The majority of the material contracts described below relate to financing arrangements of our Group. The terms of these arrangements are based on agreement with the respective contracting parties. As a result, the financial terms used in the respective agreements and in these descriptions of those agreements do not have the same meaning as those provided under IFRS and as used in the financial statements included elsewhere in this prospectus. Senior Facilities Agreement
NORMA Group Holding GmbH entered into a German law governed “Senior Facilities Agreement” on November 12, 2007 between, among others, NORMA Group AG (formerly DNL 1. Beteiligungsgesellschaft mbH) as parent and original guarantor, NORMA Group Holding GmbH, DNL Sweden AB, DNL France SAS, NORMA Germany GmbH, DNL Holding USA, Inc. as original borrowers and original guarantors, NORMA Czech s.r.o. and NORMA Polska sp. z o.o. as acceding guarantors, GE Corporate Finance Bank SAS, Zweigniederlassung Frankfurt am Main, COMMERZBANK Aktiengesellschaft and WestLB AG as mandated lead arrangers, underwriters and lenders and COMMERZBANK Aktiengesellschaft as agent and security agent.
The Senior Facilities Agreement provides for certain U.S. dollar term facilities and certain multicurrency term facilities, as well as a multicurrency revolving facility at the selection of the borrower.
The “Senior Term Facilities” consist of:
• a multicurrency term loan facility A1 in the maximum aggregate amount ofA60,000,000 (or in its equivalent in optional currencies permitted under the Senior Facilities). Facility A1 amortizes and is repayable in 14 unequal semi-annual installments with a final maturity date in November 2014;
• a U.S. dollar term loan facility A2 in the maximum aggregate amount of US$57,120,000. Facility A2 amortizes and is repayable in 14 unequal semi-annual installments with a final maturity date in November 2014;
• a multicurrency term loan facility B1 in the maximum aggregate amount ofA50,000,000 (or in its equivalent in optional currencies permitted under the Senior Facilities). Facility B1 amortizes and is repayable in a bullet payment on the final maturity date in November 2015;
• a U.S. dollar term loan facility B2 in the maximum aggregate amount of US$71,440,000. Facility B2 amortizes and is repayable in a bullet payment on the final maturity date in November 2015;
• a multicurrency term loan facility C1 in the maximum aggregate amount ofA50,000,000 (or in its equivalent in optional currencies permitted under the Senior Facilities). Facility C1 amortizes and is repayable in a bullet payment on the final maturity date in November 2016; and
• a U.S. dollar term loan facility C2 in the maximum aggregate amount of US$71,440,000. Facility C1 amortizes and is repayable in a bullet payment on the final maturity date in November 2016.
Initially, the Senior Facilities Agreement also provided for the possibility of the establishment of one or more commitments under a facility D in a maximum aggregate amount ofA70,000,000 upon request of NORMA Group Holding GmbH within a limited period of time and in compliance with certain conditions. However, NORMA Group Holding GmbH has not made use of this possibility within the prescribed time period.
The “Revolving Facility” is made available in the maximum aggregate amount of A75,000,000 (or in its equivalent in optional currencies permitted under the Revolving Facility) with a final repayment date in November 2014. At the request of NORMA Group Holding GmbH, the aggregate amount of the Revolving Facility was later reduced toA64,000,000 (or in its equivalent in optional currencies permitted under the Revolving Facility) effective May 5, 2008.
The Senior Facilities Agreement further provides for the possibility of an establishment of ancillary facilities on a bilateral basis by the conversion of all or part of any lender’s share in the available facility under the Revolving Facility upon request of a borrower or NORMA Group Holding GmbH.
Interest is payable by the relevant borrower on the last day of each interest period which can have a period of 1, 2, 3 or 6 months upon the relevant borrower’s selection at a rate per annum on the outstanding borrowing to which such interest period relates amounting to the aggregate of (i) the applicable margin (as described below), (ii) LIBOR
or, in relation to any loan in euro, EURIBOR, each as applicable on the relevant quotation date for the relevant period and (iii) any mandatory costs as set forth in the Senior Facilities Agreement.
The applicable margin prior to the offering was variable and depended on the ratio of total net debt as of the end of each quarter to the consolidated EBITDA for each such relevant period (the “Total Net Debt Cover”):
Total Net Debt Cover
Facility A1, Facility A2 and Revolving Facility Margin
Facility B1 and Facility B2 Margin
(in % per annum)
Greater than or equal to 4.00 . . . 2.25 2.75 Less than 4.00 but greater than or equal
to 3.50 . . . 2.00 2.50 Less than 3.50 but greater than or equal
to 3.00 . . . 1.75 2.25 Less than 3.00 but greater than or equal
to 2.50 . . . 1.50 2.25 Less than 2.50 . . . 1.25 2.25
The applicable margin for facility C1 and C2 prior to the offering was 3.25% per annum, respectively. The Senior Facilities Agreement is guaranteed by certain subsidiaries of NORMA Group Holding GmbH incorporated in Germany, France, Sweden, the Netherlands, the United Kingdom and the United States. The facilities are secured by the assets of NORMA Group Holding GmbH and the relevant subsidiaries, including inventory pledges, pledges of fixed assets, share pledges, account pledges, receivables pledges, bank account pledges, receivables assignments, securities transfer agreements of assets, pledges of charges and security assignments of intellectual property rights. Each obligor under the Senior Facilities Agreement has made certain representations, in particular regarding the existing group structure and the ownership of assets, some of them as repeating representations and has entered into various information undertakings.
The Senior Facilities Agreement contains a number of customary affirmative and negative covenants and other restrictions. These covenants include, among others, limitations and restrictions on security, on disposals of assets, on incurrence of financial indebtedness, on loans and guarantees, on investments, on acquisitions, on restrictions/ change of business, on dividends, on distributions and share capital. NORMA Group AG (formerly DNL 1. Beteiligungsgesellschaft mbH) as parent must also comply with and ensure that the financial condition of the group complies with certain financial covenants as customary for this kind of financing arrangement, for example, a total interest coverage ratio, a cash flow cover ratio, a total net debt cover ratio and a capital expenditure covenant. Moreover, the Senior Facilities Agreement stipulates a number of events of default, such as non-payment, misrepresentation, breach of other obligations, cross-default, insolvency, winding-up or similar events, change in the ownership of the subsidiaries of NORMA Group AG under the Senior Facilities Agreement, disposal or encumbrance not permitted under the Senior Facilities Agreement.
The senior facilities were originally fully drawn but have been partially repaid over time due to mandatory prepayment obligations. Additionally, a prepayment in the amount ofA5,000,000 together with accrued interest thereon was made under the facility A2 with effect as of May 5, 2008. The Revolving Facility is currently not utilized. A commitment fee is payable on unutilized available amounts under the Revolving Facility at a rate of 0.75% per annum. The ancillary facilities which have been made available under the Revolving Facility are currently drawn in the amount ofA6,500,000 and used in an amount of around A4,469,000. In addition, Fifth Third Bank made available a committed line of credit under the ancillary facilities in the amount of US$2,000,000, none of which has been drawn.
The Senior Facilities Agreement will be refinanced using the proceeds from the New Facilities Agreement. Mezzanine Facility Agreement
NORMA Group Holding GmbH as borrower entered into a German-law-governed Mezzanine Facility Agreement on November 12, 2007 between, among others, NORMA Group AG (formerly DNL 1. Beteiligungs- gesellschaft mbH) as parent, NORMA Group Holding GmbH as borrower, NORMA Group AG (formerly DNL 1. Beteiligungsgesellschaft mbH), NORMA Group Holding GmbH, DNL Sweden AB, DNL France SAS, NORMA Germany GmbH and DNL Holding USA, Inc. as original guarantors, NORMA Czech s.r.o. and NORMA Polska sp. z o.o. as acceding guarantors, GE Corporate Finance Bank SAS, Zweigniederlassung Frankfurt am Main, COMMERZBANK Aktiengesellschaft and WestLB AG as arrangers and COMMERZBANK Aktiengesellschaft as agent and security agent (“the Mezzanine Facility Agreement”). The Mezzanine Facility Agreement provides
for a single currency term facility in a maximum aggregate amount ofA46,000,000 which can be utilized by way of a single advance with a final repayment date in November 2017 on which the loan shall be repaid in full.
Interest is payable on the last day of each interest period which can be a period of 1, 2, 3 or 6 months upon the relevant borrower’s selection at a rate per annum on the outstanding borrowing amounting to the aggregate of (i) a cash margin of 4.00% per annum, (ii) EURIBOR for the relevant period, (iii) a PIK margin of 5.50% per annum accruing for each interest period on the outstanding amount which shall be capitalized at the end of an interest period and added to the principal amount and has to be repaid in full in November 2017, and (iv) any mandatory costs as set forth in the Mezzanine Facility Agreement.
The Mezzanine Facility Agreement contains the same guarantees, undertakings, securities and covenants as the Senior Facilities Agreement.
The Mezzanine Facility Agreement shall be refinanced together with the Senior Facilities Agreement in particular using the proceeds from the New Facilities Agreement and a portion of the proceeds of the offering. Intercreditor Agreement
To establish the relative rights of the creditors and to determine the ranks of the liabilities under the Senior Facilities Agreement and the Mezzanine Facility Agreement, the parties of the Senior Facilities Agreement and the Mezzanine Facility Agreement entered into a separate intercreditor agreement dated November 12, 2007 (the “Intercreditor Agreement”).
New Facilities Agreement
On or about 24 March 2011 a new facilities agreement will be signed between NORMA Group Holding GmbH and various subsidiaries, as borrowers, the Company and others as guarantors. Commerzbank Aktiengesellschaft, Merchant Banking, Skandinaviska Enskilda Banken AB (Publ), SEB AG, UniCredit Bank AG as mandated lead arranger and underwriters and others pursuant to which new facilities will be provided in particular in order to refinance the Senior Facilities Agreement and the Mezzanine Facility Agreement and, partly, for general corporate purposes including the making of acquisitions and the financing of capital expenditure (the “New Facilities
Agreement”). The New Facilities Agreement will have an aggregate amount ofA375,000,000 which is split in a
Term Facility A ofA250,000,000 and a Revolving Facility of A125,000,000. A100,000,000 of the Revolving Facility can be utilized for acquisitions and capital expenditure.
The Senior Facilities Agreement and the Mezzanine Facility Agreement shall be refinanced by using in particular the proceeds from the offering and utilizations under the New Facilities Agreement.
The Term Facility will amortize and be repayable in 9 semi-annual installments starting on December 30, 2011 with a final maturity date falling 5 years after the signing date.
The Revolving Facility will be available for utilization by way of loans, letters of credits and ancillary facilities with a final maturity date falling 5 years after the signing date.
The Revolving Facility will only be available for utilization if the Term Facility A is utilized prior thereto or simultaneously.
Interest will be payable on the last day of each interest period which can be except for certain exceptions 3 or 6 months or any other period agreed with the agent for the finance parties under the New Facilities Agreement at a rate per annum on the outstanding borrowing amounting to the aggregate of (i) a margin per annum as set out in the table below, (ii) EURIBOR for the relevant period and (iii) any mandatory costs as set forth in the New Facilities Agreement:
Net Debt Cover Margin p.a.
Greater than or equal to 3.0:1 . . . 3.00% Less than 3.0:1 but greater than or equal to 2.75:1 . . . 2.75% Less than 2.75:1 but greater than or equal to 2.50:1 . . . 2.50% Less than 2.50:1 but greater than or equal to 2.25:1 . . . 2.25% Less than 2.25:1 but greater than or equal to 2.00:1 . . . 2.00% Less than 2.00:1 but greater than or equal to 1.75:1 . . . 1.875% Less than 1.75:1 but greater than or equal to 1.50:1 . . . 1.75% Less than 1.50:1 . . . 1.625%
In addition, an interest period of 1 month can be chosen for the Revolving Facility up to five times in a calendar years.
The New Facilities Agreement will contain certain financial covenants, such as an interest cover, a net debt cover and an equity covenant as described in more detail in section “Capital Risk Management” above. The New Facilities Agreement will include information undertakings, in particular reporting obligations as well as a number of customary affirmative and negative covenants and other restrictions, in particular, with regard to acquisitions, mergers, joint ventures, disposals such as sale-and-lease-back transactions and factoring and ABS programmes, financial indebtedness, distribution of dividends and granting of security, however, at the same time providing for a number of important exceptions and baskets. In addition, the Company will have to procure that the interest rate hedging will be entered into in respect of, at least, 50% of the Term Facility for, at least, 3 years from the date of execution of the relevant hedging agreement within 60 days after initial utilization.
In case of a change of control (occurring when a person or a group of persons acting in concert acquires or acquires control over the shares carrying more than 30% of the voting rights in the Company) each lender will be entitled to demand prepayment of its participation in any Facility and cancellation of its commitment. The New Facilities Agreement has to be secured by first ranking security over the shares in German material companies, initial borrowers, and any other material company (other than the Company) and over any company which becomes a guarantor under the New Facilities Agreement and guarantees to be granted by the Company, each material company, each borrower and each other company to the extent required to comply with the guarantor coverage covenant, in each case subject to the agreed security principles. The New Facilities Agreement will furthermore provide for meachanics to release the security granted upon written request of the Company once the net debt cover is equal to or below 2.0:1 for two consecutive quarters or the Company maintains an investment grade rating by, at least, two of Fitch, S&P or Moody’s rating agencies. Security is to be re-established if net debt cover exceeds 2.0:1 on any quarter date within 60 days after delivery of the consolidated financial statements of the Group and the related compliance certificate confirms that net debt cover exceeds 2.0:1 if at the time of the delivery the Company does not maintain an investment grade rating by, at least, two of Fitch, S&P or Moody’s.
The New Facilities Agreement will stipulate a number of events of default such as non-payment, breach of financial covenants and other undertakings, misrepresentation, cross-default, insolvency or insolvency proceedings against material companies, payment or resolution of dividends in excess of the permitted baskets, material adverse effect or change of ownership of material companies.
Shareholder Loan Agreement
On March 17, 2006, NORMA Group Holding GmbH (formerly: DNL 2. Beteiligungsgesellschaft mbH) as borrower and certain of the 3i Funds as lenders entered into a shareholder loan agreement by which the lenders granted NORMA Group Holding GmbH a loan in the amount ofA34,658,400, bearing interest at a rate of 10% per annum and being due for final repayment on December 31, 2016 (the “Shareholder Loan Agreement”). The annual interest payments shall be capitalized until the final repayment date on December 31, 2016.
With a contribution and amendment agreement dated December 31, 2007, the lenders contributed parts of their repayment claims under the shareholder loan in the amount ofA30,000,000 to the capital reserves of the Company. Thereupon, these parts were contributed by the Company to the capital reserves of NORMA Group Holding GmbH and the shareholder loan was reduced in total byA30,000,000 with immediate effect. Currently, the remaining principal amount under the Shareholder Loan Agreement isA4,658,400.
As of December 31, 2010, the outstanding amount under the Shareholder Loan Agreement totaled A11.9 million (including accrued interest). The Company intends to use its net proceeds received from the offering to fully repay this outstanding amount.
R.G. Ray Stock Purchase Agreement
Pursuant to a stock purchase agreement dated as of May 19, 2010 (the “R.G. Ray Stock Purchase
Agreement”), NORMA Pennsylvania, Inc. (“NORMA PA”), an indirect subsidiary of NORMA Group Holding
GmbH, acquired 100% of the issued and outstanding shares of capital stock of R.G. Ray, a U.S. manufacturer of high-quality engineered clamps for engines and pump and filter systems, as well as connecting technologies used in aviation, commercial vehicles and various other industrial applications, for cash consideration of US$45.0 million. In the R.G. Ray Stock Purchase Agreement, the former shareholders of R.G. Ray made certain representations and warranties to NORMA PA. Most of these representations and warranties will expire to the extent that no claim for indemnification for losses or expenses arising from a breach of such representations and warranties has been made on or prior to May 21, 2011, except for certain representations and warranties relating to taxes, environmental
compliance and employee benefits, which have varying expiration dates later than May 21, 2011. In addition, the representations and warranties relating to the power and authority of the former shareholders of R.G. Ray, organization, conflicts, capital structure, subsidiaries and investments, and brokers survive indefinitely. With the exception of the representations and warranties relating to the power and authority of the former shareholders of R.G. Ray, organization, capital structure, subsidiaries and investments, brokers and taxes, the former shareholders’ maximum aggregate liability for breaches of representations and warranties under the R.G. Ray Stock Purchase Agreement is limited.
NORMA PA has agreed to indemnify the former shareholders of R.G. Ray for losses and expenses relating to a breach by NORMA PA of its representations, warranties or covenants under the R.G. Ray Stock Purchase Agreement. This indemnity expires on May 21, 2011 to the extent that no claim has been made thereunder on or prior to that date, except for claims relating to a breach of the representations and warranties as to NORMA PA’s organization, authority and conflicts and as to the absence of certain arrangements with brokers, or to breaches of covenants of NORMA PA requiring performance after the closing date of the transaction. NORMA PA’s obligation to indemnify for such claims does not expire.
Craig Assembly Stock Purchase Agreement
Pursuant to a stock purchase agreement dated December 23, 2010 (the “Craig Assembly Stock Purchase
Agreement”), NORMA PA acquired 100% of the issued and outstanding shares of capital stock of Craig Assembly,
a U.S. supplier of industrial quick connectors, quick connect components and molded injection products and tools for the glycol cooling hose market, for cash consideration of US$11.0 million plus a contingent earn-out payment of up to US$1.0 million based on the adjusted EBITDA of Craig Assembly for its fiscal year ending on March 31, 2011.
In the Craig Assembly Stock Purchase Agreement, the former shareholders of Craig Assembly made certain representations and warranties to NORMA PA. Most of these representations and warranties will expire to the extent that no claim for indemnification for losses or expenses arising from a breach of such representations and warranties has been made on or prior to April 15, 2012, except for certain representations and warranties relating to taxes, environmental compliance and employee benefits, which have varying expiration dates later than April 15, 2012. In addition, the representations and warranties relating to the power and authority of the former shareholders of Craig Assembly, organization, conflicts, capital structure, subsidiaries and investments, and brokers survive indefinitely. With the exception of the representations and warranties relating to the power and authority of the former shareholders of Craig Assembly, organization, conflicts, capital structure, subsidiaries and investments, environmental compliance, brokers and taxes, the former shareholders’ maximum aggregate liability for breaches