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EXHIBIT 10.33
LOAN AGREEMENT
This Loan Agreement dated as of October 12, 1999, between Star
Scientific, Inc., a Delaware corporation ("the "Borrower"), and Xxxxx &
Xxxxxxxxxx Tobacco Corporation, a Delaware corporation (the "Lender").
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Affiliate" shall have the meaning ascribed to it in Section 4.01(l)
hereof.
"Barns" means the specially fabricated tobacco curing barns utilized by
Borrower to reduce the nitrosamine levels in tobacco.
"Benefit Commitments" shall have the meaning ascribed to it in Section
4.01(f) hereof.
"Business Day" shall mean any day other than a Saturday, Sunday, or
public or Lender holiday or the equivalent for Lenders generally under the laws
of the State of Virginia.
"Collateral" shall have the meaning ascribed to it in Section 7.01.
"Collateral Documents" shall mean the Security Agreement and all
related financing statements.
"Debt" shall mean (A) indebtedness for borrowed money or for the
deferred purchase price of property or services, (B) obligations as lessee under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (C) obligations under direct
or indirect guaranties in respect of, and obligations (contingent or otherwise)
to purchase or otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds referred to in
clause (A) or (B) above, (D) liabilities incurred in respect of Benefit
Commitments in excess of plan assets under Pension Plans.
"Event of Default" shall have the meaning ascribed to it in Section
6.01 hereof.
"First Advance" shall mean the first advance by the Lender under the
Loan.
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"GAAP" shall mean generally accepted accounting principals,
consistently applied.
"Loan Agreement" shall mean this Agreement.
"Loan" shall mean the term loan in the aggregate amount of $22,000,000,
but evidenced by two separate credit facilities, one in the amount of
$13,200,000 ("Credit Facility A") and the other in the amount of $8,800,000
("Credit Facility "B") from Lender to Borrower as provided for and subject to
the terms and conditions contained in this Loan Agreement, evidenced by Note A
and Note B respectively, and secured by the Collateral Documents.
"Loan Documents" shall mean the Loan Agreement, Note A, Note B, and the
Collateral Documents.
"Master Agreement" shall mean an agreement of like date between Lender
and Borrower relating to, inter alia, the purchase of low-TSNA tobacco from
Borrower by Lender [***].
"Note A" shall mean the promissory note dated as of the date hereof
executed by the Borrower payable to the Lender in the principal amount of
$13,200,000, in the form attached hereto as Exhibit A.
"Note B" shall mean the promissory note dated as of the date hereof
executed by the Borrower payable to the Lender in the principal amount of
$8,800,000, in the form attached hereto as Exhibit B.
"Notes" shall mean Note A and Note B.
"Obligations" means the obligation of the Borrower: (A) to pay the
principal of and interest on Note A and Note B (but only to the extent funded)
in accordance with the terms thereof and to satisfy all of its other liabilities
to the Lender arising under the Loan Documents, whether now existing or
hereafter incurred, matured or unmatured, direct or contingent, including any
extensions, modifications, renewals thereof and substitutions therefor; (B) to
repay to the Lender all amounts advanced by the Lender hereunder or otherwise on
behalf of the Borrower in connection with the Loan, including, but without
limitation, advances for the payment of insurance, repairs to or maintenance or
storage of any of the Collateral; and (C) to reimburse the Lender, on demand,
for all of the Lender's expenses and costs, including the reasonable fees and
expenses of its counsel, in connection with the enforcement of this Agreement
and the documents required hereunder, including, without limitation, any
proceeding brought or threatened to enforce payment of any of the obligations
referred to in clauses (A) and (B) above.
Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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"Person" shall mean any individual, corporation, partnership, trust,
unincorporated association, joint venture, joint stock company or other entity.
"Prime Rate" shall mean that rate of interest published in The Wall
Street Journal in the Money Rates Section from time to time as the Prime Rate.
"Security Agreement" shall mean the Security Agreement of even date
herewith by and between the Borrower and Lender in the form attached hereto as
Exhibit C.
"Taxes" shall mean all federal, state and local income taxes payable by
Borrower during a specified period of time.
"Unfunded Liabilities" shall have the meaning ascribed to it in Section
4.01(f) hereof.
"Unmatured Event of Default" shall mean any event of condition which
with passage of time or giving of notice or both would become or create an Event
of Default.
ARTICLE II.
AMOUNTS AND TERMS OF THE LOAN
SECTION 2.01. Credit Facilities. The Lender agrees, on the terms and
conditions hereinafter set forth, including without limiting the generality of
the foregoing, the conditions precedent set forth in Article III hereof, to
make: (i) a term loan to Borrower in the amount of $13,200,000 ("Credit Facility
A") evidenced by Note A, and (ii) subject to the occurrence of certain
conditions, the occurrence of which is solely in Lender's discretion, a term
loan to Borrower in the amount of $8,800,000 ("Credit Facility B") evidenced by
Note B, for the purpose of financing the acquisition of Barns by Borrower. The
Borrower agrees to repay the Obligations (to the extent funded) upon the terms
and conditions and as required by the Loan Documents. No funds will be advanced
by Lender to Borrower pursuant to Credit Facility B unless Lender gives Borrower
[***]. In the event such a notice is not given by Lender, Lender will xxxx
Note B "canceled" and return it to Borrower.
SECTION 2.02 Interest Rate and Payments of Interest. Interest
shall be paid as follows:
(a) Interest shall be due and payable as provided for in the
Notes.
Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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(b) Interest shall be calculated on the basis of a 360-day
year, counting the actual number of days elapsed, and shall be payable monthly
on the outstanding principal balances as provided for in the Notes.
SECTION 2.03. Advances. Upon two (2) Business Days prior written
notice to Lender, Borrower may request advances under the Loan for the sole
purpose of acquiring Barns at the rate of [***]. With the exception of the first
and last advance under each Note, the minimum advance under either of the Credit
Facilities shall be [***]. Lender may disburse such advances directly to
Borrower or on behalf of and for the account of Borrower directly to the
manufacturer of the Barns.
SECTION 2.04 Repayment of Principal. The principal advanced and
outstanding under Credit Facility A and Credit Facility B shall be repaid as
provided for in Note A and Note B, respectively.
SECTION 2.05 Payment to the Lender. All sums payable to the Lender
hereunder shall be paid directly to the Lender in immediately available funds by
wire transfer to:
[***]
SECTION 2.06. Prepayments. Borrower may prepay the Loan in whole or
in part only on the dates for regularly scheduled principal and interest
payments upon five (5) days prior written notice to Lender. Any amounts prepaid
by Borrower may not be re-borrowed.
SECTION 2.07. Payment on Non-Business Days. Whenever any payment to
be made hereunder or under the Note shall be stated to be due on a day other
than a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
compensation of payment of interest.
Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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ARTICLE III.
CONDITIONS OF LENDING
SECTION 3.01. Condition Precedent to the Loan. The obligation of
the Lender to make the Loan is subject to the condition precedent that the
Lender shall have received on or before the day of the request for the funding
of the First Advance all of the following agreements, duly executed, and other
documents, certificates and items, all of which shall be in form and substance
satisfactory to Lender:
(a) The Notes;
(b) The Security Agreement together with such UCC financing
statements or other documents as Lender shall deem necessary or appropriate;
(c) Copy of the certificate of authority to transact business
in any jurisdiction in which the nature of Borrower's activities require it to
register as a foreign corporation in such jurisdiction;
(d) Copy of the articles of incorporation of the Borrower,
certified by the Secretary of State of the State of Delaware;
(e) Copies of the bylaws of Borrower, certified by the
Secretary of Borrower;
(f) Copies of a resolution of the board of directors of
Borrower, approving the Loan and the execution and delivery of the Loan
Documents to which it is a party, certified by the Secretary of the Borrower;
(g) A good standing certificate for the Borrower from the
Secretary of State of the State of Delaware, and of each jurisdiction in which
it transacts business;
(h) Legal opinion of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP,
counsel to Borrower, in form reasonably acceptable to Lender's counsel;
(i) UCC judgment and Federal tax lien searches for Borrower in
such jurisdictions as Lender may request;
(j) Signature and incumbency certificates with respect to each
officer executing the Loan Documents on behalf of Borrower;
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(k) Such other documents or certificates as Lender shall
reasonably require.
SECTION 3.02. Conditions Precedent to any Subsequent Advance. The
obligation of the Lender to make any subsequent advance under the Loan shall be
subject to the satisfaction of the following additional conditions precedent on
or before the date of the request for the funding of such Advance:
(a) the Lender shall have received a certificate signed by
Borrower, dated the date of the request for the funding of the Advance, stating
that, as of such date, the following statements are true:
(i) the representations and warranties contained in the
Loan Documents are correct on and as of such date;
(ii) no event has occurred and is continuing, or would
result from the Loan, which constitutes an Event of Default or would constitute
an Unmatured Event of Default, and
(iii) the number of Barns being acquired with such Advance
and the serial numbers of such Barns.
(b) the Lender shall have received such other approvals,
opinions or documents as the Lender may reasonably request.
SECTION 3.03. Priority of Security Interests. At the time of the
First Advance, the security interests in the Collateral in favor of Lender to
secure the Loan shall be perfected and a first priority on the Collateral
SECTION 3.04. Condition Precedent to Credit Facility B. Lender has
no obligation to advance any funds under Credit Facility B and Borrower has no
right to request the advance of any funds under Credit Facility B unless
Borrower receives from Lender [***].
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of Borrower. Borrower
represents and warrants to Lender as follows:
Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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(a) The Borrower is duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and is qualified to do
business as a foreign corporation and in good standing in each jurisdiction
where such qualification is necessary.
(b) The execution, delivery and performance of the Loan
Documents to which it is a party are within Borrower's corporate powers, have
been authorized by all necessary corporate action, does not contravene its (i)
articles of incorporation or bylaws or (ii) any law or regulation binding on or
affecting it, or any contractual restriction binding on or affecting it and
(iii) does not result in or require the creation of any lien, security interest
or other charge of encumbrance (other than pursuant to the Loan Documents) upon
or with respect to any of its properties.
(c) No authorization, consent or approval or other action by,
and no notice to or registration or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
Borrower of any Loan Document to which it is a party.
(d) The Agreement and all of the other Loan Documents to which
it is a party are legal, valid and binding obligations of the Borrower
enforceable against Borrower in accordance with their respective terms.
(e) There is no material pending, or to the best of Borrower's
knowledge, threatened action or proceeding at law or in equity before any court,
governmental agency, or arbitrator affecting the Borrower.
(f) The Borrower (i) is not party to any indenture, agreement
or other instrument or subject to any restriction materially adversely affecting
its business, properties, assets, operations or conditions (financial or
otherwise), and (ii) is not in material default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any material agreement or instrument to which it is a party.
(g) The Borrower has obtained all material licenses, permits,
franchises, or other governmental authorizations reasonably necessary for the
ownership of its properties and the conduct of its business. The Borrower
possesses adequate licenses, patents, patent applications, copyrights,
trademarks, trademark applications, and trade names to continue its business as
heretofore conducted by it, without any conflict with the rights of any other
person or entity.
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(h) The Borrower and its subsidiaries have not received any
communication from any Person that asserts that Star's Intellectual Property is
infringing the rights of any Person.
ARTICLE V.
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Obligation
shall remain unpaid Borrower will, unless the Lender shall otherwise consent in
writing:
(a) Maintain Corporation. Do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights and franchises and comply with all applicable laws; continue to conduct
and operate its business substantially as conducted and operated during the
present and preceding calendar year; at all times maintain, preserve and protect
all franchises and trade names and preserve all the remainder of its property
used or useful in the conduct of its business and keep the same in good repair,
working order and condition; and from time to time, make, or cause to be made,
all needed and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.
(b) Compliance with Laws, Agreements, Etc. Comply (i) in all
material respects with all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the same becomes
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent contested in good faith, and strictly
with all Loan Documents, and other material agreements and all governmental
regulatory requirements.
(c) Insurance. Keep its insurable properties adequately
insured and maintain (i) insurance against fire and other risks customarily
insured against by companies engaged in the same or a similar business, (ii)
necessary worker's compensation insurance, (iii) public liability, and (iv) such
other insurance as may be required by law or as may be reasonably required in
writing by the Lender, all of which insurance shall be in such amounts,
containing such terms, in such form, for such purposes and written by such
companies as may be satisfactory to the Lender. Borrower will deliver evidence
satisfactory to the Lender that such insurance has been so procured and, with
respect to Borrower's casualty insurance, an endorsement to reflect that Lender
is a loss payee. If Borrower fails to maintain satisfactory insurance as herein
provided, the Lender shall have the option to do so, and Borrower agrees to
repay the Lender on demand, with interest at the rate of [***] per annum above
the Prime Rate, on all amounts so expended by the Lender.
Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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SECTION 5.02. Negative Covenants. So long as any amount under the
Note shall remain unpaid, Borrower will not, without the prior written consent
of the Lender:
(a) Liens, Etc. Create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of the Collateral whether now owned or
hereafter acquired, or assign, any right to receive income, in each case to
secure any Debt of any Person, other than as created or assigned under the Loan
Documents.
(b) Debt. Create or suffer to exist any Debt other than Debt
under the Loan Documents, and other Debt entered into in the ordinary course of
business.
(c) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or entity.
(d) Sales, Etc. of Assets. Sell, lease, transfer or otherwise
dispose of any of its assets or any of its interests therein other than in the
normal course of its business without the prior written consent of Lender (which
consent may be conditioned upon using the proceeds of such sale or other
disposition to prepay the Notes).
(e) Maintenance of Licenses and Authorizations. Take or fail
to take any action which shall result directly or indirectly in the suspension,
revocation or termination of any license, franchise or other authorization held
by Borrower and necessary for its operations.
(f) Extension of Credit. Make loans, advances or extensions of
credit to any Person, except for sales on open account and in the ordinary
course of business.
(g) Guarantee Obligations. Guarantee or otherwise in any way
become or be responsible for obligations of any other Person, whether by
agreement to purchase the indebtedness of any other Person, or agreement for the
furnishing of funds of any other Person through the purchase of goods, supplies
or services (or by way of stock purchase, capital contribution, advance or loan)
for the purpose of paying or discharging the indebtedness of any other Person,
or otherwise, except for the endorsement of negotiable instruments in the
ordinary course of business for collection.
(h) Prepayment of Debt. Except as provided for in Section
2.06, make any payment in reduction of the principal amount of any Debt (other
than Debt evidenced by the
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Notes) in advance of the scheduled maturity of such Debt except in the ordinary
course of business.
ARTICLE VI.
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Borrower shall fail to pay: (i) the principal of the Note
when due, or (ii) interest on, the Note when due and such failure continues for
more than 60 days after written notice from the Lender to the Borrower; or
(b) Lender elects to terminate the Master Agreement pursuant
to the provisions of Section 11(b) (c) (d) or (e) thereof; or
(c) A material cessation or stoppage by Star to deliver to any
B&W Affiliates the quantities of Star Curea Tobacco ordered for such year.
ARTICLE VII.
SECURITY
SECTION 7.01 Composition of the Collateral. The property in which
a lien or security interest is granted pursuant to the provisions of the Loan
Documents is herein collectively called the "Collateral." The Collateral,
together with all of Borrower's other property of any kind held by the Lender,
shall stand as one general, continuing collateral security for all Obligations
and may be retained by the Lender until all Obligations have been satisfied in
full.
SECTION 7.02 Rights in Property Held by the Lender. As further
security for the prompt satisfaction of all Obligations, the Borrower hereby
assigns, transfers and sets over to the Lender all of its right, title and
interest in and to, and grants the Lender a lien on and a security interest in,
all amounts that may be owing from time to time by the Lender to Borrower in any
capacity, including, but without limitation, any account with the Lender, which
lien and security interest shall be independent of any right of set-off which
the Lender may have.
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ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Note, nor consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instances and for the specific purpose for which
given.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and shall be effective when delivered or when mailed, postage prepaid, by United
States certified or registered mail, return receipt requested, addressed as
follows:
If to Borrower:
Star Scientific, Inc.
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attension: Xxxxxx X. Xxxxxxxx
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
and
Paul, Hastings, Xxxxxxxx & Xxxxxx
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: W. Xxxxxx Xxxxx, Esq.
Telecopier No. (000) 000-0000
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And if to the Lender, to:
Xxxxx & Xxxxxxxxxx Tobacco Corporation
0000 Xxxxx & Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: [***]
with a copy to:
Wiley, Rein & Fielding
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxx
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party.
SECTION 8.03. No Waiver; Remedies. No failure on the part of the
Lender to exercise, and no delay in exercising, any right under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies existing
law, in equity or otherwise.
SECTION 8.04. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistently applied, except as otherwise stated
herein.
SECTION 8.05. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default the 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 other indebtedness at any time owing by the Lender to or for
the credit or the account of the Borrower against any and all of the
Obligations, irrespective of whether or not the Lender shall have made any
demand respecting such Obligations and although such Obligations may be
unmatured. The rights of the Lender under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Lender may have.
SECTION 8.06 Binding Effect; Governing Law. This Agreement shall
be binding upon and inure to the benefit of Borrower and the Lender and their
respective successors and assigns, except that Borrower shall not have the right
to assign its rights hereunder or any interest herein without the prior written
consent of the Lender. This Agreement, the Note and the other Loan Documents
(except where otherwise expressly so stated) shall be governed by, and construed
in accordance with, the laws of the State of Virginia.
Note: Redacted portions have been marked with [***]. The redacted portions are
subject to a request for confidential treatment that has been filed with the
Securities and Exchange Commission.
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this Loan
Agreement to be executed by their respective officers thereunto duly authorized,
all as of the date first above written.
STAR SCIENTIFIC, INC.
By:
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Name:
Title:
XXXXX & XXXXXXXXXX TOBACCO
CORPORATION
By:
-------------------------------
Name:
Title:
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