Exhibit 10.1
(Middle/Long-Term) RMB Loan Agreement
No.: 2006Year Ji Zhong Yin Si Jie Zi KD0001 Hao
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Borrower: Kadant Light Machinery (Jining) Co., Ltd.
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Enterprise Legal Person Business License No.: Qi Du Lu Ning Zong Zi No. 001159
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Legal Representative: Peter J. Flynn
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Address: No.99 Jidian Road 1, High and New Technologies Industry Development
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Zone, Shandong 272023, China
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Financial Institution and Account No.: Bank of China, Limited Jining Branch,
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405801738088091001
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Contact: 0537-2387726
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Lender: Bank of China Limited, Jining Branch
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Legal Representative/Person-in-charge: Pang Xinfeng
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Address: No.99, Guanghe Road, Jining, Shandong China
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Contact: 0537-2609646
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This RMB Loan Agreement ("this Agreement") is entered into by and between the
Borrower and the Lender, through equal negotiation, with respect to the
provision by the Lender to the Borrower of a middle/long-term RMB loan (the
"Loan").
Article 1 Amount
The total amount of the Loan hereunder shall be RMB yuan 40,000,000.00, (say
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forty million Renminbi only yuan).
Article 2 Term
The term of the Loan shall be 47 months commencing from the drawdown date as
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agreed upon by both parties hereto and ending on the last repayment date as
agreed upon by both parties hereto. If it is agreed that the Loan shall be drawn
within a specific period of time, then the "drawdown date" in the above sentence
shall refer to the date on which such period shall commence.
Article 3 Application
The Loan hereunder shall be applied for the following purposes:
Buy the business and assets of Jining Huayi Light Industry Machinery Co., Ltd.
("Huayi") and its own operating capital;
The Borrower shall alter or change in no way any above purpose of the Loan
without the written consent of the Lender.
Article 4 Interest Rate and Payment
The interest rate is a floating rate of 5.508% subject to annual adjustment
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thereto, i.e.: such interest rate shall apply for a period of one year after the
date of drawing the Loan (or, if more than one drawdown shall be made from the
Loan, the date when the first drawdown shall be made from the Loan) and, for
each following year, the interest rate applicable to the Loan shall be the legal
interest rate then published by the People's Bank of China for a loan of the
same term minus 10%
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Any interest accrued on the Loan shall be calculated from the actual drawdown
date by the Borrower on the basis of the actually drawn amount and the number of
days when such amount shall be borrowed, with 360 days calculated as one year.
The Borrower shall pay any interest accrued on the Loan according to the
following Section:
The Borrower shall pay the interest accrued on the Loan quarterly. March 20,
June 20, September 20 and December 20 of each year shall be the interest payment
dates. Should the last repayment date of the principal of the Loan fail to fall
on any of the above interest payment dates, the Borrower shall fully pay all
interest payable and accrued on the Loan on the last repayment date of the
principal of Loan.
Article 5 Conditions Precedent to Drawdown
The Lender shall be entitled to reject the Borrower's application for any
drawdown of the Loan, until and unless all the following conditions precedent to
a drawdown have been satisfied:
(1) The Borrower shall have submitted to the Lender, 1 days in advance, a
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written application for the drawdown and relevant certifications of the
purpose of such drawdown;
(2) This Agreement and all its appendices shall have come into full force and
effect;
(3) The standby L/C issued by the Bank of China Limited, New York branch as
set forth in Article 9 hereof shall have come into full force and effect;
(4) The Borrower shall have opened an account as required by the Lender for
the purpose of making the drawdown, paying the interest accrued thereon
and fees and expenses incurred therefrom and repaying the principal of the
drawdown;
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(5) The Borrower shall have delivered to the Lender:
a) the resolution and the letter of authorization adopted and issued by
the board of directors or any other competent department of the
Borrower, approving and authorizing the execution and performance of
this Agreement;
b) the list of the persons who have been authorized to execute this
Agreement and other documents in relation hereto, accompanied by the
specimens of the signatures of such persons;
(6) No event of default set forth in Article 12 hereof shall have occurred;
(7) All other conditions precedent to the drawdown provided for by law and
agreed upon by the parties hereto shall have been satisfied.
Article 6 Drawdown Period
The Borrower shall make a one-time lump-sum drawdown of the Loan within 30 days
of the signing of the Loan, provided that the procedures for drawdown in Article
7 have been met.
Article 7 Procedures for Drawdown
The Borrower shall, for the purpose of each drawdown of the Loan, submit to the
Lender an application for drawdown and complete other procedures for drawdown as
required by the Lender.
Article 8 Repayment
The Borrower must make repayments of the Loan on the day of 48-month anniversary
of the drawdown date set forth in Article 6.
In case of more than one loan agreement between the Borrower and the Lender
under which the loans have expired, the Lender shall have the right to decide on
the priority of repayment of such loans by the Borrower.
The Borrower may make early repayment without any penalty, provided that it
shall notify the Lender of such early repayment 15 days in advance. Such
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repayments shall be in installments of not less than RMB 8 million. When the
Borrower makes early repayment, the Borrower shall have the right to decide on
the priority of early repayments of loans with the Lender.
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For the term of this Loan the Borrower shall not:
1) distribute profits;
2) be entitled to increase its borrowings beyond RMB 80 million. This
restriction shall not apply to (a) shareholder's loans or affiliate loans or (b)
third party loans taken to repay this Loan.
Any early repayment prior to expiration by the Borrower shall be applied against
the drawdown of the Loan specified by the Borrower in the notice of repayment to
Lender. In such case, the Borrower shall not request to draw from the Loan any
portion which has been early repaid by it with the consent of the Lender.
In the event the shareholder of the Borrower changes then the Loan shall become
due unless the Lender consents to such change of shareholder. This restriction
shall not apply to affiliates of the Borrower or the Borrower's shareholder.
Article 9 Security
Any and all liabilities hereunder shall be secured by the standby L/C issued by
Bank of China Ltd. New York branch, initially in the amount of US$ 10 million,
and as reduced as provided below.
The Lender agrees that the amount of the standby L/C shall be reduced to the
extent the principal amount of the loans outstanding are repaid voluntarily by
the Borrower or are repaid upon the expiration of the loans. Lender agrees to
notify Bank of China-NY and JPMorgan Chase Bank within 10 days of a loan
repayment. Such notice shall state (1) the amount in RMB of repayment made, (2)
the outstanding amount of the existing RMB loans and (3) instructions to the
issuing bank to reduce the standby L/C (within three days of such instructions)
by the USD equivalent amount equal to the repayment amount, determined by
dividing the repayment amount by the prevailing exchange rate of RMB to USD
publicized by Bank of China, Head Office on the issuing date of the standby L/C
(the "Issued Exchange Rate"). For example, if this loan is repaid prior to its
expiration by 8 million RMB principal amount, and the Issued Exchange Rate is 8
RMB to one USD, then the US$ L/C will be reduced by US$1 million. The Lender at
its option may recalculate the USD value of the principal amount of all
outstanding loans after the prepayment by dividing the unpaid principal amount
of the RMB loans outstanding between the Borrower and the Lender (the "RMB
Loans") by the then prevailing exchange rate of RMB to USD exchange publicized
by the Bank of China, Head Office. However, in no event will the exchange rate
used to revalue the principal amount of outstanding RMB Loans be less than 90%
of the Issued Exchange Rate. If the amount of the USD standby L/C is less than
the then unpaid principal amount of the RMB Loans, the Lender may request the
Borrower to provide additional guarantees, provided that the sum of the value of
all such additional guarantees (including previously provided guarantees) and
the amount of the standby L/C may not exceed USD $10 million.
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Article 10 Insurance
The Borrower shall undertake insurance in relation to the Borrower's assets and
shall maintain such insurance for the term of the Loan. The Borrower shall
provide the Lender with a schedule of its insurance for its approval.
Article 11 Representations and Covenants
The Borrower hereby makes the following representations:
(1) The Borrower is duly registered and legally existing.
(2) The Borrower has obtained all necessary authorization required to
enter into this Agreement.
(3) All documents, information, statements and vouchers provided by the
Borrower to the Lender are accurate, true, complete and valid.
(4) The Borrower has fully disclosed to the Lender:
a) any and all material violations of laws or regulations involving, and
any and all material claims raised against, the Borrower or any of
its major persons-in-charge;
b) any and all material breaches committed by the Borrower under any
other material contract;
c) any and all bank liability and contingent liability assumed by the
Borrower and any and all mortgage and pledge provided to any third
party by the Borrower;
d) any and all material pending litigation and arbitration proceedings;
and
e) all other occurrences which might materially adversely affect the
financial status or the solvency of the Borrower,
which have occurred or are occurring and which might affect the judgment
on the Borrower's capability to perform this Agreement.
The Borrower hereby makes the following covenants:
(1) The Borrower will provide the latest financial statements quarterly as
required by the Lender, provide the audited financial statements covering
each year during the first quarter of the immediately following year, and
provide such documents and information, at any time as required by the
Lender, as including but not limited to reports and statements on the
operation status and financial status of the Borrower.
(2) Any counter-guarantee agreement or similar agreement, which has been or
will be entered into by the Borrower will not prejudice any right of the
Lender hereunder.
(3) The Borrower will accept, and provide adequate assistance and cooperation
to, any credit examination and supervision by the Lender.
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(4) The Borrower will notify the Lender in advance of any reduction of the
registered capital of the Borrower, any material change of its ownership
or any adjustment to its business operational modes (including without
limitation, joint venture or cooperation with foreign investors,
split-off, merger, consolidation or acquisition, restructuring,
establishment or reorganization into a company limited by shares, or
change of its business operational modes to lease, contracting,
affiliation or trusteeship) and, if such reduction, change or adjustment
might have any adverse effect on the Borrower's solvency, the Borrower
will not conduct such reduction, change or adjustment without the prior
consent of the Lender.
(5) The Borrower will not conduct any disposal of its own asset which might
lead to any decrease of its solvency.
(6) The Borrower will not supply any mortgage placed on its own land and
building to a third party during the loan period.
(7) The repayment of the liabilities owed by the Borrower to the Lender
hereunder shall be given the priority above repayment of any loan provided
to the Borrower by any of its shareholders and same as repayment of any
similar liabilities owed by the Borrower to its other creditors.
(8) The Borrower hereby undertakes to notify the Lender promptly of:
a) any material breach under this Agreement or any other material
contract;
b) any change to the member of the Board of the Borrower, any amendment
to its articles of association or any material adjustment to its
internal organizational structure;
c) any material difficulty in the business operation or material
deterioration of the financial status of the Borrower;
d) any material litigation or arbitration proceeding in which the
Borrower is involved; or
e) any other occurrence of the Borrower which would be reasonably
expected to materially adversely affect its solvency.
(9) The relevant settlement transactions of the Borrower in relation to the
Loan will be conducted at the Lender or any other branch of Bank of China
Limited and the amount of such transactions will meet the requirement of
the Lender.
(10) If the after-tax net profit of the Borrower for any given accounting year
is zero or negative or its after-tax profit is insufficient to make up all
its loss accumulated during the past accounting years, or if the profit
before tax of the Borrower for any given accounting year is not applied
against the principal of, interest accrued on and fees and expenses
incurred in relation to the Loan which shall be due and payable by the
Borrower during that accounting year or such profit before tax is
insufficient to pay in full the principal of, interest accrued on and
other fees and expenses incurred in relation to the Loan which will become
due and payable for
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the immediately following accounting year, then the Borrower shall not
distribute to any of its shareholders any profit or dividend in any form
whatsoever.
Article 12 Liability for Breach of Contract
Should the Borrower fail to make any repayment as scheduled herein and fail to
reach an agreement with the Lender to extend the time limit of such repayment,
the Lender shall be entitled to a penalty interest on such delayed repayment of
the principal of the Loan for the period commencing from the date of expiry of
such repayment and ending on the date when the Borrower shall have fully paid
all the principal of and interest accrued on such repayment. Should the Borrower
apply any drawdown of the Loan for any other purpose than those set forth
herein, the Lender shall be entitled to a penalty interest on such drawdown for
the period commencing from the date of application of such portion for the said
other purpose and ending on the date when the Borrower shall have fully paid the
principal of and interest accrued on such drawdown of the Loan.
The penalty interest rate applicable to any delayed repayment shall be the
interest rate set forth herein for the Loan plus 30%; and the penalty interest
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rate applicable to any above misapplication shall be the interest rate set forth
herein for the Loan plus 50%.
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Should the Borrower fail to fully pay any interest as scheduled herein, the
Lender shall be entitled to a quarterly compound interest on the outstanding
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interest, which becomes due and payable by the Borrower, at the same rate as the
penalty interest rate accrued on the principal of the Loan. If the Borrower
delays to pay any interest accrued on the principal of any drawdown of the Loan
and applies such drawdown for any other purpose than those set forth herein, the
compound interest payable by the Borrower therefor as specified above shall be
at the aforesaid penalty interest rate applicable to misapplication of the Loan.
If the Borrower only delays to pay any interest accrued on the principal of any
drawdown of the Loan, with the principal of the drawdown applied for the purpose
set forth herein, the compound interest payable by the Borrower therefor as
specified above shall be at the aforesaid penalty interest rate applicable to a
delayed repayment of the principal of the Loan.
In case of any adjustment to the interest rate of the Loan set forth herein, any
penalty interest or compound interest payable hereunder shall be calculated and
paid based on the original rate for the period before the date of such
adjustment and, for the period after the date of such adjustment, shall be based
on the adjusted rate.
In case of any of the following occurrences, the Lender shall have the right to
cease any drawdown by the Borrower or to cancel all remaining portion of the
Loan which has not been drawn by the Borrower, and may announce that all the
principal of and interest accrued on the Loan hereunder immediately become due
and payable:
(1) Failure of the Borrower to pay any principal or interest which becomes
due and payable by it has lasted for more than 30 days;
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(2) The amount of repayments delayed by the Borrower and the amount applied by
the Borrower for any other purpose than those set forth herein have in
aggregate reached RMB100,000.00;
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(3) Borrower applies loan funds for purpose other than as set out herein.
(4) Any representation made by the Borrower in Article 11 hereof is untrue
when made or the Borrower has committed a material breach of any of its
covenants contained in Article 11 hereof;
(5) The Borrower has committed a material breach under any other loan
contract;
(6) The Borrower has ceased its operation or has been terminated or revoked or
has become bankrupted;
(7) The financial status of the Borrower has materially deteriorated.
Article 13 Deduction
The Borrower hereby agrees that the Lender may deduct any amount due and payable
by the Borrower hereunder directly from the accounts opened by the Borrower at
the branches and departments of Bank of China.
Article 14 Taxes and Fees
Any and all taxes and fees arising out of and in connection with the execution
and performance of this Agreement and the settlement of disputes hereunder shall
be paid by the Borrower, including without limitation, the stamp tax, interest
withholding tax, litigation cost, enforcement charge, legal fees and notary fee.
Article 15 Offsetting and No Waiver
The Borrower shall fully pay any and all amounts payable by it hereunder and
shall not request any offsetting against any such amount, except with the
consent of the Lender.
The Borrower shall not assign any of its obligations hereunder to any third
party without the written consent of the Lender.
No tolerance, grace or preference granted to the Lender or any delay in
exercising any right by the Lender hereunder shall in any way affect, prejudice
or restrict any right or remedy vested in or available to the Lender under this
Agreement or by law, nor shall any such tolerance, grace, preference or delay be
deemed as a waiver by the Lender of any right, benefit or interest hereunder or
release the Borrower from any obligations assumed by it hereunder.
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Article 16 Amendment and Termination
This Agreement may be amended, supplemented or terminated by written agreement
between the parties hereto. Any and all amendments and supplements hereto shall
constitute an integral part of this Agreement.
Any invalidity of any provision hereof shall not affect in any way the validity
of any remaining provision hereof.
Article 17 Governing Law, Settlement of Disputes and Jurisdiction
This Agreement shall be governed by the laws of the People's Republic of China.
Any dispute arising from, out of or in connection with this Agreement shall be
settled by friendly consultations between the Parties. Consultations shall
begin immediately upon one Party delivering to the other Party a written
request for such consultation. If within 30 (thirty) days following the date on
which the request is given, the dispute cannot be settled through consultation,
the dispute shall be submitted to arbitration in Beijing pursuant to the then
effective arbitration rules and under the auspices of the China International
Economic and Trade Arbitration Committee (CIETAC) upon the request of any Party
with notice to the other Party. The arbitration shall have three arbitrators.
Each shall select one arbitrator. The two selected arbitrators shall jointly
select the Chairman. The Chairman shall be neither a Chinese citizen nor US
citizen. In the event the two arbitrators cannot agree upon a candidate for
Chairman then the secretary of CIETAC shall make such determination. The
arbitral award shall be final and binding upon both Parties. The costs of the
arbitration shall be borne by the losing party.
Article 18 Appendices
The following appendices, and other appendices mutually agreed upon by the
parties hereto, shall constitute an integral part hereof and shall be equally
authentic with this Agreement:
Application for drawdown
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Article 19 Effectiveness
This Agreement shall come into full force and effect upon being signed by the
legal representatives or authorized signatories of and affixed with the official
seals of the Borrower and the Lender.
This Loan Agreement shall be executed in 4 originals in English and Chinese, of
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which each party hereto shall hold 2 originals. Both versions shall be equally
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valid.
Article 20 Special Notes
The Borrower and the Lender have fully negotiated over any and all terms
contained herein.
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The Lender has requested the Borrower to pay special attention to, and to obtain
the full and accurate understanding of, any and all terms contained herein on
the rights and obligations of the parties hereto. The Lender has made relevant
explanations of such terms to the Borrower as per the Borrower's request.
Both parties hereto hereby confirm their completely identical understanding of
any and all terms contained herein.
Article 21 Notices
All notices to be issued under or in connection with this Agreement shall be in
the English and Chinese language and considered validly given effective upon
receipt if sent by reputable courier or if delivered by hand against receipt. In
case of hand delivery Kadant Inc. shall receive a copy by facsimilie and
courier:
If to Borrower:
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Kadant Light Machinery (Jining) Co., Ltd.
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No. 99 Jidian Road 1,
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High and New Technologies Industry Development Zone
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Jining, Shandong 272023 China
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Attention: Chairman
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With a copy to:
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Kadant Inc.
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One Acton Place, Suite 202
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Acton, MA 01720
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Attention: Treasurer
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If to Lender:
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Bank of China Limited, Jining Branch
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No. 99, Guanghe Road
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Jining, Shandong China
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Attention: Manager of Company Department
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For and on behalf of:
Borrower: Kadant Jining Light Machinery Co., Ltd. (official seal)
Signed by: /s/ Gan Beng Keong
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Legal Representative (or authorized signatory)
Date: 6th June, 2006
For and on behalf of:
Lender: Bank of China Stock Limited, Jining Branch (official seal)
Signed by: /s/ Xia Xiaofeng
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Legal Representative (or authorized signatory)
Date: 6th June, 2006
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