EXHIBIT 10.2
CONFIDENTIAL
April 15, 2003
Maxtor Technology (Suzhou) Co., Ltd.
(as user of the Total Commitment)
Bank of China Suzhou Branch
and
Bank of China Suzhou Industrial Park Sub-branch
(as provider of the Total Commitment)
MASTER FINANCING AGREEMENT
TABLE OF CONTENTS
CLAUSE NUMBER TITLE PAGE NUMBER
Clause 1 Interpretation 1
Clause 2 The Facilities and Purposes 5
Clause 3 Conditions of Utilization 6
Clause 4 Interest 8
Clause 5 Repayment, Prepayment and Cancellation 8
Clause 6 Fees 9
Clause 7 Comfort Letter and Negative Pledge Letter 9
Clause 8 Service promise, representations and undertakings of Party A 9
Clause 9 Representations and covenants of Party B 10
Clause 10 Events of default and remedy 14
Clause 11 Performance of agreement 14
Clause 12 Amendment and termination 14
Clause 13 Set-off, assignment and reservation of rights 15
Clause 14 Commencement of agreement 15
Clause 15 Special note 15
Clause 16 Governing law, dispute resolution and jurisdiction 15
Clause 17 Communications 16
Clause 18 Miscellaneous 17
Signature Page Party A 18
Signature page Party B 19
CLAUSE NUMBER TITLE PAGE NUMBER
Appendix 1 : Form of Loan Notification (Chinese) 20
Appendix 2 : Form of foreign exchange loan agreement (Chinese) 21
Appendix 3 : Form of Drawdown Notice (Chinese) 34
Appendix 4 : Sample of loan receipt 35
Appendix 5 : Comfort letter 36
Appendix 6 : Form of Negative Pledge Letter (Chinese) 37
MASTER FINANCING AGREEMENT
THIS AGREEMENT is made between the following parties on 15 April 2003:
(1) BANK OF CHINA SUZHOU BRANCH ("SUZHOU BRANCH") and BANK OF CHINA SUZHOU
INDUSTRIAL PARK SUB-BRANCH ("SIP SUB-BRANCH") as the provider of the
Total Commitment under this Agreement (Suzhou Branch and SIP Sub-branch
are hereinafter jointly and severally called "PARTY A");
(2) MAXTOR TECHNOLOGY (SUZHOU) CO., LTD., a wholly foreign-owned enterprise
with limited liability duly incorporated and existing in accordance
with the laws of the People's Republic of China, registered in Suzhou
Industrial Park of the People's Republic of China, as the user of the
Total Commitment under this Agreement (hereinafter called "PARTY B").
For the purpose of developing a long-term, stable and mutual business
cooperation relationship and on the principles of freedom of choice, equality,
mutuality and good faith, the above parties have reached the following agreement
after consultation:
CLAUSE 1 INTERPRETATION
1.1 Definitions
In this Agreement:
"AVAILABILITY PERIOD" means the period from and including the Effective
Date to the date falling 48 months after the Effective Date;
"CAPITAL INJECTION SCHEDULE" means the injection schedule of the
registered capital of Party B set out in clause 9.2.13, as may be
adjusted from time to time by Party B under such clause;
"CAPITAL VERIFICATION REPORT" means each report prepared and issued by
an accountant qualified in the PRC appointed by Party B in relation to
the injection of the registered capital of Party B;
"COMFORT LETTER" means the comfort letter in the form set out in
appendix 5 to this Agreement to be given by Maxtor Corporation to Party
A;
"DRAWDOWN NOTICE" means the drawdown notice in the form set out in
appendix 3 to this Agreement;
"EBITDA" has the meaning given to such expression in clause 9.2.4(b);
"EFFECTIVE DATE" means the date of this Agreement;
"EVENT OF DEFAULT" means any one of the events specified in clause 10;
"FACILITY" means the Tranche A Facility or the Tranche B Facility and
"FACILITIES" means both of them;
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"FELA" means a foreign exchange loan agreement in the form set out in
appendix 2 to this Agreement;
"FINAL MATURITY DATE" means the date falling 120 months after the
Effective Date;
"GAAP" means the generally accepted accounting standards, principles
and practices in the PRC;
"GOVERNMENT AGENCY" means any government or any governmental agency,
semi-governmental or judicial entity or authority;
"GROUP" means Maxtor Corporation and its directly and indirectly owned
subsidiaries;
"INTEREST CALCULATION DATE" means, in relation to an Interest Period,
one day prior to the first day of that Interest Period;
"INTEREST PAYMENT DATE" means each of the days which fall on each
semi-annual anniversary after the Effective Date up to and including
the Final Maturity Date, provided that on the relevant day any Loan is
outstanding;
"INTEREST PERIOD" means any of those periods mentioned in clause 4.1
and any other period by reference to which interest on a Loan or any
unpaid sum is calculated;
"LIBOR" means, in relation to any Loan or unpaid sum and any Interest
Period relating to it, the rate per annum equal to the arithmetic mean
(rounded upwards, if not already such a multiple, to the nearest whole
multiple of one-sixteenth of one per cent.) of the respective rates of
each of the banks whose rates appear on the screen page designated
"LIBO" (or any equivalent successor to such page) published or reported
by Reuters Limited on the Reuters monitor screen as the rate at which
such banks are offering in the London Inter-Bank Market deposits in US
dollars for a period comparable to such Interest Period at or about
11.00 a.m. (London time) on the Interest Calculation Date for such
Interest Period, provided that where such Interest Period is 3 months
or less, the comparable period shall be taken to be 3 months or, where
such Interest Period is greater than 3 months, the comparable period
shall be 6 months;
"LOAN" means a Tranche A Loan or a Tranche B Loan;
"LOAN DOCUMENTS" means this Agreement, each FELA, the Comfort Letter
and the Negative Pledge Letter;
"LOAN NOTIFICATION" means each loan notification from Party B to Party
A in the form set out in appendix 1;
"LOAN RECEIPT" means a loan receipt in the form set out in appendix 4;
"MARGIN" means (1) 0.5% per annum if LIBOR is equal to or lower than
3.12% per annum on the relevant Interest Calculation Date or (2) 0.6%
per annum if LIBOR is higher than 3.12% per annum on the relevant
Interest Calculation Date;
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
ability of Party B to perform its payment obligations under this
Agreement;
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"MAXIMUM LOAN AMOUNT" means, on any Utilization Date, an amount equal
to the total amount of the paid up registered capital of Party B on
that date multiplied by the ratio referred to in clause 9.2.13;
"MAXTOR CORPORATION" means Maxtor Corporation, a company incorporated
in accordance with the laws of the State of Delaware, United States of
America;
"NEGATIVE PLEDGE LETTER" means the negative pledge letter in the form
set out in appendix 6 to this Agreement to be given by Party B to Party
A;
"PERMITTED DISPOSALS" means any sale, lease, licence, transfer or other
disposal of (1) products, inventory or other assets made in the
ordinary course of trade or business of Party B, including in the
ordinary course of any business permitted by law, (2) receivables by
factoring or any other means of receivables financing, (3) obsolete or
worn-out assets, (4) land, plant, equipment or machinery in exchange
for other land, plant, equipment or machinery comparable or superior in
type, value or quality, (5) any machinery or equipment on arms length
terms for fair market value or (6) assets of a value not exceeding US$
5,000,000 by reference to their net book value, in any financial year
or (7) tangible or intangible assets under transactions between
companies in the Group pursuant to which Party B receives consideration
equal to or greater than the fair market value of the relevant assets
at the time of such disposal;
"PERMITTED INDEBTEDNESS" means (1) financial indebtedness under the
Loan Documents, (2) any indebtedness or liability of Party B arising
out of or in connection with the ordinary course of trade or business
of Party B, including in the ordinary course of any business permitted
by law, (3) any indebtedness arising under any leasing or hire purchase
arrangements, (4) any financial arrangements undertaken for the purpose
of hedging or managing foreign currency exposure, interest rate
fluctuations or other financial risks, (5) any indebtedness of Party B
not exceeding US$ 5,000,000 outstanding at any time, or (6) any
indebtedness owed to, or arising out of transactions involving, any
companies in the Group pursuant to which Party B acquires any assets
the fair market value of which is equal to or greater than such
indebtedness at the time of incurring such indebtedness;
"PERMITTED SECURITY" means (1) any security imposed by law or any
security of any nature arising out of or in connection with the
ordinary course of trade or business of Party B, including in the
ordinary course of any business permitted by law, (2) any security
deposit provided to any Government Agency or utility company in
relation to the Project or the operation of Party B's business, (3) any
security of any nature securing liabilities not exceeding US$5,000,000
outstanding at any time or (4) security of any nature arising out of
investments made in the PRC by Party B or transactions between or
involving domestic PRC companies in the Group;
"POTENTIAL EVENT OF DEFAULT" means any event which may become (with the
passage of time, the giving of notice, the satisfaction of any
condition or any combination of them) an Event of Default;
"PRC" means the People's Republic of China;
"PROJECT" means the establishment and operation of a hard disk drive
manufacturing plant at the Suzhou Industrial Park of the PRC by Party
B;
"REPAYMENT DATE" means each of the days which are 54, 60, 66, 72, 78,
84, 90 and 96
3
months after the Effective Date, and the Final Maturity Date;
"TRANCHE A COMMITMENT" means US$30,000,000 to the extent not adjusted,
cancelled or utilized in accordance with this Agreement;
"TRANCHE A FACILITY" means the working capital loan facility made
available under clause 2.1.1 of this Agreement;
"TRANCHE A LOAN" means a loan made or to be made under the Tranche A
Facility or the principal amount outstanding for the time being of that
loan;
"TRANCHE B COMMITMENT" means the aggregate of the Tranche B1 Commitment
and the Tranche B2 Commitment of US$103,000,000 to the extent not
adjusted, cancelled or utilized in accordance with this Agreement;
"TRANCHE B FACILITY" means the Tranche B1 Facility and the Tranche B2
Facility made available under clauses 2.1.2 and 2.1.3 of this
Agreement;
"TRANCHE B LOAN" means a Tranche B1 Loan or a Tranche B2 Loan;
"TRANCHE B1 COMMITMENT" means US$30,000,000, being part of the Tranche
B Commitment, to the extent not adjusted, cancelled or utilized in
accordance with this Agreement;
"TRANCHE B1 FACILITY" means the plant construction project facility
under the Tranche B Facility;
"TRANCHE B1 LOAN" means a loan made or to be made under the Tranche B1
Facility or the principal amount outstanding for the time being of that
loan;
"TRANCHE B2 COMMITMENT" means US$73,000,000, being part of the Tranche
B Commitment, to the extent not adjusted, cancelled or utilized in
accordance with this Agreement;
"TRANCHE B2 FACILITY" means the project facility other than the Tranche
B1 Facility under the Tranche B Facility;
"TRANCHE B2 LOAN" means a loan made or to be made under the Tranche B2
Facility or the principal amount outstanding for the time being of that
loan;
"TOTAL COMMITMENT" means the aggregate of the Tranche A Commitment and
the Tranche B Commitment being US$133,000,000 at the Effective Date;
"UTILIZATION DATE" means the date on which a Loan is, or is to be, made
available by Party A to Party B;
"UTILIZATION PLAN" means the plan given by Party B to Party A before
the Effective Date in relation to the amounts and order of Party B's
proposed utilization of the Facilities under this Agreement, as
adjusted from time to time in accordance with clause 2.3 of this
Agreement.
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1.2 Aids to Construction
Save where the contrary is indicated, any reference in this Agreement
to:
a "BUSINESS DAY" shall be construed as a reference to a day (other than
a Saturday or Sunday) on which banks are generally open for business in
the PRC or, if such reference relates to the date for the payment or
purchase of any sum denominated in US dollars, New York, London and the
PRC or, if such reference relates to a day on which LIBOR is to be
determined, London;
any DOCUMENT or AGREEMENT (including, without limitation, each Loan
Document) shall be construed as a reference to such document or
agreement as amended, novated, supplemented, substituted, varied or
replaced from time to time.
CLAUSE 2 THE FACILITIES AND PURPOSES
2.1 Subject to the terms of this Agreement, Party A agrees irrevocably to
make available to Party B the following facilities:
2.1.1 a working capital term loan facility in an aggregate amount
equal to the Tranche A Commitment;
2.1.2 a plant construction project term loan facility in an
aggregate amount equal to the Tranche B1 Commitment; and
2.1.3 a project term loan facility for projects other than plant
construction in an aggregate amount equal to the Tranche B2
Commitment;
for the purposes of providing finance to Party B for the plant
construction, equipment and machinery, other projects and general
working capital needs in relation to the Project. Party B shall apply
all amounts borrowed by it under this Agreement for such purposes.
2.2 On the Effective Date, the allocation of the Total Commitment is set
out in the table below:
---------------------------------------------------------------------------------------------------
COMMITMENT AMOUNT
FACILITY TYPE (US$10,000)
---------------------------------------------------------------------------------------------------
Tranche A General working capital 3000
---------------------------------------------------------------------------------------------------
Tranche B1 Plant construction 3000
---------------------------------------------------------------------------------------------------
Tranche B2 Other projects 7300
---------------------------------------------------------------------------------------------------
Total 13300
---------------------------------------------------------------------------------------------------
2.3 Party B may adjust the Utilization Plan and/or the allocation of the
Tranche B1 Commitment and the Tranche B2 Commitment set out in clause
2.2 at any time and from time to time by giving not less than 10
business days' prior written notice to Party A, provided that no such
adjustment shall cause the total amount of principal repayment
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under the Tranche B1 Facility by Party B on the Final Maturity Date to
exceed US$30,000,000.
CLAUSE 3 CONDITIONS OF UTILIZATION
3.1 Initial conditions precedent
Party B may not deliver any Drawdown Notice unless Party A has received
or waived its right to receive (in the case of clauses 3.1.6 to 3.1.11
below) an original or (in the case of clauses 3.1.1 to 3.1.5 below) a
copy, in each case (except the originals) certified as true, complete,
valid and up to date by any person authorised by Party B, of each of
the following documents:
3.1.1 the articles of association of Party B currently in force
(including any amendment and supplement);
3.1.2 the approval of the articles of association of Party B by the
Suzhou Industrial Park Administrative Committee;
3.1.3 the current and valid foreign investment enterprise approval
certificate of Party B issued by Jiangsu Provincial
Government;
3.1.4 the current and valid enterprise legal person business licence
of Party B issued by the Jiangsu Provincial Administration for
Industry & Commerce of the PRC;
3.1.5 the foreign exchange registration certificate issued by the
State Administration of Foreign Exchange, Suzhou Sub-branch;
3.1.6 the board resolutions of Party B, duly passed, approving the
signing and performance of this Agreement, each FELA and the
Negative Pledge Letter and authorising the relevant persons to
sign such documents on behalf of Party B;
3.1.7 a certificate setting out the names and specimen signatures of
the persons of Party B who are authorised to sign this
Agreement, each FELA and the Negative Pledge Letter and other
related documents on behalf of Party B;
3.1.8 the Comfort Letter;
3.1.9 the Negative Pledge Letter;
3.1.10 this Agreement duly signed by Party A and Party B with their
respective chops impressed thereon; and
3.1.11 a loan certificate or a loan card issued by the People's Bank
of China of the PRC.
Party A shall promptly notify Party B when it has received or waived
its right to receive the above documents satisfactory to Party A.
3.2 Further conditions precedent
Subject to the satisfaction of the conditions precedent in clause 3.1
above, Party B may
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utilize any Facility by way of a Loan in accordance with the terms of
this Agreement if:
3.2.1 Not less than (1) 10 business days before the Utilization Date
(in the case of a Tranche A Loan) or (2) 15 business days
before the Utilization Date (in the case of a Tranche B Loan),
unless previously provided, Party B delivers to Party A a Loan
Notification in relation to the Loan (and which, as the case
may be, may include any other Loan(s)) duly completed and
signed by Party B with its official chop impressed thereon;
3.2.2 Subject to Party A's performance of its obligations under
clause 8.5, not less than 3 business days before the
Utilization Date, Party B delivers to Party A:
(a) unless previously provided, an FELA or, as the case
may be, FELAs in relation to the Loan (and which, as
the case may be, may include any other Loan(s)) duly
completed and signed by Party B with its official
chop impressed thereon in quadruplicate with two
Chinese and two English versions;
(b) a Drawdown Notice in relation to the Loan duly
completed and signed by Party B with its official
chop impressed thereon;
(c) unless previously provided, a copy, certified as
true, complete, valid and up to date by any person
authorised by Party B, of the most recent Capital
Verification Report except that Party B shall be
entitled to provide other evidence to the reasonable
satisfaction of Party A whenever the relevant Capital
Verification Report is not available for any reason;
3.2.3 the proposed Utilization Date is a business day which falls
within the Availability Period;
3.2.4 the proposed amount of the Loan (1) is a minimum of
US$1,000,000 and a multiple of US$500,000 which is less than
the Tranche A Commitment (in the case of a Tranche A Loan) or,
as the case may be, the Tranche B Commitment (in the case of a
Tranche B Loan) and (2) when added to the total amount of all
Loans then outstanding on the proposed Utilization Date, does
not exceed the Maximum Loan Amount, and (for the avoidance of
doubt) (1) neither the Tranche A Commitment nor the Tranche B
Commitment will be reduced unless and until a Loan is drawn
under an FELA and (2) any commitment under an FELA which is
not used for any reason within the availability period under
that FELA will continue to be available to Party B under any
subsequent FELA(s);
3.2.5 no Event of Default or Potential Event of Default is
continuing on the proposed Utilization Date; and
3.2.6 the representations set out in clause 9.1 (except clause
9.1.3) are true and accurate on and as of the proposed
Utilization Date;
and immediately upon the making of such Loan, the Tranche A Commitment
(in the case of Tranche A Loan) or the Tranche B Commitment (in the
case of a Tranche B Loan) shall be reduced by the amount of such Loan
and the Total Commitment shall be reduced accordingly. The Total
Commitment shall be reduced to zero at the end of the Availability
Period or earlier if fully cancelled or utilized in accordance with the
terms of
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this Agreement.
CLAUSE 4 INTEREST
4.1 The first Interest Period of each Loan shall start on the Utilization
Date for that Loan. The period for which a Loan is outstanding shall be
divided into successive Interest Periods each of which (other than the
first) shall start on the last day of the preceding Interest Period.
4.2 The duration of each Interest Period shall, save as otherwise provided
in this Agreement, be six months, provided that:
4.2.1 the first Interest Period for each Loan shall end on the
immediately following Interest Payment Date for any Loan;
4.2.2 any Interest Period which would otherwise end before, or
extend beyond, a Repayment Date shall be of such duration that
it shall end on that Repayment Date.
4.3 If two or more Interest Periods in respect of different Loans end at
the same time then, Party B may make one single payment in respect of
all interest due on such Loans on the relevant Interest Payment Date.
4.4 On each Interest Payment Date Party B shall pay accrued interest on all
Loans.
4.5 Save as otherwise provided in this Agreement, the rate of interest
applicable to each Loan from time to time during an Interest Period
relating to that Loan shall be the rate per annum which is the sum of
the Margin and LIBOR for such Interest Period.
4.6 The rate of interest applicable to any sum payable under this Agreement
which Party B fails to pay when due in accordance with the terms of
this Agreement shall be the rate per annum which is the sum from time
to time of two per cent (2%) per annum, the Margin and LIBOR for the
relevant Interest Period.
4.7 Party A will give notice to Party B if on the Interest Calculation Date
for any Interest Period no banks have quotations of LIBOR appearing on
the Reuters screen at the relevant time.
4.8 If a notice is given under clause 4.7 then within five days of such
notice Party A and Party B shall enter into amicable negotiations and
friendly consultation with a view to agreeing a substitute basis (1)
for determining the rates of interest from time to time applicable to
the Loan(s) and/or (2) upon which the Loan(s) may be maintained
(whether in US dollars or some other currency) and any such substitute
basis that is agreed shall take effect in accordance with its terms and
be binding on each party to this Agreement. Unless and until any
substitute basis is agreed, the rate of interest applicable to the
Loans shall be the rate equal to the interest rate which was determined
in respect of the immediate preceding Interest Period. If no substitute
basis is agreed, Party B shall be entitled to repay the Loan(s) and all
interest accrued thereon to Party A.
CLAUSE 5 REPAYMENT, PREPAYMENT AND CANCELLATION
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5.1 Subject to clause 5.2 below, Party B shall:
5.1.1 repay all Tranche B1 Loans in full on the Final Maturity Date;
and
5.1.2 repay all Tranche A Loans and Tranche B2 Loans in 8 equal
instalments, one on each Repayment Date (other than the Final
Maturity Date),
so that in any event the total principal amount of repayment on the
Final Maturity Date will not exceed US$30,000,000.
5.2 Party B may prepay the whole or any part of any Loan on an Interest
Payment Date by giving Party A not less than 10 business days' prior
written notice to that effect, provided that the prepayment shall be a
minimum of US$10,000,000 and a multiple of US$1,000,000. Any prepayment
shall satisfy Party B's repayment obligations in respect of the Tranche
A Loans and Tranche B2 Loans under clause 5.1.2 in inverse
chronological order.
5.3 During the Availability Period, Party B may cancel the whole or any
part of the Total Commitment (in a minimum amount of US$10,000,000 and
of a multiple of US$1,000,000) by giving Party A not less than 10
business days' prior written notice.
CLAUSE 6 FEES
Party B is not required to pay to Party A any arrangement fee or commitment fee
or other fees in relation to the Total Commitment under this Agreement.
CLAUSE 7 COMFORT LETTER AND NEGATIVE PLEDGE LETTER
Party B shall ensure that Party A receives the Comfort Letter and the Negative
Pledge Letter in accordance with the terms of this Agreement.
CLAUSE 8 SERVICE PROMISE, REPRESENTATIONS AND UNDERTAKINGS OF PARTY A
8.1 In addition to the commitment of Party A in respect of the Total
Commitment under this Agreement, Party A will give priority treatment
to other financing requests of Party B.
8.2 At the request of Party B, Party A will provide to Party B the services
of enquiry, agency, settlement and other intermediary business services
within Party A's business scope.
8.3 Party A will provide civilised and quality service in the operation of
its financing business and intermediary business. Party A will take
Party B's supervision, enquiry, criticism and complaint seriously and
handle the same in a speedy and proper manner.
8.4 Party A undertakes to Party B to comply with the applicable and
relevant law, regulations, rules, policies and authorisations (internal
or external) and the terms of the Loan Documents.
8.5 Party A undertakes to Party B that within 3 business days of its
receipt of each Loan Notification from Party B under clause 3.2.1,
Party A will notify Party B in writing of the respective commitments of
Suzhou Branch and SIP Sub-branch to fund the Loan(s) under such Loan
Notification so as to enable Party B to perform its obligations under
clause 3.2.2(a).
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8.6 Party A undertakes to Party B that upon receipt from Party B of each
FELA in quadruplicate for any Loan(s) (in the form set out in Appendix
2) pursuant to clause 3.2.2(a) above, Party A will (1) treat the
condition under clause 3.2.2(a) as being satisfied in respect of such
Loan(s), (2) sign such FELA in the name of Suzhou Branch or SIP
Sub-branch (or both) in accordance with its notification to Party B
under clause 8.5, impress the official chop(s) of Suzhou Branch and/or
SIP Sub-branch thereon and date such FELA and (3) deliver to Party B
two originals of such FELA (one in Chinese and the other in English) on
the Utilization Date of the Loan.
8.7 Party A represents to Party B that Party A (1) is duly incorporated in
accordance with the laws of the PRC, (2) has capacity and power to
enter into and perform this Agreement and to carry on its business and
(3) has complied with all laws, regulations, rules, policies and
authorisations (internal or external) applicable to Party A in entering
into and performing this Agreement.
CLAUSE 9 REPRESENTATIONS AND COVENANTS OF PARTY B
9.1 Party B represents to Party A as follows:
9.1.1 Party B is duly incorporated and existing in accordance with
the laws of the PRC.
9.1.2 Party B has obtained all board authorisations necessary for
the signing of this Agreement.
9.1.3 All documents, written information, reports and certificates
that have been provided by Party B to Party A are accurate,
true, complete and valid in all material respects.
9.1.4 To the knowledge of Party B, Party B has not failed to
disclose any of the following events which is occurring and
has a Material Adverse Effect:
(a) major breach by Party B of law or regulations
applicable to Party B;
(b) Party B incurring or having indebtedness (except
Permitted Indebtedness) or providing mortgage or
pledge security (except Permitted Security) in favour
of third parties;
(c) current litigation or arbitration involving Party B
which, if successful, will result in a liability of
Party B of more than the greater of (1)US$2,000,000
or (2) 10% of the then paid up registered capital of
Party B;
(d) other events that will have a Material Adverse
Effect.
9.2 Party B covenants with Party A as follows:
So long as Party B has not fully repaid the Loans under this Agreement:
9.2.1 Party A will be Party B's major bank for its deposit, domestic
settlement, international settlement and other intermediary
businesses and identify Party A as
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its major bank for business co-operation, provided that Party
A's terms and quality of service are at least equivalent to
terms and quality offered by other financial institutions
operating in Jiangsu Province.
9.2.2 Party B will obtain, comply with the terms of and maintain in
force and effect all approvals and licences required in or by
any law or regulations of the PRC to enable it to lawfully
enter into and perform its obligations under this Agreement
and to operate its business.
9.2.3 Party B shall:
(a) within 180 days after the end of each of its
financial years, deliver to Party A one set of its
audited financial statements for such financial year;
(b) within 30 days after the end of each quarter (being
the end of each of Party B's fiscal quarters) in each
of its financial years, deliver to Party A one set of
its unaudited financial statements for such period;
(c) provide to Party A such information about Party B's
financial condition as Party A may reasonably
require; and
(d) ensure that each set of financial statements
delivered by it pursuant to sub-clauses (a) and (b)
above is prepared in accordance with GAAP and
consistently applied.
9.2.4 Party B will ensure that:
(a) the maximum liability to assets ratio, as determined
by reference to its relevant financial statements
delivered to Party A in accordance with clause 9.2.3
above, (1) for each of the financial years of 2004
and 2005 will not exceed 0.75 and (2) in each
financial year thereafter, will not exceed 0.7.
Liability to assets ratio means, in relation to any
financial year of Party B, the ratio of Party B's
total liability to its total assets, as determined by
reference to its relevant financial statements
delivered to Party A in accordance with clause 9.2.3
above;
(b) the minimum ratio of interest cover, as determined by
reference to its relevant financial statements
delivered to Party A in accordance with clause 9.2.3
above, will not be lower than 2 in each year from and
including 2005. In relation to any financial year,
interest cover means the ratio of EBITDA to the
interest expense of Party B for that year. EBITDA
means the total operating profit of Party B for that
financial year:
(1) before taking into account:-
(i) interest expense;
(ii) tax;
(iii) all extraordinary and exceptional
items;
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(iv) foreign exchange gains or losses;
and
(2) after adding back all amounts provided for
depreciation and amortisation (to the extent
already deducted in determining operating
profit),
in each case as determined by reference to the
relevant financial statements delivered by Party B to
Party A under clause 9.2.3 above.
9.2.5 The Loans borrowed by Party B under this Agreement will be
fully used for the purposes of the Project as set out in
clause 2.1 and Party B will not change such use without Party
A's consent.
9.2.6 Party B will not to sell, transfer, distribute or dispose of
all or a material part of its business or assets, except
Permitted Disposals.
9.2.7 Party B will not create security over any of its present or
future assets or provide security of any nature for the
liability of any third party, in each case except Permitted
Security.
9.2.8 Party B will maintain insurances on and in relation to its
business and assets with reputable underwriters or insurance
companies against such risk and to such extent as is usual for
prudent companies carrying on a business such as that carried
on by Party B and Party B shall not terminate such insurances
for any reason. If Party B terminates the insurances, Party A
is entitled to continue or effect such insurances on its
behalf as may be reasonably necessary for Party B's business
and the relevant expenses shall be borne by Party B.
9.2.9 The liabilities of Party B to Party A under this Agreement
shall rank at least pari passu with the liabilities of Party B
to other unsecured creditors save those whose claims are
preferred by law.
9.2.10 Party B shall not declare any Dividends in any year if:
(a) it has no Net Profit in that year;
(b) its Net Profit in that year does not exceed its
Accumulated Losses;
(c) it has not fully repaid all principal and interest
under this Agreement that have fallen due up to the
date of payment of the relevant Dividends; or
(d) the cashflow amount before distribution of Dividends
is insufficient to meet the needs of further
investments as shown in the Annual Cash Flow
Forecast.
In this clause 9.2.10:
"ACCUMULATED LOSSES" means the accumulated losses described as
such in, or determined by reference to, the relevant financial
statements of Party B;
"ANNUAL CASH FLOW FORECAST" means the annual cash flow
forecast, as amended
12
from time to time, delivered by Party B to Party A;
"DIVIDENDS" means any dividends or other distributions
(including by way of bonus) out of profits to the investors of
Party B;
"NET PROFIT" means the net profit described as such in the
relevant financial statements of Party B.
9.2.11 Party B will procure that Maxtor Corporation directly or
indirectly beneficially owns 50.1% or more of the paid up
registered capital of Party B, so as to give Maxtor
Corporation a controlling interest in Party B.
9.2.12 Party B shall promptly notify Party A by written notice in the
event that (1) Party B's registered capital is reduced or
materially changed (including, but not limited to, reduction
of capital, except where Party B has fully repaid principal
and paid interest which has fallen due in the relevant year
and is able to satisfy the needs of capitalization of profits
in accordance with the Capital Injection Schedule), (2) Party
B is the subject of a merger (except a restructuring of the
Group or where Party B is the surviving entity in such
merger), or where Party B takes any steps for its dissolution,
bankruptcy or cessation of business or (3) there is the
occurrence of an Event of Default.
9.2.13 Party B shall provide a Capital Verification Report as soon as
reasonably practicable after each capital injection. The
Capital Verification Report shall be conclusive evidence in
respect of the paid up registered capital except that Party B
shall be entitled to provide other evidence to the reasonable
satisfaction of Party A whenever the relevant Capital
Verification Report is not available for any reason. In the
case of material change to the schedule below, Party A and
Party B shall consult each other amicably on the principle of
equality, mutuality and good faith. The initial injection
schedule for the registered capital is set out below.
---------------------------------------------------------------------------
EQUIPMENT
CASH INJECTION CONTRIBUTION
YEAR (US$10,000) (US$10,000)
---------------------------------------------------------------------------
2003 1000
---------------------------------------------------------------------------
2004 500 1179.7
---------------------------------------------------------------------------
2005 1533.6
---------------------------------------------------------------------------
2006 2000
---------------------------------------------------------------------------
2007 457
---------------------------------------------------------------------------
Total 6670.3
---------------------------------------------------------------------------
The above schedule may be amended from time to time by Party B
and will not affect Party B's utilization of the Facilities.
Party B shall however ensure that the ratio of (1) the total
amounts of the Loans to (2) the total amount of its paid up
13
registered capital will not exceed 2:1 at any time before
Party B has fully repaid all Loans and paid interest thereon.
9.2.14 Party B will sign and deliver to Party A a Loan Receipt in
respect of each Loan upon receiving the proceeds of that Loan
from Party A.
CLAUSE 10 EVENTS OF DEFAULT AND REMEDY
Upon the occurrence of any of the following events to Party B, unless remedial
action is taken within 90 days to the reasonable satisfaction of Party A (except
an event under sub-clause 10.1 below), Party A is entitled to cancel the undrawn
portion of the Facilities and/or declare all Loans and interest accrued thereon
under this Agreement to be immediately due and payable on demand of Party A:
10.1 Party B fails to repay principal of any Loan under this Agreement after
5 days of its due date or fails to pay interest under this Agreement
after 10 days of its due date;
10.2 an event of default occurs under an FELA;
10.3 any material loss of or damage to Party B's major assets or business
which will have a Material Adverse Effect;
10.4 Party B ceases to carry on its business or threatens to cease to carry
on its business;
10.5 substantial change to the scope of the business of Party B, as set out
in its business licence which will have a Material Adverse Effect;
10.6 any action is taken or legal proceedings are started for the bankruptcy
or liquidation of Party B except where Party B in good faith takes
steps to dismiss such action or proceedings;
10.7 any material legal proceedings involving Party B or its assets which
will have a Material Adverse Effect (except where Party B in good faith
takes steps to defend such proceedings);
10.8 any representation made by Party B in this Agreement is or proves to be
incorrect in any material respect when made; or
10.9 Party B fails to perform or comply with any covenants in clause 9.2 in
any material respect.
CLAUSE 11 PERFORMANCE OF AGREEMENT
Party A and Party B will use all reasonable effort to further strengthen their
connection, provide information to each other, supervise and procure the full
performance of this Agreement together.
CLAUSE 12 AMENDMENT AND TERMINATION
This Agreement may be amended, supplemented or discharged by agreement in
writing of Party A and Party B. The amendment to and supplement of this
Agreement form part of this Agreement and shall have equal force and effect to
this Agreement.
14
CLAUSE 13 SET-OFF, ASSIGNMENT AND RESERVATION OF RIGHTS
13.1 No party shall purport to exercise any right of set-off. No party shall
assign its obligations under this Agreement to any third party without
the written consent of the other party.
13.2 No indulgence, allowance, preference to Party B or delay in exercising
any right under this Agreement by Party A shall effect, impair or
restrict any right or benefit of Party A under this Agreement, the law
or the regulations, and shall not operate as a waiver by Party A of its
rights and benefit under this Agreement and shall not discharge Party B
from any obligation that it shall perform under this Agreement.
CLAUSE 14 COMMENCEMENT OF AGREEMENT
This Agreement shall take effect on the date on which the authorised signatories
of both parties sign, put the official chops on and date this Agreement.
CLAUSE 15 SPECIAL NOTE
Party A and Party B have sufficiently consulted each other on all the terms of
this Agreement.
Each of Party A and Party B has paid special attention to all terms concerning
the rights and obligations of both parties and understands the same thoroughly
and accurately. Party A's and Party B's understanding of the terms of this
Agreement are fully consistent.
The Loan Documents involve commercial secret, each party shall keep the Loan
Documents confidential provided that each party may disclose any information
about the Loan Documents and/or the transactions thereunder (1) if disclosure is
required by law or regulations, (2) to its professional advisers, (3) to any
member of the Group (in the case of Party B) or to any member of Bank of China
(in the case of Party A) and (4) to third parties who have given a
confidentiality undertaking to Party A or, as the case may be, Party B.
CLAUSE 16 GOVERNING LAW, DISPUTE RESOLUTION AND JURISDICTION
16.1 The formation, validity, interpretation and implementation of this
Agreement shall be governed by the published and publicly available
laws of the PRC, but in the event there is no published law in the PRC
governing a particular matter relating to this Agreement, reference
shall be made to general international commercial practices.
16.2 Any question, dispute or difference between the parties arising from
the formation, performance or otherwise in connection with this
Agreement shall first be resolved through amicable negotiation and
friendly consultation between the parties, as follows:
16.2.1 either party may at any time give a written notice (the "FIRST
NOTICE") to the other requesting for resolution of the
question, dispute or difference through negotiation and
consultation;
16.2.2 within fourteen (14) days of the First Notice, each party
shall cause a senior executive to meet and confer at such time
and venue as may be convenient to the parties, with a view to
resolving the question, dispute or difference;
16.2.3 if the question, dispute or difference cannot be resolved by
the parties within thirty
15
(30) days of the First Notice, either party may give a written
notice (the "SECOND NOTICE") to the other requesting for a
meeting between the respective chief executive officer (in the
case of Party A, the president of the bank branch; and in the
case of Party B, its general manager) of the parties; and
16.2.4 within fourteen (14) days of the Second Notice, each party
shall cause its chief executive officer (in the case of Party
A, the president of the bank branch; and in the case of Party
B, its general manager) to meet and confer at such time and
venue as may be convenient to the parties, with a view to
resolving the question, dispute or difference.
16.3 If no resolution is reached within ninety (90) days of the First
Notice, the question, dispute or difference shall be submitted to the
China International Economic and Trade Arbitration Commission
("CIETAC") Beijing Branch in Beijing for final resolution by
arbitration in accordance with the rules and procedures of CIETAC
supplemented by the following:
16.3.1 the arbitration shall be conducted in the English and Chinese
languages. There shall be three (3) arbitrators, all of whom
shall be fluent in English and Chinese and shall have
experience in handling cases involving the borrowing of loans
by foreign invested enterprises from domestic banks in the
PRC;
16.3.2 the English-language text and Chinese-language text of this
Agreement shall be the reference text for the arbitrators;
16.2.3 the arbitration award shall be final and binding on the
parties, and the parties agree to be bound thereby and to act
accordingly; and
16.2.4 the costs of the arbitration (including the arbitration fees
and lawyers' fees) shall be borne by the losing party.
CLAUSE 17 COMMUNICATIONS
17.1 Any notice, request, letter or other document sent to either party in
accordance with this Agreement shall be in writing and shall be sent to
the address, telex number or fax number designated from time to time by
the recipient in writing and marked for the attention of the contact
person (if any). The initial address, telex number and fax number and
contact person (if any) of each party are set out on the signing page
of this Agreement, which shall be effective until notice of change is
given under clause 17.3 below.
17.2 Each communication between the parties under this Agreement which is
made in accordance with this Agreement shall be deemed to have been
received by the recipient and effective if such communication satisfies
the following conditions:
17.2.1 if delivered by courier, at the time of actual delivery;
17.2.2 if sent by telex or fax, at the time of the completion of
transmission and upon receiving the accurate confirmation or
fax transmission report;
17.2.3 if sent by post, at noon on the date falling 7 days after
posting by registered post to the correct address.
16
17.3 Each party under this Agreement shall promptly notify the other party
in writing of change to its address, telex number or fax number after
such change.
17.4 A communication by Party B to either Suzhou Branch or SIP Sub-branch
shall be deemed to be a communication to both of them.
CLAUSE 18 MISCELLANEOUS
18.1 This Agreement has both Chinese version and English version, may be
executed in any number of counterparts and will have equal force and
effect.
18.2 The liabilities of Suzhou Branch and SIP Sub-branch under this
Agreement is joint and several and they shall exercise their rights
jointly.
18.3 Each of the provisions of this Agreement shall be severable and
distinct from one another and if at any time any one or more of those
provisions (or any part) is or becomes invalid, illegal or
unenforceable the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired.
18.4 Notwithstanding any other provisions of this Agreement, or any of the
other Loan Documents:
18.4.1 in the event of any conflict or inconsistency between this
Agreement and any provisions of any other Loan Documents, this
Agreement shall prevail;
18.4.2 without prejudice to the foregoing, this Agreement shall
control the terms of the Total Commitment and each Loan made
thereunder, notwithstanding the terms of the FELA (or any
other Loan Document) which is entered into in relation to such
Loan or any other Loan(s); and
18.4.3 no amendment or waiver (whether by course of conduct or by any
purported amendment or waiver of any of the Loan Documents or
otherwise) which relates to, or affects, this clause 18.4 will
be effective unless made in writing by Party A and Party B
with specific reference to this clause 18.4.
17
SIGNATURE PAGE
Party A : Bank of China Suzhou Branch (official chop)
Address : Xx. 000, Xxxx Xxxxxxxx Xxxx, Xxxxxx, xxx XXX
Post Code : 215002
Tel No. : 0000-0000-00000000 Fax No. : 0000-0000-00000000
Legal representative or authorised signatory:
/s/ [ILLEGIBLE] Date : 2003.4.15
---------------
[SEAL]
Party A : Bank of China Suzhou Industrial Park Sub-branch (official
chop)
Address : Xx. 000, Xxxx Xxxx Xxxx, Xxxxxx, xxx XXX
Post Code : 215021
Tel No. : 0000-0000-00000000 Fax No. : 0000-0000-00000000
Legal representative or authorised signatory:
/s/ [ILLEGIBLE] Date : April 15, 2003
---------------
[SEAL]
18
Party B : Maxtor Technology (Suzhou) Co., Ltd. (official chop)
Address : The Suzhou Industrial Park of the People's Republic of China
Post Code : 215002
Tel No. : 00-00000000 Fax No. : 00-0-00000000
Legal representative or authorised signatory:
/s/ [ILLEGIBLE] Date : April 10, 2003
---------------
[SEAL]
With copy to:
To : c/o Maxtor Corporation
Recipient : Xxxxx X. Xxxxxxx, General Counsel
Address : 0000 Xxxxxx Xxxxx Xxxxx, Xxxxxxxx, XX 00000, Xxxxxx Xxxxxx xx
Xxxxxxx
Fax No. : 0-000-000-0000
19
APPENDIX 1 : FORM OF LOAN NOTIFICATION (CHINESE)
LOAN NOTIFICATION
To : Bank of China Suzhou Branch and Bank of China Suzhou
Industrial Park Sub-branch
Date :
Matter : Utilization of commitment amount under the Master Financing
Agreement
Dear Sirs:
1. We refer to the Master Financing Agreement in relation to a Total
Commitment of US$133,000,000.00 entered into between Maxtor Technology
(Suzhou) Co., Ltd., Bank of China Suzhou Branch and Bank of China
Suzhou Industrial Park Sub-branch on _________2003 (hereinafter called
"AGREEMENT"). Terms and conditions defined in the Agreement shall have
the same meaning in this notice.
2. This Notification is irrevocable.
3. We hereby notify you that we wish to utilize the Loan(s) in the
aggregate amount of US$ _____, such amount to be allocated under the
Facility(ies) and utilized on the date(s) as shown in the [attached
Utilization Plan for year 20[ ]] / [the latest Utilization Plan
provided to you]*. Such Utilization Plan may be amended by us in
accordance with clause 2.3 of the Agreement.
4. We confirm that the Loan(s) will be used for the purposes set out in
the Agreement which are also to be specifically set out in the FELA(s)
to be entered into between you and us in respect of the Loan(s).
5. We confirm that the representations under clause 9.1 (except clause
9.1.3) of the Agreement will be true and accurate on and as of the
Utilization Date of each Loan.
6. We confirm that no Event of Default or Potential of Event of Default is
continuing as at the date of this notice.
Signed by authorised signatory Official chop
(Maxtor Technology (Suzhou) Co., Ltd.)
* delete as appropriate
20
APPENDIX 2 : FORM OF FOREIGN EXCHANGE LOAN AGREEMENT (CHINESE)
FOREIGN EXCHANGE LOAN AGREEMENT
NO.
BORROWER: Maxtor Technology (Suzhou) Co., Ltd.
Enterprise legal person business licence number:
Legal representative:
Financial institution name and account number: [Bank of China Suzhou [ ]
Branch]
[Account no.: ]
Address:
Contact method:
LENDER: [Name of Branch]
Legal representative or person in charge:
Address:
Contact method:
A. DEFINITIONS
In this Agreement:
"AVAILABILITY PERIOD" means a period of 12 months commencing on (and including)
the date of this Agreement;
"CAPITAL INJECTION SCHEDULE" means the injection schedule of the registered
capital of the Borrower set out in clause 10.2.13, as may be adjusted from time
to time by the Borrower under such clause;
"CAPITAL VERIFICATION REPORT" means each report prepared and issued by an
accountant qualified in the PRC appointed by the Borrower in relation to the
injection of the registered capital of the Borrower;
"COMFORT LETTER" means the comfort letter given by Maxtor Corporation to the
Lender before the date of this Agreement;
21
"COMMITMENT" means US$ __________(1), as may be adjusted, cancelled or utilized
in accordance with this Agreement;
"DRAWDOWN NOTICE" means the drawdown notice in the form set out in appendix A to
this Agreement;
"EBITDA" has the meaning given to such expression in clause 10.2.4(b);
"EVENT OF DEFAULT" means any one of the events specified in clause 11;
"FACILITY" means the loan facility in an aggregate amount equal to the
Commitment irrevocably made available by the Lender to the Borrower;
"FINAL MATURITY DATE" means _________(2);
"GAAP" means the generally accepted accounting standards, principles and
practices in the PRC;
"GOVERNMENT AGENCY" means any government or any governmental agency,
semi-governmental or judicial entity or authority;
"GROUP" means Maxtor Corporation and its directly and indirectly owned
subsidiaries;
"INTEREST CALCULATION DATE" means, in relation to an Interest Period, one day
prior to the first day of that Interest Period;
"INTEREST PAYMENT DATE" means each of the days which fall on (1) _________(3)
and (2) each semi-annual anniversary after such date, provided that on the
relevant day any Loan is outstanding;
"INTEREST PERIOD" means any of those periods mentioned in clause 4.1 and any
other period by reference to which interest on a Loan or any unpaid sum is
calculated;
"LIBOR" means, in relation to any Loan or unpaid sum and any Interest Period
relating to it, the rate per annum equal to the arithmetic mean (rounded
upwards, if not already such a multiple, to the nearest whole multiple of
one-sixteenth of one per cent.) of the respective rates of each of the banks
whose rates appear on the screen page designated "LIBO" (or any equivalent
successor to such page) published or reported by Reuters Limited on the Reuters
monitor screen as the rate at which such banks are offering in the London
Inter-Bank Market deposits in US dollars for a period comparable to such
Interest Period at or about 11.00 a.m. (London time) on the Interest Calculation
Date for such Interest Period, provided that where such Interest Period is 3
months or less, the comparable period shall be taken to be 3 months or, where
such Interest Period is greater than 3 months, the comparable period shall be 6
months;
"LOAN" means a loan made or to be made under the Facility or the principal
amount outstanding for the time being of that loan;
----------------------
(1) complete as appropriate
(2) complete as appropriate, 10 years after date of MFA
(3) complete as appropriate, first Interest Payment Date
22
"LOAN RECEIPT" means a loan receipt in the form set out in appendix B;
"MARGIN" means (1) 0.5% per annum if LIBOR is equal to or lower than 3.12% per
annum on the relevant Interest Calculation Date or (2) 0.6% per annum if LIBOR
is higher than 3.12% per annum on the relevant Interest Calculation Date;
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the ability of the
Borrower to perform its payment obligations under this Agreement;
"MAXTOR CORPORATION" means Maxtor Corporation, a company incorporated in
accordance with the laws of the State of Delaware, United States of America;
"NEGATIVE PLEDGE LETTER" means the negative pledge letter given by the Borrower
to the Lender before the date of this Agreement;
"PERMITTED DISPOSALS" means any sale, lease, licence, transfer or other disposal
of (1) products, inventory or other assets made in the ordinary course of trade
or business of the Borrower, including in the ordinary course of any business
permitted by law, (2) receivables by factoring or any other means of receivables
financing, (3) obsolete or worn-out assets, (4) land, plant, equipment or
machinery in exchange for other land, plant, equipment or machinery comparable
or superior in type, value or quality, (5) any machinery or equipment on arms
length terms for fair market value or (6) assets of a value not exceeding US$
5,000,000 by reference to their net book value, in any financial year or (7)
tangible or intangible assets under transactions between companies in the Group
pursuant to which the Borrower receives consideration equal to or greater than
the fair market value of the relevant assets at the time of such disposal;
"PERMITTED INDEBTEDNESS" means (1) financial indebtedness under the Loan
Documents, (2) any indebtedness or liability of the Borrower arising out of or
in connection with the ordinary course of trade or business of the Borrower,
including in the ordinary course of any business permitted by law, (3) any
indebtedness arising under any leasing or hire purchase arrangements, (4) any
financial arrangements undertaken for the purpose of hedging or managing foreign
currency exposure, interest rate fluctuations or other financial risks, (5) any
indebtedness of the Borrower not exceeding US$ 5,000,000 outstanding at any
time, or (6) any indebtedness owed to, or arising out of transactions involving,
any companies in the Group pursuant to which the Borrower acquires any assets
the fair market value of which is equal to or greater than such indebtedness at
the time of incurring such indebtedness;
"PERMITTED SECURITY" means (1) any security imposed by law or any security of
any nature arising out of or in connection with the ordinary course of trade or
business of the Borrower, including in the ordinary course of any business
permitted by law, (2) any security deposit provided to any Government Agency or
utility company in relation to the Project or the operation of the Borrower's
business, (3) any security of any nature securing liabilities not exceeding
US$5,000,000 outstanding at any time or (4) security of any nature arising out
of investments made in the PRC by the Borrower or transactions between or
involving domestic PRC companies in the Group;
"POTENTIAL EVENT OF DEFAULT" means any event which may become (with the passage
of time, the giving of notice, the satisfaction of any condition or any
combination of them) an Event of Default;
"PRC" means the People's Republic of China;
23
"PROJECT" means the establishment and operation of a hard disk drive
manufacturing plant at the Suzhou Industrial Park of the PRC by the Borrower;
["REPAYMENT DATE" means each of the days which (1) fall on _________(4) and (2)
each semi-annual anniversary after such date up to and including
___________(5)]](6);
"UTILIZATION DATE" means the date on which a Loan is, or is to be, made
available by the Lender to the Borrower.
B. AIDS TO CONSTRUCTION
Save where the contrary is indicated, any reference in this Agreement to:
a "BUSINESS DAY" shall be construed as a reference to a day (other than a
Saturday or Sunday) on which banks are generally open for business in the PRC
or, if such reference relates to the date for the payment or purchase of any sum
denominated in US dollars, New York, London and the PRC or, if such reference
relates to a day on which LIBOR is to be determined, London;
any DOCUMENT or AGREEMENT (including, without limitation, this Agreement) shall
be construed as a reference to such document or agreement as amended, novated,
supplemented, substituted, varied or replaced from time to time.
CLAUSE 1 CURRENCY AND AMOUNT
The currency of the Loan(s) shall be US dollars.
The total amount of the Loan(s) under this Agreement is (in words) __________
(in figure) US$ _________.(7)
CLAUSE 2 TERM
The term of each Loan commences on its Utilization Date and ends on the Final
Maturity Date/the last Repayment Date(8) of the Loan as set out in clause 8.
CLAUSE 3 PURPOSES
The purposes of the Loan(s) under this Agreement are to provide finance to the
Borrower for plant construction/equipment and machinery and projects other than
plant construction/general
-------------------
(4) complete only in the case of Tranche A and Tranche B2 Loans, 54
months after date of MFA
(5) complete only in the case of Tranche A and Tranche B2 Loans, 8 years
after date of MFA
(6) delete in the case of Tranche B1 Loans, complete in the case of other
Loans
(7) complete as appropriate
(8) delete as appropriate
24
working capital needs(9).
The Borrower will not change the purposes of the Loan(s) without the consent of
the Lender.
CLAUSE 4 INTEREST RATE AND INTEREST
4.1 The first Interest Period of each Loan shall start on the Utilization
Date for that Loan. The period for which a Loan is outstanding shall be
divided into successive Interest Periods each of which (other than the
first) shall start on the last day of the preceding Interest Period.
4.2 The duration of each Interest Period shall, save as otherwise provided
in this Agreement, be six months, provided that:
4.2.1 the first Interest Period for a Loan shall end on the
immediately following Interest Payment Date for that Loan;
4.2.2 any Interest Period which would otherwise end before, or
extend beyond, the Final Maturity Date/a Repayment Date(10)
shall be of such duration that it shall end on that date.
4.3 If two or more Interest Periods in respect of different Loans end at
the same time then, the Borrower may make one single payment in respect
of all interest due on such Loans on the relevant Interest Payment
Date.
4.4 On each Interest Payment Date the Borrower shall pay accrued interest
on the Loan(s).
4.5 Save as otherwise provided in this Agreement, the rate of interest
applicable to each Loan from time to time during an Interest Period
relating to that Loan shall be the rate per annum which is the sum of
the Margin and LIBOR for such Interest Period.
4.6 The rate of interest applicable to any sum payable under this Agreement
which the Borrower fails to pay when due in accordance with the terms
of this Agreement shall be the rate per annum which is the sum from
time to time of two per cent. (2%) per annum, the Margin and LIBOR for
the relevant Interest Period.
4.7 The Lender will give notice to the Borrower if on the Interest
Calculation Date for any Interest Period no banks have quotations of
LIBOR appearing on the Reuters screen at the relevant time.
4.8 If a notice is given under clause 4.7 then within five days of such
notice the Lender and the Borrower shall enter into amicable
negotiations and friendly consultation with a view to agreeing a
substitute basis (1) for determining the rates of interest from time to
time applicable to the Loan(s) and/or (2) upon which the Loan(s) may be
maintained (whether in US dollars or some other currency) and any such
substitute basis that is agreed shall take effect in accordance with
its terms and be binding on each party to this Agreement. Unless and
until any substitute basis is agreed, the rate of interest applicable
-------------------
(9) delete as appropriate
(10) delete as appropriate
25
to the Loans shall be the rate equal to the interest rate which was
determined in respect of the immediate preceding Interest Period. If no
substitute basis is agreed, the Borrower shall be entitled to repay the
Loan(s) and all interest accrued thereon to the Lender.
CLAUSE 5 DRAWDOWN CONDITIONS
The Borrower may utilize the Facility by way of a Loan in accordance with the
terms of this Agreement if:
5.1 Not less than 3 business days before the Utilization Date, the Borrower
delivers to the Lender a Drawdown Notice duly completed and signed by
the Borrower with its official chop impressed thereon;
5.2 the proposed Utilization Date is a business day which falls within the
Availability Period;
5.3 the proposed amount of the Loan is a minimum of US$1,000,000 and a
multiple of US$500,000 which is less than the Commitment;
5.4 no Event of Default or Potential Event of Default is continuing on the
proposed Utilization Date; and
5.5 the representations set out in clause 10.1 (except clause 10.1.3) are
true and accurate on and as of the proposed Utilization Date;
and immediately upon the making of such Loan, the Commitment shall be
reduced accordingly. The Commitment shall be reduced to zero at the end
of the Availability Period or earlier if fully cancelled or utilized in
accordance with the terms of this Agreement.
CLAUSE 6 TIME OF DRAWDOWN
The Utilization Date of each Loan is or is to be set out in the Drawdown Notice
for that Loan which has been or is to be delivered to the Lender by the
Borrower.
CLAUSE 7 DRAWDOWN PROCEDURE
The Borrower shall comply with the procedure under clause 5 of this Agreement
for the drawdown of each Loan.
CLAUSE 8 REPAYMENT
8.1 Subject to clause 8.2 below, the Borrower shall repay all Loans [in
full on Final Maturity Date](11) [in 8 equal instalments, one on each
Repayment Date](12)
------------------
(11) delete in the case of Tranche A and Tranche B2 Loans
(12) delete in the case of Tranche B1 Loans
26
8.2 The Borrower may prepay the whole or any part of any Loan on an
Interest Payment Date by giving the Lender not less than 10 business
days' prior written notice to that effect, provided that the prepayment
shall be a minimum of US$10,000,000 and a multiple of US$1,000,000. Any
prepayment shall satisfy the Borrower's repayment obligations in
respect of the Loans under clause 8.1 in inverse chronological order.
8.3 During the Availability Period, the Borrower may cancel the whole or
any part of the Commitment (in a minimum amount of US$10,000,000 and of
a multiple of US$1,000,000) by giving the Lender not less than 10
business days' prior written notice.
CLAUSE 9 COMFORT LETTER AND NEGATIVE PLEDGE LETTER
The Borrower has delivered to the Lender the Comfort Letter and the Negative
Pledge Letter.
CLAUSE 10 REPRESENTATIONS AND COVENANTS
10.1 The Borrower represents to the Lender as follows:
10.1.1 The Borrower is duly incorporated and existing in accordance
with the laws of the PRC.
10.1.2 The Borrower has obtained all board authorisations necessary
for the signing of this Agreement.
10.1.3 To the knowledge of the Borrower, the Borrower has not failed
to disclose any of the following events which is occurring and
has a Material Adverse Effect:
(a) major breach by the Borrower of law or regulations
applicable to the Borrower;
(b) the Borrower incurring or having indebtedness (except
Permitted Indebtedness) or providing mortgage or
pledge security (except Permitted Security) in favour
of third parties;
(c) current litigation or arbitration involving the
Borrower which, if successful, will result in a
liability of the Borrower of more than the greater of
(1) US$2,000,000 or (2) 10% of the then paid up
registered capital of the Borrower;
(d) other events that will have a Material Adverse
Effect.
10.2 The Borrower covenants with the Lender as follows:
So long as the Borrower has not fully repaid the Loan(s) under this
Agreement:
10.2.1 The Lender will be the Borrower's major bank for its deposit,
domestic settlement, international settlement and other
intermediary businesses and identify the Lender as its major
bank for business co-operation, provided that the Lender's
terms and quality of service are at least equivalent to terms
and quality offered by other financial institutions operating
in Jiangsu Province.
27
10.2.2 The Borrower will obtain, comply with the terms of and
maintain in force and effect all approvals and licences
required in or by any law or regulations of the PRC to enable
it to lawfully enter into and perform its obligations under
this Agreement and to operate its business.
10.2.3 The Borrower shall:
(a) within 180 days after the end of each of its
financial years, deliver to the Lender one set of its
audited financial statements for such financial year;
(b) within 30 days after the end of each quarter (being
the end of each of the Borrower's fiscal quarters) in
each of its financial years, deliver to the Lender
one set of its unaudited financial statements for
such period;
(c) provide to the Lender such information about the
Borrower's financial condition as the Lender may
reasonably require; and
(d) ensure that each set of financial statements
delivered by it pursuant to sub-clauses (a) and (b)
above is prepared in accordance with GAAP and
consistently applied.
10.2.4 The Borrower will ensure that:
(a) the maximum liability to assets ratio, as determined
by reference to its relevant financial statements
delivered to the Lender in accordance with clause
10.2.3 above, (1) for each of the financial years of
2004 and 2005 will not exceed 0.75 and (2) in each
financial year thereafter, will not exceed 0.7.
Liability to assets ratio means, in relation to any
financial year of the Borrower, the ratio of the
Borrower's total liability to its total assets, as
determined by reference to its relevant financial
statements delivered to the Lender in accordance with
clause 10.2.3 above;
(b) the minimum ratio of interest cover, as determined by
reference to its relevant financial statements
delivered to the Lender in accordance with clause
10.2.3 above, will not be lower than 2 in each year
from and including 2005. In relation to any financial
year, interest cover means the ratio of EBITDA to the
interest expense of the Borrower for that year.
EBITDA means the total operating profit of the
Borrower for that financial year:
(1) before taking into account:-
(i) interest expense;
(ii) tax;
(iii) all extraordinary and exceptional items;
(iv) foreign exchange gains or losses; and
(2) after adding back all amounts provided for
depreciation and
28
amortisation (to the extent already deducted in
determining operating profit),
in each case as determined by reference to the relevant
financial statements delivered by the Borrower to the Lender
under clause 10.2.3 above.
10.2.5 The Loan(s) borrowed by the Borrower under this Agreement will
be fully used for the purposes of the Project as set out in
clause 3 and the Borrower will not change such use without the
Lender's consent.
10.2.6 The Borrower will not to sell, transfer, distribute or dispose
of all or a material part of its business or assets, except
Permitted Disposals.
10.2.7 The Borrower will not create security over any of its present
or future assets or provide security of any nature for the
liability of any third party, in each case except Permitted
Security.
10.2.8 The Borrower will maintain insurances on and in relation to
its business and assets with reputable underwriters or
insurance companies against such risk and to such extent as is
usual for prudent companies carrying on a business such as
that carried on by the Borrower and the Borrower shall not
terminate such insurances for any reason. If the Borrower
terminates the insurances, the Lender is entitled to continue
or effect such insurances on its behalf as may be reasonably
necessary for the Borrower's business and the relevant
expenses shall be borne by the Borrower.
10.2.9 The liabilities of the Borrower to the Lender under this
Agreement shall rank at least pari passu with the liabilities
of the Borrower to other unsecured creditors save those whose
claims are preferred by law.
10.2.10 The Borrower shall not declare any Dividends in any year if:
(a) it has no Net Profit in that year;
(b) its Net Profit in that year does not exceed its
Accumulated Losses;
(c) it has not fully repaid all principal and interest
under this Agreement that have fallen due up to the
date of payment of the relevant Dividends; or
(d) the cashflow amount before distribution of Dividends
is insufficient to meet the needs of further
investments as shown in the Annual Cash Flow
Forecast.
In this clause 10.2.10:
"ACCUMULATED LOSSES" means the accumulated losses described as
such in, or determined by reference to, the relevant financial
statements of the Borrower;
"ANNUAL CASH FLOW FORECAST" means the annual cash flow
forecast, as amended from time to time, delivered by the
Borrower to the Lender;
29
"DIVIDENDS" means any dividends or other distributions
(including by way of bonus) out of profits to the investors of
the Borrower;
"NET PROFIT" means the net profit described as such in the
relevant financial statements of the Borrower.
10.2.11 The Borrower will procure that Maxtor Corporation directly or
indirectly beneficially owns 50.1% or more of the paid up
registered capital of the Borrower, so as to give Maxtor
Corporation a controlling interest in the Borrower.
10.2.12 The Borrower shall promptly notify the Lender by written
notice in the event that (1) the Borrower's registered capital
is reduced or materially changed (including, but not limited
to, reduction of capital, except where the Borrower has fully
repaid principal and paid interest which has fallen due in the
relevant year and is able to satisfy the needs of
capitalization of profits in accordance with the Capital
Injection Schedule), (2) the Borrower is the subject of a
merger (except a restructuring of the Group or where the
Borrower is the surviving entity in such merger), or where the
Borrower takes any steps for its dissolution, bankruptcy or
cessation of business or (3) there is the occurrence of an
Event of Default.
10.2.13 The Borrower shall provide a Capital Verification Report as
soon as reasonably practicable after each capital injection.
The Capital Verification Report shall be conclusive evidence
in respect of the paid up registered capital except that the
Borrower shall be entitled to provide other evidence to the
reasonable satisfaction of the Lender whenever the relevant
Capital Verification Report is not available for any reason.
In the case of material change to the schedule below, the
Lender and the Borrower shall consult each other amicably on
the principle of equality, mutuality and good faith. The
initial injection schedule for the registered capital is set
out below.
---------------------------------------------------------
CASH INJECTION EQUIPMENT CONTRIBUTION
YEAR (US$10,000) (US$10,000)
---------------------------------------------------------
2003 1000
---------------------------------------------------------
2004 500 1179.7
---------------------------------------------------------
2005 1533.6
---------------------------------------------------------
2006 2000
---------------------------------------------------------
2007 457
---------------------------------------------------------
Total 6670.3
---------------------------------------------------------
The above schedule may be amended from time to time by the
Borrower and will not affect the Borrower's utilization of the
Facility.
30
10.2.14 The Borrower will sign and deliver to the Lender a Loan
Receipt in respect of each Loan upon receiving the proceeds of
that Loan from the Lender.
CLAUSE 11 EVENTS OF DEFAULT AND REMEDY
Upon the occurrence of any of the following events to the Borrower, unless
remedial action is taken within 90 days to the reasonable satisfaction of the
Lender (except an event under sub-clause 11.1 below), the Lender is entitled to
cancel the undrawn portion of the Facility and/or declare all Loan(s) and
interest accrued thereon under this Agreement to be immediately due and payable
on demand of the Lender:
11.1 the Borrower fails to repay principal of any Loan under this Agreement
after 5 days of its due date or fails to pay interest under this
Agreement after 10 days of its due date;
11.2 any material loss of or damage to the Borrower's major assets or
business which will have a Material Adverse Effect;
11.3 the Borrower ceases to carry on its business or threatens to cease to
carry on its business;
11.4 substantial change to the scope of the business of the Borrower, as set
out in its business licence which will have a Material Adverse Effect;
11.5 any action is taken or legal proceedings are started for the bankruptcy
or liquidation of the Borrower except where the Borrower in good faith
takes steps to dismiss such action or proceedings;
11.6 any material legal proceedings involving the Borrower or its assets
which will have a Material Adverse Effect (except where the Borrower in
good faith takes steps to defend such proceedings);
11.7 any representation made by the Borrower in this Agreement is or proves
to be incorrect in any material respect when made; or
11.8 the Borrower fails to perform or comply with any covenants in clause
10.2 in any material respect.
CLAUSE 12 TAX AND EXPENSES
All relevant tax and expenses, including but not limited to stamp duty, interest
tax, court fees, enforcement fees, legal representation fees, notarisation fees
in relation to the formation and performance of this Agreement and dispute
resolution under this Agreement shall be shared by the Borrower and the Lender
in accordance with the relevant regulation.
CLAUSE 13 SET-OFF, ASSIGNMENT AND RESERVATION OF RIGHTS
13.1 No party shall purport to exercise any right of set-off. No party shall
assign its obligations under this Agreement to any third party without
the written consent of the other party.
13.2 No indulgence, allowance, preference to the Borrower or delay in
exercising any right
31
under this Agreement by the Lender shall effect, impair or restrict any
right or benefit of the Lender under this Agreement, the law or the
regulations, and shall not operate as a waiver by the Lender of its
rights and benefit under this Agreement and shall not discharge the
Borrower from any obligation that it shall perform under this
Agreement.
CLAUSE 14 AMENDMENT AND TERMINATION
This Agreement may be amended, supplemented or discharged by agreement in
writing of both parties. The amendment to and supplement of this Agreement form
part of this Agreement and shall have equal force and effect to this Agreement.
CLAUSE 15 GOVERNING LAW, DISPUTE RESOLUTION AND JURISDICTION
15.1 The formation, validity, interpretation and implementation of this
Agreement shall be governed by the published and publicly available
laws of the PRC, but in the event there is no published law in the PRC
governing a particular matter relating to this Agreement, reference
shall be made to general international commercial practices.
15.2 Any question, dispute or difference between the parties arising from
the formation, performance or otherwise in connection with this
Agreement shall first be resolved through amicable negotiation and
friendly consultation between the parties, as follows:
15.2.1 either party may at any time give a written notice (the "FIRST
NOTICE") to the other requesting for resolution of the
question, dispute or difference through negotiation and
consultation;
15.2.2 within fourteen (14) days of the First Notice, each party
shall cause a senior executive to meet and confer at such time
and venue as may be convenient to the parties, with a view to
resolving the question, dispute or difference;
15.2.3 if the question, dispute or difference cannot be resolved by
the parties within thirty (30) days of the First Notice,
either party may give a written notice (the "SECOND NOTICE")
to the other requesting for a meeting between the respective
chief executive officer (in the case of the Lender, the
president of the bank branch; and in the case of the Borrower,
its general manager) of the parties; and
15.2.4 within fourteen (14) days of the Second Notice, each party
shall cause its chief executive officer (in the case of the
Lender, the president of the bank branch; and in the case of
the Borrower, its general manager) to meet and confer at such
time and venue as may be convenient to the parties, with a
view to resolving the question, dispute or difference.
15.3 If no resolution is reached within ninety (90) days of the First
Notice, the question, dispute or difference shall be submitted to the
China International Economic and Trade Arbitration Commission
("CIETAC") Beijing Branch in Beijing for final resolution by
arbitration in accordance with the rules and procedures of CIETAC
supplemented by the following:
15.3.1 the arbitration shall be conducted in the English and Chinese
languages. There shall be three (3) arbitrators, all of whom
shall be fluent in English and Chinese and shall have
experience in handling cases involving the borrowing
32
of loans by foreign invested enterprises from domestic banks
in the PRC;
15.3.2 the English-language text and Chinese-language text of this
Agreement shall be the reference text for the arbitrators;
15.2.3 the arbitration award shall be final and binding on the
parties, and the parties agree to be bound thereby and to act
accordingly; and
15.2.4 the costs of the arbitration (including the arbitration fees
and lawyers' fees) shall be borne by the losing party.
CLAUSE 16 COMMENCEMENT OF AGREEMENT
This Agreement shall take effect after the authorised signatories of both
parties have signed, impress their respective official chops on and day this
Agreement.
This Agreement is in both Chinese and English and executed in four counterparts,
each of the Borrower and the Lender keeps two counterparts, all with equal force
and effect.
CLAUSE 17 SPECIAL NOTE
The Lender and the Borrower have sufficiently consulted each other on all the
terms of this Agreement.
Each of the Lender and the Borrower has paid special attention to all terms
concerning the rights and obligations of both parties and understands the same
thoroughly and accurately. The Lender's and the Borrower's understanding of the
terms of this Agreement is fully consistent.
Borrower:____________(official chop): Lender:_______(official chop):
Legal representative Legal representative
(or authorised signatory) (or authorised signatory)
__________________ 20 ____ ____________________ 20 ____
33
APPENDIX 3 : FORM OF DRAWDOWN NOTICE (CHINESE)
DRAWDOWN NOTICE
To: Bank of China Suzhou Branch / Bank of China Suzhou Industrial Park
Sub-branch:
Pursuant to the Foreign Exchange Loan Agreement dated _______ signed by Maxtor
Technology (Suzhou) Co., Ltd. (hereinafter called the "BORROWER") and submitted
to you, we the Borrower wish to utilize a Loan as follows:
(1) The amount of the Loan is (in words) United States Dollar __________
(in figure) US$_________________.
(2) This is the _______ (number) utilization under the Foreign Exchange
Loan Agreement.
(3) The Utilization Date of the Loan is ___.
(4) Please remit the proceeds of the Loan to our bank account, the account
number is _____.
This Drawdown Notice shall be irrevocable.
Signed by authorised signatory for and on behalf of
MAXTOR TECHNOLOGY (SUZHOU) CO., LTD.
__________________________ (Official chop)
Date:____________________________
34
APPENDIX 4 : SAMPLE OF LOAN RECEIPT
The following is a scanned version of the front copy of a loan receipt. The loan
receipt shall be completed neatly and orderly, and the seal shall be affixed.
(____ Subject) Foreign Exchange Loan Receipt (loan receipt counterfoil copy) One
Date of loan: ______ 20__ Loan agreement number: _______
This copy shall be kept by lending department for record
--------------------------------------------------------------------------------------------------------
Loan Name Borrowing Name
receiving entity
entity
---------------------------------- ----------------------------------------
Settlement bank Borrowing
account number bank account
---------------------------------- ----------------------------------------
Account opening Account
bank opening bank
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Direct Method of payment Applicable interest rate
payment
----------------------------------
Commercial
contract number
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Amount of loan @
--------------------------
US$
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Bank's comment in examination and
Term of loan approval:
---------------------------------------------------------------
No. Scheduled T Scheduled
repayment date* repayment
amount*
---------------------------------------------------------------
1
---------------------------------------------------------------
2
---------------------------------------------------------------
3
---------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
Finance Chief
Seal of borrowing entity personnel Supervisor supervisor
--------------------------------------------------------------------------------------------------------
* in the case of Tranche B1 Loans, one repayment date and one repayment
amount; in the case of other Loans, eight repayment dates and eight
equal repayment amounts
35
APPENDIX 5 : COMFORT LETTER
COMFORT LETTER
Date:
Attn:
Re: Maxtor Suzhou
We refer to the Master Financing Agreement dated _____ for the Term Loan
Facility of US$133,000,000 made between Maxtor Technology (Suzhou) Co., Ltd.
("Borrower"), Bank of China Suzhou Branch and Bank of China Suzhou Industrial
Park Sub-branch (together the "Lender").
We confirm that Maxtor Corporation currently owns 100% (directly and indirectly)
of the issued and paid-up share capital of the Borrower.
We further confirm that Maxtor Corporation is aware of the terms and conditions
of the Master Financing Agreement and that Maxtor Corporation will direct the
management of the Borrower to comply with, and perform, its financial and other
obligations under the Master Financing Agreement during the term of that
transaction.
This letter, however, is not to be interpreted as a guarantee or a promise by
Maxtor Corporation to perform any obligations of the Borrower, or any other form
of legally binding commitment.
Yours faithfully,
Maxtor Corporation
(authorized signature)
36
APPENDIX 6 : FORM OF NEGATIVE PLEDGE LETTER (CHINESE)
UNDERTAKING LETTER
To Bank of China Suzhou Branch / Bank of China Suzhou Industrial Park
Sub-branch:
Pursuant to the Master Financing Agreement dated _______ signed by us and your
bank (the "Agreement"), we hereby undertake to your bank as follows:
1 Subject to, and save as provided in, the Agreement, all of our current
and future assets are not and will not be subject to any security or
mortgage in favour of third parties other than your bank;
2 The reference to "all of our current and future assets" mentioned
above, includes, without limitation, land, real property, machinery and
equipment, stock, book debt, etc.
3 If we commit any act which violates this undertaking, it may be
regarded as our breach of clause 9.2.7 of the Agreement and the
relevant clause of each of the individual loan agreements thereunder,
and we are willing to take responsibility in accordance with the terms
of the Agreement and such agreements.
Maxtor Technology (Suzhou) Co., Ltd.
(Official chop and signed by authorised signatory)
Date:_________________________
37
