AGREEMENT AND PLAN OF REORGANIZATION

Exhibit 2.1

 

Execution Version

 

AGREEMENT AND PLAN OF REORGANIZATION

 

dated as of

 

November 7, 2004

 

among

 

DIMON Incorporated

 

and

 

Standard Commercial Corporation

TABLE OF CONTENTS

 

 

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Exhibits

 

 

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AGREEMENT AND PLAN OF REORGANIZATION

 

AGREEMENT AND PLAN OF REORGANIZATION, dated as of November 7, 2004, among DIMON Incorporated, a Virginia corporation (“ DIMON ”), and Standard Commercial Corporation, a North Carolina corporation (the “ Company ”). DIMON and the Company are hereinafter sometimes collectively referred to as the “ Constituent Corporations .” Capitalized terms not otherwise defined herein are used as defined in Article 10 hereof.

 

WHEREAS, the Boards of Directors of DIMON and the Company have approved and deem it in the best interests of their respective shareholders to consummate the merger of the Company with and into DIMON upon the terms and subject to the conditions set forth herein (the “ Merger ”) pursuant to which each outstanding share of common stock, $0.20 par value per share, of the Company (the “ Company Common Stock ”), will be converted into the right to receive the Merger Consideration (as hereinafter defined), upon the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”); and

 

WHEREAS, simultaneously with the execution and delivery of this Agreement, DIMON has entered into an agreement (the “ Company Shareholders Agreement ”) with certain shareholders of the Company listed on Exhibit 6 hereto pursuant to which such shareholders agreed to vote the shares of Company Common Stock owned by them in favor of the Merger.

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, DIMON and the Company agree as follows:

 

ARTICLE 1

 

THE TRANSACTIONS

 

1.1. The Merger . Upon the terms and subject to the conditions of this Agreement and the Articles of Merger and in accordance with the VSCA and the NCBCA, at the Effective Time (as hereinafter defined), the Company shall be merged with and into DIMON, and DIMON shall be the surviving corporation in the Merger (in such capacity, the “ Surviving Corporation ”).

 

1.2. Effective Time; Filing of Articles of Merger . The Merger shall be effected by the filing at the time of the Closing (as hereinafter defined) of properly executed articles of merger, including a plan of merger and amended and restated articles of incorporation attached thereto, substantially in the form attached as Exhibit 1 hereto (the “ Articles of Merger ”) with the State Corporation Commission of Virginia (the “ SCC ”) and with the Secretary of State of the State of North Carolina (the “ NCSOS ”) in accordance with the provisions of the VSCA and NCBCA, respectively. The Merger shall become effective at the time specified in the Articles of Merger (the “ Effective Time ”).

 

1.3. Certificate of Incorporation . At the Effective Time, the amended and restated articles of incorporation attached to the Articles of Merger shall be the articles of incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and the VSCA.

 

1.4. By-Laws . At the Effective Time, the by-laws of DIMON, as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until thereafter amended in accordance with its terms and the VSCA.

 

1.5. Directors and Officers . The directors and officers of DIMON immediately following the Effective Time shall be as set forth in Section 5.14 and each such director and officer shall hold office in accordance with the articles of incorporation and by-laws of the Surviving Corporation until his or her successor is duly appointed and qualified.

 

1.6. Additional Actions . If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that consistent with the terms of this Agreement any further assignments or any other acts are necessary or desirable (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, title to and possession of any property or right of the Company acquired or to be acquired by reason of, or as a result of, the Merger, or (ii) otherwise to carry out the purposes of this Agreement, then, subject to the terms and conditions of this Agreement, the Company and its officers and directors shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such documents and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in the Surviving Corporation and otherwise to carry out the purposes of this Agreement; and the officers and directors of the Surviving Corporation are fully authorized in the name of the Company to take any and all such action.

 

1.7. Time and Place of Closing . The closing of the Merger (the “ Closing ”) shall take place (a) at the offices of Hunton & Williams LLP, Riverfront Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219 as soon as practicable and no later than the second business day following satisfaction or waiver of all of the conditions set forth in Article 6, or (b) at such other place, at such other time or on such other date as DIMON and the Company may mutually agree (the date of the Closing is hereinafter sometimes referred to as the “ Closing Date ”).

 

1.8. Effect of Merger on Capital Stock .

 

(a) At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of the Company, each share of Company Common Stock, issued and outstanding at the Effective Time (other than Excluded Shares) shall, subject to and in accordance with Section 1.9 hereof, be converted into, and become exchangeable for 3.0 shares of common stock, without par value, of DIMON, including the attached Common Stock purchase rights issued pursuant to the DIMON Rights Plan (as defined herein) (“ DIMON Common Stock ”) (the “ Merger Consideration ”).

 

(b) Excluded Shares . Each share of Company Common Stock issued and outstanding as of the Effective Time that is owned by the Company (but not including shares

 

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owned by a Subsidiary of the Company) or by DIMON (the “ Excluded Shares ”) shall be cancelled, and no consideration shall be delivered in exchange therefor.

 

(c) Effect of Merger on Capital Stock . At the Effective Time, all Company Common Stock shall no longer be outstanding and shall be canceled and retired and shall cease to exist, and each certificate (a “ Certificate ”) representing any of such Company Common Stock (other than Excluded Shares) shall thereafter represent only the right to receive the Merger Consideration and the right, if any, to receive cash in lieu of fractional shares pursuant to Section 1.9(e) and any dividends or other distributions pursuant to Section 1.9(c).

 

1.9. Exchange Procedures .

 

(a) As of the Effective Time, DIMON shall deposit, or shall cause to be deposited, with an exchange agent selected by DIMON, with the Company’s prior approval, which shall not be unreasonably withheld (the “ Exchange Agent ”), for the benefit of the holders of Company Common Stock, certificates representing the shares of DIMON Common Stock to be issued pursuant to Section 1.8 and any cash, dividends or other distributions with respect to the DIMON Common Stock to be issued or paid pursuant to Section 1.9(c) (such cash and certificates for shares of DIMON Common Stock, together with the amount of any dividends or other distributions payable with respect thereto, being hereinafter referred to as the “ Exchange Fund ”).

 

(b) In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, the Merger Consideration together with any other cash, dividends or distributions in respect thereof, may be issued and/or paid to such a transferee if the Certificate formerly representing such Company Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. If any certificate for shares of DIMON Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefore is registered, it shall be a condition of such exchange that the Person (as defined herein) requesting such exchange shall pay any transfer or other taxes required by reason of the issuance of certificates for shares of DIMON Common Stock in a name other than that of the registered holder of the Certificate surrendered, or shall establish to the satisfaction of DIMON or the Exchange Agent that such tax has been paid or is not applicable.

 

(c) Distributions with Respect to Unexchanged Shares; Voting .

 

(i) All shares of DIMON Common Stock to be issued pursuant to the Merger shall be deemed issued and outstanding as of the Effective Time and whenever a dividend or other distribution is declared by DIMON in respect of the DIMON Common Stock, the record date for which is at or after the Effective Time, that declaration shall include dividends or other distributions in respect of all shares issuable pursuant to this Agreement, provided that no dividends or other distributions declared or made in respect of the DIMON Common Stock after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of DIMON Common Stock represented thereby until the

 

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holder of such Certificate shall surrender such Certificate in accordance with this Section 1.9. Thereafter, subject to the effect of applicable laws, following surrender of any such Certificate, there shall be issued and/or paid to the holder of the certificates representing whole shares of DIMON Common Stock issued in exchange therefor, without interest, (A) at the time of such surrender, the dividends or other distributions with a record date after the Effective Time theretofore payable with respect to such whole shares of DIMON Common Stock and not paid and (B) at the appropriate payment date, the dividends or other distributions payable with respect to such whole shares of DIMON Common Stock with a record date after the Effective Time but with a payment date subsequent to surrender.

 

(ii) Holders of unsurrendered Certificates representing Merger Consideration shall be entitled to vote after the Effective Time at any meeting of DIMON shareholders the number of whole shares of DIMON Common Stock represented by such Certificates, regardless of whether such holders have exchanged their Certificates.

 

(d) Transfers . After the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing shares of Company Common Stock are presented to the Surviving Corporation or the Exchange Agent, they shall be canceled and (subject to applicable abandoned property, escheat and similar laws) exchanged for the Merger Consideration (and cash in lieu of fractional interests in accordance with Section 1.9(e) and any dividends or other distributions pursuant to Section 1.9(c)) without any interest thereon, as provided in this Section 1.9.

 

(e) Fractional Shares . Notwithstanding any other provision of this Agreement, no fractional shares of DIMON Common Stock will be issued in the Merger and any holder of Company Common Stock entitled to receive a fractional share of DIMON Common Stock but for this Section 1.9(e) shall be entitled to receive a cash payment in lieu thereof, which payment shall equal the product of (i) such holder’s proportionate interest in a share of DIMON Common Stock, and (ii) the average of the per share last sales prices, regular way, of DIMON Common Stock as reported on the New York Stock Exchange, Inc. composite transactions reporting system (as reported in the New York City edition of The Wall Street Journal or, if not reported thereby, another authoritative source) for the twenty (20) consecutive trading days ending on (and including) the second trading day prior to the Closing.

 

(f) Termination of Exchange Fund . Any portion of the Exchange Fund (including the proceeds of any investments thereof and any DIMON Common Stock) that remains unclaimed by the shareholders of the Company for 180 days after the Effective Time shall be returned to the Surviving Corporation. Any shareholders of the Company who have not theretofore complied with this Section 1.9 shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration and any cash, dividends and other distributions in respect thereof payable and/or issuable pursuant to Section 1.8 and Section 1.9 upon due surrender of their Certificates (or affidavits of loss and indemnification in lieu thereof), in each case, without any interest thereon. Notwithstanding the foregoing, none of DIMON, the

 

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Surviving Corporation, the Exchange Agent or any other Person shall be liable to any former holder of Company Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

 

(g) Lost, Stolen or Destroyed Certificates . In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by DIMON, the posting by such Person of a bond in customary amount as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen, or destroyed Certificate the Merger Consideration and any cash payable in lieu of fractional shares and any unpaid dividends or other distributions in respect of the shares of Company Common Stock represented by such Certificate pursuant to this Agreement.

 

(h) Affiliates . Notwithstanding anything herein to the contrary, Certificates surrendered for exchange into Merger Consideration by any “affiliate” (as determined pursuant to Section 5.8) of the Company shall not be exchanged until DIMON has received a written agreement from such Person as provided in Section 5.8 hereof.

 

(i) Withholding . The Exchange Agent or the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as the Exchange Agent or the Surviving Corporation, as the case may be, is required to deduct and withhold with respect to such payment under the Code or any provisions of state, local or foreign tax law. Any amounts so withheld shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Common Stock in respect of which such deduction and withholding was made.

 

1.10. Company Stock Options .

 

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of the Company or the holder thereof, each unexpired and unexercised option to purchase shares of Company Common Stock (a “ Company Stock Option ”) outstanding under the Company Stock Plans (as hereinafter defined) or otherwise granted by the Company outside of any Company Stock Plan, will be assumed by DIMON as hereinafter provided. To the extent that the “vesting” or exercisability (or acceleration of “vesting” or exercisability) of any Company Stock Option is permitted in connection with the Merger but not required by the applicable governing instruments, then the Company shall take all reasonable action within its control to cause such exercisability or acceleration not to occur and shall otherwise cause the Company Stock Options to be converted into DIMON Stock Options as provided herein (but, for the avoidance of doubt, shall not be required to make any amendment to such governing instrument that would require the consent of the holder of such instrument or the approval of the Company’s shareholders). Notwithstanding the foregoing, the Company may take action to amend the terms of the Company Stock Plans or Company Stock Options to provide that vesting or exercisability of Company Stock Options held by any individual shall occur if, within two years after the Effective Time, such individual’s employment or service with the Surviving Corporation is terminated by the Surviving Corporation other than for cause or such individual resigns for good reason (as defined below). At the Effective Time, by virtue of the Merger and without any further action on the part of the Company or the holder thereof, each Company

 

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Stock Option will be automatically converted into an option (the “ DIMON Stock Option ”) to purchase the Merger Consideration at a price equal to the exercise price specified in such Company Stock Option as adjusted for the Merger. Such DIMON Stock Option shall otherwise be subject to the same terms and conditions as such Company Stock Option. At the Effective Time, (i) all references to the Company in the Company Stock Plans, the applicable stock option or other awards agreements issued thereunder and in any other Company Stock Options shall be deemed to refer to DIMON; and (ii) DIMON shall assume the Company Stock Plans and all of the Company’s obligations with respect to the Company Stock Options.

 

(b) At the Effective Time, by virtue of the Merger and without any further action on the part of the Company or the holder thereof, each unvested restricted stock award, restricted stock unit, stock appreciation right or performance share award of the Company (“ Company Equity Based Award ”) shall be assumed by DIMON and shall be automatically converted into the Merger Consideration and otherwise subject to the same terms and conditions as the related Company Equity Based Award. To the extent that acceleration of vesting of any Company Equity Based Award is permitted in connection with the Merger but not required by the applicable governing instruments, then the Company shall take all reasonable action within its control to cause such acceleration not to occur and shall otherwise cause the Company Equity Based Award to be converted into the Merger Consideration as provided herein (but, for the avoidance of doubt, shall not be required to make any amendment to such governing instrument that would require the consent of the holder of such instrument or the approval of the Company’s shareholders). Notwithstanding the foregoing, the Company may take action to amend the terms of the Company Stock Plans or Company Equity Based Award to provide that vesting or exercisability of Company Equity Based Awards held by any individual shall occur if, within two years after the Effective Time, such individual’s employment or service with the Surviving Corporation is terminated by the Surviving Corporation other than for cause or such individual resigns for good reason (as defined below).

 

(c) In respect of each Company Stock Option as converted into a DIMON Stock Option pursuant to Section 1.10(a) and assumed by DIMON, and the shares of DIMON Common Stock underlying such option, DIMON shall file as soon as practicable after the Effective Time with the SEC, and keep current the effectiveness of, a registration statement on Form S-8 (which may be accomplished by amendment of the registration statement on Form S-4) or other appropriate form for as long as such options or equity based awards remain outstanding (and maintain the current status of the prospectus with respect thereto). DIMON agrees to reserve a number of shares of DIMON Common Stock equal to the number of shares of DIMON Common Stock issuable upon the exercise of such Company Stock Options.

 

(d) Except as disclosed in Section 1.10(d) of the Company Schedule of Exceptions, the Company agrees that, prior to the Effective Time or earlier termination hereof in accordance with Article 8 hereof, it will not grant any stock options, restricted stock, restricted stock units, stock appreciation rights, limited stock appreciation rights, performance shares or awards or any other similar awards or instruments and will not permit cash payments to holders of Company Stock Options or Company Equity-Based Awards in lieu of the assumption thereof by DIMON, as described in this Section 1.10. Except as disclosed in Section 1.10(d) of the DIMON Schedule of Exceptions, DIMON agrees that, prior to the Effective Time or earlier termination in accordance with Article 8 hereof, it will not grant any stock options, restricted

 

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stock, restricted stock units, stock appreciation rights, limited stock appreciation rights, performance shares or awards or any other similar awards or instruments.

 

(e) As used in this Section 1.10, “good reason” shall mean (i) the assignment to the individual of any duties that are inconsistent with his or her position with the Company as of the Effective Time, or (ii) a decrease in the individual’s annual base salary, target bonus or aggregate benefit levels from those in effect as of the Effective Time.

 

ARTICLE 2

 

OTHER AGREEMENTS

 

2.1. Access . Subject to the provisions of the Confidentiality Agreement referred to in Section 2.7 below, and so long as this Agreement has not been terminated as herein provided, upon reasonable request, each of the Company and DIMON shall grant to one another and their respective agents, accountants, attorneys and other advisers full access to all of the properties, facilities, books, records, financial statements and other documents and materials relating to its financial condition, assets, liabilities and business, including, without limitation, permitting (at the requesting party’s expense and subject to the prior approval of the other party, which approval shall not be unreasonably withheld) to: (a) conduct appraisals of the real estate, equipment, buildings, inventories of tobacco and other goods and supplies and other properties of the other party; and (b) conduct an environmental and occupational safety inspection of the properties of the other party. In addition, to the extent permitted by Law, the parties shall confer and consult with one another and their respective representatives, as each may reasonably request, to report on operational matters, financial matters and the general status of ongoing business operations of the Constituent Corporations.

 

2.2. Company Schedule of Exceptions .

 

(a) Company Schedule of Exceptions . The Company has delivered to DIMON the Company Schedule of Exceptions which was signed by the President, Chief Executive Officer, Chief Financial Officer and the Secretary of the Company stating that the Company Schedule of Exceptions was delivered pursuant to this Agreement and is the Company Schedule of Exceptions referred to in this Agreement. The Company Schedule of Exceptions is deemed to constitute an integral part of this Agreement and to modify, as specified, the representations, warranties, covenants or agreements of the Company contained in this Agreement.

 

(b) Updates . The Company shall update the Company Schedule of Exceptions (by either (i) revision of specific sections included in the original Company Schedule of Exceptions referred to in Section 2.2(a) or (ii) addition of new sections that were neither included in said original Company Schedule of Exceptions nor referred to in or contemplated by this Agreement as of the date of this Agreement) as soon as practicable by written notice to DIMON to reflect any matters which occur from and after the date of this Agreement and which, if existing on the date of delivery of the Company Schedule of Exceptions, would have been required to be described in the Company Schedule of Exceptions. If the Company Schedule of Exceptions is updated by the addition of new sections not referred to in or contemplated by this

 

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Agreement as of the date of this Agreement: (i) each new section shall be numbered to correspond to the applicable section or subsection which such new section is intended to modify and (ii) the applicable section or subsection corresponding to such new section shall be read to include the words “except as set forth in section [insert applicable section or subsection number]” or words of similar meaning to appropriately connote the modifications created by such new section. If requested by DIMON prior to Closing, the Company shall meet and discuss with DIMON prior to Closing any update to the Company Schedule of Exceptions disclosed by the Company which is, in the reasonable judgment of DIMON, adverse in any manner to either the Company or DIMON. The delivery of an update to the Company Schedule of Exceptions pursuant to this Section 2.2 shall not cure any breach of any representation, warranty or covenant made in this Agreement, have any effect for the purpose of determining the satisfaction of the conditions set forth in Article 6 of this Agreement or otherwise limit or affect the remedies available hereunder to any party.

 

2.3. DIMON Schedule of Exceptions .

 

(a) DIMON Schedule of Exceptions . DIMON has delivered to the Company the DIMON Schedule of Exceptions which was signed by the President, Chief Executive Officer, Chief Financial Officer and the Secretary of DIMON stating that the DIMON Schedule of Exceptions was delivered pursuant to this Agreement and is the DIMON Schedule of Exceptions referred to in this Agreement. The DIMON Schedule of Exceptions is deemed to constitute an integral part of this Agreement and to modify, as specified, the representations, warranties, covenants or agreements of DIMON contained in this Agreement.

 

(b) Updates . DIMON shall update the DIMON Schedule of Exceptions (by either (i) revision of specific sections included in the original DIMON Schedule of Exceptions referred to in Section 2.3(a) or (ii) addition of new sections that were neither included in said original DIMON Schedule of Exceptions nor referred to in or contemplated by this Agreement as of the date of this Agreement) as soon as practicable by written notice to the Company to reflect any matters which occur from and after the date of this Agreement and which, if existing on the date of delivery of the DIMON Schedule of Exceptions, would have been required to be described in the DIMON Schedule of Exceptions. If the DIMON Schedule of Exceptions is updated by the addition of new sections not referred to in or contemplated by this Agreement as of the date of this Agreement: (i) each new section shall be numbered to correspond to the applicable section or subsection which such new section is intended to modify and (ii) the applicable section or subsection corresponding to such new section shall be read to include the words “except as set forth in section [insert applicable section or subsection number]” or words of similar meaning to appropriately connote the modifications created by such new section. If requested by the Company prior to Closing, DIMON shall meet and discuss with the Company prior to Closing any update to the DIMON Schedule of Exceptions disclosed by DIMON which is, in the reasonable judgment of the Company, adverse in any manner to either DIMON or the Company. The delivery of an update to the DIMON Schedule of Exceptions pursuant to this Section 2.3(b) shall not cure any breach of any representation, warranty or covenant made in this Agreement, have any effect for the purpose of determining the satisfaction of the conditions set forth in Article 6 of this Agreement or otherwise limit or affect the remedies available hereunder to any party.

 

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2.4. Acquisition Proposals Relating to the Company .

 

(a) Prior to the Effective Time or any earlier termination hereof in accordance with Article 8 hereof, the Company agrees that none of it, any of its Subsidiaries or Affiliates, any of the respective directors, officers, employees, agents or representatives of the foregoing, will, directly or indirectly, (i) solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving the Company, or the acquisition of all or substantially all of the assets or capital stock of the Company (other than the disposition of any assets or stock related solely to the Company’s wool business) (a “ Company Acquisition Transaction ”) or (ii) negotiate, explore or otherwise engage in discussions with any Person (other than DIMON and its representatives) with respect to any Company Acquisition Transaction, or which may reasonably be expected to lead to a proposal for a Company Acquisition Transaction, or enter into any agreement, arrangement or understanding with respect to any such Company Acquisition Transaction; provided , however , that the Company may, in response to an unsolicited written proposal from a third party that the Board of Directors of the Company determines in good faith is reasonably likely to result in a Company Superior Proposal (as hereinafter defined), furnish information to and engage in discussions and negotiations with such third party, but only if the Board of Directors of the Company determines in good faith, after consultation with its financial advisors and after receiving advice from outside and independent counsel, that failing to take such action would result in a breach of the duties of such Board of Directors under applicable Law. It is understood and agreed, without limitation of the Company’s obligations, that any violation of this Section 2.4 by any director, officer, Affiliate, investment banker, financial advisor, attorney or other advisor or representative of the Company, whether or not such Person is purporting to act on behalf of the Company, or otherwise, shall be deemed to be a breach of this Section 2.4 by the Company.

 

(b) The Company agrees that, as of the date hereof, it, its Subsidiaries and Affiliates, and the respective directors, officers, employees, agents and representatives of the foregoing, shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person (other than DIMON and its representatives) conducted heretofore with respect to any Company Acquisition Transaction. The Company agrees promptly to advise DIMON in writing of the existence, prior to the Effective Time or any earlier termination hereof in accordance with Article 8 hereof, of (x) any inquiries or proposals (or desire to make a proposal) received by (or indicated to), any such information requested from, or any negotiations or discussions sought to be initiated or continued with, the Company, its Subsidiaries or Affiliates, or any of the respective directors, officers, employees, agents or representatives of the foregoing, in each case from a Person (other than DIMON and its representatives) with respect to a Company Acquisition Transaction, and (y) the terms thereof, including the identity of such third party and the terms of any financing arrangement or commitment in connection with such Company Acquisition Transaction, and to update on an ongoing basis or upon DIMON’s reasonable request, the status thereof. As used herein, “ Company Superior Proposal ” means a bona fide, written and unsolicited proposal or offer made by any Person (or group other than DIMON or any of its Subsidiaries) with respect to a Company Acquisition Transaction on terms which, as determined by the Board of Directors of the Company in good faith and in the exercise of reasonable judgment (after receiving advice of

 

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independent financial advisors), are more favorable from a financial point of view to the Company and the Company Shareholders than the transactions contemplated hereby and is reasonably likely to be completed.

 

2.5. Acquisition Proposals Relating to DIMON .

 

(a) Prior to the Effective Time or any earlier termination hereof in accordance with Article 8 hereof, DIMON agrees that none of it, any of its Subsidiaries or Affiliates, any of the respective directors, officers, employees, agents or representatives of the foregoing, will, directly or indirectly, (i) solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving DIMON, or the acquisition of all or substantially all of the assets or capital stock of DIMON (a “ DIMON Acquisition Transaction ”) or (ii) negotiate, explore or otherwise engage in discussions with any Person (other than the Company and its representatives) with respect to any DIMON Acquisition Transaction, or which may reasonably be expected to lead to a proposal for a DIMON Acquisition Transaction, or enter into any agreement, arrangement or understanding with respect to any such DIMON Acquisition Transaction; provided , however , that DIMON may, in response to an unsolicited written proposal from a third party that the Board of Directors of DIMON determines in good faith is reasonably likely to result in a DIMON Superior Proposal (as hereinafter defined), furnish information to and engage in discussions and negotiations with such third party, but only if the Board of Directors of DIMON determines in good faith, after consultation with its financial advisors and after receiving advice from outside and independent counsel, that such action is consistent with its duties under applicable Law. It is understood and agreed, without limitation of DIMON’s obligations, that any violation of this Section 2.5 by any director, officer, Affiliate, investment banker, financial advisor, attorney or other advisor or representative of DIMON, whether or not such Person is purporting to act on behalf of DIMON, or otherwise, shall be deemed to be a breach of this Section 2.5 by DIMON.

 

(b) DIMON agrees that, as of the date hereof, it, its Subsidiaries and Affiliates, and the respective directors, officers, employees, agents and representatives of the foregoing, shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person (other than the Company and its representatives) conducted heretofore with respect to any DIMON Acquisition Transaction. DIMON agrees promptly to advise the Company in writing of the existence, prior to the Effective Time or any earlier termination hereof in accordance with Article 8 hereof, of (x) any inquiries or proposals (or desire to make a proposal) received by (or indicated to), any such information requested from, or any negotiations or discussions sought to be initiated or continued with, DIMON, its Subsidiaries or Affiliates, or any of the respective directors, officers, employees, agents or representatives of the foregoing, in each case from a Person (other than the Company and its representatives) with respect to a DIMON Acquisition Transaction, and (y) the terms thereof, including the identity of such third party and the terms of any financing arrangement or commitment in connection with such DIMON Acquisition Transaction, and to update on an ongoing basis or upon the Company’s reasonable request, the status thereof. As used herein, “ DIMON Superior Proposal ” means a bona fide, written and unsolicited proposal or offer made by any Person (or group other than the Company or any of its Subsidiaries) with respect to a DIMON Acquisition Transaction on terms which, as determined by the Board of Directors of DIMON in good faith and in the

 

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exercise of good faith business judgment (after receiving advice of independent financial advisors), are more favorable from a financial point of view to DIMON and DIMON Shareholders than the transactions contemplated hereby and is reasonably likely to be completed.

 

2.6. Public Announcements . Any public announcement made by or on behalf of either DIMON or the Company prior to the termination of this Agreement pursuant to Article 8 hereof concerning this Agreement, the transactions described herein or any other aspect of the dealings heretofore had or hereafter to be had between DIMON and the Company and their respective Affiliates must first be approved by the other party (any such approval not to be unreasonably withheld), subject to either party’s obligations under applicable Law (but such party shall use its commercially reasonable efforts to consult with the other party as to all such public announcements).

 

2.7. Confidentiality Agreement . DIMON and the Company agree that the Mutual Confidentiality and Standstill Agreement entered into between DIMON and the Company, dated April 28, 2004, remains in effect, but shall at the Effective Time be deemed to have terminated without further action by the parties.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants to DIMON that, except as set forth on the Company Schedule of Exceptions:

 

3.1. Due Incorporation; Interests in Subsidiaries and Investee Companies . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, has the corporate power and authority and all necessary governmental approvals to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified to do business and is in good standing in each of the jurisdictions in which the ownership of its properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Section 3.1 of the Company Schedule of Exceptions sets forth a complete and correct list of all of the Company’s Subsidiaries, showing the name, type of entity, jurisdiction of organization and type and amount of the Company’s ownership in each of such Subsidiary. The Company has delivered to DIMON copies of the articles of incorporation and by-laws or other organizational documents of the Company and each of the Subsidiaries indicated on Section 3.1 of the Company Schedule of Exceptions. Such articles of incorporation and by-laws or other organizational documents are complete and correct and in full force and effect, and neither the Company nor any of its Subsidiaries is in violation of any of the provisions of their respective articles of incorporation, by-laws or similar organizational documents. Each of the Company’s Subsidiaries is duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization, has the corporate, partnership or other applicable power and authority and all necessary governmental approvals to own its properties and assets and to carry on its business as it is now being conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its properties or the conduct of its

 

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business requires such qualification, except for jurisdictions in which the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Except as set forth in Section 3.1 of the Company Schedule of Exceptions, all the outstanding shares of capital stock of, or other ownership interests in, the Company’s Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and are owned by the Company, directly or indirectly (except for director’s qualifying shares and shares required by Law to be locally owned shown on Section 3.1 of the Company Schedule of Exceptions), free and clear of all Liens, claims, mortgages, encumbrances, pledges, security interests, equities or charges of any kind. All of the Company’s direct and indirect interests in its Subsidiaries and in all other entities in which it owns an interest and in the income and loss of such Subsidiaries and other entities are reflected properly in accordance with GAAP (including, without limitation, FASB Interpretation No. 46, as amended and revised) and applicable Law in their respective books and records and in the Company’s consolidated financial statements included in the Company SEC Reports. Other than the Subsidiaries, there are no other Persons in which the Company owns, of record or beneficially, any direct or indirect equity or similar interest or any right (contingent or otherwise) to acquire the same.

 

3.2. Capitalization .

 

(a) The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock and 1,000,000 shares of preferred stock, par value $1.65 per share (“ Company Preferred Stock ”). As of the date hereof,

 

(i) 13,735,427 shares of Company Common Stock are issued and outstanding (excluding the shares set forth in (vi) below) and no shares of Company Preferred Stock are issued and outstanding;

 

(ii) 55,761 shares of Company Common Stock are subject to outstanding options and other awards issued pursuant to the Company’s Performance Improvement Compensation Plan (the “ 1992 PIC Plan ”) and no shares of Company Common Stock are reserved for issuance under the 1992 PIC Plan;

 

(iii) 358,219 shares of Company Common Stock are subject to outstanding options and other awards issued pursuant to the Company’s 2001 Performance Improvement Compensation Plan (the “ 2001 PIC Plan ”) and no shares of Company Common Stock are reserved for issuance under the 2001 PIC Plan;

 

(iv) 73,963 shares of the Company Common Stock are subject to outstanding options and other awards issued pursuant to the Company’s 2004 Performance Improvement Compensation Plan (the “ 2004 PIC Plan ”) and 1,161,663 shares of Company Common Stock are reserved for issuance under the 2004 PIC Plan;

 

(v) options to purchase 25,144 shares of the Company Common Stock are outstanding that were granted under other employee stock

 

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incentive plans (and together with the 1992 PIC Plan, the 2001 PIC Plan and the 2004 PIC Plan, the “ Company Stock Plans ”); and

 

(vi) 2,617,707 shares of Company Common Stock are issued and held in the treasury of the Company or are owned by any Subsidiary of the Company.

 

(b) Section 3.2 of the Company Schedule of Exceptions sets forth a complete and correct list of all holders of Existing Options, including such person’s name, the number of options (vested, unvested and total) held by such person and the exercise price for each such option. All the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights. Except as set forth above or in Section 3.2 of the Company Schedule of Exceptions, other than the transactions contemplated by this Agreement, (1) there are no shares of capital stock of the Company authorized, issued or outstanding, (2) there are no authorized or outstanding options, warrants, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock or other equity interests of the Company or any of its Subsidiaries, obligating the Company or any of its Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or other equity interest in the Company or any of its Subsidiaries or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment, and (3) there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares or other capital stock of the Company or any Subsidiary of the Company or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary of the Company or any other Person.

 

3.3. Authorization; Enforceability . The Board of Directors of the Company has on or prior to the date of this Agreement (a) deemed the Merger to be in the best interests of the Company and approved this Agreement and adopted the Articles of Merger (including the plan of merger attached thereto) in accordance with applicable Law, (b) resolved to recommend the approval of this Agreement and the Articles of Merger by the Company Shareholders and (c) directed that this Agreement and the Articles of Merger be submitted to the Company Shareholders for approval. The Company has all requisite corporate power and authority to enter into this Agreement and, subject to approval by the Company Shareholders of the Merger, to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to (x) approval by the Company Shareholders and (y) the filing of the Articles of Merger pursuant to the VSCA and the NCBCA. This Agreement has been duly executed and delivered by the Company and (assuming the valid authorization, execution and delivery thereof by the other parties thereto) constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The filing of the Proxy Statement/Prospectus with the SEC and the taking of all actions in connection therewith have been duly authorized by the Company’s Board of Directors.

 

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3.4. No Violation or Conflict . Assuming all consents, approvals, authorizations and other actions described in this Section 3.4 have been obtained and all filings and obligations described in this Section 3.4 have been made and except as set forth in Section 3.4 of the Company Schedule of Exceptions, the execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not, conflict with, result in any violation of, or breach or default (with or without notice or lapse of time, or both) under, or give to others a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any of its Subsidiaries under, any provision of (i) the articles of incorporation or by-laws of the Company, (ii) any provision of the comparable articles of incorporation, charter or organizational documents of any of the Company’s Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage, lease, indenture or other contract, agreement, instrument, permit, concession, franchise or license applicable to the Company or any of its Subsidiaries, or (iv) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than, in the case of clauses, (ii), (iii) or (iv), any such conflicts, violations, breaches, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not have a Material Adverse Effect, or adversely affect the consummation of any of the transactions contemplated hereby. No filing, notification or registration with, or authorization, consent or approval of, any governmental entity is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or is necessary for the consummation of the Merger and the other transactions contemplated by this Agreement, except for (i) in connection, or in compliance, with the provisions of the HSR Act and other U.S. or foreign antitrust or competition Laws, the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the “ Securities Act ”) and the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (collectively, the “ Exchange Act ”), (ii) the filing of the Articles of Merger with the NCSOS and SCC and the filing of appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (iii) such filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval triggered by the Merger or by the transactions contemplated by this Agreement, (iv) applicable requirements, if any, of blue sky laws and the NYSE, and (v) such other consents, orders, authorizations, registrations, declarations and filings the failure of which to be obtained or made would not, individually or in the aggregate, have a Material Adverse Effect or adversely affect the consummation of any of the transactions contemplated hereby.

 

3.5. SEC Documents and Other Reports . The Company has filed all required documents with the SEC since June 1, 2001 (the “ Company SEC Reports ”). As of their respective dates, the Company SEC Reports complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and, at the respective times they were filed, none of the Company SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements (including, in each case, any notes thereto) of the Company included in the Company SEC Reports complied as to form in all material respects

 

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with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S. generally accepted accounting principles (“ GAAP ”) (except, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present in accordance with GAAP the consolidated financial position of the Company and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). Except as disclosed in the Company SEC Reports or as required by GAAP, the Company has not, since March 31, 2004, made any change in the accounting practices or policies applied in the preparation of financial statements. The books and records of the Company and its Subsidiaries have been, and are being, maintained in accordance with GAAP and other applicable legal and accounting requirements, including but not limited to Section 13(b)(2) of the Exchange Act.

 

3.6. No Undisclosed Liabilities . Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, and there is no existing condition, situation or set of circumstances which could be expected to result in such a liability or obligation, except (a) liabilities or obligations reflected in the Company SEC Reports filed prior to the date hereof and (b) liabilities or obligations incurred in the ordinary course of business which would not, individually or in the aggregate, have a Material Adverse Effect.

 

3.7. Inventory and Accounts .

 

(a) Except as set forth in Section 3.7(a) of the Company Schedule of Exceptions, the inventory of the Company and its Subsidiaries consists of raw materials, goods in process and finished goods, all of which are (i) merchantable and fit for the purpose for which they were procured or manufactured, (ii) legally qualified for export and sale subject to minimum pricing laws (none of which will preclude the fulfillment of any commitments or orders), (iii) not slow-moving, distressed, damaged or defective and (iv) recorded in the Company’s consolidated financial statements included in the Company SEC Reports at the lower of cost or market value in accordance with GAAP. Section 3.7(a) of the Company Schedule of Exceptions sets forth as of June 30, 2004 (i) all tobacco inventories, showing type origin, grade, crop year, quantity and book value, and (ii) all commitments to purchase or deliver tobacco, showing type, origin, grade, crop year, quantity and cost (but not the identity of the customer). The Company and its Subsidiaries have no material commitments to purchase or deliver tobaccos other than as set forth in Section 3.7(a) of the Company Schedule of Exceptions.

 

(b) All accounts receivable, notes receivable and associated rights (“ Accounts ”) owned by the Company and its Subsidiaries are reflected properly in their respective books and records and in the Company’s consolidated financial statements included in the Company SEC Reports.

 

(c) All loans, advances and extensions of credit made by the Company or any of its Subsidiaries to growers and other suppliers of tobacco and tobacco growers’ cooperatives, whether short-term or long-term, to finance the growing or processing of tobacco

 

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(“ Advances ”) are reflected properly in their respective books and records and in the Company’s consolidated financial statements included in the Company SEC Reports and have arisen from bona fide transactions in the ordinary course of business.

 

(d) All accounts payable of the Company and its Subsidiaries have arisen from bona fide transactions in the ordinary course of business and are reflected properly in their respective books and records and in the Company’s consolidated financial statements included in the Company SEC Reports.

 

3.8. No Violation of Law .

 

(a) The businesses of the Company and its Subsidiaries are not being conducted in violation of any Law (provided that no representation or warranty is made in this Section 3.8 with respect to Environmental Laws) except (a) as set forth in Section 3.8 of the Company Schedule of Exceptions and (b) for violations which would not, individually or in the aggregate, have a Material Adverse Effect.

 

(b) There is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes Oxley Act”), including Section 402 thereof related to loans and Sections 302 and 906 thereof related to certifications.

 

3.9. Compliance with Foreign Corrupt Practices Act, Money Laundering and OFAC Laws .

 

(a) Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee or Affiliate of the Company or any of its Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such Person of the FCPA, including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, and the Company, its Subsidiaries and its Affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith, except, in each case, as would not reasonably be expected to have a Material Adverse Effect. “FCPA” means Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

(b) Except as would not reasonably be expected to have a Material Adverse Effect on the Company, the operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by

 

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any governmental agency (collectively, the “ Money Laundering Laws ”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(c) Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“ OFAC ”).

 

3.10. Title to Assets . Except as reflected in the Company SEC Reports filed on or prior to the date hereof, the Company and its Subsidiaries own fee simple or valid leasehold (as the case may be) title to the Company Real Estate and have valid title to their other tangible assets and properties which they purport to own, free and clear of any and all Liens, except for Permitted Liens. All leases material to the Company pursuant to which the Company or any Subsidiary of the Company, as lessee, leases real or personal property, are valid and effective in accordance with their respective terms, and there is not, under any of such lease, any material existing default by the Company or any Subsidiary of the Company or any event which, with notice or lapse of time or both, would constitute such a material default. All Buildings and Equipment of the Company or its Subsidiaries have been well maintained and are in good and serviceable condition, normal wear and tear excepted, except where the failure to be so maintained would not, individually or in the aggregate, have a Material Adverse Effect.

 

3.11. Litigation . Except as set forth in the Company SEC Reports filed prior to the date hereof or in Section 3.11 of the Company Schedule of Exceptions, (a) there are no actions, suits, claims (including worker’s compensation claims), litigation or other governmental or judicial proceedings or investigations or arbitrations against the Company, its Subsidiaries or any of its properties, assets or business, or, to the knowledge of the Company, any of the Company’s or any Subsidiary’s current or former directors or officers or any other Person whom the Company or any Subsidiary of the Company has agreed to indemnify that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (b) as of the date hereof, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened, against the Company relating to the transactions contemplated by this Agreement; and (c) there are no outstanding orders, judgments, injunctions, awards or decrees of any governmental entity against the Company, its Subsidiaries, any of its properties, assets or businesses, or, to the knowledge of the Company, any of the Company’s or its Subsidiaries’ current or former directors or officers or any other Person whom the Company or any Subsidiary of the Company has agreed to indemnify that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

3.12. Absence of Certain Changes or Events . Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement or set forth in Section 3.12 of the Company Schedule of Exceptions, (A) none of the Company or any of its Subsidiaries has incurred any liability or obligation (indirect, direct or contingent), or entered into any oral or written agreement or other transaction, that is not in the ordinary course of business or that would, individually or in the aggregate, result in a Material Adverse Effect, except for any such changes or effects resulting from this Agreement, the transactions contemplated hereby or the

 

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announcement thereof; (B) neither the Company nor any of its Subsidiaries has sustained any loss or interference with their business or properties from fire, flood, windstorm, accident or other calamity (whether or not covered by insurance) that would, individually or in the aggregate, have a Material Adverse Effect; (C) there has been no action taken by the Company or any of its Subsidiaries since March 31, 2004, that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.1; and (D) there has been no event, circumstance or development that would, individually or in the aggregate, have a Material Adverse Effect on the Company, except for any such changes or effects resulting from this Agreement, the transactions contemplated hereby or the announcement thereof.

 

3.13. Performance of Company Contracts . Each of the Company Contracts is in full force and effect and constitutes the legal and binding obligation of the Company and, to the knowledge of the Company, constitutes the legal and binding obligation of the other parties thereto. Except as disclosed in Section 3.13 of the Company Schedule of Exceptions, there are no existing breaches or defaults by the Company or, to the knowledge of the Company, any other party to a Contract, under any Contract the effect of which would, individually or in the aggregate, constitute a Material Adverse Effect and, to the knowledge of the Company, no event has occurred which, with the passage of time or the giving of notice or both, could reasonably be expected to constitute such a breach or default.

 

3.14. ERISA .

 

(a) With respect to each Company Plan (as hereinafter defined), the Company has made (or as soon as practicable will make) available to DIMON a true and correct copy of (i) the three most recent annual reports (Form 5500) filed with the Internal Revenue Service (“ IRS ”), (ii) such Company Plan, (iii) each trust agreement, insurance contract or administration agreement relating to such Company Plan, (iv) the most recent summary plan description of each Company Plan for which a summary plan description is required, (v) the most recent actuarial report or valuation relating to a Company Plan subject to Title IV of ERISA and (vi) the most recent determination letter, if any, issued by the IRS with respect to any Company Plan intended to be qualified under Section 401(a) of the Code. Except, in each case, for events or actions that would not, individually or in the aggregate, have a Material Adverse Effect, (i) each Company Plan complies with all applicable statutes and governmental rules and regulations, including but not limited to ERISA, the Code and COBRA, (ii) no “reportable event” (within the meaning of Section 4043 of ERISA) has occurred with respect to any Company Plan, (iii) neither the Company nor any of its ERISA Affiliates has withdrawn from any Company Multiemployer Plan (as hereinafter defined), or instituted, or is currently considering taking, any action to do so, and (iv) no action has been taken, or is currently being considered, to terminate any Company Plan subject to Title IV of ERISA, and (v) the Company and its ERISA Affiliates have complied with the continued medical coverage requirements of COBRA. Except as would not, individually or in the aggregate, have a Material Adverse Effect, no Company Plan, nor any trust created thereunder, has incurred any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived. Except as disclosed in the Company Schedule of Exceptions, with respect to any Company Plan which is subject to Title IV of ERISA, the present value of accrued benefit obligations, as determined in accordance with FAS 87 in accordance with the actuarial assumptions used to prepare the most recent

 

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reports of such Company Plan, did not exceed the fair market value of the Plan assets as of the most recent valuation date for which an actuarial report has been prepared and the Company has no knowledge of any material adverse change to such status.

 

(b) With respect to the Company Plans, no event has occurred in connection with which the Company or any ERISA Affiliate would be subject to any liability under the terms of such Company Plans, ERISA, the Code or any other applicable law which would have a Material Adverse Effect. Except as disclosed in the Company SEC Reports filed prior to the date hereof or set forth in Section 3.14 of the Company Schedule of Exceptions, with respect to any current or former employee or contractor of the Company or its Subsidiaries, consummation of the transactions contemplated by this Agreement shall not result in the payment or provision of additional compensation or benefits or accelerate the vesting, payment or funding of any compensation or benefits. Except as disclosed in the Company SEC Reports filed prior to the date hereof or set forth in Section 3.14 of the Company Schedule of Exceptions, no amounts payable or provided by the Company or its Subsidiaries related to the transactions contemplated by this Agreement will constitute “excess parachute payments” within the meaning of Section 280G of the Code. Each Company Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the IRS to be so qualified, or a timely application for such determination is now pending or it is a prototype or volume submitter plan document that has been pre-approved by the IRS as is evidenced by a letter from the IRS, and, to the knowledge of the Company, there is no reason why any Company Plan is not so qualified in operation. Neither the Company nor any of its ERISA Affiliates has been notified by any Company Multiemployer Plan that such Company Multiemployer Plan is currently in reorganization or insolvency under and within the meaning of Section 4241 or 4245 of ERISA or that such Company Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. Except as disclosed in the Company SEC Reports filed prior to the date hereof or set forth in Section 3.14 of the Company Schedule of Exceptions, neither the Company nor any of its ERISA Affiliates has any liability or obligation under any welfare plan to provide benefits after termination of employment to any employee or dependent other than as required by ERISA. There are no pending or, to the knowledge of the Company, threatened claims, suits, audits or investigations related to any Company Plan other than claims for benefits in the ordinary course and other than claims, suits, audits or investigations that would not, individually or in the aggregate, have a Material Adverse Effect. As used herein, (i) “Company Plan” means a “pension plan” (as defined in Section 3.2 of ERISA (other than a Company Multiemployer Plan or a plan exempt from ERISA under Section 4(b)(4) of ERISA)) or a “welfare plan” (as defined in Section 3(1) of ERISA other than a plan exempt from ERISA under Section 4(b)(4) of ERISA) established or maintained by the Company or any of its ERISA Affiliates or as to which the Company or any of its ERISA Affiliates has contributed or otherwise may have any liability and all other retirement, deferred compensation, severance, termination, change in control, stock option, restricted stock or phantom stock plans, policies or programs of the Company or its Subsidiaries, (ii) “Company Multiemployer Plan” means a “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) to which the Company or any of its ERISA Affiliates is or has been obligated to contribute or otherwise may have any liability and (iii) with respect to any Person, “ERISA Affiliate” means any trade or business (whether or not incorporated) which is under common control or would be considered a single employer with such Person pursuant to Section 414(b), (c), (m) or (o) of the Code and the regulations

 

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promulgated under those sections or pursuant to Section 4001(b) of ERISA and the regulations promulgated thereunder, including, without limitation, each of the Company’s Subsidiaries.

 

3.15. Taxes .

 

(a) Tax Returns . For all years for which the applicable statutory period of limitation has not expired, each of the Company and each of its Subsidiaries has timely and properly filed, and will through the Closing Date timely and properly file, all material federal, state, local and foreign tax returns (including but not limited to income, franchise, sales, payroll, employee withholding and social security and unemployment) that were or will be required to be filed. Each of the Company and each of its Subsidiaries has paid all taxes (including interest, penalties and additions to tax) owed by them. No material unpaid tax deficiencies have been proposed or assessed against the Company or its Subsidiaries. To the knowledge of the Company, no issue has been raised in any prior tax audit of the Company or its Subsidiaries that, by application of the same or similar principles, could reasonably be expected upon a future tax audit of the Company or its Subsidiaries to result in a proposed material deficiency for any period. Neither the Company nor any of its Subsidiaries is liable for any taxes attributable to any other Person (other than a member of an affiliated group of which the Company is the common parent), whether by reason of being a member of another affiliated group, being a party to a tax sharing agreement, as a transferee or successor, or otherwise.

 

(b) Audits . There are no material audits, examinations, investigations or other proceedings pending or threatened in writing in respect of taxes or tax matters of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has consented to any extension of the statute of limitations with respect to any open federal, state, local or federal tax returns.

 

(c) Liens . There are no tax Liens upon any property or assets of the Company or its Subsidiaries except for Liens for current taxes not yet due and payable.

 

(d) Deliveries . The Company has delivered or made available to DIMON correct and complete copies of all tax returns and reports of the Company and each of its Subsidiaries filed for all periods not barred by the applicable statute of limitations through the Effective Time.

 

(e) Withholding Taxes . Each of the Company and each of its Subsidiaries has properly withheld and timely paid substantially all withholding and employment taxes that it was required to withhold and pay relating to salaries, compensation and other amounts heretofore paid to its employees or other Persons. All IRS Forms W-2 and 1099 required to be filed with respect thereto have been timely and properly filed except where the failure to file would not, individually or in the aggregate, have a Material Adverse Effect.

 

(f) Other Representations . Each of the Company and each of its Subsidiaries has not made any elections under former Section 341(f) of the Code and, except as shown in Section 3.15 of the Company Schedule of Exceptions, has and will not be subject to disallowance of compensation deductions pursuant to Section 280G of the Code by reason of the Merger or any prior event.

 

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3.16. Labor Matters . Except as set forth in Section 3.16 of the Company Schedule of Exceptions, neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or labor contract. Neither the Company nor any of its Subsidiaries has engaged in any unfair labor practice with respect to any person employed by or otherwise performing services primarily for the Company or any of its Subsidiaries (the “ Company Business Personnel ”), and there is no unfair labor practice complaint or grievance against the Company or any of its Subsidiaries by the National Labor Relations Board or any comparable state agency pending or threatened in writing with respect to the Company Business Personnel. There is no labor strike, dispute, slowdown or stoppage pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries which may interfere with the respective business activities of the Company or any of its Subsidiaries. The Company and its Subsidiaries are in material compliance with all labor, employment and wage payment-related laws, regulations and rules.

 

3.17. Company Existing Permits . The material Company Existing Permits are listed in Section 3.17 of the Company Schedule of Exceptions. The Company and its Subsidiaries possess all licenses, permits, approvals, exemptions, orders, franchises, qualifications, permissions, agreements and governmental authorizations required by Law which the Company currently has and is required to have for the conduct of the business of the Company as currently conducted, except where the failure to have the same would not, individually or in the aggregate, have a Material Adverse Effect. No action or proceeding is pending or, to the knowledge of the Company, threatened that is reasonably likely to result in a revocation, non-renewal,