Exhibit 10.4
THIS LOAN AGREEMENT dated the day of August, 2002,
AMONG:
MFC MERCHANT BANK S.A., a bank organized under the laws
of Switzerland and having an office at Xxxxxxxxxxxxxxx 0,
0000 Xxxxxxx XX, Xxxxxxxxxxx, as Agent
AND:
MFC MERCHANT BANK S.A. AND SUCH OTHER LENDERS AS ARE
SIGNATORIES HERETO
AND:
XXXXXX INTERNATIONAL INC., a Massachusetts trust organized
under the laws of the State of Washington, U.S.A., having
its registered office at Suite 6100, 000 Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx, X.X.X., 00000-0000, as Borrower
WHEREAS:
A. The Borrower has requested that the Loan be made available by the Lenders
to the Borrower; and
B. The Lenders have agreed to make the Loan available to the Borrower upon
the terms and conditions set out herein.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the mutual
covenants and undertakings and the terms and conditions set out herein, and for
other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged), the parties hereto acknowledge, declare, covenant and
agree as follows:
ARTICLE 1.
INTERPRETATION
Section 1.1 Definitions. When used in this Agreement (including the
recitals and schedules hereto) or in any amendment hereto, the following terms
shall, unless otherwise expressly provided, have the following meanings,
respectively:
"Advance" means the advance of the full amount of the Loan;
"Advance Date" means the date specified in the Advance Request, such date to be
no earlier than the Closing Date and no later than the Termination Date;
"Advance Request" means a written notice in the form set out in Schedule "C"
hereto to be provided by the Borrower to the Agent not less than two (2) days
prior to the Advance Date requesting the Advance of the Loan;
"Affiliate" means, with respect to any given Person, any other Person directly
or indirectly Controlling, Controlled by or under common Control with, such
Person;
"Agent" means MFC Merchant Bank S.A. in its capacity as agent hereunder;
"Agreement" means this non-revolving term loan agreement as supplemented,
amended or otherwise modified, extended, renewed, replaced or restated from time
to time by any agreement supplemental or ancillary hereto; and the expressions
"Article" and "Section" followed by a number mean, and refer to the specified
Article or Section of this Agreement;
"Amalgamation" means a combination of two or more corporate entities, or the
businesses or assets of two or more corporate entities, whether by
reconstruction, reorganization, consolidation, combination, amalgamation, merger
or otherwise;
"Asset Sale" means, other than a sale or sales of inventory and other sales
within the ordinary course of business, any direct or indirect sale,
disposition, monetization or securitization or other exchange of assets held by
the Borrower, directly or indirectly, including a portion or portions of the
Borrower's interests in ZPR and/or ZSG and shall include, without limiting the
generality of the foregoing, any ZPR Asset Sale;
"Assignment Agreements" means the SPB Assignment Agreement, the ZPR Holding
Assignment Agreement and the Borrower's Assignment Agreements;
"Authorization" means any permit, licence, approval, consent, order, right,
certificate, judgment, writ, injunction, award, determination, direction,
decree, authorization, franchise, privilege, grant, waiver, exemption and other
concession or by-law, rule or regulation of, by or from any Official Body, all
as amended, supplemented, modified, replaced or renewed from time to time;
"Xxxxxxx" means Xxxxxxx & Xxxxx Investment Management Partners LP, a limited
partnership organized under the laws of the State of Delaware, having an office
at 0 Xxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, X.X.X., 00000;
"Xxxxxxx Lenders" means Xxxxxxx and such other lenders as are or may from time
to time become signatories to the Xxxxxxx Loan Agreement and their respective
successors and assigns and "Xxxxxxx Lender" means any one of them and its
successors and assigns;
"Xxxxxxx Loan" means the E 15,000,000 loan to be arranged or advanced by Xxxxxxx
to the Borrower under the Xxxxxxx Loan Agreement;
"Xxxxxxx Loan Agreement" means the E 15,000,000 loan agreement of even date
hereof between the Borrower and Xxxxxxx relating to the Stendal Project;
"BBA" means the British Bankers' Association;
"BBA Libor" means the one (1) month, three (3) month or six (6) month Euro
London Inter-Bank Offered Rate fixed on the Quotation Date by the BBA as
selected by the Borrower from time to time;
"BHV" means Bayerische Hypo-und Vereinsbank AG, a stock corporation organized
under the Federal Republic of Germany having its registered office at Am
Xxxxxxxxxx 0, 00000 Xxxxxxx, Xxxxxxx Xxxxxxxx of Germany;
"Blitz" means Blitz 01-858 GmbH;
"Borrower" means Xxxxxx International Inc.;
"Borrower's Assignment Agreements" means each assignment agreement in a form
satisfactory to the Agent, pursuant to which the Borrower shall assign to the
Security Agent its interests in intercompany loans due or accruing due from SPH
and ZPR Holding;
"Borrower's Certificate" means a certificate of a senior officer of the Borrower
substantially in the form set out in Schedule "A" hereto or such other form as
may be requested from time to time by the Agent or the Lenders;
"Borrower's Securities Pledge Agreements" means each pledge agreement in a form
satisfactory to the Agent, pursuant to which the Pledged Securities held by the
Borrower shall be pledged in favor of the Security Agent;
"Business" means the business of the Borrower as conducted as at the date
hereof;
"Business Day" means any day on which the Agent is open for business in Herisau,
Switzerland;
"Capitalized Interest" means accrued Interest added to the Principal Sum
pursuant to Section 3.1(5) of this Agreement;
"Change of Control" means:
(i) when a "person" or "group" (within the meanings Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of more than 50% of
the total voting power of the then outstanding Voting Stock of the
Borrower on a fully-diluted basis; (ii) when individuals who at the
beginning of any period of any two consecutive calendar years
constituted the Trustees (together with any trustees who are Trustees
on the date hereof and any new trustees whose election as Trustees or
whose nomination for election by the Borrower's stockholders was
approved by a vote of at least two-thirds of the Trustees then still in
office who either were Trustees at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Trustees then
in office; (iii) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
assets of the Borrower to any such "person" or "group"; or (iv) the
merger or consolidation of the Borrower with or into another corporation
or the merger of another corporation with or into the Borrower with the
effect that immediately after such transaction any such "person" or
"group" of persons or entities shall have become the beneficial owner
of securities of the surviving corporation of such merger
or consolidation representing a majority of the total voting power of
the then outstanding Voting Stock of the surviving corporation;
"Charter Documents" means, in respect of any Person and as the context requires,
the charter documents and by-laws, declaration of trust, trustees regulations
and all amendments thereto, of such Person;
"Closing" means the closing of the transactions contemplated by this Agreement
on the Closing Date;
"Closing Date" means two (2) Business Days following satisfaction by the
Borrower or waiver by the Agent of all conditions to Advance set out in this
Agreement;
"Commitment" means the commitment of the Lenders to fund the Loan, in the
Principal Sum, on the Advance Date, and, when used in relation to a particular
Lender, such Lender's committed share of the Total Commitment as set out on the
signature pages hereof next to such Lender's name;
"Control" over a Person means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or other equity
interest, representation on its board of directors or a body performing similar
functions, by contract or otherwise. The terms "Controlling" and "Controlled"
will have corollary meanings;
"corporation" means a body corporate, corporation, company, partnership,
business trust or joint venture;
"Credit Documents" means this Agreement, the Intercreditor Agreement, the
Security Trust Agreement and the Security Documents and all other documents to
be executed and delivered to the Agent, the Agent for and on behalf of the
Lenders, the Security Agent, the Lenders or a Lender by the Borrower or any
Affiliate thereof hereunder or thereunder;
"Dangerous Substance" means any radioactive emissions and any natural or
artificial substance (whether in solid or liquid form or in the form of a gas or
vapor and whether alone or in combination with any other substance) capable of
causing harm to man or any other living organism or damaging the environment or
public health or welfare including but not limited to any controlled, special,
hazardous, toxic, radioactive or dangerous waste;
"Debt" of any Person means: (i) all indebtedness of such Person for and in
respect of borrowed money, including obligations with respect to bankers'
acceptances, letters of credit and letters of guarantee; (ii) all indebtedness
of such Person for the deferred purchase price of property or services; (iii)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights or remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property); (iv)
all obligations under leases which, in accordance with GAAP (or accounting
principles generally accepted in the jurisdiction of incorporation or
organization of such Person), are recorded as capital leases in respect of which
such Person is liable as lessee; (v) the aggregate amount at which any shares or
equivalent ownership rights in the capital of such Person which are redeemable
or retractable
at the option of the holder thereof may be retracted or redeemed; (vi) all
indebtedness arising under any currency swap or interest rate swap, cap or
collar arrangement, forward sale or any other derivative instrument; (vii)
any indebtedness in respect of any amount raised under any other transaction
having the commercial effect of a borrowing or raising of money; and (viii) all
Debt Guaranteed by such Person;
"Debt Guaranteed" by any Person means the maximum amount which may be
outstanding at any time of: (i) any guarantee, indemnity, support agreement or
similar assurance of financial status or against financial loss of another
Person; and (ii) all Debt of the kinds referred to in (i) through (vi) of the
definition of Debt which is directly or indirectly guaranteed by such Person or
which such Person agreed (contingently or otherwise) to purchase or otherwise
acquire, or in respect of which such Person has otherwise assured a creditor
against loss by means of an indemnity, security, bond or similar undertaking;
"Default" means an event which, with the giving of notice or passage of time or
both, would constitute an Event of Default;
"Default Interest Rate" means Euribor plus 15.0% per annum;
"DP" means Dresden Papier GmbH;
"DP Holdings" means Dresden Papier Holdings GmbH;
"Engagement Letter" means the engagement letter agreement between the Agent and
the Borrower dated for reference August 16, 2002;
"Environmental Claim" means any claim by any Person as a result of or in
connection with any violation of Environmental Law or any Environmental
Contamination which could give rise to any remedy or penalty (whether interim or
final) or liability for any Group Company or any Lender;
"Environmental Contamination" means each of the following and their
consequences:
(i) any release, emission, leakage or spillage of any Dangerous Substance
into any part of the environment;
(ii) any accident, fire, explosion or sudden event which is directly or
indirectly caused by or attributable to any Dangerous Substance;
or
(iii) any other pollution of the environment;
"Environmental Law" means any national or supranational Law, regulation or
directive concerning the protection of human health or the environment or
concerning Dangerous Substances;
"Environmental License" means any Authorization under any Environmental Law;
"Equity Issue" means the issue or sale by the Borrower of the Borrower's equity
securities or other ownership interests, or rights to acquire the Borrower's
equity securities or other ownership interests, other than grants of options to
directors, officers or employees of the
Borrower and/or its Affiliates to purchase equity securities of the Borrower,
and equity securities issued upon the exercise of such options;
"ERISA" means the United States Employee Retirement Income Security Act of 1974
as amended;
"ERISA Affiliate" means each trade or business, whether or not incorporated,
that would be treated as a single employer with the Borrower under Section 414
of the United States Internal Revenue Code of 1986. When any provision of this
Agreement relates to a past event, the term "ERISA Affiliate" includes any
Person that was an ERISA Affiliate of the Borrower at the time of that past
event;
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended, or any successor statute, and the Rules and Regulations thereunder;
"Euribor" means, subject to Section 3.5(2) hereof, the rate determined by the
Agent to be: (i) the one (1) month, three (3) month or six (6) month percentage
rate set by the European Banking Federation, which appears on the Telerate page
Euribor for that period, or any page replacing such page, at 11:00 a.m., London,
England local time, on the Quotation Date; or (ii) if the Agent is unable to
access the relevant screen rate or if a rate is not available on the relevant
screen for the period, BBA Libor at 11:00 a.m., London, England local time, on
the Quotation Date; or (iii) if no such published rate is then available, the
rate of interest calculated by the Agent, as being the arithmetic average
(rounded up, if necessary, to the nearest full multiple of 1/16 of 1%) at which
it would be prepared to offer to leading banks in the London, England interbank
market for delivery on the first day of the particular Interest Period and for a
period equal to such Interest Period based on the number of days comprised
therein, deposits in Euro of amounts comparable to the Principal Sum or the
balance outstanding thereof during such Interest Period, at or prior to 11:00
a.m., London, England local time, on the Quotation Date;
"Euro" and "E" means the official currency of the European Monetary Union;
"Event of Bankruptcy" means, in respect of any Person, that such Person shall
generally not pay its Debts as such Debts become due, or shall admit in writing
its inability to pay its Debts generally as they become due, or shall make a
general assignment for the benefit of creditors, or that such Person shall
commence a voluntary case or proceeding under the United States Bankruptcy Code
of 1978, as amended, or under any other United States Federal or State
bankruptcy, insolvency or similar Law (collectively, "U.S. Bankruptcy Laws"), or
an involuntary case under any U.S. Bankruptcy Law shall be commenced against
such Person, or any other proceeding shall be instituted by or against any such
Person seeking to adjudicate it a bankrupt or insolvent or seeking liquidation,
winding-up, a reorganization, arrangement, adjustment, protection, relief or a
composition of it or its Debts under any Law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or for the appointment of a receiver, trustee, custodian, liquidator,
conservator or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against such Person
(but not instituted by such Person), either such proceeding shall remain
undismissed or unstayed for a period of thirty (30) days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against such Person or for the appointment of a receiver, trustee,
custodian or other similar official for such Person or for any substantial part
of its property) shall occur; or such Person shall take any action to authorize
any of the actions set forth above;
"Event of Default" has the meaning ascribed to it in Section 9.1;
"Excluded Payments" means collectively:
(i) interest not exceeding 7% per annum paid by either ZPR & Co. or ZSG to
the Borrower or its Affiliates in respect of Shareholder Loans;
(ii) all amounts realized by the Borrower, or any Affiliate thereof, arising
from goods sold or services rendered to ZPR and/or ZSG at fair market
prices or rates, on an arm's-length basis and on terms approved by the
applicable Senior Lenders or permitted under the Senior Credit
Agreements, including, without limitation, such amounts paid to the
Borrower pursuant to the Marketing and Sales Agreement;
(iii) all amounts payable to the Borrower or its Affiliates for goods and
services provided to ZPR, at cost;
(iv) all amounts distributed or distributable to the Borrower or its
Affiliates as a result of any adjustment to the ZPR Debt Service Reserve
Account resulting from the termination and/or replacement of the ZPR
Currency Hedging Agreement including, without limitation, all direct
profits or gains realized by ZPR & Co. or any Affiliate thereof upon
such termination together with all distributions becoming available on
or following September 30, 2002 as a result of the replacement of the
ZPR Currency Hedging Agreement; and
(v) any amounts available under (i) to (iv) above that are paid by
Affiliates to the Borrower in respect of fees, costs and expenses
incurred in respect of Loan, the Xxxxxxx Loan and the Stendal Project.
"Extended Maturity Date" means the date which is 14 months following the Advance
Date, provided that the First Extension Option is exercised by the Borrower;
"Extended Period" means the period commencing at 12:01 a.m., New York, New York,
U.S.A. local time, on the day following the Initial Maturity Date and expiring
at 12:00 a.m., New York, New York, U.S.A. local time, on the Extended Maturity
Date;
"Fahrbrucke" means Fahrbrucke GmbH;
"Fee Letter" means the fee letter agreement entered into between the Agent and
the Borrower dated for reference August 16, 2002;
"Fees" means all fees payable by the Borrower to the Lenders pursuant to the Fee
Letter and to the Agent pursuant to the Engagement Letter;
"Financial Quarter" means, in relation to the Borrower, a period of three (3)
consecutive months in each Financial Year of the Borrower ending on March 31,
June 30, September 30 and December 31 of each such Financial Year;
"Financial Statements" means, in respect of the Borrower, as at any particular
time, financial statements prepared in accordance with GAAP, including, without
limitation, consolidated balance sheets, statements of earning and statements of
changes in financial position;
"Financial Year" means, in relation to the Borrower, a financial year of the
Borrower commencing on January 1 of each calendar year and ending on December 31
of such calendar year;
"First Extension Option" means the option granted by the Lenders to the Borrower
hereunder to extend the Initial Maturity Date as set out in Section 5.5(1)
hereof;
"GAAP" means, at any time, accounting principles generally accepted in the
United States, applied on a consistent basis;
"Group Company" means each Intermediate Holding Company and each of ZSG and ZPR
& Co.;
"Holzspedition" means Holzspedition Blankenstein GmbH;
"Increased Cost" means:
(i) an additional cost incurred by a Lender or any of its Affiliates as a
result of it having entered into, or performing, maintaining or
funding its obligations under, any Credit Document;
(ii) that portion of an additional cost incurred by a Lender or any of its
Affiliates in making, funding or maintaining all or any advances
comprised in a class of advances formed by or including that Lender's
participations in the Loan as is attributable to that Lender making,
funding or maintaining those participations;
(iii) a reduction in any amount payable to a Lender or any of its Affiliates
or in the effective return to a Lender or any of its Affiliates under
this Agreement or (to the extent that it is attributable to this
Agreement) on its capital; or
(iv) the amount of any payment made by a Lender or any of its Affiliates, or
the amount of any interest or other return foregone by a Lender or any
of its Affiliates, calculated by reference to any amount received or
receivable by that Lender or any of its Affiliates from any other
party under this Agreement;
"Initial Maturity Date" means the date which is 8 months after the Advance Date;
"Initial Period" means the period commencing on the Advance Date and expiring at
12:00 a.m., New York, New York, U.S.A. local time, on the Initial Maturity Date;
"Intercreditor Agreement" means an intercreditor agreement in a form
satisfactory to the Agent, between: (i) the Agent for and on behalf of the
Lenders; and (ii) Xxxxxxx;
"Interest" means the interest accrued on the Loan or portion thereof outstanding
from time to time at the Interest Rate calculated semi-annually not in advance,
and payable, in arrears, on the Interest Payment Date;
"Interest Payment Date" means the earlier of (i) the Maturity Date; and (ii) the
date upon which a declaration is made pursuant to Section 9.1;
"Interest Periods" means periods of one (1) month, three (3) months or six (6)
months, as selected by the Borrower from time to time, and "Interest Period"
means any one (1) such period. Interest shall be calculated on the basis of a
year of three hundred and sixty (360) days and the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such Interest is payable;
"Interest Rate" means, as applicable: (i) during the Initial Period, Euribor
plus 6.5% per annum; (ii) during the Extended Period, Euribor plus 9.0% per
annum; (iii) during the Second Extended Period, Euribor plus 11.5% per annum;
and (iv) after the Maturity Date or upon the occurrence of an Event of Default
resulting in an acceleration of the Obligations under Section 9.1 of this
Agreement, the Default Interest Rate;
"Intermediate Holding Company" means each of SPH, ZPR Holding and SPB;
"Judgment Currency" means the currency in which a court of competent
jurisdiction may render judgment in connection with any litigation relating to
the repayment of the Outstanding Amount under this Agreement;
"Law" means any law (including common law and equity), constitution, statute,
order, treaty, regulation, rule, ordinance, order, injunction, writ, judgment,
determination, decree or award of any Official Body;
"Lenders" means MFC Merchant Bank S.A. and such other lenders as are or may from
time to time become signatories to this Agreement and their respective
successors and assigns, and "Lender" means any one (1) of them and its
successors and assigns;
"Lien" means any lien, security interest or other charge or encumbrance of any
kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement or other right-of-way or other encumbrance on title to real property;
"Loan" means the non-revolving term loan of the Principal Sum to be made
available by the Lenders hereunder to the Borrower;
"Majority Lenders" means at any time, the Lenders obligated, in the aggregate,
in respect of at least 51% of the Total Commitment;
"Mandatory Prepayment Amounts" means the Net Proceeds received by the Borrower
from: (i) all Asset Sales; (ii) all Equity Issues; and (iii) any of the Group
Companies or DP Holdings including, without limitation, all payments from the
Shareholders Accounts and all dividends, repayments of Shareholders Loans and
releases from the ZPR Debt Service Reserve Account, but excluding Excluded
Payments;
"Marketing and Sales Agreement" means the strategic, marketing and sales
agreement entered into between the Borrower and ZPR & Co. dated for reference
January 1, 2000;
"Material Adverse Effect" means a material adverse effect on: (i) the Business;
or (ii) the financial condition of the Borrower or the Borrower and its
Affiliates taken as a whole; or (iii) on the ability of the Borrower to perform
and comply with this Agreement or to pay or perform any of the Obligations; or
(iv) a material adverse effect on the priority, effectiveness or enforceability
of the Security not caused by the Agent or the Lenders excluding in the case of
(i), (ii) and (iii) above, any such effect caused by fluctuations in commodity
pulp prices within ranges that have occurred in the three (3) year period
immediately preceding the Advance Date or by other general economic conditions
affecting the markets in which the Borrower carries on its Business;
"Maturity Date" means: (i) the Initial Maturity Date if the First Extension
Option is not exercised; (ii) the Extended Maturity Date if the First Extension
Option is exercised (and the Second Extension Request is not made by the
Borrower and accepted by the Agent); and (iii) the Second Extended Maturity Date
if the Second Extension Request is made by the Borrower and is accepted by the
Agent;
"Xxxxxx Equity Financing" means the equity and subordinated debt contribution to
be provided by the Borrower directly or indirectly through any wholly-owned
Affiliate of the Borrower to ZSG in respect of the Stendal Project on the
Advance Date in the sum of approximately E 63,500,000;
"Net Proceeds" means the aggregate cash proceeds received by the Borrower in
respect of any Asset Sale, Equity Issue or release of funds from any of the
Group Companies to the Borrower, net of: (i) direct unaffiliated third party
costs relating to such Asset Sale, Equity Issue or release of funds (including,
without limitation, legal, accounting and investment banking fees, and sales
commissions); (ii) provisions for Taxes payable in respect of the fiscal year of
incurrence as a result thereof; and (iii) any reasonable reserve for adjustment
in respect of the sale price of any asset or assets;
"Obligations" means: (i) all obligations, liabilities and indebtedness of the
Borrower to the Agent, the Lenders or a Lender with respect to the principal and
Interest on the Loan and the payment or performance of all other obligations,
liabilities and indebtedness of the Borrower to the Agent, the Lenders or a
Lender hereunder or arising under and pursuant to any one or more of the Credit
Documents or with respect to the Loan and all fees, costs, expenses and
indemnity obligations hereunder or thereunder; and (ii) all Fees that become due
and payable to the Lenders and to the Agent prior to or in connection with the
payment or repayment of the obligations, liabilities and indebtedness referred
to in (i) above;
"Official Body" means any government or political subdivision or any agency
(including, without limitation, any licensing or regulatory agency), body,
office, authority, bureau,
central bank, monetary authority, commission, department or instrumentality
thereof, or any court, board, tribunal, grand jury or arbitrator, commission
or instrumentality thereof, whether foreign or domestic and, when used
in the context of a particular Person, having jurisdiction over such Person;
"Original Currency" means Euros;
"Original Lender" means MFC Merchant Bank S.A. in its capacity as an original
lender;
"Outstanding Amount" means, in respect of the Loan, on any day, an amount
calculated and expressed in Euros equal to the Principal Sum less any repayment
or prepayment received by the Agent as at such date;
"Permitted Liens" means: (i) in respect of ZPR & Co., any Liens that are
Permitted Encumbrances, as such term is defined in the ZPR Credit Agreement;
(ii) in respect of ZSG, any Liens that are Permitted Encumbrances as such term
is defined in the ZSG Project Finance Loan Agreement; and (iii) in respect of
the Intermediate Holding Companies, any Liens of a nature that would be
permitted to be incurred by ZPR & Co. in accordance with (i) above;
"Permitted Subsidiaries" means Blitz, Fahrbrucke, Holzspedition,
Zellstoff-Spedition, ZPR Beteiligungs and ZPR Logistik;
"Person" means an individual, a partnership, a corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture or
other entity, or a foreign state or a political subdivision thereof or any
agency of such state or subdivision;
"Plan" means an "employee benefit plan" within the meaning of Section 3(3) of
ERISA maintained by the Borrower or any ERISA Affiliate currently or at any time
within the last five (5) years, or to which the Borrower or any ERISA Affiliate
is required to make payments or contributions or has made payments or
contributions within the past five (5) years;
"Pledged Securities" means the securities described and listed in Schedule "B"
and any and all other securities that may be pledged to the Lenders from time to
time, and all securities issued as stock dividends or as a result of stock
splits or recapitalizations, accretions, replacements and substitutions thereto
and therefor;
"Principal Sum" means E 30,000,000 together with Capitalized Interest;
"Quotation Date" means with respect to any Interest Period the Business Day
which is two (2) Business Days prior to the commencement of such Interest
Period;
"Reportable Event" means any of the events set forth in Section 4043 of ERISA or
the related regulations;
"Request" means the Advance Request, the exercise of the First Extension Option
or the Second Extension Request;
"Second Extended Maturity Date" means the date which is 18 months after the
Advance Date, provided that the First Extension Option is exercised by the
Borrower and the Second Extension Request is made by the Borrower and accepted
by the Agent;
"Second Extended Period" means the period commencing at 12:01 a.m., New York,
New York, U.S.A. local time, on the day following the Extended Maturity Date and
expiring at 12:00 a.m., New York, New York, U.S.A. local time, on the Second
Extended Maturity Date;
"Second Extension Request" means the Borrower's request to the Agent to extend
the Extended Maturity Date to the Second Extended Maturity Date, in accordance
with Section 5.5(2) hereof;
"Security" means the security given to: (i) the Security Agent for and on behalf
of the Lenders; (ii) the Lenders; or (iii) a Lender, at any time and from time
to time to secure the Obligations, including, without limitation, the security
referred to in Section 5.1;
"Security Agent" means MFC Merchant Bank S.A., in its capacity as security agent
under the Security Trust Agreement for and on behalf of the Lenders and the
Xxxxxxx Lenders;
"Security Documents" means the documents referred to in Section 5.1 and the
agreements, instruments and documents delivered from time to time to: (i) the
Security Agent for and on behalf of the Lenders; (ii) the Lenders; or (iii) a
Lender, by the Borrower and other Persons, for the purpose of establishing,
perfecting, preserving and protecting the Security, and "Security Document"
means any one of them as the context prescribes or requires;
"Security Trust Agreement" means a security trust agreement in a form
satisfactory to the Agent pursuant to which the Security Agent will hold the
security granted under the Borrower's Securities Pledge Agreements and the
Assignment Agreements for and on behalf of the Lenders and the Xxxxxxx Lenders;
"Senior Credit Agreements" means the ZPR Credit Agreement and the ZSG Project
Finance Loan Agreement;
"Senior Lenders" means the ZPR Senior Lenders and the ZSG Senior Lenders or any
of them, as the context requires;
"Shareholders Accounts" means the Borrower's and its Affiliates' shareholder
accounts in each of ZPR & Co., ZSG and the other Group Companies;
"Shareholders Agreement Heads of Terms" means the Shareholders Agreement Heads
of Terms attached as Schedule "D" hereto;
"Shareholders Loans" means the loans between the Borrower and/or its Affiliates
as lender, and any of the Group Companies, as borrower, in an aggregate
principal amount not to exceed E 115.2 million;
"SPB" means Spezialpapierfabrik Blankenstein GmbH;
"SPB Assignment Agreement" means an assignment agreement in a form satisfactory
to the Agent pursuant to which SPB shall assign to the Security Agent its
interests in intercompany loans due or accruing due from ZPR & Co.
"SPH" means Stendal Pulp Holding GmbH;
"Stendal Project" means the design, development, financing, construction and
operation of a 552,000 tonnes per annum capacity northern bleached softwood
kraft pulp mill to be carried out by ZSG and to be situated in Arneburg, near
Stendal in Sachsen-Anhalt, Germany;
"Subsidiary" means, at any time, as to any Person, any corporation, partnership
or other entity Controlled by such Person;
"Taxes" means any and all present or future taxes (including, without
limitation, all stamp, documentary, excise or property taxes), levies, imposts,
deductions, charges or withholdings and liabilities with respect thereto
including, without limitation, interest and penalties;
"Termination Date" means October 14, 2002;
"Total Commitment" means the total commitment of all Lenders under and in
respect of the Loan as set out on the signature pages hereto, in the principal
amount of E 30,000,000 to fund the Loan on the Advance Date;
"Trustees" means trustees of the Borrower;
"Voting Stock" means, with respect to any Person, capital stock of any class or
kind ordinarily entitled to vote for the election of directors at a meeting of
stockholders called for such purpose, without the occurrence of any additional
event or contingencies;
"Zellstoff-Spedition" means Zellstoff-Spedition Blankenstein GmbH;
"ZPR" means, collectively, ZPR Holding, SPB and ZPR & Co.;
"ZPR & Co." means Zellstoff-und Papierfabrik Xxxxxxxxx GmbH & Co. KG;
"ZPR Asset Sale" means any direct or indirect sale, disposition or other
exchange of assets of ZPR or any interest in ZPR including, without limitation,
a sale by ZPR of its assets provided that such sale, exchange or disposal when
aggregated with any connected transaction relates to not less than 40% of the
Borrower's interest in ZPR or, as the case may be, 40% of the assets of ZPR and
provided that such sale shall be deemed to have occurred once the Borrower shall
have received all or a portion of the proceeds thereof (excluding nominal
consideration);
"ZPR Beteiligungs" means ZPR Beteiligungs GmbH;
"ZPR Credit Agreement" means the E 508,000,000 loan agreement among ZPR & Co.,
BHV and others dated July 6, 1998, as amended and supplemented;
"ZPR Currency Hedging Agreement" means the ZPR currency swap agreement which was
terminated on July 16, 2002;
"ZPR Debt Service Reserve Account" means the ZPR debt service reserve account
created and continuing under and pursuant to the ZPR Credit Agreement;
"ZPR Holding" means ZPR Zellstoff-und Papierfabrik Xxxxxxxxx Holding GmbH;
"ZPR Holding Assignment Agreement" means an assignment agreement in a form
satisfactory to the Agent pursuant to which ZPR Holding shall assign to the
Security Agent its interest in intercompany loans due or accruing due from SPH;
"ZPR Logistik" means ZPR Logistik GmbH;
"ZPR Senior Lenders" means the lenders under the ZPR Credit Agreement;
"ZPR Senior Security" means the security granted by ZPR & Co., SPB and ZPR
Holding to the ZPR Senior Lenders under or in connection with the ZPR Credit
Agreement;
"ZSG" means Zellstoff Stendal GmbH, a limited liability company organized under
the Laws of the Federal Republic of Germany, having its registered office at
Xxxxxxxxxxxx Xxxx 0, 00000 Xxxxxxxx, Xxxxxxx Xxxxxxxx of Germany;
"ZSG Project Finance Loan Agreement" means the E 827,950,000 project finance
loan agreement among ZSG, the ZSG Senior Lenders, and others, in respect of the
Stendal Project entered into on or about the date first above written;
"ZSG Senior Lenders" means BHV, or a Subsidiary company thereof, and other
syndicated lenders under the ZSG Project Finance Loan Agreement and their
respective successors and assigns; and
"ZSG Senior Security" means the security to be granted to the ZSG Senior Lenders
under the ZSG Project Finance Loan Agreement.
Section 1.2 Headings, etc. The division of this Agreement into
Articles and Sections and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
Section 1.3 Gender and Number. Words imparting the singular number
include the plural and vice-versa and words imparting gender include the
masculine, feminine and gender neutral as the context requires.
Section 1.4 Interpretation. A reference in this Agreement to a person
includes its successors and permitted transferees and assigns. A reference to a
Credit Document or another document is a reference to that Credit Document or
other document as novated, amended, modified, extended, renewed, replaced or
restated from time to time.
Section 1.5 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
Section 1.6 Loan Advance. The Loan, if made by more than one (1)
Lender, shall be made by deposit by each Lender of such portion thereof required
hereunder with the Agent in accordance with the provisions hereof and the Agent
shall upon receipt of such rateable shares of the Loan, remit the Loan to the
Borrower, provided that the failure of any Lender to make its rateable portion
of the Loan shall not relieve any other Lender of its obligation to make its
rateable portion of the Loan and provided further that the Original Lender shall
make up any shortfall or failure to Advance by any other Lender such that the
full Principal Sum shall be made available to the Borrower by the Original
Lender.
Section 1.7 Schedules. All documents attached or referred to in this
Agreement and the following schedules attached hereto are integral to and form
part of this Agreement:
Schedule "A" - Form of Borrower's Certificate
Schedule "B" - List of Pledged Securities
Schedule "C" - Form of Advance Request
Schedule "D" - Shareholders Agreement Heads of Terms
Schedule "E" - Corporate Chart
ARTICLE 2.
THE LOAN
Section 2.1 The Loan. (1) Each Lender hereby agrees, severally, to
lend to the Borrower, relying on each of the representations, warranties,
covenants and conditions set out herein, and upon and subject to the provisions
of this Agreement, its pro rata share of the Principal Sum.
(2) Subject to the terms and conditions hereof, including satisfaction
of the conditions to Advance set out in Article 6, each Lender shall advance its
pro rata share of the Principal Sum to the Borrower on the Advance Date.
(3) The Borrower shall use the proceeds of the Loan solely: (i) to
partially fund the Xxxxxx Equity Financing; and (ii) to pay all fees, costs and
expenses associated with the negotiation, execution and delivery of this
Agreement including, without limitation, all Fees payable on the Advance Date
pursuant to the Fee Letter.
ARTICLE 3.
INTEREST AND FEES
Section 3.1 Interest on the Loan. (1) The Borrower shall pay to
the Agent, for and on behalf of the Lenders, on the Interest Payment Date,
Interest on the Outstanding Amount from the Advance Date to the date of payment
at the relevant Interest Rate.
(2) The Borrower may, at its option, from time to time, notify the Agent
of the chosen Interest Period to apply in respect of the Loan by providing to
the Agent not less than six (6) Business Days' notice thereof prior to the
commencement of an Interest Period. If the
Borrower fails to provide such notice, it shall be deemed to have selected, and
the next Interest Period shall be, a period of one (1) month.
(3) The first Interest Period will commence on the Advance Date and
each subsequent period will commence on the expiry of the last day of the
immediately preceding Interest Period.
(4) With each successive Interest Period selected by the Borrower,
Euribor shall be reset on the Quotation Date immediately prior to the
commencement of the Interest Period and there shall be a corresponding change in
the rate of interest payable under this Agreement without the necessity of prior
notice thereof to the Borrower or any other Person.
(5) Upon each extension of the Maturity Date, including, from the
Initial Maturity Date to the Extended Maturity Date and from the Extended
Maturity Date to the Second Extended Maturity Date, all Interest accrued to the
date of such extension shall be capitalized and added to the Principal Sum for
the purpose of calculating Interest thereafter.
(6) Except as otherwise provided herein, all amounts (other than the
Loan) owed by the Borrower to the Agent, the Lenders or a Lender which are not
paid when due (whether at stated maturity, on demand, by acceleration or
otherwise) shall be capitalized and compounded monthly on the first day of each
successive Interest Period, until payment.
(7) Interest Periods in respect of amounts owed by the Borrower to the
Agent, the Lenders or a Lender which are not paid when due (whether at stated
maturity, on demand, by acceleration or otherwise) (an "Unpaid Amount") shall be
for periods of one (1) month.
(8) All Unpaid Amounts shall bear Interest (both before and after
Default or judgment), from the date on which such amount is due until such
amount is paid in full at a rate per annum equal at all times to the Default
Interest Rate.
(9) All Interest payable in respect of Unpaid Amounts shall be payable
on the last day of the relevant Interest Period.
Section 3.2 Fees. The Borrower shall pay the Fees in accordance with
the terms and conditions of the Fee Letter.
Section 3.3 Increased Costs.(1) Except as set forth below, the
Borrower shall forthwith on demand by a Lender pay to that Lender the amount of
any Increased Cost incurred by it or any of its Affiliates as a result of:
(a) the introduction of, or any change in, or any change in the
interpretation or application of, any Law or regulation; or
(b) compliance with any regulation made after the date of this
Agreement, (including any Law or regulation relating to taxation,
change in currency of a country or reserve, reserve asset, special
deposit, cash ratio, liquidity or capital adequacy requirements or
any other form of banking or monetary control).
(2) Section 3.3(1) does not apply to, and the Borrower shall have no
obligations thereunder in respect of, any Increased Cost:
(a) compensated for by the operation of Section 11.8;
(b) attributable to any change in the rate of, or change in the
basis of calculating, tax on the overall net income of a
Lender or any of its Affiliates (or the overall net income
of a division or branch of the Lender or any of its
Affiliates) imposed in the jurisdiction in which its principal
office or lending office is for the time being situate; or
(c) attributable to or resulting from any assignment, transfer or
grant of a participation right by the Agent or a Lender in
respect of its Commitment to any Person that becomes a Lender
to the extent that such increased cost would not have been
incurred if no such assignment, transfer or grant of a
participation right had occurred.
Section 3.4 Illegality. If it is or becomes unlawful in any
Jurisdiction for a Lender, other than the Original Lender, to give effect to any
of its obligations as contemplated by this Agreement or to fund or maintain its
participation in any loan, then: (i) that Lender may notify the Borrower through
the Agent accordingly; (ii) the Original Lender shall forthwith acquire the
participations of that Lender in the Loan; and (iii) the Commitment of that
Lender shall forthwith be cancelled and replaced by an identical Commitment from
the Original Lender. If it becomes unlawful for the Original Lender to give
effect to any of its obligations as contemplated by this Agreement or to fund or
maintain its participation in the Loan, then the Original Lender may notify the
Borrower and the Borrower shall forthwith prepay the participation to the
Original Lender in the Loan and the Original Lender's Commitment shall forthwith
be cancelled.
Section 3.5 Evidence and Calculations.(1) Accounts maintained by any
Lender in connection with any Credit Document are in the absence of manifest
error, conclusive evidence of the matters to which they relate.
(2) Any certification or determination by the Agent of a rate or amount
under any Credit Document is, in the absence of manifest error, conclusive
evidence of the matters to which it relates.
ARTICLE 4.
REPAYMENT OF PRINCIPAL SUM
Section 4.1 Payments. The Borrower shall pay or repay to the Agent,
for and on behalf of the Lenders, on the earlier of the Maturity Date and ten
(10) Business Days following a Change of Control, pro rata with payments or
repayments to be made to the Xxxxxxx Lenders under the Xxxxxxx Loan Agreement,
the Outstanding Amount together with all amounts owing hereunder and not
previously paid or repaid, without set-off, counterclaim or deduction.
Section 4.2 Borrower's Right to Prepay the Loan. The Borrower may,
from time to time, on five (5) Business Days' prior notice given to the Agent
stating the proposed date and aggregate principal amount of the prepayment, and,
if such notice is given, the Borrower shall, prepay the Outstanding Amount, in
whole or in part, as set out in the prepayment notice, together with accrued
Interest to the date of such prepayment on the amount prepaid, provided that the
Borrower may not prepay any amount hereunder unless a pro rata prepayment is
also made in respect of amounts owing to the Xxxxxxx Lenders under the Xxxxxxx
Loan Agreement. Each prepayment shall be in a principal amount of not less than
E 500,000 and in integral multiples of principal E 500,000 thereafter.
Section 4.3 Method and Place of Payment. All payments to be made
hereunder shall be made by the Borrower to the Agent on the day that such
payment is due at the Agent's address provided for in this Agreement.
Section 4.4 Time of Payment. Whenever any payment hereunder shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of Interest or fees, as the case may be.
Section 4.5 Mandatory Prepayment. (1) The Borrower shall use
reasonable commercial efforts during the Initial Period and, if applicable, the
Extended Period to: (i) complete an Asset Sale or Asset Sales on terms
satisfactory to the Borrower, subject to any restrictions in respect thereof
imposed under the Senior Credit Agreements or by any Official Body, including,
without limitation, with respect to any sale involving ZSG, the European
Commission; (ii) complete an Equity Issue on terms reasonably satisfactory to
the Borrower; and/or (iii) withdraw, or cause to be withdrawn and paid to the
Borrower, as soon as practicable, from time to time, the maximum amount
available to be withdrawn from the Shareholders' Accounts, as permitted under
generally accepted accounting principles applicable in Germany and under the
Senior Credit Agreements, the proceeds of which, collectively, shall be
sufficient to pay or repay the Borrower's Obligations hereunder.
(2) The Borrower shall utilize all of the Mandatory Prepayment Amounts,
as and when the aggregate of such amounts received by the Borrower total, from
time to time, E 500,000, to repay all Obligations owing to the Agent and the
Lenders hereunder and all amounts owing to Xxxxxxx under the Xxxxxxx Loan
Agreement, on a pro rata basis.
ARTICLE 5.
SECURITY
Section 5.1 Security. As general and continuing security for the
performance of all Obligations of the Borrower under the Credit Documents,
including the prompt payment when due by the Borrower of the Loan and Interest
and all other monies from time to time
owing by the Borrower hereunder, there shall be executed, delivered and
deposited with and held by the Security Agent, the Lenders and the Xxxxxxx
Lenders the following documents and instruments on the Closing Date, each of
which shall be in form and substance satisfactory to the Agent:
(a) the Borrower's Securities Pledge Agreements; and
(b) the Assignment Agreements.
Section 5.2 Continued Perfection and Agreed Releases of Security. (1)
The Borrower shall take such action and execute and deliver to the Security
Agent for and on behalf of the Lenders such agreements, conveyances, deeds and
other documents and instruments as the Agent shall reasonably request for the
purpose of establishing, perfecting, preserving and protecting the Security, in
each case forthwith upon request therefor by the Agent and in form and substance
reasonably satisfactory to the Agent.
(2) The Borrower agrees that, where the subject matter of the Security
is in the possession of the Security Agent, the Security Agent: (i) shall be
entitled to hold as additional Security any increase or profits from the subject
matter of the Security; (ii) shall not be obligated to keep identifiable and
shall be entitled to commingle the subject matter of the Security as they may
see fit; and (iii) shall not be obligated to take any steps, necessary or
otherwise, to preserve rights in respect of any instrument, security or chattel
paper.
Section 5.3 Release upon Payment. (1) Subject to Subsection (2)
hereof, upon payment by the Borrower of all of the Obligations and performance
of all other obligations of the Borrower under the Credit Documents, the
Security Agent shall, for and on behalf of the Lenders, at the expense of the
Borrower, execute and deliver such discharges, releases and other documents as
may reasonably be required to release and discharge the Lenders' interest in the
Security. Partial repayment of the Obligations shall not entitle the Borrower
to the release or discharge of the Lenders' interest in the Security, in whole
or in part.
(2) If, following payment by the Borrower of all of the Obligations the
Agent reasonably considers that there is a material risk that such payment may
be set aside as a result of the insolvency of the Borrower, then the Agent may
request and, if the Borrower is solvent, the Borrower shall provide a
certificate of a senior officer of the Borrower certifying the solvency of the
Borrower, supported by consolidated annual and quarterly Financial Statements
for the Borrower's most recently completed financial year and quarter for which
such statements are available, and the Security Agent's obligation to provide
the releases, discharges and other deliveries required under Subsection (1)
hereof shall be conditional upon receipt of such solvency certificate and
Financial Statements.
Section 5.4 Conflicts. If a conflict or inconsistency exists between a
provision of this Agreement and the terms of the Security Documents or the
Credit Documents or any one of them, the terms of this Agreement shall prevail
to the extent necessary to resolve such conflict, provided that, if any of the
Security Documents or Credit Documents contains a representation, warranty,
covenant or right in favor of the Agent or the Lenders not provided for in this
Agreement, such additional representation, warranty, covenant or right shall not
constitute a conflict or inconsistency.
Section 5.5 Extension of Maturity Date. (1) The Borrower
shall have the right to extend the Initial Maturity Date to the Extended
Maturity Date by providing written notice of the exercise of the First Extension
Option to the Agent not less than fifteen (15) days prior to the Initial
Maturity Date.
(2) The Borrower may request the extension of the Extended Maturity
Date to the Second Extended Maturity Date by providing written notice of the
Second Extension Request to the Agent not less than thirty (30) days prior to
the Extended Maturity Date, provided that each Lender shall be entitled to
accept or reject such Second Extension Request in its sole and absolute
discretion. The Agent shall provide written notice of such acceptance or
rejection by the Lenders to the Borrower within ten (10) days of receipt of the
Second Extension Request. If no such notice is received by the Borrower from
the Agent within such period then the Lenders shall be deemed to have rejected
the request.
ARTICLE 6.
CONDITIONS PRECEDENT TO THE LOAN
Section 6.1 Conditions Precedent to the Loan. The obligation of the
Lenders to Advance the Loan on the Advance Date is subject to the fulfillment of
the following conditions precedent:
(a) the Agent shall have received copies of the Borrower's, each Group
Company's, DP Holdings' and DP's Charter Documents and of the
resolutions of the Borrower's trustees and the directors of SPB and
SPH approving the execution, delivery and performance of the Credit
Documents to which each is a party;
(b) the Agent shall have received a certificate of a senior officer of
the Borrower certifying the names and true signatures of the officers
and directors thereof authorized to sign the Credit Documents to
which it is a party;
(c) the Agent shall have received certificates of good standing or like
certificates issued by the appropriate Official Body of the
jurisdiction of incorporation or formation of the Borrower and
each Group Company;
(d) the Credit Documents, the Fee Letter and the Engagement Letter shall
have been executed and delivered to the Agent, the Security shall
have been created, and all deliveries, registrations, filings or
recordings necessary or desirable to preserve, protect or perfect
the security interest and the enforceability and priority of the
Security shall have been completed, all in such form, content and
manner as is satisfactory to the Agent, other than notification of
the pledge of the Pledged Securities to the companies whose securities
are set out in Schedule "B" hereto;
(e) the Agent shall have received copies certified by a senior officer of
the Borrower of the Financial Statements of the Borrower for its most
recently completed Financial Year and Financial Quarter;
(f) all of the representations and warranties contained in the Credit
Documents to which the Borrower is a party shall be correct on and as
of the Advance Date as though made on and as of such date and the
Borrower shall have delivered a Borrower's Certificate to the Agent to
such effect on or before the Advance Date;
(g) the Agent shall have received a certificate of the Borrower certifying
that: (i) all conditions precedent to the initial draw down of the
first advance under the ZSG Project Finance Loan Agreement shall have
been satisfied or waived other than the provision of the Xxxxxx Equity
Financing and any such conditions precedent that are to be completed
after the provision of the Xxxxxx Equity Financing; (ii) all
conditions precedent to the advance of the Xxxxxxx Loan shall have
been satisfied or waived; and (iii) arrangements reasonably
satisfactory to the Agent to facilitate the completion of the
Xxxxxx Equity Financing shall be in place;
(h) the Agent shall have received a copy of the Xxxxxxx Loan Agreement and
shall be satisfied with the terms thereof, acting reasonably;
(i) the Agent shall have received a favorable opinion of counsel to the
Borrower (in form and content satisfactory to the Agent) as to such
matters as the Agent may reasonably request, including the corporate
status of the Borrower, the corporate power and capacity of the
Borrower to borrow money and to grant security therefor and the due
authorization, execution and delivery of the Credit Documents to
which it is a party and the enforceability of this Agreement;
(j) all fees and all expenses required to be paid or reimbursed to the
Agent and the Lenders on the Advance Date shall have been paid;
(k) the Agent shall have received a copy of the Shareholders Agreement
Heads of Terms in the form set out as Schedule "D" to this Agreement
duly executed by the Borrower; and
(l) the Agent shall have received such other documents as it may
reasonably request for and on behalf of the Lenders.
Section 6.2 Conditions Solely for the Benefit of the Lenders. All
conditions to the obligations of the Lenders to Advance the Loan are solely for
the benefit of the Agent and the Lenders and no other Person shall have standing
to require satisfaction of any condition and no other Person shall be deemed to
be a beneficiary of any such condition, any and all of which may be freely
waived in whole or in part by the Agent, for and on behalf of the Lenders, at
any time that it deems it advisable to do so.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
Section 7.1 Representations and Warranties by the Borrower. The
Borrower represents and warrants to the Lenders that:
(a) Organization. Each of the Borrower, ZPR Holding, SPB, ZPR & Co., SPH,
ZSG, DP and DP Holdings is duly constituted and organized and
is validly subsisting and in good standing under the Laws of
its jurisdiction;
(b) Corporate Power. The Borrower has full corporate right, power and
authority to enter into and perform its Obligations under each of
the Credit Documents to which it is a party and has full corporate
right, power and authority to own and operate its properties and
to carry on its Business;
(c) Conflict with Other Instruments. The execution and delivery by
the Borrower of each of the Credit Documents to which it is a
party and the performance of its Obligations thereunder, including,
without limitation, the grant of security over the Pledged
Securities, and the performance of the terms of the Security
Documents to which it is a party, do not and will not: (i) conflict
with or result in a breach of any of the terms, conditions or
provisions of: (A) its Charter Documents; (B) any applicable Law;
or (C) any contractual restriction binding on or affecting it, or its
properties; or (ii) result in, or require or permit: (A) the
imposition of any Lien on or with respect to the properties now
owned or hereafter acquired by it; or (B) the acceleration of the
maturity of any of its Debts under any contractual provision binding
on or affecting it;
(d) Corporate Actions and Authority. The execution and delivery by the
Borrower of each of the Credit Documents to which it is a party
and the performance by the Borrower of its Obligations thereunder
has been duly authorized by all necessary action on the part of
the Borrower and no Authorization under any applicable Law and
no registration, qualification, designation, declaration or filing
with any Official Body having jurisdiction over it is or was necessary
therefor;
(e) Execution of Binding Obligation. This Agreement has been duly
executed and delivered by the Borrower, and this Agreement
constitutes and the remaining Credit Documents to which it is a
party, when duly executed and delivered by the Borrower, will
constitute, legal, valid and binding Obligations of the Borrower
enforceable in accordance with their respective terms, subject only
to: (i) any applicable bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting creditors' rights generally;
and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at Law);
(f) Authorizations. The Borrower possesses all material Authorizations
under any applicable Law which are necessary in connection with the
operation of its Business. All such Authorizations are in full
force and effect and the
Borrower is not in default in any respect thereunder. No action
exists, is pending or threatened which has as its object the
revocation, amendment or qualification of any such Authorization;
(g) No Violation of Agreements. It is not in default under any indenture,
mortgage, deed of trust, agreement or other instrument to which it is
a party or by which it or any of its property may be bound;
(h) No Litigation. There are no actions, suits or proceedings pending or,
to the knowledge of the Borrower, after due enquiry, threatened
against or affecting the Borrower (nor, to the knowledge of the
Borrower, after due enquiry, any basis therefor) before any Official
Body having jurisdiction over the Borrower which purport to or do
challenge the validity or propriety of the transactions contemplated
by the Credit Documents or the documents, instruments or agreements
executed and delivered in connection therewith or related thereto;
(i) No Conflicts. It is not in breach of or in default under, in any
respect: (i) its Charter Documents; (ii) any applicable Law; (iii) any
contract or agreement binding on or affecting it or its property or
assets (including, without limitation, the Credit Documents to which
it is a party); or (iv) any writ, judgment, determination or award
binding on it or affecting its properties or assets;
(j) Financial Statements. The Financial Statements of the Borrower and
each of the balance sheets and related statements of earnings,
retained earnings and changes in financial position of the Borrower
for a Financial Year or a portion thereof delivered to the Agent
pursuant to Section 6.1(e) or from time to time in accordance
herewith, fairly present the financial position of the Borrower as at
such dates and the results of the operations and changes in
financial position of the Borrower for such periods all in
accordance with GAAP;
(k) Material Changes. No material adverse changes have occurred or are
continuing in respect of the financial condition of the Borrower from
that set out in the most recently delivered Financial Statements of
the Borrower; and no Law, regulation, rule or policy, or any change
therein, has been enacted or proposed prior to the Advance Date;
(l) Title to Pledged Securities. The Borrower or, where applicable, its
Affiliate, is the sole legal and beneficial owner of, and has
good and marketable title to the Pledged Securities held by it as set
forth in Schedule "B" hereto and the Security will constitute a
pledge of the Pledged Securities ranking pari passu with the pledge of
the Pledged Securities granted in favor of Xxxxxxx pursuant to the
Xxxxxxx Loan Agreement;
(m) No Agreements to Purchase. No Person has any agreement or right
capable of becoming an agreement for the purchase of any Pledged
Securities;
(n) Restrictions on Doing Business. The Borrower is not subject to any
legislation or any judgment, order or requirement of any court or
agency
which is not of general application to Persons carrying on a
business similar to theirs. There are no facts or circumstances
which could reasonably have a material adverse effect upon the
ability of the Borrower to continue to operate its Business,
operations and affairs as presently conducted;
(o) ERISA. Neither the Borrower nor any ERISA Affiliate sponsors,
maintains, administers, contributes to, participates in, or has any
obligation to contribute to or any liability under, any Plan, or in
the past five (5) years has sponsored, maintained, administered,
contributed to, participated in, or had any obligation to or
liability under, any Plan;
(p) Investment Company Act. The Borrower is not an "investment company"
or a company "controlled" by an "investment company", within the
meaning of the United States Investment Company Act of 1940 as
amended;
(q) Margin Stock. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations U and X of the Board
of Governors of the United States Federal Reserve System), and no
portion of the Loan has been or will be used, directly or indirectly,
to purchase or carry margin stock or to extend credit to others for
the purpose of purchasing or carrying margin stock and the Borrower
will upon the request of the Agent supply a statement to such
effect in conformity with the provisions of Regulation U of the Board
of Governors of the United States Federal Reserve System;
(r) Proceeds. The proceeds of the Loan will be used only for the
purposes described in Section 2.1;
(s) Environmental Laws. ZPR has been in compliance with all applicable
Environmental Laws and Environmental Licenses and, so far as it is
aware, there are no circumstances that may at any time prevent or
interfere with continued compliance by it with all applicable
Environmental Laws and Environmental Licenses. No Environmental
Claim is pending or, to the best of its knowledge, threatened against
it or any of its properties;
(t) Event of Default. No Event of Default is outstanding or might result
from the making of the Loan; and no other event is outstanding which
constitutes (or with the giving of notice, lapse of time,
determination of materiality or the fulfilment of any other
applicable condition or any combination of the foregoing, might
constitute) a default under any document which is binding on the
Borrower or any of its assets;
(u) Tax Compliance. Each of the Borrower and the Group Companies has
filed or caused to be filed, or has a valid extension of the time to
file, all Federal and material state and other tax returns that are
required to be filed and has paid all Taxes shown to be due and
payable on said returns or on any assessments made against it or any
of its property and all other Taxes, fees or other charges levied
upon it or any of its property by any governmental authority to the
extent that such Taxes have become due and payable, and no
tax Lien has been filed with respect to any such Tax, fee or other
charge, except to the extent the relevant taxes are being contested
in good faith and by appropriate means and as to which reserves
reasonably regarded as adequate have been established in accordance
with applicable generally accepted accounting principles; and
(v) Documents. There are no agreements to which the Borrower or any of
its Affiliates is a party relating to the Pledged Securities, the
Shareholders Loans or loans that are subject to Assignment
Agreements, copies of which have not been delivered to the Agent
prior to the date of this Agreement.
Section 7.2 Repetition of Representations and Warranties. The
representations and warranties set out in Section 7.1:
(a) are made on the date of this Agreement; and
(b) are deemed to be repeated by the Borrower on the date of each Request
and the first day of each Interest Period with reference to the
facts and circumstances then existing.
Section 7.3 Survival of Representations and Warranties. The
representations and warranties of the Borrower contained in this Agreement or
made by the Borrower in any certificate, notice or report delivered under this
Agreement will survive the Advance Date, the making and repayment of the Loan
and any novation, transfer or assignment of the Loan.
ARTICLE 8.
COVENANTS OF THE BORROWER
Section 8.1 Affirmative Covenants. So long as any Lender has any
Commitment under this Agreement and until the Obligations are paid and satisfied
in full, the Borrower shall (or, if applicable, shall cause the relevant action
to take place), unless the Agent otherwise consents in accordance with the
provisions of this Agreement:
(a) Financial Reporting. Deliver to the Agent (except as otherwise
provided herein) in reasonable detail the following information
prepared in accordance with GAAP and certified by a senior officer
of the Borrower as being, to the best of his knowledge after due
enquiry, true and correct in all material respects: (i) as soon as
available at the end of each Financial Quarter and in any event within
forty-five (45) days thereafter, quarterly Financial Statements,
as at the end of such Financial Quarter, setting forth, in each case
in comparative form, the figures for the previous year's corresponding
Financial Quarter and the Financial Year to date; (ii) as soon as
available and in any event within ninety (90) days after the end
of each Financial Year of the Borrower a copy of the audited
consolidated Financial Statements of the Borrower for the respective
Financial Year reported on by the independent auditors of the
Borrower, as the case may be; and (iii) such other financial
statements and information respecting the Borrower as may reasonably
be requested by the Agent from time to time;
(b) Additional Reporting. Deliver to the Agent, promptly upon the
Borrower obtaining knowledge thereof, written notice of: (i) any
Default or Event of Default, specifying the nature thereof and the
action the Borrower proposes to take or has taken with respect
thereto; (ii) any litigation, including arbitration, and of any
proceedings before any Official Body against the Borrower where
the amount involved exceeds E 5,000,000; (iii) adoption of,
participation in or contribution to any Plan by the Borrower
or any ERISA Affiliate, or any action by any of these to adopt,
participate in or contribute to any Plan, or the incurrence by any of
them of any liability or obligation to any Plan; (iv) non-compliance
with any Environmental Law or Environmental License where
non-compliance could reasonably have a Material Adverse Effect;
(v) any Environmental Claim or any other claim, notice or other
communication served on it in respect of any alleged breach of
any Environmental Law or Environmental License; and (vi) any actual
or suspected Environmental Contamination which could reasonably
result in a Material Adverse Effect;
(c) Corporate Existence. Preserve and maintain in full force and effect:
(i) its corporate existence and all qualifications to carry on the
Business, including, without limitation, all rights (statutory and
other); and (ii) all Authorizations relating thereto, non-compliance
with which could reasonably have a Material Adverse Effect;
(d) Compliance with Laws, etc. Comply with all applicable Laws
non-compliance with which could reasonably have a Material Adverse
Effect;
(e) Payment of Taxes and Claims. Pay and discharge before the same shall
become delinquent: (i) all Taxes, assessments and Official Body
charges or levies imposed upon or in respect of the Business or
any of the Borrower's assets or properties; and (ii) all lawful claims
(including, without limitation, claims for labour, materials, supplies
or services) which, if unpaid, might become a Lien upon or in
respect of the Business or the Borrower's assets or properties;
except, in each case, any such Tax, assessment, charge, levy or
claim which is being contested in good faith by proper proceedings and
for which the Borrower has maintained adequate reserves therefor
and no Liens have attached;
(f) Keeping of Books. Keep proper books of record and account in respect
of the Business, in which full and correct entries shall be made of
all financial transactions and the assets and operations in respect
of the Business in accordance with GAAP;
(g) Visitation, Inspection, etc. Permit the Agent or any of the Lenders or
any representative thereof on reasonable notice to visit and
inspect the Business of the Borrower, to examine its books and
records and to make copies and take extracts therefrom, and to
discuss its affairs, finances and accounts with the officers of the
Borrower and to inspect the Business to ensure compliance with all
Laws at all such reasonable times during normal office hours and as
often
as the Agent or any of the Lenders or any representative thereof may
reasonably request;
(h) Notice of Default. Promptly notify the Agent in writing of any
Default or Event of Default or any default, or event, condition or
occurrence which with notice or lapse of time, or both, would
constitute a default, under any agreement for borrowed money to
which the Borrower is a party and under which the Borrower owes at
least E 5,000,000 or the equivalent amount in another currency;
(i) Pay Obligations to Lenders and Perform Other Covenants. Make full and
timely payment of its Obligations hereunder, whether now existing or
hereafter arising, and duly comply with the terms and covenants
contained in each of the Credit Documents to which it is a party, all
at the times and places and in the manner set forth therein after
giving effect to all applicable grace periods provided for therein,
and at all times take all action necessary to maintain the security
interests and charges provided for under or pursuant to this Agreement
and the Security Documents to which it is a party as valid and
perfected security interests and charges on the property intended to
be covered thereby having priority as contemplated thereby and supply
all information to the Agent which is reasonably necessary for such
maintenance;
(j) Notices of Official Body Action. Promptly notify the Agent in writing
of any notice of any action by any Official Body or any action, suit,
proceeding or investigation (or any basis therefor) pending, or to
the knowledge of the Borrower threatened, against or affecting the
Borrower before any Official Body, where the amount involved exceeds
E 5,000,000 or the equivalent amount in another currency;
(k) Pari Passu. Ensure that its Obligations under the Credit Documents do
and will rank at least pari passu with its present and future
obligations under the Xxxxxxx Loan Agreement;
(l) Insurance. Cause each of ZPR & Co. and ZSG to maintain insurance with
financially sound and reputable insurers with respect to its assets
of an insurable nature against such risks and in such amounts
as are normally maintained by Persons carrying on the same or a
similar class of business;
(m) Environmental Laws. Cause each of ZPR & Co. and ZSG to comply with:
(i) all applicable Environmental Laws; and (ii) the terms and
conditions of all Environmental Licenses applicable to any of them, in
each case, where failure to do so could reasonably result in a
Material Adverse Effect;
(n) Waivers. Promptly provide to the Agent copies of any waivers provided
by the Senior Lenders and/or any amendments made as the case may be,
in respect of any obligations of ZPR & Co. and/or ZSG under the
Senior Credit Agreements;
(o) Parallel Reporting. Promptly provide to the Agent copies of any
reports or financial statements or information provided to any of
the Senior Lenders under the Senior Credit Agreements not otherwise
provided hereunder;
(p) Further Assurances. At its cost and expense, upon request by the
Agent, duly execute and deliver, or cause to be duly executed and
delivered, to the Agent, such further instruments and do and cause to
be done such other acts as may be necessary or proper in the
reasonable opinion of the Lenders to carry out more effectually the
provisions and purposes of this Agreement and the other Credit
Documents;
(q) Shareholders Agreement. (1) Within ninety (90) days of the date of
this Agreement, settle upon the terms of a shareholders agreement
or equivalent documentation in form and substance satisfactory to
the Agent reflecting the terms of the Shareholders Agreement Heads
of Terms;
(2) Upon the occurrence of an Event of Default and the Lenders
realizing upon their Security and committing to sell all or
a portion of the Pledged Securities to a third party purchaser
through public auction or otherwise, enter into a shareholders
agreement or equivalent documentation upon the agreed terms with
such third party purchaser;
(r) Maintenance of Special Purpose Vehicle Status. Ensure that each
Intermediate Holding Company and DP Holdings:
(1) maintains its existence as a limited liability company under
German Law (Gesellschaft mit beschrankter Haftung), duly
organised, validly existing and in good standing under the Laws
of Germany and does not:
(i) enter into any Amalgamation or demerger or amend its Charter
Documents in any manner;
(ii) take any action in furtherance of dissolution, liquidation
or any scheme of voluntary insolvency, reorganisation or
the like;
(iii) have any Subsidiary other than a Group Company, DP or a
Permitted Subsidiary, which is its Subsidiary as at the
date of this Agreement;
(iv) issue any further capital stock after the date of this
Agreement other than ordinary shares; or
(v) engage in any business or activity other than: (a) acting as
a special purpose vehicle for subscribing for and holding
shares in and advancing Shareholders Loans to and holding
Shareholders Loans in the Group Company, or DP, directly
owned by it as at the date hereof; (b) performing its
Obligations under any Credit Document to which it is a
party; (c) complying with its obligations under the ZPR
Senior Security;
and (d) holding its interests in, and engaging in
transactions in the ordinary course of business with, Group
Companies, DP and Permitted Subsidiaries;
(2) does not have any assets other than:
(i) its rights under the Credit Documents and the
documents evidencing the Shareholders Loans;
(ii) the authorizations referred to in subparagraph
(5) below; or
(iii) the shares of the Group Company, DP or Permitted
Subsidiaries owned by it as at the date of this
Agreement;
(3) does not have any obligations or liabilities of any
nature whatsoever other than:
(i) liabilities arising in respect of the Loan and its
other Obligations under the Credit Documents;
(ii) obligations in respect of Taxes and fees
necessary for maintenance of its corporate
existence and obligations imposed by Law in
Germany;
(iii) obligations under any contract referred to in
subparagraph (4)(iv), (v) or (vi) below; or
(iv) obligations arising under the ZPR Senior Security;
(4) is not party to any contract, agreement or arrangement
other than:
(i) the Credit Documents to which it is a party;
(ii) documents evidencing Shareholders Loans;
(iii) contracts or arrangements necessarily incidental
to maintenance of its existence and its role as
a special purpose vehicle;
(iv) contracts under which Excluded Payments are made
and which contain no other material obligation
other than that which is remunerated by the
relevant Excluded Payments;
(v) contracts, agreements or arrangements with Group
Companies, DP and Permitted Subsidiaries; and
(vi) documents relating to the ZPR Senior Security to
which it is a party;
(5) obtains, maintains and complies with the terms of all
authorizations required under any Law or regulation to
enable it to perform its Obligations under, or for the
validity or enforceability of, the Credit
Documents to which it is a party and any documents
evidencing Shareholders Loans;
(6) complies in all material respects with all Laws and
regulations applicable to it; and
(7) pays all its Taxes when due, except to the extent the
relevant taxes are being contested in good faith and by
appropriate means and as to which reserves reasonably
regarded as adequate have been established in accordance
with applicable generally accepted accounting
principles; and
(s) Additional Reporting of Indebtedness. Deliver to the Agent written
notice of the incurrence of any Debt or Debts in excess, in aggregate,
of E 10,000,000, following the incurrence thereof, setting out in
reasonable detail the particulars of such Debt.
Section 8.2 Negative Covenants. So long as any Lender has any
Commitment under this Agreement and until the Obligations are paid and satisfied
in full, the Borrower shall not (or if applicable shall not permit the relevant
action to take place):
(a) Change in Nature of Business. Change the nature of the Business in
any material respect or make or permit to exist any change, condition,
event or occurrence in or with respect to the nature of the Business
which when taken with all other conditions, events or occurrences
could reasonably be expected to have a Material Adverse Effect;
(b) Mergers, etc. Enter into or agree to enter into any transaction
(whether by way of reconstruction, reorganization, consolidation,
combination, amalgamation, merger, transfer, sale, lease, modification
or otherwise) whereby: (i) other than pursuant to an Asset Sale,
all or substantially all of the Borrower's undertaking, property or
assets will become the property of any other Person or the continuing
corporation resulting therefrom; (ii) there would be permitted any
change in the direct or indirect Control of the Borrower; or (iii) the
corporate structure of the Borrower affecting the Group Companies
would be modified, changed, altered or amended, in any manner,
from that set out in Schedule "E" hereto;
(c) Distributions. Make, allow or cause any payment on account of a
redemption, distribution or return of capital (including, without
limitation, cash dividends or any repayment of Shareholder Loans or
cash distributions) to any of its shareholders other than non-cash
dividends or distributions comprised solely of equity securities
of the Borrower;
(d) Margin Stock. Engage in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulations U and X issued by the Board of Governors of the United
Sates Federal Reserve System), and no portion of any Loan will
be used, directly or indirectly, to
purchase or carry margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock;
(e) Investment Company Act. Either by act or omission, become an
"investment company" or a company "controlled" by an "investment
company", within the meaning of the United States Investment
Company Act of 1940, as amended;
(f) ERISA. (1) Adopt, maintain, sponsor, participate in or incur any
liability or obligation under or to any Plan or incur any obligation
to provide post-retirement benefits to any Person nor allow any ERISA
Affiliate to do so; or
(2) Take any action or omit to take any action or permit any
Subsidiary or ERISA Affiliate to take any action or omit to
take any action with respect to any Plan that might result
in the imposition of a Lien or other security interest on
any property of the Borrower or any Subsidiary or otherwise have
a Material Adverse Effect;
(g) No Transfers. Sell, assign or transfer any shares or other interests
in ZPR Holding, SPB, ZPR & Co. or SPH or any Shareholders Loans or
allow any sale, assignment or transfer to any third party of any such
interest or Shareholders Loans, other than pursuant to Asset Sales;
(h) Negative Pledge. Allow to be created or permit to subsist any Lien on
any of the assets of the Group Companies or DP Holdings, except for:
(i) Liens arising under the Credit Documents; (ii) Permitted Liens;
or (iii) Liens arising under or pursuant to the Senior Credit
Agreements;
(i) Transactions Similar to Security. Allow any Intermediate Holding
Company or DP Holdings to sell, transfer or otherwise dispose of
any of its assets on terms whereby it is or may be leased to or
re-acquired or acquired by the Borrower or any Subsidiary or any of
its related entities in circumstances where the transaction is
entered into primarily as a method of raising finance or of financing
the acquisition of an asset unless such transaction would result in a
Permitted Lien;
(j) Incurrence of Debt. Permit any of the Group Companies or DP Holdings
to incur any additional Debt in excess E 5,000,000, separately or in
the aggregate, except under the Senior Credit Agreements and/or
pursuant to any currency hedging, currency swap, interest rate swap,
cap or collar arrangement or other swap arrangement, from time to
time in relation to the Senior Credit Agreements;
(k) Related Party Transactions. Enter into with any Group Company, DP or
DP Holdings or allow any Affiliate that is not a Group Company, DP
Or DP Holdings to enter into with any Group Company, DP or DP
Holdings any transaction under which the aggregate payments to be
made or the fair market value of the property which is the subject
of the transaction is greater than E 1,000,000, except pursuant to
the Marketing and Sales Agreement, unless: (i) in respect of
transactions that involve more than E 1,000,000 and up to
E 3,000,000, such transaction(s) are undertaken at fair market value
on an arm's-length basis, as determined by the board of directors or
other governing body of the Borrower or the Affiliate which is a
party to such transaction in good faith, and evidenced by resolution
thereof filed with the Agent, and provided that in respect of any
transaction which involves more than E 3,000,000, such determination
shall be based upon the written opinion of a qualified independent
appraiser, valuator, accounting firm or investment bank prepared
contemporaneously with such transaction, which opinion shall be
attached to the approving resolution;
(l) No Amendments. Permit any amendment to be made to the ZPR Credit
Agreement or the ZSG Project Finance Loan Agreement which could
result in an obligation to create additional security in favor of
the ZPR Senior Lenders or the ZSG Senior Lenders over a
Shareholders Account; and
(m) Shareholder Accounts. Pledge or allow any Group Company or DP
Holdings to pledge or otherwise deal with any Shareholder Account
other than in accordance with Section 4.5(1)(iii) hereof.
ARTICLE 9.
EVENTS OF DEFAULT
Section 9.1 Events of Default. An Event of Default shall have occurred
and be continuing if:
(a) Payment of Principal. The Borrower shall fail to pay the Principal
Sum or any portion thereof outstanding hereunder when the same
becomes due and payable and such failure shall remain unremedied
for a period of five (5) Business Days;
(b) Payment of Interest, Fees, etc. The Borrower shall fail to pay
any Interest hereunder when the same becomes due and payable or the
Borrower shall fail to pay any fees, expenses or any other amounts
hereunder when the same becomes due and payable, and in any such
case, the failure shall remain unremedied for a period of ten (10)
Business Days;
(c) Representations and Warranties Incorrect. Any representation or
warranty made by the Borrower herein or in any other Credit
Document or any representation, warranty or certification made by
the Borrower (or any of its officers) in any certificate or other
writing delivered in connection with any of the Credit Documents, or
any representation or warranty deemed to be made by the Borrower
provided herein or therein, shall prove to have been incorrect in any
respect when made or deemed to be made or repeated where the
underlying event which gives rise to such representation, warranty
or certification being incorrect, could reasonably be expected to
have a Material Adverse Effect;
(d) Failure to Perform Certain Covenants. The Borrower shall fail to
observe any of the negative covenants contained in the Credit
Documents and to be observed by the Borrower including, without
limitation, in Section 8.2 of this Agreement;
(e) Failure to Perform Other Covenants. Except as otherwise provided, the
Borrower shall fail to perform or observe any other term, covenant or
agreement contained in any of the Credit Documents and applicable to
the Borrower and such failure shall remain unremedied for thirty
(30) Business Days, if such term, covenant or agreement is reasonably
capable of being remedied in such period;
(f) Failure to Pay Debts to Third Parties. The Borrower shall fail to pay
the principal of or premium or interest on any Debt which is
outstanding in an aggregate principal amount in excess of E 5,000,000
(or the equivalent amount in any other currency) when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur
or condition shall exist, and shall continue after the applicable
grace period, if any, specified in the agreement or instrument
relating to any such Debt, if the effect of such event or condition
is to accelerate, or to permit the acceleration of, the maturity of
Debt of the Borrower which is outstanding in an aggregate principal
Amount exceeding E 5,000,000 (or the equivalent amount in any other
currency);
(g) Failure to Draw. ZSG shall fail to complete the initial draw
available to it under the ZSG Project Finance Loan Agreement within
seven (7) Business Days of the Advance Date;
(h) Event of Bankruptcy. There shall exist any Event of Bankruptcy in
respect of the Borrower;
(i) Judgments. Any judgment or order for the payment of money in excess of
E 5,000,000 in respect of the Borrower shall be rendered against the
Borrower and either: (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order; or (ii) there
shall be any period of thirty (30) consecutive days during which
a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
(j) Unenforceability. This Agreement or any Credit Document shall, at
any time after execution and delivery, and for any reason (other
than in accordance with the respective terms or with the unanimous
consent of the Lenders), cease to be in full force and effect or
shall be declared to be null and void, or the validity or
enforceability of any thereof shall be contested by the Borrower or
any other party thereto, or the Borrower or any other such party shall
deny that it has any further liability or obligation thereunder;
(k) Cross Default. ZPR & Co. and/or ZSG, as the case may be, shall fail
to pay the principal of, premium or interest or any other amounts
under the ZPR Credit Agreement and/or the ZSG Project Finance Loan
Agreement when the same becomes due and payable (whether by
scheduled maturity, required prepayment, demand or otherwise)
resulting in an acceleration of the obligations of ZPR & Co. and/or
ZSG, as the case may be, under the applicable Senior Credit
Agreement;
(l) Challenge to Security. Any of the Security shall at any time after
the execution and delivery of the relevant Security Document and
for any reason (other than with the unanimous consent of the
Lenders) cease to constitute a valid, subsisting and perfected
security interest or charge in respect of the assets and properties
referred to therein or cease to rank in priority or in the manner
contemplated herein or in the relevant Security Document other than by
reason of the act or omission of the Agent or the Lenders;
(m) Cessation of business. ZPR and/or ZSG ceases, or threatens to cease,
to carry on all or a substantial part of its business, excluding
any such event flowing from an Asset Sale;
(n) Unlawfulness. It is or becomes unlawful for the Borrower to perform
any of its Obligations under the Credit Documents; or
(o) ERISA. Any event or condition that presents a material risk that the
Borrower or any ERISA Affiliate may incur a material liability to a
Plan or to the United States Internal Revenue Service or to the
United States Pension benefit guaranty corporation; or an
"accumulated funding deficiency" (as that term is defined in Xxxxxxx
000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of 1986, as amended, or
Section 302 of ERISA), whether or not waived, by reason of the failure
of the Borrower or any ERISA Affiliate to make a contribution to a
Plan where such event could reasonably have a Material Adverse
Effect;
Upon the happening of an Event of Default described in Section 9.1(h)
(Bankruptcy) all Commitments will immediately terminate and the Loan, together
with accrued Interest, and all other amounts accrued under the Credit Documents,
will be immediately due and payable. On and any time after the occurrence of an
Event of Default (other than an Event of Default described in Section 9.1(h) the
Agent may, and shall if so directed by the Majority Lenders, by notice to the
Borrower: (i) declare the Obligations under the Agreement to be forthwith due
and payable, whereupon the same shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by the Borrower; and (ii) take all steps and proceedings
as, in the opinion of the Agent are necessary or desirable to preserve, protect
or enforce the Security.
Section 9.2 Cure of Default. The Agent shall have the right, but shall
not be obligated, from time to time while a Default or Event of Default shall
have occurred and remain continuing, to take in its name or in the name of the
Borrower or otherwise such action as it shall consider necessary or desirable to
cure or rectify such Default or Event of Default and, in so doing, neither the
Agent nor the Lenders shall incur any liability to the Borrower if any such
action taken by the Agent or the Lenders or on the Borrower's behalf
shall prove to be in whole or in part inadequate or invalid and the Borrower
shall indemnify and hold the Agent and the Lenders harmless from and against
any loss, costs, liability or expense (including, without limitation,
reasonable fees on a solicitor and a solicitor's own client basis and
disbursements of counsel) paid, suffered or incurred by the Agent or the
Lenders in connection therewith or arising therefrom.
Section 9.3 Additional Provisions. (1) Notwithstanding anything
else set out in this Article 9, in the event that the Obligations are not repaid
on the Extended Maturity Date and a Second Extension Request has not been made
by the Borrower and accepted by the Agent, (a "Payment Default"), prior to the
exercise of any remedy by the Agent hereunder, the Borrower and the Agent shall,
within thirty (30) days following such Payment Default, agree upon a course of
action pursuant to which the Borrower will sell sufficient assets to pay the
Obligations to the Lenders, provided that, if no such agreement is reached
within the prescribed time, subject to Subsection (2), the Lenders may exercise
all of their rights in and to the Security hereunder.
(2) The Agent and Lenders acknowledge and agree that: (i) any present
or future right that the Agent and/or the Lenders may otherwise have, or have
had, hereunder or pursuant to the Security to sell, assign, transfer or realize
upon any interest in ZPR pursuant to this Agreement or the Security shall be
limited to the sale of 49% of the shares thereof or interest therein unless
additional sales are consented to in writing by the ZPR Senior Lenders; and (ii)
any right that they may otherwise have to sell any interest in ZSG arising under
the Security shall be limited to such percentage thereof which is consented to
by the European Commission and, in any event, to no more than 12.5% of the
shares thereof unless additional sales are consented to in writing by the ZSG
Senior Lenders.
(3) Notwithstanding Subsection (2) hereof, the Borrower covenants and
agrees that if, following an Event of Default, the Agent reasonably determines
that it must complete sales of a greater portion of the Borrower's interests in
ZPR and/or ZSG than provided for and allowed under Subsection (2) hereof (the
"Permitted Sales") at the request of the Agent, the Borrower will co-operate
with the Lenders and make reasonable commercial efforts to obtain the consent of
the applicable Senior Lenders to sales of the Borrower's interests in ZPR and
ZSG as applicable, in addition to the Permitted Sales, provided that the
Borrower shall not be obliged to incur any expense or disburse any funds in
connection therewith.
ARTICLE 10.
THE AGENT
Section 10.1 Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto and the
Lenders and the Borrower acknowledge that all instructions, decisions and
requests for decisions not otherwise provided for herein shall be made through
the Agent. As to any matters not expressly provided for by this Agreement
(including, without limitation, enforcement or collection of the Obligations),
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Lenders and such instructions shall be binding
upon all Lenders; provided, however, that the Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable Law. The Agent agrees to give each
Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
Section 10.2 Agent as Lender. With respect to its Commitment, any
Lender who is also the Agent hereunder shall have the same rights and powers
under this Agreement as any other Lender hereunder and may exercise the same as
though it were not the Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include the Agent in its individual capacity as
Lender. The Agent and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, accept investment banking engagements from
and generally engage in any kind of business with the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if it were not the Agent and without any
duty to account therefor to the Lenders.
Section 10.3 Majority Lenders. The Agent and its Affiliates shall at
all times, collectively, be Majority Lenders hereunder.
Section 10.4 Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (i) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement; (iii) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to inspect the
property (including the books and records) of the Borrower; (iv) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any Lien or security interest created or purported to be created
under or in connection with, this Agreement or any other instrument or document
furnished pursuant hereto; and (v) shall incur no liability under or in respect
to this Agreement by acting upon any notice, Authorization, certificate or other
instrument or writing (which may be by telecopier, telegram or telex) believed
by it to be genuine and signed or sent by the proper party or parties.
Section 10.5 Lender Credit Decisions. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on Financial Statements referred to in Section 6.1(e) and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
Section 10.6 Agent Agreements. From time to time, the Agent may enter
into, execute and deliver agreements or instruments supplemental hereto with the
Borrower for the purposes of: (i) adding to the provisions hereof such
additional covenants and enforcement provisions as are, in the opinion of the
Agent, necessary or desirable and not prejudicial to the interests of the
Lenders; (ii) making such provisions not inconsistent with this Agreement as may
be necessary or desirable and not prejudicial to the interests of the Lenders
with respect to matters or questions arising hereunder; (iii) adding, altering
or modifying the provisions hereof, including relieving the Borrower from any
Obligations, conditions or restrictions herein contained provided such addition,
alteration, modification or relief shall be operative or become effective only
if, in the opinion of the Agent, such addition, alteration, modification or
relief in no way prejudices any of the rights of the Lenders or the Agent (and
the Agent may in its sole discretion decline to enter into any such addition,
alteration, modification or relief which, in its opinion, may not afford
adequate protection to it when same becomes operative); and (iv) for any other
purpose not inconsistent with the terms of this Agreement, including, without
limitation, the correction or rectification of any ambiguities, defective or
inconsistent provisions, errors, mistakes or omissions herein provided where, in
the opinion of the Agent, the rights of the Agent and the Lenders are in no way
prejudiced thereby.
Section 10.7 Indemnification. The Lenders agree to indemnify the Agent
(to the extent not reimbursed by the Borrower), rateably according to the
respective principal amount of the Loan then held by each of them (or if no
principal amount is outstanding, rateably according to the respective amounts of
their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
those arising in an action brought by a Lender) that may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement or any other Credit Document, or action taken or omitted by the Agent
under this Agreement or any other Credit Document (collectively, the
"Indemnified Costs"), provided that no Lender shall be liable for any portion of
the Indemnified Costs resulting from the Agent's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its rateable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Borrower. In the case of any investigation,
litigation or proceeding giving rise to any Indemnified Costs, this Section 10.7
applies whether any such investigation, litigation or proceeding is brought by
the Agent, any Lender or a third party.
Section 10.8 Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Obligations owing to it (other than pursuant to
Sections 3.3 or 11.8) in excess of its rateable share of payments on account of
the Obligations obtained by all of the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Obligations owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment rateably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender
the purchase price to the extent of such recovery together with an amount equal
to such Lender's rateable share (according to the proportion of (i) the amount
of such Lender's required repayment to (ii) the total amount so recovered from
the purchasing Lender) of any interest or other amount paid or payable by the
Purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender purchasing a participation from another Lender pursuant
to this Section 10.8 may, to the fullest extent permitted by Law, exercise
all of its rights of payment (including right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 10.9 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the Majority Lenders. Upon any such resignation
or removal, the Majority Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within thirty (30) days after
the retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized
under the Laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least U.S.$50,000,000. Upon
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
ARTICLE 11.
MISCELLANEOUS
Section 11.1 Records. The unpaid amount of the Loan and the unpaid
Interest accrued thereon shall at all times be ascertained from the books and
records of the Agent, which shall be conclusive absent manifest error, fraud,
dishonesty or improper conduct, and a certificate of any officer of the Agent as
to such records shall be conclusive evidence of such records.
Section 11.2 Brokerage. The Agent and the Lenders represent that it
and they have not engaged any broker in connection with this Agreement. Neither
the Agent nor the Lenders shall be liable in any way for the payment of any
brokerage fees or commissions to any broker or other Person entitled or claiming
to be entitled to same in connection herewith and the transactions contemplated
hereby, and the Borrower by acceptance hereof agrees to hold the Agent and the
Lenders harmless from all claims for brokerage fees or commissions which may be
made in connection with the transactions contemplated hereby.
Section 11.3 Lender Approval, Amendments, etc. (1) Except as
expressly provided otherwise herein and subject to Section 11.3(2) no amendment
or waiver of any provision of this Agreement or of any of the other Credit
Documents, nor any consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be
in writing and signed by the Majority Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific
purpose for which given.
(2) No amendment, waiver or consent shall, unless in writing and signed
by all the Lenders: (i) subject any Lender to any additional obligation; (ii)
reduce the principal of, or Interest on, the Loan or any fees or other amounts
due hereunder; (iii) postpone any date fixed for any payment of principal of, or
Interest on, the Loan or any fees or other amounts due hereunder; (iv) except as
provided for in this Agreement, change the number of Lenders required for the
Lenders or any of them to take any action hereunder; or (v) amend this Section
11.2. The granting of such amendment, waiver or consent shall be in the sole
discretion of each Lender and may be arbitrarily declined or withheld by such
Lender.
Section 11.4 Notices, etc. (1) Except as otherwise expressly
provided herein, all notices, requests, demands, directions and communications
by one party to the other shall be sent by facsimile or similar means of
recorded communication or hand delivery, and shall be effective when hand
delivered or, in the case of facsimile or similar means of recorded
communication, when received. All such notices shall be given to a party at its
address given on the signature page of this Agreement, or in accordance with any
unrevoked written direction from such party to the other party in accordance
with this Section 11.4(1). All notices, demands or requests to or of the
Borrower shall be copied to:
Sangra, Moller
0000 Xxxxxxxxx Xxxxx
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attention: H.S. Sangra
Facsimile No.: (000) 000-0000
(2) Except as otherwise provided hereunder, all deliveries of Financial
Statements and other documents to be made by the Borrower to the Lenders
hereunder shall be made by making delivery of such Financial Statements and
documents directly to the Agent at its address set out on the signature pages of
this Agreement, or to such other address as the Agent may from time to time
notify to the Borrower. All such deliveries shall be effective only upon actual
receipt.
Section 11.5 Reimbursement for Certain Expenses. (1) The Borrower
shall pay or cause to be paid and shall indemnify and save the Agent and the
Lenders harmless against liability for the payment of all reasonable
out-of-pocket expenses relating to the Loan, as agreed to in principal by the
Borrower, including, without limitation:
(a) counsel, assessment or compliance review fees and disbursements
(including legal fees and disbursements on a solicitor and a
solicitor's own client basis) incurred by the Agent and the Lenders
in connection with: (i) the development, preparation, execution and
interpretation of this Agreement and the other Credit Documents or
any agreement or instrument contemplated hereby or thereby subject to
the limitation set out in Section 11.5(2); (ii) on-site inspections
by the Agent or its representatives required in connection with the
enforcement of the Credit Documents; (iii) advice of counsel to the
Agent and the Lenders with respect to the administration of the Loan,
the Credit Documents or any transaction contemplated hereunder or
thereunder; (iv) the enforcement or preservation of rights under or
the refinancing, renegotiation or restructuring of the Obligations
under this Agreement or any Obligations under the other Credit
Documents or any agreement or instrument contemplated hereby or
thereby; (v) stamp taxes and custodian fees incurred and chargeable
in connection with the Pledged Securities if charged to the Agent
by a third party; or (vi) any requested amendments, waivers or
consents pursuant to the provisions hereof or of the other Credit
Documents, including such expenses as may be incurred by the Agent or
a Lender in the collection of the Obligations or any litigation,
proceeding, dispute or so-called "work-out" in any way relating
to the Obligations or the Credit Documents; and
(b) all such expenses in connection with: (i) the Borrower's failure to
complete the Loan or to make any payment, repayment or prepayment
on the date required hereunder or specified by it in any notice given
hereunder; (ii) the Borrower's failure to pay any amount required
to be made by it including, without limitation, any Interest or
fees, due under any Credit Document on its due date; or (iii) the
Borrower's failure to give any notice required to be given by it
to the Agent or the Lenders hereunder.
The obligations of the Borrower under this Section 11.5 shall survive the
advance of the Loan and the payment and satisfaction of the indebtedness and
liability of the Borrower to the Agent and the Lenders pursuant to this
Agreement.
(2) The Agent shall be reimbursed on the Advance Date for legal fees
and disbursements incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Credit Documents to the Advance
Date in an amount not to exceed U.S.$100,000.
Section 11.6 No Waiver; Remedies. No failure on the part of the Agent
or the Lenders or the Borrower to exercise, and no delay in exercising, any
right under any of the Credit Documents shall operate as a waiver thereof; nor
shall any single or partial exercise of any right under any of the Credit
Documents preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by Law.
Section 11.7 Confidentiality. Subject to the next following sentence,
the Agent and the Lenders agree to use reasonable efforts to ensure that any
Financial Statement or other information relating to the Business, properties or
condition, financial or otherwise, of the Borrower which may be delivered to the
Agent and the Lenders pursuant to this Agreement which is not publicly filed,
distributed to shareholders of the Borrower or otherwise made available to the
public generally (and which is not independently known to the Agent and the
Lenders or a Lender) will, to the extent permitted by Law, be treated
confidentially by the Agent and the Lenders and will not, except as provided for
herein or with the consent of the Borrower, be distributed or otherwise made
available by the Agent or a Lender to any Person other than the Agent's and a
Lender's employees, authorized agents, counsel or representatives, who shall be
made aware of the confidential nature of such information. The Agent and the
Lenders are hereby authorized to deliver a copy of any Financial Statements or
any other information relating to the Business, operations, or financial
condition of the Borrower and its Subsidiaries which may be furnished to it
under this Agreement or otherwise to: (i) any Official Body having jurisdiction
over the Agent or any Lender, if required by such Official Body; (ii) any
Subsidiary or Affiliate of the Agent or any Lender to whom such information
needs to be disclosed by reason of internal credit policy or for any other
proper reason directly related to the advancement of the intents and purposes of
this Agreement; and (iii) any proposed assignee hereunder. Any such Official
Body, Subsidiary or Affiliate or assignee to whom such information is disclosed
shall be made aware of the confidential nature of such information.
Section 11.8 Taxes, Costs, etc. (1) All payments by the Borrower
under this Agreement and the other Credit Documents shall be made free and clear
of, and without deduction or withholding for, Taxes unless such Taxes are
required by Law to be deducted or
withheld. If the Borrower shall be required by Law to deduct or withhold
any Taxes from or in respect of any sum payable under this Agreement or the
other Credit Documents: (i) the sum payable shall be increased as may be
necessary so that after making all required deductions or withholdings
applicable to additional amounts paid under this Section, the Lenders
receive an amount equal (on an after-tax basis, taking into account any
income Taxes any Lender will owe on the additional amounts) to the sum they
would have received (on an after-tax basis) if no deduction or withholding had
been made; (ii) the Borrower shall make such deductions or withholdings; and
(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant taxation authority or other authority in accordance with applicable
Law, provided that if any transfer, assignment or grant of a participation right
by the Agent or a Lender in respect of its Commitment results at the time of the
transfer, assignment or grant of a participation right, or thereafter, in an
increased payment, the transferee, assignee or participant shall be entitled to
receive such increased payment only to the extent that the Agent or Lender would
have been so entitled had there been no such transfer, assignment or grant of a
participation right.
(2) The Borrower shall pay all Taxes which arise from any payment made
under any of the Credit Documents or from the execution, delivery or
registration of, or otherwise in respect to, any of the Credit Documents.
(3) The Borrower shall indemnify and save harmless the Agent and the
Lenders for the full amount of Taxes levied by any jurisdiction on, or in
relation to, any sum received or receivable hereunder by the Lenders (other than
income or capital Taxes). Payment under this indemnification shall be made
within thirty (30) days from the date the Agent makes written demand therefor.
A certificate as to the amount of such Taxes submitted to the Borrower by the
Agent shall be conclusive evidence, absent manifest error, of the amount due
from the Borrower to the Lenders.
(4) Without prejudice to the survival of any other agreement or
obligations of the Borrower hereunder, the obligations of the Borrower under
this Section shall survive the payment in full of the Outstanding Amount and
Interest thereon.
Section 11.9 Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default each Lender shall have the right, at any
time and from time to time, to the fullest extent permitted by Law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of the Borrower, against any and all
of the Obligations of the Borrower now or hereafter existing under any of the
Credit Documents, irrespective of whether or not the Agent shall have made any
demand under any of the Credit Documents and although such Obligations may be
unmatured. Each Lender agrees to promptly notify the Borrower and the Agent
after any such set-off and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Lenders under this Section are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which any Lender or the Agent may have.
Section 11.10 Judgment Currency. (1) If, for the purposes
of obtaining judgment in any court, it is necessary to convert a sum due
hereunder to the Agent or the Lenders from the Original Currency into the
Judgment Currency, the parties hereto agree, to
the fullest extent that they may effectively do so, that the rate of exchange
used shall be that at which in accordance with normal banking procedures the
Agent could purchase the Original Currency with the Judgment Currency on the
Business Day preceding that on which final judgment is paid or satisfied.
(2) The Obligations of the Borrower in respect of any sum due in the
Original Currency from it to the Agent or the Lenders under any of the Credit
Documents shall, notwithstanding any judgment in any Judgment Currency, be
discharged only to the extent that on the Business Day following receipt by the
Agent or the Lenders, as the case may be, of any sum adjudged to be so due in
such Judgment Currency, the Agent may in accordance with normal banking
procedures purchase the Original Currency with such Judgment Currency. If the
amount of the Original Currency so purchased is less than the sum originally due
to the Agent or the Lenders, as the case may be, in the Original Currency, the
Borrower agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify the Agent or the Lenders, as the case may be, against such loss,
and if the amount of the Original Currency so purchased exceeds the sum
originally due to the Agent or the Lenders, as the case may be, in the Original
Currency, the Agent or the Lenders, as the case may be, agree to remit such
excess to the Borrower.
Section 11.11 Governing Law. The Credit Documents shall be governed
by, and construed in accordance with, the Laws of the State of New York and
shall be treated in all respects as a New York contract without giving effect to
applicable principles of conflicts of Law to the extent that the application of
the Laws of another jurisdiction would be required thereby.
Section 11.12 Consent to Jurisdiction. (1) The Borrower hereby
irrevocably submits to the jurisdiction of any U.S. State or Federal court
sitting in the City of New York, in any action or proceeding arising out of or
relating to this Agreement, or any other Credit Document, and hereby irrevocably
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York court. The Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. The parties agree that any such action or proceeding shall be
conducted in the English language.
(2) Nothing in this Section shall affect the right of the Agent or the
Lenders to serve legal process in any other manner permitted by Law or affect
the right of the Agent or the Lenders to bring any action or proceeding against
the Borrower or its property in the courts of other jurisdictions.
(3) Without prejudice to any other mode of service, the Borrower: (a)
irrevocably appoints CT Corporation System, 000 0xx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 as its agent for service of process in relation to any
proceedings before any courts located in the State of New York in connection
with any Credit Document; (b) agrees to maintain an agent for service of process
in the State of New York until all Commitments have terminated and the Loan and
all other amounts payable under the Credit Documents have been finally,
irrevocable and indefeasibly repaid in full; (c) agrees that failure by a
process agent to notify the Borrower of the process will not invalidate the
proceedings concerned; (d) consents to the service of process relating to any
proceedings by prepaid posting of a copy of the process to its address for the
time being set out on the signature pages hereof; and (e) agrees that if the
appointment of any Person mentioned in paragraph (a) above ceases to be
effective, the Borrower shall immediately appoint a further Person in the State
of New York, as appropriate, to accept service of process on its behalf in the
State of New York, as appropriate, and, if the Borrower does not appoint a
process agent within fifteen (15) days, the Agent is entitled and authorized to
appoint a process agent for the Borrower by notice to the Borrower.
Section 11.13 Successors and Assigns. (1) This Agreement shall become
effective when it is executed by the parties and thereafter shall be binding
upon and enure to the benefit of the Borrower, and its respective successors and
permitted assigns, the Agent and its successors and assigns and each Lender and
its successors and permitted assigns.
(2) The Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written unanimous consent of
the Lenders, which consent may be arbitrarily withheld. Any purported
assignment in violation of this provision shall be void and of no effect.
(3) A Lender may, from time to time, assign or transfer, or grant
participations in, or enter into any other arrangement with another Person or
Persons for the purpose of sharing, transferring or otherwise managing its
position with respect to, all or part of its rights and obligations in respect
of its Commitments, at such times and upon such terms as it may determine,
without any obligation to obtain any consent from any other Person provided that
by so doing any amounts payable in respect of the Obligations of the Borrower
hereunder are not increased.
(4) Any Lender may pledge its interests in the Credit Documents in the
ordinary course of its business or to any Official Body.
Section 11.14 Forum Convenience and Enforcement Abroad. The Borrower
(a) waives objection to the New York State and Federal courts on grounds of
inconvenient forum or otherwise as regards proceedings in connection with this
Agreement; and (b) agrees that a judgment or order of a New York State or
Federal court in connection with this Agreement is conclusive and binding on it
and may be enforced against it in the courts of any other jurisdiction.
Section 11.15 Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 11.16 Prior Understandings. This Agreement and the Credit
Documents supersede all prior understandings and agreements, whether written or
oral, and constitute the entire agreement among the parties hereto relating to
the transactions provided for herein.
Section 11.17 Waiver of Immunity. The Borrower irrevocably and
unconditionally:
(a) agrees that if a Lender brings proceedings against it or its assets
in relation to a Credit Document, no immunity from those
proceedings (including, without limitation, suit, attachment prior
to judgment, other attachment, the obtaining of judgment, execution
or other enforcement) will be claimed by or on behalf of itself or
with respect to its assets;
(b) waives any such right of immunity which it or its assets now has or
may subsequently acquire; and
(c) consents generally in respect of any such proceedings to the giving
of any relief or the issue of any process in connection with those
proceedings, including, without limitation, the making, enforcement
or execution against any assets whatsoever (irrespective of its
use or intended use) of any order or judgment which may be made
or given in those proceedings.
Section 11.18 Counterparts. This Agreement may be executed in
counterparts and by facsimile and by different parties in separate counterparts,
each of which when so executed shall be deemed an original and all of which,
taken together, shall constitute one and the same instrument.
SECTION 11.19 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND THE
LENDERS WAIVE ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED ON OR ARISING FROM ANY CREDIT DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED BY THE CREDIT DOCUMENTS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 11.20 Payments to Agent. All payments required to be made in
respect of the Obligations by the Borrower to the Lenders hereunder may be
made to the Agent, as agent for and on behalf of the Lenders, and such
payments shall be deemed, for all purposes, to have been made to the Lenders as
to their pro rata entitlement thereto.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER
-------------
XXXXXX INTERNATIONAL INC.
Xxxxxxxxxxxxx 00
XX-0000 Xxxxxx, Xxxxxxxxxxx Per:
Tel: 000-00-00-000-0000 ------------------------------
Fax: 000-00-00-000-0000 Authorized Signing Officer
Per:
------------------------------
Authorized Signing Officer
THE AGENT
----------
MFC MERCHANT BANK S.A.
Xxxxxxxxxxxxxxx 0
0000 Xxxxxxx AR Per:
Switzerland ------------------------------
Tel: 000 00 00 000 0000 Authorized Signing Officer
Fax: 000 00 00 000 0000
Per:
------------------------------
Authorized Signing Officer
THE LENDER(S)
--------------
MFC MERCHANT BANK S.A.
Xxxxxxxxxxxxxxx 0
0000 Xxxxxxx AR Per:
Switzerland ------------------------------
Tel: 000 00 00 000 0000 Authorized Signing Officer
Fax: 000 00 00 000 0000
Loan Commitment: E 30,000,000
Per:
------------------------------
Authorized Signing Officer
SCHEDULE "A"
BORROWER'S CERTIFICATE
XXXXXX INTERNATIONAL INC.
(the "Corporation")
TO: MFC Merchant Bank S.A., as Lender, and to such other Lenders as
may from time to time become signatories to the Loan Agreement
(as defined below)
AND TO: MFC Merchant Bank S.A., as agent
RE: Loan Agreement (the "Loan Agreement") dated the [21ST] day of
August, 2002 among MFC Merchant Bank S.A., as Agent and Lender,
and such other Lenders as may from time to time become
signatories thereto, and Xxxxxx International Inc., as Borrower
Capitalized terms used in this Certificate, which are defined in the Loan
Agreement but are not otherwise defined herein, have the meanings ascribed to
such terms in the Loan Agreement.
I, , HEREBY CERTIFY solely in my capacity as a duly elected, qualified
and acting officer of the Corporation, not in my personal capacity and without
personal liability, that:
1. I am a trustee and [ office held] of the Corporation and as such am
authorized to execute this Certificate on behalf of the Corporation and have
personal knowledge of the matters hereinafter deposed to.
2. I have made or caused to be made such examinations or investigations as
are, in my opinion, reasonably necessary to make the statements set out herein
including, without limitation, the examinations described in this Certificate,
and I have furnished this Certificate with the intent that it may be relied upon
by the Lenders and the Agent as a basis for the consummation of the transactions
contemplated by the Loan Agreement.
REPRESENTATIONS AND WARRANTIES
3. The representations and warranties of the Corporation set out in Section
7.1 of the Loan Agreement and in any of the other Credit Documents to which the
Corporation is a party are true and correct in all respects as at the date
hereof.
INCUMBENCY
4. The persons referred to below are the trustees(s) and officer(s) of the
Corporation and are duly elected or appointed to the office(s) of the
Corporation as set out opposite his/her name and, where a signature appears
opposite such name, such signature is his/her true signature and any one trustee
or officer is authorized to sign any and all documents contemplated by the Loan
Agreement , including the Credit Documents to which the Corporation is a party.
Name Office Signature
---- ------ --------
Xxxxx X.X. Xxx Trustee and President
and Chief Executive Officer
------------------------
X.X. Xxxx Trustee
------------------------
R. Xxx Xxxx Trustee and Secretary
and Chief Financial Officer
------------------------
Michel Arnulphy Trustee
------------------------
Maarten Reidel Trustee
------------------------
Jong Xxxx Xxx Trustee
------------------------
CONDITIONS PRECEDENT
5. All conditions precedent to the initial draw down of the first advance
under the ZSG Project Finance Loan Agreement have been satisfied or waived other
than the provision of the Xxxxxx Equity Financing and any such conditions
precedent that are to be completed after the provision of the Xxxxxx Equity
Financing.
6. All conditions precedent to the advance of the MFC Loan have been
satisfied or waived.
7. Upon receipt of the Loan and the Xxxxxxx Loan the Borrower shall be in a
position to advance the Xxxxxx Equity Financing.
CERTIFICATION OF DOCUMENTS
8. EXHIBIT A annexed hereto is a true, accurate and complete copy of
----------
the Declaration of Trust (including any amendments thereto) in effect as of the
date hereof. Except as attached hereto, no document with respect to an
amendment thereto has been filed in the office of the Secretary of State of
the State of Washington, and no actions have been taken by the Corporation in
contemplation of the dissolution of the Corporation.
9. EXHIBIT B annexed hereto is a true, accurate and complete copy of
----------
the Financial Statements of the Corporation for the Financial Year ending on
December 31, 2001 and for the Financial Quarter ending June 30, 2002.
10. EXHIBIT C annexed hereto is a true, accurate and complete copy of
----------
the Resolutions adopted by the board of trustees of the Corporation approving
and authorizing the execution, delivery and performance of the Credit Documents
and the transactions contemplated thereby. Such resolutions have not been
amended, rescinded or modified since their adoption and remain in full force and
effect as of the date hereof and are the only corporate proceedings of the
Corporation now in force relating to or affecting the matters referred to
therein.
DATED as of the day of August, 2002
-----
-------------------------------------
*
EXHIBIT A
STATE OF WASHINGTON
[Grapic Omitted]
SECRETARY OF STATE
I, XXX XXXX, Secretary of State of Washington and custodian of its seal,
hereby issue this
CERTIFICATE OF EXISTENCE/AUTHORIZATION
OF
XXXXXX INTERNATIONAL INC.
I FURTHER CERTIFY that the records on file in this office show that the
above named profit corporation was formed under the laws of the
State of Washington and was issued a Certificate of Incorporation
in Washington on September 30, 1968.
I FURTHER CERTIFY that as of the date of this certificate, no Articles of
Dissolution have been filed, and that the corporation is duly
authorized to transact business in the corporate form in the State of
Washington.
[Graphic Omitted] Date: August 5, 2002
Given under my hand and the Seal of the
State of Washington at Olympia, the
State Capital
sm /s/ Xxx Xxxx
------------------------------------
Xxx Xxxx, Secretary of State
EXHIBIT B
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Xxxxxx International Inc.
We have audited the accompanying consolidated balance sheets of Xxxxxx
International Inc. and Subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, comprehensive income, changes in
shareholders' equity, and cash flows for the years ended December 31, 2001, 2000
and 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Xxxxxx
International Inc. and Subsidiaries as of December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 2001, 2000 and 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ XXXXXXXX XXXXXXXX P.L.L.C.
Seattle, Washington
March 15, 2002
XXXXXX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(IN THOUSANDS OF DOLLARS)
2001 2000
-------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 10,458 $ 18,496
Investments 4,052 5,320
Receivables 42,658 46,088
Inventories 22,323 19,977
Prepaid and other 3,534 3,000
-------- --------
Total current assets 83,025 92,881
Long-Term Assets
Cash restricted 29,739 25,150
Properties 248,167 265,607
Investments 7,658 6,101
Notes receivable 4,877 4,296
Deferred income tax 9,177 9,624
-------- --------
299,618 310,778
-------- --------
$382,643 $403,659
======== ========
LIABILITIES
Current Liabilities
Accounts payable and
accrued expenses $ 46,242 $ 38,204
Notes payable 6,584 839
Debt 16,353 27,173
-------- --------
Total current liabilities 69,179 66,216
Long-Term Liabilities
Debt 193,169 208,315
Other 3,065 3,721
-------- --------
196,234 212,036
-------- --------
Total liabilities 265,413 278,252
SHAREHOLDERS' EQUITY
Shareholders' Equity
Preferred shares, no par value:
50,000,000 authorized and
issuable in series:
Series A, 500,000 authorized,
none issued and outstanding - -
Series B, 3,500,000
authorized, none issued
and outstanding - -
Shares of beneficial
interest, $1 par value:
unlimited authorized and
16,794,899 issued and
outstanding at
December 31, 2001
and 2000 99,995 99,995
Retained earnings 86,171 88,698
Accumulated other
comprehensive loss (68,936) (63,286)
-------- --------
117,230 125,407
-------- --------
$382,643 $403,659
======== ========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
2001 2000 1999
-------- -------- --------
Revenues
Sales of pulp and paper $183,496 $225,626 $125,570
Transportation 4,915 3,857 -
Other 8,578 6,719 2,297
-------- -------- ---------
196,989 236,202 127,867
Expenses
Cost of pulp and paper 161,659 175,420 117,314
Transportation 3,648 2,923 -
Special charges - - 22,155
General, administrative and other 16,502 14,284 22,420
Loss on foreign currency
derivative contracts 2,241 - -
Litigation settlement 918 - -
Interest expense 14,474 13,993 2,995
-------- -------- ---------
199,442 206,620 164,884
-------- -------- ---------
Income (loss) before income taxes (2,453) 29,582 (37,017)
Income tax provision (74) (108) (1,092)
-------- -------- ---------
Net income (loss) $ (2,527) $ 29,474 $ (38,109)
======== ======== =========
Earnings (loss) per share
Basic $ (0.15) $ 1.76 $ (2.33)
======== ======== =========
Diluted $ (0.15) $ 1.72 $ (2.33)
======== ======== =========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS OF DOLLARS)
2001 2000 1999
-------- -------- --------
Net income (loss) $ (2,527) $ 29,474 $(38,109)
Other comprehensive income
Foreign currency translation adjustment (7,687) (6,400) (21,266)
Unrealized gains (losses) on securities
Unrealized holding gains (losses)
arising during the period 2,037 (1,729) 1,745
Reclassification adjustment for
losses included in net income (loss) - 85 1,340
-------- -------- --------
2,037 (1,644) 3,085
-------- -------- --------
Other comprehensive loss (5,650) (8,044) (18,181)
-------- -------- --------
Comprehensive income (loss) $ (8,177) $ 21,430 $(56,290)
======== ======== ========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS OF DOLLARS)
Shares of Beneficial Interest
----------------------------------------
Amount
Paid in
Number Par Excess of
Of Shares Value Par Value
---------- -------- ---------
Balance at December 31, 1998 15,440,122 $ 15,440 $ 76,473
Shares issued for exercise
of warrants 1,245,277 1,245 6,097
Repurchase of shares (50,000) (50) (167)
Payment of dividends - - -
Net loss - - -
Other comprehensive income
(loss) - - -
---------- --------- ---------
Balance at December 31, 1999 16,635,399 16,635 82,403
Shares issued for exercise
of options 159,500 160 797
Net income - - -
Other comprehensive income
(loss) - - -
---------- --------- ---------
Balance at December 31, 2000 16,794,899 16,795 83,200
Net loss - - -
Other comprehensive income
(loss) - - -
---------- --------- ---------
Balance at December 31, 2001 16,794,899 $ 16,795 $ 83,200
========== ========= =========
Accumulated Other
Comprehensive
Income
--------------------------------
Foreign
Currency Unrealized
Retained Translation Gains (Losses)
Earnings Adjustments on Securities
-------- ------------- --------------
Balance at December
31, 1998 $ 98,167 $(28,663) $ (8,398)
Shares issued for
exercise of warrants - - -
Repurchase of shares - - -
Payment of dividends (834) - -
Net loss (38,109) - -
Other comprehensive
income (loss) - (21,266) 3,085
-------- -------- -------
Balance at December
31, 1999 59,224 (49,929) (5,313)
Shares issued for
exercise of options - - -
Net income 29,474 - -
Other comprehensive - (6,400) (1,644)
income (loss) -------- -------- -------
Balance at December
31, 2000 88,698 (56,329) (6,957)
Net loss (2,527) - -
Other comprehensive
income (loss) - (7,687) 2,037
------- -------- -------
Balance at December
31, 2001 $86,171 $(64,016) $(4,920)
======= ======== =======
Accumulated Other
Comprehensive
Income
-----------------
Shareholders'
Total Equity
----- -------------
Balance at December 31, 1998 $(37,061) $153,019
Shares issued for exercise
of warrants - 7,324
Repurchase of shares - (217)
Payment of dividends - (834)
Net loss - (38,109)
Other comprehensive
income (loss) (18,181) (18,181)
-------- --------
Balance at December 31, 1999 (55,242) 103,020
Shares issued for exercise
of options - 957
Net income - 29,474
Other comprehensive
income (loss) (8,044) (8,044)
-------- --------
Balance at December 31, 2000 (63,286) 125,407
Net loss - (2,527)
Other comprehensive income (loss) (5,650) (5,650)
-------- --------
Balance at December 31, 2001 $(68,936) $117,230
======== ========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS OF DOLLARS)
2001 2000 1999
-------- -------- ---------
Cash Flows from Operating Activities
Net income (loss) $ (2,527) $ 29,474 $ (38,109)
Adjustments to reconcile
net income (loss) to
cash flows from
operating activities
Special charges - - 22,155
Depreciation 20,557 22,139 7,018
Changes in current assets
and liabilities
Investment in
trading securities 460 (806) 8,478
Inventories 2,337 (3,391) (996)
Receivables 6,955 (7,227) (12,489)
Accounts payable and
accrued expenses (841) 267 7,718
Prepaid and other (282) (504) (2,411)
-------- -------- ---------
Net cash provided by
(used in) operating
activities 26,659 39,952 (8,636)
Cash Flows from Investing Activities
Proceeds from the sales of
available-for-sale securities - 189 6,867
Proceeds from the sales of
long-term investments 605 - -
Purchases of available-for-sale
securities (569) (1,918) (1,264)
Sale of properties - 13,346 -
Acquisition of properties,
net of investment grants (6,845) 26,073 (255,186)
Purchase of subsidiary,
net of cash acquired (1,839) - -
Change in notes receivable (605) 585 4,178
-------- -------- ---------
Net cash provided by
(used in) investing
activities (9,253) 38,275 (245,405)
Cash Flows from Financing Activities
Cash restricted (5,921) (12,285) -
Increase (decrease) in pulp
mill costs payable (902) (50,286) 47,701
Increase in notes payable
and debt 5,821 5,649 162,863
Decrease in notes payable
and debt (25,924) (5,582) (2,299)
Shares of beneficial interest
issued for cash - 000 -
Xxxxxxxxxx shares of beneficial
interest - - (217)
Dividends - - (834)
Other - - 3
-------- -------- ---------
Net cash provided by
(used in) financing
activities (26,926) (61,547) 207,217
Effect of exchange rate changes
on cash and cash equivalents 1,482 94 (4,704)
-------- -------- ---------
Net increase (decrease) in cash
and cash equivalents (8,038) 16,774 (51,528)
Cash and Cash Equivalents,
beginning of year 18,496 1,722 53,250
-------- -------- ---------
Cash and Cash Equivalents,
end of year $ 10,458 $ 18,496 $ 1,722
======== ======== =========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies
Xxxxxx International Inc. ("the Company") is a business trust organized
under the laws of the State of Washington, USA. Under Washington law,
shareholders of a business trust have the same limited liability as shareholders
of a corporation. The amounts in the notes are rounded to the nearest thousand
except for the per share amounts.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Significant intercompany accounts and transactions have
been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less and are recorded at cost which approximates
market. The Company maintains cash balances in foreign financial institutions in
excess of insured limits.
Investments
The Company's available-for-sale and trading securities are stated at their
fair values. Any unrealized holding gains or losses of available-for-sale
securities are reported as a separate component of comprehensive income until
realized and, for trading securities, any unrealized gains or losses are
included in the results of operations. If a loss in value in available-for-sale
securities is considered to be other than temporary, it is recognized in the
determination of net income. Cost is based on the specific identification method
to determine realized gains or losses.
The Company incurs liabilities for security acquisitions where the security
transfer is to occur at a future date. However, the liability amount is subject
to the ultimate market price of the security.
Inventories
Inventories of pulp are stated at the lower of cost (average-cost method)
or market. Paper products are stated at the lower of cost (first-in, first-out
method) or market.
Properties
Depreciable properties are stated at cost unless the estimated future
undiscounted cash flows expected to result from either the use of an asset or
its eventual disposition is less than its carrying amount in which case an
impairment loss is recognized based on the fair value of the asset. Grants
received from a government reduce costs of property improvements.
Depreciation of buildings and production equipment is based on the
estimated useful lives of the assets and is computed using the straight-line
method. Buildings are depreciated over 10 to 50 years and production equipment
over 8 to 20 years.
Foreign Currency Translation
The Company translates foreign assets and liabilities of its subsidiaries
at the rate of exchange at the balance sheet date. Revenues and expenses are
translated at the average rate of exchange throughout the year. Unrealized gains
or losses from these translations are reported as a separate component of
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. The Company and Summary of Significant Accounting Policies
(Continued)
comprehensive income. Realized gains or losses are included in general and
administrative expenses in the consolidated statements of operations. The
translation adjustments do not recognize the effect of income tax because the
Company expects to reinvest the amounts indefinitely in operations.
Environmental Conservation
Liabilities for environmental conservation are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably estimated.
Any potential recoveries of such liabilities are recorded when there is an
agreement with the reimbursing entity.
Stock-Based Compensation
Compensation cost for stock options is measured as the excess, if any, of
the quoted market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock. There was no stock-based
compensation included in these consolidated financial statements.
Taxes on Income
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax laws or rates.
Derivative Instruments
The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective
January 1, 2001. Derivative instruments are measured at fair value and reported
in the balance sheet as assets or liabilities. Accounting for gains or losses
depends on the Company's intended use of the derivative instruments. Gains or
losses on derivative instruments which are not designated xxxxxx are recognized
in earnings in the period of the change in fair value. Accounting for gains or
losses on derivative instruments designated as xxxxxx depends on the type of
hedge and such gains or losses are recognized in either earnings or other
comprehensive income.
Retroactive application of this standard was not allowed. There is no
cumulative effect in the Company's financial statements as a result of adopting
this standard. The Company had a derivative instrument at December 31, 2000,
which was entered into at year-end. There was no change in its fair value in
2000.
Earnings Per Share
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares.
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. The Company and Summary of Significant Accounting Policies
(Continued)
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
New Accounting Standards
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," is to be applied starting with years beginning after
December 15, 2001. This standard addresses how intangible assets, other than
those acquired in a business combination, should be accounted for. Goodwill and
intangible assets that have indefinite useful lives will no longer be amortized
but will be tested annually for impairment. Management has not determined the
effect this standard may have, if any, on the Company's financial statements.
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations," is effective for years beginning after June 15, 2002.
This standard addresses accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and associated retirement costs.
Management has not determined the effect, if any, this standard may have on the
Company's financial statements.
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," is effective for years beginning
after December 15, 2001. This standard supersedes the previous standard on this
issue as well as others which dealt with accounting for discontinued operations
and the elimination of an exception to consolidation. Management has not
determined the effect this standard may have on the Company's financial
statements.
Note 2. Investments
Trading securities are classified as current investments and are summarized
as follows:
DECEMBER 31
-----------------------
2001 2000
-------- --------
Bonds $ 2,158 $ 4,164
Equity securities 1,894 1,156
-------- --------
$ 4,052 $ 5,320
======== ========
Included within trading securities is an investment in a bond and common
shares of two companies that represent 53% and 46%, respectively, of the total
value of trading securities at December 31, 2001. At December 31, 2000,
investment in a bond and common shares of a company represented 39% and 18%,
respectively, of the total value of trading securities. The change in net
unrealized holding gains (losses) on trading securities which has been included
in earnings was $1,238, $(171) and $2,411 during 2001, 2000 and 1999,
respectively.
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2. Investments (Continued)
Available-for-sale securities consist of bonds and equity securities and have
been classified as long-term investments. Equity securities of two companies
represented 85% and 91% of the total available-for-sale securities at December
31, 2001 and 2000, respectively. The proceeds from sales of these securities
amounted to none, $189 and $6,867 which resulted in realized losses of none,
$(77) and $(1,340) during 2001, 2000 and 1999, respectively. The fair value of
available-for-sale securities included on the balance sheets at December 31,
2001, 2000 and 1999, was $7,305, $5,247 and $6,925, respectively. The cost of
these securities was $12,225, $12,204 and $12,238 which resulted in unrealized
losses being recorded in comprehensive income of $(4,920), $(6,957) and $(5,313)
at December 31, 2001, 2000 and 1999, respectively. Also, included in long-term
investments were equity securities stated at cost of $353 and $854 at December
31, 2001 and 2000, respectively, which did not have a readily determinable fair
value. However, management believes that the estimated market value is greater
than the carrying value.
Note 3. Receivables
DECEMBER 31
---------------------
2001 2000
-------- --------
Sale of paper and pulp products $ 21,207 $ 14,869
Securities trading 12,592 17,645
Sale of properties - 6,147
Value added tax 956 892
Other 7,903 6,535
-------- --------
$ 42,658 $ 46,088
======== ========
At December 31, 2001 and 2000, the Company pledged $12,592 and $17,645,
respectively, in securities trading receivables as collateral for amounts
payable for securities.
Note 4. Inventories
DECEMBER 31
-----------------------
2001 2000
-------- --------
Pulp and paper
Raw materials $ 13,008 $ 10,862
Work in process and finished goods 9,315 9,115
-------- --------
$ 22,323 $ 19,977
======== ========
Note 5. Properties
DECEMBER 31
---------------------------
2001 2000
-------- --------
Land $ 8,519 $ 7,425
Buildings 17,252 16,346
Production and other equipment 291,428 290,789
-------- --------
317,199 314,560
Less: Accumulated depreciation 69,032 48,953
-------- --------
$248,167 $265,607
======== ========
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 5. Properties (Continued)
During 1999, management determined that some of the Company's paper xxxxx
were impaired. These xxxxx were written down to their estimated fair values
based on existing market conditions. This impairment loss, amounting to $19,064,
was reflected as special charges in the Company's consolidated statement of
operations for the year ended December 31, 1999. Also, included in special
charges in 1999, was a loss of $3,091 on abandoned pulp mill equipment.
Note 6. Notes Payable and Debt
At December 31, 2001, the Company had two notes payable to banks. One of
the notes amounting to $5,821 is due on demand at 7% interest. The other note
which had a balance of $763 and $839 at December 31, 2001 and 2000,
respectively, is due monthly at 6.75% interest and is secured by inventory.
Long-term debt consists of the following:
DECEMBER 31
-----------------------
2001 2000
-------- --------
Note payable to bank, interest at rates
varying from 4.5% to 6.8% at December 31,
2001, principal due in semi-annual
installments based on a percentage of the
final loan amount beginning at 2.4% to 5.1%
at September 30, 2001, after an initial
payment of $21,300 on March 31, 2001,
until September 30, 2013 (final payment date),
collateralized by receivables, inventory
and pulp mill assets with 48% and 32%
principal plus interest guaranteed by the
Federal Republic of Germany and the State
of Thuringia, respectively; cash restricted
amounted to $29,739 and $25,150, at
December 31, 2001 and 2000, respectively, in
connection with this borrowing $193,607 $231,017
Debenture payable, 8% interest payable
semi-annually, due 2003, unsecured,
with attached warrants which allows a
debenture holder to acquire common
shares of the Company at the higher of
$6 per share or the average price of the
stock for the ten days prior to conversion 4,135 4,135
Loans payable to a bank, interest at rates
varying from 3.875% to 6.5%, payment terms
varying from on demand to December 31, 2003, 11,492 -
secured by receivables and other properties
Other 288 336
-------- --------
209,522 235,488
Less: Current portion (16,353) (27,173)
-------- --------
$193,169 $208,315
======== ========
On December 29, 2000 and April 1, 2001, the Company entered into foreign
currency forward swap agreements in the notational amount of $124,700 and
$66,797, respectively, with respect to the long-term note payable to bank. These
agreements are with the same bank which holds the note payable. These contracts
were entered into by the Company for its own account consistent with its policy
to manage foreign currency exchange risks. These agreements cover the period
December 29, 2000, to September 30, 2008, and April 1, 2001 to September 30,
2013, respectively. While the Company may be exposed to credit risk with respect
to these agreements, it does not anticipate nonperformance by the bank. The
Company
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Notes Payable and Debt (Continued)
recorded a gain from a change in the fair value of these contracts of
$412 during the year ended December 31, 2001. Additionally, during 2001, the
Company entered into two foreign currency forward agreements in the notational
value of $10,000 each. The contracts were entered into by the Company for its
own account and are consistent with its policy to manage foreign currency
exchange risks. These agreements mature on April 22, 2002 and May 5, 2002. The
Company recorded a loss from a change in the fair value of these contracts of
$352 during the year ended December 31, 2001. During the first quarter of 2001,
the Company entered into a U.S. dollar/euro foreign currency forward contract
with a notational amount of approximately $31,000 which was settled in March of
2001. This contract resulted in a loss of $2,301.
As of December 31, 2001, the principal maturities of long-term debt are as
follows:
MATURES AMOUNT
------- ------
2002 $ 16,353
2003 22,461
2004 12,687
2005 13,513
2006 14,441
Thereafter 130,067
--------
$209,522
========
Interest paid amounted to $14,191 in 2001, $11,465 in 2000 and $12,100
($9,904 capitalized) in 1999.
Note 7. Accounts Payable and Accrued Expenses
DECEMBER 31
----------------------
2001 2000
-------- --------
Trade payables $ 18,875 $ 14,926
Accounts payable and accrued expenses 17,640 16,357
Payable for securities 7,946 6,921
Other 1,781 -
-------- --------
$ 46,242 $ 38,204
======== ========
Note 8. Income Taxes
The provision for income taxes is current and consists of the following:
YEAR ENDED DECEMBER 31
--------------------------------
2001 2000 1999
-------- -------- --------
Provision for income taxes, non U.S $ (74) $ (108) $ (1,092)
====== ====== ========
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Income Taxes (Continued)
Differences between the U.S. Federal Statutory and the Company's effective
rates are as follows:
YEAR ENDED DECEMBER 31
-----------------------------------
2001 2000 1999
-------- -------- --------
U.S. Federal statutory rates on income
from operations benefit (provision) $ 834 $(10,058) $ 12,585
Tax differential on foreign income (loss) 3,152 (800) 8,182
Valuation allowance (5,494) 10,750 (20,748)
Other 1,434 - (1,111)
-------- -------- --------
$ (74) $ (108) $ (1,092)
======== ======== ========
Deferred tax assets are composed of the following:
DECEMBER 31
-----------------------
2001 2000
-------- --------
German tax loss carryforwards $ 64,140 $ 63,853
U.S. tax loss carryforwards 6,075 4,272
Swiss tax loss carryforwards 3,084 -
Other 617 744
-------- --------
73,916 68,869
Valuation allowance (64,739) (59,245)
-------- --------
Net deferred tax asset $ 9,177 $ 9,624
======== ========
Because of potential restrictions on the use of German preacquisition tax
loss carryforwards by successor entities, the Company provided a valuation
reserve for much of these losses. German tax losses of approximately $175,000 at
December 31, 2001, may be carried forward indefinitely. However, the Company is
the subject of income tax audits on a continuing basis in Germany which may
result in a change in the German tax loss amount. Management believes that,
while realization of the net deferred tax asset on the German tax losses is not
assured, it is more likely than not that it will be realized.
The Company's U.S. net operating losses amount to approximately $17,800 at
December 31, 2001. Losses of $4,600, $1,900, $1,200, $3,700, $2,800 and $3,600
will expire in 2021, 2020, 2019, 2018, 2012 and 2011, respectively, if not used.
Management believes that these tax loss carryforwards are likely not to be
utilized under current circumstances and has fully reserved any resulting
potential tax benefit.
The Company's Swiss net operating losses amounted to approximately $9,000
at December 31, 2001. Losses of $3,200 and $5,800 will expire in 2004 and 2007,
respectively, if not used. Management believes that these tax loss carryforwards
are likely not to be utilized under current circumstances and has fully reserved
any resulting potential tax benefit.
Income (loss) from foreign source operations amounted to $2,118, $30,152
and $(34,903) for the years ended December 31, 2001, 2000 and 1999,
respectively. These amounts are intended to be indefinitely reinvested in
operations. Since available-for-sale securities are primarily securities held by
foreign
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 8. Income Taxes (Continued)
subsidiaries and the proceeds are expected to be reinvested, no tax has been
provided in the determination of other comprehensive income for the years ended
December 31, 2001, 2000 and 1999.
Note 9. Shareholders' Equity
In a prior year, the Company issued one attached preferred share purchase
right for each outstanding share of beneficial interest. A total of 11,958,993
rights were issued which allow the holder to acquire from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock at a
price of $75 per one one-hundredth of a preferred share. The rights will expire
on December 31, 2003. The Company has the right to repurchase the rights for
$.01 each.
The Company has reserved 110,000 Series A Junior Participating Preferred
Shares in connection with the rights. The preferred shares are entitled to
quarterly dividends of $10 per share and have 100 votes per share. However, the
preferred shares will be entitled to an aggregate dividend of 100 times any
dividends declared on shares of beneficial interest and an aggregate of 100
times any payment to shares of beneficial interest on merger or liquidation.
Also, during a prior year the Company authorized the issuance of 3.5
million shares of Cumulative Retractable Convertible Preferred Shares, Series B
at a price of $20 per share. These shares have a cumulative dividend rate of up
to 4%, a liquidation preference of $20 per share plus unpaid dividends, a
redemption right beginning January 1, 2004, at $20 per share plus unpaid
dividends, and may convert up to 10% of the issued and outstanding shares into
shares of beneficial interest based on dividing the issue price plus unpaid
dividends by $20 per share.
Note 10. Acquisition
On December 14, 2001, the Company acquired all of the outstanding common
shares of Landqart AG ("Landqart"), a Swiss company, for $2,650 cash. The
effective date of this acquisition is December 31, 2001. The results of
Landqart's operations will be included in the Company's consolidated financial
statements beginning January 1, 2002. Landqart is a manufacturer of specialty
paper which is expected to become an integral part of the Company's paper
segment.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.
Current assets $11,542
Properties 9,912
-------
Total assets acquired 21,454
Current liabilities 12,237
Long-term liabilities 6,567
-------
Total liabilities assumed 18,804
-------
Net assets acquired $ 2,650
=======
The following unaudited pro forma information presents the results of
operations of the Company as if this acquisition had taken place on January 1,
2001 and 2000, respectively. The pro forma information is not necessarily
indicative of the results that would have occurred had the acquisition taken
place at the
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10. Acquisition (Continued)
beginning of the periods presented. Further, the pro forma information is not
necessarily indicative of future results.
YEAR ENDED DECEMBER 31
------------------------
2001 2000
------ --------
Revenues $232,851 $270,659
Net income (loss) $ (3,251) $ 29,473
Earnings per share
Basic $ (0.19) $ 1.76
Diluted $ (0.19) $ 1.72
The purchase agreement provides for an additional payment of up to $1,958
based on profitability criteria being met during the period January 1 through
September 30, 2003. The purchase price may be further increased if certain
parcels of real estate are sold prior to January 1, 2004. This increase will
amount to 30% of the difference between the carrying value of the parcel at
December 31, 2000, and its net sales price. If any of these contingent payments
which are to be paid in cash, become due, they will be treated as an additional
cost of acquisition.
Note 11. Stock-Based Compensation
The Company has a non-qualified stock option plan which provides for
options to be granted to officers and employees to acquire a maximum of
3,600,000 shares of beneficial interest including options for 130,000 shares to
trustees who are not officers or employees.
During 2000, options to acquire 1,600,000 shares of beneficial interest at
$6.375 per share were granted to officers and employees of the Company which
vest one-third at grant date and one-third each for the next two years. These
options expire in ten years. The weighted fair value of these options was $3.60
each.
Following is a summary of the status of the plan during 2001, 2000 and
1999:
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
Outstanding at December 31, 1999
and 1998 765,500 $ 10.03
Granted 1,600,000 6.375
Exercised (159,500) 6.00
---------
Outstanding at December 31, 2001
and 2000 2,206,000 $ 7.67
========= =========
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 11. Stock-based Compensation (Continued)
Following is a summary of the status of options outstanding
at December 31, 2001:
OUTSTANDING OPTIONS
----------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED
EXERCISE REMAINING AVERAGE
PRICE CONTRACTUAL EXERCISE
RANGE NUMBER LIFE PRICE
--------------- --------- ------------- ----------
6.00 - 6.375 1,770,000 8.0 $ 6.34
8.50 - 11.66 231,500 5.1 9.19
16.89 - 18.47 204,500 3.9 17.50
EXERCISABLE OPTIONS
-----------------------------
WEIGHTED
AVERAGE
EXERCISE
NUMBER PRICE
------ --------
1,236,666 $ 6.33
231,500 9.19
204,500 17.50
Compensation
Proforma information with respect to fair value accounting for the
Company's stock option plan is as follows:
2001 2000 1999
-------- ------- ---------
Net Income (Loss)
As reported $(2,527) $29,474 $(38,109)
Proforma $(5,403) $26,598 $(38,421)
Basic Earnings (Loss) Per Share
As reported $ (.15) $ 1.76 $ (2.33)
Proforma $ (.32) $ 1.59 $ (2.34)
Diluted Earnings (Loss) Per Share
As reported $ (.15) $ 1.72 $ (2.33)
Proforma $ (.32) $ 1.55 $ (2.34)
The fair value of each option granted is estimated on the grant date using
the Black Scholes Model. The assumptions used in calculating fair value are as
follows:
2001 2000 1999
------ ------ ------
Risk-free interest rate 4.5% 8.5% 6.0%
Expected life of the options 2 years 2 years 2 years
Expected volatility 68.9% 78.4% 60.0%
Expected dividend yield 0.0% 0.0% 0.0%
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12. Earnings Per Share
Earnings per share data for years ended December 31 is summarized as
follows:
NET INCOME (LOSS)
----------------------------------
2001 2000 1999
-------- -------- --------
Net income (loss) available to
shareholders of beneficial interest $ (2,527) $ 29,474 $ (38,109)
========= ======== =========
SHARES
-----------------------------------
2001 2000 1999
-------- -------- --------
Weighted average number of shares
outstanding - basic 16,874,899 16,778,962 16,389,944
Effect of dilutive securities:
Options - 365,528 -
---------- ---------- ---------
Weighted average number of shares
outstanding - diluted 16,874,899 17,144,490 16,389,944
========== ========== ==========
For 2001 and 1999, warrants and options were not included in the
computation of diluted earnings per share because they were anti-dilutive.
Note 13. Supplemental Disclosures with Respect to Statements of Cash Flows
There were no significant noncash transactions in 2001 and 2000.
Significant noncash transactions in 1999 include:
* The Company issued shares of beneficial interest amounting to $7,342
upon the conversion of outstanding debentures.
* The Company surrendered preferred shares in an entity valued at
$2,621 in a settlement.
Note 14. Business Segment Information
The Company operates in two reportable business segments: pulp and paper.
The segments are managed separately because each business requires different
production and marketing strategies.
The pulp segment consists of a single mill located in Germany which
currently produces and markets kraft pulp. The paper segment consists of two
xxxxx located in Germany and one located in Switzerland.
Both segments operate in industries which are cyclical in nature and their
markets are affected by fluctuations in supply and demand in each cycle. These
fluctuations have significant effect on the cost of materials and the eventual
sales prices of products.
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 14. Business Segment Information (Continued)
Summarized financial information concerning the segments is shown in the
following table:
PULP PAPER TOTAL
--------- --------- ---------
2001
Sales to external customers $130,903 $ 52,593 $183,496
Intersegment net sales 5,187 - 5,187
Segment income (loss) 4,069 (2,891) 1,178
Segment assets 333,381 47,384 380,765
Capital expenditures 6,638 2,400 9,038
Reconciliations
Loss:
Total income for reportable segments $ 1,178
Elimination of intersegment profits 2,274
Unallocated amounts, other corporate expenses. (5,905)
--------
Consolidated loss before income taxes $ (2,453)
========
Assets:
Total assets for reportable segments $380,765
Intersegment receivable (6,560)
Other unallocated amounts 8,438
--------
Consolidated total assets $382,643
========
PULP PAPER TOTAL
--------- --------- ---------
2000
Sales to external customers $147,048 $ 78,578 $225,626
Intersegment net sales 1,269 - 1,269
Segment income (loss) 31,929 (278) 31,651
Segment assets 378,362 43,290 421,652
Capital expenditures 21,881 3,003 24,884
Reconciliations
Income:
Total income for reportable segments $ 31,651
Elimination of intersegment profits 1,377
Unallocated amounts, other corporate expenses (3,446)
--------
Consolidated income before income taxes $ 29,582
========
Assets:
Total assets for reportable segments $421,652
Intersegment receivable (22,661)
Other unallocated amounts 4,668
--------
Consolidated total assets $403,659
========
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 14. Business Segment Information (Continued)
PULP PAPER TOTAL
--------- --------- ---------
1999
Sales to external customers $ 40,080 $ 85,490 $125,570
Intersegment net sales 86 - 86
Segment loss (4,200) (25,885) (30,085)
Segment assets 411,541 40,592 452,133
Capital expenditures 282,920 6,190 289,110
Reconciliations
Loss:
Total loss for reportable segments $(30,085)
Elimination of intersegment profits 2,704
Unallocated amounts, other corporate expenses. (9,636)
--------
Consolidated loss before income taxes $(37,017)
========
Assets:
Total assets for reportable segments $452,133
Intersegment receivable (357)
Other unallocated amounts 4,069
--------
Consolidated total assets $455,845
========
The following table presents net sales to external customers by geographic
area based on location of the customer.
2001 2000 1999
-------- -------- --------
Germany $ 84,574 $ 95,376 $ 72,129
Other European Union 64,406 76,827 47,498
Eastern European and other 34,516 53,423 5,943
-------- -------- --------
$183,496 $225,626 $125,570
======== ======== ========
The following table presents total assets by geographic area based on
location of the asset.
2001 2000 1999
-------- -------- --------
Germany $352,538 $398,991 $451,776
Other 30,105 4,668 4,069
-------- -------- --------
$382,643 $403,659 $455,845
======== ======== ========
The pulp mill has fiber supply contracts with two companies which expire in
2002 and 2003 at prices agreed to periodically. The Company also has labor
agreements which expire in 2002. In 2001, pulp sales to two customers amounted
to 22% of total pulp sales, and pulp sales to one customer amounted to 27% in
2000.
XXXXXX INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15. Fair Value of Financial Instruments
The fair value of other financial instruments at December 31 is summarized
as follows:
2001 2000
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- --------
Cash and cash
equivalents $ 10,458 $ 10,458 $ 18,496 $ 18,496
Cash restricted 29,739 29,739 25,150 25,150
Notes receivable 4,877 4,877 4,296 4,296
Notes payable 6,584 6,584 839 839
Long-term debt 209,522 209,522 235,488 235,488
The fair value of cash and cash equivalents is based on reported market
value. The fair value of cash restricted was equal to its carrying amount
because it is in an account which bears a market rate of interest. The value of
notes receivable is based on the value of similar long-term receivables. The
fair value of notes payable was based on the value of similar debt incurred in
the pulp industry. The fair value of long-term debt was determined using
discounted cash flows at prevailing market rates. The other long-term
liabilities which have a carrying value of $3,065 and $3,721 at December 31,
2001 and 2000, respectively, are primarily an accrued environmental liability at
the pulp mill. This liability may be partially reimbursable. Further, the
Company cannot estimate at this time when these amounts will be paid. Therefore,
the fair value of other long-term liabilities cannot be determined.
Note 16. Commitments and Contingencies
At December 31, 2001 and 2000, the Company recorded a liability for
environmental conservation expenditures of $1,822 and $1,921, respectively.
Management believes the liability amount recorded is sufficient, however, future
regulations in Germany may result in additional liability.
The Company is required to pay certain charges based on water pollution
levels at its xxxxx. Unpaid charges can be reduced by investing in qualifying
equipment that results in less water pollution. The Company believes that
equipment investments already made will offset most of these charges, but it has
not received final determination from the appropriate authorities. Accordingly,
a liability for these water charges has only been recognized to the extent that
equipment investments have not been made.
The Company is involved in various matters of litigation arising in the
ordinary course of business. In the opinion of management, the estimated outcome
of such issues will not have a material effect on the Company's financial
statements.
XXXXXX INTERNATIONAL INC.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
2001
Net Sales $ 55,996 $ 52,310 $ 47,276 $ 41,407
Gross profit 14,019 9,046 7,402 1,215
Income (loss) before
extraordinary items
and cumulative effect
of a change in accounting 4,575 (71) 169 (7,200)
Income (loss) before
extraordinary items and
cumulative effect of a
change in accounting,
per share* 0.27 (0.00) 0.01 (0.43)
Net income (loss) 4,575 (71) 169 (7,200)
2000
Net Sales $ 55,760 $ 63,715 $ 61,694 $ 55,033
Gross profit 6,868 15,531 15,899 19,561
Income before
extraordinary items
and cumulative effect
of a change in accounting 1,071 8,976 9,094 10,333
Income before extraordinary
items and cumulative effect
of a change in accounting,
per share* 0.06 0.52 0.52 0.61
Net income 1,071 8,976 9,094 10,333
-----------
* on a diluted basis
XXXXXX INTERNATIONAL INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(UNAUDITED)
XXXXXX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2002 AND DECEMBER 31, 2001
(UNAUDITED)
(EUROS IN THOUSANDS)
JUNE 30, DECEMBER 31,
2002 2001
------------- ----------------
ASSETS
Current Assets
Cash and cash equivalents E 22,873 E 11,741
Investments 1,788 4,549
Receivables 51,622 47,892
Inventories 25,727 25,062
Prepaid and other 3,706 3,968
------------ ----------------
Total current assets 105,716 93,212
Long-Term Assets
Cash restricted 25,857 33,388
Properties 268,359 278,617
Investments 7,253 8,598
Notes receivable 5,298 5,475
Deferred income tax 10,197 10,303
------------ ----------------
316,964 336,381
------------ ----------------
E 422,680 E 429,593
============ ================
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses E 36,365 E 51,916
Notes payable 8,502 7,392
Debt 19,193 18,360
------------ ----------------
Total current liabilities 64,060 77,668
Long-Term Liabilities
Debt 208,584 216,871
Other 3,043 3,441
------------ ----------------
211,627 220,312
------------ ----------------
Total liabilities 275,687 297,980
SHAREHOLDERS' EQUITY
Shares of beneficial interest 76,722 76,722
Retained earnings 72,267 59,111
Accumulated other comprehensive loss (1,996) (4,220)
------------ ----------------
146,993 131,613
------------ ----------------
E 422,680 E 429,593
============ ================
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(EUROS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
2002 2001
---------- ----------
Revenues
Sales E 119,535 E 112,404
Transportation 2,753 2,772
Other 5,574 5,575
---------- ----------
127,862 120,751
Expenses
Cost of pulp and paper 104,603 93,004
Transportation 2,478 2,031
General and administrative 14,396 9,452
Interest expense 8,099 8,366
(Gain) loss on foreign currency
derivative contracts (14,881) 2,846
---------- ----------
114,695 115,699
---------- ----------
Income before income taxes 13,167 5,052
Income taxes 11 29
---------- ----------
Net income 13,156 5,023
Retained earnings, beginning of period 59,111 61,934
---------- ----------
Retained earnings, end of period E 72,267 E 66,957
========== ==========
Earnings per share
Basic E 0.78 E 0.30
========== ==========
Diluted E 0.77 E 0.29
========== ==========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(EUROS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
2002 2001
---------- ----------
Revenues
Sales E 60,328 E 55,608
Transportation 1,337 1,477
Other 1,910 2,933
---------- ----------
63,575 60,018
Expenses
Cost of pulp and paper 50,684 48,580
Transportation 1,436 927
General and administrative 7,766 5,591
Interest expense 4,081 4,522
(Gain) loss on foreign currency
derivative contracts (18,948) 308
---------- ----------
45,019 59,928
---------- ----------
Income before income taxes 18,556 90
Income taxes 11 29
---------- ----------
Net income 18,545 61
Retained earnings, beginning of period 53,722 66,896
---------- ----------
Retained earnings, end of period E 72,267 E 66,957
========== ==========
Earnings per share
Basic E 1.10 E 0.00
========== ==========
Diluted E 1.08 E 0.00
========== ==========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(EUROS IN THOUSANDS)
2002 2001
---------- ----------
Net income E 13,156 E 5,023
Other comprehensive income:
Foreign currency translation adjustments 3,513 233
Unrealized (loss) gain on securities (1,289) 988
---------- ----------
Other comprehensive income 2,224 1,221
---------- ----------
Total comprehensive income E 15,380 E 6,244
========== ==========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(EUROS IN THOUSANDS)
2002 2001
---------- ----------
Net income E 18,545 E 61
Other comprehensive income:
Foreign currency translation adjustments 2,186 (608)
Unrealized (loss) gain on securities (2,148) 309
---------- ----------
Other comprehensive income (loss) 38 (299)
---------- ----------
Total comprehensive income (loss) E 18,583 E (238)
========== ==========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)
(EUROS IN THOUSANDS)
2002 2001
---------- ----------
Cash Flows from Operating Activities:
Net income E 13,156 E 5,023
Adjustments to reconcile net income
from operations to cash
Depreciation and amortization 13,489 11,593
Changes in current assets and liabilities
Investments 3,965 (910)
Inventories (629) 1,941
Receivables (2,639) 5,242
Accounts payable and accrued expenses (16,797) (2,692)
Other 374 (10)
---------- ----------
Net cash provided by operating
activities 10,919 20,187
Cash Flows from Investing Activities:
Purchases of fixed assets,
net of investment grants (1,710) (4,923)
Decrease in note receivable - 4,790
Other (11) 65
---------- ----------
Net cash used in investing
activities (1,721) (68)
Cash Flows from Financing Activities:
Cash restricted 7,532 1,530
Increase in indebtedness 4,170 -
Decrease in indebtedness (9,727) (23,685)
---------- ----------
Net cash provided by (used in)
financing activities 1,975 (22,155)
Effect of exchange rate changes on cash and
cash equivalents (41) (1,063)
---------- ----------
Net increase (decrease) in cash
and cash equivalents 11,132 (3,099)
Cash and cash equivalents,
beginning of period 11,741 19,691
---------- ----------
Cash and cash equivalents, end of period E 22,873 E 16,592
========== ==========
The accompanying notes are an integral part of these financial statements.
XXXXXX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR SIX MONTHS ENDED JUNE 30, 2002
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The interim period consolidated financial statements contained herein include
the accounts of Xxxxxx International Inc. and its subsidiaries (the "Company").
The interim period consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. The interim period consolidated financial statements
should be read together with the audited consolidated financial statements and
accompanying notes included in the Company's latest annual report on Form 10-K
for the fiscal year ended December 31, 2001. In the opinion of the Company, the
unaudited consolidated financial statements contained herein contain all
adjustments necessary to present a fair statement of the results of the interim
periods presented.
NOTE 2. REPORTING CURRENCY
Effective January 1, 2002, the Company changed its reporting currency from the
U.S. dollar to the Euro. The reason for this change is because a significant
majority of the Company's business transactions are originally denominated in
Euros. The Company's functional currency and reporting currency are now the
same. Prior years' financial statements had been reported in U.S. dollars, but
have been restated into Euros using the guidance of Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52").
Therefore, the financial statements for prior years depict the same trends that
the previous financial statements presented in U.S. dollars show.
The Euro was initially implemented by the European Community on January 1, 1999.
By adopting the Euro as the Company's reporting currency, most of the cumulative
foreign currency translation losses were eliminated from the Company's balance
sheets and most of the foreign currency translation losses were eliminated from
the Company's statements of comprehensive income. Prior to the restatement, at
December 31, 2001, there was a cumulative foreign currency translation loss of
$64,016 (in thousands of U.S. dollars) included as part of shareholders' equity
in the balance sheet. In conjunction with the restatement, the majority of this
amount was eliminated. During the six months ended June 30, 2001, there was a
foreign currency translation loss of $13,004 (in thousands of U.S. dollars)
included as part of comprehensive income (loss). In conjunction with the
restatement, the majority of this amount was eliminated.
For periods prior to 1999, when the Company's functional currency was the German
deutschmark, the financial statements were restated using a fixed rate of 0.5113
Euros to each deutschmark. As a result of using the fixed exchange rate, the
Company's consolidated financial statements for those periods may not be
comparable to the financial statements of companies from other countries
reporting in the Euro.
NOTE 3. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of shares outstanding during a
period. Diluted earnings per share takes into consideration shares outstanding
(computed under basic earnings per share) and potentially dilutive shares. The
weighted average number of shares outstanding for the purposes of calculating
basic earnings per share was 16,874,899 for the six months and three months
ended June 30, 2002 and 2001, respectively. The weighted average number of
shares outstanding for the purposes of calculating diluted earnings per share
was 17,054,998 and 17,154,277 for the six months ended June 30, 2002 and 2001,
respectively, and 17,093,390 and 17,089,806 for the three months ended June 30,
2002 and 2001, respectively.
NOTE 4. BUSINESS SEGMENT INFORMATION
The Company operates in two reportable business segments: pulp and paper. The
segments are managed separately because each business requires different
production and marketing strategies.
Summarized financial information concerning the segments is shown in the
following table:
PULP PAPER TOTAL
--------- --------- ---------
(Euros in thousands)
SIX MONTHS ENDED JUNE 30, 2002
Sales to external customers E 68,084 E 51,451 E 119,535
Intersegment net sales 2,925 - 2,925
Segment profit 13,039 3,376 16,415
Reconciliation of profit:
Total profit for reportable segments E 16,415
Elimination of intersegment profits 833
Unallocated amounts, other corporate expenses (4,081)
---------
Consolidated income before income taxes E 13,167
=========
SIX MONTHS ENDED JUNE 30, 2001
Sales to external customers E 80,449 E 31,955 E 112,404
Intersegment net sales 3,608 - 3,608
Segment profit 7,251 876 8,127
Reconciliation of profit:
Total profit for reportable segments E 8,127
Elimination of intersegment profits 671
Unallocated amounts, other corporate expenses (3,746)
---------
Consolidated income before income taxes E 5,052
=========
PULP PAPER TOTAL
--------- --------- ---------
(Euros in thousands)
THREE MONTHS ENDED JUNE 30, 2002
Sales to external customers E 34,451 E 25,877 E 60,328
Intersegment net sales 1,524 - 1,524
Segment profit 18,906 596 19,502
Reconciliation of profit:
Total profit for reportable segments E 19,502
Elimination of intersegment profits 456
Unallocated amounts, other corporate expenses (1,402)
---------
Consolidated income before income taxes E 18,556
=========
THREE MONTHS ENDED JUNE 30, 2001
Sales to external customers E 40,763 E 14,845 E 55,608
Intersegment net sales 1,762 - 1,762
Segment profit 1,272 801 2,073
Reconciliation of profit:
Total profit for reportable segments E 2,073
Elimination of intersegment profits 379
Unallocated amounts, other corporate expenses (2,362)
---------
Consolidated income before income taxes E 90
=========
EXHIBIT C
TRUSTEES' RESOLUTIONS
"WHEREAS:
A. The Company wishes to enter into a loan agreement (the "MFC Loan
Agreement") with MFC Merchant Bank S.A., as agent and original lender,
("MFC") pursuant to which MFC and such other lenders as may from time
to time become signatories to the agreement shall make available to the
Company a non-revolving term loan in the principal sum of Euro 30,000,000
(the "MFC Loan");
B. It is a condition to MFC making the MFC Loan available to the Company
pursuant to the MFC Loan Agreement that the Company enter into:
(i) the Borrower's Securities Pledge Agreements;
(ii) the Borrower's Assignment Agreements; and
(iii) the Security Trust Agreement,
(as defined in the MFC Loan Agreement, and, collectively, the "MFC
Credit Documents");
C. In connection with the MFC Loan Agreement, the Company wishes to
authorize its duly appointed officer Xxxxx X.X. Xxx to xxxxx a power of
attorney to Xx. Xxxxxxx Xxxxxx (the "MFC Loan Power of Attorney") to
effect the MFC Loan as described in the MFC Loan Power of Attorney;
D. The entering into of the MFC Loan Agreement and the consummation of the
transactions contemplated thereby are in the best interests of the
Company; and
E. The Company has the corporate power and capacity to enter into, execute
and deliver the MFC Loan Agreement and the MFC Credit Documents;
NOW THEREFORE BE IT RESOLVED THAT:
1. The MFC Loan Agreement in the form presented to the trustees be and is
hereby approved;
2. The Company enter into, execute and deliver to MFC the MFC Loan
Agreement;
3. The Company create, grant, issue, execute and deliver the MFC Credit
Documents;
4. The Company take all such further actions and execute and deliver all
such further agreements, instruments and documents relating to,
contemplated by, or necessary or desirable in connection with the
performance of its obligations under, the MFC Loan Agreement and each
of the MFC Credit Documents;
5. Any one officer or trustee of the Company (the "Authorized Officer") be,
and is hereby, authorized and directed to execute and deliver all
agreements, instruments and documents which are the subject of the
foregoing resolutions respecting the MFC Loan including, without
limitation, the MFC Loan Agreement and the MFC Credit Documents, in
the name and on behalf of the Company, under its corporate seal or
otherwise, in the form presented to the trustees of the Company, with
such changes, modifications and amendments thereto as such Authorized
Officer may in such person's discretion approve, which approval shall be
conclusively evidenced by the execution and delivery of such agreements,
instruments and documents including, without limitation, the MFC Loan
Agreement and the MFC Credit Documents and, to the extent that any
Such agreements, instruments and documents were executed and delivered
prior to the date hereof, the execution and delivery thereof by any
such Authorized Officer be, and is hereby, approved, ratified, and
confirmed;
6. Any Authorized Officer be, and is hereby, authorized and directed to take
all such further actions, execute and deliver such further
agreements, instruments and documents in writing and do all such other
acts and things as in such person's opinion may be necessary or desirable
in the name of and on behalf of the Company, under its corporate seal
or otherwise, to give effect to the foregoing resolutions respecting
the MFC Loan, which opinion shall be conclusively evidenced by the
taking of such further actions, the execution and delivery of such
further agreements, instruments and documents and the doing of such other
acts and things;
7. Xxxxx X. X. Xxx, as duly appointed of officer of the Company, be and is
hereby authorized to represent the Company for the purposes of entering
into agreements, making and accepting all waivers and other declarations
and taking all other legal steps, in particular acting himself and/or
by granting the MFC Loan Power of Attorney to Xx. Xxxxxxx Xxxxxx,
having his business address at Xxxxxxxxxxxxxxxx 00, 00000 Xxxxxx, who
shall then be so authorized to represent the Company for such purposes,
to act individually and under exemption from the restrictions imposed
by Section 181 of the German Civil Code and similar restrictions
under foreign laws, and each having the power to delegate his power
of attorney, whereby such delegation may also be made under exemption
from the restrictions imposed by Section 181 of the German Civil
Code and similar restrictions under foreign laws, to enter into and
perform all acts and make all declarations required for the execution
of all agreements and documents, including the MFC Loan Agreement and
the MFC Credit Documents, to be executed by the Company in connection
with the MFC Loan; and
8. To the extent necessary, all acts of the proxys on the basis of the
aforementioned MFC Loan Power of Attorney and all actions taken by Mr.
Xxxxx X. X. Xxx in connection with the foregoing are hereby approved,
affirmed and ratified"
SCHEDULE "B"
PLEDGED SECURITIES
DESCRIPTION OF SHARE CAPITAL REGISTERED HOLDER
---------------------------- ------------------
50,000 DM in ZPR Zellstoff-und Xxxxxx International Inc.
Papierfabrik Xxxxxxxxx Holding
GmbH
E 24,750 in Stendal Pulp Holding Xxxxxx International Inc.
GmbH
E 250 in Stendal Pulp Holding GmbH Xxxxxx International Inc.
50,000 DM in Dresden Papier Xxxxxx International Inc.
Holdings GmbH
SCHEDULE "C"
FORM OF ADVANCE REQUEST
*
Attention: *
Dear Sirs:
The undersigned, Xxxxxx International Inc., (the "Borrower"), refers to the
Loan Agreement dated as of August , 2002 (the "Loan Agreement) among MFC
Merchant Bank S.A., as Agent and as a Lender thereunder, and the Borrower.
All capitalized terms herein bear the meaning given to them in the Loan
Agreement.
The Borrower hereby gives notice that the Borrower hereby requests the
Advance of the Loan under the Loan Agreement, as set out below:
(a) The requested date of the Advance, being a Banking Day, is August *,
2002; and
(b) The aggregate amount of the Advance is E 30,000,000;
Yours truly,
XXXXXX INTERNATIONAL INC.
Per:
----------------------------
Authorized Signing Officer
SCHEDULE "D"
SHAREHOLDERS AGREEMENT HEADS OF TERMS
A Shareholders' Agreement (the "Agreement") shall be entered into in respect of
ZPR Zellstoff-und Papierfabrik Xxxxxxxxx Holding GmbH (the "Company") so as to
provide that upon a disposal (following enforcement of security) by the Lenders
of an interest of less than 51% of the Company (the "A Share"):
(1) pre-emption rights are granted to each shareholder including the
following terms:
PRE-EMPTION
(a) No shareholder shall be entitled to dispose of any interest in any of
its shares (other than to an affiliate) without first offering them
for transfer to the other shareholders (the "Recipient").
(b) The notice of transfer shall specify the shares offered, the price
at which they are offered, the terms of payment and any other
material terms. The notice may not be revoked.
(c) The Recipient shall notify the selling shareholder within 15 days
whether it is willing to purchase the shares.
(d) On the expiry of the offer period, if the Recipient has notified the
selling shareholder that it wishes to purchase the shares, the
Recipient shall be bound to pay the purchase price for, and to accept
a transfer of, the shares and the selling shareholder shall be bound,
on payment of the purchase price, to transfer such shares to the
Recipient.
(e) If after the expiry of the offer period the shares are not purchased
by the Recipient the selling shareholder may transfer the shares to
any person and at a price which is not less than the price specified
in the original notice of transfer and upon terms no more
advantageous to the buyer as specified in the said notice.
(2) tag along rights are granted to each shareholder including the following
terms:
TAG ALONG
(a) If at any time a shareholder intends to dispose of some or all of
its shares or any interest in its shares to a third party (after
giving effect to the pre-emption rights set out above), such
shareholder shall give notice in writing to the other shareholders
(the "Recipient") specifying:
(i) the number of shares and the nature of the interest in the
shares of which it intends to dispose;
(ii) the name(s) of the proposed transferee(s) of the relevant
shares; and
(iii) the terms of the disposal.
(b) If the Recipient wishes to dispose of its shares on the same terms
as specified in the notice then it shall within 15 business days
after the date of the notice notify the selling shareholder in
writing.
(c) The selling shareholder shall not dispose of the relevant shares
unless it has:
(i) given a notice not less than 15 business days before the
disposal; and
(ii) procured, on the same terms as contained in the notice, the
disposal of the shares or any interest in them of the
Recipient if so requested by the Recipient;
(3) drag along rights are granted to each shareholder including the
following terms:
DRAG ALONG
(a) If at any time a shareholder receives a bona fide third party
offer to purchase all the shares of the Company (an "Initial
Offer"), such shareholder shall notify the other shareholder
(the "Recipient").
(b) The notice shall specify the offer price, the terms of payment
and any other material terms of the Initial Offer.
(c) The Recipient shall notify the selling shareholder within 7
days of receipt of the notice whether it is willing to
accept the Initial Offer.
(d) If shareholders holding a simple majority of the shares in the
Company wish to accept the Initial Offer then they shall
give notice (the "Second Offer") to those shareholders who have
indicated that they do not wish to accept the offer (the
"Declining Shareholders") that they wish to sell to them all of
their shares on the terms and conditions of the Initial
Offer.
(e) If the Declining Shareholders do not accept the Second Offer
and purchase the shares of the accepting shareholders with 15
days, the Declining Shareholders shall be deemed to have
delivered a notice accepting the Initial Offer and all
shareholders will be required to participate and sell their
shares pursuant to the terms and conditions of the
Initial Offer.
(4) the following actions may not be taken without the prior written
approval of each shareholder:
(a) any revocation or alteration of the Company's constitutional
documents;
(b) the creation, or issuance of any shares in the Company or the
issuance of any securities, warrants or options exchangeable for
or carrying the right to subscribe for shares in the Company;
(c) any conversion, reclassification, subdivision, consolidation,
exchange or any other reorganisation of the Company's share
capital;
(d) the redemption or purchase by the Company of any of its share
capital or securities convertible into shares or the
cancellation of subscription rights in respect of its shares or
securities convertible into its shares;
(c) the entry into of any transaction with a shareholder or any
person affiliated with a shareholder (each a "Related Party"),
including, without limitation, any loans to a Related Party,
the payment of any management fees to a Related Party, the
disposal by the Company of any assets to a Related Party or the
acquisition by the Company of any assets from a Related Party
other than:
(i) transactions in the ordinary course of business
involving aggregate consideration of not more than
Euro 100,000 per transaction or Euro 300,000 for all
such transactions in any Financial Year;
(ii) any agreements, contracts or arrangements existing at
the date of the Agreement and which, if entered into
after the date of the Loan Agreement, are permitted
under the terms of the Loan Agreement;
(iii) salaries, benefits and other remuneration paid in the
ordinary course and reasonably consistent with past
practice to officers, directors or employees;
(d) the transfer or disposal of all or substantially all of the
Company's property, assets or undertaking, taken as a whole;
(e) the merger, amalgamation, reorganisation or consolidation
of the Company;
(f) the repayment of any loans owing by the Company to a
shareholder or any person affiliated with a shareholder
other than:
(i) pursuant to the terms of agreements existing at the date
of the Agreement provided that any such payments are
permitted under the terms of the ZPR Credit Agreement and
the agreements themselves, if entered into after the date
of the Loan Agreement were entered into in compliance with
the terms of the Loan Agreement; and
(ii) repayments pursuant to terms of agreements approved
by all of the shareholders; or
(g) reorganise or change in any material respect the nature or
scope of the Company's business from the pulp, paper or
forest products business and activities and businesses
reasonably ancillary thereto.
(5) the management of the Company shall not do any of following without the
agreement of the A Director:
(a) save to the extent required to do so as a matter of law, pass any
resolution for winding up the Company;
(b) save to the extent required to do so as a matter of law, apply
for the appointment of a receiver or an administrator over the
Company's assets; or
(c) do or fail to do anything which could reasonably result in an
event of default occurring under the ZPR Credit Agreement.
(6) the management of the Company and each of its Subsidiaries shall include
one managing director (Geschaftsfuhrer) appointed by the holder of the A
Share (the "A Director") and, subject to (7) below, a board meeting
shall not be quorate unless the A Director is present;
(7) quorum for directors shall be 3 of which one is the A Director provided
that if quorom is not met at a meeting, the meeting shall be adjourned
for at least 7 days and then reconvened. At the reconvened meeting,
quorum shall be 2 directors regardless of whether the A Director is
present.
(8) a business plan for each Financial Year of the Company (including any
Subsidiaries of the Company) shall be submitted for approval to each
of the shareholders not less than 45 Days before the end of the then
current Financial Year of the Company. Each business plan shall
include:
(a) a projected balance sheet and profit and loss account;
(b) a detailed cashflow statement detailing, in particular, payments to
affiliated companies;
(c) an estimate of working capital requirements;
(d) an operating budget; and
(e) a report on the Company's performance during the current Financial
Year of the Company.
Where a matter which would otherwise require approval under these provisions has
been expressly included in a business plan approved by the A Shareholder, no
further approval shall be required provided that there is no material change in
the terms of the transaction from those approved in the business plan.
(9) If after the date of the Agreement a material breach of the Agreement
occurs by a shareholder which is not remedied within 30 days after notice
or an act of insolvency occurs relating to such shareholder (a "Defaulting
Shareholder"), the Defaulting Shareholder shall lose its rights to
nominate directors, its entitlement to vote, and will be deemed to have
granted an option to the non-defaulting shareholder to purchase all of
its shares for an amount equal to the fair market value thereof
minus 10%.
For the purpose of the Agreement, fair market value shall be in an amount agreed
upon by the parties or failing agreement, on amount determined pursuant to a
valuation and arbitration methodology to be included in the Agreement.
(10) No shareholder shall be required to advance funds or provide guarantees
unless unanimously approved by all shareholders.
(11) Any party acquiring shares will be required to enter into an identical
shareholders' agreement.
(12) Any shareholder may upon written notice require that, to the extent
permitted, the Company's constitutional documents be amended to
reflect the terms of the Agreement.
In this Schedule capitalised terms not otherwise defined in the Schedule have
the meaning given to them in the Loan Agreement and " Loan Agreement" means
the loan agreement to which this forms a Schedule.
SCHEDULE "E"
CORPORATE CHART
--------------------------------------------------------------------------------
XXXXXX INTERNATIONAL INC.
(THE "BORROWER")
(USA)
--------------------------------------------------------------------------------
ZPR ZELLSTOFF-UND
PAPIERFABRIK STENDAL PULP HOLDINGS
XXXXXXXXX DRESDEN PAPIER GMBH
HOLDING GMBH HOLDINGS GMBH ("SPH")
("ZPR HOLDING") (GERMANY) (GERMANY)
(GERMANY)
SPECIALPAPIERFABRIK ZELLSTOFF STENDAL
BLANKENSTEIN GMBH DRESDENT PAPIER GMBH GMBH
("SPB") (GERMANY) ("ZSG")
(GERMANY) (GERMANY)
ZELLSTOFF-UND
PAPIERFABRIK
XXXXXXXXX XXXX & XX.
XX
("XXX & XX.")
(XXXXXXX)
