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MERCER INTERNATIONAL INC - 10-K - 20030331 - RESULTS_OF_OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
We operate in the pulp and paper business and our operations are located
primarily in Germany. Our manufacturing facilities are comprised of: (a) the
Rosenthal mill which produces softwood kraft pulp and has an annual production
capacity of approximately 300,000 tonnes; (b) the Stendal project, a
"greenfield" project to construct a new, state-of-the-art softwood kraft pulp
mill, which will have an annual production capacity of approximately 552,000
tonnes; and (c) the Paper mills which produce specialty papers and printing and
writing papers and have an aggregate annual production capacity of approximately
85,000 tonnes.
Total investment costs in respect of the Stendal project are estimated to be
approximately E1.0 billion, the majority of which is being financed under the
Stendal Loan Facility in the amount of E828 million. The construction of the
Stendal mill commenced in August 2002 and is scheduled to be completed in the
third quarter of 2004. Costs, including interest, in respect of the Stendal
project are capitalized. A variable-to-fixed rate interest rate swap entered
into by Stendal to fix the interest rate for the full term of the Stendal Loan
Facility is marked to market on a quarterly and annual basis and gains or losses
are recognized in our earnings for the period.
Our financial performance depends on a number of variables that impact sales
and production costs. Sales and production results are influenced largely by the
market price for products and raw materials, the mix of products produced and
foreign currency exchange rates. Kraft pulp and paper markets are highly
cyclical, with prices determined by supply and demand. Demand for kraft pulp and
paper is influenced to a significant degree by global levels of economic
activity and supply is driven by industry capacity and utilization rates. Our
product mix is important because premium grades of kraft pulp and specialty
papers generally achieve higher prices and profit margins.
Our production costs are influenced by the availability and cost of raw
materials, energy and labor, and our plant efficiencies and productivity. Our
main raw material is fiber in the form of wood chips and pulplogs for pulp
production, and waste paper and pulp for paper production. Fiber costs are
primarily affected by the supply of, and demand for, lumber and pulp, which are
both highly cyclical. Production costs also depend on the total volume of
production. High operating rates and production efficiencies permit us to lower
our average cost by spreading fixed costs over more units.
Global economic conditions, changes in production capacity and inventory
levels are the primary factors affecting kraft pulp and paper prices.
Historically kraft pulp and paper prices have been cyclical in nature. Kraft
pulp prices, which had been at historically low levels between 1996 and 1999,
rebounded in 2000 as a result of recoveries in Asian economies and a decline in
capacity resulting from the shut-down of unprofitable or older mills requiring
environmental upgrades. This contributed to tightening inventory levels among
Norscan producers, which fell to approximately 1.1 million tonnes in mid-2000
and prices
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increasing to an average of approximately $710 per tonne in the fourth quarter
of 2000. However, the decline of North American and European economies in 2001
caused a sharp reduction in paper demand. As a result, Norscan pulp inventories
rose to a high of approximately two million tonnes in early 2001 and price
levels eroded to an average of approximately $460 per tonne in late 2001.
Inventory levels ranged between 1.3 and 1.9 million tonnes in 2002 and prices
averaged approximately $463 per tonne in 2002. Low producer inventories in early
2003 resulted in producers increasing list prices for kraft pulp in Europe to
approximately $520 per tonne in March 2003.
As kraft pulp is quoted in dollars and Rosenthal's debt facilities and costs
are in Euros, Rosenthal enters into currency swaps to help manage its exposure
to exchange fluctuations between the dollar and the Euro. Gains or losses on
such swaps are recorded in our earnings either as they are settled or as they
are marked to market for each reporting period.
Selected sales data for each of our last three years is as follows:
YEAR ENDED DECEMBER 31,
--------------------------------------
2002 2001 2000
-------- -------- --------
(TONNES)
SALES VOLUME BY PRODUCT CLASS
Pulp(1).................................................. 293,607 285,654 239,552
Papers
Packaging Papers....................................... -- -- 29,111(2)
Specialty Papers....................................... 61,727(3) 40,437(3) 41,422
Printing Papers........................................ 23,195 26,815 53,552(4)
-------- -------- --------
Total Papers......................................... 84,922 67,252 124,085
-------- -------- --------
Total(1)................................................. 378,529 352,906 363,637
======== ======== ========
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YEAR ENDED DECEMBER 31,
--------------------------------------
2002 2001 2000
-------- -------- --------
(IN THOUSANDS)
REVENUES BY PRODUCT CLASS
Pulp(1).................................................. E130,173 E146,245 E159,713
Papers
Packaging Papers....................................... -- -- 9,512(2)
Specialty Papers....................................... 79,358(3) 35,959(3) 35,964
Printing Papers........................................ 18,352 22,797 39,870(4)
-------- -------- --------
Total Papers......................................... 97,710 58,756 85,346
-------- -------- --------
Total(1)................................................. E227,883 E205,001 E245,059
======== ======== ========
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(1) Excluding intercompany sales volumes of 10,768, 10,447 and 1,893 tonnes of
pulp and intercompany net sales revenues of approximately E4.9 million,
E5.8 million and E1.4 million in 2002, 2001 and 2000, respectively.
(2) We sold our packaging paper mill in Trebsen effective June 2000 and no
longer produce packaging papers. Sales of approximately 29,111 tonnes for
approximately E9.5 million from the Trebsen mill are included in our results
for 2000.
(3) We acquired the specialty paper mill in Landqart effective December 2001 and
we reorganized our interest in Landqart at the end of 2002. Sales from the
Landqart mill are not included in our results for 2001, but are included for
2002. The Landqart mill sold approximately 18,613 tonnes for
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approximately E43.2 million in 2001 and approximately 18,222 tonnes for
approximately E39.7 million in 2002. As of December 31, 2002, our interest
in the Landqart mill will no longer be consolidated and will be included in
our financial results on an equity basis.
(4) We sold our printing paper mill in Hainsberg effective November 2000. Sales
of approximately 24,964 tonnes for approximately E16.8 million from the
Hainsberg mill are included in our results for 2000.
YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001
In 2002, total revenues increased by approximately 10.5% to E239.1 million
from E216.4 million in 2001, primarily as a result of increased sales of
specialty papers resulting from the acquisition of the Landqart mill in
December 2001. In 2002, pulp and paper revenues increased by approximately 11.2%
to E227.9 million from E205 million in 2001, on a 66.3% increase in paper sales
partially offset by an 11.0% decrease in pulp sales.
Costs of sales in 2002 increased to E213.5 million from E184.7 million in
2001, primarily as a result of higher revenues.
Pulp sales in 2002 decreased to E130.2 million from E146.2 million in 2001,
as global economic weakness and high producer inventory levels lead to lower
prices. List prices for kraft pulp in Europe decreased from approximately E528
($470) per tonne at the end of 2001 to approximately E420 ($440) per tonne at
the end of the fourth quarter of 2002, before improving in early 2003 due
primarily to supply disruptions. Our pulp sales realizations in 2002 decreased
to E443 per tonne from E512 per tonne in 2001 as a result of such lower sales
prices and the weaker dollar versus the Euro during 2002 compared to the prior
period. Pulp sales by volume increased to 293,607 tonnes in 2002 from 285,654
tonnes in 2001, when we had 19 days of unscheduled technical downtime at the
Rosenthal mill.
Cost of sales and general, administrative and other expenses for our pulp
operations decreased to E125.4 million in 2002 from E126.4 million in 2001
despite higher production and sales volumes. On average, our per tonne fiber
costs for pulp production decreased by approximately 5.8% in 2002 compared to
2001 primarily because of lower fiber costs. Additionally, efficiency
improvements at the Rosenthal mill also reduced energy and chemical costs
relative to 2001. Depreciation was E21.6 million in 2002 compared to
E21.4 million in 2001. In 2002, our average per tonne production costs
(excluding depreciation) were reduced by approximately 9% compared to 2001.
Our pulp operations generated E4.8 million of income from operations in
2002, compared to E19.9 million in 2001.
Paper sales in 2002 increased to E97.7 million from E58.8 million in 2001.
Sales of specialty papers in 2002 increased to E79.4 million from E36.0 million
in 2001 as a result of the inclusion of the results of the Landqart mill, which
contributed sales volumes of 18,222 tonnes in 2002. Excluding Landqart, our
sales volumes for these grades increased to 43,505 tonnes in 2002 from 40,437
tonnes in 2001. This increase in specialty paper sales is largely the result of
our strategy to focus on niche products. In response to market conditions, we
adjusted our product mix to more specialty products at our Heidenau mill where
volumes of printing papers decreased to 23,195 tonnes in 2002 from 26,815 in the
prior period. On average, prices for specialty papers realized in 2002 increased
by approximately 44.6% and for printing papers decreased by approximately 6.9%,
compared to 2001.
Cost of sales and general, administrative and other expenses for our paper
operations increased to E99.5 million in 2002 from E62.0 million in 2001 as a
result of the inclusion of Landqart. This increase was partially offset by lower
raw material prices, particularly for virgin pulp and waste paper as compared to
2001. Furthermore, the flooding experienced at our Heidenau and Fahrbrucke Paper
mills in August 2002 resulted in a period of reduced production and increased
costs. Depreciation increased to E4.0 million in 2002 from E1.5 million in the
prior year, as a result of the inclusion of Landqart.
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A loss from operations of E1.8 million was recorded by our paper operations
in 2002 relative to a E2.5 million loss from operations in 2001.
General and administrative expenses increased to E25.0 million in 2002 from
E18.4 million in 2001, primarily as a result of the inclusion of the results of
the Landqart mill and a foreign exchange transaction loss of E3.0 million in
2002. In 2001, we recorded a foreign exchange transaction gain of $3.4 million.
We had income from operations of E0.7 million in 2002, compared to
E13.3 million in 2001. Interest expense (excluding capitalized interest of
E3.1 million in respect of the Stendal project) in 2002 decreased to
E13.8 million from E16.2 million in 2001, primarily as a result of repayments
made on outstanding indebtedness.
Pursuant to the Stendal Loan Facility, Stendal entered into
variable-to-fixed rate interest swaps for the full term of the facility to
manage the risk exposure with respect to an aggregate maximum amount of
approximately E612.6 million of the principal amount of the Stendal Loan
Facility, referred to as the "Stendal Interest Rate Swap Agreements". Under
these swaps, Stendal pays a fixed rate and receives a floating rate with respect
to interest payments calculated on a notional amount. These swaps manage the
exposure to variable cash flow risk from the variable interest payments under
the Stendal Loan Facility. The swaps are marked to market at the end of each
reporting period and all unrealized gains and losses are recognized in earnings
for a reporting period. We recognized a holding loss of E30.1 million before
minority interests in respect of these swaps for the year ended December 31,
2002. For more information about these swaps, see "Quantitative and Qualitative
Disclosures About Market Risk -- Derivative Instruments".
In 2002, we also entered into currency swaps, referred to as the "Rosenthal
Currency Swaps", to manage our exposure with respect to an aggregate amount of
approximately E223.3 million of the principal long-term indebtedness under the
Rosenthal Loan Facility. During 2002, we settled two Rosenthal Currency Swaps to
realize gains. We then subsequently re-entered into two Rosenthal Currency Swaps
and one of them was settled and a gain was realized in December 2002. In
addition, we have entered into currency forward contracts, referred to as
"Currency Forwards", and forward interest rate and interest cap contracts,
referred to as the "Interest Rate Contracts", in connection with certain
indebtedness relating to the Rosenthal mill. These derivative instruments are
also marked to market at the end of each reporting period and all gains and
losses are recognized in earnings for a reporting period. In 2002, we realized a
total gain of E23.4 million from these derivative contracts. For more
information about these derivatives, see "Quantitative and Qualitative
Disclosures About Market Risk -- Derivative Instruments".
Income tax impacts were negligible in both 2002 and 2001 given the pre-tax
losses sustained in both years. Minority interest in 2002 amounted to
E11 million and represented the minority shareholders' interest in the losses of
Stendal. There was no minority interest in 2001.
For 2002, we reported a net loss of E6.3 million, or E0.38 per share on a
basic and diluted basis, compared to a net loss of E2.8 million, or E0.17 per
share on a basic and diluted basis, in 2001.
For 2002, excluding items related to the Stendal project, net income would
have been E12.8 million, or E0.76 per share on a diluted basis, which was
determined by adding the loss on derivative financial instruments of
E30.1 million to, and subtracting minority interest of E11.0 million from, the
reported net loss of E6.3 million. As the Stendal project is currently under
construction and because of its overall size relative to our other facilities,
management uses our consolidated operating results excluding items relating to
the Stendal project to measure the performance and results of our operating
units. Management believes this measure provides meaningful information on the
performance of our operating facilities for a reporting period.
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YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000
In 2001, revenues decreased by E42.4 million to E216.4 million from
E258.9 million in 2000, primarily as a result of lower pulp prices and lower
paper sales. We completed construction of the capital project at the Rosenthal
mill in late 1999 to convert the Rosenthal mill's production to kraft pulp and
increase its annual production capacity. The Rosenthal mill ramped up production
in early 2000 and operated in excess of 90% of capacity after the first quarter
of 2000.
Cost of sales decreased to E184.7 million in 2001 from E193.7 million in
2000, primarily as a result of lower paper sales volumes.
In 2001, our pulp and paper sales decreased by approximately 16.3% to
E205.0 million from E245.1 million in 2000 on an 8.4% decrease in pulp sales and
a 31.2% decrease in paper sales. In 2001, pulp sales were lower than in 2000 as
a result of weakening demand due to global economic weakness and high producer
inventory levels that lead to a decline in prices. Overall, in 2001, paper
markets were generally stable with prices increasing marginally.
On average, pulp prices realized by us in 2001 decreased by approximately
23.2% compared to 2000. Pulp sales decreased to E146.2 million in 2001 from
E159.7 million in 2000, primarily as a result of a decrease in pulp prices. Pulp
sales volumes increased in 2001 as a result of increased production. List prices
for kraft pulp in Europe decreased from approximately E756 ($710) per tonne at
the end of 2000 to approximately E705 ($650) per tonne during the first quarter
of 2001, approximately E591 ($530) per tonne during the second quarter of 2001,
approximately E514 ($460) per tonne during the third quarter of 2001 and
approximately E525 ($470) per tonne during the fourth quarter of 2001. Kraft
pulp prices continued to weaken at the end of 2001 as a result of high product
inventories and weakening prices continued in the early part of 2002. We
undertook a planned eight-day maintenance and modification shutdown at the
Rosenthal mill in August 2001, and it was shutdown for an additional 19 days
over the year to correct technical difficulties.
On average, our per tonne fiber costs for pulp production increased by
approximately 6.3% in 2001 compared to 2000 and remained among the lowest in
Europe.
Paper prices realized by us increased by approximately 27.0% on average in
2001, compared to 2000, primarily as a result of the disposition of lower priced
product lines. Paper sales in 2001 decreased to E58.8 million from
E85.3 million in 2000, on a volume decrease of 45.8%. In 2001, sales volumes for
printing papers decreased by approximately 49.9%, primarily due to the sale of
the printing paper mill in Hainsberg effective November 2000. Sales volumes for
specialty papers decreased by 2.4% compared to 2000. We did not sell any
packaging paper in 2001 as a result of the sale of our packaging paper mill
in 2000.
While prices for waste paper, which comprises approximately 25% of the fiber
for the Paper mills, increased by approximately 30.0% in 2001 compared to 2000,
they remained relatively low compared to the cost of virgin fiber.
General and administrative expenses increased to E18.4 million in 2001, from
E15.5 million in 2000, primarily as a result of payments made in connection with
profit sharing bonuses for the prior year and costs related to specific
projects.
We had income from operations of E13.3 million in 2001, compared to
E49.7 million in 2000. Interest expense in 2001 increased to E16.2 million from
E15.2 million in 2000.
We sold our printing paper mill located in Hainsberg, Germany effective
November 2000 for approximately E5.0 million plus an amount equal to the net
working capital associated with the Hainsberg mill from the sale. We also sold
our packaging paper mill located in Trebsen, Germany effective June 2000 for
approximately E9.5 million plus an amount equal to the net working capital
associated with the Trebsen mill from the sale. As a result, we no longer
produce packaging papers.
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In 2001, we reported a net loss of E2.8 million, or E0.17 per share on a
basic and diluted basis, compared to net income of E32.0 million, or E1.91 per
share on a basic basis and E1.87 per share on a diluted basis, in 2000.
LIQUIDITY AND CAPITAL RESOURCES
The following table is a summary of selected financial information for the
periods indicated:
AS AT DECEMBER 31,
-----------------------
2002 2001
-------- --------
(IN THOUSANDS)
FINANCIAL POSITION
Working capital............................................. E 6,328 E 15,544
Properties, net............................................. 441,990 278,617
Total assets................................................ 599,750(1) 429,593
Long-term debt.............................................. 351,878(2) 216,871
Shareholders' equity........................................ 124,969 131,613
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(1) Includes approximately E186.9 million related to properties construction in
progress at the site of the Stendal mill.
(2) Includes approximately E146.5 million related to construction in progress at
the site of the Stendal mill.
At December 31, 2002, our cash and cash equivalents was E30.3 million, a net
increase of E18.5 million from E11.7 million at the end of 2001. We also had
E9.5 million of cash restricted to pay construction in progress costs payable
and E19.1 million of cash restricted in a debt service account, both relating to
the construction in progress at the site of the Stendal mill. In addition, we
had E19.7 million of cash restricted in a debt service account relating to the
Rosenthal mill. At December 31, 2002, short-term trading securities decreased to
E0.3 million from E4.5 million at December 31, 2001.
OPERATING ACTIVITIES
Operating activities in 2002 provided cash of E39.7 million, compared to
E29.8 million in 2001. Net changes in trading securities provided cash of
E4.4 million in 2002, compared to E0.5 million in 2001. Decreases in receivables
and inventories provided cash of E14.9 million and E1.7 million, respectively,
in the current period, compared to E7.8 million and E2.6 million, respectively,
in 2001. A decrease in accounts payable and accrued expenses used cash of
E13.4 million in 2002, compared to E0.9 million in 2001. We expect to continue
to generate sufficient cash flow from operations to pay our interest expense and
meet the working capital requirements for our operations.
INVESTING ACTIVITIES
Investing activities in 2002 used cash of E196.0 million, primarily as a
result of the acquisition of properties, net of investment grants, in connection
with the Stendal project, compared to E10.3 million in 2001. The acquisition of
properties in connection with the Stendal project used cash of E186.9 million in
2002. The acquisition of properties, net of investment grants, in 2001 used cash
of E7.6 million. The sale of properties in 2002 provided cash of E4.4 million.
Purchases of available-for-sale securities used cash of E0.6 million in 2002 and
2001, respectively. The disposition of a subsidiary in 2002 used cash of
E1.2 million, net of cash disposed, compared to the purchase of a subsidiary,
net of cash acquired, using cash of E2.1 million in 2001.
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In 2002, we applied for investment grants totaling E38.0 million with
respect to the Stendal project, which we expect to receive in the second half of
2003. In accordance with our accounting policies, we do not record these grants
until they are received.
Our Paper mills have or will have to replace certain equipment that was
damaged as a result of flooding in parts of Germany and other eastern European
countries during the third quarter of 2002. The aggregate equipment costs are
estimated to be approximately E3.3 million, of which approximately E0.2 million
was incurred in 2002. We have applied for German government grants and for
assistance under special credit programs instituted by the German government for
flooding victims in connection with these costs. Although we have received
approval for certain of these grants, there can be no assurance that we will
receive such grants and assistance in the amounts applied for, or at all.
We reorganized our interest in Landqart at the end of 2002 by selling a 20%
interest to a Swiss bank and exchanging the other 80% interest for an indirect
39% minority interest through a limited partnership on a non-cash basis. We
effected the reorganization as the markets for the specialty papers produced by
Landqart are significantly different from the markets for the more consumer
oriented types of specialty papers produced by us. The reorganization will allow
the management of Landqart to focus on its operations and financial requirements
without regard to our other operations. Further, to develop the business of
Landqart will require a substantial amount of capital investment in the Landqart
mill. The Swiss bank has agreed to reduce and refinance a portion of Landqart's
debt and may be able to assist Landqart in securing the funds necessary to make
the required capital investment in the Landqart mill.
We are in the process of constructing a wastewater treatment plant at the
Fahrbrucke mill and reconstructing the landfill at the Rosenthal mill. For more
information, see "Business -- Environmental" and "Business -- Capital
Expenditures", respectively.
In August 2002, we completed financing arrangements for the Stendal project.
Total investment cost in connection with the project are approximately
E1.0 billion, the majority of which is to be provided under the Stendal Loan
Facility. We also contributed approximately E63.5 million to Stendal from cash
on hand and through the Bridge Loans. For more information about the Stendal
project, see "Business -- Stendal Pulp Mill Project and Financing".
FINANCING ACTIVITIES
Financing activities provided cash of E175.8 million in 2002, primarily as a
result of a net increase in indebtedness of E166.2 million relating to the
Stendal project. An increase in restricted cash, including in connection with
the Stendal project, used cash of E14.9 million in the current period. An
increase in construction in progress costs in connection with the Stendal
project provided cash of E24.9 million in 2002. Equity invested by minority
shareholders in connection with the Stendal project provided cash of
E6.3 million in 2002. We made a repayment of E12.5 million in connection with
the Rosenthal Loan Facility in 2002. Financing activities used cash of
E30.1 million in 2001, primarily as a result of the reduction of indebtedness
during the period.
Our pulp and paper operations were reorganized in 2002 which resulted in a
reduction of tax losses being carried forward from December 31, 2001 and these
tax losses were fully utilized. For more information, see Note 9 of our
consolidated financial statements included in this annual report.
Other than the agreements entered into by Stendal relating to the Stendal
project, we had no material commitments to acquire assets or operating
businesses at December 31, 2002. We anticipate that there will be acquisitions
of businesses or commitments to projects in the future. To achieve our long-term
goals of expanding our asset and earnings base through the acquisition of
interests in companies and assets in the pulp and paper and related businesses,
and organically through high return capital expenditures at our operating
facilities, we will require substantial capital resources. The required
necessary resources will be generated from cash flow from operations, cash on
hand, borrowing against our assets, the sale of debt
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and/or equity securities and/or asset sales. In addition, in connection with our
obligation to repay or refinance the Bridge Loans, we may in 2003 issue debt,
equity or convertible securities.
SENSITIVITY ANALYSIS
The pulp and paper business is cyclical in nature and markets for our
principal products are characterized by periods of supply and demand imbalance,
which in turn affects product prices. The markets for pulp and paper are highly
competitive and sensitive to changes in industry capacity and in the economy,
both of which can have a significant influence on our selling prices and
earnings. Approximately E130.2 million, or approximately 54.4%, of our revenues
in 2002 were from pulp sales. The following table illustrates the effect on our
net operating results in 2002 of a $20 change in our average selling price per
tonne for NBSK pulp in 2002, based upon our pulp sales during the year:
YEAR ENDED
DECEMBER 31, 2002
------------------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNT)
NBSK Pulp -- $20 per tonne change
Change in net operating results........................... E6,260
Change in net operating results per share................. 0.37
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FOREIGN CURRENCY
Effective January 1, 2002, we changed our reporting currency from the
U.S. dollar to the Euro as a significant majority of our business transactions
are originally denominated in Euros. By adopting the Euro, most cumulative
foreign currency translation losses were eliminated. However, we hold certain
assets and liabilities in U.S. dollars, Swiss francs and, to a lesser extent, in
Canadian dollars. Accordingly, our consolidated financial results are subject to
foreign currency exchange rate fluctuations.
We translate foreign denominated assets and liabilities into Euros at the
rate of exchange on the balance sheet date. Unrealized gains or losses from
these translations are recorded as shareholders' equity on the balance sheet and
do not affect our net earnings.
In the year ended December 31, 2002, we reported a net E2.2 million foreign
exchange translation gain and, as a result, the cumulative foreign exchange
translation gain increased to E3.5 million at December 31, 2002 from
E1.3 million at December 31, 2001.
Based upon the exchange rate at December 31, 2002, the U.S. dollar decreased
by approximately 15.1% in value against the Euro since December 31, 2001. See
"Quantitative and Qualitative Disclosures about Market Risk -- Derivative
Instruments".
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires our management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain. As the number of variables and
assumptions affecting the probable future resolution of the uncertainties
increase, these judgments become even more subjective and complex. We have
identified certain accounting policies, described below, that are the most
important to the portrayal of our current financial condition and results of
operations. Our significant accounting policies are disclosed in Note 1 to our
consolidated financial statements included in this annual report.
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DERIVATIVE INSTRUMENTS. We adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" effective January 1, 2001. Derivative instruments are measured at
fair value and reported in the balance sheet as assets or liabilities.
Accounting for gains or losses depends on the intended use of the derivative
instruments. Gains or losses on derivative instruments which are not designated
hedges are recognized in earnings in the period of the change in fair value.
Accounting for gains or losses on derivative instruments designated as hedges
depends on the type of hedge and these gains or losses are recognized in either
earnings or other comprehensive income.
Retroactive application of this standard was not allowed. There is no
cumulative effect in our financial statements as a result of adopting this
standard. We reported a holding loss of E30.1 million before minority interests
in respect of the Stendal Interest Rate Swap Agreements and a realized gain of
E23.4 million in respect of the Rosenthal Currency Swaps and Interest Rate
Contracts in our loss for the year ended December 31, 2002.
IMPAIRMENT OF LONG-LIVED ASSETS. We periodically evaluate long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In performing the review of recoverability, we
estimate future cash flows expected to result from the use of the asset and its
eventual disposition. The estimates of future cash flows, based on reasonable
and supportable assumptions and projections, require our management to make
subjective judgments. In addition, the time periods for estimating future cash
flows is often lengthy, which increases the sensitivity of the assumptions made.
Depending on the assumptions and estimates used, the estimated future cash flows
projected in the evaluation of long-lived assets can vary within a wide range of
outcomes. Our management considers the likelihood of possible outcomes in
determining the best estimate of future cash flows.
DEFERRED TAXES. We currently have deferred tax assets which are comprised
primarily of tax loss carryforwards and deductible temporary differences, both
of which will reduce taxable income in the future. We assess the realization of
these deferred tax assets on a periodic basis to determine whether a valuation
allowance is required. We determine whether it is more likely than not that all
or a portion of the deferred tax assets will be realized, based on currently
available information, including, but not limited to, the following:
- the history of the tax loss carryforwards and their expiry dates;
- our projected earnings; and
- tax planning opportunities.
If we believe that it is more likely than not that some of these deferred
tax assets will not be realized, based on currently available information, an
income tax valuation allowance is recorded against these deferred tax assets. As
at December 31, 2002, we had E53.9 million in deferred tax assets and
E43.7 million in valuation allowances, resulting in a net deferred tax asset of
E10.1 million.
If market conditions improve or tax planning opportunities arise in the
future, we will reduce our valuation allowances, resulting in future tax
benefits. If market conditions deteriorate in the future, we will increase our
valuation allowances, resulting in future tax expenses. Any change in tax laws,
particularly in Germany, will change the valuation allowances in future periods.
ENVIRONMENTAL. Our operations are subject to a wide range of German
federal, state and local environmental laws and regulations, dealing primarily
with water, air and land pollution control. In recent years, we have devoted
significant financial and management resources to comply with all applicable
environmental laws and regulations. We believe our operations are currently in
substantial compliance with the requirements of all applicable environmental
laws and regulations and our respective operating permits.
40
Under German state environmental rules relating to effluent discharges,
industrial users are required to pay wastewater fees based upon the amount of
their effluent discharge. These rules also provide that an industrial user which
undertakes environmental capital expenditures and lowers certain effluent
discharges to prescribed levels may offset the amount of these expenditures
against the wastewater fees that they would otherwise be required to pay in a
three-year period. The requirement and timing of capital expenditures and the
amount of wastewater fee charges are subject to negotiation with government
agencies. As a result, we believe that our capital investment programs for our
manufacturing plants will fully offset the wastewater fees that would have been
payable for the past three years, subject to environmental audits. We estimate
the aggregate wastewater fees for the past three years to be approximately
E11.2 million.
Other than wastewater fees, we accrue for environmental remediation
liabilities on a site-by-site basis when it is probable that a loss can be
reasonably estimated, or as a result of an environmental action or claim,
environmental studies that we conduct or regulatory assessment. As at
December 31, 2002, we recorded a liability for environmental conservation
expenditures of E2.3 million, based on environmental studies that we conducted.
We believe that the liability amount recorded is sufficient, subject to future
changes in German environmental regulations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Statements in this report that are not reported financial results or other
historical information are "forward-looking statements" within the meaning of
the United States PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. These
statements are based on present information we have related to our existing
business circumstances and involve a number of risks and uncertainties, any of
which could cause actual results to differ materially from these forward-looking
statements. We caution you that we do not assume any obligation to update
forward-looking statements based on unanticipated events or changed
expectations. Factors that could cause actual results to differ materially
include, but are not limited to:
INDEBTEDNESS. We have incurred a significant amount of debt. Our high debt
levels may have important consequences for us, including, but not limited to the
following:
- our ability to obtain additional financing to fund future operations or
meet our working capital needs or any such financing may not be available
on terms favorable to us;
- a certain amount of our operating cash flow is dedicated to the payment of
principal and interest on our indebtedness, thereby diminishing funds that
would otherwise be available for our operations and for other purposes;
- a substantial decrease in net operating cash flows or increase in our
expenses could make it more difficult for us to meet our debt service
requirements, which could force us to modify our operations; and
- our leveraged capital structure may place us at a competitive disadvantage
by hindering our ability to adjust rapidly to changing market conditions
or by making us vulnerable to a downturn in our business or the economy in
general.
Our ability to repay or refinance our indebtedness will depend on our future
financial and operating performance. Our performance, in turn, will be subject
to prevailing economic and competitive conditions, as well as financial,
business, legislative, regulatory, industry and other factors, many of which are
beyond our control. Our ability to meet our future debt service and other
obligations may depend in significant part on the success of the Stendal mill
and the extent to which we can implement successfully our business and growth
strategy. We cannot assure you that we will be able to implement our strategy
fully or that the anticipated results of our strategy will be realized.
41
CYCLICAL NATURE OF BUSINESS; COMPETITIVE POSITION. The pulp and paper
business is cyclical in nature and markets for our principal products are
characterized by periods of supply and demand imbalance, which in turn affects
product prices. The markets for pulp and paper are highly competitive and
sensitive to cyclical changes in industry capacity and in the global economy,
all of which can have a significant influence on selling prices and our
earnings. Demand for pulp and paper products has historically been determined by
the level of economic growth and has been closely tied to overall business
activity. During the past three years, pulp prices have fallen significantly.
Our competitive position is influenced by the availability and quality of raw
materials and our experience in relation to other producers with respect to
inflation, energy, transportation, labor costs, productivity and currency
exchange rates. There can be no assurance that we will continue to be
competitive in the future, as a result of new technological advancements or
otherwise.
RAW MATERIALS. Wood chips and pulpwood comprise the fiber used by the
Rosenthal mill and which will be used by the Stendal mill. The fiber used by our
Paper mills consists of waste paper and pulp. Such fiber is cyclical in terms of
both price and supply. The cost of wood chips and pulplogs is primarily affected
by the supply and demand for lumber. The cost of fiber for our Paper mills is
primarily affected by the supply and demand for paper and pulp. Demand for these
raw materials is determined by the volume of pulp and paper products produced
globally. The markets for pulp and paper products, including our products, are
highly variable and are characterized by periods of excess product supply due to
many factors, including periods of insufficient demand due to weak general
economic activity or other causes. The cyclical nature of pricing for these raw
materials represents a potential risk to our profit margins if we are unable to
pass along price increases to our customers. Although these materials are
available from a number of suppliers, we may not be able to purchase sufficient
quantities of these raw materials to meet our production requirements at prices
acceptable to us during times of tight supply. In addition, the quality of fiber
we receive could be reduced as a result of industrial disputes, material
curtailments or shut-down of operations by suppliers for market or other
reasons, government orders and legislation, acts of god and other events beyond
our control. Historically, the fiber requirements for the Rosenthal mill were
procured by a third party. The agreement with this party will expire shortly and
will not be renewed as we have organized our own internal wood procurement
department. There can be no assurance that this department will be able to
procure our fiber requirements on terms as favorable as those procured by the
third party. An insufficient supply of fiber or reduction in the quality of
fiber we receive would materially adversely affect our business, financial
condition and results of operations.
ENVIRONMENTAL REGULATION. We are subject to extensive environmental laws
and regulations. These laws and regulations impose stringent standards on us
regarding, among other things, air emissions, effluent discharges and
remediation of environmental contamination. We may incur substantial costs to
comply with current requirements or new environmental laws that might be
adopted. In addition, we may discover currently unknown environmental problems
or conditions in the future and may incur substantial costs in correcting such
problems or conditions.
STENDAL PULP MILL PROJECT UNCERTAINTIES. The Stendal project is subject to
various risks and uncertainties customary to large "greenfield" projects of this
nature which may result in the Stendal project not being completed as currently
scheduled or budgeted. Such delays and/or cost overruns may result from:
- the availability and cost of materials and labor;
- construction delays;
- equipment failures or damage;
- weather conditions;
- industrial accidents;
- government regulations;
42
- changes to government assistance;
- delays in obtaining or amending our permits;
- errors or miscalculations in engineering, design specifications or
equipment manufacturing;
- faulty construction or workmanship; or
- defective equipment or installation.
The Stendal project will also be subject to extensive and complex
regulations and environmental compliance which may result in delays, in Stendal
and/or its shareholders, including us, incurring substantial costs, or in the
Stendal project being changed or not being completed at all.
The implementation of the Stendal project commenced in 2002 and is scheduled
to be completed in the third quarter of 2004. However, there can be no assurance
that the Stendal project will be completed or start-up will occur as currently
planned or that, if completed, the mill will perform as currently planned. For
more information about the Stendal project, see "Business -- Stendal Pulp Mill
Project and Financing".
COMPETITIVE MARKETS. We sell our products primarily in Europe and the
markets for our products are highly competitive. A number of global companies
compete in each of our markets and no company holds a dominant position. For
both pulp and paper, a large number of companies produce products that are
reasonably standardized. As a result, the traditional basis for competition in
our markets has been price. Many of our competitors have greater resources than
we do and may be able to adapt more quickly to industrial changes or devote
greater resources to the sale of products than we can. We cannot assure you that
we will be able to compete successfully against these competitors.
DERIVATIVES. We use derivative instruments in regard to our exposure to
interest rate and currency fluctuations and may in the future use derivative
instruments to mitigate pulp price risks. The derivative instruments may not be
designated as hedging instruments for accounting purposes. The purpose of the
derivative activity may be speculative in nature, as our management uses these
derivative instruments either to augment our potential gains or reduce our
potential losses, depending on our management's perception of future economic
events and developments. If any of the variety of instruments and strategies we
utilize are not effective, we may incur losses, which may have a materially
adverse effect on our results of operations and financial condition. See
"Quantitative and Qualitative Disclosures about Market Risk -- Derivative
Instruments".
LABOR AGREEMENTS. The majority of our employees in Germany are represented
by the IG-BCE, a national union that represents pulp and paper workers in
Germany. The collective agreement relating to employees at our Paper mills
expires at the end of 2003. We expect to negotiate a new collective agreement
for employees at our Paper mills in 2003. For our pulp workers, we have agreed
to negotiate in respect of an additional wage increase for August 2003 depending
upon the general economic conditions. Although we have not experienced any
significant work stoppages in the past, there can be no assurance that we will
be able to negotiate an acceptable collective agreement with our employees upon
expiration of the existing collective agreement with our employees at the Paper
mills. This could result in a strike or work stoppage by the affected workers.
The renewal of the collective agreements could result in higher wages or
benefits paid to union members. Accordingly, we could experience a significant
disruption of our operations or higher on-going labor costs, which could have a
material adverse effect on our business, financial condition, results of
operations and cash flow.
INSURANCE. We have obtained insurance coverage that we believe would
ordinarily be maintained by an operator of facilities similar to our pulp and
paper mills. Our insurance is subject to various limits and exclusions. Damage
or destruction to our facilities could result in claims that are excluded by, or
exceed the limits of, our insurance coverage.
43
LEGAL PROCEEDINGS. Although we are not currently subject to any material
legal proceedings, should legal proceedings be initiated against us in the
future, whether in connection with environmental matters or otherwise, pursuant
to which we are required to pay significant amounts under an order issued in or
to settle such a proceeding, our results of operations and financial condition
would be materially adversely affected.
OTHER RISKS. Our future results could be adversely affected by a variety of
other factors beyond our control, including, but not limited to:
- general economic and business conditions, including changes in interest
rates;
- prices and other economic conditions;
- natural phenomena;
- actions by government authorities, including changes in government
regulation;
- uncertainties associated with legal proceedings;
- technological development;
- future decisions by management in response to changing conditions;
- our ability to execute prospective business plans; and
- misjudgments in the course of preparing forward-looking statements.
INFLATION
We do not believe that inflation has had a material impact on revenues or
income during 2002.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in interest rates, foreign
currency exchange rates and equity prices which may affect our results of
operations and financial condition and, consequently, our fair value. We manage
these risks through internal risk management policies as well as the use of
derivative instruments. We use derivative instruments to reduce or limit our
exposure to interest rate and currency risks. We may in the future use
derivative instruments to reduce or limit our exposure to fluctuations in pulp
prices. We also use derivative instruments either to augment our potential gains
or to reduce our potential losses, depending on our management's perception of
future economic events and developments. These types of derivative instruments
are generally highly speculative in nature. They are also very volatile as they
are highly leveraged given that margin requirements are relatively low in
proportion to notional amounts.
Many of our strategies, including the use of derivative instruments, and the
types of derivative instruments selected by us, are based on historical trading
patterns and correlations and our management's expectations of future events.
However, these strategies may not be fully effective in all market environments
or against all types of risks. Unexpected market developments may affect our
risk management strategies during this time, and unanticipated developments
could impact our risk management strategies in the future. If any of the variety
of instruments and strategies we utilize are not effective, we may incur losses.
DERIVATIVE INSTRUMENTS
Rosenthal has entered into the Rosenthal Currency Swaps in connection with
our long-term indebtedness relating to the conversion of the Rosenthal mill to
the production of kraft pulp. These derivatives have been contracted by
Rosenthal using a dedicated credit line within the Rosenthal Loan Facility and
assigned for this purpose, and are subject to prescribed controls, including
certain maximum
44
amounts for notional and at-risk amounts. As NBSK pulp prices are quoted in
U.S. dollars and the majority of our business transactions are denominated in
Euros, Rosenthal has entered into the Rosenthal Currency Swaps to reduce the
effects of exchange rate fluctuations between the U.S. dollar and the Euro on
notional amounts under the Rosenthal Loan Facility. Under the Rosenthal Currency
Swap, Rosenthal effectively pays the principal and interest in U.S. dollars and
at U.S. dollar borrowing rates.
In December 2000, Rosenthal entered into U.S. dollar/Euro Rosenthal Currency
Swaps to manage its risk exposure with respect to in aggregate approximately
E223.3 million of the principal amount under the Rosenthal Loan Facility. These
swaps were subsequently settled and realized in July 2002. A currency gain was
recognized when loan repayments were made under the currency swap contracts
during the current period. As a consequence of the settlement of these Rosenthal
Currency Swaps, commencing from April 1, 2002, interest was paid at the
six-month Euribor plus bank margin rate and 4.5% fixed rate including bank
margin, as applicable, in accordance with the terms of the original underlying
loans.
Subsequently in July 2002, Rosenthal re-entered the Rosenthal Currency Swaps
for the principal amounts of E74.5 million and E130.4 million. In
December 2002, the swap relating to the principal amount of E130.4 million under
the Rosenthal Loan Facility was settled. In January 2003, Rosenthal re-entered
the Rosenthal Currency Swap for the principal amount of E130.4 million.
In addition, Rosenthal entered into the Interest Rate Contracts in the
fourth quarter of 2002 to either fix or limit the interest rates in connection
with certain of its indebtedness. Rosenthal also has entered into various
Currency Forwards to reduce or limit its exposure to currency risks and to
augment its potential gains or to reduce its potential losses.
In August 2002, Stendal entered into the Stendal Interest Rate Swap
Agreements in connection with its long-term indebtedness relating to the Stendal
project to fix the interest rate under the Stendal Loan Facility at the then low
level, relative to its historical trend and projected variable interest rate.
These contracts were entered into under a specific credit line under the Stendal
Loan Facility and are subject to prescribed controls, including certain maximum
amounts for notional and at-risk amounts. Under the Stendal Interest Rate Swap
Agreement, Stendal pays a fixed rate and receives a floating rate with the
interest payments being calculated on a notional amount. The interest rates
payable under the Stendal Loan Facility were swapped into fixed rates based on
the Eur-Euribor rate for the repayment periods of the tranches under the Stendal
Loan Facility. Stendal effectively converted the Stendal Loan Facility from a
variable interest rate loan into a fixed interest rate loan, thereby reducing
interest rate uncertainty. As at December 31, 2002, the aggregated notional
amount outstanding was E1.1 billion.
In addition, pursuant to the Bridge Loan which related to our investment in
the Stendal project, the bank has an option to demand that the E30.0 million
loan be repaid in Euros or U.S. dollars at an exchange rate of E1.00 = $0.9731,
which was the exchange rate prevailing at the date of the loan, if the Euro
falls below this exchange rate on the repayment date of the loan. At
December 31, 2002, the Euro had appreciated to exceed this rate. Such an option
is considered an embedded derivative.
The Rosenthal Currency Swaps, Interest Rate Contracts, Currency Forwards,
the Stendal Interest Rate Swap Agreements and embedded derivative are marked to
market at the end of each reporting period, and all unrealized gains and losses
are recognized in earnings for a reporting period.
45
The following table sets forth the maturity date, the notional amount and
the recognized gain or loss, for derivative instruments that were transacted
during the year 2002:
RECOGNIZED GAIN
(LOSS) YEAR ENDED
DERIVATIVE INSTRUMENT MATURITY DATE NOTIONAL AMOUNT DECEMBER 31, 2002
--------------------- -------------- ---------------- ------------------
(IN MILLIONS) (IN THOUSANDS)
ROSENTHAL
Currency Forward.......................... Settled $ 20.0 E 319
Currency Forward.......................... Settled $ 20.0 591
Currency Forward.......................... Settled $ 20.0 724
Currency Forward.......................... Settled $ 10.0 582
Currency Forward.......................... Settled $ 1.0 (79)
Rosenthal Currency Swaps.................. Settled E 223.3 13,890
Repayment of Loan under Currency Swap..... Settled $ 5.2 245
Rosenthal Currency Swap................... Settled E 130.4 6,974
--------
23,246
--------
AT DECEMBER 31, 2002
Rosenthal Currency Swap(1)................ September 2013 E 74.5 2,486
Interest Rate Cap Agreements(2)........... September 2007 $ 205.9 (1,612)
Forward Rate Agreements(3)................ September 2003 $ 199.3 (509)
Forward Rate Agreement.................... June 2003 $ 124.8 (182)
--------
183
--------
E 23,429
========
STENDAL
Stendal Interest Rate Swap
Agreements(4)........................... October 2017 E1,108.4 E(30,108)
========
CORPORATE
Bridge Loan, embedded derivative.......... February 2004 E 30.0 --
========
|
(1) The interest component of the swaps is required under the terms of the
Rosenthal Loan Facility, and became effective for the period starting
September 30, 2002. For the outstanding principal amounts of E74.5 million
under the Rosenthal Loan Facility, all repayment installments from
September 30, 2002 until September 30, 2013, were swapped into U.S. dollar
amounts at a rate of Euro 1.0050. The interest rate was swapped into the
six-month U.S. dollar/Libor plus bank margin rate with a cap of 6.8% until
September 28, 2007.
(2) Rosenthal entered into two interest rate cap contracts with notional amounts
of $131.0 million and $74.9 million, both maturing on September 28, 2007
with a strike rate of 6.8%.
(3) Rosenthal entered into two forward interest rate contracts with notional
amounts of $74.5 million and $124.8 million both maturing on
September 30, 2003.
(4) In connection with the Stendal Loan Facility, in the third quarter of 2002
Stendal entered into the Stendal Interest Rate Swap Agreements, which are
variable-to-fixed interest rate swaps, for the term of the Stendal Loan
Facility, with respect to an aggregate maximum amount of approximately
E612.6 million of the principal amount of the long-term indebtedness under
the Stendal Loan Facility. The swaps took effect on October 1, 2002 and are
comprised of three contracts. The first contract commenced in October 2002
for a notional amount of E4.1 million, gradually increasing to
E464.9 million, with an interest rate of 3.795%, and matures in May 2004.
The second contract is to commence in May 2004 for a notional amount of
E464.9 million, gradually increasing to
46
E612.6 million, with an interest rate of 5.28%, and matures in April 2005.
The third contract is to commence in April 2005 for a notional amount of
E612.6 million, with an interest rate of 5.28%, and the notional amount
gradually decreases and the contract terminates upon the maturity of the
Stendal Loan Facility in October 2017. As at December 31, 2002, the notional
amount of these three contracts was E30.9 million, E464.9 million and
E612.6 million, respectively.
We are exposed to very modest credit-related risks in the event of
non-performance by counterparties to derivative contracts. However, we do not
expect that the counterparties, which are major financial institutions, will
fail to meet their obligations.
Other than the embedded derivative within the Bridge Loans, as of
December 31, 2002, we have not entered into any material financial derivatives
outside of our project companies, Rosenthal and Stendal, under their existing
lines of credit. As at December 31, 2002, no derivative contract had been
executed with respect to pulp prices.
INTEREST RATE RISK
Fluctuations in interest rates may affect the fair value of fixed interest
rate financial instruments which are sensitive to such fluctuations. A decrease
in interest rates may increase the fair value of such fixed interest rate
financial instrument assets and an increase in interest rates may decrease the
fair value of such fixed interest rate financial instrument liabilities, thereby
increasing our fair value. An increase in interest rates may decrease the fair
value of such fixed interest rate financial instrument assets and a decrease in
interest rates may increase the fair value of such fixed interest rate financial
instrument liabilities, thereby decreasing our fair value. The following tables
provide information about our exposure to interest rate fluctuations for the
carrying amount of financial instruments sensitive to such fluctuations as at
December 31, 2002 and 2001, respectively, and expected cash flows from these
instruments:
AS AT DECEMBER 31, 2002
EXPECTED FUTURE CASH FLOW*
CARRYING FAIR -----------------------------------------------------------------
VALUE VALUE 2003 2004 2005 2006 2007 THEREAFTER
-------- -------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
Cash restricted....... E 48,254 E 48,254 E10,762 E 1,296 E 1,296 E 1,296 E 1,296 E 48,858
Debt obligations(1)... 224,257 224,257 23,403 29,755 20,152 36,983 38,658 144,167
|
* Including dividends and interest where applicable.
(1) Debt obligations consist of our debt, including the gross amount of loans
payable to minority shareholders of Stendal.
AS AT DECEMBER 31, 2001
EXPECTED FUTURE CASH FLOW*
CARRYING FAIR ---------------------------------------------------------------
VALUE VALUE 2002 2003 2004 2005 2006 2007
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
Investments(1)........ E 2,424 E 2,424 E 2,424 E -- E -- E -- E -- E --
Cash restricted....... 33,388 33,388 9,570 992 992 992 992 31,757
Notes receivable...... 5,475 5,475 383 5,858 -- -- -- --
Debt obligations(2)... 154,193 154,193 23,084 26,912 17,828 17,148 16,468 91,058
|
* Including dividends and interest where applicable.
(1) Investments consist of debt securities.
(2) Debt obligations consist of our debt.
47
FOREIGN CURRENCY EXCHANGE RATE RISK
Our reporting currency is the Euro. However, we hold financial instruments
denominated in U.S. dollars, Swiss francs and, to a lesser extent, in Canadian
dollars, which are sensitive to foreign currency exchange rate fluctuations. A
depreciation of these currencies against the Euro will decrease the fair value
of such financial instrument assets and an appreciation of these currencies
against the Euro will increase the fair value of such financial instrument
liabilities, thereby decreasing our fair value. An appreciation of these
currencies against the Euro will increase the fair value of such financial
instrument assets and a depreciation of these currencies against the Euro will
decrease the fair value of financial instrument liabilities, thereby increasing
our fair value. As a result of the change in our reporting currency from the
U.S. dollar to the Euro, we re-calculated our financial instrument assets and
liabilities that are sensitive to foreign currency exchange rate risk to measure
their risk against the Euro, and cash restricted is no longer sensitive to
foreign currency exchange rate risk. The following tables provide information
about our exposure to foreign currency exchange rate fluctuations for the
carrying amount of financial instruments sensitive to such fluctuations as at
December 31, 2002 and 2001, respectively, and expected cash flows from these
instruments:
AS AT DECEMBER 31, 2002
EXPECTED FUTURE CASH FLOW*
CARRYING FAIR -----------------------------------------------------------------
VALUE VALUE 2003 2004 2005 2006 2007 THEREAFTER
-------- -------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
Investments(1)............... E 5,842 E 5,842 E 305 E -- E -- E -- E -- E5,537
Debt obligations(2).......... 11,686 11,686 3,197 9,355 -- -- -- --
|
* Including dividends and interest where applicable.
(1) Investments consist of equity securities, which are denominated primarily in
U.S. dollars, and to a lesser extent, in Canadian dollars.
(2) Debt obligations consist of our debt, denominated in U.S. dollars.
AS AT DECEMBER 31, 2001
EXPECTED FUTURE CASH FLOW*
CARRYING FAIR -----------------------------------------------------------------
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- -------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
Investments(1).............. E13,139 E13,139 E4,546 E -- E -- E -- E -- E8,593
Debt obligations(2)......... 17,545 17,545 4,282 14,706 -- -- -- --
|
* Including dividends and interest where applicable.
(1) Investments consist of debt and equity securities. Debt securities are
denominated in U.S. dollars. Equity securities are denominated primarily in
U.S. dollars, and to a lesser extent, in Canadian dollars and Swiss francs.
(2) Debt obligations consist of our debt, denominated in U.S. dollars and Swiss
francs.
EQUITY PRICE RISK
Changes in trading prices of equity securities may affect the fair value of
equity securities or the fair value of other securities convertible into equity
securities. An increase in trading prices will increase the fair value of equity
based financial instrument assets, thereby increasing our fair value. A decrease
in trading prices will decrease the fair value of equity based financial
instrument assets, thereby decreasing our fair value. The following tables
provide information about our exposure to fluctuations in trading
48
prices for the carrying amount of equity based financial instruments sensitive
to such fluctuations as at December 31, 2002 and 2001, respectively, and
expected cash flows from these instruments:
AS AT DECEMBER 31, 2002
EXPECTED FUTURE CASH FLOW*
CARRYING FAIR -----------------------------------------------------------------
VALUE VALUE 2003 2004 2005 2006 2007 THEREAFTER
-------- -------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
Investments(1).................. E5,899 E5,899 E305 E -- E -- E -- E -- E5,594
|
* Including dividends where applicable.
(1) Investments consist of equity securities.
AS AT DECEMBER 31, 2001
EXPECTED FUTURE CASH FLOW*
CARRYING FAIR -----------------------------------------------------------------
VALUE VALUE 2002 2003 2004 2005 2006 THEREAFTER
-------- -------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
Investments(1)............... E10,723 E10,723 E2,126 E -- E -- E -- E -- E8,597
|
* Including dividends where applicable.
(1) Investments consist of equity securities and debt securities convertible
into equity securities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data required with
respect to this Item 8, and as listed in Item 15 of this annual report, are
included in this annual report commencing on page 59.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As a Massachusetts trust, we are managed by "trustees", who have comparable
duties and responsibilities as directors of corporations. Trustees are elected
by shareholders at annual meetings for staggered three-year terms. Each issued
and outstanding share of beneficial interest is entitled to one vote at such
meetings. Our trustees and executive officers are as follows:
J.S.H. LEE, age 45, has been a trustee since May 1985 and President and
Chief Executive Officer since 1992. Previously, Mr. Lee served with MFC
Bancorp Ltd. as a director from 1986, Chairman from 1987 and President from 1988
to December 1996, respectively.
C.S. MOON, age 56, has been a trustee since June 1994. Mr. Moon is an
independent consultant. He was formerly the Executive Director of Shin Ho Group
of Korea, an international paper manufacturer headquartered in Korea until 1998.
Mr. Moon joined Shin Ho Group in 1990 and previously served in managerial
positions with Moo Kim Paper Manufacturing Co., Ltd. and Sam Yung
Pulp Co., Ltd.
M. ARNULPHY, age 69, has been a trustee since June 1995. Mr. Arnulphy has
been the Managing Director of Electro Orient Ltd., a merchandise trading company
located in Hong Kong, since 1998. From 1975 to 1998, Mr. Arnulphy was the
Managing Director of J. Mortenson & Co., Ltd. in Hong Kong, a water treatment
equipment manufacturing company.
M. REIDEL, age 39, has been a trustee since December 1996, and Secretary and
Chief Financial Officer since November 2002. Mr. Reidel also acted as our
Secretary and Chief Financial Officer from December 1996 to October 1999.
Mr. Reidel was the Chief Financial Officer of Ision Internet AG from
August 1999 to February 2002. Mr. Reidel was a Managing Director of Rosenthal
from 1994 to 1999 and the Chairman of the Management Board of Dresden from 1995
to 1998. Previously, he was a member of the Supervisory Board of Dresden from
1992 to 1994, vice-president of Bundesanstalt fur Vereinigungsbedingte
Sonderaufgaben, the privatization agency of the German government, responsible
for portfolios of service industry and wood and paper industry companies from
1992 to 1994, and an accountant with Arthur Andersen & Co. from 1987 to 1992.
J. L. RYU, age 43, has been a trustee since May 2002. Mr. Ryu has been the
Managing Director of CSC Corporation of Korea, a general merchandise trading
company, since 1993. Mr. Ryu previously founded Sam Heung Trading Co. of Korea
in 1988 and subsequently merged it into CSC Corporation in 1993.
W. MCCARTNEY, age 47, has been a trustee since January 2003. Mr. McCartney
has been President and a director of Pemcorp Management Inc., a management
services company, since 1990. Mr. McCartney is a member of the Institute of
Chartered Accountants in Canada.
G. WITTS, age 64, has been a trustee since January 2003. Mr. Witts organized
Sanne Trust Company Limited, a trust company located in the Channel Islands, in
1988 and was managing director from 1988 to 2000, when he retired.
W. RIDDER, age 41, was appointed a managing director of Stendal in
September 2002. Mr. Ridder was the principal assistant to our chief executive
officer from November 1995 until September 2002.
The terms of Mr. Arnulphy, Mr. McCartney and Mr. Ryu as trustees expire at
the annual meeting of shareholders to be held in 2003. The terms of Mr. Moon and
Mr. Reidel as trustees expire at the annual meeting of shareholders to be held
in 2004. The terms of Mr. Lee and Mr. Witts as trustees expire at the annual
meeting of shareholders to be held in 2005.
50
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the SECURITIES EXCHANGE ACT OF 1934, as amended, requires
that our officers and trustees and persons who own more than 10% of our shares
file reports of ownership and changes in ownership with the SEC and furnish us
with copies of all such reports that they file. Based solely upon a review of
the copies of these reports received by us, and upon written representations by
our trustees and officers regarding their compliance with the applicable
reporting requirements under Section 16(a) of the Exchange Act, we believe that
all of our trustees and officers filed all required reports under Section 16(a)
in a timely manner for the year ended December 31, 2002.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information on the annual compensation for
each of the last three years paid to our chief executive officer and those
executive officers that earned in excess of $100,000 during the most recently
completed fiscal year, referred to as the "Named Executive Officers":
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
--------------------------- -------- -------- -------- ------------ ------------ ------------
Jimmy S.H. Lee................ 2002 238,504 -- 90,941 -- --
Chief Executive Officer 2001 213,012 309,137 10,679 -- --
2000 220,112 -- -- 1,360,000 --
Maarten Reidel(1)............. 2002 282,699 -- -- -- --
Chief Financial Officer
Wolfram Ridder(2)............. 2002 188,466 -- -- -- --
Managing Director of Stendal
|
(1) Mr. Reidel was appointed Chief Financial Officer in November 2002. The
amounts presented for Mr. Reidel have been annualized.
(2) Mr. Ridder was appointed a managing director of Stendal effective
September 2002 for an indefinite term at a salary of E200,000 per annum,
increasing to E240,000 in April 2003, and a bonus of up to 25% of his annual
salary based upon performance targets. The amounts presented for Mr. Ridder
have been annualized.
STOCK OPTIONS
None of our Named Executive Officers were granted options to purchase our
shares during 2002. Pursuant to Mr. Reidel's employment agreement effective
July 1, 2002, in March 2003, we granted Mr. Reidel options to acquire up to
100,000 of our shares under our stock option plan at an exercise price of $6.375
per share, exercisable immediately as to one-third of the options granted and
one-third on each of the first and second anniversaries of the date of grant.
51
The table below provides information regarding the exercise of options
during 2002 by our Named Executive Officers and information with respect to
unexercised options held by them at December 31, 2002:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ON EXERCISE REALIZED YEAR-END (#) FISCAL YEAR-END ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
Jimmy S.H. Lee.................. -- -- 1,685,000/Nil Nil/Nil
Chief Executive Officer
Wolfram Ridder.................. -- -- 60,000/Nil Nil/Nil
Managing Director of Stendal
|
COMPENSATION OF TRUSTEES
Our non-management trustees receive $20,000 annually for their services and
$500 for each meeting of trustees that they attend. We also reimburse our
trustees and officers for expenses incurred in connection with their duties as
our trustees and officers. Trustees that are not also our officers or employees
and who are in office at the end of a fiscal year may receive options to acquire
up to 6,000 of our shares at an exercise price equal to the closing price of our
shares on the NASDAQ National Market on the last trading day of a fiscal year.
INDEMNITY AGREEMENTS
We have entered into a Trustee's Indemnity Agreement with each of our
trustees. We have agreed under each of these agreements to indemnify each of our
trustees against any and all claims and costs that are or may be brought against
him as a result of his being one of our trustees, officers or employees or that
of a company related to us. However, under the agreements, we are not obligated
to indemnify a trustee against any claims or costs in certain instances,
including if it is determined that the trustee failed to act honestly and in
good faith with a view to our best interests, if the trustee failed to disclose
his interest or conflicts as required under corporate legislation in Washington
or we are not permitted to indemnify the trustee under such legislation, or if
the trustee has violated any insider trading rules under United States federal
and state securities laws.
If there is a change in control (as defined in the agreement) of Mercer
other than a change in control which has been approved by a majority of our
trustees, we are required to seek legal advice as to whether and to what extent
a trustee would be permitted to be indemnified under applicable law. In
addition, the agreements allow us to defend any claim made against a trustee.
EMPLOYMENT AGREEMENTS
Mr. Lee is a party to an amended and restated employment agreement dated
November 20, 2000 with us. The agreement generally provides, subject to certain
termination provisions, for the continued employment of Mr. Lee as president and
chief executive officer for a period of 36 months with automatic one month
renewals, so that the contract at all times has a remaining term of 36 months.
The agreement provides for a base salary of $240,000 (which is paid in a foreign
currency) and other compensation as determined by the board of trustees. The
agreement contains change in control provisions pursuant to which, if a change
in control (as defined in the agreement) occurs, Mr. Lee may only be discharged
for cause. In the event Mr. Lee is terminated without cause or resigns for good
reason (as defined in the agreement) within eighteen months of the change in
control, he shall be entitled to a severance payment of
52
three times his annual salary under the agreement and all unvested rights in any
stock option or other benefit plans shall vest in full. If Mr. Lee is terminated
without cause or resigns for good reason within three years of the change in
control, he shall be entitled to a severance payment of three times the sum of
his then annual salary under the agreement plus the higher of his last annual
bonus and the highest bonus received during the preceding five years. In
addition, all unvested rights in any stock option or other benefit plans will
vest in full. Mr. Lee will also continue to receive equivalent benefits as were
provided at the date of termination for the remaining term of the agreement.
Mr. Lee may terminate his employment with us at any time for good reason (as
described in his employment agreement) within 180 days after the occurrence of
the good reason event.
Mr. Reidel is a party to an employment agreement effective July 1, 2002 with
us. The agreement is for an indefinite term, except that it automatically
terminates at the end of the month in which Mr. Reidel turns 65 years old. Under
the agreement, Mr. Reidel is to act as chief financial officer and is
responsible for, among other things, the strategic development of Mercer. In
consideration for services provided under the agreement, Mr. Reidel is entitled
to an annual gross salary of E300,000 and options to acquire up to a maximum of
100,000 of our shares, and is entitled to participate in our bonus program. The
agreement may be terminated by either party upon three months' prior written
notice, except that no notice period is required where such termination is for
cause.
INCENTIVE BONUS PLAN
We have adopted an employee incentive bonus plan which provides for the
award of interests in an incentive bonus pool established under the plan to our
trustees, officers and employees. The purpose of the plan is to attract and
retain the services of qualified people and to provide additional incentive to
them by granting them the opportunity to participate in our profits. Under the
plan, up to 5% of our Net Income (as defined in the plan) for each fiscal year
is set aside as a bonus pool. Units in the bonus pool may be granted by our
board of trustees at its discretion to eligible persons during a fiscal year.
The amount payable to a person from the bonus pool equals the percentage of the
total number of units granted during the fiscal year which are held by the
person at the end of the fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
C.S. Moon and Michel Arnulphy served as members of the compensation
committee of our board of trustees during the year ended December 31, 2002.
Neither Mr. Moon nor Mr. Arnulphy was one of our officers or employees during
the year ended December 31, 2002, or has formerly been one of our officers.
53
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our shares as of March 21, 2003 by each shareholder who is known by
us to own more than five percent of our outstanding shares. The following is
based solely on statements made in filings with the SEC or other information we
believe to be reliable.
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS OF OWNER SHARES OWNED OUTSTANDING SHARES
------------------------- ------------ ------------------
Greenlight Capital, L.L.C................................... 2,517,500 14.9%
420 Lexington Ave.
Suite 875
New York, NY 10170
Cramer Rosenthal McGlynn.................................... 1,729,700 10.3%
707 Westchester Avenue
White Plains, NY 10604
Merrill Lynch & Co., Inc.................................... 1,596,700 9.5%
4 World Financial Center
New York, NY 10080
FMR Corp.(1)................................................ 1,564,400 9.3%
82 Devonshire Street
Boston, MA 02109
|
(1) Filed jointly with Edward C. Johnson III and Abigail P. Johnson.
The following table sets forth information regarding ownership of our shares
as of March 28, 2003 by each of our trustees and all of our trustees and
executive officers as a group. Unless otherwise indicated, each trustee has sole
voting and disposition power with respect to the shares set forth opposite
his name.
NUMBER OF PERCENTAGE OF
NAME OF OWNER SHARES OWNED OUTSTANDING SHARES
------------- ------------ ------------------
Jimmy S.H. Lee(1)........................................... 1,619,800 8.8%
C.S. Moon(2)................................................ 29,000 *
Michel Arnulphy(2).......................................... 23,000 *
Maarten Reidel(3)........................................... 153,333 *
Jong L. Ryu................................................. -- --
William McCartney........................................... -- --
Graeme Witts................................................ -- --
Wolfram Ridder(2)........................................... 60,000 *
Trustees and Officers as a Group (7 persons)(4)............. 1,885,133 10.1%
|
* Less than 1%.
(1) Includes presently exercisable stock options to acquire up to 1,585,000
shares.
(2) Represents presently exercisable stock options.
(3) Includes presently exercisable stock options to acquire up to
33,333 shares.
(4) Includes presently exercisable stock options to acquire up to 1,730,333
shares.
54
The following table sets forth information as at December 31, 2002 regarding
our stock option plan under which options to acquire an aggregate of 3,600,000
of our shares may be granted to our officers and employees, and to our trustees
who are not our officers or employees up to a maximum of 130,000 shares:
NUMBER OF SHARES TO BE WEIGHTED-AVERAGE NUMBER OF SHARES
ISSUED UPON EXERCISE OF EXERCISE PRICE OF AVAILABLE FOR FUTURE
OUTSTANDING OPTIONS OUTSTANDING OPTIONS ISSUANCE UNDER PLAN
----------------------- ------------------- --------------------
Stock Option Plan..................... 2,118,000 $7.28 158,000
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 14. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
reports on file with the SEC. It should be noted that the design of any system
of controls is based in part upon certain assumptions about the likelihood of
certain events, and there can be no assurance that any design will succeed in
achieving its stated goals under all future conditions, regardless of how
remote. In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their
last evaluation.
55
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE
--------
(a)(1) FINANCIAL STATEMENTS
Independent Auditors' Report................................ 59
Consolidated Balance Sheets................................. 60
Consolidated Statements of Operations....................... 61
Consolidated Statements of Comprehensive Income............. 62
Consolidated Statements of Changes in Shareholders'
Equity.................................................... 63
Consolidated Statements of Cash Flows....................... 64
Notes to the Consolidated Financial Statements.............. 65
|
56
(2) LIST OF EXHIBITS
3.1 (a) * Restated Declaration of Trust of the Company as filed with
the Secretary of State of Washington on June 11, 1990
together with an Amendment to Declaration of Trust dated
December 12, 1991.
(b) * Amendments to Declaration of Trust dated July 8, 1993;
August 17, 1993; and September 9, 1993.
3.2* Trustees' Regulations dated September 24, 1973.
4.1 Shareholder Rights Plan. Incorporated by reference from
Form 8-A dated August 17, 1993.
10.1 Acquisition Agreement among Treuhandanstalt, Dresden Papier
AG, Dresden Papier Holding GmbH, Mercer
International Inc., and Shin Ho Paper Mfg. Co., Ltd.
Incorporated by reference from Form 8-K dated
September 20, 1993.
10.2 Acquisition Agreement among Treuhandanstalt, Zellstoff-und
Papierfabrik Rosenthal GmbH, Raboisen
Einhundertsechsundfunfzigste Vermogensverwaltungs-
gesellschaft GmbH, to be renamed ZPR Zellstoff-und
Papierfabrik Rosenthal Holding GmbH, Mercer
International Inc. and 448380 B.C. Ltd. dated July 3,
1994. Incorporated by reference from Form 8-K dated
July 3, 1994.
10.3 Amended and Restated 1992 Stock Option Plan. Incorporated by
reference from Form S-8 dated March 2, 2000.
10.4 2002 Employee Incentive Bonus Plan.
10.5* Form of Separation Agreement between Mercer
International Inc. and Arbatax International Inc.
10.6 English Translation of a Loan Agreement in the amount of
DM508,000,000 between Zellstoff-und Papierfabrik
Rosenthal GmbH & Co. KG, Blankenstein on the one hand and
Bayerische Hypotheken-und Wechsel-Bank Aktiengesellschaft,
Munich and Bayerische Vereinsbank Aktiengesellschaft,
Munich on the other hand dated July 6, 1998. Incorporated
by reference from Form 8-K dated July 16, 1998.
10.7 English Translation of Agreement on the obligations of the
shareholders between Mercer International Inc.,
Spezialpapierfabrik Blankenstein GmbH and Zellstoff-und
Papierfabrik Rosenthal Verwaltungs GmbH and Bayerische
Hypo-und Vereinsbank Aktiengesellschaft dated
February 11, 1999.
10.8* Amended and Restated Employment Agreement between Mercer
International Inc. and Jimmy S.H. Lee dated
November 20, 2000.
10.9 English Translation of Amendment Agreement No. 4 dated
December 13, 2000 between Zellstoff-und Papierfabrik
Rosenthal GmbH & Co. KG and Bayerische Hypo-und
Vereinsbank Aktiengesellschaft to the Loan Agreement dated
July 6, 1998. Incorporated by reference from Form 8-K
dated January 23, 2001.
10.10* Purchase Agreement between Sihl and Mercer
International Inc. dated December 14, 2001 relating to
the acquisition of Landqart AG.
10.11 Project Financing Facility Agreement dated August 26, 2002
between Zellstoff Stendal GmbH and Bayerische Hypo-und
Vereinsbank AG. Incorporated by reference from Form 8-K
dated September 10, 2002.
10.12 Shareholders' Undertaking Agreement dated August 26, 2002
among Mercer International Inc., Stendal Pulp
Holdings GmbH, RWE Industrie-Losungen GmbH, AIG Altmark
Industrie AG and FAHR Beteiligungen AG and Zellstoff
Stendal GmbH and Bayerische Hypo-und Vereinsbank AG.
Incorporated by reference from Form 8-K dated
September 10, 2002.
10.13 Shareholders' Agreement dated August 26, 2002 among
Zellstoff Stendal GmbH, Stendal Pulp Holdings GmbH, RWE
Industrie- Losungen GmbH and FAHR Beteiligungen AG.
|
57
10.14 Loan Agreement dated August 26, 2002 among Babcock & Brown
Investment Management Partners LP, Babcock & Brown
Investment Management Partners LP et. al. and Mercer
International Inc. Incorporated by reference from
Form 8-K dated September 10, 2002.
10.15 Loan Agreement dated August 26, 2002 among MFC Merchant
Bank S.A., MFC Merchant Bank S.A. et. al. and Mercer
International Inc. Incorporated by reference from
Form 8-K dated September 10, 2002.
10.16 Contract for the Engineering, Design, Procurement,
Construction, Erection and Start-Up of a Kraft Pulp Mill
between Zellstoff Stendal GmbH and RWE Industrie-
Losungen GmbH dated August 26, 2002.
10.17 Purchase and Sale Agreement dated December 30, 2002 between
Equitable Industries Limited Partnership and Mercer
International Inc. relating to the sale of Landqart AG.
10.18 Employment Agreement effective July 1, 2002 between ZPR
Zellstoff-und Papierfabrik Rosenthal Holding GmbH and
Maarten Reidel.
10.19 Form of Trustee's Indemnity Agreement between Mercer
International Inc. and its Trustees.
10.20 English Translation of Agreement between Zellstoff-und
Papierfabrik Rosenthal GmbH & Co. KG, Blankenstein a.d.
Saale and Bayerische Hypo-und Vereinsbank AG dated
May 27, 2002.
21 List of Subsidiaries of Registrant.
23 Independent Auditors Consent.
99.1 Certification of Periodic Report.
99.2 Certification of Periodic Report.
|
* Filed in Form 10-K for prior years.
(b) REPORTS ON FORM 8-K
The Registrant filed the following reports on Form 8-K with
respect to the indicated items during the fourth quarter of
the fiscal year:
Form 8-K/A dated October 4, 2002:
Item 7. Exhibits
|
58
INDEPENDENT AUDITORS' REPORT
To the Shareholders
Mercer International Inc.
We have audited the accompanying consolidated balance sheets of Mercer
International Inc. and Subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, comprehensive income, changes in
shareholders' equity, and cash flows for the years ended December 31, 2002, 2001
and 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Mercer
International Inc. and Subsidiaries as of December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 2002, 2001 and 2000, in conformity with accounting principles
generally accepted in the United States.
/s/ PETERSON SULLIVAN P.L.L.C.
Seattle, Washington
January 31, 2003
|
59
MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(IN THOUSANDS OF EUROS)
2002 2001
-------- --------
ASSETS
Current Assets
Cash and cash equivalents................................. E 30,261 E 11,741
Cash restricted........................................... 9,459 --
Investments............................................... 307 4,549
Receivables............................................... 31,924 47,892
Inventories............................................... 16,375 25,062
Prepaid expenses.......................................... 7,891 3,968
-------- --------
Total current assets.................................. 96,217 93,212
Long-Term Assets
Cash restricted........................................... 38,795 33,388
Properties................................................ 441,990 278,617
Investments............................................... 5,592 8,598
Equity method investment.................................. 7,019 --
Note receivable........................................... -- 5,475
Deferred income tax....................................... 10,137 10,303
-------- --------
503,533 336,381
-------- --------
E599,750 E429,593
======== ========
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses..................... E 32,866 E 51,916
Construction in progress costs payable.................... 24,885 --
Note payable.............................................. 832 7,392
Note payable, construction in progress.................... 15,000 --
Debt, current portion..................................... 16,306 18,360
-------- --------
Total current liabilities............................. 89,889 77,668
Long-Term Liabilities
Debt, construction in progress, less current portion...... 146,485 --
Debt, less current portion................................ 205,393 216,871
Derivative financial instruments, construction in
progress................................................ 30,108 --
Other..................................................... 2,906 3,441
-------- --------
384,892 220,312
-------- --------
Total liabilities..................................... 474,781 297,980
Minority Interest........................................... -- --
SHAREHOLDERS' EQUITY
Preferred shares, no par value; 50,000,000 authorized and
issuable in series
Series A, 500,000 authorized, none issued and
outstanding............................................. -- --
Series B, 3,500,000 authorized, none issued and
outstanding............................................. -- --
Shares of beneficial interest, U.S. $1 par value; unlimited
authorized; 16,874,899 issued and outstanding at
December 31, 2002 and 16,794,899 at December 31, 2001..... 76,995 76,722
Retained earnings........................................... 52,789 59,111
Accumulated other comprehensive loss........................ (4,815) (4,220)
-------- --------
124,969 131,613
-------- --------
E599,750 E429,593
======== ========
|
The accompanying notes are an integral part of these financial statements.
60
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS OF EUROS, EXCEPT PER SHARE DATA)
2002 2001 2000
-------- -------- --------
Revenues
Sales of pulp and paper................................... E227,883 E205,001 E245,059
Transportation............................................ 4,953 5,491 4,189
Other..................................................... 6,296 5,955 9,635
-------- -------- --------
239,132 216,447 258,883
Cost of sales
Pulp and paper............................................ 208,454 180,603 190,529
Transportation............................................ 5,009 4,076 3,175
-------- -------- --------
Gross profit.......................................... 25,669 31,768 65,179
General, administrative and other........................... 24,979 18,436 15,514
-------- -------- --------
Income from operations................................ 690 13,332 49,665
Other income (expense)
Interest expense.......................................... (13,753) (16,170) (15,198)
Investment income (loss).................................. 436 2,872 (2,337)
Derivative financial instruments
Unrealized loss, construction in progress financing..... (30,108) -- --
Realized gains (losses), other.......................... 23,429 (2,504) --
Other..................................................... 1,755 (270) --
-------- -------- --------
Total other (expense)................................. (18,241) (16,072) (17,535)
-------- -------- --------
Income (loss) before income taxes and minority
interest............................................ (17,551) (2,740) 32,130
Income tax benefit (provision).............................. 264 (83) (117)
-------- -------- --------
Income (loss) before minority interest................ (17,287) (2,823) 32,013
Minority interest........................................... 10,965 -- --
-------- -------- --------
Net income (loss)..................................... E (6,322) E (2,823) E 32,013
======== ======== ========
Earnings (loss) per share
Basic..................................................... E (0.38) E (0.17) E 1.91
======== ======== ========
Diluted................................................... E (0.38) E (0.17) E 1.87
======== ======== ========
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The accompanying notes are an integral part of these financial statements.
61
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS OF EUROS)
2002 2001 2000
-------- -------- --------
Net income (loss)........................................... E(6,322) E(2,823) E32,013
Other comprehensive income (loss)
Foreign currency translation adjustment................... 2,186 (942) 187
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during the
period................................................ (3,615) 1,881 (2,219)
Reclassification adjustment for losses included in net
income (loss)......................................... 834 -- 92
------- ------- -------
(2,781) 1,881 (2,127)
------- ------- -------
Other comprehensive income (loss)........................... (595) 939 (1,940)
------- ------- -------
Comprehensive income (loss)................................. E(6,917) E(1,884) E30,073
======= ======= =======
|
The accompanying notes are an integral part of these financial statements.
62
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS OF EUROS)
ACCUMULATED OTHER COMPREHENSIVE
SHARES OF BENEFICIAL INTEREST INCOME (LOSS)
---------------------------------- --------------------------------------
AMOUNT FOREIGN
PAID IN CURRENCY UNREALIZED
NUMBER OF EXCESS OF RETAINED TRANSLATION GAINS (LOSSES)
SHARES PAR VALUE PAR VALUE EARNINGS ADJUSTMENTS ON SECURITIES TOTAL
---------- --------- --------- -------- ----------- -------------- -------
Balance at December 31, 1999.......... 16,635,399 E12,603 E63,060 E29,921 E2,060 E(5,279) E(3,219)
Shares issued for exercise of
options............................. 159,500 178 881 -- -- -- --
Net income............................ -- -- -- 32,013 -- -- --
Other comprehensive income (loss)..... -- -- -- -- 187 (2,127) (1,940)
---------- ------- ------- ------- ------ ------- -------
Balance at December 31, 2000.......... 16,794,899 12,781 63,941 61,934 2,247 (7,406) (5,159)
Net loss.............................. -- -- -- (2,823) -- -- --
Other comprehensive income (loss)..... -- -- -- -- (942) 1,881 939
---------- ------- ------- ------- ------ ------- -------
Balance at December 31, 2001.......... 16,794,899 12,781 63,941 59,111 1,305 (5,525) (4,220)
Shares issued for cash................ 200,000 191 695 -- -- -- --
Repurchase of shares.................. (120,000) (121) (492) -- -- -- --
Net loss.............................. -- -- -- (6,322) -- -- --
Other comprehensive income (loss)..... -- -- -- -- 2,186 (2,781) (595)
---------- ------- ------- ------- ------ ------- -------
Balance at December 31, 2002.......... 16,874,899 E12,851 E64,144 E52,789 E3,491 E(8,306) E(4,815)
========== ======= ======= ======= ====== ======= =======
SHAREHOLDERS'
EQUITY
-------------
Balance at December 31, 1999.......... E102,365
Shares issued for exercise of
options............................. 1,059
Net income............................ 32,013
Other comprehensive income (loss)..... (1,940)
--------
Balance at December 31, 2000.......... 133,497
Net loss.............................. (2,823)
Other comprehensive income (loss)..... 939
--------
Balance at December 31, 2001.......... 131,613
Shares issued for cash................ 886
Repurchase of shares.................. (613)
Net loss.............................. (6,322)
Other comprehensive income (loss)..... (595)
--------
Balance at December 31, 2002.......... E124,969
========
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The accompanying notes are an integral part of these financial statements.
63
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS OF EUROS)
2002 2001 2000
--------- -------- --------
Cash Flows from Operating Activities
Net income (loss)......................................... E (6,322) E (2,823) E 32,013
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss on derivative financial instruments..... 30,108 -- --
Depreciation............................................ 25,614 22,966 24,046
Minority interest....................................... (10,965) -- --
Changes in current assets and liabilities
Investment in trading securities...................... 4,356 514 (875)
Inventories........................................... 1,717 2,611 (3,683)
Receivables........................................... 14,909 7,770 (7,849)
Accounts payable and accrued expenses................. (13,373) (873) 290
Prepaid expenses and other............................ (6,310) (382) (547)
--------- -------- --------
Net cash from operating activities.................. 39,734 29,783 43,395
Cash Flows from Investing Activities
Acquisition of properties, net of investment grants....... (199,556) (7,647) 28,319
Sale of properties........................................ 4,394 -- 14,495
Purchase of subsidiary, net of cash acquired.............. -- (2,055) --
Purchases of available-for-sale securities................ (612) (636) (2,083)
Disposal of subsidiary.................................... (1,156) -- --
Other..................................................... 892 -- 840
--------- -------- --------
Net cash from investing activities.................. (196,038) (10,338) 41,571
Cash Flows from Financing Activities
Cash restricted........................................... (14,866) (6,615) (13,343)
Increase in construction in progress costs payable........ 24,885 -- --
Decrease in operating pulp mill renovation costs
payable................................................. -- (1,008) (54,617)
Increase in notes payable and debt........................ 183,017 6,503 6,136
Decrease in notes payable and debt........................ (23,725) (28,962) (6,063)
Shares of beneficial interest issued for cash, net of
repurchases............................................. 273 -- 1,059
Equity from minority shareholders......................... 6,259 -- --
--------- -------- --------
Net cash from financing activities.................. 175,843 (30,082) (66,828)
Effect of exchange rate changes on cash and cash
equivalents............................................... (1,019) 2,689 (160)
--------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 18,520 (7,948) 17,978
Cash and Cash Equivalents, beginning of year................ 11,741 19,689 1,711
--------- -------- --------
Cash and Cash Equivalents, end of year...................... E 30,261 E 11,741 E 19,689
========= ======== ========
|
The accompanying notes are an integral part of these financial statements.
64
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mercer International Inc. ("the Company") is a business trust organized
under the laws of the State of Washington, U.S. Under Washington law,
shareholders of a business trust have the same limited liability as shareholders
of a corporation. The Company produces and markets pulp and paper products. The
amounts in the notes are rounded to the nearest thousand except for the per
share amounts.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company's
subsidiaries, Dresden Papier GmbH, Papierfabrik Fahrbrucke GmbH, Spezial
Papierfabrik Blankenstein GmbH, Zellstoff-und Papierfabrik
Rosenthal GmbH & Co., KG and Zellstoff Stendal GmbH. Investments in entities
where the Company owns at least a 20% voting interest, but does not have
control, are accounted for under the equity method. The amount of earnings from
equity investees was not material. Significant intercompany accounts and
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less. The Company maintains cash balances in
foreign financial institutions in excess of insured limits.
At December 31, 2002, E9,459 in cash was restricted by a lender to pay
construction in progress costs payable. In addition, the Company had E38,795 of
long-term restricted cash representing debt service reserve accounts required by
long-term debt agreements.
INVESTMENTS
The Company's available-for-sale and trading securities are stated at their
fair values. Realized gains or losses of investments are included in the results
of operations. Any unrealized holding gains or losses for trading securities are
included in the results of operations. Any unrealized gains or losses for
available-for-sale securities are reported as a separate component of
comprehensive income until realized. If a loss in value in available-for-sale
securities is considered to be other than temporary, it is recognized in the
determination of net income. Cost is based on the specific identification method
to determine realized gains or losses.
The Company uses the equity method to account for an investment when it has
the ability to significantly influence the investee's operating and financial
policies. Under the equity method, the investment is initially recorded at cost,
then reduced by dividends and increased or decreased by the Company's
proportionate share of the investee's net earnings or loss.
INVENTORIES
Inventories of pulp are stated at the lower of cost (average-cost method) or
market. Paper products are stated at the lower of cost (first-in, first-out
method) or market.
PROPERTIES
Properties are stated at cost less accumulated depreciation, unless the
estimated future undiscounted cash flows expected to result from either the use
of an asset or its eventual disposition is less than its
65
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carrying amount in which case an impairment loss is recognized based on the fair
value of the asset. Grants received from a government reduce cost of property
improvements.
Depreciation of buildings and production equipment is based on the estimated
useful lives of the assets and is computed using the straight-line method.
Buildings are depreciated over 10 to 50 years and production equipment over 8 to
20 years. Repairs and maintenance are charged to expense as incurred.
Expenditures for new facilities and those expenditures that substantially
increase the useful lives of existing properties are capitalized, as well as
interest costs associated with major capital projects until ready for their
intended use.
FOREIGN OPERATIONS AND CURRENCY TRANSLATION
The Company translates foreign assets and liabilities of its subsidiaries,
other than those not denominated in Euros, at the rate of exchange at the
balance sheet date. Revenues and expenses are translated at the average rate of
exchange throughout the year. Gains or losses from these translations are
reported as a separate component of other comprehensive income (loss), until all
or a part of the investment in the subsidiaries is sold or liquidated. The
translation adjustments do not recognize the effect of income tax because the
Company expects to reinvest the amounts indefinitely in operations.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the local functional currency
are included in "General, administrative and other" in the statement of
operations, which amounted to E(3,026), E3,361 and E(355) for the years ended
December 31, 2002, 2001 and 2000, respectively.
Effective January 1, 2002, the Company changed its reporting currency from
the U.S. dollar to the Euro (except for currency amounts as contractually
required). The reason for this change was because a significant majority of the
Company's assets and operations are located in Germany where the currency is the
Euro. The Company's functional currency and reporting currency are now the same.
Prior years' financial statements had been reported in U.S. dollars, but have
been restated into Euros using the guidance of Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation." Therefore, the financial
statements for prior years depict the same trends as the previous financial
statements presented in U.S. dollars.
The Euro was initially implemented by the European Union on January 1, 1999.
By adopting the Euro as the Company's reporting currency, most of the cumulative
foreign currency translation losses were eliminated from the Company's balance
sheets and most of the foreign currency translation losses were eliminated from
the Company's statements of comprehensive income. Prior to the restatement, at
December 31, 2001, there was a cumulative foreign currency translation loss of
$64,016 (in thousands of U.S. dollars) included as part of shareholders' equity
in the balance sheet. In conjunction with the restatement, the majority of this
amount was eliminated. During the years ended December 31, 2001 and 2000, there
were foreign currency translation losses of $7,687 and $6,400 (in thousands of
U.S. dollars), respectively, included as part of other comprehensive income
(loss). In conjunction with the restatement, the majority of these amounts were
eliminated.
REVENUE AND RELATED COST RECOGNITION
The Company recognized revenue from product sales when the sales price is
fixed or determinable, title of ownership and risk of loss have passed to the
customer and collectibility is reasonably assured. Sales
66
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
are reported net of discounts and allowances. Amounts charged to customers for
shipping and handling are recognized as revenue. Shipping and handling costs
incurred by the Company are included in cost of sales.
ENVIRONMENTAL CONSERVATION
Liabilities for environmental conservation are recorded when it is probable
that obligations have been incurred and the amounts can be reasonably estimated.
Any potential recoveries of such liabilities are recorded when there is an
agreement with the reimbursing entity.
STOCK-BASED COMPENSATION
The Company has a stock-based employee compensation plan, which is described
more fully in Note 11. The Company accounts for the plan under the recognition
and measurement principles of APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under the plan had an
exercise price equal to or greater than the market value of the underlying
common stock on the date of grant. The following table illustrates the effect on
net income and earnings per share if the Company had applied the fair value
recognition provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation.
2002 2001 2000
-------- -------- --------
NET INCOME (LOSS)
As reported............................................... E(6,322) E(2,823) E32,013
Deduct: Total stock-based employee compensation expense
determined under fair value based methods for all
awards,
net of any related tax effects.......................... (9) (3,213) (3,124)
------- ------- -------
Proforma.................................................. E(6,331) E(6,036) E28,889
======= ======= =======
|
2002 2001 2000
-------- -------- --------
BASIC EARNINGS (LOSS) PER SHARE
As reported............................................... E(.38) E(.17) E1.91
Proforma.................................................. E(.38) E(.36) E1.72
DILUTED EARNINGS (LOSS) PER SHARE
As reported............................................... E(.38) E(.17) E1.87
Proforma.................................................. E(.38) E(.36) E1.69
|
TAXES ON INCOME
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax laws or rates.
67
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective
January 1, 2001. Derivative instruments are measured at fair value and reported
in the consolidated balance sheets as assets or liabilities. Accounting for
gains or losses depends on the Company's intended use of the derivative
instruments. Gains or losses on derivative instruments which are not designated
hedges are recognized in earnings in the period of the change in fair value.
Accounting for gains or losses on derivative instruments designated as hedges
depends on the type of hedge and such gains or losses are recognized in either
earnings or other comprehensive income.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares.
RECLASSIFICATIONS
Certain prior year amounts in the consolidated financial statements have
been reclassified to conform to the current year presentation (primarily in the
consolidated statements of operations because management has determined that the
2002 presentation better portrays operating results).
ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
Statements of Financial Accounting Standards No. ("SFAS") 145 and 146 are
generally modifications to previously adopted standards. A part of SFAS 145 is
effective for years beginning after May 15, 2002, and SFAS 146 is effective for
years beginning after December 31, 2002. These new standards do not have an
effect on the Company's consolidated financial statements.
68
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. INVESTMENTS
Trading securities are classified as current investments and are summarized
as follows:
DECEMBER 31
-------------------
2002 2001
-------- --------
Bonds....................................................... E -- E2,424
Equity securities........................................... 307 2,125
---- ------
E307 E4,549
==== ======
|
Included within trading securities at December 31, 2002, is an investment in
common shares of one company that represents 95% of the total value of trading
securities. Included within trading securities at December 31, 2001, are
investments in a bond and common shares of two companies that represent 53% of
the total value of trading securities. The change in net unrealized holding
gains (losses) on trading securities which has been included in earnings was
E(501), E1,383 and E(186) during 2002, 2001 and 2000, respectively.
Available-for-sale securities consist of equity securities and have been
classified as long-term investments. Equity securities of two companies
represented 98% and 85% of the total available-for-sale securities at
December 31, 2002 and 2001, respectively. The proceeds from sales of these
securities amounted to E948, none and E205 which resulted in realized gains
(losses) of E66, none and E(84) during 2002, 2001 and 2000, respectively. The
fair value of available-for-sale securities included on the balance sheets at
December 31, 2002, 2001 and 2000, was E4,727, E8,202 and E5,585, respectively.
The cost of these securities was E13,033, E13,727 and E12,991 which resulted in
unrealized losses being recorded in comprehensive income of E(8,306), E(5,525)
and E(7,406) at December 31, 2002, 2001 and 2000, respectively. Also, included
in long-term investments were equity securities stated at cost of E865 and E396
at December 31, 2002 and 2001, respectively, which did not have a readily
determinable fair value. However, management believes that the estimated market
value is greater than the carrying value.
NOTE 3. RECEIVABLES
DECEMBER 31
-------------------
2002 2001
-------- --------
Sale of paper and pulp products............................. E13,582 E23,809
Securities trading.......................................... -- 14,137
Derivative transactions..................................... 3,792 463
Value added tax............................................. 7,096 1,073
Other....................................................... 7,454 8,410
------- -------
E31,924 E47,892
======= =======
|
Receivables are stated at their outstanding principal balances. The Company
had a long-term note receivable at December 31, 2001, on which interest income
was accrued as earned. This note was used to reduce debt during 2002. Management
reviews the collectability of receivables on a periodic basis and determines the
appropriate amount of any allowance. Based on this review procedure, management
has determined that any allowance would not be material at either December 31,
2002 or 2001. The Company
69
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. RECEIVABLES (CONTINUED)
charges off receivables to any allowance when management determines that a
receivable is not collectible. The Company does not generally require collateral
for any of its receivables.
At December 31, 2001, the Company pledged E14,137 in securities trading
receivables as collateral, for amounts payable for securities.
NOTE 4. INVENTORIES
DECEMBER 31
-------------------
2002 2001
-------- --------
Pulp and paper
Raw materials............................................. E10,394 E14,604
Work in process and finished goods........................ 5,981 10,458
------- -------
E16,375 E25,062
======= =======
|
NOTE 5. PROPERTIES
DECEMBER 31
-------------------
2002 2001
-------- --------
Land........................................................ E 7,945 E 9,564
Buildings................................................... 12,490 19,369
Production and other equipment.............................. 335,403 327,186
-------- --------
355,838 356,119
Less: Accumulated depreciation.............................. 100,753 77,502
-------- --------
255,085 278,617
Construction in progress.................................... 186,905 --
-------- --------
E441,990 E278,617
======== ========
|
Construction in progress represents the costs incurred (including E3,134 of
debt interest capitalized in 2002) to build a 552,000 tonne softwood kraft pulp
mill located in Stendal, Germany. A subsidiary that is owned 63.6% by the
Company is building the mill and will operate it on completion. Management
estimates the total cost of the mill will be E1,000,000. Under German
legislation, non-repayable grants are provided to qualifying businesses that
comply with the terms of the grants and are operating in eastern Germany to
finance capital investments. Management expects to receive these government
grants and when received, they will reduce the overall cost. The Company has
applied for approximately E38,000 in construction grants which are expected to
be received prior to the end of 2003.
70
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. NOTES PAYABLE
At December 31, 2002, the Company has a note payable to a financial
institution in the amount of E15,000 relating to the Company's investment in the
Stendal pulp mill project, interest rate at Euribor plus 6.5% in initial term
(9.75% at December 31, 2002), Euribor plus 9.0% in extended period and Euribor
plus 11.5% in second extended period; principal plus interest due April 26,
2003, or at the Company's option on October 26, 2003 (extended period) or at the
lender's option on February 26, 2004 (second extended period); secured by an
interest in the Company's operating pulp mill.
The Company also has notes payable to banks of E832 and E7,392 at
December 31, 2002 and 2001, respectively. The notes bear interest at rates
ranging from 6.75% to 7%.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31
-------------------
2002 2001
-------- --------
Note payable to bank, included in a total credit facility of
E827,950 to finance our construction in progress related
to the Stendal pulp mill, interest at rates varying from
Euribor plus .75% to Euribor plus 1.55% (rates on amounts
of borrowing at December 31, 2002, range from 3.6% to
4.2%), principal due in required installments beginning
September 30, 2006 until September 30, 2017,
collateralized by the assets of the Stendal pulp mill
subsidiary, and at December 31, 2002, restricted cash
amounting to E19,074, with 48% and 32% guaranteed by the
Federal Republic of Germany and the State of Sachsen-
Anhalt, respectively, of up to E586,550 of outstanding
principal balance, subject to a debt service reserve
account required to pay amounts due in the following
twelve months under the terms of credit facility (none
required at December 31, 2002); payment of dividends by
the subsidiary are restricted based on certain cash flow
requirements being met (none restricted at December 31,
2002)..................................................... E101,000 E --
Note payable to bank, interest at rates varying from 4.5% to
6.8% at December 31, 2002, principal due in semi-annual
installments based on a percentage of the final loan
amount beginning at 2.4% to 5.1% at September 30, 2001,
after an initial payment of E23,547 on March 31, 2001,
until the note is due on September 30, 2013,
collateralized by receivables (amounting to E10,522 and
E14,313 at December 31, 2002 and 2001, respectively),
inventory (amounting to E10,885 and E12,002 at
December 31, 2002 and 2001, respectively) and a
subsidiary's operating pulp mill assets with 48% and 32%
principal plus interest guaranteed by the Federal Republic
of Germany and the State of Thuringia, respectively; cash
restricted amounted to E19,721 and E33,388 at
December 31, 2002 and 2001, respectively, in connection
with this borrowing; payment of dividends by the
subsidiary are restricted based on certain cash flow
requirements being met (restricted amount is E66,366 at
December 31, 2002). This borrowing was used to finance the
completed conversion of the operating pulp mill........... 204,855 217,363
|
71
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. LONG-TERM DEBT (CONTINUED)
DECEMBER 31
-------------------
2002 2001
-------- --------
Note payable to bank relating to the Company's investment in
the Stendal pulp mill project, interest rate at Euribor
plus 6.5% to April 26, 2003 (9.75% at December 31, 2002),
Euribor plus 9.0% from April 27, 2003 to October 26,
2003, and Euribor plus 11.5% from October 27, 2003 to
February 26, 2004; principal plus interest due on
February 26, 2004; secured by an interest in the Company's
operating pulp mill....................................... 30,000 --
Loans payable to minority shareholders of Stendal pulp mill,
interest at 7% accrued and payable in September 2006 then
payable semi-annually beginning March 2007, unsecured,
subordinated to all liabilities of the Stendal pulp mill,
due in 2017, E4,707 was applied to these loans in 2002 due
to right of offset under German law....................... 15,485 --
Note payable to a company, interest at 6%, due February 26,
2004, unsecured........................................... 8,582 --
Note payable to bank, interest at Euribor plus 4.5% (rate on
amount of borrowing at December 31, 2002, is 7.4%),
unsecured, due in semi-annual installments beginning in
March 2004, due in 2013................................... 5,158 --
Debenture payable, 8% interest payable semi-annually, due in
2003, unsecured, with attached warrants which allows a
debenture holder to acquire common shares of the Company
at the higher of U.S. $6 per share or the average price of
the stock for the ten days prior to conversion............ 3,104 4,643
Loans payable to a bank, interest at rates varying from
3.875% to 6.5%, payment terms varying from on demand to
due in full on December 31, 2003, secured by receivables
(amounting to E5,176 at December 31, 2001) and
properties................................................ -- 12,902
Other....................................................... -- 323
-------- --------
368,184 235,231
Less: Current portion....................................... (16,306) (18,360)
-------- --------
E351,878 E216,871
======== ========
|
The Company has entered into interest rate and foreign exchange derivative
contracts in connection with the first three notes payable in the table above.
The contracts were entered into consistent with the Company's policy to manage
interest rate and foreign currency exchange risks. The contracts are with the
same banks which hold the notes and the Company does not anticipate
nonperformance by the banks. At December 31, 2002 and 2001, the interest rate
contracts had a notional amount of E1,614,157 and none, and the foreign exchange
contracts had a notional amount of E101,413 and E225,723, respectively. The
change in the fair value of these contracts is included in net income (loss).
72
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. LONG-TERM DEBT (CONTINUED)
As of December 31, 2002, the principal maturities of long-term debt are as
follows:
MATURES AMOUNT
------- --------
2003........................................................ E 16,306
2004........................................................ 53,334
2005........................................................ 15,735
2006........................................................ 28,488
2007........................................................ 76,382
Thereafter.................................................. 177,939
--------
E368,184
========
|
Interest paid amounted to E13,894 (net of E922 capitalized) in 2002, E15,854
in 2001 and E12,451 in 2000.
NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
DECEMBER 31
-------------------
2002 2001
-------- --------
Trade payables.............................................. E13,691 E21,191
Accounts payable and accrued expenses....................... 16,872 19,408
Derivative transactions..................................... 2,303 396
Payable for securities...................................... -- 8,921
Other....................................................... -- 2,000
------- -------
E32,866 E51,916
======= =======
|
73
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES
The provision for income taxes is current and consists of the following:
YEAR ENDED
DECEMBER 31
------------------------------
2002 2001 2000
-------- -------- --------
Provision for income taxes, non U.S......................... E264 E(83) E(117)
==== ==== =====
|
Differences between the U.S. Federal Statutory and the Company's effective
rates are as follows:
YEAR ENDED DECEMBER 31
------------------------------
2002 2001 2000
-------- -------- --------
U.S. Federal statutory rates on income from operations
benefit (provision)....................................... E 5,967 E 932 E(10,924)
Tax differential on foreign income (loss)................... 474 3,521 (869)
Valuation allowance......................................... (6,356) (6,138) 11,676
Other....................................................... 179 1,602 --
------- ------- --------
E 264 E (83) E (117)
======= ======= ========
|
Deferred tax assets are composed of the following:
DECEMBER 31
-------------------
2002 2001
-------- --------
German tax loss carryforwards............................... E -- E 72,010
Basis difference between income tax and financial reporting
with respect to German operating pulp mill................ 37,442 693
Derivative financial instruments............................ 10,983 --
U.S. tax loss carryforwards................................. 5,440 6,820
Swiss tax loss carryforwards................................ -- 3,462
-------- --------
53,865 82,985
Valuation allowance......................................... (43,728) (72,682)
-------- --------
Net deferred tax asset.................................... E 10,137 E 10,303
======== ========
|
During 2002, the Company instituted a plan to reorganize its German
subsidiaries. As a part of the plan, the German tax basis of the Company's
operating pulp mill will be increased to the extent of available German tax loss
carryforwards. The reorganization together with other adjustments resulted in a
reduction of losses being carried forward from December 31, 2001. Further, the
Company is the subject of income tax audits in Germany on a continuing basis
which may result in changes to the amounts in the preceding table. Because of
this and other uncertainties regarding future amounts of taxable income in
Germany, the Company has provided a valuation reserve for much of the German
deferred tax assets. However, management believes that, while realization of the
net deferred tax asset in Germany is not assured, it is more likely than not
that it will be realized. At December 31, 2002, the Company has no significant
German tax loss carryforward amount.
74
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. INCOME TAXES (CONTINUED)
The Company's U.S. net operating losses amount to approximately E16,000 at
December 31, 2002, which will expire in years ending in 2021, if not used.
Management believes that these tax loss carryforwards are not likely to be
utilized under current circumstances and has fully reserved any resulting
potential tax benefit. Further, the Company fully reserved any tax benefit which
resulted from the Swiss tax loss carryforwards in 2001 because of uncertainties
as to their use. There were no Swiss tax loss carryforwards at
December 31, 2002.
Income (loss) from foreign source operations amounted to E(3,275), E2,366
and E32,749 for the years ended December 31, 2002, 2001 and 2000, respectively.
These amounts are intended to be indefinitely reinvested in operations. Since
available-for-sale securities are primarily securities held by foreign
subsidiaries and the proceeds are expected to be reinvested, no tax has been
provided in the determination of other comprehensive income for the years ended
December 31, 2002, 2001 and 2000.
NOTE 10. SHAREHOLDERS' EQUITY
In a prior year, the Company issued one attached preferred share purchase
right for each outstanding share of beneficial interest. A total of 11,958,993
rights were issued which allow the holder to acquire from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock at a
price of U.S. $75 per one one-hundredth of a preferred share. The rights will
expire on December 31, 2003. The Company has the right to repurchase the rights
for U.S. $.01 each.
The Company has reserved 110,000 Series A Junior Participating Preferred
Shares in connection with the rights. The preferred shares are entitled to
quarterly dividends of U.S. $10 per share and have 100 votes per share. However,
the preferred shares will be entitled to an aggregate dividend of 100 times any
dividends declared on shares of beneficial interest and an aggregate of 100
times any payment to shares of beneficial interest on merger or liquidation.
Also, during a prior year, the Company authorized the issuance of
3.5 million shares of Cumulative Retractable Convertible Preferred Shares,
Series B at a price of U.S. $20 per share. These shares have a cumulative
dividend rate of up to 4%, a liquidation preference of $20 per share plus unpaid
dividends, a redemption right beginning January 1, 2004, at $20 per share plus
unpaid dividends, and may convert up to 10% of the issued and outstanding shares
into shares of beneficial interest based on dividing the issue price plus unpaid
dividends by $20 per share.
NOTE 11. STOCK-BASED COMPENSATION
The Company has a non-qualified stock option plan which provides for options
to be granted to officers and employees to acquire a maximum of 3,600,000 shares
of beneficial interest including options for 130,000 shares to trustees who are
not officers or employees.
During 2002, options to acquire 18,000 shares of beneficial interest at
U.S. $7.46 per share were granted to trustees of the Company which vest
one-third at the grant date and one-third each of the next two years. The
options expire in ten years. The weighted fair value of these options was
U.S. $2.07 each. The options granted to one trustee expired upon his resignation
in 2002.
During 2000, options to acquire 1,600,000 shares of beneficial interest at
U.S. $6.375 per share were granted to officers and employees of the Company
which vest one-third at grant date and one-third each
75
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. STOCK-BASED COMPENSATION (CONTINUED)
for the next two years. These options expire in ten years. The weighted fair
value of these options was U.S. $3.60 each.
Following is a summary of the status of the plan during 2002, 2001 and 2000:
WEIGHTED
NUMBER OF AVERAGE EXERCISE
SHARES PRICE
--------- -------------------
(IN U.S. DOLLARS)
Outstanding at December 31, 1999............................ 765,500 $10.03
Granted..................................................... 1,600,000 6.375
Exercised................................................... (159,500) 6.00
---------
Outstanding at December 31, 2001 and 2000................... 2,206,000 7.67
Granted..................................................... 18,000 7.46
Cancelled................................................... (6,000) 7.46
---------
Outstanding at December 31, 2002............................ 2,218,000 $ 7.67
========= ======
|
Following is a summary of the status of options outstanding at December 31,
2002:
OUTSTANDING OPTIONS EXERCISABLE OPTIONS
---------------------------------------------------------- -------------------------------
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE WEIGHTED
CONTRACTUAL EXERCISE AVERAGE EXERCISE
EXERCISE PRICE RANGE NUMBER LIFE PRICE NUMBER PRICE
-------------------- --------- ----------- -------- --------- -------------------
(IN U.S. DOLLARS) (IN U.S. DOLLARS)
6.$00 - 6.375 1,770,000 7.0 $ 6.34 1,770,000 $ 6.34
7.46 12,000 9.3 7.46 4,000 7.46
8.50 - 11.66 231,500 4.1 9.19 231,500 9.19
16.89 - 18.47 204,500 2.9 17.50 204,500 17.50
|
The fair value of each option granted is estimated on the grant date using
the Black Scholes Model. The assumptions used in calculating fair value are as
follows:
2002 2001 2000
-------- -------- --------
Risk-free interest rate..................................... 8.03% -- 8.5%
Expected life of the options................................ 3 years -- 2 years
Expected volatility......................................... 34.7% -- 78.4%
Expected dividend yield..................................... 0.0% -- 0.0%
|
76
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. EARNINGS PER SHARE
Earnings per share data for years ended December 31 is summarized as
follows:
NET INCOME (LOSS)
------------------------------
2002 2001 2000
-------- -------- --------
Net income (loss) available to shareholders of beneficial
interest.................................................. E(6,322) E(2,823) E32,013
======= ======= =======
|
SHARES
------------------------------------
2002 2001 2000
---------- ---------- ----------
Weighted average number of shares outstanding -- basic... 16,774,515 16,874,899 16,778,962
Effect of dilutive securities:
Options................................................ -- -- 365,528
---------- ---------- ----------
Weighted average number of shares
outstanding -- diluted................................. 16,774,515 16,874,899 17,144,490
========== ========== ==========
|
For 2002 and 2001, options and warrants were not included in the computation
of diluted earnings per share because they were anti-dilutive. Warrants were not
dilutive in 2000.
NOTE 13. BUSINESS SEGMENT INFORMATION
The Company operates in two reportable business segments: pulp and paper.
The segments are managed separately because each business requires different
production and marketing strategies.
The pulp segment consists of a single operating mill located in Germany
which produces and markets kraft pulp. The paper segment consists of two mills
located in Germany and one located in Switzerland. The Swiss mill was acquired
in December 2001, and its results of operations are included for 2002.
Both segments operate in industries which are cyclical in nature and their
markets are affected by fluctuations in supply and demand in each cycle. These
fluctuations have significant effect on the cost of materials and the eventual
sales prices of products.
77
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. BUSINESS SEGMENT INFORMATION (CONTINUED)
Summarized financial information concerning the segments is shown in the
following table:
PULP PAPER TOTAL
-------- -------- --------
2002
Sales to external customers................................. E130,173 E97,710 E227,883
Intersegment net sales...................................... 4,878 -- 4,878
Income (loss) from operations............................... 4,773 (1,818) 2,955
Segment income (loss) including gain on financial derivative
instruments for pulp operations of E23,429................ 16,557 (1,928) 14,629
Segment assets.............................................. 405,002 29,438 434,440
Capital expenditures........................................ 8,426 5,374 13,800
RECONCILIATIONS
Loss:
Total income for reportable segments...................... E 14,629
Elimination of intersegment profits....................... 3,391
Loss on financial derivative instruments, construction in
progress financing...................................... (30,108)
Unallocated amounts, other corporate expenses............. (5,463)
--------
Consolidated loss before income taxes and minority
interest.............................................. E(17,551)
========
Assets:
Total assets for reportable segments...................... E434,440
Stendal pulp mill under construction...................... 223,386
Intersegment investments and receivables.................. (67,476)
Other unallocated amounts................................. 9,400
--------
Consolidated total assets............................... E599,750
========
|
PULP PAPER TOTAL
-------- -------- --------
2001
Sales to external customers................................. E146,245 E58,756 E205,001
Intersegment net sales...................................... 5,795 -- 5,795
Income (loss) from operations............................... 19,854 (2,476) 17,378
Segment income (loss) including loss on financial derivative
instruments for pulp operations of E2,504................. 4,546 (3,230) 1,316
Segment assets.............................................. 374,287 53,198 427,485
Capital expenditures........................................ 7,416 2,681 10,097
RECONCILIATIONS
Loss:
Total income for reportable segments...................... E 1,316
Elimination of intersegment profits....................... 2,541
Unallocated amounts, other corporate expenses............. (6,597)
--------
Consolidated loss before income taxes................... E (2,740)
========
|
78
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. BUSINESS SEGMENT INFORMATION (CONTINUED)
PULP PAPER TOTAL
-------- -------- --------
Assets:
Total assets for reportable segments...................... E427,485
Intersegment receivable................................... (7,365)
Other unallocated amounts................................. 9,473
--------
Consolidated total assets............................... E429,593
========
|
PULP PAPER TOTAL
-------- -------- --------
2000
Sales to external customers................................. E159,713 E85,346 E245,059
Intersegment net sales...................................... 1,378 -- 1,378
Income from operations...................................... 54,999 402 55,401
Segment income (loss)....................................... 34,679 (302) 34,377
Segment assets.............................................. 402,804 46,087 448,891
Capital expenditures........................................ 23,766 3,262 27,028
RECONCILIATIONS
Income:
Total income for reportable segments...................... E 34,377
Elimination of intersegment profits....................... 1,496
Unallocated amounts, other corporate expenses............. (3,743)
--------
Consolidated income before income taxes................. E 32,130
========
Assets:
Total assets for reportable segments...................... E448,891
Intersegment receivable................................... (24,125)
Other unallocated amounts................................. 4,969
--------
Consolidated total assets............................... E429,735
========
|
Income (loss) from operations stated above does not include any allocation
of corporate general, administrative and other expenses.
The following table presents net sales to external customers by geographic
area based on location of the customer.
2002 2001 2000
-------- -------- --------
Germany..................................................... E 88,809 E 94,486 E103,591
Other European Union........................................ 77,658 71,954 83,444
Eastern European and other.................................. 61,416 38,561 58,024
-------- -------- --------
E227,883 E205,001 E245,059
======== ======== ========
|
79
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. BUSINESS SEGMENT INFORMATION (CONTINUED)
The following table presents total assets by geographic area based on
location of the asset.
2002 2001 2000
-------- -------- --------
Germany..................................................... E590,350 E395,794 E424,766
Other....................................................... 9,400 33,799 4,969
-------- -------- --------
E599,750 E429,593 E429,735
======== ======== ========
|
The Company also had labor agreements which expired on December 31, 2002.
The Company is in negotiations with the employee union on a new labor agreement.
In 2002, pulp sales to one customer amounted to 12% of total pulp sales, pulp
sales to two customers amounted to 22% in 2001, and pulp sales to one customer
amounted to 27% in 2000.
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of other financial instruments at December 31 is summarized
as follows:
2002 2001
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
Cash and cash equivalents........................... E 30,261 E 30,261 E 11,741 E 11,741
Cash restricted..................................... 48,254 48,254 33,388 33,388
Note receivable..................................... -- -- 5,475 5,475
Notes payable....................................... 15,832 15,832 7,392 7,392
Long-term debt...................................... 368,184 368,184 235,231 235,231
Interest rate contract liability.................... 30,108 30,108 -- --
Foreign currency exchange contracts -- net asset.... 1,489 1,489 67 67
|
The fair value of cash and cash equivalents is based on reported market
value. The fair value of cash restricted was equal to its carrying amount
because it is in an account which bears a market rate of interest. The value of
the note receivable is based on the value of similar long-term receivables. The
fair value of notes payable was based on the value of similar debt incurred in
the pulp industry. The fair value of long-term debt was determined using
discounted cash flows at prevailing market rates. The other long-term
liabilities which have a carrying value of E2,906 and E3,441 at December 31,
2002 and 2001, respectively, are primarily an accrued environmental liability at
the pulp mill. This liability may be partially reimbursable. Further, the
Company cannot estimate at this time when these amounts will be paid. Therefore,
the fair value of other long-term liabilities cannot be determined. The fair
values of the interest rate and foreign currency exchange contracts are obtained
from dealer quotes. These values represent the estimated amount the Company
would receive or pay to terminate agreements taking into consideration current
interest rates, the creditworthiness of the counterparties and current foreign
currency exchange rates.
80
MERCER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15. COMMITMENTS AND CONTINGENCIES
At December 31, 2002 and 2001, the Company recorded a liability for
environmental conservation expenditures of E2,309 and E2,046, respectively.
Management believes the liability amount recorded is sufficient, however, future
regulations in Germany may result in additional liability.
The Company is required to pay certain charges based on water pollution
levels at its mills. Unpaid charges can be reduced by investing in qualifying
equipment that results in less water pollution. The Company believes that
equipment investments already made will offset most of these charges, but it has
not received final determination from the appropriate authorities. Accordingly,
a liability for these water charges has only been recognized to the extent that
equipment investments have not been made.
As provided in a purchase agreement for a subsidiary company in a prior
year, the Company may be required to pay up to an additional E2,241 based on
profitability criteria being met during the period January 1 through
September 30, 2003. The purchase agreement also requires additional payments
based on any sales of the subsidiary's real estate assets. At December 30, 2002,
the Company exchanged its 80% interest in this subsidiary for a 49% interest in
Equitable Industries Limited Partnership ("Equitable") (resulting in a 39%
indirect interest in the subsidiary) which represents the equity method
investments on the December 31, 2002, consolidated balance sheet. The Company
recorded this exchange based on the carrying value of the subsidiary resulting
in no gain or loss being recorded. The exchange agreement provides that the
Company is to be indemnified by Equitable if any of the contingent payments are
to be made. This was treated as a nonmonetary transaction in 2002; there were no
significant nonmonetary transactions in 2001 and 2000.
The Company is involved in various matters of litigation arising in the
ordinary course of business. In the opinion of management, the estimated outcome
of such issues will not have a material effect on the Company's financial
statements.
81
MERCER INTERNATIONAL INC.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
QUARTERLY FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------- ------------
2002(1)
Net Sales......................................... E62,477 E63,660 E 56,905 E56,090
Gross profit...................................... 7,516 11,540 7,969 (1,356)
Income before extraordinary items and cumulative
effect of a change in accounting................ (5,389) 18,545 (20,597) 1,119
Income before extraordinary items and cumulative
effect of a change in accounting, per share*.... (0.32) 1.08 (1.23) 0.07
Net income........................................ (5,389) 18,545 (20,597) 1,119
2001
Net Sales......................................... E60,363 E58,767 E 49,979 E47,338
Gross profit...................................... 14,835 9,260 5,236 2,437
Income (loss) before extraordinary items and
cumulative effect of a change in accounting..... 4,962 61 197 (8,043)
Income (loss) before extraordinary items and
cumulative effect of a change in accounting, per
share*.......................................... 0.29 0.00 0.01 (0.48)
Net income (loss)................................. 4,962 61 197 (8,043)
|
* on a diluted basis
(1) The Company acquired its specialty paper mill in Landqart, Switzerland
effective December 2001 and sold it effective December 2002. The amounts for
2002 include the results from the Landqart mill, while the amounts for 2001
do not include the results from the Landqart mill.
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the SECURITIES
EXCHANGE ACT OF 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MERCER INTERNATIONAL INC.
By: /s/ JIMMY S.H. LEE
-----------------------------------------
Jimmy S.H. Lee
Dated: March 28, 2003 Chairman
|
Pursuant to the requirements of the SECURITIES EXCHANGE ACT OF 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ JIMMY S.H. LEE
-------------------------------------------
Jimmy S.H. Lee
Chairman, Chief Executive Officer and Trustee Date: March 28, 2003
/s/ MICHEL ARNULPHY
-------------------------------------------
Michel Arnulphy Date: March 28, 2003
Trustee
/s/ C.S. MOON
-------------------------------------------
C.S. Moon Date: March 28, 2003
Trustee
/s/ MAARTEN REIDEL
-------------------------------------------
Maarten Reidel Date: March 28, 2003
Chief Financial Officer and Trustee
/s/ WILLIAM MCCARTNEY
-------------------------------------------
William McCartney Date: March 28, 2003
Trustee
/s/ GRAEME WITTS
-------------------------------------------
Graeme Witts Date: March 28, 2003
Trustee
/s/ JONG L. RYU
-------------------------------------------
Jong L. Ryu Date: March 28, 2003
Trustee
|
83
CERTIFICATION OF PERIODIC REPORT
I, Jimmy S.H. Lee, certify that:
1. I have reviewed this annual report on Form 10-K of Mercer
International Inc. (the "Registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ JIMMY S.H. LEE
---------------------------------------------
Jimmy S.H. Lee
Date: March 28, 2003 Chief Executive Officer
|
84
CERTIFICATION OF PERIODIC REPORT
I, Maarten Reidel, certify that:
1. I have reviewed this annual report on Form 10-K of Mercer
International Inc. (the "Registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
(a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to record,
process, summarize and report financial data and have identified for the
Registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ MAARTEN REIDEL
---------------------------------------------
Maarten Reidel
Date: March 28, 2003 Chief Financial Officer
|
85
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
3.1 (a)* Restated Declaration of Trust of the Company as filed with
the Secretary of State of Washington on June 11, 1990
together with an Amendment to Declaration of Trust dated
December 12, 1991.
(b)* Amendments to Declaration of Trust dated July 8, 1993;
August 17, 1993; and September 9, 1993.
3.2* Trustees' Regulations dated September 24, 1973.
4.1 Shareholder Rights Plan. Incorporated by reference from
Form 8-A dated August 17, 1993.
10.1 Acquisition Agreement among Treuhandanstalt, Dresden Papier
AG, Dresden Papier Holding GmbH, Mercer
International Inc., and Shin Ho Paper Mfg. Co., Ltd.
Incorporated by reference from Form 8-K dated
September 20, 1993.
10.2 Acquisition Agreement among Treuhandanstalt, Zellstoff-und
Papierfabrik Rosenthal GmbH, Raboisen
Einhundertsechsundfunfzigste Vermogensverwaltungs-
gesellschaft GmbH, to be renamed ZPR Zellstoff-und
Papierfabrik Rosenthal Holding GmbH, Mercer
International Inc. and 448380 B.C. Ltd. dated July 3,
1994. Incorporated by reference from Form 8-K dated
July 3, 1994.
10.3 Amended and Restated 1992 Stock Option Plan. Incorporated by
reference from Form S-8 dated March 2, 2000.
10.4 2002 Employee Incentive Bonus Plan.
10.5* Form of Separation Agreement between Mercer
International Inc. and Arbatax International Inc.
10.6 English Translation of a Loan Agreement in the amount of
DM508,000,000 between Zellstoff-und Papierfabrik
Rosenthal GmbH & Co. KG, Blankenstein on the one hand and
Bayerische Hypotheken-und Wechsel-Bank Aktiengesellschaft,
Munich and Bayerische Vereinsbank Aktiengesellschaft,
Munich on the other hand dated July 6, 1998. Incorporated
by reference from Form 8-K dated July 16, 1998.
10.7 English Translation of Agreement on the obligations of the
shareholders between Mercer International Inc.,
Spezialpapierfabrik Blankenstein GmbH and Zellstoff-und
Papierfabrik Rosenthal Verwaltungs GmbH and Bayerische
Hypo-und Vereinsbank Aktiengesellschaft dated
February 11, 1999.
10.8* Amended and Restated Employment Agreement between Mercer
International Inc. and Jimmy S.H. Lee dated November 20,
2000.
10.9 English Translation of Amendment Agreement No. 4 dated
December 13, 2000 between Zellstoff-und Papierfabrik
Rosenthal GmbH & Co. KG and Bayerische Hypo-und
Vereinsbank Aktiengesellschaft to the Loan Agreement dated
July 6, 1998. Incorporated by reference from Form 8-K
dated January 23, 2001.
10.10* Purchase Agreement between Sihl and Mercer
International Inc. dated December 14, 2001 relating to the
acquisition of Landqart AG.
10.11 Project Financing Facility Agreement dated August 26, 2002
between Zellstoff Stendal GmbH and Bayerische Hypo-und
Vereinsbank AG. Incorporated by reference from Form 8-K
dated September 10, 2002.
10.12 Shareholders' Undertaking Agreement dated August 26, 2002
among Mercer International Inc., Stendal Pulp
Holdings GmbH, RWE Industrie-Losungen GmbH, AIG Altmark
Industrie AG and FAHR Beteiligungen AG and Zellstoff
Stendal GmbH and Bayerische Hypo-und Vereinsbank AG.
Incorporated by reference from Form 8-K dated
September 10, 2002.
|
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ------------------------------------------------------------
10.13 Shareholders' Agreement dated August 26, 2002 among
Zellstoff Stendal GmbH, Stendal Pulp Holdings GmbH, RWE
Industrie- Losungen GmbH and FAHR Beteiligungen AG.
10.14 Loan Agreement dated August 26, 2002 among Babcock & Brown
Investment Management Partners LP, Babcock & Brown
Investment Management Partners LP et. al. and Mercer
International Inc. Incorporated by reference from
Form 8-K dated September 10, 2002.
10.15 Loan Agreement dated August 26, 2002 among MFC Merchant
Bank S.A., MFC Merchant Bank S.A. et. al. and Mercer
International Inc. Incorporated by reference from
Form 8-K dated September 10, 2002.
10.16 Contract for the Engineering, Design, Procurement,
Construction, Erection and Start-Up of a Kraft Pulp Mill
between Zellstoff Stendal GmbH and RWE Industrie-
Losungen GmbH dated August 26, 2002.
10.17 Purchase and Sale Agreement dated December 30, 2002 between
Equitable Industries Limited Partnership and Mercer
International Inc. relating to the sale of Landqart AG.
10.18 Employment Agreement effective July 1, 2002 between ZPR
Zellstoff-und Papierfabrik Rosenthal Holding GmbH and
Maarten Reidel.
10.19 Form of Trustee's Indemnity Agreement between Mercer
International Inc. and its Trustees.
10.20 English Translation of Agreement between Zellstoff-und
Papierfabrik Rosenthal GmbH & Co. KG, Blankenstein a.d.
Saale and Bayerische Hypo-und Vereinsbank AG dated
May 27, 2002.
21 List of Subsidiaries of Registrant.
23 Independent Auditors Consent.
99.1 Certification of Periodic Report.
99.2 Certification of Periodic Report.
|
* Filed in Form 10-K for prior years.
EXHIBIT 10.4
MERCER INTERNATIONAL INC.
2002 EMPLOYEE INCENTIVE BONUS PLAN
This 2002 Employee Incentive Bonus Plan (the "Plan") provides for the
award of interests in the Company's incentive bonus pool to employees of Mercer
International Inc. (the "Company").
1. PURPOSE
The purpose of this Plan is to attract and retain the services of
people with training, experience and ability and to provide additional incentive
to such persons by granting them the opportunity to participate in the profits
of the Company.
2. INCENTIVE BONUS POOL
The Company hereby establishes an annual incentive bonus pool ("Bonus
Pool") which shall equal 5% of the Company's Net Income (as defined herein) for
each fiscal year this Plan is in effect. The Board of Trustees of the Company
(the "Board") may increase or decrease the percentage of Net Income which is
included in the Plan for each fiscal year on or before January 31 of the
relevant year. As used herein, "Net Income" means net income as shown on the
Company's annual financial statements before provision for income taxes, before
extraordinary items, and, for any fiscal year, at the discretion of the Board,
non-cash gains or losses.
3. GRANT OF PERFORMANCE UNITS
3.1. The authority to award interests in the Bonus Pool ("Units") shall be
vested solely in the Board. The Board may from time to time delegate its
authority hereunder to a committee of two or more members of the Board appointed
by the Board. The Board shall have the authority, in its sole discretion, to
determine all matters relating to the Units, including the persons to be granted
Units (if any), the number of Units and all other terms and conditions of the
Units. The Board may also interpret the Plan; prescribe, amend and rescind rules
and regulations relating to this Plan; amend the Plan from time to time (subject
to the limitation set forth in Section 7); and make all other determinations
necessary or advisable for the administration of the Plan. The interpretation
and construction by the Board of any terms or provisions of this Plan or any
Units issued hereunder, or any rule or regulation promulgated in connection
herewith, shall be conclusive and binding on all interested parties. Nothing in
this Plan confers or is deemed to confer upon any person a right to any award of
Units or any right to continue in the employ of the Company.
3.2. Units may be granted only to persons who, at the time the Units are
granted, are employees, officers and trustees or directors who are employees of
the Company or any of its subsidiaries as determined in the discretion of the
Board. Units granted hereunder shall be in such amount annually without
restriction as determined by the Board. Units may be granted at any time during
the fiscal year with respect to that fiscal year. Units shall evidence an
interest in
- 2 -
the Bonus Pool only for the year in which they are granted and shall not entitle
any participant to a grant of Units or any interest in the Bonus Pool in any
subsequent year.
3.3. The amount payable to a participant in the Bonus Pool shall equal the
percentage of the total number of Units granted by the Company during the
applicable fiscal year which are held by a participant at the end of the fiscal
year. Amounts payable under this Plan shall be paid within 30 days of the filing
of the Company's Form 10-K for the relevant year.
4. TERMINATION OF EMPLOYMENT
4.1. In the event that a participant in this Plan ceases to be an employee,
officer or Trustee of the Company or any of its subsidiaries as a result of
termination for cause during a fiscal year in which such person has been granted
Units hereunder, the Units so granted shall be cancelled and the participant
shall have no right to the Bonus Pool with respect thereto.
4.2. In the event that a participant in this Plan ceases to be an employee,
officer or Trustee of the Company or any of its subsidiaries as a result of
death or disability, the participant shall be entitled to payment under this
Plan as if such participant had been an employee, officer or Trustee of the
Company or any of its subsidiaries for the remainder of the applicable year. In
the event a participant dies prior to payment of any amounts to which they would
otherwise be entitled hereunder, such payments shall be made to the
participant's estate.
4.3 In the event that a participant in this Plan ceases to be an employee,
officer or Trustee of the Company or any of its subsidiaries, other than as
provided in Sections 4.1 and 4.2, during a fiscal year in which such person has
been granted Units hereunder, the number of Units which have been granted to
such person shall be reduced, so that the new number of Units equals that
percentage of the Units previously granted determined by the number of weeks
such person was employed during the year divided by 52.
5. PAYMENT IN STOCK OF THE COMPANY
In the event that the Board determines for any fiscal year that payment
of the Bonus Pool in cash would impair the Company's working capital, the
Company may pay the Bonus Pool in shares of the Company's Common Stock. In the
event that the Company decides to pay the Bonus Pool in shares of Common Stock,
the shares shall be valued based on the closing price of the shares on the
NASDAQ National Market System on March 31 (other the most recent trading day if
there is no trading on NASDAQ/NMS on March 31) of the year following the year
for which the Bonus Pool is payable. The maximum number of shares of Common
Stock which may be issued under this Plan is One Hundred Thousand (100,000).
Notwithstanding the Board's decision to pay the Bonus Pool in shares of Common
Stock, any person who is subject to the reporting requirements of Section 16(a)
of the Securities Exchange Act of 1934, as amended ("Reporting Persons"), shall
not be paid in shares of Common Stock and shall be paid solely in cash.
- 3 -
6. CHANGE IN CONTROL
6.1. In the event of a Change in Control of the Company, the amount of the
Bonus Pool for the year in which the Change in Control occurs shall be
determined based on Net Income for the entire fiscal year of the Company
regardless of the date of the Change in Control. For purposes hereof, "Change in
Control" means any consolidation or merger of the Company in which the Company
is not the surviving entity, any transaction in which a person (other than an
affiliate of the Company) acquires all or substantially all of the assets of the
Company, any person files a report on Schedule 13D or 14D-1 pursuant to the
Exchange Act disclosing that such person is the beneficial owner of 50% or more
of the outstanding shares of Common Stock of the Company, or there shall occur a
change in the composition of the Board in which Continuing Trustees cease for
any reason to constitute a majority of the Board then in office. "Continuing
Trustees" means individuals who at the date this Plan is adopted are members of
the Board and any other Trustees of the Company whose election by the Board, or
whose nomination for election by the shareholders of the Company, was approved
by a vote of at least two-thirds of the Trustees then in office who either were
Trustees at the date this Plan was adopted or whose election or nomination for
election was previously so approved.
7. AMENDMENT AND TERMINATION
7.1. The Board may at any time suspend, amend or terminate this Plan;
PROVIDED, however, that the approval of the holders of a majority of the
Company's outstanding Shares is necessary within twelve (12) months before or
after the adoption by the Board of any amendment which will:
(a) increase the number of Shares which are to be reserved for
issuance under this Plan;
(b) permit the granting of Shares to a class of persons other than
those presently permitted to receive Shares under this Plan; or
(c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.
7.2. This Plan shall continue in effect until the earlier of: (a) December
31, 2007; or (b) the termination of this Plan by action of the Board. No Units
may be granted for any year commencing after such termination or during any
suspension of this Plan.
Exhibit 10-7
(Official translation from German)
156
Annex 14
Agreement on the obligations of the shareholders
Agreement on the obligations of the shareholders
Between
Mercer International, Inc.
(hereinafter referred to as "MERCER")
Spezialpapierfabrik Blankenstein GmbH
(hereinafter referred to as "SPEZIALPAPIERFABRIK"),
Zellstoff- und Papierfabrik Rosenthal Verwaltungs-GmbH
(hereinafter referred to as "VERWALTUNGS-GMBH")
on the one side
and
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHFT
(hereinafter referred to as "HypoVereinsbank")
on the other side
Zellstoff- und Papierfabrik Rosenthal GmbH & Co KG (hereinafter referred to
as "BORROWER") is a joint-venture company founded in the legal form of a GmbH
& Co KG on 31.12.1997, with Zellstoff- und Papierfabrik Rosenthal
Verwaltungs-GmbH as partner with unlimited liability, and Spezialpapierfabrik
Blankenstein GmbH as limited partner.
The BORROWER intends to convert the existing pulp mill in Blankenstein/
Thuringen into a mill producing on sulphate basis, in which bleached kraft
pulp from softwood is to be produced (hereinafter referred to as "PROJECT").
MERCER agreed to function as a sponsor.
MERCER owns (indirectly through Zellstoff- und Papierfabrik Rosenthal Holding
GmbH, Heidenau) 99% of shares in the SPEZIALPAPIERFABRIK, (indirectly through
SPEZIALPAPIERFABRIK) 100% of shares in the VERWALTUNGS-GMBH, and (indirectly
through SPEZIALPAPIERFABRIK) 100% of participation in a limited partnership
of the BORROWER.
SPEZIALPAPIERFABRIK owns 100% of shares in VERWALTUNGS-GMBH.
BAYERISCHE VEREINSBANK AKTIENGESELLSCHAFT and BAYERISCHE HYPOTHEKEN- UND
WECHSEL-BANK agreed, as INITIAL LENDERS, to provide the BORROWER with a
project financing loan in the amount of DM 508 million on the basis of the
LOAN CONTRACT of 6.7.1998 (hereinafter referred to as "LOAN CONTRACT").
Effective as of 31.8.1998, BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK
AKTIENGESELLSCHAFT merged with BAYERISCHE VEREINSBANK AKTIENGESELLSCHAFT,
wherein the name of the acquiring company was simultaneously changed into
BAYERISCHE HYPO- UND VEREINSBANK AKTIENGESELLSCHAFT.
The signing of this agreement on the obligations of the shareholders is a
suspense condition for the obligations of the BANKS under the LOAN CONTRACT.
This point having been cleared, MERCER, SPEZIALPAPIERFABRIK, and
VERWALTUNGS-GMBH (hereinafter referred to as "SHAREHOLDERS") have agreed with
the BANKS on the following:
1. DEFINITIONS
The terms and notions used in this Agreement, unless otherwise defined,
shall have the meaning ascribed to them in the LOAN CONTRACT.
2. Obligations of Mercer
MERCER undertakes towards the banks:
a) to maintain a direct or indirect participation interest of at
least 51% in the capital of SPEZIALPAPIERFABRIK and
VERWALTUNGS-GMBH as well as in the limited liability capital
of the BORROWER, unless a third party that owns at least 51%
of the particular capital or of the participation in the
limited liability company, assumes all obligations of MERCER
resulting from this Agreement after consent has been given,
in advance and in writing, by the REPRESENTATIVE (as
subsequently defined in Point 6 (d) of this Agreement), which
must not be wilfully refused taking into account the
interests of the BANKS, and
b) to sufficiently fund SPEZIALPAPIERFABRIK so that
SPEZIALPAPIER-FABRIK can meet its obligations set out under
Points 3 (a) or 3 (b) of this Agreement, and further to
guarantee that SPEZIALPAPIERFABRIK and VERWALTUNGS-GMBH take
proper care to meet their obligations towards the BANKS
resulting from this Agreement.
3. Obligations of Spezialpapierfabrik
Spezialpapierfabrik undertakes towards the banks to do the following:
a) It will ensure that the BORROWER has at its disposal, at the
latest before the BORROWER'S first drawing from the loan under
the LOAN CONTRACT, capital contributions and/or subordinated
partner loans on the basis of the provision under Article 4.1
(h) of the LOAN CONTRACT in the total amount of at least DM 45
millions.
b)
(i) in case the total construction costs (as shown in the
table on page 2 of the FIRST CASH FLOW MODEL under "Total
Construction Costs") exceed the amount of DM 572,150,000
(according to a confirmation issued by the TECHNICAL
ADVISOR) and/or the total financing costs (as shown in
the table on page 3 of the FIRST CASH FLOW MODEL under
"Total Financing Costs") exceed the amount of DM
89,709,000, upon request made by the REPRESENTATIVE,
SPEZIALPAPIERFABRIK shall provide additional funds from
own sources and/or additional subordinated partner loans
in the amount of up to DM 38,800,000, doing so in both
cases to an amount that is reasonably considered
necessary by the REPRESENTATIVE in order for the BORROWER
to be able to finance the amounts exceeding the
abovementioned costs (while taking into consideration the
availability of amounts under the MAIN TRANCHE pursuant
to Article 5.4 of the LOAN CONTRACT); however, this shall
not apply, if the BORROWER has arranged that sufficient
funds are transferred from the PARTNER ACCOUNT to the
REVENUE SUMMARY ACCOUNT, or has otherwise proved, to full
satisfaction of the REPRESENTATIVE, that the BORROWER has
at its disposal additional internal funds and/or
subordinated partner loans to pay for the exceeding costs.
(ii) SPEZIALPAPIERFABRIK further undertakes, after the expiry
of the COMPLETION DATE, upon request made by the
REPRESENTATIVE, to provide the BORROWER with additional
internal funds from own resources and/or subordinated
partner loans up to the amount of the difference of DM 25
million less all actually provided internal funds from
own sources and/or subordinated partner loans including
all amounts actually drawn under the OWN CAPITAL
COLLATERAL, and to prevent the commencement of any
bankruptcy proceedings started against the BORROWER,
doing so to an amount that, in reasonable consideration
of the REPRESENTATIVE and under application of due
diligence of a prudent businessman, is necessary to
permanently ward off the circumstances causing the danger
of commencing bankruptcy proceedings against the BORROWER
c) In addition, SPEZIALPAPIERFABRIK undertakes make the BORROWER
meet, in due form and time according to the applicable law,
its obligations pursuant to Article 19.4.1 (r) of the LOAN
CONTRACT.
d) SPEZIALPAPIERFABRIK undertakes not to demand any payment from
the BORROWER under the SUBORDINATED LOANS, should this result
in the BORROWER breaching his obligations under Article
19.4.2 (d). Furthermore, SPEZIALPAPIERFABRIK shall ensure
that the agreement on SUBORDINATED LOANS agree, in form and
content, with the draft agreed upon with the BANKS (in
accordance with Annex 1 to this Agreement), and that
no amendment be made to the agreements regarding the
SUBORDINATED LOANS without a prior written approval by the
REPRESENTATIVE.
e) SPEZIALPAPIERFABRIK undertakes not to approve any reduction in
the limited-liability capital (as defined in Article 3 of the
Memorandum of Association of the BORROWER) of the BORROWER, as
long as principle amounts are owed under the LOAN CONTRACT.
f) SPEZIALPAPIERFABRIK undertakes to maintain its direct
participation interest in the capital of VERWALTUNGS-GMBH and
in the limited-liability capital of the BORROWER in the
amount of at least 51% (unless a prior written consent given
by the REPRESENTATIVE is procured, which must not be wilfully
refused).
g) SPEZIALPAPIERFABRIK undertakes
(i) not to recall Mr. Ron Aurell from his position of General
Manager of VERWALTUNGS-GMBH before the expiry of six
months from the COMPLETION DATE, unless another expert
experienced in the pulp and paper industry is appointed
to his position with consent given by the REPRESENTATIVE,
which consent must not be wilfully refused.
(ii) To appoint only experts experienced in the pulp and paper
industry or financial experts to the position of general
manager of VERWALTUNGS-GMBH after the expiry of this
period.
h) SPEZIALPAPIERFABRIK undertakes not to approve any addendum or
amendment to or waive of in relation to the Memorandum of
Association of the BORROWER, if this would substantially affect
the rights of the REPRESENTATIVE and the BANKS under the LOAN
CONTRACT.
i) SPEZIALPAPIERFABRIK undertakes to arrange for the issuance of
an EQUITY COLLATERAL in favour of the BANKS and the BORROWER
in the amount of DM 25 million, that serves as collateral for
its own obligation to provide internal funds from own sources
in accordance with the preceding Point 3 b (1) and (ii), and,
to the extent that it is provided in the form of a collateral
for provision of internal funds from own sources, must
essentially correspond with the draft attached in Annex 2 to
this Agreement. The EQUITY COLLATERAL shall be released by
the BANKS (A) to the extent, to which SPEZIALPAPIERFABRIK
provides funds in accordance with Point 3 (b) (i) or (ii), or
(B) after the COMPLETION DATE to the extent, to which funds -
that would otherwise be available for payout to
SPEZIALPAPIERFABRIK pursuant to Article 20.2 (b) of the LOAN
CONTRACT - the are remitted from the PARTNER ACCOUNT to a
security account held with VEREINSBANK, branch office in
Dresden under the name of the BORROWER, which security
account serves as a collateral for the obligations of
SPEZIALPAPIERFABRIK in accordance with Point 3 (b) (ii)
(irrespective of the fact, whether or not the BORROWER made
any profit in the immediately preceding business year). This
account must be pledged to the BANKS and the BORROWER as a
collateral for the SPEZIALPAPIERFABRIK's obligation to
provide funds from own sources
in accordance with Point 3 (b) (ii) of this Agreement
according to a reasonable pledge contract demanded by the
REPRESENTATIVE.
j) SPEZIALPAPIERFABRIK undertakes, as long as there exist any
due amounts to be repaid under the LOAN CONTRACT or some
other payment obligation under the LOAN CONTRACT, to provide
the REPRESENTATIVE with copies, in sufficient numbers for all
LENDERS, of the following documentation that must be prepared
in conformity with all relevant statutory and professional
requirements as well as according to generally accepted
accounting principles.
- as soon as available, however no later than ninety (90)
days after the end of every business year, a set of its
audited financial statements including a balance sheet,
income statement, auditor's report for
SPEZIALPAPIERFABRIK, and the additional taxation balance
sheet with regard to its participation as
limited-liability partner in the BORROWER;
- as soon as available, however no later than sixty (60)
days after the end of every business half-year, a set of
interim half-year financial statements including a
balance sheet and income statement;
- as soon as available, the tax returns and tax assessments
of SPEZIALPAPIERFABRIK as well as uniform and separate
determination of profits of the BORROWER in relation to
the revenue of SPEZIALPAPIERFABRIK and/or the BORROWER.
This financial information (except for the tax return and the
statements of determination of profits) must be prepared in the
English language or in English translation and certified by
SPEZIALPAPIERFABRIK, and handed over to the REPRESENTATIVE.
k) SPEZIALPAPIERFABRIK undertakes to provide the REPRESENTATIVE
with a copy of any SUBORDINATED LOAN [agreement] agreed upon
with the BORROWER.
The obligations of SPEZIALPAPIERFABRIK in accordance with
paragraphs (a), (b), (c), and (i) are valid also towards the
BORROWER as the beneficiary party pursuant to Section 328 of BGB
[German Civil Code].
4. Obligations of Mercer and Spezialpapierfabrik
MERCER and SPEZIALPAPIERFABRIK undertake to meet all essential
aspects of the obligations assumed under the PURCHASE CONTRACT of
July 3, 1994 concluded with the TREUHANDANSTALT, ANSTALT DES
OFFENTLICHEN RECHTS, with respect to the participation interests of
the BORROWER (in its subsequently amended version).
5. Obligations of the shareholders
The SHAREHOLDES undertake towards the BANKS:
a) not to demand any distribution of dividends or other payment
from the BORROWER and/or, in the case of MERCER, not to
demand such payout, that would result in the BORROWER to
breach its obligations under the LOAN CONTRACT.
b) Not to initiate any judicial proceedings against the BORROWER
and not to adopt any resolution on the liquidation or
dissolution of the BORROWER without prior written approval by
the REPRESENTATIVE, which must not be wilfully refused while
taking into consideration the interests of the BANKS; and
c) To immediately pay back the BORROWER any amount that they have
received from the BORROWER (including by way of offsetting
mutual receivables) (in their respective functions of a partner
of unlimited liability, partner with limited liability and, in
the case of SPEZIALPAPIERFABRIK, as lender of subordinated
loans), if this payment would result in the BORROWER to breach
its obligations under the LOAN CONTRACT, or - in the case of a
re-payment instalment under the SUBORDINATED LOAN - if such
payment was not yet due.
6. MISCELLANEOUS
a) This Agreement as well as the rights and obligations of the
SHAREHOLDERS and the BANKS are governed by the law of the
Federal Republic of Germany and shall be interpreted in
conformity with the law of the Federal Republic of Germany.
The place of performance of this Agreement shall be Munich.
Munich shall be the place of jurisdiction for any disputes
arising from or in connection with this Agreement. However,
the REPRESENTATIVE has the right, at his discretion, to
initiate judicial proceedings in any other jurisdiction,
where some assets of the SHAREHOLDERS are located.
b) MERCER herewith appoints SPEZIALPAPIERFABRIK to be its
domestic representative, however, only with regard to such
judicial proceedings that have been initiated against MERCER
in the Federal Republic of Germany in connection with this
Agreement.
c) Should a provision of this Agreement be or become fully or
partially invalid, the remaining provisions shall remain in
force. The invalid provisions shall be interpreted in
conformity with the will expressed by the parties and the
purpose of this Agreement.
d) HypoVereinsbank (called "REPRESENTATIVE" in this capacity)
represents any other bank, to which any rights and
obligations from this Agreement devolve, in all aspects of
this Agreement.
e) The BANKS have the right to transfer their rights and
obligations resulting from this Agreement to a third party,
as long as they transfer to this third party the shares of
their credit line [balances] in accordance with Article 30 of
the LOAN CONTRACT. The SHAREHOLDERS took note that according
to the terms and conditions of the DEUTSCHE AUSGLEICHSBANK
(hereinafter referred to as "DtA")
and/or of the KREDITANSTALT FUR WIEDERAUFBAU (hereinafter
referred to as "KfW) the BANKS my be bound to transfer their
rights and obligations resulting from this Agreement to DtA
and/or KfW, if the BANKS have committed themselves, towards
DtA and/or KfW, to assumption of liability for the loans
provided to the BORROWER.
f) Any addenda and amendments to this Agreement must be made in
writing.
g) This Agreement shall remain in force as long as any amounts
(capital, interest, dues or other) are owed under the LOAN
CONTRACT, wherein MERCER shall be released from all
obligations as soon as MECER, in conformity with Point 2 (a)
no longer owns at least 51% of shares or limited-liability
partner share in SPEZIALPAPIERFABRIK, VERWALTUNGS-GMBH, and
the BORROWER.
.................... .................................
Mercer International, Inc.
................... ............................................
Spezialpapierfabrik Blankenstein GmbH
.................... ..........................................................
Zellstoff- und Papierfabrik Rosenthal Verwaltungs-GmbH
Munich, 2.11.99
................... .........................................................
Bayerische Hypo- und Vereinsbank Aktiengesellschaft
|
We herewith undertake to act a domestic representative of Mercer
International, Inc. in accordance with the above Point 6 b).
................... ............................................
Spezialpapierfabrik Blankenstein GmbH
|
Exhibit 10.13
[LOGO]
Dr. Gustav-Adolf Lange
NOTAR
BEGLAUBIIGTE ABSCHRIFT
URKUNDE NR.117/2002L
SHAREHOLDERS' AGREEMENT
between
ZELLSTOFF STENDAL GMBH,
ARNEBURG,
STENDAL PULP HOLDING GMBH,
BERLIN,
RWE INDUSTRIE-LOSUNGEN GMBH,
DUISBURG,
FAHR BETEILIGUNGEN AKTIENGESELLSCHAFT,
KC I N
26 August 2002
60325 FRANKFURT AM MAIN
SENCKENBERGANLAGE 20-22
TELEFON (069)97130-0
TELEFAX (069)97130-100
Notarial Deed No. 117/2002
NEGOTIATED
in Frankfurt am Main on August 26, 2002
before me
the undersigned notary
in the district of the Appellate Court (OBERLANDESGERICHT) of Frankfurt am Main
Dr. Gustav-Adolf Lange,
with office at Senckenberganlage 20-22, 60325 Frankfurt am Main, who has
rendered himself on request to the law office of Clifford Chance Punder, Mainzer
Landstr. 46, D-60325 Frankfurt am Main/Germany, appeared today
1. Harald Gatzke, with business address at Niedergorner Damm 1, D-39596
Arneburg, Germany, identified by means of his German identity card No.
4941052360, acting not in his own name but in the name and on behalf of
Zellstoff Stendal GmbH, Niedergorner Damm 1, D-39596 Arneburg, Germany,
registered with the commercial register of the local court of Stendal
under HR B 2446 ("ZSG"), as managing director authorized to act jointly
with another managing director and under exemption from the
restrictions imposed by Section 181 of the German Civil Code;
2. Wolfram Ridder, with business address Charlottenstrasse 59, 10117
Berlin, identified by means of his German identity card No. 8856064425,
acting not in his own name but in the name and on behalf of:
a) Zellstoff Stendal GmbH, Niedergorner Damm 1, D-39596 Arneburg,
Germany, registered with the commercial register of the local
court of Stendal under HR B 2446 ("ZSG"), as managing director
authorized to act jointly with another managing director and
under exemption from the restrictions imposed by Section 181
of the German Civil Code; and
b) Stendal Pulp Holding GmbH, Charlottenstrasse 59, D-10117
Berlin, Germany, currently registered with the commercial
register of the local court of Munich under HR B 140406 and in
the process of changing its registered seat from Munich to
Berlin ("PULP HOLDING"), as managing director, authorized to
act
individually and under exemption from the restrictions imposed
by Section 181 of the German Civil Code;
3. Norbert Kreutzer, with business address at Sonnenwall 85, D-47051
Duisburg, Germany identified by means of his German identity card No.
5083077675, acting not in his own name but in the name and on behalf of
RWE Industrie-Losungen GmbH, Sonnenwall 85, D-47051 Duisburg, Germany,
registered with the commercial register of the local court of Duisburg
under HR B 179 ("RWE"), as attorney-in-fact on the basis of the power
of attorney dated August 21, 2002, presented to the notary public in
the original form, a copy of which is attached to this deed;
4. Rolf Neuwinger, with business address at Sonnenwall 85, D-47051
Duisburg, Germany, identified by means of his German identity card No.
5238041023, acting not in his own name but in the name and on behalf of
RWE, as attorney-in-fact on the basis of the power of attorney dated
August 21, 2002, presented to the notary public in the original form, a
copy of which is attached to this deed; and
5. Peter Heinen, with business address at Dillenburger Strasse 69,
D-51170 Koln, Germany, identified by means of his German identity card
No. 5225125307, acting not in his own name but in the name and on
behalf of FAHR Beteiligungen AG, Dillenburger Strasse 69, D-51170
Koln, Germany, registered with the commercial register of the local
court of Koln under HR B 36688 ("FAHR"), as director, authorized to act
individually.
RWE, FAHR and Pulp Holding each, a "SHAREHOLDER", and together, the
"SHAREHOLDERS".
The notary asked the persons appeared whether the notary or a person
professionally associated with the notary has been working on the transaction
which is the subject matter of this deed, other than in his capacity as notary.
The persons appeared answered this question in the negative.
The notary having sufficient command of the English language was requested to
notarize this deed in the English language. From a conversation with the persons
appeared, the notary took evidence that they have sufficient command of the
English language to follow and to understand the document here notarized. After
having been instructed by the notary, the
2
persons appeared waived their right to obtain the assistance of a sworn
translator and to obtain a certified translation hereof.
The persons appeared asked that the following be notarized:
SHAREHOLDERS' AGREEMENT
WHEREAS:
A. Upon registration of the conversion of ZSG's Capital (as defined below) from
DEM to Euro and its increase to Euro 15,000,000 (to which the Shareholders have
agreed pursuant to the notarial deed No. 114/2002 of notary Gustav-Adolf Lange,
dated August 26, 2002) with the commercial register of ZSG the Capital of ZSG
will consist of Euro 15,000,000, and will be owned by the Shareholders as
follows:
NAME OWNED CAPITAL
---- -------------
RWE EUR 4,413,000
FAHR EUR 1,050,000
Pulp Holding EUR 9,537,000
|
B. In addition, the Shareholders have contributed, and agreed to further
contribute prior to Financial Close (as defined below), Shareholder Loans (as
defined below) to ZSG pursuant to the Shareholder Loan Agreements (as defined
below) in the principal aggregate amounts as follows:
NAME SHAREHOLDER LOANS
---- -----------------
RWE EUR 16,302,176
FAHR EUR 3,890,290
Pulp Holding EUR 35,063,180
|
C. In addition, the Shareholders have committed, under the Financing Documents
(as defined below) to contribute further subordinated Shareholder Loans to ZSG
under certain circumstances as further described in the Financing Documents, in
the following proportions:
3
NAME SHAREHOLDER LOANS
---- -----------------
RWE EUR 8,826,000
FAHR EUR 2,100,000
Pulp Holding EUR 19,074,000
|
D. The parties wish to work closely together to complete the Project (as defined
below);
E. The parties hereto incorporate into this Agreement by reference, a notarial
reference deed (No. 75/2002 of the notarial records register for 2002 of the
notary Gustav-Adolf Lange, Frankfurt am Main, Germany, dated August 19, 2002)
incorporating therein the subscription agreement dated December 8, 1999 among
ZSG, TRT (as defined below), RWE, AIG (as defined below) (to which Fahr is the
successor) and Mercer International Inc. (to which Pulp Holding is the
successor) including all schedules and annexes thereto (the "SUBSCRIPTION
AGREEMENT"). The parties hereto waive their right to have such reference deed
read aloud to them and to have it attached to the present deed. The reference
deed was available to the parties hereto in counterpart (AUSFERTIGUNG) during
notarization. The parties hereto confirm to have full knowledge of the reference
deed;
F. In addition to the provisions set forth in the Subscription Agreement, the
Shareholders wish to establish their respective rights and obligations with
respect to (i) the Shareholder Loans and their respective shareholdings in ZSG,
(ii) the management and control of ZSG, and (iii) other matters relating to ZSG
as set forth in this Agreement;
G. The parties hereto incorporate into this Agreement by reference, a notarial
reference deed (No. 112/2002 of the notarial records register for 2002 of the
notary Gustav-Adolf Lange, Frankfurt am Main, Germany, dated August 23, 2002)
incorporating therein the credit facility agreement dated August 26, 2002 among
ZSG as borrower and Bayerische Hypo- und Vereinsbank AG as arranger, agent,
security agent and original lender including all schedules and annexes thereto
in its final draft version, and certain agreements concluded in connection with
such facility agreement (together, the "FINANCING DOCUMENTS"). The parties
hereto waive their right to have such reference deed read aloud to them and to
have it attached to the present deed. The reference deed was available to the
parties hereto in counterpart (AUSFERTIGUNG) during notarization. The parties
hereto confirm to have full knowledge of the reference deed; and
4
H. On August 26, 2002, the Shareholders have resolved, and incorporate into this
Agreement by reference, a notarial shareholders' resolution (No. 114 of the
notarial records register for 2002 of the notary Gustav-Adolf Lange, Frankfurt
am Main, Germany) amending ZSG's articles of association. The parties hereto
waive their right to have such shareholders' resolution read aloud to them and
to have it attached to the present deed. The shareholders' resolution was
available to the parties hereto in counterpart (AUSFERTIGUNG) during
notarization. The parties hereto confirm to have full knowledge of the
shareholders' resolution.
NOW THEREFORE THIS AGREEMENT WITNESSES that the parties hereto agree as follows:
ARTICLE 1- DEFINITIONS AND INTERPRETATION
DEFINITIONS. In this Agreement, and the recitals hereto, unless something in the
subject matter or context is inconsistent therewith, the following capitalized
words and terms shall have the following meanings, respectively:
(a) "ACCEPTANCE" has the meaning ascribed thereto in the EPC
Contract (as defined below);
(b) "ACT OF INSOLVENCY" means, when used in relation to a
Shareholder, that, without the prior written consent of all of
the other Shareholders,
(i) the Shareholder becomes insolvent or unable to pay
its debt as they become due and payable or, as an
insolvent debtor, takes the benefit of any
legislation now or hereafter in force for bankrupt or
insolvent debtors, or the opening of insolvency
proceedings is refused for lack of assets; and
(ii) a filing has been made with any competent court or
administration for the purposes of commencing
insolvency, bankruptcy, voluntary or involuntary
composition or similar proceedings with respect to
the Shareholder.
5
(c) "AFFILIATE" means any juridical entity controlling, controlled
by or under common control with, another juridical entity,
whereby control of any entity shall be determined by the
direct or indirect ownership or control of more than 50
percent in voting power of the equity interest of such entity;
(d) "AGREEMENT" means this agreement dated August 26, 2002 among
ZSG, RWE, FAHR and Pulp Holding, including all schedules and
annexes hereto, as amended from time to time;
(e) "AIG" means AIG Altmark Industrie AG to which Fahr is the
successor;
(f) "ANNUAL OPERATING PLAN" means an annual operating plan
prepared by ZSG and presented to the Shareholders which sets
forth, INTER ALIA, the operating, capital expenditure and
maintenance plan for the Mill (as defined below) and the
Project (as defined below) for the upcoming fiscal year in
reasonable detail;
(g) "APPRAISAL" has the meaning ascribed thereto in Section 8.6(a)
hereof;
(h) "APPRAISED VALUE" means the compensation or purchase price for
Capital determined by one or more appraisers, as the case may
be, pursuant to Section 8.6 hereof;
(i) "ARBITRATION RULES" means the rules set forth in ANNEX 1
hereto;
(j) "BGB" has the meaning ascribed thereto in Section 8.2(b)
hereof;
(k) "BUSINESS DAY" means any day on which banks are open for
business in Frankfurt am Main, Germany;
(l) "CAPITAL" means the stated capital of ZSG and, with respect to
each Shareholder, means the stated share capital of the shares
of ZSG held by such Shareholder;
(m) "CLOSING DATE" has the meaning ascribed thereto in Section 8.2
hereof;
(n) "DEM" means Deutsche Mark;
6
(o) "DEFAULTING SHAREHOLDER" has the meaning ascribed thereto in
Section 8.1 hereof;
(p) "EPC CONTRACTOR" means RWE as the contractor of the EPC
Contract (as defined below);
(q) "EPC CONTRACT" means the contract entered into on August 26,
2002 by ZSG and the EPC Contractor for the design,
engineering, procurement, construction and start up of the
Mill (as defined below), as amended from time to time;
(r) "EURO", "EUR" AND "E" mean the legal currency of Germany;
(s) "EVENT OF DEFAULT" means, when used in relation to a
Shareholder, that such Shareholder has materially defaulted in
the performance of its obligations (i) pursuant to this
Agreement, (ii) pursuant to any agreement entered into between
or among such Shareholder, on the one hand, and the other
Shareholders or ZSG, on the other hand, relating to ZSG or the
Project, or (iii) pursuant to the Financing Documents, if such
default has not been cured within five (5) Business Days after
receipt by such Shareholder of a notice from ZSG or any other
Shareholder asking such Shareholder to cure such default;
(t) "FAHR" has the meaning ascribed thereto in introduction no. 5
hereof;
(u) "FINANCIAL CLOSE" means the date on which all conditions
precedent for the first advance of funds by the Project
Lenders (as defined below) are satisfied or waived pursuant to
the terms of the Financing Documents;
(v) "FINANCING DOCUMENTS" has the meaning ascribed thereto in
Recital G hereto;
(w) "FORCED TRANSFER" has the meaning ascribed thereto in Section
8.2(b);
(x) "GAAP" means German generally accepted principles of
accounting and bookkeeping;
(y) "GmbHG" has the meaning ascribed thereto in Section 8.2(b)
hereof;
7
(z) "GOVERNMENTAL APPROVAL" means the consent of any Governmental
Authority (as defined below) which may be required at any time
and from time to time to ensure that the performance of any
party hereto of any obligation under this Agreement is not in
contravention of any law, regulation or published policy of,
or administered by, such Governmental Authority, or which may
be required in order to ensure that the holding or continued
holding by ZSG of any franchise, license, permit or other
permission or authority required to carry on its business is
unaffected;
(aa) "GOVERNMENTAL AUTHORITY" means any legislative, executive,
judicial or administrative body, court or person, whether EU,
federal, state or local, and any governmental authority,
governmental tribunal or governmental commission of any kind
having jurisdiction in the relevant circumstances;
(bb) "INFORMATION" means any and all information in respect of the
Project and ZSG furnished by any of the parties hereto to
another, its respective directors, managing directors,
employees, agents or representatives in any and all analyses,
compilations, data studies or other documents, whether in oral
or written form or on computer disks or other forms of
electronic storage, prepared by any of the parties hereto or
its respective representatives containing or based upon any
such information;
(cc) "MILL" means a bleached softwood kraft pulp mill with an
annual average production capacity of approximately 552,000
tonnes to be located at a site in Arneburg, Germany;
(dd) NON-DEFAULTING SHAREHOLDERS" has the meaning ascribed thereto
in Section 8.2 hereof;
(ee) "NOTICE" has the meaning ascribed thereto in Section 6.1
hereof;
(ff) "NOTICE PERIOD" has the meaning ascribed thereto in Section
8.2 hereof;
(gg) "OFFER" has the meaning ascribed thereto in Section 6.1
hereof;
(hh) "OFFEREE(S)" has the meaning ascribed thereto in Section 6.2
hereof;
(ii) "OFFERED CAPITAL" has the meaning ascribed thereto in Section
6.1 hereof;
8
(jj) "OFFEROR" has the meaning ascribed thereto in Section 6.1
hereof;
(kk) "ORIGINAL SHAREHOLDERS' AGREEMENT" means the shareholders'
agreement dated March 21, 1997 among TRT, RWE, AIG and
Kvaerner plc, as amended from time to time;
(ll) "PERMITTED TRANSFEREE" means, in respect of any Shareholder:
(i) an Affiliate; or
(ii) a trust of which such Shareholder or an Affiliate
thereof is the sole beneficiary;
(mm) "PERSON" includes an individual, sole proprietorship,
partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, body corporate,
and a natural person in his capacity as trustee, executor,
administrator or other legal representative;
(nn) "PIGGYBACK CAPITAL" shall have the meaning ascribed thereto in
Section 7.1;
(oo) "PIGGYBACK DEMAND" shall have the meaning ascribed thereto in
Section 7.1;
(pp) "PIGGYBACK NOTICE" shall have the meaning ascribed thereto in
Section 7.1;
(qq) "PIGGYBACK OFFER" shall have the meaning ascribed thereto in
Section 7.2;
(rr) "PROJECT" means the project to finance, construct, bring into
commercial production and operate the Mill;
(ss) "PROJECT FINANCING" means financing from Project Lenders for
ZSG to complete the Project and finance the start-up and
ongoing operations of the Mill in an amount of E 827,950,000
under the Financing Documents, as amended from time to time;
(tt) "PROJECT LENDERS" means the lenders providing the Project
Financing;
(uu) "PULP HOLDING" has the meaning ascribed thereto in
introduction no. 2.b) hereof;
(vv) "PURCHASE PRICE" has the meaning ascribed thereto in Section
6.1 hereof;
9
(ww) "PURCHASER(S) has the meaning ascribed thereto in Section 9.3
hereof;
(xx) "REJECTED CAPITAL" has the meaning ascribed thereto in Section
6.3 hereof;
(yy) "RWE" has the meaning ascribed thereto in introduction no. 3
hereof;
(zz) "SALE NOTICE" has the meaning ascribed thereto in Section 8.2
hereof;
(aaa) "SHAREHOLDER LOAN AGREEMENTS" means the subordinated loan
agreements between, on the one side, ZSG, and, on the other
side, RWE in the amount of Euro 16,302,176 (dated August 26,
2002), FAHR in the amount of Euro 3,890,290 (dated August 26,
2002) or Pulp Holding in the amount of Euro 35,063,180 (dated
August 26, 2002), respectively, copies of which are attached
hereto as SCHEDULE 1(aaa), as amended from time to time;
(bbb) "SHAREHOLDER LOANS" means all amounts advanced by Shareholders
to ZSG from time to time (including interest thereon),
including, but not limited to, all amounts advanced by, or
outstanding to, Shareholders under the Shareholder Loan
Agreements;
(ccc) "SITE" means the real estate on which the Mill shall be built
and operated;
(ddd) "SOLD CAPITAL" has the meaning ascribed thereto in Section 9.1
hereof;
(eee) "SUBSCRIPTION AGREEMENT" has the meaning ascribed thereto in
Recital E hereto;
(fff) "TRIGGERING EVENT" has the meaning ascribed thereto in Section
8.1 hereof;
(ggg) "TRT" means Thyssen Rheinstahl Technik GmbH to which Thyssen
Rheinstahl Technik-N GmbH was the successor;
(hhh) "VENDOR" has the meaning ascribed thereto in Section 9.2
hereof;
(iii) "ZSG" has the meaning ascribed thereto in introduction no. 1
hereof.
10
ARTICLE 2 - REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each party hereto hereby
represents and warrants (GARANTIERT) (as to itself only and not as to any other
party hereto) to the other parties hereto, and acknowledges and confirms that
the other parties hereto are relying on such representations and warranties in
connection with entering into this Agreement, as of the date hereof and as of
Financial Close, that:
(a) it is a German limited liability company or stock corporation,
as applicable, duly existing and in good standing under the
laws of Germany;
(b) it has the capacity and corporate authority to enter into, and
perform all of its obligations under, this Agreement;
(c) it can fulfill its obligations hereunder without violating the
terms of its constitutive documents, by-laws or any agreement
to which it is a party or by which it is bound by any law or
regulation applicable to it;
(d) it has taken all necessary corporate action to authorize the
execution and performance of this Agreement; and
(e) this Agreement constitutes a valid and binding obligation of
it, enforceable against it in accordance with its terms.
2.2 CAPITAL OWNERSHIP. Each Shareholder represents and warrants (GARANTIERT) (as
to itself only and not as to any other party hereto, except in the case of FAHR
also including AIG where applicable) as of the date hereof and as of Financial
Close that:
(a) as at the date of entry into the commercial register of ZSG of
the conversion of ZSG's Capital into Euro and the increase of
ZSG's Capital to Euro 15.000.000 described in Recital A
hereto, it is the owner of the Capital set out opposite its
name in Recital A hereto;
(b) on the date hereof, it has or will have contributed to ZSG all
funds necessary to be or, upon entry into the commercial
register of ZSG of the increase of ZSG's Capital to Euro
15.000.000 as described in Recital A hereto, become the owner
of the Capital set out opposite its name in Recital A;
11
(c) on the date hereof, the amount of Shareholder Loans advanced
by it to ZSG is or will be as set forth in Recital B hereto
and there are no other advances or amounts due to it from ZSG,
except (i) as concerns AIG, the obligation of ZSG to pay the
second purchase price installment for the Site in the amount
of Euro 1,755,686 (plus VAT) and all claims under the rental
agreement dated May 16, 2002 (notarial deed No. 512 of the
notarial records register for 2002 of the notary Falk Ewald,
Stendal) and to reimburse to AIG funds which it made available
to ZSG for certain ancillary Site acquisition costs in the
total amount of Euro 546,794, and (ii) as concerns RWE, the
obligation of ZSG to reimburse to RWE funds which it made
available to ZSG for certain ancillary Site acquisition costs
in the total amount of Euro 1,590,899, which ancillary Site
acquisition costs are set forth on SCHEDULE 2.2(c) hereto;
(d) such Shareholder Loans constitute the legal, valid and binding
obligations, enforceable in accordance with their terms, of
the respective Shareholder, and, through the date of full and
complete repayment of all sums owed by ZSG to the lenders
under the Financing Documents, such Shareholder Loans are
subordinated to all current and future indebtedness of ZSG
including the Project Financing; and
(e) as at the date hereof and as at the date of entry into the
commercial register of ZSG of the increase of ZSG's Capital to
Euro 15,000,000 described in Recital A hereto, the Capital
owned by each Shareholder is free and clear of all claims,
liens and encumbrances whatsoever and, except as provided
herein or as required under the Financing Documents, no person
has any agreement or option or any right capable of becoming
an agreement for the purchase of any such Capital, and no
person has any agreement or option or any right capable of
becoming an agreement for the issuance or subscription of any
Capital.
2.3 NO OTHER CAPITAL/SHAREHOLDER LOANS. ZSG warrants (GARANTIERT) as at the
date hereof and as of Financial Close that:
(a) the Capital listed in Recital A hereto is the only issued
Capital and there exist no securities convertible into
Capital;
12
(b) the Shareholder Loans listed in Recital B hereto are the only
advances or amounts due to Shareholders (including for this
purpose AIG and Mercer) except, (i) as concerns AIG, the
obligation of ZSG to pay the second purchase price installment
for the Site in the amount of Euro 1,755,686 (plus VAT) and
all claims under the rental agreement dated May 16, 2002
(notarial deed No. 512 of the notarial records register for
2002 of the notary Falk Ewald, Stendal) and to reimburse to
AIG funds which it made available to ZSG for certain ancillary
Site acquisition costs in the total amount of Euro 546,794,
and (ii) as concerns RWE, the obligation of ZSG to reimburse
to RWE funds which it made available to ZSG for certain
ancillary Site acquisition costs in the total amount of Euro
1,590,899; and
(c) except as provided in this Agreement and in the Subscription
Agreement or as is required under the Financing Documents, no
person has any agreement with, or option or right granted by,
ZSG that is capable of becoming an agreement for the purchase,
subscription or issuance of any unissued Capital or any
securities convertible into Capital.
2.4 VOTING TO GIVE EFFECT TO AGREEMENT. The Shareholders agree among each other
that they shall exercise all of their voting rights with respect to the Capital
and other powers of control available to them in relation to ZSG in order to
give full effect to this Agreement and ensure that the affairs of ZSG are
conducted pursuant to the terms hereof and, to the extent not explicitly
superceded by this Agreement, the Subscription Agreement.
2.5 UNDERTAKINGS. The parties hereto undertake VIS-A-VIS each other as follows:
(a) RWE (i) undertakes to procure the issuance by RWE Solutions AG
(its parent company) of any payment security requested by the
EPC Contractor under the EPC Contract, and to the extend
legally possible, (ii) hereby undertakes VIS-A-VIS the other
Shareholders not to claim from ZSG the issuance to the EPC
Contractor of any payment security under the EPC Contract;
(b) RWE undertakes to notify ZSG and the remaining Shareholders
without undue delay if it becomes aware of any change in the
terms of, cancellation or replacement of the profit and loss
transfer agreement dated June 27, 2000/June 29, 2000 between
RWE AG and RWE Solutions AG;
13
(c) FAHR undertakes to indemnify and hold harmless ZSG, RWE and/or
Pulp Holding against any damage, cost or claim incurred by, or
asserted against, ZSG, RWE and/or Pulp Holding in connection
with, or as a result of, any hazardous substances or
contamination on, or emanating from, the Site; and
(d) FAHR undertakes to procure that AIG shall co-operate with, and
provide all reasonable assistance to, the parties hereto in
relation to all matters concerning the Site and any land
adjoining the Site.
2.7 SURVIVAL. The covenants, representations and warranties contained in this
Agreement shall survive the execution of this Agreement and, notwithstanding
such execution and regardless of any investigation made by or on behalf of any
party hereto with respect thereto, shall, to the extent permitted by law,
continue in full force and effect for the benefit of each party hereto to which
such covenants, representations and warranties were made until the expiry of
three years following the termination of this Agreement.
ARTICLE 3 - MANAGEMENT OF ZSG
The management of ZSG shall be conducted as in more detail set forth in this
Article 3, except where mandatory German corporate law requires otherwise.
3.1 MANAGING DIRECTORS OF ZSG
(A) APPOINTMENT OF MANAGING DIRECTORS. Managing directors of ZSG
shall be such persons as may be appointed from time to time by
Shareholders' resolution adopted with a majority representing
a simple majority of the Capital taking part in the vote. This
Section 3.1(a) shall apply MUTATIS MUTANDIS to the removal of
any managing directors of ZSG as well as the entering into,
and the termination of, any service agreement with any
managing director of ZSG.
(B) TERM OF OFFICE. The appointment of managing directors shall be
effective until changed by resignation or decision of the
Shareholders or expiration of the appointment. The
Shareholders may appoint such additional managing
14
directors or remove any appointed managing director as they
may determine from time to time.
(C) RESTRICTION OF POWERS. To the extent that this Agreement
specifies that any matters may only be or shall be dealt with
or approved by or shall require action by the Shareholders,
the discretion and powers of the managing directors to manage
the business and affairs of ZSG with respect to such matters
shall be correspondingly restricted.
3.2 SHAREHOLDERS' MEETING
(A) QUORUM FOR SHAREHOLDERS' MEETINGS. A Shareholders' meeting
shall take place only if 2/3 of the Capital is present or
represented at the meeting. In case the quorum is not met in
any meeting of the Shareholders, a second meeting shall be
held no earlier than two weeks after the date of such first
meeting in which second meeting no requirement as to a quorum
shall exist.
(B) MAJORITY OF VOTES. Except if a larger majority is mandatory by
applicable law (if applicable law requires a larger majority):
and except as may be otherwise provided in this Agreement, all
decisions of the Shareholders shall be adopted with a majority
representing a simple majority of the Capital taking part in
the vote.
3.3 SPECIAL APPROVAL. In addition to any other approval requirements explicitly
set forth herein, under applicable law or pursuant to the articles of
association (GESELLSCHAFTSVERTRAG) or resolutions of the Shareholders of ZSG,
none of the following actions shall be effected without the prior approval of
Shareholders holding at least three quarters of the Capital taking part in the
vote or such other majority as required by mandatory applicable law:
(a) the provision of financial assistance, whether by loan,
guarantee or otherwise, by ZSG to any Shareholder or any other
person not dealing at arm's length with such Shareholder or
other person, except any loan or any distribution of capital
reserves permitted by the Financing Documents, provided that
any such loan or distribution is made simultaneously to all
Shareholders in proportion to their Capital (for the approval
of which a simple majority vote of the Capital taking part in
the vote shall be required).
15
3.4 CHANGE OF CORPORATE FORM. The Shareholders shall in good faith review and
consider the corporate form of ZSG.
ARTICLE 4 - OPERATION AND FINANCE
4.1 ANNUAL OPERATING PLAN. ZSG shall prepare an Annual Operating Plan for each
financial year commencing with the financial year during which the "start-up" of
the Mill is envisaged and present the same to the Shareholders for their
approval at least thirty days prior to the beginning of the next financial year.
Upon approval of the Annual Operating Plan by the Shareholders, ZSG shall (i)
conduct its affairs as closely as reasonably practicable to the terms of the
Annual Operating Plan, (ii) notwithstanding any other provision of this
Agreement, ZSG may proceed to effect its business in accordance with the Annual
Operating Plan without further approval of the Shareholders, and (iii) at least
quarterly, report to the Shareholders with respect to the implementation of the
Annual Operating Plan and variances thereto.
4.2 BANK ACCOUNTS. ZSG shall maintain a bank account or bank accounts at such
financial institutions as the Shareholders shall from time to time determine.
All bank accounts shall be kept in the name of ZSG and all cheques, bills,
notes, drafts or other instruments shall require the signatures of such
individuals as the Shareholders may from time to time determine.
4.3 ACCOUNTING RECORDS. Proper books of account shall be kept by ZSG and entries
shall be made therein of all matters, terms, transactions and things as are
usually written and entered into books of account in accordance with GAAP and
each of the parties hereto shall at all times furnish to the others correct
information, accounts and statements of and concerning all transactions
pertaining to ZSG without any concealment or suppression. Within sixty days of
the end of the financial year of ZSG, the books and accounts and the annual
financial statements of ZSG shall be audited and certified by an internationally
recognized accounting firm (which statements shall include a full reconciliation
of such statements to U.S. generally accepted accounting principles) and
thereupon be submitted to the Shareholders for approval.
4.4 ADDITIONAL FUNDING. Except as required pursuant to the Financing Documents,
the Shareholders shall not be under any obligation to provide ZSG with any
additional funding.
16
The decision of any Shareholder whether or not to participate in any additional
funding shall be in such Shareholder's sole discretion and the refusal of any
Shareholder to provide any additional funding shall not be considered a default
of such Shareholder or give rise to any claims by any other party.
ARTICLE 5 - RESTRICTIONS ON TRANSFER OF CAPITAL OF ZSG
5.1 NO DEALING WITH CAPITAL. Each of the Shareholders covenants that it will not
sell, assign, donate, encumber, transfer, pledge, charge, subject to a security
interest, or otherwise dispose of or in any way whatsoever, deal with the
ownership of any Capital, securities convertible into Capital or Shareholder
Loans now or hereafter owned by it, except in accordance with the terms of this
Agreement or with the prior written unanimous consent of the other Shareholders,
and in each case only as permitted under the Financing Documents. Without
limiting the generality of the foregoing, the Shareholders agree that none of
them shall transfer any Capital or Shareholder Loans to any third party (other
than to a Permitted Transferee or, as concerns Pulp Holding, as set forth under
Section 5.5 (a) hereof) until Acceptance of the Mill.
5.2 TRANSFER TO PERMITTED TRANSFEREE. Notwithstanding the provisions of Section
5.1 hereof and any other provisions of this Agreement which restrict the
disposition of, or dealing with, Capital or Shareholder Loans, a Shareholder
shall at any time or from time to time have the right, subject to the provisions
of the Financing Documents, to dispose of all or any Capital or Shareholder
Loans held by such Shareholder to a Permitted Transferee, provided that at the
time of such disposition:
(a) such Permitted Transferee shall undertake VIS-A-VIS the other
parties hereto, in form satisfactory to such other parties,
acting reasonably, notwithstanding Section 5.3 hereof, to
assume and be bound by all of the terms and obligations of the
disposing Shareholder contained in this Agreement, the
Financing Documents and all other agreements between or among
the disposing Shareholder, on the one hand, and any of the
other parties hereto, on the other hand, in connection with
ZSG and the Project, except, in the case of RWE being the
Shareholder from whom such Capital or Shareholder Loans are
acquired, the EPC Contract and all agreements related thereto
which shall
17
continue to be binding obligations of RWE, in addition to the
Shareholder from whom such Capital or Shareholder Loans are
acquired (VERTRAGSBEITRITT, SCHULDBEITRITT);
(b) the disposing Shareholder and the Permitted Transferee agree
that the Permitted Transferee shall remain a Permitted
Transferee of the Shareholder from whom such Capital or
Shareholder Loans are acquired for so long as the Permitted
Transferee is an owner of any Capital or Shareholder Loans;
and
(c) the other parties hereto receive, in form and substance
satisfactory to them, acting reasonably, evidence that the
Permitted Transferee is a Permitted Transferee of the
Shareholder from whom Capital or Shareholder Loans are to be
acquired and that the agreements referred to in Sections
5.2(a) and (b) above, are legal, valid and binding obligations
of the Permitted Transferee and the disposing Shareholder, as
applicable.
5.3 CONTINUING LIABILITY OF SHAREHOLDERS. Notwithstanding a disposition of
Capital or Shareholder Loans to a Permitted Transferee, a disposing Shareholder
shall VIS-A-VIS the other parties hereto remain jointly and severally liable
together with the Permitted Transferee as principal obligor under all its
obligations contained in this Agreement, the Financing Documents and all other
agreements between or among the disposing Shareholder, on the one hand, and any
of the other parties hereto, on the other hand, in connection with ZSG and the
Project, and the disposing Shareholder agrees to unconditionally guarantee to
the other parties hereto the due performance by the Permitted Transferee of all
obligations imposed on such Permitted Transferee under this Agreement, the
Financing Documents and such other agreements.
5.4 TRANSFER OF CAPITAL TO PERMITTED TRANSFEREE. If Capital or Shareholder Loans
are transferred by a Shareholder to one or more Permitted Transferee(s), such
Permitted Transferee(s), together with the Shareholder should such Shareholder
retain any Capital or Shareholder Loans, shall be entitled to exercise all
rights of such Shareholder and such Permitted Transferee hereunder, the articles
of association of ZSG, the Financing Documents and under all other agreements
between or among the disposing Shareholder, on the one hand, and any of the
other parties hereto, on the other hand, in connection with ZSG and the Project
only acting jointly and unanimously.
18
5.5 TRANSFER OF PULP HOLDING SHARES AND RWE SHARES.
(a) TRANSFER OF PULP HOLDING SHARES. Notwithstanding the provision
in Section 5.1 hereof and any other provisions of this
Agreement which restrict the disposition of, or dealing with,
Capital, Pulp Holding shall at any time or from time to time
have the right, subject to the provisions of the Financing
Documents, to dispose of any Capital together with or without
any Shareholder Loans held by it representing up to 12.58% of
the entire Capital of ZSG or a percentage of the Shareholder
Loans extended by Pulp Holding to ZSG representing up to
12.58% of all Shareholder Loans, as the case may be, provided
that at the time of such disposition the acquiror of such
Capital shall undertake VIS-A-VIS the other parties hereto, in
form satisfactory to such other parties, acting reasonably, to
be bound by this Agreement and the Financing Documents
(VERTRAGSBEITRITT).
(b) TRANSFER OF RWE SHARES. Notwithstanding the provision in
Section 5.1 hereof and any other provisions of this Agreement
which restrict the disposition of, or dealing with, Capital,
RWE shall at any time or from time to time have the right,
subject to the provisions of the Financing Documents, to
dispose of any Capital together with or without any
Shareholder Loans held by it representing up to 4.31% of the
entire Capital of ZSG or a percentage of the Shareholder Loans
extended by RWE to ZSG representing up to 4.31% of all
Shareholder Loans, as the case may be, provided that at the
time of such disposition the acquiror of such Capital shall
undertake VIS-A-VIS the other parties hereto, in form
satisfactory to such other parties, acting reasonably, to be
bound by this Agreement and the Financing Documents
(VERTRAGSBEITRITT).
5.6 APPROVAL, INAPPLICABILITY OF PREEMPTIVE RIGHTS. If a transfer of Capital
and Shareholder Loans is permitted pursuant to this Article 5, all
Shareholders, in application of Section 4.1 of the articles of association of
ZSG, hereby consent to and approve such transfer. Further, as a result of
such consent and approval and the second sentence of Section 4.2 of ZSG's
articles of association, neither Article 6 hereof nor any preemptive right
(VORKAUFSRECHT) provided under ZSG's articles of association shall apply in
the case of a sale and transfer pursuant to Sections 5.2 and 5.5 hereof.
19
ARTICLE 6 - PREEMPTIVE RIGHT
6.1 NOTICE OF PROPOSED SALE. If any Shareholder (in this Article 6 referred to
as the "OFFEROR") receives a BONA FIDE written offer (in this Article 6 referred
to as the "OFFER") from any person, firm or corporation (other than in the case
of Sections 5.2 and 5.5) dealing at arm's length with the Offeror to purchase
all or any part of the Capital together with or without all or part of any
Shareholder Loans owned by the Offeror, which is acceptable to the Offeror, the
Offeror shall give notice of such Offer (in this Article 6 and the subsequent
Article 7 referred to as the "NOTICE") to the other Shareholders, shall set out
in the Notice the amount of Capital and Shareholder Loans to be sold pursuant to
the Offer (in this Article 6 and the subsequent Article 7 referred to as the
"OFFERED CAPITAL") and the terms upon which and the price at which (in this
Article 6 and the subsequent Article 7 referred to as the "PURCHASE PRICE") such
Offered Capital would be sold pursuant to the Offer. This Article 6 and the
subsequent Article 7 shall, however, only apply to Offers that provide for cash
consideration and for no other consideration than cash.
6.2 RIGHT TO PURCHASE OFFERED CAPITAL. Subject to the provisions of the
Financing Documents, upon the Notice being given, the other Shareholders (in
this Article 6 and the subsequent Article 7 sometimes collectively referred to
as the "OFFEREES" and sometimes individually referred to as an "OFFEREE") shall
have the right to purchase all, but not less than all, of the Offered Capital
for the Purchase Price. The Offerees shall be entitled to purchase the Offered
Capital PRO RATA based upon the amount of the Capital owned by each Offeree (not
taking into account the Offered Capital) or in such other proportion as the
Offerees may agree in writing. ZSG shall in such a case give all necessary
consents and take all action necessary so as to implement the above. For the
purposes of this Section 6.2, any ancillary obligations offered by the third
party in the Offer in connection with the purchase of the Offered Capital shall
not be taken into consideration and the Offerees shall not be obligated to
compensate or perform such ancillary obligations. If the Offer includes the sale
of other objects in addition to the Offered Capital, the Offerees shall not be
obligated to purchase such other objects.
6.3 NOTICE OF PURCHASE AND ADDITIONAL PURCHASES. Within ten Business Days of
having been given the Notice, each Offeree desiring to purchase all of the
Offered Capital that he is entitled to purchase in accordance with the
provisions of Section 6.2 hereof shall give notice thereof to the Offeror and to
the other Offerees. If any Offeree does not give such notice, the
20
Offered Capital that it had been entitled to purchase (in this Section 6.3
referred to as the "REJECTED CAPITAL") may instead be purchased by the Offerees
who did give such notice, PRO RATA based upon the amount of the Capital owned by
such Offerees as between themselves or in such other proportion as such Offerees
may agree in writing, and, within five Business Days of the expiry of the ten
Business Day period specified in this Section 6.3, each Offeree who desires to
purchase all of the Rejected Capital that he is entitled to purchase in
accordance with the provisions of this Section 6.3 shall give an additional
notice thereof to the Offeror and to the other Offerees. If any Offeree entitled
to give such additional notice does not do so, the Rejected Capital that he had
been entitled to purchase may instead be purchased by the Offerees who did give
such notice, and so on from time to time until the Offerees are willing to
purchase all of the Offered Capital or until they are not willing to purchase
any more. If the Offerees are willing to purchase all, but not less than all, of
the Offered Capital, the transaction of purchase and sale shall be completed in
accordance with the terms set out in the Notice, subject to the provisions of
the Financing Documents.
6.4 SALE TO THIRD PARTY. If the Offerees do not give notice in accordance with
the provisions of Section 6.3 hereof that they are willing to purchase all of
the Offered Capital, notwithstanding the provisions of Article 7, the rights of
the Offerees to purchase the Offered Capital shall forthwith cease and terminate
and, as an exception to Section 5.1 hereof and subject to the provisions of the
Financing Documents, the Offeror may sell the Offered Capital to the third party
purchaser within sixty Business Days after the expiry of the ten Business Day
period or five Business Day periods, as the case may be, specified in Section
6.3 hereof, for a price not less than the Purchase Price and on other terms no
more favorable to such person than those set forth in the Notice, provided that
the person to whom the Offered Capital is to be sold and transferred agrees
vis-a-vis the other Shareholders prior to such transaction to be bound by this
Agreement, the Financing Documents (to the extent the Offeror was bound by such
agreements) and all other agreements between or among the Offeror, on the one
hand, and any of the other parties hereto, on the other hand, in connection with
ZSG and the Project, except, in the case of RWE being the Offeror, the EPC
Contract and all agreements related thereto which shall continue to be binding
obligations of RWE, and to become a party hereto, the Financing Documents and
such other agreements in place and stead of the Offeror who shall simultaneously
with the sale and transfer of the Offered Capital assign all of its rights and
obligations under this Agreement, the Financing Documents and such other
agreements to such third party (VERTRAGSUBERNAHME, BEFREIENDE
21
SCHULDUBERNAHME), notwithstanding any obligations of the Offeror hereunder or
thereunder which by their terms shall survive the Offeror ceasing to be a
Shareholder of ZSG. If a Shareholder is entitled to sell and transfer the
Offered Capital to a third party purchaser pursuant to this Article 6, all
Shareholders, in application of ss. 4.1 of the articles of association of ZSG,
hereby consent to and approve such sale and transfer and the assignment of
rights and obligations under this Agreement, the Financing Documents and such
other agreements, provided, however, that if the Offered Capital is not sold
within the sixty Business Day period as permitted under this Article 6, the
right of the Offeror to sell, transfer and assign the Offered Capital to a third
party ceases and terminates, and any approval requirement contained in ZSG's
articles of association or otherwise, shall again take effect.
ARTICLE 7 - PIGGYBACK RIGHT
7.1 PIGGYBACK RIGHTS. In the event that Pulp Holding proposes to sell the
Offered Capital to a third party pursuant to Section 6.4 after the other parties
have not exercised their rights to purchase the Offered Capital, Pulp Holding
shall, within 30 Business Days following the expiry of the ten and five Business
Day Periods referred to in Section 6.3 hereof, give written notice (the
"PIGGYBACK NOTICE") to Fahr of its intention to sell and transfer the Offered
Capital pursuant to Section 6.4. Fahr may, not later than ten Business Days
after receipt of the Piggyback Notice, deliver to Pulp Holding a notice in
writing invoking the provisions of this Article 7 (a "PIGGYBACK DEMAND"). The
delivery by Fahr of a Piggyback Demand shall be irrevocable and shall bind Fahr
to sell all and transfer all, but not less than all, of the Capital and
Shareholder Loans (the "PIGGYBACK CAPITAL") owned by it, in accordance with the
provisions of this Article 7, subject to the provisions of the Financing
Documents.
7.2 PIGGYBACK OFFER. If Fahr delivers a Piggyback Demand, then, before
completing any sale and transfer pursuant to Section 6.4, Pulp Holding shall
cause the third party to deliver to Fahr a notarized BONA FIDE offer (the
"PIGGYBACK OFFER") to purchase from Fahr the Piggyback Capital which Piggyback
Offer must be in compliance with the first sentence of Section 6.4. The
Piggyback Offer must be binding upon the third party and shall contain only such
terms and conditions as are identical to those upon which Pulp Holding proposes
to sell to the third party the Offered Capital pursuant to Section 6.4, provided
that the offer price for the Piggyback Capital, which shall be specified in the
Piggyback Offer, shall be an adequate consideration based on the consideration
for the Offered Capital which Pulp Holding
22
proposes to sell to the third party pursuant to Section 6.4. The closing date
and other closing arrangements for the purchase and sale transaction between
Fahr and the third party shall be specified in the Piggyback Offer and shall
be the same, MUTATIS MUTANDIS, as those specified between the third party and
Pulp Holding. The first sentence and the proviso contained in the last
sentence of Section 6.4 shall apply MUTATIS MUTANDIS to Fahr. If Fahr is
entitled to sell and transfer the Piggyback Capital to the third party
pursuant to this Article 7, all Shareholders, in application of ss. 4.1 of
the articles of association of ZSG, hereby consent and approve such sale and
transfer and the assignment of rights and obligations under this Agreement,
the Financing Documents and such other agreements referred to in Section 6.4.
Further, as a result of such consent and approval and the second sentence of
Section 4.2 of ZSG's articles of association, neither Article 6 hereof nor
any preemptive right provided under ZSG's articles of association shall apply
in the case of a sale and transfer pursuant to this Article 7.
ARTICLE 8 - TRIGGERING EVENTS
8.1 TRIGGERING EVENTS DEFINED. A Triggering Event is the occurrence of any one
of the following events with respect to a Shareholder (the "DEFAULTING
SHAREHOLDER"):
(a) an Event of Default;
(b) an Act of Insolvency;
(c) any representation and warranty of the Shareholder contained
in Sections 2.1 and 2.2 hereof, or in any instrument or
document delivered pursuant to this Agreement at any time
hereafter, is or becomes not true and correct in any material
respect if the Shareholder has not taken all necessary steps,
to the satisfaction of the other Shareholders acting
reasonably, to ensure that the representation and warranty
becomes true and correct no later than thirty Business Days
after receipt by such Shareholder of notice from any other
Shareholders that the representation and warranty is not true
and correct;
(d) occurrence of a reason for redemption (EINZIEHUNG) or forced
transfer (ZWANGSUBERTRAGUNG) of the Capital of a Shareholder
pursuant to ss. 11.2 of ZSG's articles of association.
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A Defaulting Shareholder shall without undue delay give notice to the other
parties that an event has occurred with respect to such Defaulting Shareholder
which constitutes a Triggering Event or which would, if such event is not
corrected or remedied or otherwise resolved to the satisfaction of the other
Shareholders as contemplated above, constitute such a Triggering Event.
8.2 OBLIGATION OF A DEFAULTING SHAREHOLDER FOLLOWING A TRIGGERING EVENT.
(a) Upon the occurrence of a Triggering Event, the Defaulting
Shareholder shall promptly make a binding offer to sell and
transfer all of its Capital and Shareholder Loans (including
all unpaid interest accrued thereon), if any, to the other
Shareholders (in such case, the "NON-DEFAULTING SHAREHOLDERS")
by notice to the Non-Defaulting Shareholders (the "SALE
NOTICE"). The offer shall be irrevocable and notarized. The
purchase price for such Capital shall be determined in
accordance with Section 8.6 hereof and the aggregate purchase
price for such Shareholder Loans shall be equal to the net
present value of 80% of the outstanding nominal amounts of
principal of such Shareholder Loans (the discount rate being
12%) plus the amount of all unpaid interest accrued on such
Shareholder Loans through the date of transfer. Subject to the
provisions of the Financing Documents, the Non-Defaulting
Shareholders shall have the right to purchase all, but not
less than all, of the Defaulting Shareholder's Capital and
Shareholder Loans, PRO RATA based upon the amount of Capital
owned by each Non-Defaulting Shareholder or in such other
proportion as the Non-Defaulting Shareholders may agree in
writing, and shall give written notice of their decision to
purchase to the Defaulting Shareholder within fifteen Business
Days after receipt of the Sale Notice (the "NOTICE PERIOD").
The completion of a purchase and sale of the Defaulting
Shareholder's Capital and Shareholder Loans under this Section
8.2 shall take place on the 15. Business Day after the expiry
of the Notice Period (provided all Non-Defaulting Shareholders
have timely given written notice pursuant to the preceding
sentence), provided further that if the purchase price of the
Capital has not been determined as per Section 8.6 hereof by
such day, the completion shall take place within ten Business
Days after the date on which the purchase price has been
conclusively determined pursuant to Section 8.6 hereof. All
Shareholders, in application of Section 4.1 of the articles of
association
24
of ZSG, hereby consent to and approve such sale and transfer
of Capital and Shareholder Loans pursuant to this Section
8.2(a). Further, as a result of such consent and approval and
the second sentence of Section 4.2 of the articles of
association of ZSG, neither Article 6 nor 7 hereof nor any
preemptive right (VORKAUFSRECHT) provided under the articles
of association of ZSG shall apply to such sale and transfer.
Notwithstanding any rights of the Non-Defaulting Shareholders
pursuant to Section 8.2(b) hereof, if no written notice is
given by all Non-Defaulting Shareholders within the Notice
Period, the Non-Defaulting Shareholders shall be deemed to
have rejected the offer made available to them to purchase the
Capital and Shareholder Loans of the Defaulting Shareholder.
(b) Furthermore, upon the occurrence of a Triggering Event, the
Non-Defaulting Shareholders may, subject to the provisions of
the Financing Documents, in their sole discretion, resolve to
either redeem (EINZIEHEN) the Capital of such Defaulting
Shareholder, or to transfer the Defaulting Shareholder's
Capital to one or more of the Non-Defaulting Shareholders or a
third party/third parties (including ZSG) designated by the
Non-Defaulting Shareholder (a "FORCED TRANSFER"). The parties
hereto agree among each other that a Triggering Event shall
constitute a cause (WICHTIGER GRUND) within the meaning of
Section 11.2 (v) of ZSG's articles of association justifying
the exclusion of the Defaulting Shareholder and thus a
redemption or a Forced Transfer of the Capital of the
Defaulting Shareholder. Redemption or Forced Transfer shall be
effected against compensation for the Capital of the
Defaulting Shareholder in the amount equal to the Appraised
Value. Section 740 of the German Civil Code (BURGERLICHES
GESETZBUCH, the "BGB") is hereby excluded. In case of a
redemption or a Forced Transfer to ZSG following a
Triggering Event, the compensation of the purchase price shall
be payable in five equal annual installments, the first of
which shall be due and payable within ten days after the
Appraised Value has been conclusively determined pursuant to
Section 8.6 hereof unless payment of such compensation or such
purchase price would result in a violation of section 30 of
the German Law on Limited Liability Corporations (GESETZ
BETREFFEND DIE GESELLSCHAFTEN MIT BESCHRANKTER HAFTUNG, the
"GmbHG"), in which case payment shall only become due
and payable
25
(without interest thereon) if and when it would not result in
such violation. The redemption of any Capital shall become
effective at the time of notice of the redemption to the
Defaulting Shareholder, and the Forced Transfer shall become
effective at the time of the later of notice of the Forced
Transfer to the Defaulting Shareholder and acceptance of the
Forced Transfer by the Non-Defaulting Shareholder(s) or the
third party/parties designated by the Non-Defaulting
Shareholders, in each case irrespective of the date of payment
of the compensation or the purchase price.
In case of a redemption or a Forced Transfer following a
Triggering Event, subject to the provisions of the Financing
Documents, the Defaulting Shareholder shall offer to the other
Shareholders and/or any third party/parties designated by the
Non-Defaulting Shareholders to which the Forced Transfer is to
be made to sell to them all of its Shareholder Loans
(including all unpaid interest accrued thereon), if any, for
an aggregate purchase price equal to the net present value of
80% of the outstanding nominal amounts of principal of such
Shareholder Loans (the discount rate being 12%) plus the
amount of all unpaid interest accrued on such Shareholder
Loans through the effective date of sale and transfer of the
Shareholder Loans. Such offer shall be made irrevocably by
notice of the Defaulting Shareholder within ten Business Days
of the date on which the Defaulting Shareholder has been
notified of the resolution of the other Shareholders providing
for the redemption or Forced Transfer. Any one of the other
Shareholders and/or any third party/parties designated by the
Non-Defaulting Shareholders to which the Forced Transfer is to
be made may give notice to the Defaulting Shareholder that
such other Shareholders and/or such third party/parties will
accept the offer, which notice shall be given within ten
Business Days of receipt of such offer from the Defaulting
Shareholder. If such notice is given by any one of the other
Shareholders and/or such third party/parties, the other
Shareholders and/or such third party/parties are obliged to
accept such offer and acquire all of the Defaulting
Shareholder's Shareholder Loans either PRO RATA based on the
share of Capital owned by each such other Shareholder (not
taking into account all of the Capital) and/or such third
party/parties (taking into account the transferred Capital),
or in such other proportion as the other Shareholders
26
and/or such third party/parties may agree in writing, or, if
not all of such other Shareholders and/or such third
party/parties wish to acquire a portion of such Shareholder
Loans, in application of the rules set forth in Section 6.3
sentences 1 through 3 hereof. If, after application of such
rules, not all of such Shareholder Loans are acquired by the
other Shareholders and/or such third party/parties, the other
Shareholder and/or such third party/parties who has first
given notice of accepting the offer shall be obliged to
acquire the final portion of such Shareholder Loans that has
not been acquired by the other Shareholders and/or such third
party/parties. For the event that none of the other
Shareholders and/or such third party/parties accept the offer
of the Defaulting Shareholder, the Defaulting Shareholder,
with effect as of the date of redemption or the Forced
Transfer, hereby forgives 20% of the nominal amounts of
principal of such Defaulting Shareholder's Shareholder Loans
and of all unpaid interest on such 20% outstanding on or
having accrued through such date, with the remaining balance
of such Defaulting Shareholder's Shareholder Loans to be due
and payable upon complete repayment of the Project Financing
(principal and interest) by ZSG, provided, however, that no
amounts shall be due and payable if and to the extent payment
of such amounts would result in a violation of section 30 of
the GMBHG.
8.3 VOTING/DIRECTORS OF DEFAULTING SHAREHOLDER. Notwithstanding anything to the
contrary herein contained, and in addition to the third sentence of Section 11.3
of ZSG's articles of association, the parties hereto contractually
(SCHULDRECHTLICH) agree that upon a Triggering Event the Defaulting Shareholder
shall henceforth not be entitled to vote its Capital. Notwithstanding the third
sentence of Section 11.3 of ZSG's articles of association, provided that, upon
the occurrence of a Triggering Event, the Non-Defaulting Shareholders neither
purchase the Defaulting Shareholder's Capital nor, within ninety Business Days
following such Triggering Event, resolve the redemption or Forced Transfer of
the Defaulting Shareholder's Capital pursuant to the provisions of Sections
8.2(a) and (b) hereof, the Defaulting Shareholder shall again be entitled to
exercise its right to vote its Capital.
8.4 OTHER REMEDIES. Upon the occurrence of a Triggering Event, in addition to
the rights in Section 8.2 hereof, the Non-Defaulting Shareholders shall be
entitled to bring any action at law as may be permitted in order to recover
damages or to bring any proceedings in the nature of specific performance,
injunction or other remedy, it being acknowledged by the
27
Shareholders that damages at law may be an inadequate remedy for a default,
breach or threatened breach of this Agreement.
8.5 NON-WAIVER. No consent to, or waiver of, any breach or Triggering Event by
any Shareholder in the performance of its obligations under this Agreement shall
be deemed to be construed to be consent to, or waiver of, any other breach or
Triggering Event in the performance by that Shareholder of the same or any other
obligations of that Shareholder under this Agreement. Failure by any Shareholder
to complain of any act or failure to act of the other Shareholder or to declare
a Triggering Event in respect of the other Shareholder, shall not constitute a
waiver by that Shareholder of its rights under this Agreement.
8.6 DETERMINATION OF PURCHASE PRICE.
(A) APPRAISAL. For the purposes of Section 8.2 hereof, the
purchase price or compensation for the Defaulting
Shareholder's Capital shall be appraised (the "APPRAISAL") and
shall be equal to the Appraised Value of the Capital as
determined pursuant to this Section 8.6.
(B) SELECTION OF APPRAISERS. Following a Triggering Event, the
Non-Defaulting Shareholders and the Defaulting Shareholder
shall try to agree on an appraiser to conduct the Appraisal.
If such agreement cannot be reached within a period of ten
Business Days as of the date of the request by the first of
any of the Non-Defaulting Shareholders or the Defaulting
Shareholder to appoint an appraiser, both the Non-Defaulting
Shareholders and the Defaulting Shareholder shall nominate
their own appraiser by specifying the firm and the individual
within such firm to have responsibility for the appraisal
within a period of another ten Business Days. The right to
appoint an appraiser shall expire upon the expiration of the
second ten Business Day period.
(C) QUALIFICATION OF APPRAISERS AND CONDUCT OF EVALUATION. Each
appointed appraiser shall be an internationally recognized (i)
accounting firm, (ii) investment dealer, or (iii) firm
specializing in business evaluation. The Appraisal shall be
conducted by the appraiser(s) to determine the fair market
value of the Capital redeemed or to be transferred as of the
effective date of the transfer, redemption or Forced Transfer
as per Sections 8.2 (a) and (b) according to the evaluation
principles IDW S 1 (GRUNDSATZE ZUR DURCHFUHRUNG
28
VON UNTERNEHMENSBEWERTUNGEN) (as amended or replaced from time
to time) accepted by the German Accounting Standard Board of
the German Institute of Accountants (HAUPTFACHAUSSCHUSS DES
INSTITUTES FUR WIRTSCHAFTSPRUFER). The Shareholder Loan's to
be sold by the Defaulting Shareholder shall be taken into
account as liability of ZSG in determining the fair market
value. The Defaulting Shareholder shall not participate in the
profit/loss of ZSG in respect of the then current financial
year though the date of transfer or redemption.
(D) BINDING RESULT IN CASE OF ONE APPRAISER. In case there is only
one appraiser appointed, the value determined by such
appraiser, who will act as arbitrating expert
(SCHIEDSGUTACHTER), shall be final, conclusive and binding
determination of the amount of the purchase price of, or
compensation for, the Defaulting Shareholder's Capital binding
upon the Defaulting Shareholder, the Non-Defaulting
Shareholders, any third party/parties designated by the
Non-Defaulting Shareholders and ZSG, and there shall be no
contest in respect thereof to any court or arbitration except
in case of manifest error by the appraiser, provided that a
notice claiming such manifest error is given no later than ten
Business Days following the receipt of the appraiser's written
decision. Sections 318 and 319 BGB are hereby excluded. There
shall be no subsequent change of the determinations of the
appraiser whether as a result of any tax field audit, any
change of financial statements of ZSG or otherwise.
(E) BINDING RESULT IN CASE OF TWO APPRAISERS. In case there are
two appraisers appointed, the mathematical average of the
values determined by such appraisers who will act as
arbitrating experts shall be final, conclusive and binding
determination of the amount of the purchase price of, or
compensation for, the Defaulting Shareholder's Capital which
amount shall be the Appraised Value binding upon the
Non-Defaulting Shareholders, the Defaulting Shareholder, any
third party/parties designated by the Non-Defaulting
Shareholders and ZSG, and there shall be no contest in respect
thereof to any court or arbitration except in case of manifest
error by any of the appraisers, provided that notice claiming
such manifest error is given within ten Business Days
following receipt of the respective appraisers' written
decision, and provided further that the difference between the
two values shall be equal to or
29
less than 20% of the lower of the two values. If the
difference of the two values is higher than 20% of the lower
of the two values, the appraisers shall appoint, within thirty
Business Days of the submission of both of their values to the
Defaulting Shareholder, the Non-Defaulting Shareholders and
ZSG, a third appraiser who shall determine the fair market
value (acting as arbitrating expert) which shall be final,
conclusive and binding determination of the purchase price of,
or compensation for, the Defaulting Shareholder's Capital
binding upon the Non-Defaulting Shareholders, the Defaulting
Shareholder, any third party/parties designated by the
Non-Defaulting Shareholders and ZSG and in respect of which
there shall be no contest to any court or arbitration except
in case of manifest error by the third appraiser provided that
notice claiming such manifest error is given within ten
Business Days following receipt of the third appraiser's
written decision. In case the two appraisers cannot agree on a
third appraiser, the third appraiser shall be appointed by the
President of the INSTITUT FUR WIRTSCHAFTSPRUFER IN DEUTSCHLAND
e.V., Tersteegenstrasse 14, D-40474 Dusseldorf, at the request
of either the Defaulting Shareholder, the Non-Defaulting
Shareholders or ZSG. In each case Sections 318 and 319 BGB are
hereby excluded. There shall be no subsequent change of the
determinations of the appraiser(s) whether as a result of any
tax field audit, any change of financial statements of ZSG or
otherwise.
(F) ACCESS. ZSG and the Shareholders shall grant each appraiser
access to all relevant books of account, records, statements
and documents of ZSG and each of the Shareholders which may
relate to the business and affairs of ZSG. Each Shareholder
shall cooperate with each appraiser and provide to all
appraisers all information and documents reasonably requested
by any one of them. The Shareholders shall allow each
appraiser to retain such experts as the appraiser may deem
necessary to assist him in making his appraisal.
(G) PROCEDURE. The appraisers shall grant the Defaulting
Shareholder, the Non-Defaulting Shareholders (or, following
the acceptance by such third party, the third party designated
by the Non-Defaulting Shareholders) and ZSG the right to be
heard to the same extent as such right to be heard would have
to be granted by an arbitration panel in an arbitration which
is to take place in Germany. The procedure shall be conducted
in the English language.
30
(H) COSTS. The Defaulting Shareholder shall bear the costs and
expenses of the appraisals, including the fees of the
appraisers and of the INSTITUT FUR WIRTSCHAFTSPRUFER IN
DEUTSCHLAND e.V..
ARTICLE 9- GENERAL SALE PROVISIONS
9.1 APPLICATION OF GENERAL SALE PROVISIONS. Except as may otherwise be provided
in this Agreement, the provisions of this Article 9 shall apply to any purchase
and sale of Capital (the "SOLD CAPITAL") pursuant to Sections 6.2, 6.3 and
8.2(a) hereof.
9.2 REQUIREMENTS OF VENDOR. On the date of transfer and assignment (in this
Article 9 referred to as the "CLOSING DATE"), a Shareholder selling and
transferring Sold Capital pursuant to the terms of this Agreement (in this
Article 9 also referred to as a "VENDOR") shall:
(a) execute or cause the execution of notarized (if required)
transfer documents, together with a representation and
warranty executed by the Vendor in favor of the purchaser(s),
that the Sold Capital is owned by the Vendor, free and clear
of any lien, encumbrance or any rights of third parties (other
than under the Financing Documents);
(b) deliver to each of the other Shareholders and ZSG a release by
the Vendor of all its claims against ZSG with respect to any
matter or thing arising up to and including the Closing Date
which the Vendor knew or ought to have known of in its
capacity as a Shareholder or as a party hereto, as the case
may be; and
(c) deliver to the Shareholders (or third party/parties designated
by the Shareholder(s)) purchasing the Sold Capital and all
other parties hereto, a release by the Vendor of all of their
claims against such parties relating to matters the Vendor
knew or ought to have known of in its capacity as a
Shareholder or as a party hereto, except for any claims which
might arise out of the transactions of purchase and sale
herein contemplated.
31
9.3 REQUIREMENTS OF PURCHASER. On the Closing Date, the Shareholder(s) (or third
party/parties designated by the Shareholders) purchasing the Sold Capital (in
this Article 9 referred to as the "PURCHASER(S)") shall:
(a) pay the purchase price for the Sold Capital;
(b) deliver to the Vendor a release by the Purchaser(s) with
respect to those matters which any of the Purchaser(s) knew or
ought to have known of in its capacity as a Shareholder, or as
a party hereto, of its claims against the Vendor in its
capacity as a Shareholder, except for any claims which may
arise out of the transactions of purchase and sale herein
contemplated; and
(c) to the extent legally possible, cause ZSG to deliver to the
Vendor a release by ZSG of all its claims against the Vendor
with respect to any matter or thing which the books and
records of ZSG reflect or which was done in the ordinary
course of ZSG's business and arising as a result of the Vendor
being a Shareholder.
9.4 COVENANTS OF THE PARTIES. From and after the occurrence of an event giving
rise to a transaction of purchase, sale and transfer to which this Article 9
applies until the Closing Date, the Shareholders shall not do, nor cause, nor
permit to be done, anything except that which is in the ordinary course of
business of ZSG. Further, the parties hereto covenant and agree that from and
after the occurrence of an event giving rise to a transaction of purchase and
sale pursuant to the terms hereof, they shall do all things necessary or
desirable to cause the transaction of purchase and sale to be completed as soon
as possible.
9.5 NO JOINT LIABILITY. For greater certainty, the parties hereto acknowledge
and agree that the Purchasers in any transaction of sale and transfer
contemplated in this Agreement are not jointly liable for the payment of the
purchase price for the Sold Capital but are only liable for their proportionate
share thereof.
9.6 LIABILITY AS GUARANTOR. If, at the time of sale, the Vendor is liable or
responsible as a guarantor for any debts, liabilities or obligations of ZSG, the
Purchaser(s) shall use reasonable efforts to cause all such guarantees to be
released on or before the Closing Date and, if the Purchaser(s) are unable to
effect the release of such guarantees, the Purchaser(s) shall execute (or cause
the third party/parties designated by the Purchaser(s) to execute) in favor of
the Vendor an indemnity, in form and substance satisfactory to the Vendor acting
32
reasonably, whereby the Purchaser(s) (or the third party/parties designated by
the Purchaser(s)) indemnify and hold harmless the Vendor from all claims arising
out of such guarantees. Any liability of the Purchaser(s) (and the third
party/parties designated by the Purchaser(s)) shall be several (and not joint
and several) in proportion to the share of the Capital acquired by each
Purchaser.
9.7 VENDOR INDEBTED TO ZSG OR PURCHASER(S). If, at the time of sale and
transfer, the Vendor is indebted to the Purchaser(s), the Purchaser(s) shall
have the right to set off, appropriate and apply the purchase price payable for
the Sold Capital against and on account of such indebtedness to the
Purchaser(s). The parties agree that, if at the time of sale and transfer, the
Vendor is indebted to ZSG, to the extent permitted by law and the Financing
Documents, the principal amounts of the Shareholder Loans of the Vendor, if any,
shall be reduced by the amount of any such indebtedness (including interest
thereon through the date of set-off) by way of set-off immediately prior to the
Closing Date and such reduced amounts of principal shall be the basis for
determining the purchase price for such Shareholder Loans as per Sections 8.2(a)
and (b).
9.8 GOVERNMENTAL APPROVALS. If any Governmental Approval is required by the
Purchaser(s), then, notwithstanding anything contained in this Agreement, the
time period specified in this Agreement for acceptance of any offer by the
Purchaser(s) shall be extended for an additional sixty Business Days to permit
the Purchaser(s) to obtain the necessary Governmental Approval. Any such
application for Governmental Approval shall be the sole responsibility of the
Purchaser(s) who shall also be responsible for all costs and expenses incurred
in connection therewith. The other Shareholders and ZSG shall use reasonable
efforts to cooperate with the Purchaser(s) in any application for Governmental
Approval.
ARTICLE 10 - RELATIONSHIP OF SHAREHOLDERS
10.1 DISCLAIMER OF PARTNERSHIP. No partnership is created by this Agreement.
Nothing contained in this Agreement shall or shall be deemed to constitute the
parties hereto as partners nor as agent of the other nor any other relationship
whereby any party hereto could be held liable for any act or omission of the
other, save as specifically provided by this Agreement. None of the parties
hereto shall have any authority to act for the other or to incur any obligation
on behalf of the other with respect to the subject matter of this Agreement,
33
save as specifically provided by this Agreement. Each party hereto covenants to
indemnify the other parties and hold them harmless from all claims, losses,
costs, charges, fees, expenses, damages, obligations and responsibilities
incurred by such parties by reason of any action or omission of the other party
outside the scope of the authority specifically provided by this Agreement.
10.2 ACKNOWLEDGEMENT. The parties acknowledge that the group of companies to
which Pulp Holding belongs presently operates in the pulp and paper industry and
presently indirectly owns and operates a kraft pulp mill located at
Blankenstein, Germany. Unless otherwise specifically provided for in this
Agreement, any party hereto may independently engage in, be concerned with or
interested in, lend money to, or guarantee the debts or obligations of any
business endeavor whether or not competitive with the objects of the Project or
ZSG, without consulting the other parties and without in any way being
accountable to the other.
10.3 GOOD FAITH. Each party hereto shall act honestly and in good faith and in
the best interest of the Project and ZSG and shall exercise the degree of care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
ARTICLE 11 - CONFIDENTIALITY
11.1 CONFIDENTIALITY. The Information shall be kept confidential and shall not,
without the prior consent of the other parties, be disclosed by a party hereto
or its representatives in any manner or in part and shall not be used by a party
hereto or its representatives, directly or indirectly, for any purpose other
than proceeding with the Project (which such proceeding shall include any
financing or investing arrangements reasonably required by a Shareholder to
finance all or part of its contribution of capital and loans), provided that
nothing in this Agreement shall restrict or prohibit any of the parties from
making such releases or other form of disclosure as (i) may be required pursuant
to any laws, regulations or policies (including those of any stock exchange or
quotation system) applicable to it or (ii) may be made by a party pursuant to
customary written confidentiality agreements entered into by parties to consider
business opportunities.
The parties hereto each agree to furnish the Information only to the respective
representatives of a party hereto who need to know the Information for the
purposes of proceeding with the
34
Project and who are informed of the confidential nature of the Information and
agree to be bound by the terms hereof. The parties hereto each agree to be
responsible for any breach of this Agreement by any of their respective
representatives provided that such breach occurs while such representative is
employed by or is under contract to such party. Each of the parties hereto shall
make all reasonable necessary and appropriate efforts to safeguard the
Information and the existence of discussions from disclosure to anyone other
than as permitted hereby. The foregoing shall be inoperative as to such portions
of the Information which (i) are or become generally available to the public
other than as a result of disclosure by the parties hereto or their respective
representatives, (ii) are or become available to any of the parties hereto on a
non-confidential basis from a source other than the other parties hereto or
their representatives or (iii) are or become known to any of the parties hereto
on a non-confidential basis prior to its disclosure by the other parties hereto
or their representatives.
ARTICLE 12 - GENERAL PROVISIONS
12.1 TERM. (a) This Agreement shall come into force on Financial Close and may
not be terminated before the Project Financing (principal and interest) has been
completely repaid by ZSG, provided that this Agreement shall expire and
terminate automatically on the earlier of:
(i) the date of commencement of ZSG's liquidation;
(ii) December 31, 2030 (end of day).
(b) Subject to clause (c) below and subject to the terms of the
Subscription Agreement, this Agreement and the Subscription Agreement shall
automatically terminate with respect to any Shareholder as from the date on
which such Shareholder ceases to be a Shareholder or as otherwise set forth in
this Agreement.
(c) Sections 2.6, 8.2(b), 8.4, 8.6, 10.1, 11.1, 12.2, 12.5, 12.7
through 12.19 hereof shall continue to be in full force and effect among the
parties hereto after the termination of this Agreement with respect to all
parties hereto or any individual Shareholder, for a period of five years or such
other period as may be set forth in any of the Sections referred to in this
clause (c).
12.2 NOTICES. Unless a particular provision of this Agreement requires delivery
in a specified manner, all notices, demands, approvals, consents or requests and
other
35
communications which may or are required or permitted to be given under this
Agreement shall be given or made in writing and shall be delivered personally,
transmitted by facsimile or sent by registered mail, charges prepaid, to the
offices of the parties hereto as follows:
ZELLSTOFF STENDAL GmbH
Niedergorner Damm 1
D-39596 Arneburg
Fax No.: 0049/39321/50422
Attention: Mr. Wolfram Ridder
RWE INDUSTRIE-LOSUNGEN GmbH
Sonnenwall 85
D-47051 Duisburg
Fax No.: 0049/203/309-1078
Attention: Mr. Heinz-Gunter Grollmann
FAHR BETEILIGUNGEN AG
Dillenburger Strasse 69
D-51170 Koln
Fax No.: 0049/221 822-6403
Attention: Mr. Peter Heinen
STENDAL PULP HOLDING GmbH
Charlottenstrasse 59
D-10117 Berlin
Fax No.: 0049/30-20945811
Attention: Mr. Wolfram Ridder
Any such notice or other communication shall be deemed to have been given and
received on the day on which it was delivered or transmitted so long as the
delivery or transmission occurs during normal business hours, or, if mailed, on
the seventh postal delivery day next following mailing. During any period of
disruption of postal service, notices shall be delivered personally or
transmitted by facsimile.
Any party hereto may change its address for delivery for the purposes of this
Section 12.2 to any other address by giving notice to the other parties hereto
in accordance with this Section 12.2.
12.3 ADDITIONAL DOCUMENTS. The parties hereto shall sign such further and other
documents, cause such meetings to be held, resolutions passed and articles of
association amended, exercise their vote and influence, do and perform and cause
to be done and
36
performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part thereof.
12.4 TERMINATION OF ORIGINAL SHAREHOLDERS' AGREEMENT. The Original Shareholders'
Agreement other than the indemnity of AIG set forth in Section 3.1 of the
Original Shareholders' Agreement which shall survive and continue in full force
and effect is hereby terminated and of no further force or effect.
12.5 ENTIRE AGREEMENT. This Agreement (together with the Subscription Agreement
which, to the extent not explicitly superseded by provisions of this Agreement
or expired pursuant to its terms, shall remain in full force and effect)
represents the entire agreement between the parties hereto pertaining to the
subject matter of this Agreement and supersedes all prior agreements,
understandings, negotiations and discussions whether oral or written of the
parties thereto and there are no warranties, representations or other agreements
between the parties hereto in connection with the subject matter of this
Agreement except as specifically set forth in this Agreement (and the
Subscription Agreement to the extent still in full force and effect). The
Parties acknowledge that in particular the provisions of Sections 2.3 and 4.2(c)
of the Subscription Agreement have been superseded by the provisions of this
Agreement. This Agreement shall be read subject to, and construed in accordance
with, the provisions set forth in the Financing Documents. If the performance of
any provision of the Financing Documents by the parties hereto contradicts any
provisions hereof, the latter shall be superseded by the respective provision of
the Financing Documents, and any action undertaken or ommittence of action by
the parties hereto in compliance with the Financing Documents shall not
constitute a Triggering Event.
12.6 ENUREMENT. This Agreement shall enure to the benefit of and be binding upon
and enforceable by the parties hereto and, where the context so permits, their
respective successors. Except as specifically set forth herein, no party hereto
may assign this Agreement or any rights hereunder to any third party without the
prior written approval of the other parties hereto.
12.7 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any rights or
remedies upon any person other than the parties hereto and their respective
successors.
37
12.8 ECONOMIC LOSS. Except for willful misconduct, the parties hereto shall not
be liable towards each other for any indirect or consequential damage or loss
such as, but not limited to, loss of profit, loss of production or loss of
opportunity.
12.9 AGREEMENT TO GOVERN. In case of any conflict or uncertainty between this
Agreement and the articles of association of ZSG, the Subscription Agreement, or
any other agreements between the parties with respect to the Project (other than
the Financing Documents), the parties agree that this Agreement shall internally
take precedence over and govern all such agreements, except the articles of
association of ZSG, which shall prevail.
12.10 GOVERNING LAW, ARBITRATION. This Agreement shall be governed by, and
construed in accordance with, German law excluding, however, German rules of
conflicts of law. To the extent legally possible, all disputes arising out of or
in connection with this Agreement (including the binding effect of the Appraised
Value), the articles of association of ZSG, or resolutions of the Shareholders
shall be finally settled by arbitration under the Arbitration Rules by one or
more arbitrators appointed in accordance therewith. The venue of arbitration
shall be Frankfurt am Main, Germany. The proceedings shall be held in the
English language.
12.11 LANGUAGE. The governing language of this Agreement, the EPC Contract and
all meetings of the Shareholders shall be English. If for official reasons
certain agreements of ZSG or its articles of association have to be executed in
German, such agreements and articles of association shall be translated into
English and the parties agree that, to the extent legally possible, internally
such English versions shall prevail and govern for all purposes.
12.12 SEVERABILITY. If any article, section or any portion of any section of
this Agreement is determined to be unenforceable or invalid for any reason
whatsoever, such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and such
unenforceable or invalid article, section or portion thereof shall be severed
from the remainder of this Agreement. Notwithstanding the generality of the
foregoing, in the event that any of the provisions of this Agreement are held by
a court with proper jurisdiction to be partially invalid as exceeding legal
limits, such provisions shall be reduced or extended, as applicable, to their
legally authorized maximum limit.
12.13 AMENDMENT AND WAIVER. No amendment or waiver of any provision of this
Agreement shall be binding on any party hereto unless consented to in writing by
such party.
38
No waiver of any provision of this Agreement shall constitute a waiver of any
other provision, nor shall any waiver constitute a continuing waiver unless
otherwise expressly provided.
12.14 ARTICLES, SECTIONS, HEADINGS AND SCHEDULES. The division of this Agreement
into articles and sections and the insertion of headings and schedules are for
convenience of reference only and shall not affect the interpretation of this
Agreement. Unless otherwise indicated, any reference in this Agreement to an
article, section or schedule refers to the specified article or section of or
schedule to this Agreement.
12.15 NUMBER AND GENDER. In this Agreement, words importing the singular number
shall include the plural and VICE VERSA, and words importing the use of any
gender shall include the masculine, feminine and neuter genders.
12.16 CALCULATION OF TIME. When calculating the period of time within which or
following which any act is to be done or step taken pursuant to this Agreement,
the date which is the reference date in calculating such period shall be
excluded. If the last day of such period is not a Business Day, then the time
period in question shall end on the first Business Day following such
non-business day.
12.17 LEGISLATION REFERENCES. Any references in this Agreement to any law,
by-law, rule, regulation, order or act of any government, governmental body or
other regulatory body shall be construed as a reference thereto as amended or
re-enacted from time to time or as a reference to any successor thereto.
12.18 EXPENSES. Except as otherwise provided for herein, each of the parties
hereto shall bear its own expenses in relation to this Agreement. The fees of
the acting notary shall be borne in equal parts by each party.
12.19 ARTICLES OF ASSOCIATION OF ZSG. The articles of association of ZSG shall
be further amended, as required, to conform and comply with the terms of this
Agreement.
39
ANNEX 1
ARBITRATION RULES
1. The arbitration tribunal shall consist of two arbitrators and the
presiding arbitrator, each of whom shall be fluent in English and may be of
German or U.S. nationality. The party intending to institute arbitration
proceedings against one or more other parties shall inform the other parties in
writing of its intention and, at the same time, designate one arbitrator. The
other parties shall, within thirty Business Days after receipt of this notice,
designate a second arbitrator. If, within such time period, the other parties
have not designated a second arbitrator, then at the request of the party
intending to institute arbitration proceedings, the second arbitrator shall be
appointed by the International Chamber of Commerce, acting as appointing
authority. The two arbitrators thus appointed shall choose the presiding
arbitrator. If, within thirty Business Days after the appointment of the second
of the two arbitrators, the two arbitrators have not agreed upon the choice of
the presiding arbitrator, then at the request of either party to the arbitration
proceedings, the presiding arbitrator shall be appointed by the International
Chamber of Commerce.
2. All submissions and awards in relation to arbitration shall be made
in English and all arbitration proceedings and all pleadings shall be in
English. Original documents in English or German may be submitted as evidence in
their original language; witnesses not fluent in English may give evidence in
their native tongue (with appropriate translation). Original documents in a
language other than English or German shall be submitted as evidence in English
translation accompanied by the original or a true copy thereof.
3. The parties hereby adopt the rules of the International Chamber of
Commerce as the procedural rules governing arbitration hereunder, insofar as
such rules are not inconsistent with any provision of this ANNEX 1, which shall
be controlling. The arbitration panel may, at the request of a party, order
provisional or conservatory measures and shall have the authority to award
specific performance, provided, however, that until the complete establishment
of the arbitration panel, the ordinary courts shall remain competent for
provisional or conservatory measures in accordance with section 1033 of the
German Civil Procedure Code (ZIVILPROZESSORDNUNG). Any award shall be final
and not subject to appeal and the parties hereby waive all challenge to any
award of an arbitral panel under this ANNEX 1.
4. Any award shall be made in the currency in which the obligation
would have been paid, if the obligation with respect to which the award is made
was an obligation to pay money, or in Euro in all other cases.
SCHEDULE 1(aaa)
SHAREHOLDER LOAN AGREEMENTS
SCHEDULE 2.2(c)
ANCILLARY SITE ACQUISITION COST
This deed with annex 1 and schedule 1(aaa) was read aloud by the notary,
schedule 2.2(c) and annex 1 of schedule 1(aaa) were presented for review. The
persons appeared consented thereto and signed together with the notary in their
own hand as follows:
EXHIBIT 10.15
CONTRACT
FOR
ENGINEERING, DESIGN, PROCUREMENT, CONSTRUCTION,
ERECTION AND START UP
OF A
KRAFT PULP MILL
BETWEEN
ZELLSTOFF STENDAL GMBH
AND
RWE INDUSTRIE-LOSUNGEN GMBH
TABLE OF CONTENTS
PAGE
----
ART. 1 DEFINITIONS AND INTERPRETATION......................................................1
ART. 2 CONTRACT APPENDICES................................................................11
ART. 3 OBLIGATIONS OF THE CONTRACTOR-- NATURE AND EXTENT OF THE DELIVERY..................12
ART. 4 OBLIGATIONS OF THE OWNER...........................................................22
ART. 5 PARTIES' REPRESENTATIVES; INDEPENDENT ENGINEER.....................................25
ART. 6 QUALITY CONTROL....................................................................27
ART. 7 PRE-ACTIVITIES; UNFORESEEN SITE CONDITIONS.........................................32
ART. 8 TIME SCHEDULE......................................................................33
ART. 9 CONTRACT PRICE, PAYMENT TERMS AND ADJUSTMENTS TO CONTRACT PRICE....................40
ART. 10 ADVANCE PAYMENT, PERFORMANCE AND WARRANTY SECURITY.................................45
ART. 11 CHANGES IN LAW.....................................................................48
ART. 12 CHANGES............................................................................49
ART. 13 OWNERSHIP AND RISK OF LOSection....................................................54
ART. 14 INSURANCE..........................................................................59
ART. 15 WORK ENVIRONMENT RESPONSIBILITY....................................................62
ART. 16 MECHANICAL COMPLETION..............................................................64
ART. 17 TRAINING; COMMISSIONING, SYSTEM START-UP, START-UP AND SCHEDULE A TESTS............68
ART. 18 72-HOUR TEST AND ACCEPTANCE OF WORKS...............................................72
ART. 19 SCHEDULE B TESTS...................................................................77
ART. 20 DEFECTS LIABILITY..................................................................81
ART. 21 LIQUIDATED DAMAGES.................................................................87
ART. 22 INTELLECTUAL PROPERTY RIGHTS.......................................................89
ART. 23 SUSPENSION.........................................................................91
ART. 24 TERMINATION........................................................................93
ART. 25 CONTRACTORS' SUPPLIERS............................................................101
ART. 26 FORCE MAJEURE.....................................................................104
ART. 27 COPYRIGHT AND CONFIDENTIALITY.....................................................108
ART. 28 GOVERNING LAW; DISPUTES...........................................................112
ART. 29 INDEMNITY OBLIGATIONS.............................................................112
ART. 30 MISCELLANEOUS.....................................................................114
ART. 31 CONTRACT LANGUAGE.................................................................118
ART. 32 COMMENCEMENT DATE.................................................................118
ART. 33 ASSIGNMENT; TRANSFER..............................................................119
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Contract Page 1(3)
CONTRACT AGREEMENT
OWNER CONTRACTOR
Zellstoff Stendal GmbH RWE Industrie-Losungen GmbH
Niedergorner Damm 1 Sonnenwall 85
D-39596 Arneburg D-47051 Duisburg
Tel. +49 39321 50310 Tel. +49 203 309 2411
Fax. +49 39321 50320 Fax. +49 203 309 2478
VAT No. 3108-108-05531 VAT No. DE 811187276
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The following agreement has been concluded between the Contractor and the Owner.
RECITALS
A. The Owner wishes to build, own, operate and finance a softwood
kraft pulp mill with a capacity of 552,000 Adt/year and 1,700
Adt/day BSKP at Arneburg, Germany and wishes to appoint the
Contractor, upon the terms and subject to the conditions set out
herein on a lump-sum, fixed price, turnkey basis to perform the
Works. The Contractor wishes to undertake the Works to the
standards and in the manner set out herein.
B. The Owner and the Contractor have entered into this Contract
after extensive negotiations on the form and substance hereof and
each confirm that for such purpose the Contract could not in any
way be considered to be either Party's standard terms and
conditions.
C. Each Party has carefully considered and accepted the risks
allocated to it in this Contract. Accordingly, the Parties
consider that the terms and conditions hereof, including the
remuneration payable to the Contractor and the termination rights
set out in the Contract, are comprehensive and exclusive and
consider all relevant risks relating to the Works, whether
foreseeable or not.
ART.1 DEFINITIONS AND INTERPRETATION
SECTION 1.1. IN THIS CONTRACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, THE
FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
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Contract Page 2(4)
Acceptance Means the issuance or deemed issuance by the Owner
of the Acceptance Certificate.
Acceptance Certificate Means the certificate to be issued pursuant to
Article 18.
Acceptance Date Means the date upon which Acceptance has occurred.
Adt Means air dry metric tonnes.
Agent Means Bayerische Hypo- und Vereinsbank AG in its
capacity as agent under the Project Financing
Facility Agreement in relation to the Plant
entered into between, INTER ALIOS, the Owner and
Bayerische Hypo- und Vereinsbank AG, and any of
its subsequent successors and permitted
transferees and assigns.
Ancillary Facilities Means those ancillary facilities relating to the
Plant as more fully set forth in the
Specifications, including offices, utilities,
warehousing and shipping facilities.
Appendix Means an appendix to this Contract as described in
Article 2.
Banks Means the financial institutions and other
institutions that provide limited recourse
financing to the Owner for the construction,
testing and operation of the Plant.
BGB Means the German Civil Code.
Base Case As used in Sections 3.14, 4.5 and 19.3, means the
relevant line items in the "Key" and "Oper" sheets
in the so-called "base case" scenario (and the
assumptions relating thereto) attached hereto as
Appendix 4.
BSKP Means bleached softwood kraft pulp.
Business Day Means a Day that is not a Saturday, Sunday, or
Day which is recognized as a legal holiday at the
registered office of
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Contract Page 3(5)
the Owner or the Contractor set forth above.
Change Means any change, amendment, modification,
addition or deletion to or in respect of the
Works.
Change in Law Has the meaning assigned to that term in
Article 11.
Change Order Means an order to effect a Change in the
Contractor's obligations and/or rights as a result
of changed circumstances in relation to the Works.
Commencement Date Means the date when all conditions specified in
Article 32 have been fulfilled or waived.
Commissioning Means, with respect to any System, the process of
testing all control functions of, and performing
water runs or equivalent tests on, such System
following Mechanical Completion of such System and
the process of making such System ready for
operation.
Confidential Information Means any documents, data or other information
furnished directly or indirectly to one Party by
the other Party or its affiliates or subsidiaries
or acquired from the performance of the Works, or
any other information concerning the technical and
business activities and know-how of the other
Party or its affiliates or subsidiaries, in each
case as and to the extent provided in Article 27,
whether such information has been furnished prior
to, during or following termination of the
Contract.
Contract Means this Contract entered into between the Owner
and the Contractor, together with the Appendices.
Contract Day Means the Day on which the Contract is signed by
both Parties.
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Contract Page 4(6)
Contract Price Means the sum specified in Section 9.1, subject to
such additions and adjustments thereto or
deductions therefrom as may be made pursuant to
Section 9.8 or Article 12.
Contractor Means RWE Industrie-Losungen GmbH and its legal
successors or permitted assigns.
Contractor's Equipment Means machines, tools, apparatus, appliances or
things of every kind to be used by the Contractor
or any Contractor's Suppliers in or for the Works
or for the performance of any tests of the Works
or the Plant in accordance with the Contract, all
of which are to be provided by the Contractor, but
excludes any Materials or equipment intended to
form part of the Works.
Contractor's Personnel Means all personnel the Contractor uses in
execution of its obligations under the Contract.
Contractor's Representative Has the meaning assigned to that term in
Section 5.2.
Contractor's Supplier Means any supplier, agent or subcontractor of the
Contractor (including any Key Supplier) for the
execution of parts of the Works.
Day Means a calendar day of the Gregorian Calendar.
Defect Means:
(i) any error, omission or defect in the Works;
or
(ii) anything falling within the meaning of
"Mangel" in Section 633 BGB.
Defects Liability Period Means the period during which the Contractor is
liable for Defects as set forth in Article 20.
Design Documentation Has the meaning assigned to that term in
Section 6.4.
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Contract Page 5(7)
Detailed Program Means a program for the execution of the Works,
prepared in accordance with Section 8.7.
EPC Price Calculation Means the Project Cost Summary dated November 28,
2001, including the underlying detailed cost
estimate, of which both Parties have a copy.
Event of Force Majeure Has the meaning assigned to that term in
Section 26.1.
Excepted Risks Means the risks specified in Section 13.2 which
are not insurable and which are excepted from the
Contractor's responsibility for risk of loss.
HGB Means the German Commercial Code.
Independent Engineer Means the independent engineer appointed by the
Banks to provide consulting services in connection
with the Plant.
Interconnection Points Those places, to be agreed upon by the Owner and
the Contractor in accordance with Appendix 3,
Ex. 8 and identified in Appendix 3, Ex. 2.5,
drawing 100-0-2102, at which the Owner is required
to supply the temporary utilities specified in
Appendix 3, Ex. 4.2.
Key Suppliers Means suppliers of certain Systems identified in
Appendix 3, Ex. 10.
Laws Means applicable laws, orders, rules, ordinances,
regulations, by-laws, statutory orders, executive
orders and decrees, judicial decisions,
notifications or other similar directives having
the force of law, or legally binding instructions,
policy guidelines, codes or standards, in each
case adopted or issued by Relevant Authorities
(or, if applicable, by the European Union).
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Contract Page 6(8)
Major Capital Spares Means certain spare parts to be supplied by the
Contractor as specified in Appendix 3, Ex. 14.4.
Materials Means apparatus, materials, articles and things of
all kinds to be provided and incorporated in the
Works by the Contractor, but does not include
Contractor's Equipment.
Mechanical Completion Means, with respect to a System, a Non-System
Department or the Works, as the case may be, the
issuance or deemed issuance by the Owner of the
Mechanical Completion Certificate pursuant to
Article 16.
Mechanical Completion Date Means the date on which Mechanical Completion of a
System, a Non-System Department or the Works, as
the case may be, occurs.
Mechanical Completion Tests Means the tests described in Article 16.
Milestone Means an element of the Works identified in
Appendix 3, Ex. 20 and in the Detailed Program the
timely achievement of which is relevant to the
timely completion of the Works.
Milestone Date Means the targeted date for each Milestone set
forth in Appendix 3, Ex. 20.
Minimum Performance Means the minimum performance levels that must be
Requirements achieved for Acceptance or to satisfy the Schedule
B Tests, as set forth in Appendix 3, Ex. 12.4 or
12.6, as applicable, and referred to therein
(after giving effect to the last paragraph under
"Scope of Work of Contractor" in Appendix 3, Ex.
1.1.) as "absolute requirements," "absolutely
required" or "make good."
Month Means a calendar month.
Non-System Department Means a Department listed in Appendix 3, Ex. 2.4
that is not included in a System.
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Contract Page 7(9)
included in a System.
Operational Acceptance Means, with respect to a System or the Works, as
the case may be, the issuance or deemed issuance
by the Owner of the Certificate of Operational
Acceptance pursuant to Article 17.
Owner Means Zellstoff Stendal GmbH and its legal
successors or permitted assigns.
Owner's Representative Has the meaning assigned to that term in
Section 5.1.
Owner's Scope Means those works and services required to be
undertaken by the Owner as set forth in Article 4
and Appendix 3, Ex. 4.
Party Means the Owner or the Contractor.
Parties Means the Owner and the Contractor.
Payment Milestone Means the events or deliveries specified in
Appendix 2, Ex. 9, the completion of which shall
be the basis for payment under the Contract in the
respective percentages specified therein and in
accordance with the procedures set forth in
Article 9.
Performance Requirements Means the performance figures set forth in
Appendix 3, Ex. 12.4 to be achieved during the
Schedule B Tests.
Permits Means permits or applications therefor, consents,
approvals and licenses from Relevant Authorities.
Plant Means the whole and, where the context requires,
part of the kraft pulp mill with a net capacity of
1,700 Adt/d BSKP and 552,000 Adt/year,
respectively, the water intake and output
facilities, all interconnection facilities to
utilities, transportation and storage facilities,
the Ancillary Facilities and all related
infrastructure and activities related thereto, to
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Contract Page 8(10)
be constructed at the Site, a summary description
of which is set forth in Appendix 3, Ex. 1.2.
Pre-Activities Means certain activities to be undertaken by the
Contractor before the Commencement Date in
accordance with Article 7.
Pre-Activity Agreement Means the contract, in the form of Appendix 3, Ex.
22, executed by the Owner and the Contractor in
connection with the Pre-Activities.
Punch List Means a list of those items or parts of the Works
which the Contractor and the Owner agree are not
complete, but which are not material to the safe
operation of the Works and the Plant at levels
consistent with the net capacity requirements set
forth in Appendix 3, Ex. 1.2 and Ex. 2.1.
Relevant Authorities Means:
(a) the Federal Government and State Government
of Sachsen-Anhalt;
(b) any political sub-division of the Federal and
State Government and any local government
authority with jurisdiction over the Plant;
and
(c) any ministry, department, authority,
instrumentality or agency of the Federal and
State Government and/or any such political
sub-divisions, and their respective
successors and permitted assigns.
Schedule A Test(s) Means the test(s) described in Article 17 to be
performed in connection with the Start-up of
certain individual Systems, as specified in
Appendix 3, Ex. 12.1 and 12.2.
Schedule B Test(s) Means the test(s) described in Article 19 to
confirm the performance of certain individual
Systems, as specified in
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Contract Page 9(11)
Appendix 3, Ex. 12.3 and 12.4.
Scheduled Acceptance Date Means the date set forth in Section 8.5 by which
the Contractor has agreed to achieve Acceptance,
as the same may be extended in accordance with
Section 8.9 and Article 12.
Scheduled Mechanical Means the date set forth in Section 8.2 by which
Completion Date the Contractor has agreed to achieve Mechanical
Completion of the Works, as the same may be
extended in accordance with Section 8.9 and
Article 12.
Security Agent Means Bayerische Hypo- und Vereinsbank AG in its
capacity as agent under the Project Financing
Facility Agreement in relation to the Plant
entered into between, INTER ALIOS, the Owner and
Bayerische Hypo- und Vereinsbank AG, and any of
its subsequent successors and permitted
transferees and assigns.
Selected Subcontract Means any contract entered into between the
Contractor and a Selected Supplier in relation to
the Works.
Selected Supplier Means Metso Paper, Andritz-Ahlstrom Corporation,
Kvaerner Chemetics AB, FFE Minerals Denmark A/S,
AE Energietechnik GmbH, MAN Turbomaschinen AG,
PURAC GmbH (in a joint venture with Lurgi Bamag
GmbH), LINDE-KCA-Dresden GmbH, Hochtief
Construction AG and PI-Consulting OYJ.
72-Hour Test Means the 72-hour test run to demonstrate
fulfillment of the Minimum Performance
Requirements as set forth in Article 18 and
Appendix 3, Ex. 12.5 and 12.6.
Site Means the Owner's site at Arneburg/Sachsen-Anhalt
in Germany upon which the Plant is to be
installed, including
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Contract Page 10(12)
the water intake/outlet site(s) and
interconnecting land all as shown in Appendix 3,
Ex. 6.
Specifications Means the complete technical specifications for
the Works contained in Appendix 3, Ex. 6 and Ex.
7.
Start-up Means cooking of chips using liquor has started in
at least four (4) digesters sequentially.
Start-up Period Means the period from Start-up to the Acceptance
Date.
System Means each of the Plant systems specified in
Appendix 3, Ex. 1.1 and Ex. 6.
System Start-up Means operation of any System with the respective
media/raw material or, with respect to any System
that does not require media or raw material,
operation of such System for its intended purpose.
Time Schedule Means the detailed schedule for carrying out the
Works as established in accordance with Article 8.
Warranties Means the warranties given by the Contractor to
the Owner in respect of the Works as set out in
Article 20.
Week Means a period of seven (7) consecutive Days.
Works Means all or part of the works (including
Materials, supplies, machinery, equipment, tools,
buildings, roads, ways, Major Capital Spares,
and/or other items of whatever nature (excluding
the Contractor's Equipment), documents or services
to be planned, designed, engineered, manufactured,
procured, constructed, erected, installed,
commissioned, tested, completed, carried out,
undertaken or done by the Contractor in accordance
with the Contract (including any part of the Works
performed prior to the Contract Day and all
Pre-Activities to be performed by the
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Contract Page 11(13)
Contractor pursuant to the Pre-Activity
Agreement), for the provision of a fully operating
Plant (but excluding the Owner's Scope) as
described in more detail, but without limitation,
in the exhibits contained in Appendix 3, including
Ex. 3.
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SECTION 1.2. INTERPRETATION
In this Contract:
1.2.1. words importing the singular shall include the plural and vice
versa except where the context otherwise requires;
1.2.2. references to the word "INCLUDE" or "INCLUDING" are to be
construed without limitation; and
1.2.3. an "AFFILIATE" of a person shall be construed as a reference to a
subsidiary or holding company, or a subsidiary of a holding
company of such person.
SECTION 1.3. HEADINGS AND TITLES
The headings and references thereto in the Contract are included
for ease of reference and shall not affect the interpretation of
the Contract.
SECTION 1.4. OWNER ASSISTANCE
Any obligation imposed on the Owner pursuant to the terms of the Contract to
assist, or to use its best efforts to assist, the Contractor shall not be
construed as any obligation on the Owner to do anything in breach of Laws.
ART. 2 CONTRACT APPENDICES The following appendices form part of this
Contract:
Appendix
1: Direct Agreement
2: Commercial - Comprising Exhibits
Contract Page 12(14)
3: Technical - Comprising Exhibits
4: Base Case
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The text of the Articles of the Contract and the
Appendices are intended to supplement each other.
In case of incongruity between the text of the
Articles of the Contract and any of the
Appendices, the text of the Articles of the
Contract shall take precedence.
ART. 3 OBLIGATIONS OF THE CONTRACTOR -- NATURE AND EXTENT OF THE
DELIVERY CONTRACTOR'S GENERAL OBLIGATIONS
SECTION 3.1. Subject to the terms and conditions of this Contract, the
Contractor agrees to plan, design, engineer, procure, deliver,
construct, erect, install, start up and test the Works.
SECTION 3.2. The works and services to be performed by the Contractor shall
include the following:
(a) all planning, design, engineering, manufacture,
procurement, delivery to the Site and erection or
installation of all equipment, systems, components and
Materials (including the first fill of oils for machinery
and ion exchange resin for the feedwater treatment plant,
one set of cutter knives, one set of felts and wires, and
Major Capital Spares) needed to provide, commission, test,
and put into operation the Works, to achieve Acceptance by
the Scheduled Acceptance Date and to carry out the
Schedule B Tests, all in accordance with the Contract;
(b) the performance of, and completion of the Works in
accordance with, appropriate detailed design, engineering
and construction methods and techniques in accordance with
the Contract, the Specifications, all Laws and Permits
(including the Permit requirements and any environmental
remediation required based on the Environmental
Contract Page 13(15)
Impact Assessment Report (UMWELTVERTRAGLICHKEITSSTUDIE)
dated September 18, 2001 related to the Works and the
permit values contained in the Permits or applications for
Permits (or amendments to Permits) listed in items 1-6 of
Appendix 3, Ex. 4.4) and recognized rules of sound
engineering practice.
(c) the scheduling, execution and completion of the Works in
accordance with the Detailed Program established pursuant
to Section 8.7;
(d) the application for and obtaining of all Permits
(including the updated emissions Permit for which an
application has been filed and any necessary amendments or
modifications to Permits obtained by the Contractor, but
excluding those Permits to be obtained by the Owner
pursuant to Section 4.6) in good time so as not to delay
the execution and completion of the Works and the timely
initiation and diligent execution of other measures
necessary for the granting of the Permits;
(e) the timely submission of all data, information and
documentation that the Owner may reasonably request,
including the provision of such information and assistance
to enable the Owner to apply for and obtain the Permits
specified in Section 4.6 as set forth in Appendix 3,
Ex. 4.4; and
(f) the provision of complete documentation, including
operation and maintenance manuals in accordance with
Appendix 3, Ex. 3.2 and "as built" drawings in accordance
with Appendix 3, Ex. 3.2.2.1 and Ex. 19.
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SECTION 3.3. THE CONTRACTOR SHALL:
(a) at all times exercise (and has exercised) the skill, care
and diligence in the carrying out and completion of the
Works of a reasonable and prudent contractor, fully
skilled and experienced in the carrying out of work
similar to the Works, and has and will have the resources,
experience, qualifications and capabilities as are
required to fully perform its obligations under the
Contract;
(b) ensure that all Materials, equipment and workmanship shall
be of first-class quality, and all equipment, machinery
and Materials installed in the Works shall be new and
conform to the Specifications. With respect to Materials,
equipment and machinery for which a standard is not
prescribed in the Specifications or elsewhere in the
Contract, such Materials, equipment and components shall
conform to quality levels of leading European pulp mills
and shall not be of a type generally recognized in the
industry as Material, equipment or components to be
avoided or unsuitable (including due to susceptibility to
erosion or corrosion) for the application in which they
are to be used;
(c) carry out (and has carried out) the Works as a reasonable
and prudent contractor to ensure the safe operation of the
Works and Plant at levels consistent with the net capacity
requirements set forth in Appendix 3, Ex. 1.2 and Ex.2.1;
(d) carry out (and has carried out) the Works so as to comply
with the Performance Requirements and the Warranties;
(e) liase with the Owner regarding the management of the Works
and the coordination of the Owner's Scope with the Works,
all as further defined in the Contract.
Contract Page 15(17)
SETTING OUT
SECTION 3.4. The Contractor shall be responsible for accurate setting out of
the Works on the Site and for the correctness of the positions,
levels, dimensions and alignment of all parts of the Works and
for the provision of all necessary instruments, appliances and
labor in connection therewith. The Contractor shall carefully
protect and preserve all benchmarks, sight-rails, pegs and other
things used in setting out the Works and shall replace the same
should they become lost, damaged or destroyed in any way.
The Contractor shall provide such information as the Owner shall
reasonably require in relation to the setting out of the Works.
If, at any time during the carrying out and execution of the
Works, any errors which would affect the Works appear in the
positions, levels, dimensions or alignment of the Works, the
Contractor shall rectify the error at its own cost.
SECTION 3.5. HAZARDOUS SUBSTANCES, MAN-MADE MATERIALS AND ARCHAEOLOGICAL
FINDINGS
Upon the discovery of any hazardous or toxic substances, man-made
materials or fossil, coin, article of value or antiquity or any
other thing of archaeological interest, the Contractor shall
promptly:
(i) notify the Owner of such conditions;
(ii) provide the Owner in a timely manner with any information
or documentation required by the Owner to enable the Owner
to make any necessary application to any Relevant
Authority and comply with any requirements of such
Relevant Authority; and
(iii) use best efforts to mitigate the effects of any such
discovery on the performance of the Works (which efforts
shall be at the expense of the Contractor).
Contract Page 16(18)
Any fossils, coins, objects of value, antiques or objects of
geological or archaeological value discovered at the Site shall
in no case be the property of the Contractor and shall be handed
over to the Owner. The Contractor shall take appropriate
precautionary measures and prevent its agents and employees or
the agents and employees of any Contractor's Suppliers from
misappropriating or damaging any such objects.
The Contractor shall be responsible for all costs and expenses
associated with any hazardous substances or man-made materials
which may be brought onto the Site, or released or deposited at
the Site by the Contractor, any Contractor's Supplier or their
respective affiliates, directors, officers, employees or agents
or otherwise.
OPPORTUNITIES FOR OTHER CONTRACTORS
SECTION 3.6. The Contractor recognizes that certain other persons including
the Owner will, during the carrying out of the Works, require
access to and use of parts of the Site to carry out works and
services in connection with or to construct, install, operate and
maintain parts of the Plant. The Contractor shall not object to
such access, use and works and shall in accordance with the
requirements of the Owner afford all reasonable opportunities to
such persons for carrying out their work and services and to the
Owner and/or the Independent Engineer for inspecting their work
and services, provided that such access, use, works or services
does not unduly interfere with the Works or the Time Schedule. In
the event and to the extent that such undue interference in
connection with such access, use, works or services cannot be
avoided and causes delay or additional expense to the Contractor,
the Time Schedule and, if necessary, the Contract Price shall be
adjusted accordingly pursuant to Sections 8.9 and 9.8,
respectively.
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Contract Page 17(19)
LIAISON WITH THIRD PARTIES
SECTION 3.7. The Owner shall be responsible for coordination and liaison with
the Independent Engineer. The Contractor shall fully cooperate
with the Owner and the Independent Engineer in all matters
relating to the timely completion of the Plant and all works in
relation to it for which the Contractor is not responsible and
shall provide such information, attend such meetings and perform
such work as is required by the Contract or is reasonably
requested by the Owner for such purposes.
TRAINING
SECTION 3.8. The Contractor shall provide full and comprehensive training in
the German language for the Owner's personnel in accordance with
Appendix 3, Ex. 3.5 to enable such personnel to assume operating
control of the Plant upon Acceptance and operate the Plant
thereafter as a reasonable and prudent operator in accordance
with the operation and maintenance manuals and the manufacturers'
instructions and guidelines.
CLEARANCE OF SITE
SECTION 3.9. The Contractor shall keep the Site and adjacent land clean, free
and clear of all waste, rubble and hazardous substances and in a
workmanlike condition during the term of the Contract. Prior to
Mechanical Completion of each System, the Contractor shall clear
away, remove from that System and (if applicable) dispose of in
accordance with applicable Laws and Permits all Contractor's
Equipment, surplus materials, rubbish and temporary works of
every kind and leave the whole of that System clean, free and
clear of all waste, rubble and hazardous substances and in a
workmanlike condition all to the Owner's reasonable satisfaction.
Prior to Acceptance, the Contractor shall clear away and remove
from the Site and (if applicable) dispose of in accordance with
applicable Laws and Permits all Contractor's Equipment, surplus
materials, rubbish and temporary
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Contract Page 18(20)
works of every kind related to the Works and leave the whole of
the Site clean, free and clear of all waste, rubble and hazardous
substances and in a workmanlike condition all to the Owner's
reasonable satisfaction.
The Owner may require that any pre-existing buildings, structures
and other facilities not be cleared or removed by the Contractor
under this Section.
UTILITIES
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SECTION 3.10. The Contractor shall be responsible for the distribution within
the Site, as may be required for the performance of the Works in
accordance with this Contract, of all temporary utilities
provided by the Owner pursuant to Section 4.2 or necessary for
the Contractor to perform the Works. The Contractor shall, at its
risk and cost, provide any apparatus necessary for the
connections at the Interconnection Points and its use of such
utilities within the Site.
CONTRACTOR'S ADDITIONAL OBLIGATIONS
SECTION 3.11. The Contractor shall, unless specifically excluded in the
Contract, perform all such work and/or supply all such items and
materials (including any spare parts that the Owner is not
specifically required to provide pursuant to Section 4.5 when and
as the same may become necessary for replacement of parts of the
Works), even though not specifically mentioned in the Contract,
as are required within the battery limits specified in
Appendix 3, Ex. 8 for the completion, testing, functioning and
operation of the Plant including attaining Minimum Performance
Requirements and Acceptance of the Works, remedying any failures
to achieve the Performance Requirements and remedying any Defects
until the expiry of the Defects Liability Period as if such work
and/or items and materials were expressly mentioned in the
Contract.
Contract Page 19(21)
OWNER INFORMATION
SECTION 3.12. The Owner's provision of information and/or data in accordance
with this Contract, and the Owner's participation in the
selection of Key Suppliers and equipment in accordance with
Section 25.2 and in quality control as provided in Article 6 and
any act or omission by the Owner or the Independent Engineer,
shall not relieve the Contractor from any obligations under this
Contract. The Contractor shall independently verify all
documents, drawings, plans and data relating to the Works,
whether or not supplied by the Owner, and any flaws therein shall
not be partly or wholly attributed to the Owner as comparative
negligence under Section 254 BGB.
TITLE TO WORKS
SECTION 3.13. The Contractor shall provide to the Owner good title to the Works
and all equipment and Materials contained therein (as further
provided in Section 13.1), and Intellectual Property Rights
relating thereto, free of all liens, security interests,
encumbrances or any other rights of third parties.
The Contractor shall release the Owner from any liabilities
toward employees of the Contractor and SOZIALKASSEN (social
funds) pursuant to Section 1a ARBEITNEHMER-ENTSENDEGESETZ (Act
Concerning the Secondment of Employees), including liabilities
for making such payments imposed on any Contractor's Supplier or
hiring agent appointed by the Contractor or any Contractor's
Supplier.
CONTRACTOR'S RISK; OPERATION PRIOR TO ACCEPTANCE
SECTION 3.14. Prior to Acceptance, the Contractor shall have sole
responsibility for the Works and, subject to the second paragraph
of Section 13.2, operation of the Plant. Following Mechanical
Completion, the Contractor shall instruct, supervise and carry
out, using the Owner's personnel, Commissioning, System Start-up,
Start-up and testing of the Plant including Schedule A Tests,
72-Hour Test and Schedule B Tests, all as set forth in the
Contract.
Contract Page 20(22)
In carrying out the Start-up and testing of the Plant, the
Contractor shall use its best efforts (subject to compliance with
Laws) to have the Plant meet or exceed the production projected
in the Base Case for the period from Start-up until Acceptance.
The Contractor shall provide until Acceptance any wear and tear
parts that are required in excess of the amounts which are normal
(having regard to the experience of European pulp mills during
normal operation) for such wear and tear parts in a Plant of this
type during the period from Commissioning until Acceptance. The
Contractor shall also provide until expiry of the Defects
Liability Period all necessary qualified personnel to promptly
respond to and deal with any correction, replacement or
rebuilding of Defects which may become apparent in the Works
during such period.
PERMITS
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SECTION 3.15. The Contractor (directly or through the Contractor's Suppliers),
shall acquire and pay for all Permits which are necessary for the
performance of the Contract, including in relation to the
start-up, testing and operation of the Plant, in a timely manner
so as not to delay the execution and completion of the Works,
provided that the Contractor shall not be responsible for
obtaining those Permits to be obtained by the Owner as specified
in Appendix 3, Exhibit 4.4. The Contractor shall comply with all
Permit conditions and requirements (including the Permit
requirements and any environmental remediation required based on
the Environmental Impact Assessment Report
(UMWELTVERTRAGLICHKEITSSTUDIE) dated September 18, 2001) related
to the Works and the permit values contained in the Permits or
applications for Permits (or amendments to Permits) listed in
items 1-6 of Appendix 3, Ex. 4.4 and, if necessary, obtain such
amendments or modifications to such Permits as may be required by
Law and make any modifications to the Works in accordance with
Article 12 as may be required in order to comply with such
Permits and/or any modifications thereto; provided that, if such
amendments
Contract Page 21(23)
or modifications are required as a result of a Change in Law, the
provisions of Article 11 shall apply. The Contractor shall also
ensure that all Contractor's Suppliers have all Permits necessary
for the performance of their contracts.
The Contractor shall use its best efforts to assist the Owner
free of charge in obtaining in a timely and expeditious manner
the Permits to be obtained by the Owner as specified in Appendix
3, Exhibit 4.4.
CONTRACTOR'S INVESTIGATIONS
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SECTION 3.16. The Contractor confirms that, prior to the Commencement Date, it
will have informed itself about all circumstances relevant to
fulfill this Contract. The Contractor shall not thereafter make
any claim on the basis of insufficient knowledge.
CONTROL MEASURES
SECTION 3.17. All control measures required by the Relevant Authorities,
including X-ray tests, pressure testing, and examination of
calculations and drawings, shall be attended to and paid for by
the Contractor, who shall submit all relevant certificates and
reports to the Relevant Authorities and to the Owner and the
Independent Engineer without delay and in any event no later than
two (2) Weeks before System Start up (or, if not applicable until
later, two (2) Weeks before the date they are due).
FINANCING
SECTION 3.18. The Contractor shall provide to the Owner free of charge such
information and assistance as the Owner may reasonably request in
connection with the financing of the Plant and the Contractor
shall enter into a direct agreement with the Banks in the form
attached as Appendix 1.
Contract Page 22(24)
ART. 4 OBLIGATIONS OF THE OWNER
OWNER INFORMATION
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SECTION 4.1. The Owner shall provide to the Contractor the information and
data described in Appendix 3, Ex. 4.7. The Owner's provision of
such information and data shall not relieve the Contractor from
its obligations under this Contract. The Contractor shall
independently verify the accuracy of all such information and
data provided by the Owner. If the Contractor notifies the Owner
of any inconsistencies or errors in such information or data the
Owner shall, if it agrees with the Contractor, correct such
information or data within fifteen (15) Days from the Owner's
receipt of notice from the Contractor. In the event that the
Owner fails to make the agreed corrections, or if the Owner and
the Contractor cannot reach agreement on such information or
data, the Contractor shall be entitled to proceed on the basis of
the information and data that were agreed or which it considers
to be correct, respectively. The Contractor shall remain
responsible for such information and data and in no event shall
the Owner's failure to act entitle the Contractor to any relief
from its obligations under this Contract, including any
adjustment to the Contract Price or the Time Schedule.
SITE
SECTION 4.2. The Owner shall be responsible for acquiring legal and physical
possession of the Site and providing the Contractor with access
thereto. The Owner shall also provide at its cost, at the
Interconnection Points as set forth in Appendix 3, Ex. 2.5,
temporary utilities as specified in Appendix 3, Ex. 4.2.
OWNER'S SCOPE
SECTION 4.3. The Owner shall provide the equipment, Materials and services
specified in Appendix 3, Ex. 4 and Ex. 6, Depts. 820 and 830. The
Owner shall arrange for the clearance and removal from the Site
of the buildings and other items described in Appendix 3, Ex. 4.3
under "Permanent Demolition Services" in a
Contract Page 23(25)
manner that will not result in interference with the Works. The
Owner shall have no obligations other than as expressly included
in the Owner's Scope. The Owner's Scope shall be provided and
performed in accordance with the Time Schedule as set forth in
the Detailed Program and shall be of the quality stipulated in
Appendix 3, Ex. 4. The Contractor shall notify the Owner of any
act, omission, event or delay of which it becomes aware that may
affect the Owner's obligations in respect of the Owner's Scope
and shall not act or omit to act in such a manner that would
prejudice the Owner's obligations hereunder. The Contractor shall
also notify the Owner promptly of any failure by the Owner to
perform the Owner's Scope of which it becomes aware and that may
give rise to any extension of time pursuant to Section 8.9 or any
increase in the Contract Price pursuant to Section 9.8. In such
event, the Owner may, among other options to avoid or minimize
any such delay or increase in the Contract Price, request the
Contractor to undertake the performance of such item(s) of the
Owner's Scope. Any such request by the Owner shall be handled as
a Change in accordance with Article 12.
SECTION 4.4. The Owner shall provide at the Site, upon Mechanical Completion
of a System the operating personnel, raw material (furnish),
consumables, wear and tear parts and other items, in each case as
set forth in Appendix 3, Ex. 4 and Ex. 14 (but in the case of
wear and tear parts limited to the amounts which are normal
(having regard to the experience of European pulp mills during
normal operation) for such parts in a Plant of this type during
the period from Commissioning until Acceptance). The Owner shall
have no obligation to provide anything not specified in such
Appendix (or, in the case of wear and tear parts specified in
Appendix 3, Ex. 14.3, in excess of the amounts which are normal
for such parts in a Plant of this type during the period from
Commissioning until Acceptance), which shall be the obligation of
the Contractor.
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Contract Page 24(26)
SPARE PARTS
SECTION 4.5. The Owner shall provide, within the budgeted amount of Seven
Million Five Hundred Thousand Euros ((euro)7,500,000), at
Mechanical Completion of a System, the inventory of spare parts,
other than Major Capital Spares, relating to that System as set
forth in Appendix 3, Ex. 4.5, Ex. 14.1 and 14.2.
Prior to Acceptance, the Contractor shall be entitled to use the
spare parts and wear and tear parts provided by the Owner, as
well as the Major Capital Spares, in connection with the
fulfilment of its contractual obligations, including performance
of tests required by this Contact. After Acceptance and prior to
the end of the Defects Liability Period, the Contractor shall be
entitled to use the spare parts, as well as the Major Capital
Spares, in connection with the fulfillment of its contractual
obligations, including performance of tests required by this
Contract. In each case, the Contractor shall replace any spare
parts (including Major Capital Spares) so used, and any wear and
tear parts used prior to Acceptance in excess of the amounts
which are normal (having regard to the experience of European
pulp mills during normal operation) for such parts in a Plant of
this type during the period from Commissioning until Acceptance,
forthwith at its own cost. If the Contractor fails so to replace
any spare parts (including Major Capital Spares) or any such
excess wear and tear parts used by it, the Owner shall be
entitled to withhold, or draw on any performance security issued
on behalf of the Contractor, for an amount equal to the cost of
replacing and if necessary installing such spare parts (including
Major Capital Spares) and excess wear and tear parts.
PERMITS TO BE OBTAINED BY THE OWNER
SECTION 4.6. The Owner shall acquire and pay for the Permits specified in
Appendix 3 Ex. 4.4 upon receipt from the Contractor, in the case
of Permits relating to the Works, of all necessary documentation
required for any such Permits. Notwithstanding the foregoing, it
shall be the Contractor's responsibility to
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Contract Page 25(27)
monitor the progress of all Permit applications and to coordinate
all its activities to ensure that all Permits are obtained in a
timely manner. The Owner shall comply with all Permit conditions
and requirements relevant to its provision of the Owner's Scope.
SECTION 4.7. If requested by Contractor, the Owner shall, at its own cost, use
its best efforts to assist the Contractor in obtaining the
Permits to be obtained by the Contractor or any Contractor's
Supplier, including providing all technical information relating
to items within the Owner's Scope that is necessary to prepare
the Permit applications.
TRANSFER OF CONTROL OF PLANT
SECTION 4.8. The Owner shall assume responsibility for the operation of the
Plant upon Acceptance (other than in connection with the Schedule
B Tests, the performance of which shall be the responsibility of
the Contractor with respect to the affected Systems).
ART. 5 PARTIES' REPRESENTATIVES; INDEPENDENT ENGINEER
OWNER'S SITE REPRESENTATIVE AND CONTRACTOR'S SITE REPRESENTATIVE
SECTION 5.1. The Owner shall appoint within seven (7) Days from the Contract
Day a person to act as the Owner's Representative at the Site
with whom the Contractor may consult whenever necessary. The
Owner shall, from time to time, be entitled to replace such
person and notify the Contractor of the new Owner's
Representative. The Owner's Representative shall have the
authority to make decisions which are binding on the Owner in
regard to technical and commercial matters relating to
performance of activities at the Site and also to receive
proposals and recommendations from the Contractor concerning the
Plant in other respects.
SECTION 5.2. The Contractor shall appoint within seven (7) Days from the
Contract Day a person to act as the Contractor's Representative
at the Site with whom the
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Contract Page 26(28)
Owner may consult whenever necessary. The Contractor shall, from
time to time, be entitled to replace such person and notify the
Owner of the new Contractor's Representative. In addition, the
Contractor shall, upon reasonable request by the Owner based on
the substantive reasons set forth in such request, replace the
Contractor's Representative with a new Contractor's
Representative who shall be reasonably satisfactory to the Owner.
The Contractor's Representative shall have the authority to make
decisions which are binding on the Contractor in regard to
technical and commercial matters relating to performance of
activities at the Site and also to receive proposals and
recommendations from the Owner concerning the Works in other
respects.
SECTION 5.3. All decisions by the Owner's Representative and/or the
Contractor's Representative shall be documented in the Site log
book or otherwise as appropriate. Neither the Contractor's
Representative nor the Owner's Representative shall be authorized
to change any provision of the Contract, approve any Change or
agree on any item or matter which would affect the Time Schedule
or Contract Price (except as specifically authorized in a notice
provided pursuant to the following sentence), and no decisions by
either or both of the two Representatives shall be the basis for
any such changes. At or prior to the Commencement Date, each
Party shall designate by notice to the other one or more
individuals who are authorized to approve Changes or agree on
items or matters which would affect the Time Schedule or Contract
Price (including any limits on their authorizations to specific
items). A Party may change such designations from time to time by
notice to the other, provided that all approvals and agreements
that were issued by authorized individuals prior to notice of
such change shall remain valid.
INDEPENDENT ENGINEER
SECTION 5.4. The Parties acknowledge that prior to the Commencement Date the
Banks shall appoint an Independent Engineer. The Contractor shall
afford the
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Contract Page 27(29)
Independent Engineer unimpeded access to the Site and all
documentation, and records associated with the Works and fully
cooperate with the Independent Engineer as contemplated in the
Contract. No actions or omissions on the part of the Independent
Engineer or certificates or agreements given by the Independent
Engineer shall relieve the Contractor of its obligations in this
Contract.
ART. 6 QUALITY CONTROL
INSPECTION AND TESTING
SECTION 6.1. The Owner's representatives and the Independent Engineer shall be
entitled to inspect and witness any tests in connection with the
engineering, purchase, manufacture, construction and erection of
each part of the Works and the Plant to ensure that the
Contractor is performing its obligations in accordance with, and
the Works conform with the requirements of, this Contract.
The Contractor shall adopt the necessary measures to rectify
Defects (including any nonconformity with the Specifications) and
failures to maintain the Time Schedule, that are found during its
inspections or tests or that are pointed out by the Owner. The
Contractor shall not be entitled to any adjustments in the
Contract Price or Time Schedule as a result of such measures,
except to extent provided in Section 8.9 or 9.8.
SECTION 6.2. The Contractor shall ensure that the Owner and Independent
Engineer have free access during normal working hours and upon
reasonable advance notice to workplaces (including those of
Contractor's Suppliers) where constituent parts of the Works are
designed, engineered, planned, manufactured, assembled or tested
so that the Owner and the Independent Engineer can inspect and be
present at tests of the Works. In addition the Owner and the
Owner's designated consultants and representatives shall have the
right to request reasonable additional testing of the Works
during manufacture, fabrication and construction to verify
conformance with the Specifications. In the event that such
request is based on findings of defects
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Contract Page 28(30)
in similar Materials, equipment or Systems or in the event that
such testing identifies a Defect, the costs of such additional
testing shall be for the account of the Contractor and shall not
result in any increase in the Contract Price or extension of the
Time Schedule. If the request is not based on such findings and
does not identify a Defect, and provided that the Contractor had
before such additional tests provided written notice of the
increase in costs or delay in the Works that would result from
such additional tests and a reasonable explanation why such
additional tests were unnecessary or could otherwise be avoided,
all such costs shall be for the account of the Owner and the
Contract Price or Time Schedule shall be adjusted accordingly
pursuant to Section 9.8 or 8.9, respectively.
In the event that any portion of the Works at the Site will no
longer be visible or accessible by the time of Acceptance, the
Contractor shall notify the Owner and the Independent Engineer
once such portion is completed and give them an opportunity to
test and inspect such part of the Works. In the event the Owner
requires additional testing, the Owner shall advise the
Contractor of such requirements within a reasonable time prior to
the Contractor's scheduled testing. All additional inspection,
examination and testing required by the Owner shall to the extent
possible be carried out in conjunction with the Contractor's
similar activities and, if not, upon prior consultation with the
Contractor and in such a manner as to avoid any unnecessary delay
or interference in the performance of the Works.
SECTION 6.3. The Contractor shall give the Owner and the Independent Engineer
reasonable advance notice of any tests together with details of
the times and locations of such tests. Tests shall be conducted
in accordance with applicable provisions of the Specifications.
In the event that the Owner and/or the Independent Engineer are
not present the Contractor may proceed with the testing. The
Contractor shall provide to the Owner and the Independent
Engineer the test protocols, test certificates and any associated
reports and results upon completion of the relevant tests.
Contractor shall
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Contract Page 29(31)
also furnish the Owner and the Owner's designated consultants and
representatives with access to records of all performance
inspections, tests and examinations undertaken by Contractor
and/or Contractor's Suppliers.
The Owner and its designated consultants and representatives
shall have the right to reject any portion of the Works which is
defective, deficient, not within Specifications or the standards
described in Section 3.3(b) or otherwise of inferior quality or
faulty workmanship (including upon inspection or reinspection
upon arrival at the Site of Materials or equipment provided by
Contractor's Suppliers) and require its repair or replacement by
written notification to Contractor specifying the reasons for
such rejection. All rejected and other workmanship that is
defective, not within Specifications or the standards described
in Section 3.3(b) or otherwise of inferior quality or faulty
workmanship shall be repaired so as to satisfy the Contractor's
Warranties and otherwise comply with the provisions of Article
20. Rejected and other defective Materials or equipment shall be
repaired or replaced with proper Materials or equipment. The
costs associated with such repairs and replacements shall be for
the account of Contractor and not reimbursable. In no event shall
such rejection, repair or replacement result in any extension of
the Time Schedule or increase in the Contract Price. After
completion of the necessary repairs or replacements the relevant
Materials and equipment shall be subject to further inspection,
examination and testing, all the expenses of which shall be for
Contractor's account.
Should the Owner consider it necessary or advisable at any time
before Acceptance to make an examination of Work already
completed, by removing or tearing out same, Contractor shall
consult with the Owner and take reasonable steps to follow up
with the appropriate Contractor's Supplier regarding the
necessity for such action. On request by the Owner, the
Contractor shall promptly furnish all necessary facilities, labor
and material for effecting the requested examination; provided,
however, that the Owner may require removing or tearing out Work
already completed only in
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Contract Page 30(32)
circumstances where it has reasonable grounds to believe that
Defects exist in the Works that would not have been identified by
any tests previously conducted by the Contractor. All costs of
removing and tearing out any completed work and the costs
associated with its satisfactory reconstruction in accordance
with this Contract (including charges for services rendered in
connection therewith) shall be for the account of Contractor and
not reimbursable, except in the event that such removal or
tearing out does not uncover a Defect and the Contractor had
before such removal or tearing out provided written notice of the
increase in costs or delay in the Works that would result from
such removal or tearing out and reasonable evidence from the
relevant Contractor's Supplier or otherwise (including by
reference to tests previously conducted by the Contractor) as to
why such removal or tearing out was unnecessary or could be
otherwise avoided, in which case all such costs shall be for the
account of the Owner and the Contract Price or Time Schedule
shall be adjusted accordingly pursuant to Section 9.8 or 8.9,
respectively.
Contractor shall furnish at each location where inspection,
examination and testing is carried out all reasonable facilities,
assistance, labor, equipment, materials, utilities, apparatus and
instruments necessary for the safe and standard inspection and
testing of material and workmanship that may be required pursuant
to this Contract (in each case, other than any items comprising
part of the Owner's Scope).
The right of inspection, examination and testing by the Owner,
its designated consultants and representatives provided herein is
intended solely for the Owner's benefit, it being understood that
no exercise of or failure to exercise such right shall relieve
the Contractor of any of its obligations hereunder or prejudice
any of the Owner's rights under this Contract.
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Contract Page 31(33)
DESIGN
SECTION 6.4. All working drawings, specifications, flow sheets and other
designs prepared by the Contractor or Contractor's Supplier
("Design Documentation"), test certificates, records of failed
tests, detailed time schedules, minutes of construction meetings
and any other documentation that is relevant to the activities at
the Site or operation of the Plant shall be made available at the
Site for review by the Owner and the Independent Engineer (with
all other working drawings, specifications, flow sheets and other
designs being available for review at the offices or shop of the
Contractor or the relevant Contractor's Supplier), other than
proprietary manufacturer's drawings.
The Owner and the Independent Engineer shall have the right upon
giving reasonable prior notice to the Contractor at all
reasonable times to inspect, at the Site or at the premises of
the Contractor and the premises of the Contractor's Suppliers,
all the Contractor's and Contractor's Suppliers' drawings,
documents and other material relating to the Works.
SECTION 6.5. The Contractor shall, either directly or through the Contractor's
Suppliers, provide to the Owner, in accordance with this
Contract, complete documentation relating to the Works. The
Contractor shall submit to the Owner for approval and make
available to the Independent Engineer at the Site for review the
drawings and specifications indicated in Appendix 3 Ex. 3.2.2.1,
which shall be examined by the Owner as soon as possible. The
Contractor shall be notified in writing by the Owner of approval
or any remarks and observations (including remarks or
observations provided to the Owner by the Independent Engineer)
within seven (7) Days from the date on which the documents were
actually received by the Owner. The Contractor shall modify and
re-submit the Design Documentation to reflect the comments made
by the Owner. If such notification has not been communicated to
the Contractor within such period, the respective approval shall
be deemed as having been given upon the expiry of such seven (7)
Day period.
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Contract Page 32(34)
Design Documentation approved by the Owner pursuant to Appendix
3, Ex. 3.2 shall not be departed from without resubmission to and
re-approval by the Owner in accordance with this Section 6.5.
SECTION 6.6. The fact that the Owner has approved drawings and specifications
and participated in the engineering, design (including
development of the Specifications and selection of Contractor's
Suppliers and equipment), planning, manufacture, construction and
erection process shall not relieve the Contractor of any of its
responsibilities under the Contract.
SECTION 6.7. Each Party shall bear its own costs incurred in connection with
the above activities.
ART. 7 PRE-ACTIVITIES; UNFORESEEN SITE CONDITIONS
PRE-ACTIVITIES
SECTION 7.1. In order to achieve the Time Schedule as set forth in Article 8,
the Contractor shall be given the opportunity to carry out prior
to the Commencement Date the Pre-Activities in accordance with
and subject to the Pre-Activity Agreement.
UNFORESEEN GROUND CONDITIONS
SECTION 7.2. The Contractor confirms that it has, prior to the date hereof,
inspected and studied the Site and its environs and has fully
satisfied itself as to all matters affecting the Site and its
environs. The Contractor has also made itself familiar with the
investigations that had been conducted in connection with the
initially intended use of the Site for the construction of a
nuclear power station, and the additional site investigations
that were conducted in the fall of 2001 in preparation for the
Works.
Section 7.3. The Contractor acknowledges that the Works shall be designed and
engineered for erection and installation at the Site and that it
has thoroughly investigated and satisfied itself as to all
general and local conditions at the
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Contract Page 33(34)
Site and the waters adjacent thereto, including but not limited
to: river and land transportation and access to the Site,
including the availability and condition of roads; handling and
storage of materials; availability and quality of labor, water,
sand, rock and power; rainfall and other climatic conditions,
currents, soundings and ground water; topography, ground surface,
subsurface, seismic, shore and harbor conditions; the nature and
quantity of surface and subsurface materials or obstacles to be
encountered, and equipment, machinery and materials required by
the Contractor prior to and during performance of its obligations
hereunder. The Contractor acknowledges that all appropriate
allowances for the matters and conditions referred to in this
Section have been taken into account in calculating the Contract
Price and determining the Time Schedule. No increase in the
Contract Price and/or extension of the Time Schedule shall be
considered by the Owner or given effect based in whole or in part
upon any discrepancy between the conditions that the Contractor
anticipated and the actual conditions encountered by the
Contractor. Without limiting the generality of the foregoing, the
Contractor confirms that it is aware of the archaeological
investigations being conducted at the Site by the LANDESAMT FUR
ARCHAOLOGIE DES LANDES SACHSEN-ANHALT, that it has taken such
work into account in developing its workplan, and that it shall
not be entitled to any adjustment in the Contract Price or Time
Schedule as a result of any interference with the Contractor's or
Contractor's Suppliers' work caused by such investigation
provided that the investigations are completed as indicated in
the time schedule provided by the LANDESAMT FUR ARCHAOLOGIE DES
LANDES SACHSEN-ANHALT for such investigations.
ART. 8 TIME SCHEDULE
The Parties agree to fulfill their obligations as set forth in
this Contract by the times and dates specified below (as such
times and dates may be extended in accordance with Section 8.9 or
an approved Change Order).
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Contract Page 34(36)
SECTION 8.1. The Pre-Activities shall start on the date mutually agreed upon
between the Parties and shall have a duration of at least 3
months prior to Commencement Date.
SECTION 8.2. Mechanical Completion of the Works shall be not later than 22
(twenty-two) months after Commencement Date ("Scheduled
Mechanical Completion Date").
SECTION 8.3. Start-up shall be not later than 23 (twenty-three) months after
Commencement Date ("Scheduled Start-up Date").
SECTION 8.4. Production of saleable pulp shall begin not later than 24
(twenty-four) months after Commencement Date ("Scheduled
Production Date"). "Saleable pulp" means pulp which can be sold
at a price of at least seventy percent (70%) of the list price of
NBSKP (CIF North Sea Port), as reported by NLK. "NBSKP" means
northern bleached softwood kraft pulp. "NLK" means Nystrom, Lee,
Kobyashi Ltd.
SECTION 8.5. All conditions to Acceptance shall be satisfied not later than 28
(twenty-eight) months after Commencement Date.
SECTION 8.6. The times for delivery of documentation, including "as built"
drawings, are set forth in Appendix 3, Ex. 3.2 and Ex. 19.
DETAILED PROGRAM
SECTION 8.7. The Contractor shall, no later than thirty (30) Days after the
Commencement Date submit to the Owner and the Independent
Engineer for review a draft of a Detailed Program for the
execution of the Works. The Detailed Program shall be consistent
with the Milestone schedule set forth in Appendix 3, Ex. 20 and
shall set out in detail the sequence in which and the techniques
and resources by which the Contractor intends to perform the
Works so that the Contractor will achieve each Milestone by the
applicable Milestone Date, Mechanical Completion by the Scheduled
Mechanical Completion Date, Start-
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Contract Page 35(37)
up by the Scheduled Start-up Date, commencement of production of
saleable pulp (as defined in Section 8.4) by the Scheduled
Production Date, and Acceptance by the Scheduled Acceptance Date.
In particular, the Detailed Program shall include information
regarding the planned physical progress of major construction and
erection activities at the Site, including without limitation
manpower (by trade) on Site, concrete poured, equipment
installed, and piping, electrical and instrumentation installed.
Such information shall include graphs of the planned achievement
over time of the aggregate unit quantities for such items
(so-called "S-curves") in order to facilitate measurement and
reporting of actual progress against planned progress for
purposes of, among other things, the monthly progress reports to
be provided pursuant to Section 8.10. The S-curves shall be
prepared in accordance with good industrial practice as approved
by the Owner and the Independent Engineer.
The Contractor shall give due consideration to any comments made
by the Owner and the Independent Engineer regarding the Detailed
Program in finalizing the Detailed Program and any portion of the
Detailed Program that affects the implementation of the Owner's
Scope or its use of facilities shall be mutually agreed by the
Owner and the Contractor. The fact that the Owner has reviewed
and/or made comments regarding the Detailed Program shall not
relieve the Contractor of any of its obligations under the
Contract.
The Parties recognize that it is essential to complete all of the
items specified in Sections 8.1 through 8.6 by the respective
dates specified therein and the Contractor undertakes to carry
out its work diligently and in a timely manner, so that the
scheduled dates can be achieved. The Contractor shall not be
entitled to any adjustments in the Time Schedule except as and to
the extent provided in Section 8.9. Should delays occur, the
Contractor shall use all diligent means and efforts, including
but not limited to overtime work and extra resources, at no extra
cost to the Owner except as provided in Section 9.8
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Contract Page 36(38)
and Article 12 of the Contract, in order to comply with the Time
Schedule established under this Article 8.
The Contractor shall revise and update the Detailed Program as
necessary in order to achieve each Milestone by the applicable
Milestone Date, Mechanical Completion by the Scheduled Mechanical
Completion Date, Start-up by the Scheduled Start-up Date,
commencement of production of saleable pulp (as defined in
Section 8.4) by the Scheduled Production Date and Acceptance by
the Scheduled Acceptance Date; provided that any changes to any
portion of the Detailed Program that affect the implementation of
the Owner's Scope or its use of facilities shall be mutually
agreed by the Owner and the Contractor. The Contractor shall use
its best efforts to meet the Milestone Dates in the execution of
the Contract, but failure to achieve any Milestone by the
Milestone Date or to complete any of the items specified in
Section 8.1 through 8.6 by the respective dates specified therein
shall not entitle the Owner to any rights or remedies in
connection with such delay other than as expressly set forth in
Sections 8.11, 23.1 and 24.1 and Article 21; provided that
payments in respect of Payment Milestones shall only become due
upon the completion of such Payment Milestones.
SECTION 8.8. The Contractor shall carry out all other aspects of the Works in
accordance with the Detailed Program described in Section 8.7, as
such program may change from time to time in accordance with
Section 8.9 or Article 12 of this Contract.
DELAY AND EXTENSION OF TIME
SECTION 8.9. If the achievement of the Time Schedule or any Milestone will be,
or has been, delayed beyond the Milestone Date applicable
thereto; Mechanical Completion of the Works will be, or has been,
delayed beyond the Scheduled Mechanical Completion Date; Start-up
will be, or has been, delayed beyond the Scheduled Start-up Date;
commencement of production of saleable pulp will be, or has been,
delayed beyond the Scheduled Production Date, or
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Contract Page 37(39)
Acceptance will be, or has been, delayed beyond the Scheduled
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Acceptance Date by reason of:
(i) Change in Law;
(ii) suspension of the Works under Article 23 (other than by
reason of the Contractor's default or breach of the
Contract);
(iii) breach of the Contract by the Owner, including the failure
by the Owner to perform the Owner's Scope in accordance
with Article 4 or Section 17.11 as adjusted for delays
(other than by reason of the Contractor's default or
breach of the Contract);
(iv) a Force Majeure to the extent the provisions of
Section 26.4 permit a delay;
(v) it is ultimately determined that a modification to any
Milestone Date, the Scheduled Mechanical Completion Date,
the Scheduled Start-up Date, the Scheduled Production Date
or the Scheduled Acceptance Date is warranted as a
consequence of a Change Order issued by the Owner pursuant
to Section 12.10;
(vi) any additional tests performed at the request of the Owner
in cases where Section 6.2 provides for an adjustment in
the Time Schedule;
(vii) any removal or tearing out in cases where the third
paragraph of Section 6.3 provides for an adjustment in the
Time Schedule; or
(viii) undue interference with the activities of the Contractor
by the Owner in carrying out the Owner's Scope as provided
in Section 3.6,
then the Owner shall (in the case of clause (v), upon settlement
of the effects of the Change) grant an extension of the relevant
Milestone Date, the Scheduled Mechanical Completion Date, the
Scheduled Start-up Date, the Scheduled Production Date and/or the
Scheduled Acceptance Date
Contract Page 38(40)
commensurate to the effect of such delay, subject to satisfaction
by the Contractor of the following conditions:
(a) the Contractor shall have used and continue to use
its best efforts to prevent, avoid, overcome and
minimize any such delay and to proceed with the
Works;
(b) the Contractor shall as soon as practicable and in
any event within twelve (12) Days after such
occurrence deliver a notice to the Owner which
identifies the basis on which an extension of time
is claimed and within twenty five (25) Days after
the relevant circumstances have occurred, deliver
to the Owner full and detailed particulars of any
claim for an extension of time to which it
reasonably considers itself entitled; to the
extent that such full and detailed particulars are
not available at that time for reasons not
attributable to the Contractor, it shall deliver
such full and detailed particulars as soon as
practicable;
(c) the Contractor shall be entitled to an extension
of time only to the extent that any delay is not
attributable to or contributed to by any default,
omission, neglect or failure on its part, or on
the part of any Contractor's Supplier or to any
matters or events which are within the control of
the Contractor or Contractor's Supplier;
(d) any addition to the Contract Price granted by the
Owner under Section 9.8 shall not of itself
entitle the Contractor to any extension of the
Time Schedule;
If the Owner has agreed under Section 12.7 to the Contractor's
proposals for an extension of the Time Schedule in relation to
any Change, the Milestone Date, the Scheduled Mechanical
Completion Date, the Scheduled Start-up
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Contract Page 39(41)
Date, the Scheduled Production Date or the Scheduled Acceptance
Date shall be extended by the time agreed in the Change Order and
not otherwise.
REPORTS
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SECTION 8.10. Monthly progress reports shall be prepared by the Contractor and
submitted to the Owner in six copies. The first report shall
cover the period up to the end of the first calendar month
following the Commencement Date and shall reflect the
Contractor's performance of the Pre-Activities. Reports shall be
submitted monthly thereafter, each within fifteen (15) Business
Days after the end of the calendar month to which it relates.
Reporting shall continue until the Contractor has achieved
Acceptance.
The monthly progress report shall be in the form described in
Appendix 3, Ex. 23 and shall include all relevant information
needed to describe the physical and other progress of the Works,
any problems associated therewith and the main activities for the
following reporting period, including demand for manpower; in
addition, the monthly progress report shall note any events which
may cause delays, claims for increases in the Contract Price or
Changes and describe corrective actions being taken if deviations
from the Detailed Program are apparent.
The Contractor shall also provide to the Owner and the
Independent Engineer promptly after receipt copies of all
agreements it may have or enter into with any Contractor's
Supplier regarding schedule and progress (including any changes
to same) and, upon request, progress reports it receives from
specific Contractor's Suppliers.
Deviations from the Time Schedule by the Contractor or any
Contractor's Supplier shall be reported by the Contractor without
delay.
SECTION 8.11. In the event that the monthly progress reports or other reports
by the Contractor, the Owner or the Independent Engineer of
deviations from the
Contract Page 40(42)
Time Schedule and the Milestone Dates indicate that any activity
on the "critical path" or the physical progress of major
activities or groups of activities in the current Detailed
Program prepared in accordance with Section 8.7 is delayed by
more than thirty (30) Days, the Contractor shall within fifteen
(15) Days after notice from the Owner prepare, in consultation
with the Owner and subject to confirmation by the Independent
Engineer that such plan is reasonable and achievable, a
"workaround plan" which will detail additional manpower or other
resources, resequencing of the workplan and other steps to be
taken by the Contractor to achieve the Time Schedule and the
Milestones by the Milestone Dates. The Contractor shall proceed
in accordance with such plan, and shall not be entitled to any
additional payment for taking such steps. In the event the
Contractor fails to prepare and deliver such workaround plan
within such fifteen (15) Day period, the Owner shall be entitled
to have such plan prepared by the Independent Engineer or an
engineering consulting firm at the expense of the Contractor, and
the Contractor shall comply with such plan. In the event that the
Contractor does not bring the Works substantially into accord
with the workaround plan within sixty (60) Days after its
delivery (by the Contractor or, if applicable, by the Independent
Engineer or engineering consulting firm), the Owner shall have
the right, in addition to other rights and remedies under this
Contract (including, if applicable, Section 24.1.2.), to engage
third party companies or otherwise arrange for additional
resources to carry out such part or portion of the Works that are
behind schedule or affected by delay (including by adding to the
scope of the relevant Contractor's Supplier with respect to items
of equipment or components), with the cost of any such additional
resources to be for the account of the Contractor.
ART. 9 CONTRACT PRICE, PAYMENT TERMS AND ADJUSTMENTS TO CONTRACT PRICE
SECTION 9.1. For the fulfillment of all obligations and undertakings under the
terms and conditions of this Contract, the Owner shall pay to the
Contractor a contract price of:
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Contract Page 41(43)
Seven Hundred Sixteen Million Euros
(EURO 716,000,000)
The Contract Price is inclusive of all taxes and duties except
for German value added tax (MEHRWERTSTEUER, MWST.), which shall
be shown separately on each invoice and added to the Contract
Price.
The Contract Price is fixed provided that the Commencement Date
is not later than September 9, 2002. In the event the
Commencement Date occurs later than September 9, 2002, the
Parties shall agree on any adjustment to the Contract Price that
is appropriate under the circumstances.
For Contract Price breakdown see Appendix 2, Ex. 2.
The Contract Price is the total price to be paid by or on behalf
of the Owner to the Contractor in full consideration for the
performance by the Contractor of its obligations under the
Contract (including the Pre-Activities) and, except as
contemplated in the Contract, encompasses all of the risks
relating to the Works whether foreseen or unforeseen. The
Contract Price shall be escalated, increased or decreased only as
provided in Section 9.8 and any Change Order approved pursuant to
Article 12. The Contract Price shall be paid to the Contractor
against invoices received in respect of Payment Milestones
achieved in accordance with Appendix 2, Ex. 9.
SECTION 9.2. The Contractor may submit to the Owner on a Monthly basis (with a
copy to the Independent Engineer), but not more than once per
Month, its draft invoice for payment in respect of the Payment
Milestones that have been completed during such Month, together
with a certificate signed by a duly authorized officer of the
Contractor confirming that all Payment Milestones in respect of
which the Contractor is claiming payment have been completed and
attaching supporting documentation. The form of such invoice
shall be agreed by the Parties prior to the Commencement Date.
The Owner shall complete its review (including such input as it
may receive from the Independent Engineer) within seven (7)
Business Days of receipt of the draft
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Contract Page 42(44)
invoice. The Owner (or the Owner's Representative) shall, if it
agrees, approve the draft invoice or, if it disagrees, approve
only that part of the draft invoice with which it agrees and the
Contractor shall, upon receipt of the Owner's approval of
undisputed amounts, issue an invoice for payment of such
undisputed amounts by the Owner. No approval by the Owner or
payment of any invoice shall relieve the Contractor of any of its
obligations hereunder with respect to the Works or prejudice any
of the Owner's rights under the Contract, including the Owner's
rights under Article 20 hereof.
In addition to the foregoing, the Contractor shall provide to the
Owner at such times and in such form as the Owner requires, such
information and support as is required to perform and prepare the
proper accounting and make any subsidy calculations and
submissions to the Relevant Authorities.
SECTION 9.3. Each approved invoice for undisputed amounts shall be due and
payable within thirty (30) Days after receipt by the Owner
thereof; provided that, if required by Law, the Owner shall
withhold the required amount of each instalment, to be applied in
accordance with the relevant Law, unless prior to such payment
the Contractor delivers to the Owner satisfactory evidence from
the Relevant Authority confirming that the Contractor or such
payment is exempt from such withholding requirement. The
Contractor shall not be entitled to any additional compensation
for any amounts so withheld. Should the Owner fail to make the
required payment of undisputed amounts within thirty (30) Days
after submission of an approved invoice, the Contractor shall be
entitled to charge interest at a rate equal to Euribor (1 month)
at the respective due date plus three (3) percentage points,
accruing from the due date until payment is received.
SECTION 9.4. In the event of a dispute about any amount invoiced by the
Contractor, including whether the Contractor has achieved the
necessary progress, the undisputed amount of the payment shall be
made in accordance with Section 9.3. Should the Contractor claim
a right to refuse performance or a
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Contract Page 43(45)
right of retention in respect of amounts in dispute, it shall be
obligated to state the amount as to which it asserts such right
and the Owner shall be entitled to prevent such right from being
enforced by providing to the Contractor security within thirty
(30) Days after notice from the Contractor of its claim of such
right, security for the payment of the amounts in dispute in the
form of a deposit or a standby (not first demand) bank guarantee
issued by a first class bank acceptable to the Contractor (which
may be Bayerische Hypo-und Vereinsbank AG) and generally
consistent with the tenor of the bank guarantees to be provided
under Section 10.1, provided that the Owner shall not be entitled
to use such payment security for more than EURO 10,000,000 in
the aggregate at any one time.
SECTION 9.5. All bank fees assessed by the payor's bank in connection with the
payment shall be borne by Owner and all bank fees assessed by
recipient's bank shall be borne by the Contractor.
SECTION 9.6. The Contractor shall pay to the Owner all amounts payable by it
under this Contract at the times specified herein or, if not so
specified, within thirty (30) Days after such amounts become due.
If the Contractor fails to pay the Owner any amount due under the
Contract within the specified period, then the Owner may set off
the amounts in question against any amounts payable to the
Contractor under this Contract and/or call on any payment or
performance security to satisfy, in whole or in part, the
Contractor's payment obligations.
SECTION 9.7. All Change Orders issued according to Article 12 shall be
invoiced separately and in accordance with the terms of payment
contained in such Change Order.
SECTION 9.8. If as a result of the effect of any of the following the costs to
the Contractor of performing its obligations under the Contract
shall be increased or decreased:
(i) Change in Law;
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Contract Page 44(46)
(ii) suspension of the Works under Article 23 (other than by
reason of the Contractor's default or breach of the
Contract);
(iii) breach of Contract by the Owner, including the failure by
the Owner to perform the Owner's Scope in accordance with
Article 4 or Section 17.11, as adjusted for delays (other
than by reason of the Contractor's default or breach of
the Contract);
(iv) a Force Majeure to the extent the provisions of
Section 26.4 provide for an increase in the Contract
Price;
(v) it is ultimately determined that an increase in the
Contract Price is warranted as a consequence of a Change
Order issued by the Owner pursuant to Section 12.10;
(vi) any additional tests performed at the request of the Owner
in cases where Section 6.2 provides for an increase in the
Contract Price;
(vii) any removal or tearing out in cases where the third
paragraph of Section 6.3 provides for an in the Contract
Price; or
(viii) undue interference with the activities of the Contractor
by the Owner in carrying out the Owner's Scope as provided
in Section 3.6,
then the Contract Price shall (in the case of clause (v), upon
settlement of the effects of the Change) be increased (or
decreased as the case may be) by the amount of such increase (or
decrease) subject to satisfaction by the Contractor of the
following conditions:
(a) The Contractor shall have used and continue to use best
efforts to prevent, avoid and minimize any such increase
in costs;
(b) The Contractor shall as soon as practicable and in any
event within twelve (12) Days after such occurrence
deliver a notice to the Owner which identifies the basis
on which the increase in Contract Price is
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Contract Page 45(47)
claimed and within twenty five (25) Days after the
relevant circumstances have occurred, deliver to the Owner
full and detailed particulars of any claim for an increase
in the Contract Price to which it reasonably considers
itself entitled, to the extent that such full and detailed
particulars are available at the time or, to the extent
that such full and detailed particulars are not available,
to deliver such full and detailed particulars as soon as
practicable.
(c) The Contractor shall be entitled to any increase in the
Contract Price only to the extent that the circumstances
giving rise to the increase in costs to the Contractor are
not attributable to some default, omission, neglect or
failure on its part, or on the part of any Contractor's
Supplier or to any matters or events which are within the
control of the Contractor or such Contractor's Supplier;
The granting by the Owner of any extension to the Time Schedule
shall not of itself entitle the Contractor to any increase in the
Contract Price.
SECTION 9.9. In any case where the Contractor considers it is entitled to an
increase in the Contract Price under this Article 9 it shall keep
full and detailed contemporary records of the Costs it incurs in
relation to the matter in question. Such records shall be open to
inspection by designated representatives of the Owner at all
reasonable times.
ART. 10 ADVANCE PAYMENT, PERFORMANCE AND WARRANTY SECURITY
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SECTION 10.1. On or prior to the Commencement Date, the Contractor shall
provide the Owner with an irrevocable bank guarantee(s) as
security for the advance payment by the Owner, for the
performance by the Contractor of its obligations under the
Contract and for any Defects arising during the Defects Liability
Period. Such bank guarantee(s) shall be issued by a first class
bank acceptable to the Owner and the Banks, shall be in the form
set forth in Appendix 2, Ex. 4 and in the amounts therein
specified, and shall be valid and enforceable on the Commencement
Date.
Contract Page 46(48)
Such security may be issued as separate bank guarantees or a
composite bank guarantee provided that such security shall be in
the respective amounts for the periods and in respect of the
obligations set forth in Appendix 2, Ex. 4. In the event that the
bank guarantee is called in respect of the Contractor's liability
for Defects under Article 20, the Contractor shall within 3 days
of the date of such call provide to the Owner a replacement bank
guarantee or confirmation of an increase in the outstanding bank
guarantee in an amount equal to the applicable percentage of the
Contract Price as set forth in Appendix 2, Ex. 4.
Not later than forty-five (45) days prior to September 1, 2006,
the Contractor shall provide to the Owner (who shall promptly
furnish a copy to the Agent):
(i) an additional guarantee in substantially the same form as the
guarantee set forth in Appendix 2, Exhibit 4, in an amount equal
to the applicable percentage of the Contract Price as set forth
in Appendix 2, Ex 4 (being an amount no less than five (5) per
cent of the Contract Price) and having an expiry date of
January 1, 2009; or
(ii) evidence that the expiry date of the guarantee provided by
the Contractor to the Owner under this Contract as security for
the advance payment by the Owner, for the performance by the
Contractor of its obligations under the Contract and for any
Defects arising during the Defects Liability Period (the
"Original Guarantee") has been extended from September 1, 2006 to
January 1, 2009,
unless the Original Guarantee has already expired in accordance
with its terms because the Contractor has presented an original
Expiry of Defects Liability Certificate as set forth in Annex C
to Appendix 2, Ex. 4 or Annex D to Appendix 2, Ex. 4.
If the Contractor fails to provide an additional guarantee in
accordance with either paragraph (i) or (ii) above, it shall be
in breach of this Contract and the
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Contract Page 47(49)
Owner shall be entitled to call upon the Original Guarantee in
its full amount, to be held as security for the performance by
the Contractor of its obligations under the Contract and for any
Defects arising during the Defects Liability Period.
To the extent that there are no claims submitted under the bank
guarantee, the amount shall be reduced and the bank guarantee
shall be released as set forth in Appendix 2, Ex. 4.
Thereafter the Contractor shall provide to the Owner, if
applicable, a bank guarantee as set forth in Appendix 2, Ex. 5,
to cover any outstanding warranty obligations.
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SECTION 10.2. CHANGE IN CONTRACT PRICE
If the Contract Price is adjusted under Section 9.8:
(i) in the case of an increase, the Contractor shall, within 3
days and as a condition precedent to any further payment
by the Owner, provide the Owner with a replacement bank
guarantee or confirmation of an increase in the
outstanding bank guarantee to equal the applicable
percentage of the new Contract Price as set forth in
Appendix 2, Ex. 4; and
(ii) in the case of a decrease, the Contractor may within 3
days provide the Owner with a replacement bank guarantee
to equal the applicable percentage of the new Contract
Price as set forth in Appendix 2, Ex. 4.
SECTION 10.3. CONSENT TO ASSIGNMENT
At the same time as it provides any bank guarantee under this
Article 10, the Contractor shall also provide an acknowledgement
by the issuer of the bank guarantee, in a form approved by the
Owner, that the issuer consents to the assignment by the Owner of
its rights under the guarantee to the Banks.
Contract Page 48(50)
ART. 11 CHANGES IN LAW
SECTION 11.1. The Contractor shall comply with all Laws and Permits as in
effect from time to time in relation to the Works (including
during the Defects Liability Period). Except in relation to any
income taxes payable by the Contractor, if, after the Contract
Day, any Law or Permit not reasonably foreseeable on the Contract
Day, is enacted, promulgated, abrogated or changed (which shall
be deemed to include any change in interpretation or application
by the competent authorities but exclude any Law in existence on
the Contract Day that is to become effective at a later date)
that affects the Works and as a result the costs and expenses of
the Contractor (other than increases in direct or indirect labor
costs of the Contractor or any Contractor's Supplier as a result
of changes in Law or salary or benefit increases instituted by
Contractor) are increased or decreased by an amount in excess of
(euro) 500,000, individually or in the aggregate and/or the Time
Schedule is affected ("Change in Law"), the Contractor shall
promptly notify the Owner and supply to the Owner fully details
of such Change in Law, the manner in which the Contractor
proposes to comply with the Change in Law, a proposed expenditure
budget, a revised Time Schedule (if appropriate) and all
information as the Owner shall reasonably require to assess the
effect on the Contractor's obligations. The Contractor shall be
entitled to an adjustment to the Contract Price (which may be
increased or decreased) and/or the Time Schedule, by the issuance
of a Change Order as set forth in Article 12, to the extent that
the Contractor has been affected in the performance of any of its
obligations under the Contract by such Change in Law.
The same shall apply for any changes in the Works reasonably
required due to changes in permitting requirements by the
Relevant Authorities (not reasonably foreseeable on the Contract
Day) between the Contract Day and the Acceptance Date. This
Section shall not, however, apply to any change made or required
based on the permit values contained in the Permits or
Contract Page 49(51)
applications for Permits (or amendments to such Permits) listed
in items 1-6 in Appendix 3, Ex. 4.4.
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SECTION 11.2. The Contractor shall use its best efforts to avoid or minimize
any delays, cost increases or decreases in performance resulting
from the foregoing.
ART. 12 CHANGES
SECTION 12.1. The Contractor shall not be entitled to make any Changes without
the written approval and consent of the Owner in accordance with
this Article 12.
SECTION 12.2. The Owner may require the Contractor from time to time during the
performance of the Contract to make any Change provided that such
Change does not constitute unrelated work and that it is
technically practicable.
SECTION 12.3. The Contractor may from time to time during its performance of
the Contract propose to the Owner in writing any Change which the
Contractor considers necessary or desirable to improve the
quality, efficiency or safety of the Works. Should any
improvements or innovations which can be incorporated in the
design of the Works or used in connection with its operation
become available, the Contractor shall offer the Owner such
technological advances in the form of a proposal for a Change
Order. The Owner shall in its discretion approve or reject any
Change proposed by the Contractor in writing.
SECTION 12.4. If the Contractor proposes a Change the Contractor shall submit
to the Owner a written "Application for Change Proposal," giving
reasons for the proposed Change and including the information
specified in Section 12.5.
The Contractor shall not be entitled to recover any costs for
preparing the Application for Change Proposal.
Contract Page 50(52)
SECTION 12.5. If the Owner proposes a Change, it shall send to the Contractor a
request ("Request for Change Proposal") requiring the Contractor
to prepare and furnish to the Owner as soon as reasonably
practicable a proposal ("Change Proposal") which shall include
the following:
(a) description of Change and details of how the Contractor
intends to give effect to the Change;
(b) effect on the Time Schedule, including the effect on any
applicable Milestone;
(c) estimated costs of the Change;
(d) effect on Performance Requirements, if any;
(e) effect on any other provisions of the Contract; and
(f) such other information as will reasonably enable the Owner
to properly evaluate the proposed Change.
SECTION 12.6. In the event that it can be foreseen that the cost of preparing
and submitting the Change Proposal will be in excess of (euro)
5,000, the Contractor shall, prior to preparing and submitting
the Change Proposal, submit to the Owner an estimate of the cost
of preparing and submitting the Change Proposal ("Estimate for
Change Proposal").
The Contractor shall use its best efforts to obtain any Change
Proposal by a Contractor's Supplier at no cost for the Owner.
Upon receipt of the Contractor's Estimate for Change Proposal,
the Owner shall either:
(a) accept the Contractor's estimate with instructions to the
Contractor to proceed with the preparation of the Change
Proposal, or
Contract Page 51(53)
(b) advise the Contractor of any part of its Estimate for
Change Proposal that is unacceptable with a request for
the Contractor to review its estimate, or
(c) advise the Contractor that the Owner does not intend to
proceed with the Change.
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SECTION 12.7. Upon receipt of the Change Proposal, the Owner and the Contractor
shall mutually agree upon all matters therein contained. Within
fourteen (14) Days of such agreement the Owner shall, if it
intends to proceed with the Change, issue the Contractor a Change
Order, to be executed by the Parties, incorporating the changes
in question and providing for any change in the Time Schedule
(including any applicable Milestone) or other dates for
completion or delivery, any increase or reduction of the Contract
Price, change in payment terms and any change in the scope of the
Works, the Contractor's standards of performance, the
Specifications, Warranties or the Performance Requirements and,
if necessary to conform provisions of the Contract, enter into an
amendment to this Contract, in each case resulting from the
change in the Works. Any adjustment of the Contract Price shall
be determined on an "open book" basis as described in
Section 12.11 and shall take into account, among other things,
requirements of the various financial institutions providing
funding for the accomplishment of the Works, the elimination or
avoidance of Works to be performed resulting from the changes in
the scope of the Works and assistance to be given by the Owner.
The price of the Change shall be added to the Contract Price and
shall be invoiced in accordance with Article 9 of the Contract
based on an agreed payment schedule.
If the Owner decides not to proceed with a Change for whatever
reason, it shall, within said period of fourteen (14) Days notify
the Contractor accordingly. Under such circumstances, the
Contractor shall be entitled to reimbursement of all costs
reasonably incurred by it in preparation of any
Contract Page 52(54)
Change Proposal for which it has submitted an Estimate for Change
Proposal to the Owner in accordance with Section 12.6, not to
exceed the amount given by it in such Estimate for Change
Proposal.
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SECTION 12.8. The Owner shall have the right at its own choice to enter into
contracts directly with the Contractor's Suppliers or suppliers
for additional items or modifications it wishes to procure, and
shall bear the entire risk related thereto.
SECTION 12.9. Except as provided in 12.10, the Contractor shall not proceed
with any Changes unless the respective Change Order has been
issued.
SECTION 12.10. If the Owner and the Contractor fail to agree on the effect of a
Change and as a result a Change Order is not issued, the Owner
may direct the Contractor to perform the work involved in that
Change by delivering to the Contractor a Change Order signed by
the Owner and making payment for any undisputed amount related to
such Change when it becomes due, unless the amount in dispute in
respect of such Change involves a net amount payable to the
Contractor that, together with all other amounts then in dispute
under Change Orders issued under this Section 12.10, exceeds
(euro)50,000 for an individual Change or (euro)500,000 in the
aggregate. In the event amounts in dispute are greater than the
respective threshold amounts in the previous sentence, the Owner
may direct the Contractor to perform such work upon providing a
standby (not first demand) bank guarantee or other payment
assurance reasonably satisfactory to the Contractor. In such
event, the Contractor shall be obligated to carry out the Change
as instructed with the appropriate adjustment to the Contract
Price and/or Time Schedule to be determined later on an "open
book" basis as described in Section 12.11, provided that the
Contractor shall declare the basis for any claimed additional
remuneration and/or adjustment to the Time Schedule in writing
within fourteen (14) Days after receipt of such instruction. The
Contractor's performance of work pursuant to a Change Order
issued under this Section 12.10 shall not
Contract Page 53(55)
prejudice the right of either Party in the settlement of the
effects of that Change.
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SECTION 12.11. The costs for any Change shall be determined using an "open book"
methodology similar in all pertinent respects to that used in
determining the Contract Price and based on the same units prices
and the same margin used for the Contact Price or set forth in
the EPC Price Calculation.
With respect to any cost forming the basis for an adjustment in
the Contract Price, the Contractor agrees to keep records and
books of account, showing the cost of all items of labor,
Materials, equipment, supplies, services and all other
expenditures of whatever nature, and all cash and trade
discounts, rebates, allowances, credits, salvage and commissions
in respect thereof, which are reimbursable to the Contractor or
which are the subject of an adjustment in the Contract Price. The
system of accounting to be employed by the Contractor shall be in
accordance with generally accepted accounting principles in
Germany consistently applied. The Contractor's records and books
of account referred to above and all supporting documents,
including all supporting documents required for this purpose to
be obtained by the Contractor from any Contractor's Supplier,
shall be maintained in such a manner as to provide an audit trail
and as to facilitate any examination and audit thereof by the
Owner.
SECTION 12.12. For all items referred to in Section 12.11, the Owner or its
authorized representatives or agents shall have the right to
examine and audit, during business hours, all books, statements,
accounts, correspondence, instructions, specifications, plans,
drawings, receipts, memoranda, accounting documents and other
records of the Contractor, including all supporting documents
required for this purpose to be obtained by the Contractor from
any Contractor's Supplier, insofar as they are pertinent.
The Contractor shall cause all of its documentation specified
above, including all supporting documents required for this
purpose to be obtained by the
Contract Page 54(56)
Contractor from Subcontractors and the Contractor's Suppliers, to
be preserved and made available for examination and audit,
without any additional compensation therefor, for a period of
twelve (12) Months after the earlier of the date of Acceptance
and the date of any earlier termination of this Contract. The
foregoing right of examination and audit shall extend, but shall
not be limited to, calculations of unit rates, percentages per
diem charges or other similar fixed amounts or man-hours worked
or estimated to be worked which are to provide that basis of
reimbursements or indemnifications to the Contractor and
adjustments of the Contract Price. The foregoing right of
examination and audit shall survive any early termination of this
Contract.
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SECTION 12.13. Notwithstanding the execution by the Owner of any approval,
certificate of performance or payment to the Contractor or any
Contractor's Supplier, the Owner shall be entitled to a refund
from the Contractor in the event that any examination and audit
of the documentation referred to in Section 12.11 above establish
that the Contractor or any Contractor's Supplier did not incur
any amount claimed. Such right of examination and refund shall
continue for a period of three years after the earlier of the
date of Acceptance and the date of any earlier termination of
this Contract.
SECTION 12.14. Notwithstanding anything contained in this Article 12, no Change
necessary due to any default of the Contractor in the performance
of its obligations under the Contract shall result in any
adjustment of the Contract Price and/or the Time Schedule.
ART. 13 OWNERSHIP AND RISK OF LOSS
TRANSFER OF TITLE
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SECTION 13.1. The Parties hereby agree that title to all Works, equipment and
Materials (the "ITEMS") to be provided by the Contractor under
the Contract and all warrants (TRADITIONSPAPIERE, including
KONNOSSEMENTS, LADESCHEINE and LAGERSCHEINE (irrespective of the
law governing such warrants)) issued in relation to such Items
(the "WARRANTS") shall be transferred to the Owner at the earlier
of
Contract Page 55(57)
delivery to the Site or payment in respect thereof. For that
purpose, the Contractor shall every 6 months (and otherwise from
time to time as the Owner may reasonably instruct the
Contractor), notify the Owner of all Items during the preceding 6
month period (or otherwise since the last such notification
received by the Owner) in relation to which the Contractor has
received payment prior to delivery of such Items to the Site, and
the Contractor shall provide the Owner with a signed protocol
(each such protocol, a "Transfer Protocol") specifying such Items
and the Warrants relating thereto. Each Transfer Protocol shall
provide that (i) the Contractor reconfirms the passing to the
Owner of title in the Items and the Warrants relating thereto
specified in the Transfer Protocol and (ii) the Contractor waives
its right to receive a countersigned copy of the Transfer
Protocol. The Parties hereby agree that, upon counter signature
by the Owner of each Transfer Protocol, title to all Items and
the Warrants relating thereto listed in such Transfer Protocol
shall be deemed to have passed to the Owner irrespective of
whether the Contractor has actually received payment for such
Items.
The Parties hereby further agree that in the event of title
passing to the Owner upon payment prior to delivery of the
relevant Items to the Site as provided herein, for the purpose of
title passing to the Owner, the transfer of possession in the
relevant Items and the Warrants relating thereto is hereby
replaced (BESITZKONSTITUT) as follows. The Contractor shall:
(i) hold possession of any Items and the Warrants relating
thereto specified in any Transfer Protocol and of which
the Contractor has possession on behalf of the Owner free
of charge (UNENTGELTLICHE VERWAHRUNG) and, in relation to
such Items and the Warrants relating thereto of which the
Contractor does not have possession, the Contractor
assigns to the Owner any claim of the Contractor for
transfer of possession (HERAUSGABEANSPRUCHE); and
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(ii) ensure that such Items will be and will remain:
(a) upon completion of manufacture of any item of such
Works, equipment or materials, separated from any
other Works, equipment and materials; and
(b) clearly marked and/or reserved as the property of
the Owner; and
(iii) upon delivery to the Site of any Items in relation to
which title has not already passed to the Owner, ensure
that such Items are treated in the same manner as set out
in paragraph (ii).
RISK OF LOSS
SECTION 13.2. Notwithstanding the transfer of title pursuant to Section 13.1
and except as otherwise provided in Section 18.11, all risk of
damage to or loss of any item of the Works (other than Excepted
Risks) shall be borne by and remain with the Contractor until
Acceptance; provided, however, that the Contractor shall not be
obligated to repair or restore any portion of the Works that is
damaged by a risk covered by the insurance to be obtained and
maintained by the Owner pursuant to Article 14 where the Banks do
not make the proceeds of such insurance available to the
Contractor for the purpose of such repair or restoration.
The Owner shall, upon the written request of the Agent, release
the Contractor from its obligation to repair or restore any
portion of the Works that is damaged by a risk covered by the
insurance to be obtained and maintained by the Owner pursuant to
Article 14. It is hereby understood that any such release of the
Contractor from its obligation to repair or restore any portion
of the Works (the "RELEASED WORKS") shall shift the risk of loss
in respect of the Released Works to the Owner. The Contractor
hereby covenants that, in the case of a release pursuant to this
paragraph, it will not claim any material
Contract Page 57(59)
interests (VERSICHERTE INTERESSEN) from which it would benefit
without such release.
If the Contractor is released from its obligation to repair or
restore any portion of the Works pursuant to the preceding
paragraph, the Contractor shall release each Selected Supplier
from any obligation it may have to repair or restore such portion
of the Works to the extent that that Selected Supplier has an
obligation to do so pursuant to a Selected Subcontract. The
Contractor shall also procure that any such Selected Supplier (i)
covenants not to claim, in the case of a release, any material
interests (VERSICHERTE INTERESSEN) from which it would benefit
without such release and (ii) releases its suppliers from any
obligation they may have to repair or restore that portion of the
Works and procures that its suppliers covenant not to claim, in
the case of a release, any material interests (VERSICHERTE
INTERESSEN) from which they would benefit without such release.
If the Contractor reasonably incurs costs related to mitigating
the effects of the insured event between the date of the
occurrence of the insured event and the date on which the
Contractor is released from its obligation to repair or restore
any of the Works in accordance with this section 13.2, the Owner
shall, without prejudice to section 26.4, ensure that to the
extent that insurance proceeds in respect of the Contractor's
mitigation costs are paid by the insurance company under the
insurance to be obtained by the Owner pursuant to Article 14, the
Contractor is provided with any such insurance proceeds.
The Contractor shall also be responsible for all damages
resulting from the operation of the Works prior to Acceptance
unless caused by the wilful misconduct of the Owner's personnel
and during the Schedule B Tests unless caused by wilful
misconduct or gross negligence of the Owner's personnel. The
Contractor shall also be responsible for the consequences of any
non-compliance by it or any Contractor's Supplier with Laws or
Permits.
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Contract Page 58(60)
Excepted Risks shall mean each of the following insofar as they
directly affect the Site:
(a) war, hostilities (whether war be declared or not),
invasion, act of foreign enemies, terrorist acts (until
insurance for such acts is obtained by the Owner),
(b) ionizing radiation, or contamination by radioactivity from
any nuclear fuel, or from any nuclear waste from the
combustion of nuclear fuel, radioactive toxic explosive or
other hazardous properties of any explosive nuclear
assembly or nuclear component thereof, but not including
goods and material such as measuring, monitoring and
testing devices, that use low levels of radiation, in each
case from a source outside of the Site,
(c) pressure waves caused by aircraft or other aerial devices
travelling at sonic or supersonic speeds,
(d) riot, commotion or disorder, unless restricted to
employees or agents of the Contractor or the Contractor's
Suppliers,
(e) rebellion, revolution, insurrection, or military or
usurped power, or civil war;
except to the extent any of the above (i) existed prior to the
Contract Day, (ii) are covered by insurance maintained pursuant
to Article 14 or (iii) are the direct or indirect result of
actions by the Contractor or any Contractor's Supplier, or the
failure of the Contractor or any Contractor's Supplier to perform
any of its obligations under this Contract or the applicable
subcontract, and provided that the Contractor has taken all
reasonable precautions, due care, and reasonable alternative
measures in order to mitigate the consequences thereof.
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Contract Page 59(61)
SECTION 13.3. All of the Contractor's Equipment shall be brought to and kept at
the Site at the sole cost, risk and expense of the Contractor or
Contractor's Supplier and the Owner shall not be liable for any
loss or damage thereto in connection with the performance of the
Works.
ART. 14 INSURANCE
The Owner will maintain at its own cost insurance policies taken
out as at the date hereof consistent with the indicative
description set out in Appendix 2, Exhibit 6. The Contractor (and
Contractor's Suppliers) will be added as a named insured party
for its respective rights and interests in the policy.
The Owner will be responsible for notifying insurers, filing and
prosecuting all insurance claims pursuant to any insurance policy
required under the Contract.
The Contractor will be required to take out, at its own cost, and
require all Contractor's Suppliers to take out and maintain, at
their own cost, insurance in compliance with Law and:
1) Workmen's Compensation/Employers' Liability insurance with
a minimum sum insured for any one occurrence and in the
annual aggregate to a level adequate to cover statutory
liability under applicable Laws;
2) Motor Vehicle Liability (including Third Party Property
Damage) to at least the levels required to comply with
Law;
3) insurance against loss or damage to the Contractor's
Equipment used in performance of the Contract while at,
on, adjacent to or in transit to or from the Site;
4) material damage insurance against fire, lightning,
aircraft, explosion, earthquake, impact, storm, tempest,
flood, on all administrative, manufacturing and storage
facilities owned leased or hired by the
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Contract Page 60(62)
Contractor and used by the Contractor for the performance
of the Contract; and
5) Professional Indemnity insurance to the extent available
in accordance with the existing insurance policies of the
Contractor or Contractor's Suppliers.
The Contractor will be required to:
(a) bear the deductibles (up to (euro)75,000 per loss and
(euro)750,000 in the aggregate per year) where any claim
under the Owner's insurance arises by reason of the
Contractor's performance of its obligations under the
Contract;
(b) the Contractor shall be responsible for, and shall
compensate the Owner in respect of, any increase in the
premium for the Owner's Insurance to the extent that any
such increase is attributable to claims made on such
insurance by reason of fault of the Contractor;
(c) not act or omit to act in a manner which might prejudice
such insurance and promptly comply with the
recommendations of the insurers of the Owner so that said
insurance carriers will continue to provide the cover
maintained by the Owner;
(d) assist, and cause the Contractor's Suppliers to assist, in
the disclosure of information to insurers and will, and
will cause the Contractor's Suppliers to disclose all
information material to the risks covered by the insurance
procured by the Owner under the Contract;
(e) fully comply with, and require all Contractor's Suppliers
to comply fully with, all procedures and services
including completion of all necessary applications for
insurance, prompt and full compliance with all audit
requests and claim reporting procedures, and full
participation in and compliance with safety and loss
control programs implemented by, or
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Contract Page 61(63)
at the request of, the Owner, all of the above to be in
accordance with applicable professional standards;
(f) any claims with respect to any event covered by the
insurance listed in the Contract shall be made on the
basis that such insurance is the primary insurance and not
in contribution with any other insurance the Contractor or
any Contractor's Suppliers may have and thereby will not
jeopardize the availability of cover under any delay in
start up, business interruption or similar type insurance
that the Owner may have;
(g) in respect of the insurance obtained pursuant to
paragraphs (1), (2) and (3) above, obtain an "Indemnity to
Principals" clause and a clause providing for a waiver of
insurers' rights of redress against the Owner, the Lenders
and such other parties as notified to the Contractor by
the Owner;
(h) assist and co-operate, and require all Contractor's
Suppliers to assist and co-operate, in every manner
possible in connection with the adjustment of all claims
arising out of the operations conducted under, or in
connection with, the Contract and shall co-operate with
the insurers of the Owner in all litigated claims and
demands which arise out of said operations and which the
said insurers are called upon to adjust to resist.
(i) obtain certificates of insurance from each Contractor's
Supplier evidencing the required cover is in full force
and effect and, if requested, provide the Owner with such
certificates. The Contractor shall procure by stipulation
in all Contractor's Suppliers' contracts that all
insurance policies arranged by any Contractor's Suppliers
are to comply with this Contract and shall include a
provision for "Indemnity to Principals" and a waiver of
their insurers rights of redress against the
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Contract Page 62(64)
Owner, the Banks and such other parties as notified to the
Contractor by the Owner;
(j) the insurance set out under this Section does not alter
the liabilities of the Parties (except insofar as it
obligates the Owner to obtain and maintain insurance under
the conditions set out herein) or otherwise affect the
allocation of risk under this Contract and shall in no way
affect, nor are they intended as a limitation of the
Contractor's liability with respect to its performance of
the Contract.
ART. 15 WORK ENVIRONMENT RESPONSIBILITY
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SECTION 15.1. The responsibility for coordination according to the Work
Environment Act (BAUSTELLENVERORDNUNG) shall be borne by the
Contractor. However, this does not derogate from either Party's
normal employer responsibility, for their own personnel, their
own or their employee's tools, technical devices and vehicles. In
accordance with this, the Parties shall be responsible for
ensuring that their employees and their subcontractors' employees
have been given the necessary training, received appropriate
information about regulations concerning order, safety and
security at the workplace in accordance with Appendix 3, Ex. 16
and other regulations and instructions (including all TUV
(Technical Control Board) provisions, all trade law provisions,
the accident prevention provisions of the social insurance
associations and all statutes, in particular statutes for
protection against building noise and other federal and state law
emission control regulations, ordinances and local by-laws which
affect the Works) issued by the authorities or the Owner for the
work concerned.
SECTION 15.2. Each Party shall participate in the safety organization and joint
safety inspection rounds, and to comply with all applicable Laws
concerning order and safety which are applicable at each
workplace and at the Site. The Contractor shall ensure that all
Contractor's Suppliers are bound by the same obligation.
Contract Page 63(65)
SECTION 15.3. The Contractor shall, and shall ensure that each Contractor's
Supplier take all reasonable steps to protect the environment
(both on and off the Site) and to limit damage and nuisance to
people and property resulting from pollution, noise and other
results of its operations during the performance of the Works.
During the execution of the Works the Contractor shall ensure
that emissions, surface discharges and effluent from the Works,
including operation of the Plant prior to Acceptance and during
the Schedule B Tests, shall not exceed the values prescribed by
applicable Laws and Permits for the Plant.
SECTION 15.4. The Contractor shall indemnify and hold harmless the Owner and
its employees and officers from and against any and all suits,
actions or administrative proceedings, claims, demands, losses,
damages, costs, and expenses of whatsoever nature, including
attorney's fees and expenses, which the Owner may suffer as a
result of any allegation, notice of violation, claim, demand,
order, directive, cost recovery action or other cause of action
by, or on behalf of, any Relevant Authority or any person for
damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), remedial action costs,
tangible or intangible property damage, natural resource damages,
nuisance, pollution, any adverse effect on the environment caused
by any hazardous material, or for fines, penalties or
restrictions, resulting from or based upon (a) the alleged
existence, or the continuation of the existence, of a release of
hazardous material (including sudden or non-sudden, accidental or
non-accidental releases), (b) the alleged exposure to any
hazardous material, (c) the alleged presence, use, handling,
transportation, storage, treatment or disposal of any hazardous
material or (d) the violation or alleged violation of any
environmental law or environmental Permit, in the case of each of
(a) through (d) to the extent caused by the Contractor or any
Contractor's Supplier. Such indemnity shall not cover the Owner's
Scope or any use by the Owner of the Works or any part thereof
other than for the purpose indicated by, or reasonably to be
inferred from, the Contract.
Contract Page 64(66)
ART. 16 MECHANICAL COMPLETION
SECTION 16.1. The Contractor shall perform Mechanical Completion Tests and
verify the satisfaction of the applicable Mechanical Completion
checklist, each as specified in Appendix 3, Ex. 11.1, to ensure
that each System, each Non-System Department and, after each
System and Non-System Department has satisfied the applicable
Mechanical Completion Test, the Works have been properly
installed and are in accordance with the Contract. The Contractor
shall provide all equipment, Materials, supplies, personnel and
utilities for such tests except for items to be provided by the
Owner in accordance with Appendix 3, Ex. 4.
SECTION 16.2. Not later than seventy-five (75) Days prior to anticipated
Mechanical Completion of a System or Non-System Department, the
Contractor shall deliver a plan of Mechanical Completion Tests
(including details of how such tests shall be performed) for the
systematic checking of all relevant parts of the Works as set
forth in Appendix 3, Ex. 11.1, together with the Mechanical
Completion checklist for such System or Non-System Department.
The Owner shall review such plan and checklist and, within
fifteen (15) Days after the date on which such documents were
actually received by the Owner and the Independent Engineer,
shall either notify the Contractor of its approval (such approval
not to be unreasonably withheld) or of any remarks and
observations. If such notification has not been given to the
Contractor within said period, approval of the plan and checklist
shall be deemed given upon expiry of said fifteen (15) Day
period. If the Owner submits any remarks or observations
(including remarks or observations provided to the Owner by the
Independent Engineer), the Contractor shall meet with the Owner
and endeavor to resolve all issues within the next fifteen (15)
Days (all such issues shall in any event be resolved prior to the
commencement of the Mechanical Completion Tests).
SECTION 16.3. The Contractor shall give at least five (5) Business Days' prior
written notice to the Owner and the Independent Engineer of all
Mechanical Completion
Contract Page 65(67)
Tests specified in Appendix 3, Ex. 11.1 and the Owner and the
Independent Engineer shall have the right to witness all such
Mechanical Completion Tests. In the event that the Owner or the
Independent Engineer, after having been notified properly, does
not attend any such Mechanical Completion Test, the Contractor
shall be entitled to proceed in accordance with the plans and
checklists for such tests as established in accordance with
Section 16.2.
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SECTION 16.4. The Contractor shall certify in writing to the Owner and the
Independent Engineer that the relevant System, Non-System
Department or the Works, as the case may be, complies with the
requirements for Mechanical Completion set forth in Appendix 3,
Ex. 11.1 and shall submit to the Owner six copies of the
Mechanical Completion Test results and the completed Mechanical
Completion checklists, and make a copy of such test results and
checklists available to the Independent Engineer at the Site, for
verification that the test results and the completed checklists
conform to the requirements set forth in the plans prepared in
accordance with Appendix 3, Ex. 11.1. The Contractor shall give
the Owner and the Independent Engineer at least two (2) Business
Days' advance notice of the date on which it anticipates
submitting the test results for review.
SECTION 16.5. If the results of the Mechanical Completion Tests and the
completed Mechanical Completion checklists properly conform to
the requirements of the Contract, the Owner shall issue three
original signed copies of a Certificate of Mechanical Completion
for the applicable System or Non-System Department within five
(5) Business Days after receipt by the Owner and the Independent
Engineer of such results and checklists, dated to reflect the
actual date of Mechanical Completion of the System or Non-System
Department, one of such copies to be provided to the Contractor.
If the Owner believes that the test results or the completed
Mechanical Completion checklists do not properly conform to the
requirements set forth in the Contract or indicate that the
System or Non-System Department has not been properly installed,
the Owner shall notify the Contractor of such results within five
(5) Business Days
Contract Page 66(68)
after the Owner and the Independent Engineer have received such
results or checklists and the Contractor shall promptly take such
corrective action as is necessary to cure the defects or
deficiencies. The Contractor shall thereafter re-perform the
applicable Mechanical Completion Tests and re-submit test results
or completed checklists to the Owner and the Independent Engineer
as specified herein. If the Owner neither issues the Certificate
of Mechanical Completion of such System or Non-System Department
nor notifies the Contractor that the test results of the
Mechanical Completion Tests and/or the completed Mechanical
Completion checklists do not properly conform as aforesaid prior
to the end of the fifth (5th) Business Day following receipt by
the Owner and the Independent Engineer of the results of the
Mechanical Completion Tests (or the re-performance thereof) and
the completed Mechanical Completion checklists with respect to a
System or Non-System Department, then a Certificate of Mechanical
Completion of such System or Non-System Department will be deemed
to have been issued as of such fifth Business Day.
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SECTION 16.6. The Owner shall not withhold the issue of a Certificate of
Mechanical Completion of a System or Non-System Department if all
items required to achieve Mechanical Completion shall have been
completed except for Punch List items which do not adversely
affect the Commissioning of the System, Non-System Department or
any other System or Non-System Department without damage to the
Works or the environment. All such defects and deficiencies shall
be listed in the Punch List and all such Punch List items shall
be remedied by the Contractor as soon as possible but in any
event within six (6) months after Acceptance.
SECTION 16.7. The Certificate of Mechanical Completion for the Works shall be
issued after:
(a) Certificates of Mechanical Completion have been issued for
(i) all Systems and (ii) all Non-System Departments that
are scheduled to be completed by the Scheduled Mechanical
Completion Date;
Contract Page 67(69)
(b) documentation has been delivered in accordance with and to
the extent required by Appendix 3, Ex. 3.2;
(c) the training program for the Owner's personnel has been
completed to the degree provided in Appendix 3, Ex. 3.5
and Ex. 4.6; and
(d) the Contractor certifies that all items on the Master
Equipment List in Appendix 3, Ex. 5 are as required by the
Specifications and have been installed (except as agreed).
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Within five (5) Business Days after the foregoing conditions are
satisfied, the Owner shall issue three original signed copies of
the Certificate confirming the date of Mechanical Completion of
the Works, one such copy to be provided to the Contractor. The
Certificate of Mechanical Completion of the Works shall be dated
the same date as and issued (or deemed to be issued as the case
may be) concurrently with the Certificate of Mechanical
Completion for the last System or Non-System Department for which
a Certificate of Mechanical Completion is required to be issued
by the Scheduled Mechanical Completion Date.
SECTION 16.8. Within five (5) Business Days after the issuance of the
Certificate of Mechanical Completion of the Works, the Contractor
shall either confirm to the Owner that the Owner's Scope,
including the furnishing of the inventory of spare parts to be
provided by the Owner pursuant to Section 4.5, has been completed
or else notify the Owner of those items within the Owner's Scope
that remain to be completed and/or corrected. If the Contractor
does not notify the Owner prior to the end of the fifth (5th)
Business Day after the issuance of the Certificate of Mechanical
Completion of the Works of any items that remain to be so
completed and/or corrected, the Owner's Scope shall be deemed to
be completed as of such date.
Contract Page 68(70)
ART. 17 TRAINING; COMMISSIONING, SYSTEM START-UP, START-UP AND SCHEDULE A
TESTS
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SECTION 17.1. Upon Mechanical Completion of a System, Commissioning of such
System as set forth in Appendix 3, Ex. 11.2 shall be carried out
by the Owner's operating personnel under the instruction,
supervision and direction of the Contractor as described in
Appendix 3, Ex. 3.5 and 4.6. The Contractor shall be responsible
for having sufficient qualified personnel available at the Site
during Commissioning and until Acceptance to adequately supervise
the Owner's personnel and determine the cause of any Defects
which may become apparent and promptly to remedy the same.
SECTION 17.2. The Contractor shall provide all items required for the
performance of Commissioning and until Acceptance, except as
otherwise provided in Appendix 3 Ex. 4.1 and 11. The Owner shall
provide the operating personnel, the raw materials and other
consumables for Commissioning, System Start-up and for Start-up
specified in Appendix 3, Ex. 4.1. All pulp and other output
produced by the Plant prior to Acceptance, including during test
runs, shall be property of the Owner.
SECTION 17.3. After Commissioning of a System has been completed in accordance
with the Contract and training of the Owner's personnel has
progressed in accordance with the training program as set forth
in Appendix 3, Ex. 3.5 and 4.6 and the System is ready for System
Start-up, the Contractor shall give the Owner and the Independent
Engineer at least twenty-four (24) hours' prior written notice of
the scheduled date (and time) for commencement of System
Start-up.
The Contractor shall conduct System Start-up for each System as
set forth in and in the sequence provided in Appendix 3,
Ex. 11.3.
Start-up shall be conducted in accordance with Appendix 3,
Ex. 11.4 following the successful completion of System Start-up
of all Systems.
Contract Page 69(71)
SECTION 17.4. System Start-up and Start-up shall be conducted under the
instruction, supervision and direction of the Contractor by the
Owner's operating personnel as set forth in Appendix 3, Ex. 3.5
and 4.6.
SECTION 17.5. After completion of System Start-up of the respective Systems,
the Schedule A tests shall be performed pursuant to and in
accordance with detailed procedures prepared by the Contractor
and delivered to the Owner and Independent Engineer at least
sixty (60) Days prior to the anticipated commencement of such
tests. The Owner shall review such procedures and, within fifteen
(15) Days after the date on which such documents were actually
received by the Owner and the Independent Engineer, shall either
notify the Contractor of its approval (such approval not to be
unreasonably withheld) or of any remarks and observations. If
such notification has not been given to the Contractor within
said period, approval of the detailed procedure shall be deemed
given upon expiry of said fifteen (15) Day period. If the Owner
submits any remarks or observations (including remarks or
observations provided to the Owner by the Independent Engineer),
the Contractor shall meet with the Owner and endeavor to resolve
all issues within the next fifteen (15) Days (all such issues
shall in any event be resolved prior to commencement of the
Schedule A Tests).
SECTION 17.6. The Contractor shall give the Owner and the Independent Engineer
at least twenty-four (24) hours' prior written notice of the
performance of any Schedule A Test, and the Owner and the
Independent Engineer shall have the right to witness all such
tests.
SECTION 17.7. The Contractor shall submit six copies of the results of the
Schedule A tests to the Owner and make a copy of such results
available to the Independent Engineer at the Site for
verification that the tested System conforms to the requirements
of Appendix 3, Ex. 12.2. The Contractor shall give the Owner and
the Independent Engineer at least two (2) Business Days' advance
notice of the date on which it anticipates submitting such test
results for review.
Contract Page 70(72)
SECTION 17.8. If the results of the Schedule A Tests prove the compliance of
the applicable System with the performance criteria specified in
Appendix 3, Ex. 12.2, the Owner shall, within two (2) Business
Days after receiving such results, confirm that such System has
satisfied the performance criteria for the applicable Schedule A
Test by issuing three original signed copies of the Certificate
of Operational Acceptance of the System dated to reflect the
actual date of Operational Acceptance, two of such copies to be
provided to the Contractor. If the results of the Schedule A
tests indicate that the applicable System does not satisfy the
performance criteria specified in Appendix 3, Ex. 12.2, the Owner
shall notify the Contractor within two (2) Business Days after
receiving such results and the Contractor shall promptly take
such corrective action as is necessary to rectify any defect or
deficiency. After the Contractor has completed such corrective
action and determines that the System is ready for re-testing,
the Contractor shall give the Owner and the Independent Engineer
at least 24 hours' notice of the date (and time) that the failed
Schedule A test will be re-performed. Upon completion of the
re-performed Schedule A tests, the Contractor shall re-submit six
copies of such test results to the Owner and the Independent
Engineer as specified herein and the Owner shall, within two (2)
Days, either advise the Contractor in writing of any additional
defects or deficiencies that are discovered (in which event the
Contractor shall promptly take such action as is necessary to
rectify such defect or deficiency and re-perform the relevant
Schedule A Test in accordance with the procedures established
pursuant to Section 17.5) or the Owner shall issue three original
signed copies of the Certificate of Operational Acceptance of
such System dated to reflect the actual date of Operational
Acceptance, two of such copies to be provided to the Contractor.
If the Owner neither issues the Certificate of Operational
Acceptance of such System nor notifies the Contractor that the
applicable System does not conform to the requirements specified
in Appendix 3, Ex. 12.2 prior to the end of the second (2)
Business Day following receipt by the Owner and the Independent
Engineer of the results of
Contract Page 71(73)
a Schedule A test or of the results of the re-performance of such
Schedule A test with respect to a System, then a Certificate of
Operational Acceptance for such System will be deemed to have
been issued as of such second Business Day.
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SECTION 17.9. The Owner shall not withhold the issuance of a Certificate of
Operational Acceptance of a System if all items required to
achieve Operational Acceptance shall have been completed except
for Punch List items relating to the System, but all such Punch
List items shall be remedied by the Contractor as soon as
possible and in any event within six (6) months after Acceptance.
SECTION 17.10. Upon satisfaction of the following conditions the Owner shall
issue three original signed copies of the Certificate confirming
the date of Operational Acceptance of the Works (one such copy to
be provided to the Contractor):
(a) Certificates of Operational Acceptance have been issued
for all Systems that are subject to Schedule A Tests and
any Punch Lists issued;
(b) documentation has been delivered in accordance with and to
the extent provided in Appendix 3, Ex. 3.2; and
(c) the training program for the Owner's personnel has been
completed to the degree provided in Appendix 3, Ex. 3.5
and Ex. 4.6.
The Certificate of Operational Acceptance of the Works shall be
dated the same date as and, provided the conditions in clauses
(b) and (c) have then been satisfied, issued (or deemed to be
issued as the case may be) concurrently with the Certificate of
Operational Acceptance for the last System for which a
Certificate of Operational Acceptance is required to be issued.
SECTION 17.11. The issuance of the Certificate of Operational Acceptance of the
Works pursuant to Section 17.10 is the condition precedent for
commencement of the 72-Hour Test. In the event that a Schedule A
Test cannot be carried out
Contract Page 72(74)
or cannot be successfully carried out due to a failure by the
Owner to perform the Owner's Scope in accordance with the
Contract (which has not been caused or contributed to by the
Contractor), then, so long as all other Schedule A tests have
been successfully completed or waived by the Owner, the
Contractor shall be entitled to a Change in the Time Schedule
pursuant to Section 8.9 equal to the period of delay in
fulfillment by the Owner of such obligations and a Change in the
Contract Price pursuant to Section 9.8 equal to any additional
costs reasonably incurred by the Contractor as a result of such
delay.
ART. 18 72-HOUR TEST AND ACCEPTANCE OF WORKS
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SECTION 18.1. During the period between Mechanical Completion of a System and
Acceptance of the Works, such System(s) or, upon Mechanical
Completion of all Systems, the Plant will be operated by the
Owner's personnel under the instruction, supervision and
direction of the Contractor in order to fine-tune all Systems in
preparation for the 72-Hour Test.
SECTION 18.2. At least seventy-five (75) Days prior to the anticipated
commencement of the 72-Hour Test, the Contractor shall prepare
and deliver to the Owner and the Independent Engineer detailed
procedures for the conduct of the 72-Hour Test (including
sampling and testing of Materials and consumables to be supplied
by the Owner for purposes of the 72-Hour Test). The Owner and
Independent Engineer shall review such procedures and, within
fifteen (15) Days after the date on which such documents were
actually received by the Owner and the Independent Engineer, the
Owner shall either notify the Contractor of its approval (such
approval not to be unreasonably withheld) or of any remarks and
observations. If such notification has not been given to the
Contractor within said period, approval of the detailed procedure
shall be deemed given upon expiry of said fifteen (15) Day
period. If the Owner submits any remarks or observations
(including remarks or observations provided to the Owner by the
Independent Engineer), the Contractor shall meet with the Owner
and the Independent Engineer and endeavor to resolve
Contract Page 73(75)
all issues within the next fifteen (15) Days (all such issues
shall in any event be resolved prior to the 72-Hour Test).
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SECTION 18.3. At least thirty (30) Days prior to the anticipated commencement
of the 72-Hour Test, the Parties shall select and jointly engage
an independent laboratory to conduct split sample testing for
purposes of the 72-Hour Test in accordance with the test
procedures. The costs of the independent laboratory shall be
shared equally by the Parties.
SECTION 18.4. Fourteen (14) Days prior to the date when the Plant is
anticipated by Contractor to be ready for the commencement of the
72-Hour Test, the Contractor shall so notify the Owner and the
Independent Engineer. When the Plant is ready for the 72-Hour
Test, and provided that Operational Acceptance of the Works has
been achieved in accordance with Section 17.10, the Contractor
shall certify in writing to the Owner that the Works have
satisfied all required conditions for commencement of the 72-Hour
Test. The Contractor shall give the Owner and the Independent
Engineer at least twenty-four (24) hours' prior notice of the
commencement of such test and the Owner and the Independent
Engineer shall have the right to witness the test. The 72-Hour
Test shall be carried out as set forth in Appendix 3, Ex. 12.5 by
the Owner's personnel under the instruction, supervision and
direction of the Contractor and in accordance with the detailed
procedures established pursuant to Section 18.2. All data
measured and information gathered during the 72-Hour Test shall
be properly documented and signed by authorized representatives
of both Parties.
SECTION 18.5. The results of the 72-Hour Test(s) shall be evaluated in
accordance with the procedure set forth in Appendix 3, Ex. 12.5
and Ex. 12.6.
SECTION 18.6. Following completion of the 72-Hour Test, the Contractor shall
submit to the Owner as soon as available and in any event within
thirty (30) Days after completion of the 72-Hour Test, six
original signed copies of the results of such test (together with
a written certification by the Contractor that the test
Contract Page 74(76)
results and, if applicable, the test results from the independent
laboratory, are true and correct), and make a copy of such test
results and other items available to the Independent Engineer at
the Site, for approval that the Minimum Performance Requirements
for the Works specified in the Contract have been fulfilled. The
Contractor shall give the Owner and the Independent Engineer at
least two (2) Business Days' advance notice of the date on which
it anticipates submitting such test results for review.
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SECTION 18.7. If the following conditions are satisfied:
(i) the results of the 72-Hour Test shows that the Works meet
all Minimum Performance Requirements set forth in Appendix
3, Ex. 12.6,
(ii) all Non-System Departments have been successfully
completed as described in Article 16,
(iii) documentation has been delivered in accordance with and to
the extent provided in Appendix 3, Ex. 3.2,
(iv) all Permits required to have been obtained by the
Contractor by such date have been issued and are in full
force and effect, and
(v) the Contractor shall have validly assigned to the Owner
all its rights with respect to performance or availability
guarantees by the Contractor's Suppliers,
the Owner shall, within five (5) Business Days after receiving
such results, confirm that the Works have achieved all such
Minimum Performance Requirements and satisfied the 72-Hour Test
by issuing the Acceptance Certificate in the form set out in
Annex A to Appendix 2, Ex. 4 (together with a list of the Punch
List items from Sections 16.6 and 17.9, and any additional items
identified during the 72-Hour Test that remain to be completed)
dated to reflect the actual date of passing the 72-Hour Test.
Notwithstanding anything to the contrary contained herein, the
Owner shall be entitled to withhold from
Contract Page 75(77)
the amount due to the Contractor upon Acceptance one hundred
fifty percent (150%) of the value of all uncompleted Punch List
items, which amount shall be paid to the Contractor upon
completion of such Punch List items.
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SECTION 18.8. If the results of the 72-Hour Test show that the Works do not
fulfill all of the Minimum Performance Requirements set forth in
Appendix 3 Ex. 12.6 or the test was not performed in accordance
with the procedures established pursuant to Section 18.2, the
Owner shall so notify the Contractor within five (5) Business
Days after receipt by the Owner and the Independent Engineer of
such results and the Contractor shall take such corrective action
as is necessary to correct the deficiencies in the Works without
delay (and in any event within six (6) months after the results
of the first test have been given to the Owner and the
Independent Engineer) so that all of the Minimum Performance
Requirements are achieved in a repeat 72-Hour Test in accordance
with this Article 18 or, if acceptable to the Owner, as part of a
Schedule B Test.
SECTION 18.9. In no event shall the Acceptance Certificate be given, or deemed
to be given, unless and until the Works have met all of the
Minimum Performance Requirements set forth in Appendix 3, Ex.
12.6. If all of the Minimum Performance Requirements are not
achieved prior to (i) such time as the Contractor has incurred
liquidated damages for delay equal to the maximum amount
permitted under Section 21.1 of the Contract or (ii) in the event
that an insured event that does not qualify as an Event of Force
Majeure occurs off-Site with respect to the turbogenerator, steam
drum for the power boiler or recovery boiler, 33 kV transformer
or fan pump and proceeds are payable for the delay in Start-up
resulting from such event under the insurance to be obtained and
maintained by the Owner pursuant to Article 14, three (3) Months
after the expiration of the period specified in clause (i) above,
the Contractor shall pay the applicable performance liquidated
damages for deficient performance in accordance with Section 21.2
and, notwithstanding such payment, shall remain obligated to take
any and all such corrective
Contract Page 76(78)
actions at its own cost and expense (without regard to any
limitations that might otherwise be applicable under Section 635
(3) BGB) as are necessary to correct the deficiencies in the
Works so as to achieve all of the Minimum Performance
Requirements.
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SECTION 18.10. If the Owner neither issues the Acceptance Certificate nor
notifies the Contractor that the Works do not satisfy the Minimum
Performance Requirements set forth in Appendix 3, Ex. 12.6 prior
to the end of the fifth (5) Business Day following receipt by the
Owner and the Independent Engineer of the results of the 72-Hour
Test or the re-performance of such test, then the Acceptance
Certificate will be deemed to have been issued as of the fifth
Business Day after completion of the 72-Hour Test, dated to
reflect the actual date of passing the 72-Hour Test, provided
that the Contractor shall nevertheless remain obligated to
satisfy the conditions set forth in clauses (ii) - (vi) of
Section 18.7. In no event shall Acceptance be replaced by public
authority acceptance or, except as provided in this
Section 18.10, by notification of completion by the Contractor.
The possibilities of a fictitious acceptance provided for in
Section 640 BGB or of implied acceptance and the right of the
Contractor to obtain a certificate of completion pursuant to
Section 641a BGB are excluded.
SECTION 18.11. In the event that, due to the failure of the Owner to perform the
Owner's Scope in accordance with the Contract (which has not been
caused or contributed to by the Contractor), the first 72-Hour
Test cannot be carried out within six (6) months after Mechanical
Completion (plus any period by which the Time Schedule has been
extended pursuant to Section 17.11), then, provided that
Mechanical Completion of the Works has occurred, the Defects
Liability Period shall commence and risk of loss with regard to
the Works shall be transferred to the Owner upon the expiry of
such period, and the Contractor shall be entitled to a Change in
the Time Schedule pursuant to Section 8.9 equal to the period of
delay in fulfillment by the Owner of such obligations and a
Change in the Contract Price pursuant to Section 9.8 equal
Contract Page 77(79)
to any additional costs reasonably incurred by the Contractor as
a result of such delay.
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SECTION 18.12. After expiry of the six (6) month period described in Section
18.11 above (as the same may be extended), the Contractor shall
remain obligated to demonstrate compliance of the Works with the
Performance Requirements within nine (9) months following
Mechanical Completion, upon terms to be agreed upon and taking
into consideration the actual situation of the Plant.
SECTION 18.13. With regard to defects, performance deficiencies or Punch List
items previously notified to the Contractor, the Owner retains
its rights under this Contract regardless of whether it made a
formal reservation pursuant to Section 640 subpara. 2 BGB on the
occasion of Acceptance.
ART. 19 SCHEDULE B TESTS
SECTION 19.1. Not later than six (6) months after Acceptance the Contractor
shall demonstrate that the Systems set forth in Appendix 3, Ex.
12.3 achieve the Performance Requirements stipulated in Appendix
3, Ex. 12.4. The Owner shall have the right (in consultation with
the Independent Engineer) to waive in writing any Schedule B Test
if satisfied with the performance of the Plant in production.
SECTION 19.2. The Owner's operating personnel, under the instruction, direction
and supervision of the Contractor, shall carry out the Schedule B
Tests in accordance with checklists and detailed test procedures
prepared by the Contractor and delivered to the Owner and the
Independent Engineer at least seventy-five (75) Days prior to the
anticipated commencement of the first Schedule B Test. The Owner
and the Independent Engineer shall review such procedures and,
within fifteen (15) Days after the date on which such documents
were actually received by the Owner and the Independent Engineer,
the Owner shall either notify the Contractor of its approval
(such approval not to be unreasonably withheld) or the Owner
shall notify the Contractor of any remarks and observations
(including remarks or
Contract Page 78(80)
observations provided to the Owner by the Independent Engineer).
If such notification has not been communicated to the Contractor
within said period, approval of the detailed procedure shall be
deemed given upon expiry of said fifteen (15) Day period. If the
Owner submits any remarks or observations (including remarks or
observations provided to the Owner by the Independent Engineer),
the Contractor shall meet with the Owner and endeavor to resolve
all issues within the next fifteen (15) Days (all such issues
shall in any event be resolved prior to the commencement of the
Schedule B Test).
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SECTION 19.3. When the Contractor believes that a System is ready for the
commencement of its Schedule B Test, the Contractor shall provide
the Owner and the Independent Engineer with at least fourteen 14
Days' prior written notice of the performance of such test. The
exact timing of any Schedule B testing, as well as of Plant
shutdowns following Acceptance, if required, shall be agreed
between the Parties in due course in order not to interfere with
the operation of the Plant, taking into account pulp prices, the
cash flows and revenue anticipated to be generated pursuant to
the Base Case and other operating considerations and the fact
that the Contractor is entitled to 3 attempts for each Schedule B
Test. If, as a result of a written request by the Owner that the
Contractor not perform a Schedule B Test or the failure by the
Owner to respond within seven (7) Days to a written request by
the Contractor to perform a Schedule B Test, the Schedule B Tests
for one or more Systems have not been conducted within six (6)
months following Acceptance, the respective Schedule B Test
Certificate(s) shall be deemed to have been issued as of the
fifth Day following expiry of such period.
SECTION 19.4. At least thirty (30) Days prior to the anticipated commencement
of the Schedule B Tests, the Parties shall select and jointly
engage an independent laboratory to conduct split sample testing
for purposes of the Schedule B Tests in accordance with the test
procedures. The costs of the independent laboratory shall be
shared equally by the Parties.
Contract Page 79(81)
SECTION 19.5. The Contractor shall submit to the Owner within thirty (30) Days
after completion of a Schedule B Test, six (6) copies of the
results of the Schedule B Test and, if applicable, the results
from the independent laboratory (together with a written
certification by the Contractor that the test results and, if
applicable, the results from the independent laboratory, are true
and correct), and make available to the Independent Engineer at
the Site a copy of such test results and other items, for
approval that the tested System fulfills the Performance
Requirements set forth in Appendix 3, Ex. 12.4. The Contractor
will give the Owner and the Independent Engineer at least two (2)
Business Days' advance notice of the date on which it anticipates
submitting such test results for review.
SECTION 19.6. If the results of the Schedule B Test demonstrate compliance of
the applicable System with the Performance Requirements set forth
in Appendix 3, Ex. 12.4, the Owner shall, within five (5)
Business Days after receipt by the Owner of such results, issue
three original signed copies of the Schedule B Test Certificate
for such System in the form set out in Annex B to Appendix 2, Ex.
4, two of such copies to be provided to the Contractor, dated to
reflect the actual date of passing of the Test.
SECTION 19.7. If the results of the Schedule B Test indicate that the
applicable System does not fulfill the Performance Requirements
set forth in Appendix 3 Ex. 12.4 or the test was not performed in
accordance with the procedures established pursuant to
Section 19.2, the Owner shall so notify the Contractor within
five (5) Business Days after receipt by the Owner of such results
and, unless the Contractor establishes that such failure is due
to failure by the Owner to perform the Owner's Scope (which has
not been caused or contributed to by the Contractor), either:
(a) the Contractor shall promptly take such corrective action
as is necessary and the Schedule B Test shall be
re-performed in accordance with the terms of this
Article 19; or
Contract Page 80(82)
(b) (i) the Contractor may, at its option, provided that the
Minimum Performance Requirements are met, or (ii) after
the Contractor has made three attempts as permitted by
Section 19.3, the Contractor shall, pay the applicable
performance liquidated damages as set forth in
Section 21.2.
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As long as the Minimum Performance Requirements are met, payment
of such liquidated damages pursuant to clause (b) shall satisfy
the Contractor's performance obligations with respect to such
Schedule B Test (but the Contractor shall remain obligated to
remedy any Defects in accordance with Article 20).
SECTION 19.8. If the results of a Schedule B Test indicate that a System does
not meet the Minimum Performance Requirements set forth in
Appendix 3, Ex. 12.4, then the Contractor shall not have the
option to cure the shortfalls by the payment of liquidated
damages and shall have an obligation to correct the deficiencies
in the Works without delay (and in any event within six (6)
months after the results of the first test have been given to the
Owner) so that the Minimum Performance Requirements are achieved
in a repeat Schedule B Test. If the Minimum Performance
Requirements are not achieved within six months after Acceptance
or after the Contractor has made three attempts as permitted by
Section 19.3, whichever occurs first, then, unless it establishes
that such failure is due to failure by the Owner to perform the
Owner's Scope in accordance with the Contract (which has not been
caused or contributed to by the Contractor), the Contractor shall
pay the applicable liquidated damages for deficient performance
in accordance with Section 21.2 and, notwithstanding such
payment, shall remain obligated to take any and all such
corrective actions at its own cost and expense (without regard to
any limitations that might otherwise be applicable under Section
635 (3) BGB) as are necessary to correct the deficiencies in the
Works so as to achieve the Minimum Performance Requirements.
Contract Page 81(83)
SECTION 19.9. If the Owner neither issues the Schedule B Test Certificate nor
notifies the Contractor that the relevant System does not satisfy
the applicable Performance Requirements set forth in Appendix 3,
Ex. 12.4 prior to the end of the fifth Business Day following
receipt by the Owner of the results of a Schedule B Test or of
the results of the re-performance of such test, then the Schedule
B Test Certificate will be deemed to have been issued as of the
fifth Business Day after completion of the Schedule B Test, dated
to reflect the actual date of passing the Schedule B Test.
SECTION 19.10. The Owner shall not withhold the issuance of a Schedule B Test
Certificate for a System in case of Punch List items relating to
the System, but all such Punch List items shall be remedied by
the Contractor as soon as possible and in any event within (a)
six months from Acceptance for those Punch List items identified
at or prior to Acceptance and (b) three months after the issuance
of the relevant Schedule B Test Certificate for those identified
in connection with the Schedule B Tests.
ART. 20 DEFECTS LIABILITY
SECTION 20.1. THE CONTRACTOR WARRANTS UNTIL THE EXPIRY OF THE DEFECTS LIABILITY
PERIOD THAT:
(i) the Works are free from all Defects, whether arising from
defective design, engineering, equipment, Materials or
workmanship and are suitable for their intended purpose as
set forth in the Contract;
(ii) the Works conform to the Specifications, the standards set
forth in Section 3.3(a) and 3.3(b) and the Design
Documentation as approved by the Owner (or any approved
revisions thereof) and recognized rules of sound
engineering practice (as in effect up to and including the
Acceptance Date) and comply with all other requirements of
the Contract;
Contract Page 82(84)
(iii) the Works comply with the requirements and provisions of
all Permits as in effect up to and including the
Acceptance Date (including Permit requirements resulting
from the Environmental Impact Assessment Report and the
updated emissions Permit for which an application has been
filed) relating to the construction and operation of the
Works;
(iv) the Works comply in all material respects with all Laws in
effect up to and including the Acceptance Date;
(v) the Works meet the Performance Requirements; and
(vi) good title to all Works, equipment and Materials and all
Intellectual Property Rights relating thereto are vested
in the Owner.
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The Contractor's Warranties set out above do not apply to, and
the Contractor shall not be responsible for the repair,
replacement or making good of, any Defects or any damage to the
Plant which is attributable to normal wear and tear, operation or
maintenance of the Plant by the Owner after Acceptance in
violation of the instructions in the operation and maintenance
manuals or use of consumables not within the design range set out
in the Specifications.
The Contractor's obligations under this Article 20 shall not
apply to any Materials or equipment which are supplied by the
Owner, or which has a normal design life shorter than the Defects
Liability Period and fails after its normal design life.
SECTION 20.2. The Defects Liability Period shall be eighteen (18) months from
Acceptance (or, in the case of specified portions of the Works,
such longer periods as are set forth in Appendix 3, Ex. 24),
subject to any extension pursuant to Section 20.7. The provisions
of Sections 377 and 378 of the German Commercial Code (HGB)
(requirement to make a complaint in respect of a defect
immediately on receipt of the Goods) shall not apply.
Contract Page 83(85)
SECTION 20.3. The Contractor shall, at its own cost, be responsible for making
good by correction, repair, or replacement (including
substitution of materials in the event of excessive corrosion or
erosion) and, where necessary (including in the case of recurring
Defects), by procuring redesign and reengineering with all
possible speed and in accordance with the Contract any Defect
which may appear or occur in any part of the Works (including any
Defects that appear or occur on or before Acceptance) and which
arises from either:
(i) any breach of the warranties set out in Section 20.1;
(ii) any act or omission or breach of Contract of or by the
Contractor or any Contractor's Supplier (including as a
result of the operation of the Works prior to Acceptance)
or damage caused by carrying out of the Works on the Site;
or
(iii) operation of the Plant in accordance with defective
instructions in any operation and maintenance manual
(which contains material errors or omissions) that should
not reasonably have been apparent to the Owner's operating
personnel and such defective instruction or omission is
the cause of such Defect where those manuals are
subsequently revised in accordance with this clause,
and also any Defect or damage to the Works caused by or during
such correction, repair or replacement or by any Defect.
Section 635 (3) BGB is not applicable to this Contract.
If the nature or scope of the repair, replacement or redesign is
such that it might reasonably affect the performance of any
System, the Owner may require that the Contractor, after having
completed an appropriate test and checklist of the mechanical
completion and appropriate start up of the relevant System,
reperform the relevant Schedule B Tests. The request shall be
made by notice within thirty (30) Days after completion of the
making good. The relevant tests shall be repeated under the same
procedures
Contract Page 84(86)
(including with regard to costs of the Parties) as those followed
under the Contract in relation to the relevant original test.
If the results of the re-performed Schedule B Tests indicate that
the System(s) do not fulfill the relevant Performance
Requirements, then the Contractor shall either make such
additional repairs, replacements and redesign until the
Performance Requirements are fulfilled, or, at its sole option as
long as the Minimum Performance Requirements are fulfilled, pay
the applicable liquidated damages as set forth in Section 21.2
and payment of such liquidated damages shall satisfy the
Contractor's obligation in respect of such Performance
Requirements. Notwithstanding anything to the contrary contained
herein, other than as expressly set forth in this Section 20.3,
the Contractor shall have no continuing obligation (including
under Section 20.1(v)) with respect to the Performance
Requirements for a System, and shall be deemed to have met the
relevant Performance Requirements after the Owner has issued a
Schedule B certificate for such System pursuant to Section 19.6.
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SECTION 20.4. If the Owner becomes aware of a Defect, the Owner shall give the
Contractor a written notice stating the nature of any such Defect
referred to in Section 20.3, together with all available
information related thereto, promptly following the discovery
thereof. If the Contractor becomes aware of a Defect, it shall
immediately notify the Owner of the nature and effect of such
Defect. The Owner shall afford a reasonable opportunity for the
Contractor to inspect any Defect without undue delay. Promptly
after this, the Parties shall agree upon the date and duration of
the repair, which shall be effected without undue delay
("UNVERZUGLICH") (taking into account physical access and
operation of the Plant, but not considerations of cost,
additional manpower and the like).
SECTION 20.5. The Contractor shall be afforded all access to the Plant and the
Site reasonably necessary to enable the Contractor to perform its
obligations under this Article 20; however, the Contractor shall
use its best efforts in
Contract Page 85(87)
connection with the performance of such obligations not to
interfere with the operations of the Plant.
The Contractor may, with the consent of the Owner, which consent
shall not be unreasonably withheld, remove from the Site any part
of the Works if any Defect is such that permanent repairs cannot
be expeditiously carried out on the Site.
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SECTION 20.6. If the Contractor fails to commence the work necessary to remedy
a Defect or any damage to the Plant caused by such Defect, or to
complete the work, by the date agreed upon in accordance with
Section 20.4, then, unless the reasons for such delay are
attributable to the failure by the Owner to permit the Contractor
to perform as agreed, the Owner may, following expiration of
fourteen (14) Days' prior written notice to the Contractor,
proceed to do such work and the reasonable costs incurred by the
Owner in connection therewith shall be reimbursed by the
Contractor.
SECTION 20.7. The warranty and the Defects Liability Period with respect to any
part of the Works that are repaired, replaced, modified, or
otherwise altered during the Defects Liability Period shall
extend for a period of eighteen (18) months from the date of
completion of such repair, replacement, modification or
alteration (or such longer period as is set forth in Appendix 3,
Ex. 24).
If the Works or any part thereof cannot be used by reason of a
Defect and/or making good such Defect (the "stand-still" period),
such stand-still period shall be added to the Defects Liability
Period of the Works or such part, as the case may be.
The above notwithstanding, no Defects Liability Period shall
(except as otherwise set forth in Appendix 3, Ex. 24) extend more
than a total of 36 (thirty-six) months after Acceptance or more
than sixty-four (64) months after the Commencement Date plus a
period equal to the aggregate of all extensions in the Time
Schedule pursuant to Section 8.9 (other than clause
Contract Page 86(88)
(iii) of Section 8.9) or Article 12, whichever occurs first,
provided that (except as provided in Section 20.9), if a Defect
is discovered by the Contractor or, if discovered by the Owner,
as long as notice of a Defect is given to the Contractor, in each
case within the Defects Liability Period, the Contractor shall
remain liable to complete the making good of such Defect even if
the time to do so extends beyond the Defects Liability Period.
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SECTION 20.8. The remedies provided for in this Article 20 shall be in lieu of
any other remedies provided in law with respect to defects
(MANGEL), except where such defects are the result of fraud,
criminal or willful act or gross negligence of the Contractor
(and even in such cases the remedy of rescission shall be
excluded).
SECTION 20.9. Upon expiry of the Defects Liability Period as set forth in this
Article 20, or as soon thereafter as the Contractor has completed
or deemed to have completed all the Works, including remedying
any defects, and provided that all Schedule B Tests have been
completed (or waived by the Owner) and the respective Performance
Requirements have been achieved or (as long as the Minimum
Performance Requirements are fulfilled) the applicable liquidated
damages have been paid by the Contractor, the Owner shall issue
the Expiry of Defects Liability Period Certificate in the form
set out in Annex C to Appendix 2, Ex. 4. In the event that at
such time certain warranty obligations remain outstanding
(including rights of the Contractor against Contractor's
Suppliers), the Expiry of Defects Liability Period Certificate
shall be in the form set out in Annex D to Appendix 2, Ex. 4 and
shall include a reservation of rights of the Owner with respect
to any Defects covered by such warranties and shall be issued
against (i) provision by the Contractor of a bank guarantee in
the form set forth in Appendix 2, Ex. 5 for any Defects that have
not been remedied or, upon agreement with the Owner with respect
to claims against any Contractor's Supplier regarding such
Defects or (ii) in the case of warranties by Contractor's
Suppliers extending beyond the Defects Liability Period as set
forth in Appendix 3, Ex. 24, assignment by the Contractor of the
Contract Page 87(89)
respective warranty claims against such Contractor's Suppliers in
accordance with Section 25.8. If the Contractor has, despite the
exercise of its best efforts, been unable to remedy a Defect
within the Defects Liability Period, the Contractor may apply to
the Owner for the Expiry of Defects Liability Certificate if (i)
the Contractor would, apart from the Defect, be entitled to apply
for the Expiry of Defects Liability Certificate and (ii) the
Owner and the Contractor have agreed upon a sum to be paid by the
Contractor to the Owner as compensation for the Defect and the
Contractor has paid said compensation.
ART. 21 LIQUIDATED DAMAGES
LIQUIDATED DAMAGES FOR DELAY
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SECTION 21.1. In the event that Acceptance is not achieved by the Scheduled
Acceptance Date (as the same may be extended or agreed upon in
accordance with Section 8.9 or Article 12 of the Contract), the
Contractor shall be liable to pay liquidated damages for each
Week of delay in an amount equal to 0.4% (zero point four
percent) of the Contract Price. In the case of a delay that is
less than a full Week, the amount of liquidated damages payable
shall be pro rated for each day of delay (with any part of a day
being deemed a full day for purposes of such proration).
The maximum amount of liquidated damages for delay shall be
limited to twelve percent (12%) of the Contract Price.
Except as otherwise provided in Section 8.11, 23.1 and 24.1, the
liquidated damages payable pursuant to this Section 21.1 for
delay in achieving Acceptance shall be the exclusive remedy for
such delay (and, in particular, remedies pursuant to Section 286
ET SEQ. BGB ("VERZUG") shall not be available). Any further
rights or remedies of the Owner to claim any damages or loss for
delay in connection with this Contract are expressly excluded.
Contract Page 88(90)
LIQUIDATED DAMAGES FOR DEFICIENT PERFORMANCE
SECTION 21.2. In the event that (i) the Minimum Performance Requirements are
not fulfilled during the 72-Hour Test prior to such time as the
Contractor has incurred liquidated damages for delay equal to the
maximum amount permitted under Section 21.1 or, if applicable,
such later time as is provided in clause (ii) of Section 18.9, or
(ii) the Performance Requirements are not achieved during the
Schedule B Tests (or not deemed to be achieved pursuant to the
last sentence of Section 19.3) within six months after Acceptance
or after the Contractor has made three attempts as permitted by
Section 19.3, whichever occurs first, in each case other than for
reasons which the Contractor can establish are attributable to
failure by the Owner to perform the Owner's Scope in accordance
with the Contract (which has not been caused or contributed to by
the Contractor), the Contractor shall be liable to pay the
following liquidated damages:
(a) with respect to the 72-Hour Test, five percent (5%) of the
Contract Price, and
(b) with respect to each Schedule B Test, subject to the
maximums set forth below and in Section 21.3, an amount
equal to twice the applicable amount(s) set forth in
Appendix 3, Ex. 12.4.
The maximum amount of liquidated damages for deficient
performance shall be limited to ten percent (10%) of the Contract
Price.
OVERALL LIQUIDATED DAMAGES
SECTION 21.3. The aggregate maximum of liquidated damages under Sections 21.1
and 21.2 hereof shall be limited to seventeen percent (17%) of
the Contract Price.
The Parties agree that the liquidated damages constitute a
genuine and reasonable estimate of the actual damages that would
be suffered by the Owner in the event of the Contractor's delay
or non-achievement of
Contract Page 89(91)
Performance Requirements and such liquidated damages shall not be
considered as penalties and, subject to the following paragraph
and except as provided in Sections 8.11, 18.9, 19.8, 23.1 and
24.1 and Article 20, shall be in lieu of all other rights and
remedies for delay in achieving Acceptance and non-achievement of
the Performance Requirements. The Parties agree that it is not a
precondition for the assertion of a claim to payment of
liquidated damages that the Owner must have reserved such right
at the time of Acceptance or established fault ("VERSCHULDEN") on
the part of the Contractor.
The Parties further agree that the payment of liquidated damages
shall not relieve the Contractor from any of its obligations to
complete the Works, attain the Minimum Performance Requirements,
or cure Defects and that any other amounts payable pursuant to
the Contract and any costs incurred by the Contractor to attain
the Minimum Performance Requirements or cure Defects shall not be
credited against or otherwise reduce the amounts of liquidated
damages otherwise payable pursuant to this Article 21.
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SECTION 21.4. Liquidated damages for delay will be invoiced on a weekly basis.
Liquidated damages for deficient performance will be invoiced
twenty (20) Days after failure of the last permitted test
relating to the respective System.
ART. 22 INTELLECTUAL PROPERTY RIGHTS
SECTION 22.1. In the event that licenses, patents or other intellectual
property or proprietary rights held by the Contractor, or any
Contractor's Supplier, or any of their respective affiliates are
required by the Owner in the operation, maintenance, or repair of
the Plant in the manner intended and at the design capacity and
the production of the design output, the Contractor shall deliver
or cause to be delivered to the Owner such licenses on or before
the time such licenses, if any, are required. Such licenses shall
be in such form as shall be reasonably acceptable to the Owner,
shall be irrevocable, non-exclusive, and royalty free to the
Owner, and shall be assignable to the Owner and to the other
parties contemplated in the Direct Agreement.
Contract Page 90(92)
SECTION 22.2. The Contractor warrants that the Owner (and any successor in
interest) can use the Works and any parts thereof in Germany for
its intended purpose (including any modification or expansion of
the Works, but subject in the case of expansion to payment by the
Owner of any additional license fees payable in respect of such
additional capacity) in accordance with the Contract without
infringing another party's (whether in Germany or in any other
country) rights and interests in any utility model, unregistered
or registered design, trademark, copyright or other intellectual
property right registered or otherwise ("Intellectual Property
Rights"), and can sell products produced by the Works or by means
of it within and outside Germany.
SECTION 22.3. The Contractor shall indemnify and hold harmless the Owner and
its employees and officers from and against any and all suits,
actions or administrative proceedings, claims, demands, losses,
damages, costs, and expenses of whatsoever nature, including
attorney's fees and expenses, which the Owner may suffer as a
result of any infringement or alleged infringement of any
Intellectual Property Rights.
Such indemnity shall not cover the Owner's Scope or any use of
the Works or any part thereof other than for the purpose
indicated by, or reasonably to be inferred from, the Contract.
SECTION 22.4. If any proceedings are brought or any claim is made against the
Owner arising out of the matters referred to in Section 22.2, the
Owner shall promptly give the Contractor a notice thereof, and
the Contractor shall at its own expense and in the Owner's name
conduct such proceedings or claim and any negotiations for the
settlement of any such proceedings or claim.
If the Contractor fails to notify the Owner within ten (10) Days
of receipt of such notice that it intends to conduct any such
proceedings or claim, then the Owner shall be free to conduct the
same on its own behalf. Unless the Contractor has so failed to
notify the Owner within the ten (10) Day period,
Contract Page 91(93)
the Owner shall make no admission which may be prejudicial to the
defense of any such proceedings or claim.
The Owner shall, at the Contractor's request, assist the
Contractor in conducting such proceedings or claim, and shall be
reimbursed by the Contractor for all expenses incurred in so
doing. Should any claim in relation to an infringement of any
Intellectual Property Rights not be discharged, or should the
Contractor be found to have infringed such Intellectual Property
Rights the Contractor shall at its own expense (including all
reasonable direct costs and expenses suffered by the Owner) and
option either (a) procure the right to use any such Intellectual
Property Rights and all associated equipment and Materials and
transfer such rights to the Owner or (b) replace or redesign the
infringing equipment and Material and provide the Owner with a
confirmation that all Intellectual Property Rights have been
correctly obtained. The failure by the Owner to comply with the
provisions of this Section 22.4 shall not relieve the Contractor
of its obligations under Section 22.3 except to the extent that
the Contractor has been prejudiced thereby.
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SECTION 22.5. The Owner shall indemnify and hold harmless the Contractor and
its employees, officers and the Contractor's Suppliers from and
against any and all suits, actions or administrative proceedings,
claims, demands, losses, damages, costs, and expenses of
whatsoever nature, including attorney's fees and expenses, which
the Contractor may suffer as a result of any infringement or
alleged infringement of any Intellectual Property Rights in
connection with the Owner's Scope. The Contractor shall, at the
Owner's request, assist the Owner in conducting any proceedings
or claim, and shall be reimbursed by the Owner for all expenses
incurred in doing so.
ART. 23 SUSPENSION
SECTION 23.1. The Owner may, by written notice to the Contractor, order the
Contractor to suspend performance of any or all of its
obligations under the Contract. Such notice shall specify the
obligations as to which performance is to be
Contract Page 92(94)
suspended, the commencement date of the suspension and the
reasons therefor. The Contractor shall thereupon suspend
performance of such obligation (except those obligations
necessary for the care or preservation of the Works) until
ordered in writing to resume such performance by the Owner.
If, by virtue of a suspension order given by the Owner, other
than by reason of the Contractor's default or breach of the
Contract, the Contractor's performance of any of its obligations
is suspended for an aggregate period of more than one hundred
fifty (150) Days, then at any time thereafter and provided that
at that time such performance is still suspended, the Contractor
may give a notice to the Owner requiring that the Owner shall,
within thirty (30) Days of receipt of the notice, order the
resumption of such performance or request and subsequently order
a Change in accordance with Article 12 excluding the performance
of the suspended obligation from the Contract. If the Owner fails
to do so within such period, the Contractor may, by a further
notice to the Owner, elect to treat the suspension as termination
of the Contract under Article 24.
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SECTION 23.2. If (i) the Owner has failed to pay any approved invoice under the
Contract within the fourteen (14) Days after the expiry of the
thirty (30) Day period provided in Section 9.3, (ii) the Owner
has failed to approve any invoice or supporting document without
just cause pursuant to Section 9.2 within thirty (30) Days after
notice to the Owner that the Contractor considers the Owner's
failure to be without just cause or (iii) an event of default has
occurred under one or more loan agreements to which the Owner is
a party and the Owner's creditors thereunder have accelerated the
debt under such loan agreements, and within sixty (60) Days after
such acceleration suitable payment assurances reasonably
satisfactory to the Contractor have not been provided to the
Contractor, then the Contractor may, in each case by sixteen (16)
Days' notice to the Owner, suspend performance of all or any of
its obligations under the Contract, or reduce the rate of
progress until the Owner has remedied its failure. In the case of
a claim by the Contractor that the
Contract Page 93(95)
Owner has failed to approve an invoice or supporting documents
without just cause, the Owner shall be entitled to prevent such
suspension of performance by providing to the Contractor security
for the payment of the amounts in dispute in the form of a
deposit or a standby bank guarantee (which bank guarantee shall
not be first demand but shall otherwise be generally consistent
with the tenor of the bank guarantees to be provided under
Section 10.1).
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SECTION 23.3. If the Contractor's performance of its obligations is suspended
or the rate of progress is reduced pursuant to this Section 23
(other than by reason of a Contractor default or breach of the
Contract), then the Time Schedule shall be extended accordingly
pursuant to Section 8.9, and any and all additional costs or
expenses incurred by the Contractor as a result of such
suspension or reduction shall be paid by the Owner to the
Contractor in addition to the Contract Price pursuant to Section
9.8, except in the case of suspension or reduction in the rate of
progress by reason of the Contractor's default or breach of the
Contract.
SECTION 23.4. During the period of suspension, the Contractor shall not be
entitled to payment of the Contract Price otherwise payable
during the period of such suspension (other than previously
approved invoices that are payable during such period). Upon
resumption by the Contractor of all activities affected by a
suspension, the Owner shall resume payments of the Contract Price
with adjusted payment dates. During any suspension, the
Contractor shall not remove from the Site any Materials or
equipment, any part of the Works or any Contractor's Equipment
without the prior written consent of the Owner and shall, unless
otherwise instructed by Owner, cover up and continue to preserve
the Works.
ART. 24 TERMINATION
SECTION 24.1. TERMINATION BY OWNER FOR CONTRACTOR'S DEFAULT
Contract Page 94(96)
24.1.1. The Owner, without prejudice to any other rights or remedies it
may possess under this Contract, may terminate the Contract
forthwith in the following circumstances by giving a notice of
termination to the Contractor referring to the relevant provision
of this Section 24.1.1 and stating the nature of the default:
(a) if the Contractor becomes bankrupt or insolvent, has a
receiving order issued against it, compounds with its
creditors, or, being a corporation, a resolution is passed
or order is made for its winding up (other than a
voluntary liquidation for the purposes of amalgamation or
reconstruction), a receiver is appointed over any part of
its undertaking or assets, or if the Contractor takes or
suffers any other analogous action in consequence of debt;
or
(b) if the Contractor assigns or transfers the Contract in
violation of the provisions of the Contract.
24.1.2. If:
(a) the Contractor has abandoned or repudiated the Contract;
or
(b) the Contractor has without valid reason failed to commence
the Works promptly or has suspended or materially reduced
(other than pursuant to Section 23.2 hereof) the progress
of the Works for more than twenty-eight (28) Days after
receiving a written instruction from the Owner to proceed;
or
(c) the Contractor fails to perform or observe any of its
material obligations under the Contract and such failure
continues for more than thirty (30) Days after notice of
same;
(d) the workaround plan prepared pursuant to Section 8.11
indicates that Acceptance will occur more than four (4)
Months after the Scheduled Acceptance Date; or
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Contract Page 95(97)
(e) the Contractor fails to achieve Acceptance (including
achievement of the Minimum Performance Requirements and,
if applicable, taking corrective action or payment of
applicable liquidated damages for failure to fulfill the
Performance Requirements in accordance with Section 21.2)
prior to such time as the Contractor has incurred
liquidated damages for delay equal to the maximum amount
permitted under Section 21.1; or
(f) the Independent Engineer's reasonable projections show
that the Contractor will fail to achieve Acceptance by the
time when the maximum liquidated damages for delay will be
applicable.
then the Owner may, without prejudice to any other rights it may
possess under the Contract, give a notice to the Contractor
stating the nature of the default and requiring the Contractor to
remedy the same. If the Contractor fails to remedy or, in the
case of clauses (b) and (c) take all necessary and appropriate
steps to remedy the same within fourteen (14) Days of its receipt
of such notice, then the Owner may terminate the Contract
forthwith by giving a notice of termination to the Contractor
which refers to this Section 24.1.2.
24.1.3. Upon receipt of the notice of termination under Section 24.1.1 or
Section 24.1.2 above, the Contractor shall either immediately or
upon such date as is specified in the notice of termination:
(a) cease all further work, except for such work as the Owner
may specify in the notice of termination for the sole
purpose of protecting that part of the Works already
executed, or any work required to leave the Site in a
clean and safe condition; and
(b) terminate all subcontracts, except those to be assigned to
the Owner pursuant to paragraph (d) below; and
(c) upon the Owner's request deliver to the Owner the parts of
the Works executed by the Contractor up to the date of
termination; and
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Contract Page 96(98)
(d) as may be required by the Owner, to the extent legally
possible, assign to the Owner all right, title and benefit
of the Contractor to the Works, in any subcontracts
concluded between the Contractor and the Contractors
Suppliers and any warranties relating thereto, and provide
a power of attorney in form satisfactory to the Owner to
enforce such rights; and
(e) deliver to the Owner all non-proprietary detail and
conceptual drawings, specifications and other documents
prepared in connection with the Works by, and assign all
Intellectual Property Rights arising in connection with
the Works from, the Contractor or any Contractor's
Supplier as at the date of termination.
24.1.4. In the case of termination pursuant to Section 24.1.1 or 24.1.2,
the Owner may enter upon the Site, expel the Contractor, and
complete the Works itself or by employing any third party. The
Owner may, to the exclusion of any right of the Contractor over
the same, take over and use with the payment of a fair rental
rate (which shall take account of wear and tear) to the
Contractor, with all maintenance costs to the account of the
Owner and with an indemnification by the Owner for all liability
including damage or injury to persons arising out of the Owner's
use of such equipment, any Contractor's Equipment on the Site in
connection with the Works for such reasonable period as the Owner
considers expedient for the completion of the Works.
Upon Acceptance of the Works or at such earlier date as the Owner
thinks appropriate, the Owner shall give a notice to the
Contractor that such Contractor's Equipment will be returned to
the Contractor at or near the Site and shall return such
Contractors Equipment to the Contractor in accordance with such
notice. The Contractor shall thereafter without delay and at its
cost remove or arrange removal of the same from the Site.
24.1.5. Subject to Section 24.1.6 below, the Contractor shall be entitled
to be paid (after the calculations required by Section 24.1.6 are
completed) the Contract
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Contract Page 97(99)
Price attributable to the Works executed as at the date of
termination, the value of any unused or partially used Works on
the Site, and the costs, if any, incurred in protecting the Works
and in leaving the Site in a clean and safe condition pursuant to
paragraph (a) of Section 24.1.3 above. Any sums due to the Owner
from the Contractor accruing prior to the date of termination
shall be deducted from the amount to be paid to the Contractor
under this Contract and/or may be drawn from the payment or
performance security.
24.1.6. If the Owner completes the Works, the costs of completing the
Works shall be determined by reference to the costs and expenses
that were reasonably incurred by the Owner as a consequence of
the Contractor's failure to perform its obligations in accordance
with the Contract.
If the sum which the Contractor is entitled to be paid pursuant
to Section 24.1.5 above, plus the costs incurred by the Owner in
completing the Works, exceeds the Contract Price, such excess
(together with any applicable liquidated damages) shall be offset
against any amount payable to the Contractor pursuant to Section
24.1.5 and the Contractor shall pay any balance to the Owner
together with any applicable liquidated damages. For such
purpose, the Owner may call upon any payment or performance
security issued in respect of the Contractor's obligations.
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SECTION 24.2. TERMINATION BY CONTRACTOR FOR OWNER'S DEFAULT
24.2.1. The Contractor may terminate the Contract, upon ten (10) Days'
prior notice to the Owner, in the following circumstances by
giving a notice of termination and its reasons therefor to the
Owner referring to the relevant provision of this Section 24.2.1
and stating the nature of the default.
(a) if the Owner becomes bankrupt or insolvent, has a
receiving order issued against it, compounds with its
creditors, or, being a corporation, if a resolution is
passed or order is made for its winding up (other than a
voluntary liquidation for the purposes of amalgamation or
Contract Page 98(100)
reconstruction), or a receiver is appointed over any part
of its undertaking or assets, or if the Owner takes or
suffers any analogous action in consequence of debt; or
(b) if the Owner assigns or transfers the Contract in
violation of the provisions of the Contract.
24.2.2. If:
(a) the Owner fails to perform or observe any of its other
material obligations under the Contract and such failure
continues for more than one hundred twenty (120) Days
after notice of the same, or
(b) the Contractor has rightfully suspended performance under
the Contract pursuant to Section 23.2,
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then the Contractor may give a notice to the Owner of its intent
to terminate the Contract, and if the Owner has failed to remedy
the occurrence within thirty (30) Days of such notice, or if the
Contractor is still unable to carry out such obligations under
the Contract for reasons attributable to the Owner within thirty
(30) Days of such notice, the Contractor may by a further notice
to the Owner referring to this Section 24.2.2, forthwith
terminate the Contract.
24.2.3. If the Contract is terminated under Section 24.2.1 or 24.2.2
above, then the Contractor shall have the obligation to take
actions in order to minimize the costs and immediately:
(a) cease all further work, except for such work as the Owner
may specify in the notice of termination for the sole
purpose of protecting that part of the Works already
executed, or any work required to leave the Site in a
clean and safe condition; and
(b) terminate all subcontracts; and
Contract Page 99(101)
(c) upon the Owner's request, deliver to the Owner the parts
of the Works executed by the Contractor up to the date of
termination; and
(d) subject to payment of any amounts due under Section
24.2.4, deliver to the Owner all non-proprietary detail
and conceptual drawings, specifications and other
documents prepared in connection with the Works by, and
assign all Intellectual Property Rights arising in
connection with the Works from, the Contractor or any
Contractor's Supplier as at the date of termination; and
(e) remove all Contractor's Equipment from the Site and
repatriate the Contractor's and Contractor's Suppliers'
personnel from the Site.
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24.2.4. If the Contract is terminated under Section 24.2.1 or Section
24.2.2 above, the Owner shall pay to the Contractor as its
exclusive remedy:
(a) the Contract Price properly attributable to the parts of
the Works executed by the Contractor as at the date of
termination; and
(b) the costs reasonably incurred by the Contractor in the
withdrawal of the Contractor's and Contractor's Suppliers'
personnel; and
(c) amounts due to be paid by the Contractor to Contractor's
Suppliers in connection with the termination of any
subcontracts, including cancellation charges; and
(d) costs incurred by the Contractor in protecting the Plant
and leaving the Site in a clean and safe condition
pursuant to paragraph (a) of Section 24.2.3 above; and
(e) the costs of satisfying other due obligations, commitments
and claims that the Contractor has reasonably and in good
faith undertaken with third parties in accordance with the
Contract that are not covered by paragraphs (a) through
(d) above.
Contract Page 100(102)
TERMINATION IN EVENT OF FAILURE TO ACHIEVE COMMENCEMENT DATE
SECTION 24.3. In the event the conditions to the Commencement Date are not
satisfied (or waived) for any reason on or prior to September 9,
2002, either the Owner or the Contractor may terminate this
Contract upon notice to the other without any further cost or
obligation.
TERMINATION BY OWNER FOR CONVENIENCE
SECTION 24.4. The Owner may terminate this Contract for its convenience at any
time and without cause upon giving not less than sixty (60) Days'
prior notice to the Contractor. If the Contract is terminated
under this Section 24.4, the Owner shall be obligated to pay to
the Contractor the amounts specified in clauses (a) through (e)
of Section 24.2.4 plus an amount equal to fifty percent (50%) of
the agreed margin on the portion of the Works not yet performed
(determined by proration of the agreed margin specified in the
EPC Price Calculation, based on the ratio of the amount of the
Contract Price remaining unpaid (after taking into account the
amount specified in Section 24.2.4(a)) to the total Contact
Price).
CALCULATIONS
SECTION 24.5. In this Article 24, the expression "Works executed" shall include
all work executed, services provided, all Works, Materials and
equipment acquired (or subject to a legally binding obligation to
purchase) by the Contractor where title has passed to the Owner,
and used or intended to be used for the purpose of the Plant, up
to and including the date of termination; provided that the Owner
shall not be obligated to pay for any Materials or equipment
pursuant to this Article 24 until such Materials and equipment
are delivered to the Site.
SECTION 24.6. In this Article 24, in calculating any monies due from the Owner
to the Contractor, account shall be taken of any sum previously
paid by the Owner
Contract Page 101(103)
to the Contractor under the Contract, including any advance
payment paid pursuant to Article 9 of the Contract.
ART. 25 CONTRACTORS' SUPPLIERS
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SECTION 25.1. The Contractor is responsible for ensuring that all Contractor's
Suppliers engaged by it are bound by conditions substantially
similar to those which apply to the Contractor in this Contract.
Notwithstanding any approval by the Owner of any Contractor's
Supplier (including any Key Supplier), the Contractor shall be
responsible for and warrant the work and services of all
Contractor's Suppliers as if performed by the Contractor; and any
such approval by the Owner shall not relieve the Contractor of
any of its duties, responsibilities, obligations, Warranties or
liabilities under this Contract.
SECTION 25.2. The Contractor shall not subcontract the whole of the Works. The
Contractor may use only suppliers pre-qualified in Appendix 3,
Ex. 10. All Contractor's Suppliers shall hold any licenses
required for them to perform the subcontracted work. With respect
to the Key Suppliers, the Contractor shall use the suppliers and
equipment designated by the Owner with the consent of the
Contractor, which consent shall not be unreasonably withheld, and
the Owner shall have the right to review and approve the
specifications, including performance and availability guarantees
and other technical portions of the contracts with such Key
Suppliers. In the event that the Contractor wishes to use other
Key Suppliers, the Owner's prior consent shall be required, which
shall not be unreasonably withheld, and appropriate modifications
shall be made to Appendix 3 to conform to the subcontracts with
such Key Suppliers, provided that in no event shall the
applicable technical specifications and performance requirements
be reduced below those currently in Appendix 3. To the extent
that any availability guarantees are contained in Appendix 3,
Ex. 3.7, the Contractor shall ensure that the same availability
guarantees are contained in its subcontracts with the relevant
Key Suppliers.
Contract Page 102(104)
SECTION 25.3. No subcontract or purchase order shall bind or purport to bind
the Owner but all subcontracts shall contain a provision
permitting assignment thereof and all warranties contained
therein to the Owner upon the Owner's written request as provided
in the Contract, provided that any security for payments to the
Contractor's Supplier under the assigned subcontract is not
adversely affected by such assignment. The Contractor shall
furnish the Owner with such information relative to the
Contractor's Suppliers as the Owner may reasonably request. Upon
termination of this Contract, the Contractor shall deliver to the
Owner a copy of each subcontract with respect to which the Owner
has a right of assignment from the Contractor, including the
price payable thereunder so that the Owner can decide whether or
not to exercise its right of assignment.
SECTION 25.4. The Contractor shall include in all subcontracts a prohibition on
assignment or subcontracting of the entire obligation by any
Contractor's Supplier of its obligations under its respective
subcontract.
SECTION 25.5. The Contractor's contracts with each Contractor's Suppliers shall
include an initial supply of Major Capital Spares. The Contractor
will secure the undertaking from Key Suppliers to provide the
ability to supply Major Capital Spares and any other spare parts
that are not readily available from other vendors as a standard
product for a period of at least ten (10) years from Acceptance.
In the case of data processing equipment the same period of time
as above shall apply, but instead of "spare parts", "spare parts
or replacement unit or repair of such part or unit" shall apply.
Should a Contractor's Supplier's business be discontinued, the
Contractor shall provide design drawings and other necessary
manufacturing documentation to the Owner and procure the right
for the Owner to use such documentation for manufacturing the
parts in question without hindrance of patents, registered
designs or other industrial property rights, whereupon the
Contractor shall be released from its obligations under the
second sentence of this Section 25.5 in respect of such spare
parts.
Contract Page 103(105)
Upon expiry of the Defects Liability Period, the Contractor shall
validly assign to the Owner such Contractor's Supplier's
warranties as remain in effect at that time.
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SECTION 25.6. PAYMENT OF CONTRACTOR'S SUPPLIERS; RELEASE OF LIENS;
ERFULLUNGSGEHILFEN. Contractor's Suppliers shall be deemed
persons employed by the Contractor in the performance of its
obligations (ERFULLUNGSGEHILFEN) within the meaning of
Section 278 BGB. The Contractor shall pay promptly for all its
labor, equipment, subcontracts and other materials and supplies
used in connection with the Works. If any liens are filed against
the Plant or the Site in respect of the Works, the Contractor
shall immediately either (i) pay the amount in question or (ii)
cause the release of such liens by arranging for the issuance of
bonds or other reasonably satisfactory security.
SECTION 25.7. NO PAYMENTS BY SUPPLIERS. The Contractor shall not, directly or
indirectly, receive or accept any payments from any suppliers
(other than as provided in the relevant subcontract) in
connection with or related to the Works except as may be approved
in writing by the Owner. The Contractor shall not, without the
prior written consent of the Owner, reduce the scope of work of
any Key Supplier. The Contractor shall not offset against
payments otherwise due to any Supplier, if such offset could
jeopardize the performance of such Contractor's Supplier's
obligations relating to this Contract.
SECTION 25.8. ASSIGNMENT OF WARRANTY CLAIMS. (a) The Contractor hereby makes
the Owner an irrevocable and indefinite offer to assign all
warranty claims (including availability guarantees) against Key
Suppliers. The Owner shall have the right to accept this offer as
a whole or with regard to (i) individual Contractor's Suppliers
or (ii) performance guarantees with respect to any Contractor's
Supplier, by notice to the Contractor. To the extent that the
Owner accepts the offer of assignment of warranty claims (but not
in the case of the assignment of the availability guarantees as
provided in paragraph (b)) with respect to a Contractor's
Supplier, the Contractor's warranty obligation
Contract Page 104(106)
with respect to such Contractor's Supplier's scope of work shall
be extinguished but the Contractor's warranty obligation with
regard to all warranty claims which are not assigned shall remain
unaffected.
(b) Promptly after Acceptance, the Contractor shall assign to the
Owner the availability guarantees by the relevant Key Suppliers
under their subcontracts. The valid assignment of such rights by
the Contractor will satisfy the Contractor's obligations in
respect of the corresponding availability guarantees in
Appendix 3, Ex. 3.7.
(c) In case of assignment of any warranty or performance guaranty
obligation (including availability guarantees), the Contractor
shall support the Owner in enforcing the warranty and shall
supply the Owner promptly upon request with all necessary
documents and information.
ART. 26 FORCE MAJEURE
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SECTION 26.1. EVENTS OF FORCE MAJEURE. An "Event of Force Majeure" shall mean
any circumstance not within the reasonable control, directly or
indirectly, of the Party affected, but only if and to the extent
that (i) such circumstance, despite the exercise of reasonable
diligence, cannot be or be caused to be prevented, avoided or
removed by such Party, (ii) such event or series of the same or
different events materially adversely affects the ability of the
Party affected to perform its obligations under this Contract,
and such Party has taken all reasonable precautions, due care,
and reasonable alternative measures in order to avoid the effect
of such event on such Party's ability to perform its obligations
under this Contract and to mitigate the consequences thereof,
(iii) such event is not the result of the failure of such Party
to perform any of its obligations under this Contract.
SECTION 26.2. "Force Majeure" shall, subject to Section 26.1, include the
following:
(a) war, hostilities or warlike operations (whether a state of
war be declared or not), invasion, act of foreign enemy;
Contract Page 105(107)
(b) ionizing radiation, or contamination by radioactivity from
any nuclear fuel, or from any nuclear waste from the
combustion of nuclear fuel, radioactive toxic explosive or
other hazardous properties of any explosive nuclear
assembly or nuclear component thereof, but not including
goods and material such as measuring, monitoring and
testing devices, that use low levels of radiation, in each
case from a source outside of the Site;
(c) rebellion, revolution, insurrection, mutiny, usurpation of
civil or military government or civil war, or any, riot,
civil commotion or terrorist acts;
(d) confiscation, nationalization, mobilization, commandeering
or requisition by or under the order of any government or
de jure or de facto authority or ruler or any other act or
failure to act of any local state or national government
authority;
(e) strikes, lock outs or other industrial actions (in each
case that are national, regional or sector-wide),
sabotage, embargo, shipwreck, epidemics, quarantine;
(f) earthquake, landslide, volcanic activity, fire, flood or
inundation, tidal wave, typhoon or cyclone, hurricane,
storm, lightning, nuclear waves and pressure waves caused
by aircraft or other aerial devices travelling at sonic or
supersonic speeds, or other natural or physical disaster;
(g) shortage of labor, materials or shortage or restriction of
utilities where caused by circumstances that are
themselves Force Majeure.
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SECTION 26.3. The following shall in no event be considered an Event of Force
Majeure:
(i) late performance by the Contractor caused by the acts or
omissions of subcontractors or Contractor's Suppliers
(other than acts or omissions caused by an Event of Force
Majeure), by the Contractor's failure to
Contract Page 106(108)
hire an adequate number of personnel or labor or by
inefficiencies on the part of the Contractor;
(ii) delays resulting from reasonably foreseeable unfavorable
weather or sea conditions or other similarly reasonably
foreseeable adverse conditions;
(iii) delays resulting from ground or soil conditions at the
Site or from ground conditions at other sites where Work
is being performed or parts of the Works are stored or
maintained;
(iv) economic hardship of the Contractor or any of its
affiliates or its or their inability to pay debts;
(v) the late payment by the Owner or the Contractor of money
when otherwise due in accordance with the Contract;
(vi) infringements by the Contractor or any of the Contractor's
Suppliers or their affiliates of any Intellectual Property
Rights; and
(vii) delays resulting from late submission of documents and/or
drawings to either the Independent Engineer or the Owner
which does not afford the Independent Engineer and/or the
Owner with sufficient time to review, approve or make a
judgment on their content (unless such delays are caused
by circumstances that are themselves Force Majeure, in
which case such delays shall also be considered Force
Majeure).
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(viii) delays relating from strikes, lockouts or other industrial
action which relate to any dispute between the Contractor,
its affiliates or any Contractor's Supplier and their
respective directors, officers, employees or agents.
In the event that the Works or any part thereof are damaged
pursuant to an Event of Force Majeure which is covered by
insurance, and provided the
Contract Page 107(109)
insurance policy provides coverage for such event in accordance
with the insurance required under Article 14, the Contractor
shall make good such loss and damage at its own expense insofar
as such loss and damage exceeds the amount of insurance proceeds,
unless the Banks elect not to make the insurance proceeds
available to the Contractor for such purpose and the Contractor
is released pursuant to Section 13.2.
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SECTION 26.4. If either Party is prevented or delayed from or in performing any
of its obligations under the Contract by an Event of Force
Majeure, then it shall promptly (and in any event within fourteen
(14) Days) after the occurrence of such event notify the other
Party in writing of the occurrence of such event, the
circumstances thereof and the measures it is taking to avoid the
effects or mitigate the consequences thereof. Within a reasonable
time following the date of termination of such Force Majeure, the
Party having invoked such Force Majeure as a cause for such delay
shall submit to the other Party reasonable proof of the nature of
such delay, its effect upon the time of performance and the
actions being taken to comply with clause (ii) of Section 26.1.
The Parties shall thereupon consult with one another concerning
the effect of such delay upon the Detailed Program and Time
Schedule and the Time Schedule shall be equitably adjusted by the
Parties in accordance with Section 8.9 to take into account such
effect and the ability of the Contractor to reschedule project
activities to avoid or minimize overall delays resulting from the
Event of Force Majeure. Both Parties shall use their best efforts
to prevent and reduce to a minimum and mitigate the effect of any
delay occasioned by any Force Majeure and to fulfil its
obligations under the Contract, including recourse to alternate
acceptable sources of services, equipment, Materials, or
Contractor's Equipment. In case such mitigating actions or costs
associated with the reinstatement of performance have any impact
on the cost, the provisions of Section 9.8 shall apply and the
Parties shall consider them as Changes and treat them
accordingly, but without prejudice to either Party's right to
terminate the Contract pursuant to Section 26.7.
Contract Page 108(109)
SECTION 26.5. The Party affected by an Event of Force Majeure shall be excused
from the performance or punctual performance of its obligations
under the Contract for so long as the relevant event of Force
Majeure continues and to the extent that such Party's performance
is prevented, hindered or delayed. The Time Schedule shall be
extended accordingly, provided that the Party has provided prompt
notice of such delay in accordance with Section 26.4 and all
efforts to mitigate the effects as per Section 26.4 above have
been exhausted.
SECTION 26.6. No delay or non-performance by either Party hereto caused by the
occurrence of any event of Force Majeure shall:
(a) constitute a default under or breach of the Contract; or
(b) give rise to any claim for damages or, except as provided
in Section 26.4, additional cost or expense occasioned
thereby, by either Party.
SECTION 26.7. If the performance of the Contract is substantially prevented or
delayed for a continuous period of more than two hundred thirty
(230) Days on account of one or more events of Force Majeure, the
Parties will attempt to develop a mutually satisfactory solution,
including an appropriate Change Order to reflect any increased
costs, failing which either Party may terminate the Contract by
giving a notice to the other, but without prejudice to either
Party's right to terminate the Contract under Article 24.
SECTION 26.8. In the event of termination pursuant to Section 26.7 above, the
rights and obligations of the Parties shall be as specified in
Sections 24.1.3 and 24.1.5 (but without including the cross
reference to Section 24.1.6).
ART. 27 COPYRIGHT AND CONFIDENTIALITY
SECTION 27.1. Subject to Section 27.2, the copyright in all drawings, documents
and other materials containing data and information furnished to
one Party by the other Party shall remain vested in the supplying
Party, or if they are furnished by any third party, directly or
indirectly, including suppliers of Materials and
Contract Page 109(111)
equipment, the copyright in such materials shall remain vested in
such third party.
CONFIDENTIAL INFORMATION
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SECTION 27.2. The Owner and the Contractor shall keep confidential and shall
not, without the written consent of the other party hereto,
divulge to any third party or use, other than on behalf of the
other party hereto, any Confidential Information. To the extent
possible, Confidential Information shall be stamped or labeled
"Confidential" or if designated orally as Confidential
Information, such indication shall be confirmed in writing within
thirty (30) Days. Notwithstanding the foregoing, all financial
information (including the financial model) provided to or
otherwise obtained by a Party shall be Confidential Information.
Notwithstanding the above, the Contractor may furnish to its
Contractor's Suppliers Confidential Information to the extent
required for the Contractor's Suppliers to perform its/their work
under the Contract, and the Owner may furnish Confidential
Information to the Banks in connection with the financing of the
Plant. If disclosure to a third party is authorized or disclosure
to the Banks or the Contractor's Suppliers is made under this
Section 27.2, the Contractor or the Owner, as applicable, shall
obtain from such third party, Contractor's Supplier or Banks, as
applicable, a confidentiality undertaking containing terms and
conditions identical to this Section 27.2 contains.
SECTION 27.3. The Owner shall not use Confidential Information for any purpose
other than the management, operation, maintenance, rebuild and
capacity increase, production optimization, authority inspection
and divestment of the Plant and in case of termination, for the
completion of the Plant. In such case, any third party involved
by the Owner for any of the above purposes shall be bound by a
similar confidentiality obligation. Similarly, the Contractor
shall not use Confidential Information for any purpose other than
the design, procurement
Contract Page 110(112)
of the Works, construction or such other work and services as are
required for the performance of the Contract.
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SECTION 27.4. The obligation of a Party under Section 27.2 and 27.3 above,
however, shall not apply to that information which:
(a) now or hereafter enters the public domain through no fault
of that Party; or
(b) can be proven to have been possessed by that Party at the
time of disclosure, either without limitation on
disclosure to others or which subsequently becomes free of
such limitation, and which was not previously obtained,
directly or indirectly, from the other Party hereto; or
(c) belongs to the other Party and lawfully becomes available
to the Party from a third party that has no obligation of
confidentiality to the other Party;
(d) is required by the Banks and/or is required by any
Relevant Authorities in connection with the Plant, in
which case the other Party shall be informed prior to such
disclosure so that precautions with respect to proprietary
information may be taken; or
SECTION 27.5. Each of the Contractor and the Owner represent to the other that
it has a policy and procedure designed to protect trade secret
rights and its own proprietary information including notices to
its employees to prevent unauthorized publication and disclosure
of such information. The Contractor and the Owner respectively
agree that Confidential Information shall be subject to such
policy and procedure.
SECTION 27.6. Each party hereto agrees to safeguard any documents which the
other party may supply to it hereunder. The Contractor may make
copies of such documents only to the extent necessary for the
performance of the Works.
Contract Page 111(113)
Upon the expiry of the Defects Liability Period, the Contractor
shall return to the Owner all documents supplied by the Owner and
destroy all copies thereof. Should the Contractor, however,
desire to retain certain documents and receives the Owner's
written approval therefor, the Contractor shall treat said
documents as it does Confidential Information.
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SECTION 27.7. The Contractor also agrees to enter into confidentiality
agreements with third parties upon the Owner's request and to
keep in force confidentiality agreements concerning third
parties' proprietary information, which agreements shall permit
the Contractor to use such parties' proprietary information in
the Works.
SECTION 27.8. The Contractor agrees to disclose or cause to be disclosed
promptly to the Owner all inventions which the Contractor, or any
officer, director, employee, servant or agent of the Contractor
or any Affiliated Supplier may make which are wholly or in part
based upon or derived from information proprietary to the Owner.
All right, title and interest in and to such inventions shall
belong to the Owner or its designee. The Contractor agrees to
execute or cause to be executed all documents and perform or
cause to be performed other lawful acts which the Owner may deem
desirable or necessary to perfect its or its designee's title
thereto and to obtain and maintain or cause to be obtained and
maintained patent coverage thereon, provided that the Contractor
may condition its compliance with any such request on the Owner's
agreement to reimburse the Contractor for all reasonable expenses
incurred in connection therewith. "Affiliated Supplier" means any
Contractor's Supplier that controls, is controlled by, or is
under common control with, the Contractor. For purposes hereof,
control of any entity shall be determined by the beneficial
ownership of at least fifty percent (50%) in voting power of the
equity interest in such entity.
Contract Page 112(114)
SECTION 27.9. The above provisions of this Section 27 shall not in any way
modify any undertaking of confidentiality given by either of the
Parties hereto prior to the date of the Contract in respect of
the Plant or any part thereof.
SECTION 27.10. The provisions of this Section 27 shall survive Acceptance and
termination of the Contract for whatever reason for a period of
ten (10) years.
ART. 28 GOVERNING LAW; DISPUTES
SECTION 28.1. The Parties are obliged to do their utmost to settle any arising
dispute in good faith. If this is not possible Articles 28.2 and
28.3 shall apply.
SECTION 28.2. This Contract shall be governed by, and disputes shall be judged
and settled in accordance with German law, excluding, however,
the Vienna Convention of "April 1980" named "Convention of
Contracts for the International Sale of Goods".
SECTION 28.3. Any dispute arising out of or in connection with the Contract
shall be finally and exclusively settled by arbitration pursuant
to the "DEUTSCHE INSTITUTION FUR SCHIEDSGERICHTSBARKEIT". The
venue of arbitration proceedings shall be Berlin. The language to
be used in arbitration proceedings shall be English.
ART. 29 INDEMNITY OBLIGATIONS
CONTRACTOR'S INDEMNITY OBLIGATIONS
SECTION 29.1. (a) The Contractor shall indemnify and hold harmless the Owner
and its employees and officers from and against any and
all suits, actions or administrative proceedings, claims,
demands, losses, damages, costs and expenses of whatsoever
nature, including attorneys fees and expenses, for injury
to, or sickness, disease or death of, any persons
(including employees of the Contractor and the
Contractor's Suppliers) and for loss of or damage to the
property of third parties which directly or indirectly
arise out of or result from any negligent, illegal,
reckless or tortious act or omission of the Contractor or
any Contractor's Supplier
Contract Page 113(115)
or anyone directly or indirectly employed by any of them,
or anyone for whose acts such person may be liable in
connection with activities under the Contract.
(b) The Contractor shall indemnify and hold harmless the Owner
and its employees and officers from and against any and
all suits, actions or administrative proceedings, claims,
losses, and damages by the Relevant Authorities or any
third party asserting rights under or by virtue of the
relevant Law, and costs and expenses of whatever nature
whatsoever relating thereto, including attorneys fees and
expenses and any fines or penalties imposed by Relevant
Authorities, which directly or indirectly arise out of or
result from any violation of Law (including Permits) by
the Contractor in connection with its activities under
this Contract.
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OWNER'S INDEMNITY OBLIGATIONS
SECTION 29.2. (a) The Owner shall indemnify and hold harmless the Contractor
and its employees and officers from and against any and
all suits, actions or administrative proceedings, claims,
demands, losses, damages, costs and expenses of whatsoever
nature, including attorneys fees and expenses, for injury
to, sickness, disease or death of, any persons (including
employees of the Owner) and for loss of or damage to the
property of third parties which directly or indirectly
arise out of or result from any negligent, illegal,
reckless or tortious act or omission of the Owner or any
of the Owner's subcontractors (other than the Contractor)
or anyone directly or indirectly employed by any of them,
or anyone for whose acts such person may be liable in
connection with activities under the Contract.
(b) The Owner shall indemnify and hold harmless the Contractor
and its employees and officers from and against any and
all suits, actions or administrative proceedings, claims,
losses and damages by the
Contract Page 114(116)
Relevant Authorities or any third party asserting rights
under or by virtue of the relevant Law, and costs and
expenses of whatever nature whatsoever relating thereto,
including attorneys fees and expenses and any fines or
penalties imposed by Relevant Authorities, which directly
or indirectly arise out of or result from any violation of
Law (including Permits) by the Owner in connection with
its activities under this Contract.
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SECTION 29.3. If any proceedings are brought or any claim is made arising out
of the matters referred to in Section 29.1 or 29.2 above, the
Party seeking indemnification (the "Indemnified Party") shall
promptly give the other Party (the "Indemnifying Party") a notice
thereof, and the Indemnifying Party shall at its own expense and
in the Indemnified Party's name conduct such proceedings or claim
and any negotiations for the settlement of any such proceedings
or claim.
SECTION 29.4. If the Indemnifying Party fails to notify the Indemnified Party
within twenty-eight (28) Days of receipt of such notice that it
intends to conduct any such proceedings or claim, then the
Indemnified Party shall be free to conduct the same on its own
behalf. Unless the Indemnifying Party has so failed to notify the
Indemnified Party within the twenty-eight (28) Day period, the
Indemnified Party shall make no admission which may be
prejudicial to the defense of any such proceedings or claim.
SECTION 29.5. The Indemnified Party shall, at the Indemnifying Party's request,
assist the Indemnifying Party in conducting such proceedings or
claim, and shall be reimbursed by the Indemnifying Party for all
reasonable expenses incurred.
ART. 30 MISCELLANEOUS
SECTION 30.1. Notwithstanding anything contained to the contrary in this
Contract, except to the extent of the liquidated damages provided
for in this Contract, the Contractor shall in no case be liable
to the Owner for any indirect and/or consequential loss or
damage, including loss of production, loss by reason of Plant
shutdown or inability to operate at a certain capacity, claims of
Contract Page 115(117)
customers or suppliers, capital interest costs and the like. This
limitation of liability shall not apply in the event of willful
misconduct on the part of the Contractor.
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SECTION 30.2. The Contractor shall be an independent supplier performing the
Contract. The Contract does not create any agency, partnership,
joint venture or other joint relationship between the Parties
hereto.
SECTION 30.3. Subject to the provisions of the Contract, the Contractor shall
be solely responsible for the manner in which the Contract is
performed. All employees, representatives or Contractor's
Suppliers engaged by the Contractor in connection with the
Performance of the Contract shall be under the complete control
and responsibility of the Contractor and shall not be deemed to
be employees of the Owner, and nothing contained in the Contract
or in any subcontract awarded by the Contractor shall be
construed to create any contractual relationship between any such
employees, representatives or Contractor's Suppliers and the
Owner or relieve the Contractor from any of its obligations
hereunder.
SECTION 30.4. Subject to Section 30.5 below, any relaxation, forbearance, delay
or indulgence by either Party in enforcing any term of this
Contract or the granting of an extension of time by either Party
to the other shall not be considered a waiver of any right
thereafter to insist upon strict adherence to that term or any
other term of this Contract, nor shall any waiver by either Party
of any breach of this Contract operate as waiver of any
subsequent or continuing breach of this Contract.
SECTION 30.5. Any waiver of a Party's rights, powers or remedies under the
Contract must be in writing, must be dated and signed by an
authorized representative of the Party granting such waiver, and
must specify the right and the extent to which it is being
waived.
Contract Page 116(118)
SECTION 30.6. Subject to the payment of any amounts due under Section 24.2.4,
the Contractor shall not be entitled to claim a right of
retention with respect to any plans, drawings, or descriptions,
or, in the event of termination of the Contract, agreements or
contracts, invoices, accounting records or other documents
relating to the Works.
SECTION 30.7. If any provision or condition of the Contract is prohibited or
rendered invalid or unenforceable, such prohibition, invalidity
or unenforceability shall not affect the validity or
enforceability of any other provisions and conditions of the
Contract. In such event the Parties shall, by amendment to this
Contract, properly replace such provision by a reasonable new
provision or provisions which, as far as legally possible, shall
approximate what the Parties intended by such original provision
and the purpose thereof.
The performance criteria and Performance Requirements of the
Contractor provided in Articles 17, 18, 19 and set forth in
Appendix 3 and the warranties set forth in Article 20 shall not
be considered or construed as "GARANTIEN" within the meaning of
Sections 444 and 639 BGB (new version). The Parties recognize
that there is presently some uncertainty as to whether
limitations of liability of the type agreed upon in the Contract
with respect to such performance standards of the Contractor will
be held valid under the terms of the new German Civil Code. In
the event that such limitations of liability are deemed invalid
or the performance standards are deemed to be "GARANTIEN" under
Section 444 or 639 BGB (new version), the Owner agrees not to
claim any rights or assert any claims inconsistent with the
intended limitations on the liability of the Contractor under the
Contract.
Notwithstanding the foregoing, the Parties agree that the Owner
shall not be required to establish fault ("VERSCHULDEN") on the
part of the Contractor in connection with a claim for liquidated
damages or a claim under the warranties contained in Article 20.
Contract Page 117(119)
SECTION 30.8. Unless otherwise stated in the Contract, all notices to be given
under the Contract shall be in writing, and shall be sent by
personal delivery, airmail post, special courier, facsimile or
e-mail to the address of the relevant Party set out herein in
accordance with the following provisions.
SECTION 30.9. Any notice sent by facsimile or e-mail shall be confirmed within
two (2) Business Days after dispatch by notice to be sent by post
or special courier, except as otherwise agreed between the
Parties.
SECTION 30.10. Any notice sent by post or special courier shall be deemed (in
the absence of evidence of earlier receipt) to have been
delivered two (2) Business Days after dispatch. In proving the
fact of dispatch, it shall be sufficient to show that the
envelope containing such notice was properly addressed, stamped
and conveyed to the postal authorities or courier service for
transmission by post or special courier.
SECTION 30.11. Any notice delivered personally or sent by facsimile or e-mail
shall be deemed to have been delivered on the date of its
dispatch.
SECTION 30.12. Either Party may change its postal, facsimile or e-mail address
or addressee for receipt of such notices by ten (10) Days notice
to the other Party in writing.
SECTION 30.13. Notices shall be deemed to include any approvals, consents,
instructions, orders and certificates to be given under the
Contract.
SECTION 30.14. The Contract constitutes the entire Agreement between the Owner
and the Contractor with respect to the subject matter of the
Contract. All previous documents, undertakings and agreements,
whether verbal, written or otherwise, between the Parties
concerning the subject matter hereof are hereby cancelled and
shall not affect or modify any of the terms or obligations set
forth in this Contract. In addition, anything mentioned in the
text of any Appendix and not shown on the drawings made part
thereof or shown on such drawings and not mentioned in such
Appendices shall be of like effect as if shown or mentioned in
both.
Contract Page 118(120)
SECTION 30.15. No amendment or other variation of the Contract shall be
effective unless it is in writing, is dated, expressly refers to
the Contract, and is signed by a duly authorized representative
of each Party hereto.
ART. 31 CONTRACT LANGUAGE
Except as otherwise specifically provided to the contrary, all
documents, notices, waivers and all other communications written
or otherwise between the Owner and the Contractor in connection
with this Contract shall be English. However, the Contractor is
obligated to prepare all documents which are required by the
respective authorities (including for obtaining Permits), as well
as the main technical documents and drawings including manuals
and "as built" drawings, in German. Also, all training and all
training, operation and maintenance manuals and instructions,
signs and manuals shall be in German.
ART. 32 COMMENCEMENT DATE
The Parties shall proceed with the activities under this Contract
when the conditions set forth below have been fulfilled:
- the Contract has been signed by both Parties and the
Direct Agreement has been signed by the parties thereto;
- loan agreements for the construction of the Plant shall
have been executed by the Owner and the Banks and shall be
in full force and effect and all conditions for their
initial drawdown shall have been met or waived, except for
the receipt by the lenders of the Notice of Commencement
Date, which shall be executed and delivered to the Banks
by the Contractor and the Owner concurrently with the
execution and delivery to the Contractor and the Owner of
the Banks' declaration of the satisfaction of the
conditions precedent for initial drawdown under the loan
agreements;
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Contract Page 119(121)
- the Permits specified in items 1.1, 2, 3 and 5 of Appendix
3, Ex. 4.4 have been obtained, are not the subject of
pending appeal as of August 22, 2002 and, except as set
forth in paragraph 8 of Appendix 3, Ex 4.4, are not the
subject of pending modifications;
- the bank guarantee as per Section 10.1 hereof has been
received by the Owner and is in full force and effect;
- the Contractor has delivered to the Owner a Parent Company
Guaranty in the form set forth in Appendix 2, Ex. 10;
- an advance payment in an amount equal to five percent (5%)
of the Contract Price has been received by the Contractor;
and
- the Pre-Activity Period specified in the Pre-Activity
Agreement has expired.
The Owner and the Contractor shall advise each other regarding
their progress toward the satisfaction of the foregoing
conditions and, when the conditions are satisfied, shall execute
and deliver a joint notice of Commencement Date substantially in
the form set forth in Appendix 2, Ex. 1 specifying the occurrence
of the Commencement Date.
ART. 33 ASSIGNMENT; TRANSFER
Without written permission from the other Party neither the Owner
nor the Contractor is entitled to assign or transfer the Contract
or any right, interest or obligation therein to a third party,
except in the event of assignments in connection with termination
pursuant to Section 24.1.3(d) and, in the case of the Owner,
assignment of its rights under the Contract to the Banks and
except that, for the purpose of financing the construction of the
Plant, the Owner and the Contractor may assign or create a
security interest over its rights and interests under or pursuant
to this Contract. The Contractor agrees to cooperate with the
Banks and to provide such acknowledgements of any
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Contract Page 120(122)
assignment by the Owner to the Banks in such terms as the Banks
may reasonably require. Any actual, attempted or purported sale,
assignment or other transfer by a Party of any of its rights or
obligations or interests in, under or pursuant to this Contract
that does not comply with the terms of this Section 33 shall be
null, void and of no force or effect.
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This Contract may be executed in one or more counterparts, each of which when so
executed will be deemed an original, and such counterparts together shall
constitute one and the same instrument.
Frankfurt August 26/02
/s/ Wolfram Ridder /s/ Norbert Kreutzer
--------------------------------------------------------------------------------
/s/ Harald Gatzke /s/ Rolf Neuwinger
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Owner Contractor
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[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 1
DIRECT AGREEMENT
CLIFFORD
CHANGE
PUNDER EXECUTION COPY
DATED August 2002
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ZELLSTOFF STENDAL GMBH
and
RWE INDUSTRIE-LOSUNGEN GMBH
and
RWE SOLUTIONS AG
and
BAYERISCHE HYPO-UND VEREINSBANK AG
CONTRACTOR'S DIRECT AGREEMENT
CONTENTS
CLAUSE PAGE
1. DEFINITIONS AND INTERPRETATION........................................1
2. CONSENT TO SECURITY...................................................6
3. ACKNOWLEDGEMENT.......................................................6
4. PAYMENT SECURITY......................................................6
5. NOTIFICATION..........................................................7
6. SUSPENSION DEFAULT NOTICE AND SUSPENSION OF PERFORMANCE...............7
7. TERMINATION DEFAULT NOTICE AND TERMINATION............................8
8. STATEMENT OF AMOUNTS DUE.............................................10
9. WARRANTY OF ACCURACY.................................................11
10. STATEMENTS TO BE PRIMA FACIE EVIDENCE................................11
11. SUSPENSION OF WORKS..................................................12
12. STEP-IN NOTICE.......................................................13
13. CONSENT OF THE CONTRACTOR............................................13
14. ASSUMPTION...........................................................14
15. RIGHTS AND OBLIGATIONS ON ASSUMPTION.................................14
16. STEP-OUT.............................................................15
17. NOVATION PROPOSAL....................................................16
18. CONSENT OF THE CONTRACTOR............................................16
19. NOVATION.............................................................16
20. REVIVAL OF REMEDIES..................................................18
21. CONSIDERATION........................................................19
22. GUARANTOR'S CONTINUING OBLIGATIONS...................................19
23. LEGAL AND BINDING OBLIGATIONS........................................20
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24. STANDARD OF WORK.....................................................20
25. ACCESS TO SITE AND INFORMATION.......................................20
26. FORCE MAJEURE........................................................20
27. INSURANCE............................................................21
28. RESTRICTIONS ON OWNER'S RIGHTS AND OBLIGATIONS.......................21
29. ASSIGNMENT...........................................................21
30. BENEFIT..............................................................22
31. NO ASSIGNMENT........................................................22
32. NO WAIVER............................................................22
33. COUNTERPARTS.........................................................22
34. NO OTHER CLAIMS......................................................22
35. NO SET-OFF...........................................................22
36. PAYMENT OF MONIES....................................................23
37. CONFIDENTIALITY......................................................23
38. NOTICES..............................................................23
39. GOVERNING LAW........................................................25
SCHEDULE 1 ADDITIONAL OBLIGOR ACCESSION MEMORANDUM............................26
SCHEDULE 2 SUBSTITUTE ACCESSION MEMORANDUM....................................28
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THIS AGREEMENT is made on August 2002
BETWEEN
(1) ZELLSTOFF STENDAL GMBH (the "OWNER");
(2) RWE INDUSTRIE-LOSUNGEN GMBH (the "CONTRACTOR");
(3) RWE SOLUTIONS AG (the "GUARANTOR"); and
(4) BAYERISCHE HYPO-UND VEREINSBANK AG (the "SECURITY AGENT", which
expression shall include any trustee for the time being appointed
pursuant to the Security Pooling Agreement).
WHEREAS
(A) The Owner and the Contractor have entered into the Construction
Contract in relation to the Works.
(B) The Guarantor has entered into the Parent Company Guarantee and the
Contractor has procured the Advance Payment, Performance and Defects
Liability Period Guarantees as security for the obligations of the
Contractor under the Construction Contract.
(C) Pursuant to the Finance Documents, the Lenders have agreed to make
financial accommodation available to the Owner for the purpose of
financing the Plant.
(D) It is a condition precedent to the financial accommodation being made
available by the Lenders that this Agreement is executed and delivered
by the parties hereto.
IT IS AGREED as follows:
PART 1
DEFINITIONS AND INTERPRETATION
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Except where the context otherwise requires, in this Agreement the
following terms and expressions shall bear the following meanings:
"ADDITIONAL OBLIGOR" shall bear the meaning ascribed thereto in
Clause 12;
1
"ADDITIONAL TERMINATION STANDSTILL PERIOD" shall bear the meaning
ascribed thereto in Clause 7.3;
"ADVANCE PAYMENT, PERFORMANCE AND DEFECTS LIABILITY PERIOD GUARANTEES"
means the bank guarantees provided or to be provided by or on behalf
of the Contractor in favour of the Owner referred to in clause 10.1 of
the Construction Contract and in the forms appearing in appendix 2 of
the Construction Contract (or in such other form as may be agreed by
the parties hereto);
"ASSUMPTION DATE" shall bear the meaning ascribed thereto in
Clause 14;
"CONSTRUCTION CONTRACT" means the agreement dated on or about the date
hereof entered into between the Contractor and the Owner for, inter
alia, the engineering, design, procurement, construction, erection and
start-up of a kraft pulp mill and the training of certain of the
Owner's employees;
"CHANGE ORDERS" shall bear the meaning ascribed thereto in the
Construction Contract;
"DEFAULT NOTICE" means, as the case may be, a Suspension Default
Notice or a Termination Default Notice;
"EFFECTIVE DATE" shall bear the meaning ascribed thereto in Clause 17;
"FACILITY AGREEMENT" means the project financing facility agreement
dated on or about the date hereof made between the Owner, the Security
Agent, Bayerische Hypo-und Vereinsbank AG as original lender and
Bayerische Hypo-und Vereinsbank AG as arranger;
"FINANCE DOCUMENTS" means any agreement entered into with any
Permitted Subsidiary in connection with the financing of the wood
supply or logistics aspects of the Project, the Hedging Agreements,
the Security Agreements, the Shareholders' Undertaking Agreement, the
RWE Solutions AG Guarantee, any agreement regarding Shareholder Loans
and the corresponding subordination declarations, the Stand-By Equity
Security, the Fee Letter, any waiver requests, waivers and other
binding notifications, the Parent Company Guarantee, the Step-in
Rights Agreement between SP Holding, RWE-IN, FAHR and the Agent, the
State Guarantee and any other document in relation to the financing of
the Project (as each of the foregoing terms is defined in the Facility
Agreement), the Advance Payment, Performance and Defects Liability
Period Guarantees, the Facility Agreement and this Agreement;
"FIRST ADDITIONAL SUSPENSION STANDSTILL PERIOD" shall bear the meaning
ascribed thereto in Clause 6.3;
2
"INITIAL SUSPENSION STANDSTILL PERIOD" shall bear the meaning ascribed
thereto in Clause 6.2;
"INITIAL TERMINATION STANDSTILL PERIOD" shall bear the meaning
ascribed thereto in Clause 7.2;
"LENDERS" means the banks or other financial institutions providing
financial accommodation to or at the request of the Owner which is
secured by, inter alia, the Security Document;
"MILESTONES" shall bear the meaning ascribed thereto in the
Construction Contract;
"NOVATION NOTICE" shall bear the meaning ascribed thereto in
Clause 17;
"PARENT COMPANY GUARANTEE" means the guarantee given by the Guarantor
in favour of the Owner in respect of, inter alia, the present and
future obligations of the Contractor to the Owner under the
Construction Contract;
"PETITION" shall bear the meaning ascribed thereto in Clause 6.2;
"PLANT" shall bear the meaning ascribed thereto in the Construction
Contract;
"REVIVAL DATE" shall bear the meaning ascribed thereto in Clause 20;
"SECOND ADDITIONAL SUSPENSION STANDSTILL PERIOD" shall bear the
meaning ascribed thereto in Clause 6.4;
"SECURITY DOCUMENT" means the global assignment agreement dated on or
about the date hereof made between the Owner and the Security Agent.
"SECURITY POOLING AGREEMENT" means the agreement dated on or about the
date hereof made between the Owner, the Security Agent, Bayerische
Hypo- und Vereinsbank AG as original lender and as hedging
counterparty, RWE Industrie-Losungen GmbH, Stendal Pulp Holding GmbH,
Mercer International Inc., AIG Altmark Industrie AG, FAHR
Beteiligungen AG;
"SHAREHOLDERS' UNDERTAKING AGREEMENT" means the agreement dated on or
about the date hereof made between the Owner, Bayerische Hypo- und
Vereinsbank AG (as agent), RWE Industrie-Losungen GmbH, Mercer
International Inc., AIG Altmark Industrie AG, Stendal Pulp Holding
GmbH and FAHR Beteiligungen AG;
"SITE" has the meaning given to it in the Construction Contract;
"STEP-IN NOTICE" shall bear the meaning ascribed thereto in Clause 12;
3
"STEP-IN DATE" means the date upon which any Step-in Notice is given
pursuant to Clause 12;
"STEP-IN PERIOD" in relation to an Additional Obligor means the period
from and including the Step-in Date to and including the Step-out Date
relating to such Additional Obligor;
"STEP-OUT DATE" in relation to an Additional Obligor means the date
upon which any notice served by such Additional Obligor pursuant to
Clause 16 expires;
"SUBSTITUTE" shall bear the meaning ascribed thereto in Clause 17;
"SUSPENSION DEFAULT NOTICE" shall bear the meaning ascribed thereto in
Clause 6.2;
"STANDSTILL PERIOD" means the Initial Suspension Standstill Period,
First Additional Suspension Standstill Period, Second Additional
Suspension Standstill Period, Initial Termination Standstill Period
and/or Additional Termination Standstill Period, as the case may be;
"TERMINATION DEFAULT NOTICE" shall bear the meaning ascribed thereto
in Clause 7.2; and
"WORKS" shall bear the meaning ascribed thereto in the Construction
Contract.
1.2 INTERPRETATION
Save where the contrary is indicated, any reference in this Agreement
to:
1.2.1 words importing the singular shall include the plural and vice versa;
1.2.2 any person (including without limitation, an Additional Obligor,
Lender or Substitute) shall be construed so as to include its and any
subsequent successors, transferees and assigns in accordance with
their respective interests;
1.2.3 this Agreement or any other agreement or document shall be construed
as a reference to this Agreement or, as the case may be, such other
agreement or document as the same may have been, or may from time to
time be, amended, varied, novated, replaced or supplemented;
1.2.4 a Clause and a Part shall, respectively, be construed as a reference
to a clause or part to this Agreement; and
1.2.5 the "WINDING-UP", "DISSOLUTION", "ADMINISTRATION", "INSOLVENCY" or
"REORGANISATION" of a company or corporation and references to the
"LIQUIDATOR", "ASSIGNEE", "ADMINISTRATOR", "RECEIVER", "ADMINISTRATIVE
RECEIVER", "MANAGER" or "TRUSTEE" of a company or corporation shall be
4
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construed so as to include any equivalent or analogous proceedings or,
as the case may be, insolvency representatives or officers under the
law of the jurisdiction in which such company or corporation is
incorporated or constituted or any jurisdiction in which such company
or corporation or, as the case may be, insolvency representative or
officer carries on business including without limitation, the seeking
of liquidation, winding-up, reorganisation, dissolution,
administration, arrangement, adjustment, protection or relief of
debtors.
1.3 DISCRETIONS
Any discretion exercisable under the terms of this Agreement by any
party hereto shall, unless otherwise provided herein, be exercisable
by such party in its absolute discretion and shall not be
challengeable on grounds that such discretion shall not have been
exercised fairly or reasonably.
1.4 HEADINGS
Headings are for ease of reference only and shall not affect the
construction of this Agreement.
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5
PART 2
CONSENT AND ACKNOWLEDGEMENT
2. CONSENT TO SECURITY
The Contractor and the Guarantor hereby consent to the Owner's
assignment by way of security under the Security Document of all its
right, title, benefit and interest under each of the Construction
Contract, the Advance Payment, Performance and Defects Liability
Period Guarantees and the Parent Company Guarantee (provided that the
assignment under the Security Document of the Construction Contract
shall not confer on the Security Agent or the Lenders any rights,
title, benefit and interest greater than those conferred on the Owner
thereunder) and hereby acknowledge receipt of the respective notices
of such assignment.
3. ACKNOWLEDGEMENT
The Contractor and the Guarantor hereby acknowledge that none of the
Security Agent, the Lenders or their respective agents or
representatives accept or assume any liabilities or obligations under
the Construction Contract, the Advance Payment, Performance and
Defects Liability Period Guarantees or the Parent Company Guarantee as
a result of the assignment referred to in Clause 2.
4. PAYMENT SECURITY
The Contractor and Guarantor agree that if at any time the Contractor
requests payment security pursuant to section 648a of the German Civil
Code (as the same may be amended from time to time) any obligations of
the Owner pursuant to such section shall be fulfilled by the Guarantor
in accordance with the terms of the Shareholders Undertaking Agreement
and shall be a full discharge of the Owner's obligations thereunder.
6
PART 3
SUSPENSION OF REMEDIES
5. NOTIFICATION
5.1 The Contractor shall as soon as it becomes aware of any failure of the
Owner to perform its material obligations under the Construction
Contract immediately notify the Security Agent of such failure.
5.2 The Contractor shall provide to the Security Agent immediately (and in
any event within 2 days of the delivery of the relevant notice) a copy
of any notice given to the Owner in respect of any failure by the
Owner to comply with its obligations under the Construction Contract.
6. SUSPENSION DEFAULT NOTICE AND SUSPENSION OF PERFORMANCE
6.1 The Contractor acknowledges that its only rights of suspension under
the Construction Contract are those set out in sections 23.2 and 26.7
of the Construction Contract.
6.2 The Contractor undertakes not to take any step to suspend or reduce
its rate of progress or performance under the Construction Contract or
its employment under the Construction Contract, exercise any other
right it may have whether under the Construction Contract or otherwise
to rescind or terminate the Construction Contract, enforce execution
against any of the assets of the Owner or present any petition for the
administration, dissolution or winding up of the Owner (a "PETITION")
for a period of 30 days (the "INITIAL SUSPENSION STANDSTILL PERIOD")
after actual receipt by the Security Agent of written notice (a
"SUSPENSION DEFAULT NOTICE") specifying the grounds under which the
Contractor may have a right to suspend under section 23.2 (i) - (iii),
on the giving of notice in accordance with section 23.2, under the
Construction Contract.
6.3 If on or before the expiry of the Initial Suspension Standstill Period
the Security Agent (on behalf of the Lenders) by written notice to the
Contractor agrees to pay 50% of the actual costs of the Contractor
from the date of expiry of the Initial Suspension Standstill Period
for a further period 30 days ("FIRST ADDITIONAL SUSPENSION STANDSTILL
PERIOD") the Contractor undertakes not to take any step to terminate
the Construction Contract or its employment under the Construction
Contract, exercise any other right it may have whether under the
Construction Contract or otherwise to rescind, suspend the performance
of or terminate the Construction Contract, enforce execution against
any of the assets of the Owner or present any Petition prior to the
expiry of the First Additional Suspension Standstill Period.
7
6.4 If on or before the expiry of the First Additional Suspension
Standstill Period the Security Agent (on behalf of the Lenders) by
written notice to the Contractor agrees to pay 100% of the actual
costs of the Contractor from the date of expiry of the First
Additional Suspension Standstill Period for a period to be determined
by the Security Agent (not to exceed 760 days) ("SECOND ADDITIONAL
SUSPENSION STANDSTILL PERIOD") the Contractor undertakes not to take
any step to terminate the Construction Contract or its employment
under the Construction Contract, exercise any other right it may have
whether under the Construction Contract or otherwise to rescind,
suspend the performance of or terminate the Construction Contract,
enforce execution against any of the assets of the Owner or present
any Petition prior to the expiry of the Second Additional Suspension
Standstill Period.
6.5 The Contractor must continue to perform all its obligations under the
Construction Contract after the service by it of a Suspension Default
Notice on the Security Agent unless:
6.5.1 the Contractor receives a notice from the Security Agent in accordance
with Clause 11.1;
6.5.2 the Initial Suspension Standstill Period or First Additional
Suspension Standstill Period (as the case may be) expires and the
Security Agent has not agreed to pay the Contractor's costs as
contemplated in Clauses 6.3 and 6.4 (as the case may be); or
6.5.3 the Second Additional Suspension Standstill Period expires.
6.6 At the same time and in the same manner that the Contractor sends the
Suspension Default Notice to the Security Agent, the Contractor must
send a copy of the Suspension Default Notice to the Owner. The
Contractor shall, at the same time and in the same manner as provided
in the Construction Contract, send a copy of any notice sent to the
Owner under section 23.2 of the Construction Contract to the Security
Agent.
7. TERMINATION DEFAULT NOTICE AND TERMINATION
7.1 The Contractor acknowledges that its only rights to terminate the
Construction Contract are those set out in sections 24.2 and 26.7 of
the Construction Contract.
7.2 The Contractor undertakes not to take any step to terminate the
Construction Contract or its employment under the Construction
Contract or reduce its rate of progress or performance under the
Construction Contract, exercise any other right it may have whether
under the Construction Contract or otherwise to rescind or terminate
the Construction Contract, enforce execution against any of the assets
of the Owner or present any Petition for a period of 30 days in the
case
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of any event set out in section 24.2.2 of the Construction Contract
(the "INITIAL TERMINATION STANDSTILL PERIOD") after actual receipt by
the Security Agent of written notice from the Contractor together with
a certified copy of any notice of its intent to terminate the
Construction Contract given to the Owner under section 24.2.1 or
24.2.2 of the Construction Contract (a "TERMINATION DEFAULT NOTICE")
specifying the grounds for termination provided that the Security
Agent (on behalf of the Lenders) by written notice to the Contractor
agrees within 10 days of actual receipt of the Termination Default
Notice to pay 50% of the actual costs of the Contractor from the date
of receipt of the Termination Default Notice until the expiry of the
Initial Termination Standstill Period,
Provided that:
This Clause 7.2 shall not apply in the case of a termination pursuant
to section 24.2.2(b) of the Construction Contract where:
(a) there has been an expiry of the Initial Suspension Standstill
Period and no First Additional Suspension Standstill Period is in
effect; or
(b) there has been an expiry of the Initial Suspension Standstill
Period and the First Additional Suspension Standstill Period and
the Security Agent (on behalf of the Lenders) has not, by written
notice to the Contractor, agreed to pay 100% of the actual costs
of the Contractor from the date of expiry of the First Additional
Suspension Standstill Period,
in which case the Contractor shall be entitled to exercise its
remedies in accordance with the Construction Contract.
7.3 If on or before the expiry of the Initial Termination Standstill
Period the Security Agent (on behalf of the Lenders) by written notice
to the Contractor agrees to pay 100% of the actual costs of the
Contractor from the date of expiry of the Initial Termination
Standstill Period for a period to be determined by the Security Agent
(not to exceed 760 days) ("ADDITIONAL TERMINATION STANDSTILL PERIOD")
the Contractor undertakes not to take any step to terminate the
Construction Contract or its employment under the Construction
Contract, exercise any other right it may have whether under the
Construction Contract or otherwise to rescind, suspend the performance
of or terminate the Construction Contract, enforce execution against
any of the assets of the Owner or present any Petition prior to the
expiry of the Additional Termination Standstill Period.
7.4 The Contractor must continue to perform all its obligations under the
Construction Contract after the service by it of a Termination Default
Notice on the Security Agent unless:
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7.4.1 the Contractor receives a notice from the Security Agent in accordance
with Clause 11.1;
7.4.2 the Security Agent (on behalf of the Lenders) has not, by written
notice to the Contractor, agreed to pay the Contractor's costs as
contemplated in Clause 7.2 or the Initial Termination Standstill
Period expires and the Security Agent has not agreed to pay the
Contractor's costs as contemplated in Clause 7.3; or
7.4.3 the Additional Termination Standstill Period expires.
7.5 At the same time and in the same manner that the Contractor sends the
Termination Default Notice to the Security Agent, the Contractor must
send a copy of the Termination Default Notice to the Owner.
8. STATEMENT OF AMOUNTS DUE
8.1 Within 10 days after the date of any Default Notice, the Contractor
shall submit to the Security Agent statements of:
8.1.1 all amounts due and payable to the Contractor under the Construction
Contract on or before the date of such Default Notice and which remain
unpaid at such date; and
8.1.2 the nature and the amount of any monetary claim, asserted by the
Contractor against the Owner under the Construction Contract, which
arises out of or in connection with the breach for which such Default
Notice was served.
8.2 The Security Agent may appoint a firm of independent chartered
accountants:
8.2.1 to verify the statements submitted by the Contractor pursuant to
Clause 8.1 (other than for amounts that have been approved in
accordance with section 9.2 of the Construction Contract); or
8.2.2 where the Contractor fails to submit statements in accordance with
Clause 8.1, to prepare such statements themselves; and
such firm of independent chartered accountants shall provide its
determinations as soon as reasonably practicable and in any event
within 3 months from the date upon which the Contractor is required to
submit information to the Security Agent in accordance with
Clause 8.1.
8.3 The Contractor shall permit any firm of independent chartered
accountants appointed pursuant to Clause 8.2 to have access to and to
make copies of all records, documents, data and accounting and other
information not subject to legal (including, without limitation,
solicitor and own client) and other professional privilege which is
reasonably required with a view to verifying or
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preparing the statements referred to in Clause 8.1 (other than for
amounts that have been approved in accordance with section 9.2 of the
Construction Contract).
8.4 If a firm of independent chartered accountants is appointed pursuant
to Clause 8.2 to verify any statements submitted by the Contractor
pursuant to Clause 8.1 (other than for amounts that have been approved
in accordance with section 9.2 of the Construction Contract) and such
firm determines that such statements contain an amount which is in
excess of the amount which such firm believes to be accurate, fair and
reasonable, the amount determined by such firm shall be deemed to
prevail for the purposes of this Part 3.
8.5 If a firm of independent chartered accountants is appointed pursuant
to Clause 8.2 to prepare any statements which should have been
submitted by the Contractor pursuant to Clause 8.1, then such
statements shall be prepared by such firm on the basis of such
information as may be available to it and shall be treated as having
been prepared by the Contractor to the purposes of this Part 3.
8.6 The cost and expenses of any firm of independent chartered accountants
appointed by the Security Agent pursuant to Clause 8.2 shall be for
the account of the Security Agent except that, if such firm is
appointed to prepare any statements which should have been prepared by
the Contractor pursuant to Clause 8.1, then the Contractor shall
reimburse the Security Agent on demand for any amounts paid by it to
such firm in respect of the preparation of such statements.
9. WARRANTY OF ACCURACY
The Contractor warrants to the Security Agent that the statements
submitted by it pursuant to Clause 8 shall be (so far as reasonably
practicable in relation to Clause 8.1.2) true, complete and accurate
statements of the amounts to which the Contractor considers itself
entitled.
10. STATEMENTS TO BE PRIMA FACIE EVIDENCE
Without prejudice to the rights of the Contractor to pursue any claims
against the Owner following the Revival Date (if any), any statements
submitted by:
10.1.1 the Contractor pursuant to Clause 8.1 (as the same may be adjusted
pursuant to Clause 8.2); or
10.1.2 a firm of independent chartered accountants pursuant to Clause 8.2,
shall be prima facie evidence for the Security Agent, the Lenders, any
receiver and manager of the Owner, any Substitute and any Additional
Obligor that the
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Contractor has waived and abandoned all claims arising out of or in
connection with the Construction Contract prior to the date of the
Default Notice to which such statements relate other than those
disclosed in such statements.
11. SUSPENSION OF WORKS
11.1 At any time during any Standstill Period, but before the Security
Agent issues a Step-in Notice or a Novation Notice, the Security Agent
may by notice to the Contractor request the Contractor to suspend the
performance of its obligations under the Construction Contract.
11.2 Immediately after receipt of such a notice the Contractor is obliged
to suspend the Works, other than the performance of all obligations in
connection with protection and maintenance of the Works, until:
11.2.1 it receives payment of all amounts due and payable from the Owner to
the Contractor under the Construction Contract (including amounts
verified under Clause 8) plus any amounts due and payable from the
date of the Default Notice to the date on which Security Agent gave
notice of the suspension (or satisfactory payment security for such
amounts); or
11.2.2 it receives a Step-in Notice or a Novation Notice; or
11.2.3 the Contractor and the Security Agent otherwise agree; or
11.2.4 the applicable Standstill Period expires and another Standstill Period
has not become effective.
11.3 If the Contractor receives payment in accordance with Clause 11.2.1,
without prejudice to Clause 20, any right of suspension or termination
suspended by virtue of Clauses 6 or 7 shall be of no further effect
and the Contractor shall not be entitled to present a Petition,
suspend or terminate the Construction Contract by virtue of any act,
omission or circumstance prior to the date for such payment.
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12
PART 4
STEP-IN AND STEP-OUT RIGHTS
12. STEP-IN NOTICE
12.1 At any time:
12.1.1 notwithstanding any rights of the Security Agent or the Contractor
pursuant to Clause 6, on or after the occurrence of a default by the
Owner under Clause 24.2 of the Construction Contract (whilst the same
is continuing unremedied or unwaived) until the Revival Date (if any);
12.1.2 on or after the service of a notice of enforcement of the security
constituted by the Security Document over the Owner's right, title,
benefit and interest in the Construction Contract until the Revival
Date (if any); or
12.1.3 during any Standstill Period,
the Security Agent may give notice (a "STEP-IN NOTICE") in writing to
the Contractor in respect of any one of:
(a) itself;
(b) any receiver, manager or administrative receiver of the Owner
appointed under the Security Document; or
(c) a company substantially the whole of whose issued share capital
is owned by the Security Agent and/or any one or more of the
Lenders,
(each an "ADDITIONAL OBLIGOR"), stating that the Additional Obligor is
to become a party to the Construction Contract and this Agreement in
accordance with the terms hereof.
13. CONSENT OF THE CONTRACTOR
13.1 A Step-in Notice shall not take effect unless approved by the
Contractor save that the Contractor shall only be entitled to withhold
its approval to a Step-in Notice where reasonable in accordance with
Clause 13.2 and such approval shall be deemed to be given in the
absence of a response from the Contractor, within five days after
service of a Step-in Notice by the Security Agent.
13.2 Withholding approval of a Step-in Notice shall only be considered to
be reasonable if the Additional Obligor named therein:
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13.2.1 is not of sound financial standing or is not guaranteed by a person or
persons of sound financial standing; or
13.2.2 does not have the legal capacity, power and authorisation to become a
party to and perform the obligations of the Owner under the
Construction Contract.
14. ASSUMPTION
If the Contractor approves a Step-in Notice pursuant to Clause 13 and
the Additional Obligor named therein executes and delivers to the
Contractor (with a copy thereof to the other parties to this
Agreement) a duly completed Additional Obligor Accession Memorandum in
substantially the form set out in the First Schedule hereto, then such
Additional Obligor shall become a party to the Construction Contract
and this Agreement on and from the date of execution and delivery of
such Accession Memorandum (the "ASSUMPTION DATE").
15. RIGHTS AND OBLIGATIONS ON ASSUMPTION
15.1 Upon an Additional Obligor becoming a party hereto and to the
Construction Contract pursuant to Clause 14, then such Additional
Obligor shall, on and from the Assumption Date and for so long as such
Additional Obligor remains a party hereto and to the Construction
Contract, be:
15.1.1 jointly and severally entitled to exercise and enjoy the rights,
benefits, powers and discretions expressed to be assumed by or granted
to the Owner under the Construction Contract, Advance Payment,
Performance and Defects Liability Period Guarantees and Parent Company
Guarantee;
15.1.2 entitled to exercise and enjoy the rights, benefits, powers and
discretions expressed to be assumed by or granted to an Additional
Obligor under this Agreement, Advance Payment, Performance and Defects
Liability Period Guarantees and Parent Company Guarantee;
15.1.3 subject to Clause 10, jointly and severally liable with the Owner for
the payment of all sums due from the Owner under the Construction
Contract as at the Assumption Date and for the performance of all of
the Owner's obligations under the Construction Contract arising on or
after the Assumption Date; and
15.1.4 liable for the performance of the obligations expressed to be assumed
by an Additional Obligor under this Agreement.
15.2 If an Additional Obligor becomes a party hereto and to the
Construction Contract pursuant to Clause 14, then the Contractor shall
owe its obligations under the Construction Contract to the Owner and
such Additional Obligor jointly PROVIDED THAT:
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15.2.1 subject to Clause 15.2.2, the receipt of, or performance by the
Contractor in favour of, either such Additional Obligor or the Owner
shall be a good discharge of the Contractor; and
15.2.2 the Security Agent shall be entitled at any time by notice in writing
to the Contractor to direct (such direction being binding on the
Contractor and the Owner) that, at all times thereafter whilst such
Additional Obligor remains a party to the Construction Contract and
subject to any further notice from the Security Agent, such Additional
Obligor shall be solely entitled to make any decisions, to give any
directions, approvals or consents or otherwise to deal with the
Contractor under the Construction Contract.
15.3 If an Additional Obligor becomes a party hereto and to the
Construction Contract pursuant to Clause 14, then:
15.3.1 any amount due from the Owner to the Contractor under the Construction
Contract on the Assumption Date and notified to such Additional
Obligor prior to the Assumption Date shall be paid to the Contractor
by the Additional Obligor as soon as reasonably practicable without
undue delay and in any event within thirty days after the Assumption
Date, failing which the Contractor shall be entitled to exercise its
rights under the Construction Contract in respect of the amount so due
and unpaid; and
15.3.2 subject to payment by the Additional Obligor under Clause 15.3.1 and
without prejudice to Clause 20, any right of suspension or termination
suspended by virtue of Clauses 6 or 7 shall be of no further effect
and the Contractor shall not be entitled to present a Petition,
suspend or terminate the Construction Contract by virtue of any act,
omission or circumstance prior to the Assumption Date.
16. STEP-OUT
An Additional Obligor may, at any time, by giving not less than sixty
days prior written notice to the Contractor terminate its obligations
to the Contractor under the Construction Contract, in which event such
Additional Obligor shall, upon the expiry of such notice, cease to be
a party hereto and to the Construction Contract and shall be released
from all obligations hereunder and under the Construction Contract
except for any obligation which has arisen on or before the expiry of
such notice.
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15
PART 5
NOVATION
17. NOVATION PROPOSAL
At any time:
17.1.1 on or after the occurrence of a default by the Owner under Clause 24.2
of the Construction Contract (whilst the same is continuing unremedied
or unwaived) until the Revival Date (if any);
17.1.2 on or after the service of a notice of enforcement of the security
constituted by the Security Document over the Owner's right, title,
benefit and interest in the Construction Contract until the Revival
Date (if any);
17.1.3 during any Standstill Period; or
17.1.4 during any Step-in Period,
the Security Agent may give notice (a "NOVATION NOTICE") in writing to
the Contractor stating that it wishes another person (a "SUBSTITUTE")
to assume the obligations of the Owner under the Construction Contract
and specifying a date falling between the 28th and 35th day (both
dates inclusive) after the date of such Novation Notice, on which such
assumption is to be effective (the "EFFECTIVE DATE").
18. CONSENT OF THE CONTRACTOR
18.1 A Novation Notice shall not take effect unless approved by the
Contractor save that the Contractor shall only be entitled to withhold
its approval to a Novation Notice where reasonable in accordance with
Clause 18.2 and such approval shall be deemed to be given, in the
absence of a response from the Contractor, within five days after
service of a Novation Notice by the Security Agent.
18.2 Withholding approval of a Novation Notice shall only be considered
reasonable if the Substitute named therein:
18.2.1 is not of sound financial standing or is not guaranteed by a person or
persons of sound financial standing; or
18.2.2 does not have the legal capacity, power and authorisation to become a
party to and perform the obligations of the Owner under the
Construction Contract.
19. NOVATION
If the Contractor approves a Novation Notice pursuant to Clause 18 and
the Substitute named therein executes and delivers to the Contractor
(with a copy
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thereof to the other parties to this Agreement) a duly completed
Substitute Accession Memorandum in substantially the form set out in
the Second Schedule hereto, then:
19.1.1 on and from the Effective Date specified in such Novation Notice, such
Substitute shall:
(a) become a party to the Construction Contract in place of the Owner
who shall be immediately released from its obligations under, and
cease to be a party to, the Construction Contract and thereafter
such Substitute shall be treated as if it had originally been
named as a party thereto in place of the Owner with the rights,
benefits, powers, discretions and obligations of the Owner
thereunder;
(b) be entitled to exercise and enjoy the rights, benefits, powers
and discretions expressed to be in favour of a Substitute under
this Agreement; and
(c) be liable for the performance of the obligations expressed to be
owing by a Substitute under this Agreement,
and the Contractor shall owe its obligations (including, without
limitation, any undischarged liability in respect of any loss or
damage suffered or incurred by the Owner prior to the Effective Date)
under the Construction Contract to such Substitute in place of the
Owner;
19.1.2 any amount due from the Owner to the Contractor under the Construction
Contract on the Effective Date and notified to such Substitute prior
to the Effective Date shall be paid to the Contractor by the
Substitute as soon as reasonably practicable without undue delay and
in any event within thirty days after the Effective Date, failing
which the Contractor shall be entitled to exercise its rights under
the Construction Contract in respect of the amount so due and unpaid;
19.1.3 subject to payment by the Substitute under Clause 19.1.2 any right of
suspension or termination suspended by virtue of Clauses 6 or 7 shall
be of no further effect and the Contractor shall not be entitled to
present a Petition, suspend or terminate the Construction Contract by
virtue of any act, omission or circumstance prior to such Effective
Date and, if any Additional Obligor is a party to or has any
obligations under the Construction Contract on the Effective Date,
such Additional Obligor shall cease to be a party thereto and shall be
discharged from all obligations thereunder.
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17
PART 6
REVIVAL OF REMEDIES
20. REVIVAL OF REMEDIES
20.1 If a Default Notice has been given, the grounds for that notice are
continuing and either:
20.1.1 the relevant Standstill Period expires and either the Security Agent
has not agreed to pay the Contractor's costs as contemplated in
Clause 6.3, 6.4, 7.2 and/or 7.3 (as the case may be) or no Additional
Obligor or Substitute becomes a party hereto; or
20.1.2 an Additional Obligor becomes a party hereto but the Step-in Period
relating to such Additional Obligor ends without a Substitute becoming
a party hereto,
then, on and from the date (the "REVIVAL DATE") such Standstill Period
or, as the case may be, such Step-in Period expires, the Contractor
shall be entitled to:
(a) act upon any and all grounds for suspension or termination
available to it under the Construction Contract in respect of
breaches not remedied or waived Provided that no account shall be
taken of the number of days from the date such Default Notice was
given to such Revival Date (both dates inclusive) when
determining any time for the exercise of the Contractor's rights
or the time for the service of any notice by the Contractor under
the Construction Contract;
(b) pursue any and all claims and exercise any and all remedies it
may have under the Construction Contract against the Owner or the
Additional Obligor; and
(c) (if and to the extent that it is then entitled to do so under the
Construction Contract) present a Petition.
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18
PART 7
CONSIDERATION AND THE GUARANTOR'S OBLIGATIONS
21. CONSIDERATION
The Contractor acknowledges that the Lenders will make advances and
give other financial accommodation to the Owner in consideration of,
inter alia, the agreements and undertakings given by the Contractor in
this Agreement and that the execution of this Agreement is a condition
precedent to such financial accommodation being made available under
the Finance Documents.
22. GUARANTOR'S CONTINUING OBLIGATIONS
The Guarantor acknowledges and confirms to the Owner, the Security
Agent, each Substitute and each Additional Obligor and their
respective successors and assigns that:
22.1.1 its obligations under the Parent Company Guarantee shall continue in
full force and effect notwithstanding:
(a) any Additional Obligor becoming, or ceasing to be, a party to the
Construction Contract in accordance with the terms hereof; or
(b) any Substitute becoming a party to the Construction Contract in
place of the Owner in accordance with the terms hereof; and
22.1.2 if any Additional Obligor or Substitute becomes a party to the
Construction Contract pursuant to the terms hereof, then such
Additional Obligor or, as the case may be, Substitute shall be
entitled to make claims and otherwise exercise the rights, powers and
discretions of the Owner under the Parent Company Guarantee in
accordance with the terms thereof.
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19
PART 8
MISCELLANEOUS
23. LEGAL AND BINDING OBLIGATIONS
23.1 The Contractor warrants to each of the other parties to this Agreement
that each of this Agreement and the Construction Contract is its
legally binding obligation, is within its powers, has been duly
authorised by it, and does not conflict with any law or agreement to
which it is a party and that all consents and authorisations required
by it in relation to this Agreement and the Construction Contract have
been obtained.
23.2 The Guarantor warrants to each of the other parties to this Agreement,
each Substitute and each Additional Obligor that each of this
Agreement and the Parent Company Guarantee is its legally binding
obligation, is within its powers, has been duly authorised by it, and
does not conflict with any law or agreement to which it is a party and
that all consents and authorisations required by it in relation to
this Agreement and the Parent Company Guarantee have been obtained.
24. STANDARD OF WORK
Each of the Guarantor and the Contractor confirms that the Contractor
will perform the Works in accordance with the Construction Contract.
25. ACCESS TO SITE AND INFORMATION
25.1 The Contractor agrees that the Security Agent, the Lenders, and their
advisers, and representatives shall be entitled to have access to the
Site during the term of the Construction Contract, at all reasonable
times upon reasonable notice, provided that the Security Agent, the
Lenders, and their advisers and representatives do not impede the
performance of the Contractor and that they comply with health and
safety regulations applicable to the construction of Works on the
Site.
25.2 The Contractor agrees to provide to the Security Agent, the Lenders,
and their advisers and representatives copies of all information which
the Owner is entitled to receive under the Construction Contract or
requested by proposed Additional Obligor or Substitute, in each case
upon receiving written notice from the Security Agent.
26. FORCE MAJEURE
The Contractor undertakes not to terminate the Construction Contract
under section 26.7 of the Construction Contract if and to the extent
that the Security
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Agent has provided to the Contractor an undertaking in respect of its
costs arising from the expiry of the 230 days period referred to
therein.
27. INSURANCE
27.1 The Contractor warrants that it has and will continue to maintain in
full force and effect the insurance coverages required to be taken out
by the Contractor in accordance with the Construction Contract. The
Contractor shall ensure that at all times it shall comply with the
terms of the Owner's insurance policies taken out in accordance with
the Construction Contract and shall not act or omit to act in a manner
that would breach or invalidate such policies.
27.2 The Contractor acknowledges that the Owner shall control all claims
under the insurance policies required to be taken out by the Owner
under the Construction Contract. The Contractor shall pay to the
Insurance Account defined in the Facility Agreement all insurance
proceeds (other than insurance proceeds relating to third party claims
against the Contractor and any proceeds from the insurance policies
required to be maintained by the Contractor under the Construction
Contract) received by the Contractor in respect of losses affecting
the Works, which shall be distributed in accordance with the terms of
the Facility Agreement by the Owner.
28. RESTRICTIONS ON OWNER'S RIGHTS AND OBLIGATIONS
The Contractor acknowledges that the rights and obligations of the
Owner are limited by the terms of the Facility Agreement including
(without limitation) in relation to the issue of the Acceptance
Certificate (as defined in the Construction Contract), changes to the
design, specification or configuration of the Plant, amendments to the
Construction Contract, application of insurance proceeds, and
satisfaction of performance tests each of which may require the
consent of the Lenders and/or their designated representatives or
agent provided that such acknowledgment shall not relieve the Owner of
its obligations under the Construction Contract.
29. ASSIGNMENT
Each of the Contractor and the Guarantor agree not to assign, transfer
or novate its rights or obligations under the Construction Contract,
Advance Payment, Performance and Defects Liability Period Guarantees,
Parent Company Guarantee or this Agreement without the prior written
consent of the Security Agent.
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30. BENEFIT
The benefit of this Agreement (including, without limitation, all
warranties and undertakings and any sums received by the Security
Agent pursuant to this Agreement) shall be held by the Security Agent
upon and subject to the terms of the Security Pooling Agreement for
the benefit of the Lenders.
31. NO ASSIGNMENT
No party to this Agreement shall assign or transfer any part of its
respective rights or obligations under this Agreement without the
consent of the others provided that the Security Agent may assign or
transfer its rights and obligations to a successor Security Agent
under the Security Document without the consent of the other parties
to this Agreement.
32. NO WAIVER
No failure or delay by the Security Agent in exercising any right
under this Agreement shall operate as a waiver thereof or prejudice
any other or further exercise by the Security Agent of any of its
rights or remedies under this Agreement, the Construction Contract,
the Advance Payment, Performance and Defects Liability Period
Guarantees or the Parent Company Guarantee. The rights and remedies
under this Agreement may be exercised as often as necessary and are
cumulative and not exclusive of any rights or remedies provided by
law.
33. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which when taken together shall constitute one and the same
instrument.
34. NO OTHER CLAIMS
The Contractor and the Guarantor separately confirm to the Security
Agent that it has not received notice of any other assignment or
charge by the Owner to any third party of any of its right, title,
benefit or interest under, respectively, the Construction Contract,
the Advance Payment, Performance and Defects Liability Period
Guarantees or the Parent Company Guarantee.
35. NO SET-OFF
The Contractor and the Guarantor each agrees with the Security Agent
that it will not exercise any right of set-off or counterclaim it may
have against the Owner which would reduce any monies payable by the
Contractor under the Construction Contract or, as the case may be, by
the Guarantor under the Parent Company Guarantee except where the
right of set-off or counterclaim is
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contained within the Construction Contract or, as the case may be, the
Parent Company Guarantee itself.
36. PAYMENT OF MONIES
36.1 The Contractor and the Guarantor each agrees with the Security Agent
that it will pay all monies due from the Contractor under the
Construction Contract or, as the case may be, by the Guarantor under
the Parent Company Guarantee to the Revenue Account established
pursuant to clause 9.2 of the Facility Agreement unless and until,
after the date of enforcement of the Security Document, the Security
Agent otherwise directs, whereupon the Contractor or, as the case may
be, the Guarantor shall comply with the directions of the Security
Agent.
36.2 Where a payment is made by the Security Agent to the Contractor under
this Agreement, the Owner acknowledges that the amount of the payment
shall be treated as if it was an amount borrowed from the Lenders
under the Facility Agreement and accordingly the payment shall be
governed by the provisions of the Facility Agreement.
37. CONFIDENTIALITY
The Security Agent for and on behalf of the Lenders undertakes to the
Contractor to be bound to observe, mutatis mutandis, the terms of
article 27 of the Construction Contract with respect to any
information or document referred to in article 27 of the Construction
Contract which shall come into its possession pursuant to this
Agreement, the Construction Contract, the Finance Documents or the
Security Document Provided that it is hereby agreed that the Security
Agent and the Lenders shall be free to disclose any such information
or document to one another or to any actual or potential assignee,
transferee or sub-participant of any Lender who shall have been made
aware of the terms of this Clause and article 27 of the Construction
Contract.
38. NOTICES
38.1 Save as otherwise expressly provided in this Agreement, all notices or
other communications which are required or permitted hereunder shall
be in writing and sufficient if delivered personally or sent by
registered or certified mail or telecopier addressed as follows:
23
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38.1.1 if to the Owner:
Address: Niedergorner Damm 1
D-39596 Arneburg
Attention: Mr Harald Gatzke
Telecopier No: +49 393 21 50322
38.1.2 if to the Contractor:
Address: Sonnenwall 85
D-47051 Duisburg
Attention: Mr Norbert Kreutzer
Telecopier No: +49 203 3091048
38.1.3 if to the Guarantor:
Address: Guiollettstra beta e 44-48
60325 Frankfurt am Main
Germany
Attention: Mr Ernst Ullrich
Telecopier No: +49 69 7135 2180
38.1.4 if to the Security Agent:
Address: Am Tucherpark 1 (FPA1)
D-80538 Munchen
Attention: Marc Thumecke
Telecopier No: +49 89 378 41518
38.1.5 if to any Additional Obligor or Substitute, to the address or
telecopier number specified in the Additional Obligor Accession
Memorandum delivered by it pursuant to Clause 14 or, as the case may
be, the Substitute Accession Memorandum delivered by it pursuant to
Clause 19.
38.2 All notices shall be deemed delivered upon receipt.
38.3 Any party may by notice of at least fifteen days to the other party
change the address and/or addresses to which such notice and
communications to it are to be delivered or mailed.
24
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39. GOVERNING LAW
39.1 This Agreement shall be governed by, and construed in accordance with,
the laws of the Federal Republic of Germany.
39.2 The exclusive place of jurisdiction to hear and determine any suit,
action or proceeding, and to settle any disputes which may arise out
of or in connection with this Agreement is Munich. The Lenders and the
Security Agent may, however, also commence proceedings before any
other court in which assets of the Owner are located. Mandatory places
of jurisdiction remain unaffected.
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25
SCHEDULE 1
ADDITIONAL OBLIGOR ACCESSION MEMORANDUM
To: RWE INDUSTRIE-LOSUNGEN GMBH
Sonnenwall 85
D-47051 Duisburg
For the attention of Mr Norbert Kreutzer
Copied to: ZELLSTOFF STENDAL GMBH
Niedergorner Damm l
D-39596 Arneburg
For the attention of the Secretary
RWE SOLUTIONS AG
Guiollettstra(beta)e 44-48
60325 Frankfurt am Main
|
For the attention of Mr Ernst Ullrich
BAYERISCHE HYPO-UND VEREINSBANK AG
Am Tucherpark 1 (FPA1)
D-80538 Munchen
For the attention of the Secretary
From: [Additional Obligor]
ADDITIONAL OBLIGOR ACCESSION MEMORANDUM
We [INSERT NAME OF ADDITIONAL OBLIGOR] refer to the construction contract dated
[-] and originally made between Zellstoff Stendal GmbH as the Owner and
Zellstoff Stendal GmbH as the Contractor (the "CONSTRUCTION CONTRACT") and the
direct agreement dated [-] and originally made between the Zellstoff Stendal
GmbH as Owner, RWE Industrie-Losungen GmbH as Contractor, RWE Solutions AG as
Guarantor and Bayerische Hypo-und Vereinsbank AG as Security Agent (the "DIRECT
AGREEMENT"). Terms defined in the Construction Contract or, if not defined
therein, in the Direct Agreement shall have the same meanings in this Accession
Memorandum.
26
1. We hereby confirm that we are an Additional Obligor pursuant to Part 4
of the Direct Agreement.
2. We acknowledge and agree that, upon and by reason of our execution and
delivery of this Additional Obligor Accession Memorandum, we will
thereby forthwith become a party to the Construction Contract jointly
and severally with the Owner and a party to the Direct Agreement as an
Additional Obligor and, accordingly, shall have the rights, benefits,
powers, discretions and obligations of the Owner under the
Construction Contract and an Additional Obligor under the Direct
Agreement.
3. Our address, telecopier and telephone number for the purpose of
receiving communications under the Construction Contract and the
Direct Agreement are as follows:
Attention:
Address:
Telecopier No.:
4. This Accession Memorandum shall be governed by, and construed in
accordance with, the laws of the Federal Republic of Germany.
[INSERT NAME OF ADDITIONAL OBLIGOR]
By:
-------------------- --------------------
Name: Name:
Title: Title:
|
Address:
27
SCHEDULE 2
SUBSTITUTE ACCESSION MEMORANDUM
To: RWE INDUSTRIE-LOSUNGEN GMBH
Sonnenwall 85
D-47051 Duisburg
For the attention of Mr Norbert Kreutzer
Copied to: ZELLSTOFF STENDAL GMBH
Niedergorner Damm l
D-39596 Arneburg
For the attention of the Secretary
RWE SOLUTIONS AG
Guiollettstra(beta)e 44-48
60325 Frankfurt am Main
|
For the attention of Mr Ernst Ullrich
BAYERISCHE HYPO-UND VEREINSBANK AG
Am Tucherpark 1 (FPA1)
D-80538 Munchen
For the attention of the Secretary
From: [Additional Obligor]
SUBSTITUTE ACCESSION MEMORANDUM
We [INSERT NAME OF SUBSTITUTE] refer to the construction contract dated [-] and
originally made between Zellstoff Stendal GmbH as Owner and RWE
Industrie-Losungen GmbH as Contractor (the "CONSTRUCTION CONTRACT") and the
direct agreement dated [-] and originally made between the Zellstoff Stendal
GmbH as Owner, RWE Industrie-Losungen GmbH as Contractor, RWE Solutions AG as
Guarantor and Bayerische Hypo-und Vereinsbank AG as Security Agent (the "DIRECT
AGREEMENT"). Terms defined in the Construction Contract or, if not defined
therein, in the Direct Agreement shall have the same meanings in this Substitute
Accession Memorandum.
1. We hereby confirm that we are a Substitute pursuant to Part 5 of the
Direct Agreement.
28
2. We acknowledge and agree that, upon and by reason of our execution and
delivery of this Substitute Accession Memorandum, we will thereby
forthwith become a party to the Construction Contract as the Owner and
the Direct Agreement as a Substitute and, accordingly shall have the
rights, benefits, powers, discretions and obligations of the Owner
under the Construction Contract and a Substitute under the Direct
Agreement.
3. Our address, telecopier and telephone number for the purpose of
receiving communications under the Construction Contract and the
Direct Agreement are as follows:
Attention:
Address:
Telecopier No.:
4. This Accession Memorandum shall be governed by, and construed in
accordance with, the laws of the Federal Republic of Germany.
[INSERT NAME OF SUBSTITUTE] ACTING BY
By:
-------------------- --------------------
Name: Name:
Title: Title:
|
Address:
29
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written:
THE OWNER
ZELLSTOFF STENDAL GMBH
By:
-------------------- -----------------------
Name: Name:
Title: Title:
|
Address:
THE CONTRACTOR
RWE INDUSTRIE-LOSUNGEN GMBH
By:
-------------------- --------------------
Name: Name:
Title: Title:
Address:
Federal Republic of Germany
|
THE GUARANTOR
RWE SOLUTIONS AG..
By:
-------------------- --------------------
Name: Name:
Title: Title:
Address:
|
THE SECURITY AGENT
BAYERISCHE HYPO- UND VEREINSBANK AG
By:
-------------------- --------------------
Name: Name:
Title: Title:
Address: Am Tucherpark 16
80538 Munchen
Federal Republic of Germany
|
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
TABLE OF CONTENTS
1. Form of Notice of Commencement Date
2. Schedule of Prices
3. Intentionally Omitted
4. Form of Down Payment, Performance and Warranty Bank Guarantee
5. Form of Extended Defects Liability Period Bank Guarantee
6. Insurance
7. Intentioanally Omitted
8. Key Persons List
9. Payment Milestone Schedule
10. Form of Parent Company Guarantee
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
1. FORM OF NOTICE OF COMMENCEMENT DATE
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
1. FORM OF NOTICE OF COMMENCEMENT DATE
(Date)
To: RWE Industrie-Losungen GmbH
Sonnenwall B5
D 47051 Dulsburg, Germany
Attention:
To: Zellstoff Stendal GmbH
Niedergorner Damm 1
D-39596 Ameburg, Germany
Attention:
Reference is made to the Contract for Engineering, Design, Procuremnt,
Construction, Erection and Start Up for the Stendal Pulp Mill Project dated
(Date of Signature) between RWE Industrie-Losungen GmbH (the "Contractor") and
Zellstoff Stendal GmbH (the "Owner").
Contractor and Owner, respectively, hereby certify that the Commencement Date
(as defined in the Contract) occurred on ___________ (Date of Commencement) in
accordance with Article 32 of the Contract.
Zellstoff Standal GmbH RWE Industrie-Losungen GmbH
Date: Date:
------------------------ ------------------------
By: By:
------------------------ ------------------------
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[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
|
APPENDIX 2
COMMERCIAL EXHIBITS
2.Schedule of Prices
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
Schedule of Prices
Prices
Systems/Non-Systems Departments in EUR
General Plant *
Water Treatment System *
Effluent Tratment System *
Power Boiler System *
Turbine Generator System *
Wood Handling System *
Fiber Line - Cooking/Brown Stock/Bleaching *
Fiber Line - Pulp Dewatering/Drying/Baling *
Chlorine Dioxide System *
Evaporator System *
Recovery Boiler System *
Recausticizing *
Lime Kiln System *
NCGD System *
Tall Oil System *
Administration and Workshop Building *
DCS System *
Cooling Tower System *
Underground Installations *
Power Distribution System *
Emergency Power System *
Oxygen Plant *
Roads and Paved Areas *
Weighbridges and Guardhouse *
Pipe Bridges *
Fuel Oil Storage *
Railway *
-----------
Grand Total: 716,000,000
|
* These prices may be broken down as required for invoicing.
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
3. Intentionally Omitted
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERICAL EXHIBITS
4. FORM OF DOWN PAYMENT, PERFORMANCE AND WARRANTY BANK GUARANTEE
APPENDIX 2 EXHIBIT 4
AGREED FORM OF ADVANCE PAYMENT, PERFORMANCE AND DEFECTS LIABILITY PERIOD
GUARANTEE
Zellstoff Stendal GmbH
Niedergorner Damm 1
D-39596 Arneburg
Guarantee No. (_____)
Dear Sirs:
We refer to the Contract for Design, Engineering, Procurement, Construction,
Erection and Start Up made as of (_____), (the 'Contract') between Zellstoff
Stendal GmbH ('the Owner') and RWE Industrie-Losungen GmbH, Duisburg/Germany
(the 'Contractor') for the Stendal Pulp Mill Project.
In accordance with the Contract terms, the Contractor is required to provide to
the Owner a combined Advance Payment, Performance and Defects Liability Period
Guarantee in the amount of (INSERT AMOUNT EQUAL TO 17% OF CONTRACT PRICE) EURO
(EURO _____).
Certain capitalized terms are used herein with the same meanings given to them
in the Contract, as follows:
'Expiry of Defects Liability Period Certificate' means the certificate
issued by Owner to Contractor in the form of either Annex C or Annex D, in
accordance with section 20.9 of the Contract, certifying that the Expiry of
the Defects Liability Period (as defined in the Contract) has occurred in
accordance with, and subject to the conditions (including in the case of a
certificate in the form of Annex D, the reservation of the Owner's rights
with respect to certain continuing warranties referenced in Attachment A
thereto) contained in, Section 20.9 of the Contract.
'Acceptance Certificate' means the certificate issued by Owner to
Contractor in the form set out in Annex A to this Guarantee, in accordance
with section 18.7 of the Contract, confirming that Acceptance (as defined
in the Contract) has occurred in accordance with, and subject to the
conditions contained in, Section 18.7 of the Contract.
'Schedule B Test Certificate' means a certificate issued by Owner to
Contractor, in accordance with article 19 of the Contract, confirming that
all conditions to the completion of the Schedule B Test (as defined in the
Contract) for a System (as defined in the Contract) have been satisfied in
accordance with, and subject to the conditions contained in, Section 19.6
of the Contract.
'Direct Agreement' means the agreement dated August 2002 between the Owner,
Contractor, RWE Solutions AG and Bayerische Hypo-und Vereinsbank AG.
In addition, a reference in this Guarantee to a "day" shall be construed as a
reference to a calendar day.
On behalf of the Contractor, we (INSERT NAME OF BANK) hereby give our guarantee
and irrevocably and unconditionally undertake to pay to you any amount you may
claim (by one or more claims) up to but not exceeding (INSERT AMOUNT EQUAL TO
17% OF CONTRACT PRICE) EURO (EURO _____) upon receipt of your first written
demand to us stating the Contractor is in breach of the Contract and details of
the nature of such breach (which we shall consider to be sufficient and rely on
in full without investigation or inquiry).
This Guarantee is a guarantee (GARANTIE) and not a surety (BURGSCHAFT) in terms
of German law, and, accordingly, the provisions relating to sureties and
contained in the German Civil Code shall not apply to this Guarantee. This
guarantee shall in all respects be a continuing, absolute, unconditional and
irrevocable guarantee. Our obligations hereunder shall be absolute and primary
obligations irrespective of the occurrence of any circumstances which might
otherwise constitute a legal or equitable defence. In particular, the release by
the Owner of any other security granted in connection with the Contract in
fulfillment of the Owner's obligation under any other security agreement to
effect such release shall not in any way affect the obligations of the Guarantor
hereunder.
This Guarantee shall be payable in cash without set-off, deduction or
withholding in whole or in part on your first written demand notwithstanding any
defense, contestation, claims, demands or objections by the Contractor or by any
other party.
We hereby waive any right we may have of first requiring you to pursue your
legal remedies against the Contractor and waive notice of acceptance hereof, of
any action taken or omitted in reliance hereon, of any defaults under the
Contract, and any presentation, demand, protest, or notice of any kind. We
hereby agree that the Contract may be modified, amended and supplemented without
our consent in any manner and agree that no such modification, amendment, or
supplement shall release, affect or impair our liability under this Guarantee.
We further agree that no invalidity, irregularity or unenforceability of the
Contract shall affect or impair our liability under this Guarantee.
Our aggregate maximum liability under this Guarantee is in any case limited to
the sum of (INSERT AMOUNT EQUAL TO 17% OF CONTRACT PRICE) EURO (EURO _____).
This Guarantee shall become effective automatically for an amount of (INSERT
AMOUNT EQUAL TO 8.5% OF THE CONTRACT PRICE) EURO (EURO _____) upon the
deposit in the Contractor's account with (INSERT NAME OF BANK AND ACCOUNT
NUMBER) of the amount of EURO (EURO INSERT AMOUNT EQUAL TO 5% ADVANCED
PAYMENT) in funds immediately available to the Contractor.
This Guarantee shall become effective automatically for an additional amount of
(INSERT AMOUNT EQUAL TO 8.5% OF THE CONTRACT PRICE) EURO (EURO _____) upon the
deposit in the Contractor's account WITh (INSERT NAME OF BANK AND ACCOUNT
NUMBER) of the amount of EURO (EURO INSERT AMOUNT EQUAL TO 5% ADVANCED
PAYMENT) in funds immediately available to the Contractor.
This Guarantee shall automatically be reduced to the amount of (INSERT AMOUNT
EQUAL TO 10% OF THE CONTRACT PRICE) EURO (EURO _____) after 45 days from the
earliest of the following daTES:
(i) the date of presentation to us by the Contractor of a copy of the
Acceptance Certificate signed and dated by the Owner in the form set
out in Annex A to this Guarantee;
(ii) the date of presentation to us by the Contractor of a copy of a
certificate signed by the Owner stating that the conditions for
reduction of this Guarantee upon Acceptance (as defined in the
Contract) have been satisfied and that all liquidated damages
payable on or before such date have been paid to the Owner;
(iii) the date of presentation to us by the Contractor of the original of
a certificate or declaration of the Contractor, signed by the
Contractor, that the works are deemed accepted in accordance with
section 18.10 of the Contract and that all liquidated damages
payable on or before such date have been paid to the Owner, such
certificate or declaration to be accompanied by a statement of one
of the following audit companies PriceWaterhouseCoopers, KPMG, Ernst
& Young or Deutsche Treuarbeit, confirming that the statements of
the Contractor, that the works are deemed to be accepted in
accordance with section 18.10 of the Contract have been made in
accordance with the terms and conditions of the Contract and that
all liquidated damages payable on or before such date have been paid
to the Owner.
This Guarantee shall automatically be further reduced on the presentation of
copies of the seventeen (17) Schedule B Test Certificates in four successive
steps as follows:
(i) by an amount equal to (1.25% OF THE CONTRACT PRICE) EURO
(EURO _____) 65 days after the dATE of presentation to us by the
Contractor of copies of four Schedule B Test Certificates in the
form set out in Annex B to this Guarantee signed and dated by the
Owner in relation to four different Systems and a certificate to us
from the Contractor that it has not previously presented copies or
originals of such Schedule B Test Certificates;
(ii) by an amount equal to (1.25% OF THE CONTRACT PRICE) EURO
(EURO _____) 65 days after the dATE of presentation to us by the
Contractor of copies of four Schedule B Test Certificates in the
form set out in Annex B to this Guarantee signed and dated by the
Owner in relation to four different Systems and a certificate to us
from the Contractor that it has not previously presented copies or
originals of such Schedule B Test Certificates;
(iii) by an amount equal to (1.25% OF THE CONTRACT PRICE) EURO
(EURO _____) 65 days after the dATE of presentation to us by the
Contractor of copies of four Schedule B Test Certificates in the
form set out in Annex B to this Guarantee signed and dated by the
Owner in relation to four different Systems and a certificate to us
from the Contractor that it has not previously presented copies or
originals of such Schedule B Test Certificates; and
(iv) by an amount equal to (1.25% OF THE CONTRACT PRICE) EURO
(EURO _____) 65 days after the dATE of presentation to us by the
Contractor of copies of five Schedule B Test Certificates in the
form set out in Annex B to this Guarantee signed and dated by the
Owner in relation to five different Systems and a certificate to us
from the Contractor that it has not previously presented copies or
originals of such Schedule B Test Certificates,
provided that, in respect of any of the reductions set out in (i)-(iv)
above, such reductions may also take place on the date falling 65 days
after:
(v) the date of presentation to us by the Contractor of a copy of a
certificate signed by the Owner stating that the conditions for
reduction of this Guarantee upon the satisfaction of the relevant
Schedule B Tests have been satisfied and that all liquidated damages
payable on or before such date in respect of the relevant Schedule B
Tests have been paid to the Owner; or
(vi) the date of presentation to us by the Contractor of the original of
a certificate or declaration of the Contractor, signed by the
Contractor, that the relevant number of Schedule B Tests set out in
(i)-(iv) above (in respect of which a reduction in this Guarantee
has not previously been claimed) have been deemed accepted in
accordance with section 19.9 of the Contract and that all liquidated
damages payable on or before such date have been paid to the Owner,
such certificate or declaration to be accompanied by a statement of
one of the following audit companies PriceWaterhouseCoopers, KPMG,
Ernst & Young or Deutsche Treuarbeit, confirming that the statements
of the Contractor, that the relevant Schedule B Tests are deemed to
be accepted in accordance with section 19.9 of the Contract, have
been made in accordance with the terms and conditions of the
Contract, a reduction in this Guarantee has not previously been
claimed in respect of such Schedule B Tests and that all liquidated
damages payable on or before such date have been paid to the Owner.
This Guarantee will expire on the first to occur of:
(1) presentation to us by the Contractor of a copy of the original
Expiry of Defects Liability Period Certificate in the form set out
in Annex C to this Guarantee signed and dated by the Owner to
reflect the actual date of the expiry of the Defects Liability
Period;
(2) presentation to us by the Contractor of a copy of the original
Expiry of Defects Liability Period Certificate in the form set out
in Annex D to this Guarantee signed and dated by the Owner to
reflect the actual date of the expiry of the Defects Liability
Period together with a confirmation to us by the Owner that it has
received a guarantee in an amount equal to five percent (5%) of the
aggregate value of all items with respect to which the Contractor
has continuing warranty obligations under the Contract;
(3) (_____);
after which date this Guarantee shall become null and void unless your written
demand under this Guarantee has reached us at (_____) before 5:00 p.m. German
time on such date.
You shall return this Guarantee to us not later than ten (10) days following the
date of its expiry provided that no demands are then outstanding.
The rights under this Guarantee may not be assigned by you or your permitted
assigns or transferees under the Direct Agreement without our prior written
approval, such approval not to be unreasonably withheld or delayed; provided
that no approval shall be required for the assignment of the rights under this
Guarantee to your lenders by way of security or an additional obligor or
substitute appointed under the Direct Agreement and that in case of such
assignment, we will provide an acknowledgement thereof on such terms as the
assignee may reasonably require.
This Guarantee shall be governed by and construed in accordance with the laws of
Germany.
ANNEX A
FORM OF ACCEPTANCE CERTIFICATE
To: RWE Industrie-Losungen GmbH
Sonnenwall 85
D 47051 Duisburg, Germany
Attention:
From: Zellstoff Stendal GmbH
Niedergorner Damm 1
D 39596 Arneburg, Germany
Reference is made to the Contract for Engineering, Procurement,
|
Construction, Erection, Start-up and Testing of a Kraft Pulp Mill dated [-] (the
"Contract") between RWE Industrie-Losungen GmbH ("Contractor") and Zellstoff
Stendal GmbH ("Owner").
This is the Acceptance Certificate referred to in Section 18.7 of the
Contract. The Owner hereby confirms that Acceptance (as defined in the Contract)
has occurred on [-] in accordance with, and subject to the conditions contained
in, Section 18.7 of the Contract.
Zellstoff Stendal GmbH
Name:
Title:
ANNEX B
FORM OF SCHEDULE B TEST CERTIFICATE
To: RWE Industrie-Losungen GmbH
Sonnenwall 85
D 47051 Duisburg, Germany
Attention:
From: Zellstoff Stendal GmbH
Niedergorner Damm 1
D 39596 Arneburg, Germany
Reference is made to the Contract for Engineering, Procurement,
|
Construction, Erection, Start-up and Testing of a Kraft Pulp Mill dated [-] (the
"Contract") between RWE Industrie-Losungen GmbH ("Contractor") and Zellstoff
Stendal GmbH ("Owner").
This is the Schedule B Test Certificate referred to in Section 19.6 of
the Contract. The Owner hereby confirms that all conditions to the completion of
the Schedule B Test (as defined in the Contract) for the [INSERT RELEVANT
SYSTEM] have been satisfied on [-] in accordance with, and subject to the
conditions contained in, Section 19.6 of the Contract.
Zellstoff Stendal GmbH
Name:
Title:
ANNEX C
FORM OF EXPIRY OF DEFECTS LIABILITY PERIOD CERTIFICATE
To: RWE Industrie-Losungen GmbH
Sonnenwall 85
D 47051 Duisburg, Germany
Attention:
From: Zellstoff Stendal GmbH
Niedergorner Damm 1
D 39596 Arneburg, Germany
Reference is made to the Contract for Engineering, Procurement,
|
Construction, Erection, Start-up and Testing of a Kraft Pulp Mill dated [-] (the
"Contract") between RWE Industrie-Losungen GmbH ("Contractor") and Zellstoff
Stendal GmbH ("Owner").
This is the Expiry of Defects Liability Period Certificate referred to
in Section 20.9 of the Contract. The Owner hereby certifies that the Expiry of
the Defects Liability Period (as defined in the Contract) has occurred on [-] in
accordance with, and subject to the conditions contained in, Section 20.9 of the
Contract.
Zellstoff Stendal GmbH
Name:
Title:
ANNEX D
FORM OF EXPIRY OF DEFECTS LIABILITY PERIOD CERTIFICATE
To: RWE Industrie-Losungen GmbH
Sonnenwall 85
D 47051 Duisburg, Germany
Attention:
From: Zellstoff Stendal GmbH
Niedergorner Damm 1
D 39596 Arneburg, Germany
Reference is made to the Contract for Engineering, Procurement,
|
Construction, Erection, Start-up and Testing of a Kraft Pulp Mill dated [-] (the
"Contract") between RWE Industrie-Losungen GmbH ("Contractor") and Zellstoff
Stendal GmbH ("Owner").
This is the Expiry of Defects Liability Period Certificate referred to
in Section 20.9 of the Contract. The Owner hereby certifies that the Expiry of
the Defects Liability Period (as defined in the Contract) has occurred on [-] in
accordance with, and subject to the conditions (including the reservation of the
Owner's rights with respect to certain continuing warranties referenced in
Attachment A hereto) contained in, Section 20.9 of the Contract.
Zellstoff Stendal GmbH
Name:
Title:
IN WITNESS WHEREOF, we have caused this Guarantee to be executed by one or more
to our officers thereunto duly authorized on this day of August, 2002.
(Name of Guarantor)
By:
Name:
Title:
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
5. FORM OF EXTENDED DEFECTS LIABILITY PERIOD BANK GUARANTEE
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
Form of Extended Defects Liability Period Bank Guarantee
Zellstof Stendal GmbH
Niedergorner Damm 1
D-39596 Ameburg
Guarantee No. (_____)
Dear Sirs:
(to be substantially in the form of the guarantee in Appendix 2, Exhibit 4)
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
6. Insurance
Bankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
Minimum Insurance Schedule
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CONSTRUCTION PHASE INSURANCE
1. Construction/Erection "All Risks" Material Damage Insurance
1.1 The Insured Parties
(a) Borrower and any Subsidiary Companies;
(b) The ERG Contractor AND/OR Contractor's Suppliers in respect of the EPC
Contract and the Contractor and/or Contractor's Suppliers in respect
of the non-EPC ancillary Contracts;
(c) Any consultants and suppliers for their site act ivities only;
(d) The independent Engineer,
Each for their respective rights and interests.
1.2 The Insured Property
All permanent and temporary works, preliminary works (including associatad works
and site mobilisation) executed or in course of execution, materials, goods,
parts, excavations, spare parts inventory, debris removal, consumables, fuels,
chemicals and oils and all other things equipment of whatsoever nature used for
or intended for incorporation within the Site, including the rail spur,
electricity, steam, gas and water interconnections, all designs drawings
specifications plans to be provided, together with computer and building
services equipment, all other parts or units or equipment plant and machinery of
whatever nature the property of the insured or for which they are responsible,
(but excluding any contractor's or sub contractor's constructional plant and
equipment), while on or adjacent to the Site and all associated and ancillary
works connected to the Plant.
1.3 Geographical Limits
Europe and Scandinavia.
1.4 Sum Insured
EURO * representing the amount equivalent to the total reinstatement value of
the Works and the Plant, including allowance for the costs of demolition and
debris removal and professional fees (including construction management,
Technical Advisers fees and fuel, chemical, raw material and Spares Inventory
at Site at the date of Acceptance), customs duties of the Works and the Plant
(as applicable). The sum insured is to operate in respect of each occurrence
of loss or damage to the insured property.
1.5 Indemnity
All risks of physical loss of or damage to any part of the Insured Property from
any cause not excluded.
1.6 Period of Insurance
From Financial Close (or the Commencement Date under the EPC Contract if
earlier) until the date of Acceptance, extending for an additional 18 months
thereafter with respect to cover during the Defects Liability Period.
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
23/08/02 1 HypoVereinsbank
Bankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
1.7 Main Exclusions
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The Insurers shall not be liable for:
(a) War, Civil War, etc. including Terrorism (until such time as insurance
against acts of Terrorism becomes available in the international
market on what the Security Agent accepts to be reasonable commercial
terms);
(b) Radioactive Contamination, etc;
(c) Wear and Tear and gradual deterioration but this shall not exclude
consequent loss or damage;
(d) Date Recognition Clause;
(e) Unexplained Disappearance or Shortages;
(f) Consequential Losses, loss of use, delay penalties;
(g) Contractor's or its Subcontractors' Constructional Plant and
Equipment;
(h) Loss of cash, banknotes, treasury notes, money orders, cheques or
stamps;
(i) Costs incurred arising out of wear, tear, wasting or wearing away,
gradual deterioration, rust, oxidation, corrosion or erosion but not
consequent damage;
(j) Marine and Air transits (but not transits by inland waterways);
(K) Vehicles licensed for road use.
1.8 Maximum Deductible
Not exceeding EURO 75,000 in respect of each and every occurrence of loss or
damage.
1.9 Main Extensions/Conditions
(a) Including loss or damage arising from acts of Terrorism, strikes,
riots, civil commotion and criminal/malicious damage (except that
insurance against acts of Terrorism will be excluded until such tim.e
as that insurance becomes available in the international market on
what the Security Agent accepts to be reasonable commercial terms);
(b) Natural Hazards Limit; Euro 12,500,000 each event and Euro 25,000,000
per annum;
(c) Defective Design cover only excluding the component part that is
detective but otherwise covering consequential damage;
(d) Debris removal;
(e) Expediting expenses;
(f) Professional and surveyors' fees;
(g) Automatic reinstatement of sum insured;
(h) Escalator on Sum Insured;
(i) Escalator on Limit of liability applied to Sum Insured;
(j) Seventy-two Hour Clause;
(k) Plans Specifications Drawings Electronic Records and data Clause;
(1) 50/50 Marine/Construction Loss Sharing Clause; (in) Temporary Repairs
and Minimising Loss; (n) Offsite Storage and inland Transits; (o)
Cover during Defects Liability Period to cover loss or damage caused
to the Works and the Plant by defects or whilst work is being
undertaken pursuant to the Defects Liability provisions of the
relevant EPC Contract.
23/08/02 2 HypoVereinsbank
Bankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
2. Delay in Start up/Advance Loss of Revenue Insurance (Construction)
2.1 The Insured Parties
Borrower
2.2 PERIOD OF INSURANCE
From Financial Close (OR the Commencement Date under the EPO Contract if
earlier) until the date of Acceptance.
2.3 Indemnity
Fixed operating costs and standing charges including loss of debt service
(interest -including fees- and Principal); plus any minimum take or pay
obligations; plus increased cost of working following delays in the date of
Start Up, incuding in the five month period from the date of Start Up until the
scheduled date of Acceptance, as a direct result of physical loss or damage
covered under Paragraph 1, "Construction! Erection "All Risks' Material Damage
Insurance," of this Minimum lnsurance Schedule including loss or damage, which
would be insured but for the application of any deductible, that causes an
interference in the construction work resulting in a delay to the scheduled date
of Start Up or such later date on which the Insured Business would have become
operational or causes an interruption of the operation as scheduled from the
date of Start Up until scheduled date of Acceptance, respectively.
2.4 Sum Insured
EURO * for any 12 months period of indemnification being an amount sufficient
to cover the Plant's fixed operating costs including interest, fees and
principal payable plus any minimum take or pay obligations for the duration
of the Indemnity Period.
2.5 Indemnity Period
A period of 18 months from the scheduled Start Up date including the period from
the scheduled date of Start Up until the scheduled date of Acceptance for FLEXA
(Fire Lightning Explosion and Aircraft) perils and Acts of God and 12 months
from the scheduled Start Up date including the period from the scheduled date of
Start Up until the scheduled date of Acceptance for Machinery Breakdown & all
other damage.
2.6 Main Exclusions
The insurance excludes any event not insured under paragraph 1 "Construction!
Erection "All Risks" Material Damage Insurance, above.
2.7 Maximum Time Excess
Not exceeding 60 days any one delay.
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
23/08/02 3 HypoVereinsbank
Bankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
3. Marine Cargo and Inland Transit Insurance
3.1 The Insured Parties
(a) Borrower and any Subsidiary Companies;
(b) The ERG Contractor and/or Contractors Suppliers in respect of the ERG
Contract and the Contractor and/or Contractor's Suppliers in respect
of the non-EPC ancillary Contracts;
(c) The Independent Engineer,
Each for their respective rights and interests.
3.2 Period of Insurance
From Financial Close (or the Commencement Date under the EPC Contract if
earlier) until date of delivery of the final consignment to the Site.
3.3 The Insured Property
All imported Cargoes and/or interest and/or stock of whatsoever description
including plant, equipment, machinery, (other than Contractors construction
plant and equipment), spare parts and other items for incorporation within the
Site.
3.4 SUM Insured
EURO 40,000,000 any one shipment but not less than 110% of the maximum value
(including cost of freight and insurance) any one conveyance and/or location of
each shipment and EURO 10,000,000 for Inland Transit.
3.5 Indemnity
Against "All Risks' of physical loss or damage while in transit by sea, air or
land or inland waterway portion of the journey or whilst in storage en route.
From the time the insured items leave the warehouse or factory anywhere in the
world for shipment or transit to, and until they are delivered and unloaded at
the Site, and return.
3.6 MAIN Exclusions
(a) German Institute Insolvency Exclusion Clause or Equivalent;
(b) German Institute Radioactive Contamination Exclusion Clause or
Equivalent;
(c) Excluding electrical and mechanical derangement unless caused by an
insured peril.
3.7 Main Extensions/Conditions
(a) German Institute Cargo and Air Cargo Clauses (A) or Equivalent;
(b) German Institute War Clauses (Cargo, Air Cargo) or Equivalent;
(c) German Institute Strikes Clause (Cargo, Air Cargo) or Equivalent;
(d) German Institute Classification Clause or Equivalent;
(e) German Institute Replacement Clause or Equivalent;
(f) 50/50 Marine Construction Loss Sharing and Concealed Damage clause;
(g) Debris Removal Clause;
(h) Expediting Expenses;
(i) Transhipment Clause;
(j) Accumulation Clause/Off- Site Storage.
3.8 Maximum Deductible
23/08/02 4 HypoVereinsbank
Sankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
Not to exceed EURO 10,000 each and every loss.
23/08/02 5 HypoVereinsbank
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Bankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
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4. Marine Delay in Start Up/ Marine Advance Loss of Revenue
4.1 The Insured Parties
Borrower
4.2 Period of Insurance
From the date of Financial Close or the Commencement Date under the EPC Contract
(if earlier) until the date of Start Up.
4.3 Indemnity
Fixed operating costs and standing charges including loss of debt service
(interest -including fees- and Principal) plus any minimum take or pay
obligations; plus increased cost of working following delays in Start Up as a
direct result of physical loss or damage covered under Paragraph 3, "Marine
CargoiTransit Insurance," of this Minimum insurance Schedule including loss or
damage, which would be insured but for the application of any deductible, that
causes an interference in the construction work resulting in a delay to the
scheduled date of Start Up or such later date on which the Insured Business
would have become operational.
4.4 Sum Insured
EURO * being an amount sufficient to cover the Project's fixed operating
costs including interest, fees and principal payable plus any minimum take or
pay obligations for the duration of the maximum Indemnity Period.
4.5 Indemnity Period
A minimum of 12 months from the scheduled date of Start Up.
4.6 Main Exclusions
The insurance excludes any event Insurance," above. not insured under
paragraph 3, "Marine Cargo/Transit
4.7 Maximum Time Excess
Not exceeding 60 days any one delay.
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
23/08/02 6 HypoVereinsbank
Bankrisk Services Steridal Pulp Mill Project
Insurance Due Diligence Arrangers Insurance Concept
5. Third Party Liability I Environmental Impairment Liability
5.1 The Insured Parties
(a) Borrower and Subsidiary Company;
(b) The EPC Contractor and/ar Contractors Suppliers in respect of the EPC
Contract and the Contractor and/or Contractors Suppliers in respect of
the non-EF'C ancillary Contracts;
(c) Any consultants and suppliers for their site activities only;
(d) The Independent Engineer;
(e) Each of their respective assigns, employees, agents, officers,
partners and Directors,
Each for their respective rights and interests.
5.2 Period of Insurance
From Financial Close (or the Commencement Date under the EPC Contract if
earlier) until the date of Acceptance, extending for an additional 18 months
thereafter with respect to cover required in respect of the EPC Contractor/and
or its Suppliers during the Defects Liability Period.
5.3 Indemnity
The legal and contractual liability of an Insured to pay damages, costs and
expenses as a result of:
(a) Death, bodily injury and dIsease (including mental shock) of any
person;
(b) Loss or damage to any third party property and/or loss of use thereof;
(c) Interference with traffic or property or any easement, right of air,
light, water, support or way or enjoyment at use by obstruction, loss
of amenities, nuisance, trespass or any like cause; and
(d) false arrest, invasion of privacy, detention, eviction or any like
cause,
Arising out of or in the course of or in connection with the performance of the
Works.
5.4 Geographical Limits
World-wide.
5.5 Limit of Indemnity
Notless than EURO 10,000,000 for any one occurrence or all occurrences of a
series consequent upon or attributable to one source or original source but in
respect of Products Liability EURO 10,000000 in the aggregate.
5.6 Maximum Deductible
Not more than EURO 25,000 in respect of third party property damage only and not
more than EURO 250,000 in respect of EIL.
5.7 Main Extensions/Conditions
(a) Cross Liabilities Clause;
(b) World-wide jurisdiction clause;
(c) legal costs and expenses;
(d) Contingent Motor Liability.
5.8 Main Exclusions
23/08/02 7 HypoVereinsbank
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Insurance Due Diligence Arrangers Insurance Concept
(a) Death of, or bodily injury to, or illness or disease contracted by,
the employees of the Insured claiming indemnity arising out of or in
the course of their employment;
(b) Property belonging to, or in the charge, or under the control of, the
Insured;
(c) Liability arising out of technical or professional advice given for a
fee by the Insured or by any person acting on behalf of the Insured
other than advice relating to the construction and operation of the
Plant in so far as insured under paragraph 1, "Construction! Erection
"All Risks" Material Damage Insurance," of this Minimum insurance
Schedule;
(d) Liability arising out of the use of mechanically propelled vehicles
for which compulsory insurance or security is required by legislation,
except whilst in use as a tool of trade;
(e) The cost of making good loss of or damage to property indemnified
under the insurance referred to in paragraph 1 "Construction! Erection
"All Risks" Material Damage Insurance," of this Minimum Insurance
Schedule;
(f) Liability arising from ownership, possession, use or control of any
aircraft or watercraft; and
(g) Liquidated damages or penalties under any agreement in connection with
delay or guarantees of performance or efficiency.
5.9 Environmental Impairment Insurance ("Umwelthaftpflichtversicheruflg")
(a) All events for which one of the insured becomes liable to pay in
respect of legal liabilities to third parties arising from
contamination of the Project Site, which results ri a pollution event
causing third party bodily injury or property damage;
(b) Temporary ownership in Cover Component 2.6 of the
Umwelthaftpflicht-Modefl des H UK-Verbandes;
(c) 36 month extended reporting period after cancellation.
23/08/02 8 HypoVereinsbank
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
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APPENDIX 2
COMMERCIAL EXHIBITS
7. Intentionally Omitted
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
8. Key Persons List
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERCIAL EXHIBITS
8. KEY PERSONS LIST
POSITION NAME
-------- ----
Project Sponsor Rolf Neuwinger
Project Director Georg A. Gross
Technical Director Denis P. Fournier
Commercial Director Bernd Kildentoft
Engineering Manager Joe Masella
Site Manager Miguel Sanchez
Manager Subcontracts Amd Pannenbecker
Administration Coordinator Dagmar Hermes
Commisioning Manager Phil Ebert
Civil Manager Renato Gori
Erection Manager Hans Koch
Planning / Scheduling Ulrich kohlhaas
Electrical Carlos Goncalves
Authority Coordination Hans Andres
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[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
|
APPENDIX 2
COMMERCIAL EXHIBITS
9. PAYMENT MILESTONE SCHEDULE
*
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 2
COMMERICAL EXHIBITS
10. FORM PARENT COMPANY GUARANTEE
APPENDIX 2 EXHIBIT 10
AGREED FORM OF PARENT COMPANY GUARANTEE
Zellstoff Stendal GmbH
Niedergorner Damm 1
D-39596 Arneburg
This Guarantee is provided by RWE Solutions AG (the "Guarantor") pursuant to the
Contract for Engineering, Design, Procurement, Construction, Erection and Start
Up made as of ( ) August, 2002 (the "Contract") between Zellstoff Stendal GmbH,
39596 Arneburg (the "Owner") and RWE Industrie-Losungen GmbH, 47051 Duisburg
(the "Contractor").
Guarantor, being the owner of the capital stock of the Contractor and in
consideration of and in order to induce the execution and delivery of and/or
performance of its obligations under the Contract by Owner, does hereby
unconditionally and irrevocably guarantee to the Owner:
(1) the due and punctual performance by or on behalf of Contractor of any
and all obligations of the Contractor contained in the Contract; and
(2) the payment when due of all sums which may become due on the part of
the Contractor under or pursuant to the Contract
(together the "Guaranteed Obligations").
We hereby undertake that if the Contractor fails to perform the Guaranteed
Obligations we shall assume the Guaranteed Obligations (SCHULDMITUBERNAHME) as
though they were our own and perform the Guaranteed Obligations at the place, to
the extent and in the manner as specified in the Contract. Guarantor agrees that
no invalidity or unenforceability of the Contract in breach of the
representations in paragraphs (3) and (4) below shall affect or impair its
liability under this Guarantee. Payments required to be made under this
Guarantee shall be made without set-off or counterclaim and free from deductions
or withholdings.
This Guarantee shall in all respects be a continuing, absolute, unconditional
and irrevocable performance guarantee, irrespective of the occurrence of any
circumstances which might otherwise constitute a legal or equitable defense. In
particular, the release by the Owner of any other security granted in connection
with the Contract in fulfillment of the Owner's obligations under any other
security agreement to effect such release shall not in any way affect the
obligations of the Guarantor hereunder.
The Guarantor in order to fulfill its obligations hereunder shall have the right
to appoint another contractor to complete the works, provided that such
appointment shall be subject to the prior written approval of the Owner, which
approval shall not be unreasonably withheld. At such time as Guarantor is
required to perform Contractor's obligations under the Contract, all rights and
obligations of Contractor under the Contract, including the right to receive all
payments due and owing by Owner to Contractor, shall be deemed to have been
transferred and assigned to it or to such contractor appointed by it; provided,
however, that (i) Guarantor first shall have notified Owner in writing of such
transfer and assignment of rights and
obligations, (ii) Owner shall have received Contractor's written acknowledgement
that its rights and obligations under the Contract have been transferred and
assigned, and (iii) Guarantor shall have executed and delivered to Owner an
indemnity reasonably satisfactory to Owner whereby the Guarantor agrees to
indemnify the Owner against and hold it harmless from any and all claims by or
through Contractor for payments from Owner under the Contract.
Guarantor hereby agrees that the Contract may be modified, amended and
supplemented with the written agreement of Contractor without Guarantor's
consent in any manner and agrees that no such modification, amendment or
supplement shall release, affect or impair its liability under this Guarantee.
Guarantor represents that:
(1) it is a company duly organized under the laws of the Federal Republic of
Germany and has and will have the necessary power to enable it to enter
into and perform its obligations under this Guarantee;
(2) the Contractor is a company duly organized under the laws of Germany and
has and will have the necessary power to enable it to enter into and
perform its obligations under the Contract;
(3) the Contract, as originally executed and delivered, has been duly
authorized by Contractor and has been duly executed by duly authorized
officers of Contractor;
(4) the obligations of Contractor under the Contract are, or when the
Contract becomes effective in accordance with its terms, will be valid
obligations of Contractor legally binding upon it and enforceable in
accordance with the terms and conditions of the Contract;
(5) this Guarantee has been duly authorized by Guarantor and has been duly
executed by duly authorized officers of Guarantor;
(6) Guarantor's obligations under this Guarantee are, or when this Guarantee
becomes effective in accordance with its terms, will be valid obligations
of Guarantor enforceable in accordance with the terms and conditions
hereof;
(7) all necessary authorisations to enable it to enter into this Guarantee
have been obtained and are and will remain in full force and effect;
(8) all necessary authorisations to enable the Contractor to enter into the
Contract have been obtained and are and will remain in full force and
effect;
(9) its obligations under this Guarantee rank and will rank at least equally
with all its other present and future unsecured and unsubordinated
obligations save that certain categories of its other obligations will,
however, be preferred in a liquidation by virtue of mandatory provisions
of statute;
(10) no stamp, registration or similar tax is payable, and no filing or
registration is required, in connection with the execution, performance
or enforcement of this Guarantee;
(11) the execution, delivery and performance of this Guarantee will not
conflict with (a) any agreement binding on it or any of its assets; (b)
its constitutional documents; or (c) any applicable law; and
(12) the execution, delivery and performance of the Contract by the Contractor
will not conflict with (a) any agreement binding on it or any of its
assets; (b) its constitutional documents; or (c) any applicable law.
This Guarantee shall become effective on the date on which all of the conditions
set forth in article 32 of the Contract have been satisfied (the `Commencement
Date') and will expire on the date on which all amounts payable by Contractor
under the Contract have been paid in full and all obligations to be performed by
Contractor under the Contract have been performed, after which date this
Guarantee shall become null and void unless Owner's written demand by registered
letter under this Guarantee has reached Guarantor at Frankfurt, Germany before 5
p.m. German time on such date.
Owner shall return this Guarantee to Guarantor no later than ten (10) days
following the date of its expiry provided that no demands are then outstanding.
This Guarantee may not be assigned or transferred by Guarantor without Owner's
prior written approval.
This Guarantee may not be assigned by Owner without Guarantor's prior written
approval, such approval not to be unreasonably withheld or delayed; provided
that no approval shall be required for the assignment of this Guarantee to
Owner's lenders by way of security and/ or any additional obligor or substitute
appointed pursuant to the Direct Agreement. Guarantor agrees to cooperate with
Owner's lenders and to provide an acknowledgement of any such assignment in such
terms as the lenders may reasonably require. Guarantor hereby waives notice of
acceptance and agrees with Owner that acceptance will be deemed to be effected
with receipt of this Guarantee by Owner.
Any dispute arising out of or in connection with the Guarantee shall be finally
and exclusively settled by arbitration pursuant to the "DEUTSCHE INSTITUTION FUR
SCHIEDSGERICHTSBARKEIT". The venue of arbitration proceedings shall be Berlin.
The language to be used in arbitration proceedings shall be English.
This Guarantee shall be governed by and construed in accordance with the laws of
Germany.
IN WITNESS WHEREOF,[ ] has caused this Guarantee to be executed by its
officers thereunto duly authorized on this (____) day of August, 2002.
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
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APPENDIX 3
TECHNICAL EXHIBITS
4 OBLIGATIONS OF OWNER
4.4 Owner's Permits and Licenses
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 3
EXHIBIT 4.4 - OWNER'S PERMITS AND LICENSES
The construction, erection and operation of the new mill is based on five (5)
major permits, see items 1-5 below.
The Owner is responsible for handling, applying and obtaining the following
permits and authorizations. In this activity the Contractor shall supply
assistance to the Owner as set forth in the Contract and according to
Appendix 3, Exhibit 13.
I. PERMIT BASED ON GERMAN FEDERAL LAW, CONCERNING THE PROTECTION AGAINST
HARMFUL EFFECTS ON THE ENVIRONMENT
The permitting Authority is the Regierungsprasidium Magdeburg, Land
Sachsen-Anhalt (LSA), which obtains assistance from other authorities and
experts (Sachverstandige) to control technical details.
1.1 The First Partial Permit '1 . Teilgenehmigung fur die Errichtung und den
Betrieb einer Zellstofffabrik fCir 555,450 ADtId" granted on January 22,
1998, is still valid to the extent that it has not been altered by the new
Permit (the "Modifying Permit"). It concerns the erection and operation of
the whole mill (except the Effluent Treatment Plant). Because Owner has
made several considerable changes to the original concept, for example *,
an application for a change in permit (Antrag zur wesentliche Anderung
der 1 . Teilgenehmiguflg) was submitted to the Authorities on 20 June 2001.
The Modifying Permit was granted on July 26, 2002 by the
RegierungspraSiditum Magdeburg, Land Sachsen-Anhalt (LSA). The modification
(Docket # 46b-44007-227) was made pursuant to Section 1 6 of the German
Federal Law, concerning the protection against harmful effects on the
environment.
The First Partial Permit (to the extent that it has not been altered by the
Modifying Permit) and the Modified Permit are binding documents for the
Plant.
1.2 During project execution, the Owner shall, upon receipt of adequate
information from the Contractor (if related to the Works):
- Inform the Authorities in an "Anderungsanzeige", in case of minor
changes to the mill concept and equipment.
- Apply to the Authorities in an "Anderungsantrag", in cases of major
changes to the mill concept and equipment.
1.3 The Owner shall apply for a second Partial Permit "2. Teilgenehmiguflg'
according to `Dampfkesselverordnung" (The Steam Boilers Act). Owner shall
submit this application to the Authorities after Owner has received the
required design specifications and construction drawings from Contractor.
The permitting procedure of the Authorities will require considerable time.
Zellstoff Stendal GmbH Kraft Pulp Mill Projec - Appendix 3 - Exhibit 4.4 -
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
Page 1
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ZELLSTOFF
STENDAL GmbH
2. APPROVAL OF THE PLAN TO CONSTRUCT AND OPERATE THE EFFLUENT TREATMENT PLANT
FOR THE STENDAL PULP MILL (Planteststellungsverfahren)
The approving Authority is the HegierungsprasidiUrfl Magdeburg, Land
Sachsen-Anhait (LSA).
An approval 'Plant esstellungSbesChlUSS fur den Bau und Betrieb einer
Abwasserbehandlungwsantage der Zellstofffabrik Stendal" was issued on 11
September 1 998. A new application "Antrag auf Planfeststellung nach
Section 155 Wasser Gesetz LSA fur Bau und Betrieb einer
AbwasserbehandluflgSanlage zugehorig zur geplanten Zellstofffabrik rn
lndustrie- und Gewerbepark Altmark", was submitted to the Authorities on 26
June 2001.
The approval for the Plant (PlanfeststellungsbeSchluSS) (Docket #
43.2.13-62632-62-2001) was granted on July 26, 2002, being a binding
document for the Plant.
3. Permit to withdraw surface water FROM THE ELBE River (Wasserrechtliche
Bewilligung fur die Entnahrne von OberflachenwasSer aus der Elbe)
Permitting Authority is the Regierungsprasidiufll Magdeburg, Land
Sachsen-Anhalt (LSA).
The present permit 'Wasserrechtliche Bewilligung zur Entnahme von Rohwasser
aus der Elbe" was approved on 6 November 1998 and is still valid, being a
binding document for the Plant.
This permit is satisfactory to the Contractor. No change in the permit is
foreseen or has been applied for.
4. PERMISSION TO DISCHARGE CLEANED EFFLUENT INTO THE ELBE River (Gehobene
Erlaubnis zur Einleitung von Abwasser in die Elbe)
Permitting Authority is the Regierungsprasidiurn Magdeburg, Land
Sachsen-Anhalt (LSA).
There is no existing permit.
An application for "Gehobene Erlaubnis zur Einleitung von Abwasser in die
Elbe" (permit for discharge of cleaned effluent into the Elbe River) was
submitted to the Authorities on 24 October 2001. The permit is expected to
be approved in due course.
The "Plant esstellungsbeschluss fur den Bau und Betrieb einer
Abwasserbehandlullgsafllage der Zellstofffabrik Stendal" defines
environmental compatibility and all limits for the emissions into the Elbe
River.
5. PERMIT TO CONSTRUCT AND OPERATE facilities FOR THE WATER INTAKE AND
EFFLUENT OUTFALL AT THE ELBE RIVER (Genehmigung fur Errichtung von einem
Em- BZW AUSLAUFBAUWERK am Ufer der Elbe).
Permitting Authority is the Wasser- und Schifffahrtsarflt (Water and
Shipping Authority) Magdeburg.
Zellstoff Stendal GmbH Kraft Pulp Mill Projec - Appendix 3 - Exhibit 4.4 -
Page 2
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ZELLSTOFF
STENDAL GmbH
The present permit `Strom- und Schifffahrtspolizeiliche Genehmigung fur
Errichtung von einem Em- bzw Auslaufbauwerk am Ufer der Elbe" was granted
on April 15, 2002, being a binding document for the Plant.
6. OTHER PERMITS AND APPROVALS
APPROVAL TO CONSTRUCT PIPELINES AND CABLES FROM MAIN MILL SITE TO THE SITE
AT THE ELBE RIVER.
Owner has made agreements with the owner(s) of the land where the pipelines
and electrical and signal cables will be located between the main site arid
the Elbe River site. Owner shall secure approval for Contractor's use of
this road and for construction by Contractor of the piping and electrical
works between the two sites, and the construction of approximately 50
meters of access road between these two sites.
Owner shall apply for certain permits related to water drainage.
7. OTHER PERMITS.
With regard to all other registrations, licenses and permits which may be
required by the authorities and which are required to be in the name of the
Owner, for the temporary or permanent use of land or facilities,
construction and operation of the Plant, permission for construction works
during the night and weekend times, Start-up, testing and operation of the
Plant (other than those Permits required to be obtained by the Owner as
specified in this Appendix 3, Exhibit 4.4, except items 1.3 and 5), and if
directly related to the Works, the Contractor shall;
a) identify all such registrations, licenses and permits, and;
b) provide correct and complete information, data, documents and
applications related thereto, and;
c) provide all necessary assistance to the Owner to obtain, maintain, and
if necessary, amend such registrations, licenses and permits, all in due
time for the completion of the Plant in accordance with the Time Schedule.
The Contractor is responsible for obtaining any permits, which are required
to be applied for in the name of the Contractor, and as indicated in
Appendix 3, Exhibit 13.
The Contractor shall provide to the Owner for its review, approval and
signature, one (1) original copy of any applications prepared by Contractor
pursuant to this Exhibit 4.4.
The following permits are entirely the responsibility of the Owner and the
Contractor shall not support or provide assistance to the Owner in any way
for any research, preparation, submission or any other activity, or be
involved in any discussion with the authorities, except as otherwise
provided in the Contract:
1. Genehmigung des Landesbeauftragten fur Eisenbahnen in Sachsen -
Anhalt.
Zellstoff Stendal GmbH Kraft Pulp Mill Projec - Appendix 3 - Exhibit 4.4 -
Page 3
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
2. Bau-/BetirebsgeflehmigUflg fur die Eisenbahnanbindung und die
eventuell notwendige EisenbahnbrUcke.
3. Genehmigung zur Sondernutzung der Oftentlichen Straf3en (except
as required for Contractor's Works).
4. Eventuell riotwenciige BO8 Funkzulassung.
5. Gewerbeamtliche Genehmigung fur den Betrieb der Kantine.
6. Genehmigung fur Abtransport und Deponie von Abfallen aus der
Zellstoffproduktion (Abfallwirtschaftsgesetz).
7. Forstwirtschaftliche Genehm igungen fur die Holzbeschaffung.
8. NutzungsgerlehmigLlflg (Durchleitungsrecht) fur Rohrleitungen auf
nicht eigenem Gelande.
9. Genehmigungen im Zusammenhang mit Personal und Arbeitsrecht fur
Betriebspersonal.
10. Erfullung von Auflagen aus dem Feuerwehrgesetz Sachsen-Anhalt
(except if part of EPC Contract).
8. APPLICATIONS FOR PERMIT MODIFICATIONS
The following applications for Permit modifications have been filed by the
Owner:
a) Building size modifications for the * were FILED on July 16, 2002.
b) A building size modification for the * was filed on August 9, 2002.
c) Building size modifications for the * and the * were filed on
August 12, 2002.
d) A modification to replace the * with * in the * was filed on
August 12, 2002.
e) Modifications to the size of the * and the * were filed on
August 21, 2002.
Zellstoff Stendal GmbH Kraft Pulp Mill Projec - Appendix 3 - Exhibit 4.4 -
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
Page 1
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 3
Exhibit 20:
Attachment 1
The milestones set out below and identified by an asterisk, are "Milestones" for
the purposes of the contract.
*
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
[RWE SOLUTIONS LOGO]
ZELLSTOFF
STENDAL GmbH
APPENDIX 4
BASE CASE
*
* Mercer has made an application to the SEC to redact this information. The
information has been filed separately with the SEC.
EXHIBIT 10.17
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT made the 30th day of December, 2002,
BETWEEN:
EQUITABLE INDUSTRIES LIMITED PARTNERSHIP, a limited
partnership formed under the laws of the Turks and
Caicos Islands
(the "Purchaser")
OF THE FIRST PART
AND:
MERCER INTERNATIONAL INC., a business trust organized
under the laws of the State of Washington, U.S.A.
(the "Vendor")
OF THE SECOND PART
WHEREAS:
A. On the Closing Date, the Vendor shall be the legal and beneficial owner
of the Purchased Shares; and
B. The Vendor has agreed to sell the Purchased Shares to the Purchaser and
the Purchaser has agreed to purchase the Purchased Shares from the
Vendor.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the covenants,
agreements, representations, warranties and indemnities herein contained and for
other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged by each party) the parties covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS. When used in this Agreement (including the recitals hereto)
the following terms shall, unless otherwise expressly provided, have the
meanings set out below and grammatical variations of such terms shall have
corresponding meanings:
(a) "AGREEMENT" means this purchase and sale agreement and the recitals
and Schedules hereto;
-2-
(b) "CLOSING" means the completion of the transactions contemplated in
this Agreement;
(c) "CLOSING DATE" means the date first above written or such other date
as may be mutually agreed upon by the Vendor and the Purchaser;
(d) "DEFERRED PAYMENT AMOUNT" means the amount owing by the Vendor to
Sihl pursuant to and calculated in accordance with the Landqart SPA;
(e) "ENCUMBRANCE" means any encumbrance, lien, charge, hypothec, pledge,
mortgage, title retention agreement, security interest of any
nature, adverse claim, exception, reservation, easement, right of
occupation, any matter capable of registration against title,
option, right of pre-emption, privilege or any contract to create
any of the foregoing;
(f) "GKB" means Graubunder Kantonal Bank;
(g) "LANDQART" means Landqart AG, a company organized under the laws of
Switzerland and limited by shares registered with the Commercial
Register of the Cantor of Grisons;
(h) "LANDQART SPA" means the Landqart share purchase agreement dated
December 14, 2001 between Sihl and the Vendor and respecting the
purchase by the Vendor from Sihl all of the issued and outstanding
shares of Landqart;
(i) "MANAGEMENT GROUP" means the management employees of Landqart
entitled to participate in the Management Option;
(j) "MANAGEMENT OPTION" means an option in favour of the Management
Group to acquire, in aggregate, up to 10% of the share capital of
Landqart;
(k) "OBLIGATIONS" means all of the obligations of the Vendor pursuant to
the terms of the Landqart SPA including, without limitation, all
obligations in respect of the Deferred Payment Amount;
(l) "PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or any other entity;
(m) "PURCHASE PRICE" has the meaning set out in section 2.2;
(n) "PURCHASED SHARES" means all legal and beneficial interest in, and
entitlement to, the existing shares in the capital of Landqart
excepting the approximately 20% interest therein transferred to and
held by GKB, and subject to the Management Option;
-3-
(o) "SIHL" means Sihl, a company organized under the laws of Switzerland
with an office at Allmendstrasse 125, 8041 Zurich, Switzerland;
(p) "UNITS" means 1,000,000 limited partnership units of the Purchaser;
and
(q) "UNIT SUBSCRIPTION AGREEMENT" means a unit subscription agreement
and power of attorney form for the Units substantially in the form
attached hereto as Schedule "A".
1.2 CURRENCY. Unless otherwise indicated, all dollar amounts referred to in
this Agreement are expressed in lawful money of the United States of
America.
1.3 SECTIONS AND HEADINGS. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and
shall not affect the interpretation of this Agreement. Unless otherwise
indicated, any reference in this Agreement to a section or a schedule
refers to the specified section of or schedule to this Agreement.
1.4 NUMBER AND GENDER. In this Agreement, words importing the singular
number only shall include the plural and vice versa, words importing
gender shall include both genders, the word "or" is not exclusive and
the word "including" is not limiting (whether or not non-limiting
language is used with reference thereto).
1.5 SEVERABILITY. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid, illegal or unenforceable
in any respect, such determination shall not impair or affect the
validity, legality or enforceability of the remaining provisions
hereof, and each provision is hereby declared to be separate, severable
and distinct.
1.6 SCHEDULES. The following Schedule attached hereto is integral to and
forms part of this Agreement:
Schedule "A" - Form of Unit Subscription Agreement and Power of
Attorney Form
ARTICLE 2
PURCHASE AND SALE OF THE PURCHASED SHARES
2.1 PURCHASE AND SALE OF THE PURCHASED SHARES. Subject to Section 2.3 hereof,
the Vendor covenants and agrees to sell, assign and transfer the Purchased
Shares to the Purchaser, and the Purchaser covenants and agrees to purchase the
Purchased Shares from the Vendor, on the Closing Date.
2.2 PURCHASE PRICE. The purchase price payable by the Purchaser to the Vendor
for the Purchased Shares (the "Purchase Price") shall be the sum of Ten Million
($10,000,000) Dollars payable by issuing the Units to the Vendor on the Closing
Date, and the Purchaser covenants and agrees to issue the Units and to deliver a
certificate(s) representing the Units to the Vendor on the Closing Date in
accordance with the terms hereof.
-4-
2.3 RESIDUAL INTEREST ADJUSTMENTS. If the Vendor is not able to complete the
transfer of legal and/or beneficial title to all of the Purchased Shares to the
Purchaser on the Closing Date, to the extent that all or any portion of such
legal and/or beneficial title to the Purchased Shares is not so transferred (the
"Residual Interest"), the Vendor shall hold such Residual Interest absolutely in
trust and for the exclusive benefit and use of the Purchaser until such time as
all of the legal and beneficial title and interest in and to such Residual
Interest is fully and completely transferred to the Purchaser. Notwithstanding
the foregoing, the Vendor and Purchaser shall use their best efforts to complete
the transfer of the Purchased Shares to the Purchaser on the Closing Date and to
effect all registrations that may be necessary or desirable in connection
therewith.
2.4 ASSUMPTION. The Purchaser hereby assumes all of the Obligations, and
covenants to perform and pay each of the Obligations in accordance with the
terms thereof, provided that if, for any reason, the assumption provided for
herein is not effective as against any third party, due to lack of receipt of
any required consent, or for any other reason, the Purchaser will indemnify the
Vendor in respect thereof in accordance with Section 2.5 hereof.
2.5 INDEMNITY. The Purchaser hereby covenants and agrees to indemnify and hold
harmless the Vendor from and against all claims, demands, proceedings, losses,
damages, liabilities, deficiencies, costs and expenses of any nature whatsoever,
whether accrued, absolute, contingent or otherwise (including, without
limitation, all legal and other professional fees and disbursements, interest,
penalties and amounts paid in settlements) arising out of or in connection with
the Obligations including, without limitation, any claim in respect of the
Deferred Payment Amount.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE VENDOR. The Vendor represents and
warrants to the Purchaser as follows and acknowledges that the Purchaser is
relying on such representations and warranties in connection with its purchase
of the Purchased Shares:
(a) ORGANIZATION. The Vendor is duly organized, validly existing and in
good standing under the laws of the State of Washington, U.S.A. and
has the corporate power to enter into this Agreement and to perform
its obligations hereunder;
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. The Vendor has the requisite
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of
this Agreement by the Vendor has been duly authorized by all
necessary action on the part of the Vendor and no other corporate
proceedings on the part of the Vendor are necessary to authorize
this Agreement. This Agreement has been duly executed and delivered
by the Vendor and constitutes a legal, valid and binding obligation
of the Vendor, enforceable in accordance with its terms, subject to
the availability of equitable remedies and the enforcement of
creditors' rights generally;
(c) NO OTHER AGREEMENTS TO PURCHASE. Other than pursuant to the
Management Option and as disclosed in writing to the Purchaser, no
person other than the
-5-
Purchaser has any written or oral agreement or option or any right
or privilege (whether by law, pre-emptive or contractual) capable
of becoming an agreement or option for the purchase or
acquisition from the Vendor of any of the Purchased Shares; and
(d) OWNERSHIP OF PURCHASED SHARES. Other than pursuant to the Management
Option and as disclosed in writing to the Purchaser, the Vendor is
the sole legal and beneficial owner of the Purchased Shares with
good and marketable title thereto, free and clear of all
Encumbrances. Upon Closing, other than as disclosed in writing to
the Purchaser, all of the Purchased Shares will be owned by the
Purchaser as the sole legal and beneficial owner, with a good and
marketable title thereto, free and clear of all Encumbrances.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser represents
and warrants to the Vendor as follows and acknowledges that the Vendor is
relying on such representations and warranties in connection with its sale of
the Purchased Shares:
(a) ORGANIZATION. The Purchaser is a limited partnership duly formed,
validly subsisting in all respects under the laws of the Turks and
Caicos Islands and has the necessary power to enter into this
Agreement and to perform its obligations hereunder;
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. The Purchaser has the
requisite power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of
this Agreement by the Purchaser has been duly authorized by the
board of directors of the General Partner, for and on behalf of the
Purchaser, and no other corporate proceedings on the part of the
Purchaser or the General Partner are necessary to authorize this
Agreement. This Agreement has been duly executed and delivered by
the Purchaser and constitutes a legal, valid and binding obligation
of the Purchaser, enforceable against it in accordance with its
terms.
ARTICLE 4
CONDITIONS OF CLOSING
4.1 CORPORATE ACTION. The Vendor shall use its best efforts to take all
necessary corporate action, steps and proceedings to approve or authorize,
validly and effectively, the execution, delivery and consummation of the
transactions contemplated by this Agreement and the other agreements and
documents contemplated hereby and to complete the transfer of the Purchased
Shares to the Purchaser and to cause all necessary meetings of trustees of the
Vendor to be held for such purpose.
4.2 BEST EFFORTS. Each party hereto shall each use its respective best efforts
to satisfy the conditions contained herein.
4.3 DELIVERY OF DOCUMENTS. The Vendor shall deliver to the Purchaser all
necessary transfers, assignments and other documentation reasonably required to
transfer the Purchased Shares to the Purchaser with a good and marketable title,
free and clear of all Encumbrances.
-6-
4.4 CONDITIONS OF CLOSING IN FAVOUR OF THE PURCHASER. The completion of the
exchange of the Purchased Shares for the Units is subject to the following terms
and conditions, to be fulfilled or performed at or prior to Closing:
(a) PERFORMANCE OF OBLIGATIONS. The Vendor shall be in compliance in all
material respects with all of its obligations under this Agreement,
including the delivery of all documents required to be delivered by
the Vendor pursuant to this Agreement on or prior to the Closing
Date;
(b) NO JUDGMENTS. No judgment or order shall have been issued by any
agency or governmental authority, no action, suit or proceeding
shall have been threatened or taken by any agency or governmental
authority or person, and no law, regulation or policy shall have
been proposed, enacted, promulgated or applied which makes it
illegal or otherwise directly or indirectly restrains, enjoins,
prohibits or imposes material limitations or conditions on: (i) the
acquisition by, or the disposition by the Vendor to, the Purchaser
of the Purchased Shares; (ii) the acquisition of the Units by, or
the issuance of the Units by the Purchaser to, the Vendor; or (iii)
the completion of the transactions contemplated by this Agreement;
(c) REPRESENTATIONS AND WARRANTIES. the representations and warranties
of the Vendor and the Purchaser contained in this Agreement shall be
true and correct in all material respects on Closing; and
(d) COVENANTS. all of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Vendor and the
Purchaser at or before the Closing shall have been complied with or
performed.
4.5 OPTION TO WAIVE CONDITIONS. The conditions contained in sections 4.1 (b) and
(c) hereof may be waived in whole or in part by the party entitled to claim the
benefit thereof, in writing, without prejudice to any claims such party may have
for breach of covenant, representation or warranty.
4.6 CONDITIONS OF CLOSING IN FAVOUR OF THE VENDOR. The purchase and sale of the
Purchased Shares is subject to the following terms and conditions for the
exclusive benefit of the Vendor, to be fulfilled or performed at or prior to the
Closing Date:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser contained in this Agreement shall be true and
correct in all material respects on the Closing Date, with the same
force and effect as if such representations and warranties were made
at and as of such time; and
(b) COVENANTS. All of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Purchaser at or
before the Closing Date shall have been complied with or performed
in all material respects.
Any such condition may be waived in whole or in part by the Vendor
without prejudice to any claims it may have for breach of covenant,
representation or warranty.
-7-
ARTICLE 5
CLOSING ARRANGEMENTS
5.1 CLOSING. The Closing shall take place on the Closing Date.
5.2 VENDOR'S CLOSING DOCUMENTS. At the Closing, the Vendor shall deliver or
cause to be delivered the following to the Purchaser:
(a) an originally executed copy of this Agreement;
(b) an originally executed copy of the Unit Subscription Agreement;
(c) if available, subject to Section 2.3 hereof, Landqart share
certificate(s) representing the Purchased Shares issued in the
name of the Purchaser duly endorsed for transfer to the
Purchaser;
(d) if available, subject to Section 2.3 hereof, a certified copy
of resolutions of Landqart approving the transfer of the
Purchased Shares to the Purchaser and the entry of the
Purchaser as the holder of the Purchased Shares in the share
register of Landqart; and
(e) such other documents and assurances as may reasonably be
requested by the Purchaser to more effectively complete the
transactions contemplated by this Agreement.
5.3 PURCHASER'S CLOSING DOCUMENTS. At the Closing, the Purchaser shall deliver
the following to the Vendor:
(a) an originally executed copy of this Agreement;
(b) an originally executed copy of the Unit Subscription Agreement;
(c) an originally executed unit certificate representing the Units
issued to the Vendor; and
(d) such other documents and assurances as may reasonably be requested
by the Vendor to more effectively complete the transactions
contemplated by this Agreement.
5.4 TERMS OF CLOSING. The Closing shall not occur, nor shall the documents
tabled for delivery at the Closing be delivered, until all conditions of the
Closing have been satisfied or waived and all matters have been completed to
permit contemporaneous closing of the transactions as provided for herein.
5.5 FURTHER ASSURANCES. Each party to this Agreement covenants and agrees that,
from time to time subsequent to the Closing Date, it shall, at the request and
expense of the requesting party, execute and deliver all such documents,
including, without limitation, all such additional
-8-
conveyances, transfers, consents and other assurances and do all such other
acts and things as the other party hereto, acting reasonably, may from time
to time request be executed or done in order to better evidence or perfect or
effectuate any provision of this Agreement or of any agreement or other
document executed pursuant to this Agreement or any of the respective
obligations intended to be created hereby or thereby, including, without
limitation, the transfer of any Residual Interest in the Purchased Shares.
ARTICLE 6
MISCELLANEOUS
6.1 SURVIVAL OF COVENANTS. The rights and obligations of the Vendor and the
Purchaser hereunder shall survive the execution and delivery of this Agreement
and the Closing Date and continue in full force and effect until the full
payment and satisfaction of all indebtedness and obligations of the Purchaser
and the Vendor hereunder.
6.2 NOTICES.
(a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be delivered in person,
transmitted by facsimile or similar means of recorded electronic
communication or sent by registered mail, charges prepaid, addressed
as follows:
(i) if to the Vendor:
Equitable Industries Limited Partnership
Cockburn House, Market Street
P.O. Box 70, Grand Turk
Turks and Caicos Islands
Attention: General Partner
Facsimile No.: 01 649 946 2758
(ii) if to the Purchaser:
Mercer International Inc.
c/o 555 S. Renton Village Place
Suite 700
Renton, Washington, U.S.A., 98055
Attention: David Wilson, Heller Ehrman
Facsimile No.: (206) 447-0849
(b) Any such notice or other communication shall be deemed to have been
given and received on the day on which it was delivered or
transmitted so long as the delivery or transmission occurs during
normal business hours or, if mailed, on the fifth business day
following the date of mailing; provided, however, that if at the
time of
-9-
mailing or within five days thereafter there is or occurs a
labour dispute or other event that might reasonably be expected to
disrupt the delivery of documents by mail, any notice or other
communication hereunder shall be delivered or transmitted by means
of recorded electronic communication as aforesaid.
(c) Any party may at any time change its address for service from time
to time by giving notice to the other parties in accordance with
this section 6.2
6.3 EXPENSES. Except as otherwise provided herein, each of the parties shall
bear its own expenses in relation to this Agreement.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether written or
oral. There are no conditions, covenants, agreements, representations,
warranties or other provisions, express or implied, collateral, statutory or
otherwise, relating to the subject matter hereof except as herein provided.
6.5 TIME OF ESSENCE. Time shall be of the essence of this Agreement.
6.6 APPLICABLE LAW. This Agreement shall be constructed, interpreted and
enforced in accordance with, and the respective rights and obligations of the
parties shall be governed by, the laws of the State of Washington and all
federal laws of the U.S.A. applicable therein and each party hereby irrevocably
and unconditionally submits to the non-exclusive jurisdiction of the courts of
the State of Washington and all courts competent to hear appeals therefrom.
6.7 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of and
shall be binding upon and be enforceable by the parties and, where the context
so permits, their respective successors and permitted assigns. Any such
assignment shall not relieve the Purchaser from any of its obligations
hereunder, provided further that any assignee shall execute an acknowledgement
to the effect that it is bound by all of the obligations of the Purchaser set
out herein.
6.8 AMENDMENT AND WAIVERS. No amendment or waiver of any provision of this
Agreement shall be binding on any party unless consented to in writing by such
party. No waiver of any provision of this Agreement shall constitute a waiver of
any other provision, nor shall any waiver constitute a continuing waiver unless
otherwise expressly provided.
6.9 BEST EFFORTS. The parties acknowledge and agree that, for all purposes of
this Agreement, an obligation on the part of any party to use its best efforts
to obtain any waiver, consent, approval, permit, license or other document shall
not require such party to make any payment to any person for the purpose of
procuring the same, other than payments for amounts due and payable to such
person, payments for incidental expenses incurred by such person and payments
required by any applicable law or regulation.
6.10 NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns.
-10-
6.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall constitute an original and all of which taken together shall constitute
one and the same instrument.
6.12 FACSIMILE. The parties hereto agree that this Agreement may be transmitted
by facsimile or such similar device and that the reproduction of signatures by
facsimile or such similar device will be treated as binding as if originals and
each party hereto undertakes to provide each and every other party hereto with a
copy of this Agreement bearing original signatures forthwith.
IN WITNESS WHEREOF this Agreement has been executed as of the day and year first
above written.
MERCER INTERNATIONAL INC.
Per: /s/ Jimmy S.H. Lee
----------------------------------------
Authorized Signing Officer
|
Per:
Authorized Signing Officer
EQUITABLE INDUSTRIES, LTD.,
as general partner for and on behalf of
EQUITABLE INDUSTRIES LIMITED
PARTNERSHIP
By: /s/ Slobodan Anjic
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
|
SCHEDULE "A"
FORM OF SUBSCRIPTION AGREEMENT
AND POWER OF ATTORNEY FORM
EQUITABLE INDUSTRIES LIMITED PARTNERSHIP
SUBSCRIPTION AGREEMENT AND POWER OF ATTORNEY FORM
Mercer International Inc. (the "Purchaser") hereby subscribes for and agrees to
purchase from Equitable Industries Limited Partnership, a limited partnership
formed under the laws of the Turks and Caicos Islands (the "Partnership"), ONE
MILLION (1,000,000) limited partnership units ("Units") for the purchase price
of US $10.00 per Unit for an aggregate subscription price of US $10,000,000 (the
"Subscription Price") and the Partnership by its acceptance hereof agrees to
issue and sell to the Purchaser the Units. The Subscription Price shall be paid
by the Purchaser by transferring to the Partnership the Purchased Shares, as
such term is defined in the Purchase and Sale Agreement of even date hereof
entered into between the Purchaser and the Partnership. The agreement made by
the Partnership's acceptance hereof is subject to the terms and conditions
described below.
1. The Purchaser hereby accepts this subscription agreement and power of
attorney form (this "Subscription Agreement") and agrees to purchase the
Units on the terms hereof and hereby agrees to be bound, as a party to and
as a limited partner in the Partnership, by the terms of a limited
partnership agreement dated as of December 12, 2001 relating to the
Partnership, as from time to time amended and in effect (the "Partnership
Agreement"), as if the Purchaser had executed the Agreement and hereby
ratifies, for all legal purposes, execution of the Partnership Agreement on
behalf of the Purchaser and all actions taken on behalf of the Purchaser
pursuant thereto.
2. The Purchaser declares that the Purchaser has the capacity and competence
and, if a corporation, it has the necessary corporate authority, to execute
this Subscription Agreement and to enter into the Partnership Agreement.
3. In addition, in consideration of the general partner accepting the
subscription for units contemplated hereby and conditional thereon:
(a) the Purchaser agrees to be bound as a limited partner in the Partnership
by the terms of the Partnership Agreement and hereby expressly ratifies
and confirms the power of attorney given to the General Partner in
section 2.11 therein, which power of attorney is incorporated by
reference herein; and
(b) the Purchaser hereby irrevocably nominates, constitutes and appoints the
General Partner, with full power of substitution, as its agent and true
and lawful attorney to act on the Purchaser's behalf with full power and
authority in its name, place and stead to execute and record or file as
and where required, for and on its behalf, the Partnership Agreement,
any amendments thereto made in accordance with the Partnership Agreement
and any other agreements, documents or instruments referred to in
section 2.11 of the Partnership Agreement.
A-2
4. The power of attorney granted herein and in the Partnership Agreement (the
"Power of Attorney") is irrevocable and is a power coupled with an interest,
shall survive the death or disability of the Purchaser and the transfer or
assignment by the Purchaser of the whole or any part of the interest of the
Purchaser in the Partnership, extends to the heirs, executors,
administrators, successors, transferees, assigns and other legal
representatives of the Purchaser, and shall survive the subsequent legal
incapacity of such transferee, and may be exercised by the General Partner
on behalf of the Purchaser and each transferee in executing any instrument
by facsimile signature or by listing the Purchaser, any transferee and all
of the limited partners in the Partnership and executing such instrument
with a single signature as attorney and agent for any and all of them
including the Purchaser. The Purchaser agrees to be bound by any
representations or actions made or taken by the General Partner pursuant to
the Power of Attorney and hereby waives any and all defences which may be
available to contest, negate or disaffirm any action of the General Partner
taken in good faith under the Power of Attorney.
5. The Power of Attorney shall continue in respect of the General Partner so
long as it is the general partner of the Partnership, and shall terminate
thereafter, but shall continue in respect of a new general partner as if the
new general partner were the original attorney.
6. The Purchaser hereby acknowledges receiving a copy of the Partnership
Agreement.
7. Unless otherwise indicated, capitalized terms used herein shall have the
meaning ascribed thereto in the Partnership Agreement.
DATED this day of December, 2002.
--------------------- -----------------------------------
(Witness) (Authorized Signatory of Purchaser)
MERCER INTERNATIONAL INC.
-----------------------------------
(Name)
|
This Subscription Agreement and Power of Attorney Form is accepted by Equitable
Industries, Ltd., as the general partner for and on behalf of Equitable
Industries Limited Partnership this day of December, 2002.
EQUITABLE INDUSTRIES, LTD.,
as general partner for and on behalf of
EQUITABLE INDUSTRIES LIMITED
PARTNERSHIP
By:
Name:
Title:
EMPLOYMENT AGREEMENT
made by and between
ZPR Zellstoff- und Papierfabrik Rosenthal Holding
GmbH, Pirnaer Str. 31-33, 01809 Heidenau
(hereinafter referred to as the "company")
and
Mr. Maarten Reidel, Neudorf, 24321 Howacht
(hereinafter referred to as "Employee")
SECTION 1
FUNCTIONS AND RESPONSIBILITIES
1. Mr. Reidel will be responsible for the strategic development of the Company.
The company may assign the Employee to positions with affiliates of the company
which positions the Employee agrees to fill out without additional compensation.
This in particular includes the position as CFO of the Company's shareholder
Mercer International Inc..
2. The Employee shall report to the Company and its shareholder Mercer
International Inc if not decided otherwise by the shareholder's meeting.
3. The Employee's office location is Berlin.
SECTION 2
TERM OF AGREEMENT
1. This agreement is effective from 1. July, 2002 and replaces all earlier
agreements between the parties.
2. This agreement is entered into for indefinite time.
3. This agreement may be terminated by the parties by giving three (3) months'
notice to the end of a month unless the termination is due to serious breach of
this contract or illegal actions in which cases no notice period is required.
The termination notice for termination of this agreement has to be in writing.
4. If termination notice is given with respect to this agreement, no matter by
which party, the company is entitled to suspend the Employee's obligation to
perform services for the company until the actual termination date or may, for
the transitory period until the actual termination date, assign the Employee to
other positions with the company or its affiliates. If the Employee's
obligations are suspended he shall use all reasonable effort to find gainful
2
employment during the transitory period, and the company shall be no longer
obligated to pay to the Employee compensation under this agreement to the extent
that the Employee receives compensation from such new employment.
5. This agreement shall terminate without expressed termination notice at the
end of the month in which the Employee completes his 65th year of life.
SECTION 3
COMPENSATION
1. The Employee shall as compensation for his services receive an annual gross
salary of EUR 300.000,- (in words: three hundred thousand Euro). The annual
salary shall be paid in twelve equal instalments at the end of each calendar
month under withholding of applicable tax and social security deductions
(statutory pension plan, unemployment insurance).
2. Additionally the Employee is entitled to a bonus payment according to the
Mercer International Inc. Bonus Program. The bonus payment will be agreed
between the shareholder of the Company, Mercer International Inc., and the
Employee after the end of each business year.
3. The Employee is entitled to participate in the Mercer stock option program.
He will receive a total of 100.000 Mercer stock options of which 48.000 are due
with the signature of this agreement. The remaining 52.000 stock options will be
transferred to the Employee until 31. December 2002.
SECTION 4
COMPENSATION IN CASE OF INCAPACITATION
1. In case of temporary incapacitation of the Employee caused by illness or
another reason for which the Employee is not responsible, statutory law is
applicable for the continuation of compensation payments.
2. The Company agrees to take out for the Employee, an accident insurance with a
total coverage of EUR 125.000,- in case of death and EUR 250.000,- in case of
disability.
SECTION 5
VACATION
The Employee is entitled to an annual vacation of thirty (30) working days (one
week = five working days). The time during which such vacation is taken shall be
decided after the consultation with the Company.
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SECTION 6
OTHER BENEFITS
1. The Employee shall, for the performance of his function under this Agreement,
be provided with a company car with a maximum value of 60.000,- Euros which he
may also use for personal purposes. The income tax on the monetary advantage of
the private use shall be paid by the Employee.
2. Expenses which the Employee will incur in performing his responsibilities
under this Agreement, including travel and other expenses, shall be reimbursed
if supported by individual vouchers. At the Employee's option, per diem and
overnight allowances may be reimbursed on a lump-sum basis at the maximum rate
from time to time permitted under applicable tax laws.
3. The Employee is entitled to reimbursement of half of his costs of private
health insurance against invoice.
4. The Company will provide the Employee with a mobile telephone.
5. The Company will reimburse to the Employee the amount of 1.200,- EUR per
month for cost of rent for a period of 12 months.
SECTION 7
ADDITIONAL EMPLOYMENT, NON-COMPETITION CLAUSE
1. The Employee shall devote his full attention and time, as well as
professional knowledge and experience, exclusively to the company. The
acceptance of any compensated or non-compensated additional employment as well
as of the service on supervisory or advisory boards or similar positions is
subject to the prior written consent of the shareholder's meeting.
2. During the time of his employment with the company the Employee shall not
engage, directly or indirectly, in any venture, business or enterprise which
competes with the company or with which the company maintains relations.
SECTION 8
CONFIDENTIALITY
The Employee agrees that he will keep all affairs of the company absolutely
confidential to third parties. This obligation shall survive the termination of
the services for the company.
SECTION 9
RECORDS AND OTHER COMPANY PROPERTY
When leaving the service of the company, or after being suspended from his
obligation to render services pursuant to ss. 2 subparagraph 4, the Employee
agrees to return to the Company any and
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all documents, correspondence, records, drafts and the like which concern
Company matters and which are still in his possession. The Employee is not
entitled to exercise a right of retention with respect to such records and
objects.
SECTION 10
FINAL PROVISIONS
1. Amendments and additions to this Agreement, including this provision, must be
in writing. There are no oral side agreements to this Agreement. This Agreement
supersedes all earlier agreements.
2. Should any provision of this Agreement become wholly or in part invalid, the
remaining parts of this Agreement shall not be affected. The invalid provision
shall be replaced in such case by such valid provision which comes as close as
possible to the economic intent of the parties.
/s/ Jimmy Lee
-----------------------------------------------
ZPR Zellstoff- und Papierfabrik Rosenthal Holding GmbH
Jimmy Lee, Managing Director
/s/ Maarten Reidel
-----------------------------------------------
Maarten Reidel
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EXHIBIT 10.19
TRUSTEE'S INDEMNITY AGREEMENT
THIS AGREEMENT dated for reference the o day of January, 2003.
BETWEEN:
o, Businessman
(the "Trustee")
AND:
MERCER INTERNATIONAL INC., a Massachusetts business trust
organized under the laws of the State of Washington with an
office at One Renton Place, 555 S. Renton Village Place,
Suite 700, Renton, Washington, 98055
(the "Company")
WITNESSES THAT WHEREAS:
A. It is essential to the Company to retain and attract as trustees and
officers the most capable persons available;
B. The Trustee is a trustee and/or officer of the Company;
C. Both the Company and the Trustee recognize the increased risk of
litigation and claims being asserted against directors, trustees and
officers of public companies in today's environment; and
D. In recognition of the Trustee's need for substantial protection
against personal liability and in order to enhance the Trustee's
continued service to the Company in an effective manner, the Company
wishes to provide in this Agreement for the indemnification of the
Trustee to the fullest extent permitted by law and as set forth in
this Agreement.
NOW THEREFORE in consideration of the premises, the respective covenants of the
parties herein and other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged), the parties hereto covenant and
agree as follows:
1. INTERPRETATION
1.1 DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the following meanings, respectively:
(a) "BOARD" means the board of trustees of the Company;
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(b) "CLAIM" or "CLAIMS" has the meaning ascribed to such term in
Subsection 2.1(a) hereof;
(c) "CHANGE IN CONTROL" shall be deemed to have occurred if:
(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the SECURITIES EXCHANGE ACT OF 1934, as
amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of
the Company or a corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership
of shares of beneficial interest of the Company,
becomes the "beneficial owner" (as defined in Rule
13d-3 under said Act), directly or indirectly, of
securities of the Company representing 20% or more of
the total voting power represented by the Company's
then outstanding Voting Securities;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board and any new trustee of the
Company whose election by the Board or nomination
for election by the Company's shareholders was
approved by a vote of at least two-thirds of the
trustees of the Company then still in office who
either were trustees of the Company at the beginning
of such period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than a merger or consolidation
which would result in the Voting Securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into Voting
Securities of the surviving entity) at least 50.1%
of the total voting power represented by the Voting
Securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation, or the shareholders of the Company
approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition
by the Company of (in one transaction or a series of
transactions) all or substantially all of the
Company's assets;
(d) "COSTS" has the meaning ascribed thereto in Subsection 2.1(b)
hereof;
(e) "EXPENSE ADVANCE" has the meaning ascribed to such term in
Section 2.2 hereof;
(f) "INDEMNIFIABLE EVENT" has the meaning ascribed to such term in
Subsection 2.1(a) hereof;
(g) "INDEPENDENT LEGAL COUNSEL" means an attorney or firm of
attorneys, selected in accordance with the provisions of
Section 6.1 hereof, who shall not have
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otherwise performed services for the Company or the Trustee
within the last [TWO] years (other than with respect to
matters concerning the rights of the Trustee under this
Agreement, or of other trustees of the Company under similar
indemnity agreements);
(h) "POTENTIAL CHANGE IN CONTROL" shall be deemed to have occurred
if:
(i) the Company enters into an agreement, the
consummation of which would result in the occurrence
of a Change in Control;
(ii) any person (including the Company) publicly
announces an intention to take or to consider taking
actions which if consummated would constitute a
Change in Control;
(iii) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of
the Company or a corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their
ownership of shares of beneficial interest of the
Company, who is or becomes the beneficial owner,
directly or indirectly, of securities of the Company
representing [10%] or more of the combined voting
power of the Company's then outstanding Voting
Securities, increases his beneficial ownership of
such securities by [FIVE PERCENTAGE POINTS (5%)]
or more over the percentage so owned by such
person; or
(iv) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change
in Control has occurred;
(i) "RELATED COMPANIES" has the meaning ascribed to such term in
Subsection 2.1(a) hereof;
(j) "REVIEWING PARTY" means any appropriate person or body
consisting of a member or members of the Board or any other
person or body appointed by the Board who is not a party to
the particular Claim for which the Trustee is seeking
indemnification, or the Independent Legal Counsel; and
(k) "VOTING SECURITIES" means any securities of the Company which
vote generally in the election of trustees of the Company.
1.2 EFFECTIVE DATE. Notwithstanding the date of its execution and
delivery, this Agreement shall be conclusively deemed to commence on,
and be effective as of, the day upon which the Trustee first became or
becomes a trustee or officer of the Company and shall survive and
remain in full force and effect after the Trustee ceases to be a
trustee or officer of the Company and after the termination of the
Trustee's employment with the Company.
2. INDEMNITY
2.1 INDEMNIFICATION. Subject to Section 3.1, the Company shall indemnify
and save harmless the Trustee to the fullest extent permitted by law
against and from:
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(a) any and all charges and claims of every nature and kind
whatsoever which may be brought, made or advanced by any
person, firm, corporation or government, or by any
governmental department, body, commission, board, bureau,
agency or instrumentality against the Trustee, and any and
all threatened, pending or completed actions, suits or
proceedings, or any inquires or investigations, whether
instituted by the Company or any other person, that the
Trustee in good faith believes might lead to the institution
of any such action, suit or proceeding, whether civil,
criminal, administrative, investigative or other, against the
Trustee, including any and all actions, suits, proceedings,
inquires or investigations in which the Trustee was, is,
becomes or is threatened to be made a party to or witness or
other participant in (a "CLAIM", or, collectively, "CLAIMS"),
by reason of (or arising in part out of) the Trustee being a
director, officer, trustee, employee or agent of the Company,
any of the Company's subsidiaries, or any company,
partnership, joint venture, trust or other enterprise related
to or affiliated with the Company or which the Trustee was
serving at the request of the Company as a director, officer,
trustee, employee or agent (the "RELATED COMPANIES"), or that
arise out of or are in any way connected with the management,
operation, activities, affairs or existence of the Company or
any of its Related Companies (an "INDEMNIFIABLE EVENT");
(b) any and all costs, damages, expenses (including legal fees
and disbursements on a full indemnity basis), judgements,
fines, liabilities, penalties (statutory and otherwise),
losses and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in
connection with or in respect of such costs, damages,
expenses, judgements, fines, liabilities, penalties, losses
or amounts paid in settlement) (referred to herein as
"COSTS") which the Trustee may sustain, incur or be liable
for by reason of (or arising in part out of) an
Indemnifiable Event whether sustained or incurred by reason
of his negligence, default, breach of duty, breach of
trust, failure to exercise due diligence or otherwise in
relation to the Company or its Related Companies or any of
their affairs; and
(c) in particular, and without in any way limiting the generality
of the foregoing, any and all Costs which the Trustee may
sustain, incur or be liable for as a result of or in
connection with the release of or presence in the environment
of hazardous substances, contaminants, litter, waste,
effluent, refuse, pollutants or deleterious materials and that
arise out of or are in any way connected with the management,
operation, activities, affairs or existence of the Company or
any of its Related Companies.
2.2 EXPENSE ADVANCES. Subject to Section 3.1, the Company shall advance to
the Trustee the Costs reasonably estimated to be sustained, incurred or
suffered by him, in connection with the indemnification set forth in
Section 2.1 hereof within two business days of receipt by the Company
of a written request for such advance (an "EXPENSE ADVANCE"). The
Trustee hereby undertakes to repay such amounts advanced only if, and
to the extent that, it shall ultimately be determined by a court of
competent jurisdiction, which
5
determination is not subject to any subsequent appeals, that the
Trustee is not entitled to be indemnified by the Company as authorized
by this Agreement.
2.3 INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any
other provision of this Agreement, to the extent that the Trustee has
been successful on the merits or otherwise in the defence of any Claim
or in the defence of any charge, issue or matter therein, including the
dismissal of a Claim, the Company shall indemnify the Trustee against
any and all Costs actually and reasonably sustained or incurred by him
in connection with the investigation, defence or appeal of such Claim.
2.4 INDEMNIFICATION FOR EXPENSE OF A WITNESS. Notwithstanding any other
provision of this Agreement, the Company will indemnify the Trustee if
and whenever he is a witness or participant, or is threatened to be
made a witness or participant, to any action, suit, proceeding,
hearing, inquiry or investigation to which the Trustee is not a party,
by reason of the fact that he is or was a trustee, director, officer,
employee or agent of the Company or any of its Related Companies or by
reason of anything done or not done by him in such capacity, against
any and all Costs actually and reasonably sustained or incurred by the
Trustee or on the Trustee's behalf in connection therewith.
2.5 INDEMNIFICATION FOR EXPENSES IN OBTAINING INDEMNITY. The Company
shall indemnify the Trustee against any and all Costs, and, if
requested by the Trustee, shall subject to Section 3.1 hereof
(within two business days of such request) advance such Costs to the
Trustee, which are sustained, incurred or suffered by the Trustee in
connection with any action, suit or proceeding brought by the
Trustee for: (i) indemnification, or an advance thereof, by the
Company under this Agreement, any other agreement or the Restated
Declaration of Trust of the Company, as amended; or (ii) recovery
under any trustees', directors' and officers' liability insurance
policies maintained by the Company, regardless of whether the
Trustee ultimately is determined to be entitled to such
indemnification or insurance recovery, as the case may be.
2.6 PARTIAL INDEMNITY. If the Trustee is entitled under any provisions of
this Agreement to indemnification by the Company for some or a portion
of the Costs sustained, incurred or suffered by him but not, however,
for all of the total amounts thereof, the Company shall nevertheless
indemnify the Trustee for the portion thereof to which Trustee is
entitled.
3. INDEMNITY EXCEPTIONS
3.1 EXCEPTIONS TO INDEMNIFICATION. Notwithstanding the provisions of
Sections 2.1, 2.2 and 2.5 hereof, the Company shall not be obligated
to indemnify or save harmless the Trustee against and from any Claim
or Costs or make an Expense Advance:
(a) if, in respect thereof, a court of competent jurisdiction
determines, which determination is not subject to any
subsequent appeals, that the Trustee failed to act honestly
and in good faith with a view to the best interests of the
Company;
(b) arising out of any criminal conviction of the Trustee if the
Trustee pleaded guilty or was found guilty by a court of
competent jurisdiction, which finding is not
6
subject to any subsequent appeals by the Trustee, other than
in the case of a criminal proceeding in respect of which the
Trustee had no reasonable cause to believe that his conduct
was unlawful;
(c) arising out of a determination by a court of competent
jurisdiction, which determination is not subject to any
subsequent appeals, that: (i) the Trustee failed to disclose
his interest or conflicts as required under the WASHINGTON
BUSINESS CORPORATION ACT - Title 23B of the Revised Code of
Washington, as amended (the "RCW"); or (ii) the Company
is not permitted to indemnify the Trustee as provided in RCW
23B.08.510(4);
(d) in connection with any liability under Section 16(b) of the
SECURITIES EXCHANGE ACT OF 1934, as amended, or under United
States federal or state securities laws for "insider
trading";
(e) if, in respect thereof, the Expense Advance, or any other
advance to the Trustee under this Agreement, is prohibited by
the SARBANES-OXLEY ACT OF 2002, as amended; or
(f) in connection with any settlement of a Claim effected without
the Company's written consent.
4. BURDEN OF PROOF AND PRESUMPTIONS
4.1 BURDEN OF PROOF. In connection with any determination by the Company
as to whether the Trustee is entitled to be indemnified hereunder, the
burden of proof shall be on the Company to establish that the Trustee
is not so entitled.
4.2 NO PRESUMPTIONS. For purposes of this Agreement, the termination of
any Claim, by judgement, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere,
or its equivalent, shall not create a presumption that the Trustee
did not meet any particular standard of conduct or have any particular
belief or that a court had determined that indemnification is not
permitted by applicable law.
5. CONTRIBUTION
5.1 If the indemnification provided in this Agreement is unavailable and
may not be paid to the Trustee for any reason other than statutory
limitations set forth in applicable law, then in respect of any
Claim in which the Company is jointly liable with the Trustee (or
would be if joined in such Claim), the Company shall contribute to
the amount of Costs actually and reasonably sustained or incurred
and paid or payable by the Trustee in such proportion as is
appropriate to reflect (i) the relative benefits received by the
Company and all officers, trustees, directors or employees of the
Company and any of its Related
7
Companies, other than the Trustee, who are jointly liable with the
Trustee (or would be if joined in such Claim) on the one hand, and
the Trustee, on the other hand, from the transaction from which such
Claim arose, and (ii) the relative fault of the Company and all
officers, trustees, directors or employees of the Company and any of
its Related Companies, other than the Trustee, who are jointly
liable with the Trustee (or would be if joined in such Claim), on
the one hand, and of the Trustee, on the other, in connection with
the events which resulted in such Costs, as well as any other
relevant equitable ocnsiderations. The relative fault referred to
above shall be determined by reference to, among other things, the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in
such Costs. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section were determined
by pro rata allocation or any other method of allocation that does
not take account of the foregoing equitable considerations.
6. CHANGE IN CONTROL
6.1 CHANGE IN CONTROL. The Company agrees that if there is a Change in
Control of the Company (other than a Change in Control which has
been approved by a majority of the trustees of the Company who were
trustees of the Company immediately prior to such Change in Control)
then with respect to all matters thereafter arising concerning the
rights of the Trustee to indemnity payments and Expense Advances
under this Agreement, any other agreement or the Restated
Declaration of Trust of the Company, as amended, now or hereafter in
effect relating to Claims for Indemnifiable Events, the Company
shall seek legal advice only from Independent Legal Counsel selected
by the Trustee and approved by the Company (which approval shall not
be unreasonably withheld). Such counsel, among other things, shall
render its written opinion to the Company and the Trustee as to
whether and to what extent the Trustee would be permitted to be
indemnified under applicable law. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above
and to indemnify fully such counsel against any and all Costs,
claims and charges arising out of or relating to this Agreement or
its engagement pursuant hereto.
6.2 ESTABLISHMENT OF TRUST. In the event of a Potential Change in
Control, the Company shall, upon written request by the Trustee,
create a trust for the benefit of the Trustee and from time to time
upon written request of the Trustee shall fund such trust in an
amount sufficient to satisfy any and all Costs reasonably
anticipated at the time of such request to be sustained or incurred
in connection with investigating, preparing for and defending any
Claim, and the Costs sustained or incurred by the Trustee from time
to time, or reasonably anticipated to be sustained or incurred by
the Trustee in connection with any Claim, provided that in no event
shall more than [$25,000] be required to be deposited in any trust
created hereunder in excess of amounts deposited in respect of
reasonably anticipated Costs. The amount or amounts to be deposited
in the trust pursuant to the foregoing funding obligation shall be
determined by the Reviewing Party in any case in which the
Independent Legal Counsel referred to above is involved. The terms
of the trust shall provide that upon a Change in Control (i) the
trust shall not be revoked or the principal thereof invaded, without
the written consent of the Trustee, (ii) the trustee of such trust
shall advance to the Trustee, within two business days of a request
by the Trustee, the Costs sustained or incurred, or reasonably
anticipated to be sustained or incurred, by the Trustee in
connection with any Claim (and the Trustee hereby agrees to
reimburse the trust under the circumstances under which the Trustee
would be required to reimburse the Company under Section 2.2
hereof), (iii) such trust shall continue to be
8
funded by the Company in accordance with the funding obligation set
forth above, (iv) the trustee of such trust shall promptly pay to
the Trustee all amounts for which the Trustee shall be entitled to
indemnification pursuant to this Agreement or otherwise, and (v) all
unexpended funds in such trust shall revert to the Company upon a
final determination by the Reviewing Party or a court of competent
jurisdiction, as the case may be, that the Trustee has been fully
indemnified under the terms of this Agreement. The trustee of the
trust established hereunder shall be chosen by the Trustee. Nothing
in this Section 6.2 shall relieve the Company of any of its
obligations under this Agreement.
7. RESIGNATION
7.1 Nothing in this Agreement shall prevent the Trustee from resigning as
a trustee or officer of the Company or any of its Related Companies at
any time.
8. DEFENCE
8.1 NOTICE TO COMPANY. Upon the Trustee becoming aware of any pending or
threatened Claim, written notice shall be given by or on behalf of the
Trustee to the Company as soon as is reasonably practicable.
8.2 INVESTIGATION BY COMPANY. The Company shall conduct such investigation
of each Claim as is reasonably necessary in the circumstances, and
shall pay all costs of such investigation.
8.3 DEFENCE BY COMPANY. Subject to this Section, the Company shall, upon
the written request of the Trustee, defend, on behalf of the Trustee,
any Claim, even if the Claim is groundless, false or fraudulent.
8.4 APPOINTMENT OF DEFENCE COUNSEL. The Company shall consult with and
accept the reasonable choice of the Trustee concerning the appointment
of any defence counsel to be engaged by the Company in fulfillment of
its obligations to defend a Claim pursuant to Section 8.3; thereafter
the Company shall appoint such counsel.
8.5 SETTLEMENT BY COMPANY. With respect to a Claim for which the Company
is obliged to indemnify the Trustee hereunder, the Company may conduct
negotiations towards the settlement of a Claim and, with the written
consent of the Trustee (which the Trustee agrees not to unreasonably
withhold) the Company may make such settlement as it deems expedient,
provided however that the Trustee shall not be required, as part of
any proposed settlement of a Claim, to admit liability or agree to
indemnify the Company in respect of, or make contribution to, any
compensation or other payment for which provision is made under the
settlement. The Company shall pay any compensation or other payment
for which provision is made by such settlement.
9. GENERAL
9.1 LIMITATION OF ACTIONS. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company or any
of its Related Companies against the Trustee, the Trustee's spouse,
heirs, executors or personal or legal representatives after the
9
expiration of [TWO] years from the date of accrual of such cause of
action, and any claim or cause of action of the Company and any of
its Related Companies shall be extinguished and deemed released
unless asserted by the timely filing of a legal action within such
[TWO]-year period; provided, however, that if any shorter period of
limitation is otherwise applicable to such cause of action such
shorter period shall govern.
9.2 GENDER; PLURAL. In this Agreement wherever the singular or masculine
is used it will be construed as if the plural or feminine or neuter,
as the case may be, had been used where the context otherwise
requires, and a reference to a section by number is a reference to
the section so numbered in this Agreement.
9.3 NOTICES. All notices and other communications required to be given
by a party hereunder shall be in writing and shall be deemed to have
been duly given: (a) upon delivery, if delivered by hand; (b) one
(1) business day after the business day of deposit with an overnight
courier, if delivered by overnight courier, freight prepaid; (c)
five (5) days after deposit with the applicable postal service, if
delivered by first class mail postage prepaid; or (d) one (1) day
after the business day of delivery by facsimile transmission, if
delivered by facsimile transmission and a facsimile transmission
confirmation is obtained in respect thereof, with a copy by first
class mail postage prepaid, to the other party at the other party's
address specified above or to the last known facsimile number of
such party, as applicable, or at such other address or to such other
facsimile number as the other party may have last specified in
writing to the party intending to convey the notice or other
communication.
9.4 TIME. Time shall be of the essence of this Agreement.
9.5 HEADINGS. The headings in this Agreement are inserted for ease of
reference only and shall have no effect on the construction or
interpretation of this Agreement.
9.6 GOVERNING LAW. This Agreement shall be construed, interpreted,
governed by and enforced in accordance with the laws of the State of
Washington, U.S.A., applicable to contracts made and to be performed
in the State of Washington, U.S.A., without giving effect to the
principles of conflicts of laws. Each of the parties hereby
irrevocably attorns to the non-exclusive jurisdiction of the courts
of Seattle, Washington, U.S.A., with respect to any matters arising
out of this Agreement.
9.7 ENTIRE AGREEMENT. [OTHER THAN o CONTAINED IN THE EMPLOYMENT AGREEMENT
BETWEEN THE TRUSTEE AND THE COMPANY DATED THE o DAY OF o, o
(THE "EMPLOYMENT AGREEMENT")], this Agreement contains the entire
agreement between the parties relating to the subject matter hereof
and there are no agreements, representations or warranties, express or
implied, which are collateral hereto. [FOR GREATER CERTAINTY,
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEM ENT, THE
PARTIES HERETO ACKNOWLEDGE AND AGREE THAT NOTHING CONTAINED HEREIN
IS INTENDED TO MODIFY, ABRIDGE, LIMIT OR AFFECT ANY OF THE RIGHTS OR
OBLIGATIONS OF THE PARTIES HERETO CONTAINED IN THE EMPLOYMENT
AGREEMENT. NTD: AMEND ACCORDINGLY DEPENDING ON WHETHER TRUSTEE HAS A
PRE-EXISTING EMPLOYMENT AGREEMENT WITH THE COMPANY.]
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9.8 NONEXCLUSIVITY. The rights of the Trustee hereunder shall be in
addition to any rights the Trustee may have under
[THE EMPLOYMENT AGREEMENT,] the Restated Declaration of Trust of
the Company, including any amendments thereto or restatements
thereof, Chapter 23.90 of the RCW, as amended, Title 23B of the
RCW, as amended, or otherwise. To the extent that any change(s) in
Chapter 23.90 and/or Title 23B of the RCW (whether by statute or
judicial decision) permits greater indemnification by agreement
than would be afforded currently under the Company's Restated
Declaration of Trust, as amended, and this Agreement, it is the
intent of the parties hereto that the Trustee shall enjoy by this
Agreement the benefits so afforded by such change(s).
9.9 INSURANCE. To the extent the Company maintains an insurance policy or
policies providing trustees', directors' and officers' liability
insurance, the Trustee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the
coverage available for any trustee, director or officer of the Company.
9.10 AMENDMENTS. This Agreement may only be amended by a written agreement
signed by both of the parties hereto.
9.11 WAIVERS. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing
waiver.
9.12 FURTHER ASSURANCES. Each of the parties agrees to promptly do all such
further acts, and promptly execute and deliver all such further
documents, as may be necessary or advisable for the purpose of giving
effect to or carrying out the intent of this Agreement.
9.13 SUCCESSORS AND ASSIGNS. This Agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective successors,
including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, assigns, spouses, heirs, executors and
personal and legal representatives. This Agreement shall continue in
effect regardless of whether the Trustee continues to serve as a
director, officer or trustee of the Company, any of its Related
Companies or of any other enterprise at the Company's request.
9.14 SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision
within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable
in any respect, and the validity and enforceability of any such
provision in every other respect and of the remaining provisions
hereof shall not be in any way impaired and shall remain enforceable
to fullest extent permitted by law.
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9.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all parties had signed the
same document. All counterparts will constitute one and the same
agreement. This Agreement may be executed and transmitted by
facsimile transmission and if so executed and transmitted this
Agreement will be for all purposes as effective as if the parties
had delivered an executed original Agreement.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement, in the case
of a corporate party by its duly authorized officer or officers, as of the date
first written above.
SIGNED, SEALED AND DELIVERED by o in )
the presence of: )
)
--------------------------------------)
Signature )
)
--------------------------------------)
Name )
) ---------------------------
) o
--------------------------------------)
Address )
)
--------------------------------------)
)
--------------------------------------)
Occupation )
)
)
MERCER INTERNATIONAL INC. )
)
By: ----------------------------------)
)
Name:---------------------------------)
)
Title:--------------------------------)
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Exhibit 10-20
FINAL VERSION 5.2 / 24.05.2002
NON-BINDING ENGLISH TRANSLATION
LOAN AGREEMENT OVER 7.600.000,00 EUR
for the rehabilitation of a waste dump
b e t w e e n
ZELLSTOFF- UND PAPIERFABRIK ROSENTHAL GMBH & CO. KG, BLANKENSTEIN A. D. SAALE
(hereinafter ,,debtor")
a n d
BAYERISCHE HYPO- UND VEREINSBANK AG
(hereinafter ,,creditor")
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Contents:
1. definitions 4
2. amount of loan 6
3. purpose 6
4. availment 6
5. conditions of payment 6
6. interest 8
7. term, repayment 8
8. interest period 9
9. advance repayment 9
10. increased cost 10
11. payments 10
12. collateral, right of bank to further collateral 10
13. representations and warranties, conditions, termination 10
14. delay with payments 12
15. transfer 12
16. commitment interest 12
17. fees 13
18. expenses 13
19. effective date 13
20. escape clause 13
21. applicable law, venue 13
22. standard banking terms 13
23. requirement of written form 13
24. law against money laundering 13
25. communication 13
26. copies 14
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PREAMBLE
The debtor is a limited partnership under German law (GmbH & Co. KG)
incorporated on 31.12.1997 with Spezialpapierfabrik Blankenstein GmbH as
personally liable partner and ZPR Beteiligungs GmbH as only limited partner.
Sole purpose the debtor's business operation is the construction and
operation of a pulp and paper mill in Blankenstein / Saale (hereinafter "pulp
mill").
The debtor concluded on 06.07.1998 with Bayerische Hypotheken- und
Wechsel-Bank AG and Bayerische Vereinsbank AG a project loan agreement
amounting to 508.000.000,00 DM for the financing of construction and
operation of the pulp mill, the last change of which was agreed by amendment
agreement number 4 (hereinafter "project loan agreement"). The parties listed
on the signing page of amendment agreement number 4 to the project loan
agreement have joined the project loan agreement as creditors.
The debtor now intends to rehabilitate a waste dump located on his factory
premises and forming part of the business operation (hereinafter
"facilities") according to requirements by the competent authorities at an
anticipated maximum cost of 8.000.000,00 EUR (eight million euro) dispose of
the contents of the waste dump and clear the waste dump for disposal of new
waste from the operation of the pulp mill (hereinafter "project").
Construction is planed to begin in May 2002.
It is planed to finish the project with respect to the use of at least major
parts of the waste dump until 01.06.2003. Recultivation of the facilities is
anticipated to be finished until 31.10.2003.
The anticipated period of use for the waste dump is 12 years.
The bank is prepared to provide to the debtor for the purpose of financing
the project a loan amounting to 7.600.000,00 EUR under the terms and
conditions of this agreement.
The debtor as well as the guarantors of the project loan agreement (as
defined in the project loan agreement) have agreed into the conclusion of
this agreement.
Based hereon the parties agree as follows:
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1. DEFINITIONS
inherited environmental liabilities substances or remainders of substances on the premises
of the facilities which could lead to the coming into
existence or assertion of further claims by thirds
which were not enforceable by the time of conclusion
of this agreement and are not provided for in the
financial plan, or which could lead to claims or
conditions set by thirds including authorities;
facilities waste disposal operated on the premises of the debtor
and operated by the debtor to dispose of waste from
the production process, in particular chalk, ashes and
household waste;
conditions for payments The conditions set under item 5 of this agreement for
payments made by the creditor to the debtor;
payment period The period between conclusion of this agreement until
30. November 2003;
bank Bayerische Hypo- und Vereinsbank AG, Munich
bank working day A day on which banks in Munich are open and on which
payments can be made over TARGET (Trans-European
Automated Real-Time Gross Settlement Express Transfer)
construction period The period between the beginning of construction works
until completion
planning costs The costs for planning and controlling of the
construction of the facilities amounting to
approximately 500.000,00 EUR
operation period Period after the completion date
final due date Is defined as the date when all amounts payable by the
debtor under this agreement have to be repaid, agreed
to be the 30. September 2013
EURIBOR EURIBOR means the average per annum-interest-rate
which is fixed based on the quotes of leading banks at
European Interbank Euro market for Euro loans
for a period which corresponds with the
applicable fixed interest period and which is
published two bank working days before the beginning
of any fixed interest period at 11:00 o'clock
Brussels time on page 248 Bridge Telerate Service
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Should the respective Interbank rate not be
published on this day the Interbank rate is
calculated for the respective interest period
as the arithmetic average of interest rates p. a.,
which have been forwarded to the bank at 11:00
o'clock Munich time two banking days before the
first day of the respective fixed interest period by
three German major banks for loans by major banks
amounting to the respective Euro amount for the
respective interest period. Should the bank only
receive two quotes by major banks the Interbank rate
will be forwarded on the basis of the two quotes. If
a minimum of two quotes is not available the interest
rate will be calculated by adding the margin according
to item 6.2 of this agreement and the actual
refinancing costs of the bank for amounts corresponding
to the amount, currency and interest period of the
respective availment of the loan;
completion date The day on which the project should be completed
under the terms of the general construction
agreement and which is fixed for the purpose of
this agreement to be the 31. October 2003;
financing plan Plan showing the raising and employment of funds by
the debtor regarding the project according to annex 3
general contractor Bidding partners for the waste disposal Arlasgrund
with joint liability, consisting of (i) ecosoil
Sanierung GmbH, Bottrop, and (ii) ABS Anhaltinische
Braunkohlesanierungs- gesellschaft mbH, both as
successors of HOCHTIEF Umwelt GmbH, Schkeuditz;
general contractor costs The costs of the involvement of the general
contractor (excluding VAT on invoices of the general
contractor) amounting to approximately 7.100.000,00 EUR
general contracting agreement Agreement between the debtor and the general
contractor on the construction of the facilities by
the general contractor
loan The loan provided to the debtor under this agreement
amounting to 7.600.000,00 EUR
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debtor Zellstoff- und Papierfabrik Rosenthal GmbH & Co. KG,
Blankenstein an der Saale
project has the meaning as defined in the project loan
agreement
project loan agreement The agreement of 06. July 1998 between the debtor and
Bayerische Hypotheken- und Wechselbank AG and
Bayerische Vereinsbank AG amounting to 508.000.000,00
DEM regarding financing of the construction and
operation of the pulp mill, last changed by amendment
agreement No 4
project The rehabilitation and reconstruction of the
facilities for further waste disposal
payment request Irrevocable request by the debtor according to annex 1
in which the debtor requests payment of the loan (or
parts of the loan) from the bank
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2. LOAN AMOUNT
The bank, under the terms of this agreement, provides to the debtor a cash loan
amounting to a total of 7.600.000,00 EUR (in words: Euro
sevenmillionsixhundredthousand) exclusively meant for the financing of the
project.
3. PURPOSE OF THE LOAN
3.1 The loan provided under item 2 has the exclusive purpose of financing
the project; it is assumed that (i) part of 7.100.000,00 EUR of the
loan will be used to pay the general contractor costs, commitment
interest and charges and (ii) a further amount of 500.000,00 EUR to pay
the construction planning costs.
3.2 Unregarded of the obligations of the debtor under item 13.2.1a) the
bank does not have the obligation to control the use of the funds by
the debtor.
4. AVAILMENT
4.1 The debtor may request payment of the loan within the payment period,
earliest 5 bank working days after fulfilment of all conditions under
item 5. Fulfilment of the payment conditions has to be confirmed by the
bank in written form to the debtor.
7
4.2. A payment request may not be revoked and constitutes an obligation of
the debtor to accept payment.
4.3 Amounts which have not been requested for payment within the payment
period are cancelled and may not be requested any further.
4.4 The payment of all loan amounts under this agreement will be effected
to the revenue account of the debtor (as defined in the project loan
agreement).
4.5 The debtor will provide equity according to the financing plan in
annex 3 pro rata to the availment of the loan under this agreement.
5. PAYMENT CONDITIONS
The payment of the loan to the debtor will be effected under the condition to
the following documents or confirmations have been presented or given proof of,
which documents have to be in accordance with the requirements of the bank.
5.1 Conditions for the availment of the loan
Before availment of the loan the following documents have to be
presented to the bank and the following conditions have to be fulfilled
to the satisfaction of the bank:
5.1.1 A copy of the current statute and register excerpt of the debtor
confirmed by one of the managing directors of the debtor as being
identical with the original as well as shareholder resolutions
regarding the project (including this agreement) in the version valid
on the day of conclusion of this agreement;
5.1.2 Copies certified by a managing director of the debtor to be identical
with the original of concluded agreements respectively drafts of
important agreements to be concluded regarding the project with terms
acceptable for the bank; in particular the bank has to be provided a
binding offer of the general contractor to conclude a general
contracting agreement as well as a draft of the general contracting
agreement (including annexes), not exceeding an amount of 7.100.000,00
EUR and providing for a completion date 30. November 2003 the latest,
as well as providing for standard contractual penalties and guaranties;
5.1.3 Certified annual account of the debtor as of the end of last business
year before payment of the loan. Should the period between the end of
the last business year and payment of the loan be longer than 5 months
the debtor has to provide appropriate interim information on his
financial situation and profits according to the terms of the project
loan agreement.
5.1.4 Presentation of an environmental and construction permit (planning
decree of Thuringer administrative authority of 18. May 1999)
containing all necessary permits for construction and operation of the
facilities;
5.1.5 Presentation of a confirmation by the general contractor under ss. 48b
German income tax act releasing the debtor from the obligation to pay
construction tax deduction under ss.ss. 48 subsequent German income tax
act to the tax authority competent for the general contractor;
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5.1.6 Expertise acceptable for the bank on tests regarding the content of the
waste disposal including results of the analyses by an independent
research institute;
5.1.7 Consent of the debtors and guarantors of the project loan agreement (as
agreed there in) to the conclusion of this agreement;
5.1.8 The debtor has confirmed towards the bank that, to his best knowledge,
a) at no time substances have been disposed of, stored, kept,
treated, brought in or out, transported, processed, produced,
used, collected, sorted or produced on the facilities which could
be considered as inherited environmental liabilities or which
could reasonably lead to the assumption that they could be
considered as inherited environmental liabilities by the
competent authorities or courts;
b) neither against the debtor nor any possessor of premises of the
debtor claims based on environmental charges have been raised or
threatened, if such claims can reasonably considered to have a
negative impact on the ability of the debtor to fulfil his
obligations under this agreement. Accordingly no environmental
claims have been raised against members of the debtors management
(in this capacity) according to the loan agreement.
5.2 Further conditions for payment requests
Any availment of the loan under this agreement furthermore requires
fulfilment of the following conditions to the satisfaction of the bank:
5.2.1 The statements and guaranties made under item 13 are true at the time
of payment, the debtor fulfils the requirements under item 13 and a
reason for termination under item 13 does not exist.
5.2.2 The bank has received a complete and signed payment request according
to item 3 until 11:00 o'clock Munich time on the third bank working day
before availment the latest;
5.2.3 The agreements substantial for the project and provided to the bank
according to item 13.2.1b) have been validly signed and are
substantially in accordance with the drafts provided to the bank
according to item 5.1.2 and have terms satisfactory for the bank;
5.2.4 The amount to be paid out does not, if added with amounts paid out
earlier, exceed the total amount of the loan under item 2.
5.3 Further conditions for the availment for financing of the general
contractor costs the bank has to be provided with a copy of the invoice
of the general contractor according to the payment plan covering the
amounts payable by the debtor to the general contractor under the
general contracting agreement together with the request for payment.
The availment may not exceed the amount of the respective invoices.
This does not apply for the availment for the purpose of payments on
commitment interest according to item 16 and fees according to item 17.
5.4 Further conditions for the availment of the loan for the financing of
construction planning costs
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a) The debtor may only request a payment to finance construction planning
costs once to the end of each calendar month
b) In this case the debtor has, together with the request for payment,
inform the bank on construction planning costs since the last request
for payment for this purpose.
6. INTEREST
6.1 Dates for the calculation of interest are 31. March and 30. September
of each calendar year. Interest is payable at the end of each fixed
interest term.
6.2 Payments on the loan before the first due date for repayment are
subject to interest for the term of the availment (i.) with the
respective EURIBOR interest rate for one month, two months, three
months, five months or six months and in addition (ii) a margin of 4.5
% p. a.
Should the term of the interest period end in-between two EURIBOR
standard monthly terms the interest rate is calculated based on the
weighed average.
6.3 The interest rate on the loan is (i) the six months EURIBOR and in
addition (ii) a margin of 4.5 % p. a. starting with the first
repayment date.
6.4 Should the last day of an interest term not be a bank working day the
interest term ends on the following bank working day, except if this
day falls into the following calendar month. In this case the interest
term ends on the previous bank working day.
6.5 Interest is calculated on the basis of the Euro interest calculation
method based on a 360 day year (365/360 respectively 366/360 days).
7. TERM, REPAYMENT
7.1 The loan has a term of 11 years and is repayable at the end of this
term.
7.2 The loan is repayable according to the repayment schedule enclosed as
annex 2 to this agreement.
7.3 The debtor accepts the obligation to make repayments only from funds
which he is free to dispose off after payment of all liabilities which
are mentioned under article 20.2 (a) (i) - (iv) of the project loan
agreement and liabilities which have priority to obligations of the
debtor under this agreement. The debtor accepts the obligation to make
all payments under this agreement with priority to all payments related
to shareholder loans.
7.4 Amounts of the loan paid out under this agreement and repaid to the
creditor may not be requested for payment to the debtor again.
8. INTEREST PERIOD
8.1 Before the first repayment date interest periods have a flexible term
of a minimum of one month and a maximum of six months; they end at the
next following interest calculation date according to item 6.1 of
this agreement in any case. At the interest calculation dates
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under item 6.1 of this agreement all open amounts under the loan
agreement will be consolidated and considered as one amount. The
interest period for this consolidated amount will generally be six
months.
8.2 From the first repayment date the term of the interest period is
generally six months.
8.3 The first interest period relating to amounts paid out under the loan
agreement begins with the respective payment date. Each following
interest period begins immediately after the term of the previous
interest period.
8.4 Should an interest period for an amount paid out before 31. March 2004
end after 31. March 2004 it will in any case end with 31. March 2004.
From this date all open amounts under the loan agreement will be
consolidated and considered to be one amount.
8.5 All interest periods end with the final due date.
9. ADVANCE REPAYMENT
9.1 The debtor has the right to deliberately make advance repayments
(hereinafter "advance repayments") under the loan agreement. Advance
repayments have to be made to the end of an interest period and have to
be announced to the bank at least 14 bank working days before repayment
in written form. They will be settled with the last due ordinary
repayment rate under the credit agreement.
9.2 Advance repayments have to be at least at an amount of 50.000,00 EUR
or any full multiple of this amount.
10. INCREASED COST
10.1 Should for reason of changes of the law, changes of directives, decrees
or orders of the bank control authority regarding minimum reserve,
minimum liquidity or equity the cost of the bank to maintain its loan
increase or should the margin actually realised under this agreement be
reduced ("additional cost") the bank has the right, after informing the
debtor, to demand payment of the amount of additional cost from the
debtor. The information to the debtor has to contain the calculated
amount of additional cost, the date on which or from which the
additional cost has occurred as well as the reason for the additional
cost. The bank does not have the obligation to forward confidential
information or information which may allow conclusions concerning the
organisation of the bank or of its holding.
10.2 The debtor has to reimburse the bank for the additional cost as given
proof of within 10 days after receipt of the information by the bank.
11. PAYMENTS
11.1 The debtor will make all payments under this loan agreement without
request to an account named by the bank with the right availability
date and effective in the respective currency as agreed.
11.2 Should a due date not be a bank working day the payment has to be made
on the next following working day except if this day falls into the
next calendar month. In this case the payment is due on the last
previous bank working day before the due date.
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12. COLLATERAL, RIGHT OF BANK TO FURTHER COLLATERAL
12.1 The loan is preliminary granted without collateral.
12.2 Should the risk evaluation of the bank for its claims under this
agreement change within the term of this agreement the bank may, if the
project loan agreement has been totally or in substantial parts repaid
at such time, make use of its right under item 13 subitem 2 of its
standard terms to demand from the debtor additional collateral within a
delay of at least 14 bank working days.
13. REPRESENTATIONS AND WARRANTIES, CONDITIONS, TERMINATION
13.1 General
Generally article 18 (representations and warranties) and article 22
(termination) of the project loan agreement in their respective version
apply to this agreement. This also applies for the case that the debtor
has repaid the project loan before the final due date under this loan
agreement or the project loan agreement should be void or invalid for
other reasons; in this case the respective terms apply in the last
valid version of the project loan agreement. Should the articles of the
project loan agreement referred to relate to the project according to
the project loan agreement they have to be interpreted, for the
purposes of this agreement, as referring to (i) the project according
to the project loan agreement as well as (ii) the project under this
agreement.
13.2 Requirements
13.2.1 The debtor has to fulfil the following requirements:
a) The debtor has to use the amounts made available to him under the loan
agreement immediately after payment to the account named under item 4.4
exclusively for payment as provided for in item 3 of this agreement.
b) The debtor will provide the bank immediately after signature with a
copy of such agreements validly signed and of substantial interest for
the project as defined in item 5.1.2, such copy to be certified by a
managing director of the debtor to be identical to the original;
c) The debtor will provide to the bank, during the constructing period,
a monthly report as requested by the bank on the progress of the
project, containing information on the construction progress,
compliance with agreed dates, construction costs, expected payments
for the following month, current operational cost as well as all
extraordinary incidences regarding the project in the previous month.
All extraordinary incidences as well as material problems regarding
the construction have to be reported to bank immediately. Also the
solution of any problems, costs of such solution, time needed as well
as other consequences regarding the future operation of the facilities
have to be explained. The bank has the right to demand changes to the
report needed by the bank if such changes can reasonably expected.
d) The debtor will provide, in the operational phase, provide to the bank
a quarterly report (due together with the reports provided for under
article 19.1 (a) of the project loan
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agreement) designed to satisfy the needs of the bank on the
performance, readiness to use, technical availability of the
facilities, operational cost as well as all extraordinary incidences
of the previous quarter. All extraordinary incidences as well as major
technical problems have to be reported to the bank immediately, at a
maximum of one week after their occurrence. Also the solution of any
problem, cost of such solution, time needed as well as other
consequences for the operation of the facilities have to be reported.
The bank has the right to demand changes to the report needed by the
bank if such changes can reasonably expected.
e) The debtor will provide the bank with documentation from the general
contractor on the correct disposal of the contents of the waste dump
according to the general contractor agreement.
f) The debtor has the obligation to admit the bank to its operational
premises at any time.
g) The debtor has the obligation to report to the bank immediately any
discovery or any suspicion regarding the existence of inherited
environmental charges on the premises of facilities as well as any
costs exceeding the amounts to be invested under the financing plan.
h) The debtor has the obligation to cover all exceeding costs according to
item 13.2.1 (g) using equity or his cash flow.
i) The debtor will implement the project as planned and will fulfil all
agreements regarding the project.
j) The debtor will run the facilities according to generally accepted
rules.
k) The debtor will maintain all permits and other immaterial rights
necessary for the construction and operation of the facilities.
l) The debtor accepts the obligation to use the facilities only for the
disposal of his own waste from the operation of the project and not to
store waste for third parties.
m) The debtor will, on request, provide the bank with adequate proof
regarding the use of the amounts agreed under this loan agreement as
well as proof of the equity funds used for the project according to the
financing plan enclosed as annex 3.
13.2.2 In addition to the terms of article 22 (termination) of the project
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loan agreement the bank has the right to demand repayment of the loan if
a) the debtor is in delay with any payment under this agreement, be it
repayment or interest, and payment is not made within 7 bank working
days after delay has occurred, or if (ii) the debtor is in delay with
any other payments and such payments are not made within 5 bank working
days after a reminder;
b) the debtor is in delay with any payment under the project loan
agreement and such payment is not made within the delays provided for
under article 22.1 (a) of the project loan agreement.
14. DELAY WITH PAYMENT
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In case of delay of the debtor with any payments under this agreement the bank
has the right to charge a delay interest rate amounting to the base interest
rate (Basiszinssatz) plus 6 % p. a. for the period from the beginning of the
delay until receipt of the open amount. The claim for further damages is
unaffected; the debtor may give proof of a lower amount of damages.
15. TRANSFER
15.1 The debtor may not transfer any rights or claims under this agreement
to thirds.
15.2 The bank may grant sub participations to members of the European System
of Central Banks, banks, financial services companies, finance
companies, assurance companies, capital collecting entities, trusts,
pension trusts, public pension funds and comparable institutions,
considering generally accepted banking standards. The bank may in
particular implement such transfer for purposes of risk sharing,
optimising equity or refinancing. The debtor hereby waives his right to
banking secrecy, limited to the mentioned purposes.
16. COMMITMENT INTEREST
16.1 Commitment interest on the amounts of the loan which have not been paid
out is 0.5 % p. a. Commitment interest will be calculated exactly based
on a 360 day year. Commitment interest is calculated as of 30. March
and 30. September of any calendar year for the previous six months.
16.2 Commitment interest may be paid from amounts provided for construction
costs under this agreement.
17. FEES
17.1 The bank is entitled to a fee for structuring and fees for
documentation according to a separate agreement, payable with the
signature of this agreement.
17.2 The fees may be paid from the first amount paid out under this loan
agreement.
18. EXPENSES
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The debtor has to reimburse to the bank all costs and other charges incurred by
the bank in connection with the negotiation, conclusion and execution of this
agreement or claims by thirds related hereto (in particular external lawyer
fees, consulting fees, accounting fees). Furthermore the debtor has to pay all
expenses according to item 12 subparagraph 5 of the standard banking terms of
the bank.
19. EFFECTIVE DATE
This loan agreement will be effective on the day of signature.
20. ESCAPE CLAUSE
20.1 Should any provision of this agreement be held wholly or in part
invalid or unenforceable, the validity or enforceability of the other
parts shall not be affected thereby. The invalid or unenforceable
provision shall be deemed replaced by such valid and enforceable
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provision which serves best the economic interest of the contract
parties originally pursued by the invalid or unenforceable provision.
20.2 Should, after conclusion of this agreement, amendments be necessary
regarding new facts, such amendments have to be in accordance with the
aims and purposes of this agreement.
21. APPLICABLE LAW, VENUE
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This agreement is subject to German Law. Venue and place of delivery is agreed
to be Munich.
22. STANDARD BANKING TERMS
In addition to this agreement, standard banking terms as provided to the debtor
on the day of signature apply.
23. REQUIREMENT OF WRITTEN FORM
No side agreements have been made. Modifications of this loan agreement require
written form. This also applies to any waiver of the requirement of written
form.
24. LAW AGAINST MONEY LAUNDERING
The debtors hereby confirms towards the bank that the loan is only used for the
own account of the debtor and that the debtor is economically the exclusive
holder of the title as provided for under paragraph 8 of the law against money
laundering.
25. COMMUNICATION
Information regarding this loan agreement has to be addressed to:
25.1 debtor:
Zellstoff- und Papierfabrik Rosenthal GmbH & Co. KG
Hauptstra(beta)e 16
07366 Blankenstein (Saale)
Hr. Nossol
Telefax: 036642 822 70
25.2 bank:
Bayerische Hypo- und Vereinsbank AG
Global Project Finance / FPA1
Am Tucherpark 1
80538 Munchen
Hr. Baier
Telefax: 089 378 41 518
cc Telefax: 089 378 26162
26. COPIES
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This agreement is executed in two originally signed copies. Each of these copies
is regarded as an original.
15
16
for Zellstoff- und Papierfabrik Rosenthal GmbH & Co. KG:
Blankenstein, 27. May 2002
.............................. .............................
name: name:
function: Managing Director function: Managing Director
for Bayerische Hypo- und Vereinsbank AG:
Munich, 24. May 2002
.............................. .............................
name: Thomas Baier name: Marc Thumecke
function: Project Manager FPA 1 Industries function: L/FPA 1 Industries
17
ANNEX 1
EXAMPLE PAYMENT REQUEST
[letterhead ZPR]
Bayerische Hypo- und Vereinsbank AG
Global Project and Asset Finance / FPA 1
to the att. of Mr. Baier
Blankenstein, [date]
CONTRACT OF 27. MAY 2002 REGARDING FINANCING OF A WASTE DUMP TO AMOUNT OF
7.600.000,00 EUR
Dear Sirs,
We refer to the above mentioned loan agreement and make use of the credit you
granted us as follows
amount:
date of payment:
We confirm that the conditions of payment according to item 5 of the loan
agreement are satisfied and assure that the declaration according to item 5.1.8
of the loan agreement regarding to the circumstances at the time of this payment
request are true that we fulfilled the mentioned obligations in every respect
according to item 13 of the loan agreement and that no reason for termination
respectively resignation according to item 13 of the loan agreement is given.
The loan funds, which we herewith make use of, are destined for financing of
(the general contractor agreement and/or planning construction costs and/or
provisions and/or fees) according annex.
Yours sincerely,
Zellstoff- und Papierfabrik Rosenthal GmbH & Co. KG, Blankenstein:
.............................. .............................
name: name:
function: function:
ANNEX: (invoice(s) of the general constructor of [date] to the total amount
of...or proof of the general construction costs)
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18
ANNEX 2
AMORTIZATION SCHEDULE
DATE AMOUNT IN TEUR
31.03.2003 -
30.09.2003 -
31.03.2004 247
30.09.2004 261
31.03.2005 275
30.09.2005 289
31.03.2006 303
30.09.2006 317
31.03.2007 331
30.09.2007 345
31.03.2008 359
30.09.2008 373
31.03.2009 387
30.09.2009 401
31.03.2010 415
30.09.2010 429
31.03.2011 443
30.09.2011 457
31.03.2012 471
30.09.2012 485
31.03.2013 499
30.09.2013 513
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19
ANNEX 3
APPLICATION PROVENANCE
-------------------------------------------------------------------------------------------------------------
existing use amount in Euro provenance amount in Euro
-------------------------------------------------------------------------------------------------------------
General constructing 7.100.000,00 financing of waste pump 7.600.000,00
agreement
-------------------------------------------------------------------------------------------------------------
Construction plan and 500.000,00 own resources 400.000,00
control
-------------------------------------------------------------------------------------------------------------
reserves / financing fees 400.000,00
-------------------------------------------------------------------------------------------------------------
TOTAL AMOUNT: 8.000.000,00 TOTAL AMOUNT: 8.000.000,00
-------------------------------------------------------------------------------------------------------------
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EXHIBIT 21
SUBSIDIARIES OF MERCER INTERNATIONAL INC.
Shareholding
at Year End
Jurisdiction ------------------
Name of Subsidiary(1) of Incorporation Direct Indirect
----------------------------------------------------- ---------------- ------ --------
Dresden Papier GmbH.................................. Germany - 100%
Papierfabrik Fahrbrucke GmbH......................... Germany - 100%
Spezialpapierfabrik Blankenstein GmbH................ Germany - 100%
Zellstoff-und Papierfabrik Rosenthal GmbH & Co. KG... Germany - 100%
Zellstoff Stendal GmbH............................... Germany - 63.6%
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(1) All the subsidiaries are conducting business under their own names.
Exhibit 23
PETERSON SULLIVAN PLLC
601 UNION STREET SUITE 2300 SEATTLE WA 98101 (206) 382-7777 FAX 382-7700
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference in the registration
statement (No. 33-90026) on Form S-8 of Mercer International Inc. of our report
dated January 31, 2003, relating to the balance sheets of Mercer International
Inc. as of December 31, 2002 and 2001, and the related statements of operations,
comprehensive income, changes in shareholders' equity, and cash flows for the
years ended December 31, 2002, 2001, and 2000, which report appears in the
Annual Report on Form 10-K for the year ended December 31, 2002, of Mercer
International, Inc.
/s/ Peterson Sullivan PLLC
Peterson Sullivan P.L.L.C.
March 28, 2003
Seattle, Washington
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EXHIBIT 99.1
CERTIFICATION OF PERIODIC REPORT
I, Jimmy S.H. Lee, Chief Executive Officer of Mercer International Inc. (the
"Company"), certify pursuant to Section 906 of the SARBANES-OXLEY ACT OF
2002, 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the period ended
December 31, 2002 (the "Report") fully complies with the requirements
of Section 13(a) of the SECURITIES EXCHANGE ACT OF 1934 (15 U.S.C. 78m
or 78o(d)); and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Dated: March 28, 2003
/s/ JIMMY S.H. LEE
-----------------------
Jimmy S.H. Lee
Chief Executive Officer
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EXHIBIT 99.2
CERTIFICATION OF PERIODIC REPORT
I, Maarten Reidel, Chief Financial Officer of Mercer International Inc. (the
"Company"), certify pursuant to Section 906 of the SARBANES-OXLEY ACT OF 2002,
18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the period ended
December 31, 2002 (the "Report") fully complies with the requirements
of Section 13(a) of the SECURITIES EXCHANGE ACT OF 1934 (15 U.S.C. 78m
or 78o(d)); and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Dated: March 28, 2003
/s/ MAARTEN REIDEL
-----------------------
Maarten Reidel
Chief Financial Officer
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