robbins, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers.
(f) Release of Guarantors. If any Guarantor is released from
its obligations under the Indenture in accordance with the terms thereof, then
such Guarantor shall be released from its obligations hereunder.
<PAGE>
-33-
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(j) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Securities Held by the Issuer or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Issuer or its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(l) Third-Party Beneficiaries. Holders of Registrable Notes
and Participating Broker-Dealers are intended third- party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
<PAGE>
-34-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
STANDARD COMMERCIAL TOBACCO CO., INC.
By: /s/Hampton R. Poole, Jr.
-----------------------
Name: Hampton R. Poole, Jr.
Title: Vice President
STANDARD COMMERCIAL CORPORATION,
as Guarantor
By: /s/G. M. Ross
-----------------------
Name: G.M. Ross
Title: Vice President and Secretary
STANDARD WOOL, INC.,
as Guarantor
By: /s/Rick Hardy
-----------------------
Name: Rick Hardy
Title: Secretary
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
BT SECURITIES CORPORATION,
as Initial Purchaser
By: /s/Michael Apfel
-------------------------
Name: Michael Apfel
Title: Vice President
<PAGE>
-35-
WHEAT, FIRST SECURITIES, INC.,
as Initial Purchaser
By: /s/R. Walter Jones IV
-----------------------
Name: R. Walter Jones IV
Title: Managing Director
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Shareholders of
Standard Commercial Corporation
We consent to the use in this Registration Statement on Form S-4 of our report
on the financial statements of Standard Commercial Corporation, of our report on
the financial statements of Standard Commercial Tobacco Co., Inc. and
subsidiaries, of our report on the financial statements of Standard Wool, Inc.,
all dated June 18, 1997, and of our report dated June 18, 1997 relating to the
financial statement schedules, all of which appear in the Prospectus which is a
part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Raleigh, North Carolina
September 12, 1997
- -------------------------------------------------------------------------------
Securities and Exchange Commission
Washington, DC 20549
--------------
Form T-1
--------------
Statement of Eligibility Under the Trust Indenture Act of 1939 of A
Corporation Designated to Act As Trustee
Check if an application to determine eligibility of a trustee pursuant to
Section 305(b)(2)_____
Crestar Bank
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
Virginia 53-0116200
(State of Incorporation, if not a national bank) (I.R.S. employer identification no.)
</TABLE>
919 East Main Street
Richmond, VA 23219
(Address of principal executive office) (Zip Code)
John C. Clark, III
919 E. Main Street, 18th Floor, Richmond, Virginia 23219
(804)782-7455
(Name, address and telephone number of agent for service)
United Dominion Realty Trust, Inc.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Virginia 54-0857512
(State or other jurisdiction of incorporation (I.R.S. employer identification no.)
or organization
</TABLE>
10 South 6th Street, Suite 203
Richmond, VA 23219-3802
(Address of principal executive offices) (Zip Code)
Subordinated Debt Securities
(Title of indenture securities)
- -----------------------------------------------------------------------------
<PAGE>
Item 1. General Information
Furnish the following information as to trustee:
(a) Name and Address of each examining or supervising authority to which it is
subject.
Bureau of Financial Institutions,
State Corporation Commission of Virginia
Richmond, Virginia
The Board of Governors of the Federal Reserve System,
Washington, DC
The Federal Reserve Bank,
Richmond, Virginia
Federal Deposit Insurance Corporation,
Washington, DC
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe such affiliation.
Obligor is not an affiliation of the trustee.
Item 16. List of Exhibits
List below all exhibits filed as part of this Statement of Eligibility.
*Exhibit 1 - A copy of the articles of incorporation of the trustee as now in
effect. (Incorporated by reference from Exhibit 1 filed with T-1 Statement,
Registration Statement No. 33-3984.)
*Exhibit 2 - A copy of the certificate of authority of the trustee to commence
business. (Incorporated by reference from Exhibit 2 filed with T-1 Statement,
Registration Statement No. 33-3984.)
*Exhibit 3 - A copy of the certificate of the authority of the trustee to
exercise corporate trust powers. (Incorporated by reference from Exhibit 3 filed
with T-1 Statement, Registration Statement No. 33-3984.)
<PAGE>
Exhibit 4 - A copy of the existing by-laws of the trustee.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7 - A copy of the latest report of the condition of the trustee
published pursuant to law or the requirements of its supervising or examining
authority.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
*The Exhibits thus designated are incorporated herein by reference. Following
the description of such Exhibits is a reference to the copy of the Exhibits
heretofore filed with the Securities and Exchange Commission, to which there
have been no amendments or changes.
<PAGE>
Signature
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
Crestar Bank, a corporation organized and existing under the laws of the
Commonwealth of Virginia, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Richmond, and the Commonwealth of Virginia, on the fifteenth day of May,
1997.
Crestar Bank
By: /s/ L.B. BEDELL
- ------------------------------
(L. B. Bedell, Vice President)
<PAGE>
EXHIBIT T-1 (4)
Bylaws
And
Administrative Regulations
Of
Crestar Bank
Incorporated Under The Laws
Of The Commonwealth Of Virginia
Adopted December 20, 1979
(And Including Amendments Adopted
Thereto Through December 20, 1996)
<PAGE>
Index
To
Bylaws
And
Administrative Regulations
Of
Crestar Bank
<TABLE>
<CAPTION>
Article I - Meetings Of Stockholders
<S> <C>
1.1 - Place of Meetings.................................................................................1
1.2 - Annual Meetings...................................................................................1
1.3 - Special Meetings..................................................................................1
1.4 - Notice of Meetings................................................................................1
1.5 - Quorum............................................................................................1
1.6 - Voting............................................................................................1
1.7 - Conduct of Meetings...............................................................................2
1.8 - Inspector.........................................................................................2
Article II - Board Of Directors
2.1 - General Powers....................................................................................2
2.2 - Number of Directors...............................................................................2
2.3 - Election of Directors.............................................................................2
2.4 - Term of Office....................................................................................2
2.5 - Quorum............................................................................................2
2.6 - Meetings of the Board.............................................................................2
2.7 - Compensation......................................................................................3
2.8 - Eligibility.......................................................................................3
Article III - Committees
3.1 - Standing Committees...............................................................................4
3.2 - Executive Committee...............................................................................5
3.3 - Audit Committee...................................................................................5
3.4 - Human Resources and Compensation Committee........................................................6
3.5 - Nominating and Governance Committee...............................................................6
3.6 - Area Boards.......................................................................................6
3.7 - Other Committees..................................................................................7
Article IV - Officers
4.1 - Number and Manner of Election or Appointment......................................................7
4.2 - Term of Office....................................................................................7
4.3 - Removal...........................................................................................8
4.4 - Resignations......................................................................................8
4.5 - Vacancies, New Offices and Promotions.............................................................8
4.6 - Chairman of the Board.............................................................................8
4.7 - President.........................................................................................8
4.8 - Corporate Secretary...............................................................................8
4.9 - Treasurer.........................................................................................9
4.10 - Auditor...........................................................................................9
4.11 - Powers and Duties of Other Officers...............................................................9
4.12 - Bonds.............................................................................................9
Article V - Capital Stock
5.1 - Certificates......................................................................................9
5.2 - Lost, Destroyed and Mutilated Certificates.......................................................10
5.3 - Transfer of Stock................................................................................10
5.4 - Closing of Transfer Books and Fixing Record Date.................................................10
Article VI - Miscellaneous Provisions
6.1 - Seal.............................................................................................10
6.2 - Voting of Stock Held.............................................................................10
6.3 - Fiscal Year......................................................................................11
Article VII - Emergency Bylaws.................................................................................11
Article VIII - Indemnification Of Directors And Officers.......................................................12
Article IX - Amendments........................................................................................13
Administrative Regulation I
Sales, Purchase and Pledge or Deposit of Securities Owned by the Bank
1.1 - Sale, Purchase and Pledge or Deposit of Securities...............................................14
Administrative Regulation II
Exercise of Fiduciary Powers
2.1 - Certification, Authentication, etc. of Securities and Documents..................................14
2.2 - Qualification as Fiduciary.......................................................................15
2.3 - Acceptance of Trusts.............................................................................15
2.4 - Purchase and Sales of Securities.................................................................15
2.5 - Deposit of Securities Under Plans Reorganizations, etc...........................................15
2.6 - Sales, and Leases of Real Estate and Tangible Personal Property:
Foreclosure and Extension of Mortgages...........................................................15
2.7 - All Acts Done Under the Foregoing Paragraphs.....................................................16
2.8 - Voting Stock and Other Securities................................................................16
<PAGE>
Administrative Regulation III
Borrowing Money, Rediscount of Bills and Notes, Buying or Selling Funds
3.1 - Borrowed Money, Security Therefor and Rediscounts................................................16
3.2 - Purchase and Sales of Surplus Funds..............................................................16
Administrative Regulation IV
Release of Encumbrances
4.1 - Sales and Leases of Property.....................................................................17
4.2 - Release Of Encumbrances..........................................................................17
Administrative Regulation V
Checks, Drafts, Orders, etc.
5.1 - Bank - Except Trust..............................................................................17
5.2 - Trust Group......................................................................................17
Administrative Regulation VI
Signature Guarantee, Confirmations, etc.
6.1 - Signature Guarantee..............................................................................17
6.2 - Confirmations....................................................................................18
Administrative Regulation VII
Responsibility of Area Boards
7.1 - Responsibilities of Area Boards..................................................................17
Administrative Regulation VIII
Deposit and Security Accounts
8.1 - Deposit Accounts.................................................................................18
8.2 - Security Accounts................................................................................18
</TABLE>
<PAGE>
-1-
Crestar Bank
Bylaws
Article I
Meetings Of Stockholders
1.1 Place of Meetings. All meetings of the stockholders shall be held at
such place, either within or without the State of Virginia, as may be designated
by the Board of Directors.
1.2 Annual Meeting. The annual meeting of stockholders, for the election of
Directors and transaction of such other business as may come before the meeting,
shall be held at such time and date as designated by the Board of Directors.
1.3 Special Meetings. Special meetings of the stockholders for any purpose
or purposes may be called at any time by the Chairman of the Board, by the
President, or by a majority of the Board of Directors. No business shall be
transacted and no corporate action shall be taken at a special meeting other
than that stated in the notice of the meeting.
1.4 Notice of Meetings. Unless waived in the manner prescribed by law,
notice of each meeting of stockholders shall be given in writing, not less than
ten nor more than sixty days before the day of the meeting, or such other notice
as is required by law, to each stockholder entitled to vote at such meeting and
shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. If
mailed, such notice shall be deemed to have been given when deposited in the
United States mail, with postage thereon prepaid, directed to the stockholder at
his address as it appears on the stock transfer books of the Bank.
1.5 Quorum. Any number of stockholders together holding a majority of the
outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business. If less than a quorum shall be in attendance at the time for which
a meeting shall have been called, the meeting may be adjourned from time to time
by a majority of the stockholders present or represented by proxy without notice
other than by announcement at the meeting until a quorum shall attend.
1.6 Voting. At any meeting of the stockholders, each stockholder of a class
entitled to vote on any matter coming before the meeting shall, as to such
matter, have one vote, in person or by proxy, for each share of capital stock of
such class standing in his name on the stock transfer books of the Bank on the
date, not more than seventy days prior to such meeting, as designated by the
Board of Directors, for the purpose of determining stockholders entitled to
vote, as the date on which the stock transfer books of the Bank are to be closed
or as the record date.
Every proxy shall be in writing and signed by the stockholder entitled to vote
or signed by his duly authorized attorney-in-fact. At a meeting where a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote shall be the act of the stockholders.
1.7 Conduct of Meetings. At each meeting of the stockholders, the Chairman
of the Board or the President shall act as chairman and preside. In their
absence, the Chairman of the Board may designate another officer of the Bank who
need not be a Director to preside. The Corporate Secretary of the Bank or an
Assistant Corporate Secretary, or in their absence, a person whom the chairman
of such meeting shall appoint, shall act as corporate secretary of such meeting.
1.8 Inspectors. An appropriate number of inspectors for any meeting of
stockholders may be appointed by the chairman of such meeting. Inspectors so
appointed will open and close the polls, will receive and take charge of proxies
and ballots, and will decide all questions as to the qualifications of voters,
validity of proxies and ballots, and the number of votes properly cast.
Article II
Board Of Directors
2.1 General Powers. The business and affairs of the Bank shall be managed
by the Board of Directors and, except as otherwise expressly provided by law, in
accordance with the Articles of Incorporation or these Bylaws.
2.2 Number of Directors. The Board of Directors shall consist of not less
than five nor more than twenty-seven Directors, the exact number to be
designated by the Board, and a majority of whom shall be citizens of the
Commonwealth of Virginia.
2.3 Election of Directors. Directors shall be elected at each annual
meeting of the stockholders. Any vacancy occurring in the Board of Directors,
including a vacancy resulting from an increase by not more than two in the
number of authorized Directors, may be filled by the majority vote of the
remaining Directors, though less than a quorum of the Board, unless the vacancy
is sooner filled by the stockholders.
2.4 Term of Office. Each Director (unless he sooner dies, resigns, or is
removed from office) shall hold office until the next annual meeting of
stockholders or until his successor shall have been elected and qualifies.
2.5 Quorum. A majority of the number of Directors pursuant to these Bylaws
at the time of the meeting, shall constitute a quorum for the transaction of
business. The act of a majority of Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. Less than a quorum
may adjourn any meeting.
2.6 Meetings of the Board.
(a) Place of Meetings. Meetings of the Board of Directors shall be held at
such place and at such time, either within or without the State of Virginia as
may be designated by the Board, or upon call of the Chairman of the Board or the
President.
(b) Organizational Meeting. An organizational meeting shall be held as soon
as practicable after the adjournment of the annual meeting of stockholders at
which the Board of Directors is elected, for the purpose of taking the oaths of
the Directors, electing officers, appointing committees for the ensuing year,
and for transacting such other business as may properly come before the meeting.
(c) Regular Meetings. Regular meetings of the Board of Directors shall be
held at such time and place as the Board may designate, or upon call of the
Chairman of the Board, or the President, and no notice thereof need be given.
(d) Special Meetings. Special meetings of the Board of Directors may be
held at any time or place upon the call of the Chairman of the Board or the
President, or any three members of the Board.
Notice of each such meeting shall be given to each Director by mail at his
business or residence address at least forty-eight hours before the meeting, or
by telephoning or telegraphing notice to him at least twenty-four hours before
the meeting. Meetings may be held at any time without notice if all of the
Directors are present, or if those not present waive notice in writing either
before or after the meeting. The notice of meetings of the Board need not state
the purpose of the meeting.
(e) Conduct of Meetings. At each meeting of the Board of Directors, the
Chairman of the Board or the President shall act as chairman and preside. In
their absence, the Chairman of the Board may designate another officer of the
Bank who need not be a Director, to preside. The Corporate Secretary of the Bank
or an Assistant Corporate Secretary, or in their absence, a person whom the
chairman of such meeting shall appoint, shall act as corporate secretary of such
meeting.
Any action required or permitted to be taken by the Board may be taken without a
meeting if all Directors consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents of the directors
shall be filed with the minutes of the proceedings of the Board meeting.
2.7 Compensation. Directors, and members of any committee of the Board who
are not officers of the Bank or subsidiaries thereof, shall be paid such
compensation as the Board of Directors from time to time may determine for his
services as Director, or as Chairman or a member of any committee of the Board,
and shall, in addition, be reimbursed for such expenses as shall be incurred by
him in the performance of his duties. Nothing herein shall preclude Directors
and members of any committee of the Board from serving the Bank in other
capacities and receiving compensation therefor.
2.8 Eligibility. No person shall be eligible to serve as a Director unless,
when his term commences, he is not less than twenty-one years of age nor more
than seventy years of age. No Director shall be eligible for reelection after he
has attained the age of 70 or after his separation from the business or
professional organization with which he was primarily associated at the time he
first became a Director, unless elected after becoming associated with another
business or professional organization. Except for the Chief Executive Officer,
no Director who is an officer of the Corporation or any subsidiary shall be
eligible for reelection after he has retired.
Article III
Committees
3.1 Standing Committees.
(a) Number. There shall be three standing committees of the Board of
Directors. The standing committees are as follows: Executive, Audit, and Human
Resources and Compensation. In order to broaden the experience of Directors, it
shall be the policy of the Bank to seek rotation among Directors as members of
the various committees.
At the first meeting of the Board of Directors after the annual meeting of the
stockholders, the Chairman of the Board shall recommend the membership of each
committee and the Board shall elect the membership of each committee, who shall
serve at the pleasure of the Board.
(b) Quorum. A majority of the number of members of any standing committee
shall constitute a quorum for the transaction of business. The action of a
majority of members present at a committee meeting at which a quorum is present
shall constitute the act of the committee.
(c) Conduct of Meetings. Any action required or permitted to be taken by
the committee may be taken without a meeting if all members of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and written consents of the members shall be filed with the minutes
of the proceedings of the committee.
(d) Meetings and Minutes. Subject to the foregoing, and unless the Board
shall otherwise decide, each committee shall fix its rules of procedure,
determine its action and fix the time and place of its meetings. Special
meetings of a committee may be held at any time upon the call of the Chairman of
the Board, the Chairman of the Committee, or any two members of the committee.
Each committee shall keep minutes of all meetings which shall be at all times
available to Directors. Action taken by a committee shall be reported promptly
to the Board but not less frequently than quarterly.
(e) Term of Office. A member of any standing committee shall hold office
until the next organizational meeting of the Board of Directors or until he is
removed or ceases to be a Director.
(f) Vacancies. Should a vacancy occur on any standing committee resulting
from any cause whatsoever, the Board, by resolution, may fill such vacancy at
any time.
(g) Resignation and Removal. A member of a standing committee may resign at
any time by giving written notice of his intention to do so to the Chairman of
the Board or the Corporate Secretary of the Corporation, and may be removed at
any time by the Board of Directors.
3.2 Executive Committee.
(a) How Constituted. The Executive Committee shall consist of not less than
five nor more than nine Directors, including the Chairman of the Board, who
shall be Chairman of the Committee, and the President. If the Chairman of the
Board will not be present at a meeting, the President shall preside, and if the
President will not be present, the Chairman may designate another officer of the
Bank, who need not be a member of the Committee or a Director, to preside at the
meeting.
(b) Primary Responsibilities. The primary responsibilities of the Executive
Committee shall consist of: exercise of all powers of the Board of Directors
between meetings of the Board except as to matters exclusively reserved to the
Board under law; annual review of management's financial goals and business
plan; service as the Board's steering committee on capital, liquidity,
asset/liability and credit issues, as well as the Board's advisor on mergers and
acquisition and corporate structure matters; review of loan policy and
procedure, the quarterly classification of loans and the adequacy of the
allowance for loan loss reserves; review and recommendation to the Board of the
annual capital budget and authorization of capital expenditures within a level
established by the Board; supervision over the exercise of fiduciary powers;
oversight over the Bank's contributions policy, approval of the annual
contributions budget, and authorization or recommendation to the Board of larger
individual contributions as specified by the Board; joint consultation with the
Human Resources and Compensation Committee and recommendation to the Board of
any titling changes and management succession involving the top five officers of
the Bank; and evaluation and recommendation to the Board of nominees for
election as Directors.
3.3 Audit Committee
(a) How Constituted. The Audit Committee shall consist of not less than
five nor more than nine Directors, none of whom shall be officers of the Bank or
any subsidiary thereof. The Chairman of the Committee shall be appointed by the
Board of Directors upon recommendation of the Chairman of the Board. If the
Chairman of the Committee will not be present at a meeting, he may designate any
member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Audit
Committee shall consist of: recommendation of the selection of independent
accountants and auditors; review of the scope of the accountant's examination
and approval of any non-audit services to be performed by the independent
accountants; review of examination reports by the independent accountants and
regulatory agencies; approval of, and review of the results of, the internal
audit plan; review of the procedures for establishing the allowance for loan
losses and monitoring of the credit process review function; review of Crestar's
Community Reinvestment Act policy, plans and performance; review of internal
programs to assure compliance with laws and regulations and the adequacy of
internal controls; review of the adequacy of insurance coverage; and review of
compliance with the Standards of Conduct.
3.4 Human Resources and Compensation Committee.
(a) How Constituted. The Compensation Committee shall consist of not less
than five nor more than eight Directors, none of whom shall be officers of the
Corporation or any subsidiary thereof. The Chairman of the Committee shall be
appointed by the Board of Directors upon recommendation of the Chairman of the
Board. If the Chairman of the Committee will not be present at the meeting, he
may designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Human
Resources and Compensation Committee shall consist of: review and approval of
major compensation policies; determination of appropriate performance targets
under the Bank's benefit plans; recommendation to the Board of salaries, and
approval of other compensation to be paid or awarded to, the highest level and
most highly paid officers; recommendation of officers requiring Board approval
and joint consultation with the Executive Committee and recommendation to the
Board of any titling changes and management succession involving the top five
officers of the Bank; review of other matters pertaining to management
structure, succession planning and executive development; approval of election
of Corporate and Group level Executive Vice Presidents requiring Board approval;
review and recommendation for Board approval of new and significant changes to
qualified and non-qualified benefit plans; and recommendation for Board approval
of appropriate changes in Director compensation.
3.5 Nominating and Governance Committee
(a) How Constituted. The Nominating and Governance Committee shall consist
of not less than three nor more than five Directors, none of whom shall have
served as an officer of Crestar Financial Corporation or any subsidiary or
affiliate thereof within the calendar year of appointment or the calendar year
immediately preceding the year of appointment. The Chairman of the Committee
shall be appointed by the Board of Directors upon recommendation of the Chairman
of the Board. If the Chairman of the Committee will not be present at a meeting,
he or she may designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the
Nominating and Governance Committee shall consist of: interpreting the Bylaws
whenever a member's change in circumstance, such as illness, retirement or
modification of primary employment, may impact eligibility for continued Board
service; recommending changes to eligibility requirements as needed to ensure
that the Board consists of highly-qualified persons who can provide constructive
input into the business of the Bank and represent a cross section of Crestar
constituencies; conducting a comprehensive study of board governance practices
of similarly-situated corporations and recommending adoption of Crestar
corporate governance guidelines as appropriate; monitoring effectiveness of such
guidelines and implementing modification as needed; and establishing and
implementing a nomination process to identify and recommend Board nominees as
appropriate.
3.6 Area Boards. The Board of Directors or the Chairman of the Board or his
designee may appoint, from time to time, Area Boards for any one or more of the
Bank's locations, whose members may consist of such persons, including officers
and Directors, as may be deemed proper. Area Boards shall serve at the pleasure
of the Board of Directors or the Chairman of the Board and their duties shall be
those prescribed in the Administrative Regulations as in effect from time to
time.
3.7 Other Committees. The Board of Directors may, by resolution establish
such other committees of the Board as it may deem advisable. The members, terms
and authority of such committees shall be as set forth in the resolutions.
The Chairman of the Board may establish such other committees of the Board of
Directors as he deems advisable, and may appoint the members of such committees.
Any such committees shall have the authority to consider, review, advise and
recommend to the Chairman of the Board with respect to such matters as may be
referred to it by the Chairman of the Board, but shall have no authority to act
for the Bank except with the prior approval of the Board of Directors.
Article IV
Officers
4.1 Number and Manner of Election or Appointment. The officers of the Bank
shall be:
(a) The Chairman of the Board, the President, a Corporate Secretary, a
Treasurer, an Auditor, one or more Regional Presidents, and one or more
Corporate Executive Vice Presidents, and one or more Group Executive Vice
Presidents, each of whom shall be elected by the Board;
(b) one or more local Presidents, Executive Vice Presidents, Corporate
Senior Vice Presidents, and Senior Vice Presidents as appointed by the
appropriate Policy Committee member for the Group, and
(c) such other officers as appointed by an approval officer for each Group
as designated by the appropriate Policy Committee member. Officers of
subsidiaries of the Bank shall be elected and have their compensation set in the
same manner as comparable officers of the Bank. One person may hold more than
one office except that the offices of the President and Corporate Secretary may
not be held by the same person.
4.2 Term of Office. The officers designated in Section 4.1(a) shall be
elected annually by the Board at its organizational meeting. Such officers shall
each hold office until the next organizational meeting of the Board and until
their successors are elected.
The officers designated in Section 4.1(b) shall be elected annually by the Human
Resources and Compensation Committee at its first meeting following the Annual
Meeting of Stockholders. Such officers shall each hold office until the next
such meeting of the Committee and until their successors are elected. The
officers designated in Section 4.1(c) may be appointed at any time by the
appropriate Policy Committee member for the Group. The officers designated in
Section 4.1(d) may be appointed at any time by the approval officer designated
by the appropriate Policy Committee member for each Group.
4.3 Removal. Any officer may be removed from office, with or without cause,
at any time, by the Board of Directors. Any officer elected by the Human
Resources and Compensation Committee may be removed from office by the Committee
with or without cause at any time. Any officer appointed by a Policy Committee
member or approval officer for each Group may be removed from office by him with
or without cause at any time.
4.4 Resignations. Any officer may resign at any time by giving written
notice to the Board, Human Resources and Compensation Committee, Chairman of the
Board, President, or the Corporate Secretary. Such resignation shall be
effective on the date of receipt of such notice or any later date specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
4.5 Vacancies, New Offices and Promotions. A vacancy from any cause in any
office may be filled at any time for the unexpired portion of the term, in the
manner prescribed in these Bylaws for regular election or appointment to such
office. New offices may be created and filled, and the promotions and changes in
officers' titles may be made at any time in the manner prescribed in these
Bylaws for regular election or appointment to such office.
4.6 Chairman of the Board. The Chairman of the Board shall be the Chief
Executive Officer and shall have general supervision of the policies and
operations of the Bank, subject to the direction and control of the Board. He
shall preside at all meetings of the stockholders, the Board of Directors and
the Executive Committee. He shall be responsible for extending lines of credit
and other loan commitments, for making loans and for discounting acceptable
trade paper. All such extensions of credit shall be based on acceptable credit
risk. Subject to his executive authority and control, the Chairman of the Board
may delegate specific loan authority to officers and employees of the Bank. He
shall have the power to sign checks, orders, contracts, leases, notes, drafts
and other documents and instruments in connection with the business of the Bank,
and have such other powers and perform such other duties as shall be designated
by the Board of Directors or as may be incidental to his office. The Chairman of
the Board shall have the authority to appoint officers of the Bank below the
rank of Executive Vice President.
4.7 President. The President shall participate in the supervision of the
policies and management of the Corporation, and may, if so designated by the
Board of Directors, be the chief administrative officer of the Corporation. He
shall perform all duties incidental to the office of President and shall perform
such other duties as may be assigned to him from time to time by the Board of
Directors or the Chairman of the Board. In the absence of the Chairman of the
Board, he shall preside at meetings of stockholders, the Board of Directors and
the Executive Committee. He shall have the same power to sign for the
Corporation and to appoint officers as prescribed in these Bylaws for the
Chairman of the Board.
4.8 Corporate Secretary. The Corporate Secretary shall: a) keep the
minutes of all meetings of the Stockholders, the Board of Directors, the
Executive Committee, and such other Committees as the Board may designate; b)
see that all notices of such meetings are given in accordance with these Bylaws
or as required by law; c) be custodian of the corporate records and of the seal
of the Corporation and have authority to affix the seal to any documents
requiring such seal and to attest the same; d) sign, with the Chief Executive
Officer, certificates for shares of the Corporation, the issuance of which shall
have been authorized by resolution of the Board of Directors; and e) in general
perform all duties incident to the office of Corporate Secretary and such other
duties as from time to time may be assigned to him by the Board of Directors or
the Chief Executive Officer. In the absence of the Corporate Secretary, an
Assistant Corporate Secretary shall act in his stead.
4.9 Treasurer. The Treasurer shall perform such duties with respect to
securities and funds of the Bank as may be prescribed by the Board of Directors
or the Chief Executive Officer, and such other duties as may be incidental to
the office of Treasurer.
4.10 Auditor. The Auditor shall have general supervision over the internal
audit of the Bank and its subsidiaries. He shall be responsible to the Board of
Directors, through the Audit Committee, for independently evaluating the
adequacy, effectiveness, and efficiency of the Bank's systems of internal
control and of employee compliance therewith. He shall have the duty of
reporting his findings and recommendations to the Audit Committee at least
quarterly on any matters concerning the Bank, except those with respect to
credit quality, responsibility for which has been vested in the officer in
charge of credit administration. Should the Auditor deem any matter to be of
special importance or his independence to be in jeopardy, he shall report
immediately to the Chairman of the Audit Committee or, in his absence, any
member of the Committee. The Auditor shall have such other duties and perform
such special audits and examinations as may be prescribed from time to time by
the Audit Committee or the Board of Directors. For administrative purposes, the
Auditor shall be accountable to the Chief Executive Officer.
4.11 Powers and Duties of Other Officers. The powers and duties of all
other officers of the Bank shall be those usually pertaining to their respective
offices, subject to the direction and control of the Board of Directors and as
otherwise provided in these Bylaws, or as prescribed by the Chief Executive
Officer.
4.12 Bonds. Each officer and employee of the Bank shall give bond covering
the honest and faithful performance of his duties. The form and amount of such
bonds, and the name of the company providing the surety, shall be approved
annually by the Board of Directors at its organizational meeting, the premiums
thereon to be paid by the Bank.
Article V
Capital Stock
5.1 Certificates. The shares of capital stock of the Bank shall be
evidenced by certificates in forms prescribed by the Board of Directors and
executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
the stock of the Bank may be appointed by the Board of Directors and may be
required to countersign certificates representing stock of such class or
classes. If any officer whose signature or facsimile thereof shall have been
used on a stock certificate shall for any reason cease to be an officer of the
Bank and such certificate shall not then have been delivered by the Bank, the
Board of Directors may evertheless adopt such certificate and it may then be
issued and delivered as though such person had not ceased to be an officer of
the Bank.
5.2 Lost, Destroyed and Mutilated Certificates. Holders of the stock of the
Bank shall immediately notify the Bank of any loss, destruction or mutilation of
the certificate therefor, and the Board of Directors or the Executive Committee
may cause one or more new certificates for the same number of shares in the
aggregate to be issued to such stockholder upon the surrender of the mutilated
certificate or upon satisfactory proof of such loss or destruction, and the
deposit of a bond in such form and amount and with such surety as the Board of
Directors may require.
5.3 Transfer of Stock. The stock of the Bank shall be transferable or
assignable only on the Books of the Bank by the holders in person or by attorney
on surrender of the Certificate for such shares duly endorsed and, if sought to
be transferred by attorney, accompanied by a written power of attorney to have
the same transferred on the books of the Bank. The Bank shall recognize,
however, the exclusive right of the person registered on its books as the owner
of shares to receive dividends and to vote as such owner.
5.4 Closing of Transfer Books and Fixing Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may provide, that the stock transfer
books shall be closed for a stated period but not to exceed in any case, seventy
days.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than seventy days prior to the date on
which the particular action, requiring such determination of stockholders, is to
be taken. It the stock transfer books are not closed and no record date is fixed
for the determination of stockholders entitled to notice or to vote at a meeting
of stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notices of the meeting are mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of the
stockholders has been made as provided in this section such determination shall
apply to any adjournment thereof.
Article VI
Miscellaneous Provisions
6.1 Seal. The corporate seal of the Bank shall consist of a flat-face
circular die, on which there shall be engraved the Crestar logogram and the name
of the Bank. Any officer of the Bank designated in writing by the Chief
Executive Officer or Corporate Secretary shall have authority to affix and
attest the seal. Failure to use the corporate seal shall not affect the validity
of any instrument.
6.2 Voting of Stock Held. Unless otherwise provided by resolution of the
Board of Directors or of the Executive Committee, the Chairman of the Board, the
President, or any Executive or Senior Vice President may from time to time
appoint an attorney or attorneys or agent or agents of this Bank, in the name
and on behalf of this Bank, to cast the vote which this Bank may be entitled to
cast as a stockholder or otherwise in any other corporation, any of whose stock
or securities may be held by this Bank, at meetings of the holders of the stock
or other securities of such other corporation, or to consent in writing to any
action by any such other corporation. Such officer shall instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent and may execute or cause to be executed on behalf of this Bank such
written proxies, consents, waivers or other instruments as may be necessary or
proper. In lieu of an appointment of an attorney or agent, the officer may
himself attend any meetings of the holders of stock of other securities of any
such other corporation and there vote or exercise any or all power of this Bank
as the holder of such stock or other securities of such other corporation.
6.3 Fiscal Year. The fiscal year of the Bank shall be the calendar year.
Article VII
Emergency Bylaws
7.1 The Emergency Bylaws provided in this Article VII shall be operative
during any emergency resulting from an attack of the United States or any
nuclear or atomic disaster, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the Bank
or in the Virginia Stock Corporation Act (other than those provisions relating
to emergency Bylaws). To the extent not inconsistent with these Emergency
Bylaws, the Bylaws provided in the preceding articles shall remain in effect
during such emergency and upon the termination of such emergency the Emergency
Bylaws shall cease to be operative unless and until another such emergency shall
occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of
the Bank or by any Director. The notice thereof shall specify the time and place
of the meeting. To the extent feasible, notice shall be given only to such of
the Directors as it may be feasible to reach at the time, by such means as may
be feasible at the time, including publication or radio, and at a time less than
twenty-four hours before the meeting if deemed necessary by the person giving
notice. Notice shall be similarly given, to the extent feasible, to the other
persons referred to in (b) below,
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of Directors fixed at the time in accordance with Article
II of the Bylaws. If the Directors present at any particular meeting shall be
fewer than the number required for such quorum, other persons present may be
included in the number necessary to make up such quorum, and shall be deemed
Directors for such particular meeting as determined by the following provisions
and in the following order of priority:
(i) Officers designated in Section 4.1(a) of the Bylaws, Executive Vice
Presidents not already serving as Directors, in the order of their seniority of
first election to such offices, or if two or more shall have been first elected
to such offices on the same day, in the order of their seniority in age,
(ii) All other officers of the Bank in the order of their seniority of
first election to such offices, or if two or more shall have been first elected
to such offices on the same day, in the order of their seniority in age; and
(iii) Any other persons that are designated on a list that shall have
been approved by the Board of Directors before the emergency, such persons to be
taken in such order of priority and subject to such conditions as may be
provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency,
may provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the Bank shall for any
reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before any such emergency,
may, effective in the emergency, change the principal office, or designate
several alternative offices. or authorize the officers to do so.
No officer, Director or employee acting in accordance with these Emergency
Bylaws shall be liable except for willful misconduct.
These Emergency Bylaws shall be subject to repeal or change by further action of
the Board of Directors or by action of the stockholders, except that no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action or inaction prior to the time of such repeal or change.
Any such amendment of these Emergency Bylaws may make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.
Article VIII
Indemnification Of Directors And Officers
8.1 A. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors or officers, a Director or officer of
the Bank shall not be liable to the Bank or its stockholders for monetary
damages.
B. To the full extent permitted and in the manner prescribed by the
Virginia Stock Bank Act and any other applicable law, the Bank shall indemnify a
Director or officer of the Bank who is or was a party to any proceeding by
reason of the fact that he is or was such a Director or officer or is or was
serving at the request of the Bank as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. The Board of Directors is hereby empowered, by majority vote
of a quorum of disinterested Directors, to contract in advance to indemnify any
Director or officer.
C. The Board of Directors is hereby empowered, by majority vote of a quorum
of disinterested Directors, to cause the Bank to indemnify or contract in
advance to indemnify any person not specified in Section B of this Article who
was or is a party to any proceeding, by reason of the fact that he is or was an
employee or agent of the Bank, or is or was serving at the request of the Bank
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, to the same
extent as if such person were specified as one to whom indemnification is
granted in Section B.
D. The Bank may purchase and maintain insurance to indemnify it against the
whole or any portion of the liability assumed by it in accordance with this
Article and may also procure insurance, in such amounts as the Board of
Directors may determine, on behalf of any person who is or was a Director,
officer, employee or agent of the Bank, or is or was serving at the request of
the Bank as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability asserted against or incurred by such person in any such
capacity or arising from his status as such, whether or not the Bank would have
power to indemnify him against such liability under the provisions of this
Article.
E. In the event there has been a change in the composition of a majority of
the Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to Section A of this Article VIII shall be made by
special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
F. The provisions of this Article VIII shall be applicable to all actions,
claims, suits or proceedings commenced after the adoption hereof, whether
arising from any action taken or failure to act before or after such adoption.
No amendment, modification or repeal of this Article shall diminish the rights
provided hereby or diminish the right to indemnification with respect to any
claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment, modification or repeal.
G. Reference herein to Directors, officers, employees or agents shall
include Area Board Directors, former Directors, officers, employees and agents
and their respective heirs, executors and administrators.
Article IX
Amendments
9.1 These Bylaws may be amended, altered, or repealed at any meeting of the
Board of Directors by affirmative vote of a majority of the number of Directors
fixed by resolution of the Board pursuant to these Bylaws. The stockholders
entitled to vote in an election of Directors, however, shall have the power to
rescind, alter, amend or repeal any Bylaws and to enact Bylaws which, if
expressly so provided, may not be amended, altered or repealed by the Board of
Directors.
Administrative Regulation I
Sale, Purchase And Pledge Or Deposit Of Securities Owned
1.1 Sale, Purchase and Pledge or Deposit of Securities. The President, the
Executive Vice President - Investment Bank, the Managing Director
Asset/Liability Management Division, the Managing Director - Funds Management
Division, or such other officers of the Asset/Liability Management Division or
the Funds Management Division as any of the foregoing may designate in writing
(which designation shall be filed with the Corporate Secretary) are authorized
and empowered in its behalf at any time and from to time:
(a) To sell, assign, loan, sell under agreement to repurchase, transfer,
and deliver any and all securities of any description now or at any time
hereafter belonging to the Bank in its own right, or which the Bank is or shall
be authorized and empowered to sell, assign, or transfer as attorney for the
owners or holders thereof.
(b) To make any pledge or deposit of any of the bonds, notes, obligations
or any other securities belonging to the Bank (including any receipts issued by
any other banking institution evidencing the deposit by the Bank of any of its
securities with any other banking institution as custodian) including without
limitation the pledge or deposit with the Treasurer of the United States, or any
other public official or public authority, national, state or local, for the
purpose of securing (i) borrowings from the Federal Reserve Bank, (ii) deposits
for which security is or may be required or permitted by law at any time to be
given, (iii) sureties on surety bonds furnished to secure such deposits, or (iv)
deposits made, whether time or demand, by the Bank as sole or joint fiduciary of
any character. Any officer authorized hereunder to make such pledges or deposits
shall have power to make any endorsement, transfer or assignment of any such
securities, to make substitutions and withdrawals thereof, and to designate the
person or persons to whom on behalf of the Bank any such securities so withdrawn
may be delivered.
(c) To purchase, borrow, or purchase under agreement to resell for the
account of the Bank in its own right such bonds, stocks or other securities as
may be permitted by law.
(d) To do any act and to execute and acknowledge any document necessary to
the exercise of the powers hereby granted and to appoint attorneys-in-fact to do
such acts and execute such documents.
Administrative Regulation II
Exercise Of Fiduciary Powers
2.1 Certification, Authentication, etc., of Securities and Documents. Any
officer or employee of the Trust Group who may be designated from time to time
in writing (which designation shall be filed with the Corporate Secretary) by
either the President, the Executive Vice President for Trusts, any Senior Vice
President, or Vice President in the Trust Group, to act as Special Corporate
Assistant shall have the authority to authenticate or certify, on behalf of the
Bank, any bonds, certificates, or other documents necessary or proper for the
Bank to certify in its capacity as Trustee under any mortgage, deed of trust or
other instrument, and to sign or countersign in the name of the Bank (a) as
Transfer Agent or Registrar the certificates for the capital stock or the bonds
or other securities of any corporation for which the Bank may be at any time
Transfer Agent or Co-Transfer Agent, or Registrar or Co-Registrar, respectively,
and (b) as Depositary the receipts for any securities deposited with the Bank
under any agreement under which it may at any time be Depositary; and any of
said officers or employees authenticating, certifying, signing or countersigning
any of such bonds, certificates, stocks, securities, receipts and documents on
behalf of the Bank may do so under the title or style of "Authorized Officer" or
"Authorized Signature."
2.2 Qualification as Fiduciary. In all cases where the Bank shall be
appointed to act as Trustee, Executor, Administrator (with or without will
annexed), Curator, Guardian, Committee, Receiver, Special Commissioner, or in
any other lawful fiduciary capacity, any one of the following officers, namely:
The President, the Executive Vice President for Trusts, or any officer of the
Trust Group is authorized to take on behalf of the Bank any oath, and to execute
any bond required to be taken or executed, upon the Bank's qualifying to act in
such fiduciary capacity.
2.3 Acceptance of Trusts. The President, the Executive Vice President for
Trusts, or any officer in the Trust Group may accept on behalf of the Bank any
trust and sign his name to any instrument evidencing such acceptance and
acknowledge and deliver the same.
2.4 Purchase and Sales of Securities. Any of the following officers of the
Bank, namely: The President, the Executive Vice President for Trusts, or any
officer in the Trust Group, is authorized in the exercise of powers conferred
upon the Bank as fiduciary or agent, to buy, sell, assign, transfer and deliver
any bonds, stocks and other securities of every description, standing in the
name of this Bank as either sole or joint fiduciary, or in the name of any ward
for whom it is either sole guardian or co-guardian, or of any decedent for whom
it is either the sole personal representative or one of the personal
representatives, or which may be held by it in any fiduciary or representative
capacity whatsoever, either solely or in conjunction with some other person or
persons, whether registered or otherwise (and to exchange registered for bearer
or bearer for registered securities), and any such officer so authorized shall
have authority to appoint one or more attorneys for that purpose and to execute
and deliver on behalf of the Bank all necessary and proper instruments for the
purpose of effectuating the powers hereby conferred.
2.5 Deposit of Securities Under Plans of Reorganizations, etc. Any of the
following officers of the Bank, namely: The President, the Executive Vice
President for Trusts, or any officer in the Trust Group may deposit or authorize
the deposit of the securities referred to in paragraph 2.4 with any Committee or
Depository under any plan of reorganization, consolidation, merger or
readjustment of any individual, corporation, firm or association, and may
approve any such plan, and may execute in the name of the Bank in its
appropriate fiduciary or representative capacity and deliver on its behalf any
protective committee agreement for any of the above mentioned purposes.
2.6 Sales and Leases of Real Estate and Tangible Personal Property:
Foreclosure and Extension of Mortgages. Any of the following officers of the
Bank, namely: The President, the Executive Vice President for Trusts, or any
officer of the Trust Group, in the exercise of powers conferred upon the Bank as
fiduciary or agent are authorized (i) to sell, exchange or lease any real estate
or tangible personal property or any interest therein, which the Bank may hold
in any fiduciary or representative capacity, (ii) to grant options for purchase
thereof, (iii) to cause the foreclosure of any deed of trust or mortgage held by
the Bank in any such fiduciary or representative capacity, or (iv) to consent to
the extension of the maturity of any such deed of trust or mortgage.
2.7 All Acts Done Under the Foregoing Paragraphs numbered 2.2, 2.3, 2.4,
2.5 and 2.6 shall be reported to the Trust Administrative Committees, as may be
appropriate, provided that no action then taken by the Committees shall affect
the rights of third parties.
2.8 Voting Stock and Other Securities. The President, the Executive Vice
President for Trusts, or any officer of the Trust Group shall have the power and
authority to attend any meeting of the stockholders or security holders of any
corporation in which this Bank, as fiduciary or agent, is a stockholder or
security holder, and vote on behalf of this Bank any such stock or securities;
and any of them is hereby authorized and empowered to designate, in writing, any
person or persons as proxy, with power of substitution, to attend and vote at
such meeting such stock or securities on behalf of this Bank; provided, however,
that such proxy shall be empowered by such writing to vote only on the matters
and questions in the manner and to the effect therein specified.
Administrative Regulation III
Borrowing Money, Rediscounts Of Bills And Notes, Buying Or Selling Funds
3.1 Borrowed Money, Security Therefor and Rediscounts. Transactions with
the Federal Reserve Bank, or with any other bank in the nature of borrowings,
pledges or rediscounts by the Bank shall be by the President, the Executive Vice
President - Investment Bank, the Managing Director - Asset/Liability Management
Division, the Managing Director - Funds Management Division, or such other
officers of the Asset/Liability Management Division or the Funds Management
Division as any of the foregoing may designate in writing (which designation
shall be filed with the Corporate Secretary), and any of such officers is
severally authorized in the Bank's behalf at any time and from time to time:
(a) To borrow money for any temporary purpose and on such terms and for
such periods as he may deem wise;
(b) To pledge as security for the sums so borrowed, sell under repurchase
agreement, any and all securities, bills or notes, of every description
belonging to the Bank in its own right, including receipts of any other banking
institution evidencing deposit with it of any securities, bills or notes,
belonging to the Bank; or
(c) To rediscount any bills or notes belonging to the Bank in its own
right.
3.2 Purchase and Sale of Surplus Funds. The President, the Executive Vice
President - Investment Bank, the Managing Director - Asset/Liability Management
Division, the Managing Director - Funds Management Division, or such other
officers of the Asset/Liability Management Division or the Funds Management
Division as any of them may designate in writing (which designation shall be
filed with the Corporate Secretary), are authorized to purchase or sell surplus
funds.
Administrative Regulation IV
Sales And Leases Of Property
4.1 Sales and Leases of Bank-Owned Real Estate and Associated Personal
Property. The President, any officer at the level of Vice President or above in
the Real Estate Division and in the Collections and Foreclosures Division of
Crestar Mortgage Corporation (and who is also a Vice President or above of the
Bank), any managing officer or Senior Vice President of any Special Assets or
loan workout unit, and any Senior Vice President in the Real Estate Finance
Group, are authorized (I) to sell, exchange or lease any Bank-owned real estate
and any associated personal property or any interest therein, (ii) to grant
options for the purchase thereof, and (iii) to do any act and to execute,
acknowledge and deliver any deed, contract and other document necessary or
desirable in connection therewith.
4.2 Release of Encumbrances. Any release, termination statement, or
satisfaction of judgment required by the Bank shall be executed by any officer
of the Bank or by an attorney-in-fact appointed by an officer of the Bank for
the purpose. Whenever the Bank may be lawfully required to consent to the
release of the lien of any deed of trust, its consent may be evidenced by the
execution of such deed of release or any other document on behalf of the Bank by
any officer of the Bank.
Administrative Regulation V
Checks, Drafts, Orders, Etc.
5.1 Bank - Except Trust. All checks, drafts or orders of the Bank for the
payment of money, whether directed to itself or to others (except those drawn on
trust funds), shall be executed or signed on behalf of the Bank by any officer
or, if authorized to sign by any officer (other than a member of the Trust
Group) who is a Division Head, Senior Vice President or above, by any employee
of the Bank, with a copy of such authorization filed with the Corporate
Controller.
5.2 Trust Group. All checks, drafts or orders of the Trust Group for the
payment of money, whether directed to itself or others, shall be executed or
signed on behalf of the Bank by any officer or employee of the Trust Group who
may be authorized so to sign by any officer of the Trust Group who is Senior
Vice President or above, with a copy of such authorization filed with the
corporate Controller.
Administrative Regulation VI
Signature Guarantee, Confirmations, Etc.
6.1 Signature Guarantee. Any officer of the Bank, or any employee of the
Bank who may be designated in writing (which designation shall be filed with the
Corporate Secretary) by the Chairman of the Board, the President, any Executive
Vice President, any Senior Vice President or Division Head, shall have the
authority to guarantee, on behalf of the Bank, the signature of a bank customer
or other person on any stock certificate, bond, note, or other security,
provided that such officer or employee shall know personally:
1. The person signing.
2. That the signature is genuine.
3. That the signer is an appropriate person to endorse or sign.
4. That the signer has legal capacity to sign.
Any such officer or employee guaranteeing any such signature may do so under the
style of "Authorized Officer" or "Authorized Signature".
6.2 Confirmations. The General Auditor or any Vice President Audit is
authorized to certify in the name of, or on behalf of, the Bank in its own right
or in a fiduciary or representative capacity, as to the accuracy and
completeness of any account, schedule of assets, instrument or paper requiring
such certification.
Administrative Regulation VII
Responsibilities Of Area Boards
7.1 Responsibilities of Area Boards. The Area Boards, as provided by
Section 3.7 of the Bylaws, shall, jointly with senior management, assist in the
direction of one or more of the Bank's offices by: 1) selecting and evaluating
the performance of local executive officers, 2) ensuring the adoption of
challenging goals and marketing policies, 3) ensuring a reasonable return on
allocated capital, 4) ensuring a level of profitability that provides for
balanced growth, responsiveness to the credit needs of the community, and high
standards of integrity for all personnel, 5) ensuring an appropriate commitment
of the Bank to a significant role in the local community, 6) ensuring
conformance to applicable statutes & regulations, 7) ensuring a reporting system
that adequately monitors these objectives, 8) promoting the Bank through the
acquisition of business and by personal example and, 9) providing an outside
perspective as a constructive critic and loyal friend.
Administrative Regulation VIII
Deposit And Security Accounts
8.1 Deposit Accounts. The President, the Executive Vice President -
Investment Bank, the Executive Vice President, Controller and Treasurer, the
Managing Director - Asset/Liability Management Division, and the Managing
Director - Funds Management Division are individually authorized and empowered
to open and maintain in the name of the Bank one or more deposit accounts at
other financial institutions. The aforementioned officers shall designate the
personnel authorized to sign for and transact business in such accounts and may
agree to any terms governing such accounts. Any resolutions required of this
Corporation in connection with such accounts may be certified by the Corporate
Secretary as if specifically adopted by the Board of Directors.
8.2 Securities Accounts. The President, the Executive Vice President -
Investment Bank, the Managing Director Asset/Liability Management Division, and
the Managing Director - Funds Management Division are individually authorized
and empowered to open and maintain in the name of the Bank one or more
securities accounts for the purpose of purchasing, selling, reselling,
borrowing, lending, and otherwise dealing in money market instruments and
securities of any and every kind, including agreements or contracts for their
repurchase or future delivery, with banks, brokers, dealers, securities firms,
or other organizations, and to issue written, telephonic, telegraphic, or verbal
orders or instructions for transactions to be carried out in such accounts. The
aforementioned officers shall designate the personnel authorized to sign for and
transact business in such accounts and may agree to any terms governing such
accounts. Any resolutions required of this Bank in connection with such accounts
may be certified by the Corporate Secretary as if specifically adopted by the
Board of Directors.
<PAGE>
EXHIBIT T-1 (6)
Exhibit 6
Consent of Trustee
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the execution of a Indenture among United Dominion
Realty Trust, Inc. and Crestar Bank, as Trustee, we hereby consent that reports
of examinations by federal, state, territorial, or district authorities may be
furnished by such authorities to the Securities Exchange Commission upon request
therefor.
Crestar Bank
By: /s/ L.B. BEDELL
- -----------------------------
(L. B. Bedell, Vice President)
Dated: May 15, 1997
<PAGE>
EXHIBIT T-1 (7)
Federal Financial Institutions Examination Council
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 1999
Please refer to page i, Table of Contents, for the required disclosure
of estimated burden.
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices - FFIEC 031
Report at the close of business March 31, 1997
(970331)
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember
banks); and 12 U.S.C. Section 161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than
two directors (trustees) for State nonmember banks and three directors for
State member and National banks.
I, Richard G. Tilghman, Chairman and Chief Executive Officer
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/ RICHARD G. TILGHMAN
- -----------------------
Signature of Officer Authorized to Sign Report
Date of Signature 4/30/97
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may
in some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that
it has been examined by us and to the best of our knowledge and belief has
been prepared in conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
/s/ (illegible signature)
- -------------------------
Director (Trustee)
/s/ (illegible signature)
- -------------------------
Director (Trustee)
/s/ GORDON F. RAINEY, JR.
- -------------------------
Director (Trustee)
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate
Federal Reserve District Bank.
State Nonmember Banks: Return the original only in the special return
address envelope provided. If express mail is used in lieu of the special
return address envelope, return the original only to the FDIC, c/o Quality
Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
FDIC Certificate Number
(RCRI 9050)
Crestar Bank
P.O. Box 26665
Richmond, VA 23261
E512430000 55124300000
March 31, 1997 31
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-1
Consolidated Report of Income
for the period January 1, 1997 - March 31, 1997
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
I480
Dollar Amounts in Thousands RIAD Bill Mil Thou
<S> <C> <C> <C>
1. Interest Income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate 4011 151,474 1.a.(1)(a)
(b) Loans to depository institutions 4019 23 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers 4024 62 1.a.(1)(c)
(d) Commercial and industrial loans 4012 41,651 1.a.(1)(d)
(e) Acceptances of other banks 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal
expenditures:
(1) Credit cards and related plans 4054 57,989 1.a.(1)(f)(1)
(2) Other 4055 58,978 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations 4503 516 1.a.(1)(h)(1)
(2) Tax-exempt obligations 4504 3,147 1.a.(1)(h)(2)
(i) All other loans in domestic offices 4058 2,939 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases 4505 402 1.b.(1)
(2) Tax-exempt leases 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions: (1)
(1) In domestic offices 4105 0 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4106 109 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations 4027 62,913 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities 4506 0 1.d.(2)(a)
(b) Tax-exempt securities 4507 1,012 1.d.(2)(b)
(3) Other domestic debt securities 3657 9,711 1.d.(3)
(4) Foreign debt securities 3658 0 1.d.(4)
(5) Equity securities (including investments in mutual funds) 3659 1,516 1.d.(5)
e. Interest income from trading assets 4069 0 1.e.
</TABLE>
__________
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-2
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under
agreements to resell 4020 1,006 1.f.
g. Total Interest income (sum of items 1.a through 1.f) 4107 393,448 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and telephone and
preauthorized transfer accounts) 4508 2,411 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs) 4509 38,759 2.a.(1)(b)(1)
(2) Other savings deposits 4511 10,608 2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more A517 12,240 2.a.(1)(b)(3)
(4) Time deposits of less than $100,000 A518 49,597 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFs 4172 104 2.a.(2)
b. Expense of federal funds purchased and securities sold under agreements to
repurchase 4180 32,727 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and other borrowed money 4185 11,397 2.c.
d. Not applicable
e. Interest on subordinated notes and debentures 4200 7,153 2.e.
f. Total interest expense (sum of items 2.a through 2.e) 4073 164,978 2.f.
3. Net interest income (item 1.g minus 2.f) RIAD 4074 228,470 3.
4. Provisions:
a. Provision for loan and lease losses RIAD 4230 29,548 4.a.
b. Provision for allocated transfer risk RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities 4070 12,190 5.a.
b. Service charges on deposit accounts in domestic offices 4080 30,429 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum
items 8.a through 8.d) A220 350 5.c.
d. -e. Not applicable
f. Other noninterest income:
(1) Other fee income 5407 32,781 5.f.(1)
(2) All other noninterest income* 5408 13,580 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) RIAD 4079 89,330 5.g.
6. a. Realized gains (losses) on held-to-maturity securities RIAD 3521 0 6.a.
b. Realized gains (losses) on available-for-sale securities RIAD 3196 4,049 6.b.
7. Noninterest expense:
a. Salaries and employee benefits 4135 94,583 7.a.
b. Expenses of premises and fixed assets (net or rental income)
(excluding salaries and employee benefits and mortgage interest) 4217 26,334 7.b.
c. Other noninterest expense* 4092 57,709 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) RIAD 4093 178,626 7.d.
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and
7.d) RIAD 4301 113,675 8.
9. Applicable income taxes (on item 8) RIAD 4302 41,576 9.
10. Income (loss) before extraordinary items and other adjustments (item 8
minus 9) RIAD 4300 72,099 10.
11. Extraordinary items and other adjustments, net of income taxes* RIAD 4320 0 11.
12. Net income (loss) (sum of items 10 and 11) RIAD 4340 72,099 12.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-3
Schedule RI--Continued
<TABLE>
<CAPTION>
I481
Memoranda Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases
acquired after August 7, 1986, that is not deductible for federal income tax
purposes 4513 1,116 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8) 8431 123 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees at end of current period Number
(round to nearest whole number) 4150 7,992 M.5.
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying
push down accounting this calendar year, report the date of the bank's MM/DD/YY
acquisition 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative
instruments) (sum of Memorandum items 8.a through 8.d must equal
Schedule RI, item 5.c): Bill Mil Thou
a. Interest rate exposures 8757 89 M.8.a.
b. Foreign exchange exposures 8758 261 M.8.b.
c. Equity security and index exposures 8759 0 M.8.c.
d. Commodity and other exposures 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other
than trading:
a. Net increase (decrease) to interest income 8761 (183) M.9.a.
b. Net (increase) decrease to interest expense 8762 367 M.9.b.
c. Other (noninterest) allocations 8763 0 M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions) A251 0 M.10.
11. Does the reporting bank have a Subchapter S election in effect for federal YES NO
income tax purposes for the current tax year? A530 x M.11.
12. Deferred portion of total applicable income taxes included in Schedule RI, Bill Mil Thou
items 9 and 11 (to be reported with the December Report of Income) 4772 N/A M.12.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-4
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1996, Reports
of Condition and Income 3215 1,267,765 1.
2. Equity capital adjustments from amended Reports of Income, net* 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) 3217 1,267,765 3.
4. Net income (loss) (must equal Schedule RI, item 12) 4340 72,099 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net 4346 6,560 5.
6. Changes incident to business combinations, net 4356 333,028 6.
7. LESS: Cash dividends declared on preferred stock 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 0 8.
9. Cumulative effect of changes in accounting principles from prior years* (see
instructions for this schedule) 4411 0 9.
10. Corrections of material accounting errors from prior years* (see
instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale
securities 8433 (33,230) 11.
12. Foreign currency transaction adjustments 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7
or 8 above) 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must
equal Schedule RC, item 28) 3210 1,646,222 14.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
I486
(Column A) (Column B)
Charge-offs Recoveries
Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile) 4651 1,297 4661 1,629 1.a.
b. To non-U.S. addressees (domicile) 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks:
a. To U.S. banks and other U.S. depository institutions 4653 0 4663 0 2.a.
b. To foreign banks 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers 4655 0 4665 0 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) 4645 2,179 4617 826 4.a.
b. To non-U.S. addressees (domicile) 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans 4656 25,514 4666 1,947 5.a.
b. Other (includes single payment, installment, and all student loans) 4657 7,904 4667 2,646 5.b.
6. Loans to foreign governments and official institutions 4643 0 4627 0 6.
7. All other loans 4644 6 4628 329 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile) 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile) 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) 4635 36,900 4605 7,377 9.
</TABLE>
6
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-5
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Charge-offs Recoveries
Memoranda Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1-3. Not applicable
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above 5409 0 5410 0 M.4.
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part I, item 1, above):
a. Construction and land development 3582 0 3583 10 M.5.a.
b. Secured by farmland 3584 0 3585 4 M.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit 5411 341 5412 174 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties 5413 673 5414 203 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties 3588 0 3589 7 M.5.d.
e. Secured by nonfarm nonresidential properties 3590 283 3591 1,231 M.5.e.
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1996, Reports of Condition
and Income 3124 233,836 1.
2. Recoveries (must equal part I, item 9, column B above) 4605 7,377 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) 4635 36,900 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) 4230 29,548 4.
5. Adjustments* (see instructions for this schedule) 4815 35,004 5.
6. Balance end of current period (sum of items 1 through 5)(must equal Schedule RC,
item 4.b) 3213 268,865 6.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
7
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-6
Schedule RI-D--Income From International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs:
a. Interest income booked 4837 N/A 1.a.
b. Interest expense booked 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs (item 1.a minus 1.b) 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at
domestic offices 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign
offices 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item
3.a minus 3.b and 3.c) 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before
capital allocation adjustment (sum of items 1.c, 2.c, and 3.d) 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international
operations to reflect the effects of equity capital on overall bank funding
costs 4845 N/A 5.
6. Estimated pretax income attributable to international operations after
capital allocation adjustment (sum of items 4 and 5) 4846 N/A 6.
7. Income taxes attributable to income from international operations as
estimated in item 6 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) 4341 N/A 8.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations
Required by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income booked at IBFs 4849 N/A 1.
2. Interest expense booked at IBFs 4850 N/A 2.
3. Noninterest income attributable to international operations booked at
domestic offices (excluding IBFs):
a. Gains (losses) and extraordinary items 5491 N/A 3.a.
b. Fees and other noninterest income 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations
booked at domestic offices (excluding IBFs) 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at
domestic offices (excluding IBFs) 4853 N/A 5.
</TABLE>
8
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-7
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all
extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest
expense in Schedule RI. (See instructions for details.)
<TABLE>
<CAPTION>
I495
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains (losses) on other real estate owned 5415 0 1.a.
b. Net gains (losses) on sales of loans 5416 0 1.b.
c. Net gains (losses) on sales of premises and fixed assets 5417 5,808 1.c.
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 5.f.(2):
d. Text 4461 Personalized Check Sales 4461 2,512 1.d.
e. Text 4462 4462 1.e.
f. Text 4463 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets 4531 3,250 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net (gains) losses on other real estate owned 5418 0 2.b.
c. Net (gains) losses on sales of loans 5419 0 2.c.
d. Net (gains) losses on sales of premises and fixed assets 5420 0 2.d.
Itemize and describe the three largest amounts that exceed 10% of Schedule RI,
item 7.c.:
e. Text 4464 Communications 4464 8,712 2.e.
f. Text 4467 Professional Fees 4467 6,706 2.f.
g. Text 4468 4468 2.g.
3. Extraordinary items and other adjustments and applicable income tax effect
(from Schedule RI, item 11) (itemize and describe all extraordinary items
and other adjustments):
a. (1) Text 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 3.a.(2)
b. (1) Text 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 3.b.(2)
c. (1) Text 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule
RI-A, item 2) (itemize and describe all adjustments):
a. Text 4492 4492 4.a.
b. Text 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from
Schedule RI-A, item 9) (itemize and describe all changes in accounting
principles):
a. Text A546 Effect of change to GAAP from previous non-GAAP instructions A546 0 5.a.
b. Text 4495 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule
RI-A, item 10 (itemize and describe all corrections):
a. Text 4496 4496 6.a.
b. Text 4497 4497 6.b.
</TABLE>
9
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RI-8
Schedule RI-E--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A,
item 13) (itemize and describe all such transactions):
a. Text 4498 4498 7.a.
b. Text 4499 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B,
part II, item 5) (itemize and describe all adjustments):
a. Text 4521 Bank Mergers 4521 35,004 8.a.
b. Text 4522 4522 8.b.
9. Other explanations (the space below is provided for the bank to briefly
describe, at its option, any other significant items affecting the Report
of Income): I498 I499
No comment __ (RIAD 4769)
Other explanations (please type or print clearly):
(Text 4769)
</TABLE>
10
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-1
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) 0081 941,379 1.a.
b. Interest-bearing balances(2) 0071 100,000 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 818,542 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 3,782,279 2.b.
3. Federal funds sold and securities purchased under agreements to resell 1350 409,483 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 14,748,358 4.a.
b. LESS: Allowance for loan and lease losses RCFD 3123 268,865 4.b.
c. LESS: Allocated transfer risk reserve RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c) 2125 14,479,493 4.d.
5. Trading assets (from Schedule RC-D) 3545 0 5.
6. Premises and fixed assets (including capitalized leases) 2145 416,577 6.
7. Other real estate owned (from Schedule RC-M) 2150 34,173 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 1,896 8.
9. Customers' liability to this bank on acceptances outstanding 2155 3,889 9.
10. Intangible assets (from Schedule RC-M) 2143 202,968 10.
11. Other assets (from Schedule RC-F) 2160 631,685 11.
12. Total assets (sum of items 1 through 11) 2170 21,822,382 12.
</TABLE>
__________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-2
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part I) RCON 2200 15,949,823 13.a.
(1) Noninterest-bearing(1) RCON 6631 3,389,214 13.a.(1)
(2) Interest-bearing RCON 6636 12,560,609 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule
RC-E, part II) RCFN 2200 0 13.b.
(1) Noninterest-bearing RCFN 6631 0 13.b.(1)
(2) Interest-bearing RCFN 6636 0 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 2,595,340 14.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 0 15.a.
b. Trading liabilities (from Schedule RC-D) RCFD 3548 0 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less RCFD 2332 598,015 16.a.
b. With a remaining maturity of more than one year RCFD 2333 302,513 16.b.
17. Not applicable
18. Bank's liability on acceptances executed and outstanding RCFD 2920 3,889 18.
19. Subordinated notes and debentures(2) RCFD 3200 335,000 19.
20. Other liabilities (from Schedule RC-G) RCFD 2930 391,580 20.
21. Total liabilities (sum of items 13 through 20) RCFD 2948 20,176,160 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus RCFD 3838 0 23.
24. Common stock RCFD 3230 194,763 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 307,257 25.
26. a. Undivided profits and capital reserves RCFD 3632 1,201,159 26.a.
b. Net unrealized gains (losses) on available-for-sale securities RCFD 8434 (56,957) 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 1,646,222 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21 and 28) RCFD 3300 21,822,382 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the Number
bank by independent external auditors as of any date during 1996 RCFD 6724 2 M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted
in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the
consolidated holding company (but not on a bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external
auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
__________
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
12
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-3
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
C405
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and
currency and coin 0022 905,561 1.
a. Cash items in process of collection and unposted debits 0020 680,469 1.a.
b. Currency and coin 0080 225,092 1.b.
2. Balances due from depository institutions in the U.S. 0082 33,559 2.
a. U.S. branches and agencies of foreign banks
(including their IBFs) 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository
institutions in the U.S. (including their IBFs) 0085 33,559 2.b.
3. Balances due from banks in foreign countries and foreign
central banks 0070 101,717 3.
a. Foreign branches of other U.S. banks 0073 100,000 3.a.
b. Other banks in foreign countries and foreign central banks 0074 1,717 3.b.
4. Balances due from Federal Reserve Banks 0090 542 0090 542 4.
5. Total (sum of items 1 through 4) (total of column A must
equal Schedule RC, sum of items 1.a and 1.b) 0010 1,041,379 0010 1,041,379 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum RCON Bil Mil Thou
Dollar Amounts in Thousands
<S> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks
in the U.S. (included in items 2, column B above) 0050 33,559 M.1.
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
C410
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities 0211 188,227 0213 185,017 1286 499,457 1287 491,011 1.
2. U.S. Government agency
obligations
(exclude mortgage-backed
securities):
a. Issued by U.S. Government
agencies(2) 1289 14,988 1290 14,925 1291 11,760 1293 11,765 2.a.
b. Issued by U.S. Government-
sponsored agencies(3) 1294 4,939 1295 4,941 1297 84,253 1298 81,778 2.b.
</TABLE>
__________
(1) Includes equity securities without readily determinable
fair values at historical cost in item 6.b., column D.
(2) Includes Small Business Administration "Guaranteed Loan
Pool Certificates," U.S. Maritime Administration obligations,
and Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities)
issued by the Farm Credit System, the Federal Home Loan Bank,
System, the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Association, the Financing Corporation,
Resolution Funding Corporation, the Student Loan Marketing
Association, and the Tennessee Valley Authority.
13
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-4
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states
and political subdivisions
in the U.S.
a. General obligations 1676 7,801 1677 7,753 1678 0 1679 0 3.a.
b. Revenue obligations 1681 39,806 1686 39,785 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations 1694 355 1695 336 1696 0 1697 0 3.c.
4. Mortgage-backed securities
(MBS):
a. Pass-through securities:
(1) Guaranteed by GNMA 1698 2,502 1699 2,641 1701 90,471 1702 86,056 4.a.(1)
(2) Issued by FNMA and FHLMC 1703 31,070 1705 31,289 1706 2,390,395 1707 2,325,261 4.a.(2)
(3) Other pass-through
securities 1709 0 1710 0 1711 0 1713 0 4.a.(3)
b. Other mortgage-backed
securities (include CMOs,
REMICs, and stripped MBS):
(1) Issued or guaranteed by
FNMA, FHLMC, or GNMA 1714 512,839 1715 508,601 1716 95,265 1717 94,120 4.b.(1)
(2) Collateralized by MBS
issued or guaranteed
by FNMA, FHLMC, or GNMA 1718 678 1719 668 1731 129,489 1732 128,250 4.b.(2)
(3) All other mortgage-backed
securities 1733 2,960 1734 2,960 1735 123,376 1736 122,508 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities 1737 10,147 1738 10,135 1739 327,290 1741 322,566 5.a.
b. Foreign debt securities 1742 2,250 1743 2,250 1744 0 1746 0 5.b.
6. Equity securities:
a. Investments in mutual
funds and other equity
securities with readily
determinable fair values A510 20,652 1748 21,091 6.a.
b. All other equity
securities(1) 1752 97,891 1753 97,891 6.b.
7. Total (sum of items 1 through
6) (total of column A must
equal Schedule RC, item 2.a)
(total of column D must equal
Schedule RC, item 2.b) 1754 818,542 1771 811,301 1772 3,870,299 1773 3,782,297 7.
</TABLE>
__________
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c., column D.
14
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-5
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Memoranda C412
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Pledged securities(2) 0416 2,014,322 M.1.
2. Maturity and repricing data for debt securities(2),(3),(4) (excluding those in
nonaccrual status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less 0343 15,287 M.2.a.(1)
(2) Over three months through 12 months 0344 15,396 M.2.a.(2)
(3) Over one year through five years 0345 957,726 M.2.a.(3)
(4) Over five years 0346 3,336,421 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through
2.a.(4) 0347 4,324,830 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently 4544 152,302 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly 4545 4,725 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4551 0 M.2.b.(3)
(4) Less frequently than every five years 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1)
through 2.b.(4)) 4553 157,027 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must
equal total debt securities from Schedule RC-B, sum of items 1 through 5,
columns A and D, minus nonaccrual debt securities included in Schedule RC-N,
item 9, column C) 0393 4,481,857 M.2.c.
3. -5. Not applicable
6. Floating rate debt securities with a remaining maturity of one year or less
(2),(4) (included in Memorandum items 2.b.(1) through 2.b.(4) above) 5519 9,996 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to
available-for-sale or trading securities during the calendar year-to-date
(report the amortized cost at date of sale or transfer) 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and
available-for-sale accounts in Schedule RC-B, item 4.b):
a. Amortized cost 8780 10,249 M.8.a.
b. Fair value 8781 10,047 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-B, items 2, 3, and 5):
a. Amortized cost 8782 0 M.9.a.
b. Fair value 8783 0 M.9.b.
</TABLE>
__________
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-6
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading and commercial paper.
<TABLE>
<CAPTION>
C415
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate 1410 7,486,476 1.
a. Construction and land development 1415 329,453 1.a.
b. Secured by farmland (including farm residential and other improvements) 1420 15,305 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential properties
and extended under lines of credit 1797 850,551 1.c.(1)
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens 5367 3,859,140 1.c.(2)(a)
(b) Secured by junior liens 5368 255,073 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties 1460 134,183 1.d.
e. Secured by nonfarm nonresidential properties 1480 2,042,771 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S. 1505 6,650 2.a.
(1) To U.S. branches and agencies of foreign banks 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. 1507 6,560 2.a.(2)
b. To other depository institutions in the U.S. 1517 0 1517 0 2.b.
c. To banks in foreign countries 1510 1,285 2.c.
(1) To foreign branches of other U.S. banks 1513 0 2.c.(1)
(2) To other banks in foreign countries 1516 1,285 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers 1590 2,799 1590 2,799 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) 1763 2,326,506 1763 2,326,506 4.a.
b. To non-U.S. addressees (domicile) 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks 1756 0 1756 0 5.a.
b. Of foreign banks 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal expenditures
(i.e., consumer loans) (includes purchased paper) 1975 4,340,899 6.
a. Credit cards and related plans (includes check credit and other revolving
credit plans) 2008 1,280,321 6.a.
b. Other (includes single payment, installment, and all student loans) 2011 3,060,578 6.b.
7. Loans to foreign governments and official institutions (including foreign
central banks) 2081 703 2081 703 7.
8. Obligations (other than securities and leases) of states and political
subdivisions in the U.S. (includes nonrated industrial development
obligations) 2107 270,205 2107 270,205 8.
9. Other loans 1563 282,937 9.
a. Loans for purchasing or carrying securities (secured and unsecured) 1545 68,826 9.a.
b. All other loans (exclude consumer loans) 1564 214,111 9.b.
10. Lease financing receivables (net of unearned income) 2165 29,988 10.
a. Of U.S. addressees (domicile) 2182 29,988 10.a.
b. Of non-U.S. addressees (domicile) 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10
minus item 11) (total of column A must equal Schedule RC, item 4.a) 2122 14,748,358 2122 14,748,358 12.
</TABLE>
16
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-7
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Memoranda Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Not applicable
2. Loans and leases restructured and in compliance with modified terms (included
in Schedule RC-C, part I, above and not reported as past due or nonaccrual in
Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile) 1687 0 M.2.a.(1)
(2) To non U.S. addressees (domicile) 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to
individuals for household, family, and other personal expenditures) 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables of
non-U.S. addressees (domicile) included in Memorandum item 2.b. above 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those in
nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less 0348 2,194,974 M.3.a.(1)
(2) Over three months through 12 months 0349 1,521,645 M.3.a.(2)
(3) Over one year through five years 0356 3,063,112 M.3.a.(3)
(4) Over five years 0357 1,932,662 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum items 3.a.(1)
through 3.a.(4)) 0358 8,712,393 M.3.a.(5)
b. Floating rate loans with a repricing frequency of:
(1) Quarterly or more frequently 4554 4,580,579 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly 4555 1,043,546 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4561 304,633 M.3.b.(3)
(4) Less frequently than every five years 4564 31,638 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1)
through 3.b.(4)) 4567 5,960,396 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) (must
equal the sum of total loans and leases, net, from Schedule RC-C, part I,
item 12, plus unearned income from Schedule RC-C, part I, item 11, minus
total nonaccrual loans and leases from Schedule RC-N, sum of items 1 through
8, column C) 1479 14,672,789 M.3.c.
d. Floating rate loans with a remaining maturity of one year or less
(included in Memorandum items 3.b.(1) through 3.b.(4) above) A246 893,255 M.3.d.
4. Loans to finance commercial real estate, construction, and land development
activities (not secured by real estate) included in Schedule RC-C, part I,
items 4 and 9, column A, page RC-6(2) 2746 0 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) 5369 543,177 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), RCON Bil Mil Thou
column B, page RC-6) 5370 1,675,502 M.6.
</TABLE>
__________
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
17
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-8
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
C420
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. U.S. Treasury securities in domestic offices RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices
(exclude mortgage-backed securities) RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in
domestic offices RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or
GNMA (include CMOs, REMICs, and stripped MBS) RCON 3535 0 4.b.
c. All other mortgage-backed securities RCON 3536 0 4.c.
5. Other debt securities in domestic offices RCON 3537 0 5.
6. Certificates of deposit in domestic offices RCON 3538 0 6.
7. Commercial paper in domestic offices RCON 3539 0 7.
8. Bankers acceptances in domestic offices RCON 3540 0 8.
9. Other trading assets in domestic offices RCON 3541 0 9.
10. Trading assets in foreign offices RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other
commodity and equity contracts:
a. In domestic offices RCON 3543 0 11.a.
b. In foreign offices RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC,
item 5) RCFD 3545 0 12.
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES Bil Mil Thou
<S> <C> <C> <C>
13. Liability for short positions RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other
commodity and equity contracts RCFD 3547 0 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule
RC, item 15.b) RCFD 3548 0 15.
</TABLE>
18
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-9
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
Dollar Amounts in Thousands RCON BIL Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships,
and corporations 2201 3,339,286 2240 3,065,478 2346 12,152,804 1.
2. U.S. Government 2202 28,734 2280 23,544 2520 2,154 2.
3. States and political subdivisions
in the U.S. 2203 119,076 2290 93,438 2530 99,717 3.
4. Commercial banks in the U.S. 2206 128,000 2310 128,000 2550 434 4.
5. Other depository institutions
in the U.S. 2207 39,178 2312 39,178 2349 864 5.
6. Banks in foreign countries 2213 7,608 2320 7,608 2236 0 6.
7. Foreign governments and
official institutions
(including foreign central banks) 2216 0 2300 0 2377 0 7.
8. Certified and official checks 2330 31,968 2330 31,968 8.
9. Total (sum of items 1 through 8)
(sum of columns A and C must
equal Schedule RC, item 13.a) 2215 3,693,850 2210 3,389,214 2385 12,255,973 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts 6835 1,242,480 M.1.a.
b. Total brokered deposits 2365 0 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less 2344 0 M.1.c.(2)
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with
a remaining maturity of one year or less (included in Memorandum item
1.c.(1) above) A243 0 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a
remaining maturity of one year or less (included in Memorandum
item 1.b above) A244 0 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions
in the U.S. reported in item 3 above which are secured or collateralized as
required under state law) 5590 206,809 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a
through 2.d must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) 6810 5,619,801 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) 0352 1,597,757 M.2.a.(2)
b. Total time deposits of less than $100,000 6648 4,016,642 M.2.b.
c. Total time deposits of $100,000 or more 2604 1,021,773 M.2.c.
3. All NOW accounts (included in column A above) 2398 304,635 M.3.
4. Not applicable
</TABLE>
19
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-10
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000
(sum of Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum
item 2.b above): (1)
a. Fixed rate time deposits of less than $100,000 with a remaining maturity
of:
(1) Three months or less A225 889,608 M.5.a.(1)
(2) Over three months through 12 months A226 1,824,111 M.5.a.(2)
(3) Over one year A227 1,157,510 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing
frequency of:
(1) Quarterly or more frequently A228 135,413 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly A229 0 M.5.b.(2)
(3) Less frequently than annually A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining
maturity of one year or less (included in Memorandum items 5.b.(1)
through 5.b.(3) above) A231 76,662 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time
certificates of deposit of $100,000 or more and open-account time deposits
of $100,000 or more) (sum of Memorandum items 6.a.(1) through 6.b.(4) must
equal Memorandum item 2.c above): (1)
a. Fixed rate time deposits of $100,000 or more with a remaining
maturity of:
(1) Three months or less A232 531,929 M.6.a.(1)
(2) Over three months through 12 months A233 369,991 M.6.a.(2)
(3) Over one year through five years A234 107,531 M.6.a.(3)
(4) Over five years A235 1,003 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a
repricing frequency of:
(1) Quarterly or more frequently A236 11,319 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually A238 0 M.6.b.(3)
(4) Less frequently than every five years A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity
of one year or less (included in Memorandum items 6.b.(1) through
6.b.(4) above) A240 5,706 M.6.c.
</TABLE>
__________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-11
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and Agreement subsidiaries
and IBFs)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations 2621 0 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks,
including their IBFs) 2625 0 3.
4. Foreign governments and official institutions (including foreign central
banks) 2650 0 4.
5. Certified and official checks 2330 0 5.
6. All other deposits 2668 0 6.
7. Total (sum of items 1 through 6)(must equal Schedule RC, item 13.b) 2200 0 7.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C> <C>
1. Time deposits with a remaining maturity of one year or less (included in
Part II, item 7 above) A245 0 M.1.
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION> C430
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. Income earned, not collected on loans RCFD 2164 109,776 1.
2. Net deferred tax assets (1) RCFD 2148 122,333 2.
3. Interest-only strips receivable (not in the form of a security)(2) on:
a. Mortgage loans RCFD A519 3,902 3.a.
b. Other financial assets RCFD A520 0 3.b.
4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2168 395,674 4.
a. Text 3549 RCFD 3549 4.a.
b. Text 3550 RCFD 3550 4.b.
c. Text 3551 RCFD 3551 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) RCFD 2160 631,685 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes RCFD 5610 0 M.1.
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION> C435
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices (3) RCON 3645 23,321 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) RCFD 3646 159,439 1.b.
2. Net deferred tax liabilities (1) RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2938 208,820 4.
a. Text 3552 Accounts Payable - Trade Date Settlement RCFD 3552 78,794 4.a.
b. Text 3553 RCFD 3553 4.b.
c. Text 3554 RCFD 3554 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) RCFD 2930 391,580 5.
</TABLE>
__________
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) Report interest-only strips receivable in the form of a security as
available-for-sale securities in Schedule RC, item 2.b, or as trading assets
in Schedule RC, item 5, as appropriate.
(3) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-12
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440
Domestic Offices
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding 2155 3,886 1.
2. Bank's liability on acceptances executed and outstanding 2920 3,889 2.
3. Federal funds sold and securities purchased under agreements to resell 1350 409,483 3.
4. Federal funds purchased and securities sold under agreements to repurchase 2800 2,595,340 4.
5. Other borrowed money 3190 900,528 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs 2163 101,467 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs 2941 N/A 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement
subsidiaries, and IBFs) 2192 21,720,915 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement
subsidiaries, and IBFs) 3129 20,176,160 9.
</TABLE>
Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices.
<TABLE>
<CAPTION>
RCON Bil Mil Thou
<S> <C> <C> <C>
10. U.S. Treasury securities 1779 679,238 10.
11. U.S. Government agency obligations (exclude mortgage-backed
securities) 1785 113,470 11.
12. Securities issued by states and political subdivisions in the U.S. 1786 47,942 12.
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1787 2,444,889 13.a.(1)
(2) Other pass-through securities 1869 0 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS):
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1877 606,959 13.b.(1)
(2) All other mortgage-backed securities 2253 254,396 13.b.(2)
14. Other domestic debt securities 3159 332,713 14.
15. Foreign debt securities 3160 2,250 15.
16. Equity securities:
a. Investments in mutual funds and other equity securities with
readily determinable fair values A513 21,091 16.a.
b. All other equity securities 3162 97,891 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10
through 16) 3170 4,600,839 17.
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank 3051 N/A M.1.
OR
2. Net due to the IBF of the domestic offices of the reporting bank 3059 N/A M.2.
</TABLE>
22
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-13
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
C445
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC,
item 12) 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C,
part I, item 12, column A) 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I,
item 4, column A) 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of
Schedule RC-E, part II, items 2 and 3) 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1,
4, 5, and 6) 2381 N/A 6.
</TABLE>
Schedule RC-K--Quarterly Averages (1)
<TABLE>
<CAPTION> C455
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. Interest-bearing balances due from depository institutions RCFD 3381 7,255 1.
2. U.S. Treasury securities and U.S. Government agency
obligations(2) RCFD 3382 4,141,931 2.
3. Securities issued by states and political subdivisions in the U.S.(2) RCFD 3383 67,479 3.
4. a. Other debt securities(2) RCFD 3647 588,393 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal
Reserve stock) RCFD 3648 93,459 4.b.
5. Federal funds sold and securities purchased under agreements to resell RCFD 3365 324,834 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans RCON 3360 14,505,839 6.a.(1)
(2) Loans secured by real estate RCON 3385 6,622,509 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers RCON 3386 2,736 6.a.(3)
(4) Commercial and industrial loans RCON 3387 2,250,006 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures RCON 3388 4,407,073 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN 3360 0 6.b.
7. Trading assets RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income) RCFD 3484 26,216 8.
9. Total assets(4) RCFD 3368 21,526,656 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts,
ATS accounts, and telephone and preauthorized transfer accounts) (exclude
demand deposits) RCON 3485 489,000 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs) RCON 3486 5,307,080 11.a.
b. Other savings deposits RCON 3487 1,609,951 11.b.
c. Time deposits of $100,000 or more RCON A514 1,019,496 11.c.
d. Time deposits of less than $100,000 RCON A529 3,990,446 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs RCFN 3404 7,778 12.
13. Federal funds purchased and securities sold under agreements to repurchase RCFD 3353 2,499,864 13.
14. Other borrowed money (includes mortgage indebtedness and obligations
under capitalized leases) RCFD 3355 858,834 14.
</TABLE>
__________
(1) For all items, banks have the option of reporting either (1) an
average of daily figures for the quarter, or (2) an average of weekly
figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on
amortized cost.
(3) Quarterly averages for all equity securities should be based on
historical cost.
(4) The quarterly average for total assets should reflect all debt
securities (not held for trading) at amortized cost, equity securities
with readily determinable fair values at the lower of cost or fair
value, and equity securities without readily determinable fair values
at historical cost.
23
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-14
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule
RC-L. Some of the amounts reported in Schedule RC-L are regarded as
volume indicators and not necessarily as measures of risk.
<TABLE>
<CAPTION>
C460
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties,
e.g., home equity lines 3814 904,169 1.a.
b. Credit card lines 3815 3,077,672 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate 3816 1,353,418 1.c.(1)
(2) Commitments to fund loans not secured by real estate 6550 0 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 4,339,775 1.e.
2. Financial standby letters of credit and foreign office guarantees 3819 303,558 2.
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 498 2.a.
3. Performance standby letters of credit and foreign office guarantees 3821 104,999 3.
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 1 3.a.
4. Commercial and similar letters of credit 3411 52,449 4.
5. Participations in acceptances (as described in the instructions) conveyed to
others by the reporting bank 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by
the reporting (nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is
indemnified against loss by the reporting bank) 3433 0 8.
9. Financial assets transferred with recourse that have been treated as sold
for Call Report purposes:
a. First lien 1-to-4 family residential mortgage loans:
(1) Outstanding principal balance of mortgages transferred as of the report
date A521 138,977 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date A522 138,977 9.a.(2)
b. Other financial assets (excluding small business obligations reported
in item 9.c):
(1) Outstanding principal balance of assets transferred as of the report
date A523 0 9.b.(1)
(2) Amount of recourse exposure on these assets as of the report date A524 0 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the
Riegle Community Development and Regulatory Improvement Act of 1994:
(1) Outstanding principal balance of small business obligations transferred as
of the report date A249 0 9.c.(1)
(2) Amount of retained recourse on these obligations as of the report date A250 0 9.c.(2)
10. Notional amount of credit derivatives:
a. Credit derivatives on which the reporting bank is the guarantor A534 0 10.a.
b. Credit derivatives on which the reporting bank is the beneficiary A535 0 10.b.
11. Spot foreign exchange contracts 8765 23,497 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet
derivatives) (itemize and describe each component of this item over 25% of
Schedule RC, item 28, "Total equity capital") 3430 1,473,975 12.
a. TEXT 3555 Mortgage servicing with recourse RCFD 3555 1,473,975 12.a.
b. TEXT 3556 RCFD 3556 12.b.
c. TEXT 3557 RCFD 3557 12.c.
d. TEXT 3558 RCFD 3558 12.d.
</TABLE>
24
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-15
Schedule RC-L--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital") 5591 0 13.
a. Text 5592 RCFD 5592 13.a.
b. Text 5593 RCFD 5593 13.b.
c. Text 5594 RCFD 5594 13.c.
d. Text 5595 RCFD 5595 13.d.
</TABLE>
<TABLE>
<CAPTION>
C461
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
<S> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., notional amounts)
(for each column, sum of items 14.a
through 14.e must equal sum of items
15, 16.a, and 16.b):
a. Future contracts 0 0 0 0 14.a.
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
b. Forward contracts 774,381 31,193 0 0 14.b.
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded option contracts:
(1) Written options 0 0 0 0 14.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
(2) Purchased options 0 0 0 0 14.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
d. Over-the-counter option contracts:
(1) Written options 29,960 0 0 0 14.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
(2) Purchased options 3,511,960 0 0 0 14.d.(2)
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
e. Swaps 1,097,352 0 0 0 14.e.
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
15. Total gross notional amount of derivative
contracts held for trading 0 31,193 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
16. Total gross notional amount of derivative
contracts held for purposes other
than trading:
a. Contracts marked to market 0 0 0 0 16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
b. Contracts not marked to market 5,410,653 0 0 0 16.b.
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
</TABLE>
25
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-16
Schedule RC-L--Continued
<TABLE>
<CAPTION>
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17. Gross fair values of
derivative contracts:
a. Contracts held for trading:
(1) Gross positive fair value 8733 0 8734 94 8735 0 8736 0 17.a.(1)
(2) Gross negative fair value 8737 0 8738 118 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes
other than trading that
are marked to market:
(1) Gross positive fair value 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative fair value 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes
other than trading that are
not marked to market:
(1) Gross positive fair value 8749 40,855 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair value 8753 18,822 8754 0 8755 0 8756 0 17.c.(2)
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1.-2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are
reported in Schedule RC-L, items 1.a through 1.e, above (report only the
unused portions of commitments that are fee paid or otherwise legally
binding) 3833 4,412,435 M.3.
a. Participations in commitments with an original maturity
exceeding one year conveyed to others RCFD 3834 0 M.3.a.
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addresses (domicile) included in Schedule
RC-L, items 2 and 3, above 3377 41 M.4.
5. Installment loans to individuals for household, family, and other personal
expenditures that have been securitized and sold without recourse (with
servicing retained), amounts outstanding by type of loan:
a. Loans to purchase private passenger automobiles (to be completed
for the September report only) 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans) 2743 N/A M.5.c.
(to be completed for the September report only)
</TABLE>
26
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-17
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
C465
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers,
directors, principal shareholders, and their related interests as of the
report date:
a. Aggregate amount of all extensions of credit to all executive officers,
directors, principal shareholders, and their related interests 6164 31,777 1.a.
b. Number of executive officers, directors, and principal shareholders to whom
the amount of all extensions of credit by the reporting bank (including
extensions of credit to related interests) equals or exceeds the lesser of
$500,000 or 5 percent of total capital as defined for this Number
purpose in agency regulations. RCFD 6165 3 1.b.
2. Federal funds sold and securities purchased under agreements to resell with
U.S. branches and agencies of foreign banks(1) (included in Schedule RC,
item 3) 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans
serviced for others (include both retained servicing and purchased
servicing):
a. Mortgages serviced under a GNMA contract 5500 1,360,760 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer 5501 4,575 4.b.(1)
(2) Serviced without recourse to servicer 5502 2,452,268 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract 5503 108,640 4.c.(1)
(2) Serviced under a special option contract 5504 2,717,952 4.c.(2)
d. Mortgages serviced under other servicing contracts 5505 5,137,676 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items
5.a and 5.b must equal Schedule RC, item 9):
a. U.S. addresses (domicile) 2103 3,889 5.a.
b. Non-U.S. addresses (domicile) 2104 0 5.b.
6. Intangible assets:
a. Mortgage servicing rights 3164 44,191 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships 5506 0 6.b.(1)
(2) All other identifiable intangible assets 5507 3,863 6.b.(2)
c. Goodwill 3163 154,914 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) 2143 202,968 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes 6442 801 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock
dedicated to redeem the debt 3295 0 7.
</TABLE>
__________
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
27
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-18
Schedule RC-M--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices RCON 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices RCON 5510 1,904 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices RCON 5511 302 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices RCON 5512 31,967 8.a.(2)(e)
(f) In foreign offices RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) RCFD 2150 34,173 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures RCFD 5374 1,896 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated
companies RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) RCFD 2130 1,896 8.b.(3)
9. Noncumulative perpetual preferred stock and related surplus included in
Schedule RC, item 23, "Perpetual preferred stock and related surplus" RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter
(include proprietary, private label, and third party products):
a. Money market funds RCON 6441 308,411 10.a.
b. Equity securities funds RCON 8427 14,996 10.b.
c. Debt securities funds RCON 8428 2,195 10.c.
d. Other mutual funds RCON 8429 12,061 10.d.
e. Annuities RCON 8430 44,750 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a
through 10.e above) RCON 8784 19,030 10.f.
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative
contracts included in assets and liabilities reported in Schedule RC RCFD A525 0 11.
12. Amount of assets netted against nondeposit liabilities and deposits in foreign offices
(other than insured branches in Puerto Rico and U.S. territories and possessions) on
the balance sheet (Schedule RC) in accordance with generally accepted accounting
principles (1) RCFD A526 0 12.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands
RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Reciprocal holdings of banking organizations' capital instruments
(to be completed for the December report only) 3836 N/A M.1.
</TABLE>
- ------------
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet
derivative contracts, deferred tax assets netted against deferred tax
liabilities, and assets netted in accounting for pensions.
28
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-19
Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets
The FFIEC regards the information reported in all of Memorandum item 1, in
items 1 through 10, column A, and in Memorandum items 2 through 4, column A,
as confidential.
<TABLE>
<CAPTION>
C470
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addresses (domicile) 1245 124,753 1246 12,431 1247 64,132 1.a.
b. To non-U.S. addresses (domicile) 1248 0 1249 0 1250 0 1.b.
2. Loans to depository institutions and
acceptances of other banks:
a. To U.S. banks and other U.S. depository
institutions 5377 0 5378 0 5379 0 2.a.
b. To foreign banks 5380 0 5381 0 5382 0 2.b.
3. Loans to finance agricultural production
and other loans to farmers 1594 68 1597 0 1583 0 3.
4. Commercial and industrial loans:
a. To U.S. addresses (domicile) 1251 11,589 1252 10,241 1253 5,138 4.a.
b. To non-U.S. addresses (domicile) 1254 0 1255 0 1256 0 4.b.
5. Loans to individuals for household, family,
and other personal expenditures:
a. Credit cards and related plans 5383 32,953 5384 23,498 5385 0 5.a.
b. Other (includes single payment,
installment and all student loans) 5386 78,841 5387 30,538 5388 2,471 5.b.
6. Loans to foreign governments and official
institutions 5389 0 5390 0 5391 0 6.
7. All other loans 5459 2,005 5460 0 5461 3,828 7.
8. Lease financing receivables:
a. Of U.S. addresses (domicile) 1257 0 1258 0 1259 0 8.a.
b. Of non-U.S. addresses (domicile) 1271 0 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude
other real estate owned and other
repossessed assets) 3505 0 3506 0 3507 0 9.
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or
partially guaranteed by the U.S.
Government. 5612 40,076 5613 26,477 5614 0 10.
a. Guaranteed portion of loans and leases
included in item 10 above. 5615 40,025 5616 26,476 5617 0 10.a.
</TABLE>
29
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-20
Schedule RC-N--Continued
<TABLE>
<CAPTION> C473
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Tho RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included
in Schedule RC-N, items 1 through 8,
above (and not reported in Schedule RC-C,
part I, Memorandum item 2) 1658 0 1659 0 1661 1,290 M.1.
2. Loans to finance commercial real estate,
construction, and land development
activities (not secured by real estate)
included in Schedule RC-N, items 4
and 7, above 6558 0 6559 0 6560 0 M.2.
</TABLE>
<TABLE>
<CAPTION>
RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
3. Loans secured by real estate in domestic
offices (included in Schedule RC-N, item 1,
above):
a. Construction and land development 2759 10,214 2769 0 3492 15,500 M.3.a.
b. Secured by farmland 3493 56 3494 0 3495 75 M.3.b.
c. Secured by 1-4 family residential
properties:
(1) Revolving, open-end loans secured by
1-4 family residential properties and
extended under lines of credit 5398 4,023 5399 884 5400 269 M.3.c.(1)
(2) All other loans secured by 1-4 family
residential properties 5401 76,060 5402 8,184 5403 29,139 M.3.c.(2)
d. Secured by multifamily (5 or more)
residential properties 3499 1,143 3500 0 3501 1,128 M.3.d.
e. Secured by nonfarm nonresidential
properties 3502 33,257 3503 3,363 3504 18,021 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and
other commodity and equity contracts:
a. Book value of amounts carried as assets 3522 0 3528 0 M.4.a.
b. Replacement cost of contracts with a
positive replacement cost 3529 0 3530 0 M.4.b.
</TABLE>
Person to whom questions about the Reports of Condition and Income
should be directed: C477
Natie P. Hennelly (804) 782-5320
- -------------------------- --------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extenstion (TEXT 8902)
30
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-21
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION> C475
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits 0030 N/A 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) 0032 0 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits 3510 N/A 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not
included in total deposits in domestic offices) 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured
branches in Puerto Rico and U.S. territories and possessions (not included
in total deposits):
a. Demand deposits of consolidated subsidiaries 2211 15,458 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and
possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule
RC-E, Part II) 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches (included in
Schedule RC-G, item 1.b) 5515 0 5.c.
6. Reserve balances actually passed through to the Federal Reserve by the
reporting bank on behalf of its respondent depository institutions that are
also reflected as deposit liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5,
column B) 2314 5 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule
RC-E, Part I, item 4 or 5, column A or C, but not column B) 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1), (2)
a. Unamortized premiums 5516 0 7.a.
b. Unamortized discounts 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
a. Deposits purchased or acquired from other FDIC-insured institutions during the quarter
(exclude deposits purchased or acquired from foreign offices other than insured branches
in Puerto Rico and U.S. territories and possessions):
(1) Total deposits purchased or acquired from other FDIC-insured institutions during
the quarter A531 N/A 8.a.(1)
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above
attributable to a secondary fund (i.e., BIF members report deposits attributable
to SAIF; SAIF members report deposits attributable to BIF) A532 N/A 8.a.(2)
b. Total deposits sold or transferred to other FDIC-insured institutions during the
quarter (exclude sales or transfers by the reporting bank of deposits in foreign
offices other than insured branches in Puerto Rico and U.S. territories and possessions) A533 N/A 8.b.
</TABLE>
__________
(1) For FDIC insurance and FICO assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
(2) Exclude core deposit intangibles.
31
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-22
Schedule RC-O--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
9. Deposits in lifeline accounts 5385 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in
total deposits in domestic offices) 8432 0 10.
11. Adjustments to demand deposits in domestic offices and in insured branches in Puerto Rico
and U.S. territories and possessions reported in Schedule RC-E for certain reciprocal
demand balances:
a. Amount by which demand deposits would be reduced if the reporting bank's reciprocal
demand balances with the domestic offices of U.S. banks and savings associations
and insured branches in Puerto Rico and U.S. territories and possessions that were
reported in a gross basis in Schedule RC-E had been reported on a net basis 8785 0 11.a.
b. Amount by which demand deposits would be increased if the reporting bank's reciprocal
demand balances with foreign banks and foreign offices of other U.S. banks (other
than insured branches in Puerto Rico and U.S. territories and possessions) that were
reported on a net basis in Schedule RC-E had been reported on a gross basis A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of
collection were included in the calculation of the reporting bank's net reciprocal
demand balances with the domestic offices of U.S. banks and savings associations and
insured branches in Puerto Rico and U.S. territories and possessions in Schedule RC-E A182 0 11.c.
12. Amount of assets netted against deposit liabilities in domestic offices and in insured
branches in Puerto Rico and U.S. territories and possessions on the balance sheet
(Schedule RC) in accordance with generally accepted accounting principles (exclude amounts
related to reciprocal demand balances):
a. Amount of assets netted against demand deposits A527 0 12.a.
b. Amount of assets netted against time and savings deposits A528 0 12.b.
</TABLE>
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a(1)
and 1.b.(1) must equal Schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of $100,000 or less 2702 11,312,868 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be
completed for the June report only) Number
RCON 3779 N/A M.1.a.(2)
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000 2710 4,636,955 M.1.b.(1)
Number
(2) Number of deposit accounts of more than $100,000 RCON 2722 16,265 M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000 reported
in Memorandum item 1.b.(2) above by $100,000 and subtracting the result from
the amount of deposit accounts of more than $100,000 reported in Memorandum
item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a
method or procedure for determining a better estimate of uninsured Yes No
deposits than the estimate described above 6861 X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured RCON Bil Mil Thou
deposits determined by using your bank's method or procedure 5597 N/A M.2.b.
3. Has the reporting institution been consolidated with a parent bank or
savings association in that parent bank's or parent savings association's
Call Report or Thrift Financial Report?
If so, report the legal title and FDIC Certificate Number of the parent bank
or parent savings association: FDIC Cert No.
TEXT A545 N/A RCON A545 N/A M.3.
</TABLE>
32
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-23
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that
reported total assets of $1 billion or more in Schedule RC, item 12,
for June 30, 1996, must complete items 2 through 9 and Memoranda items
1 and 2. Banks with assets of less than $1 billion must complete
items 1 through 3 below or Schedule RC-R in its entirety, depending on
their response to item 1 below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Test for determining the extent to which Schedule RC-R must be completed.
To be completed only by banks with total assets of less than $1 billion. C480
Indicate in the appropriate box at the right whether the bank has total capital Yes No
greater than or equal to eight percent of adjusted total assets RCFD 6056 1.
</TABLE>
For purposes of this test, adjusted total assets equals total assets
less cash, U.S. Treasuries, U.S. Government agency obligations, and 80
percent of U.S. Government-sponsored agency obligations plus the
allowance for loan and lease losses and selected off-balance sheet
items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked NO has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not
in compliance with the risk-based capital guidelines.
NOTE: All banks are required to complete items 2 and 3 below. See optional
worksheet for items 3.a through 3.f.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
2. Portion of qualifying limited-life capital instruments
(original weighted average maturity of at least five
years) that is includible in Tier 2 capital:
a. Subordinated debt(1) and intermediate term preferred stock A515 289,000 2.a.
b. Other limited-life capital instruments A516 0 2.b.
3. Amounts used in calculating regulatory capital ratios
(report amounts determined by the bank for its own
internal regulatory capital analyses consistent with applicable
capital standards):
a. Tier 1 capital 8274 1,544,255 3.a.
b. Tier 2 capital 8275 510,041 3.b.
c. Total risk-based capital 3792 2,054,296 3.c.
d. Excess allowance for loan and lease losses (amount that
exceeds 1.25% of gross risk-weighted assets) A222 46,876 3.d.
e. Net risk-weighted assets (gross risk-weighted assets less
excess allowance reported in item 3.d above and all other
deductions) A223 17,712,279 3.e.
f. "Average total assets" (quarterly average reported in
Schedule RC-K, item 9, less all assets deducted from Tier 1
capital) (2) A224 21,112,322 3.f.
</TABLE>
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks that
answered NO to item 1 above and by banks with total assets of $1 billion or
more.
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(3)
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet: 5163 1,028,163 4.a.
b. Credit equivalent amount of off-balance sheet items 3796 0 4.b.
</TABLE>
__________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in
column A.
33
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-24
Schedule RC-R--Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet: 5195 5,427,006 5.a.
b. Credit equivalent amount of off-balance sheet items 3801 28,195 5.b.
6. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet 3802 3,776,699 6.a.
b. Credit equivalent amount of off-balance sheet items 3803 901,891 6.b.
7. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet 3804 11,916,336 7.a.
b. Credit equivalent amount of off-balance sheet items 3805 2,572,267 7.b.
8. On-balance sheet asset values excluded from and deducted in
the calculation of the risk-based capital ratio(2) 3806 (56,957) 8.
9. Total assets recorded on the balance sheet (sum of items
4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC,
item 12 plus items 4.b and 4.c) 3807 22,091,247 9.
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts
covered by the risk-based capital standards 8764 40,855 M.1.
</TABLE>
<TABLE>
<CAPTION>
With a remaining maturity of
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
2. Notional principal amounts of
off-balance sheet derivative
contracts (3):
a. Interest rate contracts 3809 79,214 8766 4,393,083 8767 137,015 M.2.a.
b. Foreign exchange contracts 3812 31,193 8769 0 8770 0 M.2.b.
c. Gold contracts 8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals contracts 8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts A000 0 A001 0 A002 0 M.2.f.
</TABLE>
__________
(1) Do not report in column B the risk-weighted amount of assets
reported in column A.
(2) Include the difference between the fair value and the amortized
cost of available-for-sale debt securities in item 8 and report the
amortized cost of these debt securities in items 4 through 7 above.
For available-for-sale equity securities, if fair value exceeds cost,
include the difference between the fair value and the cost in item 8
and report the cost of these equity securities in items 5 through 7
above; if cost exceeds fair value, report the fair value of these equity
securities in items 5 through 7 above and include no amount in item 8.
Item 8 also includes on-balance sheet asset values (or portions thereof)
of off-balance sheet interest rate, foreign exchange rate, and commodity
contracts and those contracts (e.g., futures contracts) not subject to
risk-based capital. Exclude from item 8 margin accounts and accrued
receivables not included in the calculation of credit equivalent amounts
of off-balance sheet derivatives as well as any portion of the allowance
for loan and lease losses in excess of the amount that may be included
in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14
days or less and all futures contracts.
34
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430 FFIEC 031
Page RC-25
Optional Narrative Statement Concerning the Amounts Reported in the
Reports of Condition and Income
at close of business on March 31, 1997
Crestar Bank Richmond, Virginia
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of
Condition and Income. This optional statement will be made available
to the public, along with the publicly available data in the Reports
of Condition and Income, in response to any request for individual
bank report data. However, the information reported in column A and
in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING
TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL
ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT
WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF
THEIR CUSTOMERS. Banks choosing not to make a statement may check the
"No comment" box below and should make no entries of any kind in the
space provided for the narrative statement; i.e., DO NOT enter in this
space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement
should not exceed 100 words. Further, regardless of the number of
words, the statement must not exceed 750 characters, including
punctuation, indentation, and standard spacing between words and
sentences. If any submission should exceed 750 characters, as
defined, it will be truncated at 750 characters with no notice to the
submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must
be accurate and not misleading. Appropriate efforts shall be taken by
the submitting bank to ensure the statement's accuracy. The statement
must be signed, in the space provided below, by a senior officer of
the bank who thereby attests to its accuracy.
If, subsequent to the original submission, material changes are
submitted for the data reported in the Reports of Condition and
Income, the existing narrative statement will be deleted from the
files, and from disclosure; the bank, at its option, may replace it
with a statement, under signature, appropriate to the amended data.
The optional narrative statement will appear in agency records and in
release to the public exactly as submitted (or amended as described in
the preceding paragraph) by the management of the bank (except for the
truncation of statements exceeding the 750-character limit described
above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY
THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE
STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY
HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED
THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE
OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING
BANK.
No comment [ ] (RCON 6979) C471 C472
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
_____________________________________ _________________
Signature of Executive Officer of Bank Date of Signature
35
<PAGE>
Legal Title of Bank: Crestar Bank
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 3/31/97 ST-BK: 51-2430
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<TABLE>
<S> <C>
Crestar Bank OMB No. for OCC: 1557-0081
P.O. Box 26665 OMB No. For FDIC: 3064-0052
Richmond, VA 23261 OMB No. For Federal Reserve: 7100-0036
E512430000 55124300000 Expiration Date: 3/31/99
31 SPECIAL REPORT
(Dollar Amounts in Thousands)
March 31, 1997 Close of Business FDIC Certificate Number
Date
3/31/97 12543 C-700
</TABLE>
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
The following information is required by Public Laws 90-44 and 102-
242, but does not constitute a part of the Report of Condition. With
each Report of Condition, these Laws require all banks to furnish a
report of all loans or other extensions of credit to their executive
officers made since the date of the previous Report of Condition.
Data regarding individual loans or other extensions of credit are not
required. If no such loans or other extensions of credit were made
during the period, insert "none" against subitem (a). (Exclude the
first $15,000 of indebtedness of each executive officer under bank
credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the
Code of Federal Regulations (Federal Reserve Board Regulation O) for
the definitions of "executive officer" and "extension of credit,"
respectively. Exclude loans and other extensions of credit to
directors and principal shareholders who are not executive officers.
<TABLE>
<S> <C> <C> <C>
a. Number of loans made to executive officers since the
previous Call Report date RCFD 3561 0 a.
b. Total dollar amount of above loans (in thousands of
dollars) RCFD 3562 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) RCFD 7701 0.00 % to RCFD 7702 0.00 % c.
</TABLE>
<TABLE>
<CAPTION>
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
<S> <C>
/s/ PETER C. TOMS, SENIOR VICE PRESIDENT 4/29/97
- ----------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION
(TEXT 8904)
Natie P. Hennelly (804)782-5320
</TABLE>
FDIC 8040/53 (6/95)
36
EXHIBIT 99.1
LETTER OF TRANSMITTAL
STANDARD COMMERCIAL TOBACCO CO., INC.
OFFER TO EXCHANGE ITS
8 7/8% SENIOR NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR ALL OF ITS OUTSTANDING 8 7/8% SENIOR NOTES DUE 2005
EACH GUARANTEED BY STANDARD COMMERCIAL CORPORATION AND STANDARD WOOL, INC.
PURSUANT TO THE PROSPECTUS
DATED , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
The Exchange Agent for the Exchange Offer is:
Crestar Bank
For information by telephone:
(804) 782-5726
By registered or certified mail,
by hand or overnight delivery:
Crestar Bank
10th Floor
919 East Main Street
Richmond, Virginia 23219
Attn: Kelly Pickerel
Facsimile transmissions:
(For Eligible Institutions only)
(804) 782-7855
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Standard Commercial Tobacco Co.,
Inc. (the "Issuer") and this Letter of Transmittal, which together constitute
the Issuer's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 8 7/8% Senior Notes due 2005 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 8 7/8% Senior Notes due 2005 (the
"Initial Notes"). The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on , 1997, unless the Issuer, in its sole discretion,
extends the Exchange Offer, in which case the term shall mean the latest date
and time to which the Exchange Offer is extended. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
<PAGE>
This Letter of Transmittal is to be completed by holders of Initial Notes
either if Initial Notes are to be forwarded herewith or if tenders of Initial
Notes are to be made by book-entry transfer to an account maintained by Crestar
Bank (the "Exchange Agent") at The Depository Trust Issuer (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in "The Exchange
Offer -- Procedures for Tendering" in the Prospectus.
Holders of Initial Notes who cannot deliver required documents to the
Exchange Agent on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Initial
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS SHOULD COMPLETE THIS BOX:
Senior Notes Tendered
(Attach Additional List if Necessary)
IF BLANK,
PLEASE PRINT
NAME AND
ADDRESS OF
REGISTERED
HOLDER AS IT Name:
APPEARS ON Address:
THE 8 7/8
SENIOR
NOTES
("INITIAL
NOTES").
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal
Aggregate Amount of
Principal Senior
Amount of Notes Tendered
Certificate Senior (If less than Total Amount
Number(s)* Notes all)** Tendered
</TABLE>
* Need not be completed by book-entry holders.
** Initial Notes may be tendered in whole or in part in integral multiples of
$1,000. All Initial Notes held shall be deemed tendered unless a lesser
number is specified in this column.
2
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
The Depository Trust Company Account Number
Transaction Code Number
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING: Name of Registered Holder(s) Window Ticket Number (if any) Date
of Execution of Notice of Guaranteed Delivery Name of Institution which
Guaranteed Delivery
If Guaranteed Delivered is to be made By Book-Entry Transfer:
Name of Tendering Institution
The Depository Trust Company Account Number
Transaction Code Number
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED INITIAL
NOTES ARE TO BE RETURNED BY CREDITING THE DEPOSITORY TRUST COMPANY ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE INITIAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: Address:
3
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the principal amount of the Initial
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of such Initial Notes tendered hereby, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Issuer all right,
title and interest in and to such Notes as are being tendered hereby, including
all rights to accrued and unpaid interest thereon as of the Expiration Date. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent the
true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that said Exchange Agent acts as the agent of the Issuer in connection
with the Exchange Offer) to cause the Initial Notes to be assigned, transferred
and exchanged. The undersigned represents and warrants that it has full power
and authority to tender, exchange, assign and transfer the Initial Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Initial
Notes, and that when the same are accepted for exchange, the Issuer will acquire
good and unencumbered title to the tendered Initial Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim.
The undersigned represents to the Issuer or the Guarantors that (i) the
Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such Exchange Notes, whether
or not such person is the undersigned, (ii) neither the undersigned nor any such
other person is participating in, intends to participate in, or has an
arrangement or understanding with any person to participate in, the distribution
of such Exchange Notes and (iii) the undersigned is not an "affiliate," as
defined in Rule 405 of the Securities Act of 1933, as amended, of the Issuer or
the Guarantors. If the undersigned or the person receiving the Exchange Notes
covered hereby is a broker-dealer that is receiving the Exchange Notes for its
own account in exchange for Initial Notes that were acquired as a result of
market-making activities or other trading activities, the undersigned
acknowledges that it or such other person will deliver a prospectus in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The undersigned
and any such other person acknowledge that, if they are participating in the
Exchange Offer for the purpose of distributing the Exchange Notes, (i) they
cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in Exxon Capital Holdings Corporation (available April 13,
1989), Morgan Stanley & Co., Inc. (available June 5, 1991) or similar no-action
letters and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with the resale transaction and (ii) failure to comply with such
requirements in such instance could result in the undersigned or any such other
person incurring liability under the Securities Act for which such persons are
not indemnified by the Issuer or the Guarantors. If the undersigned or the
person receiving the Exchange Notes covered by this letter is an affiliate (as
defined under Rule 405 of the Securities Act) of the Issuer or the Guarantors,
the undersigned represents to the Issuer or the Guarantors that the undersigned
understands and acknowledges that such Exchange Notes may not be offered for
resale, resold or otherwise transferred by the undersigned or such other person
without registration under the Securities Act or an exemption therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Issuer to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Notes by the Issuer and the issuance of Exchange
Notes in exchange therefor shall constitute performance in full by the Issuer
and the Guarantors of their obligations under the Registration Rights Agreement
and that the Issuer and the Guarantors shall have no further obligations or
liabilities thereunder for the registration of the Initial Notes or the Exchange
Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Certain Conditions to the
Exchange Offer". The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Issuer), as more particularly
set forth in the Prospectus, the Issuer may not be required to exchange any of
the Notes tendered hereby and, in such event, the Notes not exchanged will be
returned to the undersigned at the address shown below the signature of the
undersigned.
All authority herein conferred or agreed to be conferred shall survive the
dissolution, liquidation, death or incapacity of the undersigned and every
obligation of the undersigned hereunder shall be binding upon the heirs,
4
<PAGE>
personal representatives, successors and assigns of the undersigned. Tendered
Notes may be withdrawn at any time prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instruction" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Initial Notes delivered herewith but not exchanged, will
be registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (defined in Instruction 4).
5
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if Exchange Notes are to be issued in the name of someone
other than the registered holder of the Initial Notes whose name(s) appear(s)
above.
Issue:
[ ] Exchange Notes to:
[ ] Initial Notes not tendered to:
Name:
(Please Print)
Address:
(Include Zip Code)
(Taxpayer Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5)
To be completed ONLY if Exchange Notes are to be sent to someone other than the
registered holder of the Initial Notes whose name(s) appear(s) above, or to the
registered holder(s) at an address other than that shown above.
Mail:
[ ] Exchange Notes to:
[ ] Initial not tendered to:
Name:
(Please Print)
Address:
(Include Zip Code)
(Taxpayer Identification or Social Security No.)
6
<PAGE>
REGISTERED HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 4 AND 5)
(Please Also Complete Substitute
Form W-9 Below)
(Note: Signature(s) must be
guaranteed if required by
Instruction 4)
(Signature(s) of Holder(s))
Date: , 1997
Name(s)
(Please Print)
Area Code(s) and Telephone Number:
(Tax Identification or Social Security Number)
Must be signed by registered Holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Initial Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certificates and other information as may be required by the Issuer or
the Trustee for the Initial Notes to comply with the restrictions on transfer
applicable to the Initial Notes). If signature is by an attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or another
acting in a fiduciary capacity or representative capacity, please set forth the
signer's full title. See Instruction 4.
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED BY INSTRUCTION 4)
(Authorized Signature)
Name:
(Please Print)
Date: , 1997
Capacity or Title:
Name of Firm:
Address:
(Include Zip Code)
Area Code and Telephone Number:
7
<PAGE>
TO BE COMPLETED BY ALL
TENDERING SECURITY HOLDERS
(SEE INSTRUCTION 11)
PAYER'S NAME: STANDARD COMMERCIAL TOBACCO CO., INC.
<TABLE>
<S> <C> <C>
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE TIN_____________
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security #
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY OR
THAT (1) the number shown on this form is my correct
taxpayer identification number (or I am waiting for a number
to be issued to me), (2) I am not subject to backup
withholding either because (i) I am exempt from backup
withholding, (ii) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest
or dividends, or (iii) the IRS has notified me that I am no
longer subject to backup withholding, and (3) any other
information provided on this form is true and correct.
</TABLE>
DEPARTMENT OF THE TREASURY PART II
INTERNAL Employer Identification
REVENUE Number
SERVICE Awaiting
TIN [ ]
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) AND CERTIFICATION
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
Signature Date:
You must cross out item
(iii) in Part (2) above if
you have been notified by
the IRS that you are
subject to backup
withholding because of
under reporting interest
or dividends on your tax
return and you have not
been notified by the IRS
that you are no longer
subject to backup
withholding.
8
<PAGE>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
payments made to me on account of the New Capital Securities shall be retained
until I provide a taxpayer identification number to the Exchange Agent and that,
if I do not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31% of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature : Date :
9
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. All physically
delivered Initial Notes or confirmation of any book-entry transfer to the
Exchange Agent's account at a book-entry transfer facility of Initial Notes
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date. The method of delivery of this Letter of Transmittal, the
Initial Notes and any other required documents is at the election and risk of
the Holder, and except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. If such delivery is by
mail, it is suggested that registered mail with return receipt requested,
properly insured, be used.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
Delivery to an address other than as set forth herein, or instructions via
a facsimile number other than the one set forth herein, will not constitute a
valid delivery.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Initial
Notes, but whose Initial Notes are not immediately available and thus cannot
deliver their Initial Notes, the Letter of Transmittal or any other required
documents to the Exchange Agent (or comply with the procedures for book-entry
transfer) prior to the Expiration Date, may effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., a commercial bank or trust Issuer having an office or correspondent
in the United States or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the registration
number(s) of such Initial Notes and the principal amount of Initial Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), together
with the Initial Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility) and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Initial Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility) and all
other documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Initial Notes according to the
guaranteed delivery procedures set forth above. Any Holder who wishes to tender
Initial Notes pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such Notes prior to the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
procedures.
3. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of Initial Notes evidenced by a submitted certificate is tendered, the tendering
Holder should fill in the principal amount tendered in the column entitled
"Principal Amount Tendered" of the box entitled "Description of Senior Notes
Tendered Hereby". A newly issued Initial Note for the principal amount of
Initial Notes submitted but not tendered will be sent to such Holder as soon as
practicable after the Expiration Date. All Initial Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated.
10
<PAGE>
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date, after which tenders of Initial Notes are
irrevocable. To be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Initial Notes to be withdrawn (the "Depositor"), (ii) identify the Initial
Notes to be withdrawn (including the registration number(s) and principal amount
of such Notes, or, in the case of Initial Notes transferred by book-entry
transfer, the name and number of the account at the Book-Entry Transfer Facility
to be credited), (iii) be signed by the Holder in the same manner as the
original signature on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Initial Notes register the transfer of such
Notes into the name of the person withdrawing the tender and (iv) specify the
name in which any such notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuer, whose
determination shall be final and binding on all parties. Any Initial Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Initial Notes so withdrawn are validly retendered. Any Initial Notes which
have been tendered but which are not accepted for exchange, will be returned to
the Holder thereof without cost to such Holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Initial Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of the certificates
without alternation or enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the owner of the Initial Notes.
If any of the Initial Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Initial Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Initial
Notes tendered hereby are tendered (i) by a registered Holder who has not
completed the box entitled "Special Registration Instructions" or "Special
Delivery Instructions" on this Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or Holders
of Initial Notes (which term, for the purposes described herein, shall include a
participant in the Book-Entry Transfer Facility whose name appears on a security
listing as the owner of the Initial Notes) listed and tendered hereby, no
endorsements of the tendered Initial Notes or separate written instruments of
transfer or exchange are required. In any other case, the registered Holder (or
acting Holder) must either properly endorse the Initial Notes or transmit
properly completed bond powers with this Letter of Transmittal (in either case,
executed exactly as the name(s) of the registered Holder(s) appear(s) on the
Initial Notes, and, with respect to a participant in the Book-Entry Transfer
Facility whose name appears on a security position listing as the owner of
Initial Notes, exactly as the name of the participant appears on such security
position listing), with the signature on the Initial Notes or bond power
guaranteed by an Eligible Institution (except where the Initial Notes are
tendered for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuer, proper evidence
satisfactory to the Issuer of their authority so to act must be submitted.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. If Exchange Notes are to
be issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, tendering Holders should indicate, in the applicable box, the name and
address (or account at the Book-Entry Transfer Facility) in which the Exchange
Notes or substitute Initial Notes for principal amounts not tendered or not
accepted for exchange are to be issued (or deposited), if different from the
names and addresses or accounts of the person
11
<PAGE>
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification number or social security number of the person named
must also be indicated and the tendering Holder should complete the applicable
box.
If no instructions are given, the Exchange Notes (and any Initial Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Initial Notes or deposited at such Holder's account at the
Book-Entry Transfer Facility.
6. TRANSFER TAXES. The Issuer shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Initial Notes to it or its order
pursuant to the Exchange Offer. If a transfer tax is imposed for any other
reason other than the transfer of Initial Notes to the Issuer or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered Holder or any other person) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or exception
therefrom is not submitted herewith, the amount of such transfer taxes will be
collected from the tendering Holder by the Exchange Agent.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Initial Notes listed in this Letter of
Transmittal.
7. WAIVER OF CONDITIONS. The Issuer reserves the right, in its reasonable
judgment, to waive, in whole or in part, any of the conditions to the Exchange
Offer set forth in the Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Initial
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, stolen or destroyed Initial Notes have been followed.
9. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number(s) set forth above.
10. VALIDITY AND FORM. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered Initial Notes
will be determined by the Issuer in its sole discretion, which determination
will be final and binding. The Issuer reserves the absolute right to reject any
and all Initial Notes not properly tendered or any Initial Notes the Issuer's
acceptance of which may, in the opinion of counsel for the Issuer, be unlawful.
The Issuer also reserves the right, in its reasonable judgment, to waive any
defects, irregularities or conditions of tender as to particular Initial Notes.
The Issuer's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Initial Notes must be cured within such time as the
Issuer shall determine. Although the Issuer intends to notify Holders of defects
or irregularities with respect to tenders of Initial Notes, neither the Issuer,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Initial Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Initial
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holder as soon as practicable
following the Expiration Date.
11. BACKUP WITHHOLDING; FORM W-9. Under U.S. federal income tax law, a
holder whose tendered Initial Notes are accepted for exchange is required to
provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Form W-9. If the Exchange Agent is not provided with the
correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or
other payee to a $50 penalty. In addition, payments to such holders or other
payees with respect to Initial Notes exchanged pursuant to the Exchange Offer
may be subject to 31% backup withholding.
If the tendering holder has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future, the holder or other payee must
also complete the Certificate of Awaiting Taxpayer Identification Number in
order to avoid backup withholding. Notwithstanding that the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Form W-9. If the
holder furnishes the Exchange Agent
12
<PAGE>
with its TIN within 60 days after the date of the Form W-9, the amounts retained
during the 60-day period will be remitted to the holder and no further amounts
shall be retained or withheld from payments made to the holder thereafter. If,
however, the holder has not provided the Exchange Agent with its TIN within such
60-day period, amounts withheld will be remitted to the IRS as backup
withholding. In addition, 31% of all payments made thereafter will be withheld
and remitted to the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Initial Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Initial Notes. If the Initial Notes are registered in
more than one name or are not in the name of the actual owner, consult the
Instructions to Form W-9 for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Form W-9, and write "exempt" on the face thereof, to avoid
possible erroneous backup withholding. A foreign person may qualify as an exempt
recipient by submitting a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. Please consult
the Instructions to Form W-9 for additional guidance on which holders are exempt
from backup withholding.
Backup withholding is not an additional U.S. federal income tax. Rather,
the U.S. federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.
13
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO TENDER
8 7/8% SENIOR NOTES DUE 2005
IN EXCHANGE FOR
8 7/8% SENIOR NOTES DUE 2005
OF
STANDARD COMMERCIAL TOBACCO CO., INC.
Registered holders of outstanding 8 7/8% Senior Notes due 2005 (the
"Initial Notes") who wish to tender their Initial Notes in exchange for a like
principal amount of 8 7/8% Senior Notes due 2005 which have been registered
under the Securities Act of 1933, as amended (the "Exchange Notes"), and whose
Initial Notes are not immediately available or who cannot deliver their Initial
Notes and Letter of Transmittal (and any other documents required by the Letter
of Transmittal) to Crestar Bank (the "Exchange Agent") prior to the Expiration
Date, may use this Notice of Guaranteed Delivery or one substantially equivalent
hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission or mail to the Exchange Agent, See "The Exchange
Offer -- Procedures for Tendering" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
Crestar Bank
For information by telephone:
(804) 782-5726
By registered or certified mail or
by hand or overnight delivery:
10th Floor
919 East Main Street
Richmond, Virginia 23219
Attn: Kelly Pickerel
Facsimile transmissions:
(For Eligible Institutions only)
(804) 782-7855
Delivery of this Notice to an address other than as set forth above or
transmission of instructions via a facsimile transmission to a number other than
set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instructions thereto, such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amounts of Initial Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated , 1997 of Standard Commercial Tobacco Co.,
Inc. (the "Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND ADDRESS OF REGISTERED
HOLDER AS IT CERTIFICATE PRINCIPAL
APPEARS ON 8 7/8% SENIOR NUMBER(S) OF INITIAL AMOUNT OF
NOTES DUE 2005, NOTES TRANSMITTED INITIAL NOTES
("INITIAL NOTES") (IF AVAILABLE) TRANSMITTED
</TABLE>
THE FOLLOWING MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the Initial Notes,
together with a properly completed and duly executed Letter of Transmittal
within three New York Stock Exchange, Inc. trading days after the date of
execution of this Notice of Guaranteed Delivery.
Name of Firm: (Authorized Signature)
Address: Title:
Name:
(Zip Code)
Area Code and Telephone Number:
Date:
NOTE: DO NOT SEND CERTIFICATES FOR INITIAL NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR INITIAL NOTES SHOULD BE SENT ONLY WITH YOUR
LETTER OF TRANSMITTAL.
