AMENDMENT NO. 1 TO STEMMINGSERVICES AGREEMENT

EX-10.1 3 dex101.htm AM. NO. 1 TO STEMMING SERVICES AGREEMENT Am. No. 1 to Stemming Services Agreement

Exhibit 10.1

AMENDMENT NO. 1
TO
STEMMING SERVICES AGREEMENT

This Amendment No. 1 (this “Amendment”), dated August 29, 2002, is by and between Philip Morris Incorporated, a Virginia corporation doing business as Philip Morris U.S.A. (“PM”), and Universal Leaf Tobacco Company, Incorporated (“Contractor”), a Virginia corporation.

RECITALS

WHEREAS, PM and Contractor have entered into an Agreement for Stemming Services, dated May 11, 2001 (the “Agreement”); and

WHEREAS, PM and Contractor now wish to amend the Agreement as set forth herein.

NOW THEREFORE, in consideration of the mutual agreements set forth herein and other good and valuable consideration exchanged, PM and Contractor agree as follows:

1.	All capitalized terms shall have meanings set forth herein or in the Agreement.

2.	This Amendment shall be effective as of July 1, 2002.

3.	Section 3.8.1 of the Agreement is amended and restated as follows:

		3.8.1 Minimum and Maximum Quantities to be Processed

		This is not a requirements contract. During the Term hereof, Contractor shall accept delivery of and process such quantities of PM tobacco of domestic origin as PM may deliver for processing; provided, however, unless otherwise mutually agreed, during processing season Contractor shall not be obligated to process PM tobacco in excess of the sum of (a) 500,000 pounds plus (b) the lesser of (i) the quantity of PM green tobacco indicated in the applicable PM Forecast and (ii) the applicable Available Processing Capacity.

		PM shall deliver for processing hereunder each Contract Year (such deliveries to be before or during the Contract Year in question) a minimum quantity of PM tobacco of domestic origin approximately equal to the sum of (a) the Base Quantity, determined as provided in Section 3.8.2, and (b) the Incentive Quantity, if any, determined as provided in Section 3.8.3; provided, however, this minimum quantity shall be subject to reduction and reallocation as provided in Sections 3.8.4, 3.8.5 and 3.8.6. If the quantity of PM tobacco of domestic origin delivered for processing hereunder in any Contract Year is less than the minimum quantity required by the preceding sentence, PM

		nevertheless shall be deemed to have fulfilled its minimum delivery obligation hereunder in any Contract Year so long as the unexcused shortfall in PM’s deliveries hereunder for processing that Contract Year does not exceed 500,000 pounds.

		Unless otherwise mutually agreed, all PM tobacco to be processed hereunder shall be of domestic origin. If tobacco of foreign origin is processed hereunder, such tobacco shall be in addition to the minimum quantity required to be delivered by PM pursuant to this Section 3.8. PM undertakes no obligation to offer Contractor the opportunity to process any PM tobacco of foreign origin.

		PM reserves the right to enter into contracts with one or more other contractors for the remainder of its requirements for Stemming Services. Such contracts, however, shall not be inconsistent with the terms of this Section 3.8 respecting the allocation of quantities of PM tobacco of domestic origin for processing by Contractor hereunder.

4.	A new Section 12.6 shall be added as follows:

		12.6 Child Labor

		Contractor shall not employ any person who is younger than (i) the age of 15 or (ii) the applicable minimum legal age for the specific type of work performed by the minor employee, whichever is higher. Contractor represents and warrants that permitted employees under the age of 18 shall not be engaged in work that, by its nature, by its designation under applicable law or regulation, or given the circumstances under which it is performed, is hazardous or otherwise likely to harm the health or safety of those employees. Contractor further represents and warrants that the weekly and daily working schedules of permitted employees under the age of 18 shall be in compliance with all applicable laws and regulations, and that Contractor shall not compel any person to work involuntarily or under any threats or duress. Audits contemplated by this Agreement shall cover Contractor’s compliance with the provisions of this section.

5.	Section 24.1 of the Agreement is amended and restated in its entirety as follows:

		24.1 Obligations Arising Under Prior Contracts

		Pursuant to the Hogshead Repair, Extrusion and Stemming Services Agreement dated July 1, 1994, as amended (the “Hogshead Agreement”) and the Stemming Services Agreement dated August 18, 2000 (the “Prior Agreement”) between PM and Contractor, PM has made payments to Contractor with respect to certain capital investments made by Contractor. These payments were based on depreciation charges for certain assets acquired by Contractor, with PM’s approval, between July 1, 1994 and June 30, 2000. PM shall continue to pay depreciation-based charges to Contractor with respect to these assets in the amounts and in accordance with the payment schedule set forth in Exhibit J-1 (the

		“Capital Charges”). The Capital Charges shall be in lieu of the termination payments respecting Contractor’s capital investments in support of Stemming Services provided for in Section 24.1 of the Prior Agreement. PM and Contractor expect that this Agreement will continue for a period longer than the payment schedule set forth in Exhibit J-1, but if this Agreement is cancelled by either party due to an Event of Default, within 90 days after such cancellation PM shall pay Contractor the positive difference, if any, between (a) the sum of the Capital Charges as shall then be remaining to be paid hereunder and (b) 80% of the sum of the fair market values corresponding to those of the assets listed in Exhibit J-2 (each, a “Capital Asset”) that have not been sold, scrapped, transferred or otherwise disposed of previously in accordance with Section 24.2 below.

6.	Section 24.2 is hereby amended and restated in its entirety as follows:

		24.2 Sale or Other Disposition of Certain Assets

		(a) If, during the Term hereof, Contractor sells, scraps, transfers or otherwise disposes of any Capital Asset, Contractor shall pay PM an amount equal to 80% of the fair market value of such Capital Asset, such fair market value to be determined as provided in Section 24.3 below; provided, however, no such payment obligation shall arise with respect to the transfer of any Capital Asset (a) from the JPT Facility to a Contractor affiliate to the extent such Capital Asset continues to be used in the performance of services for PM or (b) from any other Stemming Facility to a Contractor affiliate to the extent such Capital Asset continues to be used in the performance of services for PM. For the purpose of the preceding sentence, “services for PM” shall be deemed to include Stemming Services, stem processing and blending services, special picking services and any other services provided for PM at a US facility by ULT or one of its affiliates.

		(b) During the Term of this Agreement and except in the event of a transfer to a Contractor affiliate as provided above, Contractor shall provide notice to PM in the event Contractor intends to sell, scrap, transfer or otherwise dispose of any equipment used in its tobacco processing operations in the United States (including, but not limited to, the Capital Assets) that Contractor originally purchased at a price of more than $200,000.00. Upon receipt of such notice, PM shall have the right to purchase any such Capital Asset at a mutually agreeable price. If PM does not notify Contractor of its intent to purchase such Capital Asset within 30 days of its receipt of Contractor’s notice, or if the parties are unable to agree upon a mutually agreeable price for such Capital Asset within 30 days after PM’s receipt of Contractor’s notice, Contractor shall be entitled to otherwise sell, scrap, transfer or dispose of such asset.

7. Section 24.3 of the Agreement is deleted, and Section 24.4 is renumbered Section 24.3 and amended and restated as follows:

		24.3 Fair Market Value

		For purposes of this Section 24, the “fair market value” of any Capital Asset, subject to the applicable provisions of Sections 24.1 and 24.2 hereof, shall be the positive difference, if any, between (a) the price a third party would pay for such Capital Asset on an “as-is, where-is” basis as of the applicable valuation date (the “arms length price”) and (b) the actual costs, if any, incurred by Contractor after the valuation date in removing the Capital Asset from the Stemming Facility. For purposes of the preceding sentence, the arms length price shall be determined based on Contractor’s good faith estimate of the price that a third party under no compulsion to purchase would pay for such Capital Asset as of the applicable valuation date. If, however, PM disputes Contractor’s proposed arms length price of any Capital Asset and so notifies Contractor within 30 days after receipt of Contractor’s good faith estimate, then the arms length price for such Capital Asset shall be determined by a third party dealer acceptable to both PM and Contractor, based on the dealer’s assessment of the amount a purchaser would be willing to pay for such Capital Asset on an “as is, where is” basis as of the applicable valuation date. The valuation date for determining the arms length price shall be (a) the date of cancellation of this Agreement with respect to payments pursuant to Section 24.1 or (b) the date of disposition of the Capital Asset with respect to payments pursuant to Section 24.2, as the case may be. For purposes of this paragraph, the term “as-is, where-is” shall mean the particular physical condition and the actual location of the Capital Asset as of the applicable valuation date.

8.	Section 24.5 is renumbered Section 24.4.

9.	Exhibit J-2 of the Agreement is amended and restated as provided in the document attached hereto as Appendix 1.

10.	Except as hereby specifically amended, the Agreement is and shall remain in full force and effect as written.

11. This Amendment may be executed in separate counterparts that, taken together, shall constitute and evidence the agreement of the parties.

12. The Agreement and this Amendment constitute the entire agreement of the parties regarding their subject matter and supersede all prior or contemporaneous agreements or understandings regarding such subject matter.

WITNESS the signatures of the authorized representatives of the parties:


PHILIP MORRIS INCORPORATED	UNIVERSAL LEAF TOBACCO COMPANY, INCORPORATED

By: /s/ Michael A. Farriss	By: /s/ Ray M. Paul, Jr.

Name: Michael A. Farriss	Name: Ray M. Paul, Jr.

Title: Vice President Leaf	Title: Senior Vice President

APPENDIX 1

Exhibit J-2

HENDERSON

Asset Type

Asset

Tag Nbr

Description

MACH EQUIP

11664

10978

DSC 10000 CFM SRC PROJECT

10,000 CFM Dust Bag Unit

MACH EQUIP

11650

10963

SHAKER, STRIP VIBRATING; SRC P

MacTavish 16' x 6'

MACH EQUIP

11651

10964

SHAKER, STRIP VIBRATING; SRC P

MacTavish 16' x 6'

MACH EQUIP

11652

10965

SRC AND RELATED CONVEYORS

SRC Vision Optical Tobacco Sorter

MACH EQUIP

11354

SRC CONVEYOR

9' X 3' Johnson Industrial Mach.

MACH EQUIP

11352

SRC CONVEYOR

40' x 3' Johnson Industrial Mach.

MACH EQUIP

11350

SRC CONVEYOR

32' x 30'' Johnson Industrial Mach.

MACH EQUIP

11653

10966

SRC AND RELATED CONVEYORS

SRC Vision Optical Tobacco Sorter

MACH EQUIP

11349

SRC CONVEYOR

20' X 1' Johnson Industrial Mach.

MACH EQUIP

11353

SRC CONVEYOR

4' X 3' Johnson Industrial Mach.

MACH EQUIP

11351

SRC CONVEYOR

40' X 3' Johnson Industrial Mach.

MACH EQUIP

11660

10973

SRC AND RELATED CONVEYORS

SRC Vision Optical Tobacco Sorter

MACH EQUIP

11379

SRC CONVEYOR

22' X 30'' Johnson Industrial Mach.

MACH EQUIP

11370

SRC CONVEYOR

30' X 1' Johnson Industrial Mach.

MACH EQUIP

11666

10980

SRC PROJECT

Hydro Thrift Cooling Tower Pumps - two 15 HP pumps

MACH EQUIP

11659

10972

SRC PROJECT AND RELATED CONVEY

SRC Vision Optical Tobacco Sorter

MACH EQUIP

11378

SRC CONVEYOR

22' X 30'' Johnson Industrial Mach.

MACH EQUIP

11377

SRC CONVEYOR

29' X 30'' Johnson Industrial Mach.

MACH EQUIP

11380

SRC CONVEYOR SPLITTER

Load Splitter Conveyor Johnson Industrial Mach.

MACH EQUIP

11662

10976

SRC PROJECT CUTLER-HAMMER

Cutler-Hammer Freedom 2100 Motor Control Center

MACH EQUIP

11681

10975

SRC PROJECT S/N: 97L.78246.100

SRC Vision Control Panel

MACH EQUIP

11654

10967

SRC PROJECT S/N: 97M.78246.100

SRC Vision Control Panel

MACH EQUIP

11655

10968

SRC PROJECT S/N: 97M.78246.100

SRC Vision Control Panel

MACH EQUIP

11661

10974

SRC PROJECT S/N: 97M.78246.100

SRC Vision Control Panel

MACH EQUIP

11656

10969

SRC, CUTLER-HAMMER S/N:HRAS141

Cutler-Hammer Freedom 2100 Motor Control Center

MACH EQUIP

11506

10830

KICE #FC9-WX ARR#9FB W/ 7.5 HP

Kice Fan

MACH EQUIP

28877

11017

SEPARATOR, KICE

Kice Fan

LAB

11610

10926

OVEN, FREAS

Precision Scientific Model 605

LAB

28980

11022

FREAS OVEN

Precision Scientific Model 31057P

LAB

28981

11023

FREAS OVEN

Precision Scientific Model 31057P

LAB

28982

11024

FREAS OVEN

Precision Scientific 605

LAB

28983

11025

METTLER MOISTURE ANALYZER