Subordinated Loan Agreement
between
Gigantissimo 2324 AB to be renamed Narvarme Acquisition I AB
as Borrower
and
Scandinavian Energy Finance Limited
as Lender
______________________________________
Subordinated Loan Agreement
THIS AGREEMENT is dated March 11, 2002 and made
BETWEEN:
(1) Scandinavian Energy Finance Limited (SEFL)
and
(2) Xxxxxxxxxxxx 0000 XX to be renamed Narvarme Acquisition I AB (the
"Borrower")
WHEREAS:
1. Definitions
"Agreement" means this subordinated loan agreement;
"Available Cash" means all cash from all sources held by the Company and
its affiliates (the "Group") which may be used to pay
interest and principal under the loans described herein
without violating applicable law, any contractual covenants
binding on the Group consented to by SEFL and which is not
required to pay future expenses of the Group in the
reasonable judgement of the Borrower;
"Business Day" means a day (other than a Saturday or Sunday) on which
banks in Stockholm are generally open for business;
"Drawdown" means the draw down made by the Borrower hereunder
pursuant to clause 2.2;
"Drawdown Date" means the date the draw down is made by the Borrower
hereunder pursuant to Clause 2.2 below;
"Events of Default" means an event specified in Clause 11;
"Interest Payment Day" means February 20, May 20, August 20 and November 20,
provided that if any day so indicated is not a Business Day
then that Interest Payment date shall fall on the next
Business Day in the same calendar month or, if there is no
such Business Day, on the nearest preceding Business Day in
the same calendar month;
"Loan" means the principal amount advanced pursuant to this
Agreement and for the time being outstanding;
"Repayment Date" means the day falling twenty five years after the date of
this Agreement provided that if that day is not a Business
Day, then the Repayment Day shall fall on the next Business
Day in the same calendar month or, if there is no such
Business Day, the nearest preceding Business Day in the same
calendar month.
2. Amount and Drawdown
2.1 The Lender agrees to lend to the Borrower and the Borrower agrees to
borrow from the Lender up to an amount of SEK 129.000.000.
2.2 The Drawdown shall take place in one or more tranches, of which the
first tranch for initial funding shall be SEK 115.300.000.
2.3 The loan shall be repaid on the Repayment Date.
3. Interest
3.1 The Loan will carry interest as from and excluding the Drawdown Date
up to and including the Repayment Date at an annual interest rate
that equals to the sum of (i) a fixed real interest rate of 10% plus
(ii) an inflation premium. The inflation premium equals the
percentage-change of the Swedish consumer price index
(konsumentprisindex, KPI) of the calendar year preceding the
calculation period.. The interest will be simple, calculated on the
basis of 360 days in a year of 360 days. Subject to Clause 4 below
the interest shall be paid in arrears on each Interest Payment Date.
4. Postponement
The Company shall be entitled to postpone the payment of interest or
principal if on an interest payment date or the Repayment Date (as
applicable) if and to the extent the Company does not have sufficient
Available Cash to pay interest or principal amounts. Should the
payment of interest be delayed due to such occurrence, the postponed
interest shall be paid on the following interest payment date on
which there is Available Cash to make such payment. Should the
repayment of principal be delayed due to such occurrence, the
postponed principal shall be delayed until the Company has Available
Cash to repay the principal. The Company shall make partial payments
on the dates described above in the events it has Available Cash to
make a portion of, but not all of, the interest and principal
payments as described herein. Any postponed payments of principal or
interest shall continue to accrue interest at the rate set forth in
section 3 hereof until such payment is made. Such interest shall be
charged quarterly. If the date on which a payment of principal or
interest falls due is not a banking day the payment in question shall
be made on the next succeeding day which is a banking day.
After January 1, 2005 the Company may at its own discretion prepay
all or part of the Loan to the Lender on 30 days advance written
notice.
5. Subordinated debt
Should the Company go into liquidation or be declared bankrupt, the
debt instruments shall entail the right to payment from the Company's
assets after the Company's nonsubordinated obligations and pari passu
with other subordinated obligations which are not expressly
subordinated this loan.
6. Reporting Covenants
6.1 The Borrower shall provide unaudited consolidated quarterly financial
statements within 45 days of quarter end and audited annual
consolidated financial statements within 120 days of each fiscal year
end. In each case including balance sheets, profit and loss
statements and cash flow statement. All quarterly financial
statements to be accompanied by a Certificate of No Default setting
out compliance calculations. In addition, the Borrower shall deliver
monthly operating statements within 15 days of months end for each
district heating project operated by the Borrower or its direct or
indirect subsidiaries.
7. Positive covenants
7.1 So long as any amounts remain outstanding and unpaid under the loan
the Borrower will, and will ensure that its direct and indirect
subsidiaries will:
7.1.1 Subject to Section 4 hereof pay all amounts of principal and interest
on the dates, times and at the place specified in the Terms or under
any other agreement between the Lender and the Borrower.
7.1.2 Advise Lender of any change in the amount and the terms of any credit
arrangement made with other permitted lenders or any action taken by
another lender to recover amounts outstanding with such other lender.
7.1.3 Advise promptly after the happening of any event which will result in
a material adverse change in the financial condition, business,
operations, or prospects of the Borrower or the occurrence of any
Event of Default.
7.1.4 Do all things necessary to maintain in good standing its corporate
existence and preserve and keep all material agreements, rights,
franchises, licences, permits, operations, contracts or other
arrangements in full force and effect and comply with their terms and
conditions.
7.1.5 Pay all taxes, assessments and government charges, unless such taxes,
assessments, or charges are being contested in good faith and
appropriate reserves shall be made with funds set aside in a separate
trust fund.
7.1.6 Provide Lender and its representatives, including without limitation
EIC Partners AG with information and financial date as it may
reasonably request from time to time.
7.1.7 Maintain property, plant and equipment in good repair and working
condition with reasonable wear and tear excepted.
7.1.8 Inform Lender of any actual or threatened litigation and furnish the
Lender with copies of details of any litigation or other proceedings,
which might materially and adversely affect the financial condition,
business, operations, or prospects of the Borrower.
7.1.9 Continue to carry on the business substantially currently being
carried on by the Borrower and its subsidiaries at the date hereof.
7.1.10 Maintain adequate insurance on all of its assets, undertakings, and
business risks.
7.1.11 Permit Lender or its authorised representatives including without
limitation EIC Partners AG full and reasonable advance notice to its
premises, business, financial and computer records and allow the
duplication or extraction of adequate information therefrom.
7.1.12 Comply with all applicable laws and regulations, including without
limitation, all environmental regulations at all times.
7.1.13 Maintain the legally required ratio between equity and registered
share capital.
7.1.14 Comply and cause its direct and indirect subsidiaries to comply with
all obligations to Lantbrukskredit relating to loans made by
Lantbrukskredit to the Borrower and/or its subsidiaries.
7.1.15 Comply with the reasonable request for co-operation from Lender's
financial services consultant EIC Partners AG.
7.2 The Borrower and its subsidiaries has acquired certain shares from
Narvarme Sverige AB and Varmeland Teknik AB and their Affiliates
pursuant to a Share Sale and Purchase Agreement by and among
Varmeland Teknik AB and Xxxxxxxxxxxx 0000 XX and related agreements
including without limitation an Indemnification and Escrow Agreement
by and among the parties to the aforementioned agreements
(collectively the "Acquisition Agreements"). the Borrower shall
enforce all of its rights against the respective Sellers under such
Acquisition Agreements in a diligent manner and shall keep Lender
fully informed respecting such enforcement actions.
8. Negative covenants
8.1 So long as any amounts remain outstanding under the convertible loans
the Borrower will not and will ensure that its direct and indirect
subsidiaries do not without the consent of the Borrower:
8.1.1 Merge or consolidate with any other outside Person, or acquire all or
substantially all of the shares, assets or business of any other
Person.
8.1.2 Sell, lease, assign, transfer, convey or otherwise dispose of any of
its now owned or hereafter acquired assets (including, without
limitation, shares of stock and indebtedness of subsidiaries,
receivables and leasehold interests), except for inventory disposed
of in the ordinary course of business and replacement of equipment in
the ordinary course of business.
8.1.3 Cease to carry on the business currently being carried on by each of
the Borrower and its direct or indirect subsidiaries at the date
hereof.
8.1.4 Permit any change of ownership or change in the capital structure of
the Borrower or its direct or indirect subsidiaries.
8.1.5 Effect a change in control of the Borrower or its direct or indirect
subsidiaries.
8.1.6 Pledge any security to any other party.
8.1.7 Permit any amendment or termination of material contracts [other]
than in connection with the 193.8 MSEK loan from Lantbrukskredit to
the Production Companies.
8.1.8 Enter into any agreement regarding related party transactions.
8.1.9 Replace, amend or alter the Articles of Association of the Borrower
or its direct or indirect subsidiaries.
8.1.10 Enter into or grant any options to subscribe for shares or issue any
securities convertible into shares or enter into any agreement for
the same.
8.1.11 Voluntarily liquidate or wind-up the Company.
8.1.12 Change the place of the registered office of the Company.
8.1.13 Enter into any agreement which would likely have a material effect on
the Company other than in connection with the loan from
Lantbrukskredit to the Borrower's subsidiaries. Material for these
purposes is an agreement that has gross revenues or costs of more
than SEK 500,000 per annum or which otherwise would likely have a
material effect on the operations financial conditions, assets,
business or prospects of the Borrower or its direct or indirect
subsidiaries.
8.1.14 Enter into, terminate or modify any agreement between the Borrower,
its direct or indirect subsidiaries on the one hand and any managing
director, shareholder (other than a Group Company), employee or
affiliate of the same on the other hand.
8.1.15 Agree or commit to do any of the foregoing
9. Representations and warranties
9.1 The Borrower hereby represents and warrants, which representations
and warranties shall be deemed to be continually repeated so long as
any amounts remain outstanding and unpaid:
9.1.1 The Borrower and its direct and indirect subsidiaries are
corporations duly incorporated and organised, validly existing and in
good standing under the laws of Sweden and have adequate corporate
power and authority to carry on their businesses, own property,
borrow monies and enter into agreements therefor and observe and
perform the terms and provisions of this Agreement and the
Convertibles to the extent they are parties thereof.
9.1.2 There are no laws, statutes or regulations applicable to or binding
upon the Borrower and no provisions in its charter documents or in
any by laws, resolutions, contracts, agreements, or arrangements
which would be contravened, breached, or violated as a result of the
execution, delivery, performance, observance, of any terms of this
Agreement.
9.1.3 No Event of Default has occurred nor has any event occurred which,
with the passage of time or the giving of notice, would constitute a
default under any other agreement for borrowed money upon the
Borrower or its direct or indirect subsidiaries in excess of SEK
500,000.
9.1.4 There are no actions, suits, or proceedings, including appeals or
applications for review, or any knowledge of pending actions, suits,
or proceedings against the Borrower and/or its subsidiaries, before
any court or administrative agency which would result in any material
adverse change in the property, assets, financial condition, business
or operations of the Borrower or its direct and indirect
subsidiaries.
9.1.5 All material authorisations, approvals, consents, licenses,
exemptions, filings, registrations and other requirements of
governmental, judicial and public bodies and authorities required to
carry on the business of the Borrower and its direct and indirect
subsidiaries have been or will be obtained or affected and are or
will be in full force and effect.
9.1.6 The financial statements delivered to Lender fairly present the
financial position of the Borrower and its direct and indirect
subsidiaries on a consolidated basid as at the dates and with respect
to the periods applicable to such financial statements, and have been
prepared by the Borrower in accordance with Swedish Generally
Accepted Accounting Principles consistently applied.
9.1.7 All of the remittances required to be made by the Borrower to the
government and all county and municipal governments have been made,
are currently up to date and there are no outstanding affairs.
Without limiting the foregoing, all employee source deductions, sales
taxes, corporate income taxes, corporate capital taxes, payroll taxes
and workers' compensation dues are currently paid and up to date
except for those remittances being contested in good faith and
adequately reserved for.
10. Payments
Subject to Section 4 hereof all payments to be made under this
Agreement will be made on the due date in SEK and in freely
transferable same day funds. If the due date is not a Banking Day the
payment will be made on the following Banking Day.
11. Events of Default
11.1 Each of the following is an Event of Default:
11.1.1
(i) Non-Payment: Except as permitted in Subject to Section 4
hereof the Borrower fails to pay when due any amount payable
to the Lender hereunder within five business days after the
Lender has provided written notice to the Borrower of such
non-payment; or
(ii) Breach of obligations: the Borrower fails to comply with any
obligations or covenants set forth in this Agreement and
such failure, if capable or remedy, shall not be remedied
within 30 days after the Lender has provided written notice
thereof to the Borrower; or
(iii) Bankruptcy: the Borrower becomes unable to pay its debts as
they fall due and such inability is not only temporary or
proceedings are initiated against the Borrower and are not
dismissed within 60 days or by the Borrower under any
applicable liquidation, bankruptcy, composition,
reorganisation or other similar laws; or
11.2 If there exists a suspension of business of the Borrower or its
direct or indirect subsidiaries for a period equal to 20 calendar
days.
11.2.1 If action is taken by an encumbrancer against the Borrower or any of
its subsidiaries to take possession of property or enforce
proceedings against any material assets.
11.2.2 If any material final judgement for the payment of monies is made
against the Borrower or any of its subsidiaries and it is not
discharged within 20 Business Days from the imposition of such
judgement.
11.2.3 If there exists any event, the effect of which with lapse of time or
giving of notice, will constitute an event of default or a default
under any other agreement for borrowed money in excess or SEK 500,000
entered into by the Borrower or any of its subsidiaries.
11.2.4 If there exists any state of facts which have or are reasonably
likely to have a material adverse effect on the business, operations,
assets, financial condition or prospects of the Borrower or its
subsidiaries such that their ability to comply with this Agreement is
materially impaired.
11.3 If an Event of Default occurs and is continuing the Lender may
subject to Section 4 by notice to the Borrower demand immediate
repayment of the Loan, and the Borrower agrees subject to Section 4
hereof to pay the Loan in accordance with the notice.
11.4 Lender's Costs and Expenses
The Borrower shall compensate the Lender for any reasonable costs
arising in relation to any breach or non-observance or
non-performance by the Borrower hereunder unless arising out of
failure by the Lender to exercise its rights, or comply with its
obligations, hereunder.
12. Additional Transactions
It is the intention of the parties that the Lender and the Borrower
shall enter into additional transactions on substantially the same
terms and conditions as set forth in this Agreement except as agreed
by the parties to help fund the capital needs of the Borrower subject
to there being no Events of Default for grounds for same under this
Loan or the Convertibles and such other conditions as Lender may
impose.
13. Expenses
The Borrower shall reimburse the Lender for all of its reasonable
external and internal costs, on a fully loaded basis, without profit
relating to the transaction covered by this Agreement including the
cost relating prior to signing this Agreement, the future
administration of the Subordinated Loan and the enforcement of its
rights hereunder.
14. Notices
14.1 Any notice or other communication under or in connection with this
Agreement shall be given in writing or by facsimile to the Party due
to receive such notice. Any such notice will be deemed to be given as
follows:
a) if in writing, when delivered; and
b) if by facsimile, when received.
However, a notice given in accordance with the above but received on
a non-working day or after business hours in the place of receipt
will only be deemed to be given at the opening of business on the
next working day in that place.
14.2 The addresses and facsimile numbers of each Party for all notices
under or in connection with this Agreement are:
a) in the case of the Lender;
c/o Xxxxxxx Xxxx
Xx Xxxx Xxxxxxxxxx
0 Xxxxxxxxxxxxx Xxxxx
International Financial Service Centre
Xxxxxx 0, Xxxxxxx
353 1 824 0010
with a copy to
President
US Energy Systems Inc.
Xxx Xxxxxxxxx
Xxxxxx Xxxxx
Xxxxx Xxxxxx X.X. 00000
Fax: 000 000 0000
With a copy to
EIC Partners AG
Xxxxxxxx-Xxxxx Xxxxxxx 00 X.X. Xxx 00
XX-0000 Xxxxxxxxxx Xxxxxxxxxxx
Fax: 00 0000 0000 until 15 April 2002
41 4384 410 01 after 15 April 2002
b) in the case of the Borrower;
Gigantissimo 2324 AB
to be renamed Narvarme
Acquisition I AB
Xxxxxxxxxx 00
000 00 Xxxx
Xxxxxx
or such other as a Party may notify to the other Party by no less
than five (5) business day's notice .
All notices and communication between the Parties shall be in English
unless otherwise agreed.
15. Governing Law and Disputes
15.1 This Agreement shall be governed by and construed in accordance with
the laws of Sweden.
15.2 Any dispute, controversy or claim arising out of or in connection
with this Agreement, or the breach, termination or invalidity thereof
shall be finally settled by arbitration in accordance with the rules of
the Arbitration Institute of the Stockholm Chamber of Commerce. The
number of arbitrators shall be three (3), whereof one shall be
appointed by the Borrower, one by the Lender and the third by the
Arbitration Institute in accordance with the said rules. The place of
arbitration shall be in Stockholm. The language to be used in the
arbitration proceedings shall be English.
________________________
IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be duly executed the day and year first above written in two original
copies
__________________________
Gigantissimo 2324 AB
PRESENT when the Common Seal of SCANDINAVIA ENERGY FINANCE LIMITED
was affixed hereto:
_____________________________________
Director
_____________________________________
Director/Secretary
