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LOAN AGREEMENT WITH CHATTEL MORTGAGE

Mortgage Agreement

LOAN AGREEMENT WITH CHATTEL MORTGAGE | Document Parties: ON SEMICONDUCTOR CORP | BANK OF THE PHILIPPINE ISLANDS | METROPOLITAN BANK | ON SEMICONDUCTOR PHILIPPINES, INC | SECURITY BANK CORPORATION You are currently viewing:
This Mortgage Agreement involves

ON SEMICONDUCTOR CORP | BANK OF THE PHILIPPINE ISLANDS | METROPOLITAN BANK | ON SEMICONDUCTOR PHILIPPINES, INC | SECURITY BANK CORPORATION

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Title: LOAN AGREEMENT WITH CHATTEL MORTGAGE
Date: 10/12/2007
Industry: Semiconductors     Sector: Technology

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Exhibit 10.1

LOAN AGREEMENT WITH CHATTEL MORTGAGE

This Loan Agreement with Chattel Mortgage (“Agreement”) made and entered into this October 9, 2007, at the City of Makati, Metro Manila, Philippines, by and among:

ON SEMICONDUCTOR PHILIPPINES, INC ., a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with address and place of business at Governor’s Drive, Bo. Maduya Carmona, Cavite, Philippines, represented in this transaction by RICHARD COHEN, President and General Manager, being duly authorized for the purpose (hereinafter referred to as the “ Borrower ”);

BANK OF THE PHILIPPINE ISLANDS , a financial institution duly organized and existing under and by virtue of the laws of the Philippines with address and place of business at the 7 th Floor, BPI Building, Ayala Avenue corner Paseo de Roxas, Makati City, Philippines, represented in this transaction by ALBERTO E. PASCUAL, Senior Vice-President, and AURALYN S. TORRES, Vice-President, being duly authorized for the purpose (hereinafter referred to as “BPI”) ;

METROPOLITAN BANK & TRUST COMPANY , a financial institution duly organized and existing under and by virtue of the laws of the Philippines with address and place of business at Metrobank Plaza, Sen. Gil J. Puyat Avenue, Makati City, Philippines, represented in this transaction by JOSE M. CHAN, JR., Senior Vice-President, and MARITESS D. RIVERA, Vice-President, being duly authorized for the purpose (“hereinafter referred to as “Metrobank” );

and

SECURITY BANK CORPORATION , a financial institution duly organized and existing under and by virtue of the laws of the Philippines with address and place of business at Security Bank Centre, 6776 Ayala Avenue, Makati City, Philippines, represented in this transaction by OLIVIA B. YAO, First Vice-President, and VICTOR O. MARTINEZ, Vice-President, being duly authorized for the purpose (“hereinafter referred to as “SBC” );

(Each of BPI, Metrobank and SBC may be referred to as a “Lender” in the singular or the “Lenders”, collectively; and each of the Borrower and the Lenders in this Agreement may be referred to as a “Party” in the singular, or the “Parties”, collectively)

WITNESSETH : THAT

WHEREAS , the Borrower has requested a five (5)-year term loan of up to TWENTY-FIVE MILLION US DOLLARS (US$25,000,000.00) from the Lenders, to finance the acquisition of capital expenditures, to pay certain existing obligations and for other general corporate uses;

 


WHEREAS , the Lenders have agreed to extend a term loan to the Borrower subject to the terms and conditions set forth herein;

NOW, THEREFORE , for and in consideration of the foregoing premises and of the mutual covenants and agreements hereinafter stated, the Parties hereto agree as follows:

Section 1. Construction and Definitions

 

1.01 Principles of Construction

 

(a) Capitalized terms used in this Agreement but not otherwise defined shall have the meanings set forth in Section 1.02 of this Agreement.

 

(b) The headings in this Agreement are inserted for convenience of reference only and shall not limit or affect the construction of the provisions hereof. Unless the context otherwise requires, words denoting the singular number shall include the plural and vice versa, and references to any gender shall include the other genders. Unless otherwise provided herein, all terms of accounting used herein shall be construed in accordance with generally accepted accounting principles in effect in the Philippines on the date applied. References to “Sections” and “Exhibits” are to be construed as references to the Sections and Exhibits of and to this Agreement. The Exhibits attached to this Agreement shall form integral parts hereof.

 

(c) Reference to any Applicable Law shall be construed as a reference to such Applicable Law as re-enacted, amended or extended from time to time, and any reference to any document or agreement, including this Agreement, shall be deemed to include (i) the schedules and exhibits thereof and thereto which are attached and made integral parts thereof, and (ii) references to such document or agreement as may be amended or modified from time to time in accordance with its terms, but only to the extent such amendments and other modifications are not prohibited by the terms thereof or of this Agreement, unless otherwise indicated.

 

(d) Reference to any party to this Agreement or any party to any other agreement shall include its successors, and in the case of governmental persons, persons succeeding to their respective functions and capacities.

 

1.02 Definitions

When used in this Agreement, the following terms, unless the context otherwise requires, shall have the following meanings:

 

  a) “Agreement” shall mean this Loan Agreement with Chattel Mortgage, the Note/s, and all annexes, schedules and all future amendments or supplements thereto;

 

  b)

“Applicable Law” shall mean any Philippine statute, law, regulation, ordinance, rule, judgment, order, decree, governmental approval, concession, grant, franchise, license, directive, guideline, policy, requirement or other

 

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governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any governmental authority;

 

  c) “Banking Day” shall mean a day on which: a) commercial banks are open for business in Makati City and in Carmona, Cavite; and, b) when the Philippine Clearing House Corporation is likewise open for business. Provided, that all other days not otherwise specified herein shall mean calendar days which shall be construed as successive periods of twenty-four (24) hours each whether such periods are Banking Days or not;

 

  d) “Base Rate” shall mean the three (3)-month London Interbank Offered Rate (“LIBOR”) at approximately 11:30 a.m. (Philippine time) on the Interest Rate Setting Date. In the event that such rate or screen page from Bloomberg is not available for any reason except market disruptions, the applicable Base Rate shall be determined by reference to the LIBOR of the immediately preceding day;

 

  e) “Borrowing” shall mean the advance by the Lenders to the Borrower, or as the context may require, the amount of such advance from time to time outstanding;

 

  f) “Borrower Stockholders’ Equity” shall refer to the total stockholders’ equity of the Borrower as recognized and measured in its audited financial statements in conformity with generally accepted accounting principles;

 

  g) “Commitment” shall mean the obligation of the Lenders to grant a term loan facility in favor of the Borrower up to the maximum aggregate principal amount of TWENTY-FIVE MILLION US DOLLARS (US$25,000,000.00) subject to the terms and conditions of this Agreement;

 

  h) “Days” shall mean consecutive calendar days;

 

  i) “Debt to Equity Ratio” shall mean the ratio of Long-Term Debt over Borrower Stockholders’ Equity;

 

  j) “Dollars” or “US Dollars” and the signs “$”, “US$” or “USD” shall mean the legal currency of the United States of America;

 

  k) “Drawdown” shall mean the act of availing of the Borrowing to be made by the Lenders in favor of the Borrower, here to be made in accordance with Sections 2.02 and 7 hereof;

 

  l) “Event/s of Default” shall have the same meaning set forth in Section 8.01 hereof;

 

  m)

“Governmental Authority” shall mean any governmental, state or other political subdivision thereof, or any entity exercising or entitled to exercise

 

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executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government;

 

  n) “Indebtedness” shall mean all obligations of the Borrower then outstanding for the payment or repayment of money, including (i) all indebtedness of the Borrower for or in connection with borrowed money or for the deferred purchase price of property or services or for leases and similar arrangements (including, but not limited to, reimbursement obligations under or in respect of any letter of credit or bank acceptance and the obligation to repay deposits with or advances to the Borrower), and (ii) all direct and indirect guarantees of the Borrower in respect of, and all obligations (contingent or otherwise) of the Borrower to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, all indebtedness of another Person; provided, however, that the term Indebtedness shall not include (a) payment obligations in the ordinary course of business or in the day-to-day operations of the Borrower, or (b) agreements providing for indemnification, purchase price adjustments or similar obligations incurred or assumed in connection with the acquisition or disposition of assets.

 

  o) Interest” on the Loan shall be as set out in Section 2.04 hereof.

 

  p) “Interest Payment Date” shall mean the day on which interest is due on the Loan. Should the Interest Payment Date fall on a day that is not a Banking Day in Makati City or in Carmona, Cavite or the Philippine Clearing House Corporation is not open for business, the corresponding amount of Interest shall be paid on the immediately succeeding Banking Day, without adjustment as to the amount of Interest to be paid, except on the final Interest Payment Date and on the last Loan Repayment Date which shall be computed from the last interest accrual up to the actual date of payment. For avoidance of doubt, the Interest Payment Date shall be as set out in the Loan Payment Schedule (more particularly, Exhibit “E” of this Agreement) which shall be accompanying the Note/s evidencing each Borrowing.

 

  q) “Interest Period” shall mean the period commencing on the date of the Drawdown and having a duration of three (3) Months and each period thereafter;

 

  r) “Interest Rate Setting Date” shall be the first day of each Interest Period. For avoidance of doubt, the Interest Rate Setting Date shall be as set out in the Loan Payment Schedule (more particularly, Exhibit “E” of this Agreement) which shall be accompanying the Note/s evidencing each Borrowing;

 

  s) “Lien” shall mean any pledge, mortgage, charge, encumbrance, title retention or other security arrangement on or with respect to any asset or revenue of the Borrower;

 

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  t) “Loan” shall mean the aggregate principal amount of the Borrowing made by Borrower hereunder;

 

  u) “Loan Documents” shall mean collectively this Agreement, the Note/s, and all other agreements, instruments and documents executed or delivered pursuant to the terms of this Agreement, including any and all amendments or supplements thereto;

 

  v) “Loan Repayment Date” shall mean the day on which a principal installment is due on the Loan as set out in Section 2.07 hereof and in the Loan Repayment Schedule. Should the Loan Repayment Date fall on a day that is not a Banking Day in Makati City or in Carmona, Cavite, or the Philippine Clearing House Corporation is not open for business, the corresponding amount of installment shall be paid on the immediately succeeding Banking Day, without adjustment as to the amount of Interest to be paid, except on the last Loan Repayment Date which shall be computed from the last interest accrual up to the actual date of payment;

 

  w) “Long-Term Debt” shall mean debt or liabilities of the Borrower with a maturity date of not less than twelve (12) months as recognized and measured in its audited financial statements in conformity with generally accepted accounting principles;

 

  x) “Majority Lenders” shall mean two (2) of the three (3) Lenders.

 

  y) “Month” shall mean the period commencing on a specified day in any calendar month and ending on the numerically corresponding day in the relevant subsequent calendar month (or if there is no corresponding day in the calendar month in which such period ends, such period shall end on the last day of such calendar month);

 

  z) “Note/s” shall mean each of the promissory notes executed on the date of Drawdown which by their respective terms are incorporated into and form an integral part of this Agreement, evidencing the Loan pursuant to Section 2.03 hereof and more specifically described in Exhibit “A” hereof or any promissory note/s delivered by the Borrower with the consent of the Lenders in extension, renewal or substitution thereof and evidencing all or part of such Lenders’ advances;

 

  aa) “Pesos” and the signs “ (Peso) ” and “ PhP ” shall mean the legal currency of the Republic of the Philippines;

 

  bb) “Quarter” shall mean a period of three (3) Months;

 

  cc) “Subsidiaries and Affiliates” shall mean those corporations which are either wholly-owned or controlled by the Borrower and/or the Lenders (where applicable) or are either under the control or are under common control with the Borrower and/or the Lenders (where applicable);

 

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  dd) “Taxes” shall mean any and all present or future taxes (except for the two (2%) creditable withholding tax for large taxpayers,), levies, imposts, deductions, withholdings, filings or registrations and other fees or charges and all fines, penalties and other liabilities with respect thereto (but excluding any income tax payable in respect of the overall net income of the Lenders earned in each calendar year) imposed by the Republic of the Philippines or any political subdivision or taxing authority thereof or therein on or with regard to any payment called for by the Loan Documents, and/or any aspect of the transactions contemplated therein including; but not limited to the execution, formalization, registration, performance and/or enforcement hereof;

Section 2. The Loan

 

2.01 Commitment of the Lenders

The Lenders grant to the Borrower a five (5)-year term loan facility in the maximum aggregate principal amount of TWENTY-FIVE MILLION US DOLLARS (US$25,000,000.00), broken down as follows:

(a) Eight Million Four Hundred Thousand US Dollars (US$8,400,000.00) to be granted by BPI;

(b) Eight Million Three Hundred Thousand US Dollars (US$8,300,000.00) to be granted by Metrobank; and,

(c) Eight Million Three Hundred Thousand US Dollars (US$8,300,000.00) to be granted by SBC,

upon the terms and subject to the conditions hereof (“Commitment”). The Lenders agree, upon the terms and subject to the conditions hereinafter set forth, to make advances in Dollars to the Borrower within three (3) Banking days from the signing of this Agreement in an aggregate principal amount up to but not in excess of their above-stated Commitment.

 

2.02 Procedure for Drawdown

On the proposed Drawdown date, provided all conditions set forth in Section 7 hereof have been fulfilled, each Lender shall make available to the Borrower the full amount of their respective Commitment not later than 10:00 a.m. of said date, which amount shall be released by crediting the Borrower’s designated deposit account/s (electronic fund transfer). The Lenders shall, immediately upon crediting the Borrower’s account/s, and in no case later than 3:00 p.m. on the Drawdown date, notify the Borrower by facsimile transmission of such fact.

 

2.03 The Notes

 

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(a) The Borrowing shall be evidenced by Note/s, substantially in the form of Exhibit A” hereof, dated on the Drawdown date.

 

(b) On or before the Drawdown date, the Borrower shall deliver to the Lenders the duly executed Note/s evidencing the Borrowing on such date in accordance with the Agreement.

The provisions of the Note/s, once executed, shall be complemented by the terms and conditions of this Agreement; provided, however, that in case of conflict between the Notes and this Agreement, the latter shall prevail.

 

2.04 Interest

 

(a) The Borrower shall pay Interest on the Loan on each Interest Payment Date for the relevant Interest Period at a floating rate per annum equal to the sum of Base Rate plus a spread of one percent (1.0%) p.a. (the “Interest Rate”). The applicable tax due on the interest income on the Loan shall be for the account of the Borrower. The applicable Interest Rate for the initial Interest Period shall be determined by the Lenders and the Borrower on Drawdown date. For subsequent Interest Periods, the applicable Interest Rate shall be determined by the Lenders on each of the set Interest Rate Setting Dates and shall be communicated to the Borrower thereafter. For the avoidance of doubt, the Interest Rate Setting Date and Interest Payment Date shall be as set out in the Loan Payment Schedule (substantially in the form of Exhibit “E”) which shall form part of each Note evidencing a Borrowing.

 

(b) All payments for Interest pursuant to this Section shall be computed on the basis of a 360-day year for the actual days elapsed. Interest shall accrue from and including the first (1st) day of each Interest Period up to, but excluding the last day of each Interest Period, except if it is the maturity date of the Loan.

 

(c) Interest shall be payable quarterly in arrears computed based on the outstanding balance of the Loan, with payments to commence at the last day of the third Month from Drawdown Date as set out in the Loan Payment Schedule.

 

(d) If the Borrower fails to make payment when due of any sum hereunder whether at the stated maturity, by acceleration or otherwise, the Borrower shall, in addition to the stipulated Interest which shall continue to accrue on such unpaid obligations and without prior written notice from the Lenders, be liable unconditionally to pay a Penalty Rate equivalent to three-fourths percent (0.75%) per month of delay or a fraction thereof, based on the amount due and payable, computed daily on a 30-day month basis, payable together with and in addition to the principal and Interest and other charges due.

In addition, the Borrower shall indemnify the Lenders upon demand against any reasonable loss or expense, which they may incur as a consequence of the payment default by the Borrower under this Section 2.04(d). The amount of such loss or expense shall be certified by the Lenders to the Borrower and in the absence of error

 

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in computation, upon valid proof of such loss or expense, shall be conclusive upon the Borrower.

 

2.05 Security

 

(a) As security for the payment of the Borrowing, the Borrower obliges itself to mortgage in favor of the Lenders only such machineries/equipment/chattels the value of which shall be two (2) times the outstanding amount of the Borrowing. In this regard, the Borrower hereby creates, establishes and constitutes in favor of the Lenders a chattel mortgage over such of its machineries/equipment or other chattels situated at its plant in Carmona, Cavite with a value of two (2) times the outstanding amount of the Borrowing (“Mortgaged Machineries/Equipment/Chattels”). The Mortgaged Machineries/Equipment/Chattels are more particularly described in the attached list marked as Annex “A” and made an integral part hereof.

It is understood and agreed that all additions and accretions to, or replacements or substitutions of, said Mortgaged Machineries/Equipment/Chattels shall be made and subject to the lien of this chattel mortgage and shall be held for the security and payment of the outstanding amount of the Borrowing including interest, expenses or any such other obligations owing to the Lenders under this Agreement precisely the same as the Mortgaged Machineries/Equipment/Chattels marked as Annex “A”.

 

(b) The Borrower states that it is the sole and beneficial owner of the Mortgaged Machineries/Equipment/Chattels and the one in possession thereof free from any lien, encumbrance or other security interest of any other person, except as otherwise disclosed in writing or as described in the Financial Statements as of December 31, 2006, or in the notes thereto, or as provided under Section 6.02(d) hereof.

 

(c) During the term and existence of this Agreement, the Borrower shall insure or cause to be insured at all times and at its own expense the Mortgaged Machineries/Equipment/Chattels against loss, fire, theft, pilferage, or otherwise, for the full insurance value payable to the Lenders as their interest in the Mortgaged Machineries/Equipment/Chattels may appear, and it shall endorse and deliver the policy or policies of insurance to the Lenders, and in default thereof, the Lenders may, at their option, insure the Mortgaged Machineries/Equipment/Chattels and any and all sums so paid by the Lenders for such insurance shall be repayable with interest thereon at the same interest rate as being imposed under this Agreement and shall be considered covered by herein mortgage. It is clearly understood that the Lenders, either by themselves or through their duly appointed representative/s may have the right to see and inspect the Mortgaged Machineries/Equipment/Chattels to find out their state or condition, upon a prior written notice of at least 24 hours submitted to the Borrower and only to be conducted during regular business hours from 9:00 am to 5:00 pm.

 

(d)

The Borrower shall not, during the existence of the mortgage, encumber with a second mortgage the Mortgaged Machineries/Equipment/Chattels, or any part thereof, without the written consent of the Lenders. Nor shall the Borrower transfer the Mortgaged Machineries/Equipment/Chattels to another location without the

 

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prior written consent of the Lenders, which consent shall not be unreasonably withheld.

 

(e) The Borrower may sell or dispose of the Mortgaged Machineries/Equipment/Chattels, provided the Borrower shall have the consent of Majority Lenders (which consent shall not be unreasonably withheld) and immediately replace the Mortgaged Machineries/Equipment/Chattels with other Machineries/Equipment/Chattels such that at all times it is maintained that the value of the mortgage is two times the outstanding amount of the Borrowing. In this case, the Borrower undertakes to execute a new Chattel Mortgage document to cover the substitute collateral. It is agreed that the Borrower shall furnish all documentary stamps for the new Chattel Mortgage and pay all fees for the notarization and registration (if required by the Lenders) of the documents connected therewith.

 

(f) In the event the Borrower should fail to pay the Lenders the sum of money or Borrowing secured by this mortgage, or any part thereof, when due, or is in default within the meaning of this Agreement, the Lenders shall have the right at their election, to foreclose this mortgage in accordance with the provisions of Act No. 1508, as amended, otherwise known as the Chattel Mortgage Law, and/or any other applicable law, and the proceeds of such sale of the mortgaged machineries/equipment shall be applied in accordance with Section 2.07(b).

 

(g) The Borrower agrees and undertakes to execute and deliver to a Lender such other documents which said Lender may from time to time reasonably request from the Borrower in connection with the mortgage.

 

(h) Effective upon the breach of any condition of this mortgage and in addition to the remedies herein stipulated, the Lenders are hereby appointed attorneys-in-fact of the Borrower with full powers and authority, to take actual possession of the Mortgaged Machineries/Equipment/Chattels, without the necessity of any judicial order or any other permission or power, to remove, sell or dispose of the Mortgaged Machineries/Equipment/Chattels or take any other legal action that may be deemed necessary, to lease any of the Mortgaged Machineries/Equipment/Chattels and collect rents therefor; to execute bills of sale, leases or agreements that may be deemed convenient; to make repairs or improvements in the Mortgaged Machineries/Equipment/Chattels and pay the same and perform any other act which the Majority Lenders may deem convenient for the proper administration of the Mortgaged Machineries/Equipment/Chattels. The payment of any expenses advanced by the Lenders in proportion to their respective Commitment or Advances, in connection with the purposes indicated is also guaranteed by this mortgage. Any amount received from the sale, disposal or administration abovementioned which may be executed by Majority Lenders by virtue of that power is hereby ratified.

 

2.06 Loan Repayment

The Borrower shall fully pay and liquidate the Loan within five (5) years from and after the initial Drawdown date. Sixty percent (60.0%) of the total drawn amount

 

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shall be repaid over nineteen (19) equal quarterly installments, with the balance to be repaid on the maturity date of the loan, each such quarterly installment being payable on a Loan Repayment Date as defined herein and as set out in the Loan Payment Schedule accompanying each Note. Principal Repayment shall be made every Quarter commencing at the last day of the 1st Quarter from initial Drawdown date and every Quarter thereafter.

In case of multiple loan drawdowns, the repayment schedule of any succeeding drawdown shall coincide with the repayment schedule of the initial drawdown.

For avoidance of doubt, the Loan shall be repaid in accordance with the Loan Payment Schedule (substantially in the form of Exhibit “E” of this Agreement) accompanying each Note to the respective Lenders.

 

2.07 Payments

 

  (a) All payments to be made by the Borrower hereunder or under the Note/s or under any document contemplated hereby shall be paid to each Lender not later than 12:00 noon of the due date of the payment in Dollars drawn on immediately available funds by debiting the Borrower’s designated deposit account/s.

 

  (b) Any payment made to the Lenders hereunder shall be applied first against reasonable costs, expenses and indemnities due hereunder; then against penalties; then against interest due on the Loan; then against the principal amount of the Loan then due and payable.

 

2.08 Voluntary Prepayment

The Borrower shall have the option to prepay the Loan in full or partially on the first day of each month without any penalty chargeable against it, subject to the following terms and conditions:

 

  (a) The Borrower shall give the Lenders written notice of such prepayment not less than ten (10) days prior to the proposed prepayment date, which notice, once given, shall be irrevocable and binding on the Borrower;

 

  (b) The amount payable in respect of each prepayment shall be the full or partial outstanding principal amount of the Loan plus any accrued but unpaid interest, penalties and other charges (where applicable);

The conditions for each partial prepayment are: (i) the minimum principal amount to be prepaid shall be ONE MILLION US DOLLARS (US$1,000,000.00); and, (ii) each prepayment shall be applied against the repayment installments of the Loan in the inverse order of their maturities;

 

  (c)

In case of failure by the Borrower to make the prepayment after it has given notice of prepayment to the Lenders, the Borrower shall pay a penalty fee

 

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equivalent to three percent (3%) p.a. computed from the proposed date of prepayment up to the actual date of prepayment based on the amount which should have been prepaid by the Borrower;

 

  (d) Any amount prepaid may not be re-borrowed hereunder.

 

2.09 Use of Proceeds

The Borrower agrees that it will use the proceeds of the Loan exclusively to finance capital expenditures, the payment of Borrower’s existing obligation with ON Semiconductor Trading Limited, Semiconductor Components Industries, LLC and other general corporate uses.

Section 3. Funding and Yield Protection

 

3.01 Taxes

 

(a) All payments due to the Lenders under this Agreement, whether of principal, interest, penalty, fee or otherwise, shall be made without set-off or counterclaim, free and clear of and without deduction for or on account of any Taxes, except for the two percent (2%) creditable withholding tax for large taxpayers, all of which Taxes shall be for the account of the Borrower. If the Borrower, at any time during the duration of this Agreement, shall be required by any Applicable Law to make any deduction or withholding in respect of Taxes, from any payment hereunder, except for the 2% creditable withholding tax for large taxpayers, the Borrower shall: (i) pay such amount in addition to the payments due to the Lenders under this Agreement, whether of principal, interest, penalty, fee or otherwise, as may be necessary so that the amount received by the Lenders, after all such withholdings and deductions, shall be equal to the full amount payable under this Agreement (principal, interest, penalty, fee or otherwise); and, (ii) pay the full amount deducted or withheld to the relevant tax or other authorities.

 

(b) If the Borrower shall cause the payment of any of the Taxes, except for the 2% creditable withholding tax for large taxpayers, for the account of the Lenders as provided herein, the Borrower shall, within fifteen (15) days from such payment, forward to the Lenders certified copies of official receipts or evidence acceptable to the Lenders establishing payment of such amount.

 

(c) The Borrower agrees to submit proofs of payment in case payment is made for or on account of such creditable withholding tax.

 

3.02 Change in Circumstances

 

(a)

In the event that there shall hereafter occur at any time during the term of this Agreement any change in the Applicable Law or in the interpretation or administration thereof, which shall (i) increase the cost of maintaining any reserve or special deposit against the Commitment or the Loan, or (ii) increase any other cost of complying with any law, regulation or condition with respect to making or

 

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maintaining the Commitment or the Loan, and the result of any of the foregoing, as determined by the Lenders, is to increase the cost to the Lenders by at least twenty-five basis points (25 bps), or to reduce the amount of any payment (whether of principal, interest or otherwise) receivable by the Lenders hereunder, or in the event that a law or regulation is passed or if the Bangko Sentral ng Pilipinas or other authorized government agency or instrumentality shall declare a moratorium on payments of foreign currency denominated obligations or any governmental imposition, foreign exchange law, regulation, policy, circular, memorandum, letter, order or other directive is issued, or any circumstance or event has occurred which has the effect of extending, rescheduling, adjusting or suspending payment in Dollars, or of restricting or delaying the ability of the Lenders to receive payment in Dollars, or of restricting or delaying the ability of the Borrower to source Dollars, whether the Loan is maturing or otherwise, then the Lenders shall notify the Borrower of the said fact in writing. The Borrower and the Lenders then shall discuss ways to address the situation including the option in re-denominating the obligation into Pesos without restructuring or amending the original repayment terms. Should the Parties fail to reach an agreement within thirty (30) days from receipt of notification by the Borrower, either Party has the option to terminate this Agreement. In case of a termination, the Borrower shall, within ten (10) Banking Days, prepay the Loan in full, without premium or penalty, plus accrued interest thereon up to the date of prepayment, subject to the reimbursement of costs and expenses incurred pursuant to Section 4.01.

It is understood and agreed that with respect to the provisions of this Section 3.02, a decision of Majority Lenders shall constitute the decision of the Lenders.

 

(b) In the event it shall become unlawful for the Lenders to honor their Commitment or to maintain the Borrowings, then the Commitment of the Lenders shall be cancelled and the Borrower shall, within thirty (30) days from receipt of notice from the Lenders (unless the Applicable Law or circumstance giving rise to such illegality requires a shorter period, in which case, within such shorter period provided in the Applicable Law), prepay the Borrowings in full, without premium or penalty, together with interest accrued thereon up to the date of prepayment, subject to reimbursement of costs and expenses incurred pursuant to Section 4.01. Upon the occurrence of any such event, the Lenders shall promptly notify and furnish the Borrower evidence of such illegality.

 

3.03 Cost and Losses

The Borrower shall pay the Lenders for any actual and documented reasonable costs and losses, as certified by the Lenders and upon submission by Lenders of proof of such costs and losses (without prejudice to Borrower’s right to dispute or request clarification of the charges), in connection with the unwinding or liquidation of any deposit, funding or financing arrangement that the Lenders may in good faith incur as a result of (i) any Borrowing not being made due to the failure of the Borrower to satisfy the applicable conditions specified in Section 7 of this Agreement on the proposed Drawdown date, or (ii) the default by the Borrower in the payment of the

 

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interest accrued thereon after the occurrence of any Event of Default hereunder, or (iii) any prepayment of the Loan.

Section 4. Fees and Charges

 

4.01 Costs and Expenses

 

(a) The Borrower shall, for its own account, pay all reasonable costs, charges and expenses incurred in connection with the execution of the Loan Documents and any other documentation required thereunder and/or any amendment of any of the Loan Documents, which total reasonable costs, charges and expenses shall include documentary stamp tax and notarial fees.

 

(b) The Borrower shall also reimburse the Lenders on demand for all reasonable and documented expenses incurred by them, including reasonable expenses and fees of external counsel, when applicable, (i) in connection with the enforcement and administration of the Loan Documents from and after the occurrence of an Event of Default, or (ii) with respect to any action which may be instituted by any person against the Lenders in respect of any of the foregoing or as a result of any transaction, action or non-action arising from the foregoing. Such expenses shall be reimbursed whether or not the Lenders gives notice of such Event of Default or demand acceleration of the Loan or take other action to enforce the provisions of this Agreement, unless the Lenders waives the Event of Default and in such waiver specifically waive reimbursement of administration and enforcement expenses resulting from such waived Event of Default; provided that in every case the Borrower shall have the right to contest prior to or after the payment thereof the correctness or reasonableness of the expenses incurred. It is understood that expenses shall not include representation expenses of any kind.

 

(c) The Borrower shall pay all present and future stamp taxes and other like duties and Taxes and all other like fees which may be payable in respect of the Loan Documents including all prepayments thereunder and shall indemnify the Lenders against all liabilities, costs and expenses which may result from any default or delay in paying such duties, Taxes or fees.

 

4.02 Non-Reimbursable Nature

The fees, expenses and other amounts payable by the Borrower under this Section shall be payable by the Borrower, and, if already paid, shall not be reimbursable by the Lenders, notwithstanding the failure by the Borrower to make any Borrowing under the Agreement or any other failure of the transactions contemplated herein.

Section 5. Representations and Warranties

 

5.01 One-Time Representations and Warranties

As of the date hereof, the Borrower represents and warrants to the Lenders that:

 

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  (a) Organization and Existence . It is a corporation duly organized, validly existing and in good standing under the laws of the Republic of the Philippines except as otherwise disclosed in writing to the Lenders prior to the execution of this Agreement, has its business address at Carmona, Cavite, and is registered or qualified to do business as now being conducted in every jurisdiction where registration or qualification is necessary.

 

  (b) Authorization . It has full legal right, power and authority to carry on its present business, to own its properties and assets, to incur the indebtedness and other obligations provided for in the Loan Documents, and has taken all necessary actions to authorize the execution and delivery of the Loan Documents, and to comply, perform and observe the terms and conditions hereof and thereof.

 

  (c) No Breach . Each of the Loan Documents, when executed and delivered pursuant hereto, will not violate in any respect any provision of its Articles of Incorporation, By-Laws, or other constitutive documents, or result in the breach of or constitute a default under (i) any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award of any authority, agency, or court presently in effect, or (ii) any indenture, agreement, mortgage, contract or other undertaking or instrument to which it is a party or which is binding upon it or any of its properties or assets, and do not and will not result in the creation or imposition of any security interest, lien, charge or encumbrance on any of its assets or properties pursuant to the provisions of any such indenture, agreement, contract or other undertaking or instrument; unless otherwise prevented or required by law.

 

  (d) No Declared Event of Default . No declared event of default which could be materially adverse to its business, operations, property or financial or other condition, and which could materially adversely affect the ability of the Borrower to perform its obligations under the Loan Documents has occurred which constitutes a default by the Borrower under or in respect of any agreement, undertaking or instrument to which it is a party or by which it or its ownership in any of its assets or properties may be bound. An Event of Default shall not be deemed “material” if, when quantified, the value thereof shall be less than Ten Million Pesos (Php 10,000,000);

 

  (f) Consents, Approvals and Registrations . To the best of the Borrower’s knowledge, all consents, licenses, approvals and authorizations of, and all filings and registrations with any government authority, bureau or agency or other entity required in connection with the execution of any of the Loan Documents have been obtained and are in full force and effect.

 

  (g)

Litigation . Except as otherwise disclosed in writing or as described in Borrower’s financial statements as of December 31, 2006, or in the notes thereto, there is no action, suit or proceeding pending or, to its knowledge, threatened against or affecting it or any of its assets and properties, before any court or governmental department, commission, board, bureau, agency

 

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or instrumentality of the Republic of the Philippines or any other jurisdiction which, if determined adversely, could have a material adverse effect on the business, properties, assets or financial condition of the Borrower.

 

  (h) Immunity . Neither it nor any of its properties or assets enjoy any right of immunity from suit, jurisdiction of any competent court, attachment prior to judgment, attachment in aid of execution, execution of judgment or set-off in respect of its obligations herein.

 

  (i) Audited Financial Statements . Its Financial Statements as of December 31, 2006 correctly set forth the financial conditions of the Borrower as of such date and the results of its operations for such period based on generally accepted accounting principles, and since such date, there has been no material adverse change in such condition or operations sufficient to impair its ability to perform its obligations under this Agreement in accordance with the terms hereof. There are currently no substantial liabilities of the Borrower, direct, contingent, or otherwise, not reflected in such balance sheet and which are material in the aggregate.

 

  (l) Compliance with Laws/Taxes . It is conducting its business and operations in compliance with the applicable laws and directives of government authorities having the force of law except to the extent that its failure to comply therewith could not, in the aggregate, have a material adverse effect on its business, operations, property or financial or other condition and could not materially adversely affect its ability to perform its obligations under the Loan Documents. The Borrower has filed timely tax returns which to its knowledge are required to be filed and has paid all taxes due in respect of the ownership of its properties and assets or the conduct of its operations, except to the extent that the payment of such taxes is being contested in good faith and by appropriate proceedings diligently conducted.

 

  (m) Title to Properties . It has valid, good, indefeasible and marketable title to all its properties appearing in its financial statements, free and clear of liens, encumbrances, restrictions, pledges, mortgages, security interests or charges, except as otherwise disclosed in writing or as described in the Financial Statements as of December 31, 2006, or in the notes thereto, or as provided under Section 6.02 (d) hereof.

 

5.02 Continuing Representations and Warranties

As of the date hereof and throughout the continuance of this Agreement, the Borrower represents and warrants to the Lenders that:

 

  (a)

Binding Obligation . Each of the Loan Documents will constitute its legal, valid and binding obligation enforceable in accordance with its terms and conditions, except as enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and (b) general

 

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principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

  (b) Equal Rank . The obligations of the Borrower under this Agreement constitute and will constitute its direct, absolute, unconditional and general obligation and will rank at all times at least pari-passu in priority of payment and in all respects with all its other unsecured indebtedness with the exception of those which have preference solely by operation of law.

 

  (c) Material Disclosure . All information heretofore or hereinafter given by the Borrower to the Lenders for and in connection with this Agreement and the Borrower’s financial condition, affairs and assets are and will be true and correct in all material respects and are not and will not be misleading and do not and will not omit material facts; reasonable inquiries have been made to verify the facts contained therein; and, there are no other facts the omission of which would make any fact or statement therein misleading.

 

  (d) Concessions, Trade Names and Patents . It has the right to all concessions, tradenames, patents and license agreements necessary for the conduct of its business as now conducted and as proposed to be conducted, without any known conflict with the rights of others.

 

5.03 Accuracy of Representations and Warranties

Each of the representations and warranties set forth in Section 5.01 hereof are true and accurate in all material respects as of the date hereof, and each of the representations and warranties in Section 5.02 will also be true and accurate throughout the continuance of this Agreements, with reference to the facts and circumstances subsisting from time to time. The Borrower acknowledges that the Lenders have entered into this Agreement in reliance upon the representations and warranties contained in Section 5 hereof.

Section 6. Covenants

 

6.01 Affirmative Covenants

During the term of the Loan and until payment in full of all amounts due to the Lenders under this Agreement shall have been received by the Lenders, the Borrower covenants and agrees that, unless the Lenders shall otherwise consent in writing, which consent shall not be unreasonably withheld, it shall:

 

  (a)

Maintenance and Continuity of Business/Insurance . Maintain and preserve its corporate existence, rights, privileges and franchises; carry out and conduct its business in an orderly, diligent, efficient and customary manner and in accordance with sound financial and business practices; keep all its properties in good working order and condition, ordinary wear and tear excepted, and from time to time make all needful and proper repairs, renewals, replacements and improvements thereto and thereof so that

 

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business carried on in connection therewith may be properly and advantageously conducted at all times; and, maintain insurance with reputable insurers on all its properties and assets to such extent and against such operational and other risks and liabilities as are customary for businesses of a like or similar nature;

 

  (b) Compliance with Laws/Taxes . At all times comply with or cause to be complied with, all laws, statutes, rules, regulations, orders and directives, judgments, indentures, mortgages, deeds of trust, agreements and other instruments, arrangements, obligations and duties to which it is subject or by which it is legally bound where non-compliance would materially and adversely affect the Borrower’s ability to duly perform and observe its obligations and duties under the Agreement; and timely file tax returns which to its knowledge are required to be filed and pay all taxes due in respect of the ownership of its properties and assets or the conduct of its operations;

 

  (c) Indebtedness and Contractual and Other Obligations . Promptly as practicable, (i) duly pay and discharge all indebtedness and perform all contractual obligations in accordance with their terms; (ii) duly pay and discharge all taxes, assessments and governmental charges of whatever nature validly and legally levied upon or against it or against its properties and business prior to the date on which penalties attach thereto; and, (iii) duly pay and discharge all lawful claims for labor, materials, supplies, services, or otherwise which might or could, if unpaid, become a lien or charge upon the pro

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