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Exhibit Index
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number 1-13684
DIMON Incorporated
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1746567
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
512 Bridge Street, Danville, Virginia 24541
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 792-7511
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (no par value)
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes.....X...... No...........
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates of the
registrant (based upon the closing sale price quoted by The New York Stock
Exchange) on August 31, 1996, was approximately $690,839,000. In determining
this figure, the registrant has assumed that all of its directors and officers,
and all persons known to it to beneficially own ten percent or more of its
Common Stock, are affiliates. This assumption shall not be deemed conclusive
for any other purpose.
As of August 31, 1996, there were 42,366,059 shares of Common Stock
outstanding.
Portions of the registrant's definitive Proxy Statement for its 1996
Annual Meeting of Stockholders to be held November 15, 1996, to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (the "Proxy Statement"), are incorporated by
reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
As used in the following description, unless the context otherwise requires,
the term "Company" refers to DIMON Incorporated and its subsidiaries and
affiliates. Unless otherwise indicated, references to years refer to the
Company's fiscal year ended June 30.
The Company is engaged in two international businesses -- the purchasing,
processing and selling of leaf tobacco, primarily flue-cured, burley and
oriental tobaccos, which are the primary components of American blend
cigarettes, and the purchasing, transporting and selling of fresh-cut flowers
to wholesalers and retailers. The Company believes it is the world's second
largest independent leaf tobacco merchant with an estimated 30% share of the
established worldwide leaf tobacco market. The Company is the successor to
Dibrell Brothers, Incorporated ("Dibrell") and Monk-Austin, Inc. ("Monk-
Austin") which merged in April 1995 ("the "Merger"). The Company was
incorporated in 1995 under the laws of the Commonwealth of Virginia. See Note
M to the Company's Consolidated Financial Statements for the year ended June
30, 1996, included herein as part of Item 8, for detailed financial
information regarding each of the Company's business segments.
Tobacco
The Leaf Tobacco Industry
The world's large multinational cigarette manufacturers, with one exception,
rely on independent leaf tobacco merchants such as the Company to supply the
majority of their leaf tobacco needs. Leaf tobacco merchants select,
purchase, process, store, pack, ship and, in certain developing markets,
provide agronomy expertise and financing for growing leaf tobacco. At the
present time, there are four major global leaf tobacco merchants including the
Company. These four merchants source, process and ship leaf tobacco around
the world, for delivery to manufacturers of cigarettes and other tobacco
products. The Company believes that the leaf tobacco industry is
characterized by the following trends:
Growth of American Blend Cigarettes. As a result of increased demand and
strong brand growth, production of branded American blend cigarettes has
increased based on recent calendar year information. In addition, worldwide
consumption of American blend cigarettes continues to increase even in some
countries where total cigarette consumption is flat or declining. American
blend cigarettes contain less tar and nicotine and taste milder than
cigarettes historically consumed outside of the U.S. Cigarette production in
the U.S. reached record levels in 1995, totaling 741.84 billion units, an
increase of 4.1% over 1994, according to the U.S. Department of Agriculture.
Exports of domestically produced cigarettes in 1995 totaled 35.1% of cigarette
production in the U.S., up from 31.8% in 1994 and 30.9% in 1993. As American
blend cigarettes have continued to gain market share, the demand for export
quality flue-cured, burley and oriental tobaccos sourced and processed by leaf
tobacco merchants has grown accordingly. Although the consumption of
cigarettes increased by 1% in the U.S. in 1995, the consumption of cigarettes
generally has decreased in the U.S. and in some other countries in recent
years, and may continue to decrease in the future. The Company believes that
cigarette consumption in certain other countries, however, including those in
Central and Eastern Europe and the former Soviet Union, has increased.
Growth in Foreign Operations of Large Cigarette Manufacturers. Several of the
large multinational cigarette manufacturers have expanded their operations
throughout the world, particularly in 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 and distribution, primarily due to the
semi-perishable nature of unprocessed leaf tobacco and the existence of
domestic content laws in certain countries. The Company believes
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that the international expansion of the large multinational 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 sources of tobacco.
Growth in Foreign Sourced Tobacco. In an effort to respond to cigarette
manufacturers' increasing demand for lower cost American blend cigarette
ingredients, the major leaf tobacco merchants have made significant
investments in South America, Africa and Asia, the principal sources of flue-
cured and burley tobaccos outside the U.S. This trend is expected 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 1993 and 1994. The disruption of the industry in the U.S. during these
years occurred primarily because of (1) the enactment of legislation requiring
that cigarettes manufactured in the U.S. for domestic consumption and export
contain at least 75% domestically grown tobacco (the "75/25 Rule"), (2) a poor
quality 1993 flue-cured tobacco crop in the U.S. and (3) the introduction of
legislation in the summer of 1993 to increase significantly the federal excise
tax on cigarettes that resulted in manufacturers' reluctance to build
inventories. Concurrent with the reduction in demand for international
tobaccos related to the 75/25 Rule and lower than expected initial demand for
imported tobacco products in 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 among the merchants.
In 1994 and 1995, the demand and supply imbalance in the worldwide tobacco
market began to improve. Leaf tobacco production outside the U.S. was
curtailed in response to the high levels of uncommitted tobacco inventories.
The 75/25 Rule was repealed in September, 1995, due to its violation of GATT
and was replaced by a series of less stringent import quotas. This resulted
in cigarette manufacturers in the U.S. resuming their purchases of tobacco
grown outside the U.S. The combination of lower levels of tobacco production
and increased demand had a positive impact on worldwide tobacco prices, a
corresponding positive impact on the profitability of the industry, and
resulted in significant reductions in uncommitted tobacco inventories.
Business Strategy
The Company's primary business objective is to capitalize on growth in
worldwide consumption of American blend cigarettes by becoming the low-cost
preferred supplier of leaf tobacco to the large multinational manufacturers of
American blend cigarettes. To achieve this objective, the Company has
designed a strategy to position itself to meet the needs of its cigarette
manufacturing customers throughout the world by expanding its global
operations directly in the major tobacco exporting countries and by forming
strategic relationships with its major customers in countries with emerging
tobacco production in which such customers have specific needs. The Company's
ability to respond to the global expansion and changing needs of the large
multinational cigarette manufacturers is a critical factor in developing and
expanding customer relationships.
The principal components of the Company's business strategy are as follows:
Increase the Company's operations in low-cost tobacco growing regions. To
ensure breadth and depth of supply of tobacco, particularly the tobaccos used
in American blend cigarettes, the Company has expanded and plans to continue
to expand its operations in South America, Africa and China, the largest
production areas of flue-cured and burley tobaccos outside of the U.S. In
1995, the Company signed an agreement with the China National Tobacco
Corporation to provide additional access to a state-of-the-art processing
facility and tobacco sources in the Yunnan province. The Company also made
acquisitions in 1995 in Greece and Turkey, both of which are key producers of
oriental tobacco. The Company intends to utilize its agronomy expertise in
helping to develop low-cost sources of American blend quality tobaccos and its
existing relationships with the major multinational cigarette manufacturers to
gain market share in these growth regions.
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Capitalize on outsourcing trends. The Company anticipates further outsourcing
of leaf tobacco purchasing and processing by cigarette manufacturers. This
outsourcing trend is driven by (1) higher margins in cigarette production, (2)
the increasing sophistication required in sourcing leaf tobacco on a global
basis, (3) and continued privatization of tobacco and cigarette production
operations in certain countries. In late 1994, the Company began providing
all leaf tobacco auction buying in the U.S. for R. J. Reynolds Tobacco
Company, Inc. ("RJR"), the second largest cigarette producer in the U.S. More
recently, the Company began to purchase and process all of the auction market
tobacco requirements in the U.S. for Lorillard Tobacco Company ("Lorillard"),
a major cigarette producer in the U.S.
Improve efficiency and reduce operating costs. In connection with the Merger,
the Company initiated a restructuring plan for its operations. The plan was
designed to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve operating
efficiencies and increase regional unit accountability. This initiative
resulted in the recognition of various after tax charges in 1995 and 1996,
aggregating $17.8 million and $11.8 million, respectively. These are expected
to reduce the Company's annual operating costs and expenses by approximately
$25 million pre-tax in 1997 when the benefits are expected to be fully
realized. Since the Merger, the Company has completed the following in
connection with its restructuring plan:
- Consolidated the former Dibrell and Monk-Austin operations in Brazil to
operate as DIMON do Brazil and sold its 50% interest in a Brazilian
tobacco processing joint venture in November, 1995;
- Combined the former Dibrell and Monk-Austin operations in Malawi at
Centraleaf to operate as DIMON Malawi and dissolved a former Dibrell
joint venture in Malawi;
- Combined the former Dibrell and Monk-Austin operations in Zimbabwe to
operate as DIMON Zimbabwe;
- Revised plans for two factories in China's Yunnan Province to call for a
single plant in the city of Kunming; and
- Closed Monk-Austin's Lake City, South Carolina plant.
Expand operations in new markets. During the last decade, several of the
large multinational cigarette manufacturers have expanded their global
operations, particularly into Central and Eastern Europe and the former Soviet
Union, in order to increase their access to and penetration of new markets.
The Company believes this will increase demand for local sources of leaf
tobacco and local tobacco processing due to the semi-perishable nature of
unprocessed tobacco and the existence of domestic content laws in certain
foreign countries. The Company believes those factors will cause
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 sources of leaf tobacco.
Operations
The Company has developed an extensive international network through which it
purchases, processes and sells tobacco. In addition to its processing
facilities in Virginia and North Carolina, the Company owns or has an interest
in, processing facilities in Brazil and Zimbabwe, the two most significant
non-U.S. exporters of flue-cured tobacco, Malawi and Mexico, two of the
leading non-U.S. exporters of burley tobacco, and Greece and Turkey, the
leading exporters of oriental tobacco. The Company also has processing
facilities in Italy and Germany. In addition, the Company has entered into
contracts, joint ventures and other arrangements for the purchase of tobacco
grown in substantially all countries that produce export-quality, flue-cured
and burley tobaccos, including Argentina, Canada, Chile, Guatemala, India and
Tanzania.
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Purchasing. The Company purchases tobacco in approximately 26 countries.
Although in previous years the majority of the dollar value of tobacco sold by
the Company was produced domestically, the relative importance of tobacco
grown overseas to the Company's profitability has increased steadily. During
1996, approximately 57% of the dollar value of tobacco purchased by the
Company was purchased in the U.S. Approximately 17%, 9% and 3% of the dollar
value of tobacco purchased by the Company during 1996 was purchased in Brazil,
Zimbabwe and Malawi, respectively. The balance of the Company's tobacco
purchases during 1996 were made in other tobacco growing countries, including
Argentina, Bulgaria, Canada, Chile, China, Germany, Guatemala, France, Greece,
India, Italy, Mexico, Poland, the former Soviet Union, Tanzania and Turkey.
The Company believes it has access to a diverse supply of tobacco grown in a
number of regions throughout the world and can respond quickly to factors that
may cause fluctuations in the quality, yield or price of tobacco crops grown
in any one region.
Tobacco generally is purchased at auction or directly from growers. Tobacco
grown in the U.S., Canada, Malawi and Zimbabwe is purchased by the Company
principally on auction markets. The Company purchases domestic tobacco on the
flue-cured, burley and air-cured auction markets in Florida, Georgia,
Kentucky, Maryland, North Carolina, South Carolina, Tennessee and Virginia for
shipment to the Company's facilities in North Carolina and Virginia for
processing to customer specification. The Company usually purchases tobacco
at the auction markets after receiving specific customer orders or indications
of customers' upcoming needs. The Company's network of buyers allows the
Company to cover the major auctions of flue-cured and burley tobaccos
throughout the world. These buyers are experts in differentiating hundreds of
grades of tobacco based on customer specifications and preferences that take
into account, among other factors, the texture, visual appearance and aroma of
the tobacco.
In non-auction markets such as Argentina, Brazil, Greece and Turkey, the
Company purchases tobacco directly from farmers or from local entities that
have arrangements with farmers. These direct purchases are often made by the
Company based upon its projection of the needs of its long-standing customers
rather than against specific purchase orders. The Company's arrangements with
farmers vary from locale to locale depending on the Company's predictions of
future supply and demand, local historical practice and availability of
capital. For example, in Brazil, the Company generally contracts to purchase
a farmer's entire tobacco crop at the market price at the time of harvest
based on the quality of the tobacco delivered. Pursuant to these purchase
contracts, the Company provides farmers with fertilizer and other materials
necessary to grow tobacco and may extend loans to farmers to finance the crop.
Under longer-term arrangements with farmers, the Company may also finance
farmers' construction of curing barns. In addition, the Company's field
representatives maintain frequent contact with farmers prior to and during the
growing and curing seasons to provide technical assistance to improve the
quality and yield of the crop. In other non-auction markets, such as
Argentina and India, the Company buys tobacco from local entities that have
purchased tobacco from farmers and supervises the processing of that tobacco
by those local entities. The Company believes that its long-standing
relationships with its customers are vital to its operations outside of the
auction markets.
Processing. The Company processes tobacco to meet each customer's
specifications as to quality, yield, chemistry, particle size, moisture
content and other characteristics. The Company processes purchased tobacco in
its 17 tobacco facilities located throughout the world. Unprocessed tobacco
is a semi-perishable commodity that generally must be processed within a
relatively short period of time to prevent fermentation or deterioration in
quality. Accordingly, the Company has located its processing facilities close
to its principal sources of tobacco.
Upon arrival at the Company's processing plants, flue-cured and burley tobacco
is first reclassified according to grade. Most of that tobacco is then blended
to meet customer specifications regarding color, body and chemistry, threshed
to remove the stem from the leaf and further processed to produce strips of
tobacco and separate out small scrap. The Company also sells a small amount
of processed but unthreshed flue-cured and burley tobacco in loose-leaf and
bundle form to certain of its customers.
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Processed flue-cured and burley tobacco is redried to remove excess moisture
so that it can be held in storage by customers or the Company for long periods
of time. After redrying, whole leaves, bundles, strips or stems are
separately packed in cases, bales, cartons or hogsheads for storage and
shipment. Packed flue-cured and burley tobacco generally is transported in
the country of origin by truck or rail, and exports are moved by ship.
Prior to and during processing, steps are taken to ensure consistent quality
of the tobacco, including the regrading and removal of undesirable leaves,
dirt and other foreign matter. Customer representatives are frequently
present at the Company's facilities to monitor the processing of their
particular orders. Increased customer requirements and competition among leaf
merchants have led to improvements in processing designed to minimize waste
and thereby increase yield. Throughout the processing, Company technicians
use laboratory test equipment for quality control to ensure that the product
meets all customer specifications.
From time to time, the Company processes and stores tobacco acquired by
various stabilization cooperatives under the U.S.'s price support program.
The Company can derive significant revenues from the fees charged for such
services, particularly in years when a substantial portion of the domestic
tobacco crop is acquired by such cooperatives under the program. While these
revenues are not material to the Company's net sales, they result in
additional recovery of fixed cost which may be significant to gross profit.
Selling. The Company sells its tobacco to manufacturers of cigarettes and
other consumer tobacco products located in about 60 countries around the
world. The Company ships tobacco to international locations designated by
these manufacturers. A majority of the shipments of tobacco are to factories
of these manufacturers that are located outside the U.S. In certain
countries, the Company also uses sales agents to supplement its selling
efforts. Several of these customers individually account for a significant
portion of the Company sales in a normal year. The loss of any one or more of
such customers could have a materially adverse effect on the tobacco business
of the Company.
The consumer tobacco business in most markets is dominated by a relatively
small number of large multinational cigarette manufacturers and by government
controlled entities. Approximately 55% and 52% of the Company's consolidated
tobacco sales for 1996 and 1995, respectively, were contracted to be delivered
to 37 customers which the Company believes are owned by or under common
control of Japan Tobacco, Philip Morris or RJR, each of which contributed in
excess of 10% of total tobacco sales, with RJR and Philip Morris accounting
for significantly more sales than Japan Tobacco. No other customer accounts
for more than 10% of the Company's sales. See "-- Global Operations -- United
States" and Note M to the Company's Consolidated Financial Statements for the
year ended June 30, 1996, included herein as part of Item 8. The Company
generally has maintained relationships with its customers for over forty
years. In 1996, the Company delivered approximately 38% of its tobacco sales
to customers in the U.S., approximately 28% to customers in Europe and the
remainder to customers located in Asia, South America and elsewhere.
As of June 30, 1996, the Company's consolidated entities had tobacco
inventories of approximately $315 million and approximately $254 million in
commitments or indications from customers for purchases of tobacco. At June
30, 1995, those entities had tobacco inventories of approximately $410 million
and approximately $256 million in commitments or indications from customers
for purchases of tobacco. Substantially all of the June 30, 1996, commitments
are expected to be delivered in 1997. The level of purchase commitments for
tobacco fluctuates from period to period and is significant only to the extent
it reflects short-term changes in demand for leaf tobacco. The Company makes
85-95% of its leaf tobacco purchases pursuant to customer orders or supply
contracts or customer indications of anticipated need, with most purchases
made based on indications. Customers are legally bound to purchase tobacco
acquired by the Company pursuant to orders, but no contractual obligation
exists with respect to tobacco purchased in response to indications. However,
the Company has done business with most of its customers for many years and
has never experienced a significant failure of customers to purchase tobacco
for which they have given indications. Other than the contracts with RJR and
Lorillard described below under "--Global Operations --United States," the
Company has no significant supply agreements with its customers.
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The Company typically makes sales based on a customer's letter of credit, by
cash against documents or by payment against invoice. Substantially all of
the Company's sales throughout the world are denominated in U.S. dollars.
While payment for tobacco sold by the Company is usually received after the
tobacco has been processed and shipped, some customers make advances to the
Company periodically throughout the buying season as tobacco is purchased by
the Company for their accounts. Distribution of processed tobacco is made by
delivery from the Company's storage facilities directly to customers, by truck
or rail to customers' storage or manufacturing facilities or to port for
shipping.
Global Operations
United States. The Company owns and operates four processing facilities in
North Carolina and Virginia. The price of tobacco grown in the U.S. is
supported under a government price support program which also establishes
quotas for production. Consequently, U.S.-grown tobacco is typically more
expensive than tobacco grown elsewhere. Although domestic tobacco historically
has accounted for a large portion of the Company's sales, the Company expects
that, because of this price differential and its generally increasing business
outside of the U.S., sales of flue-cured and burley tobacco grown in the U.S.
and related services will be less significant than in the past. The Company
believes that any short-term decline in its domestic business should be offset
in the short-term by increased foreign operations.
In late 1994, Monk-Austin entered into an agreement with RJR to purchase all
of RJR's U.S. auction market tobacco requirements. In late 1995, the Company
entered into an agreement with Lorillard pursuant to which the Company will
purchase and process all of Lorillard's domestic auction market tobacco
requirements. Generally, the contracts establish a framework for pricing the
Company's services (which generally is negotiated with respect to crop year,
grade of tobacco leaf or type of service provided based on market prices), do
not provide for minimum purchases and are terminable upon reasonable notice.
The Company expects that purchases under these agreements will account for a
substantial portion of its tobacco purchases in the U.S. in the future.
Brazil. The Company believes it is one of the two largest independent leaf
tobacco merchants in Brazil. The Company exports the majority of the tobacco
that it processes in Brazil to its customers around the world. In 1996, the
Company derived approximately 24% of its tobacco revenue from its Brazilian
operations.
In 1996, the Company merged its two wholly owned subsidiaries, Tabra and
Dibrell do Brazil to form DIMON do Brazil. DIMON do Brazil has three modern
tobacco processing facilities located in the center of Brazil's tobacco
production area. Brazil represents the Company's most significant foreign
operation in virtually all respects, including purchasing volume, processing
and storage capacities and operating income potential. Through the merger and
resulting reduction in duplicative functions and facilities the Company
believes that it will realize certain economies of scale. The Company
believes that these certain economies of scale and savings have been achieved
in 1996 operating results and will be fully reflected in 1997 operating
results.
Zimbabwe and Malawi. The Company exports the majority of the tobacco it
processes in Zimbabwe and Malawi to its customers around the world. In 1996,
the Company derived approximately 12% of its tobacco revenue from its
Zimbabwean and Malawian operations.
In 1995, the Company combined the former Dibrell and Monk-Austin operations in
Zimbabwe and Malawi to form two wholly-owned subsidiaries, DIMON Zimbabwe and
DIMON Malawi. Through DIMON Zimbabwe the Company purchases, processes in two
facilities and exports flue-cured and burley tobacco grown in Zimbabwe.
Through DIMON Malawi the Company purchases, processes in one facility and
exports flue-cured and burley tobacco grown in Malawi.
Greece and Turkey. The Company believes it is the largest exporter of
processed oriental tobacco in the world as a result of the acquisition of
additional oriental tobacco processing facilities in Greece and Turkey.
Greece and Turkey are the most important producers of oriental tobaccos.
Through its wholly-owned subsidiaries, DIMON Hellas Tobacco SA and DIMON Turk
Tutun AS, the Company buys, processes in two facilities in each country and
exports oriental tobacco grown in each country.
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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. In addition, the Company owns and operates
processing facilities in Italy and Germany.
In certain countries, such as China and India, the Company has processing
agreements with other processors to use their facilities under the supervision
of the Company's employees. In several South American countries where the
Company operates, tobacco is bought from the farmers by the processors at
negotiated prices, and it is necessary to prefinance the crop by making
advances of cash or materials to the farmers prior to and during the growing
season.
Competition
The leaf tobacco industry is highly competitive. Competition among dealers in
leaf tobacco is based on the price charged for products and services as well
as the dealers' ability to meet customer specifications in the buying,
processing and financing of tobacco. The Company believes that it is well
positioned to meet this competition, particularly in view of its important
processing facilities in the U.S., Brazil and other major tobacco growing
countries. Among independent tobacco leaf merchants, the principal competitors
are Universal Corporation ("Universal"), Standard Commercial Corporation and
Intabex Holding Worldwide S.A. Of the independent leaf tobacco merchants, the
Company believes that, based on revenues, it ranks second in established
worldwide market share. The Company further believes that among independent
tobacco leaf merchants, it has the largest or second largest market share in
Brazil, Greece, Turkey, the U.S. and Zimbabwe. Universal's market share in
the U.S. and Zimbabwe is considerably greater than that of the Company.
Seasonality
The purchasing and processing activities of the Company's tobacco business are
seasonal. Flue-cured tobacco grown in the U.S. generally is purchased during
the five-month period beginning in July and ending in November. U.S.-grown
burley tobacco is usually purchased from late November through January or
February. Tobacco grown in Brazil usually is purchased from January through
June. Other markets around the world last for similar periods, although at
different times of the year, and as the importance of these markets has grown,
seasonal fluctuations in the Company's results of operations have decreased.
Mature tobacco, prior to being processed and packed, is a semi-perishable
commodity. The production cycle for redrying and packing is relatively short.
For example, flue-cured tobacco in the U.S. is generally processed, packed and
invoiced within the same five-month period (July through November) that it is
purchased. During this period inventories of unprocessed tobacco, inventories
of redried tobacco and trade accounts receivable normally reach peak levels in
succession. Current liabilities, particularly advances from customers and
short-term notes payable to banks, normally reach their peak in this period as
a means of financing the seasonal expansion of current assets. Increasing
amounts of U.S.-grown burley and foreign tobacco are now being processed in
periods other than July through November, reducing the seasonal fluctuations
in working capital. At June 30, the end of the Company's fiscal year, the
seasonal components of the Company's working capital reflect primarily the
operations related to foreign grown tobacco.
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Flowers
Operations
The Company's fresh-cut flower operations consist of buying flowers from
sources throughout the world and transporting them, normally by air, to
operating units for resale to wholesalers and retailers through its wholly-
owned flowers subsidiary, Florimex Worldwide, Inc. ("Florimex"). For the year
ended June 30, 1996, the Company's flower operations produced approximately
18% of the Company's revenues and represented approximately 10% of the
Company's consolidated assets at year end.
Florimex operates through 57 offices in 17 countries, including Austria,
Canada, Colombia, the Czech Republic, Ecuador, France, Germany, Italy, Japan,
Poland, The Netherlands, Spain, Sweden, Switzerland, Thailand, the United
Kingdom and the U.S. The activities of certain of these offices are limited
to acquiring flowers in the country of origin, but most are engaged in
importation and distribution. Florimex is also engaged in additional value-
added services through the design and assembly of floral bouquets for sale to
supermarket retailers. Virtually all offices are operated as corporate profit
centers with the general manager receiving a bonus related to the financial
performance of the operation. In a limited number of cases, the local general
manager owns a minority share of the unit's equity and participates in
dividend distributions.
Florimex's Dutch exporting operations, Baardse, are headquartered in Aalsmeer,
The Netherlands, inside the premises of the world's largest flower auction
facilities. In addition to the Aalsmeer auction, Florimex routinely acquires
flowers from all principal Dutch flower auctions. Florimex's Dutch exporting
operations sell and ship product directly to Florimex's fresh-cut flower
operations and its competitors.
Business Strategy
The Company's business strategy for Florimex is to increase profitability by
increasing sales volume within its established distribution system,
rationalizing its cost structure and reducing credit losses. The Company
believes that its extensive global network, with buying capacity in all major
flower production markets and broad based distribution arrangements in the
world's primary wholesale and retail flower markets, gives it substantial
competitive advantages.
The principal components of Florimex's business strategy are as follows:
Expansion of Sales; New Distribution Channels. Florimex expects to increase
its sales by focusing on areas of growing per capita consumption of flowers,
particularly in non-traditional flower consumption markets in Europe and North
America. To accomplish this objective, Florimex has recently (1) restructured
its operations in North America to concentrate on (a) the growing channels of
supermarkets and mass merchant retailers and (b) bouquet sales in the U.S. and
(2) concentrated on sales in Europe, particularly eastern Germany and the
Czech Republic.
Rationalize operations. Florimex has realized substantial cost savings by
reducing personnel, streamlining administrative functions globally and by
eliminating unprofitable operations.
Reduce credit losses. As the timely collection of trade accounts receivable
has traditionally represented a considerable business risk to Florimex's
flower operations, trade accounts receivable reporting and credit
authorization procedures have been entirely revised. These revisions include
(1) the implementation of centralized credit reporting procedures, (2) an
overall reassessment of customer credits, (3) the culling of customer listings
for the various Florimex companies in order to concentrate on higher margin
accounts, (4) requiring bi-monthly updates to the head office on outstanding
balances, and, (5) the creation of a prompt response program for customers who
begin to evidence slow payer characteristics. These revised policies and
procedures reduced bad debt expenses for 1996 by 75% compared to the average
for the previous five years.
-9-
<PAGE>
Sources of Supply
Florimex acquires its fresh-cut flowers from more than 300 suppliers located
in more than 50 countries on five continents. Its primary sources of supply
include The Netherlands (via the Dutch auction system), Kenya (via a renewable
exclusive supplier contract effective since 1976), Columbia, Ecuador and
Thailand. Florimex purchased $40.9 million, or 13.9%, of its total purchases
in 1996 ($33.7 million, or 11.5% in 1995) from its Dutch exporting operations
on terms similar to those offered to independent parties. Florimex annually
buys approximately 30% of the flower crop grown on independent supplier farms
in Kenya. Florimex believes that its existing sources of supply are adequate
at current sales levels. Florimex also believes that its close relationships
with commercial and cargo airlines give it a competitive advantage by
permitting it to transport its products around the world expeditiously and
cost effectively.
Customers and Market Potential
Florimex sells to thousands of wholesalers and retailers throughout Europe,
North America and Asia. No customer accounts for a significant portion of
Florimex's sales in a normal year, and the loss of any one customer or a group
of related customers should not have a material adverse effect on Florimex's
business.
Industry statistics indicate that the annual retail sales of fresh-cut flowers
in the U.S., the largest single flower market in the world, exceed $6.5
billion. While the routine purchase of flowers is a tradition in the mature
European market, the U.S. market is growing and offers an opportunity for
significant penetration. The primary market growth in the U.S. is occurring
among supermarkets. During 1995, the Company substantially redirected its
U.S. flower resources to serve this important group of customers.
Competition
Competition within the fresh-cut flower distribution industry is based on
adequate and reliable supplies of competitively priced, fresh, good quality
flowers. Prices quoted to wholesalers are volatile and often change several
times a day. Credit terms are also important. Major competitors are numerous
and vary according to market. However, no cut-flower operation, including
Florimex, has more than a small share of the worldwide market. Competition is
therefore intense. Based on its long-standing sources of supply and well-
developed purchasing and distribution facilities, Florimex believes that it
competes effectively.
Seasonality
Sales of fresh-cut flowers are seasonal and are significantly affected by peak
holiday demand. Generally the June through August months have low sales
levels, with sales increasing through the fall and Christmas season. Special
days, such as Valentine's Day and Mother's Day, generally result in material
sales increases in February through May.
Employees
The Company's consolidated entities employ about 2,800 persons, excluding
seasonal employees, in its worldwide tobacco operations. In the U.S. tobacco
operations the Company's consolidated entities employ about 900 persons,
excluding 1,200 seasonal employees. Most seasonal employees are covered by
collective bargaining agreements with several U.S. labor unions. In the non-
U.S. tobacco operations the Company's consolidated entities employ about 1,900
persons, excluding 6,650 seasonal employees. The Company's worldwide
consolidated cut flower operation entities employ about 1,300 persons,
excluding seasonal employees. The Company considers its employee relations to
be satisfactory.
-10-
<PAGE>
Government Regulation, Environmental Matters and Other Matters
See " Managements' Discussion and Analysis of Financial Condition and Results
of Operations -- Factors that May Affect Future Results" for a discussion of
government regulation, environmental compliance and other matters that may
affect the Company's business.
-11-
<PAGE>
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES
As discussed in Item 1, the Company operates in two business segments: the
purchasing, processing and selling of leaf tobacco and the purchasing and
selling of cut flowers. Financial information concerning segments and
geographical operations is included in Note M to the Notes to Consolidated
Financial Statements. Information with respect to the Company's working
capital appears in Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources.
ITEM 2. PROPERTIES
Following is a description of the material properties of the Company:
Corporate
The Company's corporate headquarters are located in Danville, Virginia; the
tobacco operations are headquartered in Farmville, North Carolina, and
headquarters for flowers operations are in Nuremberg, Germany.
Tobacco Facilities
The Company operates each of its tobacco processing plants for seven to nine
months during the year to correspond with the applicable growing season.
While the Company believes its processing facilities are being efficiently
utilized, the Company also believes its domestic processing facilities and
certain foreign processing facilities have the capacity to process additional
volumes of tobacco if required by customer demand.
The following is a listing of the various properties used in the tobacco
operations:
<TABLE>
<CAPTION>
AREA IN
LOCATION USE SQUARE FEET
<C> <C> <C>
UNITED STATES
DANVILLE, VA FACTORY/STORAGE 2,017,000
KENBRIDGE, VA STORAGE (LEASED) 1,665,000
GREENVILLE, N.C. FACTORY/STORAGE 969,000
FARMVILLE, N.C. FACTORY/STORAGE 1,136,000
KINSTON, N.C. FACTORY/STORAGE 1,149,000
LAKE CITY, S.C. STORAGE 252,000
SOUTH AMERICA
VERA CRUZ, BRAZIL FACTORY/STORAGE 1,617,000
SANTA CRUZ, BRAZIL FACTORY/STORAGE 1,693,000
VENANCIO AIRES, BRAZIL FACTORY/STORAGE 848,000
ZACAPA, GUATEMALA STORAGE 15,000
AFRICA
LILONGWE, MALAWI FACTORY 248,000
HARARE, ZIMBABWE FACTORY(2)/STORAGE 1,222,000
EUROPE
KARLSRUHE, GERMANY FACTORY/STORAGE 320,000
THESSALONIKI, GREECE FACTORY(2)/STORAGE 651,000
SPARANISE, ITALY FACTORY/STORAGE 541,000
IZMIR, TURKEY FACTORY(2)/STORAGE 290,000
</TABLE>
-12-
<PAGE>
Flower Facilities
Florimex has 57 different operating facilities throughout the world. The
owned properties include an international distribution warehouse in
Kelsterbach, Germany (near Frankfurt Airport), with offices and storages of
about 60,000 square feet. In Nuremberg, the headquarters of Florimex, owned
properties include office and storages of about 300,000 square feet. At all
Florimex locations there are various properties, generally located near
airports, consisting of owned or leased offices and storages. The storages at
each location include cooler storages of various sizes to accommodate the
needs of individual locations. The Company's management believes its flower
operation facilities, including office, distribution and warehouse facilities,
are efficiently utilized and are adequate for current and projected sales
levels for the foreseeable future. Baardse, the Dutch flower exporter, has
leased about 110,000 square feet of office and storage associated with the
Aalsmeer auction operation. Aalsmeer has the largest flower auction facility
in The Netherlands. Baardse also owns greenhouses in Aalsmeer with 125,000
square feet.
All of the above property is owned, except as otherwise indicated, by the
Company, its subsidiaries or investee companies. The Company believes that
the facilities are generally well maintained and in good operating condition
and are suitable and adequate for its purposes at current and reasonably
anticipated future sales levels.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-13-
<PAGE>
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of June 30,
1996, are set forth below. Executive officers serve at the pleasure of the
Board of Directors and are elected at each annual organizational meeting of
the Board. Mr. John M. Hines and Mr. Thomas H. Faucett retired effective June
30, 1996. On August 26, 1996, Mr. Brian J. Harker, currently Senior Vice
President of DIMON International, Inc., was elected Executive Vice President
and Chief Financial Officer of DIMON Incorporated effective October 1, 1996.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Claude B. Owen, Jr. 51 Chairman of the Board - Chief Executive Officer of the
Company on October 21, 1994. He also served as Chairman,
Chief
Executive Officer and President of Dibrell from July 1993
until the effective time of the Merger and as Chairman of the
Board and Chief Executive Officer of Dibrell from February
1990
until July 1993. Mr. Owen also serves as a director for
American National Bankshares, Inc. and Richfood Holdings,
Inc.
Albert C. Monk III 56 President of the Company on October 21, 1994 and President
and Chief Executive Officer of DIMON International on January
23, 1995. He also served as Chairman, Chief Executive Officer
and President of Monk-Austin beginning from November 8, 1994
until the effective time of the Merger, Chief Executive
Officer and President of Monk-Austin since 1992 and President
of Monk-Austin since 1990. Mr. Monk is the first cousin of
Robert T. Monk, Jr., a director of DIMON Incorporated.
John M. Hines 56 Executive Vice President of the Company on February 22,
1995. He retired from the Company effective June 30, 1996 but
will continue to serve as a consultant to the Company for two
years. He also served as Executive Vice President and Chief
Financial Officer of Monk-Austin from 1990 to the effective
time of the Merger.
Thomas H. Faucett 55 Chief Financial Officer of the Company since January 23,
1995; with Dibrell Brothers, Inc. Mr. Faucett was Senior
Vice President - Chief Financial Officer beginning in
October, 1985; and was a Director beginning in 1986.
</TABLE>
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
DIMON Incorporated's common stock is traded on the New York Stock Exchange,
under the ticker symbol "DMN". The Common Stock began trading on the NYSE on
April 3, 1995.
The following table sets forth for the periods indicated the high and low
reported sales prices of the Common Stock as reported by the NYSE and the high
and low bid prices as reported by Nasdaq and the amount of dividends declared
per share for the periods indicated.
<TABLE>
<CAPTION>
DIMON
Common Stock
Dividends
High Low Declared (1)
<S> <C> <C> <C>
Fiscal Year 1996
Fourth Quarter. . . . . . . . . . . $19 1 / 2 $16 1/8 $.135
Third Quarter . . . . . . . . . . . 20 7 / 8 16 .135
Second Quarter. . . . . . . . . . . 18 3 / 4 13 3 / 4 .135
First Quarter . . . . . . . . . . . 17 5 / 8 14 5 / 8 .135
Fiscal Year 1995
Fourth Quarter. . . . . . . . . . . 18 5 / 8 14 .135
</TABLE>
<TABLE>
<CAPTION>
Dibrell Monk-Austin
Common Stock (2) Common Stock (4)
High-Low (3) High-Low
<S> <C> <C> <C>
Third Quarter . . . . . . $14 2 / 3 - 10 2 / 3 $13 1 / 4 - 11 5 / 8 $.133
Second Quarter. . . . . . 14 5 / 6 - 13 15 - 12 7 / 8 .133
First Quarter . . . . . . 13 - 9 1/4 15 - 12 1 / 4 .133
</TABLE>
______________________________________
(1) Dividends declared through the third quarter of 1995 reflect the
dividend policy of Dibrell which is being continued by DIMON. Monk-Austin
paid no dividends.
(2) Prior to April 1, 1995, Dibrell common stock was traded on The Nasdaq
National Market.
(3) Adjusted to reflect the issuance of 1.5 shares of DIMON Common Stock
for each share of Dibrell common stock in the Merger.
(4) Prior to April 1, 1995, Monk-Austin common stock was traded on the
NYSE.
As of June 30, 1996, there were 4,596 shareholders, including approximately
3,300 beneficial holders of its Common Stock. The Company pays dividends
quarterly.
The Company is subject to certain restrictions on its ability to pay
dividends. See "Managements' Discussion and Analysis of Financial Condition
and Results of Operations -- Restrictions of Dividends."
-15-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL STATISTICS
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amounts) 1996 1995 1994 1993 1992
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Summary of Operations
Sales and other operating revenues .$2,167,473 $1,941,188 $1,464,778 $1,706,294 $1,712,567
Cost of sales and expenses . . . . . 2,037,702 1,892,166 1,435,016 1,572,479 1,595,431
Restructuring and merger costs . . . 15,360 25,955 - - -
______________________________________________________________________
Operating income. . . . . . . . . . $ 114,411 $ 23,067 $ 29,762 $ 133,815 $ 117,136
Interest expense. . . . . . . . . . 46,924 45,231 35,117 38,128 42,837
______________________________________________________________________
Income (loss) from continuing
operations before income taxes,
minority interest, equity in
net income (loss) of investee
companies, extraordinary
items and cumulative effect
of accounting changes. . . . . . .$ 67,487 $ (22,164) $ (5,355) $ 95,687 $ 74,299
Income taxes. . . . . . . . . . . . (26,995) (5,980) (2,767) (31,173) (23,590)
Income (loss) applicable to
minority interest. . . . . . . . . 292 216 466 486 214
Equity in net income (loss) of
investee companies . . . . . . . . (274) (1,435) 687 1,404 5,112
U.S. taxes provided on
investee companies . . . . . . . . (56) (370) (589) (145) -
_______________________________________________________________________
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes . . . . . . . . $ 39,870 $ (30,165) $ (8,490) $ 65,287 $ 55,607
Extraordinary items:
Partial recovery of (loss) on
Iraqi receivable, net of tax . . . 1,400 - - - (3,637)
Reduction of foreign
income tax arising from
utilization of prior
years' operating losses. . . . . - - - - 6,210
Cumulative effect of accounting changes:
Postretirement benefit plans,
net of tax. . . . . . . . . . . . - - - (9,746) -
Income taxes. . . . . . . . . . . . - - - 8,963 -
_______________________________________________________________________
Net Income (Loss). . . . . . . . . . $ 41,270 $ (30,165) $ (8,490) $ 64,504 $ 58,180
Per Share Statistics
Primary:
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . $ 1.00 $ (.79) $ (0.22) $ 1.76 $ 1.57
Extraordinary items . . . . . . . . .04 - - - 0.07
Cumulative effect of
accounting changes. . . . . . . . - - - (0.02) -
Net income (loss) . . . . . . . . . 1.04 (.79) (0.22) 1.74 1.64
Fully diluted:
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . .98 * * 1.65 1.40
Extraordinary items . . . . . . . . .03 - - - 0.07
Cumulative effect of
accounting changes. . . . . . . . - - - (0.02) -
Net income (loss) . . . . . . . . . 1.01 * * 1.63 1.47
Dividends paid (1) . . . . . . . . . 0.54 0.535 0.495 0.42 0.34
Stockholders' equity . . . . . . . . 7.46 6.27 7.57 8.32 6.28
Return on average stockholders'
equity . . . . . . . . . . . . . . . 14.88% -11.45% -2.85% 24.30% 29.46%
</TABLE>
-16-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (continued)
FIVE-YEAR FINANCIAL STATISTICS (continued)
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amount) 1996 1995 1994 1993 1992
______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Current assets . . . . . . . . . . .$ 668,775 $ 731,119 $ 685,443 $ 666,454 $ 654,447
Current liabilities. . . . . . . . . 246,433 453,522 467,776 423,854 436,042
______________________________________________________________________
Working capital. . . . . . . . . . .$ 422,342 $ 277,597 $ 217,667 $ 242,600 $ 218,405
Working capital ratio. . . . . . . . 2.7 to 1 1.6 to 1 1.5 to 1 1.6 to 1 1.5 to 1
Property, plant and
equipment (net) . . . . . . . . . .$ 236,775 $ 223,049 $ 209,739 $ 189,549 $ 163,665
Total assets . . . . . . . . . . . .$1,020,014 $ 1,093,608 $1,043,816 $ 998,520 $ 940,266
Revolving credit notes and
other long-term debt. . . . . . . .$ 390,871 $ 292,528 $ 188,825 $ 180,270 $ 199,494
Convertible Subordinated
Debentures . . . . . . . . . . . .$ - $ 56,370 $ 56,475 $ 56,475 $ 56,900
Stockholders' equity . . . . . . . .$ 315,848 $ 238,806 $ 288,314 $ 308,149 $ 222,962
Other Statistics
Weighted average common shares,-
primary . . . . . . . . . . . . . . 39,671 38,100 38,091 37,072 35,354
Weighted average common shares,
fully diluted . . . . . . . . . . . 42,464 42,355 42,297 41,310 39,626
Common shares outstanding
at year end . . . . . . . . . . . . 42,366 38,092 38,069 37,035 35,351
Number of stockholders
at year end (2) . . . . . . . . . . 4,596 4,249 4,940 4,919 3,770
Dividends paid . . . . . . . . . . .$ 21,731 $ 15,570 $ 13,014 $ 9,818 $ 8,629
________________________________________________________________________
</TABLE>
* Computation of loss per share is anti-dilutive for the years 1995 and 1994.
(1) Dividends declared through the third quarter of 1995 reflect the
dividend policy of Dibrell which is being continued by DIMON.
(2) Includes the number of Shareholders of record and non-objecting
beneficial owners.
-17-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, references to years refer to the Company's fiscal
year ended June 30.
General
The Company is engaged in two business segments: the purchasing, processing
and selling of leaf tobacco and the purchasing and selling of fresh-cut
flowers.
The Company believes that it is the world's second largest independent
purchaser and processor of leaf tobacco. Approximately 82% and 80% of the
Company's revenues in 1996 and 1995, respectively, were derived from its
tobacco operations.
The Company's tobacco business is generally conducted in U.S. dollars, as is
the business of the industry as a whole. Accordingly, there is minimal
currency risk related to the sale of tobaccos. 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 individual
countries of tobacco origin. Fluctuations in the value of foreign currencies
can significantly affect the Company's operating results. In particular, the
Company has a significant concentration of its purchasing, processing and
exporting operations in southern Brazil. In recent years, Brazil's economic
problems have received wide publicity, and that country has taken and is
expected to continue to take various actions relating to foreign currency
exchange controls and adjustments for devaluation of the currency and
inflation. While such controls generally influence the amount of cash
dividends remitted from Brazil and such adjustments can affect the Company's
processing costs, they have not and are not expected to adversely affect the
Company's ability to export tobacco from Brazil. See Note N to the Company's
Consolidated Financial Statements for the year ended June 30, 1996, included
herein.
On April 1, 1995, Dibrell and Monk-Austin merged into DIMON. The Merger has
been accounted for as a pooling of interests and all consolidated financial
statements have been restated to include the historical results of operations
of both Dibrell and Monk-Austin, including the effects of conforming the
accounting policies of the two former entities. Recorded assets and
liabilities have been carried forward at their historical book values.
In connection with the Merger, the Company initiated a restructuring plan
including both the tobacco and flower businesses. The global consolidation
and rationalization program was successfully concluded during 1996. The plan
was designed to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve operating
efficiencies and increase regional unit accountability. This initiative
resulted in the recognition of various after tax charges in 1995 and 1996,
aggregating $17.8 million, and $11.8 million, respectively. These charges are
expected to reduce the Company's annual operating costs and expenses by
approximately $25 million pre-tax in 1997 when the benefits are expected to be
fully realized.
In fiscal 1996, following the completion of the Merger, the Company
implemented the Refinancing Plan (the "Refinancing Plan"), which was designed
to reduce its financial leverage, decrease its reliance on short-term
uncommitted lines of credit and diversify its sources of debt financing. The
Refinancing Plan consisted of the following three components:
-18-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
- The call for redemption in March 1996 of the Company's approximately
$54.3 million principal balance of the 7 3/4% Debentures due 2006
(the "7 3/4% Debentures");
- The sale of $125 million 8 7/8% Senior Notes due 2006 (the "Notes"),
completed on May 29, 1996; and
- The execution of a $240 million Credit Agreement, dated as of March 15,
1996 (the "New Credit Facility"), replacing the Company's $250 million
credit facility (the "Former Credit Facility").
The Company has used the net proceeds from the offering of the Notes to reduce
the level of borrowings under the Company's uncommitted unsecured short-term
lines of credit. The Company has historically financed its operations through
a combination of short-term lines of credit, customer advances, cash from
operations and equity and equity-linked securities. As the Company increased
in size and scope, it became increasingly dependent on uncommitted short-term
lines of credit. The Company now believes that it is prudent to finance a
larger percentage of its working capital with longer term, more permanent
capital. The Company believes that the longer maturity of the Notes, combined
with the reduced financial leverage resulting from the conversion of the
7 3/4% Debentures and the less restrictive terms of the New Credit Facility,
will give the Company increased financial flexibility.
The remainder of the Company's revenues are derived from purchasing and
selling fresh-cut flowers. Florimex has two principal operations, importing,
exporting and wholesaling fresh-cut flowers and exporting fresh-cut flowers
purchased primarily from the major flower auctions in The Netherlands.
Approximately 18% of the Company's 1996 revenues were derived from its flower
operations.
Results of Operations
The following table expresses items in the Statement of Consolidated Income as
a percentage of sales for each of the three most recent years. Any reference
in the table and the following discussion to any given year is a reference to
the Company's fiscal year ended June 30.
<TABLE>
<CAPTION>
Years Ended
_____________________________________
1996 1995 1994
<S> <C> <C> <C>
____________________________________________________________________________________
Sales and other operating revenues. . . . . 100.0% 100.0% 100.0%
Cost of goods and services and expenses . . 87.9 90.6 90.0
Selling, administrative and general
expenses. . . . . . . . . . . . . . . . . 6.1 6.9 8.0
Restructuring and merger related costs. . . 0.7 1.3 -
_______________________________________
Operating income. . . . . . . . . . . . . . 5.3 1.2 2.0
Interest expense. . . . . . . . . . . . . . (2.2) (2.4) (2.4)
_______________________________________
Income (loss) before income taxes, minority
interest, equity in net loss of
investee companies . . . . . . . . . . . 3.1 (1.2) (0.4)
Income taxes. . . . . . . . . . . . . . . . 1.2 0.3 0.2
Equity in net loss of investee companies. . - (0.1) -
_______________________________________
Net income (loss) . . . . . . . . . . . . . 1.9 (1.6) (0.6)
=======================================
</TABLE>
-19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1996 to the Year Ended June 30, 1995
The Company's sales and other operating revenues in 1996 were $2.167 billion,
an increase of 11.7% from $1.941 billion in 1995. Sales from tobacco
operations increased 13.8%, from $1.555 billion in 1995 to $1.770 billion in
1996, primarily due to higher prices on tobacco from South America and
increased quantities sold primarily from Europe and Africa. The sales from
South America increased in the fourth quarter in 1996 compared to 1995 as
demand improved, but the amount is not expected to reduce sales in 1997. See
"--Factors that May Affect Future Results." The higher tobacco prices from
South America accounted for $102.0 million and increased quantities sold from
Europe and Africa accounted for $85.5 million and $29.4 million, respectively.
The increased sales of tobacco from Europe resulted from the operations
acquired in Greece, Italy and Turkey.
Sales and other operating revenues of flowers increased 2.9%, from $385.9
million in 1995 to $397.3 million in 1996. The increase in the Company's sales
of flowers was primarily due to the increased export sales from The
Netherlands.
Cost of sales and expenses of the Company's tobacco operations before
restructuring and merger related costs increased 9.2% in 1996 from 1995 due
primarily to the 13.8% increase in net sales. The world oversupply of
tobacco, which began in 1993, started to improve in 1995 and further improved
in 1996 which, along with early consolidation -related cost savings, generated
the improvement in the tobacco operating margin (operating income). As a
percent of net sales, operating income, excluding restructuring costs,
increased to 7.8% in 1996 compared to 3.9% in 1995.
Cost of sales and expenses of the flower operations before restructuring costs
increased by 0.8% in 1996 from 1995 primarily due to the sales increase of
2.9% offset partially by implementing cost-cutting measures, revising credit
policies which decreased bad debts and the closing of unprofitable operations
in 1995. The flower operating income (loss) excluding restructuring costs,
increased from a (0.1%) loss as a percent of net sales in 1995 to a positive
2.0% of net sales in 1996, primarily due to increased gross margins of the
export operations in The Netherlands and by decreased costs mentioned above.
Corporate expenses before restructuring costs increased $4.6 million, or
40.7%, to $15.9 million in 1996 from $11.3 million in 1995, due primarily to
increased personnel costs and bonuses and legal and professional expenses in
1996. Some of the increased costs for personnel relate to reassigning
departments to corporate that were previously in the tobacco operations.
Restructuring charges in 1996 for the tobacco operations and corporate
amounted to $11.5 million and $4.4 million, respectively. The flower
operations had a $.5 million recovery of restructuring costs. The net charges
are comprised of $15.7 million for employee separations, a credit of $1.2
million for facility sales and closures and $.9 million for asset writedowns
and other items.
Interest expense increased $1.7 million in 1996 primarily due to higher
borrowings because of increased average tobacco purchases and, to a lesser
extent, higher average interest rates.
The effective tax rate for 1996 was 40%. In 1995, the Company had tax expense
in spite of the overall pre-tax loss due to the effects of foreign tax rates,
the mix of income and losses of subsidiaries, the currency effect in Brazil
and non-deductible merger expenses.
The $1.5 million decrease in equity in net loss of investee companies in 1996
was due primarily to the sale of the investee in Brazil which had a loss in
1995.
-20-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1995 to the Year Ended June 30, 1994
The Company's sales and other operating revenues in 1995 were $1.941 billion,
an increase of 32.5% from $1.465 billion in 1994. Sales from tobacco
operations increased 41.9%, from $1.096 billion in 1994 to $1.555 billion in
1995, primarily due to higher prices and increased sales quantities sold
primarily from the U.S. and Brazil. The higher tobacco prices and increased
sales quantities sold from the U.S. accounted for $88.1 million and $248.5
million, respectively, while the increased sales quantities sold from Brazil
accounted for substantially all of the increase from Brazil. The Company's
increase in net sales of U.S. tobacco was primarily attributable to the
Company's 1994 agreement to purchase the U.S. tobacco needs for R. J. Reynolds
Tobacco Company, Inc. The increased sales of tobacco from Brazil resulted
from the sales of uncommitted stocks from prior year crops.
Sales and other operating revenues of flowers increased 4.6%, from $369.1
million in 1994 to $385.9 million in 1995. The increase in the Company's sales
of flowers was primarily due to the favorable effect of applying U.S. dollar
exchange rates to European operations, but these favorable effects were
partially offset by decreased sales of certain North American operations that
were closed during the year. The application of exchange rates increased
sales by $35.5 million and the closing of operations decreased sales by $15.7
million.
Cost of sales and expenses of the Company's tobacco operations increased 40.6%
in 1995 from 1994, due primarily to the 41.9% increase in sales. The world
oversupply of tobacco, which began in 1993, started to improve in 1995 as
indicated by the improvement in the tobacco operating margin (operating
income), before restructuring and merger related costs. As a percent of
sales, operating income increased to 3.9% in 1995 compared to 3.0% in 1994.
However, sales prices continued to be negatively affected by the oversupply,
causing the Company to reduce the carrying amount of its tobacco inventory at
year end by $9.2 million, reflecting the revaluation of that inventory at the
lower of its cost or market value.
Cost of sales and expenses of the flower operations increased by 5.4% in 1995
from 1994, primarily due to the sales increase of 4.6% and increased bad debts
associated with flower operations now closed and other costs, inclusive of
restructuring costs. The flower operating income (loss) decreased from 0.7%
of net sales in 1994 to (0.1%) of net sales in 1995, primarily due to
decreased gross margins of both the U.S. operations that were closed and the
Baardse operations and by increased costs mentioned above.
Corporate expenses increased $5.6 million, or 97.7%, to $11.3 million in 1995
from $5.7 million in 1994, due primarily to increased personnel costs and
legal and professional expenses in 1995 and reversals of prior accruals in
1994 for stock appreciation rights and certain stock options. Some of the
increased costs for personnel relate to reassigning departments to corporate
that were previously in the tobacco operations.
Restructuring charges for the tobacco and flower operations amounted to $15.2
million and $2.6 million, respectively. The charges are comprised of $12.6
million for employee separations, $2.8 million for facility closures, $2.4
million for asset writedowns and other items. In addition the Company
incurred $8.1 million for merger related charges for legal, accounting and
financial advisors.
Interest expense increased $10.1 million in 1995, primarily due to higher
borrowings because of increased average tobacco inventories and, to a lesser
extent, higher average interest rates.
The Company had tax expense in spite of the overall pre-tax loss in 1995, due
to the effects of foreign tax rates, the mix of income and losses of
subsidiaries, the currency effect in Brazil and non-deductible merger
expenses.
-21-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The $1.9 million decrease in equity in net income of investee companies in
1995 was due primarily to the devaluations of the local currency for the
Company's investee with operations in Zimbabwe and decreased earnings for the
operations in Malawi and Brazil.
Liquidity and Capital Resources
The following table is a summary of items from the Consolidated Balance Sheet
and the Statement of Consolidated Cash Flows.
<TABLE>
<CAPTION>
Year Ended June 30
_____________________________________________
(in thousands, except for current ratio) 1996 1995 1994
________________________________________________________________________________________
<S> <C> <C> <C>
Cash and cash equivalents. . . . . . . $ 53,820 $ 42,326 $ 12,471
Net trade receivables. . . . . . . . . 190,898 182,750 164,314
Inventories and advances on purchases
of tobacco . . . . . . . . . . . . . 408,210 468,989 469,015
Total current assets . . . . . . . . . 668,775 731,119 685,443
Notes payable to banks . . . . . . . . - 233,736 255,607
Accounts payable . . . . . . . . . . . 104,506 90,446 112,310
Total current liabilities. . . . . . . 246,433 453,522 467,776
Current ratio. . . . . . . . . . . . . 2.7 to 1 1.6 to 1 1.5 to 1
Revolving Credit Notes and Other
Long-term Debt . . . . . . . . . . . 265,871 292,528 188,825
Convertible Subordinated Debentures. . - 56,370 56,475
Senior Notes . . . . . . . . . . . . . 125,000 - -
Stockholders' equity . . . . . . . . . 315,848 238,806 288,314
Purchase of property and equipment . . 41,266 35,892 32,382
Proceeds from sale of property and
equipment. . . . . . . . . . . . . . 8,605 4,877 5,991
Depreciation and amortization. . . . . 33,780 31,852 28,862
</TABLE>
The purchasing and processing activities of the Company's tobacco business are
seasonal. The Company's need for capital fluctuates accordingly and, at any
of several seasonal peaks, the Company's outstanding indebtedness may be
significantly greater or lesser than at year end. The Company historically
has needed capital in excess of cash flow from operations to finance inventory
and accounts receivable and, more recently, to finance acquisitions of foreign
tobacco operations and flower operations. The Company also prefinances
tobacco crops in certain foreign countries by making cash advances to farmers
prior to and during the growing season.
The Company's working capital increased from $277.6 million at June 30, 1995
to $422.3 million at June 30, 1996. The Company's current ratio was 2.7 to 1
and 1.6 to 1 at June 30, 1996, and June 30, 1995, respectively. At June 30,
1996, current assets had decreased $62.3 million, or 8.5%, and current
liabilities had decreased $207.1 million, or 45.7%, from June 30, 1995. The
$62.3 million decrease in current assets is primarily due to the $60.8 million
decrease in inventories and advances on purchases of tobacco. The $207.1
million decrease in current liabilities is primarily due to the $233.7 million
decrease in notes payable to banks, primarily as a result of cash generated
from operations and the issuance of the Senior Notes, offset partially by a
$24.9 million increase in advances from customers. The increase in cash and
cash equivalents is primarily related to the financing activities and the
proceeds from long-term debt. The increase in receivables reflects the
increase in sales during the fourth quarter by the tobacco division. The
increase in accounts payable is due primarily to timing of inventory
purchases, and the decrease in notes payable is due to increased long-term
debt.
-22-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Cash flows from operating activities increased to $179.8 million in 1996 as
compared to $6.8 million in 1995 and $37.2 million in 1994 which was
consistent with the net losses incurred in those periods. Cash flows used by
investing activities increased $.7 million, or 4.9%, to $15.2 million in 1996
as compared to 1995, primarily due to the decrease in payments on notes
receivable and amounts due from investees and for the increase in proceeds
from other investments and other assets. Cash flows used by investing
activities decreased $39.6 million, or 73.2%, to $14.5 million in 1995 as
compared to 1994, primarily due to the increase in payments on notes
receivable and amounts due from investees for the same period and the
reduction in issuance of notes receivable. The 1995 purchase of subsidiaries
was offset by the Company's 1994 purchase of shares of another company. Cash
was used by financing activities in 1996 as the Company applied $153 million
to reduce debt whereas in 1995 and 1994, financing activities provided $35.7
million and $14.7 million, respectively. This shift reflects the greatly
improved operations in 1996. Also, see the discussion of refinancing
activities below.
At June 30, 1996, the Company had seasonally adjusted lines of credit of
$1.137 billion, including $897 million uncommitted, unsecured working capital
lines with several banks. At June 30, 1996, the Company had borrowed $232
million under its $897 million lines of credit with interest rates ranging
from 5.8% to 8.0%. At June 30, 1996, the unused short-term lines of credit
amounted to $521 million, net of $144 million of letters of credit and
guarantees that reduce lines of credit. Total maximum outstanding borrowings
during the year ended June 30, 1996, were $724 million.
To ensure long-term liquidity, the Company entered into the $240 million New
Credit Facility effective March 15, 1996. The New Credit Facility replaced
the Company's $250 million Former Credit Facility. The Company used the
Former Credit Facility to reclassify $250 million of short-term debt to long-
term debt and did not borrow under it. The Company similarly uses the New
Credit Facility to reclassify $232 million of its short-term debt. The
interest rates available under the New Credit Facility depend on the type of
advance selected and are based either on the agent bank's base lending rate
(which was 8.25% at June 30, 1996, and is adjusted with changes in interest
rates generally) or LIBOR plus 0.75%, through March 15, 1997, and thereafter
plus a spread of 0.45% to 1.25% based on the ratings assigned to the Company's
outstanding senior debt or on its consolidated interest coverage ratio. The
New Credit Facility is subject to certain commitment fees and covenants that
among other things require the Company to maintain minimum working capital and
tangible net worth amounts, require specific liquidity and long-term solvency
ratios and restrict acquisitions and, under certain circumstances, payment of
dividends by the Company. The New Credit Facility terminates on March 15,
1998, but may be extended thereafter, year to year, upon approval of the
Lenders. As of June 30, 1996, there were no borrowings outstanding under the
New Credit Facility.
On February 9, 1996, the Company called all of the 7 3/4% Debentures for
redemption on March 11, 1996. As of March 4, 1996, holders of Debentures had
converted approximately 99.85% of the Debentures into 4,035,969 shares of
Common Stock. The remaining Debentures were redeemed on March 11, 1996, for
$89,188. The Company funded the redemption price for these Debentures and
expenses of the redemption from working capital.
The Company has historically financed its operations through a combination of
short-term lines of credit, customer advances, cash from operations and equity
and equity-linked securities. At June 30, 1996, the Company had no material
capital expenditure commitments. The Company believes that these sources of
funds combined with the Senior Notes are sufficient to fund the Company's
purchasing needs for 1997.
The Company's off balance sheet financing is not material. Certain operating
leases were acquired with the acquisition of, or have been added by, several
foreign tobacco processing facilities and the flower subsidiaries. However,
most operating assets are of long-term and continuing benefit and the Company
has generally purchased these assets.
-23-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Tax and Repatriation Matters
The Company and its subsidiaries are subject to income tax laws in each of the
countries in which it does 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.
Dividend distributions are regularly made from certain subsidiaries while the
undistributed earnings of certain other 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 of certain foreign subsidiaries 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 and reevaluates the aforementioned dividend
policy as part of its overall financing plans.
Accounting Matters
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." The
Company is required to adopt the new method of accounting for long-lived
assets no later than the first quarter of 1997. The Company believes that its
adoption of SFAS No. 121 will not have a material impact on its financial
position.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation," which will be effective for the first quarter of 1997. SFAS No.
123 defines a fair value based method of accounting for stock-based
compensation and requires certain disclosures to be made by entities electing
not to adopt this method. The Company expects to implement in 1997 the
disclosure only provisions, as permitted by SFAS No. 123.
Factors that May Affect Future Results
The foregoing discussion contains certain forward-looking statements,
generally identified by phrases such as "the Company expects" or words of
similar effect. The following important factors, among other things, in some
cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results for 1997 and beyond, to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Variability of Annual and Quarterly Financial Results
The comparability of the Company's financial results, particularly the
quarterly financial results, may be significantly affected by fluctuations in
tobacco growing seasons and customer instructions with regard to the sales of
processed tobacco. The cultivation period for tobacco is dependent upon a
number of factors, including the weather and other natural events, such as
hurricanes or tropical storms, and the Company's processing schedule can be
significantly altered by variations in harvesting periods.
-24-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Further, it is not possible to predict with precision the timing of orders or
sales, and the Company may from time to time in the ordinary course of
business keep a significant amount of processed tobacco in inventory for its
customers to accommodate their inventory management and other needs. Sales
recognition by the Company and its subsidiaries is based on the passage of
ownership, usually with shipment of product. Since individual shipments may
represent significant amounts of revenue, the Company's quarterly and annual
financial results may vary significantly depending on its customers' needs and
shipping instructions. In particular, because most deliveries of Brazilian
tobacco are made at the end of the fourth fiscal quarter of each year or the
beginning of the first quarter of the following year, significant amounts of
sales and operating profits may shift from fiscal year to fiscal year. See
Item 1, "Business Tobacco Seasonality" and "Business Flowers
Seasonality."
Governmental Intervention, Environmental Matters and Other Matters
In recent years, governmental entities in the U.S. at all levels have taken or
have proposed actions that may have the effect of reducing consumption of
cigarettes. These activities have included: (1) the U.S. Environmental
Protection Agency's decision to classify tobacco environmental smoke as a
"Group A" (known human) carcinogen; (2) 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; (3) proposals by the U.S. Food and Drug Administration to regulate
nicotine as a drug and sharply restrict cigarette advertising and promotion,
including the proposed regulations announced in August, 1996 that would (x)
prohibit cigarette brand name sponsorship at athletic, musical, cultural and
other events, (y) prohibit the sale of nontobacco products featuring cigarette
brand names or logos and (z) prohibit the offering of promotional gifts or
other items to cigarette purchasers; (4) increases in tariffs on imported
tobacco; (5) proposals to increase the U.S. excise tax on cigarettes (6) 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 and (7) recent filings of 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. It is not possible to predict the
extent to which governmental activities might affect the Company's business.
In 1993, Congress enacted a law requiring that all domestically manufactured
cigarettes contain at least 75% domestically grown tobacco. Although that law
was repealed in 1995 and was replaced with import quotas designed to assist
domestic tobacco growers, the law had the temporary effect of drastically
decreasing demand for foreign tobacco in the domestic production of
cigarettes. It is not possible to predict the extent to which future
governmental activities might 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 impossible to predict the extent to which restrictions on
advertising might affect the Company's business.
Smoking and Health Issues
Reports and speculation with respect to the alleged harmful physical effects
of cigarette smoking have been publicized for many years and, together with
restrictions on cigarette advertisements, requirements that warning statements
be placed on cigarette packaging and in advertising, increased taxes on
tobacco products and controls in certain foreign countries on production and
prices, decreased social acceptance of smoking and increased pressure from
anti-smoking groups have had an ongoing adverse effect on sales of tobacco
products. In addition, litigation is pending against the
-25-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
leading U.S. manufacturers of consumer tobacco products seeking damages for
health problems alleged to have resulted from the use of tobacco in various
forms. Neither the Company nor, to the Company's knowledge, any other leaf
merchants is a party to this litigation. It is not possible to predict the
outcome of such litigation or what effect adverse developments in pending or
future litigation against manufacturers might have on the business of the
Company.
Reliance on Significant Customers
The Company's customers are manufacturers of cigarette and tobacco products
located in approximately 60 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 55% and 52% of the Company's consolidated tobacco sales for 1996
and 1995 were to three companies. See Note M to the Company's Consolidated
Financial Statements for the year ended June 30, 1996, included herein.
International Business Risks
The Company's international operations are subject to international business
risks, including unsettled political conditions, expropriation, import and
export restrictions, exchange controls, inflationary economies and currency
risks 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 substantial sums or guaranteed local loans or lines
of credit in substantial amounts for the purchase of tobacco from growers.
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. Accordingly, there is minimal
currency risk related to the sale of tobaccos. 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. See Note N to the
Company's Consolidated Financial Statements for the year ended June 30, 1996,
included herein.
The Company has expanded its international operations in areas where the
export of tobacco has increased due to increased demand for lower-priced
tobacco. In particular, the Company has a significant concentration of its
purchasing, processing and exporting operations in southern Brazil. In recent
years, Brazil's economic problems have received wide publicity, and that
country has taken in the past, various actions relating to foreign currency
exchange controls and adjustments for devaluation of the currency and
inflation. While such controls generally influence the amount of cash
dividends remitted from Brazil and such adjustments can affect the Company's
purchases costs of tobacco and its processing costs, they have not and are
not expected to adversely affect the Company's ability to export tobacco from
Brazil. However, the Company's sales and operating profits from South America
decreased significantly in fiscal 1994. While sales recovered in 1995 and
1996, operating profits did not recover to the same extent, due partly to
Brazil's monetary policy adopted in July 1994. This policy, along with the
weakened U.S. dollar, caused the dollar cost of the 1995 and 1996 Brazilian
crops to increase by 40% over the cost of the 1994 crop. As a result, even
though the worldwide oversupply of tobacco has been reduced and uncertainties
in the U.S. import market related to government regulation have eased,
operating profits from the Company's South American sales have not recovered
to the levels they reached in 1993.
-26-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Restrictions on Dividends
Under the terms of an Indenture, dated May 29, 1996, between the Company and
Crestar Bank, as trustee, relating to the Notes (the "Indenture"), the Company
will not be permitted to make certain restricted payments, including cash
dividends on its Common Stock, under certain circumstances. The Company
generally may make such restricted payments, provided, that (1) the Company is
not in default under the Indenture, (2) the Company is able to incur at least
$1.00 of additional indebtedness under a consolidated interest coverage ratio
test set forth in the Indenture, and (3) the aggregate amount of the payments
to be made is less than the total of (x) $20.0 million, (y) 50% of the
Company's net income (as defined) for the period from April 1, 1996, through
the end of the Company's most recent fiscal quarter and (z) the net cash
proceeds from the sale by the Company of any equity securities or debt
securities that are converted into equity securities. As of June 30, 1996,
the Company was permitted to make restricted payments, including cash
dividends on its Common Stock, of up to $23.2 million.
-27-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENT OF CONSOLIDATED INCOME
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts) 1996 1995 1994
__________________________________________________________________________________________
<S> <C> <C> <C>
Sales and other operating revenues . . . . . . . . . $2,167,473 $1,941,188 $1,464,778
Cost of goods and services sold. . . . . . . . . . . 1,904,992 1,759,364 1,317,705
_____________________________________
262,481 181,824 147,073
Selling, administrative and general expenses. . . . . 132,710 132,802 117,311
Restructuring and merger related costs. . . . . . . . 15,360 25,955 -
_____________________________________
Operating Income. . . . . . . . . . . . . . . . . 114,411 23,067 29,762
_____________________________________
Interest Expense . . . . . . . . . . . . . . . . . . 46,924 45,231 35,117
_____________________________________
Income (loss) before income taxes, minority interest,
equity in net income (loss) of investee companies
and extraordinary item . . . . . . . . . . . . . . 67,487 (22,164) (5,355)
Income taxes. . . . . . . . . . . . . . . . . . . . . 26,995 5,980 2,767
_____________________________________
Income (loss) before minority interest, equity in
net income (loss) of investee companies and
extraordinary item . . . . . . . . . . . . . . . . 40,492 (28,144) (8,122)
Income applicable to minority interest. . . . . . . . 292 216 466
Equity in net income (loss) of investee companies
(net of U.S. tax expense) .. . . . . . . . . . . . (330) (1,805) 98
_____________________________________
Income (loss) before extraordinary item . . . . . . . 39,870 (30,165) (8,490)
Extraordinary item:
Partial recovery of Iraqi receivable (net of
income tax expense of $870). . . . . . . . . . . . 1,400 - -
_____________________________________
NET INCOME (LOSS) $ 41,270 $ (30,165) $ (8,490)
=====================================
Earnings Per Share, Primary
Income (loss) before extraordinary item. . . . . . $1.00 $(.79) $(.22)
Extraordinary item . . . . . . . . . . . . . . . . .04 - -
____________________________________
Net Income (Loss). . . . . . . . . . . . . . . . . $1.04 $(.79) $(.22)
====================================
Earnings Per Share, Assuming Full Dilution
Income before extraordinary item . . . . . . . . . $ .98 $ * $ *
Extraordinary item . . . . . . . . . . . . . . . . .03 - -
_____________________________________
Net Income . . . . . . . . . . . . . . . . . . . . $1.01 $ * $ *
=====================================
</TABLE>
See notes to consolidated financial statements
* Computation of loss per share is anti-dilutive for the years 1995 and 1994.
-28-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
(in thousands) 1996 1995
____________________________________________________________________________________________
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . $ 53,820 $ 42,326
Notes receivable. . . . . . . . . . . . . . . . 1,127 2,002
Trade receivables, net of allowances
(1996 - $6,558, 1995 - $8,823). . . . . . . . 190,898 182,750
Inventories:
Tobacco . . . . . . . . . . . . . . . . . . . 315,476 410,431
Other . . . . . . . . . . . . . . . . . . . . 18,025 14,179
Advances on purchases of tobacco. . . . . . . . 74,709 44,379
Recoverable income taxes. . . . . . . . . . . . 1,563 2,007
Prepaid expenses and other assets . . . . . . . 13,157 33,045
________________________________
Total current assets . . . . 668,775 731,119
________________________________
Investments and other assets
Equity in net assets of investee companies . . . . . . 8,268 22,622
Other investments. . . . . . . . . . . . . . . . . . . 2,987 1,749
Notes receivable . . . . . . . . . . . . . . . . . . . 4,078 6,107
Other. . . . . . . . . . . . . . . . . . . . . . . . . 19,151 28,147
_______________________________
34,484 58,625
________________________________
Intangible assets
Excess of cost over related net assets
of businesses acquired . . . . . . . . . . . . . 23,121 26,167
Production and supply contracts. . . . . . . . . . . . 33,325 36,340
Pension asset. . . . . . . . . . . . . . . . . . . . . 4,130 4,219
________________________________
60,576 66,726
________________________________
Property, plant and equipment
Land . . . . . . . . . . . . . . . . . . . . . . . . 19,223 19,432
Buildings . . . . . . . . . . . . . . . . . . . . . . 143,741 135,808
Machinery and equipment . . . . . . . . . . . . . . . 160,237 169,181
Allowances for depreciation . . . . . . . . . . . . . (86,426) (101,372)
_________________________________
236,775 223,049
_________________________________
Deferred taxes and other deferred charges . . . . . . . . 19,404 14,089
_________________________________
$1,020,014 $1,093,608
=================================
</TABLE>
-29-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
1996 1995
______________________________________________________________________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks . . . . . . . . . . . . . . . $ - $ 233,736
Accounts payable:
Trade. . . . . . . . . . . . . . . . . . . . . 65,970 56,559
Officers and employees . . . . . . . . . . . . 24,074 20,714
Other. . . . . . . . . . . . . . . . . . . . . 14,462 13,173
Advances from customers. . . . . . . . . . . . . . . 74,153 49,224
Accrued expenses . . . . . . . . . . . . . . . . . . 51,797 57,359
Income taxes . . . . . . . . . . . . . . . . . . . . 5,359 11,199
Long-term debt current . . . . . . . . . . . . . . . 10,618 11,558
___________________________________
Total current liabilities. . . . . . 246,433 453,522
___________________________________
Long-term debt
Revolving Credit Notes and Other. . . . . . . . . . 265,871 292,528
Convertible Subordinated Debentures . . . . . . . . - 56,370
Senior Notes. . . . . . . . . . . . . . . . . . . . 125,000 -
___________________________________
390,871 348,898
___________________________________
Deferred credits
Income taxes. . . . . . . . . . . . . . . . . . . . 21,496 10,731
Compensation and other benefits . . . . . . . . . . 44,465 40,715
__________________________________
65,961 51,446
__________________________________
Minority interest in subsidiaries . . . . . . . . . . . 901 936
__________________________________
Commitments and contingencies . . . . . . . . . . . . . - -
__________________________________
Stockholders' equity
Preferred Stock - no par value:
1996 1995
Authorized shares. . . . . . 10,000 10,000
Issued shares. . . . . . . . - - - -
Common Stock - no par value:. 1996 1995
Authorized shares. . . . . .125,000 125,000
Issued shares. . . . . . . . 42,366 38,092 136,959 80,030
Retained earnings . . . . . . . . . . . . . . . 177,419 157,880
Equity - currency conversions. . . . . . . . . . 2,842 1,565
Additional minimum pension liability . . . . . . (1,372) (1,286)
Unrealized gain on investments . . . . . . . . . - 617
_________________________________
315,848 238,806
_________________________________
$1,020,014 $1,093,608
=================================
</TABLE>
See notes to consolidated financial statements
-30-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Additional Unrealized
(in thousands, Equity Minimum Gain Total
except per share Common Retained Currency Pension (Loss) On Stockholders'
amounts) Stock Earnings Conversions Liability Investments Equity
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 . . . $ 79,833 $225,119 $3,477 $ (280) $ - $308,149
Net loss for the year. . . . (8,490) (8,490)
Cash dividends - $0.34
per share . . . . . (13,014) (13,014)
Conversion of foreign
currency financial
statements. . . . . 2,994 2,994
Addition to the minimum
pension liability . (1,094) (1,094)
Stock options exercised. . . 28 28
Unrealized loss on
investments . . . . (259) (259)
_____________________________________________________________________________________________
Balance, June 30, 1994 . . . $ 79,861 $203,615 $6,471 $(1,374) $ (259) $288,314
Net loss for the year. . . . (30,165) (30,165)
Cash dividends - $0.41
per share . . . . . (15,570) (15,570)
Conversion of foreign
currency financial
statements. . . . . (4,906) (4,906)
Reduction in minimum
pension liability . 88 88
Stock options exercised. . . 67 67
Unrealized gain on
investments . . . . 876 876
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock. . . 102 102
________________________________________________________________________________________________
Balance, June 30, 1995 . . . $ 80,030 $157,880 $1,565 $(1,286) $ 617 $238,806
Net income for the year. . . 41,270 41,270
Cash dividends - $0.54
per share . . . . . (21,731) (21,731)
Conversion of foreign
currency financial
statements. . . . . 1,277 1,277
Addition to the minimum
pension liability . (86) (86)
Stock options exercised. . . 1,564 1,564
Realized gain on
investments . . . . (617) (617)
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock. . . 55,365 55,365
________________________________________________________________________________________________
Balance,
June 30, 1996 . . . $136,959 $177,419 $2,842 $(1,372) $ - $315,848
================================================================================================
</TABLE>
See notes to consolidated financial statements
-31-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF CONSOLIDATED CASH FLOW
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands) 1996 1995 1994
__________________________________________________________________________________________
<S> <C> <C> <C>
Operating activities
Net Income (Loss). . . . . . . . . . . . . . . .$ 41,270 $ (30,165) $ (8,490)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . 33,780 31,852 28,862
Deferred items . . . . . . . . . . . . . . . . 5,851 (620) 565
Loss (gain) on foreign currency transactions . (368) 570 (1,179)
Gain on disposition of fixed assets. . . . . . (2,415) (1,819) (1,624)
Gain on sale of investee . . . . . . . . . . . (3,751) - -
Gain on sale of investment . . . . . . . . . . (1,090) - -
Undistributed (earnings) loss of investees . . 330 1,805 (99)
Dividends received from investees. . . . . . . 1,465 478 577
Income applicable to minority interest . . . . 292 216 466
Bad debt expense . . . . . . . . . . . . . . . 1,043 3,820 4,681
Gain on disposal of operations . . . . . . . . - - (1,792)
Decrease (increase) in accounts receivable . . (12,644) 52,520 31,454
Decrease (increase) in inventories and
advances on purchases of tobacco . . . . . . 64,438 2,156 (16,512)
Decrease in recoverable taxes. . . . . . . . . 444 4,293 1,351
Decrease (increase) in prepaid expenses. . . . 17,257 (3,581) (2,056)
Increase (decrease) in accounts payable
and accrued expenses . . . . . . . . . . . . 14,811 (58,163) 9,730
Increase (decrease) in advances from
customers. . . . . . . . . . . . . . . . . . 25,116 (3,028) 4,951
Increase (decrease) in income taxes. . . . . . (6,117) 6,075 (8,744)
Other. . . . . . . . . . . . . . . . . . . . . 92 404 (4,983)
__________________________________
Net cash provided by operating activities 179,804 6,813 37,158
__________________________________
Investing activities
Purchase of property and equipment. . . . . . . (41,266) (27,036) (32,382)
Proceeds from sale of property and equipment. . 8,605 4,877 5,991
Payments on notes receivable and receivables
from investees. . . . . . . . . . . . . . . . 1,132 27,541 4,477
Issuance of notes receivable. . . . . . . . . . (1,572) (6,329) (18,385)
Proceeds from or (advances) for other
investments and other assets . . . . . . . . 24,422 4,067 (194)
Purchase of minority interest in subsidiaries . - (507) -
Purchase of subsidiaries, $8,236,
1996 and $8,856, 1995 for property
and equipment . . . . . . . . . . . . . . . . (6,543) (17,123) -
Purchase of shares of Standard
Commercial Corporation. . . . . . . . . . . . - - (13,408)
Other . . . . . . . . . . . . . . . . . . . . . - - (194)
__________________________________
Net cash used by investing activities . . (15,222) (14,510) (54,095)
__________________________________
Financing activities
Repayment of debt . . . . . . . . . . . . . . . (830,863) (927,022) (279,304)
Proceeds from debt. . . . . . . . . . . . . . . 698,207 978,366 307,246
Cash dividends paid to DIMON
Incorporated stockholders . . . . . . . . . . (21,731) (15,570) (13,014)
Cash dividends paid to minority stockholders. . (169) (237) (285)
Proceeds from sale of common stock. . . . . . . 1,552 169 28
___________________________________
Net cash provided (used) by
financing activities . . . . . . . . . . (153,004) 35,706 14,671
___________________________________
Effect of exchange rate changes on cash . . . . . . . . . (84) (1,584) (1,662)
___________________________________
Increase (decrease) in cash and cash equivalents. . . . . 11,494 26,425 (3,928)
Increase in cash from purchased subsidiaries. . . . . . . - 3,430 -
Cash and cash equivalents at beginning of year. . . . . . 42,326 12,471 16,399
____________________________________
Cash and cash equivalents at end of year. $ 53,820 $ 42,326 $ 12,471
====================================
Other information:
Cash paid during the year:
Interest . . . . . . . . . . . . . . . . . . . $ 43,361 $ 46,768 $ 34,965
Income taxes . . . . . . . . . . . . . . . . . 21,075 18,917 12,627
Non-cash investing and financing activities:
Conversion of debt to equity . . . . . . . . . 55,365 102 -
</TABLE>
See notes to consolidated financial statements
-32-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Merger and Significant Accounting Policies
Merger
On October 23, 1994, Dibrell and Monk-Austin announced execution of a
definitive Agreement and Plan of Reorganization pursuant to which the
businesses of Dibrell and Monk-Austin would be combined. At special meetings
on March 31, 1995, the shareholders of both Dibrell and Monk-Austin approved
the Agreement and related combination. As a result, Dibrell and Monk-Austin
were merged into DIMON Incorporated ("DIMON") and each share of Dibrell Common
Stock outstanding at the merger date was converted to 1.5 shares, and each
share of Monk-Austin Common Stock outstanding at the merger date was converted
into 1.0 share of DIMON Common Stock, resulting in 38.069 million total
outstanding shares at April 1, 1995, the effective date of the merger.
The merger qualifies as a tax free reorganization and was accounted for as
a pooling of interests. Accordingly, the Company's financial statements have
been restated to include the results of both Dibrell and Monk-Austin for all
periods presented. Recorded assets and liabilities have been carried forward
to the combined company at their historical book values.
Combined and separate results of Dibrell and Monk-Austin during the
periods preceding the merger were as follows:
<TABLE>
<CAPTION>
Dibrell Monk-Austin Adjustment Combined
_____________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Nine months ended March 31, 1995
(unaudited)
Sales and other operating revenues . . .$819,459 $739,415 $ (140) $1,558,734
Net income (loss). . . . . . . . . . . . 6,090 (6,152) 9,829 9,767
_____________________________________________________________________________________________________________
Fiscal year ended June 30, 1994
Sales and other operating revenues . . .$928,470 $534,600 $ 1,708 $1,464,778
Net income (loss). . . . . . . . . . . . (9,144) 930 (276) (8,490)
_____________________________________________________________________________________________________________
</TABLE>
The combined financial results presented above include adjustments made to
conform accounting policies of the two companies. The significant adjustments
impacting net income for conformity relate to the accounting for income taxes,
the treatment of grower advances in Brazil, foreign currency transaction gains
and losses and certain other inventory costing policies. All other
adjustments are reclassifications to conform financial statement presentation.
Intercompany transactions between the two companies for the periods presented
were not material.
Significant Accounting Policies
The accounts of the Company and its consolidated subsidiaries are included in
the consolidated financial statements after elimination of significant
intercompany accounts and transactions. Certain foreign consolidated
subsidiaries of the Company have fiscal year ends of March 31 and May 31 to
facilitate reporting of consolidated accounts. The Company accounts for its
investments in certain investee companies (ownership 20% - 50%) under the
equity method of accounting. Investments in certain other foreign investees
and subsidiaries which are combined with other investments are stated at cost
or less than cost since the Company does not exercise significant influence
over financial or operating policies and because of restrictions imposed on
the transfer of earnings and other economic uncertainties.
Sales recognition is based on the passage of ownership, usually with
shipment of product.
Cash equivalents are defined as temporary investments of cash with
maturities of less than 90 days.
Inventories are valued at the lower of cost or market. Inventory
valuation provisions included in cost of goods and services sold totaled $9.2
million and $40.9 million for 1995 and 1994, respectively. Costs of tobacco
inventories are generally determined by the average cost method while costs of
other inventories are generally determined by the first-in, first-out method.
Substantially all of the tobacco inventory represents finished goods.
Interest and other carrying charges on the inventories are expensed in the
period in which they are incurred.
-33-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Merger and Significant Accounting Policies (continued)
Equity in net assets of investee companies includes excess of equity over
cost in the amount of $4,075 ($2,244 at June 30, 1995) and is being amortized
on a straight-line basis over ten years.
Excess of cost over related net assets of businesses acquired is being
amortized on a straight-line basis over periods ranging from 10 to 40 years.
The accumulated amortization at June 30, 1996, is $5,300 ($4,283 at June 30,
1995).
Supply contracts include the cost allocated to two ten-year tobacco supply
agreements with R. J. Reynolds Tobacco Company (RJR) pursuant to which the
Company will supply RJR and its affiliates with specified quantities of its
required tobaccos. Each contract is being amortized over the quantities
shipped or the contract period, whichever is sooner. The accumulated
amortization at June 30, 1996, is $18,900 ($15,129 at June 30, 1995).
Production contracts include the cost allocated to contracts associated
with farmers for the future supply of their annual tobacco production. The
production contracts are being amortized primarily on a straight-line basis
over ten years. The accumulated amortization at June 30, 1996, is $13,311
($9,931 at June 30, 1995).
Property, plant and equipment is accounted for on the basis of cost.
Provisions for depreciation are computed on a straight-line basis at annual
rates calculated to amortize the cost of depreciable properties over their
estimated useful lives. Buildings and machinery and equipment are depreciated
over ranges of 20 to 40 years and over five to ten years, respectively. The
consolidated financial statements do not include fully depreciated assets.
The Company provides deferred income taxes on temporary differences
arising from tax loss carryforwards, employee benefit accruals, depreciation,
deferred compensation and undistributed earnings of consolidated subsidiaries
and unconsolidated affiliates not permanently reinvested.
Primary earnings per share are computed by dividing earnings by the
weighted average number of shares outstanding plus any common stock
equivalents during each period. The fully diluted earnings per share
calculation assumes that all of the outstanding Convertible Subordinated
Debentures were converted into Common Stock at the beginning of the reporting
period thereby increasing the weighted average number of shares considered
outstanding during each period and reducing the after-tax interest expense.
The weighted average number of shares outstanding are further increased by
common stock equivalents on employee stock options.
The Company carried its equity security investments at fair value as
Prepaid expenses and other assets with any change from the average cost basis
being reflected in stockholders' equity net of the tax benefit. These
securities were sold in 1996.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of."
The Company is required to adopt the new method of accounting for long-lived
assets no later than the first quarter of 1997. The Company believes that its
adoption of SFAS No. 121 will not have a material impact on its financial
position.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation," which will be effective for the first quarter of the Company's
1997 statements. SFAS No. 123 defines a fair value based method of accounting
for stock-based compensation and requires certain disclosures to be made by
entities electing not to adopt this method. The Company expects to implement
in 1997 the disclosure only provisions, as permitted by SFAS No. 123.
In the fourth quarter of 1996 the Company reclassified Other income into
Sales and other operating revenues. The Company also reclassified Sundry
deductions into Cost of goods sold. Both Other income and Sundry deductions
are not material and the reclassification does not affect Net income. Prior
year accounts have been reclassified for conformity within the financial
statements.
-34-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Restructuring and Merger Related Costs
In connection with the April, 1995, merger of Dibrell and Monk-Austin, the
Company incurred legal, accounting and financial consultants costs of $8.1
million in 1995 and commenced various activities to restructure its worldwide
operations.
The following tables set forth the Company's restructuring provisions
provided and changes in the related reserves for 1995 and 1996. The reserve
balances are included in accrued expenses and deferred compensation and other
benefits.
<TABLE>
<CAPTION>
Facilities
Employee Closure
Separations Costs Other Total
__________________________________________________________________________________________
<S> <C> <C> <C> <C>
Provision for restructuring - 1995. $12,593 $ 2,848 $2,416 $17,857
Reduced by:
Cash payments. . . . . . . . . . . (76) (223) (205) (504)
Asset writedowns . . . . . . . . . - (1,493) (2,211) (3,704)
______________________________________________________________
Reserve balances at June 30, 1995 . . $12,517 $ 1,132 $ - $13,649
Provision for restructuring - 1996. . 15,699 (1,244) 905 15,360
Increased (reduced) by:
Cash (payments) receipts. . . . . (8,150) 4,719 (75) (3,506)
Asset writedowns and sales. . . . - (4,212) (330) (4,542)
Reserve balances at June 30, 1996 . . $20,066 $ 395 $ 500 $20,961
______________________________________________________________
</TABLE>
The 1995 restructuring provision included approximately $2.6 million for
the closing of certain unprofitable flower facilities and related severance
costs. The remaining 1995 restructuring provision of $15.2 million addressed
rationalization of the tobacco operations through elimination of duplicative
facilities and reduction of personnel. The 1996 restructuring provision of
$15.4 million was primarily for additional severance costs. During the year
ended June 30, 1996, the Company severed a total of 367 employees most of
which were involuntarily separated. The severed employees were primarily in
the tobacco division and worked in various departments throughout the Company.
Remaining cash outlays associated with employee separations are expected to
total $15.2 million, of which $10.8 million will be expended in 1997.
Remaining amounts relate primarily to the pension plan charge and other
deferred compensation, which will be made as required for funding appropriate
pension and other payments in future years. No additional restructuring
charges are anticipated.
Note C - Investee Companies, Related Parties and Acquisitions
The combined summarized information for investee companies is approximately as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
________________________________________________________________________
<S> <C> <C> <C>
Current assets. . . . . . . . . . . .$13,069 $ 84,635 $110,531
Non-current assets. . . . . . . . . . 29,087 57,344 67,066
Current liabilities . . . . . . . . . 14,631 84,244 99,649
Non-current liabilities . . . . . . . 2,446 3,130 6,275
Interest of other shareholders. . . . 12,733 31,982 37,953
Net sales . . . . . . . . . . . . . . 42,388 120,183 146,731
Gross profit. . . . . . . . . . . . . 8,771 9,953 22,506
Net income (loss) . . . . . . . . . . 594 (1,395) 2,609
___________________________________
</TABLE>
The above changes from 1995 relate primarily to the Company selling its
interest in a Brazilian investee, Rio Grande Tabacalera S.A.
-35-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Investee Companies, Related Parties and Acquitions (continued)
Balances with related parties, primarily unconsolidated, affiliated
companies, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
___________________________________________________________________________
<S> <C> <C> <C>
Trade receivables . . . . . . . . .$23,904 $ 21,258 $ 10,968
Advances on purchases of tobacco. . 32,786 9,716 38,557
Notes receivable. . . . . . . . . . - 4,169 10,425
Trade payables. . . . . . . . . . . 6,844 1,556 7,555
Other income: Interest . . . . . . 581 1,376 1,299
Net sales . . . . . . . . . . . . . 6,673 12,907 16,257
Purchases of tobacco. . . . . . . . 61,549 73,474 76,321
________________________________________
</TABLE>
On April 1, 1995 the Company acquired the businesses of Austro-Hellenique
De Tabac S.A. (Hellas) and Austro-Turk Tutun A.S. (Austro-Turk) for cash of
$13,372 and assumption of liabilities of $3,821. Hellas and Austro-Turk have
tobacco buying, processing and selling operations in Greece and Turkey,
respectively. This acquisition has been accounted for as a purchase. The
excess of cost over businesses acquired of $17,193 is being amortized over a
ten-year period.
The following pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the period. The pro forma
information includes adjustments to give effect to amortization of goodwill
and interest expense on acquisition debt, together with related income tax
effects.
<TABLE>
<CAPTION>
Year ended June 30, 1995
(unaudited)
<S> <C>
Sales and other operating revenues . . . . . . . . . . . . .$1,965,437
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . (36,577)
Loss per share, primary. . . . . . . . . . . . . . . . . . . (.96)
</TABLE>
Note D - Financial Instruments
The estimated fair value of the Company's financial instruments at June 30,
1996 is provided in the following table:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
_______________________________________________________________________
<S> <C> <C>
Senior Notes . . . . . . . . . . . . . . . . .$125,000 $124,531
Other Long-Term Debt and Capitalized Leases. . 44,813 42,561
</TABLE>
Interest rate swap agreements with an aggregate notional principal balance
of $202,714 ($125,000 fixed to floating and $77,214 floating to fixed) and
expiring at various dates through May 23, 2001, had a negative value of $435
at June 30, 1996.
In the normal course of business, the Company is a party to financial
instruments with off balance sheet risk such as letters of credit and
guarantees. Management does not expect any material losses to result from
these instruments.
The fair value estimates presented herein are based on information
available to management at June 30, 1996, and were determined using market
information and other commonly accepted valuation methodologies.
Note E - Short-Term Borrowing Arrangements
The Company has lines of credit arrangements with several banks under which
the Company may borrow up to a total of $897,523 ($876,181 at June 30, 1995),
excluding all long-term credit agreements. These lines bear interest at rates
ranging from 5.8% to 8.0% at June 30, 1996. Unused lines of credit at June
30, 1996, amounted to $521,145 ($508,947 at June 30, 1995), net of $144,701 of
available letters of credit and guarantees that reduce lines of credit. There
were no compensating balance agreements at June 30, 1996, or 1995.
-36-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note F - Long-Term Debt
Such debt is comprised of:
<TABLE>
<CAPTION>
1996 1995
__________________________________________________________________________
Maturing Maturing Maturing Maturing
within after within after
One Year One Year One Year One Year
__________________________________________________________________________
<S> <C> <C> <C> <C>
Senior Notes . . . . . . .$ - $125,000 $ - $ -
Convertible Subordinated
Debentures . . . . . . . - - - 56,370
Revolving Credit Notes . . - 231,676 - 250,000
Other Long-Term Debt . . . 9,279 32,994 9,679 40,772
________________________________________________
$ 9,279 $389,670 $ 9,679 $347,142
Capitalized Lease
Obligations . . . . . . 1,339 1,201 1,879 1,756
________________________________________________
$10,618 $390,871 $11,558 $348,898
================================================
</TABLE>
Payments of the debt are scheduled as follows:
<TABLE>
<CAPTION>
Revolving Other
Senior Credit Long-Term
Notes Notes Debt Total
_________________________________________________________________________
<S> <C> <C> <C> <C>
1998 . . . . . . . . . . .$ - $231,676 $ 7,839 $239,515
1999 . . . . . . . . . . . - - 7,724 7,724
2000 . . . . . . . . . . . - - 6,318 6,318
2001 . . . . . . . . . . . - - 2,010 2,010
2002 . . . . . . . . . . . - - 1,708 1,708
2003 . . . . . . . . . . . - - 1,500 1,500
Later years. . . . . . . . 125,000 - 5,895 130,895
________________________________________________
$125,000 $231,676 $32,994 $389,670
=================================================
</TABLE>
On May 29, 1996, the Company issued $125 million in 8 7/8% Senior Notes
(the "Notes") due 2006. The Notes are general unsecured obligations of the
Company and will rank equally in right of payment with all other
unsubordinated indebtedness (including the New Credit Facility) of the
Company. On or after June 1, 2001, the Company may redeem the Notes in whole
or in part, at established redemption prices, plus accrued and unpaid
interest, if any, to the date of redemption. There are no sinking fund
requirements for the Notes. The Notes are subject to certain covenants that
among other things, require specific liquidity and long-term solvency ratios
and, under certain circumstances, restrict payment of dividends by the
Company. The Company used the net proceeds to repay certain existing short-
term indebtedness and for other corporate purposes.
To ensure long-term liquidity, DIMON entered into a $240 million New
Credit Facility with 13 banks which replaces DIMON's $250 million Former
Credit Facility. The Company had no borrowings under these agreements at
either June 30, 1996 or 1995. However, the Company has used these facilities
to classify $231,676 ($250,000 at June 30, 1995) of working capital loans to
Revolving Credit Notes. It is the Company's intent to finance at least
$231,676 on a long-term basis. The New Credit Facility is subject to certain
commitment fees and covenants that among other things require DIMON to
maintain minimum working capital and tangible net worth amounts, require
specific liquidity and long-term solvency ratios and restrict acquisitions
and, under certain circumstances, payment of dividends by the Company. The
New Credit Facility's initial term is to March 15, 1998, and, pending approval
by the lenders, may be extended. The rates of interest are based upon the
type of loan requested by the Company. During the life of the agreement, the
interest rate could be the prime rate or the LIBOR rate adjusted. The primary
advance rate is the agent bank's base lending rate (8.25% at June 30, 1996).
The Company pays a commitment fee of 1/4% per annum on any unused portion of
the facility. Decisions relative to repayments and reborrowings are made
based on circumstances then existing, including management's judgment as to
the most effective utilization of funds.
-37-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note F - Long-Term Debt (continued)
Other long-term debt consists of obligations of DIMON Incorporated,
Florimex and the tobacco operations in Africa and Italy, and is payable at
interest rates varying from 4.85% to 12.0%.
On February 9, 1996, the Company called all of the outstanding 7 3/4%
Convertible Subordinated Debentures for redemption on March 11, 1996. The
debenture call by the Company resulted in a reduction of debt of $54,312, the
issuance of approximately 4.036 million shares of the Company's Common Stock
valued at $53,375, $89 in cash being paid to debenture holders and $848 net
for the reduction of deferred charges offset by increased interest expense.
The Company funded the redemption price for these Debentures and expenses of
the redemption from working capital.
Note G - Long-Term Leases
The Company, primarily through Florimex, has both capital and operating
leases. The capital leases are for land, buildings, automobiles and trucks;
the operating leases are for office equipment. The capitalized lease
obligations are payable through 1999. Interest rates are imputed at 7.0% to
10.7%. Amortization is included in depreciation expense. Minimum future
obligations and capitalized amounts are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
_____________________________________________________________________________
<S> <C> <C>
1997 . . . . . . . . . . . . . . . . . . . . . $ 1,481 $ 4,161
1998 . . . . . . . . . . . . . . . . . . . . . 916 3,308
1999 . . . . . . . . . . . . . . . . . . . . . 299 2,506
2000 . . . . . . . . . . . . . . . . . . . . . 33 1,631
2001 . . . . . . . . . . . . . . . . . . . . . - 1,304
Later years . . . . . . . . . . . . . . . . . - 1,707
_________________________
$ 2,729 $14,617
Less amount representing interest
and deposits . . . . . . . . . . . . . . . . 189
______
Present value of net minimum lease payments. . $ 2,540
Less current portion of obligations
under capital leases . . . . . . . . . . . . 1,339
______
Long-term obligations under capital leases . . $ 1,201
======
Capitalized amounts
Machinery and equipment, primarily vehicles. $ 4,648
Accumulated amortization . . . . . . . . . . (2,187)
_______
$ 2,461
=======
</TABLE>
-38-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note H - Preferred Stock/Capital Stock
The Board of Directors is authorized to issue shares of Preferred Stock in
series with variations as to the number of shares in any series. The Board of
Directors also is authorized to establish the rights and privileges of such
shares issued including dividend and voting rights. At June 30, 1996, no
shares had been issued.
The Company called all of its outstanding 7 3/4% Convertible Subordinated
Debentures due 2006 (the "Debentures") for redemption on March 11, 1996 (the
"Redemption Date"). Also, see Note F to the Notes to Consolidated Financial
Statements.
Note I - Stock Incentive Plan
At the 1995 Special Meeting of Stockholders the DIMON Incorporated Omnibus
Stock Incentive Plan (the Incentive Plan) and the DIMON Incorporated Non-
Employee Directors Stock Option Plan (the Directors Plan) were approved.
Also, as a result of the merger, options granted under previous plans were
assumed by DIMON.
The Incentive Plan authorizes the issuance of up to 2 million shares of
common stock (subject to increase annually by 3% of the number of shares of
common stock issued during such year, other than pursuant to the Incentive
Plan). The Incentive Plan authorizes the issuance of various stock incentives
to key employees of the Company or any subsidiary, including nonqualified or
incentive stock options, stock appreciation rights and shares of restricted
stock.
Stock options granted under the Incentive Plan allow for the purchase of
common stock at prices determined at the time the option is granted by a
committee composed of independent directors. Stock appreciation rights (SARs)
may be granted under the Incentive Plan in relation to option grants or
independently of option grants. SARs generally entitle the participant to
receive in cash the excess of the fair market value of a share of common stock
on the date of exercise over the value of the SAR at the date of grant.
Restricted stock is common stock that is both nontransferable and forfeitable
unless and until certain conditions are satisfied. No options or SARs may be
granted and no restricted stock may be awarded under the Incentive Plan after
February 8, 2005.
The options and SARs become exercisable on various dates as originally
determined for the grants assumed by DIMON. Under the Incentive Plan, the
committee will determine the dates that the options and SARs become
exercisable.
A separate Directors' Plan authorizes automatic annual grants to purchase
one thousand shares to each non-employee director. Any 1996 grants will be
awarded at the meeting of the DIMON Board following the 1996 annual meeting of
the shareholders of DIMON. The option price will be equal to the fair market
value of DIMON Common Stock on the date of grant. The maximum number of
shares to be issued under the Directors Stock Plan is 50 thousand shares.
Options granted under the Directors' Stock Plan are immediately exercisable.
Options to purchase six thousand shares had been granted as of June 30, 1996.
The Company has elected to treat the costs of SARs as compensation charges
to the income statement with quarterly adjustments for market price
fluctuations. All other options are treated as equivalent shares outstanding.
There was a $473 charge to income in 1996, a $680 charge to income in 1995,
and an $974 credit to income in 1994 arising from adjustments in fair market
values of the SARs.
-39-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note I - Stock Incentive Plan (continued)
Information with respect to options and SARs follows:
<TABLE>
<CAPTION>
Year Ended June 30
_____________________________________
1996 1995 1994
__________________________________________________________________________________
<S> <C> <C> <C>
Options outstanding at
beginning of year . . . . . . . . . . 1,540 1,354 1,074
Options and SARs granted. . . . . . . . 403 231 299
Options exercised . . . . . . . . . . . (130) (5) (12)
Options cancelled . . . . . . . . . . . (9) (40) (7)
__________________________________________
Options outstanding at end of year. . . 1,804 1,540 1,354
==========================================
SARs included as outstanding
at end of year. . . . . . . . . . . . 528 498 415
==========================================
Options available for future grants
at end of year. . . . . . . . . . . . 337 500 1,665
==========================================
Options and SARs exercisable at
end of year . . . . . . . . . . . . . 1,023 926 392
==========================================
Option and SAR market prices per share:
Date of grant. . . . . . . . . . . . . $17.00 $11.50 $16.67
15.38
Exercised (at lowest and highest
market prices) . . . . . . . . . . . 11.33- 14.42- 18.23-
20.75 18.25 20.67
Cancelled (at lowest and highest
market prices) . . . . . . . . . . . 17.00 11.50- 10.00
13.87
</TABLE>
Note J - Retained Earnings
Consolidated retained earnings included $4,490 at June 30, 1996 ($4,860 at
June 30, 1995) for the Company's share of undistributed net income of investee
companies accounted for on the equity method.
Note K - Income Taxes
Consolidated retained earnings at June 30, 1996 and 1995 include undistributed
earnings of $145,773 and $127,792 respectively, of certain foreign
consolidated subsidiaries which are not subject to additional foreign income
taxes nor considered to be subject to United States income taxes unless
remitted as dividends. The Company intends to reinvest these undistributed
earnings indefinitely; accordingly, no provision has been made for United
States taxes on such earnings.
At June 30, 1996, the Company has net operating tax loss carryforwards of
approximately $78,772 for income tax purposes that expire in 1997 and
thereafter. Those carryforwards relate primarily to state taxes for U.S.
entities and to foreign taxes on Baardse and various Florimex entities.
-40-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Income Taxes (continued)
The components of income (loss) before income taxes, minority interest,
equity in net income of investee companies and cumulative effect of accounting
changes, consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
____________________________________________________________________________
<S> <C> <C> <C>
U.S.. . . . . . . . . . . $ 6,301 $(28,293) $(1,837)
Foreign . . . . . . . . . 61,186 6,129 (3,518)
_________________________________________________
$67,487 $(22,164) $(5,355)
=================================================
</TABLE>
The details of the amount shown for income taxes in the Statement of
Consolidated Income follow:
<TABLE>
<CAPTION>
1996 1995 1994
__________________________________________________________________________
<S> <C> <C> <C>
Current
Federal . . . . . . . . . $ 7,676 $ 4,967 $ 2,721
State . . . . . . . . . . 424 73 469
Foreign . . . . . . . . . 12,633 9,719 109
________________________________________________
$20,733 $14,759 $ 3,299
________________________________________________
Deferred
Federal . . . . . . . . . $(3,181) $(6,622) $(2,417)
State . . . . . . . . . . (854) (810) (546)
Foreign . . . . . . . . . 10,297 (1,347) 2,431
________________________________________________
$ 6,262 $(8,779) $ (532)
________________________________________________
Total . . . . . . . . . . $26,995 $ 5,980 $ 2,767
================================================
</TABLE>
-41-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Income Taxes (continued)
The reasons for the difference between income tax expense based on income
or (loss) before income taxes, minority interest and equity in net income of
investee companies and the amount computed by applying the statutory Federal
income tax rate to such income, are as follows:
<TABLE>
<CAPTION>
Pre-tax Income
______________________________________
1996 1995 1994
______________________________________
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) . $23,620 $(7,757) $(1,784)
State income taxes, net of Federal
income tax benefit. . . . . . . . . . . . (280) (530) (77)
Effect of foreign income taxes . . . . . . (1,060) 6,962 2,324
U.S. taxes on foreign income,
net of tax credits . . . . . . . . . . . 1,270 1,440 524
Operating loss carryforwards, net. . . . . 2,262 1,942 1,896
Tax benefits derived from Foreign
Sales Corporations. . . . . . . . . . . . (1,633) (887) (1,169)
Meals and entertainment. . . . . . . . . . 379 316 200
Non-deductible merger expenses . . . . . . - 1,583 -
Nondeductible amortization of goodwill . . 655 1,787 799
Other. . . . . . . . . . . . . . . . . . . 1,782 1,124 54
______________________________________
Actual tax expense.. . . . . . . . . . . . $26,995 $ 5,980 $ 2,767
======================================
</TABLE>
-42-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Income Taxes (continued)
The long-term deferred tax liabilities (assets) are comprised of the
following:
<TABLE>
<CAPTION>
1996 1995
______________________________________________________________________________
<S> <C> <C>
Deferred tax liabilities:
Fixed assets. . . . . . . . . . . . . . . . . .$11,797 $13,825
Foreign taxes . . . . . . . . . . . . . . . . . 8,672 1,637
Other . . . . . . . . . . . . . . . . . . . . . 1,027 -
__________________________
Gross deferred tax liabilities . . . . . . . . . . . 21,496 15,462
__________________________
Deferred tax assets:
Tax loss carryforwards. . . . . . . . . . . . .(16,571) (12,618)
Postretirement and other benefits . . . . . . .(10,317) (9,041)
Currently non-deductible expenses . . . . . . . (4,384) (2,594)
Foreign tax credit. . . . . . . . . . . . . . . - (2,000)
Other . . . . . . . . . . . . . . . . . . . . . (892) (1,333)
__________________________
Gross deferred tax assets. . . . . . . . . . . . . . (32,164) (27,586)
Valuation allowance. . . . . . . . . . . . . . . . . 16,571 12,414
__________________________
Net deferred tax assets. . . . . . . . . . . . . . . (15,593) (15,172)
__________________________
Net deferred tax liability . . . . . . . . . . . . .$ 5,903 $ 290
========================
</TABLE>
The net change in the valuation allowance for deferred tax assets was an
increase of $4,157 and relates primarily to the increase in tax loss
carryforwards for which no benefit can be currently recognized.
Note L - Employee Benefits
Retirement Benefits
In 1995, the Company assumed the defined Benefit Pension Plan (the Retirement
Plan) and an Excess Benefit Plan of the former Dibrell. The Retirement Plan
provides retirement benefits for substantially all of the former Dibrell's
U.S. salaried personnel based on years of service rendered and compensation
during the last five years of employment. The Company maintains an Excess
Benefit Plan that provides individuals who participate in the Retirement Plan
the difference between the benefits they could potentially accrue under the
Retirement Plan and the benefits actually paid as limited by regulations
imposed by the Internal Revenue Code. The Company funds these plans in
amounts consistent with the funding requirements of Federal Law and
Regulations.
Certain non-U.S. plans are sponsored by certain Florimex subsidiaries
located in Italy, Austria and Germany. These plans cover substantially all of
their full-time employees. Additional non-U.S. plans sponsored by certain
tobacco subsidiaries cover substantially all of their full-time employees
located in Greece, Italy, The Netherlands, Turkey and Zimbabwe.
-43-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Employee Benefits (continued)
Net pension cost included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
__________________________________________________________________________________
<S> <C> <C> <C>
Service cost - benefits earned during the year . .$ 1,402 $ 1,528 $ 1,270
Interest cost on projected benefit obligation. . . 4,286 4,040 3,612
Return on assets - actual. . . . . . . . . . . . . (6,174) (4,596) (357)
Amortization of transition asset at July, 1986 . . (268) (268) (273)
Amortization of prior service costs. . . . . . . . 659 704 488
Amortization of unrecognized loss(gain). . . . . . 3,004 1,778 (2,537)
_______________________________
Net pension cost before effect of curtailment. . . 2,909 3,186 2,203
Effect of curtailment . . . . . . . . . . . . . . (698) - -
_______________________________
Net pension cost. . . . . . . . . . . . . . . . .$ 2,211 $ 3,186 $ 2,203
===============================
</TABLE>
The funded status of the plans at June 30 was as follows:
<TABLE>
<CAPTION>
1996 1995
_________________________________________________________________________
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation
Vested . . . . . . . . . . . . . . . . . . . . . $46,893 $41,935
Nonvested. . . . . . . . . . . . . . . . . . . . 484 576
_______________________
47,377 42,511
Benefits attributable to projected
salary increases . . . . . . . . . . . . . . . . 9,560 12,077
_______________________
56,937 54,588
Plan assets at fair value. . . . . . . . . . . . . 41,045 37,141
_______________________
Projected benefit obligation in excess of
plan assets. . . . . . . . . . . . . . . . . . . 15,892 17,447
Unamortized transition asset . . . . . . . . . . 1,792 2,020
Unrecognized prior service costs . . . . . . . . . (6,817) (7,728)
Unrecognized net gain (loss) . . . . . . . . . . . 4,108 (1,797)
Adjustment required to recognize
minimum liability. . . . . . . . . . . . . . . . 5,502 5,505
______________________
Net pension liability. . . . . . . . . . . . . . . $20,477 $15,447
======================
</TABLE>
For the U.S. plans, projected benefit obligations were determined using
assumed discount rates of 8% for the Retirement Plan for all three years and
8% for the Excess Benefit Plan for all three years. Assumed compensation
increases were 7% for 1996 and 6.5% for 1995 and 1994 for the Retirement Plan
and 5% for 1996 and 1995 and 4% for 1994 for the Excess Benefit Plan. The
assumed long-term rate of return on plan assets for all three years was 9% for
the Retirement Plan and 8% for 1996 and 1995 and 10% for 1994 for the Excess
Benefit Plan. Plan assets consist principally of common stock and fixed
income securities. For non-U.S. plans, discount rates and assumed
compensation increases are in accordance with locally accepted practice. No
assumed long-term rate of return is made for non-U.S. plan assets as these
plans are generally not funded.
-44-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Employee Benefits (continued)
The Company also sponsors a 401-K savings plan for most of its salaried
employees located in the United States. The Company's contributions to the
plan were $481 in 1996, $652 in 1995, and $648 in 1994.
The Company has a Profit-Sharing Plan for substantially all of the
salaried employees meeting certain eligibility requirements who were employed
by Monk-Austin. This Profit Sharing Plan is in lieu of a defined benefit
pension plan. Profit-Sharing Plan contributions are discretionary and totaled
$1,043 in 1995, and $1,416 in 1994. There were no contributions in 1996.
The Company adopted a Cash Balance Plan on July 1, 1996, that combines the
Retirement Plan of the former Dibrell and the Profit-Sharing Plan of the
former Monk-Austin. The adoption is estimated to increase the present value
of the accumulated benefit obligation by $2,300, decrease the benefits
attributable to projected salary increases by $1,800 and increase net pension
cost by $600.
Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits to retired
employees (and their eligible dependents) who meet specified age and service
requirements. Plan assets consist of paid up life insurance policies on
certain current retirees. The Company retains the right, subject to existing
agreements, to modify or eliminate the medical benefits.
The benefit obligation was determined using an assumed discount rate of
8.0% for all three years and an assumed rate of increase in health care costs,
also known as the health care cost trend rate, of 11.5% for 1996 and 13.0% for
1995 and 1994. This trend rate is assumed to decrease gradually to 5.5% by
2007. The assumed long-term rate of return on plan assets was 5.5% for 1996
and 5.4% for 1995 and 1994. Based on current estimates, increasing the health
care cost trend rate by one percentage point would increase the benefit
obligation by approximately $1.7 million.
The following table presents the plan's funded status at June 30
reconciled with amounts recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
1996 1995
_________________________________________________________________________________
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . $12,373 $11,104
Fully eligible active plan participants. . . . 2,077 2,937
Other active plan participants . . . . . . . . 5,377 4,118
Plan assets at fair value. . . . . . . . . . . . (62) (159)
_________ ________
Accumulated postretirement benefit
obligation in excess of plan assets. . . . . . 19,765 18,000
Unrecognized prior service cost. . . . . . . . . (170) (191)
Unrecognized net gain. . . . . . . . . . . . . . 456 1,237
________ ________
Accrued postretirement benefit cost. . . . . . . $20,051 $19,046
========= ========
</TABLE>
-45-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Employee Benefits (continued)
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
_____________________________________________________________________________
<S> <C> <C> <C>
Service cost . . . . . . . . . . . . . . . $ 420 $ 395 $ 361
Interest cost. . . . . . . . . . . . . . . 1,502 1,348 1,338
Actual return on plan assets . . . . . . . 16 7 (17)
______ ______ ______
Net periodic postretirement benefit cost . $1,938 $1,750 $1,682
====== ====== ======
</TABLE>
The Company continues to evaluate ways in which it can better manage these
benefits and control the costs. Any changes in the plan or revisions to
assumptions that affect the amount of expected future benefits may have a
significant effect on the amount of the reported obligation and annual
expense.
Employees in operations located in certain foreign countries are covered
by various foreign postretirement life insurance benefit arrangements. For
these foreign plans, the cash-basis cost of benefits charged to income was not
material in 1996, 1995 and 1994.
Note M - Geographic Area Data, Export Sales and Other Information
The following description and tables present the Company's tobacco and flower
operations in different geographic areas in conformity with the Statement of
Financial Accounting Standards No. 14, "Financial Reporting for Segments of a
Business Enterprise" (SFAS 14). Geographic area information for tobacco
operations as to net sales and operating profit is based on the origin of the
product sold, and identifiable assets are classified based on the origination
of the product. Turkish tobacco is included in other origin. Geographic area
information for flower operations as to net sales and operating profit is
based on the point of sale, and identifiable assets are classified based on
the point of sale. Corporate assets consist primarily of those related to cost
investments. Export sales are defined as foreign sales of United States
origin.
Tobacco
The Company is principally engaged in the tobacco business. Through its
wholly-owned subsidiary, DIMON International, Inc. ("DIMON International").
DIMON International and its U.S. tobacco subsidiaries buy leaf tobacco on the
auction markets in Florida, Georgia, South Carolina, North Carolina, Virginia,
Kentucky, Tennessee and Maryland for its customers. This tobacco is shipped
to plants located in Virginia and North Carolina where it is processed, packed
in hogsheads or cases and then stored until ordered shipped by its customers.
DIMON International and its tobacco subsidiaries also are engaged in buying,
processing and exporting tobacco grown in Argentina, Brazil, China, Greece,
Guatemala, India, Italy, Malawi, Mexico, Tanzania, Turkey, Zimbabwe and other
areas which is sold on the world markets. DIMON International's investee
companies are located in Greece, Zimbabwe and the United States.
The disaggregation of entities necessary for geographic area data may
require the use of estimation techniques for operating profit. The
identifiable assets presentation does not take into account the seasonal
aspects of the tobacco business, particularly the seasonal peak in South
America.
Flowers
The Company imports, exports and distributes cut flowers through the Florimex
group, which operates through 57 offices on six continents.
-46-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
<TABLE>
<CAPTION>
Sales and Operating
Other Profit
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
_______________________________________________________________________________________
<S> <C> <C> <C>
1996
Tobacco
United States. . . . . . . . . . .$ 854,853 $ 47,428 $ 106,615
South America. . . . . . . . . . . 524,886 57,038 442,471
Asia . . . . . . . . . . . . . . . 43,023 1,372 34,567
Africa . . . . . . . . . . . . . . 208,898 9,695 170,712
Other . . . . . . . . . . . . . . 138,506 10,756 114,213
Worldwide supply contract. . . . . - - 9,171
________________________________________
$1,770,166 $126,289 $ 877,749
___________________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 334,104 $ 5,532 $ 85,418
United States. . . . . . . . . . . 20,797 579 6,552
Other. . . . . . . . . . . . . . . 42,406 2,365 7,035
___________________________________________
$ 397,307 $ 8,476 $ 99,005
___________________________________________
$2,167,473 $134,765 (1) $ 976,754
===========
Corporate. . . . . . . . . . . . . (20,354)(1) 34,992
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 8,268
___________
$1,020,014
__________ ===========
Operating profit
before interest expense. . . . . $114,411
Interest expense . . . . . . . . . (46,924)
__________
Income before income taxes, minority
interest, equity in net assets of
investee companies and
extraordinary item. . . . . $ 67,487
===========================================
(1) Includes restructuring expenses (recoveries) of $431, Tobacco -
United States; $9,308, South America; $330, Africa; $1,369, Other; $(498),
Flowers - United States; and $4,420, Corporate.
Europe Far East Other Total
_______________________________________________________________________________________
Export sales of U.S. origin . $159,763 $193,613 $54,886 $408,262
=========================================================
Tobacco Flowers Total
________________________________________________________________________________________
Depreciation and amortization. . . . . .$26,802 $6,978 $33,780
=================================================
Capital expenditures. . . . .. . . . . .$35,444 $5,822 $41,266
=================================================
Equity in net loss of investee
companies. . . . . . . . . . . . . . .$ (330) $ - $ (330)
=================================================
</TABLE>
-47-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
<TABLE>
<CAPTION>
Sales and Operating
Other Profit (Loss)
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
_________________________________________________________________________________________
<S> <C> <C> <C>
1995
Tobacco
United States. . . . . . . . . . .$ 883,294 $ 19,137 $ 119,889
South America. . . . . . . . . . . 446,102 17,249 455,526
Asia . . . . . . . . . . . . . . . 28,111 (3,222) 40,850
Africa . . . . . . . . . . . . . . 162,562 2,926 150,736
Other . . . . . . . . . . . . . . 35,189 1,375 74,180
Worldwide supply contract. . . . . - - 10,770
_________________________________________
$1,555,258 $ 37,465 $ 851,951
____________________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 326,702 $ 1,970 $ 98,835
United States. . . . . . . . . . . 24,439 (5,698) 6,722
Other. . . . . . . . . . . . . . . 34,789 658 4,976
____________________________________________
$ 385,930 $ (3,070) $ 110,533
____________________________________________
$1,941,188 $ 34,395(1) $ 962,484
===========
Corporate. . . . . . . . . . . . . (11,328) 108,502
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 22,622
___________
$1,093,608
__________ ===========
Operating profit
before interest expense. . . . . $ 23,067
Interest expense . . . . . . . . . (45,231)
__________
Income (loss) before income
taxes, minority interest
and equity in net assets
of investee companies. . . . . $(22,164)
============================================
(1) Includes restructuring expenses of $22,295, Tobacco - United
States; $107, South America; $76, Africa; $855, Other; $741, Flowers - Europe;
and $1,881, United States.
Europe Far East Other Total
____________________________________________________________________________________
Export sales of U.S. origin . $174,649 $260,310 $23,891 $458,850
======================================================
Tobacco Flowers Total
_______________________________________________________________________________________
Depreciation and amortization. . . . . .$24,034 $7,818 $31,852
===============================================
Capital expenditures. . . . .. . . . . .$29,033 $6,859 $35,892
===============================================
Equity in net income of
investee companies. . . . . . . . . .$ 1,805 $ - $ 1,805
===============================================
</TABLE>
-48-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
<TABLE>
<CAPTION>
Sales and Operating
Other Profit (Loss)
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
__________________________________________________________________________________________
<S> <C> <C> <C>
1994
Tobacco
United States. . . . . . . . . . .$ 548,735 $ 16,370 $ 268,910
South America. . . . . . . . . . . 285,158 1,631 448,428
Asia . . . . . . . . . . . . . . . 34,473 (845) 13,177
Africa . . . . . . . . . . . . . . 161,338 13,584 105,611
Other . . . . . . . . . . . . . . 66,018 2,192 40,993
Worldwide supply contract. . . . . - - 12,000
_____________________________________________
$1,095,722 $ 32,932 $ 889,119
_____________________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 295,615 $ 3,984 $ 89,241
United States. . . . . . . . . . . 42,304 (2,104) 10,290
Other. . . . . . . . . . . . . . . 31,137 681 3,409
_____________________________________________
$ 369,056 $ 2,561 $ 102,940
_____________________________________________
$1,464,778 $ 35,493 $ 992,059
===========
Corporate. . . . . . . . . . . . . (5,731) 17,350
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 34,407
___________
$1,043,816
_________ ===========
Operating profit
before interest expense. . . . . $ 29,762
Interest expense . . . . . . . . . (35,117)
_________
Income (loss) before income
taxes, minority interest and
equity in net assets of
investee companies. . . . . . . . $ (5,355)
===============================================
Europe Far East Other Total
_____________________________________________________________________________________________
Export sales of U.S. origin . $119,650 $239,881 $9,511 $369,042
===============================================================
Tobacco Flowers Total
_________________________________________________________________________________________
Depreciation and amortization. . . . . .$21,871 $ 6,991 $28,862
================================================
Capital expenditures. . . . .. . . . . .$22,354 $10,028 $32,382
================================================
Equity in net income
of investee companies. . . . . . . . .$ 98 $ - $ 98
================================================
</TABLE>
-49-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
Of the 1996, 1995 and 1994 tobacco sales and other operating revenues,
approximately 55%, 52% and 43%, respectively, were to various tobacco
customers which management has reason to believe are now owned by or under the
common control of three companies (two companies in 1994), each of which
accounted for more than 10% of net sales. At June 30, 1996, there was
approximately $43.8 million due from the three major tobacco customers and
included in Trade receivables.
The following table summarizes the net sales made to each customer for the
periods indicated:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Customer A . . . . . . . . . . . . . . . . . . . . $474,787 $317,110 $238,370
Customer B . . . . . . . . . . . . . . . . . . . . 336,989 279,257 -
Customer C . . . . . . . . . . . . . . . . . . . . 170,167 214,622 231,852
________ ________ ________
Total . . . . . . . . . . . . . . . . . . . $981,943 $810,989 $470,222
======= ======== =======
</TABLE>
No customers in the flower operation accounted for more than 10% of
flower sales.
Note N - Foreign Currency Translation
The financial statements of foreign entities included in the consolidated
financial statements have been translated to U.S. dollars in accordance with
FASB Statement No. 52, "Foreign Currency Translation." Under that Statement,
all asset and liability accounts are translated at the current exchange rate,
and income statement items are translated at the average exchange rate for
each quarter; resulting translation adjustments, net of deferred taxes, are
made directly to a separate component of stockholders' equity. Transaction
adjustments, however, are made in the Statement of Consolidated Income. These
include realized exchange adjustments relating to assets and liabilities
denominated in foreign currencies. Financial statements of entities located
in highly inflationary economies are remeasured in U.S. dollars. The
remeasurement of and subsequent transaction adjustments are also made in the
Statement of Consolidated Income.
For 1996, the transaction adjustments netted to a gain of $368. The
transaction adjustments netted to a loss of $570 and a gain of $1,179 for
1995 and 1994, respectively, and were primarily related to the Company's
Brazilian operations.
-50-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - Contingencies and Other Information
On August 29, 1996, the Company received notices from Brazilian tax
authorities of proposed adjustments to income taxes for the calendar year 1992
based on the Company's recalculation of monetary correction as allowed under
Law 8200. The approximate proposed adjustment claims additional tax,
including penalties and interest, through August 29, 1996, of $23,474, before
related tax benefits for all assessed interest. In 1993, the Company received
notices from Brazilian tax authorities of proposed adjustments to the income
tax returns of the Company's entities located in Brazil for the calendar years
ending 1988 through 1992. The approximate proposed adjustments claim
additional tax, including penalties and interest through June 30, 1996, of
$41,577, before related tax benefits for all assessed interest. The Company
believes that it has properly reported its income and paid its taxes in Brazil
in accordance with applicable laws and intends to contest the proposed
adjustments vigorously. The Company expects that the ultimate resolution of
these matters will not have a material adverse effect on the Company's
consolidated balance sheet or results of operations.
Consistent with the 1994 plan to liquidate Korean American Tobacco, a 49%
owned affiliate, the Company is involved in legal negotiations related to the
final settlement and liquidating dividend. While the ultimate results of
these negotiations cannot be determined, management does not expect that the
outcome will have a material adverse effect on the Company's consolidated
balance sheet or results of operations.
The Company and certain subsidiaries have available letters of credit of
$195,304 at June 30, 1996, of which $144,701 was outstanding. These letters
of credit represent, generally, performance guarantees issued in connection
with purchases and sales of domestic and foreign tobacco.
The Company is guarantor as to certain lines and letters of credit of
affiliated companies in an amount not to exceed approximately $8,324. There
was approximately $527 outstanding under these guarantees at June 30, 1996.
The Company's subsidiaries have guaranteed certain loans made by Brazilian
banks to local farmers. There was approximately $32,398 outstanding under
these guarantees at June 30, 1996.
The Company enters into forward exchange contracts to hedge certain
foreign currency transactions for periods consistent with the terms of the
underlying transactions. While the forward contracts affect the Company's
results of operations, they do so only in connection with the underlying
transactions. As a result, they do not subject the Company to risk from
exchange rate movements, because gains and losses on these contracts offset
losses and gains on the transactions being hedged. At June 30, 1996, the
Company had $1.4 million ($1 million in 1995) of U.S. dollar/Deutschmark
exchange contracts outstanding, all of which were in Deutschmarks. The
forward exchange contracts generally have maturities that do not exceed 44
days at June 30, 1996.
The Company's other off balance sheet risks are not material.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates may change with future events.
-51-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note P - Selected Quarterly Financial Data (Unaudited)
Summarized quarterly financial information is as follows:
<TABLE>
<CAPTION>
Per Share of
In Thousands Common Stock
_______________________________________ ____________
Sales and
Other Net Net
Operating Gross Income Income
Revenues (1) Profit (1) (Loss) (Loss)(3)
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
1996 Fiscal Year . . . . . . .$2,167,473 $262,481 $ 41,270 $ 1.01
Fourth Quarter. . . . . . 487,271 64,022 (2) 9,130 (2) .21 (2)
Third Quarter . . . . . . 577,092 61,195 6,274 .16
Second Quarter. . . . . . 763,418 82,460 19,838 .48
First Quarter . . . . . . 339,692 54,804 6,028 (4) .16 (4)
1995 Fiscal Year . . . . . . .$1,941,188 $181,824 $(30,165) $(0.79)
Fourth Quarter. . . . . . 382,454 28,489 (2) (39,928) (2) (1.05) (2)
Third Quarter . . . . . . 649,170 62,228 7,576 0.20
Second Quarter. . . . . . 634,796 56,206 3,709 0.10
First Quarter . . . . . . 274,768 34,901 (1,522) (0.04)
____________________________________________
</TABLE>
(1) In the fourth quarter of 1996 the Company has reclassified Other income
into Sales and other operating revenues. The Company has also reclassified
Sundry deductions into Cost of goods sold. Both Other income and Sundry
deductions are not material and the reclassification does not affect Net
income.
Previously reported Net sales and Gross margin were as follows:
Net Sales Gross Profit
_____________________________
1996 Third Quarter . . $ 573,084 $ 57,355
Second Quarter. . 755,228 74,319
First Quarter . . 335,349 50,859
1995 Fiscal Year . . . $1,927,749 $170,233
Fourth Quarter. . 380,215 27,243
Third Quarter . . 644,079 58,320
Second Quarter. . 631,503 52,628
First Quarter . . 271,952 32,042
(2) In the fourth quarter of 1996 the Company recorded a $15.4
million charge related to restructuring costs. In the fourth quarter of 1995
the Company recorded charges of $9.2 million and $26.0 million related to the
valuation of certain inventories and restructuring and merger related costs,
respectively.
(3) Fully diluted amounts are anti-dilutive for 1995.
(4) In the first quarter of 1996, the Company recorded $1,400 (net of
$870 tax), or $.03 per share, as an extraordinary item for the partial
recovery of an Iraqi receivable.
-52-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information
DIMON International, Inc. and Florimex Worldwide, Inc. (collectively, the
"Guarantors"), wholly owned subsidiaries of DIMON Incorporated, have fully and
unconditionally guaranteed on a joint and several basis DIMON Incorporated's
obligations to pay principal, premium and interest relative to the $125
million Senior Notes due 2006. Management has determined that separate, full
financial statements of the Guarantors would not be material to investors and
such financial statements are not provided. Supplemental combining financial
information of the Guarantors is presented below:
<TABLE>
<CAPTION>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations
Total
<S> <C> <C> <C> <C>
<C>
Sales and other operating revenues . . . . . .$ 26,003 $1,418,433 $1,236,781 $(513,744)a
$2,167,473
Cost of goods and services sold. . . . . . . . (5,067) 1,329,424 1,030,612 (449,977)a
1,904,992
________ ___________ __________
____________ ___________
31,070 89,009 206,169 (63,767)
262,481
Selling, administrative and general. . . . . . 13,059 69,794 78,962
(29,105)a,b 132,710
Restructuring and merger
related cost . . . . . . . . . . . . . . . . 4,420 1,429 9,511 -
15,360
________ ________ ________ __________
___________
13,591 17,786 117,696 (34,662)
114,411
Interest Expense . . . . . . . . . . . . . . . 24,764 28,916 27,906 (34,662)a
46,924
________ ___________ __________ __________
___________
Income (loss) before income taxes,
minority interest and equity in
net income (loss) of investee
companies, equity in net income
of subsidiaries and
extraordinary item . . . . . . . . . . . . . (11,173) (11,130) 89,790 -
67,487
Income taxes (benefits). . . . . . . . . . . . (2,516) (2,352) 31,863 -
26,995
________ _________ __________ _________
____________
Income (loss) before minority interest,
equity in net income (loss) of
investee companies, equity in net
income of subsidiaries and
extraordinary item . . . . . . . . . . . . . (8,657) (8,778) 57,927 -
40,492
Income applicable to minority
interest . . . . . . . . . . . . . . . . . . - - 292 -
292
Equity in net income (loss) of investee
companies, net of income taxes . . . . . . . - 98 (428) -
(330)
Equity in net income of
subsidiaries . . . . . . . . . . . . . . . . 49,927 57,207 - (107,134)a
-
Extraordinary item . . . . . . . . . . . . . . - 1,400 - -
1,400
________ ___________ ________ ____________
____________
NET INCOME . . . . . . . . . . . . . . . . . . $41,270 $ 49,927 $57,207 $(107,134)
$ 41,270
======== =========== ========= ============
============
</TABLE>
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Other Income for
Consolidated Entities.
-53-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations
Total
<S> <C> <C> <C> <C>
<C>
ASSETS
Current assets
Cash and cash equivalents . . . . . $ 723 $6,894 $ 46,120 $ 83 a
$ 53,820
Notes receivable . . . . . . . . . . - 475 19,347 (18,695)b
1,127
Trade receivables, net of
allowances. . . . . . . . . . . . 26,762 178,390 162,624 (176,878)b
190,898
Inventories:
Tobacco . . . . . . . . . . . . . - 54,729 260,747 -
315,476
Other . . . . . . . . . . . . . . 49 1,174 16,802 -
18,025
Advances on purchases of tobacco . . 168,616 28,113 49,659 (171,679)b
74,709
Recoverable income taxes . . . . . . - - 1,563 -
1,563
Prepaid expenses . . . . . . . . . . 4,190 979 7,988 -
13,157
_________ _______ __________ ___________
___________
Total current assets 200,340 270,754 564,850 (367,169)
668,775
_________ ________ __________ ___________
___________
Investments and other assets
Equity in net assets of
investee companies. . . . . . . . - 5,884 2,384 -
8,268
Consolidated subsidiaries. . . . . . 288,533 336,667 21,230 (646,430)b
-
Other investments. . . . . . . . . . 23,067 2,861 9,337 (32,278)b
2,987
Notes receivable . . . . . . . . . . 139 3,965 (26) -
4,078
Other. . . . . . . . . . . . . . . . - 981 18,170 -
19,151
_________ _________ _________ ___________
___________
311,739 350,358 51,095 (678,708)
34,484
_________ _________ _________ ___________
___________
Intangible assets
Excess of cost over related net
assets of business acquired . . . 375 8,281 14,465 -
23,121
Production and supply contracts. . . - 25,960 7,365 -
33,325
Pension asset. . . . . . . . . . . . 3,042 1,088 - -
4,130
_________ _________ _________ __________
___________
3,417 35,329 21,830 -
60,576
_________ _________ __________ __________
___________
Property, plant and equipment
Land . . . . . . . . . . . . . . . . 1,770 1,925 15,528 -
19,223
Buildings. . . . . . . . . . . . . . 4,739 25,568 113,434 -
143,741
Machinery and equipment. . . . . . . 5,271 48,858 106,108 -
160,237
Allowances for depreciation. . . . . (4,883) (26,877) (54,666) -
(86,426)
_________ _________ _________ __________
___________
6,897 49,474 180,404 -
236,775
_________ _________ ________ ___________
___________
Deferred taxes and other
deferred charges . . . . . . . . . . 19,259 - 145 -
19,404
_________ __________ __________ ____________
__________
$541,652 $705,915 $818,324 $(1,045,877)
$1,020,014
========= ========== ========== ===========
==========
</TABLE>
a. To adjust for cash transfers made by DIMON Incorporated to an entity
which reports on an earlier period.
b. Inter-company eliminations.
-54-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . $ - $ - $ - $ -
$ -
Accounts payable:
Trade . . . . . . . . . . . . 1,423 281,706 86,216 (303,375)b
65,970
Officers and employees. . . . 14,427 2,263 7,384 -
24,074
Other . . . . . . . . . . . . 4,749 1,554 8,159 -
14,462
Advances from customers. . . . . 3,380 49,729 73,029 (51,985)b
74,153
Accrued expenses . . . . . . . . 2,418 13,941 35,438 -
51,797
Income taxes . . . . . . . . . . (12,489)c 3,083 15,042 (277)b
5,359
Long-term debt current . . . . . 4,286 350 5,982 -
10,618
_________ ___________ _______ __________
_________
Total current liabilities . 18,194 352,626 231,250 (355,637)
246,433
_________ ____________ _______ __________
_________
Long-term debt
Revolving Credit Notes
and Other . . . . . . . . . . 48,856 1,068 226,717 (10,770)b
265,871
Senior Notes . . . . . . . . . . 125,000 - - -
125,000
__________ _____________ ________ __________
_________
173,856 1,068 226,717 (10,770)
390,871
Deferred Credits
Income taxes . . . . . . . . . . 6,198 (6,259) 21,557 -
21,496
Compensation and other
benefits . . . . . . . . . . . 27,556 8,629 8,280 -
44,465
__________ __________ _________ __________
_________
33,754 2,370 29,837 -
65,961
Minority interest in
subsidiaries . . . . . . . . . . - - 901 -
901
__________ __________ ________ __________
_________
Stockholders' equity
Common stock/Paid-in-capital . . 136,959 143,026 180,366 (323,392)b
136,959
Retained earnings. . . . . . . . 177,419 203,982 146,398 (350,380)b
177,419
Equity-currency conversions. . . 2,842 2,843 2,855 (5,698)b
2,842
Additional minimum pension
liability. . . . . . . . . . . (1,372) - - -
(1,372)
Unrealized gain on investments . - - - -
-
__________ ________ _________ ___________
__________
315,848 349,851 329,619 (679,470)
315,848
__________ _________ _________ _____________
__________
$541,652 $705,915 $818,324 $(1,045,877)
$1,020,014
========== ========== ======== =============
===========
</TABLE>
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated
estimated tax payments.
-55-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income (Loss). . . . . . . . $ 41,270 $49,927 $57,207 $(107,134)a $41,270
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . . 2,326 10,826 20,628 - 33,780
Deferred items . . . . . . . . (3,335) 2,437 6,749 - 5,851
Loss (gain) on foreign currency
transactions . . . . . . . . 46 (69) (345) - (368)
Gain on disposition of fixed
assets . . . . . . . . . . . (14) (1,098) (1,303) - (2,415)
Gain on sale of investee . . . . . . - - (3,751) - (3,751)
Gain on sale of investment . . . . . - - (1,090) - (1,090)
Undistributed (earnings) loss of
investees/subsidiaries . . . . . (49,927) (57,305) 428 107,134 a 330
Dividends received from investee . - 1,100 365 - 1,465
Income applicable to minority
interest . . . . . . . . . . - - 292 - 292
Bad debt expense . . . . . . . - (10) 1,053 - 1,043
Decrease (increase) in accounts
receivable . . . . . . . . . 123,123 (12,826) (43,527) (79,414)a (12,644)
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 6,938 91,721 28,682 (62,903)a 64,438
Decrease in recoverable taxes. . - - 444 - 444
Decrease (increase) in
prepaid expenses . . . . . . 7,052 (313) 10,518 - 17,257
Increase (decrease) in accounts
payable and accrued expenses . 5,212 133,597 (32,157) (91,841)a 14,811
Increase (decrease) in advances
from customers . . . . . . . (499) (194,582) 13,721 206,476 a 25,116
Increase (decrease) in income
taxes. . . . . . . . . . . . (2,239) (4,306) 705 (277)a (6,117)
Other. . . . . . . . . . . . . 56 230 (194) - 92
________ ________ ________ __________ _________
Net cash provided (used) by
operating activities. 130,009 19,329 58,425 (27,959) 179,804
________ ________ ________ __________ _________
Investing Activities
Purchase of property and
equipment . . . . . . . . . . (436) (5,363) (35,467) - (41,266)
Proceeds from sale of property
and equipment. . . . . . . . . 14 4,784 3,807 - 8,605
Payments on notes receivable and
receivable from investees . . 30,034 870 228 (30,000)a 1,132
Advances of notes receivable. . (83) (350) (19,834) 18,695 a (1,572)
Proceeds from or (advances) for
other investments and
other assets . . . . . . . . 5,232 24,634 1,304 (6,748)a 24,422
Purchase of subsidiary, $8,236 for
property and equipment. . . . - (6,543) - - (6,543)
________ ________ ________ _________ _________
Net cash provided (used) by
investing activities. . . 34,761 18,032 (49,962) (18,053) (15,222)
________ ________ _________ _________ _________
</TABLE>
-56-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Financing Activities
Repayment of debt. . . . . . . (622,367) (32,346) (206,150) 30,000 a
(830,863)
Proceeds from debt . . . . . . 477,171 - 231,806 (10,770)a
698,207
Cash dividends paid to DIMON
Incorporated stockholders (21,731) - - -
(21,731)
Cash dividends paid to minority
stockholders . . . . . . . . - - (169) -
(169)
Proceeds from sale of common stock . 1,552 - - -
1,552
________ _________ ________ _________
_________
Net cash provided (used) by
financing activities. (165,375) (32,346) 25,487 19,230
(153,004)
________ ________ _________ _________
_________
Effect of exchange rate
changes on cash. . . . - - (84) -
(84)
________ ________ _________ _________
_________
Increase (decrease) in cash and
cash equivalents . . . (605) 5,015 33,866 (26,782)
11,494
Cash and cash equivalents at
beginning of year. . . 1,328 1,879 12,254 26,865
42,326
_________ __________ __________ ___________
__________
Cash and cash equivalents
at end of period $ 723 $ 6,894 $ 46,120 $ 83 $
53,820
=========== ========== ========== ==========
==========
</TABLE>
a. Inter-company eliminations.
-57-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1995
(in thousands)
<CAPTION>
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C>
<C>
Sales and other operating revenues . . . $ 10,541 $1,259,125 $849,723 $ (178,201)a
$1,941,188
Cost of goods and services sold. . . . . 3,340 b 1,159,613 733,538 (137,127)a
1,759,364
________ ___________ ________ ___________
___________
7,201 99,512 116,185 (41,074)
181,824
Selling, administrative and general. . . 13,936 51,073 80,692 (12,899)a,c
132,802
Restructuring and merger related
costs. . . . . . . . . . . . . 16,891 9,487 (423) -
25,955
________ ___________ ________ ___________
___________
(23,626) 38,952 35,916 (28,175)
23,067
________ ___________ ________ ___________
___________
Interest Expense . . . . . . . . 11,882 33,824 27,700 (28,175)a
45,231
________ ___________ ________ ___________
___________
Income (loss) before income taxes,
minority interest, equity in
net income (loss) of investee
companies, and equity in net
loss of subsidiaries . . . . . . (35,508) 5,128 8,216 -
(22,164)
Income taxes (benefits). . . . . . (8,567) 3,767 10,780 -
5,980
________ ___________ ________ ___________
___________
Income (loss) before minority
interest, equity in net income
(loss) of investee companies
and equity in net loss of
subsidiaries . . . . . . . . . . (26,941) 1,361 (2,564) -
(28,144)
Income applicable to minority
interest . . . . . . . . . . . . - - 216 -
216
Equity in net income (loss) of
investee companies, net of
income taxes . . . . . . . . . . - 348 (2,153) -
(1,805)
Equity in net loss of
subsidiaries . . . . . . . . . . (3,224) (4,933) - 8,157 a
-
________ _____________ _________ ___________
___________
NET LOSS . . . . . . . . . . . . . $(30,165) $ (3,224) $ (4,933) $ 8,157 $
(30,165)
========= ============ ========= ===========
===========
</TABLE>
a. Inter-company eliminations.
b. Reserve for inter-company profit in ending inventories
c. Royalty expense in SG&A and Royalty income in Other Income for
Consolidated Entities.
-58-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1995
(in thousands)
<CAPTION>
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C>
<C>
ASSETS
Current assets
Cash and cash equivalents. . . . . . $ 1,328 $ 1,879 $ 12,254 $ 26,865 d $
42,326
Notes receivable . . . . . . . 30,015 851 1,136 (30,000)a
2,002
Trade receivables, net of
allowances . . . . . . . . . 150,127 164,866 124,048 (256,291)a
182,750
Inventories:
Tobacco . . . . . . . . . . (5,116) b 103,294 312,253 -
410,431
Other . . . . . . . . . . . . 25 2,240 11,914 -
14,179
Advances on purchases of
tobacco . . . . . . . . . . . 183,504 70,009 25,448 (234,582)a
44,379
Recoverable income taxes . . . . - - 2,007 -
2,007
Prepaid expenses . . . . . . . . 12,499 667 19,879 -
33,045
_________ ________ _________ ___________
___________
Total current assets. . . . . 372,382 343,806 508,939 (494,008)
731,119
_________ ________ _________ ____________
___________
Investments and other assets
Equity in net assets of investee
companies . . . . . . . . . . - 2,555 20,067 -
22,622
Consolidated subsidiaries. . . . . 266,381 243,970 5,007 (515,358)a
-
Other investments. . . . . . . . 965 366 418 -
1,749
Notes receivable . . . . . . . . 45 1,016 5,046 -
6,107
Other. . . . . . . . . . . . . . 292 13,410 14,445 -
28,147
_________ ________ ________ _________
___________
267,683 261,317 44,983 (515,358)
58,625
_________ ________ ________ __________
___________
Intangible assets
Excess of cost over related net
assets of business acquired. . . . . 388 15,209 10,570 -
26,167
Production and supply contracts. . . . - 28,340 8,000 -
36,340
Pension asset. . . . . . . . . . 3,131 1,088 - -
4,219
_________ ________ _______ __________
___________
3,519 44,637 18,570 -
66,726
_________ ________ ________ __________
___________
Property, plant and equipment
Land . . . . . . . . . . . . . . 1,770 1,573 16,089 -
19,432
Buildings. . . . . . . . . . . . 4,998 21,127 109,683 -
135,808
Machinery and equipment. . . . . 5,187 44,335 119,659 -
169,181
Allowances for depreciation. . . (4,167) (25,293) (71,912) -
(101,372)
_________ ________ ________ __________
___________
7,788 41,742 173,519 -
223,049
_________ ________ ________ __________
___________
Deferred taxes and other
deferred charges . . . . . . . . 10,076 4,557 (544) -
14,089
_________ ________ __________ __________
___________
$661,448 $696,059 $745,467 $(1,009,366)
$1,093,608
========= ======== ======== ============
===========
</TABLE>
a. Inter-company eliminations.
b. Reserve for inter-company profit in ending inventories.
d. To adjust for cash transfers made by DIMON Incorporated to an entity
which reports on an earlier period.
-59-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
<CAPTION>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . $ 54,400 $ 30,000 $179,336 $ (30,000)a $
233,736
Accounts payable:
Trade . . . . . . . . . . . 4,367 149,566 111,036 (208,410)a
56,559
Officers and employees. . . 14,643 27 6,044 -
20,714
Other . . . . . . . . . . . 144 426 12,603 -
13,173
Advances from customers. . . . 3,880 228,057 75,748 (258,461)a
49,224
Accrued expenses . . . . . . . 4,509 13,815 42,158 (3,123)a
57,359
Income taxes . . . . . . . . . (10,744)e 3,672 18,271 -
11,199
Long-term debt current . . . . 4,714 628 6,216 -
11,558
________ ________ ________ ____________
___________
Total current liabilities . 75,913 426,191 451,412 (499,994)
453,522
________ ________ ________ ____________
___________
Long-term debt
Revolving Credit Notes
and Other . . . . . . . . . 264,143 2,559 25,826 -
292,528
Convertible Subordinated
Debentures. . . . . . . . . 56,370 - - -
56,370
________ ________ ________ ____________
___________
320,513 2,559 25,826 -
348,898
________ ________ ________ ____________
___________
Deferred Credits
Income taxes . . . . . . . . 70 19 10,642 -
10,731
Compensation and other
benefits . . . . . . . . . 26,146 7,642 6,927 -
40,715
________ ________ ________ ___________
___________
26,216 7,661 17,569 -
51,446
________ ________ ________ ____________
___________
Minority interest in
subsidiaries. . . . . . - - 936 -
936
________ ________ ________ ____________
___________
Stockholders' equity
Common stock . . . . 80,030 108,780 152,609 (261,389)a
80,030
Retained earnings. . 157,880 148,455 94,791 (243,246)a
157,880
Equity-currency conversions. . 1,565 1,796 1,707 (3,503)a
1,565
Additional minimum pension
liability. . . . . (1,286) - - -
(1,286)
Unrealized gain on investments . 617 617 617 (1,234)a
617
________ ________ ________ ____________
___________
238,806 259,648 249,724 (509,372)
238,806
________ ________ ________ ____________
___________
$661,448 $696,059 $745,467 $(1,009,366)
$1,093,608
======== ======== ======== ============
===========
</TABLE>
<TABLE>
a. Inter-company eliminations.
e. Current deferred tax on reserves and unallocated, estimated tax
payments.
-60-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income (Loss). . . . . . . . $ (30,165) $ (3,224) $ (4,933) $ 8,157 a
$(30,165)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . 607 10,372 20,873 -
31,852
Deferred items . . . . . . . . 3,922 (3,130) (1,412) -
(620)
Loss (gain) on foreign currency
transactions . . . . . . . . (55) 81 544 -
570
Gain on disposition of
fixed assets . . . . . . . . - (280) (1,539) -
(1,819)
Undistributed (earnings) loss of
investees/subsidiaries . . . . . 3,224 4,585 2,153 (8,157)a
1,805
Dividends received from investees. - 400 78 -
478
Income applicable to minority
interest . . . . . . . . . . - - 216 -
216
Bad debt expense . . . . . . . - (30) 3,850 -
3,820
Decrease (increase) in accounts
receivable . . . . . . . . . (102,713) (33,329) 97,941 90,621 a
52,520
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 97,253 823 (261,577) 165,657 a
2,156
Decrease in recoverable taxes. . . 1,666 - 2,627 -
4,293
Decrease (increase) in
prepaid expenses . . . . . . (8,718) 1,420 3,717 -
(3,581)
Increase (decrease) in accounts
payable and accrued expenses . . 5,224 7,736 (25,238) (45,885)a
(58,163)
Increase (decrease) in advances
from customers . . . . . . . (918) (15,652) 201,799 (188,257)a
(3,028)
Increase (decrease) in income
taxes. . . . . . . . . . . . (2,817) 7,135 1,757 -
6,075
Other. . . . . . . . . . . . . 269 - 135 -
404
__________ __________ __________ ___________
__________
Net cash provided (used) by
operating activities. (33,221) (23,093) 40,991 22,136
6,813
__________ __________ __________ ___________
__________
Investing Activities
Purchase of property and
equipment . . . . . . . . . . (117) (10,966) (15,953) -
(27,036)
Proceeds from sale of property
and equipment. . . . . . . . . - 838 4,039 -
4,877
Payments on notes receivable and
receivable from investees. . . 15 3,516 24,010 -
27,541
Issuance of notes receivable . . (30,000) (2,829) (3,500) 30,000 a
(6,329)
Proceeds from or (advances) for
other investments and
other assets . . . . . . . . . 5,865 (9,075) 2,601 4,676 a
4,067
Purchase of minority interest
in subsidiaries. . . . . . . . - - (507) -
(507)
Purchase of subsidiary, $8,856 for
property and equipment . . . . . . - (17,123) - -
(17,123)
__________ __________ __________ ___________
__________
Net cash provided (used) by
investing activities . . . . (24,237) (35,639) 10,690 34,676
(14,510)
__________ __________ __________ ___________
__________
</TABLE>
-61-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
<CAPTION>
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
Financing Activities
Repayment of debt. . . (641,100) (4,699) (281,223) -
(927,022)
Proceeds from debt . . 708,995 60,000 239,371 (30,000)a
978,366
Cash dividends paid to DIMON
Incorporated stockholders . (15,568) - (2) -
(15,570)
Cash dividends paid to minority
stockholders . . . . - - (237) -
(237)
Proceeds from sale of
common stock . . . . 169 - - -
169
_________ ___________ _________ _________
_________
Net cash provided (used) by
financing activities. . 52,496 55,301 (42,091) (30,000)
35,706
_________ ____________ ________ _________
_________
Effect of exchange rate
changes on cash. . . . - - (1,584) -
(1,584)
_________ ____________ ________ _________
__________
Increase (decrease) in cash and
cash equivalents . . . (4,962) (3,431) 8,006 26,812
26,425
Increase in cash from purchased
subsidiaries . . . . . - 3,430 - -
3,430
Cash and cash equivalents at
beginning of year. . . 6,290 1,880 4,248 53 a
12,471
_________ ____________ ___________ __________
_________
Cash and cash equivalents
at end of year . $ 1,328 $ 1,879 $ 12,254 $ 26,865 $
42,326
========= ============ =========== =========
=========
</TABLE>
a. Inter-company eliminations.
-62-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
June 30, 1994
(in thousands)
<CAPTION>
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues . . . . . . $ 8,579 $901,702 $723,174 $ (168,677)a
$1,464,778
Cost of goods and services
sold . . . . . . . . 5,517 833,767 628,829 (150,408)a
1,317,705
_______ _________ _________ ____________
___________
3,062 67,935 94,345 (18,269)
147,073
Selling, administrative and
general. . . . . . . . 6,148 51,368 69,051 (9,256)a
117,311
_________ _________ _________ _____________
___________
(3,086) 16,567 25,294 (9,013)
29,762
Interest Expense . . . . 4,568 13,879 25,683 (9,013)a
35,117
_________ _________ _________ _____________
___________
Income (loss) before income taxes,
minority interest, equity in
net income (loss) of investee
companies and equity in net
loss of subsidiaries . . (7,654) 2,688 (389) -
(5,355)
Income taxes (benefits). . (1,999) 3,067 1,699 -
2,767
_________ _________ _________ _____________
___________
Income (loss) before minority
interest, equity in net
income (loss) of investee
companies and equity in net
income (loss) of
subsidiaries . . . . . . . (5,655) (379) (2,088) -
(8,122)
Income applicable to minority
interest . . . . . . . . . - - 466 -
466
Equity in net income (loss) of investee
companies, net of
income taxes . . . . . . . (265) (109) 472 -
98
Equity in net loss of
subsidiaries . . . . . . . (2,570) (2,082) - 4,652 a
-
_________ _________ _________ ___________
___________
NET LOSS . . . . . . . . . . $ (8,490) $ (2,570) $ (2,082) $ 4,652 $
(8,490)
========= ========= ========= ==========
===========
</TABLE>
a. Inter-company eliminations, including profit in inventory.
-63-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1994
(in thousands)
<CAPTION>
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
Operating Activities
Net Income (Loss). . . . . $ (8,490) $ (2,570) $ (2,082) $ 4,652 a $
(8,490)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and
amortization. . . (416) 10,508 18,770 -
28,862
Deferred items . . 672 (4,461) 4,354 -
565
Loss (gain) on foreign currency
transactions . . 80 120 (1,379) -
(1,179)
Gain on disposition of
fixed assets. . . - (447) (1,177) -
(1,624)
Gain on disposal of
operations . . - (1,792) - -
(1,792)
Undistributed earnings of
investees/subsidiaries. 2,835 2,190 (472) (4,652)a
(99)
Dividends received from
investees. . . . - - 577 -
577
Income applicable to minority
interest . . . . - - 466 -
466
Bad debt expense . (3) - 4,684 -
4,681
Decrease (increase) in accounts
receivable. . . . (5,838) 6,356 123,701 (92,765)a
31,454
Decrease (increase) in
inventories and advances on
purchases of tobacco. . 60,215 4,301 (149,953) 68,925 a
(16,512)
Decrease (increase) in
recoverable taxes . . . (1,472) - 2,823 -
1,351
Decrease (increase) in prepaid
expenses . . . . (273) (217) (1,566) -
(2,056)
Increase (decrease) in accounts
payable and accrued
expenses . . 5,280 22,090 (8,738) (8,902)a
9,730
Increase (decrease) in
advances from customers 937 (101,502) 65,659 39,857 a
4,951
Increase (decrease) in income
taxes. . . . . . (8,373) 4,154 (4,525) -
(8,744)
Other. . . . . . . (281) - (4,702) -
(4,983)
________ ________ ________ ________
________
Net cash provided (used) by
operating activities. 44,873 (61,270) 46,440 7,115
37,158
________ ________ ________ ________
________
Investing Activities
Purchase of property and
equipment. . . . . (234) (9,897) (22,251) -
(32,382)
Proceeds from sale of property
and equipment. . . - 2,023 3,968 -
5,991
Payments received on notes
receivable and receivable
from investees . . - 7,162 6,092 (8,777)a
4,477
Advances for notes receivable. . (75) - (18,310) -
(18,385)
Proceeds from or advances for
investees, other investments
and other assets . (11,082) (5,389) 13,677 2,600 a
(194)
Purchase of shares of Standard
Commercial Corporation. . (13,408) - - -
(13,408)
Other. . . . . . . . 69 - (263) -
(194)
________ ________ ________ ________
________
Net cash provided (used) by investing
activities . . . (24,730) (6,101) (17,087) (6,177)
(54,095)
________ ________ ________ ________
________
</TABLE>
-64-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
<TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1994
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
<S> <C> <C> <C> <C> <C>
Financing Activities
Repayment of debt. . $ (35,016) $ (17,770) $(226,518) $ -
$(279,304)
Proceeds from debt . 16,605 85,403 205,238 -
307,246
Cash dividends paid to DIMON
Incorporated stockholders . (13,014) - - -
(13,014)
Cash dividends paid to minority
stockholders . . . - - (285) -
(285)
Proceeds from sale of common
stock. . . . . . . 28 - - -
28
________ ________ ________ ________
________
Effect of exchange rate changes
Net cash provided (used) by
financing activities . . . (31,397) 67,633 (21,565) -
14,671
________ ________ ________ ________
________
Effect of exchange rate changes
on cash. . . . . . . - - (1,662) -
(1,662)
________ ________ ________ ________
________
Increase (decrease) in cash and
cash equivalents . . (11,254) 262 6,126 938
(3,928)
Cash and cash equivalents at
beginning of year. . 17,544 1,618 (1,878) (885)a
16,399
________ ________ ________ ________
________
Cash and cash equivalents
at end of year $ 6,290 $ 1,880 $ 4,248 $ 53 $
12,471
=============== ========= ========== ========
=========
</TABLE>
a. Inter-company eliminations, including profit in inventory.
-65-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(1) Each of the Guarantors, the Company's wholly-owned subsidiaries,
DIMON International, Inc. and Florimex Worldwide Inc., have
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). The Company is not be restricted from
selling or otherwise disposing of any of the Guarantors other
than DIMON International, Inc. provided that the proceeds of
any such sale are applied as required by the Indenture.
Florimex Worldwide, Inc. is the primary holding and operating
company in the U.S. and represents the lead company for the
flowers segment. The cut flowers operations consist of buying
flowers from sources throughout the world and transporting
them, normally by air, to operating units for resale to
wholesalers and retailers.
DIMON International, Inc. is the primary holding and operating
company in the U.S. and represents the lead company in the
Tobacco division whose operations consist primarily of
selecting, buying, processing, packing, shipping, storing and
financing tobacco.
Management has determined that separate, full financial
statements of the Guarantors would not be material to
investors and such financial statements are not provided.
(2) DIMON Incorporated and each of the Guarantors have accounted
for their respective subsidiaries on the equity basis.
(3) 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.
-66-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(4) 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.
<TABLE>
<CAPTION>
June 30, 1996
Debit(Credit)
DIMON
Incorporated Guarantors Non-Guarantors
<S> <C> <C> <C>
Accounts Receivable . . . . . . . . . . $26,761 $120,661 $54,267
Advances on Purchases . . . . . . . . . 168,616 16,886 18,963
Accounts Payable. . . . . . . . . . . . (70) (272,781) (40,033)
Advances from Customers . . . . . . . . (3,380) (37) (52,256)
</TABLE>
<TABLE>
<CAPTION>
June 30, 1995
Debit(Credit)
DIMON
Incorporated Guarantors Non-Guarantors
<S> <C> <C> <C>
Accounts Receivable . . . . . . . . . . $ 150,153 $ 104,676 $ 20,284
Advances on Purchases . . . . . . . . . 183,503 64,284 (3,108)
Accounts Payable. . . . . . . . . . . . (780) (138,137) (69,487)
Advances from Customers . . . . . . . . (3,879) (201,229) (57,605)
</TABLE>
-67-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE-
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption "Election
of Directors" is incorporated herein by reference thereto. See "Additional
Information - Executive Officers of the Company" at the end of Part I above
for information about the executive officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated herein by
reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption "Stock
Ownership" is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption "Stock
Ownership" is reported herein by reference thereto.
-68-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Consolidated Balance Sheet--June 30, 1996 and 1995
Statement of Consolidated Income--Years ended June 30, 1996, 1995 and 1994
Statement of Consolidated Cash Flows--Years ended June 30, 1996, 1995 and
1994
Statement of Stockholders' Equity--Years ended June 30, 1996, 1995 and
1994
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
Report of Price Waterhouse LLP
Report of Ernst & Young LLP
(b) Current Reports on Form 8-K
Form 8-K/A2, filed April 3, 1996, amending Current Report
on Form 8-K/A, filed August 21, 1995.
Form 8-K/A2, filed May 8, 1996, amending Current Report
on Form 8-K/A1, filed January 16, 1996.
Form 8-K/A3, filed May 8, 1996, amends Current Report
on Form 8-K/A2 filed April 3, 1996.
-69-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
3.01 Amended and Restated Articles of Incorporation of DIMON
Incorporated (incorporated by reference to Appendix VII
to DIMON Incorporated's Joint Proxy Statement filed
pursuant to Rule 424(b) in connection with DIMON
Incorporated's Registration Statement on Form S-4
(form 33-89780))
3.02 Amended and Restated By-Laws as amended of DIMON
Incorporated (incorporated by reference to
Exhibit 3.2 to DIMON Incorporated's Registration
Statement on Form S-4 (file 33-89780))
4.01 Specimen of Common Stock Certificate (incorporated
herein by reference to Exhibit 4.1 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.02 Article III of the Amended and Restated Articles of
Incorporation of DIMON Incorporated (filed as
Exhibit 3.01)
4.03 Article III of the Amended and Restated By-Laws of DIMON
Incorporated (filed as Exhibit 3.02)
4.04 Rights Agreement, dated as of March 31, 1995, between
DIMON Incorporated and First Union National Bank of
North Carolina, as Rights Agent (incorporated by
reference to Exhibit 4 to DIMON Incorporated Current
Report on Form 8-K, dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON
Incorporated as issuer, DIMON International, Inc. and
Florimex Worldwide, Inc. as guarantors and Crestar Bank,
as trustee (filed herewith)
10.01 DIMON Incorporated Omnibus Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to DIMON
Incorporated's Registration Statement on Form S-4 (file
No. 33-89780))
10.02 DIMON Incorporated Non-Employee Directors' Stock Option
Plan (incorporated herein by reference to Exhibit 10.2 to
DIMON Incorporated's Registration Statement on Form S-4
(file No. 33-89780))
10.03 Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan (incorporated by reference to Exhibit
10.6 to Dibrell Brothers, Incorporated's Annual Report
on Form 10-K for the year ended June 30, 1994)
10.04 Form of Interpretive Letter, dated January 11, 1995, under
the Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan delivered by Dibrell Brothers, Incorporated
to Claude B. Owen, Jr., T. H. Faucett, T. W. Oakes,
L. N. Dibrell, III and H. P. Green (incorporated by
reference to Exhibit 10.6 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
-70-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.05 Dibrell Brothers, Incorporated Retirement Plan (Excess
Benefit Plan) (incorporated herein by reference to
Exhibit 10.4 to Dibrell Brothers, Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated Pension Equalization Plan
(Benefit Assurance Plan) (incorporated herein by reference
to Exhibit 10.13 to Dibrell Brothers, Incorporated's
Annual Report on Form 10-K for the year ended June 30,
1991)
10.07 Long-Term Stock Investment Plan for Key Employees of
Monk-Austin, Inc. (incorporated by reference to Exhibit
10.5 of Monk-Austin, Inc.'s Registration Statement on
S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of Amendment to Long-Term Stock
Investment Plan for Key Employees of Monk-Austin, Inc.
(incorporated herein by reference to Exhibit 10.8 to
DIMON Incorporated's Registration Statement on Form S-4
(File No. 33-89780))
10.09 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and Albert C. Monk III
(incorporated by reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.10 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and John M. Hines
(incorporated by reference to Exhibit 10.2 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.11 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and Robert T. Monk, Jr.
(incorporated by reference to Exhibit 10.3 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.12 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and Brian J. Harker
(incorporated by reference to Exhibit 10.4 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.13 Employment Agreement, dated as of December 21, 1994,
effective as of November 1, 1994, by and between Dibrell
Brothers, Incorporated and Claude B. Owen, Jr. (incorporated
by reference to Exhibit 10.1 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
-71-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.14 Employment Agreement, dated as of December 21, 1994,
effective as of November 1, 1994, by and between Dibrell
Brothers, Incorporated and L. N. Dibrell, III (incorporated
by reference to Exhibit 10.4 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
10.15 Credit Agreement dated as of March 15, 1996 among the
Company, Nationsbank, N.A. as administrative agent,
First Union National Bank of Virginia, Bank of America
National Trust and Savings Association as Co-Agent and
lenders therein (incorporated by reference to Exhibit 10.26
to DIMON Incorporated's Registration Statement on Form
S-1 (No. 333-1288))
10.16 Consulting Agreement dated April 22, 1996 between
DIMON Incorporated and John M. Hines (incorporated by
reference to Exhibit 10.29 to DIMON Incorporated's
Registration Statement on Form S-1 (No. 333-1288))
10.17 Guaranty Agreement, dated as of March 15, 1996
of DIMON Incorporated and Florimex Worldwide, Inc.
(incorporated by reference to Exhibit 10.27 to DIMON
Incorporated's Registration Statement on Form S-1
(No. 333-1288))
10.18 Form of Note in connection with Credit Agreement
(incorporated by reference to Exhibit 10.28 to DIMON
Incorporated's Registration Statement on Form S-1
(No. 333-1288))
10.19 Second Amendment dated April 22, 1996, to Employment
Agreement, dated October 18, 1994, between Monk-Austin
International, Inc. and John M. Hines (incorporated by
reference to Exhibit 10.30 to DIMON Incorporated's
Registration Statement on Form S-1 (No. 333-1288))
10.20 Purchase Agreement by and among DIMON Incorporated,
Austria Tabakwerke AG, Austria Tabak Einkaufs-Und
Handelorganisation GesmbH and Austro-Hellenique S.A.
De Tabac Et De Batiment, dated April 13, 1995
(incorporated by reference to Exhibit 10.1 to DIMON
Incorporated's Current Report on Form 8-K, dated
June 7, 1995)
10.21 Separation Agreement dated May 30, 1996, between
DIMON Incorporated and T. H. Faucett (filed herewith)
-72-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
11 Computation of Earnings per Common Share (filed herewith)
21 List of Subsidiaries (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
23.2 Consent of Ernst & Young LLP (filed herewith)
27 Financial Data Schedule (filed herewith)
(d) Financial Statement Schedules:
Schedule II, Valuation and Qualifying Accounts, appears on the
following pages. The consolidated financial statement schedules
listed in Item 14(a) appear on the following pages. All other
schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and,
therefore, have been omitted.
-73-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
DIMON INCORPORATED AND SUBSIDIARIES
PERIODS ENDED JUNE 30
:______________________________:_________________:_______________:__________________:_______________:_________________:
: COL. A : COL. B : COL. C : : COL. D :
COL. E :
: : : ADDITIONS : :
:
: : Balance at : (1) : (2) : :
Balance at :
: DESCRIPTION : Beginning : Charged to : Charged to : Deductions :
End of :
: : of Period : Costs : Other Accounts : -Describe :
Period :
: : : and : -Describe : :
:
: : : Expenses : : :
:
:______________________________:_________________:_______________:__________________:_______________:_________________:
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts $ 8,823,339 $1,042,911 $ - $3,308,099 (A) $
6,558,151
Other investments (616,861) - 616,861 -
-
___________ __________ ____________ __________
___________
Total $ 8,206,478 $1,042,911 $ 616,861 $3,308,099 $
6,558,151
=========== ========== =========== ==========
===========
Year ended June 30, 1995
Deducted from asset accounts:
Allowance for doubtful
accounts $ 9,972,568 $3,820,054 $ - $4,969,283 (A) $
8,823,339
Other investments 417,958 - (1,034,819) -
(616,861)(B)
___________ __________ ____________ __________
___________
Total $10,390,526 $3,820,054 $(1,034,819) $4,969,283 $
8,206,478
=========== ========== =========== ===========
===========
Year ended June 30, 1994
Deducted from asset accounts:
Allowance for doubtful
accounts $10,211,471 $3,633,649 $ - $3,872,552 (A) $
9,972,568
Other Investments - - 417,958 -
417,958 (B)
___________ __________ ___________ __________
___________
Total $10,211,471 $3,633,649 $ 417,958 $3,872,552
$10,390,526
=========== ========== =========== ==========
==========
(A) CURRENCY TRANSLATION AND DIRECT WRITE-OFF.
(B) NET UNREALIZED LOSS (GAIN) BEFORE TAX ON LONG-TERM MARKETABLE EQUITY SECURITIES RECORDED IN
STOCKHOLDERS' EQUITY.
-74-
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of DIMON Incorporated
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated
statements of income, of changes in stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of DIMON
Incorporated and its subsidiaries at June 30, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1996, in conformity with generally accepted accounting
principles. 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 did not audit the financial
statements of Dibrell Brothers, Incorporated, which statements reflect total
Sales and other operating revenues of $928,470,334 for the year ended June 30,
1994. Those statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for Dibrell Brothers, Incorporated is based
solely on the report of the other auditors. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report
of the other auditors provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Raleigh, North Carolina
August 22, 1996, except as to Note O, which is as of August 29, 1996
-75-
<PAGE>
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors and Shareholders of DIMON Incorporated
Our audits of the consolidated financial statements referred to in our report
dated August 22, 1996, except as to Note O, which is as of August 29, 1996,
appearing in the 1996 Annual Report to Shareholders of DIMON Incorporated
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Raleigh, North Carolina
August 22, 1996, except as to Note O, which is as of August 29, 1996
-76-
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Dibrell Brothers, Incorporated
We have audited the consolidated statements of income, stockholders' equity,
and cash flows of Dibrell Brothers, Incorporated and subsidiaries for the year
ended June 30, 1994. 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 audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows
of Dibrell Brothers, Incorporated and subsidiaries for the year ended June 30,
1994, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Winston-Salem, North Carolina
August 26, 1994
-77-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on September 19, 1996.
DIMON INCORPORATED (Registrant)
/s/ Claude B. Owen, Jr.
By ______________________________
Claude B. Owen, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on September 19, 1996.
/s/ Claude B. Owen, Jr. /s/ Albert C. Monk III
__________________________________ __________________________________
Claude B. Owen, Jr. Albert C. Monk III
Chairman of the Board and Director and President of DIMON
Chief Executive Officer of DIMON Incorporated
Incorporated
/s/ R. Stuart Dickson
/s/ Thomas F. Keller ____________________________________
__________________________________ R. Stuart Dickson
Thomas F. Keller Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Willie G. Barker, Jr.
/s/ James E. Johnson, Jr. ____________________________________
__________________________________ Willie G. Barker, Jr.
James E. Johnson, Jr. Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Jerry L. Parker
/s/ Joseph L. Lanier, Jr. ____________________________________
__________________________________ Jerry L. Parker
Joseph L. Lanier, Jr. Vice President-Controller (Principal
Director of DIMON Incorporated Accounting Officer) of DIMON
Incorporated
/s/ Norman A. Scher
__________________________________ /s/ Robert T. Monk, Jr.
Norman A. Scher __________________________________
Director of DIMON Incorporated Robert T. Monk, Jr.
Director of DIMON Incorporated
/s/ Henry F. Frigon
__________________________________ /s/ Louis N. Dibrell, III
Henry F. Frigon __________________________________
Director of DIMON Incorporated Louis N. Dibrell, III
Director of DIMON Incorporated
/s/ John M. Hines
__________________________________
John M. Hines
Director of DIMON Incorporated
-78-
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
3.01 Amended and Restated Articles of incorporated by reference
Incorporation of DIMON (see page 70)
Incorporated
3.02 Amended and Restated By-Laws as incorporated by reference
amended of DIMON Incorporated (see page 70)
4.01 Specimen of Common Stock incorporated by reference
Certificate (see page 70)
4.02 Article III of the Amended and Restated incorporated by reference
Articles of Incorporation of DIMON (see page 70)
Incorporated (filed as Exhibit 3.10)
4.03 Article III of the Amended and Restated incorporated by reference
By-Laws of DIMON Incorporated (see page 70)
(filed as Exhibit 3.20)
4.04 Rights Agreement, dated as of March 31, incorporated by reference
1995, between DIMON Incorporated and (see page 70)
First Union National Bank of North
Carolina, as Rights Agent (incorporated
by reference to Exhibit 4 to DIMON
Incorporated Current Report on Form 8-K,
dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON 83 - 205
Incorporated as issuer, DIMON International, Inc.
and Florimex Worldwide, Inc. as guarantors and
Crestar Bank, as trustee (filed herewith)
10.01 DIMON Incorporated Omnibus Stock incorporated by reference
Incentive Plan (incorporated herein (see page 70)
by reference to Exhibit 10.1 to DIMON
Incorporated's Registration Statement
on Form S-4 (file No. 33-89780))
10.02 DIMON Incorporated Non-Employee incorporated by reference
Directors' Stock Option Plan (see page 70)
(incorporated herein by reference
to Exhibit 10.2 to DIMON
Incorporated's Registration Statement
on Form S-4 (file No. 33-89780))
10.03 Dibrell Brothers, Incorporated 1994 incorporated by reference
Omnibus Stock Incentive Plan (see page 70)
(incorporated by reference to
Exhibit 10.6 to Dibrell Brothers,
Incorporated's Annual Report on
Form 10-K for the fiscal year
ended June 30, 1994)
-79-
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
10.04 Form of Interpretive letter, dated incorporated by reference
January 11, 1995, under the Dibrell (see page 70)
Brothers, Incorporated 1994 Omnibus
Stock Incentive Plan delivered by
Dibrell Brothers, Incorporated to
Claude B. Owen, Jr., T. H. Faucett,
T. W. Oakes, L. N. Dibrell, III
and H. P. Green (incorporated by
reference to Exhibit 10.6 to
Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994)
10.05 Dibrell Brothers, Incorporated incorporated by reference
Retirement Plan (Excess Benefit (see page 71)
Plan) (incorporated herein by
reference to Exhibit 10.4 to
Dibrell Brothers, Incorporated's
Annual Report on Form 10-K for
the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated incorporated by reference
Pension Equalization Plan (see page 71)
(Benefit Assurance Plan)
(incorporated herein by reference
to Exhibit 10.13 to Dibrell
Brothers, Incorporated's Annual
Report on Form 10-K for the year
ended June 30, 1991)
10.07 Long-Term Stock Investment Plan incorporated by reference
for Key Employees of Monk-Austin, (see page 71)
Inc. (incorporated by reference
to Exhibit 10.5 of Monk-Austin,
Inc.'s Registration Statement on
S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of incorporated by reference
Amendment to Long-Term Stock (see page 71)
Investment Plan for Key Employees
of Monk-Austin, Inc. (incorporated
herein by reference to Exhibit
10.8 to DIMON Incorporated's
Registration Statement on Form S-4
(File No. 33-89780))
10.09 Employment Agreement, dated incorporated by reference
October 18, 1994, between Monk-Austin (see page 71)
International, Inc. and
Albert C. Monk, III (incorporated by
reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.10 Employment Agreement, dated incorporated by reference
October 18, 1994, between Monk-Austin (see page 71)
International, Inc. and
John M. Hines (incorporated by
reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
-80-
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
10.11 Employment Agreement, dated incorporated by reference
October 18, 1994, between Monk-Austin (see page 71)
International, Inc. and
Robert T. Monk, Jr. (incorporated by
reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.12 Employment Agreement, dated incorporated by reference
October 18, 1994, between (see page 71)
Monk-Austin International, Inc.
and Brian J. Harker (incorporated by
reference to Exhibit 10.4 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.13 Employment Agreement, dated as of incorporated by reference
December 21, 1994, effective as (see page 71)
of November 1, 1994, by and between
Dibrell Brothers, Incorporated and
Claude B. Owen, Jr. (incorporated
by reference to Exhibit 10.1 to
Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.14 Employment Agreement, dated as of incorporated by reference
December 21, 1994, effective as (see page 72)
of November 1, 1994, by and between
Dibrell Brothers, Incorporated and
L. N. Dibrell, III (incorporated
by reference to Exhibit 10.1 to
Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.15 Credit Agreement dated as of March 15, 1996 incorporated by reference
among the Company, Nationsbank, N.A. as (see page 72)
administrative agent, First Union National Bank
of Virginia, Bank of America National Trust and
Savings Association as Co-Agent and lenders
therein (incorporated by reference to Exhibit
10.26 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
-81-
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
10.16 Consulting Agreement dated April 22, 1996 between incorporated by reference
DIMON Incorporated and John M. Hines (see page 72)
(incorporated by reference to Exhibit 10.29 to
DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.17 Guaranty Agreement, dated as of March 15, 1996 incorporated by reference
of DIMON Incorporated and Florimex Worldwide, (see page 72)
Inc. (incorporated by reference to Exhibit
10.27 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.18 Form of Note in connection with Credit Agreement incorporated by reference
(incorporated by reference to Exhibit (see page 72)
10.28 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.19 Second Amendment dated April 22, 1996, to incorporated by reference
Employment Agreement, dated October 18, 1994, (see page 72)
between Monk-Austin International, Inc. and
John M. Hines (incorporated by reference to
Exhibit 10.30 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.20 Purchase Agreement by and among DIMON incorporated by reference
Incorporated, Austria Tabakwerke AG, Austria (see page 72)
Tabak Einkaufs-Und Handelorganisation GesmbH
and Austro-Hellenique S.A. De Tabac Et De Batiment,
dated April 13, 1995 (incorporated by reference to
Exhibit 10.1 to DIMON Incorporated's Current Report
on Form 8-K, dated June 7, 1995)
10.21 Separation Agreement dated May 30, 1996, between 206-211
DIMON Incorporated and T. H. Faucett
(filed herewith)
11 Computation of Earnings per Common Share 212
21 List of Subsidiaries 213
23.1 Consents of Price Waterhouse LLP 214
23.2 Consents of Ernst & Young LLP 215
27 Financial Data Schedule 216
-82-
<PAGE>
</TABLE>
Exhibit 4.05
- ------------------------------------------------------------------------------
[Execution Copy]
DIMON INCORPORATED
as Issuer
and
DIMON INTERNATIONAL, INC.
as Guarantor
and
FLORIMEX WORLDWIDE, INC.
as Guarantor
$125,000,000
8 7/8% SENIOR NOTES DUE 2006
------------------------------
INDENTURE
Dated as of May 29, 1996
------------------------------
CRESTAR BANK,
Trustee
- ------------------------------------------------------------------------------
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<PAGE>
CROSS-REFERENCE TABLE
Reconciliation and tie between the Trust Indenture Act of 1939,
as amended, and the Indenture, dated as of May 29, 1996.
Trust
Indenture
Act Indenture
Section Section
- --------- ---------
SECTION 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
( c ) N.A.
SECTION 311(a) 7.11
(b) 7.11
( c ) N.A.
SECTION 312(a) 7.06(a);7.06(b)
(b) 7.06( c )
( c ) 7.06(d)
SECTION 313(a) 7.06(e)
(b) N.A.
( c ) 7.06(e);7.06(f)
(d) 7.06
SECTION 314(a) 4.16; 4.18
(b) N.A.
( c )(1) 11.03
( c )(2) 11.03
( c )(3) N.A.
(d) N.A.
(e) 11.04
(f) 4.20
SECTION 315(a) 7.01(b)
(b) 7.05(a)
( c ) 7.01(a)
(d) 7.01( c )
(e) 6.10
SECTION 316(a) 2.08
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
( c ) 9.05
SECTION 317(a)(1) N.A.
(a)(2) 6.08
(b) 2.04
SECTION 318(a) 11.01
NOTE: This reconciliation and tie shall not, for any
purpose, be deemed to be part of the Indenture.
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<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.01. Definitions 1
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act 19
SECTION 1.03. Rules of Construction 20
SECTION 1.04. Form of Documents Delivered to Trustee 20
SECTION 1.05. Acts of Holders 21
SECTION 1.06 Satisfaction and Discharge 21
ARTICLE II
THE NOTES
SECTION 2.01. Form and Dating 23
SECTION 2.02. Execution and Authentication 24
SECTION 2.03. Registrar and Paying Agent 25
SECTION 2.04. Paying Agent to Hold Money in Trust 26
SECTION 2.05. Global Note 26
SECTION 2.06. Transfer and Exchange 27
SECTION 2.07. Replacement Notes 28
SECTION 2.08. Outstanding Notes 29
SECTION 2.09 Temporary Notes 30
SECTION 2.10. Cancellation 30
SECTION 2.11. Payment of Interest; Interest Rights
Preserved 30
SECTION 2.12. Computation of Interest 31
SECTION 2.13. Persons Deemed Owners 31
SECTION 2.14. CUSIP Numbers 31
ARTICLE III
REDEMPTION
SECTION 3.01. Notice to Trustee 32
SECTION 3.02. Selection of Notes to be Redeemed 32
SECTION 3.03. Notice of Redemption 32
SECTION 3.04. Effect of Notice of Redemption 33
SECTION 3.05. Deposit of Redemption Price 33
SECTION 3.06. Notes Redeemed in Part 34
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Notes 34
SECTION 4.02. Maintenance of Office or agency 34
i
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<PAGE>
SECTION 4.03. Money for the Note Payments to be
Held in Trust 35
SECTION 4.04. Corporate Existence 35
SECTION 4.05. Maintenance of Property 36
SECTION 4.06. Payment of Taxes and Other Claims 36
SECTION 4.07. Repurchase at the Option of Holders upon a
Change of Control 36
SECTION 4.08. Limitation on Asset Sales 38
SECTION 4.09. Ownership of and Liens on Capital Stock of
Subsidiaries 43
SECTION 4.10. Restricted Payments 44
SECTION 4.11. Incurrence of Indebtedness and Issuance of
Preferred Stock 47
SECTION 4.12. Liens 50
SECTION 4.13. Dividends and Other Payment Restrictions
Affecting Subsidiaries 51
SECTION 4.14. Limitation on Sale and Leaseback
Transactions 52
SECTION 4.15. Transactions with Affiliates 53
SECTION 4.16. Reports 53
SECTION 4.17. Waiver of Stay, Extension or Usury Laws 54
SECTION 4.18. Compliance Certificate; Notice of
Default or Event of Default 54
SECTION 4.19 Payments for Consent, Waiver or
Amendment 55
SECTION 4.20. Investment Company Act 55
SECTION 4.21. Further Instruments and Acts 55
ARTICLE V
CONSOLIDATION, MERGER,
CONVEYANCE, LEASE OR TRANSFER
SECTION 5.01. Merger, Consolidation or Sale of Assets 55
SECTION 5.02. Successor Corporation Substituted 56
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default 57
SECTION 6.02. Acceleration 59
SECTION 6.03. Other Remedies 59
SECTION 6.04. Waiver of Past Defaults 60
SECTION 6.05. Control by Majority 60
SECTION 6.06. Limitation on Suits 60
SECTION 6.07. Rights of Holders to Receive Payment 61
SECTION 6.08. Trustee May File Proofs of Claim 61
SECTION 6.09. Priorities 62
SECTION 6.10. Undertaking for Costs 62
SECTION 6.11. Waiver of Stay or Extension Laws 63
ii
- 86 -
<PAGE>
SECTION 6.12. Trustee May Enforce Claims Without
Possession of the Notes 63
SECTION 6.13. Restoration of Rights and Remedies 63
SECTION 6.14. Rights and Remedies Cumulative 63
SECTION 6.15. Delay or Omission Not Waiver 63
ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee 64
SECTION 7.02. Rights of Trustee 65
SECTION 7.03. Individual Rights of Trustee 65
SECTION 7.04. Trustee's Disclaimer 66
SECTION 7.05. Notice of Defaults 66
SECTION 7.06. Preservation of Information; Reports
by Trustee to Holders 66
SECTION 7.07. Compensation and Indemnity 67
SECTION 7.08. Replacement of Trustee 68
SECTION 7.09. Successor Trustee by Merger 70
SECTION 7.10. Eligibility; Disqualification 71
SECTION 7.11. Preferential Collection of Claims Against
Company 71
ARTICLE VIII
DEFEASANCE
SECTION 8.01. Company's Option to Effect Legal
Defeasance or Covenant Defeasance 72
SECTION 8.02. Legal Defeasance and Discharge 72
SECTION 8.03. Covenant Defeasance 73
SECTION 8.04. Conditions to Legal Defeasance or Covenant
Defeasance 73
SECTION 8.05. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Miscellaneous Provisions 75
SECTION 8.06. Reinstatement 75
iii
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<PAGE>
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders 76
SECTION 9.02. With Consent of Holders 77
SECTION 9.03. Effect of Supplemental Indentures 78
SECTION 9.04. Compliance with Trust Indenture Act 78
SECTION 9.05. Revocation and Effect of Consents and
Waivers 78
SECTION 9.06. Notation on or Exchange of Notes 79
SECTION 9.07. Trustee to Execute Supplemental Indentures 79
ARTICLE X
GUARANTEES
SECTION 10.01 Guarantees 80
SECTION 10.02 Obligations of Guarantors Unconditional 82
SECTION 10.03 Limitation on Guarantors' Liability 82
SECTION 10.04 Releases of Guarantees 82
SECTION 10.05 Application of Certain Terms and
Provisions to Guarantors 83
SECTION 10.06 Additional
Guarantors 83
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls 84
SECTION 11.02. Notices 84
SECTION 11.03. Certificate and Opinion as to Conditions
Precedent 85
SECTION 11.04. Statements Required in Certificate or
Opinion 85
SECTION 11.05. Rules by Trustee, Paying Agent and
Registrar 85
SECTION 11.06. Payments on Business Days 85
SECTION 11.07. Governing Law 85
SECTION 11.08. No Recourse Against Others 85
SECTION 11.09. Successors 86
SECTION 11.10. Counterparts 86
SECTION 11.11. Table of Contents; Headings 86
SECTION 11.12. Severability 86
SECTION 11.13 Further Instruments and Acts 86
SCHEDULE A Non-Wholly Owned Subsidiaries
EXHIBIT A FORM OF GLOBAL NOTE
EXHIBIT B FORM OF CERTIFICATED NOTE
iv
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<PAGE>
INDENTURE, dated as of May 29, 1996, among DIMON
INCORPORATED, a Virginia corporation (the "Company"), having its
principal office at 512 Bridge Street, Danville, Virginia 24541,
DIMON INTERNATIONAL, INC., a North Carolina corporation ("DIMON
International"), having its principal office at 1200 West
Marlboro Road, Farmville, North Carolina 27828, and FLORIMEX
WORLDWIDE, INC., a Virginia corporation ("Florimex"), having its
principal office at 512 Bridge Street, Danville, Virginia 24541
(together with DIMON International, the "Guarantors"), and
CRESTAR BANK, a Virginia banking corporation, as trustee
hereunder (the "Trustee"), having its Corporate Trust Office at
919 East Main Street, Richmond, Virginia 23219.
RECITALS OF THE COMPANY AND THE GUARANTORS
The Company has duly authorized the creation and issue
of its 8 7/8% Senior Notes due 2006 (the "Notes") of
substantially the tenor and amount hereinafter set forth, and to
provide therefor the Company has duly authorized the execution
and delivery of this Indenture.
Each of the Guarantors has duly authorized the
execution and delivery of this Indenture to provide a guarantee
of the Notes and of certain of the obligations of the Company
hereunder.
All things necessary to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, the valid obligations
of the Company, and to make this Indenture a valid instrument of
the Company and of each of the Guarantors, in accordance with
their respective terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, for
and in consideration of the premises and the purchase of the
Notes by the Holders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of
the Notes, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions. For all purposes of this
Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) the terms defined in this Article have the meanings assigned
to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
- 89 -
<PAGE>
"Acquired Indebtedness" means, with respect to any
specified Person, (i) any Indebtedness or Disqualified Stock of
any other Person existing at the time such other Person is merged
with or into or becomes a Subsidiary of such specified Person
including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person
merging with or into or becoming a Subsidiary of such specified
Person, and (ii) Indebtedness secured by a Lien encumbering any
asset acquired by such specified Person, and in either case for
purposes of this Indenture, shall be deemed to be incurred by
such specified Person at the time such other Person is merged
with or into or becomes a Subsidiary of such specified Person or
at the time such asset is acquired by such specified Person, as
the case may be.
"Act" when used with respect to any Holder, has the
meaning set forth in Section 1.05 hereof.
"Advances on Purchases of Tobacco" means loans,
advances and extensions of credit made by the Company or any of
its Subsidiaries to growers and other suppliers of tobacco
(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.
"Affiliate" of any specified Person means (i) any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person or (ii) any other Person who is a director or executive
officer of (a) such specified Person or (b) any Person described
in the preceding clause (i). For purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"),
as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of
any class of equity securities of a Person, whether or not
voting, shall be deemed to be control.
"Affiliate Transaction" has the meaning set forth in
Section 4.15 hereof.
"Agent Members" has the meaning set forth in Section
2.05(a) hereof.
"Asset Sale" means, with respect to any Person, the
sale, lease, conveyance or other disposition, that does not
constitute a Restricted Payment or an Investment, by such Person
of any of its assets (including, without limitation, by way of a
Sale and Leaseback Transaction and including the issuance, sale
or other transfer of any Equity Interests in any Subsidiary)
other than to the Company (including the receipt of proceeds of
insurance paid on account of the loss of or damage to any asset
and awards of compensation for any asset taken by condemnation,
eminent domain or similar proceeding, and including the receipt
of proceeds of business interruption insurance), in each case, in
one or a series of related transactions; provided that,
notwithstanding the foregoing, the term "Asset Sale" shall not
include:
2 - 90 -
<PAGE>
(i) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company, as
permitted pursuant to Section 5.01 hereof; or
(ii) the sale or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business
consistent with past practice; or
(iii) a transfer of assets by the Company to a Wholly Owned
Subsidiary of the Company or by a Wholly Owned Subsidiary of the
Company to the Company or to another Wholly Owned Subsidiary of
the Company; or
(iv) an issuance of Equity Interests by a Wholly Owned
Subsidiary of the Company to the Company or to another Wholly
Owned Subsidiary of the Company, provided that the consideration
paid by the Company or such Wholly Owned Subsidiary of the
Company for such Equity Interests shall be deemed to be an
Investment; or
(v) the sale or other disposition of cash or Cash Equivalents.
"Asset Sale Offer" has the meaning set forth in Section
4.08(d) hereof.
"Asset Sale Payment Date" has the meaning set forth in
Section 4.08(e)(ii) hereof.
"Asset Sale Purchase Price" has the meaning set forth
in Section 4.08(d) hereof.
"Attributable Indebtedness" means, in respect of a Sale
and Leaseback Transaction at the time of determination thereof,
the greater of (i) the capitalized amount in respect of such
transaction that would appear on the face of a balance sheet of
the lessee in accordance with GAAP and (ii) the present value
(discounted at the interest rate borne by the Notes, compounded
annually) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such
Sale and Leaseback Transaction (including any period for which
such lease has been extended).
"Bankruptcy Law" means Title 11, United States Code, or
any other applicable federal, state or foreign bankruptcy,
insolvency or similar law, as now or hereafter constituted.
"Beneficiary" when used with respect to any individual,
means the spouse, lineal descendants (including adoptive
children), parents and siblings of any such individual, the
estates and the legal representatives of any such individual and
any of the foregoing and the trustee of any bona fide trust of
which any such individual and any of the foregoing are the sole
beneficiaries or grantors.
3 - 91 -
<PAGE>
"Board of Directors" means the Board of Directors of
the Company or any committee thereof duly authorized to act on
behalf of such Board.
"Board Resolution" means a duly adopted resolution of
the Board of Directors in full force and effect at the time of
determination and certified as such by the Secretary or an
Assistant Secretary of the Company.
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday that is not a day on which banking
institutions in The City of New York are authorized or obligated
by law, executive order or regulation to close.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability
in respect of a capital lease that would at such time be required
to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means: (i) in the case of a corporation,
capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of
a partnership, partnership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalent" means:
(i) securities issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof) having maturities not more than twelve months
from the date of acquisition;
(ii) U.S. dollar denominated (or foreign currency fully
hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (a) any
domestic commercial bank of recognized standing having capital
and surplus in excess of $500 million or (b) any bank whose short-
term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in
each case with maturities of not more than twelve months from the
date of acquisition;
(iii) commercial paper issued by any Approved Lender (or by
the parent company thereof) or any variable rate notes issued by,
or guaranteed by, any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent
thereof) or better by Moody's and maturing within twelve months
of the date of acquisition;
(iv) shares of money market mutual funds having assets in
excess of $2 billion; and
4 - 92 -
<PAGE>
(v) deposits, including interest-bearing deposits, maintained
in the ordinary course of business in banks.
"Certificated Notes" has the meaning set forth in
Section 2.01(c) hereof.
"Change of Control" means such time as:
(i) any Person or group (within the meaning of Section 13(d)
or 14(d) of the Exchange Act) (other than one or more members of the
Monk Family) has become, directly or indirectly, the beneficial
owner, by way of merger, consolidation or otherwise, of 30% or
more of the voting power of the Voting Stock of the Company on a
fully-diluted basis, after giving effect to the conversion and
exercise of all outstanding warrants, options and other
securities of the Company convertible into or exercisable for
Voting Stock of the Company (whether or not such securities are
then currently convertible or exercisable); or
(ii) the sale, lease or transfer of all or substantially all
of the consolidated assets of the Company to any Person or group;
or
(iii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted the
Board of Directors of the Company, together with any new members
of such Board of Directors whose election by such Board of
Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the members
of such Board of Directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the directors of the Company
then in office; or
(iv) the Company consolidates with or merges with or into
another Person or any Person consolidates with, or merges with or
into, the Company (in each case, whether or not in compliance
with the terms of this Indenture), in any such event pursuant to
a transaction in which immediately after the consummation thereof
Persons owning a majority of the Voting Stock of the Company
immediately prior to such consummation shall cease to own a
majority of the Voting Stock of the Company or the surviving
entity if other than the Company.
"Change of Control Offer" has the meaning set forth in
Section 4.07(a) hereof.
"Change of Control Payment Date" has the meaning set
forth in Section 4.07(a) hereof.
"Change of Control Purchase Price" has the meaning set
forth in Section 4.07(a) hereof.
5 - 93 -
<PAGE>
"Clearing Agency" has the meaning set forth in Section
3(a)(23) of the Exchange Act.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commission" means the United States Securities and
Exchange Commission, as from time to time constituted, created
under the Exchange Act, or, if at any time after the execution of
this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, the body
performing such duties at such time.
"Company" means the party named as such in the preamble
to this Indenture until a successor replaces it pursuant to the
applicable provisions hereof and, thereafter, means such
successor.
"Company Order" means a written order signed in the
name of the Company by (i) its Chairman of the Board, Chief
Executive Officer, President, or a Vice President, and (ii) its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary.
"Consolidated EBITDA" means, with respect to any Person
for any period, the sum, without duplication, of:
(i) the Consolidated Net Income for such period, plus
(ii) the Consolidated Interest Expense for such period, plus
(iii) amortization of deferred financing charges for such
period, plus
(iv) provision for taxes based on income or profits for such
period (to the extent such income or profits were included in
computing Consolidated Net Income for such period), plus
(v) consolidated depreciation, amortization and other noncash
charges of such Person and its Subsidiaries required to be
reflected as expenses on the books and records of such Person,
minus
(vi) cash payments with respect to any nonrecurring, noncash
charges previously added back pursuant to clause (v), and
excluding
(vii) the impact of foreign currency translations.
Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and
amortization and other noncash charges of, a Subsidiary of a
Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in the same proportion)
that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a
6 - 94 -
<PAGE>
corresponding amount would be permitted at the date of
determination to be dividended to such Person by such Subsidiary
without prior approval (unless such approval has been obtained),
pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its
stockholders.
"Consolidated Interest Coverage Ratio" means with
respect to any Person for any period, the ratio of the
Consolidated EBITDA of such Person and its Subsidiaries for such
period to the Consolidated Interest Expense of such Person and
its Subsidiaries for such period. If the Company or any of its
Subsidiaries incurs, assumes, guarantees or repays or redeems any
Indebtedness (other than revolving credit borrowings) or issues
or redeems preferred stock subsequent to the commencement of the
four-quarter reference period for which the Consolidated Interest
Coverage Ratio is being calculated but on or prior to the date on
which the event for which the calculation of the Consolidated
Interest Coverage Ratio is made (the "Calculation Date"), then
the Consolidated Interest Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption,
guarantee, repayment or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had
occurred at the beginning of the applicable four-quarter
reference period, provided however, that in making such
computation on a pro forma basis, the Consolidated Interest
Expense of such Person attributable to interest on any
Indebtedness bearing a floating interest rate and which was not
actually outstanding during all or any part of such four-quarter
reference period shall be computed on a pro forma basis as if the
rate in effect on the date of computation (after giving effect to
any hedge in respect of such Indebtedness that will, by its
terms, remain in effect until the earlier of the maturity of such
Indebtedness or the date one year after the date of such
determination) had been the applicable rate during that portion
of such four-quarter reference period when such Indebtedness was
not actually outstanding.
For purposes of making the computation referred to
above, (i) acquisitions that have been made by the Company or any
of its Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-
quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period,
(ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Consolidated Interest Expense
attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Consolidated
Interest Expense will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"Consolidated Interest Expense" means, with respect to
any Person for any period, the consolidated interest expense of
such Person and its Subsidiaries for such period determined in
accordance with GAAP (net of any interest income), plus, to the
extent not included in such interest expense
7 - 95 -
<PAGE>
(i) amortization of original issue discount, noncash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations and any Attributable Indebtedness,
commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings,
and net payments (if any) pursuant to Hedging Obligations, but
excluding amortization of deferred financing charges for such
period, plus
(ii) the consolidated interest expense of such Person and
its Subsidiaries that was capitalized during such period, plus
(iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Subsidiaries or
secured by a Lien on assets of such Person or one of its
Subsidiaries (whether or not such guarantee or Lien is called
upon), plus
(iv) the product of (a) all cash dividend payments (and
noncash dividend payments in the case of a Person that is a
Subsidiary) on any series of preferred stock of such Person
payable to a party other than the Company or a Wholly Owned
Subsidiary, multiplied by (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such
Person, expressed as a decimal.
"Consolidated Net Income" means, with respect to any
Person for any period, the aggregate of the Net Income of such
Person and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided that (i) the
Net Income (but not loss) of any Person that is not a Subsidiary
or that is accounted for by the equity method of accounting shall
be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly
Owned Subsidiary thereof, (ii) the Net Income of any Subsidiary
shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Subsidiary of that
Net Income is not at the date of determination permitted without
any prior governmental approval (unless such approval has been
obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded,
and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"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
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 this Indenture in the book value of
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<PAGE>
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 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, patents,
trademarks, tradenames, 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.
"Corporate Trust Office" means the principal office of
the Trustee at which at any particular time its corporate trust
business shall be principally administered, which office is, at
the date of execution of this Indenture, located at 919 East Main
Street, Richmond, Virginia 23219.
"Covenant Defeasance" has the meaning set forth in
Section 8.03(b) hereof.
"Default" means any event that is or with the passage
of time or the giving of notice or both would be an Event of
Default.
"Defaulted Interest" has the meaning set forth in
Section 2.11 hereof.
"Depositary" means The Depository Trust Company, its
nominees, and their respective successors.
"Disqualified Stock" means (i) with respect to any
Person, Capital Stock of such Person that, 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 option of the
Holder thereof, in whole or in part, on or prior to the date
which is one year after the latest date on which the Notes mature
and (ii) with respect to any Subsidiary of such Person, any
Capital Stock other than any common stock with no preference,
privileges, or redemption or repayment provisions.
"Eligible Inventory" means, as of any date, all
inventory of the Company and any of its 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.
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<PAGE>
"Eligible Receivables" means, as of any date, all
accounts receivable of the Company and any of its 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.
"Equity Interests" means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock), whether outstanding prior to,
on or after the date of this Indenture.
"Event of Default" has the meaning set forth in Section
6.01 hereof.
"Excess Proceeds" has the meaning set forth in Section
4.08(c) hereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
"Exempt Affiliate Transactions" means (i) transactions
between or among the Company and/or its Wholly Owned
Subsidiaries, (ii) advances to officers of the Company or any
Subsidiary of the Company in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such
persons in the performance of their responsibilities to the
Company or such Subsidiary or in connection with any relocation,
(iii) fees and compensation paid to and indemnity provided on
behalf of directors, officers or employees of the Company or any
Subsidiary of the Company in the ordinary course of business,
(iv) any employment agreement that is in effect on the date of
this Indenture in the ordinary course of business and any such
agreement entered into by the Company or a Subsidiary of the
Company after the date of this Indenture in the ordinary course
of business of the Company or such Subsidiary, and (v) any
Restricted Payment that is not prohibited by Section 4.10 hereof.
"Exempt Asset Sale" means (i) an Asset Sale on or after
the date of this Indenture (A) the Net Proceeds of which plus the
Net Proceeds of all other Asset Sales concurrently or previously
made on or after the date of this Indenture do not exceed $25.0
million and (B) the Net Proceeds of which plus the Net Proceeds
of all other Asset Sales concurrently or previously made in the
same fiscal year do not exceed $10.0 million; (ii) the issuance
on or after the date of this Indenture of shares of Capital Stock
in any Subsidiary of the Company which conducts the Company's
tobacco business in Greece to the Company's joint venture partner
in Georges Allamanis Tobacco International in connection with the
contribution to such Subsidiary by such partner of its interest
in Georges Allamanis Tobacco International; provided that, such
transaction meets the requirements set forth in clause (i) of
Section 4.08(a) hereof.
"Existing Indebtedness" means the Indebtedness of the
Company and its Subsidiaries (other than Indebtedness under the
New Credit Facility) in existence on the date of this Indenture,
until such amounts are repaid.
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<PAGE>
"GAAP" means United States generally accepted
accounting principles, consistently applied, as 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 may be approved by a significant segment of the accounting
profession of the United States, that are applicable to the
circumstances as of the date of determination, provided that,
except as specifically provided in the Indenture, all
calculations made for purposes of determining compliance with the
covenants set forth in Article IV and Section 5.01 hereof shall
use GAAP as in effect on the date of this Indenture for financial
statements for fiscal years ending on or after December 31, 1996,
but that for such purposes of determining compliance GAAP shall
not include Statement of Financial Accounting Standards No. 121.
"Global Note" has the meaning set forth in Section
2.01(c) hereof.
"guarantee" means any obligation, contingent or
otherwise, of any Person, directly or indirectly guaranteeing any
Indebtedness of any other Person, including any such obligation,
direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such
other Person (whether arising by agreement to purchase assets,
goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "guarantee" shall not
include endorsements for collection or deposit in the ordinary
course of business. The term "guarantee" used as a verb shall
have a correlative meaning.
"Guarantee" means the guarantee of the Notes by each
Guarantor under Article X hereof.
"Guarantors" means DIMON International, Florimex and
each Material Domestic Subsidiary formed or acquired (and each
other Person that becomes a Material Domestic Subsidiary) after
the date of this Indenture, provided that any Material Domestic
Subsidiary so acquired which is prohibited from entering into a
Guarantee pursuant to restrictions contained in any debt
instrument in existence at the time such Material Domestic
Subsidiary was so acquired and not entered into in anticipation
or contemplation of such acquisition shall not be required to
become a Guarantor so long as any such restriction is in
existence and to the extent of any such restriction.
"Hedging Obligations" means, with respect to any
Person, the obligations of such Person entered into in the
ordinary course of business under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar
agreements and other similar financial agreements or arrangements
designed to protect such Person against, or manage the exposure
of such Person to, fluctuations in interest rates, (ii) forward
exchange agreements, currency swap, currency option and other
similar financial agreements or arrangements designed to protect
11 - 99 -
<PAGE>
such Person against, or manage the exposure of such Person to,
fluctuations in foreign currency exchange rates, and (iii)
forward contracts, commodity swap, commodity option and other
similar financial agreements or arrangements designed to protect
such Person against, or manage the exposure of such Person to,
fluctuations in commodity prices.
"Holder" means (i) in the case of any Certificated
Note, the person in whose name such Certificated Note is
registered on the Note Registry, and (ii) in the case of any
Global Note, the Depositary.
"incur" has the meaning set forth in Section 4.11(a)
hereof.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or
Attributable Indebtedness with respect to Sale and Leaseback
Transactions, or the balance deferred and unpaid of the purchase
price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or
trade payable incurred in the ordinary course of business, if and
to the extent any of the foregoing indebtedness (other than
letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not
such indebtedness is assumed by such Person) and, to the extent
not otherwise included, the guarantee by such Person of any
indebtedness of any other Person.
"Indenture" means this instrument as originally
executed or as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof, and shall
include, for all purposes of this instrument and any such
supplemental indenture, the provisions of the Trust Indenture Act
that are deemed to be a part of and govern this instrument, and
any such supplemental indenture, respectively.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including
Affiliates) in the form of direct or indirect loans (including
guarantees of Indebtedness or other obligations), advances or
capital contributions (excluding advances to officers and
employees of the type specified in clause (ii) of the definition
of Exempt Affiliate Transactions), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests
or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in
accordance with GAAP; provided that an acquisition of assets,
Equity Interests or other securities by the Company for
consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment.
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<PAGE>
"Joint Venture" means a single-purpose corporation,
partnership or other legal arrangement hereafter formed by the
Company or any of its Subsidiaries with another Person in order
to conduct a common venture or enterprise with such Person
through a separate legal entity.
"Legal Defeasance" has the meaning set forth in Section
8.02 hereof.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give
a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Material Domestic Subsidiary" means any Subsidiary of
the Company which is organized under the laws of the United
States of America, any state thereof or the District of Columbia
and would constitute a "significant subsidiary" of the Company as
defined in Rule 1.02 of Regulation S-X promulgated by the
Commission except that for purposes of this definition all
reference therein to ten (10) percent shall be deemed to be
references to five (5) percent.
"Material Foreign Subsidiary" means any Subsidiary of
the Company, other than any Subsidiary which is organized under
the laws of the United States of America, any state thereof or
the District of Columbia, which constitutes a "significant
subsidiary" of the Company as defined in Rule 1.02 of Regulation
S-X promulgated by the Commission.
"Maturity" means, when used with respect to a Note, the
date on which the principal of such Note becomes due and payable
as provided therein or in this Indenture, whether on the date
specified in such Note as the fixed date on which the principal
of such Note is due and payable, on the Change of Control Payment
Date or the Asset Sale Payment Date, or by declaration of
acceleration, call for redemption or otherwise.
"Monk Family" means A.C. Monk III, R.T. Monk, Jr., W.C.
Monk and their spouses, lineal descendants (including adoptive
children), parents and siblings and their heirs, legatees, legal
representatives and all trusts established by any of them for
estate planning purposes of which any such individuals are the
sole beneficiaries or grantors.
"Moody's" means Moody's Investors Service, Inc., or, if
Moody's Investors Service, Inc. shall cease rating the specified
debt securities and such ratings business with respect thereto
shall have been transferred to a successor Person, such successor
Person; provided that if Moody's Investors Service, Inc. ceases
rating the specified debt securities and its ratings business
with respect thereto shall not have been transferred to any
successor Person or such successor Person is S&P, then "Moody's"
shall mean any other nationally recognized rating agency (other
than S&P) that rates the specified debt securities and that shall
have been designated by the Company in an Officers' Certificate.
13 - 101 -
<PAGE>
"Net Income" means, with respect to any Person for any
period, the net income (loss) of such Person for such period,
determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation, dispositions
pursuant to any Sale and Leaseback Transaction) or (b) the
disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries and (ii) any extraordinary gain
or loss, together with any related provision for taxes on such
extraordinary gain or loss; provided that in calculating Net
Income, the restructuring charges incurred in connection with the
merger of Dibrell Brothers, Incorporated and Monk-Austin, Inc. on
April 1, 1995, shall be excluded from such calculation to the
extent such charges do not exceed $38.4 million (which is
composed of $23.4 million in various charges for the fiscal year
of the Company ended June 30, 1995, additional charges of $5.6
million for the nine months ended March 31, 1996 and an estimated
$9.4 million in additional anticipated restructuring charges).
"Net Proceeds" means the aggregate cash proceeds
received by the Company or any of its Subsidiaries in respect of
any Asset Sale (including, without limitation, any cash received
upon the sale or other disposition of any noncash consideration
received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions), taxes paid
or payable as a result thereof, and any reserve for adjustment in
respect of the sale price of such asset or assets established in
accordance with GAAP.
"New Credit Facility" means the Credit Agreement, dated
as of March 15, 1996, among the Company as borrower thereunder,
NationsBank, N.A., as administrative agent, Bank of America
NT&SA, First Union National Bank of Virginia and Crestar Bank, as
co-agents, and the lenders party thereto, including any related
notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, replaced, restated or
refinanced from time to time.
"Note Register" has the meaning set forth in Section
2.03 hereof.
"Notes" has the meaning set forth in the Recitals of
the Company and the Guarantors and more particularly means any of
the Notes authenticated and delivered under this Indenture.
"Obligations" means any principal, premiums, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
"Officer" means the Chairman of the Board of Directors,
the Chief Executive Officer, the President, a Vice President, the
Chief Financial Officer, the Treasurer, an Assistant Treasurer,
the Secretary, or an Assistant Secretary.
14 - 102 -
<PAGE>
"Officers' Certificate" means a certificate signed by
(i) the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or a Vice President of the Company, and
(ii) the Chief Financial Officer, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the
Company, and delivered to the Trustee, which certificate shall
comply with the provisions of Section 11.04 hereof; provided that
any Officers' Certificate delivered pursuant to the first
paragraph of Section 4.18 hereof shall be signed by the Chief
Executive Officer, the Chief Financial Officer or the Chief
Accounting Officer of the Company.
"Opinion of Counsel" means a written opinion from legal
counsel (who may be counsel to the Company or the Trustee) who is
acceptable to the Trustee, which opinion shall comply with the
provisions of Section 11.04 hereof; provided that any Opinion of
Counsel delivered pursuant to Section 8.04 hereof shall not be
rendered by an employee of the Company or any of its
Subsidiaries.
"Paying Agent" means any Person authorized by the
Company to make payments of principal, premium or interest with
respect to the Notes on behalf of the Company.
"Permitted Investments" means
(i) any Investments in the Company;
(ii) any Investments in cash or Cash Equivalents;
(iii) Investments made as a result of the receipt of noncash
consideration from an Asset Sale that was made pursuant to and in
compliance Section 4.08 hereof;
(iv) Investments (other than Advances on Purchases of
Tobacco) outstanding as of the date of this Indenture;
(v) Investments in Wholly Owned Subsidiaries of the Company
and any entity that (a) is engaged in the same or a similar line of
business as the Company or any of its Subsidiaries was engaged in
on the date of this Indenture and which has not been discontinued
on or prior to the date of such Investment or any reasonable
extensions or expansions thereof, and (b) as a result of such
Investment is a Wholly Owned Subsidiary of the Company;
(vi) 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 (i) 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 (ii) any
international bank of recognized standing ranking among the
world's 100 largest commercial banks in terms of total assets;
and
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(vii) any Advances on Purchases of Tobacco, but only to the
extent that the aggregate principal amount of such advances
outstanding at any time to any Person and such Person's
Affiliates does not exceed 15% of the Consolidated Tangible Net
Worth of the Company for the most recently ended fiscal quarter
for which internal financial statements are available.
"Permitted Refinancing Indebtedness" means any
Indebtedness of the Company or any of its Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness
of the Company or any of its Subsidiaries; provided that:
(i) the principal amount of such Permitted Refinancing
Indebtedness does not exceed the principal amount of the
Indebtedness so extended, refinanced, renewed, replaced, defeased
or refunded (plus the amount of reasonable expenses incurred in
connection therewith);
(ii) such Permitted Refinancing Indebtedness (x) has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded,
(y) does not have a stated maturity earlier than the stated
maturity of the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, and (z) does not permit
redemption or other retirement (including pursuant to any
required offer to purchase to be made by the Company or a
Subsidiary of the Company) of such Indebtedness at the option of
the holder thereof prior to the final stated maturity of the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded, other than a redemption or other retirement
at the option of the holder of such Indebtedness (including
pursuant to a required offer to purchase made by the Company or a
Subsidiary of the Company) which is conditioned upon a change of
control of the Company pursuant to provisions substantially
similar to those contained in Section 4.07 hereof;
(iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the Notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at
least as favorable to the Holders of Notes as those contained in
the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company or
by the Subsidiary of the Company who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, limited or
general partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
16 - 104 -
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"pro forma" means, with respect to any calculation made
or required to be made pursuant to the terms hereof, a
calculation in accordance with Article 11 of Regulation S-X
promulgated under the Securities Act (to the extent applicable),
as interpreted in good faith by the Board of Directors, or
otherwise, a calculation made in good faith by the Board of
Directors, as the case may be.
"Property" means, with respect to any Person, any
interest of such Person in any kind of property or asset, whether
real, personal or mixed, tangible or intangible, excluding
Capital Stock in any other Person.
"Purchase Money Obligation" of any Person means any
obligation of such Person to any seller or any other Person
incurred or assumed to finance the construction and/or
acquisition of real or personal property constituting plant or
equipment to be used in the business of such Person or any of its
Subsidiaries (excluding accounts payable to trade creditors
incurred in the ordinary course of business), which obligation is
secured by a Lien on such property constructed or acquired.
"Record Date" means, for the interest payable on any
Interest Payment Date, the date specified in Section 2.11 hereof.
"Redemption Date" means, when used with respect to any
Note or part thereof to be redeemed hereunder, the date fixed for
redemption of such Notes pursuant to the terms of the Notes and
this Indenture.
"Redemption Price" means, when used with respect to any
Note or part thereof to be redeemed hereunder, the price fixed
for redemption of such Note pursuant to the terms of the Notes
and this Indenture, plus accrued and unpaid interest thereon, if
any, to the Redemption Date.
"Registrar" has the meaning set forth in Section 2.03
hereof.
"Restricted Investment" means an Investment other than
a Permitted Investment.
"Restricted Payment" has the meaning set forth in
Section 4.10(a) hereof.
"S&P" means Standard & Poor's Ratings Group, a division
of McGraw Hill Corporation, or, if Standard & Poor's Ratings
Group shall cease rating the specified debt securities and such
ratings business with respect thereto shall have been transferred
to a successor Person, such successor Person; provided that if
Standard & Poor's Ratings Group ceases rating the specified debt
securities and its ratings business with respect thereto shall
not have been transferred to any successor Person or such
successor Person is Moody's, then "S&P" shall mean any other
nationally recognized rating agency (other than Moody's) that
rates the specified debt securities and that shall have been
designated by the Company in an Officers' Certificate.
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"Sale and Leaseback Transaction" of any Person means an
arrangement with any lender or investor or to which such lender
or investor is a party providing for the leasing by such Person
of any property or asset of such Person which has been or is
being sold or transferred by such Person more than 180 days after
the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or
to any Person to whom funds have been or are to be advanced by
such lender or investor on the security of such property or
asset. The stated maturity of such arrangement shall be the date
of the last payment of rent or any other amount due under such
arrangement prior to the first date on which such arrangement may
be terminated by the lessee without payment of a penalty.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Special Record Date" means a date fixed by the Trustee
pursuant to Section 2.11 for the payment of Defaulted Interest.
"Stated Maturity" means, with respect to any security,
the date specified in such security as the fixed date on which
the payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency unless such contingency has occurred), and,
when used with respect to any installment of interest on such
security, the fixed date on which such installment of interest is
due and payable.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a)
the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only
general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Temporary Notes" has the meaning set forth in Section
2.09 hereof.
"Trust Indenture Act" means the Trust Indenture Act of
1939 (15 U.S.C. 77aaa-77bbbb) as in effect on the date of this
Indenture except as required by Section 9.04 hereof, provided
that in the event the Trust Indenture Act of 1939 is amended
after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939,
as so amended.
"Trust Officer" means any officer or assistant officer
of the Trustee assigned by the Trustee to administer this
Indenture.
18 - 106 -
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"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 Trustee.
"U.S. Government Obligations" means (i) securities that
are (a) direct obligations of the United States of America for
the payment of which the full faith and credit of the United
States of America is pledged or (b) obligations of a Person
controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof; and (ii) depositary receipts issued by a bank (as
defined in Section 3(a)(2) of the Securities Act) as custodian
with respect to any U.S. Government Obligation which is specified
in clause (i) above and held by such bank for the account of the
holder of such depositary receipt, or with respect to any
specific payment of principal or interest on any U.S. Government
Obligation which is so specified and held, provided that (except
as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such
depositary receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment
of principal or interest of the U.S. Government Obligation
evidenced by such depositary receipt.
"Voting Stock" of a corporation means all classes of
Capital Stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
"Weighted Average Life to Maturity" means, when applied
to any Indebtedness at any date, the number of years obtained by
dividing (i) the sum of the product obtained by multiplying (a)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payments at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(ii) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a
Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors'
qualifying shares) shall at the time be owned by such Person or
by one or more Wholly Owned Subsidiaries of such Person or, in
the case of Subsidiaries that are not organized under the laws of
the United States of America, any state thereof or the District
of Columbia, by one or more nominees of such Person.
SECTION 1.02. Incorporation by Reference of Trust
Indenture Act. (a) This Indenture is subject to, and shall
be governed by, the provisions of the Trust Indenture Act
that are required to be a part of and to govern indentures
qualified under the Trust Indenture Act, and such provisions
are incorporated by reference in and made a part of this
Indenture.
19 - 107 -
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(b) Whenever this Indenture refers to a provision of
the Trust Indenture Act, the provision is incorporated by
reference in and made a part of this Indenture. The
following Trust Indenture Act terms incorporated by
reference 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 the indenture securities means the
Company, the Guarantors, or other obligor on the Notes, if
any.
All other Trust Indenture Act terms used or
incorporated by reference in this Indenture that are defined
by the Trust Indenture Act, defined by Trust Indenture Act
reference to another statute or defined by Commission rule
have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the
context otherwise requires:
(a) the words "herein," "hereof" and "hereunder," and
other words of similar import, refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision;
(b) "or" is not exclusive;
(c) "including" means "including without limitation";
(d) the principal amount of any noninterest bearing or
other discount security, at any date shall be the principal
amount thereof that would be shown on a balance sheet of the
issuer dated such date prepared in accordance with GAAP; and
(e) when used with respect to the Notes, the term
"principal amount" shall mean the principal amount thereof
at the Stated Maturity of such principal amount.
SECTION 1.04. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
20 - 108 -
<PAGE>
Any certificate or opinion of an officer of the Company
or any Guarantor may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by,
counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or such
Guarantor, as the case may be, stating that the information with
respect to such factual matters is in the possession of the
Company or such Guarantor, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
SECTION 1.05. Acts of Holders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to
the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 7.01)
conclusive in favor of the Trustee and the Company and the
Guarantors, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit
of a witness of such execution or by an acknowledgment of a
notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a
capacity other than such signer's individual capacity, such
certificate or affidavit shall also constitute sufficient proof
of the signer's authority. The fact and date of the execution of
any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which
the Trustee deems sufficient.
SECTION 1.06. Satisfaction and Discharge. This
Indenture shall cease to be of further effect and the Trustee, on
receipt of a Company Order requesting such action, shall execute
proper instruments acknowledging satisfaction and discharge of
this Indenture, when (a) either (i) all outstanding Notes have
been delivered to the Trustee for cancellation or (ii) all such
Notes not theretofore delivered to the Trustee for cancellation
21 - 109 -
<PAGE>
have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Notes, for principal,
premium, if any, and interest to the date of such deposit
together with irrevocable instructions from the Company in form
and substance satisfactory to the Trustee directing the Trustee
to apply such funds to the payment thereof; (b) the Company has
paid or caused to be paid all other sums payable hereunder by the
Company; and (c) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with. Notwithstanding the satisfaction and discharge of this
Indenture pursuant to this Section 1.06, the obligations of the
Company and the Guarantors to the Trustee under Section 7.07
hereof, and, if money shall have been deposited with the Trustee
in trust for the Holders pursuant to this Section 1.06, the
obligations of the Trustee under this Section 1.06 hereof shall
survive.
All money deposited with the Trustee pursuant to this
Section 1.06 shall be held in trust and applied by it, in
accordance with the provisions of the Notes and this Indenture,
to the payment, either directly or through any Paying Agent, to
the Persons entitled thereto, of the principal, premium, if any,
and interest for the payment of which such money has been
deposited with the Trustee. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in
accordance with this Section 1.06 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 Company's and the Guarantors'
obligations under this Indenture, and the Notes shall be revived
and reinstated as though no deposit had occurred pursuant to this
Section 1.06 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations
in accordance with this Section 1.06; provided, that if the
Company or the Guarantors have made any payment on any Notes
because of the reinstatement of its obligations, the Company or
the Guarantors, as the case may be, shall be subrogated to the
rights of the Holders of such Notes to receive such payment from
the cash or U.S. Government Obligations held by the Trustee or
Paying Agent.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charges imposed on or assessed against the
U.S. Government Obligations deposited pursuant to this Section
1.06 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.
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ARTICLE II
THE NOTES
SECTION 2.01. Form and Dating. (a) The Notes and the
certificate of authentication of the Trustee thereon shall
be substantially in the form of Exhibit A or Exhibit B
hereto, as applicable, which are hereby incorporated in and
expressly made a part of this Indenture.
(b) The Notes may have such letters, numbers or other
marks of identification and such legends and endorsements,
stamped, printed, lithographed or engraved thereon, (i) as
the Company may deem appropriate and as are not inconsistent
with the provisions of this Indenture, (ii) such as may be
required to comply with this Indenture, any law or any rule
of any securities exchange on which the Notes may be listed
and (iii) such as may be necessary to conform to customary
usage. Each Note shall be dated the date of its
authentication by the Trustee. The Notes shall be issued
only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.
(c) The Notes shall be issued initially in the form of
one Global Note substantially in the form of Exhibit A
hereto (a "Global Note"). Upon issuance, such Global Note
shall be duly executed by the Company and authenticated by
the Trustee as hereinafter provided and deposited with the
Trustee as custodian for the Depositary and registered in
the name of Cede & Co., as nominee of the Depositary (such
nominee being referred to herein as the "Global Note
Holder"). The Global Note may be exchanged for securities
in definitive form substantially in the form of Exhibit B
hereto ("Certificated Notes") pursuant to Section 2.06
hereof. Upon issuance, any Certificated Note shall be duly
executed by the Company and authenticated by the Trustee as
hereinafter provided.
(d) The Global Note shall bear the following legend on
the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO DIMON
INCORPORATED OR THE REGISTRAR FOR REGISTRATION OF TRANSFER
OR EXCHANGE AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
23 - 111 -
<PAGE>
TRANSFER OF THIS NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF INTERESTS IN THIS NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE
DATED AS OF MAY 29, 1996 AMONG DIMON INCORPORATED, AS
ISSUER, DIMON INTERNATIONAL, INC. AND FLORIMEX WORLDWIDE,
INC., AS GUARANTORS, AND THE TRUSTEE NAMED THEREIN, PURSUANT
TO WHICH THIS NOTE WAS ISSUED.
(e) Definitive Notes shall be typed, printed,
lithographed or engraved or produced by any combination of
such methods or produced in any other manner permitted by
the rules of any securities exchange on which such Notes may
be listed, all as determined by the officers of the Company
executing such Notes, as evidenced by their execution of
such Notes.
SECTION 2.02. Execution and Authentication. The
aggregate principal amount of Notes outstanding at any time shall
not exceed $125,000,000, except as provided in Section 2.07
hereof. The Notes shall be executed on behalf of the Company by
its Chief Executive Officer, its President, any Executive Vice
President, its Vice President and Treasurer or its Vice President
and Controller, under its corporate seal reproduced or imprinted
on the Notes by facsimile or otherwise, and shall be attested by
the Company's Secretary or one of its Assistant Secretaries, in
each case by manual or facsimile signature.
The Notes shall be authenticated by manual signature of
an authorized signatory of the Trustee and shall not be valid for
any purpose unless so authenticated.
In case any officer of the Company whose signature
shall have been placed upon any of the Notes shall cease to be
such officer of the Company before authentication of such Notes
by the Trustee and the issuance and delivery thereof, such Notes
may, nevertheless, be authenticated by the Trustee and issued and
delivered with the same force and effect as though such Person
had not ceased to be such officer of the Company.
The Trustee shall, upon receipt of a Company Order
requesting such action, authenticate Notes for original issue up
to the aggregate principal amount not to exceed $125,000,000
outstanding at any given time in the form of the Global Note.
Upon the occurrence of any event specified in Section
2.06(a) hereof, the Company shall execute and the Trustee shall
authenticate and make available for delivery to each beneficial
owner identified by the Depositary, in exchange for such
beneficial owner's interest in the Global Note, Certificated
Notes representing Notes theretofore represented by the Global
Note.
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<PAGE>
A Note shall not be valid or entitled to any benefits
under this Indenture or obligatory for any purpose unless
executed by the Company and authenticated by the manual signature
of one of the authorized signatories of the Trustee as provided
herein. Such signature upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly
authenticated and delivered under this Indenture and is entitled
to the benefits of this Indenture.
The Trustee may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Notes.
Unless limited by the terms of such appointment, an
authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
agent. Any authenticating agent of the Trustee shall have the
same rights hereunder as any Registrar or Paying Agent.
Notwithstanding the foregoing, if any Note shall have
been authenticated and delivered hereunder but never issued and
sold by the Company, and the Company shall deliver such Note to
the Trustee for cancellation as provided in Section 2.10 together
with a written statement (which need not comply with Section 1.04
and need not be accompanied by an Opinion of Counsel) stating
that such Note has never been issued and sold by the Company, for
all purposes of this Indenture such Note shall be deemed never to
have been authenticated and delivered hereunder and shall not be
entitled to the benefits of this Indenture.
SECTION 2.03. Registrar and Paying Agent. The Company
shall maintain, pursuant to Section 4.02 hereof, an office or
agency where the Notes may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency
where Notes may be presented for payment (the "Paying Agent") and
an office or agency where notices and demands to or upon the
Company in respect of the Notes and this Indenture may be served.
The Company shall cause to be kept at such office a
register (the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Notes and of transfers of Notes
entitled to be registered or transferred as provided herein. The
Trustee, at its Corporate Trust Office, is initially appointed
Registrar for the purpose of registering Notes and transfers of
Notes as herein provided. The Company may, upon written notice
to the Trustee, change the designation of the Trustee as
Registrar and appoint another Person to act as Registrar for
purposes of this Indenture. If any Person other than the Trustee
acts as Registrar, the Trustee shall have the right at any time,
upon reasonable notice, to inspect or examine the Note Register
and to make such inquiries of the Registrar as the Trustee shall
in its discretion deem necessary or desirable in performing its
duties hereunder.
The Company shall enter into an appropriate agency
agreement with any Person designated by the Company as Registrar
or Paying Agent that is not a party to this Indenture, which
agreement shall incorporate the provisions of the Trust Indenture
Act and shall implement the provisions of this Indenture that
relate to such Registrar or Paying Agent. Prior to the
designation of any such Person, the Company shall, by written
notice (which notice shall include the name and address of such
Person), inform the Trustee of such designation. The Trustee, at
25 - 113 -
<PAGE>
its Corporate Trust Office, is initially appointed Paying Agent
under this Indenture. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such.
Subject to Section 2.06, upon surrender for
registration of transfer of any Note at an office or agency of
the Company designated for such purpose, the Company shall
execute, and the Trustee shall authenticate and make available
for delivery, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denomination
or denominations, of like tenor and aggregate principal amount,
all as requested by the transferor.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company,
the Trustee or the Registrar) be duly endorsed, or be accompanied
by a duly executed instrument of transfer in form satisfactory to
the Company, the Trustee and the Registrar, by the Holder thereof
or such Holder's attorney duly authorized in writing.
SECTION 2.04. Paying Agent to Hold Money in Trust. On
or prior to each due date of the principal, premium, or any
payment of interest with respect to any Note, the Company shall
deposit with the Paying Agent a sum sufficient to pay such
principal, premium or interest when so becoming due.
The Company 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 Holders or the Trustee all money
held by such Paying Agent for the payment of principal, premium
and interest with respect to the Notes, shall notify the Trustee
of any default by the Company in making any such payment and at
any time during the continuance of any such default, upon the
written request of the Trustee, shall forthwith pay to the
Trustee all sums held in trust by such Paying Agent.
The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee and to account for any
funds disbursed by such Paying Agent. Upon complying with this
Section 2.04, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. Global Note. (a) So long as the Global
Note is registered in the name of the Depositary or its
nominee, members of, or participants in, the Depositary
("Agent Members") shall have no rights under this Indenture
with respect to the Global Note held on their behalf by the
Depositary or the Trustee as its custodian, and the
Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes. Notwithstanding
the foregoing, nothing herein shall (i) prevent the Company,
the Trustee or any agent of the Company or the Trustee, from
giving effect to any written certification, proxy or other
authorization furnished by the Depositary or (ii) impair, as
between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights
of a Holder of Notes.
26 - 114 -
<PAGE>
(b) The Holder of a Global Note, may grant proxies and
otherwise authorize any Person, including Agent Members and
Persons that may hold interests in such Global Note through
Agent Members, to take any action which a Holder of Notes is
entitled to take under this Indenture or the Notes.
(c) Whenever, as a result of an optional redemption of
Notes by the Company, a Change of Control Offer, an Asset
Sale Offer, an exchange or pursuant to Section 2.06 hereof,
a Global Note is redeemed, repurchased or exchanged in part,
such Global Note shall be surrendered by the Holder thereof
to the Trustee who shall cause an adjustment to be made to
Schedule A thereof so that the principal amount of such
Global Note will be equal to the portion of such Global Note
not redeemed, repurchased or exchanged and shall thereafter
return such Global Note to such Holder, provided that any
such Global Note shall be in a principal amount of $1,000 or
an integral multiple thereof.
SECTION 2.06. Transfer and Exchange. (a) The Global
Note shall be exchanged by the Company for one or more
Certificated Notes if (i) the Depositary (A) has notified
the Company that it is unwilling or unable to continue as,
or ceases to be, a clearing agency registered under Section
17A of the Exchange Act and (B) a successor to the
Depositary registered as a clearing agency under Section 17A
of the Exchange Act is not able to be appointed by the
Company within 90 calendar days or (ii) the Depositary is at
any time unwilling or unable to continue as Depositary and a
successor to the Depositary is not able to be appointed by
the Company within 90 calendar days. If an Event of Default
occurs and is continuing, the Company shall, at the request
of the Holder of the Global Note, exchange all or part of
such Global Note for one or more Certificated Notes;
provided that the principal amount of each of such
Certificated Notes, and such Global Note, after such
exchange, shall be $1,000 or an integral multiple thereof.
Whenever the Global Note is exchanged as a whole for one or
more Certificated Notes such Global Note shall be
surrendered by the Holder thereof to the Trustee for
cancellation. Whenever the Global Note is exchanged in part
for one or more Certificated Notes pursuant to this Section
2.06(a), it shall be surrendered by the Holder thereof to
the Trustee and the Trustee shall make the appropriate
notations thereon pursuant to Section 2.05(c) hereof. All
Certificated Notes issued in exchange for the Global Note or
any portion thereof shall be registered in such names, and
delivered, as the Depositary shall instruct the Trustee.
(b) A Holder may transfer a Note only upon the
surrender of such Note for registration of transfer. No
such transfer shall be effected until, and the transferee
shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer in the Note
Register by the Registrar. When Notes are presented to the
Registrar with a request to register the transfer of, or to
exchange, such Notes, the Registrar shall register the
transfer or make such exchange as requested if its
requirements for such transactions and any applicable
requirements hereunder are satisfied. To permit
registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Certificated
Notes at the Registrar's request.
27 - 115 -
<PAGE>
(c) The Company shall not be required to make and the
Registrar need not register transfers or exchanges of
Certificated Notes (i) selected for redemption (except, in
the case of Certificated Notes to be redeemed in part, the
portion thereof not to be redeemed) and (ii) for a period of
15 calendar days before a selection of Notes to be redeemed.
(d) No service charge shall be made for any
registration of transfer or exchange of Notes, but the
Company may require payment by Holders of a sum sufficient
to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer of
Notes.
(e) All Notes issued upon any registration of transfer
or exchange pursuant to the terms of this Indenture will
evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered for
such registration of transfer or exchange.
(f) Any Holder of a Global Note shall, by acceptance
of such Global Note, agree that transfers of beneficial
interests in such Global Note may be effected only through a
book entry system maintained by such Holder (or its agent),
and that ownership of a beneficial interest in the Notes
represented thereby shall be required to be reflected in
book entry form. Transfers of a Global Note shall be
limited to transfers in whole and not in part, to the
Depositary, its successors, and their respective nominees.
Interests of beneficial owners in a Global Note shall be
transferred in accordance with the rules and procedures of
the Depositary (or its successors).
SECTION 2.07. Replacement Notes. If any mutilated
Note is surrendered to the Trustee, the Company shall execute and
upon its written request the Trustee shall authenticate and make
available for delivery, in exchange for any such mutilated Note,
a new Note containing identical provisions and of like principal
amount, bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the
Trustee (i) evidence to their satisfaction of the destruction,
loss or theft of any Note and (ii) such security or indemnity as
may be required by them to save either of them and any agent of
each of them harmless, then, in the absence of notice to the
Company or the Trustee that such Note has been acquired by a bona
fide purchaser, the Company shall execute and upon its request
the Trustee shall authenticate and make available for delivery,
in lieu of any such destroyed, lost or stolen Note, a new Note
containing identical provisions and of like principal amount,
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Note has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Note, pay
such Note.
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<PAGE>
Upon the issuance of any new Note under this Section
2.07, the Company may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 2.07 in
lieu of any destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Note shall be at any
time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any
and all other Notes duly issued hereunder.
The provisions of this Section 2.07 are exclusive and
shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.
SECTION 2.08. Outstanding Notes. Notes outstanding at
any time are all Notes authenticated by the Trustee except for
those canceled by it, those delivered to it for cancellation,
those paid pursuant to Section 2.07 hereof and those described in
this Section 2.08 as not outstanding. A Note does not cease to
be outstanding because the Company or an Affiliate of the Company
holds such Note.
If a Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee and the Company
receive proof satisfactory to them that such replaced Note is
held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or Maturity
date money sufficient to pay all principal, premium, if any, and
interest payable on that date with respect to the Notes (or
portions thereof) to be redeemed or maturing, as the case may be,
then on and after that date such Notes (or such portions thereof)
shall cease to be outstanding and interest on them shall cease to
accrue.
In determining whether the Holders of the required
principal amount of Notes have concurred in any direction, waiver
or consent or any amendment, modification or other change to this
Indenture, Notes held or beneficially owned by the Company or a
Subsidiary of the Company or by an Affiliate of the Company or of
a Subsidiary of the Company or by agents of any of the foregoing
shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such
direction, waiver or consent or any amendment, modification or
other change to this Indenture, only Notes which a Trust Officer
actually knows are so owned shall be so disregarded. Notes so
owned which have been pledged in good faith shall not be
disregarded if the pledgee establishes to the satisfaction of the
Trustee such pledgee's right so to act with respect to the Notes
and that the pledgee is not the Company, a Subsidiary of the
Company, an Affiliate of the Company or of a Subsidiary of the
Company, or any of their agents.
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SECTION 2.09. Temporary Notes. Pending the
preparation of definitive Notes, the Company may execute, and the
Trustee shall authenticate, temporary notes ("Temporary Notes")
which are printed, lithographed, or otherwise produced,
substantially of the tenor of the definitive Notes in lieu of
which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officer
executing the Notes may reasonably determine, as conclusively
evidenced by such officer's execution of such Notes.
If Temporary Notes are issued, the Company shall cause
definitive Notes to be prepared without unreasonable delay.
After the preparation of definitive Notes, the Temporary Notes
shall be exchangeable for definitive Notes upon surrender of the
Temporary Notes to the Trustee, without charge to the Holder.
Until so exchanged, Temporary Notes will evidence the same debt
and will be entitled to the same benefits under this Indenture as
the definitive Notes in lieu of which they have been issued.
SECTION 2.10. Cancellation. The Company 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 registration of transfer, exchange,
purchase or payment. The Trustee shall cancel all Notes
surrendered for registration of transfer, exchange, purchase,
payment or cancellation and shall return such canceled Notes to
the Company. The Company may not issue new Notes to replace
Notes it has redeemed or paid or that have been delivered to the
Trustee for cancellation.
SECTION 2.11. Payment of Interest; Interest Rights
Preserved. Interest on any Note which is payable, and is
punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name such Note is
registered at the close of business on the Record Date for such
interest payment, which shall be the May 15 or November 15
(whether or not a Business Day) immediately preceding such
Interest Payment Date.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment
Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the registered Holder on the relevant Record
Date, and, except as hereinafter provided, such Defaulted
Interest, and any interest payable on such Defaulted Interest,
may be paid by the Company, at its election, as provided in
clause (a) or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest, and any interest payable on such
Defaulted Interest, to the Persons in whose names the Notes
are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify
the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on the Notes and the date of the
proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such
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Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit 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 Clause. Thereupon
the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15
calendar days and not less than 10 calendar days prior to
the date of the proposed payment and not less than 10
calendar days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and
at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor to be sent, first class mail, postage
prepaid, to each Holder at such Holder's address as it
appears in the Note Register, not less than 10 calendar days
prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose
names the Notes are registered at the close of business on
such Special Record Date and shall no longer be payable
pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted
Interest, and any interest payable on such Defaulted
Interest, on the Notes in any other lawful manner not
inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section
2.11, each Note delivered under this Indenture upon registration
of transfer of, or in exchange for, or in lieu of, any other
Note, shall carry the rights to interest accrued and unpaid, and
to accrue, which were carried by such other Note.
SECTION 2.12. Computation of Interest. Interest on
the Notes shall be computed on the basis of a 360-day year of
twelve 30-day months.
SECTION 2.13. Persons Deemed Owners. Prior to the due
presentation for registration of transfer of any Note, the
Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name such
Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of, premium, if any,
and interest on such Note and for all other purposes whatsoever,
whether or not such Note is overdue, and none of the Company, the
Trustee, the Paying Agent, the Registrar or any co-Registrar
shall be affected by notice to the contrary.
SECTION 2.14. CUSIP Numbers. The Company, in issuing
the Notes, may use a "CUSIP" number for the Notes and, if so, the
Trustee shall use the relevant CUSIP number in any notices to
Holders as a convenience to such Holders; provided that any such
notice may state that no representation is made 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 Company shall
promptly notify the Trustee of any change in any CUSIP number
used.
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ARTICLE III
REDEMPTION
SECTION 3.01. Notice to Trustee. If the Company
elects to redeem Notes pursuant to the optional redemption
provisions thereof it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give each such notice to the Trustee at least
30 calendar days prior to the Redemption Date unless the Trustee
consents to a shorter period. Such notice shall be accompanied
by an Officers' Certificate and an Opinion of Counsel from the
Company to the effect that such redemption will comply with any
conditions to such redemption set forth herein and in the Notes.
SECTION 3.02. Selection of Notes to be Redeemed. If
less than all the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed in compliance with
the requirements of the principal national securities exchange,
if any, on which such Notes are listed, or, if such Notes are not
listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate. In selecting Notes to
be redeemed pursuant to this Section 3.02, the Trustee shall make
such adjustments, reallocations and eliminations as it shall deem
proper so that the principal amount of each Note to be redeemed
shall be $1,000 or an integral multiple thereof, by increasing,
decreasing or eliminating any amount less than $1,000 which would
be allocable to any Holder. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of
Notes called for redemption. The Trustee shall notify the
Company promptly of the Notes or portions of Notes to be
redeemed.
SECTION 3.03. Notice of Redemption. At least 30
calendar days but not more than 60 calendar days before a
Redemption Date, the Company shall send a notice of redemption,
first class mail, postage prepaid, to Holders of Notes to be
redeemed at the addresses of such Holders as they appear in the
Note Register.
The notice shall identify the Notes to be redeemed
(including CUSIP number) and shall state:
(a) the Redemption Date;
(b) the Redemption Price (and shall specify the
portion of such Redemption Price that constitutes the amount
of accrued and unpaid interest to be paid, if any);
(c) the name and address of the Paying Agent;
(d) that the Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption
Price;
(e) if any Global Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed
and that, after the Redemption Date, the Global Note, with a
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notation on Schedule A thereof adjusting the principal
amount thereof to be equal to the unredeemed portion, will
be returned to the Holder thereof;
(f) if any Certificated Note is being redeemed in
part, the portion of the principal amount of such Note to be
redeemed and that, after the Redemption Date, a new
Certificated Note or Certificated Notes in principal amount
equal to the unredeemed portion will be issued;
(g) if fewer than all the outstanding Notes are to be
redeemed, the identification and principal amounts of the
particular Notes to be redeemed;
(h) that, unless the Company defaults in making the
redemption payment, interest on the Notes (or portions
thereof) called for redemption shall cease and such Notes
(or portions thereof) shall cease to accrue interest on and
after the Redemption Date;
(i) the paragraph of the Notes pursuant to which the
Notes are being called for redemption; and
(j) any other information necessary to enable Holders
to comply with the notice of redemption.
At the Company's request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's
expense. In such event, the Company shall provide the Trustee
with the information required by this Section 3.03 in a timely
manner.
SECTION 3.04. Effect of Notice of Redemption. Once
notice of redemption is mailed, Notes called for redemption shall
become due and payable on the Redemption Date and at the
Redemption Price stated in such notice. Upon surrender to the
Paying Agent, such Notes shall be paid at the Redemption Price
stated in such notice. Failure to give notice or any defect in
the notice to any Holder shall not affect the validity of the
notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. On or
prior to 10:00 a.m., New York City time, on each Redemption Date,
the Company shall deposit with the Paying Agent (or, if the
Company, one of its Subsidiaries or any of their Affiliates is
the Paying Agent, the Paying Agent shall segregate and hold in
trust for the benefit of the Holders) money, in federal or other
immediately available funds, sufficient to pay the Redemption
Price on all Notes to be redeemed on that date other than Notes
or portions of Notes called for redemption on such date which
have been delivered by the Company to the Trustee for
cancellation.
So long as the Company complies with the preceding
paragraph and the other provisions of this Article III, interest
on the Notes or portions thereof to be redeemed on the applicable
Redemption Date shall cease to accrue from and after such date
and such Notes or portions thereof shall be deemed not to be
entitled to any benefit under this Indenture except to receive
payment of the Redemption Price on the Redemption Date (subject
to the right of each Holder of record on the relevant Record Date
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to receive interest due on the relevant Interest Payment Date).
If any Note called for redemption shall not be so paid upon
surrender for redemption, then, from the Redemption Date until
such Redemption Price is paid, interest shall be paid on the
unpaid principal and premium and, to the extent permitted by law,
on any accrued but unpaid interest thereon, in each case at the
rate prescribed therefor by such Notes.
SECTION 3.06. Notes Redeemed in Part. (a) Upon
surrender and cancellation of a Certificated Note that is
redeemed in part, the Company shall issue and the Trustee
shall authenticate and make available for delivery to the
surrendering Holder (at the Company's expense) a new
Certificated Note equal in principal amount to the
unredeemed portion of the Certificated Note surrendered and
canceled, provided that each such Certificated Note shall be
in a principal amount of $1,000 or an integral multiple
thereof.
(b) Upon surrender of a Global Note that is redeemed
in part, the Paying Agent shall forward such Global Note to
the Trustee who shall make a notation on Schedule A thereof
to reduce the principal amount of such Global Note to an
amount equal to the unredeemed portion of such Global Note,
as provided in Section 2.05(c) hereof.
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall
promptly 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. Principal, premium and interest shall be
considered paid on the date due if, on such date, the Trustee or
the Paying Agent holds in accordance with this Indenture money
sufficient to pay all principal, premium and interest then due.
To the extent lawful, the Company shall pay interest on
overdue principal, overdue premium and Defaulted Interest
(without regard to any applicable grace period), at the interest
rate borne on the Notes. The Company's obligation pursuant to
the previous sentence shall apply whether such overdue amount is
due at its Stated Maturity, as a result of the Company's
obligations pursuant to Section 4.07 or Section 4.08 hereof, or
otherwise.
All payments with respect to a Global Note or a
Certificated Note (including principal, premium, if any, and
interest) the Holders of whom have given wire transfer
instructions to the Company will be required to be made by wire
transfer of immediately available funds to the account or (in the
case of a Global Note) accounts specified by the Holders thereof
or, if no such account is specified, by sending via first-class
mail, postage prepaid, a check to each such Holders' registered
address.
SECTION 4.02. Maintenance of Office or Agency. The
Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be presented or
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surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes and this
Indenture may be served, which office shall be initially the
Corporate Trust Office. The Company shall give prompt written
notice to the Trustee of any change in the location of such
office or agency. If at any time the Company 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
Corporate Trust Office of the Trustee, and the Company hereby
appoints the Trustee its agent to receive all presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in or outside of The City of New
York) where the Notes may be presented or surrendered for any or
all of such purposes, and may from time to time rescind such
designations; provided that no such designation or rescission
shall in any manner relieve the Company of its obligation to
maintain an office or agency in The City of New York, for such
purposes. The Company shall give prompt written notice to the
Trustee of any such designation and any change in the location of
any such other office or agency.
The Company hereby designates the Corporate Trust
Office of the Trustee as one such office or agency of the Company
in accordance with Section 2.03 hereof.
SECTION 4.03. Money for the Note Payments to be Held
in Trust. If the Company, any Subsidiary of the Company or any
of their respective Affiliates shall at any time act as Paying
Agent with respect to the Notes, such Paying Agent shall, on or
before each due date of the principal of, premium, if any, or
interest on any of the Notes, segregate and hold in trust for the
benefit of the Persons entitled thereto money sufficient to pay
the principal, premium, if any, or interest so becoming due until
such money shall be paid to such Persons or otherwise disposed of
as herein provided, and shall promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying
Agents with respect to the Notes, it shall, prior to or on each
due date of the principal of, premium, if any, or interest on any
of the Notes, deposit with a Paying Agent a sum sufficient to pay
the principal of, premium, if any, or interest so becoming due,
such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest and (unless such
Paying Agent is the Trustee) the Paying Agent shall promptly
notify the Trustee of the Company's action or failure so to act.
SECTION 4.04. Corporate Existence. Subject to the
provisions of Article V hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force
and effect the corporate existence, rights (charter and
statutory) and franchises of the Company and each of its
Subsidiaries; provided that the Company and any such Subsidiary
shall not be required to preserve the corporate existence of any
such Subsidiary or any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company
and that the loss thereof is not disadvantageous in any material
respect to the Holders of Notes.
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SECTION 4.05. Maintenance of Property. The Company
shall cause all Property used or useful in the conduct of its
business or the business of any of its Subsidiaries to be
maintained and kept in good 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,
may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times; provided that nothing in this Section 4.05 shall prevent
the Company from discontinuing the operation or maintenance of
any of such Property if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the
business of any of its Subsidiaries and not disadvantageous in
any material respect to the Holders of Notes.
SECTION 4.06. 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, (a) all taxes,
assessments and governmental charges levied or imposed upon the
Company or any of its Subsidiaries or upon the income, profits or
Property of the Company or any of its Subsidiaries and (b) all
lawful claims for labor, materials and supplies which, if unpaid,
might by law become a Lien upon the Property of the Company or
any of its Subsidiaries; provided 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 proceedings upon stay of execution or the enforcement
thereof and for which adequate reserves in accordance with GAAP
or other appropriate provision has been made.
SECTION 4.07. Repurchase at the Option of Holders upon
a Change of Control. (a) Upon the occurrence of a Change
of Control, each Holder of Notes shall have the right to
require the Company to purchase such Holder's Notes, in
whole or in part, in a principal amount that is an integral
multiple of $1,000, pursuant to the offer described in
Section 4.07(b) hereof (the "Change of Control Offer") at a
purchase price (the "Change of Control Purchase Price") in
cash equal to 101% of the principal amount of such Notes (or
portions thereof) to be redeemed plus accrued and unpaid
interest thereon to the date of purchase (the "Change of
Control Payment Date") (subject to the right of each Holder
of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date).
(b) Within 30 calendar days after the date of any
Change of Control, the Company, or the Trustee at the
request and expense of the Company, shall send to each
Holder by first class mail, postage prepaid, a notice
prepared by the Company describing the transaction or
transactions that constitute the Change of Control and
stating:
(i) that a Change of Control has occurred and a Change
of Control Offer is being made pursuant to this Section 4.07,
and that all Notes that are timely tendered will be accepted for
payment;
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(ii) the Change of Control Purchase Price, and the Change
of Control Payment Date, which date shall be a Business Day no
earlier than 30 calendar days nor later than 60 calendar days
subsequent to the date such notice is mailed;
(iii) that any Notes or portions thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Purchase Price with respect thereto, all Notes
or portions thereof accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest from and after
the Change of Control Payment Date;
(v) that any Holder electing to have any Notes or portions
thereof purchased pursuant to a Change of Control Offer will be
required to tender such Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of such Notes completed,
to the Paying Agent at the address specified in the notice, prior
to the close of business on the third Business Day preceding the
Change of Control Payment Date;
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of
Control Payment Date, a facsimile transmission or letter, setting
forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is
withdrawing such Holder's election to have such Notes or portions
thereof purchased pursuant to the Change of Control Offer;
(vii) that any Holder electing to have Notes purchased
pursuant to the Change of Control Offer must specify the
principal amount that is being tendered for purchase, which
principal amount must be $1,000 or an integral multiple thereof;
(viii) if Certificated Notes have been issued pursuant to
Section 2.06, that any Holder of Certificated Notes whose
Certificated Notes are being purchased only in part will be
issued new Certificated Notes equal in principal amount to the
unpurchased portion of the Certificated Note or Notes
surrendered, which unpurchased portion will be equal in principal
amount to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global
Note that is being purchased in part such Global Note with a
notation on Schedule A thereof adjusting the principal amount
thereof to be equal to the unpurchased portion of such Global
Note; and
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(x) any other information necessary to enable any Holder
to tender Notes and to have such Notes purchased pursuant to this
Section 4.07.
(c) On the Change of Control Payment Date, the Company
shall (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer,
(ii) irrevocably deposit with the Paying Agent, by 10:00
a.m., New York City time, on such date, in immediately
available funds, an amount equal to the Change of Control
Purchase Price in respect of all Notes or portions thereof
so tendered and (iii) deliver or cause to be delivered to
the Trustee the Notes so tendered together with an Officers'
Certificate stating the aggregate principal amount of Notes
or portions thereof being purchased by the Company. Subject
to the provisions of Section 4.01, the Paying Agent shall
promptly send by first class mail, postage prepaid, to each
Holder of Notes or portions thereof so accepted for payment
the Change of Control Purchase Price for such Notes or
portions thereof. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For
purposes of this Section 4.07, the Trustee shall act as the
Paying Agent.
(d) Upon surrender and cancellation of a Certificated
Note that is purchased in part pursuant to the Change of
Control Offer, the Company shall promptly issue and the
Trustee shall authenticate and deliver to the surrendering
Holder of such Certificated Note a new Certificated Note
equal in principal amount to the unpurchased portion of such
surrendered Certificated Note; provided that each such new
Certificated Note shall be in a principal amount of $1,000
or an integral multiple thereof.
Upon surrender of a Global Note that is purchased in
part pursuant to a Change of Control Offer, the Paying Agent
shall forward such Global Note to the Trustee who shall make
a notation on Schedule A thereof to reduce the principal
amount of such Global Note to an amount equal to the
unpurchased portion of such Global Note, as provided in
Section 2.05(c) hereof.
(e) The Company shall comply with the requirements of
Section 14(e) of, and Rule 14e-1 under, the Exchange Act and
any other securities laws or regulations, to the extent such
laws and regulations are applicable, in connection with the
purchase of Notes pursuant to a Change of Control Offer.
SECTION 4.08. Limitation on Asset Sales. (a) The
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, engage in an Asset
Sale (except an Exempt Asset Sale), unless:
(i) the Company (or such Subsidiary) 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, and in the case of a lease of
assets, a lease providing for rent and other conditions
which are no less favorable to the Company (or such
Subsidiary) in any material respect than the then
prevailing market conditions, evidenced in each case by
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a resolution of the Board of Directors of such entity
set forth in an Officers' Certificate delivered to the
Trustee; and
(ii) at least 75% (100% in the case of lease
payments) of the consideration therefor received by the
Company or such Subsidiary is in the form of cash or
Cash Equivalents.
(b) The Company may apply, and may permit its
Subsidiaries to apply, Net Proceeds of an Asset Sale (other
than an Exempt Asset Sale) at its option, in each case
within 270 days after the consummation of such an Asset
Sale:
(i) to permanently reduce any outstanding Indebtedness of
the Company or any Guarantor (and to correspondingly reduce the
commitments, if any, with respect thereto) that ranks pari passu
with the Notes or the Guarantees, or, in the case of Net Proceeds
of an Asset Sale by any Subsidiary of the Company that is not a
Guarantor, to permanently reduce (A) any outstanding Indebtedness
of the Company or any Guarantor (and to correspondingly reduce
the commitments, if any, with respect thereto) that ranks pari
passu with the Notes or the Guarantees, or (B) any outstanding
Indebtedness of such Subsidiary (and to correspondingly reduce
the commitments, if any, with respect thereto);
(ii) to acquire another business or other long-term assets,
in each case, in, or used or useful in, the same or a similar
line of business as the Company or any of its Subsidiaries was
engaged in on the date of this Indenture and which has not been
discontinued on or prior to the date of such acquisition or any
reasonable extensions or expansions thereof (including the
Capital Stock of another Person engaged in such business,
provided such other Person is, or immediately after giving effect
to any such acquisition shall become, a Wholly Owned Subsidiary
of the Company or the Investment in such Person otherwise
constitutes an Investment in a Joint Venture permitted by the
provisions of Section 4.10(c) hereof); or
(iii) to reimburse the Company or its Subsidiaries for
expenditures made, and costs incurred, to repair, rebuild,
replace or restore property subject to loss, damage or taking to
the extent that the Net Proceeds consist of insurance proceeds
received on account of such loss, damage or taking.
Pending the final application of any such Net Proceeds,
the Company may (A) use such Net Proceeds to reduce
temporarily any outstanding Indebtedness of the Company or
any Guarantor that ranks pari passu with the Notes or the
Guarantees or, in the case of Net Proceeds of an Asset Sale
by any Subsidiary of the Company that is not a Guarantor, to
reduce temporarily (1) any outstanding Indebtedness of the
Company or any Guarantor that ranks pari passu with the
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Notes or the Guarantees or (2) any outstanding Indebtedness
of such Subsidiary or (B) otherwise invest such Net Proceeds
temporarily in Cash Equivalents.
(c) Any Net Proceeds from Asset Sales (other than
Exempt Asset Sales) that are not applied as provided in the
preceding Section 4.08(b) within 270 days after the
consummation of such an Asset Sale will be deemed to
constitute "Excess Proceeds."
(d) When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make
an offer to all Holders of Notes then outstanding (an "Asset
Sale Offer") to purchase, on a pro rata basis, the principal
amount of Notes equal in amount to the Excess Proceeds (and
not just the amount thereof that exceeds $10.0 million), at
a purchase price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest
thereon to the date of purchase (the "Asset Sale Purchase
Price") (subject to the right of each Holder of record on
the relevant Record Date to receive interest due on the
relevant Interest Payment Date), in accordance with the
procedures set forth in this Indenture, and in accordance
with the following standards:
(i) If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata
basis, based on the principal amount of Notes tendered, with such
adjustments as may be deemed appropriate by the Trustee, so that
only Notes in denominations of $1,000 or integral multiples
thereof shall be purchased.
(ii) If the aggregate principal amount of Notes tendered
pursuant to such Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds
following the completion of the Asset Sale Offer for general
corporate purposes (subject to the other provisions of this
Indenture), and the amount of Excess Proceeds then required to be
otherwise applied in accordance with this covenant shall be reset
to zero, subject to any subsequent Asset Sale.
(e) Within 30 calendar days after the date the amount
of Excess Proceeds exceeds $10.0 million, the Company, or
the Trustee at the request and expense of the Company, shall
send to each Holder by first class mail, postage prepaid, a
notice prepared by the Company stating:
(i) that an Asset Sale Offer is being made pursuant to
this Section 4.08, and that all Notes that are timely tendered will
be accepted for payment, subject to proration if the amount of
Excess Proceeds is less than the aggregate principal amount of
all Notes timely tendered pursuant to the Asset Sale Offer;
(ii) the Asset Sale Purchase Price, the amount of Excess
Proceeds that are available to be applied to purchase tendered
Notes, and the date Notes are to be purchased pursuant to the
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Asset Sale Offer (the "Asset Sale Payment Date"), which date
shall be a Business Day no earlier than 30 calendar days nor
later than 60 calendar days subsequent to the date such notice is
mailed;
(iii) that any Notes or portions thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the
Asset Sale Purchase Price with respect thereto, all Notes or
portions thereof accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest from and after the Asset
Sale Payment Date;
(v) that any Holder electing to have any Notes or portions
thereof purchased pursuant to the Asset Sale Offer will be
required to surrender such Notes, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of such Notes
completed, to the Paying Agent at the address specified in the
notice, prior to the close of business on the third Business Day
preceding the Asset Sale Payment Date;
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Asset Sale
Payment Date, a facsimile transmission or letter, setting forth
the name of the Holder, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing
such Holder's election to have such Notes or portions thereof
purchased pursuant to the Asset Sale Offer;
(vii) that any Holder electing to have Notes purchased
pursuant to the Asset Sale Offer must specify the principal
amount that is being tendered for purchase, which principal
amount must be $1,000 or an integral multiple thereof;
(viii) if Certificated Notes have been issued pursuant to
Section 2.06, that any Holder of Certificated Notes whose
Certificated Notes are being purchased only in part will be
issued new Certificated Notes equal in principal amount to the
unpurchased portion of the Certificated Note or Notes
surrendered, which unpurchased portion will be equal in principal
amount to $1,000 or an integral multiple thereof;
(ix) that the Trustee will return to the Holder of a Global
Note that is being purchased in part such Global Note with a
notation on Schedule A thereof adjusting the principal amount
thereof to be equal to the unpurchased portion of such Global
Note; and
(x) any other information necessary to enable any Holder to
tender Notes and to have such Notes purchased pursuant to this
Section 4.08.
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(f) On the Asset Sale Payment Date, the Company shall
(i) accept for payment any Notes or portions thereof
properly tendered and selected for purchase pursuant to the
Asset Sale Offer and Section 4.08(e) hereof; (ii)
irrevocably deposit with the Paying Agent, by 10:00 a.m.,
New York City time, on such date, in immediately available
funds, an amount equal to the Asset Sale Purchase Price in
respect of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee the
Notes so accepted together with an Officers' Certificate
listing the Notes or portions thereof tendered to the
Company and accepted for payment. Subject to the provisions
of Section 4.01, the Paying Agent shall promptly send by
first class mail, postage prepaid, to each Holder of Notes
or portions thereof so accepted for payment the Asset Sale
Purchase Price for such Notes or portions thereof. The
Company shall publicly announce the results of the Asset
Sale Offer on or as soon as practicable after the Asset Sale
Payment Date. For purposes of this Section 4.08, the
Trustee shall act as the Paying Agent.
(g) Upon surrender and cancellation of a Certificated
Note that is purchased in part, the Company shall promptly
issue and the Trustee shall authenticate and deliver to the
surrendering Holder of such Certificated Note a new
Certificated Note equal in principal amount to the
unpurchased portion of such surrendered Certificated Note;
provided that each such new Certificated Note shall be in a
principal amount of $1,000 or an integral multiple thereof;
(h) Upon surrender of a Global Note that is purchased
in part pursuant to an Asset Sale Offer, the Paying Agent
shall forward such Global Note to the Trustee who shall make
a notation on Schedule A thereof to reduce the principal
amount of such Global Note, as provided in Section 2.05(c)
hereof.
(i) Upon completion of an Asset Sale Offer (including
payment of the Asset Sale Purchase Price for accepted
Notes), any surplus Excess Proceeds that were the subject of
such offer shall cease to be Excess Proceeds, and the
Company may then use such amounts for general corporate
purposes (subject to other provisions of this Indenture).
(j) If at any time any non-cash consideration received
by the Company or any Subsidiary of the Company in
connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash, then such conversion or
disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Proceeds thereof shall be applied in
accordance with this Section 4.08.
(k) The provisions of this Section 4.08 shall not
apply to a transaction consummated in compliance with the
provisions of Section 5.01 hereof. In the event of the
transfer of substantially all (but not all) of the property
and assets of the Company and its Subsidiaries as an
entirety to a Person in a transaction permitted by
Section 5.01 hereof, the successor corporation shall be
deemed to have sold the properties and assets of the Company
and its Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this
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covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such
properties and assets of the Company and its Subsidiaries
deemed to be sold shall be deemed to be Net Proceeds for
purposes of this Section 4.08.
(l) The Company may use Net Proceeds from Exempt Asset
Sales for general corporate purposes (subject to the other
provisions of this Indenture).
(m) The Company shall comply with the requirements of
Section 14(e) of, and Rule 14e-1 under, the Exchange Act and
any other securities laws or regulations, to the extent such
laws and regulations are applicable, in connection with the
purchase of Notes pursuant to an Asset Sale Offer.
(n) Notwithstanding any of the foregoing, the Company
shall not permit DIMON International to sell all or
substantially all of its assets.
SECTION 4.09. Ownership of and Liens on Capital Stock
of Subsidiaries. The Company (a) shall not permit any
Person (other than the Company or any Wholly Owned
Subsidiary of the Company or, in the case of Subsidiaries of
Florimex, Florimex) to own any Capital Stock of any
Subsidiary of the Company or any Lien thereon, (b) shall
not, and shall not permit any Subsidiary of the Company to,
transfer, convey, sell or otherwise dispose of any shares of
Capital Stock of such Subsidiary or any other Subsidiary
(except to the Company or to a Wholly Owned Subsidiary of
the Company), and (c) shall not permit any Subsidiary of the
Company to issue Capital Stock or securities convertible
into, or warrants, rights or options to subscribe for or
purchase shares of, its Capital Stock to any Person (except
to the Company or to a Wholly Owned Subsidiary of the
Company) or create, incur, assume or suffer to exist any
Lien thereon, in each case except (i) directors' qualifying
shares, (ii) shares of Capital Stock issued prior to the
time such Person became a Subsidiary of the Company,
provided that such Capital Stock was not issued in
anticipation of such transaction, (iii) if such Subsidiary
merges with another Subsidiary of the Company, (iv) (A) if
such Subsidiary (other than DIMON International) ceases to
be a Subsidiary of the Company (as a result of the sale of
all of the issued and outstanding shares of Capital Stock of
such Subsidiary owned by the Company or any Subsidiary of
the Company), (B) shares of Capital Stock of Florimex or any
Subsidiary of Florimex which are sold or issued to any
Person (other than to a Wholly Owned Subsidiary of the
Company) or (C) shares of Capital Stock of any Subsidiary of
the Company which are sold or issued pursuant to the
exercise of a contractual "call" option to any Person (other
than to a Wholly Owned Subsidiary of the Company) which
owned a portion of the Capital Stock of such Subsidiary
prior to such sale or issuance; provided that, the Net
Proceeds from each such sale or issuance described in this
clause (iv) are applied in accordance with, and such sale or
issuance otherwise complies with, Section 4.08 hereof, or
(v) for purposes of clause (a) above, shares of Capital
Stock of Subsidiaries of the Company that are not Wholly
Owned Subsidiaries of the Company on the date of this
Indenture, which shares are not owned by the Company or any
Wholly Owned Subsidiary of the Company, as set forth in
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Schedule A to this Indenture and (vi) for purposes of
clauses (a) and (c) above, (A) Liens on Capital Stock of any
Subsidiary of the Company granted in accordance with the
provisions of this Indenture described in the first sentence
of Section 4.12 hereof and (B) shares of Capital Stock in
any Subsidiary of the Company which conducts the Company's
tobacco business in Greece issued after the date of this
Indenture to the Company's joint venture partner in Georges
Allamanis Tobacco International in connection with the
contribution to such Subsidiary by such partner of its
interest in Georges Allamanis Tobacco International.
The Company shall not permit DIMON International to
cease to be a Subsidiary of the Company.
SECTION 4.10. Restricted Payments. (a) The Company
shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend or make any
distribution of any kind or character (whether in cash,
securities or other property) on account of any class of the
Company's or any of its Subsidiaries' Equity Interests or
the holders thereof (including, without limitation, any
payment to stockholders of the Company in connection with a
merger or consolidation involving the Company), other than
(x) dividends or distributions payable solely in Equity
Interests (other than Disqualified Stock) of the Company or
(y) dividends or distributions payable solely to the Company
or any Wholly Owned Subsidiary of the Company and, if such
Subsidiary is not a Wholly Owned Subsidiary of the Company,
payable simultaneously to its minority shareholders on a pro
rata basis;
(ii) purchase, repurchase, redeem or otherwise acquire
or retire for value any Equity Interests of the Company or
any Subsidiary or other Affiliate of the Company (other than
any such Equity Interests owned by the Company or any Wholly
Owned Subsidiary of the Company);
(iii) make any principal payment on, or purchase,
repurchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness of the Company or any Guarantor
that is pari passu with or subordinated to the Notes or the
Guarantees prior to any scheduled repayment date, sinking
fund payment date or final maturity date except (w) the
prepayment of Indebtedness of the Company or any of its
Subsidiaries from proceeds from the issuance of the Notes
within 30 days after the date on which the Company receives
such proceeds, (x) the repayment of Indebtedness from Net
Proceeds of Asset Sales in accordance with the provisions
described in Section 4.08 hereof, (y) the repayment of
Indebtedness under the New Credit Facility or (z) the
purchase, redemption or acquisition by the Company of
Indebtedness of the Company through the issuance in exchange
therefor of Equity Interests (other than Disqualified
Stock); or
(iv) make any Investment (other than Permitted
Investments)
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(all such payments and other actions set forth in
clauses (i) through (iv) being collectively referred to as
"Restricted Payments"), unless, at the time of and after
giving effect to such Restricted Payment:
(I) no Default or Event of Default shall have
occurred and be continuing or would occur as a
consequence thereof;
(II) at the time of such Restricted Payment and
after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of
the applicable four-quarter period, the Company would
have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Consolidated
Interest Coverage Ratio test set forth under Section
4.11(a) hereof; and
(III) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments
declared or made by the Company and its Subsidiaries on
or after the date of this Indenture (excluding
Restricted Payments permitted by Sections 4.10(b)(ii),
4.10(b)(iii) and 4.10(b)(iv) hereof and excluding
Restricted Payments permitted by Section 4.10(c)
hereof) is less than the sum of (A) $20.0 million, plus
(B) 50% of the Consolidated Net Income of the Company
for the period (taken as one accounting period) from
the beginning of the fiscal quarter commencing April 1,
1996 to the end of the Company's most recently ended
fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (C) 100% of
the aggregate net cash proceeds received by the Company
from the issue or sale after the date of this Indenture
of Equity Interests of the Company or of debt
securities of the Company that have been converted into
such Equity Interests (other than Equity Interests (or
convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified
Stock).
(b) The foregoing clauses (II) and (III) of Section
4.10(a) will not prohibit:
(i) the payment of any dividend on any class of
Capital Stock of the Company or any Subsidiary of the
Company within 60 days after the date of declaration
thereof, if on the date when such dividend was declared
such payment would have complied with the provisions of
this Indenture; or
(ii) the making of any Investment in exchange for,
or out of the proceeds of, the substantially concurrent
sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than
Disqualified Stock); provided, that any net cash
proceeds that are used for any such Investment, and any
Net Income resulting therefrom, shall be excluded from
clause (III) of Section 4.10(a); or
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(iii) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of
the Company (other than any Disqualified Stock);
provided that any net cash proceeds that are used for
any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom,
shall be excluded from clause (III) of Section 4.10(a);
or
(iv) the defeasance, redemption or repurchase of
pari passu or subordinated Indebtedness with the net
cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially
concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the Company (other than
Disqualified Stock); provided, that any net cash
proceeds that are used for any such defeasance,
redemption or repurchase, and any Net Income resulting
therefrom, shall be excluded from clause (III) of
Section 4.10(a)
(c) Clause (III) of Section 4.10(a), however, will not
prohibit the Company or any of its Subsidiaries from making any
Investment in Joint Ventures in the tobacco business on or after
the date of this Indenture provided that the amount of any such
Investment, together with the aggregate amount of all other such
Investments in Joint Ventures made on or after the date of this
Indenture, shall not at any time exceed 15% of the Consolidated
Tangible Net Worth of the Company as of the last day of the
quarterly period most recently ended prior to the date of such
Investment for which internal financial statements of the Company
are available.
(d) The amount of all Restricted Payments (other than
cash) shall be the fair market value (evidenced by a resolution
of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) on the date of the Restricted Payment
of the asset(s) proposed to be transferred by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted
Payment. 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 is permitted and
setting forth the basis upon which the calculations required by
this Section 4.10 were computed, which calculations may be based
upon the Company's latest available financial statements.
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SECTION 4.11. Incurrence of Indebtedness and Issuance
of Preferred Stock.
(a) The Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness) and the Company shall not issue any
Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company and the Guarantors may
incur Indebtedness (including Acquired Indebtedness) and the
Company may issue shares of Disqualified Stock if:
(i) the Consolidated Interest Coverage Ratio for the
Company's most recently ended four full fiscal quarters for
which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been
at least 2.25 to 1.0, if such Indebtedness is incurred on or
before June 30, 1998, and 2.75 to 1.0, if such Indebtedness is
incurred after June 30, 1998, in each case determined on a pro
forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued, as the case
may be, at the beginning of such four-quarter period; and
(ii) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof;
provided, that no guarantee may be incurred pursuant to this
paragraph, unless the guaranteed Indebtedness is incurred by
the Company or a Guarantor pursuant to this paragraph.
(b) The foregoing provisions will not apply to:
(i) the incurrence by the Company or the Guarantors of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund, any Indebtedness described in Section 4.11(a)
hereof;
(ii) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes and the Guarantees thereof;
(iii) the incurrence by the Company of Indebtedness under the
New Credit Facility (and the incurrence by 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 Subsidiaries thereunder) not to exceed
$240 million, less the aggregate amount of all Net Proceeds of
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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
4.08(b) hereof;
(iv) the incurrence by the Company or any of its
Subsidiaries of Indebtedness in an aggregate principal amount at
any time outstanding not to exceed the sum of (A) 50% of Eligible
Inventory, plus (B) 75% of Eligible Receivables; provided that
(1) the aggregate principal amount of any such Indebtedness
incurred by Subsidiaries of the Company that are not Guarantors
at any time outstanding shall not exceed the greater of (X) the
aggregate principal amount of Advances on Purchases of Tobacco
outstanding at such time and (Y) the sum of (I) 50% of Eligible
Inventory of all such Subsidiaries that are not Guarantors, plus
(II) 75% of Eligible Receivables of all such Subsidiaries that
are not Guarantors; (2) no more than $50.0 million of such
Indebtedness may be secured by Liens on assets or property of
Subsidiaries of the Company that are not Guarantors; and (3) none
of such Indebtedness may be secured by Liens on assets or
properties of the Company or the Guarantors;
(v) the incurrence by the Company or any of its Subsidiaries
of Indebtedness used to fund Advances on Purchases of Tobacco, but
only to the extent that the aggregate principal amount of such
advances outstanding at any time to any Person and such Person's
Affiliates does not exceed 15% of the Consolidated Tangible Net
Worth of the Company for the most recently ended fiscal quarter
for which internal financial statements are available;
(vi) the incurrence by the Company or any of its
Subsidiaries of Indebtedness represented by Purchase Money
Obligations or Capital Lease Obligations, in each case incurred
for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property used in
the business of the Company or such Subsidiary, or any Permitted
Refinancing Indebtedness thereof; provided that (a) the aggregate
principal amount of any such Indebtedness does not exceed 100% of
the purchase price or cost of the property to which such
Indebtedness relates, (b) the Indebtedness is incurred within 180
days (or 360 days, in the case of such Indebtedness incurred to
finance property used in the business of any Subsidiary of the
Company that is not organized under the laws of the United States
of America, any state thereof or the District of Columbia) of the
acquisition, construction or improvement of such property, and
(c) the aggregate principal amount of such Indebtedness
outstanding, together with the aggregate principal amount of
Attributable Indebtedness with respect to Sale and Leaseback
Transactions permitted under clause (vii) below, at any time
shall not exceed $15.0 million;
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(vii) Attributable Indebtedness with respect to Sale and
Leaseback Transactions permitted pursuant to Section 4.14 hereof;
provided that the aggregate principal amount of such Indebtedness
outstanding together with the aggregate principal amount of
Indebtedness permitted under clause (vi) above, at any time shall
not exceed $15.0 million;
(viii) (A) the incurrence by the Company or any of its Wholly
Owned Subsidiaries of intercompany Indebtedness owing to the
Company or any of its Subsidiaries, (B) the incurrence by any
Subsidiary of the Company that is not a Wholly Owned Subsidiary
of Indebtedness owing to the Company or any of its Wholly Owned
Subsidiaries, or (C) the incurrence by the Company or any of its
Subsidiaries of Indebtedness in an aggregate principal amount
outstanding at any time not to exceed $5.0 million for the
purpose of making advances to Subsidiaries that are not Wholly
Owned Subsidiaries of the Company or to Joint Ventures in which
the Company or any of its Subsidiaries owns an interest; provided
that Indebtedness may be incurred pursuant to clauses (B) and (C)
only if and to the extent that the Investment constituting such
Indebtedness shall be permitted under Section 4.10; and provided
further that, for purposes of clauses (A) and (B), (I) in the
case of Indebtedness of the Company or any Guarantor, such
obligations and any trade payables owed by the Company or any
Guarantor to any Subsidiary of the Company shall be unsecured and
subordinated in case of an Event of Default in all respects to
the Company's obligations pursuant to the Notes and such
Guarantor's obligations under its Guarantee; and (II)(X) any
subsequent issuance or transfer of Equity Interests that results
in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Subsidiary of the Company and (Y) any
sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Wholly Owned Subsidiary of the
Company shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, to which this clause (viii) no
longer applies;
(ix) the incurrence by the Company and its Subsidiaries of
Hedging Obligations;
(x) the incurrence by the Company and its Subsidiaries of
Indebtedness with respect to letters of credit issued to
customers to secure an obligation to deliver tobacco for which
the customer has prepaid the purchase price thereof in cash, but
only to the extent of the amount of such cash prepayment; and
(xi) the incurrence by the Company and its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other
clause of this Section 4.11) in an aggregate principal amount at
any time outstanding not to exceed $15.0 million.
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(c) The Company 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 Company or 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 subordinated 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 Company or such
Guarantor, as the case may be.
SECTION 4.12. Liens. The Company shall not, and shall
not permit any Guarantor to, directly or indirectly, create,
incur, assume or suffer to exist any Lien on any of its assets,
now owned or hereafter acquired, securing any Indebtedness unless
the Notes, in the case of the Company, or the Guarantees, in the
case of the Guarantors, are secured equally and ratably with such
other Indebtedness; provided that, if such Indebtedness is by its
terms subordinate to the Notes or the Guarantees, the Lien
securing such subordinate or junior Indebtedness shall be
subordinate and junior to the Lien securing the Notes or the
Guarantees with the same relative priority as such subordinated
or junior Indebtedness shall have with respect to the Notes or
the Guarantees.
The foregoing restrictions shall not apply to the
following Liens:
(a) Liens securing only Existing Indebtedness, in an
aggregate principal amount not greater than $1.2 million;
(b) Liens securing only the Notes;
(c) Liens in favor of the Company;
(d) Liens to secure Indebtedness incurred for the
purpose of financing all or any part of the purchase price
or cost of construction or improvement of the property
subject to such Liens and permitted by Section 4.11(b)(vi)
hereof; provided that such Lien does not extend to or cover
any property other than such item of property and any
improvements on such item;
(e) Liens on property existing immediately prior to
the time of acquisition thereof (and not created in
anticipation or contemplation of such acquisition or the
financing of such acquisition) and securing Acquired
Indebtedness; provided that such Lien does not extend to or
cover any property other than such item of property and any
improvements on such item;
(f) Liens on property of a Person existing at the time
such Person is merged with or into or consolidated with the
Company or any Guarantor (and not created in anticipation or
contemplation thereof) and securing Acquired Indebtedness;
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provided that such Lien does not extend to or cover any
property other than such item of property and any
improvements on such item;
(g) Liens securing Attributable Indebtedness of the
Company or any Guarantor incurred with respect to Sale and
Leaseback Transactions; provided that such Lien does not
extend to or cover any property other than the property sold
and leased back pursuant to such Sale and Leaseback
Transaction; and
(h) Liens to secure Permitted Refinancing Indebtedness
of any Indebtedness secured by Liens referred to in the
foregoing clauses (a), (d), (e) or (f) so long as such Lien
does not extend to any other property.
SECTION 4.13. Dividends and Other Payment Restrictions
Affecting Subsidiaries. The Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary of
the Company to:
(a) pay dividends or make any other distributions to
the Company or any of its Subsidiaries on its Capital Stock
or with respect to any other interest or participation in,
or measured by, its profits; or
(b) pay any Indebtedness or other obligation owed to
the Company or any of its Subsidiaries; or
(c) make loans or advances to the Company or any of
its Subsidiaries; or
(d) sell, lease or transfer any of its properties or
assets to the Company or any of its Subsidiaries; or
(e) guarantee the obligations of the Company evidenced
by the Notes or any renewals, refinancings, exchanges,
refundings or extensions thereof,
except for such encumbrances or restrictions existing under or by
reason of:
(i) this Indenture and the Notes; or
(ii) applicable law; or
(iii) any instrument governing Acquired Indebtedness or
Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except
to the extent such Acquired Indebtedness was incurred in
connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or
the properties or assets of any Person, other than the Person, or
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the property or assets of the Person, so acquired, provided that
the Consolidated Net Income of such Person is not taken into
account in determining whether such acquisition was permitted by
the terms of this Indenture; or
(iv) any document or instrument governing Indebtedness
incurred pursuant to Sections 4.11(b)(vi) or (vii) hereof,
provided that any such restriction contained therein relates only
to the asset or assets constructed or acquired in connection
therewith; or
(v) Permitted Refinancing Indebtedness of Indebtedness
described in clause (iii) of this Section 4.13(e), provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being
refinanced.
SECTION 4.14. Limitation on Sale and Leaseback
Transactions. The Company shall not, and shall not permit any of
its Subsidiaries to, enter into any Sale and Leaseback
Transaction unless:
(a) after giving pro forma effect to any such Sale and
Leaseback Transaction, the Company or such Subsidiary, as
the case may be, could incur the Attributable Indebtedness
relating to such Sale and Leaseback Transaction under
Sections 4.11 and 4.12 hereof,
(b) the gross cash proceeds of such Sale and Leaseback
Transaction are at least equal to the fair market value of
such Property, as determined by the Board of Directors of
the Company, such determination to be evidenced by a
resolution of the Board of Directors of the Company,
(c) the aggregate rent payable by the Company or such
Subsidiary in respect of such Sale and Leaseback Transaction
is not in excess of the fair market rental value of the
Property leased pursuant to such Sale and Leaseback
Transaction, and
(d) the Company applies the Net Proceeds of the
Property sold pursuant to the Sale and Leaseback Transaction
as provided in Section 4.08 hereof.
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SECTION 4.15. Transactions with Affiliates. The
Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, in any one transaction or a series of
related transactions, sell, lease, transfer or otherwise dispose
of any of its properties, assets or services to, or make any
payment to, or purchase any property, assets or services from, or
enter into or make any agreement, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), other than Exempt
Affiliate Transactions, unless:
(a) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary of
the Company than those that would have been obtained in a
comparable arm's-length transaction by the Company or such
Subsidiary with a Person that is not an Affiliate, and
(b) the Company delivers to the Trustee (i) with
respect to any Affiliate Transaction entered into after the
date of this Indenture involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying
that such Affiliate Transaction complies with clause (a)
above and that such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board of
Directors and (ii) with respect to any Affiliate Transaction
involving aggregate consideration in excess of $5.0 million,
a written opinion from an independent financial advisor (as
defined below) that such Affiliate Transaction is fair to
the Company or such Subsidiary, as the case may be, from a
financial point of view. "Independent financial advisor"
means a nationally recognized accounting, appraisal or
investment banking firm that is, in the reasonable judgment
of the Company's Board of Directors, qualified to perform
the task for which such firm has been engaged and
disinterested and independent with respect to the Company.
SECTION 4.16. Reports. The Company shall, so long as
any Notes are outstanding, whether or not required by the rules
and regulations of the Commission, furnish to the Holders of
Notes, and file with the Trustee, within 15 days after it is, or
would have been, required to file such with the Commission, (i)
all quarterly and annual financial information that is or would
be required to be contained in a filing with the Commission on
Forms 10-Q and 10-K if the Company is or were required to file
such Forms, including a Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect
to annual information only, a report thereon by the Company's
certified independent accountants, and (ii) all current reports
that are or would be required to be filed with the Commission on
Form 8-K if the Company is or were required to file such reports.
In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of all such
information and reports with the Commission for public
availability (unless the Commission will not accept such filing)
and make such information available to securities analysts or
prospective investors upon written request.
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Delivery of such reports, information and documents to
the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information
contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to
rely exclusively on Officers' Certificates).
SECTION 4.17. Waiver of Stay, Extension or Usury Laws.
The Company and the Guarantors will not at any time, to the
extent that they may lawfully not do so, insist upon, or 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 Company or the Guarantors
from paying all or any portion of the principal of or premium, if
any, interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and,
to the extent that they may lawfully do so, the Company and the
Guarantors hereby expressly waive all benefit or advantage of any
such law and expressly agree that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.18. Compliance Certificate; Notice of
Default or Event of Default. (a) The Company shall deliver
to the Trustee within 120 calendar days after the end of
each fiscal year of the Company ending after the date
hereof, an Officers' Certificate stating whether or not, to
the best knowledge of such officer, the Company has complied
with all conditions and covenants under this Indenture, and,
if the Company shall be in Default, specifying all such
Defaults and the nature thereof of which such officer may
have knowledge.
For the purposes of this Section 4.18(a), compliance
shall be determined without regard to any period of grace or
requirement of notice under this Indenture.
(b) The Company shall deliver written notice to the
Trustee immediately upon any executive officer of the
Company becoming aware of the occurrence of any event which
constitutes, or with the giving of notice or the lapse of
time or both would constitute, a Default or Event of
Default, describing such Default or Event of Default, its
status and what action the Company is taking or proposes to
take with respect thereto.
(c) So long as not contrary to the then-current
recommendations of the American Institute of Certified
Public Accountants, the year-end financial statements
delivered pursuant to Section 4.16 hereof shall be
accompanied by a written statement of the Company's
independent public accountants (who shall be a firm of
established national reputation) that in making the
examination necessary for certification of such financial
statements, nothing has come to their attention that would
lead them to believe that the Company has violated any
provisions of Article IV or Article V hereof or, if any such
violation has occurred, specifying the nature and period of
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existence thereof, it being understood that such accountants
shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
SECTION 4.19. Payment for Consent, Waiver or
Amendment. Neither the Company nor any of its Subsidiaries
shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to
any Holder of Notes for or as an inducement to any consent,
waiver or amendment of any terms or provisions of the Notes,
unless such consideration is offered to be paid or agreed to be
paid to all Holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or amendment.
SECTION 4.20. Investment Company Act. None of the
Company or its Subsidiaries shall become an investment company
subject to registration under the Investment Company Act of 1940,
as amended.
SECTION 4.21 Further Instruments and Acts. Upon
request of the Trustee, the Company shall execute and deliver
such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
ARTICLE V
CONSOLIDATION, MERGER,
CONVEYANCE, LEASE OR TRANSFER
SECTION 5.01. Merger, Consolidation or Sale of Assets.
The Company shall not, and shall not permit any Subsidiary of the
Company to, in a single transaction or series of related
transactions, consolidate or merge with or into (other than the
consolidation or merger of a Wholly Owned Subsidiary of the
Company with another Wholly Owned Subsidiary of the Company or
into the Company and other than the consolidation or merger of
Florimex or any Subsidiary of Florimex in connection with an
Asset Sale permitted pursuant to Section 4.08 hereof) (whether or
not the Company or such Subsidiary is the surviving corporation),
or directly and/or indirectly through its Subsidiaries sell,
assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company and
its Subsidiaries (determined on a consolidated basis for the
Company and its Subsidiaries taken as a whole) in one or more
related transactions to, another corporation, Person or entity
unless:
(a) either (i) the Company, in the case of a
transaction involving the Company, or such Subsidiary, in
the case of a transaction involving a Subsidiary of the
Company, is the surviving corporation or (ii) in the case of
a transaction involving the Company or a Guarantor, the
entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company or such
Guarantor) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made
is a corporation organized or existing under the laws of the
United States of America, any state thereof or the District
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of Columbia and expressly assumes all the obligations of the
Company or such Guarantor, as the case may be, under the
Notes, the relevant Guarantee and this Indenture pursuant to
a supplemental indenture in a form reasonably satisfactory
to the Trustee;
(b) immediately prior to and after such transaction no
Default or Event of Default exists;
(c) the Company or, if other than the Company, the
entity or Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have
been made (i) will have a Consolidated Net Worth immediately
after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding
the transaction and (ii) will, at the time of such
transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the
Consolidated Interest Coverage Ratio test set forth in
Section 4.11(a) hereof;
(d) if, as a result of any such transaction, property
or assets of the Company or a Guarantor would become subject
to a Lien securing Indebtedness not excepted from the
provisions of this Indenture described in Section 4.12 the
Company, any such Guarantor or the surviving entity, as the
case may be, shall have secured the Notes as required by
such provisions; and
(e) the Company shall deliver, or cause to be
delivered, to the Trustee, in form reasonably satisfactory
to the Trustee, an Officers' Certificate and, except in the
case of a merger of a Subsidiary of the Company into the
Company or into a Wholly Owned Subsidiary of the Company, an
Opinion of Counsel, each stating that such consolidation,
merger, conveyance, lease or disposition and any
supplemental indenture with respect thereto comply with this
Section 5.01 and that all conditions precedent herein
provided for relating to such transaction or series of
transactions have been complied with.
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 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 with, or merger by the Company with and into,
any other corporation, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of
the Property of the Company and its Subsidiaries taken as a whole
in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into which the Company is merged,
or the Person to which such sale, conveyance, assignment,
transfer, lease, conveyance or other disposition is made, shall
succeed to, and be substituted for, and may exercise every right
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and power of, the Company under this Indenture with the same
effect as if such successor Person has been named as the Company
herein; and thereafter the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture
and the Notes, except for the obligation to pay the principal of,
premium, if any, and interest if any, on the Notes.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. "Event of Default,"
wherever used herein with respect to the Notes, means any one of
the following events (whatever the reason for such event, and
whether it shall be voluntary or involuntary, or be effected by
operation of law, pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body):
(a) the Company fails to make any payment of interest on any
Note when the same becomes due and payable and such failure
continues for a period of 30 calendar days; or
(b) the Company fails to make any payment of the principal
of, or premium, if any, on any Note when the same becomes due and
payable whether upon maturity, redemption, required repurchase or
otherwise; or
(c) the Company fails to observe or perform any covenant,
condition or agreement on the part of the Company to be observed
or performed pursuant to Sections 4.07, 4.08, 4.09, 4.10, 4.11 or
5.01 hereof; or
(d) the Company fails to comply with any of its other agreements
or covenants in, or provisions of, the Notes or this Indenture
for 30 calendar days after written notice by the Trustee or
Holders of at least 25% of the aggregate principal amount of the
Notes outstanding, which notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of
Default"; or
(e) a default occurs under any mortgage, indenture or instrument
(including without limitation, the New Credit Facility) under
which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or
any of its Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Subsidiaries) whether such Indebtedness
or guarantee now exists, or is created after the date of this
Indenture, which default (i) is caused by a failure to pay
principal of such Indebtedness at final maturity thereof (a
"Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the
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principal amount of any other such Indebtedness as to which there
has been a Payment Default or the maturity of which has been so
accelerated, exceeds in the aggregate $5.0 million; or
(f) a final judgment or judgments or an order or orders are
rendered against the Company or any of its Subsidiaries by a
court or courts of competent jurisdiction for the payment of
money not fully covered by insurance in an amount in excess of
$10.0 million in the aggregate, and either (i) a creditor
commences an enforcement proceeding upon any such judgment or
order or (ii) any such order or judgment remains undischarged or
unstayed for a period of 45 days after the date on which the
right to appeal has expired; or
(g) the entry by a court having jurisdiction in the premises of
(i) a decree or order for relief in respect of the Company or any
Material Domestic Subsidiary or any Material Foreign Subsidiary
in an involuntary case or proceeding under any Bankruptcy Law or
(ii) a decree or order (A) adjudging the Company or any Material
Domestic Subsidiary or any Material Foreign Subsidiary a bankrupt
or insolvent, or (B) approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition
of, or in respect of, the Company or any Material Domestic
Subsidiary or any Material Foreign Subsidiary under any
Bankruptcy Law, or (C) appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Material Domestic Subsidiary or
any Material Foreign Subsidiary or of any substantial part of the
Property of the Company or any Material Domestic Subsidiary or
any Material Foreign Subsidiary, or (D) ordering the winding-up
or liquidation of the affairs of the Company or any Material
Domestic Subsidiary or any Material Foreign Subsidiary, and in
each case, the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a
period of 60 consecutive calendar days; or
(h) the commencement by the Company or any Material Domestic
Subsidiary or any Material Foreign Subsidiary of a voluntary case
or proceeding under any Bankruptcy Law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent; or (ii) the
consent by the Company or any Material Domestic Subsidiary or any
Material Foreign Subsidiary to the entry of a decree or order for
relief in respect of the Company or any Material Domestic
Subsidiary or any Material Foreign Subsidiary in an involuntary
case or proceeding under any Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding
against the Company or any Material Domestic Subsidiary or any
Material Foreign Subsidiary; or (iii) the filing by the Company
or any Material Domestic Subsidiary or any Material Foreign
Subsidiary of a petition or answer or consent seeking
reorganization or relief under any Bankruptcy Law; or (iv) the
consent by the Company or any Material Domestic Subsidiary or any
Material Foreign Subsidiary to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official
of the Company or any or of any substantial part of the Property
of the Company or any Material Domestic Subsidiary or any
Material Foreign Subsidiary, or (v) the making by the Company or
any Material Domestic Subsidiary or any Material Foreign
Subsidiary of an assignment for the benefit of creditors; or (vi)
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the admission by the Company or any Material Domestic Subsidiary
or any Material Foreign Subsidiary in writing of its inability to
pay its debts generally as they become due; or (vii) the
approval by stockholders of the Company of any plan or proposal
for the liquidation or dissolution of the Company; or (viii) the
taking of corporate action by the Company or any Material
Domestic Subsidiary or any Material Foreign Subsidiary in
furtherance of any such action; or
(i) the Guarantee of any Guarantor shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect (other than in accordance
with the terms of this Indenture) or any Guarantor or any Person
acting on behalf of any Guarantor shall deny or disaffirm such
Guarantor's obligations under its Guarantee (other than by reason
of a release of such Guarantor from its Guarantee in accordance
with the terms of this Indenture).
SECTION 6.02. Acceleration. If an Event of Default
(other than an Event of Default specified in Section 6.01(g) or
Section 6.01(h)) occurs and is continuing, the Trustee by notice
to the Company or the Holders of at least 25% in aggregate
principal amount of all of the then outstanding Notes by written
notice to the Company and the Trustee may declare the unpaid
principal of and any accrued interest on all the Notes then
outstanding to be immediately due and payable. Upon such
declaration the principal and interest shall be due and payable
immediately (together with any premium if applicable). If an
Event of Default specified in Section 6.01(g) or Section 6.01(h)
occurs, such an amount 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 Holders of a majority in aggregate principal amount
of the then outstanding Notes by written notice to the Trustee
may rescind and annul such an acceleration and its consequences
if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of
principal, interest or premium that have become due solely
because of the acceleration) have been cured or waived. No such
recission shall affect any subsequent Default or impair any right
consequent thereon.
SECTION 6.03. Other Remedies. The Company covenants
that if an Event of Default specified in Section 6.01(a) or
Section 6.01(b) occurs the Company shall, upon demand of the
Trustee, pay to the Trustee, for the benefit of the Holders, the
whole amount then due and payable on the Notes for principal,
premium, if any, and interest and, to the extent that payment of
such interest shall be legally enforceable, interest upon the
overdue principal and premium, if any, and upon Defaulted
Interest at the rate or rates prescribed therefor in the Notes;
and, in addition thereto, 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 and all other
amounts due to the Trustee pursuant to Section 7.07 hereof.
If the Company fails to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust, may institute a judicial proceeding for the
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collection of the sums so due and unpaid, and may prosecute such
proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the Property of the Company or any
other obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, whether for the specific enforcement
of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 6.04. Waiver of Past Defaults. The Holders of
not less than a majority in principal amount of the outstanding
Notes may on behalf of the Holders of all the Notes waive any
existing Default or Event of Default and its consequences under
this Article VI, except a continuing Default or Event of Default
(a) in the payment of the principal of (or premium, if any) or
interest on any Note (except a payment default resulting from an
acceleration that has been rescinded), or (b) in respect of a
covenant or provision hereof which under Section 9.02 hereof
cannot be modified or amended without the consent of the Holder
of each outstanding Note. Any such waiver may (but need not) be
given in connection with a tender offer or exchange offer for the
Notes.
SECTION 6.05. Control by Majority. The Holders of not
less than a majority in principal amount of the outstanding Notes
shall 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 that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture or unduly prejudicial to
the rights of other Holders and would not subject the
Trustee to personal liability; and
(b) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
SECTION 6.06. Limitation on Suits. No Holder of Notes
shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment
of a receiver or trustee, or for any other remedy hereunder,
unless
(a) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to
the Notes;
(b) the Holders of not less than 25% in principal
amount of the outstanding Notes shall have made written
request to the Trustee to institute proceedings in respect
of such Event of Default in its own name as Trustee
hereunder;
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(c) such Holder or Holders have offered to the Trustee
security or indemnity satisfactory to the Trustee in its
reasonable discretion against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 30 calendar days after its receipt
of such notice, request and offer of indemnity has failed to
institute any such proceeding; and
(e) no direction inconsistent with such written
request has been given to the Trustee during such 30-day
period by the Holders of a majority in principal amount of
the outstanding Notes;
in any event, it being understood and intended that no one or
more Holders of Notes shall have any right in any manner whatever
by virtue of, or by availing of, any provision of this Indenture
to affect, disturb or prejudice the rights of any other Holders
of Notes, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right
under this Indenture, except in the manner herein provided and
for the equal and ratable benefit of all Holders of Notes.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder to receive payment of principal of, premium, if
any, and interest on the Notes held by such Holder, on or after
the respective due dates expressed in the Notes or the redemption
dates or purchase dates provided for therein, or to bring suit
for the enforcement of any such payment on or after such
respective dates, shall be absolute and unconditional and shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. Trustee May File Proofs of Claim. In
case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceedings, or any voluntary or
involuntary case under any Bankruptcy Law relative to the Company
or any other obligor upon the Notes or the Property of the
Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of such Notes shall then
be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in
such proceeding or otherwise, (i) to file and prove a claim for
the whole amount of principal, premium, if any, and interest
owing and unpaid in respect of the Notes, to file such other
papers or documents and to take such other actions, including
participating as a member or otherwise in any official committee
of creditors appointed in the matter, 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 and counsel
and all other amounts due to the Trustee pursuant to Section 7.07
hereof) and of the Holders allowed in such judicial proceeding,
and (ii) to collect and receive any moneys or other Property
payable or deliverable on any such claims and to distribute the
same; and any receiver, assignee, trustee, custodian, liquidator,
sequestrator (or other similar official) in any such proceeding
is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the
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making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section
7.07 hereof. Nothing contained herein 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 6.09. Priorities. Any money collected by the
Trustee pursuant to this Article VI shall be applied in the
following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of the
principal of, premium, if any, or interest, upon presentation of
the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
(a) FIRST: To the payment of all amounts due the Trustee under
Section 7.07 hereof;
(b) SECOND: To the payment of the amounts then due and unpaid
for principal of, premium, if any, and interest on the Notes,
ratably, without preference or priority of any kind, according to
the amounts due and payable on such Notes for principal, premium,
if any, and interest, respectively; and
(c) THIRD: To the Company.
The Trustee may fix a record date and payment date for
any payment to Holders pursuant to this Section 6.09. At least
15 calendar days before such record date, the Company shall mail
to each Holder and the Trustee a notice that states such record
date, the payment date and amount to be paid. The Trustee may
mail such notice in the name and at the expense of the Company.
SECTION 6.10. Undertaking for Costs. All parties to
this Indenture agree, and each Holder of any Note by such
Holder's acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, 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, suffered or
omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit and
that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Holder,
or group of Holders, holding in the aggregate more than 10
percent in principal amount of the outstanding Notes, or to any
suit instituted by any Holder for the enforcement of the payment
of the principal of (or premium, if any) or interest on any Note
on or after its Stated Maturity.
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SECTION 6.11. Waiver of Stay or Extension Laws. The
Company (to the extent it may lawfully do so) shall not at any
time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture;
and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
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 6.12. Trustee May Enforce Claims Without
Possession of the Notes. All rights of action and claims under
this Indenture or the Notes may be prosecuted and enforced by the
Trustee without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its
own name, as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Notes.
SECTION 6.13. Restoration of Rights and Remedies. If
the Trustee or any Holder of Notes has instituted any proceeding
to enforce any right or remedy under this Indenture 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 Company, 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.
SECTION 6.14. Rights and Remedies Cumulative. Except
as otherwise provided in Section 2.07 hereof, no right or remedy
herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity
or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.15. Delay or Omission Not Waiver. No delay
or omission of the Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every
right and remedy given by this Article VI or by law to the
Trustee or to the Holders may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
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ARTICLE VII
TRUSTEE
SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the
rights and powers vested in it by this Indenture and shall use the
same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such
person's own affairs.
(b) Except during the continuance of an Event of
Default: (i) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and (ii) 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; provided
that in the case of any such certificates or opinions that
by any provision of this Indenture are specifically required
to be furnished to the Trustee, the Trustee shall examine
such certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act
or its own willful misconduct, provided that: (i) this
paragraph (c) shall not limit the effect of paragraph (b) of
this Section 7.01; (ii) 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; and (iii) 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 6.05 hereof.
(d) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Company.
(e) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by
law.
(f) 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 of liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions
of this Article VII and to the provisions of the Trust
Indenture Act.
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SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by the
proper Person. Except as provided in Section 7.01(b) hereof,
the Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of
Counsel. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on any
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any such
agent; provided that such agent was appointed with due care
by the Trustee.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided that the
Trustee's conduct does not constitute willful misconduct or
negligence.
(e) The Trustee shall not be charged with knowledge of
any Default or Event of Default under Sections 6.01(c),
6.01(d), 6.01(e) or 6.01(f) hereof, of the identity of any
Material Domestic Subsidiary or any Material Foreign
Subsidiary or of the existence of any Change of Control or
Asset Sale relating to the Company unless either (i) a Trust
Officer shall have actual knowledge thereof, or (ii) the
Trustee shall have received notice thereof in accordance
with Section 11.02 hereof from the Company or any Holder of
Notes.
(f) The Trustee may consult with counsel of its
selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance
thereon.
(g) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, 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 to examine
the books, records and premises of the Company, personally
or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The
Trustee, any Paying Agent or Registrar, in its individual or any
other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same
rights it would have if it were not Trustee, Paying Agent or
Registrar hereunder, as the case may be; provided that the
Trustee must in any event comply with Section 7.10 and Section
7.11 hereof.
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SECTION 7.04. Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Notes, it shall not
be accountable for the Company's use of the proceeds from the
Notes, and it shall not be responsible for any statement of the
Company in this Indenture, including the recitals contained
herein, or in any document issued in connection with the sale of
the Notes or in the Notes other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults. Within 90 calendar
days after the occurrence of any Default hereunder with respect
to the Notes, the Trustee shall transmit by mail to all Holders,
as their names and addresses appear in the Note Register, notice
of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided that, except in
the case of a Default in the payment of the principal of (or
premium, if any) or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board
of directors, the executive committee or a trust committee of
directors and/or Trust Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest
of the Holders.
SECTION 7.06. Preservation of Information; Reports by
Trustee to Holders.
(a) The Company shall furnish or cause to be furnished to the Trustee:
(i) semiannually, not less than 10 calendar days prior to
each Interest Payment Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders
as of the Record Date immediately preceding such Interest Payment
Date; and
(ii) at such other times as the Trustee may request in
writing, within 30 calendar days after the receipt by the Company
of any such request, a list of similar form and content as of a
date not more than 15 calendar days prior to the time such list
is furnished;
provided, however, that if and so long as the Trustee shall
be the Registrar for the Notes, no such list need be
furnished with respect to the Notes.
(b) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of
Holders contained in the most recent list furnished to the
Trustee as provided in Section 7.06(a) hereof and the names
and addresses of Holders received by the Trustee in its
capacity as Registrar, if so acting. The Trustee may
destroy any list furnished to it as provided in Section
7.06(a) hereof upon receipt of a new list so furnished.
(c) Holders may communicate as provided in Section
312(b) of the Trust Indenture Act with other Holders with
respect to their rights under this Indenture or under the
Notes.
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(d) Each Holder of Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither
the Company nor the Trustee shall be held accountable by
reason of the disclosure of any such information as to the
names and addresses of the Holders in accordance with this
Section 7.06, regardless of the source from which such
information was derived, and that the Trustee shall not be
held accountable by reason of mailing any material pursuant
to a request made under this Section 7.06.
(e) Within 60 calendar days after January 15 of each
year commencing with the year 1997, the Trustee shall
transmit by mail to all Holders of Notes, a brief report
dated as of such January 15 if and to the extent required
under Section 313(a) of the Trust Indenture Act.
(f) The Trustee shall comply with Sections 313(b) and
313(c) of the Trust Indenture Act.
(g) A copy of each report described in Section 7.06(e)
hereof shall, at the time of its transmission to Holders, be
filed by the Trustee with each stock exchange, if any, upon
which the Notes are then listed, with the Commission and
also with the Company. The Company shall promptly notify
the Trustee of any stock exchange upon which the Notes are
listed.
SECTION 7.07. Compensation and Indemnity. (a) The
Company shall pay to the Trustee from time to time such
compensation for its services as the Company and the Trustee
shall from time to time agree. The Company shall reimburse
the Trustee upon request for all reasonable out-of-pocket
expenses incurred or made by it, including costs of
collection, in addition to the compensation for its
services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the
Trustee's agents and counsel. The Trustee's compensation
shall not be limited by any law on compensation of a trustee
of an express trust.
(b) The Company shall indemnify the Trustee for, and
hold it harmless against, any and all loss, liability,
damage, claim or expense (including reasonable attorneys'
fees and expenses) arising out of or incurred by it in
connection with the acceptance or administration of the
trust created by this Indenture and the performance of its
duties hereunder, except as set forth in the next paragraph.
The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend any such
claim and the Trustee shall cooperate in the defense of such
claim. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably
withheld.
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(c) The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by
the Trustee through the Trustee's own willful misconduct,
negligence or bad faith.
(d) To secure the Company's payment obligations in
this Section 7.07, the Trustee shall have a Lien prior to
the Notes on all money or property held or collected by the
Trustee other than money or property held in trust to pay
principal of, premium, if any, and interest on, particular
Notes.
(e) The Company's payment obligations pursuant to this
Section 7.07 shall survive the resignation or removal of the
Trustee and discharge of this Indenture. Subject to any
other rights available to the Trustee under applicable
bankruptcy law, when the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.01(g) or
Section 6.01(h) hereof, the expenses are intended to
constitute expenses of administration under any Bankruptcy
Law.
SECTION 7.08. Replacement of Trustee. (a) No
resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article VII shall
become effective until the acceptance of appointment by the
successor Trustee under this Section 7.08.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If an instrument of
acceptance by a successor Trustee shall not have been
delivered to the Trustee within 30 calendar days after the
giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in principal amount of the
outstanding Notes, delivered to the Trustee and to the
Company. A successor Trustee may be appointed by Act of the
Holders with the Company's consent. If an instrument of
acceptance by a successor Trustee shall not have been
delivered to the Trustee within 30 calendar days after the
giving of notice of removal, the Trustee being removed may
petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 310(b)
of the Trust Indenture Act after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Note
for at least six months, unless the Trustee's duty to resign is
stayed in accordance with the provisions of Section 310(b) of the
Trust Indenture Act; or
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(ii) the Trustee shall cease to be eligible under Section
7.10 hereof and shall fail to resign after written request
therefor by the Company or by any such Holder; or
(iii) the Trustee shall become incapable of acting or a
decree or order for relief by a court having jurisdiction in the
premises shall have been entered in respect of the Trustee in an
involuntary case under any Bankruptcy Law; or a decree or order
by a court having jurisdiction in the premises shall have been
entered for the appointment of a receiver, custodian, liquidator,
assignee, trustee, sequestrator (or other similar official) of
the Trustee or of its Property or affairs, or any public officer
shall take charge or control of the Trustee or of its Property or
affairs for the purpose of rehabilitation, conservation, winding
up or liquidation; or
(iv) the Trustee shall commence a voluntary case under any
Bankruptcy Law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trustee
or its Property or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due, or shall take
corporate action in furtherance of any such action,
then, in any such case, (i) the Company by a Board Resolution
may remove the Trustee with respect to the Notes, or (ii) subject
to Section 6.10 hereof, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of such
Holder and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee for the Notes. If an
instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 calendar days after
the giving of notice of removal, the Trustee being removed may
petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the
office of Trustee for any cause, the Company, by or pursuant
to a Board Resolution, shall promptly appoint a successor
Trustee. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy,
a successor Trustee shall be appointed by the Holders of a
majority in principal amount of the outstanding Notes
delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with this
Section 7.08, become the successor Trustee and to that
extent replace any successor Trustee appointed by the
Company. If no successor Trustee shall have been so
appointed by the Company or the Holders and shall have
accepted appointment in the manner hereinafter provided, any
Holder that has been a bona fide Holder for at least six
months may, subject to Section 6.10 hereof, on behalf of
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himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a
successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such
resignation, removal and appointment by first class mail,
postage prepaid, to the Holders as their names and addresses
appear in the Note Register. Each notice shall include the
name of the successor Trustee with respect to the Notes and
the address of its Corporate Trust Office.
(g) In the event of an appointment hereunder of a
successor Trustee, each such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to
the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties
of the retiring Trustee but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee, and shall duly
assign, transfer and deliver to such successor Trustee all
Property and money held by such former Trustee hereunder,
subject to its Lien, if any, provided for in Section 7.07
hereof.
(h) Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully
and certainly vesting in and confirming to such successor
Trustee all such rights, powers and trusts referred to in
Section 7.08(g) hereof.
(i) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article VII and
under the Trust Indenture Act.
SECTION 7.09. Successor Trustee by Merger. Any
corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder; provided that
such corporation shall be otherwise qualified and eligible under
this Article VII and under the Trust Indenture Act, without the
execution or filing of any paper or any further act on the part
of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Notes so authenticated with the same effect as if such
successor Trustee had itself authenticated such Notes. In the
event that any Notes shall not have been authenticated by such
predecessor Trustee, any such successor Trustee may authenticate
and deliver such Notes, in either its own name or that of its
predecessor Trustee, with the full force and effect which this
Indenture provides for the certificate of authentication of the
Trustee.
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SECTION 7.10. Eligibility; Disqualification. There
shall at all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under
the laws of the United States of America, any State or
Territory thereof or the District of Columbia, authorized
under such laws to exercise corporate trust powers, and
subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority; or
(b) a corporation or other Person organized and doing
business under the laws of a foreign government that is
permitted to act as Trustee pursuant to a rule, regulation
or order of the Commission, authorized under such laws to
exercise corporate trust powers, and subject to supervision
or examination by authority of such foreign government or a
political subdivision thereof substantially equivalent to
supervision or examination applicable to United States
institutional trustees,
in either case having a combined capital and surplus of at
least $50,000,000.
(c) If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of
the aforesaid supervising or examining authority, then for
the purposes of this Section 7.10, the combined capital and
surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published. Neither the Company nor
any Guarantor, nor any Affiliate of the Company or any
Guarantor, shall serve as Trustee hereunder. If at any time
the Trustee shall cease to be eligible to serve as Trustee
hereunder pursuant to the provisions of this Section 7.10,
it shall resign immediately in the manner and with the
effect specified in this Article VII.
(d) If the Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b)
of the Trust Indenture Act, the Trustee and the Company
shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act. Nothing herein shall
prevent the Trustee from filing with the Commission the
application referred to in the penultimate paragraph of
Section 310(b) of the Trust Indenture Act.
SECTION 7.11. Preferential Collection of Claims
Against Company. The Trustee shall comply with Section 311(a) of
the Trust Indenture Act, excluding any creditor relationship
listed in Section 311(b) of the Trust Indenture Act. A Trustee
who has resigned or been removed shall be subject to Section
311(a) of the Trust Indenture Act to the extent indicated
therein.
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ARTICLE VIII
DEFEASANCE
SECTION 8.01. Company's Option to Effect Legal
Defeasance or Covenant Defeasance. The Company may elect, at its
option, at any time, to have Section 8.02 or Section 8.03 hereof
applied to the outstanding Notes (in whole and not in part) upon
compliance with the conditions set forth below in this Article
VIII. Such election shall be evidenced by a Board Resolution
delivered to the Trustee and shall specify whether the Notes are
being defeased to Stated Maturity or to a specified Redemption
Date determined in accordance with the terms of this Indenture
and the Notes.
SECTION 8.02. Legal Defeasance and Discharge. Upon
the Company's exercise under Section 8.01 hereof of its option to
have this Section 8.02 applied to the outstanding Notes (in whole
and not in part), the Company and the Guarantors shall be deemed
to have been discharged from their obligations with respect to
such Notes as provided in this Section 8.02 on and after the date
the conditions set forth in Section 8.04 hereof are satisfied
(hereinafter called "Legal Defeasance"). For this purpose, such
Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such
Notes, which shall thereafter be deemed to be "outstanding" only
for the purpose of Section 8.05 hereof and the other Sections of
this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Notes and this
Indenture insofar as such Notes are concerned (and the Trustee,
on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), subject to the
following which shall survive until otherwise terminated or
discharged hereunder:
(a) the rights of Holders of such Notes to receive,
solely from the trust fund described in Section 8.04 hereof
and as more fully set forth in such Section 8.04 payments in
respect of the principal of and any premium and interest on
such Notes when payments are due;
(b) the Company's obligations with respect to such
Notes under Sections 2.04, 2.06, 2.07, 2.09, 4.02, 4.03 and
4.04 hereof;
(c) the rights, powers, trusts, duties and immunities
of the Trustee under this Indenture and the Company's
obligations in connection therewith;
(d) Article III hereof; and
(e) this Article VIII.
Subject to compliance with this Article VIII, the
Company may exercise its option to have this Section 8.02 applied
to the outstanding Notes (in whole and not in part)
notwithstanding the prior exercise of its option to have Section
8.03 hereof applied to such Notes.
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SECTION 8.03. Covenant Defeasance. Upon the Company's
exercise under Section 8.01 hereof of its option to have this
Section 8.03 applied to the outstanding Notes (in whole and not
in part):
(a) the Company shall be released from its obligations
with respect to any covenants contained in Sections 4.05
through 4.16, inclusive, Section 5.01(c), and any covenant
added to this Indenture subsequent to the date of this
Indenture pursuant to Section 9.01 hereof;
(b) the occurrence of any event specified in Section
6.01(c) or Section 6.01(d) hereof, with respect to any of
Sections 4.05 through 4.16, inclusive, Section 5.01(c), and
any covenant added to this Indenture subsequent to the date
of this Indenture pursuant to Section 9.01 hereof, shall be
deemed not to be or result in an Event of Default, in each
case with respect to such Notes as provided in this Section
8.03 on and after the date the conditions set forth in
Section 8.04 hereof are satisfied (hereinafter called
"Covenant Defeasance"); and
(c) the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver,
consent, declaration or act of Holders (and the consequences
of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be
deemed outstanding for accounting purposes).
For this purpose, such Covenant Defeasance means that,
with respect to such Notes, the Company may omit to comply with
and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent
so specified in the case of Sections 6.01(c) and 6.01(d) hereof),
whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or by reason of any
reference in any such Section to any other provision herein or in
any other document; but the remainder of this Indenture and the
Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01 (e) and 6.01(f) hereof shall thereafter not
constitute Events of Default.
SECTION 8.04. Conditions to Legal Defeasance or
Covenant Defeasance. The following shall be the conditions to
the application of Section 8.02 or Section 8.03 hereof to the
outstanding Notes:
(a) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee as trust funds in
trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely
to the benefits of the Holders of Notes, (i) cash in United
States dollars, or (ii) noncallable United States Government
Obligations which through the scheduled payment of principal
and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due
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date of any payment, cash in United States dollars, or (iii)
a combination thereof, in each case sufficient, in the
opinion of a nationally recognized firm of independent
public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of,
premium, if any, and any installment of interest on such
Notes on the Stated Maturity thereof or applicable
Redemption Date, as the case may be, in accordance with the
terms of this Indenture and such Notes;
(b) In the event of an election to have Section 8.02
hereof apply to the outstanding Notes, the Company shall
have delivered to the Trustee an Opinion of Counsel stating
that (i) the Company 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 (i) or
(ii) to the effect that, and based thereon such opinion
shall confirm that, the Holders of Notes will not recognize
income, gain or loss for Federal income tax purposes as a
result of the deposit, Legal Defeasance and discharge to be
effected with respect to such Notes and will be subject to
Federal income tax on the same amounts, in the same manner
and at the same times as would be the case if such deposit,
Legal Defeasance and discharge were not to occur;
(c) In the event of an election to have Section 8.03
hereof apply to the outstanding Notes, the Company shall
have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of
the deposit and Covenant Defeasance to be effected with
respect to such Notes and will be subject to Federal income
tax on the same amounts, in the same manner and at the same
times as would be the case if such deposit and Covenant
Defeasance were not to occur;
(d) No Default or Event of Default with respect to the
outstanding Notes shall have occurred and be continuing at
the time of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied
to such deposit) after giving effect thereto or, with
respect to a Default or Event of Default specified in
Section 6.01(g) or Section 6.01(h), any time on or prior to
the 91st calendar day after the date of such deposit (it
being understood that this condition shall not be deemed
satisfied until after such 91st calendar day);
(e) Such Legal Defeasance or Covenant Defeasance shall
not cause the Trustee to have a conflicting interest within
the meaning of the Trust Indenture Act (assuming for the
purpose of this clause (e) that all Notes are in default
within the meaning of such Act);
(f) Such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a
default under, any material agreement or instrument to which
the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;
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(g) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders
over any other creditors of the Company or the Guarantors or
with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company, the
Guarantors or others;
(h) Such Legal Defeasance or Covenant Defeasance shall
not result in the trust arising from such deposit
constituting an investment company within the meaning of the
Investment Company Act of 1940, as amended, unless such
trust shall be registered under such Act or exempt from
registration thereunder; and
(i) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent with respect to such
Legal Defeasance or Covenant Defeasance have been complied
with.
SECTION 8.05. Deposited Money and U.S. Government
Obligations to be Held in Trust; Miscellaneous Provisions.
(a) All money and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee pursuant to
Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any
such Paying Agent as the Trustee may determine, to the
Holders of such Notes, of all sums due and to become due
thereon in respect of principal and any premium and
interest, but money so held in trust need not be segregated
from other funds except to the extent required by law. The
Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 8.04
hereof 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.
(b) Anything in this Article VIII to the contrary
notwithstanding, the Trustee shall deliver or pay to the
Company from time to time upon Company Order any money or
U.S. Government Obligations held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee,
are in excess of the amount thereof that would then be
required to be deposited to effect the Legal Defeasance or
Covenant Defeasance, as the case may be, with respect to the
outstanding Notes.
SECTION 8.06. Reinstatement. If the Trustee or
Paying Agent is unable to apply any money in accordance with this
Article VIII with respect to any Notes by reason of any order or
judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application then the
obligations under this Indenture and such Notes from which the
Company and the Guarantors have been discharged or released
pursuant to Section 8.02 or 8.03 hereof shall be revived and
reinstated as though no deposit had occurred pursuant to this
Article VIII with respect to such Notes, until such time as the
Trustee or Paying Agent is permitted to apply all money held in
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trust pursuant to Section 8.05 hereof with respect to such Notes
in accordance with this Article VIII; provided that if the
Company makes any payment of principal of or any premium or
interest on any such Note following such reinstatement of its
obligations, the Company shall be subrogated to the rights (if
any) of the Holders of such Notes to receive such payment from
the money so held in trust.
ARTICLE IX
AMENDMENTS
SECTION 9.01. Without Consent of Holders. The
Company, the Guarantors and the Trustee may, at any time, and
from time to time, without notice to or consent of any Holders,
enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company
and the assumption by such successor of the covenants of the
Company herein and contained in the Notes; or
(b) to add to the covenants of the Company for the benefit of
the Holders of the Notes or to surrender any right or power
herein conferred upon the Company; or
(c) to add any additional Events of Default; or
(d) to provide for uncertificated Notes in addition to or in
place of Certificated Notes; or
(e) to evidence and provide for the acceptance of appointment
hereunder of a successor Trustee; or
(f) to secure the Notes; or
(g) to cure any ambiguity herein, or to correct or supplement
any provision hereof which may be inconsistent with any other
provision hereof, or to add any other provisions with respect to
matters or questions arising under this Indenture; provided that
such actions shall not adversely affect the interests of the
Holders of Notes in any material respect; or
(h) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under
the Trust Indenture Act; or
(i) to evidence the agreement or acknowledgment of a Material
Domestic Subsidiary formed or acquired (and each other Person
that becomes a Material Domestic Subsidiary) after the date of
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this Indenture that is not otherwise prohibited from doing so
that it is Guarantor for all purposes under this Indenture
(including, without limitation, Article X hereof).
SECTION 9.02. With Consent of Holders. (a) With the consent
of the Holders of not less than a majority in principal amount of
the outstanding Notes (which consent may, but need not, be given in
connection with any tender offer or exchange offer for the Notes), by
Act of said Holders delivered to the Company and the Trustee, the
Company, the Guarantors and the Trustee may enter into one or more
indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights
of the Holders (including Section 4.07 and Section 4.08 hereof);
provided that no such supplemental indenture shall, without the
consent of the Holder of each outstanding Note:
(i) reduce the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver; or
(ii) reduce the principal of or premium on or change the
Stated Maturity of any Note or alter or waive any of the
provisions with respect to the redemption of the Notes, except as
provided above with respect to Sections 4.07 and 4.08 hereof; or
(iii) reduce the rate of or change the time for payment of
interest, including Defaulted Interest, on any Note; or
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest if any, on any Note
(except a rescission of acceleration of the Notes by the Holders
of at least a majority in aggregate principal amount of the then
outstanding Notes and a waiver of the payment default that
resulted from such acceleration); or
(v) make any Note payable in money other than that stated
in the Notes; or
(vi) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of, premium, if any, or
interest on the Notes; or
(vii) waive a redemption payment with respect to any Note
(other than a payment required by Section 4.07 or Section 4.08
hereof); or
(viii) modify the ranking or priority of the Notes or the
Guarantees of any Guarantor; or
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(ix) release any Guarantor from any of its obligations under
its Guarantee or this Indenture other than in accordance with the
terms of this Indenture; or
(x) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
(b) It shall not be necessary for any Act of Holders
under this Section 9.02 to approve the particular form of
any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
(c) After an amendment or supplement under this
Section or a waiver under Section 6.04 becomes effective,
the Company shall mail to the Holders of Notes a notice
briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the
validity of any such amended or supplemental Indenture or
waiver.
SECTION 9.03. Effect of Supplemental Indentures. Upon
the execution of any supplemental indenture under this Article
IX, this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture
for all purposes; and every Holder of Notes theretofore or
thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.04. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall comply with the Trust Indenture Act as then in effect.
SECTION 9.05. Revocation and Effect of Consents and
Waivers. (a) A consent to an amendment, supplement or a
waiver by a Holder of a Note shall bind the Holder and every
subsequent Holder of such Note or portion of such Note that
evidences the same debt as the consenting Holder's Note,
even if notation of the consent or waiver is not made on
such Note; provided that any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's
Note or portion of such Note if the Trustee receives the
notice of revocation before the date the amendment,
supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective pursuant to this
Article IX, it shall bind every Holder.
(b) The Company may, but shall not be obligated to,
fix a record date for the purpose of determining the Holders
entitled to give their consent or take any other action
described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then
notwithstanding 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 give such consent or to revoke any consent
previously given or to take any such action, whether or not
such Persons continue to be Holders after such record date.
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No such consent shall be valid or effective for more than
120 calendar days after such record date.
SECTION 9.06. Notation on or Exchange of Notes. If a
supplemental indenture changes the terms of a Note, the Trustee
may require the Holder thereof to deliver such Note to the
Trustee. The Trustee may place an appropriate notation on such
Note regarding the changed terms and return it to the Holder.
Alternatively, if the Company or the Trustee so determines, the
Company in exchange for such Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment or supplement.
SECTION 9.07. Trustee to Execute Supplemental
Indentures. The Trustee shall execute any supplemental indenture
authorized pursuant to this Article IX if such supplemental
indenture does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee
may, but shall not be required to, execute such supplemental
indenture. In executing any supplemental indenture, the Trustee
shall be entitled to receive indemnity reasonably satisfactory to
it and to receive, and (subject to Section 7.01 hereof) shall be
fully protected in relying upon, an Officers' Certificate (which
need only cover the matters set forth in clause (a) below) and an
Opinion of Counsel provided by the Company stating that:
(a) such supplemental indenture is authorized or
permitted by this Indenture and that all conditions
precedent to the execution, delivery and performance of such
supplemental indenture have been satisfied;
(b) the Company and each Guarantor have all necessary
corporate power and authority to execute and deliver the
supplemental indenture and that the execution, delivery and
performance of such supplemental indenture have been duly
authorized by all necessary corporate action of the Company
and each Guarantor;
(c) the execution, delivery and performance of the
supplemental indenture do not conflict with, or result in
the breach of or constitute a default under any of the
terms, conditions or provisions of (i) this Indenture, (ii)
the charter documents and By-Laws of the Company or any
Guarantor, or (iii) any material agreement or instrument to
which the Company or any Guarantor is subject;
(d) to the best knowledge and belief of legal counsel
writing such Opinion of Counsel, the execution, delivery and
performance of the supplemental indenture do not conflict
with, or result in the breach of any of the terms,
conditions or provisions of (i) any law or regulation
applicable to the Company or any Guarantor, or (ii) any
material order, writ, injunction or decree of any court or
governmental instrumentality applicable to the Company or
any Guarantor;
(e) such supplemental indenture has been duly and
validly executed and delivered by the Company and each
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Guarantor, and this Indenture together with such
supplemental indenture constitutes a legal, valid and
binding obligation of the Company and each Guarantor
enforceable against the Company and each Guarantor in
accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights
generally and general equitable principles; and
(f) this Indenture together with such amendment or
supplement complies with the Trust Indenture Act.
ARTICLE X
GUARANTEES
SECTION 10.01. Guarantees. (a) Subject to the provisions of
this Article X, each Guarantor, jointly and severally, hereby
irrevocably and unconditionally Guarantees to each Holder of Notes
and to the Trustee on behalf of the Holders (i) the due and punctual
payment of principal of, premium, if any, and interest in full on
each Note when and as the same shall become due and payable whether
at Stated Maturity, by declaration of acceleration, in connection
with a Change of Control Offer, Asset Sale Offer or redemption, or
otherwise, (ii) the due and punctual payment of interest on the
overdue principal of, premium, if any, and interest in full on the
Notes, to the extent permitted by law, and (iii) the due and punctual
performance of all other Obligations of the Company and the other
Guarantors to the Holders or the Trustee, including without limitation
the payment of fees, expenses, indemnification or other amounts, all
in accordance with the terms of the Notes and this Indenture. In
case of the failure of the Company punctually to make any such
principal or interest payment or the failure of the Company or any
other Guarantor to perform any such other Obligation, each Guarantor
hereby agrees to cause any such payment to be made punctually when
and as the same shall become due and payable, whether at Stated
Maturity, by declaration of acceleration, in connection with a
Change of Control Offer, Asset Sale Offer or redemption, or
otherwise, and as if such payment were made by the Company and to
perform any such other Obligation of the Company immediately. Each
Guarantor hereby further agrees to pay any and all expenses
(including reasonable counsel fees and expenses) incurred by the
Trustee or the Holders in enforcing any rights under these
Guarantees. The Guarantees under this Article X are guarantees of
payment and not of collection.
(b) Each of the Company and the Guarantors hereby
waives diligence, presentment, demand of payment, filing of
claims with a court in the event of merger, insolvency or
bankruptcy of the Company or any other Guarantor, any right to
require a proceeding first against the Company or any other
Guarantor, protest or notice with respect to the Notes or the
Indebtedness evidenced thereby and all demands whatsoever, and
covenants that these Guarantees will not be discharged except by
complete performance of the Obligations contained in the Notes
and in this Indenture, or as otherwise specifically provided
therein and herein.
(c) Each Guarantor hereby waives and relinquishes:
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(i) any right to require the Trustee, the Holders or
the Company (each, a "Benefited Party") to proceed against the
Company, the Subsidiaries of the Company or any other Person or to
proceed against or exhaust any security held by a Benefited Party
at any time or to pursue any other remedy in any secured party's
power before proceeding against the Guarantors;
(ii) any defense that may arise by reason of the incapacity,
lack of authority, death or disability of any other Person or
Persons or the failure of a Benefited Party to file or enforce a
claim against the estate (in administration, bankruptcy or any
other proceeding) of any other Person or Persons;
(iii) demand, protest and notice of any kind (except as
expressly required by this Indenture), including but not limited
to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-
action on the part of the Guarantors, the Company, the
Subsidiaries of the Company, any Benefited Party, any creditor of
the Guarantors, the Company or the Subsidiaries of the Company or
on the part of any other Person whomsoever in connection with any
obligations the performance of which are hereby guaranteed;
(iv) any defense based upon an election of remedies by a
Benefited Party, including but not limited to an election to
proceed against the Guarantors for reimbursement;
(v) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger
in amount nor in other respects more burdensome than that of the
principal;
(vi) any defense arising because of a Benefited Party's
election, in any proceeding instituted under the Bankruptcy Law,
of the application of Section 1111(b)(2) of the Bankruptcy Law;
and
(vii) any defense based on any borrowing or grant of a
security interest under Section 364 of the Bankruptcy Law.
(d) Each Guarantor further agrees that, as between
such Guarantor, on the one hand, and Holders and the Trustee, on
the other hand, (i) for purposes of the relevant Guarantee, the
maturity of the Obligations Guaranteed by such Guarantee may be
accelerated as provided in Article VI, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed thereby, and (ii) in the
event of any acceleration of such Obligations (whether or not due
and payable) such Obligations shall forthwith become due and
payable by such Guarantor for purposes of such Guarantee.
(e) The Guarantees shall continue to be effective or
shall be reinstated, as the case may be, if at any time any
payment, or any part thereof, of principal of, premium, if any,
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or interest on any of the Notes is rescinded or must otherwise be
returned by the Holders or the Trustee upon the insolvency,
bankruptcy or reorganization of the Company or any of the
Guarantors, all as though such payment had not been made.
(f) Each Guarantor shall be subrogated to all rights
of the Holders against the Company in respect of any amounts paid
by such Guarantor pursuant to the provisions of the Guarantees or
this Indenture; provided, however, that a Guarantor shall not be
entitled to enforce or to receive any payments until the
principal of, premium, if any, and interest on all Notes issued
hereunder shall have been paid in full.
(g) Each Guarantor specifically designates the
relevant Guarantee as Indebtedness of such Guarantor for purposes
of this Indenture.
SECTION 10.02 Obligations of Guarantors Unconditional.
Each Guarantor hereby agrees that its Obligations hereunder shall
be Guarantees of payment and shall be unconditional, irrespective
of and unaffected by the validity, regularity or enforceability
of the Notes or this Indenture, or of any amendment thereto or
hereto, the absence of any action to enforce the same, the waiver
or consent by any Holder or by the Trustee with respect to any
provisions thereof or of this Indenture, the entry of any
judgment against the Company or any other Guarantor or any action
to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of
a guarantor.
SECTION 10.03. Limitation on Guarantors' Liability.
Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the
Guarantee by such Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of
the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state
law. To effectuate the foregoing intention, the Holders and such
Guarantor hereby irrevocable agree that the Obligations of such
Guarantor under this Article X shall be limited to the maximum
amount as will, 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 this Article X, result in the Obligations of such
Guarantor under its Guarantee not constituting a fraudulent
transfer or conveyance under applicable federal or state law.
SECTION 10.04. Releases of Guarantees. (a) If the Notes
are defeased in accordance with the terms of Article VIII of
this Indenture, then each Guarantor shall be deemed to have
been released from and discharged of its obligations under its
Guarantee as provided in Article VIII hereof, subject to the
conditions stated therein.
(b) If more than 50% of the Capital Stock or consolidated
assets of Florimex or all or substantially all of the assets or
all of the Capital Stock of any Guarantor (other than DIMON
International) is sold (including by issuance or otherwise) by
the Company or any of its Subsidiaries in one transaction or in
a series of related transactions, and if (i) such Guarantor is
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released from its obligations under its guarantee of the Company's
obligations under the New Credit Facility and (ii)(x) the Net
Proceeds from such Asset Sale are applied in accordance with the
provisions of Section 4.08 hereof or (y) the Company
delivers to the Trustee an Officers' Certificate to the
effect that the Net Proceeds from such Asset Sales shall be
used in accordance with the provisions of Section 4.08
hereof within the time limits specified in Section 4.08(b)
hereof, then such Guarantor shall be released from and
discharged of its obligations under its Guarantee.
(c) Upon delivery by the Company to the Trustee of an
Officers' Certificate and Opinion of Counsel, and to the
effect that such sale or other disposition was made by the
Company in accordance with the provisions of this Indenture,
including without limitation Section 4.08 hereof, the
Trustee shall execute any documents reasonably required in
order to evidence the release of any such Guarantor from its
obligations under its Guarantee.
(d) Any Guarantor not released from its obligations
under its Guarantee shall remain liable for the full amount
of principal of, premium, if any, and interest on the Notes
and for the other obligations of the Company, such Guarantor
and any other Guarantor under this Indenture as provided in
this Article X.
SECTION 10.05. Application of Certain Terms and
Provisions to Guarantors. (a) For purposes of any provision of
this Indenture which provides for the delivery by any Guarantor
of an Officers' Certificate or an Opinion of Counsel or both, the
definitions of such terms in Section 1.01 shall apply to such
Guarantor as if references therein to the Company were references
to such Guarantor.
(b) Any request, direction, order or demand which by
any provision of this Indenture is to be made by any
Guarantor shall be sufficient if evidenced by a Company
Order; provided that the definition of such term in Section
1.01 hereof shall apply to such Guarantor as if references
therein to the Company were references to such Guarantor.
(c) Any notice or demand which by any provision of
this Indenture is required or permitted to be given or
served by the Trustee or by the Holders of Notes to or on
any Guarantor may be given or served as described in Section
11.02 hereof.
(d) Upon any demand, request or application by any
Guarantor to the Trustee to take any action under this
Indenture, such Guarantor shall furnish to the Trustee such
certificates and opinions as are required in Section 11.04
hereof as if all references therein to the Company were
references to such Guarantor.
SECTION 10.06. Additional Guarantors. The Company
shall cause each Material Domestic Subsidiary, whether
formed or acquired (and each other Person that becomes a
Material Domestic Subsidiary) after the date of this
Indenture, to execute and deliver to the Trustee, promptly
upon any such formation or acquisition (a) a supplemental
indenture in form and substance satisfactory to the Trustee
which subjects such Material Domestic Subsidiary to the
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provisions of this Indenture as a Guarantor, and (b) an
Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such
Material Domestic Subsidiary and constitutes the legal,
valid, binding and enforceable obligation of such Material
Domestic Subsidiary (subject to such customary exceptions
concerning fraudulent conveyance laws, creditors' rights and
equitable principles as may be acceptable to the Trustee in
its discretion), provided, that any Material Domestic
Subsidiary acquired after the date of this Indenture which
is prohibited from entering into a Guarantee pursuant to
restrictions contained in any debt instrument or other
agreement in existence at the time such Material Domestic
Subsidiary was so acquired and not entered into in
anticipation or contemplation of such acquisition shall not
be required to comply with the foregoing provisions of this
Section so long as any such restriction is in existence and
to the extent of any such restriction.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls. If and
to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by, or with
another provision (an "incorporated provision") included in this
Indenture by operation of, Sections 310 to 318, inclusive, of the
Trust Indenture Act, such imposed duties or incorporated
provision shall control.
SECTION 11.02. Notices. (a) Any notice or
communication shall be in writing and delivered in person or
mailed by first class mail, postage prepaid, addressed as
follows: if to the Company or to any Guarantor: DIMON
Incorporated, 512 Bridge Street, P.O. Box 681, Danville,
Virginia 24543-0681, Attention: Claude B. Owen, Jr. or
James A. Cooley; if to the Trustee: Crestar Bank, 919 East
Main Street, Richmond, Virginia, 23219, Attention:
Corporate Trust Trustee Administration.
(b) The Company or the Trustee, by notice to the
other, may designate additional or different addresses for
subsequent notices or communications. Any notice or
communication mailed to a Holder shall be sent to the Holder
by first class mail, postage prepaid, at the Holder's
address as it appears in the Note Register and shall be duly
given if so sent 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 to the
Company, the Trustee or a Holder in the manner provided
above, it is duly given, whether or not the addressee
receives it. In case by reason of the suspension of regular
mail service or by reason of any other cause it shall be
impracticable to give notice by mail to Holders, then such
notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for every
purpose hereunder.
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(c) Any notice or communication delivered to the
Company under the provisions herein shall constitute notice
to the Guarantors.
SECTION 11.03. Certificate and Opinion as to
Conditions Precedent. Upon any request or application by the
Company to the Trustee to take or refrain from taking any action
under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied
with; and (b) an Opinion of Counsel stating that, in the opinion
of such counsel, all such conditions precedent have been complied
with.
SECTION 11.04. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a covenant or condition provided for in this Indenture
(other than pursuant to Section 4.18 hereof) shall include: (a) a
statement that the individual making such certificate or opinion
has read such covenant or condition; (b) 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; (c) a statement that, in the opinion of such
individual, such person has made such examination or
investigation as is necessary to enable such person to express an
informed opinion as to whether or not such covenant or condition
has been complied with; and (d) a statement as to whether or not,
in the opinion of such individual, such covenant or condition has
been complied with.
SECTION 11.05. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules for action by
or a meeting of Holders, and any Registrar and Paying Agent may
make reasonable rules for their functions; provided that no such
rule shall conflict with terms of this Indenture or the Trust
Indenture Act.
SECTION 11.06. Payments on Business Days. If a
payment hereunder is scheduled to be made on a date that is not a
Business Day, payment shall be made on the next succeeding day
that is a Business Day, and no interest shall accrue with respect
to that payment during the intervening period. If a regular
record date is a date that is not a Business Day, such record
date shall not be affected.
SECTION 11.07. Governing Law. THIS INDENTURE AND THE
NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN SAID STATE.
SECTION 11.08. No Recourse Against Others. No
director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of
the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or
their creation, solely by reason of its status as a director,
officer, employee, incorporator or stockholder of the Company.
No director, officer, employee, incorporator or stockholder of
any Guarantor, as such, shall have any liability for any
85 - 173 -
<PAGE>
obligations of any Guarantor under the Guarantees or this
Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation, solely by reason of its
status as a director, officer, employee, incorporator or
stockholder of any Guarantor. By accepting a Note, each Holder
waives and releases all such liability (but only such liability)
as part of the consideration for issuance of such Note to such
Holder.
SECTION 11.09. Successors. All agreements of the
Company in this Indenture and the Notes shall bind its successors
and assigns whether so expressed or not. All agreements of any
Guarantor under this Indenture shall bind its successors and
assigns whether so expressed or not. All agreements of the
Trustee in this Indenture shall bind its successors and assigns
whether so expressed or not.
SECTION 11.10. Counterparts. This Indenture may be
executed in any number of counterparts and by the parties thereto
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.
SECTION 11.11. Table of Contents; Headings. The table
of contents, cross-reference table and headings of the Articles
and Sections of this Indenture have been inserted for convenience
of reference only, are not intended to be considered a part
hereof and shall not modify or restrict any of the terms or
provisions hereof.
SECTION 11.12. Severability. In case any provision in
this Indenture or in the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.13. Further Instruments and Acts. Upon
request of the Trustee, the Company and each Guarantor will
execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above
written.
DIMON INCORPORATED,
as Issuer
By /s/ James A. Cooley
Name: James A. Cooley
Title: Vice President and
Treasurer
DIMON INTERNATIONAL, INC.,
as Guarantor
By /s/ James A. Cooley
Name: James A. Cooley
Title: Treasurer
FLORIMEX WORLDWIDE, INC.,
as Guarantor
By /s/ James A. Cooley
Name: James A. Cooley
Title: Vice President
CRESTAR BANK,
as Trustee
By
Name:
Title:
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SCHEDULE A
Non-Wholly Owned Subsidiaries
COMMONWEALTH OF VIRGINIA )
) SS.:
CITY OF RICHMOND )
On the 29th day of May, 1996, before me personally came
James A. Cooley, to me known, who, being by me duly sworn, did
depose and say that he is Vice President and Treasurer of DIMON
Incorporated, one of the corporations described in and which
executed the foregoing instrument, and that he signed his name
thereto by authority of the Board of Directors of said
corporation.
Notary Public
State of
My commission expires
/ /
[Seal]
COMMONWEALTH OF VIRGINIA )
) SS.:
CITY OF RICHMOND )
On the 29th day of May, 1996, before me personally came James A.
Cooley, to me known, who, being by me duly sworn, did depose and
say that he is Treasurer of DIMON International, Inc., one of the
corporations described in and which executed the foregoing
instrument, and that he signed his name thereto by authority of
the Board of Directors of said corporation.
Notary Public
State of
My commission expires
/ /
[Seal]
88 - 176 -
<PAGE>
COMMONWEALTH OF VIRGINIA )
) SS.:
CITY OF RICHMOND )
On the 29th day of May, 1996, before me personally came James A.
Cooley, to me known, who, being by me duly sworn, did depose and
say that he is Vice President of Florimex Worldwide, Inc., one of
the corporations described in and which executed the foregoing
instrument, and that he signed his name thereto by authority of
the Board of Directors of said corporation.
Notary Public
State of
My commission expires
/ /
[Seal]
COMMONWEALTH OF VIRGINIA )
) SS.:
CITY OF RICHMOND )
On the 29th day of May, 1996, before me personally came
_____________, to me known, who, being by me duly sworn, did
depose and say that he is _____________ of Crestar Bank, one of
the corporations described in and which executed the foregoing
instrument, and that he signed his name thereto by authority of
the Board of Directors of said corporation.
Notary Public
State of
My commission expires
/ /
[Seal]
89 - 177 -
<PAGE>
EXHIBIT A
FORM OF GLOBAL NOTE
FORM OF FACE OF GLOBAL NOTE
DIMON INCORPORATED
No. CUSIP No. 254394 AB 5
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO DIMON
INCORPORATED OR THE REGISTRAR FOR REGISTRATION OF TRANSFER
OR EXCHANGE AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER ENTITY AS HAS BEEN REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS HAS BEEN REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, AND NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF INTERESTS IN THIS NOTE SHALL BE
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LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE
DATED AS OF MAY 29, 1996 AMONG DIMON, AS ISSUER, DIMON
INTERNATIONAL, INC. AND FLORIMEX WORLDWIDE, INC., AS
GUARANTORS, AND1 THE TRUSTEE NAMED THEREIN PURSUANT TO WHICH
THIS NOTE WAS ISSUED.
GLOBAL NOTE
REPRESENTING 8 7/8% SENIOR NOTES DUE 2006
DIMON Incorporated, a Virginia corporation, for value
received, hereby promises to pay to CEDE & CO., or its registered
assigns, the principal sum indicated on Schedule A hereof, on
June 1, 2006.
Interest Payment Dates: June 1 and December 1,
commencing December 1, 1996.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been duly executed by the Trustee referred to on the reverse
hereof by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any
purposes.
IN WITNESS WHEREOF, DIMON Incorporated has caused this
Note to be duly executed under its corporate seal.
Dated:
DIMON INCORPORATED
By: /s/ James A. Cooley
__________________________________________
Name:
Title:
[Corporate Seal]
Attest:
____________________________
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TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CRESTAR BANK,
as Trustee, certifies that this Note is one of
the Notes referred to in the Indenture.
By:
Authorized Signatory
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FORM OF REVERSE SIDE OF GLOBAL NOTE
DIMON INCORPORATED
GLOBAL NOTE
REPRESENTING 8 7/8% SENIOR NOTES DUE 2006
1. Indenture.
This Note is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "8
7/8% Senior Notes due 2006" (the "Notes") limited in aggregate
principal amount to $125,000,000 issued under an indenture dated
as of May 29, 1996 (as amended or supplemented from time to time,
the "Indenture") among the Company, as issuer, DIMON
International, Inc. and Florimex Worldwide, Inc., as guarantors
(collectively, and, together with any future or successor
Guarantors under the Indenture, the "Guarantors"), and Crestar
Bank, as trustee (the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture
reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder
of the Company, the Guarantors, the Trustee and each Holder of
Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The summary of the terms of this
Note contained herein does not purport to be complete and is
qualified by reference to the Indenture. To the extent permitted
by applicable law, in the event of any inconsistency between the
terms of this Note and the terms of the Indenture, the terms of
the Indenture shall control. All capitalized terms used in this
Note which are not defined herein shall have the meanings
assigned to them in the Indenture.
The Indenture contains certain covenants that, among
other things, limit the ability of the Company and the
Subsidiaries to incur additional indebtedness, pay dividends or
make certain other restricted payments, issue preferred stock,
incur liens to secure indebtedness of the Company and the
Guarantors, enter into certain sale and leaseback transactions,
apply net proceeds from certain asset sales, merge with or into
any other person, transfer or issue shares of capital stock of
Subsidiaries to third parties, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the
assets of the Company and the Subsidiaries, or enter into certain
transactions with affiliates.
2. Principal and Interest.
DIMON Incorporated, a Virginia corporation (such
corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called "the Company"),
promises to pay the principal amount set forth on Schedule A of
this Note to the Holder hereof on June 1, 2006.
The Company shall pay interest on this Note at a rate
of 8 7/8% per annum, from the date of issuance or from the most
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recent Interest Payment Date thereafter to which interest has
been paid or duly provided for, semiannually in arrears on June 1
and December 1 of each year, commencing on December 1, 1996 in
cash, to the Holder hereof until the principal amount hereof is
paid or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
Date will, subject to certain exceptions provided in the
Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued)
is registered at the close of business on the Record Date for
interest payable on such Interest Payment Date. The Record Date
for any interest payment is the close of business on May 15 or
November 15, as the case may be, whether or not a Business Day,
immediately preceding the Interest Payment Date on which such
interest is payable. Any such interest not so punctually paid or
duly provided for ("Defaulted Interest") shall forthwith cease to
be payable to the Holder on such Record Date and shall be paid as
provided in Section 2.11 of the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Each payment of interest in respect of an Interest
Payment Date will include interest accrued through the day before
such Interest Payment Date. If an Interest Payment Date falls on
a day that is not a Business Day, the interest payment to be made
on such Interest Payment Date will be made on the next succeeding
Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as
a result of such delayed payment.
To the extent lawful, the Company shall pay interest on
(i) any overdue principal of (and premium, if any, on) this Note,
at the interest rate borne on this Note plus 1.00% per annum, and
(ii) Defaulted Interest (without regard to any applicable grace
period), at the same rate. The Company's obligation pursuant to
the previous sentence shall apply whether such overdue amount is
due at its Stated Maturity, as a result of the Company's
obligations pursuant to Section 3.05, Section 4.07 or Section
4.08 of the Indenture, or otherwise.
3. Method of Payment.
The Company, through the Paying Agent, shall pay
interest on this Note to the registered Holder of this Note, as
provided above. The Holder must surrender this Note to a Paying
Agent to collect principal payments. The Company will pay
principal, premium, if any, and interest in money of the United
States of America that at the time of payment is legal tender for
payment of all debts, public and private. Principal, premium, if
any, and interest shall be paid by check mailed to the registered
Holders of Notes at their registered addresses; provided that all
payments with respect to Notes the Holders of which have given
wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof.
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4. Registrar and Paying Agent.
Initially, the Trustee will act as Registrar and Paying
Agent under the Indenture. The Company may, upon written notice
to the Trustee, appoint and change any Registrar or Paying Agent.
If the Company or any of its Affiliates acts as Paying Agent, the
Company or such Affiliate shall segregate the funds held by it as
Paying Agent and hold them in trust for the benefit of the
Holders of Notes or the Trustee.
5. Guarantees.
This Note is entitled to the benefits of the
Guarantees made by DIMON International, Inc. and Florimex
Worldwide, Inc. and may thereafter be entitled to Guarantees made
by other Guarantors for the benefit of the Holders of Notes.
Each initial Guarantor has guaranteed, and each future Guarantor
will guarantee, irrevocably and unconditionally, jointly and
severally, the punctual payment when due, whether at Stated
Maturity, by acceleration, in connection with a Change of Control
Offer, an Asset Sale Offer or redemption, or otherwise, of all
Obligations of the Company under the Indenture and this Note,
whether for payment of principal of, premium, if any, or interest
on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from the relevant Guarantee upon the
terms and subject to the conditions set forth in the Indenture.
6. Optional Redemption.
The Notes may not be redeemed at the option of the
Company prior to June 1, 2001. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or
in part, upon not less than 30 calendar days' nor more than 60
calendar days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued
and unpaid interest thereon to the applicable Redemption Date
(subject to the right of each Holder of record on the relevant
Record Date to receive interest due on the relevant Interest
Payment Date), if redeemed during the twelve-month period
beginning June 1 of the years indicated below:
Year Percentage
2001 104.4375%
2002 102.9583%
2003 101.4791%
2004 100.0000%
7. No Mandatory Redemption.
The Notes are not subject to any sinking fund or
mandatory redemption.
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8. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar
days before a Redemption Date, the Company shall send, or cause
to be sent, by first-class mail, postage prepaid, a notice
prepared by the Company describing the redemption to each Holder
of Notes to be redeemed at the addresses of such Holders as they
appear in the Note Register.
If less than all of the Notes are to be redeemed at any
time, the Trustee shall select the Notes to be redeemed in
compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed, or,
if such Notes are not listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate. If
any Note is redeemed subsequent to a Record Date with respect to
any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on
such Interest Payment Date to the Holder of the Note on such
Record Date. If money in an amount sufficient to pay the
Redemption Price of all Notes (or portions thereof) to be
redeemed on the Redemption Date is deposited with the Paying
Agent on or before the applicable Redemption Date and certain
other conditions are satisfied, interest on the Notes or portions
thereof to be redeemed on the applicable Redemption Date will
cease to accrue.
9. Repurchase at the Option of Holders upon Change of
Control.
Upon the occurrence of a Change of Control, each Holder
of Notes shall have the right to require the Company to purchase
such Holder's Notes, in whole or in part, in a principal amount
that is an integral multiple of $1,000, pursuant to a Change of
Control Offer, at a purchase price in cash equal to 101% of the
principal amount of such Notes (or portions thereof) to be
redeemed plus accrued and unpaid interest thereon to the Change
of Control Payment Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date).
Within 30 calendar days after the date of any Change of
Control, the Company shall send, or cause to be sent, by first-
class mail, postage prepaid, a notice prepared by the Company
describing the Change of Control Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion
hereof in an authorized denomination purchased by completing the
form entitled "Option of Holder to Elect Purchase" appearing
below and tendering this Note pursuant to the Change of Control
Offer. Unless the Company defaults in the payment of the Change
of Control Purchase Price with respect thereto, Notes or portions
thereof accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest from and after the Change of
Control Payment Date.
10. Repurchase at the Option of Holders upon Asset Sales.
If at any time the Company or any Subsidiary of the
Company engages in any Asset Sales, as a result of which the
aggregate amount of Excess Proceeds exceeds $10.0 million, the
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Company shall make an offer to all Holders of Notes then
outstanding to purchase, on a pro rata basis, the principal
amount of Notes equal in amount to the Excess Proceeds (and not
just the amount thereof that exceeds $10.0 million), at a
purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest
thereon to the Asset Sale Payment Date (subject to the right of
each Holder of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date). Upon
completion of an Asset Sale Offer (including payment of the Asset
Sale Purchase Price for accepted Notes), any surplus Excess
Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for
general corporate purposes (subject to other provisions of the
Indenture).
Within 30 calendar days after the date the amount of
Excess Proceeds exceeds $10.0 million, the Company shall send, or
cause to be sent, to each Holder of Notes, by first-class mail,
postage prepaid, a notice prepared by the Company describing the
Asset Sale Offer. The Holder of this Note may elect to have this
Note or a portion hereof in an authorized denomination purchased
by completing the form entitled "Option of Holder to Elect
Purchase" appearing below and tendering this Note pursuant to the
Asset Sale Offer. Unless the Company defaults in the payment of
the Asset Sale Purchase Price with respect thereto, all Notes or
portions thereof accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest from and after the Asset
Sale Payment Date.
"Excess Proceeds" are defined in Section 4.08 of the
Indenture to be Net Proceeds from Asset Sales (other than Exempt
Asset Sales) not utilized for certain purposes within 270 days of
consummation of an Asset Sale. "Exempt Asset Sales" are also
defined in the Indenture and include, among other things, an
Asset Sale (i) the Net Proceeds of which plus the Net Proceeds of
all other Asset sales concurrently or previously made on or after
the date of the Indenture do not exceed $25.0 million and (ii)
the Net Proceeds of which plus the Net Proceeds of all other
Asset Sales concurrently or previously made in the same fiscal
year do not exceed $10.0 million.
11. The Global Note.
So long as this Global Note is registered in the name
of the Depositary or its nominee, members of, or participants in,
the Depositary ("Agent Members") shall have no rights under the
Indenture with respect to this Global Note held on their behalf
by the Depositary or the Trustee as its custodian, and the
Depositary may be treated by the Company, the Guarantors, the
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Trustee and any agent of the Company, the Guarantors or the
Trustee as the absolute owner of this Global Note for all
purposes. Notwithstanding the foregoing, nothing herein shall
(i) prevent the Company, the Guarantors, the Trustee or any agent
of the Company, the Guarantors or the Trustee, from giving effect
to any written certification, proxy or other authorization
furnished by the Depositary or (ii) impair, as between the
Depositary and its Agent Members, the operation of customary
practices governing the exercise of the rights of a Holder of
Notes.
The Holder of this Global Note may grant proxies and
otherwise authorize any Person, including Agent Members and
Persons that may hold interests in this Global Note through Agent
Members, to take any action which a Holder of Notes is entitled
to take under the Indenture or the Notes.
Whenever, as a result of optional redemption by the
Company, a Change of Control Offer, an Asset Sale Offer or an
exchange for Certificated Notes, this Global Note is redeemed,
repurchased or exchanged in part, this Global Note shall be
surrendered by the Holder thereof to the Trustee who shall cause
an adjustment to be made to Schedule A hereof so that the
principal amount of this Global Note will be equal to the portion
not redeemed, repurchased or exchanged and shall thereafter
return this Global Note to such Holder; provided that this Global
Note shall be in a principal amount of $1,000 or an integral
multiple of $1,000.
12. Transfer and Exchange.
The Holder of this Global Note shall, by acceptance of
this Global Note, agree that transfers of beneficial interests in
this Global Note may be effected only through a book entry system
maintained by such Holder (or its agent), and that ownership of a
beneficial interest in the Notes represented thereby shall be
required to be reflected in book entry form.
Transfers of this Global Note shall be limited to
transfers in whole and not in part, to the Depositary, its
successors, and their respective nominees. Interests of
beneficial owners in this Global Note shall be transferred in
accordance with the rules and procedures of the Depositary (or
its successors).
This Global Note shall be exchanged by the Company for
one or more Certificated Notes as specified in Section 2.06(a) of
the Indenture if (a) the Depositary (i) has notified the Company
that it is unwilling or unable to continue as, or ceases to be, a
clearing agency registered under Section 17A of the Exchange Act
and (ii) a successor to the Depositary registered as a clearing
agency under Section 17A of the Exchange Act is not able to be
appointed by the Company within 90 calendar days or (b) the
Depositary is at any time unwilling or unable to continue as
Depositary and a successor to the Depositary is not able to be
appointed by the Company within 90 calendar days. If an Event of
Default occurs and is continuing, the Company shall, at the
request of the Holder hereof, exchange all or part of this Global
Note for one or more Certificated Notes; provided that the
principal amount of each of such Certificated Notes and this
Global Note, after such exchange, shall be $1,000 or an integral
multiple thereof. Whenever this Global Note is exchanged as a
whole for one or more Certificated Notes, it shall be surrendered
by the Holder to the Trustee for cancellation. Whenever this
Global Note is exchanged in part for one or more Certificated
Notes, it shall be surrendered by the Holder to the Trustee and
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the Trustee shall make the appropriate notations hereon pursuant
to Section 2.05(c) of the Indenture. All Certificated Notes
issued in exchange for this Global Note or any portion hereof
shall be registered in such names, and delivered, as the
Depositary shall instruct the Trustee. Interests in this Global
Note may not be exchanged for Certificated Notes other than as
provided in this paragraph.
13. Denominations.
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof
of principal amount.
14. Unclaimed Money
If money for the payment of principal premium, if any,
or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to the Company at its
request unless an abandoned property law designates another
Person. After any such payment, Holders of Notes entitled to the
money must look only to the Company and not to the Trustee for
payment unless such abandoned property law designates another
Person.
15. Discharge and Defeasance.
Subject to certain conditions, the Company at any time
may terminate some or all of the obligations of the Company and
the Guarantors under the Notes and the Indenture if the Company
irrevocably deposits in trust with the Trustee cash or U.S.
Government Obligations for the payment of principal, premium, if
any, and interest on the Notes to redemption or maturity, as the
case may be.
16. Amendment, Waiver.
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Notes may be amended with the
written consent of the Holders of not less than a majority in
principal amount of the outstanding Notes (which consent may, but
need not, be given in connection with any tender offer or
exchange offer for Notes) and (ii) any past Default or Event of
Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount
of the outstanding Notes. Subject to certain exceptions set
forth in the Indenture, without the consent of any Holder of
Notes, the Company, the Guarantors and the Trustee may amend the
Indenture or the Notes, among other things, (i) to evidence the
succession of another Person to the Company and the assumption by
such successor of the covenants of the Company under the
Indenture and contained in the Notes; (ii) to add to the
covenants of the Company with respect to the Notes; (iii) to add
any additional Events of Default; (iv) to secure the Notes; (v)
to evidence and provide for the acceptance of appointment under
the Indenture of a successor Trustee; (vi) to cure any
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ambiguity in the Indenture or to correct or supplement any
provision in the Indenture which may be inconsistent with any
other provision therein or to add any other provision with
respect to matters or questions arising under the Indenture,
provided that such actions shall not adversely affect the
interests of the Holders of Notes in any material respect; (vii)
to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or (viii) to evidence the agreement or
acknowledgment of a Material Domestic Subsidiary formed or
acquired (and each Person that becomes a Material Domestic
Subsidiary) after the date of the Indenture that is not otherwise
prohibited from doing so that it is a Guarantor for all purposes
under the Indenture.
17. Defaults and Remedies.
Under the Indenture, Events of Default include: (i)
failure by the Company to make any payment of interest on any
Note when the same becomes due and payable, and such failure
continues for 30 calendar days; (ii) failure by the Company to
make any payment of principal of, or premium, if any, on any
Notes when the same becomes due and payable, whether upon Stated
Maturity, redemption, required purchase, or otherwise; (iii)
failure by the Company to observe or perform certain covenants,
conditions, agreements or other provisions of the Indenture or
this Note (and, in the case of certain covenants, conditions,
agreements or other provisions, such failure has continued for 30
calendar days after written notice by the Trustee or the Holders
of at least 25% in principal amount of the Notes); (iv) certain
Payment Defaults with respect to and accelerations of other
Indebtedness if the amount unpaid or accelerated exceeds $5.0
million; (v) certain events of bankruptcy or insolvency with
respect to the Company, any Material Domestic Subsidiary or any
Material Foreign Subsidiary; (vi) certain undischarged judgments
or orders for the payment of money in excess of $10.0 million; or
(vii) the Guarantee of any Guarantor being held in any judicial
proceeding to be unenforceable or invalid or ceasing for any
reason to be in full force and effect (other than in accordance
with the terms of the Indenture) or any Guarantor or any Person
acting on behalf of any Guarantor denying or disaffirming the
Guarantee of such Guarantor.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the
Notes, subject to certain limitations, may declare the unpaid
principal of and any accrued interest on all the outstanding
Notes to be immediately due and payable. Certain events of
bankruptcy or insolvency are Events of Default and shall result
in the Notes being immediately due and payable upon the
occurrence thereof without any further act of the Trustee or any
Holder.
Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may
refuse to enforce the Indenture or the Notes unless it receives
reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount of the
Notes may direct the Trustee in its exercise of any trust or
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power under the Indenture. The Holders of a majority in
principal amount of the outstanding Notes, by written notice to
the Company and the Trustee, may rescind any declaration of
acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events
of Default have been cured or waived except nonpayment of
principal, premium if any, or interest that has become due solely
because of acceleration. No such recission shall affect any
subsequent Default or impair any right consequent thereto.
18. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust
Indenture Act, the Trustee or any Paying Agent or Registrar, in
its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, the
Guarantors or its or their Affiliates with the same rights it
would have if it were not Trustee, Paying Agent or Registrar, as
the case may be, under the Indenture.
19. No Recourse Against Certain Others.
No director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such
Guarantor under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of, such
obligations or their creation, solely by reason of its status as
a director, officer, employee, incorporator or stockholder of the
Company or such Guarantor. By accepting a Note, each Holder
waives and releases all such liability (but only such liability)
as part of the consideration for issuance of such Note to such
Holder.
20. Authentication.
This Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of
authentication on the other side of this Note.
21. Abbreviations.
Customary abbreviations may be used in the name of a
Holder of Notes or an assignee, such as TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with rights of survivorship and not as tenants in
common), CUST (= custodian), and U/G/M/A (= Uniform Gift to
Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Notes and has
directed the Trustee to use CUSIP numbers in notices of
redemption as a convenience to Holders of Notes. No
representation is made as to the accuracy of such numbers either
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as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed thereon.
23. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Notes upon
written request and without charge to the Holder a copy of the
Indenture which has in it the text of this Note. Requests may be
made to:
DIMON Incorporated
512 Bridge Street
Post Office Box 681
Danville, VA 24543-0681
Att.: Secretary
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SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount at maturity of this Note shall be
$125,000,000. The following decreases/increase in the principal
amount in denominations of $1,000 or integral multiples thereof
at maturity of this Note have been made:
<TABLE>
<CAPTION>
Total Principal
Amount at Notation
Decrease in Increase in Maturity Made by
Date of Principal Principal Following such or on
Decrease/ Amount at Amount at Decrease/ Behalf of
Increase Matturity Maturity Increase Trustee
<S> <C> <C> <C> <C>
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
____________ ___________ ___________ _____________ _________
</TABLE>
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<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED ___________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- -------
BOX (FOR SOCIAL SECURITY NUMBER)
- -------
_______________________________________________________________
(Please print name and address of transferee)
_________________________________________________________________
this Note, together with all right, title and interest herein,
and does hereby irrevocably constitute and appoint
________________________________ Attorney to transfer this Note
on the Note Register, with full power of substitution.
Dated: _______________
________________________________ _______________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must
correspond to the Name as written upon the face of this Note in
every particular, without alteration or any change whatsoever.
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OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
__ In connection with the Change of Control Offer made pursuant
to Section 4.07 of the Indenture, the undersigned hereby
elects to have
__ the entire principal amount
__ $________________ ($1,000 in principal amount or an
integral multiple thereof)
of this Note repurchased by the Company. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
__________________________ an amount in cash equal to 101%
of the principal amount indicated in the preceding sentence
plus accrued and unpaid interest thereon, if any, to the
Change of Control Payment Date (subject to the right of the
Holder of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date).
__ In connection with the Asset Sale Offer made pursuant to
Section 4.08 of the Indenture, the undersigned hereby elects
to have
__ the entire principal amount
__ $________________ ($1,000 in principal amount or an
integral multiple thereof)
of this Note repurchased by the Company. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
__________________________ an amount in cash equal to 100%
of the principal amount indicated in the preceding sentence
plus accrued and unpaid interest thereon, if any, to the
Asset Sale Payment Date (subject to the right of the Holder
of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date).
Dated: _______________
________________________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing must correspond to the
Name as written upon the face of this Note in every particular,
without alteration or any change whatsoever.
_______________________________
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EXHIBIT B
FORM OF CERTIFICATED NOTE
FORM OF FACE OF CERTIFICATED NOTE
DIMON INCORPORATED
No. CUSIP No. 254394 AB 5
8 7/8% SENIOR NOTE DUE 2006
DIMON Incorporated, a Virginia corporation, for value
received, hereby promises to pay to __________, or its registered
assigns, the principal amount of $_______ on June 1, 2006.
Interest Payment Dates: June 1 and December 1,
commencing December 1, 1996.
Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of
this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been duly executed by the Trustee referred to on the reverse
hereof by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any
purposes.
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<PAGE>
IN WITNESS WHEREOF, DIMON Incorporated has caused this
Note to be duly executed under its corporate seal.
Dated:
DIMON INCORPORATED
By:
__________________________________________
Name:
Title:
[Corporate Seal]
Attest:
____________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
CRESTAR BANK,
as Trustee, certifies that this Note is one of
the Notes referred to in the Indenture.
By:
Authorized Signatory
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<PAGE>
FORM OF REVERSE SIDE OF CERTIFICATED NOTE
DIMON INCORPORATED
8 7/8% SENIOR NOTE DUE 2006
1. Indenture.
This Note is one of a duly authorized issue of debt
securities of the Company (as defined below) designated as its "8
7/8% Senior Notes due 2006" (the "Notes") limited in aggregate
principal amount to $125,000,000 issued under an indenture dated
as of May 29, 1996 (as amended or supplemented from time to time,
the "Indenture") among the Company, as issuer, DIMON
International, Inc. and Florimex Worldwide, Inc., as guarantors
(collectively, and, together with any future or successor
Guarantors under the Indenture, the "Guarantors"), and Crestar
Bank, as trustee (the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture
reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder
of the Company, the Guarantors, the Trustee and each Holder of
Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. The summary of the terms of this
Note contained herein does not purport to be complete and is
qualified by reference to the Indenture. To the extent permitted
by applicable law, in the event of any inconsistency between the
terms of this Note and the terms of the Indenture, the terms of
the Indenture shall control. All capitalized terms used in this
Note which are not defined herein shall have the meanings
assigned to them in the Indenture.
The Indenture contains certain covenants that, among
other things, limit the ability of the Company and the
Subsidiaries to incur additional indebtedness, pay dividends or
make certain other restricted payments, issue preferred stock,
incur liens to secure indebtedness of the Company and the
Guarantors, enter into certain sale and leaseback transactions,
apply net proceeds from certain asset sales, merge with or into
any other person, transfer or issue shares of capital stock of
Subsidiaries to third parties, sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the
assets of the Company and the Subsidiaries, or enter into certain
transactions with affiliates.
2. Principal and Interest.
DIMON Incorporated, a Virginia corporation (such
corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called "the Company"),
promises to pay the principal amount set forth on the face hereof
to the Holder hereof on June 1, 2006.
The Company shall pay interest on this Note at a rate
of 8 7/8% per annum, from the date of issuance or from the most
recent Interest Payment Date thereafter to which interest has
been paid or duly provided for, semiannually in arrears on June 1
and December 1 of each year, commencing on December 1, 1996 in
cash, to the Holder hereof until the principal amount hereof is
paid or duly provided for. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
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Date will, subject to certain exceptions provided in the
Indenture, be paid to the Person in whose name this Note (or the
Note in exchange or substitution for which this Note was issued)
is registered at the close of business on the Record Date for
interest payable on such Interest Payment Date. The Record Date
for any interest payment is the close of business on May 15 or
November 15, as the case may be, whether or not a Business Day,
immediately preceding the Interest Payment Date on which such
interest is payable. Any such interest not so punctually paid or
duly provided for ("Defaulted Interest") shall forthwith cease to
be payable to the Holder on such Record Date and shall be paid as
provided in Section 2.11 of the Indenture. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Each payment of interest in respect of an Interest
Payment Date will include interest accrued through the day before
such Interest Payment Date. If an Interest Payment Date falls on
a day that is not a Business Day, the interest payment to be made
on such Interest Payment Date will be made on the next succeeding
Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as
a result of such delayed payment.
To the extent lawful, the Company shall pay interest on
(i) any overdue principal of (and premium, if any, on) this Note,
at the interest rate borne on this Note plus 1.00% per annum, and
(ii) Defaulted Interest (without regard to any applicable grace
period), at the same rate. The Company's obligation pursuant to
the previous sentence shall apply whether such overdue amount is
due at its Stated Maturity, as a result of the Company's
obligations pursuant to Section 3.05, Section 4.07 or Section
4.08 of the Indenture, or otherwise.
3. Method of Payment.
The Company, through the Paying Agent, shall pay
interest on this Note to the registered Holder of this Note, as
provided above. The Holder must surrender this Note to a Paying
Agent to collect principal payments. The Company will pay
principal, premium, if any, and interest in money of the United
States of America that at the time of payment is legal tender for
payment of all debts, public and private. Principal, premium, if
any, and interest shall be paid by check mailed to the registered
Holders of Notes at their registered addresses; provided that all
payments with respect to Notes the Holders of which have given
wire transfer instructions to the Company will be required to be
made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof.
4. Registrar and Paying Agent.
Initially, the Trustee will act as Registrar and Paying
Agent under the Indenture. The Company may, upon written notice
to the Trustee, appoint and change any Registrar or Paying Agent.
If the Company or any of its Affiliates acts as Paying Agent, the
Company or such Affiliate shall segregate the funds held by it as
Paying Agent and hold them in trust for the benefit of the
Holders of Notes or the Trustee.
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<PAGE>
5. Guarantees.
This Note is entitled to the benefits of the
Guarantees made by DIMON International, Inc. and Florimex
Worldwide, Inc. and may thereafter be entitled to Guarantees made
by other Guarantors for the benefit of the Holders of Notes.
Each initial Guarantor has guaranteed, and each future Guarantor
will guarantee, irrevocably and unconditionally, jointly and
severally, the punctual payment when due, whether at Stated
Maturity, by acceleration, in connection with a Change of Control
Offer, an Asset Sale Offer or redemption, or otherwise, of all
Obligations of the Company under the Indenture and this Note,
whether for payment of principal of, premium, if any, or interest
on the Notes, expenses, indemnification or otherwise. A
Guarantor shall be released from the relevant Guarantee upon the
terms and subject to the conditions set forth in the Indenture.
6. Optional Redemption.
The Notes may not be redeemed at the option of the
Company prior to June 1, 2001. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or
in part, upon not less than 30 calendar days' nor more than 60
calendar days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued
and unpaid interest thereon to the applicable Redemption Date
(subject to the right of each Holder of record on the relevant
Record Date to receive interest due on the relevant Interest
Payment Date), if redeemed during the twelve-month period
beginning June 1 of the years indicated below:
Year Percentage
2001 104.4375%
2002 102.9583%
2003 101.4791%
2004 100.0000%
7. No Mandatory Redemption.
The Notes are not subject to any sinking fund or
mandatory redemption.
8. Notice of Redemption.
At least 30 calendar days but not more than 60 calendar
days before a Redemption Date, the Company shall send, or cause
to be sent, by first-class mail, postage prepaid, a notice
prepared by the Company describing the redemption to each Holder
of Notes to be redeemed at the addresses of such Holders as they
appear in the Note Register.
If less than all of the Notes are to be redeemed at any
time, the Trustee shall select the Notes to be redeemed in
compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed, or,
if such Notes are not listed, on a pro rata basis, by lot or by
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such method as the Trustee shall deem fair and appropriate. If
any Note is redeemed subsequent to a Record Date with respect to
any Interest Payment Date specified above and on or prior to such
Interest Payment Date, then any accrued interest will be paid on
such Interest Payment Date to the Holder of the Note on such
Record Date. If money in an amount sufficient to pay the
Redemption Price of all Notes (or portions thereof) to be
redeemed on the Redemption Date is deposited with the Paying
Agent on or before the applicable Redemption Date and certain
other conditions are satisfied, interest on the Notes or portions
thereof to be redeemed on the applicable Redemption Date will
cease to accrue.
9. Repurchase at the Option of Holders upon Change of
Control.
Upon the occurrence of a Change of Control, each Holder
of Notes shall have the right to require the Company to purchase
such Holder's Notes, in whole or in part, in a principal amount
that is an integral multiple of $1,000, pursuant to a Change of
Control Offer, at a purchase price in cash equal to 101% of the
principal amount of such Notes (or portions thereof) to be
redeemed plus accrued and unpaid interest thereon to the Change
of Control Payment Date (subject to the right of each Holder of
record on the relevant Record Date to receive interest due on the
relevant Interest Payment Date).
Within 30 calendar days after the date of any Change of
Control, the Company shall send, or cause to be sent, by first-
class mail, postage prepaid, a notice prepared by the Company
describing the Change of Control Offer to each Holder. The
Holder of this Note may elect to have this Note or a portion
hereof in an authorized denomination purchased by completing the
form entitled "Option of Holder to Elect Purchase" appearing
below and tendering this Note pursuant to the Change of Control
Offer. Unless the Company defaults in the payment of the Change
of Control Purchase Price with respect thereto, Notes or portions
thereof accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest from and after the Change of
Control Payment Date.
10. Repurchase at the Option of Holders upon Asset
Sales.
If at any time the Company or any Subsidiary of the
Company engages in any Asset Sales, as a result of which the
aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall make an offer to all Holders of Notes then
outstanding to purchase, on a pro rata basis, the principal
amount of Notes equal in amount to the Excess Proceeds (and not
just the amount thereof that exceeds $10.0 million), at a
purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest
thereon to the Asset Sale Payment Date (subject to the right of
each Holder of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date). Upon
completion of an Asset Sale Offer (including payment of the Asset
Sale Purchase Price for accepted Notes), any surplus Excess
Proceeds that were the subject of such offer shall cease to be
Excess Proceeds, and the Company may then use such amounts for
general corporate purposes (subject to other provisions of the
Indenture).
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Within 30 calendar days after the date the amount of
Excess Proceeds exceeds $10.0 million, the Company shall send, or
cause to be sent, to each Holder of Notes, by first-class mail,
postage prepaid, a notice prepared by the Company describing the
Asset Sale Offer. The Holder of this Note may elect to have this
Note or a portion hereof in an authorized denomination purchased
by completing the form entitled "Option of Holder to Elect
Purchase" appearing below and tendering this Note pursuant to the
Asset Sale Offer. Unless the Company defaults in the payment of
the Asset Sale Purchase Price with respect thereto, all Notes or
portions thereof accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest from and after the Asset
Sale Payment Date.
"Excess Proceeds" are defined in Section 4.08 of the
Indenture to be Net Proceeds from Asset Sales (other than Exempt
Asset Sales) not utilized for certain purposes within 270 days of
consummation of an Asset Sale. "Exempt Asset Sales" are also
defined in the Indenture and include, among other things, an
Asset Sale (i) the Net Proceeds of which plus the Net Proceeds of
all other Asset sales concurrently or previously made on or after
the date of the Indenture do not exceed $25.0 million and (ii)
the Net Proceeds of which plus the Net Proceeds of all other
Asset Sales concurrently or previously made in the same fiscal
year do not exceed $10.0 million.
11. Transfer and Exchange.
A Holder may transfer a Note only upon the surrender of
such Note for registration of transfer. No such transfer shall
be effected until, and such transferee shall succeed to the
rights of a Holder only upon, final acceptance and registration
of the transfer in the Note Register by the Registrar. When
Notes are presented to the Registrar with a request to register
the transfer of, or to exchange, such Notes, the Registrar shall
register the transfer or make such exchange as requested if its
requirements for such transactions and any applicable
requirements hereunder are satisfied.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require
payment of sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of
transfer of Notes.
12. Denominations.
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and integral multiples thereof
of principal amount.
13. Unclaimed Money
If money for the payment of principal premium, if any,
or interest remains unclaimed for two years, the Trustee or
Paying Agent shall pay the money back to the Company at its
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request unless an abandoned property law designates another
Person. After any such payment, Holders of Notes entitled to the
money must look only to the Company and not to the Trustee for
payment unless such abandoned property law designates another
Person.
14. Discharge and Defeasance.
Subject to certain conditions, the Company at any time
may terminate some or all of the obligations of the Company and
the Guarantors under the Notes and the Indenture if the Company
irrevocably deposits in trust with the Trustee cash or U.S.
Government Obligations for the payment of principal, premium, if
any, and interest on the Notes to redemption or maturity, as the
case may be.
15. Amendment, Waiver.
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Notes may be amended with the
written consent of the Holders of not less than a majority in
principal amount of the outstanding Notes (which consent may, but
need not, be given in connection with any tender offer or
exchange offer for Notes) and (ii) any past Default or Event of
Default and its consequences may be waived with the written
consent of the Holders of at least a majority in principal amount
of the outstanding Notes. Subject to certain exceptions set
forth in the Indenture, without the consent of any Holder of
Notes, the Company, the Guarantors and the Trustee may amend the
Indenture or the Notes, among other things, (i) to evidence the
succession of another Person to the Company and the assumption by
such successor of the covenants of the Company under the
Indenture and contained in the Notes; (ii) to add to the
covenants of the Company with respect to the Notes; (iii) to add
any additional Events of Default; (iv) to secure the Notes; (v)
to evidence and provide for the acceptance of appointment under
the Indenture of a successor Trustee; (vi) to cure any
ambiguity in the Indenture or to correct or supplement any
provision in the Indenture which may be inconsistent with any
other provision therein or to add any other provision with
respect to matters or questions arising under the Indenture,
provided that such actions shall not adversely affect the
interests of the Holders of Notes in any material respect; (vii)
to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the
Trust Indenture Act; or (viii) to evidence the agreement or
acknowledgment of a Material Domestic Subsidiary formed or
acquired (and each Person that becomes a Material Domestic
Subsidiary) after the date of the Indenture that is not otherwise
prohibited from doing so that it is a Guarantor for all purposes
under the Indenture.
16. Defaults and Remedies.
Under the Indenture, Events of Default include: (i)
failure by the Company to make any payment of interest on any
Note when the same becomes due and payable, and such failure
continues for 30 calendar days; (ii) failure by the Company to
make any payment of principal of, or premium, if any, on any
Notes when the same becomes due and payable, whether upon Stated
Maturity, redemption, required purchase, or otherwise; (iii)
failure by the Company to observe or perform certain covenants,
conditions, agreements or other provisions of the Indenture or
this Note (and, in the case of certain covenants, conditions,
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agreements or other provisions, such failure has continued for 30
calendar days after written notice by the Trustee or the Holders
of at least 25% in principal amount of the Notes); (iv) certain
Payment Defaults with respect to and accelerations of other
Indebtedness if the amount unpaid or accelerated exceeds $5.0
million; (v) certain events of bankruptcy or insolvency with
respect to the Company, any Material Domestic Subsidiary or any
Material Foreign Subsidiary; (vi) certain undischarged judgments
or orders for the payment of money in excess of $10.0 million; or
(vii) the Guarantee of any Guarantor being held in any judicial
proceeding to be unenforceable or invalid or ceasing for any
reason to be in full force and effect (other than in accordance
with the terms of the Indenture) or any Guarantor or any Person
acting on behalf of any Guarantor denying or disaffirming the
Guarantee of such Guarantor.
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the
Notes, subject to certain limitations, may declare the unpaid
principal of and any accrued interest on all the outstanding
Notes to be immediately due and payable. Certain events of
bankruptcy or insolvency are Events of Default and shall result
in the Notes being immediately due and payable upon the
occurrence thereof without any further act of the Trustee or any
Holder.
Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may
refuse to enforce the Indenture or the Notes unless it receives
reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount of the
Notes may direct the Trustee in its exercise of any trust or
power under the Indenture. The Holders of a majority in
principal amount of the outstanding Notes, by written notice to
the Company and the Trustee, may rescind any declaration of
acceleration and its consequences if the rescission would not
conflict with any judgment or decree, and if all existing Events
of Default have been cured or waived except nonpayment of
principal, premium if any, or interest that has become due solely
because of acceleration. No such recission shall affect any
subsequent Default or impair any right consequent thereto.
17. Individual Rights of Trustee.
Subject to certain limitations imposed by the Trust
Indenture Act, the Trustee or any Paying Agent or Registrar, in
its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, the
Guarantors or its or their Affiliates with the same rights it
would have if it were not Trustee, Paying Agent or Registrar, as
the case may be, under the Indenture.
18. No Recourse Against Certain Others.
No director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such
Guarantor under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of, such
obligations or their creation, solely by reason of its status as
a director, officer, employee, incorporator or stockholder of the
Company or such Guarantor. By accepting a Note, each Holder
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waives and releases all such liability (but only such liability)
as part of the consideration for issuance of such Note to such
Holder.
19. Authentication.
This Note shall not be valid until the Trustee or an
authenticating agent manually signs the certificate of
authentication on the other side of this Note.
20. Abbreviations.
Customary abbreviations may be used in the name of a
Holder of Notes or an assignee, such as TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with rights of survivorship and not as tenants in
common), CUST (= custodian), and U/G/M/A (= Uniform Gift to
Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Notes and has
directed the Trustee to use CUSIP numbers in notices of
redemption as a convenience to Holders of Notes. No
representation is made as to the accuracy of such numbers either
as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed thereon.
22. Governing Law.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
The Company will furnish to any Holder of Notes upon
written request and without charge to the Holder a copy of the
Indenture which has in it the text of this Note. Requests may be
made to:
DIMON Incorporated
512 Bridge Street
Post Office Box 681
Danville, VA 24543-0681
Att.: Secretary
-203-
<PAGE>
ASSIGNMENT
(To be executed by the registered Holder
if such Holder desires to transfer this Note)
FOR VALUE RECEIVED ___________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAX IDENTIFYING NUMBER OF TRANSFEREE
- ------
BOX (FOR SOCIAL SECURITY NUMBER)
- -----
_______________________________________________________________
(Please print name and address of transferee)
_________________________________________________________________
this Note, together with all right, title and interest herein,
and does hereby irrevocably constitute and appoint
________________________________ Attorney to transfer this Note
on the Note Register, with full power of substitution.
Dated: _______________
________________________________ _______________________
Signature of Holder Signature Guaranteed:
NOTICE: The signature to the foregoing Assignment must
correspond to the Name as written upon the face of this Note in
every particular, without alteration or any change whatsoever.
-204-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
(check as appropriate)
__ In connection with the Change of Control Offer made pursuant
to Section 4.07 of the Indenture, the undersigned hereby
elects to have
__ the entire principal amount
__ $________________ ($1,000 in principal amount or an
integral multiple thereof)
of this Note repurchased by the Company. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
__________________________ an amount in cash equal to 101%
of the principal amount indicated in the preceding sentence
plus accrued and unpaid interest thereon, if any, to the
Change of Control Payment Date (subject to the right of the
Holder of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date).
__ In connection with the Asset Sale Offer made pursuant to
Section 4.08 of the Indenture, the undersigned hereby elects
to have
__ the entire principal amount
__ $________________ ($1,000 in principal amount or an
integral multiple thereof)
of this Note repurchased by the Company. The undersigned
hereby directs the Trustee or Paying Agent to pay it or
__________________________ an amount in cash equal to 100%
of the principal amount indicated in the preceding sentence
plus accrued and unpaid interest thereon, if any, to the
Asset Sale Payment Date (subject to the right of the Holder
of record on the relevant Record Date to receive interest
due on the relevant Interest Payment Date).
Dated: _______________
________________________________ _____________________
Signature of Holder Signature Guaranteed:
-205-
<PAGE>
NOTICE: The signature to the foregoing must correspond to the
Name as written upon the face of this Note in every particular,
without alteration or any change whatsoever.
<PAGE>
Exhibit 10.19
-------------
SEPARATION AGREEMENT, WAIVER AND RELEASE
This Separation Agreement, Waiver and Release ("Agreement")
sets forth the complete terms under which the employment of T. H.
Faucett with DIMON Incorporated will end.
1. Recitals.
a. Each reference in this Agreement to "DIMON" shall include
DIMON Incorporated, and any of its current or former divisions,
parents, subsidiaries, affiliates, shareholders, owners, officers,
directors, employees, servants, attorneys, agents, representatives,
predecessors, successors, and assigns.
b. Each reference in this Agreement to "Faucett" shall
include T. H. Faucett, and any of his agents, attorneys, personal
representatives, executors, administrators, heirs, beneficiaries,
successors, and assigns.
2. Conclusion of Employment.
Faucett acknowledges that he has voluntarily resigned from all
of his duties as an employee of DIMON effective June 30, 1996.
Faucett acknowledges that, as of March 31, 1996, he has resigned as
an officer of DIMON and that he no longer has any authority to act
on behalf of DIMON, and Faucett shall not hold himself out as an
employee or representative of DIMON for any purpose. Faucett
agrees that he will not seek further employment with DIMON, and he
specifically waives and renounces any claim for employment with
DIMON at any time after June 30, 1996.
3. Retirement Benefits.
As of July 1, 1996, Faucett may receive the benefits provided
under the DIMON Incorporated Savings and Profit Sharing Plan and
the Retirement Plan for Employees of Dibrell Brothers and
Subsidiary Companies (the "Retirement Plan"). Faucett will also be
eligible to receive any benefit that he has accrued under the
component of the Dibrell Brothers Incorporated Pension Equalization
Plan that restores the Retirement Plan benefit that Faucett could
not accrue on account of Section 401(a)(17) of the Internal Revenue
Code of 1986, as amended.
4. Cash Bonus Award.
If a "Bonus Award" is made under the DIMON, Incorporated Cash
Bonus Plan for the fiscal year ending June 30, 1996, Faucett will
receive the Bonus Award approved for him. Such Bonus Award shall
be in the amount that Faucett would have received had he not
terminated employment pursuant to this Agreement.
-206-
<PAGE>
5. Special Separation and Retirement Benefits.
a. DIMON agrees to pay Faucett his regular base salary of
$15,000 per month through June 30, 1996. DIMON will make such
payments on the regularly scheduled pay periods. These payments
will be reduced by the amounts required by law to be withheld and
paid to the appropriate taxing agencies and by such other amounts
authorized by Faucett. Faucett shall also be entitled to continued
use of his company car through June 30, 1996.
b. DIMON agrees that through June 30, 1996 Faucett and his
spouse may continue to participate in any employee benefit plan in
which they were eligible to participate as of March 31, 1996, or in
any successor plan should DIMON amend or terminate any such plan
prior to June 30, 1996. Faucett will remain responsible for his
share of any premium, co-payments or deductibles under the
respective plans. If Faucett accepts other employment prior to
June 30, 1996, DIMON's obligation to continue Faucett's health and
life insurance benefits under this Agreement shall cease on the
date Faucett becomes eligible for coverage under the new employer's
insurance benefit plans or June 30, 1996, whichever occurs sooner.
Faucett shall be eligible to participate as a retiree under the
terms of DIMON's health and life insurance plans. DIMON
acknowledges that Faucett's rights under COBRA will begin July 1,
1996.
c. In addition to any benefit available under the Retirement
Plan, DIMON will provide Faucett an annuity benefit equal in value
to a single life annuity paying $8,500 per month commencing July 1,
1996 and ending with the payment due for the month in which Faucett
dies. The annuity benefit will be provided in the same form as the
form of annuity in which Faucett elects to receive his benefit from
the Retirement Plan. The monthly annuity payments will also be
adjusted according to the actuarial assumptions and methods applied
under the Retirement Plan if Faucett elects to receive the annuity
in a form other than a single life annuity.
d. Faucett and DIMON acknowledge that the payments described
in Section 5c are in lieu of the Special Supplemental Retirement
Benefit to which he would otherwise be entitled pursuant to Article
6 of his Employment Agreement with Dibrell Brothers, Incorporated
dated January 13, 1995. Faucett acknowledges and agrees that he is
not entitled to any additional compensation from DIMON of any type
or nature, including but not limited to any salary, bonus,
commission, or pay in lieu of any benefits.
e. DIMON shall provide to Faucett access to the listing of
position openings maintained by the outplacement firm Drake Beam
Moran through December 31, 1996.
-207-
<PAGE>
6. Exercise of Stock Options.
Through his employment with Dibrell Brothers Incorporated
("Dibrell"), on August 21, 1991, August 24, 1992, August 26, 1993,
and August 25, 1994, Faucett was granted options to purchase
Dibrell stock (which now cover DIMON stock) (the "Dibrell
Options"). In connection with Faucett's voluntary resignation from
employment with DIMON, as part of the consideration for this
Agreement, and notwithstanding any agreement to the contrary,
Faucett will be permitted to exercise all or part of each Dibrell
Option until the expiration date of such option; provided, however,
that no Dibrell Option may be exercised more than one year after
Faucett's death. Faucett may exercise those options as they become
exercisable in accordance with their original terms,
notwithstanding his voluntary resignation from employment, and in
a manner consistent with the terms of the Dibrell Options.
7. Waiver, Release, and Covenant Not to Sue.
a. In exchange for the consideration provided by this
Agreement, Faucett forever waives, releases, and covenants not to
sue with respect to any claim against DIMON, including but not
limited to all claims arising from or relating in any way to his
employment with DIMON or any other act, event, or communication
occurring prior to the execution of this Agreement, whether such
claims are now known or may hereafter be discovered. In addition to
any other claims, Faucett specifically waives, releases, and
covenants not to sue with respect to any claims under the Age
Discrimination in Employment Act of 1967, as amended.
b. Faucett does not waive any rights or claims that may
arise after the date this Agreement is executed.
8. Covenant to Maintain Confidentiality.
a. Faucett acknowledges that during his employment with
DIMON, he was exposed to and learned a substantial amount of
information which is proprietary and confidential to DIMON, whether
or not he developed or created such information. Faucett
acknowledges that such proprietary and confidential information
includes, but is not limited to, employee information, trade
secrets, inventions, manufacturing know-how, designs, formulae,
secret processes and machinery; acquisition or merger information;
advertising and promotional programs; resource or developmental
projects; plans or strategies for future business development;
financial or statistical data; customer information, including, but
not limited to, the names of DIMON's customers, the nature of
DIMON's relationship to said customers, customer lists, sales
records, account records, sales and marketing programs, pricing
matters, and account strategies and reports; legal documents and
records; sales and marketing plans and strategies; and any DIMON
manuals, forms, techniques, and other business procedures or
methods, devices, or matters of any kind relating to or with
respect to any confidential research, engineering, developmental
work, programs, or projects of DIMON, or any other information of
a similar nature made available to Faucett and not known in the
trade in which DIMON is engaged, which, if misused or disclosed,
would adversely affect the business or standing of DIMON.
-208-
<PAGE>
b. Faucett agrees that, for a period of three (3) years
subsequent to July 1, 1996, except as required by law, he will not
divulge to any person, agency, institution, company or other entity
any information which he knows or has reason to believe is
proprietary or confidential to DIMON, including but not limited to
the types of information described in Section 8(a).
c. Nothing under this Section 8 shall require Faucett to
maintain in confidence information which is generally known in the
industry.
9. Confidentiality of Terms of Agreement.
Faucett agrees that he will not reveal or allow anyone else to
reveal the terms of this Agreement, to any person (including
officers or employees of DIMON), agency, institution, company, or
other entity unless DIMON agrees in writing that he may do so. The
sole exceptions are that Faucett may make such disclosures as are
required by law, including disclosures to taxing agencies, and
Faucett may disclose the terms of this Agreement to his wife and
his attorney, accountant, or tax advisor, provided that Faucett
shall inform his wife and his attorney, accountant, or tax advisor
that the terms are strictly confidential and are not to be revealed
to anyone else except as required by law.
10. No Disparaging Remarks.
Faucett agrees that he will not disparage, denigrate, or
otherwise make negative statements about DIMON or its management to
any person, agency, institution, company, or other entity,
including but not limited to any customer, competitor, vendor, or
other business enterprise engaged in any business or commercial
relationship with DIMON, whether such statements are true or
otherwise. DIMON agrees that it will not disparage, denigrate, or
otherwise make negative statements about Faucett to any person,
agency, institution, company, or other entity, whether such
statements are true or otherwise.
11. Cooperation.
a. Faucett agrees, at no financial cost to him, to cooperate
with DIMON and to provide consultation and advice to DIMON or its
affiliates or legal or tax matters and such other matters important
to the continuing functioning of DIMON and its affiliates, as
requested by DIMON's Chief Executive Officer or his designee. In
that regard, Faucett agrees that he shall refrain from initiating
or conducting conversations with employees or customers of DIMON
regarding the strategy, structure, or operations of DIMON, unless
specifically requested in writing by DIMON's Chief Executive
Officer or his designee.
-209-
<PAGE>
b. Faucett's duties to cooperate and provide the services
set forth in Section 11(a) shall extend through June 30, 1997,
unless terminated sooner at DIMON's sole discretion.
12. Remedies for Breach.
Faucett acknowledges that DIMON would be irreparably harmed if
the covenants provided in Section 8 of this Agreement were not
specifically enforced. Accordingly, DIMON shall be entitled to
injunctive relief for the purpose of restraining Faucett from
violating those covenants, in addition to any other relief to which
DIMON may be entitled.
13. Construction of Agreement.
a. This Agreement does not constitute and shall not be
deemed an admission by DIMON of a violation of any statute or law
or wrongdoing of any kind, nor is it an admission or finding that
any claim that Faucett may raise against DIMON, including any claim
in connection with Faucett's employment with DIMON or the
conclusion of that employment, is or would be in any way valid or
meritorious.
b. Faucett and DIMON agree that this Agreement, contains all
the promises and covenants made by them with respect to its subject
matter, and any and all prior understandings and agreements between
them, including the Employment Agreement dated January 13, 1995
between Dibrell Brothers, Incorporated and Faucett, have been
merged herein or canceled by the mutual agreement of the parties.
c. Any waiver of a breach of this Agreement will not
constitute a waiver of any future breach, whether of a similar or
dissimilar nature.
d. This Agreement will be governed by and interpreted in
accordance with the laws of the Commonwealth of Virginia, without
any presumption or construction against the party causing the
Agreement to be drafted. Any dispute arising between the parties
related to or involving this Agreement will be litigated in a court
having jurisdiction in the Commonwealth of Virginia.
e. If any provision of this Agreement is held invalid, such
invalidity will not invalidate the entire Agreement, and the
remainder of the Agreement will not be affected.
-210-
<PAGE>
f. Faucett acknowledges and agrees that DIMON is not
undertaking to advise him with respect to the tax consequences of
this Agreement and that he is solely responsible for determining
those consequences.
g. Faucett acknowledges that he has read this Agreement, has
had at least 21 days to consider it, has been advised of his right
to discuss it with his attorney, understands its terms, and is
satisfied with those terms. Faucett understands that this
Agreement will become effective, enforceable and binding on him
seven (7) days from the day of his signature below, unless he has
revoked it prior to that time. Faucett is satisfied with the terms
of this Agreement and agrees that the terms are binding upon him.
Agreed this 30th day of May, 1996.
_____________________ /s/ T. H. Faucett
Date T. H. Faucett
5/30/96 /s/ DIMON, Incorporated
Date DIMON, Incorporated
-211-
<PAGE>
<TABLE>
Exhibit 11
DIMON and Subsidiaries
Computation of Earnings Per Common Share
<CAPTION>
YEAR ENDED JUNE 30
(in thousands, except per share data)
1996 1995 1994
<S> <C> <C> <C>
PRIMARY
EARNINGS
Income (loss) before extraordinary item $ 39,870 $(30,165) $ (8,490)
Extraordinary item 1,400 - -
Net Income (Loss) $ 41,270 $(30,165) $ (8,490)
SHARES
Weighted average number of common shares outstanding 39,560 38,070 38,069
Shares applicable to stock options, net of shares
assumed to be purchased from proceeds at average
market price 111 30 22
Average Number of Shares Outstanding 39,671 38,100 38,091
EARNINGS PER SHARE
Income (loss) before extraordinary item $1.00 $(.79) $(.22)
Extraordinary item .04 - -
Net Income (Loss) $1.04 $(.79) $(.22)
ASSUMING FULL DILUTION
EARNINGS
Income (loss) before extraordinary item $ 39,870 $(30,165) $ (8,490)
Add after tax interest expense applicable to 7 3/4%
Convertible Debentures issued June 3, 1991 1,765 2,674 2,714
Income (loss) before extraordinary item 41,635 (27,491) (5,776)
Extraordinary item 1,400 - -
Net Income (Loss) as Adjusted $ 43,035 $(27,491) $ (5,776)
SHARES
Weighted average number of common shares outstanding 39,560 38,070 38,068
Shares applicable to stock options, net of shares
assumed to be purchased from proceeds at the greater
of average market price or ending market price 162 83 26
Assuming conversion of 7 3/4% Convertible Debentures at
beginning of period 2,742 4,202 4,203
Average Number of Shares Outstanding 42,464 42,355 42,297
EARNINGS PER SHARE
Income (loss) before extraordinary $ .98 $(.65) $(.14)
Extraordinary item .03 - -
Net Income (Loss) as Adjusted $1.01 $(.65) $(.14)
</TABLE>
-212-
<PAGE>
Exhibit 21
SUBSIDIARIES OF REGISTRANT (at June 30, 1995)
<TABLE>
<CAPTION>
JURISDICTION PERCENTAGE OF VOTING
IN WHICH SECURITIES OWNED
NAME ORGANIZED BY REGISTRANT BY AFFILIATE
<S> <C> <C> <C>
DIMON International, Inc. (A) North Carolina 100.00%
DIMON International Tabak B.V. (A) The Netherlands 100.00% (B)
DIMON International A.G. (A) Switzerland 100.00% (B)
DIMON Do Brasil Tabacos Ltda. (A) Brazil 100.00% (B)
Mashonaland Tobacco Holdings
(PVT) Ltd. (A) Zimbabwe 100.00% (B)
Kin-Farm, Inc. (A) North Carolina 100.00% (B)
Monk-Austin VI (FSC) (A) Virgin Islands 100.00% (B)
Florimex Worldwide, Inc. (A) Virginia 100.00%
DIMON GmbH (A) Germany 100.00% (C)
Florimex
Verwaltungsgesellschaft mbH (A) Germany 100.00% (D)
Florimex Worldwide (A) The Netherlands 100.00% (C)
Baardse B.V. (A) The Netherlands 100.00% (J) (C)
</TABLE>
(A) Included in the Consolidated Financial Statements
(B) Owned by DIMON International, Inc.
(C) Owned by Florimex Worldwide, Inc.
(D) Owned by DIMON GmbH
-213-
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-93172, 33-91364, 33-93162, 33-93174,
33-93170 and 33-93168) of DIMON Incorporated of our report dated August 22,
1996, except as to Note O, which is as of August 29, 1996, appearing in this
Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears
in this Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Raleigh, North Carolina
September 19, 1996
-214-
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
Form S-8 (Nos. 33-93172, 33-91364, 33-93162, 33-93174, 33-93170 and 33-93168)
of DIMON Incorporated of our report dated August 26, 1994, included in the
Annual Report (Form 10-K) of DIMON Incorporated for the year ended June 30,
1996, with respect to the consolidated financial statements of Dibrell
Brothers, Incorporated for the year ended June 30, 1994.
/s/ Ernst & Young LLP
Ernst & Young LLP
Winston-Salem, North Carolina
September 19, 1996
-215-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 53,820
<SECURITIES> 0
<RECEIVABLES> 190,898
<ALLOWANCES> 6,558
<INVENTORY> 333,501
<CURRENT-ASSETS> 668,775
<PP&E> 323,201
<DEPRECIATION> (86,426)
<TOTAL-ASSETS> 1,020,014
<CURRENT-LIABILITIES> 246,433
<BONDS> 390,871
<COMMON> 136,959
0
0
<OTHER-SE> 178,889
<TOTAL-LIABILITY-AND-EQUITY> 1,020,014
<SALES> 2,167,473
<TOTAL-REVENUES> 2,167,473
<CGS> 1,904,992
<TOTAL-COSTS> 1,904,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,043
<INTEREST-EXPENSE> 46,924
<INCOME-PRETAX> 67,487
<INCOME-TAX> 26,995
<INCOME-CONTINUING> 39,870
<DISCONTINUED> 0
<EXTRAORDINARY> 1,400
<CHANGES> 0
<NET-INCOME> 41,270
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.01
