Page 1 of 255
Exhibit Index
on Page 63 through 67
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, 1999
_____ 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:
Title of Each Class Name of Exchange On Which Registered
Common Stock (no par value) New York Stock Exchange
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 September 20, 1999, was
approximately $169,461,000. 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 September 20, 1999, there were 44,525,004 shares of Common
Stock outstanding.
Portions of the registrant's definitive Proxy Statement for
its 1999 Annual Meeting of Stockholders to be held November 12,
1999, 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.
<PAGE>
PART I
ITEM 1. BUSINESS
--------
THE COMPANY
-----------
DIMON Incorporated (the "Company") is the second largest
independent leaf tobacco merchant in the world. The Company was
formed through the April 1, 1995 merger of Dibrell Brothers,
Incorporated (established in 1873) and Monk-Austin, Inc.
(established in 1907). Effective April 1, 1997, the Company
acquired Intabex Holdings Worldwide S.A. ("Intabex"), then the
world's fourth largest independent leaf tobacco merchant.
Previously, the Company was also engaged in the fresh-cut flower
industry through its wholly-owned Florimex subsidiary. Florimex
was sold effective September 30, 1998 and the results of its
operations, together with the gain on disposal, are treated as
discontinued in the Company's Consolidated Financial Statements.
BUSINESS DESCRIPTION
--------------------
Product
-------
The world's large multinational cigarette manufacturers, with one
exception, rely primarily 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. The Company's
revenues primarily comprise sales of processed tobacco and fees
charged for related services to manufacturers of tobacco products
around the world. The Company does not manufacture cigarettes or
other consumer tobacco products.
The Company deals primarily in flue-cured, burley, and oriental
tobaccos that are used in international brand cigarettes.
International brand cigarettes have gained market share in several
major foreign markets including Asia (particularly the Pacific
Rim), Europe and the Middle East in recent years. International
brand cigarettes contain approximately 50% flue-cured, 35% burley
and 15% oriental tobacco, contain less tar and nicotine and taste
milder than locally produced cigarettes containing dark and semi-
oriental tobacco historically consumed in certain parts of the
world. According to the Tobacco Merchants Association,
international brand cigarettes represented 48% of worldwide
cigarette consumption (excluding China) in 1990, compared to 54% in
1998. As international brand cigarettes have continued to gain
global market share, the demand for export quality flue-cured,
burley and oriental tobacco sourced and processed by the Company
and its competitors has grown accordingly.
Several of the large multinational cigarette manufacturers have
expanded their operations throughout the world, particularly in
Asia, Central and Eastern Europe and the former Soviet Union, in
order to increase their access to and penetration of these markets.
As cigarette manufacturers expand their global operations, the
Company believes that demand will increase 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 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 by improving local
agronomic practices.
Through its wholly-owned subsidiary, Compania General de Tabacos de
Filipinas S.A. ("CdF"), the Company is also a leading
international dealer in dark tobaccos, typically used for cigars
and smokeless tobacco products.
- -2-
<PAGE>
Markets, Customers and Selling Arrangements
-------------------------------------------
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 the Company's customers individually account for a significant
portion of the Company sales in a normal year. In addition, some
of our customers have begun to consolidate their operations, which
may increase the company's reliance on fewer customers. 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. Of the 1999,
1998, and 1997 sales and other operating revenues, approximately
29%, 32%, and 42%, respectively, were to various tobacco customers
which management has been led to believe are owned by or under
common control of Philip Morris Companies Inc. or R. J. Reynolds
Tobacco Company, Inc., each of which contributed in excess of 10%
of total sales. No other customer accounts for more than 10% of
the Company's sales. The Company generally has maintained
relationships with its customers for over forty years. In fiscal
1999, the Company delivered approximately 30% of its tobacco sales
to customers in the U.S., approximately 37% to customers in Europe
and the remainder to customers located in Asia, South America and
elsewhere.
The Company believes that the present uncertainty in the litigation
and legislative environments has led certain of the Company's key
U.S. customers to decrease their global purchase programs
significantly. In fiscal 1999, the Company's gross profit on sales
to three of its larger customers, Philip Morris Companies, Inc., R.
J. Reynolds Tobacco Company, Inc. and Lorillard Tobacco Company,
was down approximately $27.5 million from fiscal 1998. Other
customers have become more opportunistic and have begun taking
advantage of the softer global demand for tobacco. In addition, a
surplus of flue-cured and burley tobacco has led to smaller crop
sizes in the U.S.
Recent economic problems in Asia and the former Soviet Union have
had an impact on the Company. Weakness in local currencies made it
difficult for the Company's customers in these regions to translate
local currency sales into U.S. dollar purchases of leaf tobacco,
causing shipping delays during much of fiscal 1999. Also, as
disposable income declined, consumers in these regions tended to
trade down from international brand cigarettes to cheaper, lower
quality alternatives.
However, the Company believes that its reduced sales and profit
margins represent a temporary adjustment in world leaf demand. The
Company has taken steps that may mitigate the effect of current
market conditions. In March 1999, the Company announced the
closure of its Kinston, North Carolina processing facility and the
substantial reorganization of its North American operations. To
further improve the operating efficiency of its Brazilian
operations, the Company sold one of three production facilities in
August 1999. This action, together with other global cost
efficiency initiatives implemented during fiscal year 1999, are
expected to provide more than $25 million in annual operating cost
savings. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Factors That May Affect
Future Results."
As of June 30, 1999, the Company's consolidated entities had
tobacco inventories of $417.6 million and had significant
commitments or indications from customers for purchases of tobacco.
The Company expects to deliver substantially all of the June 30,
1999 orders in fiscal 2000. The level of purchase commitments for
tobacco fluctuates from period to period and is significant only to
the extent that it reflects short-term changes in demand for leaf
tobacco. The Company typically makes approximately 90% of its leaf
tobacco auction 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 purchased 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.
- -3-
<PAGE>
The Company has entered into agreements with R. J. Reynolds Tobacco
Company and Lorillard Tobacco Company to purchase and process their
entire domestic auction market tobacco requirements. Generally,
the agreements 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. Other than these contracts, the Company
has no significant supply agreements with its customers.
The Company typically makes sales based on a customer's letter of
credit, by cash against documents or by payment against invoice.
Most of the Company's sales throughout the world are denominated in
U.S. dollars. While the Company usually receives payment for
tobacco sold after the Company has processed and shipped it, some
customers advance payments to the Company throughout the buying
season as the Company purchases tobacco for the customers'
accounts.
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, Macedonia
and Turkey, the leading exporters of Oriental tobacco. The Company
also has processing facilities in Germany, Italy, Spain, Tanzania
and Thailand. The Company has historically contracted with third
parties for the processing of tobacco in certain countries
including Canada, Chile, China, Congo, Guatemala, India, Spain and
certain countries of the former Soviet Union. 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
tobacco, including Argentina, Canada, China, and India.
The Company purchases tobacco in 31 countries. Although a
significant portion of the dollar value of tobacco sold by the
Company is produced domestically, the relative importance of
tobacco grown overseas to the Company's profitability has increased
steadily. During fiscal 1999, approximately 44% of the dollar
value of tobacco purchased by the Company was purchased in the U.S.
Approximately 12%, 9% and 4% of the dollar value of tobacco
purchased by the Company during fiscal 1999 was purchased in
Brazil, Zimbabwe and Malawi, respectively.
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 tobacco buyers allows the Company to cover the
major auctions of flue-cured and burley tobacco 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 the United States, there
has been speculation in the industry about the possibility of
purchasing tobacco under contract directly from growers rather than
through the auction system. The Company is not aware of any
significant effort to do so and is unable to predict whether or the
extent to which such a change in purchasing methods may occur or
the effect that it would have on the Company's business.
In non-auction markets such as Argentina, Brazil, Greece, Spain,
Tanzania, and Turkey, the Company purchases tobacco directly from
farmers or from local entities that have arranged for purchase from
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,
- -4-
<PAGE>
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 agronomists 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.
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 over 30 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 in
proximity 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 sieve 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.
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 consumption of
discount and value-priced cigarettes 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 domestic
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 costs that may be significant to gross profit.
The Company's dark tobacco operation, CdF, maintains its
administrative and sales headquarters in Barcelona and has
operations in the major dark tobacco producing countries including
Colombia, the Dominican Republic, Indonesia, Northern Brazil,
Paraguay, and the Philippines.
Seasonality and Working Capital Practices
-----------------------------------------
The purchasing and processing activities of the Company's tobacco
business are seasonal. Flue-cured tobacco grown in the U.S. is
purchased generally during the five-month period beginning in July
and ending in November. U.S.-grown burley tobacco is purchased
usually from late November through January or February. Tobacco
grown in Brazil is purchased usually from January through June and
delivered from January to July. Other markets around the world
have similar purchasing periods, although at different times of the
year, and as the importance of these markets has grown, the
seasonality in the Company's business has decreased.
-5-
<PAGE>
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 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.
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, shipping, 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.
At the present time, there are three major global leaf tobacco
dealers, including the Company. The Company's principal
competitors are Universal Corporation ("Universal") and Standard
Commercial Corporation. The Company believes that it has a global
market share of approximately 35%. 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 leaf tobacco merchants, it has the
largest or second largest market share in Argentina, Brazil,
Greece, Guatemala, Malawi, Mexico, Spain, Turkey, the U.S. and
Zimbabwe as well as other countries. Universal's market share in
the U.S. and Africa is considerably greater than that of the
Company.
Research and Development
------------------------
The Company routinely cooperates with both its customers and the
manufacturers of the equipment used in its processing facilities to
improve processing technologies. However, no material amounts are
expended for research and development, and the Company holds no
material patents, licenses, franchises, or concessions.
Employees
---------
The Company's consolidated entities employed about 3,200 persons,
excluding seasonal employees, in its worldwide operations at June
30, 1999. In the U.S. operations, the Company's consolidated
entities employed about 540 employees at June 30, 1999. During
processing periods the seasonal employees in the U.S. would number
approximately 1,700. Most U.S. seasonal employees are covered by
collective bargaining agreements with two local labor unions. Most
of the full-time employees of the Company are not covered by
collective bargaining agreements. In the non-U.S. operations, the
Company's consolidated entities employed about 2,660 persons,
excluding 8,600 seasonal employees at June 30, 1999. The Company
considers its employee relations to be satisfactory.
Government Regulation and Environmental Compliance
--------------------------------------------------
See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations - Factors That May Affect Future
Results" for a discussion of government regulation and
environmental compliance.
Financial Information About Industry Segments, Foreign And
----------------------------------------------------------
Domestic Operations, And Export Sales
-------------------------------------
The Company is principally engaged in the tobacco business: the
purchasing, processing, selling and storing of leaf tobacco.
Financial information concerning the Company's reporting is
included in Note O 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."
- -6-
<PAGE>
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, and the tobacco operations are headquartered in
Farmville, North Carolina.
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 material properties used
in operations:
<TABLE>
<CAPTION>
AREA IN
LOCATION USE SQUARE FEET
_________________________________________________________
<S> <C> <C>
UNITED STATES
_________________
DANVILLE, VA. FACTORY/STORAGE 1,891,000
GREENVILLE, N.C. STORAGE 745,000
FARMVILLE, N.C. FACTORY/STORAGE 1,020,000
LAKE CITY, S.C. STORAGE 252,000
ROCKY MOUNT, N.C. FACTORY/STORAGE 239,000
SOUTH AMERICA
_________________
VERA CRUZ, BRAZIL FACTORY/STORAGE 1,364,000
SANTA CRUZ, BRAZIL FACTORY/STORAGE 1,396,000
VENANCIO AIRES, BRAZIL FACTORY/STORAGE 1,250,000
AFRICA
_________________
LILONGWE, MALAWI FACTORY/STORAGE 809,000
HARARE, ZIMBABWE FACTORY/STORAGE 1,080,000
MOROGORO, TANZANIA FACTORY/STORAGE 602,000
EUROPE
_________________
KARLSRUHE, GERMANY FACTORY/STORAGE 404,000
THESSALONIKI, GREECE FACTORY/STORAGE 197,000
SPARANISE, ITALY FACTORY/STORAGE 466,000
IZMIR, TURKEY FACTORY(2)/STORAGE 839,000
ASIA
_________________
LAMPHUN, THAILAND FACTORY/STORAGE 181,000
</TABLE>
- -7-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
-----------------
DIMON acquired Intabex, and certain assets of Tabex (Private)
Limited, an affiliate of Intabex, on April 1, 1997, for an initial
purchase price of $264.19 million, consisting of 1.7 million shares
of DIMON common stock, $140 million in ten year, 6.25% subordinated
convertible debentures, convertible at $28.77 a share (the
"Convertible Debentures"), and $86.12 million in cash, as reported
on Form 8-K filed April 16, 1997. As described below, contractual
purchase price reduction mechanisms have resulted in total
reductions of $75.9 million, for a net purchase price of $188.29
million.
The purchase agreements for DIMON's acquisition of Intabex and the
Tabex assets provided several purchase price adjustment mechanisms
relating to the pre-acquisition financial statements of Intabex and
the representations, warranties and covenants of Intabex negotiated
by DIMON as part of the acquisition. The Intabex stock purchase
agreement provided for a post-closing adjustment to the purchase
price based upon the net worth of Intabex as of March 31, 1997, as
determined by audited financial statements of Intabex that were
prepared in accordance with certain requirements of the stock
purchase agreement. In August 1997, the Intabex purchase price was
adjusted pursuant to this mechanism and reduced by $18.6 million to
$245.6 million. The adjustment was effected by the return of $16.7
million principal amount of Convertible Debentures plus certain
interest payments that had been made thereon, and $1.9 million in
cash. The adjustment was reflected in the Company's Form 10-Q for
the quarter ended September 30, 1997.
At the time of the post-closing settlement, one of the former
Intabex shareholders, Folium, Inc., also agreed to guarantee the
sales price by DIMON of certain tobacco inventory that had been
acquired as part of the Intabex acquisition. That guarantee
resulted in a further payment to DIMON by one of the sellers,
Folium, Inc., of $7.3 million in April 1998.
In addition to the post-closing audit and purchase price adjustment
and the inventory payments, the former Intabex shareholders also
agreed to indemnify DIMON, up to $90 million, for
misrepresentations or breaches in Intabex's representations,
warranties or covenants, including representations and warranties
as to Intabex's financial statements for periods prior to April 1,
1997. Convertible Debentures in the principal amount of $90
million (the "Set-Off Debentures") were segregated at the time of
the acquisition to secure any claims by DIMON for indemnification.
Following its analysis of post-closing adjustments, DIMON asserted
claims for indemnification for the full amount of the Set-Off
Debentures. The purchase agreements generally required that DIMON
assert such claims by September 30, 1998, the anticipated
completion of DIMON's second full audit cycle after the
acquisition. Consequently, on September 22, 1998, DIMON filed an
action in the United States District Court for the Southern
District of New York to enforce its right to indemnity.
On May 24, 1999, DIMON settled the above mentioned action. As part
of the settlement, $50 million of the Set-Off Debentures were
cancelled, and DIMON dismissed all of its claims in the action.
DIMON continues to have a right of set-off against the final $10
million in Set-Off Debentures until April 1, 2001, decreasing to $5
million in Set-off Debentures until April 1, 2002, to satisfy
certain additional claims for indemnification that it may discover.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
- -8-
<PAGE>
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of
June 30, 1999, 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.
<TABLE>
<CAPTION>
NAME AGE POSITION
____________________________________________________________________________
<S> <C> <C>
Brian J. Harker 49 President and Chief Executive Officer since
May 1999; prior thereto President of
DIMON Incorporated since March 1999; prior
thereto Executive Vice President and Chief
Financial Officer since October 1, 1996; prior
thereto Senior Vice President of
DIMON International, Inc.
Albert C. Monk III 59 Vice Chairman of the Board since March 1999;
prior thereto President of the Company
since 1994.
James A. Cooley 48 Senior Vice President-Chief Financial Officer
since February 1999; prior thereto Senior Vice
President-Treasurer since September 1997; prior
thereto Vice President-Treasurer.
Larry R. Corbett 53 Senior Vice President-Regional Executive North
America/Asia since March, 1999; prior
thereto Senior Vice President-Regional Executive
North America since March, 1998; prior thereto
Senior Vice President North American Region,
DIMON International.
Steve B. Daniels 41 Senior Vice President-Regional Executive Latin
America/Africa since March, 1999; prior
thereto Senior Vice President-Regional Executive
Latin America since March 1998; prior thereto
Senior Vice President Brazil/South America Region,
DIMON International.
Richard D. O'Reilly 50 Senior Vice President-Human Resources since May
1995; prior thereto Vice President-Human Resources
Sweetheart Corporation, Chicago, Illinois.
</TABLE>
- -9-
<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 amount of dividends declared per share for the
periods indicated.
<TABLE>
<CAPTION
DIMON
Common Stock
Dividends
High Low Declared
_______________________________________
<S> <C> <C> <C>
Fiscal Year 1999
Fourth Quarter...........$ 6.50 $ 3.25 $.05
Third Quarter............ 7.94 3.81 .09
Second Quarter........... 13.50 6.56 .09
First Quarter............ 12.31 8.69 .17
Fiscal Year 1998
Fourth Quarter...........$16.81 $10.50 $.17
Third Quarter............ 26.31 15.56 .17
Second Quarter........... 26.43 23.25 .17
First Quarter............ 26.50 21.50 .15
</TABLE>
As of June 30, 1999, there were 5,729 shareholders, including
approximately 4,557 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 "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Restrictions of
Dividends."
- -10-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
FIVE-YEAR FINANCIAL STATISTICS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts____________________________________________________________________________
and number of stockholders) 1999 1998 1997** 1996 1995
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Summary of Operations
Sales and other operating revenues $1,815,223 $2,171,803 $2,125,739 $1,770,166 $1,555,258
Restructuring, asset impairment and
merger costs........................... 25,932 - 3,864 15,858 25,214
Income (loss) before income (loss)
from discontinued operations
and extraordinary item................ (28,378) 41,829 72,568 37,120 (23,455)
Income (loss) from discontinued
operations, net of income taxes....... 22,912 1,820 4,605 2,750 (6,710)
Extraordinary item:
Partial recovery on Iraqi
receivable, net of income tax.......... - - - 1,400 -
___________________________________________________________________________________________________________________
Net Income (Loss)........................ (5,466) 43,649 77,173 41,270 (30,165)
___________________________________________________________________________________________________________________
Per Share Statistics
Basic Earnings Per Share:
Income (loss) before income (loss)
from discontinued operations
and extraordinary item................ $ (.63) $ .94 $ 1.69 $ .93 $ (.61)
Net income (loss)...................... (.12) .98 1.80 1.04 (.79)
Diluted Earnings Per Share:
Income (loss) before income (loss)
from discontinued operations
and extraordinary item................ (.63)* .94* 1.67 .92 *
Net income............................. (.12)* .98* 1.77 1.01 *
Dividends paid........................... .40 .66 .585 .54 .535
Book value............................... 8.91 9.48 9.21 7.46 6.27
___________________________________________________________________________________________________________________
Balance Sheet Data
Working capital.......................... $ 443,602 $ 706,384 $ 699,993 $ 422,342 $ 277,597
Total assets............................. 1,471,290 1,797,478 1,987,603 1,020,014 1,093,608
Revolving Credit Notes and
Other Long-Term Debt................... 458,180 673,699 702,826 390,871 292,528
Convertible Subordinated Debentures 73,328 123,328 123,328 - 56,370
Stockholders' equity..................... 396,539 421,930 408,263 315,848 238,806
___________________________________________________________________________________________________________________
Other Statistics
Common shares outstanding
at year end............................ 44,525 44,525 44,312 42,366 38,092
Number of stockholders
at year end (1)........................ 5,729 4,576 4,357 4,596 4,249
___________________________________________________________________________________________________________________
* Computation of loss per share is antidilutive for the year 1995. For 1998 and 1999, assumed conversion of
Convertible Debentures at the beginning of the period has an antidilutive effect on earnings per share.
** See Note C to the consolidated financial statements for a discussion of acquisition.
(1)Includes the number of Stockholders of record and non-objecting beneficial owners.
</TABLE>
- -11-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
General
-------
The Company believes that it is the world's second largest
independent purchaser and processor of leaf tobacco. The Company's
tobacco operating profits fluctuate from year to year, primarily
due to the effects of worldwide supply and demand on the Company's
inventory positions and government regulations. See "Factors that
May Affect Future Results - Variability of Annual and Quarterly
Financial Results."
On April 1, 1997, the Company acquired all the outstanding capital
stock of Intabex. The acquisition of Intabex was accounted for
under the purchase method of accounting and, accordingly, no
restatement has been made to the Company's historical financial
information. The financial information of the Company
prospectively includes that of Intabex for periods beginning after
March 31, 1997.
On August 12, 1998, the Company signed a definitive agreement to
sell the assets of its flower business for approximately $90
million in cash and assumed debt. As a result of the sale, the
flower business has been reflected as a discontinued operation in
the Company's income statements for all periods presented.
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
tobacco. However, local country operating costs, including the
purchasing and processing costs for tobacco, 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. See "Factors that May Affect Future Results -
International Business Risks" and Note P to the Company's
Consolidated Financial Statements for the year ended June 30, 1999.
In fiscal 1995, the Company initiated a restructuring plan designed
to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve
operating efficiencies and increase regional unit accountability.
This initiative continued through 1997 and resulted in the
recognition of various charges. Those charges for continuing
operations before tax totaled $3.9 million in 1997, $15.9 million
in 1996 and $25.2 million in 1995.
On March 22, 1999, the Company announced that it planned to close
its tobacco processing plant in Kinston, North Carolina, reduce
staffing at its processing facility in Farmville, North Carolina,
and substantially downsize its leaf tobacco buying department in
the United States. These actions are the result of smaller tobacco
crops anticipated in 1999 and beyond. The Company also planned to
close a processing facility and sales office in Brazil and a
processing facility in Germany. As of June 30, 1999, the Company
has recognized $25.9 million in pre-tax charges related to this
restructuring and asset impairment, of which approximately $20.8
million is non-cash.
During the year ended June 30, 1999, the Company severed
approximately 200 employees, primarily in the United States, and
expensed $5.1 million for severance costs. As of June 30, 1999,
severance paid out totaled $1.1 million. Cash outlays for
severance to be paid out in fiscal 2000 are approximately
$3.7 million.
Asset writedowns incurred during the year in connection with the
restructuring included a charge of $10.7 million associated with
the closing and planned disposal of property, plant and equipment
in the facilities mentioned above.
In addition, global overcapacity of tobacco caused management to
believe that certain assets should be analyzed for impairment. The
analysis, based on undiscounted cash flows, resulted in an
impairment writedown of $10.1 million for assets which have been
identified as available-for-sale by the Company in
- -12-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
accordance with Financial Accounting Standards Board Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," (SFAS 121). In accordance
with SFAS 121, when an impairment writedown is required, the
related assets are adjusted to their estimated fair value. In
determining fair value, the Company considered the range of
preliminary purchase prices being discussed with potential buyers
as well as third-party appraisals.
The estimated market value of the assets written down as part of
the restructuring and asset impairment costs, consisting primarily
of buildings and machinery and equipment, is approximately $24.2
million.
Results of Operations
---------------------
The following table expresses items in the Statements of
Consolidated Income and Comprehensive 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
June 30
__________________________________
1999 1998 1997*
==================================
<S> <C> <C> <C>
Sales and other operating revenues............. 100.0% 100.0% 100.0%
Cost of goods and services and expenses........ 91.4 88.0 87.1
Selling, administrative and general expenses... 6.5 5.5 4.8
Restructuring and asset impairment costs....... 1.4 - .2
Recovery from litigation settlement............ (.9) - -
__________________________________
Operating income............................... 1.6 6.5 7.9
Interest expense............................... (3.6) (3.9) (2.4)
__________________________________
Income (loss) from continuing operations
before income taxes and income from
discontinued operations...................... (2.0) 2.6 5.5
Income taxes................................... .5 (.7) (2.1)
Income from discontinued operations............ 1.2 .1 .2
__________________________________
Net income..................................... (.3) 2.0 3.6
==================================
* Restated for discontinued operations.
</TABLE>
- -13-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Comparison of the Year Ended June 30, 1999 to the Year
Ended June 30, 1998
------------------------------------------------------
The Company's sales and other operating revenues were $1.815
billion, a decrease of 16.4% from $2.172 billion in 1998 primarily
due to lower quantities of foreign and U.S. grown tobaccos, lower
prices of U.S. and foreign grown tobaccos and lower service and
processing revenues in both U.S. and foreign operations. The lower
quantities and lower average prices are both results of a worldwide
oversupply of tobacco. Quantities of U.S. grown tobacco decreased
7.5% from 1998 and quantities of foreign grown tobacco decreased
9.1% from 1998. The changes in quantities accounted for decreases
of $56.6 million and $99.5 million respectively. The decreased
quantities of foreign grown tobaccos were primarily a result of
decreased volumes in Europe and South America, partially offset by
higher volumes of African grown tobacco. Average prices of U.S.
grown tobacco declined 2.0% and average prices of foreign tobacco
declined 9.0%. The impact of the change in U.S. prices was $14.0
million and the impact of the change in prices of foreign grown
tobacco was $126.2 million. Prices of foreign grown tobacco have
also decreased due to declines in the purchase price of tobacco.
Decreases in service and processing revenue accounted for a
decrease of $26.9 million on foreign operations and $21.8 million
on U.S. operations. Foreign service and processing revenues
decreased primarily due to lower fertilizer sales to farmers. The
decrease in U.S. service and processing revenue was primarily due
to lower volumes processed for the U.S. stabilization program.
Other decreases in operating revenues from 1998 to 1999 are related
to items such as interest income, gain on the sale of investments,
and recovery of tax and license items.
The cost of sales and expenses decreased $256 million or 12.6% from
$2.032 billion in 1998 to $1.776 billion in 1999. Most of the
decrease is the direct result of lower volumes sold and lower
average prices. In fiscal 1999, the Company's gross profit on
sales to three of its larger customers was down approximately $27.5
million from fiscal 1998. Operating margin, as a percentage of
sales, before restructuring and asset impairment costs and recovery
from litigation settlement, decreased from 6.5% in 1998 to 2.1% in
1999. The erosion in margins from 1998 to 1999 was primarily the
result of liquidation of old crop tobaccos during a period of
depressed market prices.
Restructuring and asset impairment costs were $25.9 million in
1999. These costs included $20.8 million related to facilities and
$5.1 million for personnel related costs.
Interest expense for 1999 decreased $17.7 million from $83.8
million in 1998 to $66.1 million in 1999 of which $16.3 million was
due to lower borrowings and $1.4 million was due to lower average
rates.
The effective tax rate for 1999 was 23.9% compared to 26.3% in 1998
primarily due to changes in the distribution of taxable income
between taxing jurisdictions.
- -14-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Comparison of the Year Ended June 30, 1998 to the Year
Ended June 30, 1997
------------------------------------------------------
The Company's sales and other operating revenues from continuing
operations were $2.172 billion, an increase of 2.2% from $2.126
billion in 1997, primarily due to higher volumes of foreign grown
tobacco, offset partially by lower volumes from the United States
and lower prices on foreign grown tobaccos. Higher volumes of
foreign grown tobacco accounted for increases of $296.3 million.
Increases in quantities were principally from South America and
Europe. The volume of foreign grown tobacco has increased 27.5%
over the prior fiscal year primarily due to the inclusion of a full
year of Intabex. Lower volumes in the United States resulted in a
$150.6 million decrease in sales, and lower prices of foreign grown
tobacco resulted in a $106.3 million decrease in sales. The
volume of U.S. grown tobacco has decreased 16.7% from the prior
fiscal year. The decrease in quantities of U.S. grown tobacco is
primarily the result of decreased orders from domestic cigarette
manufacturers due to uncertainties surrounding settlement of
tobacco legislation and potentially higher excise taxes on
cigarettes sold in the U.S. The decrease in prices of foreign
grown tobacco was primarily due to product mix and decreases in
purchase prices of tobacco. The Company has also been negatively
impacted by devaluation of currencies in certain Asian countries
which has resulted in delay or cancellation of some shipments of
tobacco. The Company believes that the risks of further delays in
shipments and the realization of lower average prices could
continue in future periods.
The cost of sales and expenses from continuing operations before
restructuring and asset impairment costs increased 3.9% from $1.955
billion in 1997 to $2.032 billion in 1998. Operating margin
(operating income) as a percentage of sales before restructuring
decreased from 8.1% in 1997 to 6.5% in 1998. The decrease in
operating margins was due primarily to $10 million in excess costs
associated with start-up operations in Tanzania and $6.9 million in
inventory writedowns. There were also increases in personnel and
professional expenses of $10.8 million and depreciation and
amortization of $6.3 million. Amortization expense related to the
Intabex acquisition increased from $.9 million in 1997 to $4.0
million for a full year in 1998.
Restructuring charges in fiscal 1997 were $3.9 million and related
principally to employee separations.
Interest expense in 1998 increased $33.3 million, of which
approximately $44 million was due to higher average borrowings,
offset partially by an approximate $11 million decrease due to
lower average rates.
The effective tax rate for 1998 was 26.3% compared to 38% in 1997.
The decrease in rate was due to changes in the distribution of
income between tax jurisdictions.
Income from discontinued operations, net of tax, has decreased $2.8
million, primarily due to a $3 million pre-tax charge in connection
with the reorganization of the Company's German flower operations.
- -15-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Liquidity and Capital Resources
-------------------------------
The following table is a summary of items from the Consolidated
Balance Sheet and the Statement of Consolidated Cash Flows.
<TABLE>
<CAPTION>
Years Ended June 30
_______________________________________
(in thousands, except for current ratio) 1999 1998 1997*
_________________________________________________________________________________
<S> <C> <C> <C>
Cash and cash equivalents.................$ 21,451 $ 18,729 $ 107,131
Net trade receivables..................... 295,593 319,295 396,156
Inventories and advances on
purchases of tobacco.................... 571,534 804,817 835,626
Total current assets...................... 922,500 1,208,890 1,371,479
Notes payable to banks.................... 297,376 282,470 350,263
Accounts payable.......................... 94,169 96,483 143,927
Total current liabilities................. 478,898 502,506 671,486
Current ratio............................. 1.9 to 1 2.4 to 1 2.0 to 1
Revolving Credit Notes and Other
Long-Term Debt.......................... 333,180 548,699 577,826
Convertible Subordinated Debentures....... 73,328 123,328 123,328
Senior Notes.............................. 125,000 125,000 125,000
Stockholders' equity...................... 396,539 421,930 408,263
Purchase of property and equipment........ 32,156 61,168 60,860
Acquisition of subsidiary,
net of cash acquired.................... - - 6,382
Proceeds from sale of property
and equipment........................... 3,843 24,597 8,853
Depreciation and amortization............. 45,141 43,476 37,191
_______________________________________
* Not restated for discontinued operations
</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 less 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. The Company also prefinances tobacco crops in
certain foreign countries including Argentina, Brazil, Dominican
Republic and Indonesia by making cash advances to farmers prior to
and during the growing season.
The Company's working capital decreased from $706 million at June
30, 1998, to $444 million at June 30, 1999. The Company's current
ratio was 1.9 to 1 and 2.4 to 1 at June 30, 1999 and June 30, 1998,
respectively. At June 30, 1999, current assets had decreased
$286.4 million and current liabilities had decreased $23.6 million
from June 30, 1998. The $286.4 million decrease in current assets
is primarily due to the $233.3 million decrease in inventories and
advances on purchases of tobacco and a $56.6 million combined
decrease in net trade receivables and net assets of discontinued
operations. The $23.6 million decrease in current liabilities is
primarily due to a $39.8 million combined decrease in advances from
customers, accounts payable and accrued expenses, partially offset
by a $14.9 million increase in notes payable to banks. The
decrease in inventories and advances on purchases of tobacco is the
result of the Company's efforts to liquidate inventories in order
to de-leverage its balance sheet.
- -16-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Liquidity and Capital Resources (continued)
-------------------------------
Cash flows from operating activities increased to $181.5 million in
1999 as compared to $57.3 million in 1998 and $25.3 million in
1997. The increases in cash flows provided by operating activities
in 1999 over 1998 were due to changes in current assets and
liabilities, primarily the decrease in inventories and advances to
suppliers, partially offset by the decrease in net income. The
increase in 1998 over 1997 was primarily due to fluctuations in
current assets and liabilities, offset partially by the change in
net income. Cash flows provided by investing activities increased
to $43.7 million in 1999 as compared to a usage of $37.1 million in
1998 and a usage of $43.2 million in 1997. The increased cash from
investing activities in 1999 compared to 1998 is primarily due to
proceeds from the sale of property and equipment of discontinued
operations, proceeds from subsidiary sales and lower purchases of
property and equipment, offset partially by lower proceeds from the
sale of property and equipment. The decrease in usage of cash for
investing activities in 1998 compared to 1997 is primarily due to
proceeds from the sale of property and equipment. In 1999, $220.0
million was used by financing activities compared to $108.3 million
used in 1998 and $71.1 million provided in 1997. The increased use
by financing activities in 1999 over 1998 is primarily due to net
debt repayments. The increased use by financing activities in 1998
over 1997 is primarily due to net debt repayments in 1998 compared
to net additional borrowings in 1997. Additionally, in the fourth
quarter of fiscal 1999, the Company cancelled $50.0 million of
Convertible Subordinated Debentures as a result of the Intabex
Settlement as described in Note C to the Consolidated Financial
Statements. Also, see the discussion of refinancing activities
below.
At June 30, 1999, the Company had seasonally adjusted lines of
credit of $855.9 million. At June 30, 1999, the Company had
borrowed $397.4 million under its $855.9 million lines of credit
with a weighted average interest rate of 7.0%. At June 30, 1999,
the unused short-term lines of credit amounted to $359.6 million.
Total maximum outstanding short-term borrowings during the year
ended June 30, 1999 were $559.0 million. At June 30, 1999, the
Company had $49.1 million of letters of credit outstanding and an
additional $49.8 million of letters of credit lines available.
To ensure long-term liquidity, DIMON entered into a $300 million
New Credit Facility, effective June 29, 1999, with a group of
banks which replaced DIMON's $500 million credit facility. The
Company had $200 million of borrowings under this agreement at
June 30, 1999. The Company used the New Credit Facility to
classify $100 million of working capital loans to Revolving Credit
Notes at June 30, 1999. It is the Company's intent to finance at
least $300 million 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, including certain borrowing base
restrictions, and restrict acquisitions. The Company continuously
monitors its compliance with these covenants. The New Credit
Facility's initial term expires on June 29, 2001, and, subject to
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 (7.75% at June 30, 1999). The
Company pays a commitment fee of 1% 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.
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, 1999, the Company had no material capital expenditure
commitments. The Company believes that these sources of funds are
sufficient to fund the Company's anticipated needs for 2000. There
can be no assurance, however, that other alternative sources of
capital will be available in the future or, if available, that any
such alternative sources will be available on favorable terms.
Reliance on available credit presents financial risk to the Company
going forward.
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.
However, most operating assets are of long-term and continuing
benefit and the Company has generally purchased these assets.
- -17-
<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 they do business through wholly
owned subsidiaries and through affiliates. The Company makes a
comprehensive review of the income tax requirements of each of its
operations, files appropriate returns and makes appropriate income
tax planning analyses directed toward the minimization of its
income tax obligations in these countries. Appropriate income tax
provisions are determined on an individual subsidiary level and at
the corporate level on both an interim and annual basis. These
processes are followed using an appropriate combination of internal
staff at both the subsidiary and corporate levels as well as
independent outside advisors in review of the various tax laws and
in compliance reporting for the various operations.
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 June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which provides a
comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. In June 1999,
the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133," which delays implementation of SFAS No.
133 until fiscal years beginning after June 15, 2000. This
statement will be effective for the Company's September 30, 2000,
interim financial statements. The Company does not expect this
statement to have a material impact on the Company's financial
position or results of operations upon adoption.
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 2000 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.
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 significant 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.
- -18-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Taxes, Legislation, Regulation, Litigation and Other Matters
------------------------------------------------------------
Regarding Tobacco and Smoking
-----------------------------
The tobacco industry, both in the United States and abroad, has
faced, and continues to face, a number of issues that may reduce
the consumption of cigarettes and adversely affect the business,
sales volume, results of operations, cash flows and financial
position of the Company.
These issues, some of which are more fully discussed below,
include:
* legislation or other governmental action seeking to ascribe
to the tobacco industry responsibility and liability for the
purported adverse health effects associated with both
smoking and exposure to environmental tobacco smoke
("ETS");
* increased smoking and health litigation;
* retail price increases in the United States related to the
settlement of certain tobacco litigation against consumer
tobacco-product manufacturers;
* actual and proposed excise tax increases on consumer tobacco
products;
* the issuance of final regulations by the United States Food
and Drug Administration (the "FDA") that, if upheld by the
courts, would regulate cigarettes as "drugs" or "medical
devices";
* governmental and grand jury investigations;
* actual and proposed requirements regarding disclosure of
cigarette ingredients and other proprietary information, as
well as the testing and reporting of the yields of "tar,"
nicotine and other constituents found in cigarette smoke;
* governmental and private bans and restrictions on smoking;
* actual and proposed price controls and restrictions on
imports in certain jurisdictions outside the United States;
* actual and proposed restrictions on tobacco manufacturing,
marketing, advertising and sales (including two European
Union directives that, if implemented, will (i) ban
virtually all forms of tobacco advertising and sponsorship
in the European Union other than at the retail point of
sale, and (ii) abolish duty-free tobacco sales among member
states of the European Union);
* proposed legislation to eliminate the U.S. tax deductibility
of tobacco advertising and promotional costs;
* the diminishing social acceptance of smoking and increased
pressure from anti-smoking groups and unfavorable press
reports; and
* other tobacco legislation that may be considered by
Congress, the states and other countries.
In November 1998, certain United States tobacco product
manufacturers entered into a Master Settlement Agreement (the
"MSA") with 46 states, the District of Columbia, the Commonwealth
of Puerto Rico, Guam, the United States Virgin Islands, American
Samoa and the Northern Marianas to settle asserted and unasserted
health care cost recovery and other claims. These manufacturers
had previously settled similar claims brought by Mississippi,
Florida, Texas and Minnesota (together with the MSA, the "State
Settlement Agreements") and an ETS smoking and health class action
brought on behalf of airline flight attendants.
- -19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Taxes, Legislation, Regulation, Litigation and Other Matters
------------------------------------------------------------
Regarding Tobacco and Smoking (continued)
-----------------------------
Key provisions of the MSA are as follows:
* payments of $206 billion over 25 years from the cigarette
manufacturers to the states based on each state's Medicaid
population (Medicaid expenses to treat residents have been
the basis for many of the claims against the cigarette
manufacturers);
* marketing and advertising restrictions, including bans on
cartoon characters, point-of-sale advertising, billboards,
bus and taxi placards and sponsorships of sporting events by
brand names;
* disband the Tobacco Institute, the Council for Tobacco
Research and the Council for Indoor Air Research;
* elimination of vending machine sales and requirements that
all tobacco products be behind a counter; and
* payments of $1.7 billion for educational efforts about the
dangers of smoking and discouraging youth smoking.
Lastly, the State Settlement Agreements also include provisions
relating to advertising and marketing restrictions, public
disclosure of certain industry documents, limitations on challenges
to certain tobacco control and underage use laws, lobbying
activities and other provisions. It is not possible to predict the
extent to which these actions might adversely affect the Company's
business.
The leading cigarette manufacturers also face hundreds of lawsuits
brought throughout the United States and, to a lesser extent, the
world. Such suits have been brought on behalf of (i) individuals
and classes of individuals alleging personal injury and (ii)
federal, state and local governments seeking recovery of health
care costs allegedly caused by cigarette smoking, as well as other
groups such as unions, health maintenance organizations, federal
and state taxpayers, Native American tribes and others. Damages
claimed in some of the smoking and health class actions and health
care costs recovery cases range into the billions of dollars.
Plaintiffs continue to file more such suits. Most recently, on
September 22, 1999, the United States Department of Justice filed
a lawsuit against the leading cigarette manufacturers, seeking to
recover billions of dollars in alleged federal smoking-related
health care costs.
It is not possible to predict the outcome of the litigation pending
against the U.S. cigarette manufacturers. Litigation is subject to
many uncertainties, and it is possible that some of these actions
could be decided unfavorably. An unfavorable outcome or settlement
of a pending smoking and health or health care cost recovery case
could encourage the commencement of additional, similar litigation.
Adverse legislative, regulatory, political and other developments
concerning cigarette smoking and the tobacco industry continue to
receive widespread media attention. These developments may
negatively affect the perception of potential judges and juries
with respect to the tobacco industry, possibly to the detriment of
certain pending litigation, and may prompt the commencement of
additional, similar litigation.
In recent years, various members of Congress have introduced
legislation, some of which has been the subject of hearings or
floor debate, that would subject cigarettes to various regulations
under the Department of Health and Human Services or regulation
under the Consumer Products Safety Act, establish anti-smoking
educational campaigns or anti-smoking programs, or provide
additional funding for governmental anti-smoking activities,
further restrict the advertising of cigarettes, including requiring
additional warnings on packages and in advertising, provide that
the Federal Cigarette Labeling and Advertising Act and the Smoking
Education Act could not be used as a defense against liability
under state statutory or common law, allow state and local
governments to restrict the sale and distribution of cigarettes,
- -20-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Taxes, Legislation, Regulation, Litigation and Other Matters
------------------------------------------------------------
Regarding Tobacco and Smoking (continued)
-----------------------------
and further restrict certain advertising of cigarettes and
eliminate or reduce the tax deductibility of tobacco advertising.
It is not possible to determine the outcome of the FDA regulatory
initiative or the related litigation discussed above, or to predict
what, if any, other foreign or domestic governmental legislation or
regulations will be adopted relating to the manufacturing, advertising,
sale or use of cigarettes, or to the tobacco industry generally.
However, if any or all of the foregoing were to be implemented, the
business, volume, results of operations, cash flows and financial
position of the Company could be materially adversely affected.
Reports with respect to the alleged harmful physical effects of
cigarette smoking have been publicized for many years, and the
sale, promotion and use of cigarettes continue to be subject to
increasing governmental regulation. Since 1964, the Surgeon General
of the United States and the Secretary of Health and Human Services
have released a number of reports linking cigarette smoking with a
broad range of health hazards, including various types of cancer,
coronary heart disease and chronic lung disease, and recommending
various governmental measures to reduce the incidence of smoking.
The 1988, 1990, 1992 and 1994 reports focus upon the "addictive"
nature of cigarettes, the effects of smoking cessation, the
decrease in smoking in the United States, the economic and
regulatory aspects of smoking in the Western Hemisphere, and
cigarette smoking by adolescents, particularly the "addictive"
nature of cigarette smoking in adolescence.
A number of foreign nations also have 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 other countries. It is impossible to
predict the extent to which these and any additional restrictions
might affect the Company's business.
In addition, from time to time, the leaf tobacco industry has been
the subject of government investigations regarding trade practices.
In September 1998, the Company and several of its employees
received subpoenas relating to an investigation by the Antitrust
Division of the United States Department of Justice into certain
buying practices alleged to have occurred in the industry. The
Company is cooperating fully with this investigation.
Due to the present litigation, regulatory and legislative
environment, a substantial risk exists that past growth trends in
tobacco sales may not continue and that existing sales may decline.
However, it is not possible to predict the extent to which any of
these issues may affect the Company's business.
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 29%
and 32% of the Company's consolidated tobacco sales for 1999 and
1998 were to two companies. See Note O to the Company's
Consolidated Financial Statements for the year ended June 30, 1999,
included herein.
- -21-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
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 P to the Company's Consolidated
Financial Statements for the year ended June 30, 1999, 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
significant investments in its purchasing, processing and exporting
operations in southern Brazil, Indonesia, Thailand and the African
countries of Malawi, Tanzania and Zimbabwe. In recent years, these
countries' economic problems have received wide publicity related
to devaluation of the local currency and inflation. While
devaluation can affect the Company's purchase 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 these
countries.
Asian and Eastern European Customers
----------------------------------
As noted previously, tobacco sales are denominated primarily in
U.S. dollars. However, the devaluation of certain Asian currencies
has resulted in reduced purchasing power from certain customers in
these areas. The Company continuously evaluates the credit risk of
its customers. However, the Company may incur a loss of business
as a result of the devaluation of these currencies.
Restrictions on Dividends
-------------------------
Under the terms of the Indenture, dated May 29, 1996, between the
Company and Crestar Bank, as trustee (the "Indenture"), relating
to the Company's 8 7/8% Senior Notes due 2006 (the "Notes"), the
Company will not be permitted to make certain restricted payments,
including cash dividends on 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 consolidated net income 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. At June 30, 1999 and 1998, the
Company was permitted to make restricted payments, including cash
dividends on its Common Stock, of up to $32.4 million and $73.5
million, respectively.
- -22-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (continued)
-----------------------------------
Year 2000 Issue
---------------
DIMON's management has long recognized the importance of early
preparation and planning for the upcoming millennium change. The
Company's Y2K project began in 1996 and is presently being managed
by a "project office" that coordinates the efforts of operations
around the world. This organization will remain in place until all
critical millennium dates have been passed and the corporate Y2K
objectives have been met -- compliance and readiness at every
location well in advance of January 1, 2000, leading to business
continuity and undisturbed customer service.
To date, DIMON has spent $3.4 million on the implementation of a
new integrated manufacturing and accounting application for its
U.S. operations. This project was completed in June of 1999,
finalizing Year 2000 compliance of all U.S.-based systems. In
addition to this system implementation, over $3.5 million has been
spent over the past three years on the upgrading of network and
computer equipment across all locations. This effort has created a
100% client-server based environment throughout DIMON that is fully
Y2K compliant.
The Company's critical applications include its manufacturing,
inventory and financial systems at each location. Assessments,
remediation and testing efforts have been conducted at all Company
locations on these systems, tobacco processing equipment, network
hardware and software, and general facilities. These efforts have
been completed at most sites, which have been certified as
compliant. A checklist of remediation tasks has been assembled for
the select remaining locations. These tasks are scheduled for
completion by October 1, 1999. Attention has now turned toward
the development of contingency plans for all critical business
processes at each location. Should any of these processes be
impacted as a result of system, equipment or business-partner
failure, action plans are expected to be in place to immediately
address the situation.
DIMON has communicated and will continue to communicate with its
suppliers, financial institutions, customers and other key business
partners on their Y2K efforts. All systems that electronically
link the Company with these businesses have passed all Y2K related
tests. There can be no assurance that these business partners will
be fully compliant or that problems they may encounter will have no
adverse effect on their ongoing operations. DIMON believes that
its risk is minimized, however, because DIMON's business is
positioned near the beginning of the tobacco supply chain, with
little dependence on technology among its primary suppliers.
No company can provide complete assurance that it has been able to
identify all Year 2000 issues prior to the problems manifesting
themselves. It is the opinion of DIMON management that the Company
is taking adequate and appropriate action to address Year 2000
issues and does not expect the financial impact of being Year 2000
compliant to be material to the Company's consolidated financial
position, results of operations or cash flows.
The EURO
--------
Eleven countries in the European Union began the conversion from
their local currencies to the "Euro" on January 1, 1999. As of
that date, the exchange rate of the affected currencies was
permanently fixed against the Euro. However, the new currency will
not be placed in circulation until 2002.
The underlying intent of this change is to create a strong, hard
currency for the European Union that will be a competitor to the
U.S. dollar for international trading and financial transactions.
The Euro will eliminate cross-border exchange risk within the
adopting countries and may significantly reduce many foreign
exchange exposures for multinational companies.
The Company modified certain accounting systems to record both the
Euro and the local currency to deal with the conversion. The
Company has studied the implications of the overall Euro conversion
and does not expect the conversion, once complete, to have a
material impact on the Company's consolidated financial condition
or results of operations.
- -23-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts) 1999 1998 1997
===================================================================================================
<S> <C> <C> <C>
Sales and other operating revenues.......................$1,815,223 $2,171,803 $2,125,739
Cost of goods and services sold.......................... 1,657,984 1,911,843 1,851,547
_________________________________________
157,239 259,960 274,192
Selling, administrative and general expenses............. 117,826 120,202 103,705
Restructuring and asset impairment costs................. 25,932 - 3,864
Recovery from litigation settlement...................... (15,353) - -
_________________________________________
Operating Income....................................... 28,834 139,758 166,623
Interest Expense......................................... 66,123 83,769 50,518
_________________________________________
Income (loss) from continuing operations before
income taxes, equity in net income (loss) of
investee companies and income
from discontinued operations........................... (37,289) 55,989 116,105
Income taxes (benefit)................................... (8,923) 14,725 44,063
_________________________________________
Income (loss) from continuing operations before
equity in net income (loss) of investee companies
and income from discontinued operations................ (28,366) 41,264 72,042
Equity in net income (loss) of investee
companies (net of income taxes)........................ (12) 565 526
_________________________________________
Income (loss) from continuing operations
before income from discontinued operations............. (28,378) 41,829 72,568
Discontinued business:
Income (loss) from operations, net of income taxes..... (841) 1,820 4,605
Gain on disposal, net of $4,288 tax.................... 23,753 - -
_________________________________________
NET INCOME (LOSS) $ (5,466) $ 43,649 $ 77,173
=========================================
Other Comprehensive Income:
Net Income (Loss)......................................$ (5,466) $ 43,649 $ 77,173
Increase in Equity Currency Conversion................. (2,448) (3,334) (2,172)
Increase (decrease) in Additional Minimum
Pension Liability.................................... 333 (498) 505
_________________________________________
TOTAL COMPREHENSIVE INCOME (LOSS) $ (7,581) $ 39,817 $ 75,506
=========================================
Basic Earnings Per Share
Income (loss) from continuing operations before
discontinued operations............................. $ (.63) $.94 $1.69
Discontinued operations................................ .51 .04 .11
_________________________________________
Net Income (Loss)....................................... $(.12) $.98 $1.80
=========================================
Diluted Earnings Per Share
Income (loss) from continuing operations
before discontinued operations...................... $(.63) $.94 $1.67
Discontinued operations............................... .51 .04 .10
_________________________________________
Net Income (Loss)...................................... $(.12) $.98 $1.77
=========================================
See notes to consolidated financial statements
</TABLE>
- -24-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
___________________________
(in thousands) 1999 1998
============================================================================
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................$ 21,451 $ 18,729
Notes receivable............................... 4,744 5,600
Trade receivables, net of allowances
(1999 - $3,800, 1998 - $2,799)................ 295,593 319,295
Inventories:
Tobacco....................................... 417,620 588,143
Other......................................... 23,059 24,483
Advances on purchases of tobacco............... 130,855 192,191
Recoverable income taxes....................... 9,851 2,748
Prepaid expenses and other assets.............. 19,327 24,794
Net assets of discontinued operations.......... - 32,907
___________________________
Total current assets....... 922,500 1,208,890
___________________________
Investments and other assets
Equity in net assets of investee companies..... 6,119 6,022
Other investments.............................. 11,740 9,896
Notes receivable............................... 7,404 9,313
Other.......................................... 7,059 13,796
___________________________
32,322 39,027
___________________________
Intangible assets
Excess of cost over related net assets
of businesses acquired........................ 171,596 179,589
Production and supply contracts................ 19,091 26,442
Pension asset.................................. 3,982 3,555
___________________________
194,669 209,586
___________________________
Property, plant and equipment
Land........................................... 19,772 20,085
Buildings...................................... 180,621 174,310
Machinery and equipment........................ 208,498 237,368
Allowances for depreciation.................... (109,145) (113,663)
___________________________
299,746 318,100
___________________________
Deferred taxes and other deferred charges........ 22,053 21,875
___________________________
$1,471,290 $1,797,478
===========================
</TABLE>
- -25-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
___________________________
(in thousands) 1999 1998
============================================================================
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks and others..............$ 297,376 $ 282,470
Accounts payable:
Trade......................................... 70,988 80,994
Officers and employees........................ 6,135 7,664
Other......................................... 17,046 7,825
Advances from customers........................ 33,342 50,521
Accrued expenses............................... 44,695 57,294
Income taxes................................... 2,277 5,150
Long-term debt current......................... 7,039 10,588
___________________________
Total current liabilities.... 478,898 502,506
___________________________
Long-term debt
Revolving Credit Notes and Other............... 333,180 548,699
Convertible Subordinated Debentures............ 73,328 123,328
Senior Notes................................... 125,000 125,000
___________________________
531,508 797,027
___________________________
Deferred credits
Income taxes................................... 24,033 36,723
Compensation and other benefits................ 39,786 38,812
___________________________
63,819 75,535
___________________________
Minority interest in subsidiaries................ 526 480
___________________________
Commitments and contingencies.................... - -
___________________________
Stockholders' equity
Preferred Stock - no par value: 1999 1998
Authorized shares.......... 10,000 10,000
Issued shares.............. - - - -
Common Stock - no par value: 1999 1998
Authorized shares.......... 125,000 125,000
Issued shares.............. 44,525 44,525 182,143 182,143
Retained earnings.............................. 220,540 243,816
Accumulated other comprehensive income......... (6,144) (4,029)
___________________________
396,539 421,930
___________________________
$1,471,290 $1,797,478
==========================
See notes to consolidated financial statements
</TABLE>
- -26-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Accumulated
Other Comprehensive Income
--------------------------
Additional
Equity- Minimum Total
(in thousands, Common Retained Currency Pension Stockholders'
except per share amounts) Stock Earnings Conversions Liability Equity
=====================================================================================================
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1996................. $136,959 $177,419 $ 2,842 $(1,372) $315,848
Net income for the year................ 77,173 77,173
Cash dividends - $.585
per share............................ (25,071) (25,071)
Conversion of foreign
currency financial
statements........................... (2,172) (2,172)
Reduction in the minimum
pension liability.................... 505 505
Stock options exercised................ 3,910 3,910
Shares issued in purchase
of Intabex........................... 38,070 38,070
_____________________________________________________________
Balance, June 30, 1997................. $178,939 $229,521 $ 670 $ (867) $408,263
Net income for the year................ 43,649 43,649
Cash dividends - $.66
per share............................ (29,354) (29,354)
Conversion of foreign
currency financial
statements........................... (3,334) (3,334)
Increase in the minimum
pension liability.................... (498) (498)
Stock options exercised................ 3,204 3,204
_____________________________________________________________
Balance, June 30, 1998................. $182,143 $243,816 $(2,664) $(1,365) $421,930
Net income (loss) for the year......... (5,466) (5,466)
Cash dividends - $.40
per share............................ (17,810) (17,810)
Conversion of foreign
currency financial
statements........................... (2,448) (2,448)
Reduction in the minimum
pension liability.................... 333 333
_____________________________________________________________
Balance, June 30, 1999............... $182,143 $220,540 $(5,112) $(1,032) $396,539
======================================================================================================
See notes to consolidated financial statements
</TABLE>
- -27-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
STATEMENT OF CONSOLIDATED CASH FLOWS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts) 1999 1998 1997
=================================================================================================
<S> <C> <C> <C>
Operating activities
Net Income (Loss)......................................$ (5,466) $ 43,649 $ 77,173
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization......................... 45,141 43,476 37,191
Restructuring and asset impairment charges............ 25,932 - -
Recovery from litigation settlement.................... (15,353) - -
Deferred items........................................ (9,643) 59 9,440
Loss (gain) on foreign currency transactions.......... 1,187 (221) 3,655
Gain on disposition of fixed assets................... (631) (1,394) (3,697)
Changes in discontinued operations.................... 1,023 (6,540) -
Gain on disposition of discontinued operations........ (23,753) - -
Undistributed (earnings) loss of investees............ 12 (564) (526)
Dividends received from investees..................... - 608 -
Income (loss) applicable to minority interest......... (14) - 124
Bad debt expense...................................... 954 274 89
Decrease (increase) in accounts receivable............ 3,452 35,992 (96,072)
Decrease in inventories and advances on purchases
of tobacco.......................................... 219,182 48,427 49,673
Increase in recoverable taxes......................... (6,655) (952) (1,497)
Decrease (increase) in prepaid expenses............... (5,069) (3,872) 12,450
Decrease in accounts payable and accrued expenses..... (21,470) (58,297) (81,055)
Decrease in advances from customers................... (16,674) (23,801) (5,724)
Increase (decrease) in income taxes................... (10,064) (19,069) 23,381
Other................................................. (596) (438) 694
________________________________________
Net cash provided by operating activities........... 181,495 57,337 25,299
________________________________________
Investing activities
Purchase of property and equipment..................... (32,156) (61,168) (60,860)
Proceeds from sale of property and equipment........... 3,843 24,597 8,853
Proceeds from sale of property and equipment
of discontinued operations.......................... 37,637 - -
Payments on notes receivable and receivables
from investees...................................... 5,072 5,270 2,348
Issuance of notes receivable........................... (3,902) (1,427) (12,869)
Proceeds from or (advances) for other
investments and other assets........................ 4,787 (2,133) 13,109
Purchase of minority interest in subsidiaries.......... - - (118)
Acquisition of subsidiary, net of cash acquired........ - - 6,382
Purchase of remaining interest in investee............. - (2,200) -
Proceeds from sale of discontinued operations.......... 28,435 - -
________________________________________
Net cash provided (used) by investing activities.... 43,716 (37,061) (43,155)
________________________________________
</TABLE>
- -28-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
STATEMENT OF CONSOLIDATED CASH FLOWS (continued)
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts) 1999 1998 1997
=================================================================================================
<S> <C> <C> <C>
Financing activities
Net change in short-term borrowings...................$(185,915) $ (69,941) $ (13,431)
Repayment of debt..................................... (35,229) (18,098) (162,833)
Proceeds from debt.................................... 18,961 5,932 268,940
Cash dividends paid to DIMON Incorporated
stockholders....................................... (17,810) (29,354) (25,071)
Cash dividends paid to minority stockholders.......... - - (379)
Proceeds from sale of common stock.................... - 3,204 3,910
_________________________________________
Net cash provided (used) by financing activities... (219,993) (108,257) 71,136
_________________________________________
Effect of exchange rate changes on cash................. (2,496) (448) 31
_________________________________________
Increase (decrease) in cash and cash equivalents........ 2,722 (88,429) 53,311
Increase in cash from consolidation of investee......... - 27 -
Cash and cash equivalents at beginning of year.......... 18,729 107,131 53,820
_________________________________________
Cash and cash equivalents at end of year........$ 21,451 $ 18,729 $ 107,131
=========================================
Other information:
Cash paid during the year:
Interest.............................................$ 68,705 $ 85,667 $ 48,935
Income taxes......................................... 8,796 18,252 25,919
Non-cash investing and financing activities:
Intabex purchase (settlement)........................ (50,000) - 161,398
Restructuring and impairment of assets............... 20,800 - -
See notes to consolidated financial statements
</TABLE>
- -29-
<PAGE>
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - 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
under the equity method of accounting. Investments in certain other
foreign investees and subsidiaries that are combined with other
investments are stated at cost or less than cost because 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 were $13,181 at June 30, 1999 ($27,709 at June
30, 1998). 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.
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, 1999, is
$15,583 ($12,175 at June 30, 1998).
The carrying value of intangible assets is periodically reviewed
by the Company based on the expected future undiscounted operating
cash flows of the related business unit. Based upon its most recent
analysis, the Company believes that no material impairment of
intangible assets existed at June 30, 1999.
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, 1999, is $30,300 ($26,500 at June 30, 1998).
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, 1999, is $21,705 ($18,155 at June 30, 1998).
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.
Basic earnings per share are computed by dividing earnings by the
weighted average number of common shares outstanding. The diluted
earnings per share calculation assumes that all of the outstanding
Convertible Subordinated Debentures outstanding during the periods
presented were converted into Common Stock at the beginning of the
reporting period, or as of the date of issue, 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.
- -30-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Significant Accounting Policies (continued)
----------------------------------------
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which provides a
comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. In June 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133," which delays implementation of FASB 133 until years
beginning after June 15, 2000. This statement will be effective for
the Company's September 30, 2000, interim financial statements. The
Company does not expect this statement to have a material impact on
the Company's financial position or results of operations upon
adoption.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
- -31-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Significant Accounting Policies (continued)
----------------------------------------
DIMON and Subsidiaries Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
__________________________________
(in thousands, except per share data) 1999 1998 1997
==============================================================================
<S> <C> <C> <C>
BASIC EARNINGS
Income (loss) from continuing operations
before discontinued operations.......... $(28,378) $41,829 $72,568
Discontinued operations................... 22,912 1,820 4,605
--------- -------- --------
Net Income (Loss)......................... $ (5,466) $43,649 $77,173
SHARES
Weighted Average Number of
Shares Outstanding...................... 44,525 44,473 42,850
========= ======== ========
BASIC EARNINGS PER SHARE
Income (loss) from continuing operations
before discontinued operations.......... $(.63) $.94 $1.69
Discontinued operations................... .51 .04 .11
--------- -------- --------
Net Income (Loss)......................... $(.12) $.98 $1.80
========= ======== ========
DILUTED EARNINGS
Income (loss) from continuing operations
before discontinued operations.......... $(28,378) $41,829 $72,568
Add after tax interest expense applicable
to 6 1/4% Convertible Debentures issued
April 1, 1997 for 1997.................. - * - * 1,151
--------- -------- --------
Income (loss) from continuing operations
before discontinued operations.......... (28,378) 41,829 73,719
Discontinued operations................... 22,912 1,820 4,605
--------- -------- --------
Net Income (Loss) as Adjusted............. $ (5,466)* $43,649 * $78,324
========= ======== ========
SHARES
Weighted average number of common
shares outstanding...................... 44,525 44,473 42,850
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..... - 258 323
Assuming conversion of 6 1/4%
Convertible Debentures in 1997 at
the beginning of the period............. - * - * 1,068
--------- -------- --------
Average Number of Shares Outstanding...... 44,525 * 44,731 * 44,241
========= ======== ========
DILUTED EARNINGS PER SHARE
Income (loss) from continuing operations
before discontinued operations.......... $(.63)* $.94 * $1.67
Discontinued operations................... .51 * .04 * .10
--------- -------- --------
Net Income (Loss) as Adjusted............. $(.12)* $.98 * $1.77
========= ======== ========
* Assumed conversion of Convertible Debentures at the beginning of the period
has an antidilutive effect on earnings per share.
</TABLE>
- -32-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Discontinued Operations
--------------------------------
On August 12, 1998, the Company reached a definitive agreement to sell
the net assets of the flower operations for approximately $66,072 in
cash and the assumption of $31,557 of the debt of Florimex Worldwide.
The Company recorded a pre-tax gain of $27,976 in the first quarter of
the year ending June 30, 1999. Net assets of $32,907 relating to the
sale have been segregated on the June 30, 1998 Consolidated Balance
Sheet.
The results of operations for all years presented have been
restated for the discontinued flower operations.
Net Assets of Discontinued Operations:
<TABLE>
<CAPTION>
June 30,
1998
===============================================================
<S> <C>
Assets
Cash and cash equivalents....................... $ 3,262
Receivables..................................... 35,515
Inventories..................................... 3,921
Recoverable income taxes........................ 350
Prepaid expenses and other...................... 5,470
Intangible assets............................... 17,419
Property, plant and equipment, net.............. 37,335
___________
Total Assets................................. 103,272
___________
Liabilities
Notes payable to banks and others............... 10,539
Accounts payable and accruals................... 35,166
Income taxes payable............................ 1,431
Long-term debt.................................. 17,110
Deferred taxes and other........................ 5,661
Minority interest............................... 458
___________
Total Liabilities............................ 70,365
___________
Net Assets of Discontinued Operations........ $ 32,907
===========
</TABLE>
Summary of Operating Results of Discontinued Operations:
<TABLE>
<CAPTION>
1999 1998 1997
======================================================================================
(S> <C> <C> <C>
Sales and other operating revenues............... $101,023 $391,560 $387,488
Cost of goods and services sold.................. 92,892 351,517 343,786
Selling, administrative and general expenses..... 9,129 33,856 33,419
_________ ________ _________
Operating income (loss)...................... (998) 6,187 10,283
Interest expense................................. 609 1,909 2,509
_________ ________ _________
Income (loss) before income taxes and
minority interest............................. (1,607) 4,278 7,774
Income taxes (benefit)........................... (761) 2,358 3,045
Income (loss) applicable to minority interest.... (5) 100 124
_________ ________ _________
Income (loss) from discontinued operations $ (841) $ 1,820 $ 4,605
========= ========= =========
</TABLE>
- -33-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Acquisition
--------------------
On April 1, 1997, DIMON Incorporated acquired all the outstanding
capital stock and other rights of Intabex Holdings Worldwide S.A.
(Intabex), a privately owned Luxembourg holding company. Intabex
owned and operated leaf tobacco buying, processing and exporting
operations in principal tobacco markets around the world including the
United States, Brazil, Argentina, Malawi, Italy and Thailand. A
former Intabex subsidiary, Compania de Filipinas (CdF), is one of the
two major suppliers of premium cigar leaf and other dark air-cured
tobaccos to the cigar industry in the United States and Europe.
Separately, a Zimbabwe company that is a wholly owned subsidiary of
DIMON acquired certain tobacco assets from an Intabex affiliated
company (Tabex) in Zimbabwe. Intabex was a major supplier of
Zimbabwean and other African grown tobacco to the cigarette industry.
The transaction was accounted for as a purchase and, accordingly,
the consolidated financial statements of DIMON include the results of
operations of Intabex from the date of acquisition. The initial
purchase price of Intabex and the Tabex assets was $264.2 million,
consisting of 1.7 million shares of DIMON common stock, $140 million
in ten year, 6.25% subordinated convertible debentures, convertible at
$28.77 a share (the "Convertible Debentures"), and $86.1 million in
cash. The purchase agreements for DIMON's acquisition of Intabex and
the Tabex assets provided several purchase price adjustment mechanisms
which, as described below, have resulted in reducing the purchase
price by $75.9 million to a net purchase price of $188.3 million.
As a part of the Stock Purchase Agreement, Intabex's former
shareholders, Folium, Inc., Tabacalera, S.A. and Leaf Management
Investments Ltd., have indemnified DIMON against claims arising from
breaches of representations and warranties made by the former
shareholders in connection with the acquisition of Intabex, subject to
a maximum of $90 million. DIMON may, subject to fulfillment of
certain conditions in the agreement, set off any such claims against
$90 million of the debentures held by Folium and Tabacalera (Set-Off
Debentures).
The Intabex stock purchase agreement also provided for a post-
closing adjustment in the purchase price based upon the net worth of
Intabex as of March 31, 1997, as determined by audited financial
statements that were prepared in accordance with certain requirements
of the stock purchase agreement. As a result of this agreement, the
purchase price was reduced by $18.6 million in August of 1997. The
reduction resulted in the return of $16.7 million of Convertible
Debentures plus certain interest payments on the Convertible
Debentures, and $1.9 million in cash. At the time of the post-closing
settlement, one of the former Intabex shareholders, Folium, Inc.,
also agreed to guarantee the sales price by DIMON of certain tobacco
inventory that had been acquired as part of the Intabex acquisition.
That guarantee resulted in a further payment to DIMON by Folium, Inc.
of $7.3 million in April 1998. Folium, Inc. is controlled by a
British Virgin Islands trust of which A.C.B. Taberer is a potential
beneficiary. Mr. Taberer was a director of and consultant to DIMON
and the former chairman of Intabex. Mr. Taberer resigned as a
director as of January 25, 1999.
To allow adequate opportunity for discovery of possible
adjustments, DIMON required that the claims mechanisms under the
purchase agreements operate at least through September 30, 1998, the
anticipated completion of DIMON's second full audit cycle after the
acquisition. Following its analysis of post-closing adjustments, on
September 22, 1998, DIMON filed an action in the United States
District Court for the Southern District of New York to enforce its
right to indemnity.
On May 24, 1999, DIMON settled the suit with the former Intabex
shareholders. As part of the settlement, the former Intabex shareholders
canceled $50 million of the Set-Off Debentures, and DIMON dismissed all
of its claims in the action. DIMON recognized as income the recovery of
$15.4 million related to charges to income for the overstatement in
carrying values of certain assets and the understatement or omission
of certain liabilities or expenses by Intabex at the date of the Intabex
acquisition. The balance of the recovery, $34.6 million, was applied
against the carrying value of certain acquired assets and the direct
costs of the settlement. DIMON continues to have a right to set-off
$10 million in Set-Off Debentures until April 1, 2001, decreasing to
$5 million in Set-Off Debentures until April 1, 2002, to satisfy certain
additional claims for indemnification that it may discover.
The purchase price was allocated based on estimated fair values of
assets acquired and liabilities assumed at the date of acquisition.
This allocation resulted in an excess purchase price over net assets
acquired of $152.0 million after application of the May 24, 1999
settlement. The $152.0 million excess purchase price is being
amortized on a straight-line basis over 40 years.
- -34-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Acquisition (continued)
--------------------
In conjunction with this acquisition, the Company capitalized $9.2
million, net of $3.7 million of tax, to cover the anticipated costs of
combining the acquired tobacco business with existing tobacco
operations of DIMON. The capitalized amounts related primarily to
severance and closure of certain duplicative administrative, warehouse
and plant facilities acquired from Intabex. Of the capitalized
amounts, $7.0 million related to severance and other costs associated
with employee separations and $2.2 million related to costs of planned
facility closures. As these amounts are paid out in cash, the Company
will reduce an accrual established for their expenditure. As of June
30, 1999, the Company has utilized $5.3 million of the reserves for
severance and the full $2.2 million of the reserves for facility
closures. The Company expects the remaining reserves to be paid out
in fiscal 2000.
Note D - Restructuring and Asset Impairment Costs
-------------------------------------------------
In 1995, the Company 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 1997, 1998 and 1999. 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>
Reserve balances at June 30, 1996.......... $20,066 $ 395 $ 500 $20,961
Provision for restructuring - 1997......... 2,864 - 1,000 3,864
Reduced by:
Cash payments......................... (9,487) (100) - (9,587)
Asset writedowns and other............ (694) (270) (500) (1,464)
_________________________________________________
Reserve balances at June 30, 1997.......... $12,749 $ 25 $ 1,000 $13,774
Increased (reduced) by:
Cash payments......................... (3,631) (25) - (3,656)
Asset writedowns and other............ 749 - (1,000) (251)
_________________________________________________
Reserve balances at June 30, 1998.......... $ 9,867 $ - $ - $ 9,867
Reduced by:
Cash payments......................... (1,622) - - (1,622)
Adjustment to retirement
reserve and other................ (1,438) - - (1,438)
_________________________________________________
Reserve balances at June 30, 1999.......... $ 6,807 $ - $ - $ 6,807
=================================================
</TABLE>
The 1997 restructuring provision included additional
restructuring charges in the amount of $3,864, of which $2,864 relates
to additional severance costs and $1,000 relates to a reduction of
capitalized idle plant expense. Remaining cash outlays associated
with employee separations are expected to total $4,107, of which
approximately $999 will be expended in fiscal 2000. 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.
- -35-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note D - Restructuring and Asset Impairment Costs (continued)
-------------------------------------------------
On March 22, 1999, the Company announced that it planned to close
its tobacco processing plant in Kinston, North Carolina, reduce
staffing at its processing facility in Farmville, North Carolina, and
substantially downsize its leaf tobacco buying department in the
United States. The Company also planned to close a processing
facility in Germany and a processing facility and sales office in
Brazil. These actions are the result of smaller tobacco crops
anticipated in 1999 and beyond. The restructuring was completed by
June 30, 1999, and resulted in pre-tax charges of $15,812, of which
$10,695 is non-cash.
During the year ended June 30, 1999, the Company severed
approximately 200 employees, primarily in the United States, and
expensed $5,117. As of June 30, 1999, severance paid out totaled
$1,108. Cash outlays for severance to be paid out in 2000 are
approximately $3,712.
Asset writedowns incurred during the year in connection with the
restructuring included a charge of $10,695 associated with the closing
and planned disposal of property, plant and equipment in the
facilities mentioned above.
The following tables set forth the Company's restructuring
provisions provided and changes in the related reserves.
<TABLE>
<CAPTION>
Employee Asset
Separations Writedowns Total
==================================================================================
<S> <C> <C> <C>
Provision for restructuring - 1999........ $5,117 $10,695 $15,812
Reduced by:
Cash Payments........................... (1,108) - (1,108)
________________________________________
Reserve balances at June 30, 1999......... $4,009 $10,695 $14,704
========================================
</TABLE>
Global overcapacity of tobacco caused management to believe that
certain assets should be analyzed for impairment. The analysis, based
on undiscounted cash flows, resulted in an impairment writedown of
$10,120 for assets which have been identified as available-for-sale by
the Company in accordance with Financial Accounting Standards Board
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," (SFAS 121). In
accordance with SFAS 121, when an impairment writedown is required,
the related assets are adjusted to their estimated fair value. In
determining fair value, the Company considered the range of
preliminary purchase prices being discussed with potential buyers as
well as third-party appraisals.
The estimated market value of the assets written down as part of the
restructuring and impairment costs, consisting primarily of buildings
and machinery and equipment, is approximately $24,240.
- -36-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note E - Investee Companies and Related Parties
-----------------------------------------------
The combined summarized information for investee companies follows:
<TABLE>
<CAPTION>
1999 1998 1997
=======================================================================
<S> <C> <C> <C>
Current assets........................ $9,549 $11,340 $61,887
Non-current assets.................... 4,285 10,147 13,684
Current liabilities................... 6,596 9,934 56,933
Non-current liabilities............... 74 755 866
Interest of other shareholders........ 2,093 4,776 8,100
Net sales............................. 9,653 22,290 44,294
Gross profit.......................... 1,890 5,734 9,276
Net income (loss)..................... (366) 1,362 1,014
________________________________
</TABLE>
The above changes from 1998 relate to the planned decrease in
operations of certain investees in Africa, and the changes from 1997
relate primarily to the sale of certain investees of Intabex.
Balances with related parties, primarily unconsolidated,
affiliated companies, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
=======================================================================
<S> <C> <C> <C>
Trade receivables..................... $53,539 $46,944 $ 16,352
Advances on purchases of tobacco...... 53,702 92,416 101,540
Notes receivable...................... - 3,767 4,190
Trade payables and advances
from customers..................... 11,062 17,719 7,405
Other income: Interest............... 204 756 917
Net sales............................. 5,733 11,036 12,274
Purchases of tobacco.................. 46,223 76,352 80,389
__________________________________
</TABLE>
Note F - Financial Instruments
------------------------------
The estimated fair value of the Company's financial instruments at
June 30, 1999 is provided in the following table:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
________________________________________________________________
<S> <C> <C>
Senior Notes..............................$125,000 $110,000
Convertible Subordinated Debentures....... 73,328 49,863
Other Long-Term Debt...................... 40,219 35,844
__________________________
</TABLE>
Interest rate swap agreements modify the interest characteristics
of a portion of the Company's debt. The differential to be paid or
received is accrued as interest rates change and recognized as an
adjustment to interest expense in the statement of consolidated
income. The related accrued receivable or payable is included in
other assets or liabilities. The fair values of the swap agreements
are not recognized in the financial statements.
- -37-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note F - Financial Instruments (continued)
------------------------------
The counterparties to these contractual arrangements are a
diverse group of major financial institutions with which the Company
also has other financial relationships. The Company is exposed to
credit loss in the event of non-performance by these counterparties.
If a counterparty fails to meet the terms of a swap agreement, the
Company's exposure is limited to the net amount that would have been
received, if any, over the agreement's remaining life. The Company
does not anticipate non-performance by the other parties, given their
high credit ratings and no material loss would be expected from non-
performance by any one of such counterparties.
Interest rate swap agreements with an aggregate notional
principal balance of $440,000 ($125,000 fixed to floating and $315,000
floating to fixed) and expiring at various dates through September 21,
2008, had a negative value of $206 at June 30, 1999.
In the normal course of business, the Company is 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, 1999, and were
determined using quoted market prices and the discounted value of
future cash flows.
Note G - 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 $855,937 ($1,305,479 at
June 30, 1998), excluding all long-term credit agreements. These
lines bear interest at a weighted average rate of 7.0% for the year
ending June 30, 1999. Unused lines of credit at June 30, 1999,
amounted to $359,610 ($663,009 at June 30, 1998), net of $98,950 of
available letters of credit lines. There were no compensating balance
agreements at June 30, 1999 or 1998.
Note H - Long-Term Debt
-----------------------
Such debt is comprised of:
<TABLE>
<CAPTION>
1999 1998
_________________________________________________
Maturing Maturing Maturing Maturing
within after within after
One Year One Year One Year One Year
========================================================================================
<S> <C> <C> <C> <C>
Senior Notes............................$ - $125,000 $ - $125,000
Convertible Subordinated Debentures..... - 73,328 - 123,328
Revolving Credit Notes.................. - 300,000 - 500,000
Other Long-Term Debt.................... 7,022 32,948 10,492 48,661
________________________________________________
$7,022 $531,276 $10,492 $796,989
Capitalized Lease Obligations........... 17 232 96 38
________________________________________________
$7,039 $531,508 $10,588 $797,027
========================================================================================
</TABLE>
- -38-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note H - Long-Term Debt (continued)
-----------------------
Payments of the debt are scheduled as follows:
<TABLE>
<CAPTION>
Convertible Revolving Other
Senior Subordinated Credit Long-Term
Notes Debentures Notes Debt Total
============================================================================
<S> <C> <C> <C> <C> <C>
2000............ $ - $ - $ - $ 7,022 $ 7,022
2001............ - - 300,000 6,816 306,816
2002............ - - - 23,720 23,720
2003............ - - - 1,450 1,450
2004............ - - - 147 147
2005............ - - - 132 132
Later years..... 125,000 73,328 - 683 199,011
____________________________________________________________
$125,000 $73,328 $300,000 $39,970 $538,298
============================================================
</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, discussed below) of the Company. The Company used
the net proceeds to repay certain existing short-term indebtedness and
for other corporate purposes. 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 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) $20,000, (y) 50% of the Company's consolidated net
income 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. At June 30,
1999, the Company was permitted to make restricted payments, including
cash dividends on its Common Stock, of up to $32,371.
On April 1, 1997, DIMON Incorporated issued $73,328 of 6 1/4%
Convertible Subordinated Debentures due on March 31, 2007 (the
"Debentures"), net of the cancellation of $50,000 in settlement of
the Intabex litigation as discussed in Note C. The Debentures are
convertible into approximately 2,549 shares of the Company's Common
Stock at a conversion price of $28.77 per share at any time prior to
maturity. The Debentures are subordinated in right of payment to all
existing and future senior indebtedness, as defined, of the Company,
and do not have a cross-default provision. The Debentures are
redeemable at the option of the Company under certain circumstances on
or after April 1, 2000. As discussed in Note C, Intabex's former
shareholders have indemnified DIMON against certain liabilities in
connection with the acquisition of Intabex. DIMON may set off any
such indemnified liabilities against $10,000 of the Debentures.
To ensure long-term liquidity, DIMON entered into a $300,000 New
Credit Facility, effective June 29, 1999, with eight banks which
replaces DIMON's $500,000 Former Credit Facility. The Company had
$200,000 borrowings under these agreements on June 30, 1999 ($140,000
in 1998). However, the Company has used these facilities to classify
$100,000 ($360,000 at June 30, 1998) of working capital loans to
Revolving Credit Notes. It is the Company's intent to finance at
least $300,000 on a long-term
- -39-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note H - Long-Term Debt (continued)
-----------------------
basis. The New Credit Facility is subject to certain commitment fees
and covenants, including a subjective acceleration clause that, among
other things, require DIMON to maintain minimum working capital and
tangible net worth amounts, require specific liquidity and long-term
solvency ratios, including certain base borrowing restrictions, and
restrict acquisitions. The New Credit Facility's initial term is to
June 29, 2001, 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 (7.75% at June 30, 1999). The
Company pays a commitment fee of 1% 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.
Other long-term debt consists of obligations of DIMON
Incorporated and the tobacco operations in Asia, Africa, Germany,
Italy and Spain, and is payable at interest rates varying from 3.48%
to 6.53%.
Note I - Long-Term Leases
-------------------------
The Company has both capital and operating leases. The operating
leases are for land, buildings, automobiles and other equipment; the
capital leases are for machinery and equipment. The capitalized lease
obligations are payable through 2002. Interest rates are imputed at
10.6% to 13.0%. Amortization is included in depreciation expense.
Minimum future obligations and capitalized amounts are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
========================================================================
<S> <C> <C>
2000............................................... $ 17 $ 3,070
2001............................................... 157 2,773
2002............................................... 75 2,595
2003............................................... - 2,054
2004............................................... - 1,288
Later years ....................................... - 16,138
_____________________
$249 $27,918
Less amount representing interest and deposits..... -
_____
Present value of net minimum lease payments........ $249
Less current portion of obligations
under capital leases............................. 17
_____
Long-term obligations under capital leases......... $232
=====
Capitalized amounts:
Machinery and equipment, primarily vehicles...... $249
Accumulated amortization......................... (77)
_____
$172
=====
</TABLE>
Note J - Preferred 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, 1999, no shares had been issued.
- -40-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - 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.
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 (the
Committee). 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. As of
June 30, 1999, no restricted stock had been awarded under the
Incentive Plan. No awards may be granted 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 1999
grants will be awarded at the meeting of the DIMON Board following the
1999 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' Plan is 50 thousand shares. Options granted under the
Directors' Plan are immediately exercisable. Options to purchase 27
thousand shares had been granted as of June 30, 1999.
At the 1998 Annual Stockholders' Meeting, the DIMON Incorporated
Directors' Stock Plan was approved. The Plan authorizes automatic
annual grants to purchase one thousand shares to each non-employee
director. Any 1999 grants will be awarded at the meeting of the DIMON
Board following the 1999 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' Plan is 70 thousand shares. Options
granted under the Directors' Plan are immediately exercisable. No
options to purchase shares had been granted as of June 30, 1999.
The Company accounts for 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 $2,816 credit to income in 1998 and a $2,142
charge to income in 1997 arising from adjustments in fair market
values of the SARs.
As permitted by SFAS No. 123, the Company has elected to continue
to account for stock-based compensation in accordance with APB No. 25.
If the Company had elected to recognize compensation cost based on the
fair value of the options granted at grant date as prescribed by SFAS
No. 123, net income (loss) and per share amounts based on fair value
would have been reduced to the unaudited pro forma amounts indicated
in the table below (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
============================================================================
<S> <C> <C> <C>
Net income (loss) as reported.............$ (5,466) $43,649 $77,173
Net income (loss) Pro Forma............... (7,515) 41,603 76,185
Earnings per share, basic as reported..... (.12) .98 1.80
Earnings per share, basic Pro Forma....... (.16) .93 1.77
</TABLE>
- -41-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K- Stock Incentive Plan (continued)
----------------------------
Information with respect to options and SARs follows:
<TABLE>
<CAPTION>
1999 1998 1997
================================================================================
<S> <C> <C> <C>
Options and SARs outstanding at
beginning of year.......................... 2,039 1,854 1,804
Options and SARs granted...................... 751 455 436
Options and SARs exercised.................... - (237) (263)
Options and SARs cancelled.................... (85) (33) (123)
________________________________
Options and SARs outstanding at
end of year................................ 2,705 2,039 1,854
================================
SARs included as outstanding at end
of year.................................... 496 417 407
================================
Options available for future grants
at end of year............................. 216 857 822
================================
Options and SARs exercisable at
end of year................................ 1,161 830 833
================================
Option and SAR market prices per share:
Date of grant (at lowest market price).....$ 5.50 $22.31 $18.13
(at highest market price).... 9.25 23.38 20.88
Exercised (at lowest market price)..... - 21.25 19.00
(at highest market price).... - 26.38 26.75
Cancelled (at lowest market price)..... 9.25 11.25 19.25
(at highest market price).... 22.31 25.94 26.50
</TABLE>
Weighted average option exercise price information for the years
1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1999 1998 1997
=======================================================================
<S> <C> <C> <C>
Outstanding at July 1........................ $18.16 $16.87 $16.46
Granted during the year...................... 7.53 22.33 18.17
Exercised during the year.................... - 25.10 23.97
Outstanding at June 30....................... 15.40 18.16 16.87
Exercisable at June 30....................... 16.65 16.52 17.53
</TABLE>
- -42-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Stock Incentive Plan (continued)
-----------------------------
Option groups outstanding at June 30, 1999 and related weighted
average price and life information follows:
<TABLE>
<CAPTION>
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
______________________________________________________________________
<S> <C> <C> <C> <C>
8/21/91............ 122 122 $14.42 2
8/27/92............ 188 188 $22.00 3
8/26/93............ 167 167 $16.67 4
8/25/94............ 145 145 $11.50 5
4/1/95............ 140 140 $16.50 6
8/24/95............ 347 347 $17.00 6
11/17/95............ 6 6 $15.38 6
8/22/96............ 399 - $18.13 7
11/15/96............ 7 7 $20.88 7
8/21/97............ 436 - $22.31 8
11/14/97............ 7 7 $23.38 8
8/27/98............ 459 - $ 9.25 9
11/25/98............ 7 7 $ 8.75 9
5/24/99............ 275 25 $ 5.50 10
_____ _____
2,705 1,161
===== =====
</TABLE>
The weighted average fair value at date of grant for options
granted during 1999 and 1998 was $3.16 and $10.07 per option,
respectively. The fair value of options at date of grant was
estimated using the Black-Scholes model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
Black-Scholes Assumptions 1999 1998
_____________________________________________________________
<S> <C> <C>
Expected Life in Years................ 10 10
Interest Rate......................... 5.26% 6.49%
Volatility............................ 10.5% 31.0%
Dividend Yield........................ 5.98% 2.70%
</TABLE>
Note L - Retained Earnings
--------------------------
Consolidated retained earnings included $860 at June 30, 1999 ($873 at
June 30,1998) for the Company's share of undistributed net income of
investee companies accounted for under the equity method.
Note M - Income Taxes
---------------------
Consolidated retained earnings at June 30, 1999 and 1998 include
undistributed earnings of $282,213 and $261,452, 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. If
earnings were remitted as dividends, foreign tax credits available
under present law would reduce the amount of U.S. taxes payable.
At June 30, 1999, the Company has net operating tax loss
carryforwards of approximately $49,656 for income tax purposes that
expire in 2000 and thereafter. The components of income (loss) from
continuing operations before income taxes and equity in net income
(loss) of investee companies consisted of the following:
- -43-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Income Taxes (continued)
<TABLE>
<CAPTION>
1999 1998 1997
=================================================================
<S> <C> <C> <C>
U.S.....................$(49,350) $(51,109) $ 9,902
Foreign................. 12,061 107,098 106,203
__________________________________________
$(37,289) $ 55,989 $116,105
==========================================
</TABLE>
The details of the amount shown for income taxes (benefits) in
the Statements of Consolidated Income and Comprehensive Income follow:
<TABLE>
<CAPTION>
1999 1998 1997
==================================================================
<S> <C> <C> <C>
Current
Federal...................$ (7,923) $ 2,531 $ 4,566
State..................... - - -
Foreign................... 9,681 12,499 37,694
_______________________________________
$ 1,758 $15,030 $42,260
_______________________________________
Deferred
Federal...................$ (8,584) $(8,945) $ 384
State..................... 1,714 (1,494) 85
Foreign................... (3,811) 10,134 1,334
_______________________________________
$(10,681) $ (305) $ 1,803
_______________________________________
Total.....................$ (8,923) $14,725 $44,063
==================================================================
</TABLE>
The reasons for the difference between income tax expense based on
income (loss) before income taxes and equity in net income (loss) of
investee companies and the amount computed by applying the statutory
Federal income tax rate to such income are as follows:
<TABLE>
<CAPTION>
Pre-Tax Income
____________________________
1999 1998 1997
==================================================================
<S> <C> <C> <C>
Computed "expected" tax expense.......$(13,051) $19,596 $40,637
Effect of foreign income taxes........ (10,890) (9,009) 5,261
U.S. taxes on foreign income,
net of tax credits................. 4,539 7,003 958
Operating loss carryforwards, net..... 12,666 1,152 (2,779)
Tax benefits derived from
Foreign Sales Corporations......... (1,294) (1,504) (1,624)
Permanent items....................... (893) (2,513) 1,610
____________________________
Actual tax expense (benefits).........$ (8,923) $14,725 $44,063
============================
</TABLE>
- -44-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Income Taxes (continued)
---------------------
The long-term deferred tax liabilities (assets) are comprised of
the following:
<TABLE>
<CAPTION>
1999 1998
================================================================
<S> <C> <C>
Deferred tax liabilities:
Fixed assets...........................$ 11,951 $ 13,254
Foreign taxes.......................... 14,977 15,311
Other.................................. 4,271 4,921
_____________________
Gross deferred tax liabilities........... 31,199 33,486
_____________________
Deferred tax assets:
Foreign tax credits.................... (12,595) -
Tax loss carryforwards................. (17,637) (13,149)
Postretirement and other benefits...... (10,692) (10,726)
Currently non-deductible expenses...... (687) (3,072)
Other.................................. (1,531) (1,305)
_____________________
Gross deferred tax assets................ (43,142) (28,252)
Valuation allowance...................... 17,561 13,073
_____________________
Net deferred tax assets.................. (25,581) (15,179)
_____________________
Net deferred tax liability...............$ 5,618 $ 18,307
=====================
</TABLE>
The net change in the valuation allowance for deferred tax assets
was an increase of $4,488 and relates primarily to the utilization of
tax loss carryforwards for which no benefit had been recognized in
prior years.
Note N - Employee Benefits
--------------------------
Effective July 1, 1998, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." The
provisions of SFAS No. 132 revise employers' disclosures about pension
and other postretirement benefit plans. It does not change the
measurement or recognition of these plans. It standardizes the
disclosure requirements for pensions and other postretirement
benefits to the extent practicable.
Retirement Benefits
-------------------
The Company adopted a Cash Balance Plan on July 1, 1996, that combined
the retirement plan of the former Dibrell Defined Benefit Pension Plan
and the profit-sharing plan of the former Monk-Austin. The Cash
Balance Plan provides retirement benefits for substantially all U.S.
salaried personnel based on years of service rendered, age and
compensation. The Company also maintains an Excess Benefit Plan that
provides individuals who participated in the former Dibrell Defined
Benefit Pension Plan the difference between the benefits they could
have potentially accrued under the Defined Benefit Pension Plan and
the benefits that would have actually been 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.
Additional non-U.S. plans sponsored by certain tobacco
subsidiaries cover substantially all of the full-time employees
located in Greece, Italy, The Netherlands, Turkey and Zimbabwe.
- -45-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Retirement Benefits (continued)
A reconciliation of benefit obligations, plan assets and funded
status of the plans at June 30 was as follows:
<TABLE>
<CAPTION>
1999 1998
===============================================================
<S> <C> <C>
Change in Benefit Obligation
Benefit obligation, beginning............$ 58,004 $ 51,416
Service cost............................. 2,896 2,534
Interest cost............................ 3,994 3,834
Actuarial loss/(gain).................... (778) 4,214
Acquisition.............................. 1,895 -
Discontinued operations.................. (4,581) -
Benefits paid............................ (5,046) (3,994)
______________________
Benefit obligation, ending...............$ 56,384 $ 58,004
======================
Change in Plan Assets
Fair value of plan assets, beginning.....$ 52,525 $ 44,457
Actual return on plan assets............. 5,805 9,259
Company contribution..................... 1,705 2,803
Acquisition.............................. 1,687 -
Benefits paid............................ (5,046) (3,994)
______________________
Fair value of plan assets, ending........$ 56,676 $ 52,525
======================
Funded status of plan.....................$ 292 $ (5,479)
Unrecognized actuarial (gain)/loss........ (13,540) (9,823)
Unrecognized prior service cost........... 4,902 5,076
Unrecognized net transition obligation.... (1,180) (1,485)
______________________
Net amount recognized....................$ (9,526) $(11,711)
======================
Amounts Recognized in the Consolidated
Balance Sheet Consist of:
Prepaid benefit cost ....................$ - $ 1,621
Accrued benefit liability................ (14,540) (18,252)
Intangible asset......................... 3,982 3,555
Additional minimum pension liability..... 1,032 1,365
_______________________
Net amount recognized....................$ (9,526) $(11,711)
=======================
</TABLE>
- -46-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Retirement Benefits (continued)
Net periodic pension costs included the following components:
<TABLE>
<CAPTION>
1999 1998 1997
==================================================================
<S> <C> <C> <C>
Service cost.........................$ 2,896 $ 2,534 $ 1,863
Interest expense..................... 3,994 3,834 3,261
Expected return on plan assets....... (4,512) (3,690) (3,289)
Amortization of prior service cost... 584 743 523
Amortization of transition amount.... (311) (311) (311)
Actuarial (gain)/loss................ (286) (350) (338)
Curtailment cost..................... 77 - -
_____________________________
Net periodic pension cost............$ 2,442 $ 2,760 $ 1,709
=============================
</TABLE>
For the U.S. plans, benefit obligations for the Retirement Plan
and the Excess Benefit Plan were determined using assumed discount
rates of 7.75% for 1999, 7.25% for 1998 and 8% for 1997. Assumed
compensation increases were 4% for 1999, 1998 and 1997 for the
Retirement Plan and 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 all three years 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.
The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for those plans in which the accumulated
benefit obligation was in excess of plan assets were $20,671, $19,609
and $11,706, respectively, for 1999 and $15,049, $13,333 and $13,333,
respectively, for 1998.
During 1999, the plan assets and benefit obligation of a
liquidated entity were merged into the Cash Balance Plan as of July 1,
1998. These amounts have been reflected as Acquisition amounts in the
tables above. Also, under the provisions of SFAS No. 88, "Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits," termination of three executive contracts
under restructuring resulted in the recognition of $722 of net
curtailment gains. This gain resulted from the net decrease in the
Company's benefit obligation for one of its plans.
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 $517 in 1999, $588 in 1998 and $546 in
1997.
Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits to
retired U.S. employees (and their eligible dependents) who meet
specified age and service requirements. Plan assets consist of paid-
up life insurance policies on certain current retirees. The Company
retains the right, subject to existing agreements, to modify or
eliminate the medical benefits.
- -47-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Postretirement Health and Life Insurance Benefits (continued)
A reconciliation of benefit obligations, plan assets and funded
status of the plans at June 30 was as follows:
<TABLE>
<CAPTION>
1999 1998
===============================================================
<S> <C> <C>
Change in Benefit Obligation
Benefit obligation, beginning............$ 14,145 $ 13,019
Service cost............................. 334 340
Interest cost............................ 1,000 1,025
Actuarial loss/(gain).................... (870) 887
Curtailment loss......................... 488 -
Benefits paid............................ (911) (1,126)
______________________
Benefit obligation, ending...............$ 14,186 $ 14,145
======================
Change in Plan Assets
Fair value of plan assets, beginning.....$ 69 $ 69
Actual return on plan assets............. (75) -
Company contribution..................... 150 -
Benefits paid............................ (55) -
______________________
Fair value of plan assets, ending........$ 89 $ 69
======================
Funded status of plan.....................$(14,097) $(14,076)
Unrecognized actuarial (gain)/loss........ (3,229) (2,929)
Unrecognized prior service cost........... (2,140) (2,766)
_____________________
Net amount recognized.....................$(19,466) $(19,771)
=====================
Amounts Recognized in the Statement of
Financial Position Consist of:
Prepaid benefit cost ....................$ - $ -
Accrued benefit liability................ (19,466) (19,771)
Intangible asset......................... - -
Additional minimum pension liability..... - -
_____________________
Net amount recognized....................$(19,466) $(19,771)
=====================
</TABLE>
For measurement purposes, a 7% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The
rate was assumed to decrease gradually to 5.5% for 2002 and remain at
that level thereafter.
- -48-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Postretirement Health and Life Insurance Benefits (continued)
Net periodic benefit costs included the following components:
<TABLE>
<CAPTION>
1999 1998 1997
=================================================================
<S> <C> <C> <C>
Service cost.........................$ 334 $ 340 $ 315
Interest expense..................... 1,000 1,025 1,093
Expected return on plan assets....... (4) (4) (3)
Amortization of prior service cost... (254) (254) (254)
Actuarial (gain)/loss................ (98) (157) (169)
Curtailment cost..................... (372) - -
____________________________
Net pension cost.....................$ 606 $ 950 $ 982
============================
</TABLE>
Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plans. A one-percentage-
point change in assumed health care cost trend rates would have the
following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
======================================================================================
<S> <C> <C>
Effect on total of service and interest
cost components....................................$ 66 $ (57)
Effect on postretirement benefit obligation........... 488 (431)
_________________________________
</TABLE>
In 1999, under the provisions of SFAS No. 88, "Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," the pre-65 retiree count increased as a result
of restructuring which resulted in the recognition of $488 of
curtailment loss. This loss resulted from the net increase in the
Company's benefit obligation. This loss was offset by a decrease of
$372 in the net periodic benefit cost for 1999 due to the advanced
recognition of negative prior service costs bases. These amounts have
been reflected in the tables above accordingly.
The Company continues to evaluate ways to 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. There are no postretirement health benefits due to
coverage ceasing at retirement or coverage continuing through a
national health system. For these foreign plans, the cash-basis cost
of benefits charged to income was not material in 1999, 1998 and 1997.
Note O - Segment Information
----------------------------
Effective June 30, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"). Disclosures for
fiscal years 1998 and 1997 have been restated to conform to the
current year presentation.
The Company is principally engaged in the tobacco business. The
Company buys 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 is also engaged in buying, processing and exporting
tobacco grown in Argentina, Brazil, China, Greece, Guatemala, India,
Italy, Malawi, Mexico, Tanzania, Thailand, Turkey, Zimbabwe and other
areas which is sold on the world markets. The Company's investee
companies are located in Colombia and Malawi.
- -49-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - Segment Information (continued)
----------------------------
Due to the global environment in which DIMON operates, management
utilizes regional reporting information for making operating decisions
and assessing the Company's performance. These regions have been
identified by the Company as reportable operating segments under SFAS
131. The accounting policies of the segments are the same as those
described in "Note A - Significant Accounting Policies."
Summarized financial information concerning the Company's
reportable operating segments is shown in the following tables.
Operating segment information as to sales and other operating revenues
is based on the origin of the product sold. Sales by customer
location are based on the tobacco customer's delivery point. Long-
lived assets and capital expenditures are classified based on the
location of the asset.
<TABLE>
<CAPTION>
1999 1998 1997
===============================================================================
<S> <C> <C> <C>
Sales and Other Operating Revenues:
United States....................... $ 703,716 $ 806,603 $ 941,894
Brazil.............................. 294,009 436,648 444,784
Asia................................ 117,768 158,471 111,175
Africa.............................. 337,607 326,102 309,831
Europe.............................. 190,065 265,774 166,790
Other............................... 172,058 178,205 151,265
__________________________________________
$1,815,223 $2,171,803 $2,125,739
==========================================
Sales by Delivery Destination:
North America....................... $ 561,918 $ 635,113 $ 823,504
Asia................................ 378,973 453,140 394,439
Europe.............................. 669,769 817,859 689,609
Other............................... 204,563 265,691 218,187
__________________________________________
$1,815,223 $2,171,803 $2,125,739
=========================================
</TABLE>
Sales and other operating revenues to major customers:
Of the 1999, 1998 and 1997 sales and other operating revenues,
approximately 29%, 32% and 42%, respectively, were to various tobacco
companies which management has reason to believe are now owned by or
under the common control of two companies. (The following table
summarizes the net sales to each customer for the periods indicated:)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Customer A.............................$ 269,535 $ 437,231 $484,841
Customer B............................. 249,654 269,356 401,396
_______________________________________
$ 519,189 $ 706,587 $886,237
=======================================
</TABLE>
- -50-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - Segment Information (continued)
----------------------------
<TABLE>
<CAPTION>
1999 1998 1997
===============================================================================
<S> <C> <C> <C>
Long-Lived Assets and Total Assets:
United States.......................$ 69,162 $ 82,978 $ 66,854
Brazil.............................. 56,268 63,027 84,345
Africa.............................. 120,162 113,939 89,997
Europe.............................. 31,513 32,195 33,125
Other............................... 22,641 25,961 24,649
_________________________________________
Long-Lived Assets......... 299,746 318,100 298,970
Long-lived assets discontinued
operations....................... - - 33,782
Current assets...................... 922,500 1,208,890 1,371,479
Investments and other assets........ 32,322 39,027 50,160
Intangible assets................... 194,669 209,586 210,464
Deferred taxes and other
deferred charges................. 22,053 21,875 22,748
_________________________________________
Total Assets..............$1,471,290 $1,797,478 $1,987,603
=========================================
Capital Expenditures:
United States.......................$ 8,038 $ 24,969 $ 12,404
Brazil.............................. 1,800 4,097 2,680
Africa.............................. 14,532 24,431 36,187
Europe.............................. 3,890 1,756 2,423
Other............................... 3,896 5,915 1,098
_________________________________________
$ 32,156 $ 61,168 $ 54,792
=========================================
</TABLE>
Note P - 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 Statements of
Consolidated Income and Comprehensive Income.
For 1999 the transaction loss was $1,187, which is related to 12
countries located primarily in Africa and Europe, offset partially by
gains in Brazil and Zimbabwe.
In 1998, the transaction gain was $221 related primarily to gains
in Thailand, Malawi and Zimbabwe, offset partially by losses in Brazil
and Greece. The transaction adjustment in 1997 was a gain of $3,655
related primarily to Brazil.
- -51-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q - 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 June 30,
1999, of $11,158, after the recent devaluation of the Brazilian
currency but 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, 1999, of $10,733,
after the recent devaluation of the Brazilian currency but before
related tax benefits for all assessed interest. During fiscal year
ended June 30, 1998, the Company had $22,793 of assessments reversed
in its favor. 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.
The Company and certain subsidiaries had available letters of
credit of $98,950 at June 30, 1999, of which $49,149 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
$5,006. There was approximately $59 outstanding under these
guarantees at June 30, 1999.
The Company's foreign subsidiaries have guaranteed certain loans
made by Brazilian banks to local farmers. There was approximately
$34,521 outstanding under these guarantees at June 30, 1999.
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. The Company entered into a forward
exchange contract to purchase pounds sterling as needed on a monthly
basis throughout fiscal 2000 to fund the operations of the
administrative office in Camberley, U.K. The Company believes that
the exchange rate exposure of this contract is immaterial.
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.
- -52-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Selected Quarterly Financial Data (Unaudited)
------------------------------------------
Summarized quarterly financial information is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
1999
----
Sales and Other Operating
Revenue...................$384,165 $595,114 $485,377 $ 350,567 $1,815,223
Gross Profit................ 38,468 29,888 39,086 49,797 157,239
Income (loss) from
Continuing Operations..... (8,635) (8,695) (22,996)(3) 11,948(3) (28,378)
Discontinued Operation...... 22,912 (2) - - - 22,912
Per Share of Common Stock:
Diluted Earnings (1)........ .32 * (.20) * (.52) * .27 (.12)*
Cash Dividends per Share.... .17 .09 .09 .05 .40
Market Price - High......... 12.31 13.50 7.94 6.50 13.50
- Low.......... 8.69 6.56 3.81 3.25 3.25
_________________________________________________________________
1998
----
Sales and Other Operating
Revenue...................$439,185 $591,827 $627,721 $513,070 $2,171,803
Gross Profit................ 82,901 58,802 61,228 57,029 259,960
Income from
Continuing Operations..... 20,847 10,580 8,274 2,128 41,829
Income (loss) from
Discontinued Operations... (396) 359 2,368 (511) 1,820
Per Share of Common Stock:
Diluted Earnings (1)........ .44 .25 .24 .04* .98*
Cash Dividends per Share.... .15 .17 .17 .17 .66
Market Price - High......... 26.50 26.43 26.31 16.81 26.50
- Low.......... 21.50 23.25 15.56 10.50 10.50
_________________________________________________________________
(1) Does not add due to rounding.
(2) Includes $23,753 gain on disposal, net of tax, of discontinued business.
(3) Includes charges in Quarter 3 of $15,910 and Quarter 4 of $2,674
for restructuring and other asset impairment charges and recovery in Quarter 4 from
the litigation settlement of $9,979, net of tax.
* Assumed conversion of Convertible Debentures at the beginning of each period has
an antidilutive effect on earnings per share.
</TABLE>
- -53-
<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 of Certain Beneficial Owners and Management" is
incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Inapplicable.
- -54-
<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
--------------------------------------------------------------
Statements of Consolidated Income and Comprehensive Income
--Years ended June 30, 1999, 1998 and 1997
Consolidated Balance Sheet--June 30, 1999 and 1998
Statement of Stockholders' Equity--Years ended June 30, 1999,
1998 and 1997
Statement of Consolidated Cash Flows--Years ended June 30, 1999,
1998 and 1997
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Report of PricewaterhouseCoopers LLP
(b) Current Reports on Form 8-K - None
(c) 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 (file 33-89780))
3.02 Amended and Restated By-Laws, as amended, of DIMON
Incorporated effective May 17, 1999 (filed herewith)
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)
- -55-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
----------------------------------------------------
ON FORM 8-K (continued)
-----------
(c) Exhibits (continued)
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 (incorporated by reference to Exhibit 4.05 to
DIMON Incorporated's Annual Report on Form 10-K for
the year ended June 30, 1996)
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 fiscal 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)
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)
- -56-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
----------------------------------------------------
ON FORM 8-K (continued)
-----------
(c) Exhibits (continued)
10.10 Amendment to Employment Agreement, dated August 10, 1995,
between DIMON International, Inc. and Albert C. Monk III
(filed herewith)
10.11 Second Amendment to Employment Agreement, dated August 5,
1999, between DIMON Incorporated and Albert C. Monk III
(filed herewith)
10.12 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)
10.13 Early Retirement Agreement, dated May 17, 1999, between
DIMON Incorporated and Claude B. Owen, Jr. (filed herewith)
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 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994)
10.15 Stock Purchase Agreement, dated as of February 14, 1997,
among DIMON Incorporated, Intabex Holdings Worldwide S.A.,
Folium Inc., Leaf Management Investments Ltd. and
Tabacalera S.A. (incorporated by reference herein to
Exhibit 10.1 to DIMON Incorporated's Current Report on
Form 8-K dated April 16, 1997)
10.16 Indenture, dated as of April 1, 1997, by DIMON
Incorporated to LaSalle National Bank, relating to 6 1/4%
Convertible Subordinated Debentures due March 31, 2007
(incorporated by reference herein to Exhibit 10.2 to DIMON
Incorporated's Current Report on Form 8-K dated April 16,
1997)
10.17 Non-Competition Agreements, dated as of April 1, 1997,
by and between Intabex S.A. (Zug) and Folium Inc.
(incorporated by reference herein to Exhibit 10.3 and
10.7 to DIMON Incorporated's Current Report on Form 8-K
dated April 16, 1997)
10.18 Registration Rights Agreement, dated as of April 1, 1997,
by and between DIMON Incorporated, Tabacalera S.A.,
Folium Inc. and Leaf Management Investments Ltd.
(incorporated by reference herein to Exhibit 10.4 to
DIMON Incorporated's Current Report on Form 8-K dated
April 16, 1997)
10.19 Consulting Agreement, dated April 1, 1997, by and
between Intabex S.A. (Zug) and Anthony C.B. Taberer
(terminated September 23, 1998) (incorporated by
reference herein to Exhibit 10.5) to DIMON
Incorporated's Current Report on Form 8-K dated
April 16, 1997)
- -57-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
----------------------------------------------------
ON FORM 8-K (continued)
-----------
(c) Exhibits (continued)
10.20 Asset Purchase Agreement, dated as of February 14, 1997,
by and between Dibrell Brothers Zimbabwe (Private)
Limited and Tabex (Private) Limited (incorporated by
reference herein to Exhibit 10.6 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.21 Employment Agreement dated January 3, 1997, with
Brian J. Harker (incorporated by reference to
Exhibit 10 to DIMON Incorporated's Quarterly Report on
Form 10-Q dated February 14, 1997)
10.22 First Amendment to Employment Agreement, dated April
22, 1999, between DIMON Incorporated and Brian J. Harker
(filed herewith)
10.23 Employment Agreement, dated July 1, 1994, between Monk-
Austin International, Inc. and Larry R. Corbett
(incorporated by reference to Exhibit 10.7 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994) (filed herewith)
10.24 Amendment to Employment Agreement, dated August 10,
1995, between DIMON International, Inc. and
Larry R. Corbett (filed herewith)
10.25 Amended DIMON Incorporated Supplemental Retirement
Plan dated July 30, 1998 and effective
January 1, 1997 (incorporated by reference to
Exhibit 10.22 to DIMON Incorporated's Annual Report
on Form 10-K for the year ended June 30, 1998)
10.26 $300,000,000 Credit Agreement dated as of
June 29, 1999, among the Company, the lenders named
therein, NationsBank, N.A. as Administrative Agent,
Banc of America Securities LLC as Lead Arranger,
First Union National Bank as Syndication Agent and
Cooperative Central Raiffeisen-Boerenleenbank B.A.,
"Rabobank International," New York Branch as Managing
Agent (filed herewith)
10.27 First Amendment to Credit Agreement, dated as of
September 1, 1999, (the "Amendment"), is by and
among DIMON Incorporated, a Virginia corporation
(the "Borrower"), the several lenders identified
on the signature pages hereto (the "Lenders"),
Bank of America, N.A., formerly NationsBank,
N.A., as administrative agent for the ("FUNB"),
as syndication agent for the Lenders (in such
capacity, the "Syndication Agent"), and
Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A. and "Rabobank International" ("Rabobank"),
as managing agent for the Lenders (in such capacity,
the "Managing Agent") (filed herewith)
10.28 DIMON Incorporated Directors' Stock Plan
(filed herewith)
10.29 Settlement Agreement, dated May 24, 1999, between
DIMON Incorporated and Tabex (Private) Limited,
Folium Inc., Blair Investments (Private) Limited,
Tabacalera S.A., Anthony C. B. Taberer,
Paul A.B. Taberer, and Charles M.B. Taberer
(filed herewith)
- -58-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
----------------------------------------------------
ON FORM 8-K (continued)
-----------
(c) Exhibits (continued)
21 List of Subsidiaries (filed herewith)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
23.2 Consent of PricewaterhouseCoopers 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.
- -59-
<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, 1997
Deducted from asset accounts:
Allowance for doubtful accounts $ 6,558,151 $ 88,892(B) $ - $ 744,744(A) $ 5,902,299
Other investments - - - - -
___________ __________ _________ __________ ___________
Total $ 6,558,151 $ 88,892 $ - $ 744,744 $ 5,902,299
=========== ========== ========= ========== ===========
Year ended June 30, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts $ 5,902,299 $ 5,604 $ - $3,108,682(B) $ 2,799,221
Other Investments - - - - -
___________ __________ ________ __________ ___________
Total $ 5,902,299 $ 5,604 $ - $3,108,682 $ 2,799,221
=========== ========== ======== ========== ===========
Year ended June 30, 1999:
Deducted from asset accounts:
Allowance for doubtful accounts $ 2,799,221 $ 954,178 $ - $ 46,298(A) $ 3,799,697
Other Investments - - - - -
___________ __________ ________ __________ ___________
Total $ 2,799,221 $ 954,178 $ - $ 46,298 $ 3,799,697
=========== ========== ======== ========== ===========
(A) CURRENCY TRANSLATION AND DIRECT WRITE-OFF.
(B) CURRENCY TRANSLATION AND DIRECT WRITE-OFF, NET OF DISCONTINUED OPERATIONS.
</TABLE>
- -60-
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of DIMON Incorporated
In our opinion, the consolidated financial statements appearing under
Item 14(a)(1) and Item 14(a)(2), present fairly, in all material
respects, the financial position of DIMON Incorporated and its
subsidiaries at June 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the
period ended June 30, 1999 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial
statement schedules appearing under Item 14(a)(1) and Item 14(a)(2),
present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial
statement schedules are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our
audits. 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 provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 27, 1999
- -61-
<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 27, 1999.
<TABLE>
DIMON INCORPORATED (Registrant)
/s/ Brian J. Harker
By____________________________________
Brian J. Harker
President 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 27, 1999.
<S><C> <C>
/s/ Brian J. Harker /s/ Norman A. Scher
_____________________________ ________________________________
Brian J. Harker Norman A. Scher
President and Chief Executive Officer, Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Joseph L. Lanier, Jr. /s/ Henry F. Frigon
_____________________________ ________________________________
Joseph L. Lanier, Jr. Henry F. Frigon
Non-Executive Chairman of the Director of DIMON Incorporated
Board of DIMON Incorporated
/s/ John M. Hines
/s/ Louis N. Dibrell, III ________________________________
John M. Hines John M. Hines
__________________________________ Director of DIMON Incorporated
Louis N. Dibrell, III
Director of DIMON Incorporated /s/ R. Stuart Dickson
________________________________
/s/ Albert C. Monk III R. Stuart Dickson
__________________________________ Director of DIMON Incorporated
Albert C. Monk III
Vice Chairman of the Board of /s/ William R. Slee
DIMON Incorporated ________________________________
William R. Slee
/s/ Robert T. Monk, Jr. Director of DIMON Incorporated
_________________________________
Robert T. Monk, Jr. /s/ Jerry L. Parker
Director of DIMON Incorporated ________________________________
Jerry L. Parker
/s/ Thomas F. Keller Senior Vice President-Controller (Principal
__________________________________ Accounting Officer) of DIMON Incorporated
Thomas F. Keller
Director of DIMON Incorporated
/s/ James E. Johnson, Jr.
__________________________________
James E. Johnson, Jr.
Director of DIMON Incorporated
</TABLE>
- -62-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page No.
------- --------
<S> <C> <C>
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 (file 33-89780))
3.02 Amended and Restated By-Laws, as amended, 68 - 81
of DIMON Incorporated effective May 17, 1999
(filed herewith)
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 (incorporated by reference to
Exhibit 4.05 to DIMON Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1996)
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 fiscal year ended June 30, 1994)
</TABLE>
- -63-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page No.
------- --------
<S> <C> <C>
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)
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) (filed herewith)
10.10 Amendment to Employment Agreement, dated 82 - 83
August 10, 1995, between DIMON International, Inc.
and Albert C. Monk III (filed herewith)
10.11 Second Amendment to Employment Agreement, 84 - 85
dated August 5, 1999, between DIMON Incorporated
and Albert C. Monk III (filed herewith)
</TABLE>
- -64-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page No.
------- --------
<S> <C> <C>
10.12 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)
10.13 Early Retirement Agreement, dated May 17, 1999, 86 - 89
between DIMON Incorporated and
Claude B. Owen, Jr. (filed herewith)
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 10.1 to Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
10.15 Stock Purchase Agreement, dated as of
February 14, 1997, among DIMON Incorporated,
Intabex Holdings Worldwide S.A., Folium Inc.,
Leaf Management Investments Ltd. and
Tabacalera S.A. (incorporated by reference herein
to Exhibit 10.1 to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.16 Indenture, dated as of April 1, 1997, by
DIMON Incorporated to LaSalle National Bank,
relating to 6 1/4% Convertible Subordinated
Debentures due March 31, 2007 (incorporated by
reference herein to Exhibit 10.2 to
DIMON Incorporated's Current Report on
Form 8-K dated April 16, 1997)
10.17 Non-Competition Agreements, dated as of
April 1, 1997, by and between Intabex S.A. (Zug)
and Folium Inc. (incorporated by reference herein to
Exhibit 10.3 and 10.7 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.18 Registration Rights Agreement, dated as of
April 1, 1997, by and between DIMON Incorporated,
Tabacalera S.A., Folium Inc. and Leaf Management
Investments Ltd. (incorporated by reference herein to
Exhibit 10.4 to DIMON Incorporated's Current Report
on Form 8-K dated April 16, 1997)
</TABLE>
- -65-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page No.
------- --------
<S> <C> <C>
10.19 Consulting Agreement, dated April 1, 1997, by
and between Intabex S.A. (Zug) and
Anthony C.B. Taberer (terminated
September 23, 1998) (incorporated by reference
herein to Exhibit 10.5) to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.20 Asset Purchase Agreement, dated as of
February 14, 1997, by and between Dibrell Brothers
Zimbabwe (Private) Limited and Tabex
(Private) Limited (incorporated by reference
herein to Exhibit 10.6 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.21 Employment Agreement dated January 3, 1997,
with Brian J. Harker (incorporated by reference
to Exhibit 10 to DIMON Incorporated's
Quarterly Report on Form 10-Q dated
February 14, 1997)
10.22 First Amendment to Employment Agreement, 90 - 91
dated April 22, 1999, between DIMON Incorporated
and Brian J. Harker (filed herewith)
10.23 Employment Agreement, dated July 1, 1994, between 92 - 107
Monk-Austin International, Inc. and Larry R. Corbett
(incorporated by reference to Exhibit 10.7 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994)
(filed herewith)
10.24 Amendment to Employment Agreement, dated 108 - 109
August 10, 1995, between DIMON International, Inc.
and Larry R. Corbett (filed herewith)
10.25 Amended DIMON Incorporated Supplemental
Retirement Plan dated July 30, 1998 and effective
January 1, 1997 (incorporated by reference to
Exhibit 10.22 to DIMON Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1998)
10.26 $300,000,000 Credit Agreement dated as of 110 - 203
June 29, 1999, among the Company, the lenders
named therein, NationsBank, N.A. as
Administrative Agent, Banc of America
Securities LLC as Lead Arranger, First Union
National Bank as Syndication Agent and
Cooperative Central Raiffeisen-Boerenleenbank B.A.,
"Rabobank International," New York Branch as
Managing Agent (filed herewith)
</TABLE>
- -66-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page No.
------- --------
<S> <C> <C>
10.27 First Amendment to Credit Agreement, dated as of 204 - 209
September 1, 1999, (the "Amendment"), is by and among
DIMON Incorporated, a Virginia corporation
(the "Borrower"), the several lenders identified on the
signature pages hereto (the "Lenders"), Bank of
America, N.A., formerly NationsBank, N.A., as
administrative agent for the ("FUNB"), as syndication
agent for the Lenders (in such capacity, the "Syndication
Agent"), and Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. and "Rabobank International"
("Rabobank"), as managing agent for the Lenders
(in such capacity, the "Managing Agent") (filed herewith)
10.28 DIMON Incorporated Directors' Stock Plan 210 - 224
(filed herewith)
10.29 Settlement Agreement, dated May 24, 1999, between 225 - 251
DIMON Incorporated and Tabex (Private) Limited,
Folium Inc., Blair Investments (Private) Limited,
Tabacalera S.A., Anthony C. B. Taberer,
Paul A.B. Taberer, and Charles M.B. Taberer
(filed herewith)
21 List of Subsidiaries (filed herewith) 252
23.1 Consent of PricewaterhouseCoopers LLP 253
(filed herewith)
23.2 Consent of PricewaterhouseCoopers LLP 254
(filed herewith)
27 Financial Data Schedule (filed herewith) 255
</TABLE>
- -67-
<PAGE>
AMENDED AND RESTATED
BYLAWS
of
DIMON INCORPORATED
ARTICLE 1
---------
Definitions
-----------
Capitalized terms that are not otherwise defined herein shall have
the meanings given in the Agreement and Plan of Reorganization, dated
as of October 22, 1994 and amended and restated as of February 22, 1995,
by and among the Corporation, Dibrell Brothers, Incorporated and
Monk-Austin, Inc., as amended through the date hereof (the "Merger
Agreement").
Article II
----------
Offices
-------
Section 1. Principal Office. The principal office of the
Corporation shall be located in the City of Danville, Virginia.
Section 2. Other Offices. The Corporation may have such
other offices at such other place or places as the Board of Directors
may from time to time designate or appoint.
ARTICLE III
-----------
Capital Shares
--------------
Section 1. Certificates. Shares of the Corporation shall
be evidenced by certificates in forms prescribed by the Board of
Directors and executed in any manner permitted by law and stating thereon
the information required by law.
Transfer books in which shares shall be transferred shall be
kept by the Corporation or by one or more transfer agents appointed by it.
A record shall be kept of each share certificate that is issued. The
Corporation shall have the right to appoint at any time or from time to
time one or more registrars of its capital shares.
Section 2. Transfer of Shares. Shares of the Corporation
shall be transferable or assignable only on the books of the Corporation
by the holder in person or by an attorney on surrender of the certificate
- -1-
(68)
<PAGE>
representing such shares duly endorsed and, if sought to be transferred by
an attorney, accompanied by a written power of attorney. The Corporation
shall recognize the exclusive right of the person registered on its books
as the owner of shares to receive dividends and to vote as such owner.
Section 3. Lost Destroyed and Mutilated Certificates.
After receiving notice from a shareholder of any loss, destruction or
mutilation of a share certificate, the Secretary or his nominee may in
his discretion cause one or more new certificates for the same number of
shares in the aggregate to be issued to such shareholder upon the surrender
of the mutilated certificate or upon satisfactory proof of such loss or
destruction and the deposit of a bond in such form and amount and with such
surety as the Secretary or his nominee may require.
Section 4. Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof or entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date for any
such determination of shareholders, such date in any case to be not more than
seventy (70) days prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If no record date is
fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders or shareholders entitled to receive payment of
a dividend, the date on which notices of the meeting are first mailed or
the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders.
ARTICLE IV
----------
Shareholders
------------
Section 1. Annual Meeting. Subject to the Board of
Directors' ability to postpone a meeting under Virginia law, the annual
meeting shall be held on such date and at such time and place as may be
fixed by the Board of Directors and stated in the notice of the meeting.
The annual meeting shall be held for the purpose of electing Directors and
for the transaction of only such other business as is properly brought before
the meeting in accordance with these bylaws. To be properly brought before
an annual meeting, business must be (i) specified in the notice of annual
meeting (or any supplement thereto) given by or at the direction of the Board
- -2-
(69)
<PAGE>
of Directors, (ii) otherwise properly brought before the annual meeting by or
at the direction of the Board of Directors, or (iii) otherwise properly
brought before the annual meeting by a shareholder. In addition to any
other applicable requirements for business to be properly brought before
an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary. To be timely, a shareholder's
notice must be in writing and delivered or mailed to and received by the
Secretary not less than sixty (60) days before the first anniversary of
the date of the Corporation's proxy statement in connection with the last
annual meeting. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the shareholder proposing such
business, (iii) the class, series and number of the Corporation's shares
that are beneficially owned by the shareholder, and (iv) any material
interest of the shareholder in such business. Notwithstanding anything
in these bylaws to the contrary, no business shall be conducted at the
annual meeting except in accordance with the procedures set forth in this
Article IV(1); provided, however, that nothing in this Article IV(1) shall
be deemed to preclude discussion by any shareholder of any business
properly brought before the annual meeting. In the event that a share-
holder attempts to bring business before an annual meeting without complying
with the provisions of this Article IV(1), the chairman of the meeting may,
if the facts warrant, determine that the business was not properly brought
before the meeting in accordance with the foregoing procedures, and, if he
shall so determine, he shall so declare to the meeting and such business
shall not be transacted.
Section 2. Special Meetings. Special meetings of the
shareholders may be held at any time and at any place designated in the
notice thereof upon call of the Chairman of the Board of Directors, the
President or a majority of the Board of Directors.
Section 3. Notice. Notice in writing of every annual or
special meeting of the shareholders, stating the date, time and place, and,
in case of a special meeting, the purpose or purposes thereof, shall be
mailed not less than ten (10) nor more than sixty (60) days before any
such meeting to each shareholder of record entitled to vote at such
- -3-
(70)
<PAGE>
meeting, at his address as it appears in the share transfer books of
the Corporation. Such further notice shall be given as may be required
by law, but meetings may be held without notice if all of the
shareholders entitled to vote at the meeting waive such notice, by
attendance at the meeting or otherwise, in accordance with law.
Section 4. Quorum. A majority of the votes entitled to
be cast by any voting group on any matter, represented in person or by
proxy, shall constitute a quorum of such voting group with respect to
action on such matter. If at the time and place of the meeting there
be present less than a quorum, the meeting may be adjourned from time
to time by the vote of a majority of the shares present in person or
by proxy without notice other than announcement at the meeting.
Section 5. Voting. Except as otherwise specified in
the Articles of Incorporation or the Virginia Stock Corporation Act, at
all meetings of the shareholders, each holder of an outstanding share
may vote in person or by proxy, and shall be entitled to one vote on
each matter voted on at such meeting for each share registered in the
name of such shareholder on the books of the Corporation on the
record date for such meeting. Every proxy shall be in writing, dated
and signed by the shareholder entitled to vote or his duly authorized
attorney-in-fact.
Unless a greater vote is required pursuant to the Articles
of Incorporation or the Virginia Stock Corporation Act, if a quorum
exists, action on a matter (other than the election of Directors) by a
voting group is approved if the votes cast favoring the action exceed
the votes cast opposing the action. Unless otherwise provided in the
Articles of Incorporation, Directors shall be elected by a plurality
of votes cast by shares entitled to vote in the election at a meeting
at which a quorum is present.
Section 6. Presiding Officer. All meetings of the
shareholders shall be presided over by the Chairman of the Board of
Directors or, in his absence or at his request, by the President,
or in the absence of the President, the Vice Chairman of the Board of
Directors. In case none of the Chairman of the Board of Directors,
the President or the Vice Chairman of the Board of Directors, the
meeting shall elect a chairman. The Secretary or, in his absence or
at his request, an Assistant Secretary shall act as secretary of such
meetings. In case there be present neither the Secretary nor an
Assistant Secretary, a secretary may be appointed by the chairman of
the meeting.
Section 7. Inspectors and Tellers. An appropriate
- -4-
(71)
<PAGE>
number of inspectors and tellers for any meeting of the shareholders
may be appointed by or pursuant to the direction of the Board of
Directors. Inspectors and tellers so appointed will open and close
the polls, will receive and take charge of proxies and ballots and will
decide all questions as to the qualifications of voters validity of
proxies and ballots and the number of votes properly cast.
ARTICLE V
---------
Directors
---------
Section 1. General Powers. The business and the
affairs of the Corporation shall be managed under the direction of
the Board of Directors, and, except as expressly provided by law, the
Articles of Incorporation or these bylaws, all of the powers of the
Corporation shall be vested in such Board of Directors.
Section 2. Number and Election of Directors. The number
of Directors constituting the Board of Directors shall be twelve (12),
who shall be divided into three classes, Class I, Class II and Class III,
as nearly equal in number as possible. Directors of each class shall be
elected by the shareholders to serve for the terms specified in the
Articles of Incorporation and, unless sooner removed in accordance with
the Articles of Incorporation and applicable law, shall serve until
their respective successors are duly elected and qualified. Subject to
Article V of the Articles of Incorporation of the Corporation, any
vacancy may be filled by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board of Directors,
and Directors so chosen shall hold office until the next annual meeting
of the shareholders. At such annual meeting of the shareholders, the
shareholders shall elect a Director to fill the vacancy, and the newly
elected Director shall hold office for a term expiring at the annual
meeting of the shareholders at which the term of the class to which
he has been elected expires.
Section 3. Nomination of Directors. Any shareholder
entitled to vote in the election of directors generally may nominate
at a meeting one or more persons for election as a director only if
written notice of such nomination or nominations is delivered or mailed
to the Secretary of the Corporation (i) in the case of an annual
- -5-
(72)
<PAGE>
meeting of shareholders that is called for a date that is within 30
days before or after the anniversary date of the immediately preceding
annual meeting of shareholders, not less than 50 days nor more than
75 days prior to such anniversary date and (ii) in the case of an
annual meeting of shareholders that is called for a date that is not
within 30 days before or after the anniversary date of the immediately
preceding annual meeting of shareholders, or in the case of a special
meeting of shareholders for the purpose of electing directors, not
later than the close of business on the tenth day following the day
on which the notice of meeting was mailed or public disclosure of
the date of the meeting was made, whichever occurs first. Such
notification shall contain the following information to the extent
known by the notifying shareholder: (a) the name, age and address of
each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the nominee's qualifications to serve as a director;
(d) the name and residence address of the notifying shareholder;
and (e) the number of shares owned by the notifying shareholder. The
Secretary of the Corporation shall deliver all such notices to the
Nominating Committee of the Board of Directors or to such other
committee as may be appointed from time to time by the Board of
Directors for the purpose of recommending to the Board of
Directors candidates to serve as directors or, in the absence of
any such committee, to the Board of Directors, for review. The
Nominating Committee or such other committee shall thereafter make
its recommendation to the Board of Directors, and the Board of
Directors shall thereafter make its determination, with respect to
whether such candidate should be nominated for election as a director.
The chairman of the meeting shall disregard nominations not made
in accordance with the provisions of this Article V(3) and all votes
cast for each such nominee shall be disregarded.
Section 4. Annual Meeting. A regular annual meeting
of the Board of Directors shall be held following the adjournment of
the annual meeting of the shareholders at such place as the Board of
Directors may designate. The regular annual meeting of the Board of
Directors then just elected by the shareholders shall be held for
the election of officers of the Corporation and the transaction of
all other business as shall come before the such meeting.
Section 5. Special Meeting. Special meetings of
the Board of Directors may be called at any time by the Chairman of
the Board of Directors, the President or by any two members of the
Board of Directors on such date and at such time and place as may
be designated in such call, or may be held on any date and at any
time and place without notice by the unanimous written consent of
- -6-
(73)
<PAGE>
all the members or by the presence of all of the members at such
meeting.
Section 6. Notice of Meetings. Notice of the time
and place of every meeting of the Board of Directors shall be mailed,
telephoned or transmitted by any other means of telecommunication by
or at the direction of the Secretary or other officer of the
Corporation to each Director at his last known address not less than
twenty-four (24) hours before such meeting, provided that notice need
not be given of the annual meeting or of regular meetings held at
times and places fixed by resolution of the Board of Directors.
Such notice need not describe the purpose of a special meeting.
Meetings may be held at any time without notice if all the Directors
waive such notice, by attendance at the meeting or otherwise,
in accordance with law.
Section 7. Quorum: Presence at Meeting. A quorum at
any meeting of the Board of Directors shall consist of a majority
of the number of Directors fixed from time to time in these bylaws.
Members of the Board of Directors may participate in any meeting of
the Board of Directors by means of a conference telephone or similar
communication equipment whereby all persons participating in the
meeting may simultaneously hear each other, and participation by such
means shall be to constitute presence in person at such meeting.
Section 8. Voting. (a) If a quorum is present when a
vote is taken, the affirmative vote of a majority of Directors present
is the act of the Board of Directors, unless the Articles of
Incorporation or these bylaws require the vote of a greater number
of Directors. A Director who is present at a meeting of the Board
of Directors or any committee thereof when corporate action is taken
is deemed to have assented to the action unless (i) he objects at
the beginning of the meeting, or promptly upon his arrival, to holding
it or transacting specified business at the meeting, or (ii) he votes
against, or abstains from, the action taken.
(b) Approval of the following matters shall require the
affirmative vote of two-thirds of the Directors then in
office at a meeting at which a quorum is present:
(1) any merger, statutory share exchange,
sale or other disposition of all or substantially all the
Corporation's assets, or any sale, lease, transfer,
distribution or other disposition (to a party other than
the Corporation or a subsidiary thereof) of any business
constituting a "significant subsidiary" of the Corporation
- -7-
(74)
<PAGE>
for purposes of Regulation S-X promulgated under the
Securities Act of 1933, as amended, or any dissolution of
the Corporation;
(2) the redemption by the Corporation of
the rights issued under or the material amendment of the
DIMON Shareholder Rights Plan (except as otherwise provided
therein);
(3) any increase or decrease in the size of
the Board of Directors of the Corporation;
(4) the issuance by the Corporation of any
class of preferred stock that would vote as a class with the
Common Stock on transactions described in item (b)(1) above;
(5) the issuance by the Corporation in one
transaction of an aggregate number of shares of Common Stock
that exceeds ten percent (10%) of the issued and outstanding
shares of Common Stock immediately prior to such issuance
or sale;
(6) the issuance by the Corporation in one
transaction of rights to acquire more than ten percent (10%)
of the issued and outstanding shares of Common Stock;
(7) the purchase, redemption or other
acquisition by the Corporation of five percent (5%) or more
of the outstanding shares of Common Stock,
(8) the declaration by the Corporation of
any reverse stock split or recapitalization;
(9) the adoption of, or proposal to the
shareholders of, any amendment to any provision of the
Corporation's Articles of Incorporation requiring the action
described in that provision to be approved by more than a
majority of the votes entitled to be cast by each voting
group that is entitled to vote on the matter; and
(10) the amendment of this Section 8(b) or
any other provision of these bylaws or the Amended and
Restated Articles of Incorporation requiring action to
- -8-
(75)
<PAGE>
be approved by more than a majority of the directors
present at a meeting at which a quorum is present.
Section 9. Compensation of Directors. Directors, as such,
shall not receive any stated salary for their services, except that,
by resolution of the Board of Directors, Directors may be paid (i) a
retainer in an amount determined by the Board of Directors for their
services as such, (ii) an additional retainer in an amount determined
by the Board of Directors for their services as Chairman of the Board
of Directors or Chairman of any special or standing committee of the
Board of Directors, and (iii) a fixed sum and expenses for attendance
at each regular, adjourned, or special meeting of the Board of
Directors or any special or standing committee thereof. Nothing
herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving
compensation therefor.
Section l0. Eligibility. Except as hereinafter
provided, no person shall be elected or re-elected to the Board of
Directors if at the time of any proposed election or reelection he
shall have attained the age of 70 years; provided, however, that the
forgoing provision may be waived by the affirmative vote of a
majority of the Directors then in office. Notwithstanding the
foregoing, no person shall be elected or re-elected to the Board
of Directors if at the time of any proposed election or reelection
he shall have attained the age of 72 by the annual meeting following
his 72nd birthday.
Section 11. Chairman of the Board of Directors.
The Board of Directors shall elect from its number at each annual
meeting a Chairman of the Board of Directors, who shall preside at
all meetings of the shareholders, the Board of Directors and the
Executive Committee and shall have such other powers as may be
conferred upon him by the Board of Directors. The Board of
Directors may also elect from time to time a Vice Chairman of
the Board of Directors. Either the Chairman or Vice Chairman also
may serve in such capacity as an officer of the Corporation subject
to Article VII below, with such duties and powers as may be conferred
upon him by the board of Directors. Subject to the provisions of
the Articles of Incorporation, the Chairman or Vice Chairman of
the Board of directors may withdraw, resign or be removed at any
time, and any vacancy occurring therefrom or from any other cause
whatever may be filled by a majority of the number of Directors
fixed by these bylaws.
- -9-
(76)
<PAGE>
ARTICLE VI
----------
Executive and Other Committees
------------------------------
Section 1. Creation of Executive Committee. There shall
be an Executive Committee of the Board of Directors which shall consist
of not less than three (3) Directors. Subject to the provisions of
the Articles of the Corporation, the members of the Executive
Committee shall serve until the Board of Directors designates their
successors or until removed. Except as otherwise provided by the
Articles of Incorporation or these bylaws, the Executive Committee,
when the Board of Directors is not in session, shall have all powers
vested in the Board of Directors by law, by the Articles of
Incorporation or by these bylaws; provided, that the Executive
Committee shall not have the authority to take any action that may
not be delegated to a committee under the Virginia Stock Corporation
Act. The Executive Committee shall report at the next regular or
special meeting of the Board of Directors on action which the
Executive Committee has taken since the last regular or special meeting
of the Board of Directors.
Section 2. Audit Committee. The Board of Directors,
by resolution adopted by a majority of the number of Directors fixed
in accordance with these bylaws, shall elect an Audit Committee which
shall consist of not less than two (2) Directors. No Director who is
also an officer of the Corporation shall be a member of the Audit
Committee. The Audit Committee shall review and discuss with the
Corporation's independent accountants the financial records of the
Corporation and report to the Board of Directors with respect thereto.
The Audit Committee shall report at the next regular or special meeting
of the Board of Directors on all action which it has taken since the
last regular or special meeting of the Board of Directors.
Section 3. Other Committees. The Board of Directors,
by resolution adopted by a majority of the number of Directors fixed
in accordance with these bylaws, may establish such other standing or
special committees of the Board of Directors as it may deem advisable,
consisting of two (2) or more Directors. The members, terms and
authority of such committees shall be in the resolutions enabling
the same.
Section 4. Meetings. Regular and special meeting of
any committee established pursuant to this Article may be called and
held subject to the same requirements with respect to date, time, place
and notice as are specified in these bylaws for regular and special
meetings of the Board of Directors.
- -10-
(77)
<PAGE>
Section 5. Quorum and Manner of Acting. A quorum of
the members of any committee serving at the time of any meeting thereof
for the transaction of business at such meeting shall consist of a
majority of such members. The action of a majority of those members
present at a committee meeting at which a quorum is present shall
constitute the act of the committee.
Section 6. Term of Office. Members of any committee
shall be elected as above provided and shall hold office until their
successors are elected by the Board of Directors or until the Board
of Directors dissolves such committee.
Section 7. Resignation and Removal. Subject to the
Articles of Incorporation, any member of a committee may resign at
any time by giving written notice of his intention to do so to the
Chairman of the Board, President or the Secretary, or may be removed,
with or without cause, at any time by such vote of the Board of
Directors as would suffice for his election.
Section 8 Vacancies. Subject to the provisions of
the Articles of Incorporation, any vacancy occurring in a committee
resulting from any cause whatever may be filled by a majority of
the number of Directors fixed by the bylaws.
Article VII
-----------
Officers
--------
Section 1. Required Officers. The officers of the
Corporation shall be a Chief Executive Officer (the "CEO"), a President,
and a Secretary, together with such other officers, including one or
more Executive Vice Presidents, one or more Vice Presidents (whose
seniority and titles may be specified by the Board of Directors) and
a Treasurer, as may be elected from time to time by the Board of
Directors. Any two or more offices may be held by the same person.
Section 2. Election of Officers:
Compensation. The officers of the Corporation shall be
elected by the Board of Directors and shall hold office until the next
annual meeting of the Board of Directors and until their successors
are duly elected and qualified; provided, however, that, subject to
Article V(8) of these bylaws, any officer may be removed and the
resulting vacancy filled at any time, with or without cause, by the
- -11-
(78)
<PAGE>
Board of Directors. The salaries or compensation of all officers of
the Corporation shall be fixed by or pursuant to the direction of
the Board of Directors
Section 3. The CEO. The CEO shall be the chief executive
officer of the Corporation and shall be primarily responsible for the
implementation of policies of the Board of Directors. He shall have
authority over the general management and direction of the business
and operations of the Corporation and its divisions, if any, subject
only to the ultimate authority of the Board of Directors. Except
as otherwise provided in these bylaws, in the absence of the Chairman,
the CEO shall preside at all corporate meetings. He may sign and
execute in the name of the Corporation share certificates, deeds,
mortgages, bonds, contracts or other instruments except in cases
where the signing and the execution thereof shall be expressly and
exclusively delegated by the Board of Directors or by these bylaws
to some other officer or agent of the Corporation or shall be
required by law otherwise to be signed or executed. In addition,
he shall perform all duties incident to the office of Chief Executive
Officer and such other duties as from time to time may be assigned
to him by the Board of Directors.
Section 4. President. The President shall perform
such duties as shall be required of him by the CEO or Board of
Directors. The President may sign and execute in the name of the
Corporation deeds, mortgage, bonds, contracts or other instruments
authorized by the Board of Directors, except where the signing and
execution of such documents shall be expressly and exclusively
delegated by the Board of Directors, the CEO or by these bylaws to
some other officer or agent of the Corporation or shall be required
by law otherwise to be signed or executed. During the absence or
inability of the CEO to act, the President shall act in the place
of the CEO and shall be the Acting Chief Executive officer of the
Corporation.
Section 5. Executive Vice Presidents; Vice Presidents.
The Executive Vice Presidents and Vice Presidents shall perform
such duties as shall be required of them by the CEO, the President
or the Board of Directors. Any Executive Vice President or
Vice President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other instruments authorized
by the Board of Directors, except where the signing and execution
of such documents shall be expressly and exclusively delegated by
the Board of Directors, the CEO or by these bylaws to some other
officer or agent of the Corporation or shall be required by law
otherwise to be signed or executed.
- -12-
(79)
<PAGE>
Section 6. Secretary. The Secretary shall prepare
and maintain custody of the minutes of all meetings of the Board of
Directors and shareholders of the Corporation. When requested, he
shall also act as secretary of the meetings of the committees of
the Board of Directors. He shall see that all notices required to
be given by the Corporation are duly given and served; he shall
have custody of all deeds, leases, contracts and other important
corporate documents; he shall have charge of the books, records
and papers of the Corporation relating to its organization and
management as a corporation; and he shall in general perform all
the duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the CEO,
the President, or the Board of Directors. An Assistant Secretary
may exercise any of the functions or perform any of the duties of
the Secretary.
Section 7. Treasurer. The Treasurer shall have
custody of the moneys and securities of the Corporation, shall
sign or countersign such instruments as require his signature and
shall perform such other duties as may be incident to his office
or are properly required of him by the CEO, the President or the
Board of Directors. An Assistant Treasurer may exercise any of
the functions or perform any of the duties of the Treasurer.
ARTICLE VIII
------------
Indemnification
---------------
The Corporation shall indemnify persons who were
directors, officers, employees and agents of the Dibrell Companies
and the Monk-Austin Companies to the fullest extent provided by law
with respect to any matter occurring prior to the Effective Time.
Notwithstanding any other provision of these bylaws, this
Article VIII shall not be amended for a period of six years following
the Effective Time.
ARTICLE IX
----------
Miscellaneous
-------------
Section 1. Voting of Shares. Shares of any corporation
which this Corporation shall be entitled to vote may be voted either
in person or by proxy, by the CEO, the President or by any other officer
- -13-
(80)
<PAGE>
expressly authorized by this Corporation's Board of Directors or
Executive Committee, and each such officer is authorized to give this
Corporation's consent in writing to any action of such corporation,
and to execute waivers and take all other necessary action on behalf
of the Corporation with respect to such shares.
Section 2. Seal. The corporate seal of the Corporation
shall consist of a flat-faced circular die, of which there may be any
number of counterparts, on which there shall be engraved two concentric
circles between which is inscribed the name of the Corporation and in
the center the year of its organization and the word "corporate seal".
Section 3. Amendments to Bylaws. Unless proscribed by
the Articles of Incorporation, the Board of Directors of the Corporation
shall have the power to adopt and from time to time amend, alter, change
or repeal these bylaws with or without the approval of the shareholders
of the Corporation, but bylaws so made, amended, altered or changed,
may be further altered changed or repealed by the shareholders.
The shareholders in adopting or amending a particular bylaw may provide
expressly that the Board of Directors may not amend or repeal that bylaw.
- -14-
(81)
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment"), made
and entered into on the 10th day of August, 1995, to be effective as
of the 1st day of July, 1995, by and between DIMON International, Inc.
(the "Company") and Albert C. Monk III (the "Executive").
R E C I T A L S:
- - - - - - - -
The Company and the Executive entered into that certain Employment
Agreement (the "Agreement") dated October 18, 1994, which was effective
as of July 1, 1994. The Company and the Executive have agreed to modify
Section 4.1 of the Agreement to reflect certain understandings between
the parties with regard to the payment of the Executive's Base Salary
and the Executive's participation in the Company's new incentive bonus
plan.
NOW, THEREFORE, the Company and the Executive agree that the
Agreement shall be amended by inserting the following new paragraph at
the end of Section 4.1:
"The Company has selected the Executive to participate
in the new incentive bonus plan. If the requirements
of the incentive bonus plan are met, the Executive will be
entitled to a bonus with respect to each fiscal year of the
Company in an amount ranging from 0% to 75% of $355,000.
(This dollar amount shall be referred to as the Executive's
"Revised Base Salary"). In consideration of the Company
selecting the Executive to participate in the incentive
bonus plan, the Executive agrees that his annual Base Salary,
for purposes of determining his monthly salary payments
pursuant to this Section 4.1, shall be equal to his Revised
Base Salary. Should the sum of (A) and (B), where (A) is
his Revised Base Salary and (B) is the amount of the annual
incentive bonus paid or to be paid with respect to the
Executive for any Employment Year, be less than the amount
of the Base Salary specified in this Section 4.1 (as
increased each Employment Year by the annual cost of living
adjustment), the Company shall pay the difference to the
Executive effective as of the end of the applicable
Employment Year. The Executive's Revised Base Salary may
be increased (but not decreased) from time to time by
action of the Company's Board of Directors."
- -1-
(82)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
to Employment Agreement on the day and year first above written.
EXECUTIVE:
/s/ Albert C. Monk III (SEAL)
___________________________________
Albert C. Monk III
WITNESS:
/s/ John M. Hines
___________________________
John M. Hines
DIMON lnternational, Inc.:
By: /s/ Albert C. Monk III
___________________________________
Albert C. Monk III
President or Vice President
Attest:
/s/ Thomas A. Lewis
_______________________
Thomas A. Lewis
Secretary/Asst. Secretary
- -2-
(83)
<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
("Second Amendment"), made and entered into this 5th
day of August, 1999, to be effective as of the
1st day of May, 1999, by and between DIMON Incorporated
(the "Company") and Albert C. Monk, III (the
"Executive").
WHEREAS, DIMON International, Inc. was merged into
DIMON Incorporated, and DIMON Incorporated is the
successor in interest to that certain Employment
Agreement (the "Agreement") dated October 18, 1994,
which was effective as of July 1, 1994, entered into by
the Executive. The Company and the Executive have agreed
to modify Section 3.1 of the Agreement to reflect certain
understandings between the parties with regard to the
expiration date of the Initial Term and the provisions
for notice regarding expiration of the Term of the
Executive's employment.
NOW, THEREFORE, for good and valuable consideration,
the sufficiency of which is hereby acknowledged, the
Company and the Executive agree that the Agreement shall
be amended as follows:
1. The date "June 30, 1999" used in subsection
(i) of the first sentence of Section 3.1 shall be
replaced with the date "October 31, 1999" such that the
first sentence of Section 3.1 shall read as follows:
3.1 Term of Employment. The
term of the Executive's employment
(the "Initial Term") under this
Agreement shall be effective as of
July 1, 1994, and shall continue
until the earliest to occur of the
following (the "Termination Date"):
(i) October 31, 1999 (except as
otherwise provided in this Section
3.1); (ii) the last day of the
Employment Year (as defined in this
Section 3.1) in which the Executive
attains the age of sixty-five (65);
(iii) the date of death of the
Executive; (iv) the date coinciding
with the end of one hundred eighty
(180) days of continuous "Total
Disability" of the Executive (as
defined in ARTICLE 7); (v) the
specified date of termination under
the Notice Exception (as defined in
Section 3.2); (vi) the date of
termination under the Cause Exception
(as defined in Section 3.3); or (vii)
the date the Executive terminates his
employment for Good Reason (as
defined in Section 3.4).
2. The date "May 1" used in the third sentence of
Section 3.1 shall be replaced with the date "September 1"
such that the third sentence of Section 3.1 shall
read as follows:
If either party hereto desires for
the Term to expire at the end of the
Initial Term or at the end of any
- -1-
(84)
<PAGE>
succeeding one-year Extension Period,
such party shall give written notice
of such desire to the other party no
later than September 1 of the
Employment Year (as defined in this
Section 3.1) in which the Initial
Term will expire or September 1 of
any succeeding one-year Extension
Period.
3. The date "July 1" used in the last sentence of
Section 3.1 shall be replaced with the date "November 1"
such that the sentence reads as follows:
Each twelve-month period beginning
November 1 during the Term is
referred to herein as an "Employment
Year."
IN WITNESS WHEREOF, the parties have executed this
Second Amendment to Employment Agreement on the day and
year first above written.
EXECUTIVE
/s/ Albert C. Monk, III
____________________________
Albert C. Monk, III
WITNESS
/s/ Debra F. Alderson
Debra F. Alderson
_________________________
DIMON INCORPORATED
/s/ Richard O. O'Reilly
By: Richard O. O'Reiley
______________________
Its: Senior Vice President -
Human Relations
______________________
Attest:
/s/ John O. Hunnicutt
John O. Hunnicutt
_________________________
Secretary/Assistant Secretary
- -2-
(85)
<PAGE>
EARLY RETIREMENT AGREEMENT
THIS EARLY RETIREMENT AGREEMENT ("Early Retirement
Agreement"), made and entered into this 17th day of May,
1999, by and between DIMON Incorporated (the "Company")
and Claude B. Owen, Jr. (the "Executive").
WHEREAS, the Company and the Executive entered into
that certain Employment Agreement on December 21, 1994,
effective November 1, 1994 (the "Agreement") and
subsequent amendment, entered into on August 29, 1995.
WHEREAS, the Executive has advised the Company of
his intention to retire as Chief Executive Officer and a
director of the Company with full benefits as soon as he
is eligible to do so, although he is prepared to continue
for a transition period if the Board of Directors of the
Company so requests.
WHEREAS, in view of the Executive's intention, the
Company and the Executive both believe that it is in the
Company's best interest to effect succession and
management transition as soon as reasonably practicable
before October 31, 1999.
WHEREAS, it is the desire of the Company and the
Executive to preserve for the Executive and the Company
the full benefits to which each is entitled under the
Agreement.
NOW, THEREFORE, for good and valuable consideration,
the Company and the Executive agree as follows:
1. Term. The Company and the Executive mutually
agree that, as of the date hereof, the Executive's
employment under the Agreement ends, the Executive
retires from his employment with the Company and the
Executive tenders his resignation as a member of the
Board of Directors of the Company. The Company and the
Executive mutually acknowledge and agree that, in view of
the Executive's desire to retire and the Company's desire
to effect succession and management transition as soon as
reasonably practicable prior to October 31, 1999, this
retirement by the Executive gives rise to the rights and
obligations under the Agreement pursuant to Section 3.4
of the Agreement, other than any notice requirement
provided for by Sections 3.4 or 3.5, which notice
requirement is hereby waived, and other than the
provisions of Section 13.3 as to the noncompetition
provision, which is hereby confirmed as continuing in
full force and effect following the Executive's
retirement as provided below.
2. Reimbursement of Expenses, Office and
Secretarial Assistance. The Company acknowledges the
eligibility under the Agreement of the Executive through
the Compensation Continuance Period for reimbursement of
his reasonable expenses incurred for the benefit of the
Company, an office, and secretarial assistance pursuant
to Article 5, although Executive hereby waives the right
to have an office provided.
- -1-
(86)
<PAGE>
3. Special Supplemental Retirement Benefits.
Although eligible to receive Special Supplemental
Retirement Benefits ("SSRB") pursuant to Section 6.1,
the Executive acknowledges and agrees that because the
Executive's Basic Benefits payable under Pension
Equalization Plan ("PEP") exceed the SSRB benefits,
pursuant to the SSRB benefits calculation in Section 6.1
he will not receive any SSRB benefits.
4. Special Health Care Benefits. The Company
acknowledges the eligibility of the Executive, and his
spouse where applicable, for Special Health Care Benefits
pursuant to Section 6.2.
5. Other Employee Benefits. The Company
acknowledges the eligibility of the Executive for
participation in other employee benefits plans and
receipt of other employee benefits during the
Compensation Continuance Period pursuant to Article 10 as
amended below, including without limitation participation
in the Company's matching gift program and the use of a
Company car in accordance with the Company's policy
therefor for senior executives.
6. Compensation Continuance and Special Severance
Benefit. The Company and Executive acknowledge the
eligibility of the Executive for the Severance Benefit
following the expiration of the Compensation Continuance
Period pursuant to Section 12.3 equal to Executive's Base
Salary and bonus under the Cash Bonus Plan for the
Employment Year just completed. In lieu of the rights
under Section 12.3, the Company and Executive agree that
Compensation Continuance Period under Section 12.2 shall
continue through October 31, 2000, but that the
compensation payable during such period shall be the same
as payable pursuant to the Severance Benefit.
7. Post-Termination Obligations. The Executive
acknowledges his post-termination obligations to the
Company pursuant to Article 13, including obligations
under Section 13.3 as to the noncompetition provision,
which is hereby confirmed as continuing in full force and
effect following the Executive's retirement and is
extended until one year following the termination of the
Compensation Continuance Period, or October 31, 2001,
rather than one year from the date hereof.
8. Gross-Up Payment. The Company acknowledges the
eligibility of the Executive for a Gross-Up Payment
pursuant to Article 14.
9. Pension Equalization Plan Eligibility. The
Company and the Executive acknowledge and agree that the
Executive, pursuant to Article 30 and the provisions of
the PEP, will be entitled to participate in the PEP to
the fullest extent possible upon completion of the
Compensation Continuance Period, notwithstanding any
provision in the Agreement or the PEP to the contrary,
and that the Executive shall be fully vested in the PEP
as of the Termination Date, with all related benefits
that flow therefrom, including without limitation the
Executive's vesting in the Company's split-dollar life
insurance on the Executive's life.
- -2-
(87)
<PAGE>
10. Pension Equalization Plan Computations. The
Company and Executive agree that for purposes of
calculating the Executive's Final Average Earnings
under the PEP, which are defined as one-fifth of
his annual earnings during the highest consecutive
five-year period within the immediately preceding
ten year period, the annual earnings received by
the Executive through October 31, 2000, may be
considered when determining the highest
consecutive five year period.
11. Stock Options. The Company acknowledges
that after the Termination Date the Executive will
be entitled to all of his stock options, both
vested and unvested in accordance with existing
Company policy as reflected in the letter dated
January 11, 1995 to the Executive from John O.
Hunnicutt on behalf of the Company. The unvested
options will remain outstanding for the balance of
their life and will continue to vest according to
their normal vesting schedule as if the
Executive's employment had not terminated.
12. Announcements. Neither the Company nor
the Executive will take any action or make any
comments which impugn, disparage, criticize or
negatively characterize, on the one hand, the
Executive, and on the other hand, the Company, its
directors, officers, management, employees or
agents, except that nothing herein shall limit
either party's rights and obligations as may be
required by law. Any public or Company
announcement with respect to the Executive's
retirement shall be reviewed between the Company
and the Executive before being made and shall be
reasonably acceptable to both parties, with the
Executive acknowledging that the Company in all
cases will have to meet its legal and regulatory
obligations as to public disclosure.
13. The Company and the Executive agree that
to the extent the provisions herein conflict with
the terms of the Agreement, the provisions herein
shall supersede and amend those terms of the
Agreement, and to the extent the provisions herein
conflict with the terms of the PEP, the provisions
herein supersede and amend those terms of the PEP.
14. The Company and the Executive agree that
to the extent the provisions herein do not
conflict with the terms of the Agreement, the
terms of the Agreement not repealed or modified
above remain in effect, and to the extent the
provisions herein do not conflict with the terms
of the PEP, the terms of the PEP remain in effect.
- -3-
(88)
<PAGE>
IN WITNESS WHEREOF, the parties have executed
this Early Retirement Agreement and amendment to
Employment Agreement on the day and year first
above written.
EXECUTIVE
____________________________
Claude B. Owen, Jr.
WITNESS
/s/ Thurston R. Moore
Thurston R. Moore
________________________
DIMON INCORPORATED
/s/ Joseph L. Lanier, Jr.
Joseph L. Lanier, Jr.
By: ______________________
Chairman
Its: ____________________
Attest:
/s/ John O. Hunnicutt
John O. Hunnicutt
_________________________
Secretary/Assistant Secretary
- -4-
(89)
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
("First Amendment"), made and entered into this 22nd
day of April, 1999, to be effective as of the
1st day of May, 1999, by and between DIMON Incorporated
(the "Company") and Brian J. Harker (the "Executive").
WHEREAS, the Company and the Executive entered into
that certain Employment Agreement (the "Agreement")
dated January 3, 1997, which was effective as of October
1, 1996. The Company and the Executive have agreed to
modify Section 3.1 of the Agreement to reflect certain
understandings between the parties with regard to the
expiration date of the Initial Term and the provisions
for notice regarding expiration of the Term of the
Executive's employment.
NOW, THEREFORE, for good and valuable consideration,
the sufficiency of which is hereby acknowledged, the
Company and the Executive agree that the Agreement shall
be amended as follows:
1. The date "September 30, 1999" used in
subsection (i) of the first sentence of Section 3.1 shall
be replaced with the date "October 31, 1999" such that
the first sentence of Section 3.1 shall read as follows:
3.1 Term of Employment. The
term of the Executive's employment
(the "Initial Term") under this
Agreement shall commence effective as
of October 1, 1996, and shall
continue until the earliest to occur
of the following dates (the
"Termination Date"): (i) October
31, 1999 (except as otherwise
provided in this Section 3.1); (ii)
the last day of the Employment Year
(as defined in this Section 3.1) in
which the Executive attains the age
of sixty (60); (iii) the date of
death of the Executive; (iv) the date
coinciding with the end of one
hundred eighty (180) days of
continuous "Total Disability" of the
Executive (as defined in Section
7.4); (v) the specified date of
termination under the Notice
Exception (as defined in Section
3.2); (vi) the date of termination
under the Cause Exception (as defined
in Section 3.3) determined pursuant
to Section 3.5; or (vii) the date the
Executive terminates his employment
for Good Reason (as defined in
Section 3.4) determined pursuant to
Section 3.5.
2. The date "August 1" in the third sentence of
Section 3.1 shall be replaced with the date "September
1" such that the third sentence of Section 3.1 shall
read as follows:
If either party hereto desires for
the Term to expire at the end of the
Initial Term or at the end of any
succeeding one-year Extension Period,
- -2-
(90)
<PAGE>
such party shall give written notice
of such desire to the other party no
later than September 1 of the
Employment Year (as defined in this
Section 3.1) in which the Initial
Term will expire or September 1 of
any succeeding one-year Extension
Period.
3. The date "October 1" used in the last sentence
of Section 3.1 shall be replaced with the date "November
1" such that the sentence reads as follows:
Each twelve-month period beginning
November 1 during the Term is
referred to herein as an "Employment
Year."
IN WITNESS WHEREOF, the parties have executed this
First Amendment to Employment Agreement on the day and
year first above written.
EXECUTIVE
/s/ Brian J. Harker
____________________________
Brian J. Harker
WITNESS
Susan P. Herndon
/s/ Susan P. Herndon
_________________________
DIMON INCORPORATED
/s/ Richard O. O'Reilly
By: Richard O. O'Reilly
______________________
Its: Senior Vice President -
Human Relations
______________________
Attest:
/s/ John O. Hunnicut
John O. Hunnicutt
_________________________
Secretary/Assistant Secretary
- -2-
(91)
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made and
entered into on the 18th day of October, 1994, to be effective
as of the lst day of July, 1994, by and between MONK-AUSTIN
INTERNATIONAL, INC. (the "Company"), a corporation organized
and existing under the laws of the State of North Carolina and
having its principal office at Farmville, North Carolina, and
LARRY R. CORBETT (the "Executive"), an individual residing at
Kinston, North Carolina.
R E C I T A L S:
- - - - - - - -
The Company is engaged in the business of purchasing and
processing leaf tobacco and selling processed tobacco to
manufacturers of cigarettes and other consumer tobacco
products. The Executive is experienced in, and knowledgeable
concerning, all aspects of the business of the Company. The
Executive has heretofore been employed by the Company as its
Senior Vice-President and Director of Sales. The Company
desires to continue to employ the Executive as Senior Vice-
President and Director of Sales of the Company, and the
Executive desires to continue to be employed by the Company in
that capacity. Furthermore, the Company desires to provide
for the Executive certain disability, death, severance and
supplemental retirement benefits in addition to those provided
by the employee benefit plans of the Company. The Company and
the Executive desire to reduce to writing the terms of their
understanding and to provide for the Executive's continued
employment by the Company pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
and obligations herein and the compensation the Company agrees
herein to pay the Executive, and of other good and valuable
consideration, the receipt of which is hereby acknowledged,
the Company and the Executive agree as follows:
ARTICLE 1. EMPLOYMENT OF EXECUTIVE. Subject to the terms
and conditions set forth in this Agreement, the Company hereby
employs the Executive and the Executive hereby accepts such
employment for the period stated in ARTICLE 3 of this
Agreement.
ARTICLE 2. POSITION, RESPONSIBILITIES AND DUTIES.
2.1 Position and Responsibilities. During the Term (as
defined in Section 3.1 of ARTICLE 3), the Executive shall
serve as Senior Vice-President and Director of Sales of the
Company on the conditions herein provided. The Executive
shall provide such executive services in the management of the
Company's business not inconsistent with his position and the
provisions of Section 2.2 as shall be assigned to him from
time to time by the Board of Directors of the Company (the
"Board") or by such officers of the Company as may be senior
in authority to the Executive.
2.2 Duties. In addition to having the responsibilities
described in Section 2.1, during the Term, the Executive shall
- -1-
(92)
<PAGE>
also serve, if elected, as an officer and director of
the Company or of any subsidiary or affiliate of the
Company. During the Term and except for illness, reasonable
vacation periods, and reasonable leaves of absence, the
Executive shall devote his full business time, attention,
skill, energies and efforts to the faithful performance of his
duties hereunder and to the business and affairs of the
Company and any subsidiary or affiliate of the Company and
shall not during the Term be employed in any other business
activity, whether or not such activity is pursued for gain,
profit or other pecuniary advantage; provided, however, that
(i) with the approval of the Board, the Executive may serve,
or continue to serve, on the boards of directors of, and hold
any other offices or positions in, companies or organizations,
which, in the Board's judgment, will not present any conflict
of interest with the Company or any of its subsidiaries or
affiliates or divisions, or materially affect the performance
of the Executive's duties pursuant to this Agreement and (ii)
the Executive shall not be prevented from investing his
personal assets in any business which does not compete with
the Company or with any subsidiary or affiliate of the
Company, where the form or manner of such investment will not
require substantial services on the part of the Executive in
the operation of the business in which such investment is
made. Notwithstanding the foregoing, the duties of the
Executive (i) shall not be expanded without the Executive's
prior approval and (ii) shall not require him to relocate his
residence from Kinston, North Carolina, and shall not make it
impractical for him to continue to reside there or cause him
to reside away from there for extended periods of time.
ARTICLE 3. TERM.
3.1 Term of Employment. The term of the Executive's
employment (the "Initial Term") under this Agreement shall be
effective as of July 1, 1994, and shall continue until the
earliest to occur of the following (the "Termination Date"):
(i) June 30, 1995 (except as otherwise provided in this
Section 3.1); (ii) the last day of the Employment Year (as
defined in this Section 3.1) in which the Executive attains
the age of sixty (60); (iii) the date of death of the
Executive; (iv) the date coinciding with the end of one
hundred eighty (180) days of continuous 'Total Disability" of
the Executive (as defined in ARTICLE 7); (v) the specified
date of termination under the Notice Exception (as defined in
Section 3.2); (vi) the date of termination under the Cause
Exception (as defined in Section 3.3); or (vii) the date the
Executive terminates his employment for Good Reason (as
defined in Section 3.4). In the event that the Initial Term
shall expire for the terminating event described in
subparagraph (i) of this Section 3.1, then, notwithstanding
the provisions of subparagraph (i) of this Section 3.1, the
Initial Term shall be extended automatically, without any
further action by the Company or the Executive, for successive
one-year periods (each, an "Extension Period") following the
expiration of the Initial Term (by reason of the terminating
event described in subparagraph (i) of this Section 3.1) or
any succeeding one-year Extension Period (except as otherwise
provided in this Section 3.1). If either party hereto desires
for the Term to expire at the end of the Initial Term or at
the end of any succeeding one-year Extension Period, such
party shall give written notice of such desire to the other
party no later than May 1 of the Employment Year (as defined
- -2-
(93)
<PAGE>
in this Section 3.1) in which the Initial Term will expire or
May 1 of any succeeding one-year Extension Period. All
references herein to the term of the Executive's employment
(the "Term") shall refer to the Initial Term and shall include any
Extension Period. Each twelve-month period beginning July 1
during the Term is referred to herein as an "Employment Year."
3.2 Termination by Giving Notice. If either party hereto
desires to terminate the Executive's employment prior to the
expiration of the Term, such party shall give not less than
sky (60) days written notice of such desire to the other party
specifying the date of termination (the "Notice Exception").
Notwithstanding the foregoing, the Notice Exception shall not
be effected by the Company while the Executive is Totally
Disabled as provided in ARTICLE 7.
3.3 Termination for Cause, Automatic Termination. The
Company shall at all times have the right to discharge the
Executive for cause. For purposes of this Agreement, for
cause shall be limited to one or more of the following: (i)
habitual intoxication by the Executive while performing his
duties under this Agreement; (ii) theft or embezzlement; (iii)
alcoholism; (iv) drug addiction; (v) conviction of a felony;
or (vi) willful, flagrant, deliberate and repeated infractions
of material published policies and regulations of the Company
of which the Executive has actual knowledge (the "Cause
Exception"). If the Company desires to discharge the
Executive under the Cause Exception, it shall give notice to
the Executive as provided in Section 3.5 and the Executive
shall have thirty (30) days after notice has been given to him
in which to cure the reason for the Company's exercise of the
Cause Exception. If the reason for the Company's exercise of
the Cause Exception is timely cured by the Executive, the
Company's notice shall become null and void. For purposes of
this Agreement, for cause shall not include the Executive's
Total Disability (as defined in Section 7.4).
3.4 Good Reason. The Executive may terminate his
employment at any time for Good Reason (as defined in this
Section 3.4). If the Executive desires to terminate his
employment for Good Reason, he shall give notice to the
Company as provided in Section 3.5. For purposes of this
Section 3.4, "Good Reason" shall mean any of the following:
(a) The Executive's resignation from the Company's
employment on account of the failure by the Board
or any officer of the Company as may be senior in
authority to the Executive to reelect or reappoint
the Executive to a responsible executive position in
the Company and the Executive then elects to
leave the Company's employment within six (6) months
of such failure to so reelect or reappoint the
Executive;
(b) The Executive's resignation from the Company's
employment on account of a material modification by
the Board or any officer of the Company as may be
senior in authority to the Executive of theduties,
functions and responsibilities of the Executive as
Senior Vice-President and Director of Sales without
his consent within six (6) months of such modification;
or
(c) The Executive's resignation from the Company's
employment on account of any material breach of a
provision of this Agreement by the Company, which
breach is not cured within thirty (30) days after
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(94)
<PAGE>
notice has been given to the Company by the Executive.
Without limiting the generality of the foregoing
sentence, the Company shall be in material breach of
its obligations hereunder if, for example, the Company
shall not permit the Executive to exercise such
responsibilities as are consistent with the Executive's
position and are of such a nature as are usually
associated with such offices of a corporation engaged in
substantially the same business as the Company, or the
Executive shall at any time be required to report to
anyone other than directly to the Board or any officer
of the Company as may be senior in authority to the
Executive, or the Company causes the Executive to
relocate his residence from Kinston, North Carolina or
makes it impractical for him to continue to reside there
or causes him to reside away from there for extended
periods of time, or the Company shall fail to make
a payment when due to the Executive.
3.5 Notice of Termination. Any termination by the
Company under the Cause Exception or by the Executive for Good
Reason shall be communicated by Notice of Termination to the
other party hereto. For purposes of Sections 3.3 and 3.4, a
"Notice of Termination" means a written notice which (i),
indicates the specific termination provision in this Agreement
relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated
and (iii) if the termination date is other than the date of
receipt of such notice, specifies the effective date of
termination (with respect to the events described in Sections
3.4(a) and (b), such date shall be not more than 15 days after
the giving of such notice).
3.6 Rights of Executive Upon Termination of Employment.
(a) Following the date the Term expires on account of
one of the terminating events described in subparagraphs
(i), (v) or (vii) of Section 3.1, the rights of the
Executive shall be as provided in ARTICLES 4, 5, 6, 9,
10, 12, 13, 14, 15, 16, 18, 26 and 31.
(b) Following the date the Term expires on account of
the Executive's attainment of age sixty (60) as
provided in subparagraph (ii) of Section 3.1, the
rights of the Executive shall be as provided in
ARTICLES 4, 5, 6, 9, 10, 12, 13, 14, 15, 16, 18 and 26.
(c) Following the date the Term expires on account of
the Executive's death as provided in subparagraph (iii)
of Section 3.1, the rights of the Executive's personal
representative and designated beneficiary (as determined
pursuant to ARTICLE 16) shall be as provided in ARTICLES
4, 5, 8, 10, 12, 14, 15, 16, 18 and 26.
(d) Following the date the Term expires on account of
the Executive's Total Disability as provided in
subparagraph (iv) of Section 3.1, the rights of the
Executive shall be as provided in ARTICLES 4, 5, 7, 9,
10, 12, 13, 14, 15, 16, 18 and 26.
- -4-
(95)
<PAGE>
(e) Following the date the Executive is terminated
for cause as provided in subparagraph (vi) of Section 3.1,
the rights of the Executive shall be as provided in
ARTICLES 4, 5, 9, 10, 12, 13, 14, 15, 16, 18 and 26.
ARTICLE 4. COMPENSATION. For all services
rendered by the Executive during the Term, including without
limitation, services as an executive, officer, director (except
fees and reimbursements to which all members of the Board, or a
subsidiary or affiliate of the Company, are generally entitled)
or member of any committee of the Company or of any subsidiary,
affiliate, or division thereof, the Company shall pay the
Executive as compensation the following:
4.1 Base Salary. The Executive shall be paid for
his services during the Term a base annual salary of $200,000
"Base Salary"), payable in appropriate installments to conform
with regular payroll dates for salaried personnel of the Company.
The Executive's Base Salary shall be automatically increased on
July 1 of each Employment Year to reflect increases in the cost
of living (as hereinafter described). In no event, however,
shall the Executive's Base Salary under, this Agreement ever be
less than $200,000. In addition to any cost of living increase
in the Executive's Base Salary, the Board may, in its sole
discretion, increase the Executive's Base Salary based on his
performance. The amount of any annual automatic cost of living
increase in the Executive's Base Salary shall be determined by
multiplying the most recent Base Salary times a fraction
whose numerator shall be the Consumer Price Index (the
"CPI") [All Urban Consumers, South Region Average (1982-
84 = 100); All Items, Bureau of Labor Statistics of The
United States Department of Labor], for the month of May
next preceding the July 1 of the current Employment Year,
and whose denominator shall be the CPI for the month of
May next preceding the July 1 of the Employment Year
immediately prior to the current Employment Year. If the
quotient obtained in the foregoing fraction shall be a
number less than one (1), the Base Salary shall be equal
to the Base Salary of the Employment Year just completed.
In the event (i) the CPI ceases to use the 1982-84
average of 100 as the base of calculation, or (ii) a
substantial change is made in the quality or quantity of
the items utilized in determining the CPI, or (iii) the
publishing of the CPI shall be discontinued for any
reason, the United States Department of Labor shall be
requested to furnish a new index comparable to the CPI,
together with the information which will make possible
the conversion of such new index to replace the CPI for
the purposes of computing the Base Salary as provided for
herein. If for any reason the United States Department
of Labor does not furnish such an index and information,
the parties hereto shall thereafter accept and use, as
determined by the Board, such other index or comparable
statistics to measure the cost of living as shall be
computed and published by (i) an agency of the United
States Government, (ii) a reasonable financial periodical
or (iii) a recognized authority mutually selected by the
Company and the Executive.
4.2 Discretionary Bonus. In addition to the Base
Salary provided for in Section 4.1, the Executive shall be
entitled to such bonus or bonuses, if any, as may be
awarded to the Executive from time to time by the Board.
Any such bonus shall be payable in the manner specified by
the Board at the time any such bonus is awarded.
- -5-
(96)
<PAGE>
ARTICLE 5. REIMBURSEMENT OF EXPENSES, OFFICE
AND SECRETARIAL ASSISTANCE. The Company recognizes that the
Executive will incur, from time to time, expenses for the
benefit of the Company and in furtherance of the Company's
business, including, but not limited to, expenses for
entertainment, travel and other business expenses consistent
with the Company's past practices. During the Term and any
Compensation Continuance Period (as defined in ARTICLE 12),
the Executive will be reimbursed for his reasonable expenses
incurred for the benefit of the Company in accordance with
the general policy of the Company as adopted from time to
time by the Board. To receive such reimbursement, the
Executive must present to the Company an itemized accounting,
in such detail as the Company may reasonably request, of
such expenditures. The Company further agrees to furnish
the Executive during the Term and any Compensation
Continuance Period (as defined in ARTICLE 12) with an
office and such secretarial assistance as shall be suitable
to the character of the Executive's position with the
Company and adequate for the performance of his duties
hereunder. In the event of the termination of the
Executive's employment for any reason, the Company shall
reimburse the Executive (or in the event of death, his
personal representative) for expenses incurred by the
Executive on behalf of the Company prior to the
Termination Date to the extent such expenses have not,
been previously reimbursed by the Company.
ARTICLE 6. SPECIAL SUPPLEMENTAL RETIREMENT
BENEFIT. Upon the expiration of the Term for any reason
(other than for one of the terminating events described
in subparagraphs (iii), (iv) or (vi) of Section 3.1),
whether voluntary or involuntary on the part of the
Executive, the Executive shall be entitled to receive a
special supplemental annual retirement benefit (the
"Deferred Benefit") equal to fifty percent (50%) of his
Average Base Salary (as defined in this ARTICLE 6). The
Deferred Benefit shall be payable for three (3) years in
approximately equal monthly installments commencing on the
first day of the month next following the later of
(i) the end of the Employment Year in which the Term
expires or (ii) the end of the Severance Period (as
defined in ARTICLE 12) in the event the Executive is
eligible to receive the Severance Benefit (as defined in
ARTICLE 12), and continuing for thirty-rive (35) consecutive
calendar months thereafter. The Deferred Benefit payments
shall be paid in accordance with the payroll schedule for
salaried personnel of the Company. For purposes of this
Agreement, the "Average Base Salary" of the Executive shall
mean the average of his annual Base Salary for the three
(3) consecutive calendar years of employment pursuant to
this Agreement (or, in the event the Executive does not
have three (3) consecutive calendar years of employment
pursuant to this Agreement, his annual salary for calendar
years of employment prior to the date of this Agreement)
ending coincident " with or next preceding the Termination
Date. If the Executive shall not have three (3)
consecutive calendar years of employment, his Average Base
Salary shall be equal to the Base Salary (or annual salary,
as the case may be) for the calendar year of employment
next preceding the Termination Date. Notwithstanding the
foregoing, for purposes of this ARTICLE 6, the Executive's
Average Base Salary shall in no event be less than $200,000.
ARTICLE 7. DISABILITY BENEFITS.
7.1 Commencement of Total Disability. If the Executive
suffers a "Total Disability" (as defined in Section 7.4),
he shall be deemed totally disabled ("Totally Disabled")
for purposes of this Agreement as of the date such Total
Disability commenced.
- -6-
(97)
<PAGE>
7.2 Benefits Payable Upon Total Disability. In the event
of the Total Disability of the Executive, the Company shall
continue to pay the Executive his Base Salary during the
Disability Period (as defined in this Section 7.2); provided,
however, that if the Term shall otherwise expire during the
Disability Period pursuant to the provisions of ARTICLE 3, the
Company shall cease paying the Executive his Base Salary under
this Section 7.2 as of the Termination Date, and the remaining
provisions of this Agreement shall apply. In the event that
the Executive's Total Disability continues for a period of one
hundred eighty (180) days (measured from the date the
Executive became Totally Disabled), the Term shall
automatically expire, as provided in subparagraph (iv) of
Section 3.1, at the end of such one hundred eighty day period
(the "Disability Period"). If the Term shall expire on
account of the Executive's Total Disability, the Company shall
pay to the Executive an annual disability benefit (the
"Disability Benefit") equal to fifty percent (50%) of his
Average Base Salary (as defined in ARTICLE 6). The annual
disability benefit shall be payable to the Executive for three
(3) years in approximately equal monthly installments on the
first day of each calendar month commencing with the calendar
month next following the month in which the Term expires on
account of the Executive's Total Disability and continuing for
thirty-five (35) consecutive calendar months thereafter. The
Disability Benefit payments shall be paid in accordance with
the payroll schedule for salaried personnel of the Company.
7.3 Cessation of Disability. Notwithstanding the
provisions of Section 7.2, if prior to the end of the
Disability Period, the Executive's Total Disability shall have
ceased under the definition of Total Disability set forth in
Section 7.4 and he shall have commenced to perform his regular
duties hereunder, the following special provisions shall
apply: (i) this Agreement shall continue in full force and
effect (except as otherwise provided in ARTICLE 3); and (ii)
the Executive shall be entitled to resume his employment under
this Agreement and to receive thereafter compensation in
accordance with ARTICLE 4 as though he had not been Totally
Disabled; provided, however, that unless the Executive shall
perform his regular duties hereunder for a continuous period
of at least sixty (60) days following a period of Total
Disability before he again becomes Totally Disabled, he shall
not be entitled to start a new Disability Period, but instead
must continue under the remaining portion of the original
Disability Period. In this event, the resumption of the
original Disability Period shall commence on the date such
Total Disability resumed.
7.4 Definition of Total Disability. For purposes of this
Agreement, 'Total Disability" shall mean the permanent and
total inability, by reason of physical or mental infirmity, or
both, of the Executive to perform his regular and customary
duties with the Company in a satisfactory manner. The total
and irrevocable loss of the sight of both eyes, or of the use
of both hands, or of both feet, or of one hand and one foot,
or of speech or hearing shall be considered Total Disability.
The determination of the existence or nonexistence of Total
Disability shall be made by the Board, pursuant to a medical
examination by a medical doctor licensed to practice medicine
in the state of North Carolina selected or approved by the
Board.
- -7-
(98)
<PAGE>
ARTICLE 8. DEATH BENEFIT. Upon the expiration
of the Term on account of the Executive's death (as provided
in subparagraph (iii) of Section 3.1), the Company shall pay
to the Executive's designated beneficiary (as determined
pursuant to ARTICLE 16) an annual death benefit (the "Death
Benefit") equal to twenty-five percent (25%) of the
Executive's Average Base Salary (as defined in ARTICLE 6).
The Death Benefit shall be payable to the Executive's
designated beneficiary for three (3) years in approximately
equal monthly installments on the first day of each calendar
month commencing with the calendar month next following the
month in which the Term expires on account of the Executive's
death and continuing for thirty-five (35) consecutive calendar
months thereafter.
ARTICLE 9. DEATH FOLLOWING COMMENCEMENT OF PAYMENTS.
Upon the expiration of the Term under circumstances entitling
the Executive to receive payments pursuant to ARTICLES 6, 7 or
12, and if he shall die prior to receiving any or all of the
monthly installments to which he is due hereunder, then such
remaining monthly installments shall be payable to his
designated beneficiary (as determined pursuant to ARTICLE 16).
ARTICLE 10. OTHER EMPLOYEE BENEFITS. The Executive
shall be entitled to participate in any and all retirement,
health, disability, life insurance, long-term disability
insurance, nonqualified deferred compensation and tax-
qualified retirement plans or any other plans or benefits
offered by the Company to its executives generally, if and to
the extent the Executive is eligible to participate in
accordance with the terms and provisions of any such plan or
benefit program. Nothing in this ARTICLE 10 is intended, or
shall be construed, to require the Company to institute any
particular plan, program or benefit. Benefits payable
pursuant to this Agreement shall be in addition to benefits
payable to the Executive under all other employee benefit
plans or programs of the Company.
ARTICLE 11. VACATION AND SICK LEAVE. The Executive
shall be entitled to reasonable periods of vacation and sick
leave during each Employment Year, commensurate with his
position and in accordance with established Company policy.
The Executive shall continue to receive his Base Salary during
the time of his vacation and sick leave. Vacation and sick
leave not taken during the applicable Employment Year cannot
be accumulated and taken during a subsequent Employment Year
nor will the Executive be paid for vacation and sick leave not
taken.
ARTICLE 12. TERMINATION COMPENSATION.
12.1 Monthly Compensation. Upon the expiration of the
Term for any reason, the Executive shall be entitled to
continue to receive his Base Salary through the last day of
the month in which the Termination Date occurs (the
"Termination Month").
12.2 Compensation Continuance. In addition to the
compensation provided for in Section 12.1, upon the
termination of the Executive's employment by the Company's
exercise of the Notice Exception or by the Executive for Good
Reason, the Executive (or in the event of his subsequent
death, his designated beneficiary) shall be entitled to
continue to receive during the remainder of the Term following
the last day of the Termination Month (the "Compensation
Continuance Period"), the Base Salary (as increased each year
to reflect
- -8-
(99)
<PAGE>
increases in the cost of living) that he would have received
pursuant to Section 4.1 during the Compensation Continuance
Period if the Term had not expired. During the Compensation
Continuance Period, the Executive shall (i) continue to
participate in all employee benefit plans or programs of the
Company (as described in ARTICLE 10), and (ii) be available at
reasonable times to provide consulting services to the
Company.
12.3 Special Severance Benefit. In addition to the
compensation provided for in Sections 12.1 and 12.2, upon the
termination of the Executive's employment by the Company's
exercise of the Notice Exception, or by the Executive for Good
Reason, or by the Company's giving notice which would cause
the Term to expire at the end of the Initial Term or at the
end of any succeeding Extension Period, the Executive (or in
the event of his subsequent death, his designated beneficiary)
shall be entitled to a special severance benefit (the
"Severance Benefit") equal to his Base Salary for the
Employment Year just completed, which Severance Benefit shall
be payable for one (1) year in approximately equal monthly
installments commencing on the first day of the month next
following the expiration of the Compensation Continuance
Period (or the last day of the Termination Month, as the case
may be), and continuing for eleven (11) consecutive calendar
months thereafter (the "Severance Period"). The Severance
Benefit payments shall be paid in accordance with the payroll
schedule for salaried personnel of the Company.
See ARTICLE 6 for additional benefits the Executive may
be entitled to receive following receipt of the compensation
provided for in this ARTICLE 12.
ARTICLE 13. POST-TERMINATION OBLIGATIONS. All
payments and benefits to the Executive under this Agreement
shall be subject to the Executive's compliance with the
following provisions during the Term and following the
termination of the Executive's employment:
13.1 Assistance in Litigation. The Executive shall, upon
reasonable notice, furnish such information and assistance to
the Company as may reasonably be required by the Company in
connection with any litigation in which it is, or may become,
a party, and which arises out of facts and circumstances known
to the Executive. The Company shall promptly reimburse the
Executive for his out-of-pocket expenses incurred in
connection with the fulfillment of his obligations under this
Section 13.1.
13.2 Confidential Information. The Executive shall not
disclose or reveal to any unauthorized person any trade secret
or other confidential information relating to the Company, its
subsidiaries or affiliates, or to any businesses operated by
them, and the Executive confirms that such information
constitutes the exclusive property of the Company; provided,
however, that the foregoing shall not prohibit the Executive
from disclosing such information to the extent necessary or
desirable in connection with obtaining financing for the
Company (or furnishing such information under any agreements,
documents or instruments under which such financing may have
been obtained) or otherwise disclosing such information to
third parties or governmental agencies in furtherance of the
interests of the Company; or as may be required by law.
- -9-
(100)
<PAGE>
13.3 Noncompetition. The Executive shall not: (i) during the
Term and for the one-year period following the expiration of
the Term, without the prior written consent of the Company,
engage directly or indirectly, as a licensee, owner, manager,
consultant, officer, employee, director, investor or
otherwise, in any business in competition with the Company,
within the state of North Carolina; or (ii) usurp for his own
benefit any corporate opportunity under consideration by the
Company during his employment, unless the Company shall have
finally decided not to take advantage of such corporate
opportunity. The restrictions of part (i) of this Section
13.3 shall not apply if the employment of the Executive is
terminated by the Company's exercise of the Notice Exception
or by the Executive for Good Reason, and shall further not
apply to a passive investment by the Executive constituting
ownership of less than five percent (5%) of the equity of any
entity engaged in any business described in part (i) of this
Section 13.3. The Executive acknowledges that the possible
restrictions on his activities which may occur as a result
of his performance of his obligations under this
Section 13.3 are required for the reasonable protection of
the Company.
13.4 Failure to Comply. In the event that the Executive
shall fail to comply with any provision of this ARTICLE 13,
and such failure shall continue for ten (10) days following
delivery of notice thereof by the Company to the Executive,
all rights hereunder of the Executive and any person claiming
under or through him shall thereupon terminate and no person
shall be entitled thereafter to receive any payments or
benefits hereunder (except for benefits under employee benefit
plans or programs as provided in ARTICLE 10 which have been
earned or otherwise fixed or determined to be payable prior to
such termination). In addition to the foregoing, in the event
of a breach or threatened breach by the Executive of the
provisions of this ARTICLE 13, the Company shall have and may
exercise any and all other rights and remedies available to
the Company at law or otherwise, including but not limited to
obtaining an injunction from a court of competent jurisdiction
enjoining and restraining the Executive from committing such
violation, and the Executive hereby consents to the issuance
of such injunction.
ARTICLE 14. ADDITIONAL PAYMENTS BY COMPANY. In the
event that any amount required to be paid or distributed to
the Executive pursuant to this Agreement shall constitute a
parachute payment within the meaning of Section 28OG of the
Internal Revenue Code of 1986, as amended (the "Code"), and
the aggregate of such parachute payments and any other amounts
otherwise required to be paid or distributed to the Executive
by the Company shall cause the Executive to be subject to the
excise tax on excess parachute payments under Section 4999 of
the Code (the "Excise Tax"), or any successor or similar
provision thereof, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net
amount the Executive shall receive after the payment of any
Excise Tax, shall equal the amount which he would have
received if the Excise Tax had not been imposed. The Gross-Up
Payment shall be the sum of the following:
(a) The rate of the Excise Tax multiplied by the
amount of the excess parachute payments;
- -10-
(101)
<PAGE>
(b) Any federal income tax, social security tax,
unemployment tax or Excise Tax imposed upon the
Executive as a result of the Gross-Up Payment required
to be made under this ARTICLE 14; and
(c) Any state income or other tax imposed upon the
Executive as a result of the Gross-Up Payment required
to be made under this ARTICLE 14.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation
for individuals in the calendar year in which the Excise Tax
is required to be paid. In addition, the Executive shall be
deemed to pay state income taxes at a rate determined in
accordance with the following formula:
( 1 - (highest marginal rate of federal income
taxation for individuals)) x (highest marginal rate of
North Carolina income taxes for individuals in the
calendar year in which the Excise Tax is required to
be paid).
In the event the Executive is subject to the provisions
of Section 68 of the Code, the combined federal and state
income tax rate determined above shall be adjusted to reflect
any loss in the federal deduction for state income taxes on
the Gross-Up Payment.
The Gross-Up Payment shall be made not later than the
fifth (5th) day, or as soon thereafter as the Company deems
practicable, following the date the Executive becomes subject
to payment of the Excise Tax; provided, however, that if the
amount of such payment cannot be finally determined on or
before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payment and shall pay
the remainder of such payment (together with interest at the
rate provided under Section 1274(b)(2)(B) of the Code) as soon
as the amount can be determined but no later than the
thirtieth (30th) day after the date the Executive becomes
subject to the payment of the Excise Tax. In the event the
amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on
the fifth (5th) day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code).
In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account
hereunder at the time the Gross-Up Payment is made, the
Executive shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax, federal and state taxes
imposed on the Gross-Up Payment being repaid by the Executive,
if such repayment results in a reduction in Excise Tax and/or
a federal or state tax deduction) plus interest on the amount
of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account
hereunder at the time the Gross-Up Payment is made, (including
by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
- -11-
(102)
<PAGE>
ARTICLE 15. ATTORNEYS' FEES. In the event that the
Executive incurs any attorneys' fees in protecting or
enforcing his rights under this Agreement or under any
employee benefit plans or programs sponsored by the
Company in which the Executive is a participant, the
Company shall reimburse the Executive for such reasonable
attorneys' fees and for any other reasonable expenses
related thereto. Such reimbursement shall be made within
thirty (30) days following final resolution of the
dispute or occurrence giving rise to such fees and
expenses.
ARTICLE 16. BENEFICIARY. The Executive shall name one
or more primary beneficiaries and one or more contingent
beneficiaries, who shall be entitled to receive any death
benefit payable under ARTICLE 8 or any benefits payable under
ARTICLE 9 due to the Executive's death following commencement
of payments under ARTICLES 6, 7 or 12, which beneficiary or
beneficiaries shall be subject to change from time to time by
notice in writing to the Board. A beneficiary may be a trust,
an individual or the Executive's estate. If the Executive
fails to designate a beneficiary, primary or contingent, then
and in such event, such benefit shall be paid to the surviving
spouse of the Executive or, if he shall leave no surviving
spouse, then to the Executive's estate. If a named
beneficiary entitled to receive any death benefit is not
living or in existence at the death of the Executive or dies
prior to asserting a written claim for any such death benefit,
then and in any such event, such death benefit shall e paid to
the other primary beneficiary or beneficiaries named by the
Executive who shall then be living or in existence, if any,
otherwise to the contingent beneficiary or beneficiaries named
by the Executive who shall then be living or in existence, if
any; but if there are no primary or contingent beneficiaries
then living or in existence, such benefit shall be paid to the
surviving spouse of the Executive or, if he shall leave no
surviving spouse, then to the Executive's estate. If a named
beneficiary is receiving or is entitled to receive payments of
any such death benefit and dies before receiving all of the
payments due him, any remaining benefits shall be paid to the
other primary beneficiary or beneficiaries named by the
Executive who shall then be living or in existence, if any,
otherwise to the contingent beneficiary or beneficiaries named
by the Executive who shall then be living or in existence, if
any; but if there are no primary or contingent beneficiaries
then living or in existence, the balance shall be paid to the
estate of the beneficiary who was last receiving the payments.
ARTICLE 17. DECISIONS BY COMPANY-, FACILITY OF
PAYMENT. Any powers granted to the Board hereunder may be
exercised by a committee, appointed by the Board, and such
committee, if appointed, shall have general responsibility for
the administration and interpretation of this Agreement.
Subject to and to the extent not inconsistent with the
provisions of ARTICLE 16, if the Board or the committee shall
find that any person to whom any amount is or was payable
hereunder is unable to care for his affairs because of illness
or accident, or is a minor, or has died, then the Board or the
committee, if it so elects, may direct that any payment due
him or his estate (unless a prior claim therefore has been
made by a duly appointed legal representative) or any part
thereof be paid or applied for the benefit of such person or
to or for the benefit of his spouse, children or other
dependents, an institution maintaining or having custody of
such person, any other person deemed by the Board or committee
to be a proper recipient on behalf of such person otherwise
entitled to payment, or any of them, in such manner and
proportion as the Board or committee may deem proper. Any
such payment shall be in complete discharge of the liability
of the Company therefor.
- -12-
(103)
<PAGE>
ARTICLE 18. INDEMNIFICATION. The Company shall
indemnify the Executive during his employment and
thereafter to the maximum extent permitted by applicable
law for any and all liability of the Executive arising
out of, or in connection with, his employment by the
Company or membership on the Board; provided, that in no
event shall such indemnity of the Executive at any time
during the period of his employment by the Company be
less than the maximum indemnity provided by the Company
at any time during such period to any other officer or
director under and indemnification insurance policy or
the bylaws or charter of the Company or by agreement.
ARTICLE 19. SOURCE OF PAYMENTS: NO TRUST. 'Me
obligations of the Company to make payments hereunder shall
constitute a liability of the Company to the Executive. Such
payments shall be from the general funds of the Company, and
the Company shall not be required to establish or maintain any
special or separate fund, or otherwise to segregate assets to
assure that such payments shall be made, and neither the
Executive nor his designated beneficiary shall have any
interest in any particular asset of the Company by reason of
its obligations hereunder. Nothing contained in this
Agreement shall create or be construed as creating a trust of
any kind or any other fiduciary relationship between the
Company and the Executive or any other person. To the extent
that any person acquires a right to receive payments from the
Company hereunder, such right shall be no greater than the
right of an unsecured creditor of the Company.
ARTICLE 20. SEVERABILITY. All agreements and covenants
contained herein are severable, and in the event any of them
shall be held to be invalid by any competent court, this
Agreement shall be interpreted as if such invalid agreements
or covenants were not contained herein.
ARTICLE 21. ASSIGNMENT PROHIBITED. This Agreement is
personal to each of the parties hereto, and neither party may
assign nor delegate any of his or its rights or obligations
hereunder without first obtaining the written consent of the
other party; provided, however, that nothing in this ARTICLE
21 shall preclude (i) the Executive from designating a
beneficiary to receive any benefit payable under this
Agreement upon his death or (ii) the executors,
administrators, or other legal representatives of the
Executive or his estate from assigning any rights under this
Agreement to the person or persons entitled thereto.
ARTICLE 22. NO ATTACHMENT. Except as otherwise provided
in this Agreement or required by applicable law, no right to
receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involuntary,
to effect any such action shall be null, void and of no
effect.
ARTICLE 23. HEADINGS. The headings of articles,
paragraphs and sections herein are included solely for
convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
ARTICLE 24. GOVERNING LAW. The parties intend that this
Agreement and the performance hereunder and all suits and
special proceedings hereunder shall be construed
- -13-
(104)
<PAGE>
in accordance with and under and pursuant to the laws of the
State of North Carolina and that in any action, special
proceeding or other proceeding that may be brought arising out
of, in connection with, or by reason of this Agreement, the
laws of the State of North Carolina shall be applicable and
shall govern to the exclusion of the law of any other forum,
without regard to the jurisdiction in which any action or
special proceeding may be instituted.
ARTICLE 25. BINDING EFFECT. This Agreement shall be
binding upon, and inure to the benefit of, the Executive and
his heirs, executors, administrators and legal representatives
and the Company and its permitted successors and assigns.
ARTICLE 26. MERGER OR CONSOLIDATION. The Company will
not consolidate or merge into or with another corporation, or
transfer all or substantially all of its assets to another
corporation (the "Successor Corporation") unless the Successor
Corporation shall assume this Agreement, and upon such
assumption, the Executive and the Successor Corporation shall
become obligated to perform the terms and conditions of this
Agreement.
ARTICLE 27. COUNTERPARTS. This Agreement may be
executed simultaneously in one or more counterparts, each of
which shall be deemed an original but all of which together
shall constitute one and the same instrument.
ARTICLE 28. ENTIRE AGREEMENT. This Agreement expresses
the whole and entire agreement between the parties with
reference to the employment of the Executive and, as of the
effective date hereof, supersedes and replaces any prior
employment agreement, understanding or arrangement (whether
written or oral) between the Company and the Executive. Each
of the parties hereto has relied on his or its own judgment in
entering into this Agreement.
ARTICLE 29. NOTICES. All notices, requests and other
communications to any party under this Agreement shall be in
writing (including telefacsimile transmission or similar
writing) and shall be given to such party at its address or
telefacsimile number set forth below or such other address or
telefacsimile number as such party may hereafter specify for
the purpose by notice to the other party:
(a) If to the Executive:
Larry R. Corbett
1904 Eleanor Drive
Kinston, North Carolina 28501
(b) If to the Company:
Monk-Austin International, Inc.
1200 West Marlboro Road
P.O. Box 166
Farmville, North Carolina 27828
Fax Number: (919) 753-8200
- -14-
(105)
<PAGE>
Each such notice, request or other communication shall be
effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (ii) if given
by any other means, when delivered at the address
specified in this ARTICLE 29.
ARTTCLE 30. MODIFICATION OF AGREEMENT. No waiver or
modification of this Agreement or of any covenant, condition,
or limitation herein contained shall be valid unless in
writing and duly executed by the party to be charged
therewith. No evidence of any waiver or modification shall be
offered or received in evidence at any proceeding,
arbitration, or litigation between the parties hereto arising
out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid. The
parties further agree that the provisions of this ARTICLE 30
may not be waived except as herein set forth.
ARTICLE 31. SPECIAL- PROVISIONS RELATING TO STOCK
OPTIONS.
The Executive has been granted options to purchase shares of
common stock of Monk-Austin, Inc. pursuant to the Long-Term
Stock Investment Plan for Key Employees of Monk-Austin, Inc.
(the "Stock Option Plan") and has entered into a stock option
agreement with the Company (the "Stock Option Agreement") to
further the purposes of the Stock Option Plan. The Executive
acknowledges that the Company intends to amend the Stock
Option Plan to eliminate the provision which would provide for
the expiration and immediate vesting of stock options in the
event of a dissolution, liquidation, merger, share exchange or
change in control involving the Company (the "Stock Option
Plan Amendment"). The Executive agrees to enter into an
amendment to his Stock Option Agreement that is consistent
with the Stock Option Plan Amendment. In consideration of the
Executive's agreement to amend his Stock Option Agreement as
described above, the Company agrees to use its best efforts to
cause Monk-Austin, Inc. to agree to enter into a further
amendment to the Executive's Stock Option Agreement (which
amendment may be embodied in the amendment described in the
preceding sentence) that provides, upon the termination of the
Executive's employment by the Company's exercise of the Notice
Exception, or by the Executive for Good Reason, or by the
Company's giving notice which would cause the Term to expire
at the end of the Initial Term or at the end of any succeeding
Extension Period, all outstanding grants of stock options
(whether incentive stock options, non-qualified stock options
or reload options) and stock appreciation rights granted to
the Executive under the Stock Option Plan (or any successor or
replacement stock option plan) shall fully vest and become
immediately exercisable as of the Termination Date without
regard to any installment exercise limitations set forth in
the Stock Option Agreement (or any successor or replacement
stock option agreement).
ARTICLE 32. TAXES. To the extent required by
applicable law, the Company shall deduct and withhold all
necessary Social Security taxes and all necessary federal and
state withholding taxes and any other similar sums required by
law to be withheld from any payments made pursuant to the
terms of this Agreement.
- -15-
(106)
<PAGE>
ARTICLE 33. RECITALS. The Recitals to this Agreement
are incorporated herein and shall constitute an integral
part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the day and year first above written.
EXECUTIVE:
/s/ Larry R. Corbett
____________________ (SEAL)
Larry R. Corbett
WITNESS:
/s/ James H. Felth
__________________________________
MONK-AUSTIN INTERNATTONAI, INC:
/s/ Albert C. Monk III
By: __________________________________
Albert C. Monk III
President or Vice President
Attest:
/s/ Thomas A. Lewis
_______________________________
Thomas A. Lewis
Secretary/Asst. Secretary
- -16-
(107)
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, (the "Amendment"), made
and entered into on the 10th day of August, 1995, to be effective as
of the Ist day of July, 1995, by and between DIMON International, Inc.
(the "Company") and Larry R. Corbett (the "Executive").
R E C I T A L S:
---------------
The Company and the Executive entered into that certain Employment
Agreement (the "Agreement") dated October 18, 1994, which was
effective as of July 1, 1994. The Company and the Executive have
agreed to modify Section 4.1 of the Agreement to reflect certain
understandings between the parties with regard to the payment of the
Executive's Base Salary and the Executive's participation in the
Company's new incentive bonus plan.
NOW, THEREFORE, the Company and the Executive agree that the
Agreement shall be amended by inserting the following new paragraph
at the end of Section 4.1:
"The Company has selected the Executive to
participate in the new incentive bonus plan. If the
requirements of the incentive bonus plan are met, the
Executive will be entitled to a bonus with respect to
each fiscal year of the Company in an amount ranging
from 0% to 45% of $180,000. (This dollar amount shall
be referred to as the Executive's "Revised Base
Salary"). In consideration of the Company selecting
the Executive to participate in the incentive bonus
plan, the Executive agrees that his annual Base Salary,
for purposes of determining his monthly salary payments
pursuant to this Section 4.1, shall be equal to his
Revised Base Salary. Should the sum of (A) and (B),
where (A) is his Revised Base Salary and (B) is the
amount of the annual incentive bonus paid or to be paid
with respect to the Executive for any Employment Year,
be less than the amount of the Base Salary specified in
this Section 4.1 (as increased each Employment Year by
the annual cost of living adjustment), the Company
shall pay the difference to the Executive effective as
of the end of the applicable Employment Year. The
Executive's Revised Base Salary may be increased (but
not decreased) from time to time by action of the
Company's Board of Directors."
- -1-
(108)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
to Employment Agreement on the day and year first above written.
EXECUTIVE:
/s/ Larry R. Corbett
_______________________(SEAL)
Larry R. Corbett
WITNESS:
/s/ Sheila M. Mozingo
__________________________
Sheila M. Mozingo
DIMON International, Inc.
By: /s/ Albert C. Monk III
________________________________
Albert C. Monk III
President or Vice President
Attest:
/s/ Thomas A. Lewis
________________________
Thomas A. Lewis
Secretary/Asst. Secretary
- -2-
(109
<PAGE>
$300,000,000
CREDIT AGREEMENT
dated as of June 29, 1999
among
DIMON INCORPORATED
As Borrower
-----------
THE LENDERS NAMED HEREIN
as Lenders
----------
NATIONSBANK, N.A.
as Administrative Agent
-----------------------
BANC OF AMERICA SECURITIES LLC
as Lead Arranger
----------------
FIRST UNION NATIONAL BANK
as Syndication Agent
--------------------
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK INTERNATIONAL," NEW YORK BRANCH
as Managing Agent
-----------------
(110)
<PAGE>
TABLE OF CONTENTS
ARTICLE I GENERAL DEFINITIONS.................................1
Section 1.1 Definitions..................................1
Section 1.2 Other Interpretative Provisions.............19
Section 1.3 Accounting Terms and
Determinations...................................20
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES.................21
Section 2.1 The Advances.................................21
Section 2.2 Evidence of Debt.............................21
Section 2.3 Making the Advances..........................22
Section 2.4 Conversion and Continuation
Elections....................................23
Section 2.5 Termination, Reduction or Increase
of Commitments...............................24
Section 2.6 Prepayments..................................26
Section 2.7 Repayment of the Obligations.................28
Section 2.8 Extension of Termination Date................28
Section 2.9 Interest.....................................29
Section 2.10 Fees........................................30
Section 2.11 Payments and Computations...................30
Section 2.12 Sharing of Payments, Etc....................31
Section 2.13 Limitation of Interest......................31
Section 2.14 Use of Proceeds.............................32
ARTICLE III YIELD PROTECTION, INTEREST RATE...................32
Section 3.1 Additional Interest on Eurodollar
Rate Advances................................32
Section 3.2 Interest Rate Determination and
Protection...................................32
Section 3.3 Increased Costs..............................34
Section 3.4 Illegality...................................34
Section 3.5 Taxes........................................35
Section 3.6 Funding Losses...............................37
Section 3.7 Certificates of Lenders......................38
Section 3.8 Replacement of a Lender......................38
Section 3.9 Survival.....................................39
ARTICLE IV CONDITIONS PRECEDENT..............................39
Section 4.1 Conditions of Initial Borrowing..............39
Section 4.2 Conditions to All Borrowings.................42
ARTICLE V REPRESENTATIONS AND WARRANTIES.....................42
Section 5.1 Corporate Existence and Power................42
Section 5.2 Corporate and Governmental
Authorization; Contravention.................43
Section 5.3 Binding Effect...............................43
Section 5.4 Financial Information........................43
- i -
(111)
<PAGE>
Section 5.5 Litigation...................................44
Section 5.6 Marketable Title.............................44
Section 5.7 Filings......................................44
Section 5.8 Regulation U.................................44
Section 5.9 Subsidiaries and Affiliates..................45
Section 5.10 Solvency....................................45
Section 5.11 ERISA Compliance............................45
Section 5.12 Taxes.......................................45
Section 5.13 Environmental Matters.......................45
Section 5.14 Regulated Entities..........................46
Section 5.15 No Burdensome Restrictions..................46
Section 5.16 Labor Relations.............................46
Section 5.17 Copyrights, Patents, Trademarks
and Licenses, etc...........................47
Section 5.18 Compliance With Laws........................47
Section 5.19 Broker's Fees; Transaction Fees.............47
Section 5.20 Full Disclosure.............................47
Section 5.21 Year 2000 Compliance........................48
ARTICLE VI FINANCIAL COVENANTS...............................48
Section 6.1 Consolidated Working Capital.................48
Section 6.2 Minimum Consolidated Tangible Net
Worth.......................................48
Section 6.3 Consolidated Fixed Charge Coverage
Ratio........................................49
Section 6.4 Consolidated Leverage Ratio..................49
Section 6.5 Consolidated Total Senior Debt to
Borrowing Base Ratio.........................49
Section 6.6 Calculations.................................49
ARTICLE VII AFFIRMATIVE COVENANTS............................50
Section 7.1 Information..................................50
Section 7.2 Payment of Obligations.......................53
Section 7.3 Maintenance of Property; Insurance...........54
Section 7.4 Conduct of Business and Maintenance
of Existence.................................54
Section 7.5 Compliance with Laws.........................54
Section 7.6 Accounting; Inspection of Property,
Books and Records............................54
Section 7.7 Additional Guarantors........................55
Section 7.8 ERISA........................................55
Section 7.9 Year 2000 Compliance.........................55
ARTICLE VIII NEGATIVE COVENANTS..............................55
Section 8.1 Restriction on Liens.........................55
Section 8.2 Debt.........................................57
Section 8.3 Guarantees...................................58
Section 8.4 Consolidations, Mergers and Sale of
Assets.......................................58
Section 8.5 Acquisitions and Investments.................59
Section 8.6 Transactions with Other Persons..............61
Section 8.7 Transactions with Affiliates.................62
Section 8.8 Compliance with ERISA........................62
- ii -
(112)
<PAGE>
Section 8.9 Change in Structure..........................62
Section 8.10 Restrictions on Negative Pledges............62
Section 8.11 Limitation on Dividend
Restrictions................................63
Section 8.12 Payments of Subordinated Debt
Securities..................................63
Section 8.13 Maximum Uncommitted Inventories.............63
ARTICLE IX EVENTS OF DEFAULT.................................63
Section 9.1 Events of Default............................63
Section 9.2 Remedies.....................................66
ARTICLE X ADMINISTRATIVE AGENT, SYNDICATION AGENT AND
MANAGING AGENT.............................................67
Section 10.1 Authorization and Action....................67
Section 10.2 Administrative Agent's Reliance,
etc.........................................67
Section 10.3 NationsBank, FUNB, Rabobank and
Affiliates..................................68
Section 10.4 Lender Credit Decision......................68
Section 10.5 Indemnification.............................68
Section 10.6 Successor Administrative Agent..............69
Section 10.7 Notice of Default...........................69
Section 10.8 Administrative Agent's Fee..................69
ARTICLE XI MISCELLANEOUS.....................................70
Section 11.1 Notices....................................70
Section 11.2 No Waivers.................................70
Section 11.3 Expenses; Indemnity........................70
Section 11.4 Amendments, etc............................71
Section 11.5 Successors and Assigns.....................72
Section 11.6 Right of Set-off...........................75
Section 11.7 CONSENT TO JURISDICTION....................75
Section 11.8 VIRGINIA LAW...............................76
Section 11.9 Counterparts; Effectiveness................76
Section 11.10 WAIVER OF JURY TRIAL.......................76
Section 11.11 Termination of Existing Credit
Agreement..................................77
Section 11.12 Confidentiality............................77
- iii -
(113)
<PAGE>
SCHEDULES AND EXHIBITS
----------------------
Schedule 1.1 - Applicable Margin Calculation
Schedule 2.10 - Commitment Fee Calculation
Schedule 5.5 - Litigation
Schedule 5.9 - List of Subsidiaries and Affiliates
Schedule 5.13 - Environmental Matters
Schedule 5.17 - Intellectual Property Matters
Schedule 8.1 - Existing Liens
Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Subsidiary Guaranty
Exhibit C - Form of Promissory Note
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Notice of
Continuation/Conversion
Exhibit F - Opinion of Counsel to the Borrower and
the Guarantors
Exhibit G - Form of New Commitment Agreement
Exhibit H - Form of Borrowing Base Certificate
- iv -
(114)
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of June
29, 1999 by and among DIMON INCORPORATED, a Virginia
corporation ("Borrower"), the lenders listed on the
signature pages hereof (each, a "Lender" and
collectively, together with their successors and
permitted assigns, the "Lenders"), NATIONSBANK, N.A., a
national banking association ("NationsBank"), as
administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent"), FIRST UNION
NATIONAL BANK ("FUNB"), as Syndication Agent for the
Lenders hereunder (in such capacity, the "Syndication
Agent"), and COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL," NEW YORK
BRANCH ("Rabobank"), as managing agent for the Lenders
hereunder (in such capacity, the "Managing Agent").
ARTICLE I
---------
GENERAL DEFINITIONS
-------------------
Section 1.1 Definitions.
The following terms, as used herein, shall have the following
meanings:
"Acquisition" shall mean any transaction, or any series of
related transactions, by which the Borrower and/or any of its
Subsidiaries directly or indirectly (a) acquires any ongoing
business or all or substantially all of the assets of any Person
or division thereof, whether through purchase of assets, merger
or otherwise, (b) acquires (in one transaction or as the most
recent transaction in a series of transactions) control of at
least a majority in ordinary voting power of the securities of
a Person which have ordinary voting power for the election of
directors or (c) otherwise acquires control of a 50% or more
ownership interest in any such Person.
"Additional Commitment" means, with respect to any lender
which executes a New Commitment Agreement in accordance with
Section 2.5(d), the commitment of such Lender in an aggregate
principal amount up to the amount specified in such New Commitment
Agreement to make Advances in accordance with the provisions of
Section 2.1.
"Administrative Agent" shall mean NationsBank or any
successor administrative agent appointed pursuant to Article X.
"Advance" shall mean an advance by a Lender to the Borrower
pursuant to Article II, and refers to a Base Rate Advance or a
Eurodollar Rate Advance (each of which shall be a "Type" of Advance).
"Advances on Tobacco" means loans, advances and extensions of
credit made by the Borrower or any of its Subsidiaries to growers
and other suppliers of tobacco (including Affiliates) and tobacco
(115)
<PAGE>
growers' cooperatives, whether short-term or long-term, in the
ordinary course of business to finance the growing or processing
of tobacco.
"Affiliate" shall mean, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. A Person shall be
deemed to control another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of the other Person,
whether through the ownership of voting securities, by contract or
otherwise. Without limitation, any beneficial owner of ten percent
(10%) or more of the equity of a Person shall, for the purposes of
this Agreement, be deemed to control the other Person.
"Aggregate Commitment" shall mean the combined Commitments of
the Lenders in the amount of Three Hundred Million Dollars
($300,000,000), as such amount may be increased or reduced from
time to time pursuant to this Agreement.
"Agreement" shall mean this Credit Agreement, together with
all Schedules and Exhibits hereto, each as amended, modified or
supplemented from time to time in accordance with the terms hereof.
"Applicable Lending Office" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case
of a Eurodollar Rate Advance.
"Applicable Margin" shall mean (a) with respect to each Base
Rate Advance, zero percent (0%) per annum, and (b) with respect to
each Eurodollar Rate Advance, (i) 2.50% per annum (which includes
the Borrowing Base Premium) from the Closing Date through the date
on which the Administrative Agent first receives the officer's
certificate to be furnished by the Borrower pursuant to Section 7.1(c)
of this Agreement, and (ii) thereafter, the rate per annum derived
from the formula set forth on Schedule 1.1 attached hereto. The
Applicable Margin with respect to both Base Rate Advances and
Eurodollar Rate Advances shall be increased upon the occurrence
and during the continuance of an Event of Default (including after the
acceleration of the Obligations), by an additional two percent (2%)
per annum.
"Approved Accounting Firm" shall mean PricewaterhouseCoopers LLP
or any other independent public accountants selected by the Borrower
and satisfactory to the Required Lenders.
"Asset Sale" shall have the meaning given to such term in the
Senior Indenture.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an Eligible Assignee and
consented to by the Borrower and the Administrative Agent, in
substantially the form of Exhibit A hereto or such other form as
shall be accepted by the Administrative Agent.
"BAS" shall mean Banc of America Securities LLC, and its
successors.
- -2-
(116)
<PAGE>
"Base Rate" shall mean, for any period, a fluctuating interest
rate per annum as shall be in effect from time to time, which rate
per annum shall at all times be equal to the highest of:
(i) the rate of interest announced publicly by
NationsBank in Charlotte, North Carolina, from time to time,
as NationsBank's prime rate; or
(ii) one half of one percent (1/2 of 1%) per annum
above the latest three-week moving average of secondary market
morning offering rates in the United States for three-month
certificates of deposit of major United States money center
banks, such three-week moving average being determined weekly
on each Monday (or, if any such day is not a Business Day, on
the next succeeding Business Day) for the three-week period
ending on the previous Friday by NationsBank on the basis of
such rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by NationsBank from three
New York certificate of deposit dealers of recognized standing
selected by NationsBank, in either case adjusted to the
nearest one sixteenth of one percent (1/16 of 1%) or, if
there is no nearest one sixteenth of one percent (1/16 of 1%),
to the next higher one sixteenth of one percent (1/16 of 1%);
or
(iii) one half of one percent (1/2 of 1%) per
annum above the Federal Funds Rate.
"Base Rate Advance" shall mean an Advance which bears interest
as provided in Section 2.9(a).
"Borrower" shall mean DIMON Incorporated, a Virginia
corporation, and its successors.
"Borrowing" shall mean a borrowing consisting of Advances of
the same Type made on the same day by the Lenders, and in the case
of Eurodollar Rate Advances, with the same Interest Period. All
Advances made as, Converted to, or Continued as, the same Type and
(in the case of Eurodollars Advances) with the same Interest Period
on the same day shall be deemed to constitute a single Borrowing
until paid, prepaid or next Converted or Continued.
"Borrowing Base" means, as of any day, the sum of (a) 80% of
Eligible Receivables, plus (b) 80% of total Advances on Tobacco,
plus (c) 80% of Committed Inventories constituting Eligible
Inventory, plus (d) 50% of Uncommitted Inventories constituting
Eligible Inventory, in each case as set forth in the most recent
Borrowing Base Certificate delivered to the Administrative Agent
and the Lenders in accordance with the terms of Section 7.1(d).
"Borrowing Base Certificate" shall have the meaning assigned
to such term in Section 7.1(d).
"Borrowing Base Premium" shall have the meaning assigned to
such term in Schedule 1.1.
- -3-
(117)
<PAGE>
"Brazilian Tax Assessment" shall mean that certain assessment
imposed on the Borrower by the Brazilian taxing authorities for
calendar years 1988 through 1992, in an amount, together with all
interest and penalties, not exceeding $21,277,000 as of June 30,
1998, as more fully described in Note Q to the Borrower's
consolidated financial statements for the fiscal year ended
June 30, 1998 and incorporated into the Borrower's 1998 Annual
Report.
"Business Day" shall mean a day of the year on which banks
are not required or authorized to close in Charlotte, North
Carolina or New York City and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings in
Dollars are carried on in the London interbank market.
"Calculation Period" shall mean as of the last day of any
fiscal quarter the four fiscal-quarter period of the Borrower
ending on such date.
"Capital Lease" shall mean a lease that should be capitalized
on a balance sheet of the lessee prepared in accordance with GAAP.
"Change of Control" means such time as:
(i) any Person or group (within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act) 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 Borrower on a
fully-diluted basis, after giving effect to the conversion
and exercise of all outstanding warrants, options and other
securities of the Borrower convertible into or exercisable
for Voting Stock of the Borrower (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 Borrower 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 Borrower, 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 Borrower 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 Borrower then in office; or
(iv) the Borrower consolidates with or merges with or
into another Person or any Person consolidates with, or merges
with or into, the Borrower (in each case, whether or not in
compliance with the terms of this Agreement), 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 Borrower immediately prior to such consummation
shall cease to own a majority of the Voting Stock of the
Borrower; or
- -4-
(118)
<PAGE>
(v) the occurrence of a "Change of Control" under and
as defined in the Subordinated Indenture.
"Closing Date" shall mean June 29, 1999, the date as of which
this Agreement and the other Loan Documents were executed and
delivered by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment" shall have the meaning set forth in Section 2.1.
"Commitment Percentage" shall mean, as to any Lender, the
percentage equivalent of such Lender's Commitment divided by the
Aggregate Commitment.
"Committed Inventories" shall mean tobacco inventories for
which the Borrower has received a Confirmed Order.
"Confirmed Order" shall mean an order by a customer not an
Affiliate of the Borrower which has been accepted in the ordinary
course of business by representatives of the Borrower or an
Affiliate of the Borrower and recorded on the inventory records of
such Affiliate or the Borrower.
"Consolidated Net Capital Expenditures" shall mean, for any
fiscal period of the Borrower, the greater of (i) the difference
between (a) all expenditures by the Borrower and its Subsidiaries
during such period for the acquisition or leasing of any fixed
assets or improvements, or for replacements, substitutions or
additions thereto, which have a useful life of more than one year
(such fixed assets or improvements referred to as "Capital
Assets") and which are or should be reflected on the Borrower's
consolidated statement of cash flows for such period as
capital expenditures in accordance with GAAP less (b) the net
cash proceeds received by the Borrower and its Subsidiaries
during such period from the sale of Capital Assets and (ii)
zero.
"Consolidated EBIT" shall mean, for any fiscal period of
the Borrower, the sum (without duplication) of (i) Consolidated
Net Income of the Borrower for such period, plus (ii) the
Consolidated Income Tax Expense deducted in determining such
Consolidated Net Income, plus (iii) the Consolidated Interest
Expense deducted in determining such Consolidated Net Income,
minus (iv) any extraordinary items of gain included in
Consolidated Net Income for such period, determined for
the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"Consolidated EBITDA" shall mean, for any fiscal
period of the Borrower, the sum of (i) Consolidated
EBIT for such period, plus (ii) the aggregate amount of
the Borrower's depreciation expense and amortization
expense for such period to the extent deducted in
determining Consolidated Net Income, in each case
determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" shall
mean, at any date, the ratio of (a) the sum of (i)
Consolidated EBITDA for the Calculation Period ending
- -5-
(119)
<PAGE>
on such date, minus (ii) Consolidated Income Tax
Expense for such Calculation Period, minus (iii)
Consolidated Net Capital Expenditures for such
Calculation Period, plus (iv) Consolidated Rental
Expense for such Calculation Period to (b) the sum of
(i) scheduled payments of principal of the Borrower's
Consolidated Funded Debt during such Calculation Period
(including, without limitation, the principal component
of scheduled payments under Capital Leases), plus (ii)
Consolidated Interest Expense for such Calculation
Period, plus (iii) the amount of dividends,
distributions, stock repurchases and stock redemptions
paid in cash by the Borrower or any of its Subsidiaries
(other than any such dividend, distribution, stock
repurchase or stock redemption payments made to the
Borrower or any of its Subsidiaries) during such
Calculation Period, plus (iv) Consolidated Rental
Expense for such Calculation Period, in each case
determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Consolidated Funded Debt" shall mean, at any
date, all liabilities of the Borrower and its
Subsidiaries that are or should be reflected at such
date on the Borrower's consolidated balance sheet as
long-term debt and current maturities of long-term debt
in accordance with GAAP.
"Consolidated Income Tax Expense" shall mean, for
any fiscal period of the Borrower, the Borrower's
income tax expense for such period, determined for the
Borrower and its Subsidiaries on a consolidated basis
in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for
any fiscal period of the Borrower, the Borrower's
interest expense for such period (including, without
limitation, the interest component of payments under
Capital Leases), determined for the Borrower and its
Subsidiaries on a consolidated basis in accordance with
GAAP.
"Consolidated Leverage Ratio" shall mean, at any
date, the ratio of (a) Consolidated Total Debt to (b)
the sum of (i) Consolidated Net Worth, plus (ii)
Consolidated Total Debt.
"Consolidated Net Income" shall mean, for any
fiscal period of the Borrower, the Borrower's net
income (or net loss) for such period, determined for
the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"Consolidated Net Worth" shall mean, at any date,
(a) the Borrower's total stockholders' equity at such
date, without giving effect to (i) the effect of
foreign currency translation adjustments under
Financial Accounting Standards Board Statement No. 52,
"Foreign Currency Translation", (ii) the effect of the
adjustments to the value of the Borrower's investments
in debt and equity securities under Financial
Accounting Standards Board Statement No. 115,
"Accounting For Certain Investments In Debt And Equity
Securities", and (iii) the effect of the cost of post
retirement benefits to employees of the Borrower under
Financial Accounting Standards Board Statement No. 106,
"Employer's Accounting for Postretirement Benefits
Other Than Pensions", minus (b) any write-up of the
Borrower's assets subsequent to June 30, 1999,
determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
- -6-
(120)
<PAGE>
"Consolidated Rental Expense" shall mean, for any
fiscal period of the Borrower, the Borrower's rental
expense under Operating Leases for such period,
determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, at
any date, the sum of (i) Consolidated Net Worth, minus
(ii) the amount of the Borrower'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 the
Borrower and its Subsidiaries on a consolidated basis
in accordance with GAAP.
"Consolidated Total Assets" shall mean, at any
date, the Borrower's total assets, as determined for
the Borrower and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"Consolidated Total Debt" shall mean, at any date,
the aggregate amount of all Debt which creates
Consolidated Interest Expense, whether or not such
interest is deferred.
"Consolidated Total Senior Debt" shall mean, at
any date, the aggregate principal amount of (a) short-
term bank debt, (b) outstanding Advances, (c) the
Senior Debt Securities, (d) current maturities of long-
term debt, (e) customer advances and (f) other senior
Debt, in each case as determined for the Borrower and
its Subsidiaries on a consolidated basis in accordance
with GAAP.
"Consolidated Total Senior Debt to Borrowing Base
Ratio" shall mean, at any date, the ratio of (a)
Consolidated Total Senior Debt to (b) the Borrowing
Base.
"Consolidated Working Capital" shall mean, at any
date, the amount by which the Borrower's current assets
exceed its current liabilities at such date, determined
on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.
"Continue", "Continuation" and "Continued" shall
each refer to the continuation of a Borrowing comprised
of Eurodollar Rate Advances for a subsequent Interest
Period upon the expiration of the preceding Interest
Period pursuant to Section 2.4.
"Convert", "Conversion" and "Converted" shall each
refer to a conversion of Advances of one Type into
Advances of another Type pursuant to Section 2.4 or
Section 3.2.
"Covenant Defeasance" shall mean an election by
the Borrower under the Senior Indenture to release the
obligations of the Borrower under the Senior Debt
Securities with respect to certain covenants set forth
in the Senior Indenture.
"Debt" of any Person shall mean, at any date,
without duplication, (i) all obligations of such Person
for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such Person to
pay the deferred purchase price of property or services
(except trade accounts payable arising in the ordinary
- -7-
(121)
<PAGE>
course of business), (iv) all obligations of such
Person as lessee under Capital Leases, (v) all
obligations of such Person to purchase securities or
other property which arise out of or in connection with
the sale of the same or substantially similar
securities or property, (vi) all non-contingent
obligations of such Person to reimburse any other
Person in respect of amounts paid under letters of
credit, surety and appeal bonds and performance bonds
or similar instruments assuring any other Person of the
performance of any act or acts or the payment of any
obligation, (vii) all obligations of others secured by
a Lien on any asset of such Person, whether or not such
obligation is assumed by such Person and (viii) the
principal portion of all obligations of such Person
under any synthetic lease or other similar off-balance
sheet financing product.
"Default" shall mean any condition or event
specified in Section 9.1 which with the giving of
notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Dollars" and "$" the sign shall each mean the
lawful currency of the United States of America.
"Domestic Lending Office" shall mean, with respect
to each Lender, its office located at its address set
forth on the signature pages hereof (or identified on
the signature pages hereof as its Domestic Lending
Office) or such other office as such Lender may
hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"Domestic Subsidiary" shall mean any Subsidiary of
the Borrower which is not a Foreign Subsidiary.
"Eligible Assignee" shall mean (i) a commercial
bank organized under the laws of the United States, or
any state thereof, and having a combined capital and
surplus of at least $100,000,000; (ii) a commercial
bank organized under the laws of any other country
which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or
agency located in the United States; (iii) a Lender or
any Affiliate of a Lender; and (iv) any other Person
approved by the Administrative Agent and the Borrower;
provided, however, that no Person who is a nonresident
alien or a foreign entity for United States income tax
purposes (except a commercial bank of the type
described in clause (ii) above), may be an Eligible
Assignee unless each Note to be acquired by such Person
is reissued in registered form prior to transfer.
"Eligible Inventory" means, as of any date of
determination and without duplication, the lower of the
aggregate book value (based on an average cost
valuation, consistently applied in accordance with GAAP
principles) or fair market value of all raw materials
and finished goods inventory owned by the Borrower or
any of its Material Domestic Subsidiaries less
appropriate reserves determined in accordance with GAAP
but excluding in any event (i) inventory subject to a
Lien that is not a Permitted Lien, (ii) inventory which
is not in good condition or fails to meet standards for
sale or use imposed by governmental agencies,
departments or divisions having regulatory authority
over such goods, (iii) inventory which is not useable
- -8-
(122)
<PAGE>
or salable and (iv) inventory which fails to meet such
other specifications and requirements as may from time
to time be established by the Administrative Agent in
its reasonable discretion.
"Eligible Receivables" means, as of any date of
determination and without duplication, the aggregate
book value of all accounts receivable, receivables, and
obligations for payment created or arising from the
sale of inventory or the rendering of services in the
ordinary course of business (collectively, the
"Receivables"), owned by or owing to the Borrower or
any of its subsidiaries, net of allowances and reserves
for doubtful or uncollectible accounts and sales
adjustments consistent with such Person's internal
policies and in any event in accordance with GAAP, but
excluding in any event (i) any Receivable which is
subject to a Lien that is not a Permitted Lien, (ii)
Receivables which are more than 90 days past due (net
of reserves for bad debts in connection with any such
Receivables), (iii) 50% of the book value of any
Receivable not otherwise excluded by clause (ii) above
but owing from an account debtor which is the account
debtor on any existing Receivable then excluded by such
clause (ii), unless the exclusion by such clause (ii)
is a result of a legitimate dispute by the account
debtor and the applicable Receivable is no more than 90
days past due, (iv) Receivables owing by an account
debtor which is not solvent or is subject to any
bankruptcy or insolvency proceeding of any kind, (v)
Receivables which are contingent or subject to offset,
deduction, counterclaim, dispute or other defense to
payment, in each case to the extent of such offset,
deduction, counterclaim, dispute or other defense, (vi)
Receivables for which any direct or indirect Subsidiary
or any Affiliate is the account debtor and (vii)
Receivables which fail to meet such other
specifications and requirements as may from time to
time be established by the Administrative Agent in its
reasonable discretion.
"Environmental Claim" shall mean any claim,
however asserted, by any Governmental Authority or
other Person alleging potential liability or
responsibility for violation of any Environmental Law
or for release into or injury to the environment or
threat to public health, personal injury (including
sickness, disease or death), property damage, natural
resources damage, or otherwise alleging liability or
responsibility for damages (punitive or otherwise),
cleanup, investigation, removal, remedial or response
costs, litigation costs, restitution, civil or criminal
penalties, injunctive relief, or other type of relief,
resulting from or based upon (a) the presence,
placement, discharge, emission or release (including
intentional and unintentional, negligent and non-
negligent, sudden or non-sudden, accidental or non-
accidental placement, spills, leaks, discharges,
emissions, releases or threatened releases) of any
Hazardous Material at, in, or from property, whether or
not owned by the Borrower or any of its subsidiaries,
or (b) any other circumstances forming the basis of any
violation, or alleged violation, of any Environmental
Law.
"Environmental Law" shall mean any federal, state
or local law, statute, ordinance, code, rule,
regulation, decree, order, judgment, or principles of
common law relating to (i) releases or threatened
releases of Hazardous Materials or materials containing
Hazardous Materials; (ii) the manufacture, handling,
transport, use, treatment, storage or disposal of
Hazardous Materials or materials containing Hazardous
Materials; or (iii) otherwise relating to the
environment or to the protection of human health.
- -9-
(123)
<PAGE>
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" shall mean any Person who for
purposes of Title IV of ERISA would, together with the
Borrower or any of its Subsidiaries, be treated as
members of the same "controlled group" within the
meaning of Section 4001(a)(14) of ERISA.
"ERISA Event" shall mean (i) a Reportable Event,
unless the 30-day notice requirement with respect
thereto has been waived by the PBGC; (ii) the provision
by the administrator of any Plan of a notice of intent
to terminate such Plan, pursuant to Section 4041(a)(2)
of ERISA (including any such notice with respect to a
plan amendment referred to in Section 4041(e) of
ERISA); (iii) the cessation of operations at a facility
in the circumstances described in Section 4062(e) of
ERISA; (iv) the withdrawal by the Borrower or an ERISA
Affiliate from a Multiemployer Plan during a plan year
for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (v) the failure by the
Borrower or any ERISA Affiliate to make a payment to a
Plan required under Section 302(f)(1) of ERISA, which
Section imposes a lien for failure to make required
payments; (vi) the adoption of an amendment to a Plan
requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (vii) the
institution by the PBGC of proceedings to terminate a
Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, a Plan.
"Eurocurrency Liabilities" shall have the meaning
assigned to that term in Regulation D of the Federal
Reserve Board, as in effect from time to time.
"Eurodollar Lending Office" shall mean, with
respect to each Lender, its office, branch or affiliate
located at its address set forth on the signature pages
hereof (or identified on the signature pages hereof as
its Eurodollar Lending Office) or such other office,
branch or affiliate of such Lender as it may hereafter
designate as its Eurodollar Lending Office by notice to
the Borrower and the Administrative Agent.
"Eurodollar Rate" shall mean, for any Interest
Period for each Eurodollar Rate Advance comprising part
of the same Borrowing, an interest rate per annum equal
to the average (rounded upward to the nearest whole
multiple of 1/16 of 1% per annum, if such average is
not such a multiple) of the rate per annum at which
deposits in Dollars are offered by the principal office
of each of the Reference Lenders to prime banks in the
London interbank market at 11:00 A.M. (London, England
time) two Business Days before the first day of such
Interest Period in an amount substantially equal to
such Reference Lender's Eurodollar Rate Advance
comprising part of such Borrowing and for a period
equal to such Interest Period. The Eurodollar Rate for
any Interest Period for each Eurodollar Rate Advance
comprising part of the same Borrowing shall be
determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the
Administrative Agent from the Reference Lenders two
Business Days before the first day of such Interest
Period, subject, however, to the provisions of Section
3.2.
- -10-
(124)
<PAGE>
"Eurodollar Rate Advance" shall mean an Advance
which bears interest is provided in Section 2.9(b).
"Eurodollar Rate Reserve Percentage", of any
Lender for any Interest Period for any Eurodollar Rate
Advance, shall mean the reserve percentage applicable
during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of
such percentages for those days in such Interest Period
during which any such percentage shall be so
applicable) under regulations issued from time to time
by the Federal Reserve Board for determining the
maximum reserve requirement (including, without
limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with
respect to liabilities or assets consisting of or
including Eurocurrency Liabilities having a term equal
to such Interest Period.
"Event of Default" shall have the meaning set
forth in Section 9.1; provided that any requirement for
notice or lapse of time or both shall have been
satisfied.
"Excess Proceeds" shall have the meaning given to
such term in the Senior Indenture.
"Exempt Asset Sale" shall have the meaning given
to such term in the Senior Indenture.
"Existing Credit Agreement" shall have the meaning
given to such term in Section 4.1(c).
"FUNB" shall mean First Union National Bank and
its successors.
"Federal Funds Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates
on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business
Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a
Business Day, the average of the quotations for such
day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized
standing selected by it.
"Federal Reserve Board" shall mean the Board of
Governors of the Federal Reserve System, or any
successor thereto.
"Fee Letter" shall mean the fee letter agreement,
dated April 6, 1999, among the Borrower, NationsBank
and BAS.
"Foreign Subsidiary" shall mean any Subsidiary of
the Borrower (i) which is organized under the laws of
any jurisdiction outside of the United States of
America, (ii) which conducts the major portion of its
business outside of the United States of America and
(iii) all or substantially all of the property and
assets of which are located outside of the United
States of America.
"GAAP" shall mean generally accepted accounting
principles in the United States, as set forth from time
to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and
- -11-
(125)
<PAGE>
pronouncements of the Financial Accounting Standards
Board (or agencies with similar functions of comparable
stature and authority within the accounting
profession), which are applicable to the circumstances
as of the date of determination; provided, however,
that, in the event any changes are mandated by any of
the accounting authorities noted above, such changes
shall be included in GAAP as applicable to the Borrower
(and its Subsidiaries) only from and after such date as
the Borrower and the Required Lenders shall have
amended this Agreement to the extent necessary to
reflect any such changes in the financial covenants set
forth in Article VI hereto (and any related defined
terms).
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision
thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or
administrative functions of or pertaining to
government, and any corporation or other entity owned
or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Guarantee" shall mean, with respect to any
Person, any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing, or
making such Person contingently liable for, any Debt or
other obligation of any other Person and, without
limiting the generality of the foregoing, includes any
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 Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial
statement conditions or otherwise), (ii) entered into
for the purpose of assuring in any other manner the
obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in
respect thereof (in whole or in part) or (iii) to
reimburse any bank or other Person in respect of
amounts paid or payable under letters of credit surety
and appeal bonds and performance bonds or similar
instruments assuring any other Person of the
performance of any act or acts or the payment of any
obligation; provided, 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 has a corresponding meaning.
"Guarantors" shall mean, collectively, each
Domestic Subsidiary of the Borrower which becomes a
party to the Subsidiary Guaranty pursuant to Section
7.7 hereof.
"Hazardous Materials" shall mean (i) those
substances defined in or regulated as toxic or
hazardous under the following federal statutes and
their state counterparts, as well as the statutes'
implementing regulations, as amended from time to time:
the Hazardous Materials Transportation Act; the
Resource Conservation and Recovery Act; the
Comprehensive Environmental Response, Compensation and
Liability Act; the Clean Water Act; the Safe Drinking
Water Act; the Toxic Substances Control Act; the
Federal Insecticide, Fungicide and Rodenticide Act; the
Federal Food, Drug, and Cosmetic Act; and the Clean Air
Act; and (ii) any pollutant, contaminant or other
substance with respect to which a Governmental
Authority requires environmental investigation,
monitoring, reporting or remediation.
- -12-
(126)
<PAGE>
"Hostile Acquisition" shall mean any Acquisition
involving a tender offer or proxy contest that has not
been recommended or approved by the board of directors
of the Person that is the subject of the Acquisition
prior to the first public announcement or disclosure
relating to such Acquisition.
"Insolvency Proceeding" shall mean (a) any case,
action or proceeding before any court or other
Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors or
other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors;
in the case of each of clauses (a) and (b), undertaken
under U.S. federal, state or foreign law, including the
Bankruptcy Reform Act of 1978 (12 U.S.C. 101, et
seq.), as amended.
"Insufficiency" shall mean, with respect to any
Plan, the amount, if any, of its unfunded benefit
liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Interest Period" shall mean, for each Eurodollar
Rate Advance comprising part of the same Borrowing, the
period commencing on the date of such Advance or the
date of the Conversion of any Base Rate Advance into a
Eurodollar Rate Advance or of the Continuation of a
Eurodollar Rate Advance and ending on the last day of
the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent
period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest
Period shall be one, two, three or six months, in each
case as the Borrower may, upon notice received by the
Administrative Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the second Business
Day prior to the first day of such Interest Period,
select; provided, that:
(i) no Interest Period may extend
beyond the Termination Date;
(ii) Interest Periods commencing on the
same date for Advances comprising part of the same
Borrowing shall be of the same duration;
(iii) whenever the last day of any
Interest Period would otherwise occur on a day
other than a Business Day, the last day of such
Interest Period shall be extended to occur on the
next succeeding Business Day; provided, that if
such extension would cause the last day of such
Interest Period to occur in the next following
calendar month, the last day of such Interest
Period shall occur on the next preceding Business
Day; and
(iv) there shall not be more than five
(5) Interest Periods under this Agreement in
effect at any time.
"Investment" shall mean, with respect to any
Person, any investment by that Person in any other
Person, whether by means of the purchase or other
acquisition of any stock, evidence of indebtedness or
other security of such Person, the making of any loan,
advance, guarantee or contribution of capital to such
Person, or the purchase of any other debt or equity
participation or interest in such Person, in each case
- -13-
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<PAGE>
other than an Acquisition. Each Investment shall be
valued as of the date made; provided that any
Investment or portion of an Investment consisting of
Debt shall be valued at the outstanding principal
balance thereof as of the date of determination.
"IRS" shall mean the Internal Revenue Service, an
agency of the United States government, or any
successor thereto.
"Legal Defeasance" shall mean an election by the
Borrower under the Senior Indenture to discharge the
obligations of the Borrower and the guarantors of the
Senior Debt Securities under or in respect of the
Senior Debt Securities.
"Lender" shall have the meaning assigned to such
term in the heading hereof.
"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit
arrangement, encumbrance, lien (statutory or other) or
preference, priority or other security interest or
preferential arrangement of any kind or nature
whatsoever (including those created by, arising under
or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a
Capital Lease, any financing lease having substantially
the same economic effect as any of the foregoing, or
the filing of any financing statement naming the owner
of the asset to which such lien relates as debtor,
under the UCC or any comparable law) and any contingent
or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an
Operating Lease.
"Loan Documents" shall mean a collective reference
to this Agreement, the Notes, the Subsidiary Guaranty,
the Fee Letter, each Notice of Borrowing, each Notice
of Continuation/Conversion and all documents delivered
to the Administrative Agent, the Syndication Agent, the
Managing Agent or the Lenders in connection therewith.
"Managing Agent" shall mean Rabobank.
"Margin Stock" shall mean margin stock, as such
term is defined in Regulation T, U or X of the Federal
Reserve Board.
"Material Adverse Effect" shall mean (a) a
material adverse change in, or a material adverse
effect, at such time or in the future, in or upon the
operations, business, properties or condition
(financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Borrower or any
Guarantor to perform its obligations under any Loan
Document to which it is a party; or (c) a material
adverse effect upon the legality, validity, binding
effect or enforceability of any Loan Document.
"Material Domestic Subsidiary" shall mean any
Subsidiary of the Borrower which is organized under the
laws of the United States, any state thereof or the
District of Columbia and would constitute a
"significant subsidiary" of the Borrower as defined in
Rule 1.02 of Regulation S-X promulgated by the
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(128)
<PAGE>
Securities and Exchange Commission except that for
purposes of this definition all references in such Rule
1.02 to "ten percent (10%)" shall be deemed to be
references to "five percent (5%)".
"Material Foreign Subsidiary" shall mean each
Foreign Subsidiary which constitutes a "significant
subsidiary" as such term is defined in Rule 1.02 of
Regulation S-X promulgated by the Securities and
Exchange Commission.
"Material Subsidiary" shall mean, collectively,
each of the Material Domestic Subsidiaries and the
Material Foreign Subsidiaries.
"Multiemployer Plan" shall mean a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) to
which the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate is or has been obligated to
contribute.
"NationsBank" shall mean NationsBank, N.A., and
its successors.
"Net Proceeds" shall have the meaning given to
such term in the Senior Indenture.
"New Commitment Agreement" shall have the meaning
given to such term in Section 2.5(d).
"Note" shall mean a promissory note of the
Borrower payable to the order of any Lender, in
substantially the form of Exhibit C hereto, evidencing
the aggregate indebtedness of the Borrower to such
Lender resulting from the Advances made by such Lender.
"Notice of Borrowing" shall mean a notice from the
Borrower to the Administrative Agent substantially in
the form of Exhibit D.
"Notice of Continuation/Conversion" shall mean a
notice from the Borrower to the Administrative Agent
substantially in the form of Exhibit E.
"Obligations" shall mean all present and future
indebtedness, liabilities and obligations of the
Borrower and each of the Guarantors owing to the
Administrative Agent, any Lender, or any Person
entitled to indemnification pursuant to Section 11.3,
or any of their respective successors, permitted
transferees or permitted assigns, arising under or in
connection with this Agreement, the Notes, the
Subsidiary Guaranty, the Fee Letter or any other Loan
Document.
"Operating Lease" shall mean any lease which is
not a Capital Lease.
"Other Taxes" shall have the meaning set forth in
Section 3.5(b).
"Payment Office" shall mean the office of the
Administrative Agent set forth on the Administrative
Agent's signature page to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereto.
- -15-
(129)
<PAGE>
"Permitted Liens" shall mean the Liens referred to
in clauses (a) through (m) of Section 8.1.
"Person" shall mean an individual, a corporation,
a partnership, a limited liability company, an
association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" shall mean any "employee pension benefit
plan" (as defined in section 3(2) of ERISA) maintained
by or on behalf of the Borrower or any ERISA Affiliate
or to which the Borrower or any ERISA Affiliate is
obligated to contribute for any employees or former
employees of the Borrower or any ERISA Affiliate and
which is subject to the provisions of Title IV Of ERISA
(including a Multiemployer Plan).
"Pro Forma Basis" means, with respect to any
transaction, that such transaction shall be deemed to
have occurred as of the first day of the four fiscal-
quarter period ending as of the last day of the most
recent fiscal quarter preceding the date of such
transaction with respect to which the Administrative
Agent and the Lenders shall have received the financial
statements referred to in Section 7.1(a) or (b), as
applicable. As used herein, "transaction" means (i) any
incurrence, assumption or retirement of Debt as
referred to in Section 8.2, (ii) any corporate merger
or consolidation as referred to in Section 8.4, (iii)
any Acquisition as referred to in Section 8.5(a), (iv)
any Investment as referred to in Section 8.5(n) or (v)
any increase in the Aggregate Commitment as referred to
in Section 2.5(d). With respect to any transaction of
the type described in clause (i) above regarding Debt
which has a floating or formula rate, the implied rate
of interest for such Debt for the applicable period for
purposes of this definition shall be determined by
utilizing the rate which is or would be in effect with
respect to such Debt as at the relevant date of
determination.
"Rabobank" shall mean Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, and its successors.
"Reference Lenders" shall mean NationsBank, FUNB
and Rabobank and each such other Lender as may be
appointed pursuant to Section 11.5(j).
"Register" shall have the meaning given such term
in Section 11.5(c).
"Reportable Event" means any of the reportable
events described in Section 4043 of ERISA.
"Requirement of Law" shall mean, as to any Person,
any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or
binding upon the Person or any of its property or to
which the Person or any of its property is subject.
"Required Lenders" shall mean at any time, a
minimum of four Lenders holding greater than 66 % of
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<PAGE>
the aggregate unpaid principal amount of the Notes or,
if no Advances are at the time outstanding hereunder, a
minimum of four Lenders having greater than 66 % of the
Aggregate Commitment.
"Responsible Officer" shall mean any of the
president, chief executive officer, chief financial
officer, chief accounting officer, treasurer, executive
vice presidents or senior vice presidents of the
Borrower.
"Securities Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
"Senior Debt Securities" shall mean any one of the
8 7/8% Senior Notes Due 2006, in an aggregate principal
amount of $125,000,000, issued by the Borrower pursuant
to the Senior Indenture, as such Senior Debt Securities
may be supplemented, amended or otherwise modified from
time to time.
"Senior Indenture" shall mean that certain
Indenture, dated as of May 29, 1996, by and among the
Borrower, as issuer, and Crestar Bank, as trustee, as
supplemented, amended or otherwise modified from time
to time.
"Solvent" shall mean, as to the Borrower or any
Guarantor at any time, that (i) each of the fair value
and the present fair saleable value of such Person's
assets (including any rights of subrogation or
contribution to which such Person is entitled, under
any of the Loan Documents or otherwise) is greater than
such Person's debts and other liabilities (including
contingent, matured and unliquidated debts and
liabilities) and the maximum estimated amount required
to pay such debts and liabilities as such debt and
liabilities mature or otherwise become payable; (ii)
such Person is able and expects to be able to pay its
debts and other liabilities (including, without
limitation, contingent, unmatured and unliquidated
debts and liabilities) as they mature; and (iii) such
Person does not have unreasonably small capital to
carry on its business as conducted and as proposed to
be conducted.
"Split-Dollar Agreement" shall mean an agreement
between the Borrower or any of its Subsidiaries and an
employee of the Borrower or such Subsidiary (or one or
more affiliates of such employee that shall be the
owner of the policy of life insurance referred to
below), pursuant to which the Borrower or such
Subsidiary shall agree to fund non-scheduled premiums
under a policy of insurance on the life of such
employee and such employee (or such affiliate or
affiliates) shall agree to reimburse the Borrower or
such Subsidiary for such non-scheduled premiums upon
the termination of such agreement.
"Split-Dollar Assignment" shall mean a collateral
assignment executed and delivered in connection with a
Split-Dollar Program by an employee of the Borrower or
one of its Subsidiaries (or one or more affiliates of
such employee that shall be the owner of the policy of
life insurance referred to below), by which such
employee (or such affiliate or affiliates), as
collateral security for such employee's (or such
affiliate's or affiliates') obligations under the Split-
Dollar Agreement executed and delivered in connection
with such Split-Dollar Program, assigns to the Borrower
or such Subsidiary the policy of insurance on the life
of such employee contemplated by such Split-Dollar
Agreement.
- -17-
(131)
<PAGE>
"Split-Dollar Program" shall mean an arrangement,
established under a Split-Dollar Agreement between the
Borrower or any of its Subsidiaries and an employee
thereof (or one or more affiliates of such employee),
whereby the Borrower or such Subsidiary establishes a
split-dollar life insurance program for the benefit of
such employee and agrees to pay non-scheduled premiums
under the life insurance policy issued in connection
therewith, subject to the obligation of such employee
(or such affiliate or affiliates) to reimburse the
aggregate amount of such nonscheduled premiums upon the
termination of such program.
"Subordinated Debt Securities" shall mean any one
of the 6 1/4% Convertible Subordinated Debentures due
March 31, 2007, in an original aggregate principal
amount of $140,000,000, issued by the Borrower pursuant
to the Subordinated Indenture (of which original
principal amount, $73,328,440 is outstanding as of the
Closing Date), as such Subordinated Debt Securities may
be supplemented, amended or otherwise modified from
time to time.
"Subordinated Indenture" shall mean that certain
Indenture, dated as of April 1, 1997, by and among the
Borrower and LaSalle National Bank, as trustee, as
supplemented, amended or otherwise modified from time
to time.
"Subsidiary" shall mean any corporation or other
entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the
board of directors or other persons performing similar
functions are at the time directly or indirectly owned
by the Borrower.
"Subsidiary Guaranty" shall mean that certain
continuing guaranty required to be executed and
delivered by each Material Domestic Subsidiary and, if
required by Section 7.7, each other Domestic
Subsidiary, in substantially the form of Exhibit B
attached hereto, guaranteeing all of the Obligations,
subject to the limitations set forth therein, as
hereafter amended, modified or supplemented.
"Syndication Agent" shall mean FUNB.
"Taxes" shall have the meaning set forth in
Section 3.5(a).
"Termination Date" shall mean the earlier to occur
of (i) June 29, 2001 or such later anniversary thereof
as the Commitments may have extended by the Lenders
pursuant to Section 2.8, or (ii) the date of
termination in whole of the Aggregate Commitment
pursuant to Section 2.5 or 9.2.
"UCC" shall mean the Uniform Commercial Code as in
effect in the Commonwealth of Virginia from time to
time.
"Uncommitted Inventories" shall mean tobacco
inventories for which the Borrower has not received a
Confirmed Order.
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(132)
<PAGE>
"Unutilized Commitment" shall mean, with respect
to each Lender as of any date, an amount equal to (i)
the Commitment of such Lender as of such date, minus
(ii) the aggregate principal amount of such Lender's
Advances outstanding on such date.
"Voting Stock" shall mean, at any time, all
classes of capital stock of the Borrower then
outstanding and normally entitled to vote in the
election of directors.
"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, one of the fifty states
thereof or the District of Columbia, by one or more
nominees of such Person.
"Withdrawal Liability" shall have the meaning
given such term under Part 1 of Subtitle E of Title IV
of ERISA.
Section 1.2 Other Interpretative Provisions.
(a) Defined Terms. Unless otherwise
specified herein or therein, all terms defined in
this Agreement shall have the defined meanings
when used in any certificate or other document
made or delivered pursuant hereto. The meaning of
defined terms shall be equally applicable to the
singular and plural forms of the defined terms.
Terms (including uncapitalized terms) not
otherwise defined herein and that are defined in
the UCC shall have the meanings therein described.
(b) This Agreement. The words "hereof",
"herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this
Agreement as a whole and not to any particular
provision of this Agreement; and, Section,
Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) Certain Common Terms.
(i) The term "documents" includes
any and all instruments, documents,
agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not
limiting and means including without
limitation.
(d) Performance; Time. Whenever any
performance obligation hereunder (other than a
payment obligation) shall be stated to be due or
required to be satisfied on a day other than a
Business Day, such performance shall be made or
satisfied on the next succeeding Business Day. In
the computation of periods of time from a
specified date to a later specified date, the word
"from" means "from and including"; the words "to"
and "until" each mean "to but excluding", and the
word "through" means "to and including". If any
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(133)
<PAGE>
provision of this Agreement refers to any action
taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision
shall be interpreted to encompass any and all
means, direct or indirect, of taking, or not
taking, such action.
(e) Contracts. Unless otherwise expressly
provided herein, references to agreements and
other contractual instruments shall be deemed to
include all subsequent amendments and other
modifications thereto, but only to the extent such
amendments and other modifications are not
prohibited by the terms of any Loan Document.
(f) Laws. References to any statute or
regulation are to be construed as including all
statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting
the statute or regulation.
(g) Captions. The captions and headings of
this Agreement are for convenience of reference
only and shall not affect the interpretation of
this Agreement.
(h) Independence of Provisions. The parties
acknowledge that this Agreement and other Loan
Documents may use several different limitations,
tests or measurements to regulate the same or
similar matters, and that such limitations, tests
and measurements are cumulative and must each be
performed, except as expressly stated to the
contrary in this Agreement.
Section 1.3 Accounting Terms and Determinations.
(a) Unless otherwise specified herein, all
accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be
made, and all financial statements required to be
delivered hereunder shall be prepared in
accordance with GAAP as in effect from time to
time, applied on a basis consistent (except for
changes concurred in by the Borrower's Approved
Accounting Firm) with the audited consolidated
financial statements of the Borrower and its
Subsidiaries for the fiscal year ended June 30,
1998; provided, that if any change in GAAP after
June 30, 1998 in itself materially affects the
calculation of any financial covenant in
Article VI, the Borrower may by notice to the
Administrative Agent, or the Administrative Agent
(at the request of the Required Lenders) may by
notice to the Borrower, require that such covenant
thereafter be calculated in accordance with GAAP
as in effect, and applied by the Borrower,
immediately before such change in GAAP occurs. If
such notice is given, the compliance certificates
delivered pursuant to Section 7.1 after such
change occurs shall be accompanied by
reconciliations of the difference between the
calculations set forth therein and a calculation
made in accordance with GAAP as in effect from
time to time after such change occurs.
(b) References herein to "fiscal year" and
"fiscal quarter" refer to such fiscal periods of
the Borrower unless the context clearly indicates
otherwise.
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(134)
<PAGE>
ARTICLE II
----------
AMOUNTS AND TERMS OF THE ADVANCES
---------------------------------
Section 2.1 The Advances.
Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make Advances to
this Borrower from time to time on any Business Day
during the period from the Closing Date until the
Termination Date in an aggregate amount not to exceed
at any time outstanding the amount set forth on such
Lender's signature page hereto under the heading
"Commitment," as such amount may be increased pursuant
to Section 2.5(d) or Section 2.8, reduced pursuant to
Section 2.5 or increased or reduced as a result of one
or more assignments pursuant to Section 11.5 (such
amount, as increased or reduced, hereinafter referred
to as such Lender's "Commitment"); provided, however,
that after giving effect to any Borrowing, the
aggregate principal amount of all outstanding
Borrowings shall not exceed the Aggregate Commitment.
Each Borrowing shall consist of Advances of the same
Type made on the same day by the Lenders ratably
according to their respective Commitment Percentages.
Within the limits of each Lender's Commitment, and
subject to the other terms and conditions of this
Agreement, the Borrower may borrow, prepay pursuant to
Section 2.6 and reborrow pursuant to this Section 2.1.
Section 2.2 Evidence of Debt.
(a) The Advances made by each Lender
pursuant to its Commitment shall be evidenced by a
Note payable to the order of that Lender in an
amount equal to its Commitment and, in accordance
with the provisions of this Section 2.2, by the
books and records of the Administrative Agent and
the Lenders.
(b) Each Lender shall maintain an account or
accounts evidencing each Advance made by such
Lender to the Borrower from time to time,
including the amounts of principal and interest
payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain
the Register pursuant to Section 11.5(c), and a
subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i)
the amount, type and Interest Period of each such
Advance hereunder, (ii) the amount of any
principal or interest due and payable or to become
due and payable to each Lender hereunder and (iii)
the amount of any sum received by the
Administrative Agent hereunder from or for the
account of the Borrower and each Lender's share
thereof.
(d) The entries made in the accounts,
Register and subaccounts maintained pursuant to
subsection (c) of this Section 2.2 (and, if
consistent with the entries of the Administrative
Agent, subsection (b)) shall be prima facie
evidence of the existence and amounts of the
obligations of the Borrower therein recorded;
provided, however, that any error or omission in
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(135)
<PAGE>
such account, such Register or such subaccount, as
applicable, shall not in any manner affect the
obligation of the Borrower to repay the Advances
made by such Lender in accordance with the terms
hereof.
Section 2.3 Making the Advances.
(a) Each Borrowing shall be made upon the
Borrower's prior written notice delivered to the
Administrative Agent in accordance with Section
11.1 in the form of a Notice of Borrowing (which
notice of Borrowing must be received by the
Administrative Agent prior to 11:00 A.M.
(Charlotte, North Carolina time) (x) three
Business Days prior to the requested date of the
Borrowing, in the case of a Borrowing comprised of
Eurodollar Rate Advances; and (y) on the
requested, date of the Borrowing, in the case of a
Borrowing comprised of Base Rate Advances, and
shall be irrevocable upon receipt by the
Administrative Agent), specifying:
(i) the amount of the Borrowing,
which shall be in an aggregate minimum
principal amount of Ten Million Dollars
($10,000,000) or any integral multiple of One
Million Dollars ($1,000,000) in excess
thereof;
(ii) the requested Business Day on
which the Borrowing is to be made;
(iii) whether the Borrowing is
to be comprised of Eurodollar Rate Advances,
or Base Rate Advances; and
(iv) in the case of a Borrowing
comprised of Eurodollar Rate Advances, the
duration of the Interest Period applicable to
such Borrowing. If the Notice of Borrowing
shall fail to specify the duration of the
Interest Period for any Borrowing comprised
of Eurodollar Rate Advances, such Interest
Period shall be one month.
(b) Upon receipt of the Notice of Borrowing,
the Administrative Agent shall promptly notify
each Lender thereof and of the amount of such
Lender's Advance.
(c) Each Lender will make the amount of its
Advance available to the Administrative Agent
through such Lender's Applicable Lending Office
for the account of the Borrower at the
Administrative Agent's Payment Office by 1:00 P.M.
(Charlotte, North Carolina time) on the date for
such Borrowing requested by the Borrower in funds
immediately available to the Administrative Agent
in Dollars. Subject to the requirements of
Article IV, the proceeds of all such Borrowings
will then be made available to the Borrower by the
Administrative Agent at such office by crediting
the account of the Borrower on the books of the
Administrative Agent with the aggregate of the
amounts made available to the Administrative Agent
by the Lenders and in like funds as received by
the Administrative Agent.
(d) Unless the Administrative Agent shall
have received notice from a Lender prior to the
date of any Borrowing that such Lender will not
make available to the Administrative Agent the
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<PAGE>
amount of such Lender's Advance, the
Administrative Agent may (but shall not be
required to) assume that such Lender has made such
amount available to the Administrative Agent on
the date of such Borrowing in accordance with
Section 2.3(c), and the Administrative Agent may,
in reliance upon such assumption, make available
to the Borrower on such date a corresponding
amount. If and to the extent that such Lender
shall not have so made such amount available to
the Administrative Agent, such Lender and the
Borrower severally agree to repay to the
Administrative Agent forthwith on demand such
corresponding amount, together with interest
thereon, for each day from the date such amount is
made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at
(i) in the case of the Borrower, the interest rate
applicable at the time to the Advances comprising
such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate on each such day.
If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Advance as
part of such Borrowing for purposes of this
Agreement.
(e) The failure of any Lender to make its
Advance in connection with any Borrowing shall not
relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of
such Borrowing, but no Lender shall be responsible
for the failure of any other Lender to make the
Advance to be made by such other Lender on the
date of any Borrowing.
(f) Unless the Required Lenders shall
otherwise agree, during the existence of a Default
or an Event of Default, the Borrower may not elect
to have a Borrowing be made as, or Converted into
or Continued as, a Borrowing comprised of
Eurodollar Rate Advances.
Section 2.4 Conversion and Continuation Elections.
(a) The Borrower may, upon written notice to
the Administrative Agent in accordance with
Section 2.4(b):
(i) elect to Convert on any
Business Day any Borrowing comprised of Base
Rate Advances (or any part thereof in an
aggregate minimum principal amount of
$10,000,000 or any integral multiple of
$1,000,000 in excess thereof) into a
Borrowing comprised of Eurodollar Rate
Advances; or
(ii) elect to Convert on the last
day of the applicable Interest Period any
Borrowing comprised of Eurodollar Rate
Advances having Interest Periods maturing on
such day (or any part thereof in an aggregate
minimum principal amount of $10,000,000 or
any integral multiple of $1,000,000 in excess
thereof) into a Borrowing comprised of Base
Rate Advances; or
(iii) elect to Continue on the
last day of the applicable Interest Period
any Borrowing comprised of Eurodollar Rate
Advances having Interest Periods maturing on
such day (or any part thereof in an aggregate
minimum principal amount of $10,000,000 or
any integral multiple of $1,000,000 in excess
thereof).
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<PAGE>
(b) The Borrower shall deliver a Notice of
Continuation/Conversion in accordance with Section
11.1 (which Notice of Continuation/Conversion must
be received by the Administrative Agent not later
than 11:00 A.M. (Charlotte, North Carolina time)
at least (x) three Business Days in advance of the
date of Conversion or Continuation, as applicable,
if the Advances are to be Converted into or
Continued as Eurodollar Rate Advances; and (y) on
the date of Conversion if the Advances are to be
Converted into Base Rate Advances, and shall be
irrevocable upon receipt by the Administrative
Agent), specifying:
(i) the proposed date of
Conversion or Continuation, as applicable;
(ii) the aggregate amount of the
Borrowing or part thereof to be Converted or
Continued;
(iii) the nature of the
proposed Conversion or Continuation; and
(iv) except in the case of the
Conversion of Eurodollar Rate Advances into
Base Rate Advances, the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest
Period applicable to a Borrowing comprised of
Eurodollar Rate Advances, the Borrower has failed
to select timely a new Interest Period to be
applicable to such Borrowing, the Borrower shall
be deemed to have elected to Convert such
Borrowing into a Borrowing comprised of Base Rate
Advances effective as of the expiration of such
current Interest Period.
(d) Upon receipt of a Notice of Continua
tion/Conversion, the Administrative Agent will
thereafter promptly notify each Lender thereof,
or, if no timely notice is provided by the
Borrower with respect to a Borrowing comprised of
Eurodollar Rate Advances subject to an expiring
Interest Period, the Administrative Agent will
promptly notify each Lender of the automatic
Conversion of such Advances to Base Rate Advances.
Section 2.5 Termination, Reduction or Increase
of Commitments.
(a) Voluntary Termination or Reduction. The
Borrower may, upon not less than three Business
Days' prior notice to the Administrative Agent,
terminate the Aggregate Commitment or permanently
reduce the Aggregate Commitment by an aggregate
minimum amount of $10,000,000 or any integral
multiple of $1,000,000 in excess thereof;
provided, that, no such reduction or termination
shall be permitted if, after giving effect thereto
and to any prepayments of the Borrowings made on
the effective date thereof, the then-outstanding
principal amount of the Borrowings would exceed
the amount of the Aggregate Commitment then in
effect and, provided, further, that once reduced
in accordance with this Section 2.5, the Aggregate
Commitment may not be increased.
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<PAGE>
(b) Mandatory Reduction. On any date that
the Advances are required to be prepaid and the
Commitments are required to be reduced pursuant to
the terms of Section 2.6(b), the Aggregate
Commitment automatically shall be permanently
reduced (without duplication) by the amount of
such required prepayment and reduction.
(c) General. Any reduction of the Aggregate
Commitment shall be applied to each Lender's
Commitment in accordance with such Lender's
Commitment Percentage. All commitment fees
accrued to, but not including, the effective date
of any reduction or termination of the Aggregate
Commitment shall be paid on the effective date of
such reduction or termination.
(d) Increase in Aggregate Commitment. The
Borrower shall have the right, upon at least ten
(10) Business Days' prior written notice to the
Administrative Agent at any time on or after the
Closing Date and prior to the Termination Date,
but not more than once per annum, to increase the
Aggregate Commitment by up to $100,000,000;
subject, however, in any such case, to
satisfaction of the following conditions
precedent:
(i) no Default or Event of Default
shall have occurred and be continuing on the
date on which such Aggregate Commitment
increase is to become effective;
(ii) both before and after giving effect
to such Aggregate Commitment increase on a
Pro Forma Basis, the Borrower shall be in
compliance with each of the financial
covenants set forth in Article VI of this
Agreement;
(iii) the representations and
warranties set forth in Article V of this
Agreement shall be true and correct in all
material respects on and as of the date on
which such Aggregate Commitment increase is
to become effective;
(iv) such Aggregate Commitment increase
shall be an integral multiple of $10,000,000
and shall in no event be less than
$25,000,000;
(v) after giving effect to such
Aggregate Commitment increase, the Aggregate
Commitment shall not exceed $400,000,000;
(vi) such requested Aggregate Commitment
increase shall be effective on such date only
to the extent that, on or before such date,
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<PAGE>
the Administrative Agent shall have received
and accepted from one or more Eligible
Assignees an agreement in the form of Exhibit
G hereto (each such agreement a "New
Commitment Agreement"), with respect to the
Additional Commitment of such Lender;
(vii) receipt by each Lender that
funds a portion of the Additional Commitment
of a duly executed promissory note in the
amount of such Lenders' aggregate Commitment;
and
(viii) on or before the date on which
such Aggregate Commitment increase is to
become effective, the Administrative Agent
shall have received, for its own account, an
administrative fee of $3,500 to be paid by
the Borrower in connection with such
increase.
(e) Adjustments of Commitment Percentages.
Upon the effectiveness of the increase in the
Aggregate Commitment pursuant to subsection (d),
the Commitment Percentage of each Lender shall be
automatically adjusted so that, after giving
effect to such adjustment, the Commitment
Percentage of each Lender (other than a Lender
whose Commitment shall have been increased in
connection with such increase in the Aggregate
Commitment) multiplied by the Aggregate Commitment
shall, before and after giving effect to such
increase, be equal.
(f) Adjustments of Outstanding Advances. If
and when any adjustment is made to the Commitment
Percentage of any Lender pursuant to subsection
(e) at any time when any Advances are outstanding,
the Borrower, the Administrative Agent and the
Lenders will use all commercially reasonable
efforts to assign and assume outstanding Advances
to conform the respective amounts thereof held by
each Lender to the respective Commitment
Percentages as so adjusted, it being understood
that the parties hereto shall use commercially
reasonable efforts to avoid prepayment or
assignment of any Advance that is a Eurodollar
Rate Advance on a day other than the last day of
the Interest Period applicable thereto.
Section 2.6 Prepayments.
(a) Optional. Subject to Section 3.4, the
Borrower may, at any time or from time to time,
upon at least three (3) Business Days' notice with
respect to Borrowings comprised of Eurodollar Rate
Advances, and same Business Day's notice with
respect to Borrowings comprised of Base Rate
Advances, to the Administrative Agent received by
11:00 A.M. (Charlotte, North Carolina time),
ratably prepay Borrowings in whole or in part, in
amounts of $10,000,000 or any integral multiple of
$1,000,000 in excess thereof, together with
interest thereon and (in the case of a prepayment
of any Borrowings comprised of Eurodollar Rate
Advances on a day that is not the last day of the
Interest Period applicable thereto) any cost, loss
or expense specified in Section 3.6. Such notice
of prepayment shall specify the date and amount of
such prepayment and whether such prepayment is of
Borrowings comprised of Base Rate Advances, or
Borrowings comprised of Eurodollar Rate Advances,
or any combination thereof. Such notice shall not
thereafter be revocable by the Borrower and the
Administrative Agent will promptly notify each
Lender thereof and of the amount of such Lender's
Commitment Percentage of such prepayment. If such
notice is given by the Borrower, the Borrower
shall make such prepayment and the payment amount
specified in such notice shall be due and payable
on the date specified therein, together with
accrued interest to each such date on the amount
prepaid and (in the case of a prepayment of any
Borrowings comprised of Eurodollar Rate Advances
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<PAGE>
on a day that is not the last day of the Interest
Period applicable thereto) any amounts required
pursuant to Section 3.6.
(b) Mandatory. In the event that Borrower
or any of its Subsidiaries intends to make any
Asset Sale (other than an Exempt Asset Sale) that
would involve an aggregate sale price (including
cash and non-cash consideration) in excess of 10%
of Consolidated Total Assets as of the most recent
fiscal year end with respect to which the
Administrative Agent and the Lenders shall have
received the financial statements referred to in
Section 7.1(a)(i):
(i) the Borrower will give the
Administrative Agent, not later than the date
of such Asset Sale, written notice thereof
specifying the manner in which the Borrower
intends to apply the Net Proceeds of such
Asset Sale, and, in the event that the
Borrower elects to make a voluntary
prepayment, repurchase, redemption or
retirement of any of the Senior Debt
Securities with any of such Net Proceeds,
then, at the request of the Required Lenders,
the Borrower shall simultaneously pay or
prepay the outstanding Advances, if any, and
reduce the Commitments, in the amount
specified by the Required Lenders, such
amount in any event not to exceed the amount
equal to the percentage of the Net Proceeds
applied or to be applied to such voluntary
prepayment, repurchase, redemption or
retirement of Senior Debt Securities obtained
by dividing (1) the then current Aggregate
Commitment by (2) the sum of (x) the
aggregate then outstanding principal amount
of all Senior Debt Securities plus (y) the
then current Aggregate Commitment; and
(ii) if the Borrower shall not
previously have made any payment or
prepayment of the Advances with the Net
Proceeds of such Asset Sale pursuant to the
terms of clause (i) above, the Borrower will
give the Administrative Agent, not later than
the date which is 250 days after the date of
such Asset Sale, written notice specifying
the amount of the Net Proceeds of such Asset
Sale which, on the date which is 270 days
after the date of such Asset Sale, are
expected by the Borrower to become Excess
Proceeds, then, at the request of the
Required Lenders, the Borrower shall,
simultaneously with the purchase of any
Senior Debt Securities pursuant to the Senior
Indenture, pay or prepay the outstanding
Advances, if any, and reduce the Commitments,
in the amount specified by the Required
Lenders, such amount in any event not to
exceed the amount equal to the percentage of
the Net Proceeds of such Asset Sale exceeding
$10,000,000.00 obtained by dividing (1) the
then current Aggregate Commitment by (2) the
sum of (x) the aggregate then outstanding
principal amount of all Senior Debt
Securities plus (y) the Aggregate Commitment;
and
The Administrative Agent hereby agrees to promptly
notify each of the Lenders of receipt by the
Administrative Agent of any notice from the
Borrower pursuant to this Section 2.6(b).
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<PAGE>
Payments and prepayments pursuant to this Section
2.6(b) shall be applied, first to Base Rate
Advances and then to Eurodollar Rate Advances in
direct order of Interest Period maturities.
(c) General. All prepayments of Advances
shall be subject to Section 3.6 but otherwise
without premium or penalty and shall be
accompanied by accrued interest on the principal
amount being prepaid to the date of prepayment and
all other amounts due and payable hereunder with
respect to such Loans.
Section 2.7 Repayment of the Obligations.
The Borrower shall repay in full the aggregate
outstanding Obligations on the Termination Date.
Section 2.8 Extension of Termination Date.
(a) The Borrower may request an extension of
the initial Termination Date, or if previously
extended, the then-applicable Termination Date,
for an additional twelve (12) month period in the
case of each such extension by delivering an
irrevocable written notice to the Administrative
Agent, accompanied by projections prepared by the
Borrower with respect to such extension period
containing such information as may be reasonably
requested by the Administrative Agent (which
notice, together with such projections, shall
promptly be forwarded by the Administrative Agent
to the Lenders), not more than one hundred twenty
(120) nor less than ninety (90) days prior to the
anniversary of the Closing Date that precedes the
then-effective Termination Date by one year (any
such request, an "Extension Request"). Upon
receipt of such Extension Request, each Lender
shall respond to the Borrower and the
Administrative Agent in writing no later than
sixty (60) days prior to such anniversary of the
Closing Date, either irrevocably consenting to
such Extension Request or declining to extend such
Lender's Commitment. Any determination by any
Lender to consent to an extension of the
Termination Date shall be in its sole and absolute
discretion and, subject to receipt by the Borrower
and the Administrative Agent of such consent,
there shall be no obligation on the part of any
Lender hereunder, whether express or implied, to
extend the Termination Date. Any Lender which
fails to respond by the date set forth above shall
be deemed to have declined the Extension Request.
Upon receipt of the written consent to such
Extension Request by the Borrower and the
Administrative Agent from Lenders holding 100% of
the Aggregate Commitment, the Administrative Agent
shall notify the Borrower and the Lenders that the
Termination Date has been extended for an
additional twelve (12) month period.
(b) In the event any Lender shall fail to
consent to an Extension Request within the time
provided in paragraph (a) above (each such Lender,
a "Non-Extending Lender"), the Borrower may obtain
one or more other Lenders or, with the consent of
the Administrative Agent, one or more other
Eligible Assignees willing to replace such Non-
Extending Lender (each such Eligible Assignee, a
"Replacement Lender"); provided, that, any
replacement must occur on or prior to the
anniversary of the Closing Date that precedes the
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<PAGE>
then-effective Termination Date by one year. Any
Non-Extending Lender that is being replaced shall
assign its Advances and its Commitment hereunder
to any Replacement Lender upon not less than five
(5) days' prior written notice from the Borrower
in accordance with the assignment procedure set
forth in Section 11.5 hereof; provided that the
Borrower shall pay the administrative fee for such
assignment to the Administrative Agent specified
in Section 11.5. Upon receipt of duly executed
Assignment and Acceptances with respect to the
Commitments and outstanding Advances of each Non-
Extending Lender and the satisfaction of the
conditions set forth therein and in Section 11.5,
the Administrative Agent shall notify the Borrower
and the Lenders that the Termination Date has been
extended for an additional twelve (12) month
period.
(c) If the Borrower does not replace each
Non-Extending Lender with one or more Replacement
Lenders assuming all of the Advances and
Commitments of such Non-Extending Lenders by the
anniversary of the Closing Date that precedes the
then-Effective Termination Date by one year, the
Termination Date shall not be extended beyond its
then-existing date unless the Borrower, the
Administrative Agent and each of the Lenders
(other than any Non-Extending Lenders) shall
otherwise agree; provided that, the Non-Extending
Lenders shall not be bound by any such agreement.
Section 2.9 Interest.
The Borrower shall pay interest on the unpaid
principal amount of each Advance made by each Lender
from the date of such Advance until such principal
amount shall be paid in full, at the following rates
per annum:
(a) Base Rate Advance. During such periods
as such Advance is a Base Rate Advance, a rate per
annum at all times equal to the sum of the Base
Rate in effect from time to time plus the
Applicable Margin, payable in arrears
(i) quarterly on the last day of each calendar
quarter during such periods, (ii) on the date such
Base Rate Advance shall be Converted or paid in
full and (iii) on the Termination Date.
(b) Eurodollar Rate Advances. During such
periods as such Advance is a Eurodollar Rate
Advance, a rate per annum at all times during each
Interest Period for such Advance equal to the sum
of the Eurodollar Rate for such Interest Period
for such Advance plus the Applicable Margin,
payable in arrears (i) on the last day of such
Interest Period, (ii) if any Interest Period
exceeds three months, on the last day of each
three month period comprising such Interest
Period, (iii) on the date such Eurodollar Rate
Advance shall be paid in full and (iv) on the
Termination Date.
(c) Interest After Default. While any Event
of Default exists (including after the
acceleration of the Obligations), in addition to
paying accrued interest on the outstanding
Advances, the Borrower shall pay interest on the
amount of all other outstanding Obligations
(including accrued but unpaid interest to the
extent permitted by law) at a rate per annum equal
to the Base Rate plus the Applicable Margin then
in effect for Base Rate Advances. While any Event
of Default exists (including after the
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<PAGE>
acceleration of the Obligations), the Borrower
shall pay interest on all of the Obligations upon
demand of the Administrative Agent and interest
shall continue to accrue on the unpaid Obligations
after as well as before entry of judgment thereon
to the extent permitted by law.
Section 2.10 Fees.
The Borrower agrees to pay to the Administrative
Agent, for the account of each Lender, a commitment fee
on the average daily Unutilized Commitment of such
Lender, from the date hereof in the case of each Lender
named on the signature pages to this Agreement and from
the effective date specified in the Assignment and
Acceptance or the New Commitment Agreement, as
applicable, pursuant to which it became a Lender in the
case of each other Lender, until the Termination Date,
payable quarterly on the last day of each calendar
quarter during the term of such Lender's Commitment,
commencing on June 30, 1999, and ending on the
Termination Date, at the rate equal to (i) from the
Closing Date through the date on which the
Administrative Agent first receives the officer's
certificate to be furnished by the Borrower pursuant to
Section 7.1(c) of this Agreement, the per annum rate
determined by reference to Category 3 on Schedule 2.10,
and (ii) thereafter, the rate determined by reference
to the formula set forth on Schedule 2.10. The
commitment fees provided in this Section 2.10 shall
accrue at all times after the date hereof, including
any time during which one or more conditions in Article
IV are not met.
Section 2.11 Payments and Computations.
(a) The Borrower shall make each payment
hereunder and under the Notes not later than 11:00
A.M. (Charlotte, North Carolina time) on the day
when due in Dollars to the Administrative Agent at
its Payment Office in same day funds. The
Administrative Agent will promptly thereafter
cause to be distributed like funds relating to the
payment of principal or interest or fees ratably
in accordance with such Lender's Commitment
Percentage (other than amounts payable pursuant to
Article III) to the Lenders for the account of
their respective Applicable Lending Offices, and
like funds relating to the payment of any other
amount payable to any Lender to such Lender for
the account of its Applicable Lending Office, in
each case to be applied in accordance with the
terms of this Agreement.
(b) The Borrower hereby authorizes each
Lender, if and to the extent payment owed to such
Lender is not made by the Borrower pursuant to the
terms hereof, when due hereunder or under the Note
held by such Lender, to charge from time to time
against any or all of the Borrower's accounts with
such Lender any amount so due.
(c) All computations of interest based on
the Base Rate shall be made by the Administrative
Agent on the basis of a year of 365 or 366 days,
as the case may be, and all computations of
interest based on the Eurodollar Rate or the
Federal Funds Rate and of fees shall be made by
the Administrative Agent, and all computations of
interest pursuant to Section 3.1 shall be made by
a Lender, on the basis of a year of 360 days, in
each case for the actual number of days (including
the first day but excluding the last day)
occurring in the period for which such interest or
fees are payable. Each determination by the
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(144)
<PAGE>
Administrative Agent (or, in the case of Section
3.1, by a Lender) of an interest rate hereunder
shall be conclusive and binding for all purposes,
absent manifest error.
(d) Whenever any payment hereunder or under
the Notes shall be stated to be due on a day other
than a Business Day, such payment shall be made on
the next succeeding Business Day, and such
extension of time shall in such case be included
in the computation of payment of interest or fees,
as the case may be.
(e) Unless the Administrative Agent shall
have received notice from the Borrower prior to
the date on which any payment is due to the
Lenders hereunder that the Borrower will not make
such payment in full, the Administrative Agent may
assume that the Borrower has made such payment in
full to the Administrative Agent on such date, and
the Administrative Agent may (but shall not be
required to), in reliance upon such assumption,
cause to be distributed to each Lender on such due
date an amount equal to the amount then due such
Lender. If and to the extent the Borrower shall
not have so made such payment in full to the
Administrative Agent, each Lender shall repay to
the Administrative Agent forthwith on demand such
amount distributed to such Lender together with
interest thereon, for each day from the date such
amount is distributed to such Lender until the
date such Lender repays; such amount to the
Administrative Agent, at the Federal Funds Rate as
in effect for each such day.
Section 2.12 Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether
voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the
Advances made by it (other than pursuant to Article
III) in excess of its ratable share of payments on
account of the Advances obtained by all the Lenders,
such Lender shall forthwith purchase from the other
Lenders such participations in the Advances made by
them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of
them; provided, that if all or any portion of such
excess payment is thereafter recovered from such
purchasing Lender, such Purchase from each Lender shall
be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such
Lender's ratable share (according to the proportion of
(i) the amount of such Lender's required repayment to
(ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable
by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant
to this Section 2.12 may, to the fullest extent
permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such
participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such
participation.
Section 2.13 Limitation of Interest.
It is the intention of the parties hereto that
each of the Lenders shall conform strictly to usury
laws applicable to it, if any. Accordingly, if the
transactions with the Lenders contemplated hereby would
be usurious under applicable law, if any, then, in that
event, notwithstanding anything to the contrary in the
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(145)
<PAGE>
Notes, this Agreement or any other Loan Document it is
agreed as follows: (i) the aggregate of all
consideration which constitutes interest under
applicable law that is contracted for, taken, reserved,
charged or received by the Lenders under any Note, this
Agreement or under any other Loan Document shall under
no circumstances exceed the maximum amount allowed by
such applicable law and any excess shall be canceled
automatically, and if theretofore paid, shall at the
option of any Lender be credited by such Lender on the
principal amount of the Obligations owed to such Lender
by the Borrower or refunded by such Lender to the
Borrower, and (ii) in the event that the maturity of
any Note or other Obligation payable to any Lender is
accelerated or in the event of any required or
permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender
may never include more than the maximum amount allowed
by such applicable law and all interest in excess of
such lawful amount, if any, payable to any Lender under
this Agreement or otherwise shall be canceled
automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall, at the
option of any Lender be credited by such Lender on the
principal amount of the Obligations owed to such Lender
by the Borrower or refunded by such Lender to the
Borrower.
Section 2.14 Use of Proceeds.
The proceeds of all Advances made hereunder shall
be used by the Borrower (i) for its working capital and
general corporate purposes, including Acquisitions
permitted by this Agreement and (ii) to refinance
certain existing Debt of the Borrower on the Closing
Date.
ARTICLE III
-----------
YIELD PROTECTION, INTEREST RATE DETERMINATION, TAXES, ETC.
- ----------------------------------------------------------
Section 3.1 Additional Interest on Eurodollar
Rate Advances.
The Borrower shall pay to each Lender, so long as
such Lender shall be required under regulations of the
Federal Reserve Board to maintain reserves with respect
to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate
Advance, from the date of such Advance until such
principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained
by subtracting (i) the Eurodollar Rate for each
Interest Period for such Eurodollar Rate Advance from
(ii) the rate obtained by dividing such Eurodollar Rate
by a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is
payable on such Eurodollar Rate Advance. Such
additional interest shall be determined by such Lender
and notified to the Borrower through the Administrative
Agent.
Section 3.2 Interest Rate Determination and
Protection.
(a) Each Reference Lender agrees to furnish
to the Administrative Agent timely information for
the purpose of determining each Eurodollar Rate.
If any one of the Reference Lenders shall not
furnish such timely information to the
Administrative Agent for the purpose of
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<PAGE>
determining any such Eurodollar Rate, the
Administrative Agent shall determine such
Eurodollar Rate on the basis of timely information
furnished by the two remaining Reference Lenders.
(b) The Administrative Agent shall give
prompt notice to the Borrower and the Lenders of
the applicable interest rate determined by the
Administrative Agent for purposes of Section
2.9(a) or (b), and the applicable rate, if any,
furnished by each Reference Lender for the purpose
of determining the applicable interest rate under
Section 2.9(b).
(c) If more than one of the Reference
Lenders fails to furnish timely information to the
Administrative Agent for determining the
Eurodollar Rate for any Eurodollar Rate Advances,
(i) the Administrative Agent shall
forthwith notify the Borrower and the Lenders
that the interest rate cannot be determined
for such Eurodollar Rate Advances,
(ii) each outstanding Eurodollar
Rate Advance will automatically, on the last
day of the then-existing Interest Period
therefor, Convert into a Base Rate Advance,
and
(iii) the obligation of the
Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended
until the Administrative Agent shall notify
the Borrower and the Lenders that the
circumstances causing such suspension no
longer exist.
(d) If, with respect to any Eurodollar Rate
Advances, the Required Lenders notify the
Administrative Agent that the Eurodollar Rate for
any Interest Period for such Advances will not
equal or exceed the cost to such Required Lenders
of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period,
the Administrative Agent shall forthwith so notify
the Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance
will automatically, on the last day of the
then-existing Interest Period therefor,
Convert into a Base Rate Advance, and
(ii) the obligation of the Lenders
to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended
until the Administrative Agent shall notify
the Borrower and the Lenders that the
circumstances causing such suspension no
longer exist.
(e) On the date on which the aggregate
unpaid principal amount of any Eurodollar Rate
Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to
less than $10,000,000, such Advances shall
automatically Convert into Base Rate Advances, and
thereafter, for purposes of prepayment pursuant to
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<PAGE>
Section 2.6 and Conversion pursuant to Section
2.4, all outstanding Base Rate Advances shall be
deemed to be part of one Borrowing.
Section 3.3 Increased Costs.
(a) If, due to either (i) the introduction
of or any change (other than any change by way of
imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law
or regulation, in each case, after the Closing
Date, or (ii) the compliance with any guideline
or request from any Governmental Authority
(whether or not having the force of law) made
after the Closing Date, there shall be any
increase in the cost to any Lender of agreeing to
make or making, funding or maintaining Eurodollar
Rate Advances (except as otherwise provided in
Sections 3.1 and 3.5 hereof), then the Borrower
shall, within three days after demand by such
Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative
Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for
such increased cost.
(b) If any Lender determines that compliance
with any law or regulation enacted or promulgated
after the Closing Date or any guideline or request
made after the Closing Date from any Governmental
Authority (whether or not having the force of law
and except as otherwise provided in Section 3.5
hereof) affects or would affect the amount of
capital required or expected to be maintained by
such Lender or any corporation controlling such
Lender and that the amount of such capital is
increased by or based upon the existence of such
Lender's commitment to lend hereunder and other
commitments of this type, then, upon demand by
such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay,
within three days after demand, to the
Administrative Agent for the account of such
Lender, from time to time as specified by such
Lender, additional amounts sufficient to
compensate such Lender or such corporation in the
light of such circumstances, to the extent that
such Lender reasonably determines such increase in
capital to be allocable to the existence of such
Lender's commitment to lend hereunder.
Section 3.4 Illegality.
Notwithstanding any other provision of this
Agreement, if any Lender shall notify the
Administrative Agent that the introduction of or any
change in or in the interpretation of any law or
regulation, in each case, after the Closing Date, makes
it unlawful, or any Governmental Authority asserts that
it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (i) the obligation
of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension
no longer exist and (ii) the Borrower shall forthwith
prepay in full all Eurodollar Rate Advances of all
Lenders then outstanding, together with interest
accrued thereon, unless the Borrower, within five
Business Days of notice from the Administrative Agent,
Converts all Eurodollar Rate Advances of all Lenders
then outstanding into Base Rate Advances in accordance
with Section 2.4.
- -34-
(148)
<PAGE>
Section 3.5 Taxes.
(a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in
accordance with Section 2.11 free and clear of and
without deduction for any and all present or
future taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect
thereto, excluding in the case of each Lender and
the Administrative Agent, taxes imposed on or
measured by all or part of its net income, and
franchise taxes imposed on it, by the jurisdiction
under the laws of which such Lender or the
Administrative Agent (as the case may be) is
organized or any political subdivision thereof or,
in the case of each Lender, by the jurisdiction of
such Lender's Applicable Lending Office or any
political subdivision thereof (all such non-
excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or the
Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making
all required deductions (including deductions
applicable to additional sums payable under this
Section 3.5) such Lender or the Administrative
Agent (as the case may be) receives an amount
equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall
pay the full amount deducted to the relevant
taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay
any present or future stamp, documentary or
intangibles taxes or any other similar taxes,
charges or levies which arise from any payment
made hereunder or under the Notes or from the
execution, delivery or registration of, or
otherwise with respect to, this Agreement, the
Notes or any of the other Loan Documents
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender
and the Administrative Agent for the full amount
of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this
Section 3.5) paid by such Lender or the
Administrative Agent (as the case may be) and any
liability (including penalties, interest and
expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. This
indemnification shall be made within thirty (30)
days from the date such Lender or the
Administrative Agent (as the case may be) makes
written demand therefor. The Administrative Agent
or any Lender claiming indemnification pursuant to
this Section 3.5(c) shall make written demand
therefor no later than one (1) year after the
earlier of (i) the date on which such Lender or
the Administrative Agent makes payment of such
Taxes or Other Taxes and (ii) the date on which
the appropriate Governmental Authority makes
written demand on such Lender or the
Administrative Agent for payment of such Taxes or
Other Taxes.
(d) If a Lender or the Administrative Agent
shall become entitled to claim a refund, credit or
reduction in respect of Taxes or Other Taxes as to
which it has been indemnified by the Borrower, or
- -35-
(149)
<PAGE>
with respect to which the Borrower has made
payments pursuant to this Section 3.5, such Lender
or the Administrative Agent shall, within ninety
(90) days after receipt of a written request by
the Borrower and at Borrower's sole expense, make
an appropriate filing or claim with the
appropriate Governmental Authority to obtain or
use such refund, credit or reduction. Upon a
written request of the Borrower, each Lender or
the Administrative Agent shall use reasonable
efforts to cooperate with the Borrower in
determining whether or not the Administrative
Agent or such Lender is entitled to such a refund,
credit or reduction. If a Lender or the
Administrative Agent receives a refund or realizes
the benefit of a credit or reduction in respect of
any such Taxes or other Taxes (whether or not as a
result of a filing or claim made pursuant to the
first sentence of this paragraph), such Lender or
the Administrative Agent shall within ninety (90)
days from the date of such receipt or realization
pay over the amount of such refund, credit or
reduction to the Borrower (but only to the extent
of indemnity payments made or other amounts paid
by the Borrower under this Section 3.5 with
respect to such Taxes or Other Taxes), net of all
reasonable out-of-pocket expenses of such Lender
or the Administrative Agent and without interest
(other than interest paid by the relevant
Governmental Authority with respect to such
refund, credit or reduction); provided that the
Borrower (upon the written request of such Lender
or the Administrative Agent) agrees to repay the
amount paid over to the Borrower to such Lender or
the Administrative Agent (together with any
interest payable to the relevant Governmental
Authority) in the event such Lender or the
Administrative Agent is required to repay such
refund, credit or reduction to such Governmental
Authority.
(e) Within forty-five (45) days after the
date of any payment of Taxes by the Borrower, the
Borrower will furnish to the Administrative Agent,
at its address referred to in Section 11.1, the
original or a certified copy of a receipt (if any)
evidencing payment thereof.
(f) Each Lender that is a non-resident alien
or is organized under the laws of a jurisdiction
outside the United States, on or prior to the date
of its execution and delivery of this Agreement
(or, in the case of any Person becoming a Lender
after the Closing Date, on or prior to the
effective date of the Assignment and Acceptance
pursuant to which it becomes a Lender), from time
to time thereafter if requested in writing by the
Borrower, and upon any change in designation of
the Lender's Applicable Lending Office (but only
so long as such Lender remains lawfully able to do
so), shall provide each of the Borrower and the
Administrative Agent (i) if such Lender is not a
bank within the meaning of Section 881(c)(3)(A) of
the Code, a duly completed original U.S. Treasury
Department Form W-8 (or successor form) certifying
that such Lender is not a United States citizen or
resident (or that such Lender is filing for a
foreign corporation, partnership, estate or trust)
and providing the name and address of the Lender,
together with a certificate representing that it
is not a bank within the meaning of Section
881(c)(3)(A) of the Code and is not a ten percent
(10%) shareholder (within the meaning of Section
871(h)(3)(B) of the Code) with respect to the
Borrower, or (ii) if such Lender is a bank within
the meaning of Section 881(c)(3)(A) of the Code, a
duly completed original U.S. Treasury Department
Form W-8 BEN or Form W-8 ECI (or successor form),
- -36-
(150)
<PAGE>
whichever is applicable, properly claiming
complete exemption from United States withholding
tax on payments by the Borrower pursuant to this
Agreement and under the Notes.
(g) The Borrower shall not be required to
indemnify any Lender or the Administrative Agent,
or to pay any other amount to any such Lender, in
respect of any Tax pursuant to this Section 3.5 to
the extent that: (i) in the case of a Lender that
is a non-resident alien or is organized under the
laws of a jurisdiction outside the United States,
the obligation to make such indemnification or to
pay such other amount would not have arisen but
for a failure by such non-resident Lender to
comply with the provisions of Section 3.5(f),
unless such failure is due to a change in law
occurring subsequent to the date on which a form
originally was required to be provided; provided,
however, that should a Lender be subject to
withholding Tax because of such failure, the
Borrower shall take such steps (at Lender's
expense) as the Lender shall reasonably request in
writing to assist the Lender to recover such Tax;
or (ii) such Tax was applicable on the date such
Lender or Administrative Agent became a party to
this Agreement or, with respect to payments to a
new Applicable Lending Office, the date such
Lender designated such Applicable Lending Office;
provided, however, that this clause (ii) shall not
apply to any Lender or new Applicable Lending
Office that becomes a Lender or Applicable Lending
Office as a result of an assignment or designation
made at the request of the Borrower, and provided
further that this clause (ii) shall not apply to
the extent the indemnity payment or other amount
any transferee Lender, or a Lender through a new
Applicable Lending Office, would be entitled to
receive does not exceed the indemnity payment or
other amount that the Lender making the
assignment, or making the designation of such new
Applicable Lending Office, would have been
entitled to receive in the absence of such
assignment or designation.
(h) Subject to Section 3.8, in the event
that a Lender that originally provided such form
as may be required under Section 3.5(f) thereafter
ceases to qualify for complete exemption from
United States withholding tax, such Lender may
assign its interest under this Agreement to any
Eligible Assignee in accordance with Section 11.5
and such Eligible Assignee shall be entitled to
the same benefits under this Section 3.5 as the
assignor provided that the rate of United States
withholding tax (and the rate of any Taxes or
Other Taxes) applicable to such Eligible Assignee
shall not exceed the rate then applicable to the
assignor.
Section 3.6 Funding Losses.
The Borrower agrees to reimburse each Lender and
to hold each Lender harmless from any loss or expense
(including loss of anticipated profits) which the
Lender may sustain or incur as a consequence of:
(a) the failure of the Borrower to borrow,
or to Continue or Convert to a Borrowing comprised
of Eurodollar Rate Advances after the Borrower has
given (or is deemed to have given) a Notice of
Borrowing or a Notice of Continuation/Conversion;
- -37-
(151)
<PAGE>
(b) the failure of the Borrower to make any
prepayment after the Borrower has given a notice
in accordance with Section 2.6;
(c) the payment or prepayment (including
pursuant to Section 2.6) of a Borrowing comprised
of Eurodollar Rate Advances on a day which is not
the last day of the Interest Period with respect
thereto; or
(d) the Conversion of any Borrowing
comprised of Eurodollar Rate Advances to a
Borrowing comprised of Base Rate Advances on a day
that is not the last day of the respective
Interest Period;
including any such loss or expense arising from the
liquidation or reemployment of funds obtained by it to
maintain its Eurodollar Rate Advances hereunder or from
fees payable to terminate the deposits from which such
funds were obtained. Solely for purposes of
calculating amounts payable by the Borrower to the
Lenders under this Section 3.6 and under Section
3.3(a), each Eurodollar Rate Advance made by a Lender
(and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been
funded at the Eurodollar Rate used in determining the
rate of interest for such Eurodollar Rate Advance by a
matching deposit or other borrowing in the London
interbank market for a comparable amount and for a
comparable period, whether or not such Eurodollar Rate
Advance is in fact so funded.
Section 3.7 Certificates of Lenders.
(a) Any Lender claiming reimbursement or
compensation pursuant to this Article III shall
deliver to the Borrower (with a copy to the
Administrative Agent) a certificate setting forth
in reasonable detail the amount payable to such
Lender hereunder and such certificate shall be
prima facie evidence of the amount of compensation
due to such Lender in the absence of manifest
error.
(b) Prior to giving such certificate to the
Administrative Agent pursuant to Sections 3.1,
3.3, or 3.5, or notifying the Administrative Agent
pursuant to Section 3.4 that such Lender is unable
to make Eurodollar Advances, the affected Lender
shall designate a different Applicable Lending
Office if such designation would eliminate the
need to give such certificate or certification and
would not, in the judgment of such Lender, be
illegal or otherwise disadvantageous to such
Lender.
(c) Any Lender claiming reimbursement or
compensation pursuant to Section 3.3 shall deliver
the demand required by Section 3.3(a) or (b), as
applicable, in the form of the certificate
described in paragraph (a) no later than one (1)
year after such Lender obtains knowledge of such
additional cost, and if any Lender fails to give
notice to the Borrower within such period, the
Borrower shall have no obligation to pay any
amount accrued prior to the date which is one year
prior to delivery of such certificate.
Section 3.8 Replacement of a Lender.
- -38-
(152)
<PAGE>
If the Borrower shall: (i) as a result of the
requirements of Sections 3.1, 3.3 or 3.5, be required
to pay any Lender the additional interest referred to
in such Section 3.1, the additional costs referred to
in such Section 3.3 or the Taxes or Other Taxes
referred to in such Section 3.5, which interests, costs
or taxes are not imposed by all of the other Lenders,
and the Borrower deems such additional amounts to be
material; (ii) as a result of the requirements of
Section 3.4, be required to prepay all Eurodollar Rate
Advances; or (iii) as a result of the failure of any
Lender to make available to the Administrative Agent
the amount of such Lenders Advance, be required to
repay to the Administrative Agent such corresponding
amount pursuant to Section 2.3(d) hereof, then, in each
case, the Borrower may obtain one or more other Lenders
or, with the consent of the Administrative Agent, one
or more other Eligible Assignees willing to replace
such Lender, and such Lender shall execute and deliver
to such Eligible Assignee an Assignment and Acceptance
with respect to such Lender's entire interest under
this Agreement and the Notes, and upon the execution by
such Eligible Assignee of such Assignment and
Acceptance and compliance with the requirements of
Section 11.5 hereof, such Eligible Assignee shall
succeed to all of such Lender's rights and duties under
this Agreement. If the Borrower exercises its election
under this Section 3.8 to replace a Lender, the
Borrower shall pay the administrative fee payable to
the Administrative Agent under Section 11.5 hereof.
Section 3.9 Survival.
The agreements and obligations of the Borrower in
this Article III shall survive the payment of all other
Obligations and the termination of this Agreement.
ARTICLE IV
-----------
CONDITIONS PRECEDENT
--------------------
Section 4.1 Conditions of Initial Borrowing.
The obligation of each Lender to make its initial
Advance hereunder is subject to the satisfaction, prior
to or simultaneously with the making of such Advance,
of the following conditions:
(a) This Agreement. The Administrative
Agent shall have received, on or before the
Closing Date, counterparts of this Agreement
executed by the Borrower, the Syndication Agent,
the Managing Agent and each of the Lenders in the
manner specified in Section 11.9 hereof, in
sufficient numbers so that each Lender shall
retain a counterpart thereof.
(b) Other Documents. The Administrative
Agent shall have received, on or before the
Closing Date, the following, each dated as of such
date, in form and substance satisfactory to the
Administrative Agent and in sufficient copies
(except for the Notes) for each Lender:
- -39-
(153)
<PAGE>
(i) Notes. The Notes, payable to
the order of each of the Lenders, duly
executed by the Borrower;
(ii) Resolutions; Incumbency.
(A) copies of the
resolutions of the board of directors of
the Borrower approving and authorizing
the execution, delivery and performance
by the Borrower of this Agreement and
the other Loan Documents to be delivered
by the Borrower hereunder, and
authorizing the borrowings hereunder,
certified as of the Closing Date by the
secretary or an assistant secretary of
the Borrower; and
(B) a certificate of the
secretary or assistant secretary of the
Borrower certifying the names and true
signatures of the officers of the
Borrower authorized to execute, deliver
and perform, as applicable, this
Agreement and all other Loan Documents
to be delivered hereunder;
(iii) Articles of
Incorporation; By-Laws and Good Standing.
Each of the following documents:
(A) the articles or
certificate of incorporation of the
Borrower and of each Guarantor as in
effect on the Closing Date, certified by
the Secretary of State (or similar,
applicable Governmental Authority) of
the state of incorporation of the
Borrower and of each Guarantor as of a
recent date and by the secretary or
assistant secretary of the Borrower and
of such Guarantor as of the Closing
Date, and the bylaws of the Borrower and
of each Guarantor as in effect on the
Closing Date, certified by the secretary
or assistant secretary of the Borrower
and of such Guarantor as of the Closing
Date; and
(B) a good standing
certificate as of a recent date for the
Borrower and each Guarantor from the
Secretary of State (or similar,
applicable Governmental Authority) of
its state of incorporation and each
state where the Borrower or such
Guarantor is qualified to do business as
a foreign corporation;
(iv) Legal Opinions. A favorable
opinion of Hunton & Williams, counsel to the
Borrower and the Guarantors, addressed to the
Administrative Agent and the Lenders,
substantially in the form of Exhibit F
hereto;
(v) Certificate. A certificate
signed by the chief executive officer, chief
financial officer or treasurer of the
Borrower stating that:
- -40-
(154)
<PAGE>
(A) the representations
and warranties contained in Article V
are true and correct on and as of such
date, as though made on and as of such
date;
(B) no Default or Event
of Default exists; and
(C) except as for
changes in the financial condition and
results of operations reflected in the
financial statements filed with the
Borrower's Form 10-Q for the third
quarter of 1999, since June 30, 1998, no
event or circumstance has occurred that
has resulted or could reasonably be
expected to result in a material adverse
change in, or a material adverse effect,
at such time or in the future, in or
upon the operations, business,
properties or condition (financial or
otherwise) of the Borrower and its
Subsidiaries taken as a whole; and
(vi) Other Documents. Such other
approvals, opinions, documents or materials
as the Administrative Agent, or the Required
Lenders through the Administrative Agent, may
request.
(c) Termination of Existing Credit
Agreement. Concurrently with the execution and
delivery of this Agreement, each of the lenders
(other than any Lender hereunder) which is party
to that certain Credit Agreement, dated as of June
27, 1997, by and among the Borrower, the Lenders
listed therein, the Administrative Agent, FUNB as
the Syndication Agent and Rabobank and Societe
Generale, as Co-Agents thereunder, as amended by
that certain Amendment No. 1 dated as of May 6,
1998, as amended by that certain Amendment No. 2
dated as of February 12, 1999 and as further
amended by that certain Amendment No. 3 dated as
of April 30, 1999 (as amended, the "Existing
Credit Agreement"), shall have received, or waived
in writing, timely notice of the termination of
such credit agreement as of the effective date of
this Agreement provided for in Section 11.9 and
all obligations (if any) thereunder shall have
been paid in full.
(d) Year 2000 Problem. The Administrative
Agent and the Lenders shall be satisfied that (i)
the Borrower and its Subsidiaries are taking all
necessary and appropriate steps to ascertain the
extent of, and to quantify and successfully
address, business and financial risks facing the
Borrower and its Subsidiaries as a result of what
is commonly referred to as the "Year 2000 Problem"
(i.e., the inability of certain computer
applications to recognize correctly and perform
date-sensitive functions involving certain dates
prior to and after December 31, 1999) and (ii) the
Borrower's and its Subsidiaries' material computer
applications will, on a timely basis, adequately
address the Year 2000 Problem in all material
respects.
(e) Payment of Fees. The Borrower shall
have paid to (i) the Administrative Agent, for
disbursement to the Lenders, such amounts as are
due and payable by the Borrower to the Lenders on
the Closing Date as agreed upon among the Borrower
and the Lenders, and (ii) the Administrative
Agent, for itself and for disbursement to BAS,
- -41-
(155)
<PAGE>
such amounts as are payable to the Administrative
Agent and BAS on the Closing Date pursuant to the
Fee Letter.
Section 4.2 Conditions to All Borrowings.
The obligation of each Lender to make any Advance
to be made by it hereunder (including its initial
Advance) is subject to the satisfaction of the
following conditions precedent on the relevant
borrowing date:
(a) Notice of Borrowing. The Administrative
Agent shall have received a Notice of Borrowing
(with, in the case of the initial Borrowing only,
a copy for each Lender);
(b) Continuation of Representations and
Warranties. The representations and warranties
made by the Borrower contained in Article V shall
be true and correct on and as of the date of such
Borrowing, with the same effect as if made on and
as of the date of such Borrowing (except to the
extent such representations and warranties
expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier
date);
(c) No Existing Default. No Default or
Event of Default shall exist or shall result from
such Borrowing; and
(d) Senior Indenture. At any time that the
aggregate principal amount of all outstanding
Borrowings shall exceed $240,000,000, the Borrower
shall have provided detailed calculations (in form
and substance reasonably satisfactory to the
Administrative Agent) evidencing compliance with
Section 4.11 of the Senior Indenture.
Each Notice of Borrowing submitted by the Borrower
hereunder shall constitute a representation and
warranty by the Borrower hereunder, as of the date of
each such notice and as of the date of each Borrowing,
that the conditions in Section 4.2 are satisfied.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the
Administrative Agent, the Syndication Agent, Managing
Agent and each of the Lenders that:
Section 5.1 Corporate Existence and Power.
Each of the Borrower and its Subsidiaries is a
corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its
organization, and has all corporate powers and all
material governmental licenses, authorizations,
consents and approvals required to carry on its
business as now conducted. Each of the Borrower and
its Subsidiaries is duly qualified as a foreign
- -42-
(156)
<PAGE>
corporation, licensed and in good standing in each
jurisdiction where qualification or licensing is
required by the nature of its respective business or
the character and location of its respective property,
business or customers and in which the failure so to
qualify or be licensed, as the case may be, in the
aggregate, could have a Material Adverse Effect.
Section 5.2 Corporate and Governmental
Authorization; Contravention.
The execution, delivery and performance by each of
the Borrower and the Guarantors of the Loan Documents
to which it is a party are within its corporate power,
have been duly authorized by all necessary corporate
action, require no action by or in respect of, or
filing with, any Governmental Authority and do not and
will not contravene, or constitute (with or without the
giving of notice or lapse of time or both) a default
under, any provision of applicable law as now in effect
or of the articles of incorporation or by-laws of the
Borrower or any Guarantor as now in effect or of any
material agreement, judgment, injunction, order, decree
or other instrument now binding upon or affecting the
Borrower or such Guarantor or result in the creation or
imposition of any Lien on any of their respective
assets.
Section 5.3 Binding Effect.
This Agreement and the Notes each constitutes a
valid and binding agreement of the Borrower and the
Subsidiary Guaranty constitutes a valid and binding
obligation of each of the Guarantors, in each case
enforceable against such Person in accordance with its
respective terms, except as (i) the enforceability
hereof and thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by
equitable principles of general applicability.
Section 5.4 Financial Information.
(a) The consolidated balance sheet of the
Borrower and its Subsidiaries as of June 30, 1998
and the related consolidated statements of income,
cash flows and stockholders' equity for the fiscal
year then ended, reported on by
PricewaterhouseCoopers LLP and set forth in the
Borrower's 1998 Form 10-K, a copy of which has
been delivered to each of the Lenders, fairly
present, in conformity with GAAP, the consolidated
financial position of the Borrower and its
Subsidiaries as of such date and the consolidated
results of operations and cash flows for such
fiscal year. The Borrower and its Subsidiaries
did not, as of June 30, 1998, have any material
contingent obligation, contingent liability or
liability for taxes, long-term lease or unusual
forward or long-term commitment, which is not
reflected in any of such financial statements or
notes thereto.
(b) The unaudited consolidated balance sheet
of the Borrower and its Subsidiaries as of March
31, 1999 and the related unaudited consolidated
statements of income, cash flows and stockholders'
equity for the nine months then ended, set forth
in the Borrower's Quarterly Report for the fiscal
quarter ended March 31, 1999 as filed with the
Securities and Exchange Commission on Form 10-Q, a
copy of which has been delivered to each of the
Lenders, fairly present, in conformity with GAAP
applied on a basis consistent with the financial
- -43-
(157)
<PAGE>
statements referred to in paragraph (a), the
consolidated financial position of the Borrower
and its Subsidiaries as of such date and the
consolidated results of operations and cash flows
for such nine-month period (subject to normal year-
end adjustments).
(c) Except as for changes in the financial
condition and results of operations reflected in
the financial statements filed with the Borrower's
Form 10-Q for the third quarter of 1999, since
June 30, 1998, no event or circumstance has
occurred that has resulted or could reasonably be
expected to result in a Material Adverse Effect.
Section 5.5 Litigation.
Except as set forth on Schedule 5.5, (i) no
summons, complaint or other similar pleading has been
served on the Borrower or any of its Subsidiaries in
connection with any action, suit or proceeding, and
(ii) to the knowledge of the Borrower, there is no
action, suit or proceeding pending or threatened
against, or affecting, the Borrower or any of its
Subsidiaries, before any Governmental Authority, in the
case of clause (i) or (ii) in which there is a
reasonable possibility of an adverse decision which
could have a Material Adverse Effect or which in any
manner questions the validity of this Agreement, the
Notes or any Subsidiary Guaranty and there is no basis
known to the Borrower for any such action, suit or
proceeding.
Section 5.6 Marketable Title.
The Borrower and each of its Material Subsidiaries
has good and marketable title to all its material
properties and assets subject to no Lien, except
Permitted Liens.
Section 5.7 Filings.
All actions by or in respect of, and all filings
with, any Governmental Authority required in connection
with the execution, delivery and performance of this
Agreement, the Notes and the Subsidiary Guaranty, or
necessary for the validity or enforceability thereof or
for the protection of the rights and interests of the
Administrative Agent and each of the Lenders
thereunder, will, prior to the date of delivery
thereof, have been duly taken or made, as the case may
be, and will at all times thereafter remain in full
force and effect.
Section 5.8 Regulation U.
The proceeds of the Advances will be used by the
Borrower only for the purposes set forth in Section
2.14 hereof. None of the proceeds of any Advance will
be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the
purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry Margin
Stock or for any other purpose which might constitute
the Advances a "purpose credit" within the meaning of
Regulations T, U and X issued by the Federal Reserve
Board.
- -44-
(158)
<PAGE>
Section 5.9 Subsidiaries and Affiliates.
Schedule 5.9 sets forth a correct list of each
Subsidiary and Affiliate of the Borrower and the
percentage of ownership of the Borrower with respect to
each such entity. Such Schedule correctly identifies
all Material Subsidiaries.
Section 5.10 Solvency.
The Borrower and each of the Guarantors, if any,
is Solvent.
Section 5.11 ERISA Compliance.
(a) No Reportable Event has occurred and is
continuing with respect to any Plan; (b) the PBGC has
not instituted proceedings to terminate any Plan; (c)
neither the Borrower, any Subsidiary of the Borrower,
any ERISA Affiliate, nor any duly-appointed
administrator of a Plan (i) has incurred any liability
to the PBGC with respect to any Plan other than for
premiums not yet due or payable, or (ii) has instituted
or intends to institute proceedings to terminate any
Plan under Sections 4041 or 4041A of ERISA or withdraw
from any Multiemployer Plan; (d) no "accumulated
funding deficiency" (as defined in ERISA Section 302 or
Code Section 412) exists with respect to any Plan,
whether or not waived; (e) each "employee benefit plan"
(as defined in Section 3(3) of ERISA) maintained or
contributed to by or on behalf of the Borrower and its
Subsidiaries has been administered substantially and
funded in accordance with its terms and with all
provisions of the Code and ERISA applicable thereto;
and (f) the Borrower and its Subsidiaries have not
incurred any liability with respect to any welfare plan
(as defined in ERISA Section 3(1)) or for "welfare
benefits" (as defined in Code Section 419) that is not
reflected on the financial statements of the Borrower
and its Subsidiaries which would have a Material
Adverse Effect.
Section 5.12 Taxes.
The Borrower and each of its Subsidiaries have
filed all federal and other material tax returns and
reports required to be filed, and have paid all federal
and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or
their respective properties, income or assets otherwise
due and payable, except those which are being contested
in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with
GAAP and, with the exception of the Brazilian Tax
Assessment, no notice of lien has been filed or
recorded with respect to the Borrower, any of its
Subsidiaries or any of their respective properties.
There is no proposed tax assessment against the
Borrower or any of its Subsidiaries which would, if the
assessment were made, have a Material Adverse Effect.
Section 5.13 Environmental Matters.
(a) The on-going operations of the Borrower
and each of its Subsidiaries comply in all
respects with all Environmental Laws, except such
non-compliance which would not (if enforced in
accordance with applicable law) result in
liability in excess of $2,000,000 in the
aggregate.
- -45-
(159)
<PAGE>
(b) Except as specifically disclosed in
Schedule 5.13, the Borrower and each of its
Subsidiaries have obtained all licenses, permits,
authorizations and registrations required under
any Environmental Law ("Environmental Permits")
and necessary for their respective ordinary course
operations, no Governmental Authority responsible
for such Environmental Permits has threatened to
revoke, refuse to reissue or materially limit such
Environmental Permits, and the Borrower and each
of its Subsidiaries are in compliance with all
material terms and conditions of such
Environmental Permits.
(c) Except as specifically disclosed in
Schedule 5.13, none of the Borrower, any of its
Subsidiaries or any of their respective present
assets or operations, is subject to, any
outstanding written order from, or agreement with,
any Governmental Authority, nor subject to any
judicial or docketed administrative proceeding,
respecting any Environmental Law, Environmental
Claim or Hazardous Material.
(d) Except as specifically disclosed in
Schedule 5.13, there are no Hazardous Materials or
other conditions or circumstances existing with
respect to any assets, or arising from operations
prior to the Closing Date, of the Borrower, any of
its Subsidiaries or any of their respective
predecessors that would reasonably be expected to
give rise to Environmental Claims with a potential
liability to the Borrower and its Subsidiaries in
excess of $1,000,000 in the aggregate for any such
condition, circumstance or assets. In addition,
(i) to the knowledge of the Borrower, neither the
Borrower nor any of its Subsidiaries has any
underground storage tanks (x) that are not
properly registered or permitted under applicable
Environmental Laws, or (y) that are leaking or
disposing of Hazardous Materials, and (ii) to the
extent required by applicable Environmental Law,
the Borrower and its Subsidiaries have notified
all of their employees of the existence, if any,
of any health hazard arising from the conditions
of their employment and have met all material
notification requirements under all Environmental
Laws.
Section 5.14 Regulated Entities.
None of the Borrower, any Person controlling the
Borrower, or any Subsidiary of the Borrower, is (a) an
"Investment Company" within the meaning of the
Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce
Act, any state public utilities code, or any other
federal or state statute or regulation limiting its
ability to incur Debt.
Section 5.15 No Burdensome Restrictions.
Neither the Borrower nor any of its Subsidiaries
is a party to or bound by any contract or agreement, or
subject to any charter or corporate restriction, or any
Requirement of Law, which could reasonably be expected
to have a Material Adverse Effect.
Section 5.16 Labor Relations.
- -46-
(160)
<PAGE>
There are no strikes, lockouts or other labor
disputes against the Borrower or any of its
Subsidiaries, or, to the best of the Borrower's
knowledge, threatened against or affecting the Borrower
or any of its Subsidiaries that reasonably could be
expected to have a Material Adverse Effect, and no
significant unfair labor practice complaint is pending
against the Borrower or any of its Subsidiaries or, to
the knowledge of the Borrower, threatened against any
of them before any Governmental Authority, if
determined adversely to the Borrower or any of its
Subsidiaries, that reasonably could be expected to have
a Material Adverse Effect.
Section 5.17 Copyrights, Patents, Trademarks and
Licenses, etc.
The Borrower or its Subsidiaries own or are
licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names,
copyrights, contractual franchises, authorizations and
other rights that are reasonably necessary for the
operation of their respective businesses, without
conflict with the rights of any other Person. To the
knowledge of the Borrower, no slogan or other
advertising device, product, process, method,
substance, part or other material now employed, or now
contemplated to be employed, by the Borrower or any of
its Subsidiaries infringes upon any rights held by any
other Person; except as specifically disclosed in
Schedule 5.17, no claim or litigation regarding any of
the foregoing is pending or, to the knowledge of the
Borrower, threatened, and no patent, invention, device,
application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the
knowledge of the Borrower, proposed, which, in either
case, could reasonably be expected to have a Material
Adverse Effect.
Section 5.18 Compliance With Laws.
The Borrower and each of its Subsidiaries are in
compliance with all applicable Requirements of Law
except where the failure to comply could not reasonably
be expected to have a Material Adverse Effect.
Section 5.19 Broker's Fees; Transaction Fees.
Neither the Borrower nor any of the its
Subsidiaries has any obligation to any Person in
respect of any finder's, broker's or investment
banker's fee in connection with the transactions
contemplated hereby, except as provided in the Fee
Letter.
Section 5.20 Full Disclosure.
All information heretofore furnished by any
Responsible Officer of the Borrower to the
Administrative Agent or any Lender for purposes of or
in connection with this Agreement or any transaction
contemplated hereby was, when furnished, and all such
information hereafter furnished by the Borrower to the
- -47-
(161)
<PAGE>
Administrative Agent or any Lender will be, true,
accurate and complete in every material respect or
based on reasonable estimates on the date as of which
such information is stated or certified. None of such
information omits any material fact known by the
Borrower that is required to be stated therein or
necessary to make the statements made therein, in light
of the circumstances under which they are made, not
misleading as of the time when made or delivered. The
Borrower has disclosed to the Lenders in writing any
and all facts known by the Borrower that could have or
cause a Material Adverse Effect.
Section 5.21 Year 2000 Compliance.
The Borrower has (i) initiated a review and
assessment of all areas within its and each of its
Subsidiaries' businesses and operations (including
those affected by suppliers, vendors and customers)
that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications
may not be able to recognize and properly perform date-
sensitive functions after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year
2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that
timetable. Based on the foregoing, the Borrower
believes that all computer applications (including
those of its suppliers, vendors and customers) that are
material to its or any of its Subsidiaries' business
and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive
functions for all dates before and after January 1,
2000 (that is, be "Year 2000 Compliant"), except to the
extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
ARTICLE VI
----------
FINANCIAL COVENANTS
-------------------
The Borrower agrees that so long as any Advance or
any other Obligation shall remain unpaid or any Lender
shall have a Commitment hereunder, the Borrower shall,
unless the Required Lenders otherwise consent in
writing:
Section 6.1 Consolidated Working Capital.
Maintain Consolidated Working Capital, calculated
on the last day of each fiscal quarter, of not less
than $400,000,000.
Section 6.2 Minimum Consolidated Tangible Net
Worth.
Maintain Consolidated Tangible Net Worth,
calculated on the last day of each fiscal quarter
beginning on the date on which the Administrative Agent
first receives the officer's certificate to be
furnished by the Borrower pursuant to Section 7.1(c) of
this Agreement, greater than or equal to the "Minimum
Compliance Level". The "Minimum Compliance Level"
shall equal the sum of (a) $165,000,000 plus (b) upon
the conversion of any Subordinated Debt Securities into
stock of the Borrower, an amount equal to the aggregate
principal amount of Subordinated Debt Securities so
converted plus (c) as of the last day of each fiscal
year, from and including the fiscal year ending June
30, 1999, by an amount equal to 55% of Consolidated Net
Income (inclusive of extraordinary gains and without
reduction for extraordinary losses) for such fiscal
year. The foregoing increases in the Minimum
Compliance Level shall be cumulative, and no reduction
shall be made on account of any Consolidated Net Income
of less than zero for any fiscal year.
- -48-
(162)
<PAGE>
Section 6.3 Consolidated Fixed Charge Coverage
Ratio.
Maintain a Consolidated Fixed Charge Coverage
Ratio, calculated on the last day of each fiscal
quarter of not less than the ratio set forth opposite
such date:
<TABLE>
<CAPTION>
Calendar Year March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1999 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00
2000 1.10 to 1.00 1.15 to 1.00 1.15 to 1.00 1.15 to 1.00
2001 1.15 to 1.00 1.20 to 1.00 1.20 to 1.00 1.20 to 1.00
thereafter 1.20 to 1.00
</TABLE>
Section 6.4 Consolidated Leverage Ratio.
Maintain a Consolidated Leverage Ratio, calculated
on the last day of each fiscal quarter ending on the
dates set forth below, of not more than the ratio set
forth opposite such date:
<TABLE>
<CAPTION>
Calendar Year March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1999 0.725 to 1.00 0.725 to 1.00 0.70 to 1.00
2000 0.70 to 1.00 0.675 to 1.00 0.675 to 1.00 0.65 to 1.00
thereafter 0.65 to 1.00
</TABLE>
Section 6.5 Consolidated Total Senior Debt to
Borrowing Base Ratio.
Maintain a Consolidated Total Senior Debt to
Borrowing Base Ratio, calculated on the last day of
each fiscal quarter ending on the dates set forth
below, of not more than the ratio set forth opposite
such date:
<TABLE>
<CAPTION>
Calendar Year March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1999 1.20 to 1.00 1.20 to 1.00 1.20 to 1.00
2000 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00
thereafter 1.00 to 1.00
</TABLE>
Section 6.6 Calculations.
For purposes of calculating the financial
covenants contained in Section 6.2 and Section 6.3 of
this Article VI, the Borrower shall be permitted to
exclude during the appropriate Calculation Periods the
effect of one-time restructuring and other asset
impairment charges incurred during the fiscal quarters
ending March 31, 1999 and June 30, 1999 in an aggregate
amount not to exceed $26,000,000.
- -49-
(163)
<PAGE>
ARTICLE VII
-----------
AFFIRMATIVE COVENANTS
---------------------
The Borrower agrees that so long as any Advance or
any other Obligation shall remain unpaid or any Lender
shall have a Commitment hereunder, unless the Required
Lenders otherwise consent in writing:
Section 7.1 Information.
The Borrower shall deliver or cause to be
delivered to each of the Lenders:
(a) Annual Reports. (i) As soon as
available and in any event within 90 days
after the end of each fiscal year of the
Borrower, a consolidated balance sheet of the
Borrower and its Subsidiaries as of the end
of such fiscal year and the related
consolidated statement of cash flows and the
consolidated statements of income and
stockholders' equity for such fiscal year,
setting forth in each case in comparative
form the figures for the previous fiscal
year, all in reasonable detail and
accompanied by an opinion on such
consolidated statements by an Approved
Accounting Firm which opinion shall state
that such consolidated financial statements
present fairly the consolidated financial
position of the Borrower and its Subsidiaries
as of the date of such financial statements
and their consolidated results of their
operations and cash flows for the period
covered by such financial statements in
conformity with GAAP applied on a consistent
basis (except for changes in the application
of which such accountants concur) and shall
not contain any "going concern" or like
qualification or exception or qualifications
arising out of the scope of the consolidated
audit;
(ii) As soon as available and in any
event within 90 days after the end of each
fiscal year, a consolidated and consolidating
balance sheet of the Borrower and its
Subsidiaries and the related consolidated and
consolidating statements of income, cash
flows and stockholders' equity for such
fiscal year, setting forth (in the case of
consolidating statements) separate figures
for U.S. and non-US tobacco and flower
operations and fully consolidated operations
and (in the case of consolidated statements)
the consolidated figures in comparative form
for the Borrower's previous fiscal year, all
certified (subject to normal year-end audit
adjustments) as complete and correct in all
material respects by the Borrower's chief
financial officer, treasurer or chief
accounting officer;
(b) Quarterly Reports. As soon as available
and in any event within 45 days after the end of
each of the first three fiscal quarters, a
consolidated and consolidating balance sheet of
the Borrower and its Subsidiaries and the related
consolidated and consolidating statements of
income, cash flows and stockholders' equity for
the portion of the Borrower's fiscal year ended at
the end of such quarter, setting forth (in the
case of consolidating statements) separate figures
for U.S. and non-US tobacco and flower operations
- -50-
(164)
<PAGE>
and fully consolidated operations and (in the case
of consolidated statements) the consolidated
figures in comparative form for the corresponding
portion of the Borrower's previous fiscal year,
all certified (subject to normal year-end audit
adjustments) as complete and correct in all
material respects by the Borrower's chief
financial officer, treasurer or chief accounting
officer;
(c) Officer's Certificates. Simultaneously
with the delivery of the financial statements
referred to in paragraphs (a) and (b) above, (i) a
certificate of the Borrower's chief financial
officer, treasurer or chief accounting officer (A)
setting forth in reasonable detail the
calculations required to establish whether the
Borrower was in compliance with the requirements
of Article VI and (B) stating that the Borrower
was in compliance with Sections 8.1, 8.2, 8.3 and
8.5, each on the date of such financial
statements; and (ii) a certificate of the
Borrower's chief financial officer, treasurer or
chief accounting officer (A) stating whether there
exists on the date of such certificate any Default
or Event of Default and, if any Default or Event
of Default then exists, setting forth the details
thereof and the action which the Borrower is
taking or proposes to take with respect thereto
and (B) stating whether, since the date of the
most recent previous delivery of financial
statements pursuant to paragraphs (a) or (b) of
this Section, any event has occurred that would
have a Material Adverse Effect and, if so, the
nature of such Material Adverse Effect;
(d) Borrowing Base Certificates. Within 45
days after the end of each fiscal quarter, a
certificate as of the end of the immediately
preceding fiscal quarter, substantially in the
form of Exhibit H and certified by a Responsible
Officer of the Borrower to be true and correct as
of the date thereof (a "Borrowing Base
Certificate").
(e) Accountant's Certificates.
Simultaneously with the delivery of each set of
financial statements referred to in paragraph (a)
above, a statement of the Approved Accounting Firm
that reported on such statements (i) stating that
their audit examination has included the reading
of this Agreement and the Notes as they relate to
financial or accounting matters, (ii) whether
anything has come to their attention to cause them
to believe that there existed on the date of such
statements any Default or Event of Default and
(iii) confirming the calculations set forth in the
officer's certificate delivered simultaneously
therewith pursuant to paragraph (c) above;
(f) Notice of Default. Forthwith upon the
occurrence of any Default or Event of Default,
notice of such Default or Event of Default in the
form of a certificate of the Borrower's chief
financial officer, treasurer or chief accounting
officer setting forth the details thereof and the
action which the Borrower is taking or proposes to
take with respect thereto;
(g) Notice of Litigation. Promptly upon, but
in no event later than fifteen (15) days after a
Responsible Officer becoming aware thereof,
written notice of the commencement of, or of a
material threat of the commencement of, an action,
suit or proceeding against the Borrower or any of
its Subsidiaries, whether or not the claim shall
be covered by insurance, which could have a
Material Adverse Effect or which in any manner
- -51-
(165)
<PAGE>
questions the validity of this Agreement, the
Notes, the Subsidiary Guaranty or any of the other
transactions contemplated hereby or thereby, a
notice setting forth the nature of such pending or
threatened action, suit or proceeding and such
additional information as the Administrative
Agent, at the request of any Lender, may
reasonably request;
(h) Press Releases. Promptly upon issuance
thereof, copies of all press releases and other
statements made available generally by the
Borrower or its Material Subsidiaries to the
public concerning material developments in the
results of operations, financial condition,
business or prospects of the Borrower or its
Material Subsidiaries;
(i) Accountant's Reports. Promptly upon
receipt thereof, (x) each report submitted to the
Borrower by its Approved Accounting Firm
concerning its accounting practices and systems
and any final comment letter submitted by such
accountants to management in connection with the
annual audit of the Borrower by its Approved
Accounting Firm and (y) copies of each report
material to the financial condition or operations
of the Borrower submitted to a Responsible Officer
of the Borrower or any of its Material
Subsidiaries by independent public accountants in
connection with any annual, interim or special
audit made by them of the books of the Borrower or
any of its Material Subsidiaries;
(j) Shareholder Communications. Promptly
upon the mailing thereof to the Borrower's
shareholders, copies of all financial statements,
reports and proxy statements so mailed;
(k) SEC Filings. Promptly upon the filing
thereof, copies of all registration statements
(other than the exhibits thereto and any
registration statements on Form S-8 or its
equivalent) and annual, quarterly or periodic
reports which the Borrower shall have filed with
the Securities and Exchange Commission;
(l) Schedule Update. From time to time such
information as is necessary so that each of
Schedule 5.9, Schedule 5.13 and Schedule 5.17 is
accurate and complete;
(m) Additional Information. From time to
time such additional information regarding the
financial position, results of operations or
business of the Borrower or any Material
Subsidiary as the Administrative Agent, at the
request of any Lender, may reasonably request;
(n) Notices to Holders of Senior Debt
Securities. Simultaneously with delivery thereof,
copies of all written notices as the Borrower
shall send to the holders of the Senior Debt
Securities;
(o) Environmental Matters. Promptly upon,
but in no event later than fifteen (15) days after
a Responsible Officer becoming aware thereof,
written notice of (i) any and all enforcement,
cleanup, removal or other governmental or
regulatory actions instituted, completed or
threatened against the Borrower or any of its
Subsidiaries or any of their respective properties
- -52-
(166)
<PAGE>
pursuant to any applicable Environmental Laws,
(ii) all other Environmental Claims, and (iii) any
environmental or similar condition on any real
property adjoining or in the vicinity of the
property of the Borrower or any Subsidiary that
could reasonably be anticipated to cause such
property or any part thereof to be subject to any
restrictions on the ownership, occupancy,
transferability or use of such property under any
Environmental Laws;
(p) ERISA. Promptly and in any event within
fifteen (15) days after
(i) a Responsible Officer or any
ERISA Affiliate knows or has reason to know
that any ERISA Event has occurred, a
statement of the chief executive officer,
chief financial officer or treasurer of the
Borrower describing such ERISA Event and the
action, if any, which the Borrower or such
ERISA Affiliate proposes to take with respect
thereto;
(ii) receipt thereof by the
Borrower or any ERISA Affiliate, copies of
each notice from the PBGC stating its
intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(iii) receipt thereof by the
Borrower or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of
each notice received by the Borrower or any
ERISA Affiliate concerning (x) the imposition
of withdrawal liability by a Multiemployer
Plan, or (y) the reorganization or
termination, within the meaning of Title IV
of ERISA, of any Multiemployer Plan and such
notice shall include the estimated amount of
withdrawal liability incurred or which may be
incurred by the Borrower or any ERISA
Affiliate in connection with such event
described in clause (x) or (y) above; and
(q) Rating Change. Promptly upon receipt of
notice thereof by a Responsible Officer, a written
notice of the issuance of any rating of, or any
change in the rating of, the Borrower's senior
unsecured debt affecting the calculation of the
Applicable Margin or of the commitment fees due
pursuant to Section 2.10 hereof or any other
issuance or change in the public rating of any
other obligations of the Borrower or any of its
Material Subsidiaries.
Section 7.2 Payment of Obligations.
The Borrower and each of its Material Subsidiaries
shall pay and discharge, as the same shall become due
and payable, (i) all of their respective obligations
and liabilities in an amount exceeding $500,000,
including all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other
like Persons which, in any such case, if unpaid, might
by law give rise to a Lien upon any of their properties
or assets, and (ii) all lawful taxes, assessments and
charges or levies made upon their properties or assets
by any Government, except where any of the items in
clause (i) or (ii) of this Section 7.2 may be
diligently contested in good faith by appropriate
- -53-
(167)
<PAGE>
proceedings, and the Borrower or such Subsidiary shall
have set aside on its books, if required under GAAP,
appropriate reserves for the accrual of any such items.
Section 7.3 Maintenance of Property; Insurance.
The Borrower and each of its Material
Subsidiaries shall keep all property useful and
necessary in their respective businesses in good
working order and condition, subject to ordinary wear
and tear, shall maintain (either in the Borrower's name
or in such Material Subsidiary's own name) with
financially sound and reputable insurance companies,
insurance on all their respective properties in at
least such amounts and against at least such risks (and
with such risk retentions) as are usually insured
against by companies engaged in the same or a similar
business in similar locations and shall furnish to the
Administrative Agent upon request by the Administrative
Agent or the Required Lenders full information as to
the insurance carried.
Section 7.4 Conduct of Business and Maintenance
of Existence.
The Borrower and, subject to the provisions of
Section 8.4, each of its Material Subsidiaries shall
continue to engage in business of the same general type
as now conducted by the Borrower or such Material
Subsidiary. The Borrower shall, and, subject to Section
8.4, shall cause each Material Subsidiary to, take all
reasonable action to preserve, renew and keep in full
force and effect its respective corporate existence and
its respective rights, privileges and franchises to the
extent such rights, privileges and franchises remain
material to the normal conduct of its business.
Section 7.5 Compliance with Laws.
The Borrower and each Subsidiary shall comply in
all material respects with all Requirements of Law
(including, without limitation, ERISA and the rules and
regulations thereunder and Environmental Laws), except
where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or
non-compliance could not be reasonably expected to have
a Material Adverse Effect.
Section 7.6 Accounting; Inspection of Property,
Books and Records.
The Borrower and each Subsidiary shall keep proper
books of records and accounts in which full, true and
correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to their
respective businesses and activities; the Borrower
shall maintain its fiscal reporting period on a June 30
fiscal year, and each Subsidiary (other than a Foreign
Subsidiary) shall maintain its respective fiscal
reporting period on the present basis; and the
Borrower shall permit, and shall cause each Subsidiary
to permit, upon three (3) days, prior written notice to
the Borrower, representatives of any Lender to visit
and inspect any of their respective properties, to
examine and make abstracts from any of their respective
books and records and to discuss their respective
affairs, finances and accounts with their officers,
employees and independent public accountants, all at
such reasonable times and as often as may reasonably be
desired; provided that no such notice shall be required
if a Default or Event of Default has occurred and is
continuing.
- -54-
(168)
<PAGE>
Section 7.7 Additional Guarantors.
(a) In the event that any Subsidiary of the
Borrower or any other Person becomes a Material
Domestic Subsidiary after the Closing Date,
whether pursuant to an acquisition, merger or
transfer of assets permitted or consented to by
the Required Lenders under Section 8.4 hereof,
through internal growth or otherwise, the Borrower
shall, at the request of the Administrative Agent,
cause each such Material Domestic Subsidiary to
become a party to the Subsidiary Guaranty, and to
deliver all relevant documentation with respect
thereto of the types described in Section 4.1(b)
with respect to such Subsidiary.
(b) At such time as the value of the total
assets (as determined in accordance with GAAP) of
all Domestic Subsidiaries (other than Material
Domestic Subsidiaries) exceeds 20% of Consolidated
Total Assets, the Borrower shall, at the request
of the Administrative Agent, cause each such
Domestic Subsidiary to become a party to the
Subsidiary Guaranty, and to deliver all relevant
documentation with respect thereto of the types
described in Section 4.1(b) with respect to such
Subsidiary.
Section 7.8 ERISA.
The Borrower shall make, and cause each of its
Subsidiaries and ERISA Affiliates to make, prompt
payments of contributions required by the terms of each
plan and to meet the minimum funding standards
applicable thereto.
Section 7.9 Year 2000 Compliance.
The Borrower will promptly notify the
Administrative Agent in the event it discovers or
determines that any computer application (including
those of its suppliers, vendors and customers) that is
material to its or any of its Subsidiaries' business
and operations will not be Year 2000 Compliant, except
to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect
ARTICLE VIII
------------
NEGATIVE COVENANTS
------------------
The Borrower agrees that so long as any Advance or
any other Obligation shall remain unpaid or any Lender
shall have a Commitment hereunder, unless the Required
Lenders otherwise consent in writing:
Section 8.1 Restriction on Liens.
- -55-
(169)
<PAGE>
The Borrower shall not, and shall not permit any
Material Subsidiary to, create, assume or suffer to
exist any Lien on any property or asset now owned or
hereafter acquired by the Borrower or such Material
Subsidiary or assign or otherwise subordinate any
present right, or subordinate any future right
subsequent to the acquisition thereof, to receive
assets, except:
(a) Liens existing on the Closing Date and
set forth on Schedule 8.1, which Liens secure Debt
outstanding on the Closing Date in an aggregate
principal amount not exceeding $50,000,000;
(b) purchase money Liens on any capital
asset of the Borrower or a Material Subsidiary if
such purchase money Lien attaches to such capital
asset concurrently with the acquisition thereof
and if the Debt secured thereby does not exceed
the lesser of the cost or fair market value as of
the time of acquisition of the asset covered
thereby by the Borrower or such Material
Subsidiary; provided, that the aggregate amount of
debt (excluding any Debt permitted under clause
(a) above), secured by all such Liens does not
exceed $15,000,000 in the aggregate at any one
time outstanding; and provided further, that no
such Lien shall extend to or cover any property or
asset of the Borrower or such Material Subsidiary
other than the related property or asset
(including accessions thereto and proceeds
thereof, to the extent provided in the security
agreement creating such Lien);
(c) Liens not securing Debt which are
incurred in the ordinary course of business in
connection with workers' compensation,
unemployment insurance, old-age pensions, social
security and public liability laws and similar
legislation;
(d) Liens securing the performance of bids,
tenders, leases, contracts (other than for the
repayment of Debt), statutory obligations, and
other obligations of like nature, incurred as an
incident to and in the ordinary course of
business;
(e) Liens securing taxes, assessments or
charges or levies of any Governmental Authority or
the claims of growers, materialmen, mechanics,
carriers, warehousemen, landlords and other like
Persons; provided, that (i) with respect to Liens
securing taxes, such taxes are not yet due and
payable, (ii) with respect to Liens securing
claims or demands of growers, materialmen,
mechanics, carriers, warehousemen, landlords and
the like, such Liens are inchoate and unfiled and
no other action has been taken to enforce the same
and (iii) with respect to taxes, assessments or
charges or levies of any Governmental Authority
secured by such Liens, payment thereof is not at
the time required by Section 7.2;
(f) zoning restrictions, easements,
licenses, reservations, covenants, conditions,
waivers, restrictions on the use of property or
other minor encumbrances or irregularities of
title which do not materially impair the use of
any material property in the operation of the
business of the Borrower or any Material
Subsidiary or the value of such property for the
purpose of such businesses or which are being
contested in good faith by appropriate
proceedings;
- -56-
(170)
<PAGE>
(g) attachment, judgment or similar Liens
arising in connection with court proceedings and
the Brazilian Tax Assessment; provided, that the
execution or other enforcement of such Liens is
effectively stayed, the claims secured thereby are
being actively contested in good faith by
appropriate proceedings and the Borrower or such
Material Subsidiary shall have set aside on its
books, if required by GAAP, appropriate reserves
for such Liens;
(h) any Lien existing on any asset of any
Person at the time such Person becomes a Material
Subsidiary and not created in contemplation of
such event;
(i) any Lien on any asset of any Person
existing at the time such Person is merged or
consolidated with or into the Borrower or a
Material Subsidiary and not created in
contemplation of such event;
(j) any Lien existing on any asset prior to
the acquisition thereof by the Borrower or a
Material Subsidiary and not created in
contemplation of such event;
(k) Liens given to secure Debt owing to life
insurance companies (or affiliates thereof)
issuing life insurance policies in connection with
Split-Dollar Programs, incurred to finance non-
scheduled premiums paid by the Borrower or its
Subsidiaries under such policies pursuant to
Split-Dollar Agreements executed in connection
with the Split-Dollar Program which Debt does not
exceed $10,000,000 in the aggregate, provided that
in connection with any Split-Dollar Program such
Liens shall be limited to the Borrower's right,
title and interest in and to (i) the Split-Dollar
Agreement and the Split-Dollar Assignment executed
in connection with such Split-Dollar Program and
(ii) the policy of life insurance assigned to the
Borrower as collateral pursuant to such
Split-Dollar Assignment;
(l) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt
secured by any Lien permitted by any of the
foregoing paragraphs of this Section 8.1;
provided, that the principal amount of such Debt
is not increased and such Debt is not secured by
any additional assets; and
(m) Liens not otherwise permitted by the
foregoing paragraphs of this Section 8.1 securing
Debt in an aggregate principal amount at any time
outstanding not to exceed $500,000.
Section 8.2 Debt.
(a) The Borrower shall not create, assume or
suffer to exist any Debt (i) that is secured by
any Lien that is not permitted by Section 8.1 or
(ii) in the case of any Debt for borrowed money
incurred or assumed after the Closing Date, if on
the date of incurrence or assumption of such Debt
after giving effect on a Pro Forma Basis to the
incurrence or assumption of such Debt and to the
concurrent retirement of any other Debt of the
Borrower or any of its Subsidiaries, a Default or
Event of Default would exist hereunder; provided,
- -57-
(171)
<PAGE>
however, that the Borrower may renew, refinance or
extend any Debt originally permitted to be
incurred pursuant to this paragraph (a) so long as
such renewed, refinanced or extended Debt is on
terms and conditions no less favorable to the
Borrower than the Debt originally issued
(including, without limitation, any shortening of
the final maturity or average life to maturity or
requiring any payment to be made sooner than
originally scheduled or any increase in the
interest rate applicable thereto or any change to
any subordination provision thereof).
(b) The Borrower shall not permit any
Subsidiary to create, assume or suffer to exist
any Debt other than (i) purchase money Debt to the
extent secured by Liens permitted by Section 8.1
and (ii) additional Debt, including Debt arising
under any Guarantee permitted by Section 8.3,
which in the aggregate does not exceed (x)
$60,000,000 for Domestic Subsidiaries, and (y)
$600,000,000 for Foreign Subsidiaries; provided,
however, that this Section 8.2(b) shall not permit
the incurrence or assumption of any Debt if on the
date of incurrence or assumption of such Debt
after giving effect on a Pro Forma Basis to the
incurrence or assumption of such Debt and to the
concurrent retirement of any other Debt of the
Borrower or any of its Subsidiaries, a Default or
Event of Default would exist hereunder.
Section 8.3 Guarantees.
The Borrower shall not, and shall not permit any
Subsidiary to, create, assume or suffer to exist any
Guarantee, other than (i) Guarantees which are incurred
in the ordinary course of business for the purpose of
carrying unsold tobacco inventories held against
Confirmed Orders, (ii) other Guarantees incurred in the
ordinary course of business so long as the aggregate
outstanding amount of all obligations Guaranteed under
this clause (ii) does not at any time exceed
$200,000,000, (iii) Guarantees of the Guarantors
pursuant to the Subsidiary Guaranty and (iv) Guarantees
of the Guarantors of the Borrower's obligations under
the Senior Indenture and the Senior Debt Securities.
Section 8.4 Consolidations, Mergers and Sale of
Assets.
The Borrower shall not, and shall not permit any
Material Subsidiary to, consolidate or merge with or
into any other Person or sell, lease or otherwise
transfer all or any substantial part of its assets to
any other Person, except that:
(a) the Borrower may merge with another
Person if (i) the Borrower is the corporation
surviving such merger and (ii) immediately after
giving effect to such merger on a Pro Forma Basis,
no Default or Event of Default shall have occurred
and be continuing;
(b) any Material Subsidiary may merge with
or into, or sell, lease or otherwise transfer all
or any substantial part of its assets to the
Borrower or to a Material Domestic Subsidiary
(determined immediately thereafter) if, in
connection with any such merger (i) either the
Borrower or such Material Domestic Subsidiary is
- -58-
(172)
<PAGE>
the surviving corporation and (ii) immediately
after giving effect to such merger, sale, lease or
other transfer on a Pro Forma Basis, no Default or
Event of Default shall have occurred and be
continuing;
(c) any Material Foreign Subsidiary may
merge into or sell, lease or otherwise transfer
all or substantially all of its assets to any
other Foreign Subsidiary in which the Borrower,
directly or indirectly, shall retain a
proportionate equity interest equal to or greater
than the equity interest of the Borrower in the
merging Subsidiary if immediately after giving
effect to such merger, sale, lease or other
transfer on a Pro Forma Basis, no Default or Event
of Default shall have occurred and be continuing;
(d) any Material Subsidiary may merge with
another Person in connection with an Acquisition
permitted by Section 8.5 if (i) such Material
Subsidiary is the surviving corporation and (ii)
following such Acquisition, the Borrower shall
retain, directly or indirectly, a proportionate
equity interest in such Material Subsidiary equal
to or greater than the Borrower's equity interest
immediately prior to such Acquisition;
(e) the Borrower may complete the orderly
liquidation of its interests in Korean American
Tobacco Company; and
(f) the Borrower or any Material Subsidiary
may transfer its interests in any Foreign
Subsidiary to one or more Wholly Owned
Subsidiaries of the Borrower or such Material
Subsidiary.
Section 8.5 Acquisitions and Investments.
The Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly, make any
Acquisition or Investment, or enter into any agreement
to make any Acquisition or Investment, except for:
(a) In addition to any Investments otherwise
permitted by this Section 8.5, any Acquisition
(other than a Hostile Acquisition) or Investment
for consideration consisting of cash or cash
equivalents, common stock of the Borrower (valued
at the market value thereof as of the date of the
issuance thereof), other securities or properties
of the Borrower or any Subsidiary (valued in good
faith by the Board of Directors of the Borrower),
the assumption of any Debt (valued at the
principal amount thereof), any other consideration
(valued in good faith by the board of directors of
the Borrower) or any combination of the foregoing;
provided that the aggregate value of all such
consideration for all Acquisitions and Investments
of the Borrower and its Subsidiaries made during
any fiscal year shall not exceed 10% of
Consolidated Tangible Net Worth as of the most
recent fiscal year end with respect to which the
Administrative Agent and the Lenders shall have
received the financial statements referred to in
Section 7.1(a)(i); provided further that in the
case of any Acquisition involving an aggregate
purchase price (including cash and non-cash
consideration) in excess of $10,000,000, the
Borrower shall have delivered to the
Administrative Agent a certificate of the
- -59-
(173)
<PAGE>
Borrower's chief financial officer, treasurer or
chief accounting officer containing calculations
that demonstrate that after giving effect to such
Acquisition on a Pro Forma Basis, the Borrower is
in compliance with the financial covenants set
forth in Article VI.
(b) Investments in direct obligations of, or
obligations Guaranteed as to principal and
interest by, the United States government or any
agency or instrumentality thereof maturing in one
year or less from the date of acquisition thereof;
(c) Investments in deposits in (including
money market funds of), or certificates of
deposits or bankers' acceptances of, (i) any bank
or trust company organized under the laws of the
United States or any state thereof having capital
and surplus in excess of $100,000,000, (ii) any
international bank organized under the laws of any
country which is a member of the OECD or a
political subdivision of any such country, and
having a combined capital and surplus of at least
$100,000,000, or (iii) leading banks in a country
where the Borrower or the Subsidiary making such
Investment does business; provided, that all such
Investments mature within 270 days of the date of
such Investment; and provided, further, that all
Investments pursuant to clause (iii) above are (A)
solely of funds generated in the ordinary course
of business by operations of Foreign Subsidiaries
in the country where such Investment is made, and
(B) denominated in the currency of the country in
which such Investment is made or in Dollars;
(d) Investments in commercial paper maturing
within 270 days and having one of the two highest
ratings of either Standard & Poor's Corporation,
Moody's Investors Service, Inc. or Fitch
Investors' Service, Inc.;
(e) Investments in money market funds (other
than those referred to in paragraph (c) above)
that have assets in excess of $2,000,000,000, are
managed by recognized and responsible institutions
and invest solely in obligations of the types
referred to in paragraphs (b) (c)(i) and (ii) and
(d) above;
(f) Investments in Persons evidencing the
deferred purchase price receivable of assets sold,
leased or otherwise transferred in accordance with
Section 8.4;
(g) Investments in the Borrower and any
Material Domestic Subsidiary (determined
immediately after such Investment);
(h) loans and advances in the ordinary
course of its business to officers and employees
of the Borrower or any Subsidiary of the Borrower
in an aggregate outstanding principal amount not
to exceed $3,000,000;
(i) loans and advances to growers and other
suppliers of tobacco (including Affiliates) in the
ordinary course of its business in an aggregate
outstanding principal amount consistent with past
practice of the Borrower;
(j) Guarantees permitted by Sections 8.2 and
8.3;
- -60-
(174)
<PAGE>
(k) Investments in (i) direct noncallable
obligations of, or obligations Guaranteed as to
principal and interest by the United States
government or any agency or instrumentality
thereof, without regard to the maturity of such
obligations, and (ii) depository receipts issued
by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933) as custodian with respect
to any obligation of the United States government
referred to in clause (i) above and held by such
bank for the account of the holder of such
depository receipt, or with respect to any
specific payment of principal or interest on any
obligation of the United States government 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 depository receipts from any
amount received by the custodian in respect of the
United States government obligations or the
specific payment of principal or interest of the
United States government obligations evidenced by
such depository receipts, where the sole purpose
of such Investments is either the Legal Defeasance
or the Covenant Defeasance of the outstanding
Senior Debt Securities, as provided in the Senior
Indenture;
(l) Investments made by any Foreign
Subsidiary in the ordinary course of such Person's
business, in connection with the financing of
international trading transactions, in export
notes, trade credit assignments, bankers'
acceptances guarantees and instruments of a
similar nature issued by (i) any commercial bank
or trust company (or any Affiliate thereof)
organized under the laws of the United States or
any state having capital and surplus in excess of
$100,000,000 or (ii) any international bank
organized under the laws of any country which is a
member of the OECD or a political subdivision of
any such country, and having a combined capital
and surplus of at least $100,000,000;
(m) Investments by the Borrower in the
Senior Debt Securities in connection with any
purchase of the Senior Debt Securities by the
Borrower, as required or permitted by the Senior
Indenture, and otherwise permitted under this
Agreement;
(n) Investments by the Borrower in the
Subordinated Debt Securities in connection with
any conversion or purchase of the Subordinated
Debt Securities by the Borrower, as required or
permitted by the Subordinated Indenture, and
otherwise permitted under this Agreement; provided
that the Borrower shall make no such Investment
(other than a conversion of the Subordinated Debt
Securities into stock of the Borrower) unless
immediately after giving effect thereto on a Pro
Forma Basis, no Default or Event of Default shall
have occurred and be continuing;
(o) Transfers of interests in Foreign
Subsidiaries to the extent permitted under Section
8.4(f); and
(p) Investments by a Foreign Subsidiary in
any other Foreign Subsidiary.
Section 8.6 Transactions with Other Persons.
- -61-
(175)
<PAGE>
The Borrower shall not enter into any agreement
with any Person whereby the Borrower shall agree to any
restriction on the Borrower's right to amend or waive
any of the provisions of this Agreement.
Section 8.7 Transactions with Affiliates.
The Borrower shall not, and shall not permit any
Material Subsidiary to, enter into any transaction with
any Affiliate of the Borrower or any such Material
Subsidiary, except (a) as expressly permitted by this
Agreement, or (b) in the ordinary course of business
and pursuant to the reasonable requirements of the
business of the Borrower or such Material Subsidiary,
provided that such transaction is upon fair and
reasonable terms no less favorable to the Borrower or
such Material Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not
an Affiliate of the Borrower or such Material
Subsidiary.
Section 8.8 Compliance with ERISA.
The Borrower shall not, and shall not permit any
Subsidiary or any ERISA Affiliate to, (a) terminate any
Plan or withdraw from any Multiemployer Plan so as to
result in any liability to the Borrower or any of its
Subsidiaries in excess of $2,500,000, either singly or
in the aggregate, (b) enter into any "prohibited
transaction" (as defined in Section 4975 of the Code
and in Section 406 of ERISA) which results in any
liability to the Borrower or any of its Subsidiaries in
excess of $2,500,000, either singly or in the
aggregate, (c) cause any occurrence of any Reportable
Event which results in any, liability to the Borrower
or any of its Subsidiaries in excess of $2,500,000,
either singly or in the aggregate, or (d) allow or
suffer to exist any other event or condition known to
the Borrower or any of its Subsidiaries which results
in any liability to the Borrower or any of its
Subsidiaries in excess of $2,500,000, either singly or
in the aggregate, with respect to an "employee benefit
plan" (as defined in Section 3(3) of ERISA), including
a Plan.
Section 8.9 Change in Structure.
Except as expressly permitted by this Agreement,
the Borrower shall not, and shall not permit any
Material Subsidiary to, make any changes in its equity
capital structure (including in the terms of its
outstanding stock) that would reduce or impair the
consolidated equity capital of the Borrower and its
Material Subsidiaries immediately thereafter, or amend
its certificate of incorporation or by-laws in any
respect which is adverse to the interests of the
Lenders, provided that, nothing herein shall limit or
impair the right or ability of the Borrower or any of
its Subsidiaries to issue stock.
Section 8.10 Restrictions on Negative Pledges.
The Borrower shall not, and shall not permit any
Material Subsidiary to, enter into any indenture,
agreement, instrument or other arrangement (other than
the Senior Indenture) that (or modify any indenture,
agreement, instrument or other arrangement such that
it), directly or indirectly, prohibits or restrains, or
has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the
- -62-
(176)
<PAGE>
granting of Liens by the Borrower or any Material
Subsidiary of the Borrower to the Administrative Agent
for the benefit of the Lenders.
Section 8.11 Limitation on Dividend
Restrictions.
The Borrower shall not, and shall not permit any
Subsidiary to, enter into any agreement or otherwise
become subject to any arrangement (except as may be
required or imposed by any Requirement of Law in the
case of a Foreign Subsidiary) which restricts or
prohibits, in any manner whatsoever, the payment of
dividends or any similar distribution from any
Subsidiary to the Borrower or between or among the
Subsidiaries.
Section 8.12 Payments of Subordinated Debt
Securities.
If any Default or Event of Default has occurred
and is continuing or would be directly or indirectly
caused as a result thereof, the Borrower shall not, and
shall not permit any Subsidiary to, make (or give any
notice with respect thereto) any payment or prepayment
or redemption or acquisition for value of (including
without limitation, by way of depositing money or
securities with the trustee with respect thereto before
due for the purpose of paying when due), refund,
refinance or exchange of any Indebtedness (including
interest and fees) arising under the Subordinated
Indenture and the Subordinated Debt Securities;
provided that the Borrower shall at all times be
permitted to convert the Subordinated Debt Securities
into stock of the Borrower as required or permitted by
the Subordinated Indenture, and otherwise permitted
under this Agreement.
Section 8.13 Maximum Uncommitted Inventories.
The Borrower shall not permit the Uncommitted
Inventories to exceed $175,000,000.
ARTICLE IX
----------
EVENTS OF DEFAULT
-----------------
Section 9.1 Events of Default.
Any one or more of the following events shall
constitute an event of default hereunder ("Events of
Default"):
(a) Non-Payment. The Borrower shall fail to
pay (i) when due, any amount of principal of any
Advance, (ii) within three (3) days after the same
shall become due, any interest or fee payable
hereunder or pursuant to any other Loan Document
or (iii) within three (3) days after written
demand therefor from the Administrative Agent or
any Lender, any other amount payable hereunder or
pursuant to any other Loan Document; or
(b) Specific Covenants. The Borrower shall
fail to observe or perform any covenant contained
in Articles VI, VII or VIII; provided, that, with
- -63-
(177)
<PAGE>
respect to a failure to observe or perform the
covenants set forth in Sections 7.1(g), 7.1(k),
7.1(l), 7.3, or 7.6, such failure shall continue
for fifteen (15) days or more after written notice
thereof to the Borrower from the Administrative
Agent or any Lender; or
(c) Other Covenants. The Borrower shall
fail to observe or perform any covenant or
agreement contained in this Agreement or any other
Loan Document (other than those covered by Section
9.1(a) or (b)) for thirty (30) days or more after
written notice thereof has been given to the
Borrower by the Administrative Agent or the
Required Lenders; or
(d) Representation or Warranty. Any
representation, warranty, certification or
statement made by the Borrower or any Material
Subsidiary in this Agreement, any other Loan
Document or in any certificate, financial
statement or other document delivered pursuant
hereto or thereto shall prove to have been
incorrect in any material respect when made or
deemed to have been made; or
(e) Cross-Default. Without limiting the
terms of Section 9.1(n) or Section 9.1(o), the
Borrower or any of its Subsidiaries (i) shall fail
to make any payment in respect of any Debt when
due (beyond the period of grace, if any, and
whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise)
which Debt is in an aggregate principal amount of
$10,000,000 or more; or (ii) shall fail to perform
or observe any other condition or covenant, or any
other event shall occur or condition exist, under
any agreement or instrument relating to any such
Debt, and such failure shall continue after the
applicable grace or notice period, if any,
specified in the document relating thereto if the
effect of such failure, event or condition is to
cause, or to permit the holder or holders of such
Debt or beneficiary or beneficiaries of such Debt
(or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause,
such Debt to be declared to be due and payable
prior to its stated maturity or cash collateral in
respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceeding. The
Borrower or any of its Material Subsidiaries shall
(i) generally fail to pay, or admit in writing its
inability to pay, its debts as they become due,
subject to applicable grace periods, if any,
whether at stated maturity or otherwise;
(ii) commence any Insolvency Proceeding with
respect to itself; or (iii) take any action to
effectuate or authorize any of the foregoing or
the Borrower or any of its Material Subsidiaries
shall voluntarily cease to conduct its business in
the ordinary course except, in the case of
Material Subsidiaries, as expressly permitted by
the terms of Section 8.4 of this Agreement; or
(g) Involuntary Proceeding. (i) Any
involuntary Insolvency Proceeding shall be
commenced or filed against the Borrower or any of
its Material Subsidiaries, or any writ, judgment,
warrant of attachment, execution or similar
process, shall be issued or levied against all or
a substantial part of the Borrower or any of its
Subsidiaries' assets, and any such proceeding or
petition shall not be dismissed, or such writ,
judgment, warrant of attachment, execution or
similar process shall not be released, vacated or
fully bonded within sixty (60) days after
- -64-
(178)
<PAGE>
commencement, filing or levy; (ii) the Borrower or
any of its Material Subsidiaries shall admit the
material allegations of a petition against it in
any Insolvency Proceeding, or an order for relief
(or similar order under non-U.S. law) shall be
ordered in any Insolvency Proceeding; or (iii) the
Borrower or any of its Material Subsidiaries shall
acquiesce in the appointment of a receiver,
trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or
other similar Person for itself or a substantial
portion of its assets or business; or
(h) ERISA Event. Any ERISA Event shall have
occurred with respect to a Plan and, thirty (30)
days after notice thereof shall have been given to
the Borrower by the Administrative Agent or any
Lender, (i) such ERISA Event shall still exist and
(ii) the sum (determined as of the date of
occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency
of any and all other Plans with respect to which
an ERISA Event shall have occurred and then exist
(or, in the case of a Plan with respect to which
an ERISA Event described in clauses (iii) through
(vi) of the definition of ERISA Event shall have
occurred and then exist, the liability related
thereto) exceeds $2,500,000; or
(i) Withdrawal Liability. The Borrower, any
of its Subsidiaries or any ERISA Affiliate shall
have been notified by the sponsor of a
Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount
which, when aggregated with all other amounts
required to be paid to Multiemployer Plans by the
Borrower, any of its Subsidiaries or any ERISA
Affiliate as Withdrawal Liability (determined as
of the date of such notification), exceeds
$2,500,000; or
(j) Monetary Judgments. One or more non-
interlocutory judgments, non-interlocutory orders,
decrees or arbitration awards shall be entered
against the Borrower or any of its Subsidiaries
involving in the aggregate, a liability (not fully
covered by independent third-party insurance) as
to any single transaction or series of related
transactions, incidents or conditions, of
$10,000,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal
for a period of forty-five (45) days after the
entry thereof; or
(k) Non-Monetary Judgments. Any non-
monetary judgment, order or decree shall be
rendered against the Borrower or any of its
Subsidiaries which, individually or collectively
with other non-monetary judgments, orders or
decrees, does or would reasonably be expected to
have a Material Adverse Effect, and the same shall
remain unsatisfied, unvacated and unstayed pending
appeal for a period of forty-five (45) days after
the entry thereof; or
(l) Change of Control. There shall occur
any Change of Control; or
(m) Guarantor Defaults. Any of the
Guarantors shall fail in any material respect to
perform or observe any term, covenant or agreement
in the Subsidiary Guaranty and such failure shall
not be remedied within any applicable cure period
set forth therein; or the Subsidiary Guaranty
shall for any reason be partially (including with
respect to future advances) or wholly revoked or
- -65-
(179)
<PAGE>
invalidated, or otherwise cease to be in full
force and effect, or any of the Guarantors shall
contest in any manner the validity or
enforceability thereof or deny that it has any
further liability or obligation thereunder; or
(n) Senior Debt Securities. The occurrence
and continuation of any Event of Default under and
as defined in the Senior Indenture; or
(o) Subordinated Debt Securities. The
occurrence and continuation of any Event of
Default under and as defined in the Subordinated
Indenture; or
(p) Material Adverse Effect. There shall
occur a Material Adverse Effect as determined by
the Required Lenders and such condition shall
continue fifteen (15) days or more after written
notice thereof to the Borrower from the
Administrative Agent or the Required Lenders.
Section 9.2 Remedies.
If any Event of Default occurs and is continuing,
the Administrative Agent shall, at the request of, or
may, with the consent of, the Required Lenders:
(a) declare the Commitment of each Lender to
make Advances to be terminated, whereupon such
Commitments shall forthwith be terminated;
(b) declare the unpaid principal amount of
all the Notes, all interest accrued and unpaid
thereon, and all other Obligations payable
hereunder or under any other Loan Document to be
immediately due and payable, without presentment,
demand, protest or other notice of any kind, all
of which are hereby expressly waived by the
Borrower; and
(c) exercise on behalf of itself and the
Lenders all rights and remedies available to it
and the Lenders under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any
event specified in paragraph (f) or (g) of Section 9.1
above, the obligation of each Lender to make Advances
shall automatically terminate and the unpaid principal
amount of the Notes and all interest and other
Obligations as aforesaid shall automatically become due
and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby
expressly waived by the Borrower, or any further act of
the Administrative Agent or any Lender.
- -66-
(180)
<PAGE>
ARTICLE X
-----------
ADMINISTRATIVE AGENT, SYNDICATION AGENT AND
-------------------------------------------
MANAGING AGENT
--------------
Section 10.1 Authorization and Action.
Each Lender hereby appoints and authorizes the
Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this
Agreement and each other Loan Document as are delegated
to the Administrative Agent by the terms hereof and
thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly
provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement
or collection of the Notes and the Subsidiary
Guaranty), the Administrative Agent shall not be
required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting
(and shall be fully protected in so acting or
refraining from acting) upon the instructions of the
Required Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes;
provided, that the Administrative Agent shall not be
required to take any action which exposes the
Administrative Agent to personal liability or which is
contrary to this Agreement, any other Loan Document or
applicable law. The Administrative Agent agrees to
give to each Lender prompt notice of each notice given
to it by the Borrower pursuant to the terms of this
Agreement. The Syndication Agent and the Managing
Agent, in their respective capacities as such, shall
not have any duties or obligations whatsoever under
this Agreement, the Notes, the Subsidiary Guaranty or
any of the other Loan Documents.
Section 10.2 Administrative Agent's Reliance,
etc.
Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by
it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful
misconduct as determined in a final, nonappealable
judgment by a court of competent jurisdiction. Without
limitation of the generality of the foregoing, the
Administrative Agent: (i) may treat the payee of any
Note as the holder thereof until the Administrative
Agent receives and accepts an Assignment and Acceptance
entered into by the Lender who is the payee of the Note
and an Eligible Assignees as assignee as provided
herein; (ii) may consult with legal counsel (including
counsel for the Borrower), independent public
accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be
taken, in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and
shall not be responsible to any Lender for any
statements, warranties or representations (whether
written or oral) made in or in connection with this
Agreement or any other Loan Document; (iv) shall not
have any duty to ascertain or to inquire as to the
performance or observance of any of the terms,
covenants or conditions of this Agreement or any other
Loan Document on the part of the Borrower or any
Guarantor or to inspect the property (including the
books and records) of the Borrower or any Guarantor;
(v) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or
document furnished pursuant hereto; and (vi) shall
incur no liability under or in respect of this
Agreement or any other Loan Document by acting upon any
notice, consent, certificate or other instrument or
- -67-
(181)
<PAGE>
writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent
by the proper party or parties.
Section 10.3 NationsBank, FUNB, Rabobank and
Affiliates.
With respect to its Commitment, the Advances made
by it and the Note issued to it, each of NationsBank,
FUNB and Rabobank shall have the same rights and powers
under this Agreement as any other Lender and may
exercise the same as though it were not the
Administrative Agent, Syndication Agent or a Managing
Agent, as appropriate; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated,
include NationsBank, FUNB and Rabobank in their
individual capacities. NationsBank, FUNB and Rabobank
and their respective Affiliates may accept deposits
from, lend money to, act as trustee under indentures
for, and generally engage in any kind of business with,
the Borrower, the Guarantors, any of their Subsidiaries
or Affiliates and any Person who may do business with
or own securities of the Borrower, the Guarantors, or
any such Subsidiaries or Affiliates, all as if
NationsBank were not the Administrative Agent, FUNB
were not the Syndication Agent and Rabobank was not the
Managing Agent and without any duty to account therefor
to the Lenders.
Section 10.4 Lender Credit Decision.
Each Lender acknowledges that it has,
independently and without reliance upon the
Administrative Agent or any other Lender and based on
the financial statements referred to in Section 5.4 and
such other documents and information as it has deemed
appropriate, made its own credit analysis and decision
to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without
reliance upon the Administrative Agent any other Lender
and based on such documents and information as it shall
deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under
this Agreement.
Section 10.5 Indemnification.
The Lenders agree to indemnify the Administrative
Agent (to the extent not reimbursed by the Borrower),
ratably according to the respective Commitment
Percentages of each Lender from and against any and all
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising
out of this Agreement or any of the other Loan
Documents or any action taken or omitted by the
Administrative Agent under this Agreement or any of the
other Loan Documents; provided that no Lender shall be
liable to the Administrative Agent for any portion of
such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses
or disbursements to the extent that any of the
foregoing is found in a final, nonappealable judgment
by a court of competent jurisdiction to have resulted
from the Administrative Agent's gross negligence or
willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the
Administrative Agent promptly upon demand for its
Commitment Percentage of any out-of-pocket expenses
(including counsel fees) incurred by the Administrative
Agent in connection with the preparation, execution,
- -68-
(182)
<PAGE>
delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this
Agreement or any of the other Loan Documents, to the
extent that the Administrative Agent is not reimbursed
for such expenses by the Borrower.
Section 10.6 Successor Administrative Agent.
The Administrative Agent may resign at any time
by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with cause by
the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to
appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so
appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the
retiring Administrative Agent gives notice of
resignation or the Required Lenders, removal of the
retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which shall
be a Lender or a commercial bank organized or licensed
under the laws of the United States of America or of
any state thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance
of any appointment as Administrative Agent hereunder by
a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and
become vested with all the rights and duties of the
retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its
duties and obligations hereunder and under each of the
other Loan Documents. After any retiring
Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article X
shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was
Administrative Agent hereunder.
Section 10.7 Notice of Default.
The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event
of Default or Default unless the Administrative Agent
has received notice from a Lender or the Borrower or
any Guarantor referring to this Agreement, describing
such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the
Administrative Agent receives such a notice, the
Administrative Agent shall give prompt notice thereof
to the Lenders. The Administrative Agent shall take
such action with respect to any such Default or Event
of Default as shall be reasonably directed by the
Required Lenders, provided that, unless and until the
Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from
taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best
interests of the Lenders subject to the requirements of
this Agreement that certain actions be taken only with
the consent of a specified percentage of the Lenders.
Section 10.8 Administrative Agent's Fee.
The Borrower shall pay the Administrative Agent a
fee in such amounts and at such times as previously
agreed upon by the Administrative Agent and the
Borrower pursuant to the Fee Letter.
- -69-
(183)
<PAGE>
ARTICLE XI
-----------
MISCELLANEOUS
-------------
Section 11.1 Notices.
All notices and other communications provided for
hereunder shall be in writing (including telecopier,
provided, however that any telecopied notices or
communications shall be confirmed by delivery of the
manually-signed original of any such notice or
communication by first-class mail, postage prepaid,
postmarked no later than five (5) Business Days after
the date of any such telecopied notice or
communication) and mailed, or delivered, if to the
Borrower, at its address at 512 Bridge Street,
Danville, Virginia 24543, Attention: James A. Cooley,
Senior Vice President and Chief Financial Officer,
Telecopier No. (804) 791-0349; if to any Lender, at its
address for notices specified on its signature page
hereto or its notice address specified in the
Assignment and Acceptance pursuant to which it became a
Lender; if to the Administrative Agent, at its address
at NationsBank, N.A., 901 Main Street, TX1-492-14-11,
Dallas, Texas 75202, Attention: Agency Services,
Telecopier No. (214) 290-9437; or, as to each party, at
such other address as shall be designated by such party
in a written notice to the other parties. All such
notices and communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be
effective when deposited in the mails postage prepaid,
confirmed by electronic confirmation, delivered to the
telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except
that notices and communications to the Administrative
Agent pursuant to Articles II, III or X shall not be
effective until received by the Administrative Agent.
Section 11.2 No Waivers.
No failure or delay by the Administrative Agent or
any Lender in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver
thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof
or the exercise or any other right, power or privilege.
The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.3 Expenses; Indemnity.
(a) The Borrower agrees to pay on demand (i) all
reasonable out-of-pocket costs and expenses of the
Administrative Agent, including fees and disbursements
of special counsel for the Administrative Agent, in
connection with the preparation and administration of
this Agreement and the Notes, any waiver or consent
hereunder and thereunder or any amendment hereof or
thereof or any Default or alleged Default hereunder and
thereunder and (ii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the
Administrative Agent or any Lender, including
reasonable fees and disbursements of counsel (including
staff counsel), in connection with such Event of
Default and collection and other enforcement
proceedings resulting therefrom.
- -70-
(184)
<PAGE>
(b) In addition to any other indemnity provided
for herein or in any other Loan Document, the Borrower
hereby indemnifies the Administrative Agent, the
Syndication Agent, the Managing Agent and each Lender
and their respective shareholders, directors, agents,
officers, subsidiaries and affiliates (each, an
"Indemnified Party") from and against any and all
liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever
(including, without limitation, reasonable fees and
expenses of counsel) which may be imposed on, incurred
by, or asserted against any Indemnified Party in, or in
connection with the preparation for a defense of, any
litigation, proceeding or investigation or claim
instituted or conducted by any Governmental Authority
or any other Person (other than the Borrower) with
respect to any aspect of, or any transaction
contemplated by, or referred to in, or any matter
related to, this Agreement or any of the other Loan
Documents contemplated hereby, whether or not any
Indemnified Party is a party thereto, except to the
extent that any of the foregoing is found in a final,
nonappealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence
or willful misconduct of such Indemnified Party or the
violation by such Indemnified Party of any latter
regulation in the conduct of its business.
Additionally, the Borrower hereby indemnifies the
Indemnified Parties and agrees to defend and hold the
Indemnified Parties harmless from and against any and
all losses, damages (including, without limitation,
consequential damages), costs, claims, liabilities,
actions, judgments, actions, suits, disbursements,
obligations, claims, penalties, fees, injuries or
expenses of whatever kind or nature (including, without
limitation, reasonable counsel fees and costs), which
any Indemnified Party may sustain or incur in
connection with any Environmental Claim asserted
against any Indemnified Party in connection with or
relating to (i) the Borrower's or any of its
Subsidiaries, premises, including, without limitation,
any real or other property now or formerly owned,
operated, leased or used by the Borrower, any of its
Subsidiaries or any of their respective predecessors;
or (ii) the Borrower's, any of its Subsidiaries, or any
of their respective predecessors, operations, whether
such operations took place before or after the date of
this Agreement, except to the extent that any of the
foregoing is found in a final, nonappealable judgment
by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of such
Indemnified Party. The indemnification in this Section
11.3 shall survive termination of this Agreement and
the other documents executed in connection herewith as
well as the payment of all Notes.
Section 11.4 Amendments, etc.
Any provision of this Agreement, the Notes or any
other Loan Document (other than the Fee Letter, which
may be amended only in accordance with the terms
thereof) may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the
Borrower and the Required Lenders (or the
Administrative Agent with the consent of the Required
Lenders) and, if the rights or duties of the
Administrative Agent are affected thereby, by the
Administrative Agent; provided, that no such amendment
or waiver shall, unless signed by all the Lenders, (a)
increase or extend the Commitment of any Lender or
subject any Lender to any additional obligation, (b)
reduce the principal of or rate of interest on any
Advance or any fees payable hereunder, (c) postpone the
date fixed for any payment of principal of or interest
on any Advance or any fees payable hereunder, (d)
change the provisions of this Section 11.4, the
definition of "Required Lenders", or otherwise change
the percentage of Lenders required to take any action
- -71-
(185)
<PAGE>
hereunder or under the Loan Documents, (e) release the
Borrower from its Obligations, or (f) except in
connection with a disposition of the stock or assets of
a Guarantor permitted pursuant to the terms of this
Agreement (or otherwise consented to by the Required
Lenders), release all or substantially all of the
Guarantors from their obligations under the Subsidiary
Guaranty.
Section 11.5 Successors and Assigns.
(a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the
parties hereto and their respective successors and
assigns, except that the Borrower may not assign
or otherwise transfer any of its rights or
delegate any of its duties under this Agreement
and that no Lender may assign or otherwise
transfer any of its rights hereunder, except as
specifically provided herein.
(b) Each Lender may (and, so long as no
Event of Default has occurred and is continuing,
at the election of the Borrower given pursuant to
Section 3.8 any Lender shall) assign to one or
more Eligible Assignees all or a portion of its
rights and obligations under this Agreement
(including, without limitation, all or a portion
of its Commitment and the Advances owing to it),
with the consent of the Administrative Agent and
the Borrower, which consent shall not unreasonably
be withheld or delayed; provided, that (i) each
such assignment shall be of a constant, and not a
varying, percentage of all rights and obligations
of such Lender under the Advances made by such
Lender and the Commitment held by such Lender,
(ii) unless waived in writing by the
Administrative Agent and the Borrower, the amount
of the Commitment of an assigning Lender being
assigned pursuant to each such assignment
(determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall
in no event be less than $5,000,000 and shall be
an integral multiple of $1,000,000, except that in
the case of an assignment to an existing Lender
the amount of the Commitment being assigned may be
less than $5,000,000 if the assigning Lender is
assigning its entire Commitment or is retaining a
Commitment of not less than $5,000,000, and (iii)
each such assignment shall be to an Eligible
Assignee. Prior to effecting any such assignment,
the assigning Lender shall give the Administrative
Agent reasonable notice of its intent to do so,
requesting that the Administrative Agent seek the
consent of the Borrower required by this Section
11.5(b) and demonstrating that, if such consent is
obtained, the proposed assignment will otherwise
conform to the requirements of this Section
11.5(b). The Administrative Agent shall, as
promptly as is reasonably practicable after
receipt of such notice, notify such Lender whether
such consent has been obtained. If such consent
has been obtained, the parties to such assignment
shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with
any Note subject to such assignment and an
administrative fee of $3,500, no later than five
(5) Business Days prior to the effective date of
any such assignment. Upon such execution,
delivery and acceptance, from and after the
effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a
party hereto and, to the extent that rights and
obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have
the rights and obligations of a Lender hereunder
and (y) the assignor thereunder shall, to the
extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be
- -72-
(186)
<PAGE>
released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an
assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a
party hereto).
(c) The Administrative Agent shall maintain
at its address referred to in Section 11.1 a copy
of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation
of the names and addresses of the Lenders and the
Commitment of, and principal amount of the
Advances owing to, each Lender from time to time
(the "Register"). The entries in the Register
shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the
Administrative Agent, the Syndication Agent, the
Managing Agent and the Lenders may treat each
Person whose name is recorded in the Register as a
Lender hereunder for all purposes of this
Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any
reasonable time and from time to time upon
reasonable prior notice.
(d) By executing and delivering an
Assignment and Acceptance, the Lender assignor
thereunder and the assignee thereunder confirm to
and agree with each other and the other parties
hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning
Lender makes no representation or warranty and
assumes no responsibility with respect to any
statements, warranties or representations made in
or in connection with this Agreement or any of the
other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency
or value of this Agreement or any of the other
Loan Documents; (ii) such assigning Lender makes
no representation or warranty and assumes no
responsibility with respect to the financial
condition of the Borrower or any of the Guarantors
or the performance or observance by the Borrower
or any of the Guarantors of any of its
Obligations; (iii) such assignee confirms that it
has received a copy of this Agreement, together
with copies of the financial statements referred
to in Section 5.4 and such other documents and
information as it has deemed appropriate to make
its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee
will, independently and without reliance upon the
Administrative Agent, such assigning Lender or any
other Lender and based on such documents and
information as it shall deem appropriate at the
time, continue to make its own credit decisions in
taking or not taking action under, this Agreement;
(v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and
authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such
powers, under this Agreement as are delegated to
the Administrative Agent by the terms hereof,
together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their
terms all of the obligations which by the terms of
this Agreement are required to be performed by it
as a Lender.
(e) Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an
assignee representing that it is an Eligible
Assignee, together with any Note subject to such
assignment, the Administrative Agent shall, if
such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit A
hereto (or such other form as shall be acceptable
to the Administrative Agent), (i) accept such
Assignment and Acceptance, (ii) record the
- -73-
(187)
<PAGE>
information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.
Within five Business Days after its receipt of
such notice, the Borrower, at its own expense,
shall execute and deliver to the Administrative
Agent in exchange for the surrendered Note a new
Note payable to such Eligible Assignee in an
amount equal to the outstanding principal balance
of the ratable Commitment assigned to it pursuant
to such Assignment and Acceptance, and, if the
assigning Lender has retained a portion of the
Commitment hereunder, a new Note payable to the
assigning Lender in an amount equal to the ratable
portion of the Commitment retained by it
hereunder, as the case may be. Such new Note
shall be in an aggregate principal amount equal to
the aggregate Commitment of such surrendered Note,
shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be
in substantially the form of Exhibit A, hereto.
(f) Each Lender may sell participations to
one or more banks or (other entities in or to all
or a portion of its rights and obligations under
this Agreement (including, without limitation, all
or a portion of its Commitment, the Advances owing
to it and the Note held by it); provided, however,
that (i) such Lender's obligations under this
Agreement (including, without limitation, the
Commitment to the Borrower hereunder) shall remain
unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender
shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the
Administrative Agent and the other Lenders shall
continue to deal solely and directly with such
Lender in connection with such Lender's rights and
obligations under this Agreement, and (v) such
Lender shall notify the Administrative Agent of
any such sale promptly after the making thereof,
specifying the purchaser and the interest
purchased, and the Administrative Agent shall
forward a copy of such notice to the Borrower.
Notwithstanding any other provision of this
Agreement, no sale or existence of any
participation shall increase any amount payable by
the Borrower pursuant to Article III hereof.
(g) Any Lender may, in connection with any
assignment or participation or proposed assignment
or participation pursuant to this Section 11.5,
disclose to the assignee or participant or
proposed assignee or participant, any information
relating to the Borrower and the Subsidiaries
furnished to such Lender by or on behalf of the
Borrower or the Subsidiaries; provided that, prior
to any such disclosure, the assignee or
participant or proposed assignee or participant
shall agree to preserve the confidentiality of any
confidential information relating to the Borrower
and its Subsidiaries received by it from such
Lender in a writing containing substantially the
terms of Section 11.12.
(h) Notwithstanding any other provision set
forth in this Agreement which may be to the
contrary, any Lender may at any time (i) assign
all or any portion of its rights and obligations
under this Agreement (including, without
limitation, all or any portion of its Commitment,
the Advances owing to it and the Note held by it)
to any Affiliate of such Lender, subject to the
proviso of the definition of "Eligible Assignee"
(with written notice to the Borrower and the
Administrative Agent) and (ii) create a security
interest in all or any portion of its rights under
this Agreement (including, without limitation, the
- -74-
(188)
<PAGE>
Advances owing to it and the Note held by it) in
favor of any Federal Reserve Bank in accordance
with Regulation A of the Federal Reserve Board.
(i) The Administrative Agent and the
Borrower may, for all purposes of this Agreement,
treat any Lender as the holder of any Note drawn
to its order (and owner of the Advances evidenced
thereby) until written notice of assignment,
transfer or participation shall have been received
by them.
(j) If any Reference Lender assigns or
otherwise transfers its Note other than pursuant
to paragraph (h) above to any unaffiliated
institution, the Administrative Agent shall, in
consultation with the Borrower, appoint another
Lender to act as a Reference Lender hereunder;
provided that in no event shall there be more than
three (3) Reference Lenders at any given time.
Section 11.6 Right of Set-off.
Upon (i) the occurrence and during the continuance
of any Event of Default and (ii) the making of the
request or the granting of the consent specified by
Section 9.2 to authorize the Administrative Agent to
declare the Notes due and payable, each Lender is
hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to
or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement and the
other Loan Documents, whether or, not such Lender shall
have made any demand under this Agreement and although
such obligations may be contingent and unmatured. Each
Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender,
provided that the failure to give such notice shall not
affect the validity of such set-off and application.
The rights of each Lender under this Section 11.6 are
in addition to other rights and remedies (including,
without limitation, other rights; of set-off) which
such Lender may have.
Section 11.7 CONSENT TO JURISDICTION.
(a) THE BORROWER, IN RESPECT OF ITSELF AND
ITS PROPERTIES, REPRESENTS THAT IT IS SUBJECT TO
(AND HEREBY IRREVOCABLY SUBMITS TO) THE NON-
EXCLUSIVE JURISDICTION OF ANY COURT IN THE STATE
OF NORTH CAROLINA IN MECKLENBURG COUNTY, OR OF THE
UNITED STATES FOR THE WESTERN DISTRICT OF NORTH
CAROLINA, IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE NOTES, AND THE BORROWER
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT. THE BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
- -75-
(189)
<PAGE>
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORM.
(b) THE BORROWER IRREVOCABLY CONSENTS TO
PROCESS BEING SERVED IN ANY SUIT, ACTION OR
PROCEEDING OF THE NATURE REFERRED TO IN PARAGRAPH
(a) OF THIS SECTION 11.7 BY MAILING A COPY THEREOF
BY REGISTERED OR CERTIFIED AIR MAIL, POSTAGE
PREPAID, RETURN RECEIPT REQUESTED, TO THE ADDRESS
OF THE BORROWER SPECIFIED IN OR DESIGNATED
PURSUANT TO SECTION 11.1. THE BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ALL CLAIM
OF ERROR BY REASON OF ANY SUCH SERVICE AND AGREES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, THAT SAID SERVICE (A) SHALL
BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON THE BORROWER IN ANY SUCH SUIT, ACTION
OR PROCEEDING AND (B) SHALL BE TAKEN AND HELD TO
BE VALID PERSONAL SERVICE UPON AND PERSONAL
DELIVERY TO THE BORROWER.
The foregoing provisions shall not limit the right
of any Lender, the Administrative Agent or any other
party hereto to serve process in any other manner
permitted by law or limit the right of any Lender, the
Administrative Agent or other party hereto to bring any
suit, action or proceeding or to obtain execution on
any judgment rendered in any suit, action or proceeding
in any other appropriate jurisdiction or in any other
matter.
Section 11.8 VIRGINIA LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
Section 11.9 Counterparts; Effectiveness.
This Agreement may be signed in any number of
counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall
become effective when the Administrative Agent shall
have received (i) counterparts hereof signed by all
parties and (ii) the fees referred to in Section
4.1(d). In the case of the Lenders only, such
execution may be evidenced by the execution and
delivery of signature pages by facsimile transmission
to the Administrative Agent together with a letter
addressed to the Administrative Agent confirming that
the original executed signature pages will be delivered
to the Administrative Agent by a reputable overnight
courier service.
Section 11.10 WAIVER OF JURY TRIAL.
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF
THE BORROWER, THE ADMINISTRATIVE AGENT, THE SYNDICATION
- -76-
(190)
<PAGE>
AGENT, THE MANAGING AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.11 Termination of Existing Credit
Agreement.
By joining in the execution and delivery of this
Agreement, each of the Lenders who is a party to the
Existing Credit Agreement hereby irrevocably waives all
requirements for prior notice of the termination of its
respective commitments thereunder and hereby agrees
with the Borrower that the Existing Credit Agreement
shall terminate on the effective date of this Agreement
provided for in Section 11.9 and shall be of no
further force or effect thereafter (except for any
indemnification provisions thereof which shall survive
in accordance with the terms of such agreement).
Section 11.12 Confidentiality.
The Administrative Agent, the Syndication Agent,
the Managing Agent and the Lenders agree to keep
confidential (and to cause their respective affiliates,
officers, directors, employees, agents and
representatives to keep confidential) all information,
materials and documents furnished to the Administrative
Agent, the Syndication Agent, the Managing Agent or any
such Lender by or on behalf of the Borrower or any
Subsidiary (whether before or after the Closing Date)
which relates to the Borrower or any Subsidiary (the
"Information"). Notwithstanding the foregoing, the
Administrative Agent, the Syndication Agent, the
Managing Agent and each Lender shall be permitted to
disclose Information (i) to its affiliates, officers,
directors, employees, agents and representatives in
connection with its participation in any of the
transactions evidenced by this Agreement or any other
Loan Documents or the administration of this Agreement
or any other Loan Documents; (ii) to the extent
required by applicable laws and regulations or by any
subpoena or similar legal process, or requested by any
Governmental Authority; (iii) to the extent such
Information (A) becomes publicly available other than
as a result of a breach of this Agreement or any
agreement entered into pursuant to clause (iv) below,
(B) becomes available to the Administrative Agent, the
Syndication Agent, the Managing Agent or such Lender on
a non-confidential basis from a source other than the
Borrower or any Subsidiary or (C) was available to the
Administrative Agent, the Syndication Agent, the
Managing Agent or such Lender on a non-confidential
basis prior to its disclosure to the Administrative
Agent, the Syndication Agent, the Managing Agent or
such Lender by the Borrower or any Subsidiary; (iv) to
any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant
(or prospective assignee or participant) first
specifically agrees in a writing furnished to and for
the benefit of the Borrower to be bound by the terms of
this Section 11.12; or (v) to the extent that the
Borrower shall have consented in writing to such
disclosure. Nothing set forth in this Section 11.12
shall obligate the Administrative Agent, the
Syndication Agent, the Managing Agent or any Lender to
return any materials furnished by the Borrower or any
Subsidiary.
- -77-
(191)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.
"BORROWER"
DIMON INCORPORATED
/s/ James A. Cooley
By________________________________
Name: James A. Cooley
Title: Senior Vice President
and Chief Financial Officer
and
/s/ Ritchie L. Bond
By_______________________________
Name: Ritchie L. Bond
Title: Senior Vice President
and Treasurer
ADDRESS FOR NOTICES:
512 Bridge Street
P.O. Box 681
Danville, Virginia 24543
Telecopier No.: (804) 791-0415
(192)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
ADMINISTRATIVE AGENT: NATIONSBANK, N.A., as
Administrative Agent
By: /s/ William F. Sweeney
By________________________________
Name: William F. Sweeney
Title: Principal
SYNDICATION AGENT: FIRST UNION NATIONAL BANK,
as Syndication Agent
By: /s/ Susan K. Doyle
By________________________________
Name: Susan K. Doyle
Title: Senior Vice President
MANAGING AGENT: COOPERATIEVE CENTRALE
RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL," NEW YORK BRANCH,
as Managing Agent
By: /s/ Theodore W. Cox
By________________________________
Name: Theodore W. Cox
Title: Vice President
By: /s/ Ian Reece
By________________________________
Name: Ian Reece
Title: Senior Credit Officer
(193 - 195)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
"LENDERS"
COMMITMENT NATIONSBANK, N.A.
$85,000,000.00
By: /s/ William F. Sweeney
By________________________________
Name: William F. Sweeney
Title: Principal
Domestic and Eurodollar Lending
Offices
901 Main Street
TX1-492-14-11
Dallas, Texas 75202
Attn: Molly Oxford, Corporate Credit
Services
Telecopier No.: (214) 290-9437
Address for Notices
901 Main Street
TX1-492-14-11
Dallas, Texas 75202
Attn: Molly Oxford, Corporate Credit
Services
Telecopier No.: (214) 290-9437
(196)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: CRESTAR BANK
$17,500,000.00
By: /s/ C. Gray Key
By________________________________
Name: C. Gray Key
Title: Vice President
Domestic and Eurodollar Lending
Offices
1001 Semmes Avenue
Richmond, Virginia 23224
Attention: John Cary
Telecopier No.: (804) 319-1736
Address for Notices
919 East Main Street
Richmond, Virginia 23219
Attention: Gray Key
Telecopier No.: (804) 782-5413
(197)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: FIRST UNION NATIONAL BANK
$75,000,000.00
By: /s/ Susan K. Doyle
By________________________________
Name: Susan K. Doyle
Title: Senior Vice President
Domestic and Eurodollar Lending
Offices
201 South Jefferson Street (VA-7441)
Roanoke, Virginia 24011
Attention: Ms. Susan K. Doyle
Telecopier No.: (540) 561-5262
Address for Notices
First Union National Bank
201 South Jefferson Street (VA-7441)
Roanoke, Virginia 24011
Attention: Ms. Susan K. Doyle
Telecopier No.: (540) 561-5262
(198)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: COOPERATIEVE CENTRALE RAIFFEISEN-
$60,000,000.00 BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL," NEW YORK BRANCH
By: /s/ Theodore W. Cox
By________________________________
Name: Theodore W. Cox
Title: Vice President
By: /s/ Ian Reece
By________________________________
Name: Ian Reece
Title: Senior Credit Officer
Domestic and Eurodollar Lending
Offices
10 Exchange Place, 16th Floor
Jersey City, New Jersey 07302
Attention: Swati Wadnerkar
Telecopier No.: (201) 499-5326
Address for Notices
245 Park Avenue
New York, New York 10167
Attention: Corporate Services Department
Telecopier No.: (212) 818-0233
With a copy to:
1201 West Peachtree Street,
Suite 3450
Atlanta, Georgia 30309
Attention: Mr. Theodore Cox
Telecopier No.: (404) 877-9150
(199)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: WACHOVIA BANK, N.A.
$15,000,000.00
By: /s/ Keith A. Sherman
By________________________________
Name: Keith A. Sherman
Title: Senior Vice President
Domestic and Eurodollar Lending
Offices
NC-37202
P.O. Box 37202
Winston Salem, North Carolina 27150
Attention: Mr. Greg Asbelle
Telecopier No.: (336) 732-3257
Address for Notices
227 Fayetteville Street Mall
P.O. Box 27886
Raleigh, North Carolina 27601
Attention: Mr. Keith A. Sherman
Telecopier No.: (919) 755-7806
(200)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: ABN AMRO BANK N.V. NEW YORK
BRANCH
$25,000,000.00
By: /s/ Ronald C. Spurga
By________________________________
Name: Ronald C. Spurga
Title: Vice President
By: /s/ Shameem Quadree
By________________________________
Name: Shameem Quadree
Title: Assistant Vice President
Domestic and Eurodollar Lending
Offices
500 Park Avenue
Commodities Department
New York, New York 10022
Attention: Mr. Shameem Quadree
Telecopier No.: (212) 446-4164
Address for Notices
500 Park Avenue
Commodities Department
New York, New York 10022
Attention: Mr. Christopher Plumb
Telecopier No.: (212) 688-5815
(201)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: DEUTSCHE BANK AG - AMSTERDAM
BRANCH
$15,000,000.00
By: /s/ Guy R. Fransen/
/s/ H.J. van der Heiden
By________________________________
Name: Guy R. Fransen/
H.J. van der Heiden
Title: Relationship Manager/Director
Domestic and Eurodollar Lending Offices
Herengracht 450-454
1017 CA Amsterdam
Attention: Mr. Boris Brummelhuis
Telecopier No.: 31-20-555-4552
Address for Notices
Herengracht 450-454
1017 CA Amsterdam
Attention: Mr. Guy R. Fransen
Telecopier No.: 31-20-555-4552
(202)
<PAGE>
[Signature Page to Credit Agreement dated as of June
29, 1999 among DIMON Incorporated, as Borrower,
NationsBank, N.A., as Administrative Agent, First Union
National Bank, as Syndication Agent, and Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
International," New York Branch, as Managing Agent, and
the lenders listed on the signature pages thereof, as
Lenders]
COMMITMENT: NATEXIS BANQUE
$7,500,000.00
By: /s/ Stephen A. Jendras/Alain Loisy
By________________________________
Name: Stephen A. Jendras/Alain Loisy
Title: Vice President/Senior Vice President
Domestic and Eurodollar Lending Offices
645 Fifth Avenue, 20th Floor
Commodities Department
New York, New York 10022
Attention: Mr. Terry Bethel
Telecopier: (212) 872-5045
Address for Notices
645 Fifth Avenue, 20th Floor
Commodities Department
New York, New York 10022
Attention: Mr. Stephen A. Jendras
Telecopier: (212) 872-5045
(203)
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of
September 1, 1999 (the "Amendment"), is by and among DIMON
INCORPORATED, a Virginia corporation (the "Borrower"), the
several lenders identified on the signature pages hereto (the
"Lenders"), BANK OF AMERICA, N.A., formerly NationsBank, N.A.,
as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), FIRST UNION NATIONAL BANK ("FUNB"),
as syndication agent for the Lenders (in such capacity, the
"Syndication Agent"), and COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. and "RABOBANK INTERNATIONAL" ("Rabobank"),
as managing agent for the Lenders (in such capacity, the
"Managing Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement dated as of June
29, 1999 (the "Credit Agreement") among the Borrower, the
Lenders, the Administrative Agent, the Syndication Agent and
the Managing Agent, the Lenders have extended commitments to
make certain credit facilities available to the Borrower;
WHEREAS, the parties hereto have agreed to enter into
this Amendment in order to effect certain amendments to the
Credit Agreement.
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereby agree as follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. Unless other-
wise defined herein or the context otherwise requires,
the following terms used in this Amendment, including its
preamble and recitals, have the following meanings:
"Amendment Effective Date" is
defined in Subpart 3.1.
SUBPART 1.2. Other Definitions. Unless otherwise
defined herein or the context otherwise requires, terms
used in this Amendment, including its preamble and
recitals, have the meanings provided in the Credit
Agreement (as amended hereby).
- -1-
(204)
<PAGE>
PART II
AMENDMENTS TO CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the
Amendment Effective Date, the Credit Agreement is hereby
amended in accordance with this Part II.
SUBPART 2.1. Amendments to Section 6.5. Section 6.5 of
the Credit Agreement is hereby amended in its entirety to read
as follows:
Section 6.5 Consolidated Total Senior Debt to
Borrowing Base Ratio.
Maintain a Consolidated Total Senior Debt to Borrowing
Base Ratio, calculated on the last day of each fiscal quarter
ending on the dates set forth below, of not more than the
ratio set forth opposite such date:
<TABLE>
<CAPTION>
Calendar Year March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1999 1.25 to 1.00 1.20 to 1.00 1.20 to 1.00
2000 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00 1.10 to 1.00
thereafter 1.00 to 1.00
</TABLE>
PART III
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1. Amendment Effective Date. This
Amendment shall be and become effective as of the date
hereof (the "Amendment Effective Date") when all of the
conditions set forth in this Subpart 3.1 shall have been
satisfied.
SUBPART 3.1.1. Execution of Counterparts
of Amendment. The Administrative Agent shall
have received counterparts of this Amendment,
which collectively shall have been duly
executed on behalf of the Borrower and the
Required Lenders.
SUBPART 3.1.2. Other Documents. The
Administrative Agent shall have received such other
documentation as the Administrative Agent may
reasonably request in connection with the foregoing,
all in form reasonably satisfactory to the
Administrative Agent.
PART IV
MISCELLANEOUS
SUBPART 4.1. Cross-References. References in this
Amendment to any Part or Subpart are, unless otherwise
specified, to such Part or Subpart of this Amendment.
- -2-
(205)
<PAGE>
SUBPART 4.2. Instrument Pursuant to Credit
Agreement. This Amendment is a Credit Document executed
pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and
provisions of the Credit Agreement.
SUBPART 4.3. References in Other Credit Documents.
At such time as this Amendment shall become effective
pursuant to the terms of Subpart 3.1, all references in
the Credit Documents to the "Credit Agreement" shall be
deemed to refer to the Credit Agreement as amended by
this Amendment.
SUBPART 4.4. Survival. Except as expressly modified and
amended in this Amendment, all of the terms and provisions and
conditions of each of the Credit Documents shall remain
unchanged.
SUBPART 4.5. Counterparts. This Amendment may be
executed by the parties hereto in several counterparts,
each of which shall be deemed to be an original and all
of which shall constitute together but one and the same
agreement.
SUBPART 4.6. Governing Law. THIS AMENDMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SUBPART 4.7. Successors and Assigns. This
Amendment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns.
- -3-
(206)
<PAGE>
Each of the parties hereto has caused a counterpart of this
Amendment to be duly executed and delivered as of the date
first above written.
BORROWER: DIMON INCORPORATED
/s/ James A. Cooley
By________________________________
Name: James A. Cooley
Title: Senior Vice President and
Chief Financial Officer
and
/s/ Ritchie L. Bond
By_______________________________
Name: Ritchie L. Bond
Title: Senior Vice President and
Treasurer
- -4-
(207)
<PAGE>
LENDERS: BANK OF AMERICA, N.A., formerly
NationsBank, individually as a Lender and
in its capacity as Administrative Agent
By: /s/ William F. Sweeney
_______________________________________
Name: William F. Sweeney
Title: Principal
FIRST UNION NATIONAL BANK,
individually as a Lender and in its
capacity as Syndication Agent
By: /s/ Susan K. Doyle
Name: Susan K. Doyle
_______________________________________
Title: Senior Vice President
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL," NEW YORK BRANCH,
individually as a Lender and in its
capacity as Managing Agent
By: /s/ Theodore w. Cox
Name: Theodore w. Cox
_______________________________________
Title: Vice President
By: /s/ Ian Reece
Name: Ian Reece
Title: Senior Credit Officer
CRESTAR BANK
By: /s/ Brad H. Booker
Name: Brad H. Booker
_______________________________________
Title: Senior Vice President
- -5-
(208)
<PAGE>
WACHOVIA BANK, N.A.
By: /s/ K. A. Sherman
Name: K. A. Sherman
_______________________________________
Title: Senior Vice President
ABN AMRO BANK N.V. NEW YORK BRANCH
By:
Name:
_______________________________________
Title:
By:
Name:
_______________________________________
Title:
DEUTSCHE BANK AG - AMSTERDAM BRANCH
By: /s/ Guy R. Fransen and
H. J. van der Heiden
_______________________________________
Name: Guy R. Fransen and
H. J. van der Heiden
Title: Relationship Manager and
Director
NATEXIS BANQUE
By:
_______________________________________
Name:
Title:
- -6-
(209)
<PAGE>
DIMON INCORPORATED
DIRECTORS' STOCK PLAN
(210)
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................1
1.01. Affiliate...........................................1
1.02. Agreement...........................................1
1.03. Board...............................................1
1.04. Code................................................1
1.05. Committee...........................................1
1.06. Common Stock........................................1
1.07. Company.............................................1
1.08. Deferred Compensation Plan..........................1
1.09. Deferred Stock Benefit..............................2
1.10. Fair Market Value...................................2
1.11. Option..............................................2
1.12. Participant.........................................2
1.13. Performance Share...................................2
1.14. Plan................................................2
1.15. Stock Award.........................................3
ARTICLE II PURPOSES............................................3
ARTICLE III ADMINISTRATION.....................................3
ARTICLE IV ELIGIBILITY.........................................4
ARTICLE V STOCK SUBJECT TO PLAN................................4
5.01. Shares Issued.......................................4
5.02. Aggregate Limit.....................................4
5.03. Reallocation of Shares..............................4
ARTICLE VI OPTIONS.............................................5
6.01. Award...............................................5
6.02. Option Price........................................5
6.03. Maximum Option Period...............................5
6.04. Nontransferability..................................5
6.05. Transferable Options................................6
6.06. Status..............................................6
- - i -
(211)
<PAGE>
6.07. Exercise............................................6
6.08. Payment.............................................6
6.09. Shareholder Rights..................................7
ARTICLE VII STOCK AWARDS.......................................7
7.01. Award...............................................7
7.02. Vesting.............................................7
7.03. Status..............................................7
7.04. Shareholder Rights..................................8
7.05. Deferred Stock Benefits.............................8
ARTICLE VIII PERFORMANCE SHARE AWARDS..........................8
8.01. Award...............................................8
8.02. Earning the Award...................................8
8.03. Payment.............................................9
8.04. Shareholder Rights..................................9
8.05. Nontransferability..................................9
8.06. Status..............................................9
ARTICLE IX ADJUSTMENT UPON CHANGE IN COMMON STOCK..............9
ARTICLE X COMPLIANCE WITH LAW AND APPROVAL OF
REGULATORY BODIES........................................10
ARTICLE XI GENERAL PROVISIONS.................................11
11.01. Effect on Service.................................11
11.02. Unfunded Plan.....................................11
11.03. Rules of Construction.............................11
ARTICLE XII AMENDMENT.........................................11
ARTICLE XIII DURATION OF PLAN.................................12
ARTICLE XIV EFFECTIVE DATE OF PLAN............................12
- - ii -
(212)
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
1.01. Affiliate
---------
Affiliate means any "subsidiary" or "parent"
corporation (within the meaning of Section 424 of the
Code) of the Corporation.
1.02. Agreement
---------
Agreement means a written agreement (including any
amendment or supplement thereto) between the Company and
a Participant specifying the terms and conditions of an
Option, Performance Share award or Stock Award granted to
such Participant.
1.03. Board
-----
Board means the Board of Directors of the Company.
1.04. Code
----
Code means the Internal Revenue Code of 1986, and
any amendments thereto.
1.05. Committee
---------
Committee means the Executive Committee of the
Board.
1.06. Common Stock
------------
Common Stock means the common stock of the Company.
1.07. Company
-------
Company means DIMON Incorporated.
1.08. Deferred Compensation Plan
--------------------------
Deferred Compensation Plan means a plan or
arrangement maintained by the Company or an Affiliate of
the Company, including a plan or arrangement adopted
after the adoption of this Plan, that provides for the
deferral of income or benefits for or on behalf of one or
more Participants. A plan that is qualified under
Section 401(a) of the Code is not a Deferred Compensation
Plan.
- -2-
(213)
<PAGE>
1.09. Deferred Stock Benefit
----------------------
Deferred Stock Benefit means a benefit payable under
a Deferred Compensation Plan to the extent that such
benefit is settled in Common Stock.
1.10. Fair Market Value
-----------------
Fair Market Value means, on any given date, the
closing price of a share of Common Stock as reported on
the New York Stock Exchange composite tape on such date,
or if the Common Stock was not traded on the New York
Stock Exchange on such day, then on the next preceding
day that the Common Stock was traded on such exchange,
all as reported by such source as the Committee may
select.
1.11. Option
------
Option means a stock option that entitles the holder
to purchase from the Company a stated number of shares of
Common Stock at the price set forth in an Agreement.
1.12. Participant
-----------
Participant means a member of the Board who is not
an employee of the Company or an Affiliate of the Company
or a person who provides services to the Company or an
Affiliate of the Company in a capacity other than as an
employee, who is selected to receive an Option,
Performance Shares, a Stock Award, or a combination
thereof.
1.13. Performance Share
-----------------
Performance Share means an award stated with
reference to a specified number of shares of Common Stock
that entitles the holder to receive a payment for each
specified share equal to the Fair Market Value on the
date of payment. In the discretion of Committee, subject
to the approval of the Board, a Performance Share award
may include the right to receive an additional payment
for the accumulated dividends that would have been paid
on each specified share as if such dividends had been
invested in Common Stock on the dividend payment date,
from the date of grant to the date of payment.
1.14. Plan
----
Plan means the DIMON Incorporated Directors' Stock
Plan.
- -2-
(214)
<PAGE>
1.15. Stock Award
-----------
Stock Award means Common Stock awarded to a
Participant under Article VII, including Common Stock
issued in settlement of a Deferred Stock Benefit and
Common Stock issued in settlement of a Performance Share
award.
ARTICLE II
----------
PURPOSES
--------
The Plan is intended to assist the Company in
recruiting and retaining as members of the Board and as
other service providers individuals with ability and
initiative by enabling such persons to participate in the
future success of the Company and to associate their
interests with those of the Company and its shareholders.
The Plan is intended to permit the grant of Options,
Performance Shares and Stock Awards. The proceeds
received by the Company from the sale of Common Stock
pursuant to this Plan shall be used for general corporate
purposes.
ARTICLE III
-----------
ADMINISTRATION
--------------
The Plan shall be administered by the Committee;
provided, however, that all awards under the Plan shall
be subject to the final approval of the Board. Subject
to the preceding sentence, the Committee shall have
authority to grant Options, Performance Shares and Stock
Awards upon such terms (not inconsistent with the
provisions of this Plan), as the Committee may consider
appropriate. Such terms may include conditions (in
addition to those contained in this Plan), on the
exercisability of all or any part of an Option or on the
vesting or transferability or both of Stock Awards and
Performance Shares. Notwithstanding any such conditions,
the Committee may, in its discretion (but subject to the
approval of the Board), accelerate the time at which any
Option may be exercised, the time at which any Stock
Award may become nonforfeitable, exercisable, or both or
the time at which Performance Shares may be earned,
settled, or both. In addition, the Committee shall have
complete authority to interpret all provisions of this
Plan; to prescribe the form of Agreements; to adopt,
amend, and rescind rules and regulations pertaining to
the administration of the Plan; and to make all other
determinations necessary or advisable for the
administration of this Plan. The express grant in the
Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the
Committee (other than the requirement that all awards
under the Plan must be approved by the Board). Any
decision made, or action taken, by the Committee or the
Board in connection with the administration of this Plan
- -3-
(215)
<PAGE>
shall be final and conclusive. No member of the
Committee or the Board shall be liable for any act done
in good faith with respect to this Plan or any Agreement,
Option, Performance Share or Stock Award. All expenses
of administering this Plan shall be borne by the Company.
ARTICLE IV
----------
ELIGIBILITY
-----------
Any member of the Board who is not an employee of
the Company or an Affiliate (including a corporation that
becomes an Affiliate after the adoption of this Plan) and
any person who is providing services to the Company or an
Affiliate in a capacity other than as an employee, is
eligible to participate in this Plan if the Committee,
with the approval of the Board, determines that such
person has contributed significantly or can be expected
to contribute significantly to the profits or growth of
the Company or an Affiliate.
ARTICLE V
---------
STOCK SUBJECT TO PLAN
---------------------
5.01. Shares Issued.
--------------
Upon the award of shares of Common Stock pursuant to
a Stock Award the Company may issue shares of Common
Stock from its authorized but unissued Common Stock.
Upon the exercise of any Option the Company may deliver
to the Participant (or the Participant's broker if the
Participant so directs), shares of Common Stock from its
authorized but unissued Common Stock.
5.02. Aggregate Limit.
----------------
The maximum aggregate number of shares of Common
Stock that may be issued under this Plan pursuant to the
exercise of Options and the grant of Stock Awards is
70,000 shares. The maximum aggregate number of shares
that may be issued under this Plan shall be subject to
adjustment as provided in Article IX.
5.03. Reallocation of Shares.
-----------------------
If an Option is terminated, in whole or in part, for
any reason other than its exercise, the number of shares
of Common Stock allocated to the Option or portion
thereof may be reallocated to other Options, Performance
Shares and Stock Awards to be granted under this Plan.
If a Performance Share award is terminated, in whole or
- -4-
(216)
<PAGE>
in part, prior to being earned, the number of shares of
Common Stock allocated to the Performance Share award may
be reallocated to other Options, Performance Shares and
Stock Awards to be granted under this Plan. If a Stock
Award is forfeited, in whole or in part, the number of
shares of Common Stock allocated to the Stock Award or
portion thereof may be reallocated to other Options,
Performance Shares and Stock Awards to be granted under
this Plan.
ARTICLE VI
----------
OPTIONS
-------
6.01. Award.
------
In accordance with the provisions of Article IV, the
Committee, subject to the approval of the Board, will
designate each individual to whom an Option is to be
granted. In accordance with the provisions of Article IV
and upon such terms as may be prescribed by the Committee
and approved by the Board, the Committee may designate
one or more individuals to whom an Option will be granted
in lieu of cash or other compensation otherwise payable
to such individual or individuals by the Company or an
Affiliate.
6.02. Option Price.
-------------
The price per share for Common Stock purchased on
the exercise of an Option shall be determined by the
Committee on the date of grant, subject to the approval
of the Board, but shall not be less than the Fair Market
Value on the date the Option is granted.
6.03. Maximum Option Period
---------------------
The maximum period in which an Option may be
exercised shall be determined by the Committee on the
date of grant, subject to the approval of the Board,
except that no Option shall be exercisable after the
expiration of ten years from the date such Option was
granted.
6.04. Nontransferability.
-------------------
Except as provided in Section 6.05, each Option
granted under this Plan shall be nontransferable except
by will or by the laws of descent and distribution.
Except as provided in Section 6.05, during the lifetime
of the Participant to whom the Option is granted, the
Option may be exercised only by the Participant. No
right or interest of a Participant in any Option shall be
- -5-
(217)
<PAGE>
liable for, or subject to, any lien, obligation, or
liability of such Participant.
6.05. Transferable Options.
---------------------
Section 6.04 to the contrary notwithstanding, if the
Agreement provides, an Option may be transferred by a
Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family
members or a partnership in which such family members are
the only partners, on such terms and conditions as may be
permitted under Securities Exchange Commission Rule 16b-3
as in effect from time to time. The holder of an Option
transferred pursuant to this section shall be bound by
the same terms and conditions that governed the Option
during the period that it was held by the Participant;
provided, however, that such transferee may not transfer
the Option except by will or the laws of descent and
distribution.
6.06. Status.
-------
In the event that the terms of any Option provide
that it may be exercised only during a Participant's
service on the Board or only during the Participant's
continued service to the Company or an Affiliate or
within a specified period of time thereafter, the
Committee may decide to what extent leaves of absence for
governmental or military service, illness, temporary
disability, or other reasons shall not be deemed
interruptions of continuous service.
6.07. Exercise.
---------
Subject to the provisions of this Plan and the
applicable Agreement, an Option may be exercised in whole
at any time or in part from time to time at such times
and in compliance with such requirements as the
Committee, with the approval of the Board, shall
determine. An Option granted under this Plan may be
exercised with respect to any number of whole shares less
than the full number for which the Option could be
exercised. A partial exercise of an Option shall not
affect the right to exercise the Option from time to time
in accordance with this Plan and the applicable Agreement
with respect to the remaining shares subject to the
Option.
6.08. Payment.
--------
Unless otherwise provided by the Agreement, payment
of the Option price shall be made in cash or a cash
equivalent. If the Agreement provides, payment of all or
part of the Option price may be made by surrendering
shares of Common Stock to the Company. If Common Stock
is used to pay all or part of the Option price, the sum
of the cash and cash equivalent and the Fair Market Value
(determined as of the day preceding the date of exercise)
- -6-
(218)
<PAGE>
of the shares surrendered must not be less than the
Option price of the shares for which the Option is being
exercised.
6.09. Shareholder Rights.
-------------------
No Participant shall have any rights as a
shareholder with respect to shares subject to his Option
until the date of exercise of such Option.
ARTICLE VII
-----------
STOCK AWARDS
------------
7.01. Award.
------
In accordance with the provisions of Article IV, the
Committee, subject to the approval of the Board, will
designate each individual to whom a Stock Award is to be
made and the number of shares of Common Stock subject to
the Stock Award. In accordance with the provisions of
Article IV and upon such terms as may be prescribed by
the Committee and approved by the Board, the Committee
may designate one or more individuals to whom a Stock
Award will be granted in lieu of cash or other
compensation otherwise payable to such individual or
individuals by the Company or an Affiliate.
7.02. Vesting.
--------
The Committee on the date of the award, subject to
the approval of the Board, may prescribe that a
Participant's rights in a Stock Award shall be
forfeitable or otherwise restricted for a period of time
or subject to such conditions as may be set forth in the
Agreement.
7.03. Status.
-------
In the event that the terms of any Stock Award
provide that shares may become transferable and
nonforfeitable thereunder only after completion of a
specified period of service on the Board or only after
completion of a specified period of service to the
Company or an Affiliate, the Committee may decide in each
case to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous
service.
- -7-
(219)
<PAGE>
7.04. Shareholder Rights
------------------
Prior to their forfeiture (in accordance with the
applicable Agreement and while the shares of Common Stock
granted pursuant to the Stock Award may be forfeited or
are nontransferable), a Participant will have all rights
of a shareholder with respect to a Stock Award, including
the right to receive dividends and vote the shares;
provided, however, that during such period (i) a
Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of shares of Common
Stock granted pursuant to a Stock Award, and (ii) the
Company shall retain custody of the certificates
evidencing shares of Common Stock granted pursuant to a
Stock Award, and (iii) the Participant will deliver to
the Company a stock power, endorsed in blank, with
respect to each Stock Award. The limitations set forth
in the preceding sentence shall not apply after the
shares of Common Stock granted under the Stock Award are
transferable and are no longer forfeitable.
7.05. Deferred Stock Benefits
-----------------------
A Stock Award may be granted in satisfaction, in
whole or in part, of a Deferred Stock Benefit payable to
or on behalf of a Participant. The terms of such Stock
Award shall be governed by the Deferred Compensation Plan
under which the Deferred Stock Benefit is payable.
ARTICLE VIII
------------
PERFORMANCE SHARE AWARDS
------------------------
8.01. Award
-----
In accordance with the provisions of Article IV, the
Committee, subject to the approval of the Board, will
designate each individual to whom an award of Performance
shares is to be made and the number of shares of Common
Stock subject to the Performance Share award. In
accordance with the provisions of Article IV and upon
such terms as may be prescribed by the Committee and
approved by the Board, the Committee may designate one or
more individuals to whom Performance Shares will be
awarded in lieu of cash or other compensation otherwise
payable to such individual or individuals by the Company
or an Affiliate.
8.02. Earning the Award
-----------------
The Committee, on the date of the grant of an award,
subject to the approval of the Board, may prescribe that
the Performance Shares, or portion thereof, will be
- -8-
(220)
<PAGE>
earned, and the Participant will be entitled to receive
payment pursuant to the award of Performance Shares, only
upon the satisfaction of such criteria as may be
prescribed by the Committee and approved by the Board.
8.03. Payment
-------
In the discretion of the Committee, subject to the
approval of the Board, the amount payable when an award
of Performance Shares is earned may be settled in cash,
by the issuance of a Stock Award or a combination of cash
and a Stock Award. A fractional share shall not be
deliverable when an award of Performance Shares is
earned, but a cash payment will be made in lieu thereof.
8.04. Shareholder Rights
------------------
No Participant shall, as a result of receiving an
award of Performance Shares, have any rights as a
shareholder until and to the extent that the award of
Performance Shares is earned and settled by the issuance
of a Stock Award. After an award of Performance Shares
is earned, if settled completely or partially by a Stock
Award, a Participant will have all the rights of a
shareholder with respect to the Common Stock covered by
the Stock Award.
8.05. Nontransferability
------------------
Performance Shares granted under this Plan shall be
nontransferable except by will or by the laws of descent
and distribution. No right or interest of a Participant
in any Performance Shares shall be liable for, or subject
to, any lien, obligation, or liability of such
Participant.
8.06. Status
------
In the event that the terms of any Performance Share
award provide that no payment will be made unless the
Participant completes a specified period of service on
the Board or a specified period of service to the Company
or an Affiliate, the Committee may decide in each case to
what extent leaves of absence for governmental or
military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous
employment.
ARTICLE IX
----------
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The maximum number of shares as to which Options,
Performance Shares and Stock Awards may be granted under
this Plan and the terms of outstanding Options,
Performance Shares and Stock Awards shall be adjusted as
- -9-
(221)
<PAGE>
the Board shall determine to be equitably required in the
event that (a) the Company (i) effects one or more stock
dividends, stock split-ups, subdivisions or
consolidations of shares or (ii) engages in a transaction
to which Section 424 of the Code applies or (b) there
occurs any other event which, in the judgment of the
Board necessitates such action. Any determination made
under this Article IX by the Board shall be final and
conclusive.
The issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or
services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company
convertible into such shares or other securities, shall
not affect, and no adjustment by reason thereof shall be
made with respect to, the maximum number of shares as to
which Options, Performance Shares and Stock Awards may be
granted or the terms of outstanding Options, Performance
Shares and Stock Awards.
ARTICLE X
---------
COMPLIANCE WITH LAW ANDAPPROVAL OF REGULATORY BODIES
----------------------------------------------------
No Option shall be exercisable, no Common Stock
shall be issued, no certificates for shares of Common
Stock shall be delivered, and no payment shall be made
under this Plan except in compliance with all applicable
federal and state laws and regulations (including,
without limitation, withholding tax requirements), any
listing agreement to which the Company is a party, and
the rules of all domestic stock exchanges on which the
Company's shares may be listed. The Company shall have
the right to rely on an opinion of its counsel as to such
compliance. Any share certificate issued to evidence
Common Stock when an Option is exercised or a Stock Award
is granted may bear such legends and statements as the
Committee may deem advisable to assure compliance with
federal and state laws and regulations. No Option shall
be exercisable, no Common Stock shall be issued, no
certificate for shares shall be delivered, and no payment
shall be made under this Plan until the Company has
obtained such consent or approval as the Committee may
deem advisable from regulatory bodies having jurisdiction
over such matters.
- -10-
(222)
<PAGE>
ARTICLE XI
----------
GENERAL PROVISIONS
------------------
11.01. Effect on Service.
------------------
Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan
(or any part thereof), shall confer upon any individual
any right to continue in the service of the Company or an
Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the service of any
individual at any time with or without assigning a reason
therefor.
11.02. Unfunded Plan.
--------------
The Plan, insofar as it provides for grants, shall
be unfunded, and the Company shall not be required to
segregate any assets that may at any time be represented
by grants under this Plan. Any liability of the Company
to any person with respect to any grant under this Plan
shall be based solely upon any contractual obligations
that may be created pursuant to this Plan. No such
obligation of the Company shall be deemed to be secured
by any pledge of, or other encumbrance on, any property
of the Company.
11.03. Rules of Construction.
----------------------
Headings are given to the articles and sections of
this Plan solely as a convenience to facilitate
reference. The reference to any statute, regulation, or
other provision of law shall be construed to refer to any
amendment to or successor of such provision of law.
ARTICLE XII
-----------
AMENDMENT
---------
The Board may amend or terminate this Plan from time
to time; provided, however, that no amendment may become
effective until shareholder approval is obtained if (i)
the amendment increases the aggregate number of shares of
Common Stock that may be issued under the Plan (other
than an adjustment pursuant to Article IX) or (ii) the
amendment changes the class of individuals eligible to
become Participants. No amendment shall, without a
Participant's consent, adversely affect any rights of
such Participant under any Option, Performance Share or
Stock Award outstanding at the time such amendment is
made.
- -11-
(223)
<PAGE>
ARTICLE XIII
------------
DURATION OF PLAN
----------------
No Option, Performance Share or Stock Award may be
granted under this Plan after November 30, 2008.
Options, Performance Shares and Stock Awards granted
before that date shall remain valid in accordance with
their terms.
ARTICLE XIV
-----------
EFFECTIVE DATE OF PLAN
----------------------
Options may be granted under this Plan upon its
adoption by the Board, provided that no Option shall be
effective or exercisable unless this Plan is approved by
a majority of the votes cast by the Company's
shareholders, voting either in person or by proxy, at a
duly held shareholders' meeting at which a quorum is
present. Performance Shares and Stock Awards may be
granted under this Plan upon its approval by the
Company's shareholders in accordance with the preceding
sentence.
- -12-
(224)
<PAGE>
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT, effective May 24, 1999
(the "Agreement"), is entered into by and among DIMON
Incorporated, a Virginia corporation ("DIMON"), Tabex
(Private) Limited, formerly known as Dibrell Brothers
Zimbabwe (Private) Limited, organized under the laws of
Zimbabwe ("Tabex") and each of their respective
predecessors, successors and assigns, and Folium Inc.,
organized under the laws of the British Virgin Islands
("Folium"), Tabacalera, S.A., organized under the laws
of the Kingdom of Spain ("Tabacalera"), Blair
Investments (Private) Limited (formerly known as Tabex
(Private) Limited), organized under the laws of
Zimbabwe ("Blair"), and Messrs. Anthony C.B. Taberer,
Paul A.B. Taberer and Charles M.B. Taberer, each an
individual, and each of their respective predecessors,
successors and assigns (collectively referred to as the
"Defendants").
WHEREAS, DIMON entered into a Stock Purchase
Agreement, dated as of February 14, 1997 (as amended,
- -1-
(225)
<PAGE>
the "Stock Purchase Agreement"), with Intabex Holdings
Worldwide, S.A., a Luxembourg corporation ("Intabex"),
Folium, Leaf Management Investments Limited ("LMI") and
Tabacalera (the "Shareholders"), pursuant to which
DIMON purchased all of the outstanding capital stock of
Intabex on April 1, 1997. The Stock Purchase Agreement
was amended, and the parties entered into agreements
regarding, among other things, certain "Specified
Stocks" of tobacco, pursuant to an Agreement and
Amendment No. 1 to Stock Purchase Agreement, dated as
of August 14, 1997, between DIMON and the Shareholders.
WHEREAS, Tabex (formerly known as Dibrell Brothers
Zimbabwe (Private) Limited), organized under the laws
of Zimbabwe, and Blair (each under their former names
referred to above) are parties to an Asset Purchase
Agreement, dated as of February 14, 1997 (the "Asset
Purchase Agreement"), pursuant to which Tabex purchased
certain assets of Blair on April 1, 1997.
WHEREAS, DIMON, Intabex, the Shareholders, Tabex
(by its predecessor) and Blair (by its predecessor) are
parties to a Coordinating Agreement, dated as of
February 14, 1997, pursuant to which the parties agreed
upon certain matters (the "Coordinating Agreement").
WHEREAS, DIMON International Tabak S.A. (formerly
known as Intabex S.A. (Zug)) ("DIMON International"), a
wholly-owned subsidiary of DIMON, and Mr. Anthony C.B.
Taberer are parties to a Consulting Agreement, dated as
of April 1, 1997 (the "Consulting Agreement").
WHEREAS, DIMON International and Mr. Paul A.B.
Taberer are parties to an Employment Agreement, dated
as of April 1, 1994 (the "Employment Agreement").
WHEREAS, DIMON International and Folium are
parties to two Non-Competition Agreements, dated as of
April 1, 1997, providing for certain limits, as
described in those Agreements, on the ability of Folium
and certain other parties to compete with Intabex in
the leaf tobacco business.
WHEREAS, in a series of letters described in the
list annexed hereto as Exhibit A, DIMON asserted
numerous claims against the Shareholders under the
Stock Purchase Agreement and Asset Purchase Agreement
(the "Claim Letters").
WHEREAS, on September 22, 1998, DIMON and Tabex
(by its predecessor Dibrell) filed an action in the
United States District Court for the Southern District
of New York (the "Court") captioned DIMON Inc. v.
Folium Inc. et al., 98 Civ. 6732 (LAK) (the "Action")
seeking recovery against the Defendants and LMI. DIMON
- -2-
(226)
<PAGE>
subsequently filed an Amended Complaint, dated October
20, 1998, and a Second Amended Complaint, dated
December 28, 1998 in the Action. Although the
Defendants have not yet been required to file an Answer
in the Action, they deny DIMON's allegations and deny
that they are liable to DIMON.
WHEREAS, Blair subsequently commenced an action
against Tabex in the High Court of Zimbabwe captioned
Blair Investments (Private) Limited (formerly Tabex
(Private) Limited) and Tabex (Private) Limited
(formerly Dibrell Brothers (Zimbabwe) (Private)
Limited) (the "Zimbabwe Action"). Although Tabex has
not been required to answer Blair's action, Tabex
denies Blair's allegations and denies that Blair is
entitled to any relief requested in that action.
WHEREAS, LMI was liquidated and dissolved pursuant
to British Virgin Islands law in June 1998.
WHEREAS, DIMON and the Defendants now desire to
settle their disputes relating to DIMON's claims
amicably on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises
and other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the
parties to this Agreement agree as follows:
1. Definitions. Capitalized terms used in
this Agreement but not otherwise defined shall have
the meanings set forth in the Stock Purchase Agreement
or the Asset Purchase Agreement, as the context
requires.
2. Releases and Indemnities. The
following releases and indemnities shall be effective
immediately and irrevocably upon the receipt by the
parties of the settlement consideration as provided in
paragraph 3 hereof.
a. Release by DIMON and Tabex. Except as
set forth in subparagraphs 2(a)(i)
- -3-
(227)
<PAGE>
through (iii), below, and as necessary
to enforce the terms and provisions of
this Agreement, DIMON and Tabex, for
themselves and their subsidiaries,
successors, and assigns, completely
release, acquit and forever discharge
each of the Defendants, LMI, the
liquidator of LMI and their respective
present and former officers, directors,
employees, agents, professional advisors
and Affiliates, from any and all claims,
suits, demands, debts, causes of action
and damages whatsoever, whether at
common law, in equity, (including, but
not limited to, all claims arising under
the Stock Purchase Agreement, the Asset
Purchase Agreement, the Coordinating
Agreement, the Employment Agreement, the
Consulting Agreement or any related
document or agreement), or pursuant to
any statutory or regulatory right of
action (including, without limitation,
claims or rights of action under the
securities laws of the United States,
any State or territory of the United
States or any foreign country), which
DIMON ever had, now has, or may in the
future have for, upon, or by reason of
any matter, cause or thing whatsoever
whether for known or unknown, disclosed
or undisclosed, accrued or unaccrued,
pled or unpled, foreseen or unforeseen,
past, present or future harm, damages,
losses, debts, pecuniary or nonpecuniary
damages, or injury from the beginning of
time to the effective date of this
Agreement, including but not limited to
any and all claims arising directly or
indirectly from or in any way related to
(i) DIMON's acquisition of Intabex's
- -4-
(228)
<PAGE>
capital stock or Tabex's acquisition of
certain Blair assets, (ii) any of the
claims or factual circumstances alleged
in the Action or (iii) the matters
encompassed by the Claim Letters.
This release shall not, however, in any
way affect, restrict or abridge:
(i) (A) the rights of DIMON and its
officers, directors, employees,
agents and Affiliates to obtain
from Folium indemnity on the terms
and conditions of Article XII of
the Stock Purchase Agreement with
respect to any and all Losses
suffered, incurred or sustained by
any of them or to which any of them
becomes subject, resulting from,
arising out of or relating to any
of the matters referred to in
Section 12.01(a)(ii) of the Stock
Purchase Agreement or any
misrepresentation or breach of
warranty contained in Sections
2.01(b), (c), (d) (but only insofar
as such Section 2.01(d) relates to
the capital stock or other equity
interests of the Subsidiaries),
(i), (l) or (n) of the Stock
Purchase Agreement, which
representations and warranties
shall survive for the periods set
forth in Section 11.01 of the Stock
Purchase Agreement and with respect
to which Folium shall be fully
liable notwithstanding the
provisions of Section 12.01(a) of
the Stock Purchase Agreement with
regard to the several liability of
Folium, (B) the rights of Tabex and
its officers, directors, employees,
agents and Affiliates to obtain
indemnity from Blair pursuant to
Article X of the Asset Purchase
- -5-
(229)
<PAGE>
Agreement with respect to any and
all Losses suffered, incurred or
sustained by any of them or to
which any of them becomes subject,
resulting from, arising out of or
relating to any of the matters set
forth in Section 10.1(a)(i) of the
Asset Purchase Agreement or any
misrepresentation or breach of
warranty contained in Sections 2.2,
2.5, 2.8 and 2.16 of the Asset
Purchase Agreement, which
representations and warranties
shall survive for the periods set
forth in Section 9.15 of the Asset
Purchase Agreement, and (C) any
rights of DIMON with respect to the
representations and warranties of
Folium contained in the fourth or
fifth sentences of Section 2.02(a),
and Sections 2.02(b) and (i) of the
Stock Purchase Agreement, provided
that the foregoing provisions of
this paragraph 2(a)(i) are subject
to the following limitations: (V)
if the factual circumstances
relating to any alleged claim for
indemnity with respect to any
matter, representation or warranty
identified in paragraph 2(a) were
the subject of any specific claims
or allegations made by DIMON in any
of the Claim Letters or in the
Action, then such matters are
barred by the foregoing Release and
may not be the subject of claims;
(W) DIMON's right of set-off
against the remaining Set-Off
Debentures (or any cash, Specified
Investments and Purchaser Common
Stock held in escrow pursuant to
Section 12.05(d) of the Stock
Purchase Agreement), shall be
limited in accordance with
- -6-
(230)
<PAGE>
paragraph 3(a)(ii) hereof,
otherwise shall be governed by
Article XII of the Stock Purchase
Agreement; (X) with respect to any
claim for indemnity under the Stock
Purchase Agreement, but not the
Asset Purchase Agreement, the Loss
Threshold described in Section
12.01(c)(i) of the Stock Purchase
Agreement shall be deemed to have
been met; (Y) any liability
whatsoever of Folium and Blair to
indemnify DIMON and Tabex, whether
under this paragraph 2(c),
paragraph 2(d) or otherwise, shall
be limited as follows: with
respect to claims made during the
period from the effective date of
this Agreement until April 1, 2001
any such liability shall be no
greater than a total amount of $10
million and with respect to claims
made thereafter any such liability
shall be no greater than a total
amount of $5 million plus amounts
then claimed or demanded but, in
any event, no greater than $10
million; and (Z) DIMON shall have
no continuing rights against
Tabacalera in any event;
(ii) the rights of DIMON International
to enforce its rights against
Folium and Folium Group (as defined
in the Non-Competition Agreements)
under the Non-Competition
Agreements with respect to any
claim discovered or arising after
the date of this Agreement; or
(iii) the rights of DIMON
International to enforce its rights
against Anthony C. B. Taberer with
- -7-
(231)
<PAGE>
respect to Section 11 of the
Consulting Agreement with respect
to any claim discovered or arising
after the date of this Agreement.
b. Release by Defendants. Except as set
forth in subparagraphs 2(b)(i) through
(iii) below, and as necessary to enforce
the terms of this Agreement, each of the
Defendants, for itself and its
successors and assigns, completely
releases, acquits and forever discharges
DIMON and Tabex and their respective
present and former officers, directors,
agents, professional advisors, employees
and Affiliates from any and all claims,
suits, demands, debts, causes of action
and damages whatsoever, whether at
common law, in equity (including, but
not limited to, all claims arising under
the Stock Purchase Agreement, the Asset
Purchase Agreement, the Coordinating
Agreement, the Employment Agreement, the
Consulting Agreement and any related
document or agreement) or pursuant to
any statutory or regulatory right of
action (including, without limitation,
claims or rights of action under the
securities laws of the United States,
any State or territory of the United
States or of any foreign country) which
any of the Defendants ever had, now has,
or may in the future have for, upon, or
by reason of any matter, cause or thing
whatsoever whether for known or unknown,
accrued or unaccrued, pled or unpled,
foreseen or unforeseen, past, present or
future harm, damages, losses, debts,
pecuniary or nonpecuniary damages or
injury from the beginning of time to the
- -8-
(232)
<PAGE>
effective date of this Agreement,
including, but not limited to, any and
all claims arising directly or
indirectly from or in any way related to
(i) DIMON's acquisition of Intabex's
capital stock or Tabex's acquisition of
certain Blair (formerly Tabex) assets;
(ii) DIMON's performance with respect to
the Specified Stocks; (iii) any of the
claims or factual circumstances alleged
in the Action; (iv) the matters
encompassed by the Claim Letters; or (v)
the Zimbabwe Action.
This release shall not in any way
affect, restrict or abridge:
(i) the rights of Folium and Tabacalera with respect
to the proceeds of the COISA litigation as set forth
in 5.5(b) of the Stock Purchase Agreement;
(ii) the rights of Folium, Tabacalera and their
officers, directors, employees, agents and Affiliates
to obtain indemnity from DIMON on the terms and
conditions of Article XII of the Stock Purchase
Agreement with respect to any and all Losses suffered,
incurred or sustained by any of them or to which any of
them becomes subject, resulting from, arising out of or
relating to any misrepresentations or breach of
warranty contained in Section 3.02 or 3.10 of the Stock
Purchase Agreement, which representations and
warranties shall survive for the periods set forth in
Section 11.01 of the Stock Purchase Agreement; and
(iii) the rights of Blair and its officers,
- -9-
(233)
<PAGE>
directors, employees, agents and Affiliates to obtain
indemnity from Tabex on the terms and conditions of
Article X of the Asset Purchase Agreement with respect
to any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject,
resulting from, arising out of or relating to any
misrepresentations or breach of warranty contained in
Section 3.2 or 3.7 of the Asset Purchase Agreement,
which representations and warranties shall survive for
the periods set forth in Section 9.15 of the Asset
Purchase Agreement.
d. Representations.
(i) DIMON and Tabex represent that as of the date of
this Agreement none of the individuals listed on
Exhibit B hereto has actual knowledge of any Loss by
DIMON or Tabex arising under any of the provisions of
the Stock Purchase Agreement, the Asset Purchase
Agreement or the other Agreements referred to in
paragraph 2(a)(i) through (iii) hereof, and has no
actual knowledge of the assertion of a claim by a third
party that could give rise to a Loss under those same
referenced provisions, other than those claims
previously made by DIMON in the Claim Letters or the
Action.
(ii) The Defendants represent that as of the date
of the date of this Agreement none of the individuals
listed on Exhibit B hereto has any actual knowledge of
any Loss by Defendants arising under any of the
provisions of the Stock Purchase Agreement or the Asset
- -10-
(234)
<PAGE>
Purchase Agreement referred to in paragraphs 2(b)(ii)
through (iii) hereof, and has no actual knowledge of
the assertion of a claim by a third party that could
give rise to a Loss under the same referenced
provisions.
d. Indemnities. Folium shall
indemnify and hold DIMON harmless
against: (i) any and all losses
incurred by DIMON as a result of the
assertion of any claims by LMI, the
liquidator of LMI, or any assignee of
LMI against DIMON that are within the
scope of the subject matter of the
release provided by the Defendants
herein; and (ii) any commissions paid by
DIMON to Kortem, Ozegener or Tezol with
respect to the Turkish Tobaccos (as
defined in Section 3(b)(iii)
("Contingent Commissions")), provided
that DIMON shall not be entitled to
indemnification for any Contingent
Commission unless, prior to paying such
commission, DIMON notifies Folium and
Paul A. B. Taberer of the receipt of a
demand for such payment and provides
Paul A. B. Taberer with a period of
ninety days thereafter to dispute that
any such payment is owing and to resolve
such dispute with the party demanding
the Contingent Commission. With respect
to the indemnity provided pursuant to
paragraph 2(d)(ii) hereof, if after such
nine-day period any dispute remains
unresolved, DIMON shall be entitled,
upon Notice to Folium and Paul A. B.
Taberer, to pay any such Contingent
Commission and se-off the full amount of
such payment against the Set-Off
Debentures. The existence of this
indemnity, however, shall not in any way
affect the timing of the release of the
Set-Off Debentures. With respect to the
- -11-
(235)
<PAGE>
payment of any Contingent Commission by
DIMON under the circumstances set forth
above, DIMON shall assign to Folium any
and all of its rights against the party
claiming such Contingent Commission.
3. Settlement Consideration and Conditions
to Releases. In consideration of the foregoing
releases and the settlements provided for in this
Agreement, the parties agree as follows:
a. Obligations of Defendants. The
Defendants shall:
(i)Deliver to DIMON for immediate
cancellation Set-Off Debentures
having an aggregate principal amount
of US$50 million. The certificates
representing such Set-Off Debentures
shall be endorsed in blank and shall
be transferred to DIMON free and
clear of any mortgage, pledge, lien,
charge or encumbrance. On or after
the date of this Agreement, the
Defendants shall not be entitled to
any further interest payments with
respect to the Set-Off Debentures
cancelled pursuant to this paragraph
3(a)(i).
(ii) Deliver to DIMON for exchange
Set-Off Debentures having an
aggregate principal amount of US$30
million. DIMON shall immediately
issue new certificates representing
such Debentures free of any legend
referring to any right of set-off,
and DIMON shall have no further
right of set-off with respect to
such debentures. The remaining Set-
Off Debentures issued to Folium with
- -12-
(236)
<PAGE>
an aggregate principal amount of
US$10 million shall continue to be
subject to DIMON's right of set-off
pursuant to Section 12.05 of the
Stock Purchase Agreement on the
terms and conditions of Article 12
of the Stock Purchase Agreement and
paragraph 2 of this Agreement,
except that Section 12.05(e) shall
be amended to provide that on the
fourth anniversary of the Closing
Date, any Set-Off Debentures, cash,
Specified Investments and Purchaser
Common Stock held in escrow in
excess of $35 million plus amounts
then claimed or demanded by
Purchaser pursuant to Section 12.01
shall be released from the
restrictions of Section 12.05 and
any escrow, and that on the fifth
anniversary of the Closing Date any
Set-Off Debentures, cash, Specified
Investments and Purchaser Common
Stock held in escrow in excess of
amounts then claimed or demanded by
Purchaser pursuant to Section 12.01
shall be released from the
restrictions of Section 12.05 and
any escrow.
(iii) Within two business days after
the effective date of this
Agreement, Blair shall file a Notice
of Withdrawal with the High Court of
Zimbabwe withdrawing the Zimbabwe
Action.
(iv) Folium shall obtain and provide
to DIMON an undertaking from the
liquidator of LMI stating that LMI
has been dissolved and that the
liquidator will not seek to revive
or consent to the revival of LMI for
any purpose, including for the
purpose of bringing or assigning any
- -13-
(237)
<PAGE>
claim against DIMON.
b. Obligations of DIMON. DIMON shall:
(i) Pay to Anthony C.B. Taberer by
wire transfer of immediately
available funds an amount equal to
US$967,000. Upon receipt by Anthony
C.B. Taberer of such payment, the
Consulting Agreement shall terminate
without further liability of either
party thereunder, provided, that the
provisions of Section 11,
"Confidential Information," of the
Consulting Agreement shall survive
such termination.
(ii) Reinstate Paul A.B. Taberer to
active employment effective
simultaneously with the
effectiveness of the Releases in a
position and upon terms and
conditions to be mutually agreed
upon by Paul A.B. Taberer and DIMON.
Such employment shall be in
accordance with the terms and
conditions of the Employment
Agreement or with any written
amendment to the Employment
Agreement.
(iii) Purchase from Folium 1,475,634
kilos of Turkish 93AG tobacco at
US$2.80 per kilo representing the
remaining unsold Specified Stocks
(the "Turkish Tobacco"). In
consideration for the Turkish
Tobacco and in full settlement of
all of the obligations of the
parties to one another with respect
to the Specified Stocks (except as
provided in the remainder of this
subsection (iii)), DIMON shall pay
to Folium US$5,014,734.00 by wire
transfer of immediately available
- -14-
(238)
<PAGE>
funds. Folium shall deliver to
DIMON a duly executed bill of sale
and all other documents or
instruments necessary to convey
title to the Turkish Tobacco to
DIMON free and clear of any
mortgage, pledge, lien, charge,
encumbrance or commission. DIMON
shall retain an additional $5,466.51
that would be payable to Folium
under this subparagraph as a reserve
against potential commissions
payable on demand by Kortem on pre-
closing sales of certain Specified
Stocks. If Kortem has not demanded
payment of this amount by January 1,
2000, however, DIMON shall remit the
$5,466.51 to Folium. Unless
otherwise agreed to the contrary in
this Agreement, DIMON shall be
responsible for any and all costs,
including but not limited to
commissions, warehousing and freight
charges with respect to the Turkish
Tobacco after the Closing. In
addition, DIMON has sold on Folium's
behalf 47,796 kilos of Turkish 93AG
tobacco to CNTIEC at a total price
of US$191,184.00, for which payment
has not yet been received. DIMON
shall use its commercially
reasonable best efforts to collect
the full amount of such purchase
price on Folium's behalf and shall
promptly remit to Folium all sale
proceeds actually received by it,
net of freight and direct selling
costs (presently estimated to result
in net sale proceeds of
US$172,916.37) within three business
days of receipt thereof by DIMON.
- -15-
(239)
<PAGE>
c. Obligations of Defendants and DIMON.
Within two business days after the
effective date of this Agreement, DIMON
and the Defendants shall cause to be
filed with the Court a Stipulation in the
form annexed hereto as Exhibit C to be
entered as an Order by the Court: (1)
dismissing all claims in the action with
prejudice and (2) releasing to Folium all
payments of interest on the Convertible
Debentures that previously were deposited
into the Court during the pendency of the
Action.
d. Closing. Within two business days after
the date that the Court enters the
Stipulation referred to in paragraph (c)
as an Order and the Zimbabwe Action has
been fully and finally withdrawn, the
parties shall exchange the remaining
consideration (except for CNTIEC sale
proceeds and the $5,466.51 commission
reserve) provided for in paragraphs 3(a)
and (b) hereof. Immediately upon
exchange of such consideration, the
Releases, undertakings and indemnities,
undertakings and covenants herein shall
become effective. If any party fails to
transfer the consideration provided for
in paragraph 3(a) and (b) in a timely
fashion in accordance with this
paragraph, that party shall pay interest
at the United States prime rate on any
unpaid balance from the date such
consideration was required to be
delivered through the date such
consideration is actually received by the
party entitled to it.
4. Covenants.
a. Third Party Claims. Except with respect
to the actions set forth on Exhibit D
- -16-
(240)
<PAGE>
hereto, DIMON and Tabex for themselves
and their respective subsidiaries,
successors and assigns hereby covenant
that each of them will commence no action
or proceeding nor bring any claim in any
action or proceeding against any former
professional advisor of Intabex or Blair,
including but not limited to any of the
member firms of the Ernst & Young
international organization, CS First
Boston, or any other accountant,
investment banker or professional service
provider to Intabex or the Defendants
(hereinafter the "Professional Advisors")
relating to (i) DIMON's acquisition of
Intabex's capital stock or Tabex's
acquisition of certain Blair assets, (ii)
any of the claims or factual
circumstances alleged in the Action; or
(iii) the matters encompassed by the
Claim Letters. In the event a
Professional Advisor commences an action
or proceeding or brings any claim in any
action or proceeding against DIMON or
Tabex or their respective subsidiaries,
successors and assigns relating to the
matters identified in the immediately
preceding sentence, then this covenant
shall terminate as to that Professional
Advisor.
b. Res Judicata. The Defendants for
themselves and their respective
successors and assigns hereby covenant
that in any action or proceeding brought
by DIMON with respect to any claim
preserved by paragraphs 2(a)(i) through
(iii) of this Agreement, they shall not
assert that any such claim is barred by
the principles of res judicata or
otherwise is barred as a result of the
dismissal of the Action. In the event
- -17-
(241)
<PAGE>
that any court nevertheless dismisses any
action or claim brought by DIMON with
respect to any claim preserved by
paragraphs 2(a)(i) through (iii) of this
Agreement on the ground of res judicata,
the Defendants hereby consent to the
arbitration of any such claim before a
single arbitrator to be conducted in New
York, New York under the Commercial Rules
of the American Arbitration Association,
consistent with paragraph 10(a) of this
Agreement.
c. Further Assurances. Each of the
parties to this Agreement shall take any
and all actions reasonably necessary to
ensure compliance with and effectuation
of the terms and conditions of this
Settlement.
b. Return of Documents. Within 60 days
after the Effective Date, or at such
further time as may be agreed upon by
counsel for the parties, each party and
its counsel and experts shall return to
the producing party or destroy (at the
non-producing party's option) all
documents produced by the producing party
during discovery and all copies thereof.
Each non-producing party, or its counsel,
shall provide written notice to the
producing party certifying that those
documents have been returned or
destroyed. The two immediately foregoing
sentences shall not apply to:
(i) copies of documents produced
that either were annexed as exhibits
to papers filed in Court in the
Action or marked as deposition
exhibits to be bound with the
transcripts of such depositions,
which may be maintained by the
parties, but which shall be subject
to the terms of that Stipulation and
Protective Order between DIMON,
- -18-
(242)
<PAGE>
Defendants and LMI dated March 15,
1999, as amended April 15, 1999 (the
"Protective Order"), except
paragraph 14 thereof;
(ii) documents and all copies thereof
obtained from non-parties pursuant
to subpoenas which may be maintained
by the parties, but which shall be
subject to the terms of the
Protective Order, except paragraph
14 thereof;
(iii) transcripts and videotapes of
any non-party depositions which may
be maintained by the parties but
which shall be subject to the terms
of the Protective Order except
paragraph 14 thereof; and
(iv) Originals and/or copies of the
materials produced by Blair to DIMON
relating to the tobacco business of
Blair's predecessor, Tabex. To the
extent that any such materials
contain information pertaining to
any non-tobacco business of Blair's
predecessors or Affiliates, however,
the use of such information shall be
subject to the provisions of the
Protective Order, except paragraph
14 thereof.
c. Confidential Discovery Material; Press
Release. Except as set forth in
paragraph 4(c) hereof, the parties shall
comply with the terms of the Protective
Order with respect to Confidential
Discovery Material, as defined therein.
DIMON and the Defendants shall provide
each other with copies of any press
releases to be issued by any of them in
connection with this Agreement not later
than one business day before release.
- -19-
(243)
<PAGE>
5. No Admission of Liability. Entering into
and carrying out this Agreement is not, and shall not
be construed as, or deemed to be evidence of, an
admission by or against any party of any fault,
wrongdoing or liability or an admission or concession
by the parties that their claims or defenses were
advanced in bad faith or otherwise lacked merit.
Subject to the foregoing and in the interest of
reaching an amicable settlement, effective upon the
closing, DIMON withdraws any allegations of fraud
against the Defendants in the Action.
6. Fees and Expenses. All parties shall pay
their own attorneys' fees, costs, expert fees or any
other expenses incurred during, or in preparing for,
the Action and in negotiating and preparing this
Agreement.
7. Notices. Any and all notices, requests,
consents, directives or communications by any party
relating to this Agreement intended for any other
party shall be in writing, shall be given personally,
telecopied, sent by postage prepaid certified or
registered mail, return receipt requested, or
guaranteed overnight delivery carrier, and shall be
deemed delivered on the earlier of (a) the date
received or (b) the date two business days after
deposit with a guaranteed overnight delivery carrier,
and shall be addressed as follows:
If to DIMON or Tabex:
DIMON Incorporated
512 Bridge Street
Danville, Virginia 24543-0681
Attention: Mr. Brian J. Harker
Mr. James A. Cooley
- -20-
(244)
<PAGE>
with a copy to
Hunton & Williams
951 East Byrd Street
Richmond, Virginia, 23219
Attention: Mr. Thurston R. Moore
Mr. Robert F. Brooks
If to Folium:
Maitland & Co.
35 rue la Boetie
Paris, France 75008
Attention: Mr. Steven Georgala
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Mr. Charles W. Gerdts, III
If to Tabacalera:
Tabacalera S.A.
Alcala 47
28014 Madrid, Spain
Attention: Mr. Calixto Rios
with a copy to:
Whitman, Breed, Abbot & Morgan, LLP
200 Park Avenue
New York, NY 10166-0005
Attention: Mr. Berge Setrakian
If to Blair:
Winterton, Holmes & Hill
7 Beverly Place
Selous Avenue
Harare, Zimbabwe
Attention: Mr. Alwyn Pichanick
Mr. Ray Passaportis
- -21-
(245)
<PAGE>
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Mr. Charles W. Gerdts, III
If to Anthony C.B. Taberer:
Anthony C. B. Taberer
Avontuur Estate
Old Stellenbosch Road
Cape Province, South Africa
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Mr. Charles W. Gerdts, III
If to Paul A.B. Taberer:
Paul A.B. Taberer
New Place
The Ridges
Finchampstead
Berkshire RG403TA
UK
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Mr. Charles W. Gerdts, III
If to Charles M.B. Taberer:
Charles M.B. Taberer
10A Spurrier Road
New Ardbennie
Harare, Zimbabwe
- -22-
(246)
<PAGE>
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, NY 10103
Attention: Mr. Charles W. Gerdts, III
Any party may, from time to time, change the
address to which such written notice, request, consent,
directive or communications are to be mailed, by giving
the other parties ten days' prior written notice of the
changed address in the manner hereinabove provided.
8. Entire Agreement; Captions. This Agreement
constitutes the entire agreement between the parties
and may not be amended except by a writing signed by
the parties to be bound thereby. The recitals and
section and subsection captions used in this Agreement
have been inserted for convenience of reference only
and to not define or limit the provisions hereof.
9. Counterparts. This Agreement may be
executed in one or more counterparts, each of which
will be deemed an original and all of which together
shall constitute one and the same instrument.
10. Governing Law and Submission to Jurisdiction.
a. Governing Law. This Agreement shall be
governed by, and construed and enforced
in accordance with, the laws of the State
of New York applicable to a contract
executed and performed in such state.
b. Consent to Jurisdiction; Venue.
(i) DIMON, Tabex and the Defendants (the
"Consenting Parties") consent to submit
to the exclusive jurisdiction of the
United States District Court for the
Southern District of New York or, in the
event (but only in the event) such court
does not have subject matter
jurisdiction, of the courts of the State
- -23-
(247)
<PAGE>
of New York sitting in the County of New
York for any actions, suits or
proceedings arising out of this
Agreement. Each of the Consenting
Parties agrees not to commence any
action, suit or proceeding arising out of
this Agreement except in such courts and
further agrees that service of any
process, summons, notice or document by
U.S. registered mail to the address of
the party set forth above shall be
effective service of process for any
action, suit or proceeding brought
against them in any such court. Each of
the Consenting Parties unconditionally
waives any objection to the laying of
venue of any action, suit or proceeding
arising out of this Agreement in such
courts, and waives and agrees not to
plead or claim in any such court that any
such action, suit or proceeding brought
in any such court has been brought in an
inconvenient forum.
b. Service of Process. DIMON, Tabex,
Blair, Folium and Tabacalera each hereby
irrevocably designates, appoints and
empowers CT Corporation System, at 1633
Broadway, New York, New York 10019, or
such other address where such
representative office may be located in
New York City, and its successors and
assigns, as its true and lawful agent for
service of process to receive and accept
on its behalf service of process in any
actions, suits or proceedings arising out
of this Agreement. Each of Anthony C. B.
Taberer, Paul A. B. Taberer and Charles
M. B. Taberer hereby irrevocably
designates, appoints and empowers
Maitland & Co., 5th Floor, 44-48 Dover
Street, London W1X 3RF, as his true and
- -24-
(248)
<PAGE>
lawful agent for service of process to
receive and accept service of process on
his behalf in any actions, suits or
proceedings to enforce this Agreement.
DIMON, Tabex and each of the Defendants
agrees that the failure of such process
agent to give notice of any service of
process to it or him shall not impair or
affect the validity of service upon such
agent or any judgment based thereron.
DIMON, Tabex and the Defendants each
shall be responsible for all fees and
expenses of such agent for its own
account.
c. Waiver of Jury Trial. EACH PARTY
HERETO IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT
OF THIS AGREEMENT OR THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT OF THIS AGREEMENT.
d. Fees and Expenses. In any action,
suit or proceeding brought to enforce
this Agreement, the prevailing party or
parties shall be entitled to receive from
the non-prevailing party or parties its
or their fees and expenses, including the
reasonable fees and expenses of counsel,
incurred in prosecuting such action, suit
or proceeding. The parties expressly
agree that any action brought by any
party relating to any claims not released
by this Agreement shall not be considered
an action brought to enforce this
Agreement or otherwise be subject to this
paragraph 10.
11. Successors and Assigns. This Agreement
- -25-
(249)
<PAGE>
shall be binding on, and inure to the benefit of, the
parties hereto and their respective successors and
assigns.
12. Co-Drafters Stipulation. DIMON and the
Defendants agree that they shall be deemed co-drafters
in the event of any judicial interpretation or
construction of the terms of this Agreement. As a
result, no contra proferentum presumption shall apply
to this Agreement. To the contrary, the release and
discharge language shall be given the broadest
possible interpretation favorable to DIMON and the
Defendants, as applicable.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of May 24, 1999.
Seen & Agreed:
DIMON INCORPORATED
By: /s/ Brian J. Harker
_____________________
Name: Brian J. Harker
Title: President & CEO
Seen & Agreed:
TABEX (PRIVATE) LIMITED
formerly known as DIBRELL BROTHERS
ZIMBABWE (PRIVATE) LIMITED
By: /s/ Iain A. Bell
_____________________
Name: Iain A. Bell
Title: Finance and Administrative Director
Seen & Agreed:
FOLIUM INC.
By: /s/ J. Herholdt
_____________________
Name: J. Herholdt
Title: Attorney to Folium
- -26-
(250)
<PAGE>
Seen & Agreed:
TABACALERA S.A.
By: /s/ Richard F. Markert
_____________________
Name: Richard F. Markert
Title: With authority from Tabacalera S.A.
Seen & Agreed:
BLAIR INVESTMENTS (PRIVATE) LIMITED
By: /s/ Charles Taberer
_____________________
Name: Charles Taberer
Title: Managing Director
Seen & Agreed:
/s/ Anthony C. B. Taberer
_____________________
Anthony C.B. Taberer
Seen & Agreed:
/s/ Paul A. B. Taberer
______________________
Paul A.B. Taberer
Seen & Agreed:
/s/ Charles M.B. Taberer
________________________
Charles M.B. Taberer
- -27-
(251)
<PAGE>
<TABLE>
<CAPTION>
Exhibit 21
----------
SUBSIDIARIES OF REGISTRANT (at June 30, 1999)
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED
IN WHICH -----------------------------
NAME ORGANIZED BY REGISTRANT BY AFFILIATE
==============================================================================================
<S> <C> <C> <C>
DIMON International Tabak B.V. (A) The Netherlands 100.00%
Intabex Netherlands B.V. (A) The Netherlands 100.00%
Olima Holdings AG (A) Switzerland 100.00% (B)
DIMON Do Brasil Tabacos Ltda. (A) Brazil 100.00% (C)
DIMON Tanzania Ltd. (A) Tanzania 100.00% (C)
Contentnea, Inc. (A) Delaware 100.00%
Kin-Farm, Inc. (A) North Carolina 100.00% (D)
DIMON International Tabak AG (S.A. Ltd.) (A) Switzerland 100.00% (E)
(A) Included in the Consolidated Financial Statements
(B) Owned by DIMON International, Tabak B.V.
(C) Owned by Intabex Netherlands B.V.
(D) Owned by Contentnea, Inc.
(E) Owned by Olima Holdings AG
</TABLE>
- -252-
<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.'s 33-93172, 33-91364, 33-
93162, 33-93174, 33-93170 and 33-93168) of DIMON Incorporated of our
report dated September 27, 1999 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 27, 1999
- -253-
<PAGE>
Exhibit 23.2
------------
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-
33267) of DIMON Incorporated of our report dated September 27, 1999
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 Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 27, 1999
- -254-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 21,451
<SECURITIES> 0
<RECEIVABLES> 295,593
<ALLOWANCES> 3,800
<INVENTORY> 440,679
<CURRENT-ASSETS> 922,500
<PP&E> 408,891
<DEPRECIATION> (109,145)
<TOTAL-ASSETS> 1,471,290
<CURRENT-LIABILITIES> 478,898
<BONDS> 531,508
<COMMON> 182,143
0
0
<OTHER-SE> 214,396
<TOTAL-LIABILITY-AND-EQUITY> 1,471,290
<SALES> 1,815,223
<TOTAL-REVENUES> 1,815,223
<CGS> 1,657,984
<TOTAL-COSTS> 1,657,984
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 954
<INTEREST-EXPENSE> 66,123
<INCOME-PRETAX> (37,289)
<INCOME-TAX> (8,923)
<INCOME-CONTINUING> (28,378)
<DISCONTINUED> 22,912
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,466)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
