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EXHIBIT 1
OPTION AGREEMENT
This Option Agreement (the "Option Agreement") is made and entered into this 22
day of June, 2001 by and among PACIFIC ATLANTIC TRADING CORPORATION INC., a
corporation organized and existing under the laws of Cayman Islands, SQ GRAND
CAYMAN CORP., a corporation organized and existing under the laws of Grand
Cayman and XXXXXXX XXXXXX XXXX (collectively "PATCO") and NORSK HYDRO ASA, a
corporation organized and existing under the laws of Norway ("HYDRO").
I) A) RECITALS.
WHEREAS pursuant to the Letter of Intent executed on May 21, 2001 by
and among Hydro and Patco (the "LOI"), Hydro agreed (i) to loan US$7,000,000.-
to SQ Grand Cayman Corp. ("SQGC"), a subsidiary of Patco (the "SQH Loan"), and
(ii) offer to loan US$18,000,000 to Calichera Caiman ("PCOS"), a subsidiary of
Sociedad de Inversiones Pampa Calichera S.A. (the "PC Loan").
WHEREAS pursuant to the LOI, in consideration of and upon the Date of
Exercise of the SQH Loan and the PC Loan, Patco agreed to grant Hydro an option
to subscribe newly issued shares of SQH equal to 49% of the outstanding shares
of SQH for an amount computed as provided for in Sections II and III of this
Agreement, (the "Original Subscription Value").
WHEREAS, on the date hereof the SQH Loan and the PC Loan have been
executed and a copy of each of such agreements are attached hereto as Annex I.A.
NOW THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
B) DEFINITIONS.
Terms defined in the LOI shall for the purposes of this Agreement have the
meanings ascribed to them in the LOI. Except as otherwise specified or as the
context may otherwise require, the following terms shall have the respective
meanings set forth below whenever used in this Agreement:
"Affiliate" means, with respect to any Person, any other Person that, directly
or indirectly, Controls, is Controlled by or is under common Control with such
Person.
"Bylaws" shall mean the bylaws of SQH.
"Business Day" means any day excluding Saturday, Sunday and any date that shall
be in the Republic of Chile or in Norway a legal holiday.
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"Chilean GAAP" shall mean Chilean generally accepted accounting principles
applied on a consistent basis.
"Date of Exercise" shall mean the date of execution of the first Subscription
Agreement.
"Escrow Agreement", means the Escrow Agreement attached as Annex I.X. hereof.
"Exchange Rate" shall mean the exchange rate denominated "Dolar Observado",
published in the Chilean Official Gazette on the day previous to the day of such
determination takes place, by the Central Bank of Chile in accordance with
Chapter I, paragraph six, of the Compendium of Foreign Exchange Regulations of
the Central Bank of Chile; provided that if the Central Bank of Chile ceases to
publish the Dolar Observado, the exchange rate shall be determined by reference
to the rate of exchange replacing the Dolar Observado.
"Xxxxx Xxxxx Personal Guarantee", means the guarantee (codeuda solidaria)
granted by Xx. Xxxxx Xxxxx Lerou in order to secure Patco's obligations, the
seriousness and effectiveness of its representations and warranties and the
payment of any indemnities contained in this Option Agreement evidenced by means
of public deed of even date, granted in Notary of Xxxxxxxx of Xx. Xxxx Xxxxxxx
Xxxxxx, which is attached to this agreement as Annex I.B.(a).
"Lien" means with respect to any asset, any mortgage, lien, pledge, charge,
security interest, claim, option, limitation, restriction, or similar
encumbrance in respect of such asset.
"Net Financial Adverse Effect" or "NF" means, with respect to any application
within representations and warranties made by Patco, a consolidated adverse
financial effect in SQH which, has an impact that is greater than US$1,500,000
on the Chilean GAAP shareholders' equity of SQH. No Net Financial Adverse Effect
may be caused, or contributed to, by a change in the market value of the assets
and liabilities of each of SQH, NG, OB, PC and SQM due solely to a change in the
then prevailing interest rates or fluctuations in the stock markets.
"NG" shall mean Norte Grande S.A., a publicly traded corporation organized under
the laws of Chile and listed on the Xxxxxxxx Stock Exchange.
"NG Pledge" shall mean the pledge over shares of NG granted by SQH in favor of
Hydro by means of public deed dated June 22, 2001 executed in the Notary of
Xxxxxxxx of Xx. Xxxx Xxxxxxx Xxxxxx, a copy of which is attached hereto as Annex
I.B.(b);
"Person" means an association, corporation, individual, partnership, trust or
other entity or organization, including a government or a political subdivision,
agency or instrumentality thereof.
"Shares" shall mean the shares of SQH.
"OB" shall mean Sociedad de Inversiones Oro Xxxxxx X.X., a publicly traded
corporation organized under the laws of Chile and listed on the Xxxxxxxx Stock
Exchange.
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"Pesos" or "CH$" means the local currency of the Republic of Chile.
"PC" shall mean Sociedad de Inversiones Pampa Calichera S.A., a publicly traded
corporation organized under the laws of Chile and listed on the Xxxxxxxx Stock
Exchange.
"PCOS" shall mean Calichera Caiman, an offshore subsidiary of PC.
"SQH" shall mean Inversiones SQ Holding S.A. a Chilean corporation, and a
subsidiary of Patco.
"SQM" shall mean Sociedad Quimica y Minera de Chile S.A. a publicly traded
corporation organized under the laws of Chile and listed on the Xxxxxxxx Stock
Exchange.
"US$" means United States dollars.
II) THE HYDRO OPTION.
2.1. The Option. Patco hereby grants Hydro an option to subscribe newly
issued shares of SQH equal to 49% of the outstanding shares of SQH for
an amount equal to the Original Subscription Value (the "Option").
2.2. Term to Exercise the Option. The Option is exercisable at the option of
Hydro as to all, but not less than all, of the shares subject thereto,
until the later of:
(i) Two years after this date; or
(ii) The date upon which all amounts due under the SQH Loan
and the PC Loan are paid in full.
2.3. Exercise of the Option. In order to exercise the Option Hydro shall
give Patco a written notice substantially in the form of Annex 2.3.
hereto (the "Option Notice"). As soon as practicable after receipt of
the Option Notice, but not later than 30 days as of the receipt of the
Option Notice, Patco shall:
(i) Hold an extraordinary shareholders meeting with the
presence of all of the shareholders of SQH to approve a
capital increase of SQH for the amount of the Original
Subscription Value and the corresponding issuance of shares
representing 49% of the outstanding shares of SQH. The minutes
of such shareholders meeting shall be substantially in the
form of Annex 2.3. (i);
(ii) Permit Hydro to attend the shareholders meeting in order
that all the shareholders of SQH waive or transfer for a
nominal value their preferential subscriptions rights in favor
of Hydro; and
(iii) Permit Hydro to subscribe the shares issued as a
consequence of such capital increase by means of a
simultaneous execution of a subscription agreement
substantially in the form of Annex 2.3. (iii) (the
"Subscription Agreement").
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2.4. Payment of the Shares. Hydro shall pay the Original Subscription Value,
in cash as follows:
(a) US$25,000,000 shall be paid at the Date of Exercise;
(b) If at the Date of Exercise it is certain that there is a
balance to complete the Original Subscription Value, this
balance shall be paid within 10 days after the date the SQH
Loan and the PC Loan have been fully paid. If it is no
certainty according to the rules of the deferrals contained in
Section III herein, paragraph III and IV shall apply.
For these purposes, the capital increase of SQH shall be expressed in
Chilean Pesos in the amount equivalent to the Original Subscription
Value at the Exchange Rate, payable in US$.
III) SUBSCRIPTION VALUE.
3.1. Subscription Value Determination. The Original Subscription Value will
be determined by subtracting the amounts determined in accordance with
paragraphs 3.1.(a) and (b) from US$ 60 million. The amounts deferred
pursuant to paragraphs 3.1.(a) and (b) may be subscribed at a later
date as described therein.
a. Non Core Assets. If after conducting the due
diligence procedure on the non-core assets of PC (Ceramicas
Industriales S.A.) and NG (Ceramica Xxxxxxxx X.X.), the
appraisal by an internationally recognised firm of investment
bankers chosen from the list prepared by Patco and approved by
Hydro (the "Appraisal Value") is less than US$ 60 million for
both Ceramicas Industriales S.A., ("CISA") and Ceramicas
Xxxxxxxx X.X. ("CSSA"), (such value defined as the "Assumed
Value") payment of an amount equal to 50% of the amount
determined by subtracting the Appraisal Value from 70% of the
Assumed Value (the "Threshold Value"), if and only if such
amount is a positive number, shall be deferred (the "Deferral
Amount"), and therefore deducted from the subscription value,
until such time as such assets are sold to an independent
third party. This is demonstrated by the following formula:
FORMULA:
APPRAISAL VALUE - (.7 X ASSUMED VALUE) = X [IF X IS > 0] X .5 = DEFERRAL AMOUNT
Upon the sale of such assets:
i. In the event that the net cash proceeds of the
sales to PC and NG (the "Sale Price") are less than
the Appraisal Value no subscription of the Deferral
Amount shall be made.
ii. In the event that the Sale Price is equal to or
greater than the Threshold Value, the Deferral Amount
shall be
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subscribed in accordance with the deferred
subscription procedure described in Section IV,
below;
iii. In the event that the Sale Price is greater
than the Appraisal Value but less than the Threshold
Value, a proportional subscription based upon the
Sale Price shall be made in accordance with the
deferred subscription procedure described in Section
IV, below. Such proportion shall be equal to the
percentage of the Deferral Amount that is equal to
the percentage determined by dividing the Sale Price
by the Threshold Value;
iv. In the event that the sale of CISA
and/or CSSA has not occurred prior to the date upon
which the consolidated financial statements of SQM
for the year ended 31 December 2003 are approved by
the annual shareholders' meeting of such corporation,
the obligation to subscribe the Deferral Amount
hereunder shall terminate; and
v. The Parties undertake to carry out this
adjustment procedure within 60 days after the date
hereof and in any event prior to the exercise of the
Hydro Option.
b. Additional Investments. Based on a commercial
assessment of SQH and its subsidiaries and on publicly
available information about SQM, Hydro has determined the
subscription value. Hydro has requested and Patco has agreed
to defer the subscription of the sum of US$ 8 million (and
therefore deduct it from the US$ 60 million in order to
determine the original subscription value). In the event that
on 31 December 2002, SQM has not made or become contractually
obligated with respect to investments with an aggregate cost
in excess of US$100 million per year during calendar years
2001, 2002 or 2003 (based on the published investment program
of SQM attached as Annex 3.1.(b) hereto, the deferred amount
shall be subscribed in accordance with the deferred
subscription procedure described in Section IV, below on
January 10, 2003. In the event that SQM has made or become
contractually obligated to make such additional investments,
the deferred amount shall be subscribed in accordance with the
deferred subscription procedure described in Section IV,
below, as follows:
i. DEBT RATIO. US$ 2 million shall be
subscribed within 10 business days after the December
31, 2003 audited consolidated financial statements of
SQM are approved by the annual shareholder meeting
provided that the Net Debt (for this purpose "Net
Debt" means total interest bearing debt minus cash
and cash equivalents) of SQM on the balance sheet (as
reported on an audited consolidated basis under
Chilean GAAP) as of 31 December 2003 is equal to or
less than 34.5% of the sum of the Net Debt plus total
shareholders' equity. The above referred percentage
has been agreed upon based on a stable dividend
policy of 50% of the net income, therefore if such
dividend policy is in fact modified during any of the
years 2001, 2002 and/or 2003, the shareholders'
equity shall be
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adjusted, up or down, to reflect such variance. The
intent of the parties has been to neutralise the
effect of a dividend policy change on the calculation
of the Net Debt ratio stated above; and shall be
calculated as follows:
FORMULA:
NET DEBT 2003 = TO OR LESS THAN 34.5%
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NET DEBT 2003 + EQUITY 2003
Where
- NET DEBT = total interest bearing debt - (cash + cash
equivalents)
- EQUITY 2003 = shareholders' equity 2003 according to
consolidated balance sheet +/- (change in dividends
2001 +/- change in dividends 2002 +/- change in
dividends 2003)
- CHANGE IN DIVIDENDS IN ANY YEAR 2001 TO 2003 = (0,50
Net Income +/- Actual Dividend)
ii. EBITDA TEST.
1. In the event that the weighted
average EBITDA of SQM (as reported on an
audited consolidated basis under Chilean
GAAP) for the two years ended 31 December
2003 is equal to or greater than US$ 205
million, the sum of US$ 6 million shall be
subscribed;
2. In the event that the test set
forth in the preceding paragraph is not met
but the weighted average EBITDA of SQM (as
reported on an audited consolidated basis
under Chilean GAAP) for the three years
ended 31 December 2003 is equal to or
greater than US$ 132.5 million, the sum of
US$ 4 million shall be subscribed; and
3. In the event that the weighted
average EBITDA for the three years ended 31
December 2003 is less than US$ 132.5
million, no subscription shall be made.
For purposes of the EBITDA Test in paragraph
(1) the weighted average EBITDA for the 2
years ended 31 December 2003 shall be the
sum of (a) 50% of the EBITDA for 2002 plus
(b) 50% of the EBITDA for 2003 and for
purposes of the EBITDA Test in paragraphs
(2) and (3) the weighted average EBITDA for
the 3 years ended 31 December 2003 shall be
the sum of (x) 20% of the EBITDA for 2001
(y) 30% of the EBITDA for 2002 and (z) 50%
of the EBITDA for 2003. Any payment in
respect of the EBITDA Test shall be made on
the same date as provided in paragraph
3.1.(b)(i) with respect to the Debt Ratio.
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IV) ADDITIONAL SUBSCRIPTIONS.
If under the application of the rules contemplated under Section III above,
Hydro becomes obligated to subscribe additional amounts (the "Additional
Amounts"), the parties will follow the following procedure in order to achieve
SQH receiving 100% of such additional payment and also keep the agreed
shareholding proportion of 51% for Patco and 49% for Hydro.
(i) Patco and Hydro shall approve a capital increase of SQH equal to
the Additional Amounts to be made by Hydro;
(ii) The capital increase shall be subscribed by the shareholders in
the 51% for Patco and 49% for Hydro shareholding;
(iii) In order to fund the payment of such capital increase, Hydro
shall pay the Additional Amounts as follows: (a) 49% of such amount
shall be paid by Hydro to SQH as the subscription price of the capital
increase and (b) 51% of such amount shall be paid by Hydro to SQGC, as
a net indemnity, and Patco shall use such funds to pay its portion of
the capital increase.
V) REPRESENTATIONS AND WARRANTIES OF PATCO.
Patco hereby represents and warrants to Hydro as of the date hereof and as of
the date each of the Subscription Agreements are executed and delivered by SQH
and Hydro that in respect of each of Patco, SQGC, SQH, NG, OB and PC
(collectively, "the Companies"), that:
5.1. Corporate Existence and Power. Patco and SQGC have been duly
incorporated and are validly existing as corporations under the laws of
the Cayman Islands and both have all corporate powers required to carry
on its business as now conducted.
5.2. Ownership of Shares. SQGC is the owner of all but one of the shares of
SQH, free and clear of any Lien, and will transfer and deliver to Hydro
at the Date of Exercise valid title to subscribe the newly issued
shares representing 49% free and clear of any Lien.
5.3. Good Standing. Each of SQH, NG, OB, PCOS and PC (i) has been duly
incorporated and is validly existing and in good standing as a sociedad
anonima under the laws of the Republic of Chile; (ii) has all corporate
powers required to own and operate its properties and to carry on its
business as now conducted; (iii) has all governmental licenses,
authorisations, permits, consents and approvals required to carry on
its business as now conducted ("Licenses") and to the best knowledge of
Patco no notice of revocation, suspension or modification of any of
those Licenses has been received nor is any such revocation, suspension
or modification threatened; (iv) the copies of the estatutos of each of
SQH, NG, OB, PCOS and PC attached in Schedule 5.3 (iv) to this Option
Agreement, are accurate and complete copies of the estatutos of each of
SQH, NG, OB, PCOS and PC ; (v) no changes to any such estatutos are
pending or are envisaged to be required to be made to them except as
provided in this Option Agreement; (vi) has complied with and is not in
violation of any of the provisions of
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its certificate of incorporation or estatutos or the applicable laws
and regulations of the Republic of Chile; and (vii) Except as provided
on Schedule 5.3 (vii) there are no Liens on the Shares and on the
shares of each of NG, OB, PC and SQM owned by such entities.
5.4. Corporate Authorizations. The execution, delivery and performance by
Patco of this Option Agreement and the consummation by Patco of the
transactions contemplated hereby are within Patco's corporate powers
and have been or will be duly authorized by all necessary corporate
action on the part of Patco. This Option Agreement constitutes a valid
and binding agreement of Patco, enforceable against Patco in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditor's rights generally.
5.5. Governmental Authorization. Other than the notices to be given to the
Superintendencia de Valores y Seguros of Chile, to the Chilean stock
exchanges and /or to the Securities and Exchange Commission and the New
York Stok Exchange in the United States, the execution, delivery and
performance by Patco of this Option Agreement does not require any
approval of, authorization by, notification to, or filing with, any
governmental body, agency, official or authority on the part of Patco.
5.6. Non-Contravention. The execution, delivery and performance by Patco of
this Option Agreement does not (i) contravene or conflict with the
estatutos of Patco or each of the estatutos of SQH, NG, OB, PCOS and
PC; (ii) contravene or constitute a violation of any provision of any
law, regulation, judgement, injunction, order or decree binding upon or
applicable to Patco or each of SQH, NG, OB, PCOS, and PC ; (iii)
require any consent by any Person under, constitute a default under, or
give rise to any right of termination, cancellation of any obligation
of each of SQH, NG, OB, PCOS and PC under any contract or other written
instrument binding upon each of SQH, NG, OB, PC and PCOS or any
license, franchise, permit or other similar authorization held by each
of SQH, NG, OB, PC and PCOS; (iv) result in the creation or imposition
of any Lien on any asset of each of SQH, NG, OB, PC and PCOS; and/or
(v) contravene any pre-emptive rights or rights of first refusal
regarding any of Shares.
5.7. Capitalization. As of the date of this Option Agreement and on the Date
of Exercise:
(a) The authorized capital of each of SQH, NG, OB, PC and PCOS is
what is stated in Schedule 5.7 (a);
(b) Except as stated in Schedule 5.7.(a), all outstanding shares
of capital stock of each of SQH, NG, OB, PC and PCOS have been
duly authorized, subscribed for, validly issued, duly
registered and fully paid-in, and there are no outstanding (i)
securities of each of SQH, NG, OB, PC and PCOS convertible
into or exchangeable for shares of capital stock or voting
securities of each of SQH, NG, OB, PC and PCOS; (ii) options
or other rights, to acquire from each of SQH, NG, OB, PC and
PCOS, or other obligation of each of SQH, NG, OB, PC and PCOS
to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting
securities of each
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of SQH, NG, OB, PC and PCOS (the items in clauses (i) and (ii)
above being referred to collectively as the "Each of SQH, NG,
OB, PC and PCOS Securities"); (iii) Each of SQH, NG, OB, PC
and PCOS Securities encumbered with any Lien, other than what
is listed in Schedule 5.7.(a); (iv) options or other rights of
any Persons with respect to non-subscribed securities of each
of SQH, NG, OB, PC and PCOS; nor (v) obligations for each of
SQH, NG, OB, PC and PCOS to repurchase, redeem or otherwise
acquire any capital stock.
5.8. Financial Statements. The December 31, 2000 audited financial
statements (and any subsequently published audited or unaudited
financial statements) of each of SQH, NG, OB, PC and PCOS have been
prepared in accordance with Chilean law and Chilean GAAP. Such audited
financial statements are true, accurate and complete representations of
the assets, liabilities, financial position, state of affairs, and the
results of operation for the periods then ended.
5.9. Absence of Certain Changes. Since the date of execution of the LOI,
each of SQH, NG, OB, PC and PCOS has conducted its operations prudently
and in the ordinary and usual course of its business and there has not
been:
(i) any change in the financial condition, properties, business,
or results of the operations on each of SQH, NG, OB, PC and
PCOS, that individually or in the aggregate has, have or may
have a Net Financial Adverse Effect;
(ii) any disposal of, or agreement to dispose of, any asset other
than in the ordinary course of trading, nor for an amount
which is lower than book value or an open market arm's length
value, whichever is higher; and
(iii) any acquisition of, or agreement to acquire, any asset for an
amount which is higher than open market arm's length value.
5.10. There are, other than those required by law, no employment, deferred
compensation, severance, retirement or other similar agreements entered
into with any director or officer of SQH, NG, OB, PC and PCOS.
5.11. Properties.
(i) Each of SQH, NG, OB, PC and PCOS has good and marketable title
to all of its material tangible assets, (all of such assets
being adequately insured against any and all customary risks),
or in the case of leased property have valid leasehold
interests in, all property and assets (whether real or
personal, tangible or intangible) material to the business of
each of SQH, NG, OB, PC and PCOS, and the accounts making
adequate provisions or reserves for, or disclose, all
liabilities (including contingent and disputed liabilities),
indicating clearly which of those liabilities are not provided
or reserved for;
(ii) There are no Liens, nor has each of SQH, NG, OB, PC and PCOS
agreed to create any Liens, over any part of its undertakings
or assets material to the business of each of SQH, NG, OB, PC
and PCOS other than those disclosed in Schedule 5.11;
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5.12. Litigation. There is no action, suit, investigation or proceeding
pending, or to the knowledge of Patco, threatened in writing, against
each of SQH, NG, OB, PC and PCOS before any court, arbitrator or
governmental authority, which would have a Net Financial Adverse
Effect;
5.13. Material Contracts.
(a) Except as disclosed on Schedule 5.13 (a) or as may be entered
into in the ordinary course of the business conducted by each
of SQH, NG, OB, PC and PCOS, each of SQH, NG, OB, PC and PCOS
is not a party to:
(i) any contract or series of contracts related to the same
matter for the purchase of materials, supplies, goods,
services, equipment or other assets providing for
annual payments by each of SQH, NG, OB, PC and PCOS of
US$ 500,000 or more (or the equivalent thereof in other
currencies);
(ii) any agreement relating to the acquisition or
disposition of any business (whether by merger, sale of
stock, sale of assets or otherwise) material to each of
SQH, NG, OB, PC and PCOS.
(iii) any agreement or contract the existence of which would
reasonably be expected to have a Net Financial Adverse
Effect.
(b) Each agreement, contract and commitment to which each of SQH,
NG, OB, PC and PCOS is a party disclosed in any Schedule to
this Agreement is in full force and effect, and to the
knowledge of Patco neither of SQH, NG, OB, PC and PCOS is in
default or breach in any material respect under the terms of
any such agreement, contract or commitment which would
reasonably be expected to have a Net Financial Advers Effect;
5.14. Compliance with Laws. Each of SQH, NG, OB, PC and PCOS is not in
violation of any applicable laws, statutes, ordinances, regulations or
regulatory orders.
5.15. Trademarks. (a) No activities of each of SQH, NG, OB, PC and PCOS
infringe any trademark or other Intellectual Property rights of any
third party and no notice of any claim has been received by Patco nor
by each of SQH, NG, OB, PC and PCOS in respect of such infringements
5.16. Taxes. (a) All Tax-returns, statements, reports and forms
(collectively, "Each of SQH, NG, OB, PC and PCOS Returns") required to
be filed with any Taxing Authority by each of SQH, NG, OB, PC and PCOS
have been filed; (b) all information provided in the each of SQH, NG,
OB, PC and PCOS Returns is true, correct and complete in all material
respects; (c) all taxes shown as due and payable on the each of SQH,
NG, OB, PC and PCOS Returns that have been filed have been timely paid,
or provision therefore has been duly made, and (d) there is no claim,
audit, action, suit, proceeding, or investigation now pending or
threatened against each of SQH, NG, OB, PC and PCOS in respect of any
Tax.
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The following terms, as used above, have the following meaning:
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means any
income tax, stamp tax, real estate taxes, tax on assets or value added
tax, capital gains tax, business license tax ("patente municipal"),
custom duties, and any other taxes, duties or contributions, including
any tax to be withheld by each of SQH, NG, OB, PC and PCOS and any
"Pagos Provisionales Mensuales", or any tax arising out of the
transactions contemplated by this Agreement together with any interest
or any penalty, addition to tax or additional amount imposed by any
governmental or municipal authority (domestic or foreign) responsible
for the imposition of any such tax (a "Taxing Authority").
5.17. Environmental Matters. Each of SQH, NG, OB, PC and PCOS is not in
violation of any applicable environmental laws and regulations, as per
Chilean standards.
5.18. Finders' Fees. No investment banker, broker, finder or other
intermediary has been retained by or is authorized to act on behalf of
Patco or each of SQH, NG, OB, PC and SQM who is entitled to any fee or
commission from Hydro upon consummation of the transactions
contemplated by this Option Agreement.
5.19. Complete Information. Patco declares that they have supplied to Hydro
all information and data with respect to SQH and have omitted or
withheld none of the information or data, which Patco reasonably ought
to have supplied to Hydro in order to enable the latter to form a
correct opinion on the desirability of the subscription of the Shares.
5.20. Confidential Information. Neither Patco nor SQH or its subsidiaries
shall provide any information deemed confidential or privileged unless
there is a direct interest in the relevant deal or matter, or has a
satisfactory indirect interest such as guarantor of the obligation of
another party or in any other way, in which cases, the delivery of
information shall be decided by the competent board or shareholder's
meeting, as required by applicable law.
And, in respect of SQM Patco hereby represents and warrants to Hydro as of the
date hereof and as of the date each of the subscription agreements under Section
2.3. and IV herein, are executed and delivered by SQH and Hydro that, the annual
report of SQM as filed with the SVS and SEC does not contain any misstatement of
a material fact or omit to state any material fact necessary to be stated under
the circumstances.
VI) REPRESENTATIONS AND WARRANTIES OF HYDRO.
Hydro hereby represents and warrants to Patco as of the Date of Exercise that:
6.1. Corporate Existence and Power. Hydro (i) has been duly incorporated and
is validly existing as a corporation organized under the laws of
Norway; (ii) Hydro has all corporate powers to carry on its business as
now conducted, (iii) Hydro has all
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governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted.
6.2. Corporate Authorization. The execution, delivery and performance by
Hydro of this Agreement and the consummation by Hydro of the
transactions contemplated hereby are within the Hydro's corporate
powers and have been or will be duly authorized by all necessary
corporate action on the part of Hydro. This Agreement constitutes a
valid and binding agreement of Hydro, enforceable against Hydro in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally.
6.3. Governmental Authorization. To the knowledge of Hydro, the execution
delivery and performance by Hydro of this Agreement does not require
any approval of, or filing with, any governmental body, agency,
official or authority on the part of Hydro or any of its subsidiaries
other than those required in similar transactions of this nature.
6.4. Non Contravention. The execution, delivery and performance by Hydro of
this Agreement does not and will not (i) contravene or conflict with
the certificate of incorporation or by-laws of Hydro, (ii) contravene
or constitute a violation of any provision of any law, regulation,
judgement, injunction, order or decree binding upon Hydro or (iii)
require any consent or other action by any Person under, constitute a
default under, or give rise to any right of termination, cancellation
or acceleration of any right or obligation of Hydro under, any
agreement or other instrument binding upon Hydro or any of its
Affiliates or any license, franchise, permit or other similar
authorization held by Hydro or any of its Affiliates.
6.5. Finders' Fees. No investment banker, broker, finder or other
intermediary has been retained by or is authorized to act on behalf of
Hydro who is entitled to any fee or commission from Patco or any of
their Affiliates upon consummation of the transactions contemplated by
this Agreement.
6.6. Litigation. There is no action, suit, investigation or proceeding
pending, or to the knowledge of Hydro threatened, against Hydro before
any court, arbitrator or governmental authority which seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement.
VII) COVENANTS OF PATCO.
7.1. Amendment of Bylaws. Within 30 days after the delivery of the
Option Notice, and in all event prior to the execution of the
Subscription Agreement, Patco shall amend the Bylaws of SQH, in order
to provide that the sale of shares in NG shall be decided by the
unanimous proposal and resolution of the board of directors and by a
shareholders meeting adopted by two thirds of the issued shares with
voting rights.
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Within the same term, Pacto shall cause the board of NG to call a
shareholders meeting to decide the amendment of the bylaws of NG, in
order to provide, if such meeting so decides, that the sale of its
interest in OB shall require a unanimous proposal and resolution of the
board of directors and be decided by the shareholders meeting through a
resolution adopted by two thirds of the issued shares with voting
rights, according to the interest of NG. The same procedure shall apply
for the purpose of granting of a power of attorney addressed to the
sale of such shares. Patco, to the extent permitted by applicable law,
and acting in the best interest of NG, shall cause such decisions.
Within the same term, Patco shall cause the board of OB to call a
shareholders meeting to decide the amendment of the bylaws of OB, in
order to provide, if such meeting so decides, that the sale of its
interest in PC shall require a unanimous proposal and resolution of the
board of directors and be decided by the shareholders meeting through a
resolution adopted by two thirds of the issued shares with voting
rights, according to the interest of OB. The same procedure shall apply
for the purpose of granting of a power of attorney addressed to the
sale of such shares. Patco, to the extent permitted by applicable law,
and acting in the best interest of OB, shall cause such decisions.
Within the same term, Pacto shall cause the board of PC to call a
shareholders meeting to decide the amendment of the bylaws of PC, in
order to provide, if such meeting so decides, that the sale of its
interest in SQM shall require a unanimous proposal and resolution of
the board of directors and be decided by the shareholders meeting
through a resolution adopted by two thirds of the issued shares with
voting rights, according to the interest of PC. The same procedure
shall apply for the purpose of granting of a power of attorney
addressed to the sale of such shares. Patco, to the extent permitted by
applicable law, and acting in the best interest of PC, shall cause such
decisions.
7.2. Capital Contributions. Upon completion of each of the capital
subscriptions by Hydro, SQH shall use the proceeds to pay its own
indebtedness, and, once paid, shall cause a capital increase and shall
subscribe at least its proportion of the newly issued shares. The same
actions and the same use of proceeds shall be made by NG and OB in NG
at the time those entities receive capital increases from its parent
company. For these purposes SQH, NG and OB shall cause the amendment of
the bylaws of its respective immediate subsidiary necessary to make
capital increases in its immediate subsidiary in order for it to pay
its indebtedness.
7.3. Conduct of Business. From and after the date hereof, Patco will use its
best efforts to conduct SQH's business and affairs only in the ordinary
course of business. Patco will give Hydro prompt written notice of any
material change in any of the information contained in the
representations and warranties made in Article V hereof which occurs
prior to the exercise of the Option. Without limiting the generality of
the foregoing, prior to the exercise of the Option, Patco will not,
without Hydro's prior written approval:
(a) change SQH's certificate of incorporation or by-laws or merge
or consolidate or obligate itself to do so with or into any
other entity;
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(b) create, incur or assume any liability or obligation for
borrowed money; except in the ordinary course of business;
(c) assume or guarantee any liability or responsibility (whether
directly, contingently or otherwise) for the obligations of
any other person;
(d) declare or make any payment of dividends or other
distributions upon or in respect of any shares of its capital
stock, or purchased, retired or redeemed, or obligated itself
to purchase, retire or redeem, any of its shares of capital
stock or other securities;
(e) sell, transfer, lease, mortgage, pledge or agree to sell,
transfer, lease, mortgage or pledge or otherwise disposed of
or agreed to dispose of any of its assets or canceled or
agreed to cancel any debts or claims except in the ordinary
course of business except the non core assets referred to in
Section 3.1 a);
(f) terminate or received any notice of termination of any
contract, lease, license or other agreement except in the
ordinary course of business;
(g) make any increase in the rate of compensation, commission,
bonus or other direct or indirect remuneration payable to any
director, officer or key employee other than increases
occurring in the Ordinary Course of Business;
(h) make any capital expenditures or capital additions or
betterments in excess of an aggregate of US$ 2 million;
(i) enter into any transaction, contract or commitment which is
material except for (i) those entered into, in the ordinary
course of business, (ii) capital expenditures permitted under
subparagraph (j) above or (iii) transactions contemplated or
permitted by this Agreement;
(j) issue any shares of capital stock of SQH or securities
convertible into capital stock of SQH other than as
contemplated under this Agreement;
(k) grant any options to acquire capital stock of SQH or its
subsidiaries;
(l) change SQH's method of accounting;
(m) settle any arbitration, proceeding, litigation or other claim
other than the payment, discharge or satisfaction in the
ordinary course of business; or
(n) make any tax election or enter into any settlement or
compromise of any tax liability other than in the ordinary
course of business.
7.4 Shareholders Agreement. Simultaneously with the execution of the
Subscription Agreement by Hydro, Patco shall execute a shareholders
agreement substantially in the form of Annex 7.4 hereof.
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VIII) COVENANTS OF HYDRO.
8.1. Change of Guarantor. Hydro undertakes to agree that upon the exercise
of the Hydro Option, Hydro shall consent that SQH becomes the guarantor
of any debt of SQGC, SQH, NG, OB, PC and PCOS and Subsidiaries,
currently guaranteed by Xx. Xxxxx Xxxxx Lerou, subject to the consent
of the creditors with respect to such debt and the release of Xx. Xxxxx
Xxxxx Lerou from such guarantees.
IX) GUARANTEES.
It has been material for Hydro for entering into this Option Agreement that in
order to guarantee the effectiveness and seriousness of the representations,
warranties and indemnities made by Patco under section V above and the
fulfillment of the obligations assumed by Patco under this agreement, that the
following guaranties are granted:
(a) The NG Pledge;
(b) Xxxxx Xxxxx Personal Guarantee - In his capacity as the beneficial
owner of SQH, Xx. Xxxxx Xxxxx Lerou personally guarantees the
obligations of Patco with respect to the representations and warranties
of Patco set forth in Section V hereof and the obligations of Patco
under this agreement; and
(c) An Escrow Account for US$1,000,000 .- Simultaneously with the execution
of the Subscription Agreement, Patco has delivered to a Public Notary
one endorsable and automatically renewable 6 months term deposit for
the amount of US$1,000,000, with instructions to the notary to deliver
such deposit under the terms of the Escrow Agreement, which is attached
hereto as Annex I.X.
The above referred guarantees will last for 3 years from the date of exercise of
the Option.
X) GENERAL PROVISIONS.
10.1. Amendment and Waiver. This Agreement may be amended, supplemented or
modified only by written instruments duly executed by or on behalf of
each party hereto. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit
thereof, but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party waiving
such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be
or construed as a waiver of the same or any other term or condition of
this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
10.2. Assignment. Neither party may assign its rights and obligations to any
third party without the other party's consent, with the exception that
Hydro may freely assign, wholly or partly, its rights and obligations
hereunder to a subsidiary with a registered branch in Santiago, Chile.
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10.03. Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been given only if delivered
personally or by facsimile or mailed (first class postage prepaid or by
air courier) to the intended recipient at the address for notices
specified below its name on the signature pages hereof.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be
deemed given upon delivery, (ii) if delivered by facsimile transmission
to the facsimile number as provided in this Section, be deemed given
upon receipt, and (iii) if delivered by mail in the manner described
above to the address as provided in this Section, be deemed given upon
receipt (in each case regardless of whether such notice, request or
other communication is received by any other Person to whom a copy of
such notice, request or other communication is to be delivered pursuant
to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party
hereto.
If to Patco: Pacific Atlantic Trading Corporation Inc.
Xxxxxxx Xxxxxxx 000
Xxxxxxxx, Xxxxx
Attn.: Xxxxxx Xxxxxx Huidobro Xxx-Xxxxxxx
Cc: Xxxxxx Xxxxxx, Esq,
Huerfanos 835 p. 00
Xxxxxxxx, Xxxxx
If to Hydro: Norsk Hydro ASA
Legal Department
0240 Oslo, Norway
Attn.: Xx. Xxxx Xxxxx
10.4. Publicity. Hydro and Patco will consult with each other upon any press
releases or public announcements pertaining to the transactions
contemplated by this Agreement and shall not issue any such press
releases or make any such public announcements before such consultation
and agreement, except as may be required by applicable law in which
case the party proposing to issue such press release or make such
public announcement shall use all reasonable efforts to consult in good
faith with the other party before any such issuance or announcement.
10.5. Confidentiality. Each party hereto agrees to keep information obtained
by it pursuant hereto confidential in accordance with such party's
customary practices and agrees that it will only use such information
in connection with the transactions contemplated by this Agreement and
not disclose any of such information other than (a) to such party's
employees, representatives, attorneys, auditors, agents or affiliates
who are advised of the confidential nature of such information, (b) to
the extent such information presently is or hereafter becomes available
to such party on a non-confidential basis and without a breach of a
similar confidentiality obligation from any source or such information
that is in the public domain at the time of disclosure, (c) to the
extent disclosure is required by
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Law (including applicable securities Laws), regulations, subpoenas or
judicial order or process (provided that notice of such requirement or
order shall be promptly furnished to the other party unless such notice
is legally prohibited), (d) to transferees or prospective transferees
who agree to be bound by the provisions of this Section, (e) to the
extent required in connection with any litigation between any parties
hereto with respect to this Agreement or (f) with the other party's
prior written consent.
10.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of Chile.
10.7. Arbitration. The parties shall endeavor to resolve any controversy,
claim or dispute arising between them out of or relating to this
Agreement including without limitation, the interpretation of any
provision thereof or the breach, termination or invalidity thereof (a
"DISPUTE"), by discussions in good faith in a spirit of mutual good
will, and that, if necessary, a meeting of senior management of the
parties shall be convened if the Dispute is not solved amicably within
thirty (30) days of the Dispute arising.
If any of such Disputes cannot be resolved within forty five (45) days
as of the date the Dispute arose, then such Dispute shall be
exclusively and finally settled by arbitration. It is specifically
understood and agreed that any Dispute may be submitted to arbitration
irrespective of the magnitude thereof, the amount in controversy or
whether such Dispute would otherwise be considered justifiable or ripe
for resolution by a court. Only if the panel is already established, it
is specifically agreed that any legal action, including the filing of
any precautionary actions (medidas precautorias), pre-judicial actions
(medidas prejudiciales) shall be known and resolved by the arbitral
tribunal, as appointed hereinbelow.
Unless the parties agree otherwise, the arbitration shall be conducted
in accordance with the Rules of Arbitration of the International
Chamber of Commerce ("ICC") as in effect on the date of this Agreement,
except to the extent such rules conflict with the provisions of this
arbitration section in which event the provisions of this section shall
control.
The arbitration shall be conducted in the Spanish language, provided
that, any witness whose native language is not Spanish may give
testimony in English or Norwegian, with simultaneous translation into
Spanish. In this case the translator shall be appointed by the arbitral
tribunal and any party shall have the right to participate in such
examinations and cross-examinations accompanied by a translator hired
by such party. Each party shall bear its own costs in connection with
such arbitration, unless the arbitrators determine otherwise.
The arbitral tribunal consist of three arbitrators from the following
list to be appointed in the same order of this list.
List of Arbitrators:
-------------------
1.- Xxxx Xxxxxxxxx Xxxx
2.- Xxxx Xxxxxxx Xxxxxxxx Xxxxxx
3.- Xxxx Xxxx Xxxx Xxxxxx
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4.- Xxxxxxxx Xxxxxx Tocornal
5.- Xxxxxxx Xxxxxxx xx Xxxxxx
6.- Xxxxxx Xxxxxxx Xxxxxx Xxxxxx
7.- Xxxxxxx Xxxxxxx Xxxxxxxxxx
8.- Xxxx Xxxxx Errazuriz Grez
9.- Xxxxxx Xxxxxxxxxx Xxxx
10.- Xxxx Xxxxxxxxx Xxxxxxxxx Irarrazaval
11.- Xxxx Xxxxxxx Xxxxx Xxxx
If it has turned to be impossible to appoint 3 arbitrators from the
list, the parties shall agree on the name(s) of the missing
arbitrator(s). If the parties cannot agree on the name of the
arbitrators needed to complete the three member panel within 15 days as
of the date the last arbitrator of the list refused or is evidenced
that cannot assume the position, then the ICC shall appoint enough
arbitrators to complete the 3 member panel.
The arbitration shall be conducted in the city of Xxxxxxxx, Chile, or
such other place as is unanimously agreed in writing by the parties to
the arbitration. The arbitrators shall act as arbitros arbitradores.
Consequently, and as this Agreement is governed by the laws of the
Republic of Chile, any Dispute existing between the parties shall be
settled under such laws, with the exception of the procedural
provisions contained in the ICC's Rules, if such rules are to be used
under this clause, which provisions shall be applied.
Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. Any rights to
appeal or to review of such award by any court or tribunal are hereby
waived, to the extend permitted by law. The arbitral award may be
enforced against the parties to the arbitration proceeding or their
assets wherever they may be found and judgement upon the arbitral award
may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, each party hereto has signed this Agreement, or
caused its duly authorized officer to sign this Agreement, as of the date first
above written.
Patco
By:
--------------------------------
Name:
Title
HYDRO
By:
--------------------------------
Name:
Title
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ANNEX LIST
Annex I.A. Copies of the SQH Loan and PC Loan.
Annex I.X. Escrow Agreement.
Annex I.B.(a) Xxxxx Xxxxx Personal Guarantee.
Annex I.B.(b) Copy of the NG Pledge
Annex 2.3. Option Notice.
Annex 2.3.(i) Form of SQH Shareholders Meeting Minutes.
Annex 2.3.(iii) Form of Subscription Agreement.
Annex 3.1.(b) SQM Published Investment Program
Annex 7.4. Form of Shareholders Agreement
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ANNEX I.A.
COPIES OF THE SQH LOAN AND PC LOAN
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ANNEX I.X.
ESCROW AGREEMENT
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ANNEX I.B. (a)
XXXXX XXXXX PERSONAL GUARANTEE
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ANNEX I.B. (b)
COPY OF THE NG PLEDGE
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ANNEX 2.3.
OPTION NOTICE
-----------
[Date]
To: Pacific Atlantic Trading Corporation Inc.,
SQ Grand Cayman Corp., and
Xx. Xxxxxxx Xxxxxx Xxxx
Dear _____,
In accordance with the provisions set forth in the Option Agreement dated ___,
2001 between Pacific Atlantic Trading Corporation Inc., SQ Grand Cayman Corp.,
Xxxxxxx Xxxxxx Lyon and Norsk Hydro ASA (the "Option Agreement"), by means of
this instrument we hereby give you notice of exercise of our right to subscribe
newly issued shares of Inversiones SQ Holding S.A., for a total amount
representing 49% of the issued shares of such company.
Sincerely,
Norsk Hydro ___
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ANNEX 2.3. (i)
FORM OF SQH SHAREHOLDERS MEETING MINUTES
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ANNEX 2.3. (iii)
FORM OF SUBSCRIPTION AGREEMENT
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ANNEX 3.1. (b)
SQM PUBLISHED INVESTMENT PROGRAM
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ANNEX 7.4.
FORM OF SHAREHOLDERS AGREEMENT
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SCHEDULE LIST
a) Schedule 5.3 (iv)
b) Schedule 5.3 (vii)
c) Schedule 5.7 (a)
d) Schedule 5.11
e) Schedule 5.13 (a)
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