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NATIONAL TOBACCO COMPANY, L.P.,
a Delaware limited partnership
and
LANCASTER LEAF TOBACCO COMPANY OF PENNSYLVANIA, INC.
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THIRD AMENDED AND RESTATED
PURCHASING AND PROCESSING AGREEMENT
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Dated as of June 25, 1997
TABLE OF CONTENTS
Page
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STATEMENT OF BACKGROUND ................................................... 1
ARTICLE I - DEFINITIONS ................................................... 2
1.01. Certain Definitions ........................................ 2
ARTICLE II - TOBACCO PURCHASE AND STORAGE ................................. 5
2.01. Tobacco Purchases .......................................... 5
(a) Right and Obligation to Purchase ....................... 5
(b) Condition to Purchase Obligation and Right ............. 5
(c) Tobacco for Company Affiliates ......................... 6
(d) Waivers Are Limited .................................... 6
2.02. Tobacco Storage ............................................ 6
2.03. Company's Commitment for Lancaster's Purchases ............. 7
2.04. Price and Payment Terms .................................... 7
2.05. Obligation to Insure ....................................... 7
2.06. Disclaimer of Warranties ................................... 8
2.07. Ownership of Tobacco ....................................... 8
ARTICLE III - PROCESSING .................................................. 8
3.01. Processing Commitment and Agreement ........................ 8
(a) Exclusive Processing Right and Obligation .............. 8
(b) Early Termination ...................................... 9
(c) Renewal and Termination ................................ 11
(d) Exceptions to Exclusive Processing For Company
Affiliates ............................................. 12
(e) Processing on Termination of Agreement ................. 12
3.02. Inspection; Control ........................................ 13
3.03. Delivery of Processed Tobacco .............................. 13
3.04. Processing Rates ........................................... 14
(a) Rates .................................................. 14
(b) Modification of Rates .................................. 14
3.05. Carrying Charges ........................................... 14
(a) Billing ................................................ 14
(b) Payment Required as a Condition of Delivery ............ 14
3.06. Finance Charges ............................................ 14
3.07. Payment for Processed Tobacco .............................. 15
3.08. Release of Security Agreements ............................. 15
ARTICLE IV - CERTAIN CONDITIONS ........................................... 16
4.01. Deliveries at Closing ...................................... 16
4.02. Additional Conditions Precedent to Lancaster
Obligations ................................................ 16
4.03. Conditions Precedent to Company Obligations ................ 17
(i)
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF LANCASTER ................... 17
5.01. Organization and Good Standing ............................. 17
5.02. Authority .................................................. 18
5.03. Validity of Documents ...................................... 18
5.04. Litigation ................................................. 18
5.05. Financial Condition ........................................ 18
ARTICLE VI - REPRESENTATIONS AND WARRANTIES BY COMPANY .................... 19
6.01. Organization and Good Standing ............................. 19
6.02. Authority .................................................. 19
6.03. No Violations .............................................. 19
6.04. Validity of Documents ...................................... 20
6.05. Litigation ................................................. 20
6.06. Solvency ................................................... 20
6.07. Disclosure ................................................. 20
6.08. No Default ................................................. 20
ARTICLE VII - COVENANTS OF LANCASTER ...................................... 21
7.01. Confidentiality ............................................ 21
7.02. Lancaster's Employees ...................................... 21
7.03. Access to Premises ......................................... 21
7.04. Insurance .................................................. 21
7.05. Tobacco Storage ............................................ 22
7.06. Tobacco Purchasing and Processing .......................... 22
ARTICLE VIII - COVENANTS OF COMPANY ....................................... 22
8.01. Financial Information ...................................... 22
8.02. Existence .................................................. 23
8.03. Insurance .................................................. 23
8.04. Notice of Default or Change of Condition ................... 23
8.05. Additional Documents ....................................... 23
ARTICLE IX - DEFAULT ...................................................... 23
9.01. Events of Default .......................................... 23
9.02. Waivers .................................................... 25
ARTICLE X - MISCELLANEOUS ................................................. 25
10.01. Force Majeure ............................................. 25
10.02. Entire Agreement .......................................... 26
10.03. Notices, Etc .............................................. 26
10.04. Applicable Law ............................................ 28
10.05. Consent to Jurisdiction and Waiver of Service ............. 28
10.06. Product Liability and Indemnity ........................... 28
10.07. Execution in Counterparts ................................. 29
10.08. Binding Effect; Assignment ................................ 30
10.09. Severability of Provisions, Etc ........................... 30
10.10. Captions .................................................. 30
10.11. Recovery of Expenses After Default ........................ 30
(ii)
10.12. Lancaster Expenses ........................................ 31
10.13. Rules of Construction ..................................... 31
(iii)
THIRD AMENDED AND RESTATED
PURCHASING AND PROCESSING AGREEMENT
THIS THIRD AMENDED AND RESTATED PURCHASING AND PROCESSING AGREEMENT is made
by and between NATIONAL TOBACCO COMPANY, L.P., a Delaware limited partnership
(the "Company"), and LANCASTER LEAF TOBACCO COMPANY OF PENNSYLVANIA, INC., a
Virginia corporation qualified to do business in Pennsylvania ("Lancaster").
STATEMENT OF BACKGROUND
In January, 1988, the Company was formed by its management team and
Shearson Xxxxxx Brothers, Inc. ("Shearson") to acquire the smokeless tobacco
division of Lorillard, Inc. ("Lorillard"), which was accomplished in April,
1988. As part of that transaction Lancaster financed on behalf of the Company
the acquisition of Lorillard's inventory, and as part of that transaction
entered into an Agreement for (i) Financing Purchase of Tobacco Inventory, (ii)
storage of Tobacco, (iii) Purchase of Tobacco to meet Processing Requirements,
and (iv) Processing Tobacco dated April 26, 1988 (the "Original Lancaster
Agreement").
As part of recapitalizations and refinancings in 1992 and 1996, the Company
and Lancaster restated and amended in its entirety the Original Lancaster
Agreement in accordance with amended and restated agreements dated as of April
14, 1992 (the "Amended Lancaster Agreement") and May 17, 1996 (the "Second
Amended Lancaster Agreement"), respectively. The Company is again recapitalizing
and refinancing (the "1997 Recapitaliza tion") as part of its acquisition of the
stock of NATC Holding USA, Inc., a Delaware corporation (the "Zig Zag(R)
Acquisition"). Part of the Company's 1997 Recapitalization involves the Company
purchasing from Lancaster the Tobacco owned and financed by Lancaster for the
Company's use, and Lancaster releasing the security interests previously granted
to Lancaster by the Company to secure the financing by Lancaster of its Tobacco
purchases. In connection therewith, the Company and Lancaster have agreed to
amend and restate in its entirety the Second Amended Lancaster Agreement.
THEREFORE, with the foregoing Statement of Background being incorporated
into this Agreement by reference, it is agreed as follows:
ARTICLE I
DEFINITIONS
1.01. Certain Definitions. In addition to the words and terms defined
elsewhere in this Agreement, the words and terms defined in this Section 1.01,
whenever used and whether or not beginning with initial capital letters in this
Agreement, shall, unless the context requires otherwise, have the respective
meanings specified in this Section 1.01.
"Accumulated carrying charges", with reference to Tobacco, means the cost
charged by Lancaster associated with or for purchasing, financing, storing,
transporting, insuring, and otherwise dealing with or handling Tobacco.
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with the Person in question. As used
in this definition of "Affiliate", the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, ownership of partnership equity, by contract or otherwise.
"Agreement" means this Third Amended and Restated Purchasing and Processing
Agreement and the Exhibits and Schedules attached to and made a part of this
Agreement, if any, as modified and supplemented and in effect from time to time.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States or the
states of Pennsylvania, New York or Kentucky shall not be regarded as a Business
Day.
"By-products" means stems, veins and siftings that are removed from the
tobacco leaf and/or foreign tobacco strips while the tobacco is being processed
into a final strip form prior to manufacture into a consumer product.
"Closing" means June 25, 1997, the date of execution and delivery of this
Agreement and of the documents and instruments delivered in connection with the
1997 Recapitalization and the closing of the Zig Zag(R) Acquisition.
"Company" means National Tobacco Company, L.P., a Delaware limited
partnership, and its successors.
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"Crop Year" means the approximately annual period, generally from December
1 through November 30, in which Lancaster purchases (i) domestic tobacco and
(ii) foreign tobacco, and is generally designated by Lancaster with reference to
the year in which the first purchases of newly harvested domestic tobacco are
made. For example, the 1995 Crop Year includes the domestic tobacco purchased in
December, 1995, and January-March, 1996, as well as any other domestic or
foreign tobacco purchased prior to Lancaster purchasing the domestic tobacco
grown in the summer of 1996 and harvested in the fall of 1996.
"Default" means an Event of Default or an event which with notice or lapse
of time or both would, unless cured or waived, become an Event of Default.
"Dollars" and the symbol "$" means lawful money of the United States of
America.
"Event of Default" or "Events of Default" shall have the meaning set forth
in Section 9.01.
"Governing Documents" means for the purposes of Article VI, in the case of
(a) a partnership, its partnership agreement, as amended to date, and (b) a
corporation, its certificate or articles of incorporation and bylaws, as amended
to date.
"Index" means the Consumer Price Index (1982 - 84 = 100) as published by
the United States Bureau of Labor Statistics for Philadelphia, Pennsylvania, in
the category "All Items" (or similar successor index).
"Industry" means the loose leaf tobacco industry.
"Lancaster" means Lancaster Leaf Tobacco Company of Pennsylvania, Inc., a
Virginia corporation, and its successors.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"North Atlantic Trading" means North Atlantic Trading Acquisition Company,
Inc., a Delaware corporation. North Atlantic Trading will change its name
following the Zig-Zag(R) Acquisition to North Atlantic Trading Company, Inc.
North Atlantic Trading is the sole limited partner of the Company.
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"NTFC" means National Tobacco Finance Corporation, a Delaware corporation,
which, contemporaneously with the Zig-Zag(R) Acquisition will be a wholly-owned
subsidiary of North Atlantic Trading. NTFC is the sole general partner of the
Company.
"Person" means any individual, corporation, partnership, limited liability
company, association, joint-stock company, trust, unincorporated organization,
joint venture, court or government or political subdivision or agency thereof.
"Prime Rate" means the rate of interest periodically defined and
established by Crestar Bank, Richmond, Virginia, or such other bank or other
entity which is a principal provider of financing to Lancaster, as its "prime
rate", as designated by Lancaster. A determination by Lancaster from time to
time of the Prime Rate shall be conclusive absent manifest error.
"Processed Tobacco" means leaf tobacco and unprocessed foreign strips from
which the middle stem and other associated material is removed from the lamina
to form a strip ready for the final stages of manufacturing into a consumer
product.
"Purchase Price", with reference to Tobacco, shall have the meaning set
forth in Section 2.04.
"Termination Fee" has the meaning set forth in Section 3.01(b)(3) of this
Agreement.
"Tobacco" means domestic and foreign leaf tobacco, unprocessed and
processed strips (including Processed Tobacco), and By-products.
ARTICLE II
TOBACCO PURCHASE AND STORAGE
2.01. Tobacco Purchases.
(a) Right and Obligation to Purchase. Subject to the provisions of this
Agreement, the Company agrees that for the term ending November 30, 2006, or
such longer term as provided for herein with respect to renewal or as otherwise
mutually agreed from time to time, Lancaster will, at the Company's request,
have the right and, to the extent provided below, the obligation, to purchase
all of the Tobacco required by the Company and its Affiliates, subject as to any
Affiliate of the Company, only, the requirement that Lancaster (directly or
through Affiliates of Lancaster) is in the business of processing Tobacco of the
type required by such Company Affiliate.
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(b) Condition to Purchase Obligation and Right. Lancaster's obligations to
purchase Tobacco are conditioned upon the general availability in the
marketplace of Tobacco of the types and quantities which the Company has
requested Lancaster to purchase in quantities sufficient to meet the needs of
the Company and Lancaster's other customers. In the event Lancaster is unable to
purchase sufficient quantities of domestic or foreign tobacco to meet the needs
of the Company and Lancaster's other customers, the Company agrees and
acknowledges that Lancaster will provide for the Company an appropriate
proportionate amount (as determined by Lancaster after discussion with the
Company) of the Tobacco which the Company has requested and which Lancaster is
able to buy. In any Crop Year during the term of this Agreement, if Lancaster is
unable to purchase sufficient quantities of a particular type of Tobacco
requested by the Company, and Lancaster is unable to obtain a sufficient
quantity of alternative Tobacco which satisfies the needs of the Company in the
reasonable exercise of the judgment of the Company which is of comparable type
to the Tobacco requested by the Company for such Crop Year, then, to the extent
of the deficit of the requested Tobacco for such Crop Year, the Company may
purchase from other sources for processing by Lancaster the amount of the
requested Tobacco that Lancaster was unable to supply in that Crop Year.
(c) Tobacco for Company Affiliates. The Company and North Atlantic Trading
hereby guaranty the obligations of each Company Affiliate to pay for Tobacco in
accordance with the terms of this Agreement. If and to the extent that any
Affiliate of the Company acquired in the future is bound by contractual
obligations existing at the time such entity becomes an Affiliate of the Company
that cannot be terminated with the reasonable best efforts (not requiring the
payment of any material premiums or material penalties) of the Company or the
Affiliate which require that such Affiliate purchase its Tobacco requirements
elsewhere, such contractual requirements may be honored, but shall not be
extended or renewed. Further, if the newly acquired Affiliate of the Company has
at the time of acquisition an internal purchasing organization in place, the
Affiliate may continue to purchase such Affiliate's Tobacco needs through its
own internal organization, so long as such purchases are consistent with prior
practices, and so long as any Tobacco purchases are only for the Affiliate's
requirements and products, and not the Company's or any other Company
Affiliate's requirements or products.
(d) Waivers Are Limited. Any waiver of any of the requirements of this
Section 2.01 by Lancaster or the Company shall be for the specific event or for
the specific time in question only, and such waiver or refusal in any case shall
not
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constitute a waiver of the provisions and requirements of this Section 2.01 for
any subsequent event or year, unless otherwise specifically stated in such
waiver.
2.02. Tobacco Storage. The Company agrees that all Tobacco now or hereafter
owned by or for the benefit of the Company and its Affiliates (subject to the
exceptions as to any Company Affiliate's Tobacco set forth in Section 2.01(c)),
or, to the extent permitted by this Agreement, purchased for the Company's or
any Company Affiliate's benefit by any other Person, shall be stored in
facilities under Lancaster's control, unless specifically agreed to the contrary
by Lancaster. Lancaster will, in accordance with Lancaster's standard business
practices, (i) keep the Company's Tobacco segregated from any Tobacco or Tobacco
products owned by Lancaster or any other Person, (ii) clearly xxxx and identify
the Tobacco owned by the Company as the Company's property, and (iii) take such
steps as reasonably requested by the Company to perfect a security interest in
the Company's Tobacco in favor of the Company's secured note holders and lenders
as is consistent with Industry standards. Lancaster shall handle the Company's
Tobacco in Lancaster's storages, subject to the Company's right of inspection
during normal business hours, in a manner consistent with Lancaster's practices
for handling its customers' Tobacco in general.
2.03. Company's Commitment for Lancaster's Purchases. Lancaster will
confirm in writing the Company's or the Company's Affiliate's request for
Tobacco purchases with respect to type and amount of Tobacco. Lancaster's
confirmation will constitute the Company's (or its Affiliate's) binding
commitment to pay Lancaster for the purchased Tobacco, when invoiced, which will
be, in general, following receipt by Lancaster of the purchased Tobacco in
Lancaster, Pennsylvania. Lancaster will invoice the Company or its Affiliate for
purchased Tobacco based on the provisions set forth in Section 2.04 and, to the
extent applicable, Section 3.01(b). The Company agrees that until Lancaster
receives written notice to the contrary, it may rely on any order or
confirmation for Tobacco purchases from any one of Xxxxxx X. Xxxxx, Xx., Xxxxx
X. Xxxxxxx, Xxxx Xxxxxxxxxxxxx, or Xxxxxxx X. Xxxxxxx as the binding commitment
of the Company.
2.04. Price and Payment Terms. The Company will pay to Lancaster, from time
to time, those fees and charges invoiced by Lancaster for purchasing,
transporting, insuring, storing, processing and otherwise dealing with or
handling all Tobacco for the benefit of the Company or any Affiliate of the
Company, based on the pricing determined by Lancaster and communicated to the
Company in writing (the "Purchase Price"), subject to and in accordance with
this Section 2.04, Sections 3.04 through 3.07,
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inclusive, and, to the extent applicable, Section 3.01, in immediately available
funds promptly upon receipt of, and in accordance with, Lancaster's invoices.
2.05. Obligation to Insure. The Company is not obligated to insure or cause
to be insured the Company's and the Company's Affiliates' Tobacco. Nonetheless,
the Company has requested and Lancaster has agreed, at its initial expense, and
subject to the provisions of Section 7.04 of this Agreement, which are
incorporated herein, to insure all Tobacco purchased for the benefit of the
Company or any Affiliate of the Company until such Tobacco is shipped to the
Company F.O.B. Lancaster.
2.06. Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPLICITLY SET FORTH IN
THIS AGREEMENT, LANCASTER DOES NOT MAKE AND HEREBY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER WARRANTY,
WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY TOBACCO HERETOFORE OR
HEREAFTER PURCHASED. EXCEPT AS SPECIFICALLY PROVIDED TO THE CONTRARY HEREIN,
LANCASTER SHALL NOT BE LIABLE TO THE COMPANY OR ANY AFFILIATE OF THE COMPANY FOR
ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER.
2.07. Ownership of Tobacco. All Tobacco purchased for the Company or any
Company Affiliate from time to time by Lancaster is and shall remain at all
times the sole and exclusive property of Lancaster until such time as Lancaster
has received payment of Lancaster's invoice for such purchased Tobacco. Upon
payment of Lancaster's invoice for the purchased Tobacco, title to the invoiced
Tobacco shall pass to the Company or the Company's Affiliate, as appropriate.
Any provision of this Agreement to the contrary notwithstanding, Lancaster's
obligation to purchase, process, sell and deliver any Tobacco to or at the
direction of the Company or any Affiliate of the Company is expressly subject to
the Company's compliance with the terms and conditions of this Agreement.
ARTICLE III
PROCESSING
3.01. Processing Commitment and Agreement.
(a) Exclusive Processing Right and Obligation. Subject to the provisions of
Section 3.01(b) and 10.01, Lancaster shall continue to have the sole and
exclusive right to process all Tobacco for the Company and the Company
Affiliates, for a term ending on November 30, 2006, subject as to any Company
Affiliate only, to (i) the exceptions set forth in Sections
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2.01(c) and 3.01(d), and (ii) Lancaster, directly or through Affiliates of
Lancaster, being in the business of processing Tobacco of the type required by
such Company Affiliate. Subject to the provisions of this Agreement, Lancaster
will process all Tobacco required by the Company and its Affiliates during the
period of this Agreement in accordance with any reasonable written
specifications or requirements furnished by the Company or such Company
Affiliate to Lancaster. The Company agrees that Lancaster may rely on oral
modifications, changes, amendments or directions with respect to processing the
Company's and any Company Affiliate's Tobacco requirements received from Xxxxxxx
X. Xxxxxxx or Xxxx Xxxxxxxxxxxxx, or other individuals from time to time
designated by the Company or such Company Affiliate in writing, notwithstanding
that such oral modifications or changes may contradict the Company's or any
Company Affiliate's existing written specifications (provided that any
modifications or changes which will increase Lancaster's processing costs and
the Company's or Company Affiliate's charges shall be agreed upon), and that
Lancaster shall be fully protected and indemnified in relying upon such oral
representations.
(b) Early Termination.
(1) Permitted Termination; Exclusive Reason. Subject to the provisions of
Section 9.01 (providing for Events of Default by Company and certain remedies),
Lancaster's right and obligation to process Tobacco for the Company and its
Affiliates on an exclusive basis may be terminated by the Company in the event
of Lancaster's materially uncompetitive pricing as hereafter set forth in this
Section 3.01(b), but only after compliance with the provisions of such Section.
(2) Materially Uncompetitive Pricing. Any provision of this Agreement to
the contrary notwithstanding, if in any twelve-month period from July 1 to June
30, (A) Lancaster's pricing to the Company for Processed Tobacco is
demonstratively proven by the Company to be materially uncompetitive with other
dealers in the business of processing Tobacco for the Industry who (i) produce a
finished product of comparable quality and yield with Lancaster's, and (ii) have
provided estimates at normal and customary Industry pricing levels (and for this
purpose the Company shall have obtained and provided to Lancaster at least two
(2) written offers from independent dealers in the Industry to provide Processed
Tobacco, all of which are significantly lower than Lancaster's pricing), and (B)
Lancaster refuses to reduce its processing fees to the Company to be competitive
with (but not necessarily equal to) the highest of such independent dealer's
written offers made at normal and customary Industry pricing levels, and (C) as
a result of Lancaster's higher processing fees the Company can demonstrate
through information compiled by the Company and reviewed by its
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independent outside auditors that, as a result of such cost differential, its
financial performance will be materially adversely affected, then the Company
may terminate this Agreement by giving Lancaster at least sixty (60) days' prior
written notice of intent to do so, if during such sixty (60) day period
Lancaster does not cure the failure to reduce its processing rates as provided
in clause B of this Section 3.01(b)(2), subject to Lancaster's right, at its
option, to process Tobacco on hand in accordance with the provisions of Section
3.01(e).
(3) Termination Fee.
(A) Except for termination pursuant to Section 3.01(b)(4), if this
Agreement is terminated prior to expiration of its term for any reason
whatsoever except in connection with Section 3.01(b)(2) (dealing with
termination in the event of materially uncompetitive pricing), the Company shall
pay a fee (the "Termination Fee") to Lancaster in the amount of $5,000,000. The
Termination Fee will be increased as of each January 1 starting January 1, 1997,
by the percentage increase in the Index from the prior January to the applicable
January. If such termination occurs after January 1, 2003, the Termination Fee
of $5,000,000, as adjusted, will continue to increase by the percentage increase
in the Index for each year, but after giving effect to such increase will be
reduced for each year thereafter starting with the year 2003 by the following
percentages:
For Example Only, Proforma
Reduction to Termination Fee (Subject
Original Termination to Increases by the
Year Fee (as increased) Index not Included Here)
---- ------------------ ------------------------
2003 25% $3,750,000
2004 50% $2,500,000
2005 75% $1,250,000
2006 100% $0
(B) The Company and Lancaster agree that the Termination Fee provided for
herein constitutes liquidated damages; is in lieu of actual damages, the proof
of which would be difficult and time consuming; was the result of commercial
negotiations between the parties intended to approximate actual damages to
Lancaster; and does not constitute a penalty.
(4) Sale as Going Concern.
The Company will use its best efforts (not requiring the payment of any
material premium or material penalty) in the event of sale of all or
substantially all of the assets of the Company as a going concern to cause this
Agreement to be assumed and reaffirmed by the successor owners of the Company.
If all Accumulated Carrying Charges are paid at the
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Closing of such transaction, and if the Company and the acquiror of the
Company's assets reaffirm and agree to be bound by the terms and conditions of
this Agreement, no Termination Fee shall be due or payable solely as a result of
such sale.
Notwithstanding the foregoing or anything else in this Agreement to the
contrary, upon the sale of all or substantially all of the assets of the
Company, or upon the acquisition by a person or entity (other than an existing
partner or stockholder of the Company as of the date hereof) of a majority of
the voting stock or voting equity interests issued by the Company having the
right to elect members to the Board of Directors of the Company, Lancaster may,
at its option, elect to terminate this Agreement in its entirety, in which event
neither Lancaster nor the Company shall be further obligated under this
Agreement, except with respect to Lancaster's right to process pursuant to
Section 3.01(e), and the Company's obligation to pay for, the Company's and
Company's Affiliates' Tobacco on hand as of the date of termination, as set
forth in Section 3.01(e), and the obligation of the Company to pay the Purchase
Price for the Company's and the Company's Affiliates' Tobacco. If Lancaster
elects to terminate this Agreement because of the sale of all or substantially
all of the Company's assets or such acquisition of voting stock or voting equity
interests as provided above, and no Event of Default exists or will exist with
the passage of time, Lancaster will, subject to the compliance by the Company
with the provisions of this Agreement, process the Tobacco on hand as of the
date of termination.
(c) Renewal and Termination. Unless terminated earlier in accordance with
Section 3.01(b) or Section 9.01, this Agreement for purchasing and processing
Tobacco shall continue for a term ending on November 30, 2006, and shall
automatically renew thereafter for successive additional annual terms unless
either party shall have given the other party one (1) year's prior written
notice of intent to terminate this Agreement. Upon demand by Lancaster after the
expiration or earlier termination of this Agreement, the Company shall pay to
Lancaster, by wire transfer or other payment method acceptable to Lancaster, the
Purchase Price and, if payable pursuant to Section 3.01(b), the Termination Fee,
as communicated by Lancaster to the Company; provided, however, that, in the
event this Agreement is terminated by the Company in accordance with Section
3.01(b)(2) because of Lancaster's materially uncompetitive pricing, and
Lancaster, in connection with such termination, elects to continue processing
Tobacco in accordance with Section 3.01(e), then payment for such Tobacco shall
be made by the Company in accordance with Section 3.07.
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(d) Exceptions to Exclusive Processing For Company Affiliates.
Notwithstanding the foregoing (except for Section 2.01(c)), with respect to any
Affiliate of the Company, Lancaster may at its option from time to time, decline
to process Tobacco for a Company Affiliate, in which event it shall notify the
Company thereof. If Lancaster elects not to process Tobacco for a Company
Affiliate for any reason other than as permitted by this Agreement, such Company
Affiliate shall be entitled to enter into such other agreements as it deems
reasonable with respect to purchasing and processing of such Company Affiliate's
(but only such Company Affiliate's) Tobacco. Further, to the extent that any
newly acquired Company Affiliate is bound by contractual obligations existing at
the time of acquisition by the Company that cannot be terminated with the
reasonable best efforts of the Company or the Company Affiliate and which
require such Company Affiliate's Tobacco be processed by another Person, such
contractual requirements may be honored as to the Company Affiliate's Processed
Tobacco, but not extended or renewed. Further, if the newly acquired Company
Affiliate at the time of acquisition processes its own Tobacco in the Company
Affiliate's facilities, such Company Affiliate may continue to process its own
Tobacco requirements at its own facilities, so long as such processing is
consistent with prior practices, and so long as the Company Affiliate processes
solely its own Tobacco for its own requirements and products.
(e) Processing on Termination of Agreement. Notwithstanding anything in
this Agreement to the contrary, in the event this Agreement is terminated for
any reason whatsoever, including the expiration of the term hereof, any default
or breach, the payment of the Termination Fee under Section 3.01(b)(3), or for
any other reason, then, notwithstanding such termination, Lancaster shall be
entitled, at its option, to process so much of, up to all, the Company's and the
Company's Affiliate's Tobacco held by Lancaster as of the date of termination of
this Agreement as Lancaster may elect, in accordance with the pricing and
payment terms of this Agreement, prior to the Company or any Company Affiliate
processing or permitting the processing of any Tobacco by the Company or any
Person other than Lancaster (except as permitted by Section 3.01(d)); and, if
necessary, the Company will purchase through Lancaster, subject to the terms of
this Agreement, such additional Tobacco as may be required to meet the Company's
or the Company's Affiliate's, as the case may be, blend or mix requirements in
connection with such processing by Lancaster.
3.02. Inspection; Control. Lancaster agrees that during such periods of
time as it is storing or processing any Tobacco for the benefit of the Company
or any Company Affiliate, it will
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permit representatives of the Company upon any of Lancaster's facilities engaged
in such storage or processing during normal business hours for the purpose of
observing the storage or production of unprocessed and Processed Tobacco and for
determining the specifications or requirements appropriate to the type of
Tobacco delivered to Lancaster for processing. The Company and its
representatives shall have no right to direct or control any of the employees of
Lancaster, all of whom shall remain at all times under the direction and control
of Lancaster.
3.03. Delivery of Processed Tobacco. Upon completion of the production
process, and upon payment in accordance with this Agreement, Lancaster shall
deliver Processed Tobacco F.O.B. at Lancaster's factory door to any carrier
selected by the Company for transportation to the destinations designated by the
Company, in the amounts and upon the dates specified by the Company. The
Processed Tobacco will be free and clear of liens and encumbrances created by
Lancaster. Prior to loading, the Processed Tobacco shall be packed by Lancaster
in appropriate containers as provided by the Company and in accordance with the
Company's instructions. Lancaster, at its initial expense, shall be obligated to
load the Processed Tobacco upon the carrier's means of transportation. The
Company shall provide all appropriate packing materials.
3.04. Processing Rates.
(a) Rates. The charges payable by the Company to Lancaster for Lancaster's
handling and processing of Tobacco for 1997 are attached hereto as Schedule I.
(b) Modification of Rates. Lancaster reserves the right from time to time
to modify and increase its processing rates and service fees and charges, if
Lancaster's costs with respect to purchasing, storing, transporting, insuring,
processing, or otherwise dealing with Tobacco, or with respect to Lancaster's
plant and employees, increase; provided, however, that Lancaster will not
increase its charges to the Company unless Lancaster increases or seeks to
increase its charges, in general, to substantially all of its customers. Any
increase in charges shall be effective as of the effective date announced by
Lancaster, and will be reflected in an amended Schedule I hereto.
3.05. Carrying Charges.
(a) Billing. Lancaster will xxxx the Company quarter-annually for
Accumulated Carrying Charges, or in other installments mutually agreeable to
Lancaster and the Company, in amounts as computed by Lancaster. The Company will
pay Lancaster
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on account of such billed Accumulated Carrying Charges within fifteen (15) days
of when billed in immediately available funds.
(b) Payment Required as a Condition of Delivery. The Company acknowledges
that as a condition of shipping Processed Tobacco to the Company, the Company
shall not be delinquent in the payment of any invoiced Tobacco or billed
Accumulated Carrying Charges or other charges.
3.06. Finance Charges. Finance charges will be computed on the cost of all
Tobacco purchases until the Purchase Price for such Tobacco is paid by the
Company (as described in Sections 2.03 and 2.04), and on Accumulated Carrying
Charges and other charges until paid at a varying rate per annum equal to the
Prime Rate plus 1%, in accordance with Lancaster's normal and customary
procedures and in accordance with the terms hereafter set forth. The finance
charges will be based on Lancaster's determination of the Prime Rate for each
day, and by reference to Lancaster's records as to the Tobacco and amount of
charges to which the interest rate will apply, computed on actual days elapsed
using a year of 365/366 days.
3.07. Payment for Processed Tobacco. The Company shall, prior to the date
any Processed Tobacco requested by the Company is delivered to the Company's
carrier, pay in full Lancaster's invoice for such Processed Tobacco, in
accordance with the provisions of Sections 3.04 through 3.07, inclusive, Section
2.04 and, to the extent applicable, Section 3.01. Notwithstanding the foregoing
sentence, if Lancaster should ever waive such payment requirement and elect in
its sole discretion to deliver Processed Tobacco to or for the benefit of the
Company prior to receiving full payment of Lancaster's invoice for such
Processed Tobacco (including outstanding invoices for purchased Tobacco and for
Accumulated Carrying Charges), the Company shall make payment immediately upon
and in accordance with Lancaster's demand for payment. Lancaster may in its
discretion from time to time refuse to deliver Tobacco until all outstanding
invoices relating to any Tobacco or Accumulated Carrying Charges are paid in
full.
3.08. Release of Security Agreements. Lancaster hereby releases and
terminates all of its right, title and interest in, to and under the property
and assets of the Company in which it was granted a security interest pursuant
to the Security Agreements (as defined in the Second Amended Lancaster
Amendment) and hereby terminates such Security Agreements. Lancaster hereby
agrees to execute and deliver to the Company, at the Company's expense, such
instruments, notices, releases or certificates as the Company may reasonably
request to more fully effectuate the foregoing terminations and releases,
including, without
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limitation, all documents necessary to release the liens on, and security
interests in, all United States Trademark Registrations (and all other
intellectual property filing releases) filed in the United States Patent and
Trademark Office with respect to the Company. Lancaster authorizes the Company
and its agents to file the Uniform Commercial Code Form UCC-3 termination
statements and Release and Reassignment referred to in Schedule II hereto in the
appropriate jurisdictions.
ARTICLE IV
CERTAIN CONDITIONS
4.01. Deliveries at Closing. At Closing, there shall be or have been
delivered to Lancaster, in form satisfactory to Lancaster:
(a) counterparts of this Agreement duly executed and delivered by the
Company and North Atlantic Trading;
(b) satisfactory opinions of Weil, Xxxxxxxx & Xxxxxx, special counsel to
the Company, as to the power and authority of the Company to enter into this
Agreement; its due authorization, execution and delivery; and the validity and
binding effect and enforceability hereof;
(c) by wire transfer of immediately available funds to Lancaster's account
designated by Lancaster, the following:
(i) the Purchase Price, as calculated by Lancaster, of the Tobacco,
Accumulated Carrying Charges, Lancaster's fees and expenses in connection
with this transaction, and the fees and expenses of Lancaster's counsel;
and
(ii) the Deferred Financing Fee of $250,000 as contemplated by Section
4.06 of the Second Amended Agreement; and
(d) such other documents, certificates and instruments as Lancaster or its
counsel deems necessary or appropriate.
4.02. Additional Conditions Precedent to Lancaster Obligations. The
obligation of Lancaster to perform its obligations under this Agreement is
further conditioned upon:
(a) all legal details and proceedings in connection with the transactions
contemplated by this Agreement shall be in
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form and substance reasonably satisfactory to Lancaster and its
counsel; and
(b) the absence of any Default or Event of Default; and
(c) the simultaneous closing on the 1997 Recapitalization and the Zig
Zag(R) Acquisition, and the execution and delivery of the documents and
instruments contemplated by each thereof.
4.03. Conditions Precedent to Company Obligations. The obligation of the
Company to perform its obligations under this Agreement is conditioned upon:
(a) The execution and delivery by Lancaster of this Agreement;
(b) The simultaneous closing by the Company and all other parties on the
1997 Recapitalization and the Zig Zag(R) Acquisition;
(c) The delivery by Lancaster at Closing of such documents and instruments,
including (A) the Forms UCC-3 Termination Statements and (B) the Release and
Reassignment, as identified on Schedule II hereto, as (i) the Company may
reasonably require to satisfy, at Company expense, all recorded liens held by
Lancaster on the Company's assets; and (ii) as any other senior secured note
holder or lender, with the Company, may reasonably request in connection with
terminating Lancaster's liens on Company assets and perfecting in favor of such
Person liens in their favor thereon; and
(d) the delivery by Lancaster to the Company for cancellation of the
original PIK Notes (as defined in the Second Amended Lancaster Agreement), which
are the only Notes outstanding under the Second Amended Lancaster Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LANCASTER
Lancaster represents and warrants to the Company:
5.01. Organization and Good Standing. Lancaster (i) is a corporation duly
organized and validly existing under the laws of the Commonwealth of Virginia,
(ii) is in good standing under the laws of the Commonwealths of Virginia and
Pennsylvania, and each other jurisdiction, if any, in which it is required to be
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registered as a foreign corporation and where failure to qualify would have a
material adverse effect on the business or properties of Lancaster, and (iii)
has all the necessary power and authority to own its properties and to carry on
its business as now conducted and as presently proposed to be conducted.
5.02. Authority. The execution, delivery and performance by Lancaster of
this Agreement have been duly authorized by all necessary action on its part.
The execution, delivery and performance by Lancaster of this Agreement does not
violate any order, writ, judgment, injunction, decree, determination or award
presently in effect and having application to Lancaster, or any provision of its
Articles of Incorporation or Bylaws, as amended to date, and will not result in
any breach of or constitute a default under any term of any indenture, loan or
credit agreement, or other agreement, lease or instrument to which Lancaster is
a party or by which Lancaster may be bound.
5.03. Validity of Documents. This Agreement is the legal, valid and binding
obligation of Lancaster, and is enforceable against Lancaster in accordance with
its terms.
5.04. Litigation. There are no actions, suits or proceedings pending, or to
the knowledge of Lancaster, threatened against or affecting Lancaster, or any of
its assets or properties, before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to Lancaster, would have a material adverse
effect on the financial condition, operations or properties of Lancaster, or
upon the ability of Lancaster to perform its obligations under this Agreement.
5.05. Financial Condition. Lancaster (i) is in sound financial condition,
(ii) has all necessary financial resources required to perform its obligations
under this Agreement, and (iii) will maintain sufficient resources, financial
and otherwise, to enable it to perform its obligations under this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES BY COMPANY
The Company represents and warrants to Lancaster at Closing and as of the
date of the requested purchase of any Tobacco for the Company or any Company
Affiliate by Lancaster that:
6.01. Organization and Good Standing. (i) The Company is a limited
partnership, and NTFC and North Atlantic Trading are
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each corporations, each of which is duly organized and validly existing under
the laws of the State of Delaware, (ii) the Company, North Atlantic Trading, and
NTFC are each in good standing under the laws of those jurisdictions where they
are required to be qualified to do business and where the failure to qualify
would have a material adverse effect on the business or properties of each of
them, and (iii) the Company, North Atlantic Trading and NTFC each have all the
necessary power and authority to own its properties and to carry on its business
as now conducted and as presently proposed to be conducted.
6.02. Authority. The execution, delivery and performance by the Company,
North Atlantic Trading, and NTFC of this Agreement are within the respective
authority of each of them and have been duly authorized by all necessary action
on each of their part.
6.03. No Violations. The execution, delivery and performance by the
Company, North Atlantic Trading, and NTFC of this Agreement does not violate any
law or regulation of the United States, any state or any subdivision thereof or
any agency of the United States, or any order, writ, judgment, injunction,
decree, determination or award presently in effect and having application to any
of them, or any provision of any of their Governing Documents, and will not
result in any breach of or constitute a default under, or result in the creation
or imposition of any lien or charge upon any property of the Company, North
Atlantic Trading, or NTFC pursuant to any term of any indenture, loan or credit
agreement, or other agreement, lease or instrument to which any of them is a
party or by which any of them may be bound or to which any of their properties
may be subject. The Company, North Atlantic Trading and NTFC are not in default
under any such indenture, agreement, lease or instrument.
6.04. Validity of Documents. This Agreement is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
6.05. Litigation. There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against the Company, North Atlantic
Trading, or NTFC, or any of the assets or properties of any of them, before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if determined adversely to any of
the Company, North Atlantic Trading, or NTFC, would have a material, adverse
effect on the financial condition or business of the Company, except as
disclosed to Lancaster.
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6.06. Solvency. The Company now (i) has capital sufficient to carry on its
business and transactions as now conducted and all business and transactions in
which it currently plans to engage, (ii) is solvent and able to pay its debts as
they mature, and (iii) owns property having a value, both at fair valuation and
at present fair saleable value within the meaning of applicable bankruptcy and
fraudulent conveyance laws, greater than the amount required to pay the
Company's Indebtedness (as defined in the Second Amended Lancaster Agreement).
6.07. Disclosure. Neither the Company's financial statements for the years
ended December 31, 1994, 1995, or 1996 heretofore provided to Lancaster nor any
other information furnished to Lancaster by the Company in connection with this
Agreement, the 1997 Recapitalization, or the Zig Zag(R) Acquisition contains any
misstatement of a material fact or is untrue in any material respect.
6.08. No Default. No Default or Event of Default exists as of the date of
Closing or will exist as of the date of any purchase of Tobacco by Lancaster.
ARTICLE VII
COVENANTS OF LANCASTER
Lancaster covenants and agrees with the Company as follows:
7.01. Confidentiality. Lancaster shall, in accordance with its customary
procedures for handling confidential information, use its best efforts to ensure
that all written or oral specifications or requirements, all financial
information, and all confidential information furnished to Lancaster by the
Company or any Company Affiliates that is not in the public domain shall not be
published or disclosed to Persons (including other customers of Lancaster)
outside Lancaster's manufacturing division, or to Lancaster's employees or
employees of Lancaster's Affiliates, other than those who need to know such
information in order to fulfill Lancaster's obligations to the Company, without
the Company's prior written consent.
7.02. Lancaster's Employees. Lancaster will be responsible at all times for
the insurance, pay and benefits of Lancaster's employees, including worker's
compensation insurance.
7.03. Access to Premises. Lancaster will permit the Company's
representatives upon any of Lancaster's facilities engaged in the processing of
Tobacco for the Company or any
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Company Affiliate during normal business hours for the purposes of either
inspecting Tobacco owned by the Company or any Company Affiliate, or observing
the production of Processed Tobacco for the Company and its Affiliates, and/or
determining the specifications or requirements appropriate to the type of leaf
tobacco and leaf tobacco stems delivered to Lancaster for processing.
Notwithstanding the foregoing, Lancaster reserves the right to refuse access to
its premises at any time in which it is engaged in the processing of Tobacco for
other customers.
7.04. Insurance. As provided in Section 2.05, so long as requested to do so
by the Company Lancaster will at its initial expense insure (subject to
deductibles and other terms and conditions of any applicable policy of insurance
from time to time in effect) all Tobacco from time to time purchased by
Lancaster for the Company or any Company Affiliate until the Tobacco is shipped
to the Company or Company Affiliate F.O.B. Lancaster, at which time the
obligation to insure the Tobacco becomes that of the Company. Any insurance
maintained or provided by Lancaster covering Tobacco purchased for or owned by
the Company or any Company Affiliate shall be in amounts, with such deductibles,
and upon the same terms and conditions as Lancaster insures its own Tobacco. In
the event of insured loss or damage to the Company's or any Company's
Affiliaates' Tobacco, Lancaster shall make available to the Company the proceeds
of any insurance received by Lancaster covering the Company's or Company's
Affiliates' Tobacco. Lancaster shall not be obligated under any circumstances to
replace any Tobacco that is destroyed or damaged by casualty; and Company for
itself and each Company Affiliate acknowledges that it will look solely to
insurance proceeds as its only remedy for Tobacco destroyed or damaged by
casualty. The deductible under Lancaster's current policies insuring Tobacco is
$10,000, but Lancaster reserves the right from time to time to amend its
insurance policies and deductibles. If Lancaster materially changes its
deductibles, it will provide thirty (30) days advance notice thereof to the
Company.
7.05. Tobacco Storage. Storage of Tobacco in Lancaster's facilities does
and will conform to Industry standards, and Lancaster will handle the Tobacco in
its storage with the same care and skill as Lancaster uses with respect to
Tobacco owned by Lancaster and Lancaster's other customers.
7.06. Tobacco Purchasing and Processing. Lancaster will (i) purchase
Tobacco for the Company and Company Affiliates with the same care and skill as
Lancaster uses in purchasing Tobacco to meet other customers' requirements, and
(ii) process the Tobacco in accordance with Industry standards.
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ARTICLE VIII
COVENANTS OF COMPANY
The Company covenants and agrees with Lancaster as follows:
8.01. Financial Information. The Company will provide to Lancaster in a
timely manner copies of its Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K.
8.02. Existence. The Company will preserve and maintain the existence,
rights, franchises and privileges of the Company in the jurisdiction of its
formation and in each jurisdiction in which the nature and character of its
properties and activities makes such qualification necessary, and where the
failure to maintain such existence, rights, franchises and privileges would have
a material adverse effect on the business and properties of the Company;
provided, however, that nothing herein contained shall be deemed to limit the
Company's right to convert from a limited partnership to a corporation by merger
or otherwise.
8.03. Insurance. The Company shall have no obligation to insure any of its
or any Company Affiliates' Tobacco in the custody of Lancaster. However,
Lancaster shall have no liability for any loss or damage to the Company's or any
Company Affiliates' Tobacco at any time the Tobacco is not insured by Lancaster,
unless such loss or damage is caused by Lancaster's negligence.
8.04. Notice of Default or Change of Condition. The Company will, promptly
upon discovery, notify Lancaster of any Default or any event of default under
this Agreement and amendments hereof, and will promptly notify Lancaster of any
material adverse change in the Company's financial condition.
8.05. Additional Documents. The Company will execute and deliver and cause
to be executed and delivered such documents or instruments as Lancaster may from
time to time reasonably request in order to carry out the intent of this
Agreement.
ARTICLE IX
DEFAULT
9.01. Events of Default. If any one or more of the following events
(individually, an "Event of Default" and collectively, the "Events of Default")
shall occur:
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(a) default shall be made in the obligation of the Company or any Company
Affiliate to pay when due any invoiced charge or other costs of or related to
purchasing, processing, handling, insuring, or otherwise dealing with Tobacco as
set forth in and required by this Agreement;
(b) the Company or any Company Affiliate shall default in the performance
or observance of any of its obligations under this Agreement (other than those
referred to in Section 9.01(a)), and such default shall continue unremedied for
a period of twenty (20) days after notice thereof to the Company by Lancaster;
(c) the Company or North Atlantic Trading shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any action to authorize any of the
foregoing;
(d) an involuntary case or other proceeding shall be commenced against the
Company or North Atlantic Trading seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee
of any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty (60)
days;
(e) this Agreement, in whole or in part, after delivery thereof, shall for
any reason cease to be a valid and binding obligation upon the Company or any
Company Affiliate, in whole or in part;
then, upon the happening of any one or more of the foregoing Events of Default,
Lancaster may, at its option, by providing notice to the Company, do any one or
more of the following: (i) declare all sums or obligations payable by the
Company under this Agreement or under any invoice or document to be immediately
due and payable; (ii) immediately terminate this Agreement and Lancaster's
obligations hereunder and require the Company to
-21-
immediately pay the Purchase Price and Termination Fee; (iii) terminate
Lancaster's obligations to purchase Tobacco and to process Tobacco subsequently
acquired by the Company or any Company Affiliate, but continue to process the
Tobacco in Lancaster's possession as of the date of termination, in accordance
with the provisions of Section 3.01(e); or (iv) exercise any other remedy,
either alone or in conjunction with one or more of the foregoing remedies, as
are available to Lancaster pursuant to other provisions of this Agreement, at
law, in equity, or otherwise, as Lancaster may elect in its sole discretion from
time to time. The Company expressly waives any presentment, demand, protest or
other notice of any kind.
9.02. Waivers. Failure or delay of Lancaster to exercise any of the
remedies provided in this Agreement or otherwise available shall not constitute
a waiver thereof by Lancaster, nor shall use of one or more of any such remedies
from time to time prevent the subsequent or concurrent resort to any other
remedy or remedies which shall be vested in Lancaster by this Agreement or at
law or in equity. To be effective, any waiver by Lancaster must be in writing,
and such waiver shall be limited in its effect to the condition or default
specified therein, and no such waiver shall extend to any subsequent condition
or default or impair any right consequent thereon.
ARTICLE X
MISCELLANEOUS
10.01. Force Majeure. Neither Lancaster nor the Company nor any Company
Affiliate shall be responsible for any delay or failure of performance under
this Agreement which is caused, in whole or in part, by any act, event or
condition beyond the reasonable control of Lancaster or the Company or such
Company Affiliate, including, as an illustration and not a limitation: fire;
acts of God; adverse weather; unavailability or shortage of fuel, utilities, raw
materials, equipment, means of repair, labor, contractors, carriers or means of
transportation; war; civil strife; governmental proclamation or regulation;
accidents; break-down of machinery; strike, lockout, boycott, or other
interruption of or disruption from labor (regardless of whether demands by labor
are within the power of Lancaster or the Company or such Company Affiliate to
grant); injunction, administrative regulation, compliance with the requirements
of law or governmental agencies, and the like; provided, however, that the
parties so affected shall (i) take reasonable steps to avoid or remove such
action, event or condition causing nonperformance and
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to resume performance with reasonable dispatch as soon as such action, event or
condition is removed, and (ii) give notice promptly to the other party as soon
as such action, event or condition causing non-performance is discovered,
including an estimate of the period thereof. With respect to Lancaster's
obligation to purchase Tobacco pursuant to Section 2.01, the Company
acknowledges that market conditions may be such from time to time as to render
it impossible, as a practicable matter, for Lancaster to perform, and in such
event Lancaster will notify the Company and keep the Company fully apprised of
market conditions. To the extent that any of the events or conditions covered by
this Section 10.01 occur, and as a result Lancaster is delayed in purchasing
Tobacco or processing tobacco, thereby causing the normal cycle of purchasing
Tobacco and processing tobacco for the Company or any Company Affiliate to be
extended, the Company and its Affiliates may, if Lancaster is unable to find
alternative means to meet its processing obligations under Section 3.01 and such
failure is likely to continue for more than thirty (30) days and will have a
material, adverse effect on the Company or any Company Affiliate, after ten (10)
days' prior written notice to Lancaster to such effect, find and utilize
alternative processing sources until Lancaster is again able to meet its
processing obligations under this Agreement and so notifies the Company. Nothing
contained in this Section 10.01 shall constitute an extension of time for
payment with respect to any purchased Tobacco or Processed Tobacco delivered to
or for the Company or its Affiliates.
10.02. Entire Agreement. This Agreement and the Schedules and Exhibits (if
any) attached to this Agreement set forth the entire agreement of the parties,
and supersede any prior writings or agreements. This Agreement may be amended
only in conformity with the provisions of this Agreement.
10.03. Notices, Etc. All notices, requests, demands, directions and other
communications provided for in this Agreement shall be in writing (including
telegraphic communication) and shall be sufficiently and satisfactorily given if
the same are mailed, postage prepaid, by certified or registered mail, return
receipt requested, or delivered by hand, or delivered by private courier, fee
prepaid, or delivered by facsimile transmission with positive confirmation of
receipt, to the applicable party at the address indicated below:
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If to the Company or any Company Affiliate:
National Tobacco Company, L.P.
000 Xxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Xx., President
FAX No. (000) 000-0000
with a copy to:
Xxxxxxx X. Xxx, Esquire
Fennebresque, Clark, Xxxxxxxx & Hay
Nations Bank Corporate Center, Suite 2900
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
FAX No. (000) 000-0000
If to Lancaster:
Lancaster Leaf Tobacco Company of
Pennsylvania, Inc.
000 Xxxx Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, President
FAX No. (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxx, Esquire
Xxxxxxx Xxxxxxxxx & Xxxxxxxx
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
FAX No. (000) 000-0000
or at such other address as shall be designated by a Person in accordance with
this Section 10.03. All such notices, requests, demands, directions and other
communications shall be effective when personally delivered or faxed, upon
actual delivery; or when delivered by private courier or telegraphed, shall be
effective one (1) Business Day after being delivered to the courier or telegraph
company; or when mailed by certified or registered mail, shall be effective
three (3) Business Days after being deposited in the mails.
10.04. Applicable Law. This Agreement and the rights and obligations of the
parties hereunder, shall be governed by and
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construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to Pennsylvania's laws of conflict of laws.
10.05. Consent to Jurisdiction and Waiver of Service.
(a) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE COURT OF COMMON PLEAS
OF LANCASTER COUNTY, PENNSYLVANIA, OR, AT LANCASTER'S OPTION, THE UNITED STATES
DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, SHALL HAVE EXCLUSIVE
JURISDICTION AND VENUE IN ANY LAWSUIT OR ACTION PERTAINING TO THIS AGREEMENT OR
TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT.
(b) The Company hereby waives personal service of the Writ, Complaint, and
other process issued in any action or suit and agrees that service of such Writ,
Complaint and other process may be made by registered or certified mail, or by
private courier addressed to the Company at the address set forth in this
Agreement. Nothing in this Agreement shall be deemed or operate to affect the
right of Lancaster to serve legal process in any other manner permitted by law,
or to preclude the enforcement by Lancaster of any claim, or any judgment or
order obtained in such forum, or the taking of any action under this Agreement
to enforce same, in any other appropriate forum or jurisdiction.
10.06. Product Liability and Indemnity. The Company shall indemnify and
hold harmless Lancaster and its Affiliates, and their employees, officers and
directors, from and against liability (including punitive damages) and costs
(including reasonable attorneys' fees) arising out of a claim or claims for
personal injury, illness, disease or death caused by, or alleged to have been
caused by, the purchase or use of chewing tobacco or other tobacco products or
components of tobacco products manufactured and sold by the Company (a "Claim"),
except that this indemnity shall not apply to any Claim to the extent caused by
or arising out of the negligence or intentional misconduct of Lancaster or its
Affiliates or any of their employees, officers, directors, contractors or
agents. The Company's indemnity obligation as stated herein shall be conditioned
on (1) Lancaster providing reasonable notice of the assertion or initiation of
any Claim for which it asserts a right of indemnity hereunder (2) Lancaster
granting to the Company the right to direct and provide (through counsel
selected by the Company) the defense of any such Claim, and (3) Lancaster's
reasonable cooperation in the preparation and presentation of such defense,
which cooperation
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shall include cooperating in discovery and providing reasonable access to and
the testimony of Lancaster officers, directors, employees, contractors and
agents who may be witnesses or potential witnesses. Prior to the settlement,
release or other disposition of any such Claim ("Disposition"), the Company
shall provide written notice to Lancaster of the terms and conditions of the
proposed Disposition, but Lancaster shall have absolute discretion in whether to
accept or reject any proposed Disposition to the extent such Disposition would
affect a Claim as to which Lancaster asserts a right to indemnity hereunder. The
Company shall have no indemnity obligation hereunder with respect to any Claim
that Lancaster shall settle or otherwise compromise, in whole or in part,
without the prior written consent of the Company. This indemnity shall survive
the termination of this Agreement for any reason whatsoever.
10.07. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
10.08. Binding Effect; Assignment. This Agreement shall bind and inure to
the benefit of the Company and Lancaster, and their respective successors and
assigns, except that neither the Company nor Lancaster shall have the right to
assign any of its rights hereunder or any interest herein without the written
consent of the other party, which consent may be arbitrarily re fused. No Person
not a party to this Agreement is intended to be benefitted hereby or shall have
any rights hereunder. Notwith standing the foregoing, the Company may assign as
collateral security its rights under this Agreement to its senior secured note
holders and lenders; provided, however, that except as expressly provided
otherwise in any agreement that may be subsequently entered into between or
among Lancaster and any of the Company's senior secured note holders or lenders,
Lancaster shall have no obligation to such note holders or lenders under this
Agreement unless and until such note holders or lenders shall have agreed to
assume the obligations of the Company under this Agreement.
10.09. Severability of Provisions, Etc. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remainder of this
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Agreement or the validity or enforceability of such provision in any other
jurisdiction.
10.10. Captions. Article and Section captions in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
10.11. Recovery of Expenses After Default. If Lancaster or the Company
defaults in the performance of the obligations under this Agreement, and the
other sues to enforce the provisions of this Agreement, or to cure the default,
or for damages, the prevailing party shall be entitled to recover its costs
incurred in such proceeding, including reasonable attorney's fees.
10.12. Lancaster Expenses. The Company will pay to Lancaster at Closing,
and from time to time upon demand of Lancaster thereafter, all reasonable
expenses incurred by Lancaster (including legal fees and expenses) with respect
to (a) advice concerning, or actions taken in connection with, the terms,
conditions and requirements of this Agreement and any matters relating to the
Company, and (b) the enforcement of this Agreement, including without limitation
all reasonable costs and expenses of Lancaster (including attorneys' fees and
expenses) in any bankruptcy proceedings.
10.13. Rules of Construction. As used in this Agreement, neutral pronouns
and any variations thereof shall be deemed to include the feminine and masculine
and all terms used in the singular shall be deemed to include the plural, and
vice versa, as the context may require. The words "herein", "hereof", "hereto"
and "hereunder" and other words of similar import refer to this Agreement as a
whole, including the Schedules and Ex hibits hereto, as the same may from time
to time be amended or supplemented and not to any subdivision contained in this
Agree ment. The word "including" when used herein means "including, without
limitation", is intended to be construed in the widest possible context, and is
not intended to be exclusive notwithstanding any contrary rule of statutory
interpretation. References herein to a Section, subsection, clause, Schedule or
Exhibit shall refer to the appropriate Section, subsection, clause, Schedule or
Exhibit in or to this Agreement.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, the Company
and Lancaster together with NTC Holding as guarantor, have caused this Agreement
to be duly and properly executed as of the 25th day of June, 1997.
NATIONAL TOBACCO COMPANY, L.P.,
a Delaware limited partnership,
by its authorized General Partner,
NATIONAL TOBACCO FINANCE
CORPORATION
By:
-------------------------------
Xxxxxx X. Xxxxx, Xx., President
its authorized officer
[Signatures continued on next page]
LANCASTER LEAF TOBACCO
COMPANY OF PENNSYLVANIA, INC.
By:
-------------------------------
Xxxxxxx X. Xxxxxx,
Executive Vice President
its authorized officer
For purposes of guarantying and becoming surety to Lancaster for the payment and
performance of the obligations of the Company and each Company Affiliate
pursuant to the terms of this Agreement.
NORTH ATLANTIC TRADING
ACQUISITION COMPANY, INC.,
to be renamed NORTH
ATLANTIC TRADING COMPANY,
INC.
By:
-------------------------------
Xxxxxx X. Xxxxx, Xx., President
its authorized officer
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