Execution Version Tahorakuri
EXHIBIT 4.20
MANAGEMENT AGREEMENT
BETWEEN
CNI TIMBER OPERATING COMPANY LIMITED
AND
▇▇▇▇▇▇▇▇ CHALLENGE FORESTS INDUSTRIES LIMITED
[▇▇▇▇▇▇▇ GRIERSON LOGO]
Execution Version Tahorakuri
TABLE OF CONTENTS
1. INTERPRETATION................................................... 1
2. APPOINTMENT OF MANAGER........................................... 7
3. MANAGEMENT PLANS AND REPORTS..................................... 8
4. MANAGEMENT OF THE PLANTATION ASSETS.............................. 13
5. COSTS AND FEES................................................... 17
6. TERM OF AGREEMENT AND SUSPENSION................................. 21
7. INSURANCE........................................................ 25
8. INDEMNITY........................................................ 26
9. REPRESENTATIONS AND WARRANTIES................................... 28
10. CONFLICTS OF INTEREST............................................ 29
11. HEALTH AND SAFETY IN EMPLOYMENT ACT.............................. 30
12. HISTORIC AND SACRED PLACES....................................... 31
13. HISTORIC PLACES AND ARTEFACTS.................................... 32
14. FORCE MAJEURE.................................................... 32
15. ASSIGNMENT....................................................... 33
16. RESOLUTION OF DISPUTES........................................... 34
17. CONFIDENTIALITY.................................................. 35
18. SEVERABILITY..................................................... 36
19. LIMITED RECOURSE................................................. 36
20. APPLICABLE LAW................................................... 37
21. NOTICES.......................................................... 37
22. COPIES OF NOTICES................................................ 39
23. THIRD PARTY NOTICES.............................................. 39
24. ENTIRE AGREEMENT................................................. 39
25. MODIFICATION..................................................... 40
26. WAIVER........................................................... 40
27. COUNTERPARTS..................................................... 40
28. FURTHER ASSURANCES............................................... 40
29. COSTS............................................................ 40
30. NO PARTNERSHIP................................................... 40
FIRST SCHEDULE - Plantation Assets.................................... 43
APPENDIX I - Forestry Right............................................ 44
APPENDIX II - Undertaking from ▇▇▇▇▇▇▇▇ Challenge Industries Limited... 45
THIS AGREEMENT is dated the day of 2003
BETWEEN CNI TIMBER OPERATING COMPANY LIMITED an incorporated company
having its registered office at Auckland ("CNI")
AND ▇▇▇▇▇▇▇▇ CHALLENGE FORESTS INDUSTRIES LIMITED an
incorporated company having its registered office at
Auckland (the "Manager")
BACKGROUND
A. The Manager is a New Zealand registered company holding a leadership
position in New Zealand's forest industries.
B. CNI has been established as a special purpose vehicle to acquire the
Trees and the Forestry Right. CNI is exclusively advised and managed by
UBS Timber Investors (a division of UBS Global Asset Management (New
York), Inc, a portion of the asset management division of UBS AG).
C. The Manager and Teal 3 Limited have entered into a Sale and Purchase
Agreement under which the Manager will sell the Trees to CNI (as Teal 3
Limited's nominee under the Sale and Purchase Agreement) and create the
Forestry Right in favour of CNI over the Land to be registered pursuant
to the Forestry Rights Registration ▇▇▇ ▇▇▇▇.
D. CNI will be granted certain rights to the Plantation Assets by virtue
of the Forestry Right.
E. On settlement of the Sale and Purchase Agreement the Manager and CNI,
as nominee, are required to execute and deliver a Wood Supply Agreement
and Infrastructure Agreement, which will set out further arrangements
between the parties in relation to the supply of certain Trees to the
Manager and supply of certain infrastructure services.
F. CNI wishes to retain the Manager to manage the Plantation Assets and
the Manager wishes to manage the Plantation Assets pursuant to the
terms and conditions set out in this agreement.
THE PARTIES AGREE:
1. INTERPRETATION
In this agreement unless the context indicates otherwise:
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1.1 DEFINITIONS:
"ACT" means the Companies ▇▇▇ ▇▇▇▇;
"AFFILIATE" of a person shall mean a person controlled by,
controlling or under common control with, such person and for
the purposes of this definition Forestry Corporation of New
Zealand Limited (In Receivership) is not an Affiliate of any
party;
"▇▇▇▇ RATE" means the average of the bid rates for 90-day bank
accepted bills of exchange, expressed as a percentage per
annum as quoted on Reuters page BKBM (subject to manifest
error) as fixed at 10.45 am on each Business Day following the
due date;
"BUSINESS DAY" means a day on which registered banks are open
for business in Auckland excluding Saturdays, Sundays and
public holidays;
"CAP" means the cap as defined in clause 8.2;
"COMMENCEMENT DATE" means the date of "Settlement" as that
term is defined in the Sale and Purchase Agreement being the
date of this agreement;
"CONFIDENTIAL INFORMATION" means any information:
(a) relating to the terms of this agreement;
(b) relating directly or indirectly to research or
development by, accounting for or marketing of the business of
either party or its suppliers or customers excluding Working
Block(s), PHI, price information and other information related
to sales of stumpage and logs from the Stands; or
(c) disclosed by either party to the other party on the
express basis that such information is confidential;
provided that, where information relates exclusively to one
party, nothing in this agreement will require that party to
maintain confidentiality in respect of that information;
"DEFAULT INTEREST RATE" means interest calculated at the ▇▇▇▇
Rate plus 4% per annum;
"ENVIRONMENTAL GUIDELINES" means codes of practice and
guidelines issued from time to time by any competent authority
(including for the avoidance of doubt any relevant District or
Regional Plans or resource consents) or CNI, which address in
whole or in part the protection of the environment and are
relevant to the management of Plantation Assets pursuant to
this agreement;
"ENVIRONMENTAL LAW" means all applicable law relating to any
aspect of:
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(a) the environment;
(b) the Plantation Assets;
(c) substances which may have an adverse effect on the
environment; and
(d) the carrying on or permitting of activities which may
have an adverse effect on the environment;
whether pursuant to the Resource Management ▇▇▇ ▇▇▇▇, any
other statutes, under the common law or otherwise;
"ENVIRONMENTAL REQUIREMENTS" means Environmental Law and
Environmental Guidelines;
"FIRE PREVENTION COSTS" means any external costs directly
incurred by the Manager in implementing fire prevention
measures or fire suppression measures;
"FOREST HEALTH COSTS" means any external costs directly
incurred by Manager in spraying or otherwise treating the
Stand or the immediate environment of the Stand to protect the
health of the Trees;
"FORESTRY CONSULTANT" means a reputable forestry expert with
relevant experience;
"FORESTRY RIGHT" means the forestry right to be entered into
between CNI and the Manager concurrently with this agreement
in accordance with the provisions of the Forestry Rights
Registration Act 1983 and in relation to certain identified
Stands and a copy of which is attached at Appendix 1;
"GST" means goods and services tax levied in accordance with
the GST Act and includes any tax levied in substitution for
such tax and excludes any penalties and interest;
"GST ACT" means the Goods and Services Tax ▇▇▇ ▇▇▇▇;
"HARVEST AREA" means those of the Working Blocks that the
Manager chooses to purchase in accordance with the Wood Supply
Agreement;
"HARVEST PLAN" means the harvest plan for each Year provided
by CNI to the Manager pursuant to the Wood Supply Agreement;
"HISTORIC PLACE" has the meaning given to that term in the
Historic Places ▇▇▇ ▇▇▇▇;
"IMPROVEMENTS" means all roads, tracks, fencing, gates,
accessways, landings, skid sites, bridges, stream crossings,
culverts, drainage works and water storage on the Land;
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"INFRASTRUCTURE AGREEMENT" means the infrastructure agreement
entered into between CNI and the Manager concurrently with
this agreement in relation to the provision of certain
services by the Manager;
"INSOLVENCY EVENT" means with respect to a company when:
(a) an application is made to a court for an order and an
order is duly made appointing a liquidator,
provisional liquidator, interim liquidator, receiver,
manager, receiver and manager, administrator,
administrative receiver, trustee in administration,
statutory manager or similar officer in respect of
the company or one of them is appointed;
(b) the members of the company pass a special resolution
or the board of the company resolves to appoint a
liquidator or formal notice of a proposed resolution
to do so is given or any other steps are taken
evidencing an intention to do so;
(c) the company stops or threatens to stop payment of
creditors generally or is deemed to be unable to pay
its debts as they fall due, has a compromise proposed
in respect of it, commences negotiations with any one
or more of its creditors with a view to the general
readjustment or rescheduling of its indebtedness,
makes a general assignment for the benefit of or a
composition with its creditors or proposes a
reorganisation, moratorium or other administration
involving them;
(d) execution issued against the company in respect of a
judgment debt has been returned unsatisfied in whole
or in part;
(e) a statutory demand is served on the company for an
amount exceeding 1% of its gross assets as shown in
the accounts of the company for the most recently
completed financial year of the company and expires
unremedied unless such statutory demand relates to an
amount which is the subject of a bona fide dispute by
the company; or
(f) a creditor of the company, which creditors rights are
intended to be subordinate to the obligations of the
company under this agreement attempts to exercise any
rights, or to gain any specific rights which would
impinge upon CNI's rights under the Forestry Right;
other than where, in the case of any of the events referred to
in sub clauses (a) to (f) above, such event takes place for
the purposes of and is followed by a reconstruction,
amalgamation or reorganisation (not involving or arising out
of insolvency) approved in writing by CNI which consent is not
to be unreasonably or arbitrarily withheld or delayed;
"LAND" means the land the subject of the Forestry Right and
more particularly comprised and described in the Forestry
Right;
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"LAND COSTS" means all rates, taxes, charges, assessments,
duties, levies, costs and expenses payable in relation to the
ownership of the Land and any other costs arising from such
ownership;
"LOGS" means sawlogs or pulplogs of any size or class
harvested from the Land;
"MANAGEMENT FEE" means the fee to be paid to the Manager by
CNI pursuant to clause 5 of this agreement;
"MANAGEMENT PLANS" means, at any time, a strategic plan and an
operating plan for the management of the Plantation Assets
approved by CNI in accordance with clause 3.1.2 of this
agreement and in force at that time, including any amendments
thereto approved following any Quarterly meeting in accordance
with clause 3.3.2 of this agreement;
"MARGINAL STRIPS" means any marginal strips related to the
Land pursuant to the provisions of part IVA of the
Conservation ▇▇▇ ▇▇▇▇, if any;
"MONTHLY OPERATIONAL PHOTOGRAPHY" means aerial photographs or
equivalent marked up Stand maps of the Tahorakuri forest taken
by the Manager every month;
"NZ$" means the lawful currency of New Zealand;
"OPERATING COSTS" means all costs directly incurred in the
management of the Plantation Assets and which have been
approved under the then applicable Operating Plan, or
otherwise approved under the terms of this agreement,
including, without limitation, Forest Health Costs and Fire
Prevention Costs. For the avoidance of doubt, this
specifically excludes all costs associated with the attaining
of, and compliance with, any regulatory consents as referred
to in clause 2.13.2 of the Infrastructure Agreement (including
any auditing of compliance with such regulatory consents).
"OPERATING PLAN" has the meaning set forth in clause 3.1.3(b)
of this agreement;
"PLANTATION ASSETS" means the assets described in the First
Schedule to this agreement including amendments to that
schedule made from time to time;
"QUARTER" means a calendar quarter ending on 31 March, 30
June, 30 September and 31 December in each Year;
"RELATED AGREEMENTS" means the Forestry Right, the
Infrastructure Agreement, the Sale and Purchase Agreement and
the Wood Supply Agreement;
"REMAINING STANDS" means those Stands which remain subject to
the Forestry Right, as determined in accordance with the
Forestry Right, at the end of each Quarter;
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"RESOURCE MANAGEMENT ACT 1991" means the Resource Management
Act 1991 and includes all regulations, orders, notices,
regional plans, policy statements, district plans and resource
consents made, given or issued under or pursuant to that Act;
"SALE AND PURCHASE AGREEMENT" means the sale and purchase
agreement entered into between Teal 3 Limited and the Manager
on 15 January 2003 (as may be amended by any deed(s) of
amendment) pursuant to which the Manager will sell the Trees
to CNI (as Teal 3 Limited's nominee under that agreement) and
create the Forestry Right;
"SPECIAL REPORTS" shall have the meaning set forth in clause
3.5 of this agreement;
"STAND" means those parts of the Land comprising specific
plantation areas of the same age class, area and silvicultural
condition described in the Forestry Right;
"STRATEGIC PLAN" has the meaning set forth in clause 3.1.3(a)
of this agreement;
"TREES" means all the Pinus radiata trees growing, standing or
lying on the Stands as at the date of the Sale and Purchase
Agreement and any logs or forest produce arising from such
trees and includes any trees forming part of any stand of
trees on any Marginal Strip;
"WOOD SUPPLY AGREEMENT" means the wood supply agreement to be
entered into between CNI and the Manager concurrently with
this agreement under which CNI will supply certain Trees to
the Manager;
"WORKING BLOCKS" means those Trees in a Stand (or part
thereof) which CNI proposes to harvest or is harvesting in a
given year in accordance with a Harvest Plan as per the Wood
Supply Agreement;
"YEAR" means a calendar year;
1.2 PARTIES: references to parties are references to parties to
this agreement;
1.3 PERSONS: references to persons shall be deemed to include
references to individuals, companies, corporations, firms,
partnerships, joint ventures, associations, organisations,
trusts, states or agencies of state, government departments
and municipal authorities or other regulatory bodies or
regulatory authorities in each case whether or not having
separate legal personality;
1.4 DEFINED EXPRESSIONS: expressions defined in the main body of
this agreement bear the defined meaning in the whole of this
agreement including the background;
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1.5 CLAUSES, SCHEDULES AND BACKGROUND: references to clauses,
schedules and background are references to clauses, schedules
and background to this agreement unless otherwise indicated;
1.6 HEADINGS: section, clause and other headings are for ease of
reference only and shall not be deemed to form any part of the
context or to affect the interpretation of this agreement;
1.7 SINGULAR AND PLURAL: words importing the singular number shall
include the plural and vice versa;
1.8 SCHEDULES AND APPENDICES: the schedules and appendices to this
agreement and the provisions and conditions contained in such
schedules and appendices shall have the same effect as if set
out in the body of this agreement;
1.9 NEGATIVE OBLIGATIONS: any obligation not to do anything shall
be deemed to include an obligation not to suffer, permit or
cause that thing to be done;
1.10 GENDER: words importing one gender shall include the other
genders;
1.11 STATUTES AND REGULATIONS: references to a statute include
references to regulations, orders or notices made under or
pursuant to such statute or regulations made under the statute
and references to a statute or regulation include references
to all amendments to that statute or regulation whether by
subsequent statute or otherwise and a statute or regulation
passed in substitution for the statute or regulation referred
to as incorporating any of the provisions;
1.12 MATERIAL ADVERSE EFFECT: references to something having a
"material adverse effect" on a person are references to it
having a material adverse effect:
1.12.1 FINANCES: on that person's financial condition,
assets, business or results of operating; or
1.12.2 PERFORMANCE: on its ability to perform and comply
with its obligations under this agreement; and
1.13 DISPOSAL: references to disposal include sale, exchange,
transfer, assignment, lease or parting with possession or
control of, and the word "dispose" means to make a disposal;
and
1.14 NEW ZEALAND DOLLARS: all monetary amounts are payable in New
Zealand dollars.
2. APPOINTMENT OF MANAGER
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2.1 APPOINTMENT: CNI appoints the Manager as its agent, with
effect from the Commencement Date, to manage the Plantation
Assets on the terms set out in this agreement and the Manager
hereby accepts the appointment.
2.2 STANDARD OF PERFORMANCE: Subject to specific reasonable
instructions or directions given to the Manager pursuant to
this agreement by CNI, the Manager shall manage the Plantation
Assets in good faith employing the same degree of care and
skill as:
2.2.1 MANAGER'S AFFAIRS: the Manager employs in the conduct
of its own affairs; or
2.2.2 HIGHLY COMPETENT MANAGER: a highly competent manager
with expertise in large scale commercial plantation
forestry management would use in carrying out
equivalent obligations;
whichever is the higher standard. The parties acknowledge that
nothing in this clause 2.2 shall limit the Manager's
obligation to act as an adviser to CNI to the standards
required by clauses 2.2.1 and 2.2.2 (meaning, for example,
that in briefing or advising CNI, the Manager must advise to
the standard required, and if CNI issued the Manager with an
instruction that a manager conforming with the standard of
performance set out in this clause would find fault with, the
Manager must inform CNI), nor shall it limit the Manager's
obligation to discharge any instruction or direction from CNI
to the standard of performance set out in this clause.
2.3 ACCESS TO PLANTATION ASSETS: Notwithstanding the appointment
of the Manager under this agreement, CNI, through its
authorised agents, and such other persons authorised by CNI,
each with prior reasonable notice to the Manager, and in each
case at their individual risk and expense (but with the
benefit of insurance (if any) maintained by CNI) shall have
access to the Plantation Assets owned by CNI at any reasonable
time subject to compliance with the Manager's reasonable
requirements relating to such access, including compliance
with the Manager's health and safety policies and procedures,
any requirements under the Infrastructure Agreement and
otherwise in accordance with the Forestry Right. For the
avoidance of doubt CNI acknowledges that the Manager may
(acting reasonably) restrict access to the Land for reasons of
health and safety (eg, high winds) or as a fire protection
measure.
2.4 PERSONNEL: For the purposes of communication between CNI and
the Manager, the Manager shall, from time to time, notify CNI
of the person or persons who are authorised to accept such
communications on behalf of the Manager and CNI shall, from
time to time, notify the Manager of the person or persons who
are authorised to accept such communications on behalf of CNI.
3. MANAGEMENT PLANS AND REPORTS
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3.1 MANAGEMENT PLANS: The management of the Plantation Assets
shall operate in accordance with the Strategic Plan and
Operating Plan prepared by the Manager and approved by CNI.
The parties agree that the Strategic Plan and the Operating
Plan will only be concerned with the duties of the Manager as
set out in this agreement.
3.1.1 CONSULTATION: Prior to the formal submission of each
of the Management Plans in accordance with the
provisions of sub clause 3.1.3, the Manager shall by
1 May each Year, review with CNI the Manager's
proposed strategies and assumptions and receive
advice on the proposed harvest intentions of CNI for
the Management Plans.
3.1.2 CONTENT AND APPROVAL: The Management Plans shall
include, among other things, a description of the
management activities proposed for the relevant
ensuing period, an estimate of Operating Costs that
is likely to be payable for the relevant ensuing
period, and include other items as specified by CNI
acting reasonably. To the extent that the Management
Plans incorporate any economic assumptions or
judgments those economic assumptions and judgments
will be made on a reasonable basis and in good faith
by the Manager. Until such Management Plans have been
approved by CNI, the most recently approved
Management Plans shall remain in effect.
3.1.3 PREPARATION OF THE MANAGEMENT PLANS:
(a) STRATEGIC PLAN
(i) PREPARATION AND SUBMISSION: By 30
May each Year, the Manager shall
prepare and submit to CNI for its
approval, not to be unreasonably or
arbitrarily withheld, a Strategic
Plan for the management of the
Plantation Assets, in which its
objectives, issues and actions will
be further specified. Such
Strategic Plan shall present, in
reasonable detail having regard to
clause 3.1.3(a)(ii), those matters
specified in clause 3.1.2 for the
ensuing period commencing at 1 July
that Year and ending on the expiry
of the Forestry Right. CNI is to
advise the Manager in writing
within 20 Business Days whether the
Strategic Plan is approved or any
reasonable amendments that it may
require be made to the Strategic
Plan.
(ii) ACCURACY OF INFORMATION: The
parties acknowledge that
information provided in the
Strategic Plan must necessarily be
less accurate the further in time
the period for which the
information is provided is from the
date on which that information is
provided.
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Conversely the parties acknowledge
that such information must
increasingly be more precise and
accurate the closer in time the
period for which such information
is provided is from the date on
which that information is provided.
(b) OPERATING PLAN: By 30 May each Year, the
Manager shall prepare and submit to CNI for
approval, not to be unreasonably or
arbitrarily withheld, the Operating Plan for
the period from 1 July that Year until 31
December in the following Year ("Operating
Period") based upon the Strategic Plan. CNI
is to advise the Manager in writing within
20 Business Days whether the Operating Plan
is approved or any reasonable amendments
that it may require be made to the Operating
Plan. If the Operating Plan is approved, it
shall be implemented by the Manager. The
Operating Plan shall present, in reasonable
detail, those matters specified in clause
3.1.2 for the ensuing year. If CNI does not
approve the Operating Plan by the
commencement of the Operating Period to
which the Operating Plan pertains, then the
projections set forth for the appropriate
Operating Period in the most recently
approved Strategic Plan shall serve as the
Operating Plan until CNI has approved an
Operating Plan for the applicable Operating
Period.
3.1.4 MANAGEMENT PLANS OBJECTIVES: The Management Plans
shall be formulated to achieve the objective of
minimising the costs of protecting and maintaining
the Plantation Assets consistent with the standards
in clause 2.2 while protecting the investment value
and practising responsible environmental stewardship.
3.1.5 INITIAL MANAGEMENT PLANS: The initial Operating Plan
which will apply until 30 June 2003 will be discussed
with the Manager and a finalised plan provided by the
Manager to CNI within 15 Business Days following the
date that the Sale and Purchase Agreement goes
unconditional in all respects. For the avoidance of
doubt the Manager is not required to submit a
Strategic Plan for the period to 30 June 2003.
3.2 MONTHLY REPORTS: Within ten (10) Business Days after the end
of each month, the Manager shall provide CNI with a report
showing the management operations, and the results of
management operations including, without limitation, Monthly
Operational Photography and a comparison of Operating Costs
against budget for the immediately preceding month.
3.3 MEETINGS AND QUARTERLY REPORTS:
3.3.1 QUARTERLY MEETINGS: Once each Quarter, within twenty
(20) calendar days after the end of the previous
Quarter, the Manager shall hold a
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meeting, which may, at the discretion of CNI, be in
person or by telephone, with representatives of CNI
to discuss the performance of the Manager and outlook
for the management of the Plantation Assets based on
the Quarterly report (including any necessary
amendments to the Management Plans) and technical and
other information relating to the operations of the
Plantation Assets.
3.3.2 QUARTERLY REPORTS: Not later than five (5) Business
Days prior to each Quarterly meeting the Manager
shall provide CNI with a report for discussion and,
showing the same information as required for the
monthly reports (but on a quarterly basis) together
with updated Operating Period end estimates of the
information contained in the then current Operating
Plan for approval by CNI such approval not to be
unreasonably or arbitrarily withheld, not more than 5
Business Days later.
3.4 ANNUAL ACTIVITIES REPORT: The Manager shall provide CNI with
an annual activities report on the principal activities in
respect of the Plantation Assets by the end of August in each
Year. It shall include, without limitation, a summary of
activities for the previous 12 month period ending 30 June,
Operating Costs incurred in performing the Manager's duties in
this agreement, any conditions or events which materially
alter the value of any of the Plantation Assets in the
Manager's opinion and any other items reasonably requested by
CNI. The Operating Costs statements shall be prepared in
accordance with NZ GAAP and information shall also be provided
as reasonably requested by CNI to enable CNI to meet US GAAP
requirements and shall include a comparison (and discussion of
the reasons for any significant changes) with the preceding 12
month period ending 30 June and with the Operating Plan.
3.5 SPECIAL REPORTS: CNI may at any time and from time to time
request the Manager to provide it with a special report in
respect of any matter connected with the management of the
Plantation Assets. If the Manager does not possess the
expertise to provide the report or any part thereof, it shall
be entitled, at its discretion, to retain independent
advisers, acceptable to CNI and at CNI's expense, to provide a
report or reports satisfying part or all of any such request.
If in the reasonable opinion of the Manager the provision of a
special report will result in material cost to the Manager,
the Manager will advise CNI of the time and cost required to
produce such report. Within 10 Business Days of receipt of
such time and cost estimate CNI will advise the Manager
whether it wishes for the Manager to proceed with the
preparation of such report. In the event that CNI asks the
Manager to proceed with the preparation of a special report,
CNI is to pay the Manager such costs as estimated by the
Manager and approved by CNI within 15 Business Days after CNI
receives the report. In all other instances special reports
prepared by the Manager shall be at no additional fee to CNI,
but any out of pocket costs reasonably incurred by the Manager
in connection with such reports shall be for the account of
CNI. The Manager shall also provide CNI with such
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other information about the management operations in relation
to the Plantation Assets as may be reasonably requested by CNI
at no additional fee.
3.6 SIGNIFICANT EVENTS: The Manager shall promptly report to CNI
any event known to it or which becomes known to it which, in
the reasonable opinion of the Manager, results or will result
in a significant departure from the Management Plans or will
impact the Management Plan objectives set out in clause 3.1.4
and shall consult with CNI with respect to the effects of the
foregoing and any actions to be taken in respect thereof.
Events generally known to the New Zealand public affecting the
New Zealand forestry industry need to be reported only when
the Manager reasonably determines that CNI will not be aware
of them. Where in the reasonable opinion of the Manager, to
protect the value of the Plantation Assets, it is necessary to
perform any management tasks not specifically contemplated in
any current Operating Plan and before approval can be obtained
from CNI, the Manager has the authority to perform those tasks
and the performance of those tasks shall be deemed to have
received the approval of CNI and the Operating Plan amended
prior to the performance of those tasks. The Manager shall
promptly report to CNI any tasks performed by the Manager
which were not approved by CNI prior to being performed but
which are deemed to be approved pursuant to this clause 3.6.
3.7 SPECIAL AUDITS: CNI may at any time and from time to time
engage persons to undertake a special audit of any activity
undertaken or report produced by the Manager pursuant to this
agreement. Any such audit shall be for the account of CNI and
shall be undertaken in such a manner as shall reasonably limit
disruption to the operations of the Manager and the operations
of the Tahorakuri estate as a whole. The Manager shall fully
co- operate with the reasonable requests of such persons
undertaking any such audit.
3.8 PRESENTATIONS TO INVESTORS; INVESTOR VISITS: The Manager shall
attend, and participate in as and if requested by CNI, once
per Year the UBS Annual Client Conference and report on the
affairs relating to the Plantation Assets and the performance
of the Manager's obligations under this agreement. Each
presentation will cover such details and be in respect of such
period as may be reasonably requested by CNI. Each
presentation will be made at the location required by CNI
without any additional fee hereunder, except that if any
presentation is required to be made outside of New Zealand,
any travel and accommodation and other out of pocket
travelling and associated costs reasonably incurred by the
Manager in connection with making such presentation shall be
for the account of CNI and the Manager shall be reimbursed for
any such costs by CNI upon demand. If requested by CNI, the
Manager shall also host visits from time to time to the Land
by CNI.
3.9 LIMITATION OF LIABILITY FOR PROJECTIONS: CNI recognises that
the Manager is not a guarantor of the results of CNI's
investment in the Plantation Assets or the economic
assumptions, judgments, estimates, projections and other
factors affecting the value or accuracy of the Management
Plans and any other plans,
Management Agreement Page 13
budgets, reports or presentations provided or made by the
Manager pursuant to this agreement. The Manager shall not be
liable to CNI with respect to any such assumptions, judgments,
estimates, projections or other factors in any plans, budgets,
reports and presentations provided that, subject to any
changes required by CNI, such plans, budgets, reports and
presentations are prepared in accordance with the standard of
performance set forth in subclause 2.2.
4. MANAGEMENT OF THE PLANTATION ASSETS
4.1 PERFORMANCE OBLIGATIONS: In carrying out its obligations under
this agreement the Manager shall:
4.1.1 COMPLY WITH CNI'S DIRECTIONS: at all times comply (or
require compliance by its contractors,
subcontractors, agents, employees, invitees, visitors
or licensees) with the reasonable directions of CNI;
4.1.2 COMPLY WITH THE LAW ETC: at all times comply (or
require compliance by its contractors,
subcontractors, agents, employees, invitees, visitors
or licensees) with:
(a) GENERAL: all applicable laws, rules,
regulations, permits, approvals, consents,
orders, judgments, decrees, injunctions or
agreements of or with any governmental
authority, including, without limitation
those relating to forest management and
forest practice; and
(b) ENVIRONMENTAL: the Environmental
Requirements; and
4.1.3 PERFORMANCE STANDARD: meet the standard of
performance set out in subclause 2.2.
4.2 DUTIES: The Manager shall implement and comply with the
Management Plans and fully and properly manage the Plantation
Assets in accordance with the terms set out in this agreement.
For the avoidance of doubt the Manager's duties will cease in
respect of a Working Block or Stand when that Working Block or
Stand is returned to the Manager in accordance with clause 12
of the Forestry Right. These obligations shall include,
without limitation:
4.2.1 FOREST HEALTH CHECK: inspection activities to monitor
the health of the Trees, including, without
limitation, regular inspections and inspections
following adverse weather events;
4.2.2 FOREST HEALTH SURVEYS: participating in any annual
forest health survey conducted by the New Zealand
Forest Owners Association and providing CNI with
copies of any relevant reports (or parts of reports);
Management Agreement Page 14
4.2.3 CONTROL PESTS AND DISEASE: employing New Zealand
forest industry standards for the control of insect
and other pests and fungal and other tree diseases;
4.2.4 RECORDS: updating forest records including stand
descriptions and all mapping;
4.2.5 MAINTENANCE: general periodic maintenance of fences,
gates, roads, water tables and drainage to allow or
control vehicle access to the Land;
4.2.6 EROSION AND POLLUTION: use its reasonable endeavours
to control soil erosion and pollution of waterways;
4.2.7 STORAGE: store all fuels and oils brought onto the
Land by the Manager and those under the control of
the Manager safely on suitably cleared land;
4.2.8 DEBRIS: clear away and dispose of all debris carried
on to adjoining properties by the Manager and those
under the control of the Manager;
4.2.9 PUBLIC ACCESS: control public access to the Land on
specified terms for subsidiary land uses (such as
grazing, beehive siting and recreation) and taking
appropriate actions reasonably required to limit
trespass;
4.2.10 ILLEGALITY: notify the relevant authorities if it
becomes aware of any illegal behaviour on the Stands;
4.2.11 FIRE PROTECTION: in all respects complying with the
Forest and Rural Fires ▇▇▇ ▇▇▇▇ and (subject to the
provisions of that Act or any other statutory
regulation affecting the same) the Manager shall:
(a) FIRE PLAN: include the Plantation Assets in
the relevant annual fire plan and provide a
copy of such fire plan to CNI;
(b) FIRE PROTECTION: put in place fire
appropriate protection methods and processes
in relation to the Stands;
(c) FIRE PREVENTION: take all reasonable
measures that may be necessary to prevent
the spreading of any fire on, from, to or
across the Stands;
(d) EQUIPMENT: have available or access to
equipment which is suitable and adequate for
the purpose of fighting fires and for
securing the reasonable safety of lives from
fire on the Stands;
(e) STRUCTURES: erect structures and do all
things that the Manager considers reasonably
necessary for the protection of
Management Agreement Page 15
the Trees and keep its fire fighting and
safety equipment in good working order and
condition;
(f) OTHER FIRE PROTECTION: be entitled to erect
look-outs, construct fire- breaks and take
such other normal fire protection measures
as may from time to time be necessary;
(g) NOTIFY AUTHORITIES: as soon as the Manager
becomes aware ensure that the appropriate
authorities and CNI are immediately notified
should there be an outbreak of fire on the
Land;
(h) FIRE BREAKS: keep the fire breaks situated
on the Stands clear of undergrowth; and
(i) SPARK PREVENTION: ensure all vehicles and
equipment brought onto the Land by or under
the control of the Manager have a safe and
efficient means of preventing the escape of
dangerous sparks or flames from the exhaust
and carry a fire extinguisher in working
order;
4.2.12 OBTAIN CONSENTS ETC: use all reasonable endeavours to
obtain all consents, authorisations, approvals or
orders of any Court or governmental authority or
agency necessary in order to perform its obligations
under this agreement and the Management Plans;
4.2.13 FOREST STEWARDSHIP COUNCIL CERTIFICATION: for so long
as the parties agree, to maintain and comply with (or
require compliance by its contractors,
subcontractors, agents, employees, invitees, visitors
or licensees) Forest Stewardship Council
Certification;
4.2.14 ADVISE OF LEGAL ACTIONS: to the extent it has actual
knowledge thereof, promptly notify CNI of any suit or
proceeding threatened or commenced against CNI or the
Manager in connection with the Plantation Assets or
the performance of the Manager's obligations under
this agreement;
4.2.15 DEFEND LEGAL ACTIONS: at the direction of CNI and
cost in all respects of CNI take or cause to be taken
all reasonable steps to defend CNI against legal
actions or initiate claims or proceedings to protect,
enforce or confirm the rights of CNI with respect to
the Plantation Assets or any contract or agreement
entered into by or on behalf of CNI, provided that
CNI accepts that the Manager is not required to
comply with the provisions of this clause, except
that the Manager must provide reasonable co-operation
to allow CNI to defend such legal actions or initiate
such claims or proceedings, if in the Manager's
reasonable opinion the Manager and/or its business
may be prejudiced in complying
Management Agreement Page 16
with this clause 4.2.15 and this will not be a
failure by the Manager in complying with its
obligations under this agreement; and
4.2.16 ADVISING: acknowledging the Manager's position in
owning and managing other plantation assets in New
Zealand, advising CNI of any relevant matters in the
Manager's reasonable opinion impacting the operations
or the protection of the investment in the Trees.
4.3 CONTRACTS BY MANAGER: The Manager shall only enter into
contracts or agreements on behalf of CNI if such contracts or
agreements are in accordance with the Management Plans and the
terms of this agreement. The Manager shall be entitled, but
not required, to use its own employees to perform its
obligations under this agreement. The Manager may also enter
into contracts or other agreements with independent
contractors who are selected and supervised by the Manager,
utilising the same standard of performance as that set forth
in subclause 2.2. The Manager shall take all reasonable steps
to direct its personnel that such agreements shall state that
they are being executed by the Manager as agent for CNI and
not as principal, except where such contract or agreement also
relates to the Manager's own business and/or forest estate.
The Manager will require such contractors carry insurance with
limits, insurers, endorsements, creditworthiness and coverage
which are determined by the Manager to be adequate under the
circumstances. CNI will not be liable in the event that any
such coverage is inadequate. The Manager will not be liable in
the event that any such coverage is inadequate provided only
that its determination of adequacy was made on a reasonable
basis and in good faith.
4.4 PROCEDURES: In performing its obligations under this
agreement, the Manager shall adopt and implement such
supervisory, accounting, payment and control procedures as
shall meet the standard of performance set forth in subclause
2.2.
4.5 BOOKS AND RECORDS: The Manager shall keep books and records in
relation to its management obligations under this agreement in
accordance with the following provisions.
4.5.1 SEPARATE BOOKS AND RECORDS: Subject to clause 4.5.2,
the Manager shall keep separate records and books of
account in relation to its management of CNI's
financial interest in and expenditure on the
Plantation Assets in which complete entries shall be
made reflecting the activities and financial
transactions undertaken by the Manager in performing
its obligations under this agreement.
4.5.2 COMBINED RECORDS: The parties acknowledge that it
will not always be practicable to keep the records
for the Plantation Assets separate from records for
the Manager's other plantation assets, and (provided
CNI is consulted in accordance with clause 4.5.3) CNI
acknowledges that separate records for the Plantation
Assets may not be kept where:
Management Agreement Page 17
(a) POLICIES: those records contain policies
that are applicable for both the Plantation
Assets and any other plantation assets owned
or managed by the Manager; and/or
(b) OTHER MATTERS: those records relate to
industry or region-wide matters.
4.5.3 CONSULTATION: In the event that the Manager (acting
reasonably) believes that combined records must be
kept in accordance with clauses 4.5.2(a) and (b), the
Manager shall consult with CNI as to CNI's needs in
regards to such records. In consulting with CNI, the
Manager shall act in good faith and give reasonable
consideration to CNI's requests.
4.5.4 IDENTIFICATION OF RELEVANT ENTRIES: Where it is not
possible to keep separate records in relation to the
Plantation Assets, any transaction entered into by
the Manager as agent in the performance of its
obligations under this agreement, or any other
relevant entry in a record of the Manager that
relates to the Plantation Assets, shall be
appropriately identified in the records of the
Manager at the time.
4.5.5 ACCESS: The Manager shall permit any officer,
employee, agent or advisor of CNI, at any time during
regular business hours and upon reasonable prior
notice to the Manager, to examine and make copies of
such records and books of account and to discuss them
or the performance by the Manager of its obligations
under this agreement with such of the Manager's
officers or employees as the Manager advises.
4.5.6 AUDIT: The Manager shall co-operate with any audit of
the Manager's records, books of account or
performance under this agreement by a reputable and
independent auditor who shall at all times be bound
to the confidentiality provisions set out in clause
17.
4.5.7 EXPIRATION/TERMINATION: Subject to subclause 6.4, and
subject to CNI having paid to the Manager all
outstanding monies due to the Manager under this
agreement, on the expiration or earlier termination
of this agreement, the records and books of account,
or copies of the relevant parts of such records where
the records are combined records pursuant to clause
4.5.2, shall if requested by CNI be delivered by the
Manager to CNI at such location as CNI may reasonably
designate.
5. COSTS AND FEES
5.1 FEE:
5.1.1 MANAGEMENT FEE: In consideration of the Manager's
management obligations under this agreement, CNI
shall pay to the Manager, quarterly in advance in
accordance with clause 5.1.2(a) during the term of
this
Management Agreement Page 18
agreement, an amount equal to NZ$18 per hectare of
Remaining Stands plus GST.
5.1.2 REDUCING FEE:
(a) CALCULATION OF REMAINING AREA: The parties
acknowledge and agree that the area of the
Stands that are subject to the Forestry
Right will diminish over the term of the
Forestry Right until there are no longer any
Remaining Stands. Accordingly, the parties
acknowledge and agree that the Management
Fee will decrease at a hectare equivalent
rate. To this end, CNI shall calculate the
area of the Remaining Stands (which in turn
will be used to calculate the Management Fee
payable for the following Quarter in
accordance with clause 5.1.1), no later than
twenty (20) Business Days prior to the end
of each Quarter, by deducting from the area
of the Stands at the start of the prior
Quarter:
(i) SALES TO THE MANAGER: Stands that
have been sold and transferred to
the Manager in accordance with the
Wood Supply Agreement; and
(ii) SALES TO THIRD PARTIES: Stands that
have been sold to and harvested by
either a third party or the Manager
(as evidenced by a notice of
completion of harvest issued to the
Manager) in accordance with the
Forestry Right.
(b) NOTIFICATION OF REMAINING AREA: CNI shall
notify the Manager of the area of the
relevant Remaining Stands twenty (20)
Business Days prior to the end of each
Quarter.
5.1.3 FEE REVIEW:
(a) BIENNIAL REVIEW: The Management Fee shall be
reviewed biennially at the relevant April
Quarterly meeting. The Management Fee is to
be reviewed on the basis that any benefit or
detriment to CNI arising from or as a
consequence of the Related Agreements and/or
the operations and business of the Manager
is to be disregarded when determining the
new Management Fee. At the time of such
review the parties shall negotiate in good
faith to determine the new Management Fee to
apply for the next 2 Year period taking into
account the then current market rates for
the services being provided by the Manager
under this agreement. Any disagreement over
the level of the Management Fee will be
resolved under clause 16 of this agreement.
Management Agreement Page 19
(b) MANAGEMENT FEE TO APPLY: If the parties are
unable to resolve any dispute over fees
before the commencement of the next 2 Year
period then the Management Fee applicable to
the previous 2 year period will continue to
apply and be payable by CNI until the
dispute is resolved.
(c) DISPUTE RESOLVED: Once the dispute has been
resolved and:
(i) FEE INCREASE: the Management Fee
has increased from the previous
Management Fee, the Manager will be
entitled to be paid the difference
between the two fee levels together
with any additional GST; or
(ii) FEE DECREASE: the Management Fee
has decreased from the Management
Fee applicable for the previous
period, then CNI will be entitled
to the difference between the two
fee levels together with a credit
note for any overpaid GST;
and the payment will be backdated to the
start of the relevant two year period such
payment is payable to the other party within
10 Business Days of the dispute being
resolved. The party paying the difference
shall forthwith pay such amount to the other
party together with interest thereon at the
▇▇▇▇ Rate calculated daily from the start of
the relevant 2 year period to the day 10
Business Days after the dispute has been
resolved, and, if relevant, interest thereon
at the Default Interest Rate calculated
daily from the day 11 Business Days after
the dispute has been resolved to the date of
payment of the balance the other party and
compounded monthly.
5.1.4 INVOICING AND PAYMENT OF FEES: The Manager shall
provide CNI with an invoice for all fees to be paid
to the Manager hereunder for each Quarter (as
calculated in accordance with clauses 5.1.1 and
5.1.2). CNI shall pay each invoice received from the
Manager within 15 Business Days of receipt of such
invoice.
5.2 COSTS:
5.2.1 OPERATING COSTS: All Operating Costs set forth in the
Operating Plan, as amended from time to time, shall
be for the account of CNI. Deviations from Operating
Costs, as set forth in the then applicable Operating
Plan, which are permitted or approved following any
Quarterly meeting pursuant to subclause 3.3.2 shall
be for the account of CNI. It is agreed that any
deviation in the total Operating Costs from that in
the Operating Plan for the relevant Operating Period
of less than 10% will
Management Agreement Page 20
not be deemed to be an amendment to the Operating
Plan requiring approval following any Quarterly
meeting under clause 3.3.2 and shall be for the
account of CNI.
5.2.2 ADDITIONAL APPROVED COSTS: Subject to clause 5.2.1
all reasonable costs incurred by the Manager in
respect of items not contemplated in the then
applicable Operating Plan shall be Operating Costs
but only if and to the extent that they have been
approved following any Quarterly meeting and the
Operating Plan amended in accordance with clause
3.3.2 of this agreement prior to their being incurred
by the Manager; provided that where, in the
reasonable opinion of the Manager, to avoid CNI
suffering a material adverse effect, it is necessary
to incur any such costs before the approval can be
obtained, the Manager has the authority to incur
these costs and the incurrence of those costs shall
be deemed to have received the approval of CNI as if
approved by CNI following a Quarterly meeting in
accordance with clause 3.3.2 and the Operating Plan
amended accordingly prior to being incurred. The
Manager shall promptly report to CNI any costs
incurred by the Manager which were not approved by
CNI prior to being incurred but are deemed to be
approved pursuant to this subclause 5.2.2.
5.2.3 INVOICING AND PAYMENT OF COSTS: All invoices
submitted by the Manager to CNI for Operating Costs
incurred by the Manager under this agreement will be
in the following form:
(a) TAX INVOICE: each invoice must be a valid
"tax invoice" as required by law;
(b) OPERATING COSTS: each invoice must specify
the Operating Costs incurred, and the dates
they were incurred;
(c) EXPLANATION: Where Operating Costs deviate
by more than 10% from the estimate in the
Operating Plan each invoice must be
accompanied with a statement explaining how
such Operating Costs relate to the Operating
Plan, or an explanation of why those costs
should be considered additional approved
costs in accordance with clause 5.2.2.
5.2.4 DUE DATE FOR PAYMENT: Subject to clauses 5.2.1 and
5.2.2, provided the Operating Costs specified in each
invoice received by CNI either comply with the
Operating Plan or have been approved following any
Quarterly meeting in accordance with clause 3.3.2,
each such invoice will be payable on the 15th
Business Day after receipt by CNI of that invoice.
5.3 PAYMENT IN CLEARED FUNDS: Receipt of a cheque, ▇▇▇▇ of
exchange or other negotiable instrument will not constitute
payment of any amount under this
Management Agreement Page 21
agreement until the amount represented by that cheque, ▇▇▇▇ of
exchange or negotiable instrument has been received in full,
in cleared funds, by the intended payee.
5.4 DEFAULT INTEREST: If any amount falls overdue for payment
under this agreement, the overdue amount will (without
prejudice to any other right or remedy under this agreement)
bear default interest from the date on which payment of that
amount falls overdue until the date on which payment of the
overdue amount is made in full. Default interest will be
calculated daily at the Default Interest Rate and will be
compounded monthly.
5.5 SETTLEMENT OF EXPENSES: Following any termination of this
agreement, the Manager and CNI shall promptly settle and pay
all outstanding costs, fees and reimbursements which are due
to any of the parties pursuant to the terms of this agreement.
5.6 LAND COSTS: The Manager acknowledges and agrees that as the
owner of the Land all Land Costs shall be for the account of
the Manager only and nothing express or implied in this
agreement will confer any liability on CNI in relation to Land
Costs.
5.7 GST: A party must pay GST on a taxable supply made to it under
this agreement, in addition to any consideration (excluding
GST) that is payable for that taxable supply. The party making
the taxable supply must provide a valid tax invoice to the
other party at or before the time that the other party is
required to pay the GST. Excluding the term "GST", terms used
in this clause have the meaning given to them in the GST Act.
6. TERM OF AGREEMENT AND SUSPENSION
6.1 TERM: Unless this agreement is earlier terminated as set forth
in subclause 6.2, the term of this agreement shall be from the
Commencement Date until the termination of the Forestry Right.
6.2 EARLY TERMINATION: This agreement may be terminated prior to
the expiration of the period specified in subclause 6.1 by
notice from CNI to the Manager if any of the following events
occur (in relation to clauses 6.2.1- 6.2.5) or by notice from
the Manager to CNI (in relation to clauses 6.2.1 and 6.2.3).
6.2.1 MATERIAL BREACH: Either party breaches, and fails to
properly or promptly perform, any of its material
obligations within twenty (20) Business Days after
written notice from the other party specifying the
breach and its intention to terminate this agreement
if such obligation is not properly and promptly
performed provided that such breach is not disputed
by the relevant party alleged to be in breach (in
which case clauses 6.3.1 to 6.3.4 shall apply).
Management Agreement Page 22
6.2.2 THE MANAGER'S FAILURE TO PERFORM ITS DUTIES: If, CNI:
(a) DUTIES: notifies the Manager that it is in
material breach of the performance of its
duties under this agreement in any material
respect; and
(b) CAUSE: such failure is not caused by any
specific instruction or direction given to
the Manager pursuant to this agreement by
CNI and acted on by the Manager nor is such
failure caused by any failure to act by CNI,
nor is such failure caused by the
implementation of the approved Management
Plans in accordance with the performance
standards in clause 2.2, in each case where
the Manager has met the standard of
performance set out in clause 2.2.
6.2.3 EVENT OF DEFAULT: If any one or more of the following
events of default occur this agreement may be
terminated by the affected party prior to the
expiration of the period specified in subclause 6.1
by notice from the affected party to the other if any
of the following events occur:
(a) DISTRESS: distress is levied or a judgment
order or encumbrance is enforced, or becomes
enforceable, or can be rendered so by the
giving of notice, lapse of time or
fulfilment of any condition, against
substantially all of the Manager's property;
(b) INSOLVENCY EVENT: an Insolvency Event occurs
in respect of the Manager;
(c) NOTICE FROM REGISTRAR: the Manager receives
notice from the Registrar of Companies (or a
Deputy Registrar) under section 30 of the
Corporations (Investigation and Management)
▇▇▇ ▇▇▇▇ or the Securities Commission makes
a recommendation under section 38 of that
Act in respect of the Manager; or
(d) OFFICIAL MANAGER: a person is appointed
under either section 179 of the Act or the
Corporations (Investigation and Management)
▇▇▇ ▇▇▇▇ to investigate any part of the
affairs of the Manager.
6.2.4 DISPOSAL OF PLANTATION ASSETS: CNI disposes of all of
the Plantation Assets.
6.2.5 CAP EXCEEDED: If the amounts that have been
determined to be owed by the Manager to CNI exceed in
aggregate the Cap where such amounts arise as a
result of breaches of either the Infrastructure
Agreement or this
Management Agreement Page 23
agreement and where such amounts are determined
either by agreement between the parties or by the
award of an arbitrator or by court order (all rights
of appeal having either expired or been exhausted),
irrespective of the time period over which the
liability for such amounts accrues.
An early termination of this agreement under this clause 6.2
shall not be effective until the date ten (10) Business Days
after receipt of the notice of termination by the Manager.
6.3 TERMINATION DISPUTES:
6.3.1 DISPUTE OVER BREACH: In such event that CNI has
notified the Manager that it is in material breach
under this agreement in accordance with clause 6.2.2
and the Manager disputes that termination notice, or
if the recipient of a termination notice under clause
6.2.1 disputes that termination notice, then the
dispute resolution procedure under clause 16 shall
apply.
6.3.2 SUSPENSION: Pending resolution of a dispute under
clause 6.3.1 CNI may suspend this agreement (or the
relevant part of it where the disputed breach is in
relation to only part of the services in this
agreement and the Manager is able to provide the
balance of the Manager's services in this agreement)
on providing written notice of such suspension (or
partial suspension) to the Manager, and appoint an
interim replacement to fulfil the Manager's
obligations under this agreement.
6.3.3 MANAGEMENT FEES: Notwithstanding that the agreement
or part of it has been suspended as provided in
clause 6.3.2, the Management Fees (and the Operating
Costs as applicable where only part of the agreement
is suspended and the Manager is still incurring
Operating Costs) payable by CNI to the Manager will
continue to be payable in full in accordance with the
relevant provisions of this agreement as if this
agreement (or part of it) had not been suspended,
pending determination of the dispute pursuant to
clause 6.3.1.
6.3.4 DETERMINATION OF BREACH: If it is determined pursuant
to clause 6.3.1 that there is no breach then CNI must
immediately terminate the interim replacement manager
and reinstate the Manager. If it is determined that
there is a breach, CNI may immediately terminate this
agreement and will notify the Manager in writing of
the out of pocket costs incurred by it as a result of
the appointment of the interim replacement manager
(including a statement of such costs). The Manager
will pay such costs to CNI within 5 Business Days of
receipt of such notification.
6.3.5 CURABLE BREACH: If prior to referring the issue to
dispute resolution in accordance with this clause CNI
and the Manager can agree on a method and period
within which such failure is to be cured, and the
Manager fails
Management Agreement Page 24
to cure such failure according to the method and
within the period agreed, then CNI may terminate this
agreement by notice to the Manager in writing and
this agreement will terminate 10 Business Days from
the date of such notice.
6.4 EFFECT OF TERMINATION:
6.4.1 SURVIVAL: The expiration or earlier termination of
this agreement will be without prejudice to the
rights and obligations of the parties prior to such
expiration or earlier termination becoming effective
and the obligations of the parties under subclause
4.5, subclause 5.5, clause 8, subclause 11.3 and
clause 17 will survive the expiration or earlier
termination of this agreement.
6.4.2 RELATED AGREEMENTS: The expiration or earlier
termination of this agreement will be without
prejudice to the rights and obligations of the
parties under the Related Agreements.
6.5 TRANSFER:
6.5.1 EARLY TERMINATION: On the early termination of this
agreement the Manager shall at no additional fee or
cost to CNI and at all times acting in good faith,
promptly and efficiently take all actions reasonably
requested to assist its replacement in assuming its
responsibilities in terms of such replacement
manager's appointment including, without limitation,
the handing over of all relevant and up-to-date
records relating to the Trees in a form that can
immediately be used by CNI to continue to manage the
Trees to a standard consistent with that in clause
2.2 (provided that the Manager is entitled to
withhold the records until all monies owing to the
Manager under this agreement are paid in full). For
the avoidance of doubt, the Manager will have no
obligation to transfer proprietary systems or
operational processes. All reasonable out of pocket
expenses incurred by the Manager in effecting the
transfer shall be to the account of CNI.
6.5.2 EXPIRATION: On the expiration of this agreement by
the effluxion of time the Manager shall at no
additional fee or cost to CNI and at all times acting
in good faith, promptly and efficiently take all
actions reasonably requested to assist CNI wind up
its interest in the Plantation Assets, including,
without limitation, the handing over of all relevant
records relating to the Trees, provided that the
Manager is entitled to withhold the records until all
monies owing to the Manager under this agreement are
paid in full. For the avoidance of doubt, the Manager
will have no obligation to transfer proprietary
systems or operational processes. All reasonable out
of pocket expenses incurred by the Manager in
effecting the transfer shall be to the account of
CNI.
Management Agreement Page 25
6.6 INJUNCTIVE RELIEF OR SPECIFIC PERFORMANCE: Each of the parties
acknowledges and agrees that in the event of a breach of this
agreement, damages alone will be an insufficient remedy.
Accordingly, each of the parties further acknowledge that the
other party may be entitled to equitable relief, including
injunctive relief or specific performance, in the event of any
breach, or threatened breach of this agreement, in addition to
any and all other remedies available to it at law.
7. INSURANCE
7.1 INSURANCE: The Manager shall be permitted to self-insure its
risks, provided that if at any time during the term of this
agreement, the net assets of ▇▇▇▇▇▇▇▇ Challenge Industries
Limited fall below $200 million the Manager shall promptly
notify CNI of the same and the provisions of the following
clauses will apply until the net assets of ▇▇▇▇▇▇▇▇ Challenge
Industries Limited exceed $200 million. All calculations of
net assets required to be carried out pursuant to this clause
must be made using those accounting principles used for the
preparation of the financial statements of ▇▇▇▇▇▇▇▇ Challenge
Forests Limited.
7.1.1 PUBLIC LIABILITY INSURANCE: The Manager shall obtain
and maintain, at its expense, public liability
insurance coverage, with an extension for fire
fighting costs and levies pursuant to the Forest and
Rural Fires ▇▇▇ ▇▇▇▇, in respect of activities
undertaken by it and its subcontractors in performing
its obligations under this agreement in such amounts,
on such terms and with such insurers as a prudent
forestry manager of the Plantation Assets would
insure for based on the risks and liabilities
attendant on such activities and will provide CNI
with confirmation in writing of the cover and that
the premiums are paid.
7.1.2 ADDITIONAL INSURED: CNI shall be named as an
additional insured on all insurance policies
providing such coverage.
7.1.3 CHANGE IN SCOPE: Any proposed material change in the
scope, insurer or amount of insurance coverage
maintained by the Manager pursuant to this subclause
7.1 shall be promptly reported to CNI. The Manager
shall have no obligation to insure the Plantation
Assets except as specified in this clause 7.
7.2 OTHER INSURANCE: The Manager shall use reasonable endeavours
to obtain and maintain such insurance in respect of the
Plantation Assets (including, without limitation, insurance
against fraud or theft on the part of the Manager's employees
or contractors which would cause loss to CNI), with such
insurers and coverage, and for such amount, as CNI shall
request. The cost of such insurance including any brokerage
fees and out of pocket expenses shall be for the account of
CNI. The Manager will obtain written quote(s) for such
insurance including brokerage fees and out of pocket costs and
will not be under any obligation to place such insurance until
such time as it has received payment of the agreed quote in
full in
Management Agreement Page 26
cleared funds from CNI. Upon request, the Manager shall
furnish to CNI, all certificates of the insurances obtained
and maintained pursuant to this subclause 7.2. The Manager
shall have no obligation to insure the Plantation Assets
except as specified in this subclause 7.
7.3 CNI INSURANCE: CNI may, at its sole and absolute discretion
and cost, obtain and maintain such other insurance in respect
of the Plantation Assets in addition to any insurance obtained
and maintained by the Manager in accordance with clauses 7.1
and 7.2, but without limiting the Manager's obligation to
obtain and maintain insurance in accordance with clauses 7.1
and 7.2.
7.4 FCIL UNDERTAKING: In order to satisfy CNI of the Manager's
creditworthiness in respect of its self insuring for the above
risks, the Manager will provide CNI with a signed undertaking
from ▇▇▇▇▇▇▇▇ Challenge Industries Limited in the form set out
in Appendix II together with a guarantee from ▇▇▇▇▇▇▇▇
Challenge Industries Limited in the form attached to Appendix
II on execution of this agreement.
8. INDEMNITY
8.1 MANAGER'S DUTY TO INDEMNIFY: The Manager shall indemnify CNI
and its respective officers, directors, employees and
Affiliates against any and all costs, expenses, claims,
damages and liabilities incurred whatsoever, including
reasonable legal expenses, arising as a direct result of any
breach by the Manager of the provisions of this agreement,
except if, and then only to the extent that, such breach, act
or omission occurs as a result of:
8.1.1 SPECIFIC INSTRUCTIONS: the Manager carrying out and
performing any specific instruction or direction
given to the Manager pursuant to this agreement by
CNI; or
8.1.2 FAILURE BY CNI: the Manager, having met the standard
of performance set out in subclause 2.2, being unable
to comply with any of its duties under this agreement
caused by the failure to act by CNI.
8.2 LIMITATION OF LIABILITY - MANAGER: The Manager's liability
under clauses 8.1 and 11.3 of this agreement and clauses 4.3
and 7.1 of the Infrastructure Agreement cannot exceed in
aggregate NZ$2 million (the "Cap").
8.3 CNI'S DUTY TO INDEMNIFY: CNI hereby indemnifies the Manager,
its officers, directors, employees and Affiliates, against any
and all costs, expenses, claims, damages and liabilities
whatsoever, including reasonable legal expenses, arising
directly out of any breach by CNI of the provisions of this
agreement.
8.4 LIMITATION OF LIABILITY - CNI: CNI's liability under clause
8.3 of this agreement and clause 7.3 of the Infrastructure
Agreement cannot exceed in aggregate NZ$2 million.
Management Agreement Page 27
8.5 LIABILITY: Nothing expressed or implied in this agreement
shall confer any liability on either party (referred to in
this clause as the "First Party") in respect of any indirect,
consequential or special loss, damage, cost or expense of any
kind including (but not limited to) loss of savings and profit
suffered or incurred by the other party as a direct or
indirect result of a breach by the First Party of any of its
obligations under this agreement.
8.6 RIGHT TO DEFEND: If any action or proceeding is brought
against a party or parties indemnified under subclause 8.1 or
subclause 8.3 or subclause 11.3 (the "Indemnified Party"),
such Indemnified Party shall promptly notify in writing the
party or parties against whom such indemnity may be sought
(the "Indemnifying Party"). The Indemnifying Party shall then
be entitled to assume the defence of the action or proceeding
with counsel reasonably satisfactory to the Indemnified Party
and shall pay the fees and expenses of such counsel. If the
Indemnifying Party has given written notice invoking the
provisions of clause 16 with respect to its obligation to
indemnify, the Indemnifying Party may assume such defence
subject to a reservation of rights against the Indemnified
Party. In any such action or proceeding, any Indemnified Party
shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such
Indemnified Party unless:
8.6.1 BY MUTUAL AGREEMENT: the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the
retention of such counsel; or
8.6.2 DIFFERING INTERESTS: the named parties to any such
proceedings (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same
counsel would be inappropriate due to an actual or
potential conflict of interest between them.
Where there is any disagreement between the parties as to
whether there is an actual or potential conflict of interest
pursuant to subclause 8.6.2 such disagreement shall be
referred to the President of the New Zealand Law Society whose
determination shall be binding and the costs of obtaining such
determination shall be paid equally by the Indemnifying Party
and the Indemnified Party. It is understood and agreed by the
parties that the Indemnifying Party shall not, in connection
with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses
of more than one separate firm for the Indemnified Party. The
Indemnifying Party shall not be liable for any settlement of
any proceeding effected without its written consent, but if
settled with such consent or if there is a final judgment for
the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Party
shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought
pursuant to this clause 8 by such Indemnified Party.
Management Agreement Page 28
8.7 NO DOUBLE CLAIMS: Neither party is entitled to claim more than
once in respect of any one matter giving rise to a claim under
this agreement or any Related Agreement.
8.8 MITIGATION: Each party will take all reasonable steps to
mitigate any costs, damages, fines, penalties, loss or
expense, it may suffer.
9. REPRESENTATIONS AND WARRANTIES
9.1 MANAGER'S REPRESENTATIONS AND WARRANTIES: The Manager
represents and warrants as follows.
9.1.1 STANDING: The Manager is a company duly incorporated
and validly existing under the laws of New Zealand.
9.1.2 AUTHORITY TO ENTER INTO AGREEMENT: The execution,
delivery and performance by the Manager of this
agreement have been duly authorised by all necessary
action on its part, do not contravene any law binding
on the Manager, do not contravene the incorporation
documents of the Manager and do not contravene the
provisions of or constitute a default under any other
agreement to which the Manager may be a party or by
which any of its assets may be bound.
9.1.3 CONSENTS, APPROVALS ETC: It has obtained or made all
consents, approvals, authorisations or orders of any
court or governmental authority or agency required on
its behalf to be obtained or made on or prior to the
date of execution of this agreement in connection
with the execution and delivery of this agreement and
the performance by it of its obligation hereunder.
9.1.4 VALID AGREEMENT: This agreement has been duly
executed and delivered by the Manager and constitutes
the legal, valid and binding obligation of the
Manager, enforceable against the Manager in
accordance with its terms.
9.1.5 NO PROCEEDINGS: There is no action, suit or
proceeding before any court or governmental agency or
authority now pending or, to the knowledge of the
Manager, threatened against the Manager which might
adversely affect the ability of the Manager to
perform its obligations under this agreement.
9.2 CNI'S REPRESENTATIONS AND WARRANTIES: CNI represents and
warrants as follows.
9.2.1 STANDING: It is a company duly incorporated and
validly existing under the laws of New Zealand.
Management Agreement Page 29
9.2.2 AUTHORITY TO ENTER INTO AGREEMENT: The execution,
delivery and performance by it of this agreement have
been duly authorised by all necessary action on its
part, do not contravene any law binding on it, do not
contravene its incorporation documents, and do not
contravene the provisions of or constitute a default
under any other agreement to which it is a party or
by which any of its assets may be bound.
9.2.3 CONSENTS, APPROVALS ETC: It has obtained or made all
consents, approvals, authorisations or orders of any
court or governmental authority or agency required on
its behalf to be obtained or made on or prior to the
date of execution of this agreement in connection
with the execution and delivery of this agreement and
the performance by it of its obligation hereunder.
9.2.4 VALID AGREEMENT: This agreement has been duly
executed and delivered by it and constitutes the
legal, valid and binding obligations of it
enforceable against it in accordance with its terms.
9.2.5 NO PROCEEDINGS: There is no action, suit or
proceeding before any court or governmental agency or
authority now pending or, to the knowledge of CNI,
threatened against CNI which might adversely affect
the ability of CNI to perform its obligations under
this agreement.
10. CONFLICTS OF INTEREST
10.1 OTHER ACTIVITIES: CNI acknowledges that the Manager owns other
plantation assets in New Zealand and is actively involved in
the business of managing such plantation assets and harvesting
and marketing forest products (as well as managing plantation
assets and harvesting and marketing forest products owned by
others) both in the domestic and export markets. From time to
time, the Manager's acquisition and management of plantation
assets and harvesting and marketing of forest products for its
own account, or for a third party, may create a conflict of
interest with respect to the obligations of the Manager under
this agreement.
10.2 EFFECTS OF CONFLICT: In the event of a conflict of interest
(which the parties acknowledge could arise due to a change in
the effective control or management of the Manager) CNI shall
have the right, following consultation with the Manager, to
terminate this agreement without cause on 30 Business Days
notice in writing where the conflict of interest is reasonably
likely to cause the Manager to:
10.2.1 CONFIDENTIALITY: be unable to comply in all respects
with its confidentiality obligations under this
agreement; or
10.2.2 MANAGEMENT OBJECTIVES: be unable to meet the
objectives set out in clause 3.1.4; and
Management Agreement Page 30
thereby result in a material adverse effect on CNI.
10.3 CONTINUING FEE: The parties acknowledge that as a result of
terminating this agreement under this clause 10, the Manager
may incur certain "winding up" costs. By way of recognition of
this fact, CNI shall continue to pay the Management Fee to the
Manager for a period of 90 days following the date of the
notice referred to in clause 10.2. For the avoidance of doubt,
the provisions of clause 6.5.1 shall apply in the event that
the agreement is terminated in accordance with this clause 10.
11. HEALTH AND SAFETY IN EMPLOYMENT ACT
11.1 COMPLIANCE: The Manager shall take all practicable steps to
ensure that no act or omission by it or its employees, agents,
contractors, subcontractors, invitees, visitors or licensees:
11.1.1 HAZARD: causes a hazard, significant hazard, harm or
serious harm to any employee of the Manager or CNI or
any person lawfully on the Land; or
11.1.2 BREACH OF HSE ACT: is a breach of any duty or
obligation of the Manager under the Health and Safety
in Employment ▇▇▇ ▇▇▇▇ ("HSE Act") and any
regulations or codes of practice made pursuant to the
HSE Act; or
11.1.3 HSE ACT ENFORCEMENT: does or is likely to give rise
to the issue of an improvement or prohibition notice,
enforcement proceedings or a prosecution under the
HSE Act against the Manager or CNI,
provided the Manager shall only be required to take all
reasonably practicable steps to enforce the requirements in
this clause 11.1 in respect of its agents, contractors,
subcontractors, invitees, visitors or licensees.
11.2 FURTHER OBLIGATIONS: Without limiting its general obligations
the Manager shall:
11.2.1 RELEVANT RULES AND REGULATIONS: obtain and shall be
familiar with, all relevant rules, regulations,
standard and industry practices;
11.2.2 MAINTENANCE: in relation to the Manager's duties
under this agreement require that all plant,
equipment, machinery, vehicles and tools used are in
a safe working condition and subject to periodic
checks to ensure this standard is maintained and it
shall require that the use of equipment that is
damaged or does not meet accepted safety standards is
not permitted;
Management Agreement Page 31
11.2.3 PROTECTIVE EQUIPMENT: in relation to the Manager's
duties under this agreement require that appropriate
protective equipment and clothing is supplied to, and
used by, all personnel, associated with the work;
11.2.4 INSTRUCTIONS: in relation to the Manager's duties
under this agreement require the observance of any
instructions by any competent authority in relation
to the maintenance of safe working practices and
accident prevention;
11.2.5 REPORT ACCIDENTS: in relation to the Manager's duties
under this agreement require all accidents resulting
in injuries to personnel to be reported to CNI in
accordance with prescribed procedures.
11.3 INDEMNITY: The Manager shall indemnify and keep indemnified
CNI from all costs, damages, fines, penalties, loss and
expense incurred or suffered by any of them in respect of any
breach of the HSE Act, or any conviction of or proceedings
instigated against any of them pursuant to the HSE Act
directly related to a breach by the Manager of any of the
provisions set out in subclause 11.1 and 11.2. Provided that
this indemnity will not apply where any claim under this
indemnity against the Manager arises as a result of any act or
omission by CNI, where the Manager was acting consistently
with, either any request of CNI, or directions from CNI. Each
party will take all reasonable steps to mitigate any costs,
damages, fines, penalties, loss or expense it may incur.
11.4 NOTIFICATION OF BREACH: If the Manager becomes aware that it
is or may be in breach, or is likely to be in breach of any of
the provisions in subclause 11.1 or 11.2, the Manager shall
promptly notify CNI of such a breach or anticipated breach. In
relation to any breach or anticipated breach in connection
with any of the provisions in subclause 11.1 or 11.2 the
Manager shall follow the reasonable directions, if any, of CNI
to avoid, remedy or mitigate such breach or anticipated
breach.
11.5 INDUCTION: All of the Manager's employees, agents,
contractors, subcontractors, invitees, visitors or licensees
shall undergo a safety induction and an adequate safety
training programme before commencing work on the Land. The
Manager shall promptly advise CNI in writing of any major
changes to any of its safety policies and procedures. The
Manager shall be responsible for ensuring that its affected
employees, agents, contractors, subcontractors, invitees,
visitors or licensees are advised of any such changes.
11.6 FIRE TRAINING: The Manager shall procure that any contractor
engaged by the Manager in working in the forest shall make
their personnel available for fire training, suppression, and
standby as may be required by CNI, and at the cost of CNI with
such actual costs to be payable by CNI with 15 Business Days
of receipt of an appropriate invoice.
Management Agreement Page 32
12. HISTORIC AND SACRED PLACES
12.1 PRESERVE AND SAFEGUARD: The Manager shall preserve and
safeguard to the best of its ability those ▇▇▇▇▇▇ of the Maori
people, monuments, sacred places and places of historical
significance in or on the Land of which the Manager has
received notice.
12.2 DISCOVERIES: If the Manager or the Manager's agents discover
any human bones in or on the Land such discovery shall be
notified to CNI as soon as possible and the Manager may then,
at its discretion, provide the Maori people an opportunity for
the bones to be re-interred in appropriate burial grounds.
Pending re-interment, or any decision not to re-inter, the
bones shall be regarded and treated with respect and proper
provisions shall be made with all due reverence for their
interim safety and custody.
13. HISTORIC PLACES AND ARTEFACTS
If any Historic Place or Maori artifact is discovered by the Manager or
its employees, agents, contractors, subcontractors, invitees, visitors
or licensees, then, subject to the provisions of the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ and the Antiquities ▇▇▇ ▇▇▇▇, the Manager shall take all
practicable steps to preserve, safeguard and protect the Historic Place
or the artifact and shall inform CNI as soon as possible.
14. FORCE MAJEURE
14.1 DELAY OR FAILURE TO PERFORM: No party shall be liable for
failure to perform or delay in performing hereunder if the
cause of such failure or delay is outside or beyond the
reasonable control of the party failing to perform (including
but without derogating from the generality of the foregoing:
fire, wind, flood, earthquake, volcanic eruption, public
disorders, riot, war, embargoes, transport restrictions and
forest fire prevention restrictions. For the purposes of this
clause the solvency of a party shall be deemed to be within
that party's reasonable control. Further nothing in this
section shall excuse payment of any money due or which becomes
due under this agreement where the obligation to pay arose
before the occurrence of the event of force majeure.
14.2 SUSPENSION OF PERFORMANCE LIMITED: Any suspension of
performance by reason of this section shall be limited to the
period during which the force majeure exists.
14.3 NOTICE: The party claiming force majeure shall as soon as
possible and in any event no later than five (5) Business Days
after it becomes aware of the happening of the event causing
the failure give notice to the other of the happening of the
event causing the failure and shall furnish all reasonably
available information detailing the cause or event and give an
estimate of the period of time required to remedy the failure
(if such remedy is deemed practicable). Failure to give such
notice shall prevent the party from claiming that the event
gives rise to force majeure until notice has been given.
Management Agreement Page 33
14.4 PRIOR OBLIGATIONS: No situation of force majeure pursuant to
this section shall relieve either party of any duty or
obligation under this agreement which relates to a period
prior to the existence of the situation of force majeure and
had arisen or been incurred prior to the existence of the
situation of force majeure.
14.5 SUSPENSION AND TERMINATION:
14.5.1 SUSPENSION: If an event beyond the Manager's
reasonable control prevents the Manager from carrying
out any obligations under this agreement, CNI may
immediately suspend this agreement (or the relevant
part of it), on providing written notice of such
suspension to the Manager, and appoint a replacement
manager. Such suspension shall continue until CNI is
reasonably satisfied that the Manager is capable of
resuming its responsibilities under this agreement.
Notwithstanding that the agreement or part of it has
been suspended, the Management Fees (and the
Operating Costs as applicable where only part of the
agreement is suspended and the Manager is still
incurring Operating Costs) payable by CNI to the
Manager will continue to be payable in full in
accordance with the relevant provisions of this
agreement as if this agreement (or part of it) had
not been suspended.
14.5.2 TERMINATION - MANAGER: If an event beyond the
Manager's reasonable control prevents the Manager
from carrying out any obligation under this agreement
for a continuous period of twenty (20) Business Days,
then CNI may cancel this agreement immediately upon
providing written notice to the Manager provided that
prior to termination CNI must pay to the Manager
reasonable out of pockets costs arising from the
early termination of this agreement. The Manager must
take all reasonable steps to minimise such costs. In
that case, clauses 6.4 and 6.5 will apply.
14.5.3 TERMINATION - CNI: If an event beyond CNI's
reasonable control prevents CNI from carrying out any
obligation under this agreement for a continuous
period of 40 Business Days, then the Manager may
cancel this agreement by giving 10 Business Days
written notice to CNI. In that case clause 6.4 and
6.5 will apply.
15. ASSIGNMENT
15.1 CONSENT: This agreement shall be binding upon and inure to the
benefit of the parties, their respective successors and
permitted assigns. The parties recognise that CNI has
contracted for the Manager's services as provided in this
agreement because of certain special and unique abilities of
the Manager and that the Manager has agreed to provide such
services due to special and unique characteristics of CNI. For
this reason, a party may not assign its rights or transfer its
obligations under this agreement to any other person or entity
without the prior
Management Agreement Page 34
written consent of the other party. Such consent is not to be
unreasonably or arbitrarily withheld.
15.2 DEED: In the case of request for assignment the assignor shall
obtain the execution by the proposed assignee of a deed of
covenant to be prepared by the other party's solicitors at the
assignor's costs whereby the proposed assignee covenants with
the other party to observe and perform all the terms of this
agreement to be observed and performed on the part of the
assignor.
15.3 FORESTRY RIGHT CONTEMPORANEOUS: For the avoidance of doubt,
the parties agree that if requested by the Manager within five
Business Days of being notified by CNI of its intention to
transfer or assign its right or interest in the Forestry Right
(in part or whole), CNI shall use its reasonable endeavours to
persuade the proposed assignee/transferee to allow the Manager
to continue to provide to the assignee/transferee management
services in respect of the Plantation Assets of the type set
out in this agreement on the terms set out in clause 9.2 of
the Forestry Right.
16. RESOLUTION OF DISPUTES
In the event of a dispute arising between the parties in relation to
this agreement the following provisions will apply.
16.1 NEGOTIATE: A party claiming that a dispute has arisen
concerning this agreement must give notice to the other party
specifying the matter in dispute. The parties will use their
best endeavours to resolve the dispute by negotiation in good
faith. The parties will attend at least one meeting to discuss
and attempt to resolve the dispute as a condition precedent to
taking any other steps concerning the dispute (including but
not limited to commencing any legal proceedings other than an
application for injunctive relief). The attendees at such
meeting will include the Managing Director of UBS Timber
Investors (or nominee) and the Chief Executive Officer of
▇▇▇▇▇▇▇▇ Challenge Forests Limited (or nominee). All
discussions will be without prejudice and will not be referred
to in any later proceedings.
16.2 ARBITRATION: If the dispute cannot be resolved in accordance
with clause 16.1 within ten (10) Business Days after the date
of the notice referred to in clause 16.1, then any party may
then require (by written notice to the other party) the
dispute to be referred to arbitration. If this clause is
invoked then the following shall apply.
16.2.1 ARBITRATION ACT: The dispute will be referred to
arbitration by a sole arbitrator under the provisions
of the Arbitration ▇▇▇ ▇▇▇▇. The arbitrator will be
agreed upon between the parties within ten (10)
Business Days of written notice, or failing
agreement, by the President of the New Zealand Law
Society or its successor body, or any nominee of the
President. In either case, the arbitrator must not be
a person who has
Management Agreement Page 35
participated in any informal dispute resolution
procedure in respect of the dispute. Any party may
request the appointment of an expert to sit with the
arbitrator but any such expert shall have an advisory
role only and shall not have the authority to make a
binding decision. Each of the parties may make
submissions to the arbitrator as to the relevant
skills and expertise of an appropriate expert, but
the selection of an appropriate expert is ultimately
at the arbitrator's sole discretion.
16.2.2 ARBITRATION IN NEW ZEALAND: The arbitration will take
place in New Zealand.
16.2.3 AWARD FINAL: The award in the arbitration including
any award by the arbitrator of costs will be final
and binding on the parties.
16.2.4 AWARD OF INTEREST: The arbitrator may award interest
upon any amount due and payable under his or her
award at such rate and for such period as he or she
considers just, down to the date of the award.
16.3 PARTIES TO CONTINUE TO PERFORM: Subject to the provisions of
clause 6.2, pending resolution of any dispute or difference,
the parties shall continue to perform their respective
obligations pursuant to the provisions of this agreement.
16.4 INJUNCTIVE RELIEF: Nothing in this clause will prevent any
party commencing any legal proceedings for injunctive relief.
17. CONFIDENTIALITY
Each party will maintain as confidential at all times, and will not at
any time, directly or indirectly:
17.1 DISCLOSE: disclose or permit to be disclosed to any person;
17.2 USE: use for itself; or
17.3 USE TO DETRIMENT: use to the detriment of the other party;
any Confidential Information except:
17.4 LEGAL REQUIREMENT: subject to clause 17.10, as required by law
or regulatory body (including any stock exchange);
17.5 PUBLIC KNOWLEDGE: as is already or becomes public knowledge,
otherwise than as a result of a breach by the party disclosing
or using that Confidential Information of any provision of
this agreement;
17.6 AUTHORISED: as authorised in writing by the other party;
Management Agreement Page 36
17.7 LENDERS AND UNDERWRITERS: as required to communicate and make
disclosure to institutional lenders to and underwriters for,
or potential institutional lenders to and underwriters for,
the Manager or CNI, provided that the relevant party shall
ensure compliance by such persons with this clause 17 and
shall be liable for any breach of such obligations by such
persons and, in the case of potential institutional lenders or
underwriters, to procure the return of all such information if
the lending to or underwriting is not consummated;
17.8 AFFILIATES AND ADVISERS: as required to communicate and make
disclosure to Affiliates of the parties or the parties' or the
Affiliates' respective advisers who have a legitimate need to
know the information in order to perform activities connected
with this agreement or the Related Agreements, and provided
that the relevant party shall ensure compliance by such
persons with this clause 17 and shall be liable for any breach
of such obligations by such persons; or
17.9 OTHER: to the extent reasonably required by this agreement
(and, without limiting the effect of this clause, a party may
disclose Confidential Information only to those of its
officers, employees or professional advisers, on a "need to
know" basis, as is reasonably required for the implementation
of this agreement).
17.10 CONSULTATION: In the event that one party (the first party) is
required by law or stock exchange reporting obligations to
disclose Confidential Information, such disclosure may be made
only after the other party (the second party) has been
notified and, subject to timing obligations imposed by law or
the relevant stock exchange, has been given every reasonable
opportunity to consult with the first party as to timing and
content of any such disclosure. In consulting with the second
party, the first party shall act in good faith and give
reasonable consideration to the second party's requests.
17.11 MANAGER'S SAFEGUARDS: If reasonably requested by CNI, the
Manager will document to the reasonable satisfaction of CNI
the internal safeguards it will put in place to meet its
confidentiality obligations under this clause 17.
18. SEVERABILITY
Any provision of this agreement which is prohibited or unenforceable in
any jurisdiction shall be ineffective as to such jurisdiction to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this agreement or affecting the validity or
unenforceability of such provision in any other jurisdiction.
19. LIMITED RECOURSE
The Manager undertakes and agrees as follows.
19.1 CNI'S ASSETS: The Manager will look only to the assets held by
CNI or the benefit of any insurance maintained by CNI to
satisfy the obligations or liabilities of CNI to the Manager
hereunder or otherwise.
Management Agreement Page 37
19.2 LIMITATION OF LIABILITY: None of the Affiliates of CNI, direct
or indirect holders of securities or debt of CNI, nor any of
their respective officers, directors, or employees, shall be
liable for the obligations of CNI to the Manager.
19.3 NO ACTIONS OR PROCEEDINGS: The Manager shall not commence any
action or proceeding against any of the persons referred to in
sub clause 19.2 for the purpose of enforcing the obligations
of CNI.
20. APPLICABLE LAW
20.1 NEW ZEALAND LAW: The law applicable to this agreement
including all submissions to arbitration shall be the law of
New Zealand and the parties irrevocably and unconditionally
agree to submit to be and be bound by the jurisdiction of the
courts and tribunals of New Zealand.
20.2 NON EXCLUSIVE JURISDICTION: The submission to jurisdiction in
clause 20.1 does not and is not to be construed to limit the
rights of a party to take proceedings against the other party
in another court of competent jurisdiction, nor is the taking
of proceedings in one or more jurisdictions to preclude the
taking of proceedings in another jurisdiction, whether
concurrently or not.
21. NOTICES
21.1 DELIVERY OF NOTICE: All notices and other communications
required or permitted under this agreement shall be in
writing. Any written notice required under this agreement must
be signed by a duly authorised senior representative of any
party giving the notice and will be deemed validly given if:
21.1.1 PERSONAL DELIVERY: delivered personally;
21.1.2 DOMESTIC POST: sent by prepaid post; or
21.1.3 FACSIMILE: sent by facsimile transmission,
addressed to the recipient at the address or facsimile number
set out below (as applicable) or to any other address or
facsimile number that a party may notify to the other parties
by like notice.
CNI: if to CNI to:
CNI Timber Operating Company Limited
C/- UBS Warburg NZ Equities Limited
▇ ▇ ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
For: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Management Agreement Page 38
Facsimile: (▇▇) ▇▇▇ ▇▇▇▇
With a copy to:
UBS Timber Investors
Trade Center, 4th Floor
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
For: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇ ▇▇▇▇
and:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
For: ▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇ ▇▇▇▇
THE MANAGER: if to the Manager, to:
▇▇▇▇▇▇▇▇ Challenge Forests Industries Limited
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇
Private Bag 92036
Auckland Mail Centre
Auckland
For: Chief Executive Officer
Facsimile: (▇▇) ▇▇▇ ▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Challenge Forests Industries Limited
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇
Private Bag 92036
Auckland Mail Centre
Auckland
For: Company Secretary
Facsimile: (▇▇) ▇▇▇ ▇▇▇▇
21.2 TIME OF RECEIPT: No written communication will be effective
until received. Without limiting any other ways for a party to
prove that another party has
Management Agreement Page 39
received a notice, a notice or other written communication
under this agreement, will be treated as received:
21.2.1 PERSONAL DELIVERY: if delivered personally, when left
with an apparently responsible person at the
recipient's address;
21.2.2 PREPAID POST: if sent by prepaid post three (3)
Business Days (if posted within New Zealand to an
address in New Zealand), or ten (10) Business Days
(if posted by prepaid airmail from country to
country) after the date of posting;
21.2.3 REGISTERED POST: if sent by registered post, on
acknowledgment of receipt by or on the recipient's
behalf; or
21.2.4 AIR COURIER DELIVERY: if sent by air courier
delivery, on acknowledgment of receipt by or on the
recipient's behalf; or
21.2.5 FACSIMILE: if sent by facsimile, on the sender's
receipt of a transmission report indicating that the
facsimile was sent in its entirety to the recipient's
facsimile number;
but, if the delivery or receipt is not on a Business Day or
after 5.00pm (local time) on any Business Day, the notice will
be treated as received by the recipient at 9.00am (local time)
on the next Business Day.
22. COPIES OF NOTICES
If a party is required by any term of this agreement to give a copy of
a notice or other communication to a third party, the failure to give
the copy of it to the third party will not affect the effectiveness of
that notice or communication to a party.
23. THIRD PARTY NOTICES
Each party shall promptly provide to the other party a copy of every
notice it receives from a third party in respect of the Plantation
Assets to the extent that it is relevant to this agreement and/or the
Related Agreements or any part thereof. Notwithstanding the above, the
provisions of this clause shall not apply to any notice received by any
party from any Affiliate of such party.
24. ENTIRE AGREEMENT
This agreement together with the Sale and Purchase Agreement, Forestry
Right, Infrastructure Agreement and Wood Supply Agreement contain the
entire agreement between the parties in connection with the subject
matter hereof and supersede and replace all prior negotiations,
agreements or representations, whether oral or written, between them
with respect thereto.
Management Agreement Page 40
25. MODIFICATION
This agreement may not be amended or modified except by written
agreement signed by the parties.
26. WAIVER
No provision of this agreement may be waived except in writing by the
party granting the waiver and then only in the specific instance and
for the specific purpose for which given.
27. COUNTERPARTS
27.1 GENERAL: This agreement may be executed in one or more
counterparts, each of which will be deemed to be an original,
but all of which together will constitute only one and the
same agreement.
27.2 FACSIMILE EXCHANGE: The parties acknowledge that this
agreement may be executed on the basis of any exchange of
facsimile copies and confirm that their respective execution
of this agreement by such means shall be a valid and
sufficient execution. The parties acknowledge that any
execution of this agreement by facsimile will be followed by
execution of the engrossments of this agreement.
28. FURTHER ASSURANCES
The parties shall execute and deliver such further and other documents
and instruments and do such other things as may be reasonably necessary
to implement and carry out the intent and purpose of this agreement.
29. COSTS
Except as expressly provided elsewhere in this agreement, each party is
to bear its own costs in connection with the preparation, negotiation
and execution of this agreement and the Related Agreements and other
documentation contemplated by this agreement.
30. NO PARTNERSHIP
None of the provisions of this agreement are deemed to constitute a
partnership or joint venture between the parties and neither party has
any authority to bind or to pledge the credit of the other party in any
way except as expressly provided in this agreement.
[SPACE INTENTIONALLY LEFT BLANK]
Management Agreement Page 41
In witness of which this management agreement has been executed.
SIGNED on behalf of
▇▇▇▇▇▇▇▇ CHALLENGE FORESTS
INDUSTRIES LIMITED
By:
__________________________________________ __________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
__________________________________________ __________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
WITNESS:
(if other than two directors sign)
__________________________________________
Signature of witness
__________________________________________
Full name of witness
__________________________________________
Occupation of witness
___________________________________________
Address of witness
Management Agreement Page 42
SIGNED by CNI TIMBER OPERATING
COMPANY LIMITED by:
_______________________________ ____________________________
Full name of attorney Signature of attorney
WITNESS:
(if other than two directors sign)
__________________________________________
Signature of witness
__________________________________________
Full name of witness
__________________________________________
Occupation of witness
__________________________________________
Address of witness
FIRST SCHEDULE
PLANTATION ASSETS
A. Trees
B. The rights conferred to CNI under the Forestry Right
C. Improvements
D. Stands
APPENDIX I
FORESTRY RIGHT
APPENDIX II
UNDERTAKING FROM ▇▇▇▇▇▇▇▇ CHALLENGE INDUSTRIES LIMITED
In consideration of CNI Timber Operating Company Limited entering into the
Management Agreement ("the Agreement") with ▇▇▇▇▇▇▇▇ Challenge Forests
Industries Limited, ▇▇▇▇▇▇▇▇ Challenge Industries Limited agrees to grant a
guarantee to CNI Timber Operating Company Limited of ▇▇▇▇▇▇▇▇ Challenge Forests
Industries Limited's obligations and liability under the Agreement and the
Related Agreements in the form attached and undertakes to CNI Timber Operating
Company Limited that during the term of the Forestry Right ▇▇▇▇▇▇▇▇ Challenge
Industries Limited shall:
1. ensure that ▇▇▇▇▇▇▇▇ Challenge Industries Limited maintains net assets
in any year of the Forestry Right in an amount not less than $200
million;
2. provide to CNI Timber Operating Company Limited a copy of the audited
financial statements of ▇▇▇▇▇▇▇▇ Challenge Forests Limited and its
group, as soon as they become available for release;
3. provide to CNI Timber Operating Company Limited a certificate from the
Chief Financial Officer of ▇▇▇▇▇▇▇▇ Challenge Forests Limited, issued
no later than five months after the end of the financial year of
▇▇▇▇▇▇▇▇ Challenge Forests Limited, confirming that as at the end of
that financial year the net assets of ▇▇▇▇▇▇▇▇ Challenge Industries
Limited are no less than $200 million;
4. no later than the end of December in each year provide to CNI Timber
Operating Company Limited a copy of the unaudited financial statements
of ▇▇▇▇▇▇▇▇ Challenge Industries Limited.
5. ▇▇▇▇▇▇▇▇ Challenge Industries Limited represents and warrants to CNI on
execution and delivery of this undertaking and the guarantee given
under this undertaking that this undertaking and the guarantee given
under this undertaking:
(a) will have been validly authorised by all necessary action on
the part of ▇▇▇▇▇▇▇▇ Challenge Industries Limited;
(b) will not contravene any law binding on it;
(c) will not contravene its incorporation documents;
(d) will not contravene the provisions of or constitute a default
under any other agreement to which it is a party;
(e) will constitute legal, valid and binding obligations
enforceable against ▇▇▇▇▇▇▇▇ Challenge Industries Limited in
accordance with their respective terms;
and that ▇▇▇▇▇▇▇▇ Challenge Industries Limited will have and continue
to have the necessary corporate powers to enter into this undertaking
and the guarantee given
under this undertaking and perform its obligations under this
undertaking and the guarantee given under this undertaking.
All calculations of net assets required to be carried out pursuant to this
undertaking must be made using those accounting principles used for the
preparation of the financial statements of ▇▇▇▇▇▇▇▇ Challenge Forests Limited
Capitalised terms have the meaning ascribed to them in the Agreement.
EXECUTED AS A DEED by ▇▇▇▇▇▇▇▇ Challenge Industries Limited by:
__________________________________________ __________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
__________________________________________ __________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
Witness:
(if other than two directors sign)
____________________________________
Signature of witness
____________________________________
Full name of witness
____________________________________
Occupation of witness
____________________________________
Address of witness
DEED OF GUARANTEE AND INDEMNITY
BETWEEN
▇▇▇▇▇▇▇▇ CHALLENGE INDUSTRIES LIMITED
AND
CNI TIMBER OPERATING COMPANY LIMITED
[▇▇▇▇▇▇▇ GRIERSON LOGO]
Execution Version Tahorakuri
TABLE OF CONTENTS
1. INTERPRETATION............................................. 1
2. GUARANTEE.................................................. 2
3. LIABILITY NOT TO BE AFFECTED............................... 3
4. PAYMENTS................................................... 4
5. SUSPENSION OF RIGHTS....................................... 5
6. REPRESENTATIONS AND WARRANTIES............................. 6
7. UNDERTAKINGS............................................... 6
8. COSTS...................................................... 7
9. RELEASE.................................................... 7
10. SET-OFF.................................................... 7
11. NOTICES.................................................... 7
12. CURRENCY INDEMNITY......................................... 9
13. GENERAL.................................................... 10
14. CONFIDENTIALITY............................................ 11
Execution Version Tahorakuri
GUARANTEE AND INDEMNITY dated the 2003
PARTIES
1. ▇▇▇▇▇▇▇▇ CHALLENGE INDUSTRIES LIMITED ("Guarantor")
2. CNI TIMBER OPERATING COMPANY LIMITED ("Beneficiary")
THIS DEED WITNESSES:
1. INTERPRETATION
In this Guarantee, unless the context indicates otherwise:
1.1 DEFINITIONS:
"BUSINESS DAY" means a day on which registered banks are open
for banking business in Auckland, excluding Saturdays, Sundays
and public holidays;
"CONFIDENTIAL INFORMATION" means any information disclosed by
the Guarantor to the Beneficiary on the express basis that
such information is confidential;
"DEBTOR" means ▇▇▇▇▇▇▇▇ Challenge Forests Industries Limited;
"DEFAULT INTEREST RATE" means default interest rate as that
term is defined in clause 1 of an agreement for sale and
purchase of trees between the Debtor and Teal 3 Limited dated
15 January 2003 ("Agreement");
"GUARANTEE" means this guarantee and indemnity;
"GUARANTEED MONEY" means all money which the Debtor presently
is, or at any time becomes, actually or contingently liable to
pay to the Beneficiary under the Agreement and any of the
Related Agreements;
"GUARANTEED OBLIGATIONS" means all obligations (whether
present or future) of the Debtor to the Beneficiary under the
Agreement and any of the Related Agreements;
1.2 GENERAL:
(a) words denoting the singular include the plural and
vice versa;
(b) words denoting any gender includes all genders;
Page 2
(c) references to any document (however described) will
include references to that document as modified,
varied, novated, supplemented or replaced from time
to time;
(d) headings and the table of contents are for
convenience only and will not affect interpretation;
and
(e) capitalised terms not defined in this Guarantee shall
have the meaning ascribed to them in the Agreement.
2. GUARANTEE
2.1 GUARANTEE: The Guarantor guarantees to the Beneficiary the due
and punctual payment by the Debtor of the Guaranteed Money and
the due and punctual performance of the Guaranteed
Obligations.
2.2 PAYMENT ON DEFAULT: If the Debtor defaults in the due and
punctual payment of any of the Guaranteed Money, the Guarantor
will pay that money to the Beneficiary on demand.
2.3 PRINCIPAL DEBTOR: The Guarantor's obligations under this
Guarantee are:
(a) principal obligations and may be enforced against the
Guarantor without the Beneficiary being required to
exhaust any remedy it may have against the Debtor or
to enforce any security the Beneficiary may hold with
respect to the Guaranteed Money; and
(b) unconditional and irrevocable.
2.4 CONTINUING GUARANTEE: This Guarantee is a continuing guarantee
for the Guaranteed Money. It is not discharged by any payment
or anything else, and remains in full force until the
Beneficiary has executed and delivered a release to the
Guarantor.
2.5 REINSTATEMENT: If any payment received by the Beneficiary on
any account of the Guaranteed Money is or may be avoided by
law (despite a release having been executed and delivered by
the Beneficiary):
(a) the Guarantor's obligation to have made such payment
will be deemed not to have been affected or
discharged under this Guarantee or any other security
given to the Beneficiary; and
(b) the Beneficiary and the Guarantor will, in any such
case, be deemed to be restored to the position in
which each would have been, and will be entitled to
exercise the rights they respectively would have had,
if that payment had not been made.
Page 3
3. LIABILITY NOT TO BE AFFECTED
The liability of the Guarantor under this Guarantee shall not be
abrogated, prejudiced or affected by any of the following:
3.1 GRANTING OF TIME ETC: the granting of time, credit or any
indulgence or other concession to the Debtor or the Guarantor
or any other guarantor of the Debtor or to any other person by
the Beneficiary;
3.2 FAILURE TO DEMAND: any failure by the Beneficiary to present,
demand or give notice in respect of any negotiable instrument;
3.3 COMPOUNDING ETC: any compounding, compromise, release,
abandonment, waiver, variation, relinquishment or renewal of
any agreements, securities, documents of title, assets, or of
the rights of the Beneficiary against the Debtor or the
Guarantor or any other person;
3.4 ACTS OR OMISSIONS: anything done or omitted or neglected to be
done by the Beneficiary in exercise of the authorities, powers
and discretions vested in the Beneficiary by this Deed;
3.5 SECURITY OR LAW: any security or law or any other dealing,
matter or thing which but for this provision might operate to
abrogate, prejudice or affect the Guarantee (it being the
intention of the parties that the Guarantee and obligations of
the Guarantor shall be absolute and unconditional in any and
all circumstances);
3.6 OTHER LIABILITY CEASING: the liability of any other guarantor
of the Debtor or any other person ceasing from any cause
whatsoever (including release or discharge by the
Beneficiary);
3.7 JOINT OR SIMILAR GUARANTEES: any other person joining in this
or giving any similar Guarantee and/or indemnity;
3.8 LIQUIDATION OF DEBTORS ETC: the liquidation or bankruptcy of
the Debtor or any other guarantor of the Debtor or any other
person;
3.9 INCOMPETENCE OF OTHERS ETC: any other guarantor of the Debtor
or any other person being incompetent to give any other
Guarantee or any collateral security or failing to become
legally bound in whole or in part under any of them
respectively;
3.10 SECURITIES VOID ETC: any security from time to time held or
taken in respect of the indebtedness or obligations of the
Debtor or the Guarantor or any other guarantor of the Debtor
or any other person to the Beneficiary being void, defective
or informal or being released, partially released, discharged,
partially discharged or varied in any way;
3.11 FAILURE TO PROVIDE SECURITY: failure of the Debtor or the
Guarantor or any other guarantor of the Debtor or any other
person to provide any security which has been stipulated by
the Beneficiary;
Page 4
3.12 VARIATIONS: any variation of this Guarantee and Indemnity
and/or any other Guarantee and/or indemnity given in relation
to any of the Guaranteed Money and/or any of the Guaranteed
Obligations;
3.13 FAILURE TO GUARANTEE ETC: any person intended to Guarantee
payment of the Guaranteed Money and/or performance of the
Guaranteed Obligations failing or refusing to do so;
3.14 CLAIMS: any claim that the Beneficiary has not fully realised
all securities held by it in respect of the Guaranteed Money
and/or the Guaranteed Obligations or has not realised any of
such securities in a manner so as to maximise their realisable
value; or
3.15 OTHER MATTERS: any other matter or thing whatsoever.
4. PAYMENTS
4.1 PAYMENT: The Guarantor will make each payment to the
Beneficiary under this Guarantee in funds which are freely
transferable and immediately available for disbursement on the
day of payment.
4.2 NO DEDUCTIONS: All payments by the Guarantor to the
Beneficiary under this Guarantee will be made free of any
restriction or condition and, except to the extent required by
law, without deduction or withholding of any nature whether by
way of set-off, counterclaim or otherwise.
4.3 GROSS UP: If:
(a) the Guarantor is required by law to make any
deduction or withholding from any amount paid or
payable by it to the Beneficiary under this
Guarantee; or
(b) the Beneficiary is required by law to make any
deduction, withholding, or payment on, or calculated
by reference to, any amount received or receivable by
it under this Guarantee for or on account of tax
(except on account of tax on overall net income of
the Beneficiary) or otherwise,
then the amount payable by the Guarantor in respect of which
such deduction, withholding or payment is required to be made
will be increased to the extent necessary to ensure that,
after the making of such deduction, withholding or payment,
the Beneficiary receives and retains (free from any liability
in respect of any such deduction, withholding or payment) a
net amount equal to the amount which it would have received
and so retained had no such deduction, withholding or payment
been required to be made.
Page 5
4.4 NOTIFY BENEFICIARY: The Guarantor will:
(a) notify the Beneficiary immediately if it is required
to make any deduction or withholding;
(b) ensure that such deduction or withholding does not
exceed the legal minimum; and
(c) pay the amount required to be deducted or withheld to
the applicable taxation or other authority before the
date on which penalties attach.
4.5 TAX RECEIPTS: The Guarantor will deliver to the Beneficiary
promptly, on receipt, a copy of the receipt issued by the
applicable taxation or other authority or other evidence
satisfactory to the Beneficiary evidencing that such deduction
or withholding has been made.
4.6 INTEREST: The Guarantor will pay to the Beneficiary on demand
interest on all amounts payable by the Guarantor from the due
date to the date of actual receipt by the Beneficiary. Such
interest will accrue and be calculated on a daily basis (after
as well as before judgment) at the Default Interest Rate.
Interest will be compounded at monthly intervals.
5. SUSPENSION OF RIGHTS
5.1 Until the Guaranteed Money has been paid and discharged in
full, the Guarantor will not, without the consent of the
Beneficiary:
(a) take any steps to enforce a right or claim against
the Debtor in respect of any money paid by the
Guarantor to the Beneficiary under this Guarantee; or
(b) have or exercise any rights in competition with the
Beneficiary (including any right of subrogation or
indemnity).
5.2 BENEFICIARY AUTHORISED TO PROVE: Until the Beneficiary shall
have received one hundred cents in the dollar in respect of
the indebtedness of the Debtor in relation to the Guaranteed
Money, the Guarantor authorises the Beneficiary to:
(a) prove or claim for all money which the Guarantor has
paid or are otherwise owing to the Guarantor and have
not been repaid by the Debtor or any other guarantor
of the Debtor or any other person; and
(b) retain and to carry to a suspense account and
appropriate at the discretion of the Beneficiary any
amount received.
5.3 GUARANTOR'S WAIVER OF RIGHTS: So far as is necessary to give
effect to anything contained or implied in this Guarantee and
to ensure that the whole of the Guaranteed Money and
Guaranteed Obligations are paid or
Page 6
satisfied or performed in full, the Guarantor waives in favour
of the Beneficiary all rights whatever against the
Beneficiary, the Debtor, any other guarantor of the Debtor or
any other person or their or its estate and assets. Such
waiver extends to and includes rights of subrogation,
contribution and marshalling.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS: The Guarantor represents and warrants to the
Beneficiary that:
(a) the Guarantor has taken all necessary corporate
action to authorise the performance of, and
compliance with, its obligations under this
Guarantee; and
(b) the Guarantor has not taken any security interest or
benefit from the Debtor for or in consideration of
assuming the obligations contained under this
Guarantee or any part of them.
(c) the Guarantor is solvent and able to pay the
Guarantor's indebtedness as it falls due.
6.2 NO RELIANCE: The Guarantor confirms that it has not executed
this Guarantee as a result of or in reliance on any promise,
representation, statement or information of any kind or nature
whatever given by the Beneficiary.
6.3 NO DISCLOSURE: Subject to the Agreement and the Related
Agreements, the Guarantor confirms that the Beneficiary was
not, before execution of this Guarantee and is not in the
future, liable to do anything (including disclosing any
information to the Guarantor) relating to the affairs of the
Debtor or any transactions of the Debtor with the Beneficiary.
6.4 CONTINUING: The representations and warranties in this clause
6 will be deemed to be repeated continuously at all times
during which this Guarantee remains in effect by reference to
the facts and circumstances then existing.
7. UNDERTAKINGS
The Guarantor will:
7.1 INFORMATION: provide the Beneficiary within five Business Days
of receiving a reasonable request from the Beneficiary with
such information relating to its financial condition,
business, assets or affairs as is relevant to the performance
of its obligations under this Guarantee provided however that
the Guarantor is under no obligation to provide information
that it considers, in its absolute discretion, disclosure of
which would be a breach of any applicable Stock Exchange
Listing Rules; and
Page 7
7.2 PROCEEDINGS: give the Beneficiary prompt notice of any
litigation, or proceedings affecting it or any of its
business, assets or affairs.
8. COSTS
The Guarantor will pay the Beneficiary on demand for all reasonable
costs and expenses (including reasonable legal costs) in connection
with:
8.1 ENFORCEMENT: the enforcement of this Guarantee; and
8.2 AMENDMENT ETC: any amendment to, or any consent, waiver or
release of this Guarantee requested by the Guarantor.
9. RELEASE
The Beneficiary will not be obliged to execute a release of this
Guarantee unless it is satisfied that:
9.1 Guaranteed Money Paid: all of the Guaranteed Money has been
paid; and
9.2 NO PAYMENT AVOIDED: no payment affecting or relating to the
Guaranteed Money is or may be avoided under any law relating
to insolvency or otherwise.
10. SET-OFF
The Beneficiary is authorised to apply (without prior notice or demand)
any credit balance of the Guarantor on any account or any money owed by
the Beneficiary to the Guarantor towards satisfaction of the Guaranteed
Money or any money due and unpaid by the Guarantor to the Beneficiary
under this Guarantee.
11. NOTICES
11.1 DELIVERY OF NOTICE: All notices and other communications
required or permitted under this Guarantee shall be in
writing. Any written notice required under this Guarantee must
be signed by a duly authorised senior representative of any
party giving the notice and will be deemed validly given if:
(a) delivered personally;
(b) sent by prepaid post; or
(c) sent by facsimile transmission,
addressed to the recipient at the address or facsimile number
set out below (as applicable) or to any other address or
facsimile number that a party may notify to the other parties
by like notice.
Page 8
BENEFICIARY: If to the Beneficiary to:
CNI Timber Operating Company Limited
C/- UBS Warburg New Zealand Equities Limited
▇ ▇ ▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ Building
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
For: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇) ▇▇▇ ▇▇▇▇
With a copy to:
UBS Timber Investors
Trade Center, 4th Floor
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
For: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇ ▇▇▇▇
And with a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ of America
For: ▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇ ▇▇▇▇
GUARANTOR: If to the Guarantor, to:
▇▇▇▇▇▇▇▇ Challenge Industries Limited
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇
Private Bag 92036
Auckland Mail Centre
Auckland
For: The Chief Executive Officer
Facsimile: (▇▇) ▇▇▇ ▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Challenge Industries Limited
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇
Private Bag 92036
Auckland Mail Centre
Auckland
Page 9
For: The Company Secretary
Facsimile: (▇▇) ▇▇▇ ▇▇▇▇
11.2 TIME OF RECEIPT: No written communication will be effective
until received. Without limiting any other ways for a party to
prove that another party has received a notice, a notice or
other written communication under this Guarantee, will be
treated as received:
(a) if delivered personally, when left with an apparently
responsible person at the recipient's address;
(b) if sent by prepaid post three (3) Business Days (if
posted within New Zealand to an address in New
Zealand), or ten (10) Business Days (if posted by
prepaid airmail from country to country) after the
date of posting;
(c) if sent by registered post, on acknowledgment of
receipt by or on the recipient's behalf; or
(d) if sent by air courier delivery, on acknowledgment of
receipt by or on the recipient's behalf; or
(e) if sent by facsimile, on the sender's receipt of a
transmission report indicating that the facsimile was
sent in its entirety to the recipient's facsimile
number;
but, if the delivery or receipt is not on a Business Day or
after 5.00pm (local time) on any Business Day, the notice will
be treated as received by the recipient at 9.00am (local time)
on the next Business Day.
11.3 COPIES OF NOTICES: If a party is required by any term of this
Guarantee to give a copy of a notice or other communication to
a third party, the failure to give the copy of it to a third
party will not affect the effectiveness of that notice or
communication to a party.
12. CURRENCY INDEMNITY
If, at any time and for any reason, an amount payable by the Guarantor
under or in respect of this Guarantee ("Relevant Amount") is converted
into and received by the Beneficiary in a currency ("Payment Currency")
other than the contractual currency of payment under the Agreement
("Contractual Currency") then the Guarantor will indemnify the
Beneficiary and will hold the Beneficiary harmless against, and will
pay the Beneficiary on demand the amount certified by the Beneficiary
as being the amount required to compensate it for, the loss suffered as
a result of any discrepancy between:
12.1 CONTRACTUAL CURRENCY RECEIVED: the amount of the Contractual
Currency which the Lender receives on converting the amount it
receives in the Payment Currency into an amount in the
Contractual Currency in accordance with its usual practice;
and
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12.2 RELEVANT AMOUNT: the Relevant Amount in the Contractual
Currency.
13. GENERAL
13.1 CERTIFICATE: The certificate of the Beneficiary as to any
amount or fact which might reasonably be expected to be within
the Beneficiary's knowledge will be prima facie evidence of
such matter or fact.
13.2 SEVERABILITY: Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall be
ineffective as to such jurisdiction to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Guarantee or affecting the
validity or unenforceability of such provision in any other
jurisdiction.
13.3 DELAY: No delay, grant of time, release, compromise,
forbearance (whether partial or otherwise) or other indulgence
by the Beneficiary in exercising all or any of its rights,
remedies and powers or concerning any breach of any of the
Guarantor's obligations under this Guarantee is to:
(a) operate as a waiver of or prevent the subsequent
enforcement of any such rights, remedies, powers or
obligations; or
(b) be deemed a delay, grant of time, release,
compromise, forbearance (whether partial or
otherwise) or other indulgence of, or a waiver of,
any subsequent or other breach.
13.4 MODIFICATION: This Guarantee may not be amended or modified
except by written agreement signed by the parties.
13.5 WAIVER: Any consent, waiver or acknowledgement by the
Beneficiary under this Guarantee must be in writing and any
such consent, waiver or acknowledgment shall only be effective
in the specific instance and for the specific purpose given.
13.6 ADDITIONAL TO OTHER SECURITIES: This Guarantee is in addition
to and not in substitution for any other security, undertaking
or right which the Beneficiary may now or subsequently have in
respect of the Guaranteed Money and/or the Guaranteed
Obligations. This Guarantee may be enforced against the
Guarantor or any other Guarantor of the Debtor without first
having recourse to any such securities, undertaking or rights
and without taking any steps or proceedings against the
Debtor. It may be enforced notwithstanding that any other
security, undertaking or right may be in whole or in part
unenforceable by reason of any rule of law or equity and
notwithstanding any laches, acts, omissions or delays on the
part of the Beneficiary.
13.7 APPLICABLE LAW:
(a) The law applicable to this Guarantee shall be the law
of New Zealand and the parties irrevocably and
unconditionally agree to
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submit to and be bound by the jurisdiction of the
courts and tribunals of New Zealand.
(b) The submission to jurisdiction in clause 13.7(a) does
not (and is not to be construed to) limit the rights
of the Beneficiary to take proceedings against the
Guarantor in another court of competent jurisdiction,
nor is the taking of proceedings in one or more
jurisdictions to preclude the taking of proceedings
in another jurisdiction whether concurrently or not.
14. CONFIDENTIALITY
The Beneficiary will maintain as confidential at all times, and will
not at any time, directly or indirectly:
14.1 DISCLOSE: disclose or permit to be disclosed to any person;
14.2 USE: use for itself; or
14.3 USE TO DETRIMENT: use to the detriment of the other party;
any Confidential Information except:
14.4 LEGAL REQUIREMENT: subject to clause 14.10, as required by law
or regulatory body (including any stock exchange);
14.5 PUBLIC KNOWLEDGE: as is already or becomes public knowledge,
otherwise than as a result of a breach by the Beneficiary of
any provision of this deed;
14.6 AUTHORISED: as authorised in writing by the Guarantor;
14.7 LENDERS AND UNDERWRITERS: as required to communicate with and
make disclosure to institutional lenders to and underwriters
for, or potential institutional lenders to and underwriters
for the Beneficiary provided that the Beneficiary shall ensure
compliance by such persons with this clause 14 and shall be
liable for any breach of such obligations by such persons, and
in the case of potential institutional lenders or
underwriters, to return all such information if the lending to
or underwriting is not consummated;
14.8 AFFILIATES AND ADVISERS: as required to communicate with and
make disclosure to Affiliates of the Beneficiary or the
Beneficiary's or the Affiliates' respective advisers who have
a legitimate need to know the information in order to perform
activities connected with this deed, the Agreement or the
Related Agreements, and provided that the relevant party shall
ensure compliance by such persons with this clause 14 and
shall be liable for any breach of such obligations by such
persons; or
14.9 OTHER: to the extent reasonably required by this deed (and,
without limiting the effect of this clause, the Beneficiary
may disclose
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Confidential Information only to those of its officers,
employees or professional advisers, on a "need to know" basis,
as is reasonably required for the implementation of this
deed).
14.10 CONSULTATION: In the event that the Beneficiary is required by
law or stock exchange reporting obligations to disclose
Confidential Information, such disclosure may be made only
after the Guarantor has been notified and, subject to timing
obligations imposed by law or the relevant stock exchange, has
been given every reasonable opportunity to consult with the
Beneficiary as to timing and the content of any such
disclosure. In consulting with the Guarantor, the Beneficiary
shall act in good faith and give reasonable consideration to
the Guarantor's requests.
14.11 THE BENEFICIARY'S SAFEGUARDS: If requested, the Beneficiary
will document to the reasonable satisfaction of the Guarantor
the internal safeguards it will put in place to meet its
confidentiality obligations under this clause 14.
Executed as a deed.
SIGNED by ▇▇▇▇▇▇▇▇ CHALLENGE
INDUSTRIES LIMITED by:
_________________________________________ _________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
_________________________________________ _________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
WITNESS:
(if other than two directors sign)
_______________________________________
Signature of witness
_______________________________________
Full name of witness
_______________________________________
Occupation of witness
_______________________________________
Address of witness
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SIGNED by CNI TIMBER OPERATING
COMPANY LIMITED by:
_________________________________________ __________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
_________________________________________ __________________________________________
Full name of director/authorised signatory Signature of director/authorised signatory
WITNESS:
(if other than two directors sign)
_______________________________________
Signature of witness
_______________________________________
Full name of witness
_______________________________________
Occupation of witness
_______________________________________
Address of witness