1
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Table of Contents |
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Part I - Financial Information |
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Page No. |
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Item 1. |
Condensed Consolidated Financial Statements |
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Condensed Consolidated
Statements of Income --
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3 |
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Condensed Consolidated Statements
of Comprehensive Income (Loss) --
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4 |
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Condensed Consolidated
Balance Sheets --
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5 |
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Condensed Consolidated
Statements of Cash Flows --
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6 |
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Notes to the Condensed Consolidated Financial Statements |
7 |
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Item 2. |
Management's Discussion and
Analysis of Financial Condition
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16 |
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Item 4. |
Controls and Procedures |
25 |
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Part II - Other Information |
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Item 6. |
Exhibits |
26 |
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Signatures |
26 |
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Forward Looking Information
Certain portions of this report contain forward-looking statements about the business, financial condition and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in demand for the Company’s products, changes in competition, economic conditions, fluctuations in market price for Titanium dioxide pigments, changes in foreign currency exchange rates, increases in the price of energy and raw materials, such as ilmenite, interest rate fluctuations, changes in the capital markets, changes in tax and other laws and governmental rules and regulations applicable to the Company’s business, and other risks indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws. When used in this report, the words “believes,” “estimates,” “plans,” “expects,” “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.
2
3
4
5
6
7
TOR Minerals International, Inc. and Subsidiaries
(Unaudited)
|
Note 1. |
Accounting Policies |
Basis of Presentation and Use of Estimates
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim condensed consolidated financial statements include the consolidated accounts of TOR Minerals International, Inc. and its wholly-owned subsidiaries with all significant intercompany transactions eliminated. In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the consolidated financial position, results of operations and cash flows for the interim periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2010, in our Annual Report on Form 10-K filed with the SEC on March 24, 2011. Operating results for the three and nine month periods ended September 30, 2011, are not necessarily indicative of the results for the year ending December 31, 2011.
Income Taxes: The Company records income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
For the three and nine month periods ended September 30, 2011, income tax expense consisted of federal income tax expense of $6,000 and $18,000, respectively; state income tax expense of $2,000 and $4,000, respectively; and foreign deferred tax expense of $52,000 and $176,000, respectively. For the three and nine month periods ended September 30, 2010, income tax expense consisted of federal income tax benefit of $12,000; state income tax expense of $3,000 and $8,000, respectively; and foreign deferred tax expense of $7,000 and $24,000, respectively. Taxes are based on an estimated annualized consolidated effective rate of 6.8% for the year ended December 31, 2011.
When accounting for uncertainties in income taxes, we evaluate all tax years still subject to potential audit under the applicable state, federal and foreign income tax laws. We are subject to taxation in the United States, Malaysia and The Netherlands. Our federal income tax returns in the United States are subject to examination for the tax years ended December 31, 2007 through December 31, 2010. Our state returns, which are filed in Texas and Ohio, are subject to examination for the tax years ended December 31, 2006 through December 31, 2010. Our tax returns in various non-US jurisdictions are subject to examination for various tax years ended December 31, 2005 through December 31, 2010.
As of January 1, 2011, we did not have any unrecognized tax benefits and there was no change during the nine month period ended September 30, 2011. In addition, we did not recognize any interest and penalties in our consolidated financial statements during the nine month period ended September 30, 2011. If any interest or penalties related to any income tax liabilities are imposed in future reporting periods, we expect to record both of these items as components of income tax expense.
Recently Adopted and Recently Issued Accounting Standards
The Company reviewed significant newly issued accounting pronouncements and concluded that they are either not applicable to the Company’s business or that no material effect is expected on the consolidated financial statements as a result of future adoption.
8
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 2. |
Debt |
Long-term Debt – Financial Institutions
Following is a summary of our long-term debt to financial institutions:
|
(Unaudited) |
||||
|
(In thousands) |
September 30, |
December 31, |
||
|
2011 |
2010 |
|||
|
Fixed Rate term note payable to a U.S. bank, with an interest rate of 6.65% at September 30, 2011, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our US operation. |
$ |
1,769 |
$ |
2,000 |
|
Term note payable to a U.S. equipment financing company, with an interest rate of 5.24% at September 30, 2011, due April 1, 2013, secured by a Caterpillar front-end loader. |
41 |
60 |
||
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Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at September 30, 2011, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€348) |
467 |
485 |
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Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.6% at September 30, 2011, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€346) |
465 |
482 |
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Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at September 30, 2011, due July 31, 2015, secured by TPT's assets. (€196) |
263 |
312 |
||
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Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at September 30, 2011, due July 5, 2014, secured by TPT's assets. (€661) |
887 |
- |
||
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U.S. Dollar term note payable to a Malaysian bank which matured May 30, 2011. |
- |
41 |
||
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Total |
3,892 |
3,380 |
||
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Less current maturities |
820 |
533 |
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Total long-term debt and notes payable - financial institutions |
$ |
3,072 |
$ |
2,847 |
Six-percent Convertible Subordinated Debentures
As reported in the Company’s Forms 8-K filed with the SEC on May 6, 2009 and August 10, 2009, the Company’s Board of Directors authorized the issuance of its six-percent (6%) convertible subordinated debentures with detachable warrants (the “Debentures”) for the purpose of refinancing, in whole or in part, its debt to the Bank and for general corporate purposes. Under the current authorization, the Company received, $1,500,000 from the sale of Debentures, due May 4, 2016, from nine accredited investors, four of which are directors of the Company and another of which is a greater than 5% shareholder. At September 30, 2011, a balance of $1,450,000 remained outstanding on the Debentures.
9
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Short-term Debt
US Operations
On December 31, 2010, the Company entered into a new U.S. credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1 million line of credit (the “Line”) which matures July 1, 2012. The amount which the Company is entitled to borrow from time to time under the line of credit is subject to a borrowing base based on the loan value of the collateral pledged to the Lender to secure the indebtedness owing to the Lender by the Company. Amounts advanced under the line of credit bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 5.50%. At September 30, 2011, the Company had no outstanding funds borrowed on the Line.
Under the terms of the Agreement, the Company must maintain a ratio of cash flow to debt service of at least 1.25 to 1.0 measured on a rolling four quarter basis. At September 30, 2011, the ratio of cash flow to debt service was 3.38 to 1.0.
Netherlands Operations
On March 20, 2007, our subsidiary, TOR Processing and Trade, B.V. (“TPT”), entered into a short-term credit facility (the “Credit Facility”) with Rabobank which increased TPT’s line of credit from €650,000 to €1,100,000. The Credit Facility was renewed on January 1, 2010 and has no stated maturity date. The Credit Facility, which has a variable interest rate of Bank prime plus 2.8% (currently at 4.397%), is secured by TPT’s accounts receivable and inventory. At September 30, 2011, TPT had utilized €838,000 ($1,125,000) of its short-term credit facility.
TPT’s loan agreements covering both the credit facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings. However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case the lenders could foreclose on the assets of TPT.
Malaysian Operations
On June 27, 2011, the Company’s subsidiary, TOR Minerals Malaysia, Sdn. Bhd. (“TMM”), amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2011 to April 30, 2012. The HSBC facility includes the following in Malaysian Ringgits (“RM”): (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($157,000, $2,025,000 and $1,567,000, respectively).
On June 1, 2011, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date to April 4, 2012. The RHB facility includes the following: (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($313,000, $2,915,000, $376,000 and $7,837,000, respectively).
The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments. At September 30, 2011, the outstanding balance on the ECR facilities was RM 8,559,000 ($2,683,000) at a current interest rate of 4.25%.
The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia for such facilities. The loan agreements are secured by TMM’s property, plant and equipment. However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM. The credit facilities prohibit TMM from paying dividends and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.
10
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 3. |
Series A Convertible Preferred Stock Dividend |
On June 6, 2011, the Company declared a dividend, in the amount of $375 or $0.075 per share, for the quarterly period ended September 30, 2011, payable on October 1, 2011, to the holders of record of the Series A Convertible Preferred Stock as of the close of business on September 5, 2011.
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Note 4. |
Fair Value Measurements |
The following table presents the Company’s financial assets and financial liabilities that are measured and recognized at fair value on a recurring basis, classified under the appropriate level of fair value hierarchy, as of September 30, 2011. The Company did not hold any non-financial assets and/or non-financial liabilities subject to fair value measurements at September 30, 2011.
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September 30, 2011 |
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(In thousands) |
Balance at
|
Quoted Prices in Active
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Significant Other Observable Inputs
|
Significant
|
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Liability for foreign
currency
|
$ |
70 |
$ |
- |
$ |
70 |
$ |
- |
Our foreign currency derivative financial instruments mitigate foreign exchange risks and include forward contracts.
The fair value of the Company’s debt is based on estimates using standard pricing models that take into account the present value of future cash flows as of the balance sheet date. The computation of the fair value of these instruments is generally performed by the Company. The carrying amounts and estimated fair values of the Company’s long-term debt, including current maturities, are summarized below:
|
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September 30, 2011 |
|
December 31, 2010 |
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(In thousands) |
|
Carrying
|
|
Fair
|
|
Carrying
|
|
Fair
|
|
Long-term debt, including current portion |
$ |
3,892 |
$ |
3,776 |
$ |
3,380 |
$ |
3,286 |
|
Long-term debt – convertible debentures |
1,450 |
1,426 |
1,475 |
1,424 |
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$ |
5,342 |
$ |
5,202 |
$ |
4,855 |
$ |
4,710 |
|
The carrying amounts reported in the balance sheet for cash and cash equivalents, trade receivables, payables and accrued liabilities and short-term borrowings approximate fair value due to the short term nature of these instruments. Accordingly, these items have been excluded from the above table.
11
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 5. |
Capital Leases |
On June 27, 2005, TPT entered into a financial lease agreement with De Lage Landen Financial Services, BV for equipment related to the production of ALUPREM. The cost of the equipment under the capital lease is included in the balance sheets as property, plant and equipment and was $381,181. Accumulated amortization of the leased equipment at September 30, 2011 was approximately €174,000 ($233,000). Amortization of assets under capital leases is included in depreciation expense. The capital lease matured May 27, 2011.
On March 13, 2008, the Company entered into a financial lease agreement with Toyota Financial Services for a forklift. The cost of the equipment under the capital lease, in the amount of $26,527, is included in the balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at September 30, 2011 was approximately $15,000. Amortization of assets under capital leases is included in depreciation expense. The capital lease is in the amount of $31,164 including interest of $4,637 (implicit interest rate 6.53%). The lease term is 60 months with equal monthly installments of $519. The net present value of the lease at September 30, 2011 was approximately $8,000.
On August 1, 2010, the Company entered into a financial lease agreement with Dell Financial Services for new computer servers. The cost of the equipment under the capital lease, in the amount of $19,093, is included in the consolidated balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at September 30, 2011 was approximately $9,000. Amortization of assets under capital leases is included in depreciation expense. The capital lease is in the amount of $20,698 including interest of $1,605 (implicit interest rate 5.3%). The lease term is 36 months with equal monthly installments of $575. The net present value of the lease at September 30, 2011 was approximately $12,000.
12
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 6. |
Calculation of Basic and Diluted Earnings per Share |
The following table sets forth the computation of basic and diluted earnings per share:
|
(in thousands, except per share amounts) |
Three Months
|
Nine Months
|
||||||
|
2011 |
|
2010 |
2011 |
|
2010 |
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Numerator: |
||||||||
|
Net Income |
$ |
1,067 |
$ |
236 |
$ |
2,723 |
$ |
1,290 |
|
Preferred Stock Dividends |
- |
(15) |
(15) |
(45) |
||||
|
Numerator for basic earnings per share -
|
1,067 |
221 |
2,708 |
1,245 |
||||
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Effect of dilutive securities: |
||||||||
|
6% Convertible Debenture Interest Expense |
22 |
22 |
66 |
67 |
||||
|
Preferred Stock Dividends |
- |
- |
15 |
- |
||||
|
Numerator for
diluted income per share -
|
$ |
1,089 |
$ |
243 |
$ |
2,789 |
$ |
1,312 |
|
Denominator: |
||||||||
|
Denominator for basic income per share -
|
2,122 |
1,908 |
2,052 |
1,899 |
||||
|
Effect of dilutive securities: |
||||||||
|
Employee stock options |
37 |
12 |
40 |
10 |
||||
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Detachable warrants |
555 |
336 |
542 |
274 |
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6% Convertible Debenture |
547 |
566 |
552 |
566 |
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Preferred Stock Dividends |
3 |
- |
48 |
- |
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Dilutive potential common shares |
1,142 |
914 |
1,182 |
850 |
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Denominator for diluted income per share -
|
3,264 |
2,822 |
3,234 |
2,749 |
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Basic income per common share |
$ |
0.50 |
$ |
0.12 |
$ |
1.32 |
$ |
0.66 |
|
Diluted income per common share |
$ |
0.33 |
$ |
0.09 |
$ |
0.86 |
$ |
0.48 |
For the three and nine month periods ended September 30, 2010, approximately 111,000 common shares issuable upon conversion of the 200,000 convertible preferred shares were excluded from the calculation of diluted earnings per share as the conversion price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.
For the three and nine month periods ended September 30, 2010, approximately 566,000 shares issuable upon conversion of convertible debentures were excluded from the calculation of diluted earnings per share as the conversion price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.
For the three and nine month periods ended September 30, 2010, approximately 315,000 shares of common stock issuable upon exercise of warrants were excluded from the computation of diluted earnings per share as the effect would be antidilutive.
For the three and nine month periods ended September 30, 2011 and 2010, approximately 24,000 and 153,000, respectively, of shares issuable upon exercise of employee stock options were excluded from the computation of diluted earnings per share because the effect would be antidilutive.
13
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 7. |
Segment Information |
The Company and its subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All United States manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company’s wholly-owned subsidiaries, TMM, located in Malaysia, and TPT, located in the Netherlands. A summary of the Company’s manufacturing operations by geographic area is presented below:
14
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Product sales of inventory between Corpus Christi, TPT and TMM are based on inter-company pricing, which includes an inter-company profit margin. In the geographic information, the location loss from all locations is reflective of these inter-company prices, as is inventory at the Corpus Christi location prior to elimination adjustments. Such presentation is consistent with the internal reporting reviewed by the Company’s chief operating decision maker. The elimination entries include an adjustment to the cost of sales resulting from the adjustment to ending inventory to eliminate inter-company profit, and the reversal of a similar adjustment from a prior period. To the extent there are net increases/declines period over period in Corpus Christi inventories that include an inter-company component, the net effect of these adjustments can decrease/increase location profit.
Sales from the subsidiary to the US parent company and between subsidiaries are based upon profit margins which represent competitive pricing of similar products. Intercompany sales consisted of SR, HITOX, ALUPREM and TIOPREM.
|
Note 8. |
Stock Options and Equity Compensation Plan |
For the three and nine month periods ended September 30, 2011, the Company recorded stock-based employee compensation expense of $6,000 and $53,000, respectively. For the three month period ended September 30, 2010, all options were fully vested; therefore, the Company did not recognize any option compensation expense. For the nine month period ended September 30, 2010, the Company recorded stock-based employee compensation expense of $91,000. This compensation expense is included in the selling, general and administrative expenses in the accompanying consolidated statements of income.
The Company granted 23,500 and 23,404 options during the nine month periods ended September 30, 2011 and 2010.
As of September 30, 2011, there was approximately $158,000 of stock-based employee compensation expense related to non-vested awards which is expected to be recognized over a weighted average period of 4.33 years.
As all options issued under the Plan are Incentive Stock Options, the Company does not normally receive significant excess tax benefits relating to the compensation expense recognized on vested options.
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Note 9. |
Inventories |
A summary of inventory follows:
|
(In thousands) |
|
|
|
September 30, |
|
December 31, |
||
|
|
|
|
2011 |
|
2010 |
|||
|
Raw materials |
$ |
9,384 |
$ |
6,337 |
||||
|
Work in progress |
1,756 |
1,343 |
||||||
|
Finished goods |
2,797 |
2,895 |
||||||
|
Supplies |
1,315 |
794 |
||||||
|
Total Inventories |
15,252 |
11,369 |
||||||
|
Inventory reserve |
(300) |
(348) |
||||||
|
Net Inventories |
$ |
14,952 |
$ |
11,021 |
15
TOR Minerals International, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
|
Note 10. |
Derivatives and Other Financial Instruments |
The Company has
exposure to certain risks relating to its ongoing business operations,
including financial, market, political and economic risks. The following
discussion provides information regarding our exposure to the risks of changing
energy prices and foreign currency exchange rates. The Company has not
entered into these contracts for trading or speculative purposes in the past,
nor do we currently anticipate entering into such contracts for trading or
speculative purposes in the future. The natural gas and foreign exchange
contracts are used to mitigate uncertainty and volatility, and to cover
underlying exposures.
Foreign Currency Forward Contracts
We manage the risk of changes in foreign currency exchange rates, primarily at our Malaysian operation, through the use of foreign currency contracts. Foreign exchange contracts are used to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies, including sales and purchases transacted in a currency other than the functional currency, will be adversely affected by changes in exchange rates. We report the fair value of the derivatives on our balance sheet and changes in the fair value are recognized in earnings in the period of the change.
At September 30, 2011, we marked these contracts to market, recording $70,000 as a current liability on the balance sheet. For the three and nine month periods ended September 30, 2011, we recorded a net loss on these contracts of $70,000 and $85,000, respectively, as a component of our net income. For the three and nine month periods ended September 30, 2010, we recorded a net gain of $30,000 and $143,000, respectively, as a component of our net loss.
The following table summarizes the gross fair market value of all derivative instruments, which are not designated as hedging instruments and their location in our Condensed Consolidated Balance Sheet:
|
(In thousands) |
||||||
|
Asset Derivatives |
||||||
|
|
|
September 30, |
|
December 31, |
||
|
Derivative Instrument |
|
Location |
|
2011 |
|
2010 |
|
Foreign Currency Exchange Contracts |
Other Current Assets |
$ |
- |
$ |
11 |
|
|
|
|
|
$ |
- |
$ |
11 |
|
|
|
|
|
|
|
|
|
Liability Derivatives |
||||||
|
|
|
September 30, |
|
December 31, |
||
|
Derivative Instrument |
|
Location |
|
2011 |
|
2010 |
|
Foreign Currency Exchange Contracts |
Accrued Expenses |
70 |
- |
|||
|
|
|
|
$ |
70 |
$ |
- |
The following table summarizes the impact of the Company’s derivatives on the condensed consolidated financial statements of operations for the three and nine month periods ended September 30, 2011 and 2010:
|
|
|
|
Amount of (Loss) Gain Recognized in Income
|
|||||||
|
|
Location of (Loss) |
|
Three Months Ended |
|
Nine Months Ended |
|||||
|
Derivative |
|
Gain on Derivative |
|
September 30, |
|
September 30, |
||||
|
Instrument |
|
Instrument |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Foreign Currency
|
Other (Expense) Income |
$ |
(70) |
$ |
30 |
$ |
(85) |
$ |
143 |
|
16
TOR Minerals International, Inc. and Subsidiaries
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
Company Overview
We are a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders, engineered fillers and flame retardants used in the manufacture of paints, industrial coatings, plastics, and catalysts applications. We have operations in the US, Asia and Europe.
Our US Operation, located in Corpus Christi, Texas, manufactures HITOX, BARTEX, HALTEX/OPTILOAD and TIOPREM. The facility is also the global headquarters for the Company. The Asian Operation, located in Ipoh, Malaysia, manufactures SR, HITOX and TIOPREM and our European Operation, located in Hattem, Netherlands, manufactures ALUPREM.
Operating expenses in the foreign locations are primarily in local currencies. Accordingly, we have exposure to fluctuation in foreign currency exchange rates. These fluctuations impact the translation of sales, earnings, assets and liabilities from local currency to the US Dollar.
Our business is closely correlated with the construction industry and its demand for materials that use pigments, such as paints and plastics. This has generally led to higher sales in our second and third quarters due to increases in construction and maintenance during warmer weather. Also, pigment consumption is closely correlated with general economic conditions. When the economy is in an expansionary state, there is typically an increase in pigment consumption while a slow down typically results in decreased pigment consumption. When the construction industry or the economy is in a period of decline, TOR's sales and profit are likely to be adversely affected.
Following are our results for the three and nine month periods ended September 30, 2011 and 2010.
|
(Unaudited) |
||||||||
|
(In thousands, except per share amounts) |
|
Three Months
|
|
Nine Months
|
||||
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
NET SALES |
$ |
11,401 |
$ |
7,543 |
$ |
31,475 |
$ |
22,327 |
|
Cost of sales |
9,026 |
6,234 |
24,703 |
17,765 |
||||
|
GROSS MARGIN |
|
2,375 |
|
1,309 |
|
6,772 |
|
4,562 |
|
Technical services and research and development |
74 |
66 |
206 |
184 |
||||
|
Selling, general and administrative expenses |
1,098 |
846 |
3,322 |
2,666 |
||||
|
OPERATING INCOME |
|
1,203 |
|
397 |
|
3,244 |
|
1,712 |
|
OTHER EXPENSE: |
||||||||
|
Interest expense |
(139) |
(110) |
(336) |
(343) |
||||
|
Gain (loss) on foreign currency exchange rate |
63 |
(53) |
6 |
(47) |
||||
|
Other, net |
- |
- |
7 |
- |
||||
|
INCOME BEFORE INCOME TAX |
|
1,127 |
|
234 |
|
2,921 |
|
1,322 |
|
Income tax expense |
60 |
(2) |
198 |
32 |
||||
|
NET INCOME |
$ |
1,067 |
$ |
236 |
$ |
2,723 |
$ |
1,290 |
|
|
|
|
|
|
|
|
|
|
|
Income per common share: |
||||||||
|
Basic |
$ |
0.50 |
$ |
0.12 |
$ |
1.32 |
$ |
0.66 |
|
Diluted |
$ |
0.33 |
$ |
0.09 |
$ |
0.86 |
$ |
0.48 |
17
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net Sales : Consolidated net sales for the three and nine month periods ended September 30, 2011 increased approximately $3,858,000 or 51% and $9,148,000 or 41%, respectively, as compared to the same three and nine month periods of 2010 when we experienced increases in our consolidated net sales of $1,102,000 or 17% and $4,529,000 or 25%, respectively.
Following is a summary of our consolidated products sales for the three and nine month periods ended September 30, 2011 and 2010 (in thousands). All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|||||||||||||||||
|
Product |
2011 |
2010 |
Variance |
|
2011 |
2010 |
Variance |
||||||||||||
|
HITOX |
$ |
5,352 |
47% |
$ |
2,941 |
39% |
$ |
2,411 |
82% |
$ |
14,072 |
44% |
$ |
8,939 |
40% |
$ |
5,133 |
57% |
|
|
ALUPREM |
3,680 |
32% |
2,719 |
36% |
961 |
35% |
10,645 |
34% |
8,038 |
36% |
2,607 |
32% |
|||||||
|
BARTEX |
1,132 |
10% |
985 |
13% |
147 |
15% |
2,944 |
9% |
2,804 |
13% |
140 |
5% |
|||||||
|
HALTEX |
759 |
7% |
618 |
8% |
141 |
23% |
2,385 |
8% |
1,977 |
9% |
408 |
21% |
|||||||
|
TIOPREM |
342 |
3% |
180 |
3% |
162 |
90% |
1,119 |
4% |
266 |
1% |
853 |
321% |
|||||||
|
OTHER |
136 |
1% |
100 |
1% |
36 |
36% |
310 |
1% |
303 |
1% |
7 |
2% |
|||||||
|
Total |
$ |
11,401 |
100% |
$ |
7,543 |
100% |
$ |
3,858 |
51% |
$ |
31,475 |
100% |
$ |
22,327 |
100% |
$ |
9,148 |
41% |
|
HITOX sales increased 82% and 57% for the three and nine month periods ended September 30, 2011, respectively, as compared to the same periods in 2010 primarily due to the stabilization and recovery in the paint and plastics end markets, as well as a tight supply of commodity titanium dioxide, which have led to the addition of many new global customers. This compares to an increase of 2% and 16% for the three and nine month periods ended September 30, 2010, respectively. Since the end of the quarter, we are seeing increasing competitive pricing pressure from Chinese-based low-grade titanium dioxide producers, which is likely to put near-term pressure on HITOX volumes in Asia and South America. However, we expect overall average selling prices to continue to increase, as the pricing environment in Europe and North America remains favorable.
ALUPREM sales increased 35% during the third quarter of 2011 and 32% for the nine month period ended September 30, 2011, as compared to the same periods of 2010 primarily due to an increase in sales volume in both the US and Europe. This compares to an increase of 20% and 18% during the same three and nine month periods of 2010, respectively.
BARTEX sales increased 15% during the third quarter of 2011 and 5% for the nine month period ended September 30, 2011. This follows an increase of approximately 40% and 47% during the same three and nine month periods of 2010, respectively, primarily due to an increase in volume and our customer base.
HALTEX sales increased 23% and 21% for the three and nine month periods ended September 30, 2011, respectively. This compares to an increase of 30% and 76% for the same three and nine month periods of 2010, respectively. The year-over-year increase is related to new business for our OPTILOAD specialty products which are gaining acceptance in the marketplace.
TIOPREM sales increased significantly during the three and nine month periods ended September 30, 2011 as compared to the same periods of 2010 primarily due to the product gaining greater acceptance in the global marketplace.
18
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Corpus Christi Operation
Our Corpus Christi operation manufactures and sells HITOX, BARTEX, HALTEX/OPTILOAD and TIOPREM to third party customers. In addition, we purchase ALUPREM and HITOX from our subsidiaries, TPT and TMM, for distribution in the Americas. Following is a summary of net sales for our Corpus Christi operation for the three and nine month periods ended September 30, 2011 and 2010 (in thousands), as well as a summary of the material changes. All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|||||||||||||||||
|
Product |
2011 |
2010 |
Variance |
|
2011 |
2010 |
Variance |
||||||||||||
|
HITOX |
$ |
3,369 |
47% |
$ |
1,954 |
41% |
$ |
1,415 |
72% |
$ |
8,244 |
45% |
$ |
6,136 |
44% |
$ |
2,108 |
34% |
|
|
ALUPREM |
1,547 |
22% |
974 |
20% |
573 |
59% |
3,916 |
22% |
2,544 |
18% |
1,372 |
54% |
|||||||
|
BARTEX |
1,132 |
16% |
985 |
21% |
147 |
15% |
2,944 |
16% |
2,804 |
20% |
140 |
5% |
|||||||
|
HALTEX |
759 |
11% |
618 |
13% |
141 |
23% |
2,385 |
13% |
1,977 |
14% |
408 |
21% |
|||||||
|
TIOPREM |
154 |
2% |
130 |
3% |
24 |
18% |
577 |
3% |
205 |
2% |
372 |
181% |
|||||||
|
OTHER |
118 |
2% |
92 |
2% |
26 |
28% |
263 |
1% |
285 |
2% |
(22) |
-8% |
|||||||
|
Total |
$ |
7,079 |
100% |
$ |
4,753 |
100% |
$ |
2,326 |
49% |
$ |
18,329 |
100% |
$ |
13,951 |
100% |
$ |
4,378 |
31% |
|
Year to date, the increase in HITOX sales of 34% is primarily due to an increase in volume of 50% and an increase in price of 50% both of which are related to the tight supply of commodity titanium dioxide resulting in an increase in demand for HITOX from both new and existing customers. This compares to an increase of 8% during the same nine month period of 2010. Going forward we anticipate the growth rate in the average price of HITOX sales from the Corpus Christi operation to accelerate due to significant price increases that were implemented during the third and fourth quarters. HITOX volumes in North America are expected to continue to benefit from both new and existing customers. HITOX sales in South America, which represents approximately 13% of the HITOX sales from the Corpus Christi operation, are likely to be negatively impacted by increasing competitive pressure from Chinese-based low-grade titanium dioxide producers.
HALTEX sales in the US increased primarily due to new business, an increase in demand and the acceptance of our new product, OPTILOAD, in the market place.
TIOPREM sales in the US increased 18% and 181% during the three and nine month periods ended September 30, 2011, respectively, primarily due to the product gaining greater acceptance in the marketplace.
19
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Netherlands Operation
Our subsidiary in the Netherlands, TPT, manufactures and sells ALUPREM to third party customers, as well as to our Corpus Christi operation for distribution to our US customers. In addition, TPT purchases HITOX from TMM for distribution in Europe. The following table represents TPT’s ALUPREM and HITOX sales (in thousands) for the three and nine month periods ended September 30, 2011 and 2010 to third party customers. All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|||||||||||||||||
|
Product |
2011 |
2010 |
Variance |
|
2011 |
2010 |
Variance |
||||||||||||
|
ALUPREM |
$ |
2,133 |
88% |
$ |
1,745 |
89% |
$ |
388 |
22% |
$ |
6,729 |
83% |
$ |
5,494 |
90% |
$ |
1,235 |
22% |
|
|
HITOX |
231 |
10% |
187 |
10% |
44 |
24% |
1,104 |
14% |
596 |
10% |
508 |
85% |
|||||||
|
TIOPREM |
59 |
2% |
21 |
1% |
38 |
181% |
214 |
3% |
32 |
<1% |
182 |
569% |
|||||||
|
Total |
$ |
2,423 |
100% |
$ |
1,953 |
100% |
$ |
470 |
24% |
$ |
8,047 |
100% |
$ |
6,122 |
100% |
$ |
1,925 |
31% |
|
TIOPREM sales in Europe increased significantly during the three and nine month periods ended September 30, 2011, primarily due to the product gaining greater acceptance in the marketplace.
20
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Malaysian Operation
Our subsidiary in Malaysia, TMM, manufactures and sells HITOX and SR to third party customers, as well as to our Corpus Christi operation and TPT. The following table represents TMM’s sales (in thousands) for the three and nine month periods ended September 30, 2011 and 2010 to third party customers. All inter-company sales have been eliminated.
|
(Unaudited) |
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|||||||||||||||||
|
Product |
2011 |
2010 |
Variance |
|
2011 |
2010 |
Variance |
||||||||||||
|
HITOX |
$ |
1,752 |
92% |
$ |
800 |
96% |
$ |
952 |
119% |
$ |
4,724 |
93% |
$ |
2,207 |
98% |
$ |
2,517 |
114% |
|
|
TIOPREM |
129 |
7% |
29 |
3% |
100 |
345% |
328 |
6% |
29 |
1% |
299 |
1031% |
|||||||
|
OTHER |
18 |
1% |
8 |
1% |
10 |
125% |
47 |
1% |
18 |
1% |
29 |
161% |
|||||||
|
Total |
$ |
1,899 |
100% |
$ |
837 |
100% |
$ |
1,062 |
127% |
$ |
5,099 |
100% |
$ |
2,254 |
100% |
$ |
2,845 |
126% |
|
TIOPREM sales in Asia increased 345% and 1031% during the three and nine month periods ended September 30, 2011, respectively. The increase, as compared to the same periods of 2010, is primarily due to the product gaining greater acceptance in the global marketplace.
21
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Consolidated Results
Gross Margin : For the three month period ended September 30, 2011, gross margin increased 3.5%, from 17.3% for the third quarter 2010 as compared to 20.8% for the same three month period of 2011. For the nine month period ended September 30, 2011, gross margin increased 1.1% from 20.4% for the nine month period ended September 30, 2010 to 21.5% for the same nine month period of 2011. An increase in selling price, product mix and a reduction in idle plant time increased the year to date gross margin approximately 65%, 30% and 5%, respectively. These factors were more than enough to offset cost pressures we faced during the year. In particular, fuel costs are up approximately 40% year over year and the cost of ilmenite ore has tripled from last year. As we look at costs for the remainder of the year, we expect fuel and raw material costs will continue to put pressure on margins. However, despite these pressures, we expect to show year over year improvement in profitability during the fourth quarter due to favorable trends in pricing, increasing sale3s and better plant utilization.
Technical Services and Selling, General, Administrative and Expenses (“SG&A”) : Total SG&A expense increased approximately 28.5% during the three month period ended September 30, 2011 as compared to the same period of 2010 primarily related to an increase in salaries of approximately 28%, sales commissions of 47% and legal fees of 20%. For the nine month period ended September 30, 2011, SG&A expenses increased approximately 23.8% primarily due to an increase in salary expense of 37%, which included a bonus for executive management of $170,000, as well as increases relating to business travel of 50% and sales commissions of 45% which were partially offset by a reduction in accounting fees of 25% and legal fees of 46%.
Interest Expense : Net interest expense for the third quarter of 2011 increased approximately 26% as compared to the same periods of 2010 primarily due to higher outstanding balances on our line of credit and ECR financing. For the nine month period ended September 30, 2011 remained relatively flat as compared to the same period of 2010.
Income Taxes : For the three and nine month periods ended September 30, 2011, income tax expense consisted of federal income tax expense of $6,000 and $18,000, respectively; state income tax expense of $2,000 and $4,000, respectively; and foreign deferred tax expense of $52,000 and $176,000, respectively. For the three and nine month periods ended September 30, 2010, income tax expense consisted of federal income tax benefit of $12,000; state income tax expense of $3,000 and $8,000, respectively; and foreign deferred tax expense of $7,000 and $24,000, respectively. Taxes are based on an estimated annualized consolidated effective rate of 6.8% for the year ended December 31, 2011.
22
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity, Capital Resources and Other Financial Information
Long-term Debt – Financial Institutions
Following is a summary of our long-term debt to financial institutions:
|
(Unaudited) |
||||
|
(In thousands) |
September 30, |
December 31, |
||
|
2011 |
2010 |
|||
|
Fixed Rate term note payable to a U.S. bank, with an interest rate of 6.65% at September 30, 2011, due January 1, 2016, secured by real estate, leasehold improvements, property, plant and equipment, inventory and accounts receivable of our US operation. |
$ |
1,769 |
$ |
2,000 |
|
Term note payable to a U.S. equipment financing company, with an interest rate of 5.24% at September 30, 2011, due April 1, 2013, secured by a Caterpillar front-end loader. |
41 |
60 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at September 30, 2011, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (€348) |
467 |
485 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.6% at September 30, 2011, due January 31, 2030, secured by TPT's land and building purchased January 2005. (€346) |
465 |
482 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.05% at September 30, 2011, due July 31, 2015, secured by TPT's assets. (€196) |
263 |
312 |
||
|
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.25% at September 30, 2011, due July 5, 2014, secured by TPT's assets. (€661) |
887 |
- |
||
|
U.S. Dollar term note payable to a Malaysian bank which matured May 30, 2011. |
- |
41 |
||
|
Total |
3,892 |
3,380 |
||
|
Less current maturities |
820 |
533 |
||
|
Total long-term debt and notes payable - financial institutions |
$ |
3,072 |
$ |
2,847 |
Six-percent Convertible Subordinated Debentures
As reported in the Company’s Forms 8-K filed with the SEC on May 6, 2009 and August 10, 2009, the Company’s Board of Directors authorized the issuance of its six-percent (6%) convertible subordinated debentures with detachable warrants (the “Debentures”) for the purpose of refinancing, in whole or in part, its debt to the Bank and for general corporate purposes. Under the current authorization, the Company received, $1,500,000 from the sale of Debentures, due May 4, 2016, from nine accredited investors, four of which are directors of the Company and another of which is a greater than 5% shareholder. At September 30, 2011, a balance of $1,450,000 remained outstanding on the Debentures.
23
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Short-term Debt
US Operations
On December 31, 2010, the Company entered into a new U.S. credit agreement (the “Agreement”) with American Bank, N.A. (the “Lender”) which established a $1 million line of credit (the “Line”) which matures July 1, 2012. The amount which the Company is entitled to borrow from time to time under the line of credit is subject to a borrowing base based on the loan value of the collateral pledged to the Lender to secure the indebtedness owing to the Lender by the Company. Amounts advanced under the line of credit bear interest at a variable rate equal to one percent per annum point above the Wall Street Journal Prime Rate as such prime rate changes from time to time, with a minimum floor rate of 5.50%. At September 30, 2011, the Company had no outstanding funds borrowed on the Line.
Under the terms of the Agreement, the Company must maintain a ratio of cash flow to debt service of at least 1.25 to 1.0 measured on a rolling four quarter basis. At September 30, 2011, the ratio of cash flow to debt service was 3.38 to 1.0.
Netherlands Operation
On March 20, 2007, our subsidiary, TOR Processing and Trade, B.V. (“TPT”), entered into a short-term credit facility (the “Credit Facility”) with Rabobank which increased TPT’s line of credit from €650,000 to €1,100,000. The Credit Facility was renewed on January 1, 2010 and has no stated maturity date. The Credit Facility, which has a variable interest rate of Bank prime plus 2.8% (currently at 4.397%), is secured by TPT’s accounts receivable and inventory. At September 30, 2011, TPT had utilized €838,000 ($1,125,000) of its short-term credit facility.
TPT’s loan agreements covering both the credit facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings. However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case the lenders could foreclose on the assets of TPT.
Malaysian Operations
On June 27, 2011, the Company’s subsidiary, TOR Minerals Malaysia, Sdn. Bhd. (“TMM”), amended its banking facility with HSBC Bank Malaysia Berhad (“HSBC”) to extend the maturity date from April 30, 2011 to April 30, 2012. The HSBC facility includes the following in Malaysian Ringgits (“RM”): (1) overdraft of RM 500,000; (2) an import/export line (“ECR”) of RM 6,460,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($157,000, $2,025,000 and $1,567,000, respectively).
On June 1, 2011, TMM amended its banking facility with RHB Bank Berhad (“RHB”) to extend the maturity date to April 4, 2012. The RHB facility includes the following: (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; (3) a bank guarantee of RM 1,200,000; and (4) a foreign exchange contract limit of RM 25,000,000 ($313,000, $2,915,000, $376,000 and $7,837,000, respectively).
The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers’ and inter-company shipments. At September 30, 2011, the outstanding balance on the ECR facilities was RM 8,559,000 ($2,683,000) at a current interest rate of 4.25%.
The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia for such facilities. The loan agreements are secured by TMM’s property, plant and equipment. However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM. The credit facilities prohibit TMM from paying dividends and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.
24
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Cash and Cash Equivalents
As noted on the following table, cash and cash equivalents decreased $452,000 for the nine months ended September 30, 2011 as compared to a decrease of $438,000 for the nine months ended September 30, 2010.
|
(Unaudited) |
||||
|
Nine Months Ended September 30, |
||||
|
(In thousands) |
|
2011 |
|
2010 |
|
Net cash provided by (used in) |
||||
|
Operating activities |
$ |
(1,329) |
$ |
2,050 |
|
Investing activities |
(2,733) |
(1,009) |
||
|
Financing activities |
3,808 |
(1,737) |
||
|
Effect of exchange rate fluctuations |
(198) |
258 |
||
|
Net change in cash and cash equivalents |
$ |
(452) |
$ |
(438) |
Operating Activities
We used $1,329,000 in operating activities during the first nine months of 2011. Following are the major changes in working capital affected by cash used in operating activities for the nine month period ended September 30, 2011:
Investing Activities
We used cash of $2,733,000 in investing activities during the first nine months of 2011 primarily for the purchase of fixed assets as compared to $1,009,000 during the same period 2010. Net investments for each of our three locations are as follows:
25
TOR Minerals International, Inc. and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Financing Activities
Financing activities provided $3,808,000 during the nine month period ended September 30, 2011 as compared to cash used of $1,737,000 for the same period 2010. Significant factors relating to financing activities include the following:
Off-Balance Sheet Arrangements and Contractual Obligations
No material changes have been made to the “ Off-Balance Sheet Arrangements and Contractual Obligations” noted in the Company’s 2010 Annual Report on Form 10-K.
|
Item 4. |
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
During the last fiscal quarter, there were no changes in the Company's internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
26
Part II - Other Information
|
Item 6. |
Exhibits
|
|
|
|
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
|
|
TOR Minerals International, Inc. |
|
||
|
____________ |
||||
|
(Registrant) |
||||
|
Date: |
October 28, 2011 |
OLAF KARASCH
|
||
|
Date: |
October 28, 2011 |
BARBARA RUSSELL
|
||
27
EXHIBIT 10.1
PRIVATE AND CONFIDENTIAL
15 November 2010
TOR MINERALS (M) SDN BHD
4 ½, Miles Lahat Road,
30200 Ipoh, Perak
Dear Sirs,
Banking Facility(ies) ("Facilities")
Account No. 383-136280
We have reviewed your Facilities and agree to continue providing you the Facilities as revised below for a further period subject to the terms and conditions herein.
The Facilities are subject to review at any time, in any event by April 2011 .
The Facilities are subject always to the Bank's customary overriding right of suspension, withdrawal and repayment on demand. Other terms herein also apply which may allow the Bank to cease providing the Facilities to you.
Please send us two signed/certified copies of your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above.
|
Facilities |
Limit |
|
|
|
Previously |
Revised |
|
Overdraft Bank Guarantees Import/Export Line # consisting of:- • Documentary credits • Bankers Acceptance (90 days) • Export Credit Refinancing Scheme (Pre/Post Shipment) (120 days)
Total Gross Foreign Exchange Contract Limit
|
RM500,000.00 RM500,000.00 RM2,500,000.00 (RM2,500,000.00) (RM2,500,000.00)
(RM2,500,000.00)
RM5,000,000.00 |
RM500,000.00 RM500,000.00 RM2,500,000.00 (RM2,500,000.00) (RM2,500,000.00)
(RM2,500,000.00)
RM5,000,000.00 |
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Purpose :
Overdraft
Bank Guarantee
Import Line
Export Line
Export
Credit Refinancing Scheme (Pre/Post Shipment)
Bankers Acceptances
Total
Gross Foreign Exchange Contract Limit
Spot and forward foreign exchange contracts to hedge against fluctuations in foreign exchange rates for your trade-related and other permitted transactions as we may agree to. |
The Bank shall have no obligation to monitor or ensure the usage of the Facilities for their stated purpose(s). It shall have the right to recall the Facilities if not used for the purpose(s) stated.
The Facilities are also granted subject to satisfactory conduct of your current accounts in accordance with guidelines issued by Bank Negara Malaysia and/or policies of the Bank or other financial institutions you have current accounts with from time to time.
If there is any breach which may subject any of your current accounts (be it with the Bank or other financial institution) to closure, the Bank shall have the right to recall the Facilities. This is notwithstanding that your current account(s) with the Bank whether held solely or jointly with others are conducted satisfactorily.
The Bank may rely on information furnished by the Credit Bureau established by Bank Negara Malaysia for information whether any of your current accounts have become liable to closure.
Reliance by the Bank on such information shall not subject it to any liability to you or other parties should there be inaccuracy in such information unknown to the Bank.
Please arrange for your authorised signatories, in accordance with your company's Board Resolution (or similar corporate authorisation) given or to be given to the Bank, to sign this letter.
Please return it together with the required documents before 15 December 2010 after which this offer will lapse, unless the Bank in its discretion agrees to any extension thereof.
We are pleased to be of assistance to you and look forward to the development of a mutually beneficial and lasting banking relationship. Should you have any query, please do not hesitate to contact our Lim Jit Foo at telephone no. 05-522 6332 .
Yours faithfully,
for and on behalf of
HSBC Bank Malaysia Berhad
Relationship Manager Relationship Manager
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Terms and Conditions
(Annexure to Letter of Offer
- to be read as an integral part thereof)
General Terms
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Representations
and warranties:
You
and companies within your Group are in compliance with all applicable
environmental laws, regulations and guidelines ('environmental laws') in force
from time to time in the place(s) where the business of your company and
companies within your Group are conducted.
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Covenants : You shall during the tenor of the facility: 1. inform the Bank regarding any management structure change/change in the composition of the Board/major shareholders in your business. 2. submit audited accounts on your business whenever requested by the Bank to do so. To submit your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above. 3. inform the Bank of any significant internal or external business developments which may affect the financial position of your business. 4. ensure that audited financial statements submitted to the Bank shall be by External Audit Firms/Partners acceptable to the Bank. The Bank shall have the right to require engagement of alternative External Audit Firms/Partners if otherwise not acceptable, without assigning reason therefore. 5. ensure that trade debts due from the holding company/any related company must not exceed 25% of total annual turnover or RM10,000,000.00 whichever is lower at the close of every financial year.
6. ensure that not to declare or pay any dividend without the Bank's prior consent.
7. ensure that not to lend to related companies.
8. ensure facility utilization ratio to be at least 70%. 9. ensure that ratio of Total Bank Borrowings to Tangible Networth (hereinafter known as "Gearing Ratio") calculated annually in accordance with the formula below, not to exceed 150% at all times.
Formula: Gearing
Ratio =
Total Bank Borrowings
Tangible Networth is defined as aggregate of paid up share capital, profit and loss account and other reserves LESS Intangibles (such as goodwill). |
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Documents Required: 1) A suitable Board Resolution (or similar corporate authorisation) authorising:- a) the negotiation and acceptance of the Facilities; b) the provision of a cash cover/cash margin, on demand by the Bank, in respect of the Bank's contingent liabilities under the documentary credits/bank guarantees issued/to be issued by the Bank; c) the relevant named persons on your behalf to fix or extend foreign exchange transactions and as well as those confirming and/or authorising settlement thereof; -Foreign Exchange Contract Limit d) and the mode of execution on all relevant security documents in accordance with your Memorandum and Articles of Association. 2) To submit your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above. If at any time the Bank shall consider security for the Facilities to be insufficient or is required you shall within 14 days from the date of a notice from the Bank provide such security or further security as the Bank shall require, whether in cash or otherwise, of such value and for such tenure as the Bank shall specify. |
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Conditions precedent
The Facilities shall only be available for drawing or utilisation if:
• no misrepresentation or breach of warranty made to the Bank express or implied has occurred;
• all fees, costs and expenses due and payable under the Facilities or under any of the Security Documents shall have been fully paid and settled;
• no Event of Default and no event which with the giving of notice or lapse of time would constitute an Event of Default shall have occurred or is continuing;
the Bank shall have received all documents, opinions, certificates, or evidence of authorisations as it shall require;
The conditions precedent are for the sole benefit of the Bank, who may waive their compliance without prejudice to its rights herein or in any Security Document.
Waiver shall not preclude us from demanding that any waived provision be complied with or remedied subsequently. Waiver of a condition precedent shall not mean waiver of any other condition precedent or term.
SPECIFIC TERMS APPLICABLE TO A FACILITY
Overdraft
Interest
• Interest is charged at 1.25% per annum at daily rests above the Bank's Base Lending Rate (presently at 6.30% per annum). The effective rate is therefore presently 7.55% per annum subject to fluctuations at our absolute discretion.
• Interest will be payable monthly, to the debit of your current account on every 26th day of the month, or as otherwise stipulated by the Bank.
• In the event the approved limit is exceeded, or if the Bank has demanded repayment of the overdraft, additional interest will be charged at one percentum (1%) per annum, or such other higher rate determined by the Bank from time to time, above the applicable rate of interest of the overdraft on the excess amount, or the amount outstanding and unpaid after demand for repayment, as the case may be.
• The additional interest shall accrue from day to day and may be debited to your current account but this shall not oblige the Bank to allow or continue to allow any excesses on your overdraft or shall be without prejudice to any right or remedy of the Bank arising upon demand for repayment, as the case may be.
• Interest due shall be capitalised and added for all purposes to the principal sum, and bear interest at the relevant applicable rate, notwithstanding any demand by the Bank and/or cessation of the banker and customer relationship.
Commitment Fee
A commitment fee of 1.0% per annum will be charged on the unutilised portion of the overdraft facility as permitted under the Rules of the Association of Banks in Malaysia.
Repayment
The overdraft, in accordance with banking practice, is subject to the Bank's customary overriding right of repayment on demand. This shall be notwithstanding anything to the contrary herein contained and whether it is prior to the time for annual review.
Where the overdraft is recalled, it shall be your sole responsibility to immediately fund your account without any further notice to you from the Bank to meet any un-presented cheques in circulation to avoid such cheques being returned for lack or insufficiency of funds. In the event you fail to do so, the Bank shall be entitled to refuse to honour any such cheques still in circulation and shall not incur any liability to you whatsoever.
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Combined Import/Export Documentary Credit
DC Opening Charges
At the prevailing rates prescribed by the Association of Banks in Malaysia, currently at 0.10% for each month or part thereof (minimum RM200.00).
Where a bill under a Documentary Credit is drawn at usance, in addition to the above, an opening charge on usance period of 0.10% is levied on the amount of the Documentary Credit for each month or part thereof.
The facility is subject to our right to call for cash cover/cash margin on demand for prospective and contingent liabilities under the documentary credits issued/to be issued by us.
Bankers Acceptance
Availability
We may, at our sole and absolute discretion, refuse to allow drawings under this Bankers Acceptance facility if the drawee is considered by us to be unacceptable and/or if the transaction in question does not meet our operational requirements in respect of this Bankers Acceptance facility.
Commission
Bankers Acceptance ( BA ) commission is charged at 1.25% per annum subject to fluctuations at the Bank's discretion.
Interest
Interest will be charged at a rate quoted by the Bank for the respective tenor at the time of discounting. Quotations are obtainable on request.
Sales proceeds of all BAs financed must be credited to your current account to meet payments on maturing BAs. Notwithstanding this , all BAs drawn must be paid on their respective maturity dates and if there is default in such payment, the matured BAs will be charged at:-
i) the maximum interest margin plus penalty (if any) prescribed by Bank Negara Malaysia from time to time; or
ii) the original discount rate plus a late payment fee of 1.0%; or
iii) the prevailing BA discounting rate plus a late payment fee of 1.0% effective on the day the BA goes into past due; or
iv) 3.50% per annum over our then prevailing Base Lending Rate, plus a late payment fee of RM150.00;
whichever is the highest, for the period overdue.
Procedures for accepting or discounting BAs will be subject to the conditions and guidelines laid down from time to time by Bank Negara Malaysia or other statutory bodies.
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Export Credit Refinancing Scheme (Pre/Post Shipment)
Availability
We may, at our sole and absolute discretion, refuse to allow drawings under this Export Credit Refinancing Scheme (Pre/Post Shipment) facility if the drawee is considered by us to be unacceptable and/or if the transaction in question does not meet our operational requirements in respect of this Export Credit Refinancing Scheme (Pre/Post Shipment) facility.
Interest
Interest is charged at 1.00% above Export Import Bank of Malaysia Berhad's (Exim Bank) funding rate, currently at 2.80% per annum. The effective rate is therefore 3.80% per annum, subject to fluctuations at Exim Bank's discretion.
Procedures of the ECR Scheme are subject to conditions and guidelines laid down from time to time by Exim Bank.
Bank Guarantees
Commission
Commission of not less than 0.10% per month (or part thereof) subject to a minimum of RM200.00 shall be charged for the full liability period (inclusive of any claims period) of Guarantees issued.
Where a Guarantee does not have a claims period, additional commission of not less than 0.10% per month shall be charged from the date of expiry to the date of return of the Guarantee or on receipt of notification from the beneficiary that the Bank is no longer liable under the Guarantee.
Content of Guarantees
• All Guarantees issued by us must bear an expiry date.
• We are at liberty to refuse to issue any particular guarantee which wording and effect is not acceptable to us.
• Amendments made to any Guarantee are for the Bank's own requirements only. In no case shall the Bank be obliged to advise or assess if any provisions therein are appropriate for you for the underlying transaction guaranteed.
Other Conditions
• Guarantees issued to or on behalf of non-residents are subject to exchange control regulations prevailing from time to time; it shall be your responsibility to ensure that any notification/registration requirements are complied with, unless the Bank expressly agrees to notify/register the same on your behalf.
• Financial Guarantees to be issued favouring non-residents shall be subject to your confirmation (which you deemed to give when applying for such Guarantees) that the underlying facility secured is obtained in compliance with the prevailing foreign exchange administration rules.
• Where the Bank agrees to transmit any Guarantee to the beneficiary, it shall be at the applicant's cost and the Bank shall not be liable for any failure or delay or loss in transit.
• Should a Guarantee issued be demanded on or become payable, we may immediately debit your account with the amount payable. You shall arrange to have funds available therefor.
The facility remains subject to our immediate right to settlement/cash cover on demand, as stated in the terms of your Counter Indemnity in the event of any claims being made under any Guarantee issued.
Nothing herein shall require payment demanded on a Guarantee to have been made by the Bank from its own funds before it is entitled to rely on any of its rights.
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Total Gross Foreign Exchange Contract Limit
( inclusive of marked-to-market losses incurred from time to time )
Utilisation and determination of limit
The Bank reserves the right at its discretion to decide:
• whether or not any utilisation of the facility may be made; and
• to specify further conditions on which utilisation may be made.
The amount of any and each utilisation of the facility or the aggregate amount and value thereof for determining the available limit or if a call for cash cover is required shall be calculated by the Bank, whose calculation shall be conclusive.
Cash cover
• The Bank shall have an overriding right to call for cash cover on demand if in its view a negative foreign exchange position requires such cover, and/ or to close out any or all contracts outstanding at any time, without further reference to you and to demand settlement of the balance due.
• The right to call for cash cover is in addition to and without prejudice to any relevant rights contained in the English Law IFEMA / in any Master Agreement governing FX Transactions between you and the Bank.
Contract forms
FEX transactions are governed by the conditions appearing in and on the reverse of the standard contract form. You agree to check the same upon receipt, and sign the copy and return it to the Bank forthwith.
Exchange Control Regulations
FEX transactions are subject to applicable Exchange Control Regulations as amended from time to time.
The terms applicable include (not exhaustive):
• the maturity date of forward contracts for the sale of any export proceeds should not be later than the due date of payment of the underlying contract, but in any case must not be later than 6 months after the date of export;
• FEX transactions based on firm underlying commitments are to be for amounts and tenures corresponding with the committed payments or receipts, as the case may be;
• FEX transactions entered into on an anticipatory basis for imports/exports of goods and services shall be for up to such capped amounts based on the value of your payments and receipts in the preceding 12 months.
The determination whether the tenure or amount of any FEX transaction is permitted under the Exchange Control Regulations shall be made by the Bank in good faith, and shall be binding on you. The Bank shall have no liability to you as a result of any determination so made.
Where an FEX transaction is required to be registered with the Controller of Foreign Exchange, you shall be responsible to register the same (and provide evidence thereof as the Bank may require), unless the Bank had expressly agreed to submit the registration on your behalf.
If prior registration/permission is required before entering into a FEX transaction, the Bank may decline to enter into any such FEX transaction if you are unable to furnish such Controller registration/permission to the Bank.
All FEX transactions entered into between the parties shall be to hedge underlying trade transactions and other permitted purposes, and not for speculative purposes.
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Either party may electronically record all telephonic conversations and any such tape recordings may be submitted in evidence in any proceedings for any purpose relating to an FEX transaction. Neither party shall be obliged to maintain such recordings for the availability of the other.
Upon request, you shall provide the Bank with documentary evidence of underlying commitments to support the FEX transactions.
This may be required before transacting or at any time prior to the maturity of the FEX transaction, whether the FEX transaction is based on a firm commitment or on anticipatory basis. Satisfactory documentary evidence may also be required where you seek to cancel or extend any FEX transaction.
The Bank shall have the right to unwind or cancel any FEX transactions immediately if the underlying contract therefore does not materialise, or if satisfactory documentary evidence is not furnished when requested.
Without prejudice to anything herein contained, the Bank reserves the right (and without need for reference to you) to:
• reduce the amount of a FEX transaction where the amount of receipts/payments on the underlying transaction for firm hedges is reduced to less than the amount of the FEX transaction;
• adjust the maturity date of a FEX transaction where the Bank is satisfied that the due or expected date of payment/receipt of the underlying transaction for firm hedges has changed, provided always that the new maturity date does not exceed the period permitted under exchange control and other relevant rules/laws;
and any differences arising therefrom shall be payable by you and may be debited to your current or other accounts notwithstanding that the day originally stipulated for settlement may not have arrived.
The Bank is obliged to report any cancellation of FEX transactions or if it is of the view that the proceeds thereof are not used for the intended purpose or where otherwise required by the Controller under prevailing Exchange Control Regulations.
Master Agreement
In the absence of an executed agreement governing the FEX transactions, the latest published English Law IFEMA terms shall apply. Each utilisation of the Foreign Exchange Contract Limit (whether or not the relevant IFEMA Document has been signed) shall be deemed to be subject to and shall be subject to the English Law IFEMA terms unless the relevant Confirmation/contract specifies to the contrary.
In the event of any conflict between the terms of this facility letter, those of the English Law IFEMA and the standard contracts terms, the terms shall prevail in the following order:-
(a) the terms of the latest published English law IFEMA (a copy is available on request)
(b) the terms of this facility letter; and lastly
(c) the standard contract terms.
The Bank shall have the right to set-off from or debit any amount due from any of your accounts with the Bank and/or the HSBC Group.
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General Terms applicable to the Facilities
Review of Facilities
The Bank may charge a facilities management fee annually or upon amendment of existing facilities, which charges shall be paid before any of the facilities are utilised and if remaining unpaid shall be debited without further notice to your current/disbursement/other account opened by the Bank for the purpose. Notwithstanding these charges, the Bank reserves the absolute discretion to exercise its remedies provided hereunder and/or whether to grant, vary, restructure, adjust or otherwise modify any facility or its terms, and/or temporary excess or temporary drawing against uncleared effects.
Variation of Terms
Notwithstanding anything to the contrary, the Bank may in its absolute discretion without discharging any of your liabilities herein and/or under the security documents vary or add to the terms herein.
Variations include, but are not limited to
Except for fluctuations to the Base Lending Rate or otherwise expressly provided, variations or additions shall take effect upon notice to you.
Events Of Default
Without prejudice to our customary overriding right of repayment on demand, the Facilities may be immediately suspended or terminated and all sums (including contingent sums) payable on demand in the event:‑
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a) you default in the payment of any sum due under the Facilities (whether instalments, interest or otherwise); or b) you have given incomplete, misleading or incorrect material information to the Bank in relation to procuring the provision or continued provision of the Facilities, or your account is conducted in an unsatisfactory manner; or c) you fail to observe or perform any of your covenants or obligations to the Bank; or d) a petition is presented and not withdrawn or stayed by an order of Court within a period of thirty (30) days of its presentment or an order is made or resolution passed for your winding-up, dissolution or liquidation; or e) you commence a meeting for the purpose of making or proposing and/or entering into any arrangement with or for the benefit of your creditors; or f) a receiver or other similar officer is appointed over the whole or any part of your assets or undertaking; or g) you cease or threaten to cease to carry on business or are unable to pay your debts, or dispose or threaten to dispose of the whole or a substantial part of your undertaking or assets; or h) for any reason any guarantee or security given for the repayment of the Facilities shall be challenged, terminated or lapse for any reason whatsoever or if the guarantor or security provider shall be in default under the terms of such guarantee or security or dies or becomes of unsound mind or is wound up or commits any act of bankruptcy or similar; or i) you allege that all or a material part of these terms or any security document have ceased to be of full force or effect; or j) any of your other indebtedness to us or any third party or parties becomes capable in accordance with the relevant terms thereof of being accelerated in repayment or declared due prematurely by reason of your default or your failure to make any payment in respect thereof on the due date for each payment or if due on demand when demanded or any security for such indebtedness becomes enforceable; or k) where the purpose of the facility is to finance acquisition of property, you or any other party to the sale and purchase agreement commits or threatens to commit a breach of any term, stipulation, covenant or undertaking contained in such agreement, or if a petition is presented for the winding-up of the developer of the property (where applicable) being financed; or l) if your company, any security provider or a Related Corporation (as defined in the Companies Acts 1965) is under investigation under the provisions of Part IX of the Companies Act 1965 or any securities legislation and regulations in force from time to time; or m) in the Bank's opinion, there is any change or threatened change in circumstances which would materially and adversely affect your business or financial condition or the ability to perform your obligations under this letter or any other agreement with the Bank, including any change or threatened change in your shareholders or directors; or n) in the Bank's opinion, there is any change or threatened change in circumstances which materially and adversely affect the ability of any guarantor or security provider to perform its obligations under any security given to the Bank; or o) any applicable law or regulations or their interpretation or application is amended or changes, making it unlawful for the Bank to comply with its obligations herein or to allow the Facilities to continue to be outstanding. |
The events of default are more comprehensively dealt within the security documentation.
If there are circumstances likely to lead to events of default among other things due to irregularities in your financial affairs or your inability to meet your indebtedness to us it is proposed that you contact us for an early appraisal of your commitment.
Other Terms and Conditions
a) Payment of outgoings for property charged as security (where applicable)
You undertake to forward us on a regular basis for our records, the receipts you receive for payments of quarterly Municipal Assessment and Annual Quit Rent in respect of the property charged.
b) Availability
Availability of the Facilities is subject to legal documentation having been completed to the satisfaction of the Bank. If security documentation cannot be perfected for any reason within 3 months of the acceptance date of this Letter, the Bank reserves the right to withdraw the Facilities offered without further reference to you. In any event, any part of the Facilities not drawn down within 12 months from the date hereof shall be automatically cancelled.
c) Fees and charges
The Bank shall charge at its absolute discretion, where applicable, fees as follows:
i) Facility Arrangement Fee; and/or
ii) Facility Management Fee;
which charges shall be paid before any Facilities is utilised and if remaining unpaid shall be debited without further notice to your current/disbursement/other account whether or not opened by the Bank for the purpose. Please refer to the Bank's standard Tariff and Charges (available for download at www.hsbc.com.my) subject to variation from time to time. If there is any conflict between the said Tariff and Charges and any fees and charges specifically stated herein, the fees and charges specifically stated herein shall prevail. (If you are a "small and medium enterprise" within the National SME Development Council's definition, such fees and charges shall not apply to you.)
Notwithstanding these charges, the Bank reserves the absolute discretion whether to grant or otherwise any facility, restructuring / adjustment of facility and/or temporary excess or temporary drawing against uncleared effects.
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d) Legal expenses and other charges
All stamp duty and solicitors' fees that is payable (assessed on a 'solicitor and client' basis) incurred by the Bank:
i) in connection with or incidental to the provision of the Facilities; and/or
ii) in its enforcement of its rights under any of the Facilities or any security provided;
shall be payable by you.
Such amounts may be debited without prior notice to your current or other account(s) or a disbursement/suspense account opened by the Bank for the purpose.
e) Cross Default on facilities from HSBC Amanah Malaysia Berhad (where applicable)
Notwithstanding any other provision herein:
i) if there shall be a default of any sums payable by you and/or by a security provider for any other facilities granted to either of you by the Bank or by HSBC Amanah Malaysia Berhad; or
ii) if there shall be a default by you and/or such security provider for any banking or financing facilities granted to either of you by any other financial institution or other party;
whether such sums are due jointly or individually by you or such security provider, then in such event, all amounts owed (including contingent sums) under the Facilities shall immediately become due and payable on demand and any security therefor may be enforceable according to its terms.
f) Insurance of property charged as security (where applicable)
The insurable risks of your business and the properties charged or secured to the Bank are to be arranged by the Bank and insured with HSBC Amanah Takaful (Malaysia) Sdn Bhd or the Bank's other panel insurers. If you and/or the chargor are not agreeable to such insurance with HSBC Amanah Takaful (Malaysia) Sdn Bhd, kindly advise your Relationship Manager or the Bank's Corporate Credit Administration Department.
If you, or the proprietor, as the case may be, fails to insure or fails to continue to insure the properties, the Bank may but shall not be under any duty to, take up or pay the premium for such insurance and any moneys expended thereto may be debited to any of your accounts with the Bank.
g) Inspection and valuation of property charged as security (where applicable)
Inspection and valuation of any property charged or forming security shall be at least once in every two years by us or by a firm on the Bank's panel of valuers, the cost in connection therewith being for your account.
h) Security denominated in foreign currency (where applicable)
In the case of foreign currency denominated security, the rate of exchange to be applied for the conversion of such currency shall be our spot rate of exchange (as conclusively determined by us) for purchasing such currency on the date of settlement and in the event of a shortfall you will promptly pay to us such additional amount as makes the net amount received by us equal to the full amount payable by you or the security provider, as the case may be.
i) Withholding or deduction
All payments by you under the Facilities are to be made in immediately available funds free and clear of and without any withholding or deduction for any and all present or future taxes, duties or other such levies.
If you are compelled by law to make any such withholding or deductions you will pay to us such additional amounts required to enable us to receive the amount which would be payable if no such withholding or deduction had been required.
You shall provide us with evidence that such taxes, duties or other such levies have been paid by forwarding us official receipts within 30 days of payment.
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j) Maintenance of shareholding (applicable if third party security, guarantee and/or letter of awareness is provided by the borrower's related company)
The relevant related company of the Borrower within the same group of companies shall undertake not to divest its shareholding or any part thereof in the Borrower or the security provider or guarantor (as applicable) without first obtaining the Bank's consent.
k) Increased costs
If the effect of any, or a change in any, law or regulation is to increase the cost to us of advancing, maintaining or funding the Facilities or to reduce effective return to us, we reserve the right to require payment on demand of such amounts as we consider necessary to compensate us therefore.
l) Non- contravention of legislation prohibiting connected party lending
Please note that applicable banking legislation has imposed certain prohibitions on our providing banking facilities to persons related to our officers, directors or employees, and that of our holding company, The Hong Kong and Shanghai Banking Corporation Limited (incorporated in Hong Kong SAR). These are section 62 of the Banking and Financial Institutions Act 1989 ("BAFIA") read with the Guidelines on Credit Transactions and Exposures with Connected Parties issued by Bank Negara Malaysia, and also Section 83 of the Banking Ordinance of Hong Kong SAR (collectively, the "Prohibitions").
In acknowledging/accepting this Letter you are to advise us whether you are in any way connected to any of our officers, directors or employees, and/or the directors or employees of The Hong Kong and Shanghai Banking Corporation Limited within the meaning of the Prohibitions, and in the absence thereof, you represent you are not so connected.
You are required to immediately advise the Bank in writing should such relationships creating a prohibited lending under the aforesaid Prohibitions be established subsequent to the acceptance of the Facilities.
(Please note that for the purposes of the BAFIA, "officer" encompasses "any employee of the financial institution" and that "director" and "officer" also includes a spouse, child or parent of a director or officer. The texts and summary clarifications of these Prohibitions will be made available upon request.)
m) Terms and conditions in other documentation
i) Other terms and conditions as contained in the Bank's legal or security documentation executed or to be executed by you shall apply.
ii) For avoidance of doubt, additional, modified, or other terms and conditions to those stated herein may be advised by our solicitors and may be contained in those other documents when formalising such documentation on our behalf.
iii) You are to carefully read and understand all terms and should obtain independent legal advice thereto before signing.
n) Default/Late Payment Interest not otherwise provided for
Where a specific default, excess or late payment interest rate is not otherwise provided for under the terms of any specific facility, the Bank may charge the following for any payments that are overdue, or if payable on demand, from the date the amount is stated to be due pursuant to such demand:
i) For Ringgit-denominated facilities or amounts, or after any amounts due in other currencies are converted to Ringgit
1% per annum above the interest rate applicable for the particular facility, or if none, 3.5% above the Bank's prevailing Base Lending Rate or such other rate as may be determined by the Bank from time to time.
ii) For non-Ringgit-denominated facilities or amounts, before the amounts due are converted to Ringgit
1% per annum above the interest rate applicable for the particular facility, or if none, 3.5% above the Bank's prevailing Cost of Funds (for such tenor as selected by the Bank) or such other rate as may be determined by the Bank from time to time.
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Such interest shall be capitalised and added for all purposes to the principal or overdue sum, as the case may be for that facility, and shall bear interest at the relevant applicable rate notwithstanding any demand by the Bank and/or cessation of the banker and customer relationship for whatever reason and before as well as after judgment.
o) Priorities
Subject to the provision of the security documents (where applicable), if any amount received or recovered in respect of your liabilities hereunder or any part thereof is less than the amount then due, the Bank shall apply that amount to interest, profit, principal or any other amount then due and payable in such proportions and order of priority and generally in such manner as the Bank may determine.
p) Repayments generally and ascertaining of limits
Unless otherwise provided, interest due shall be capitalised and added for all purposes to the principal sum and shall bear interest at the relevant applicable rate notwithstanding any demand by the Bank and/or cessation of the banker and customer relationship for whatever reason and before as well as after judgment.
Any amounts of interest or other non-principal sums debited to your accounts which is capitalised shall be not affect the determining whether the principal limit under any security given for the Facilities has been exceeded or not.
q) Bankers common law rights applicable
We may combine, consolidate or merge all or any of your accounts and may set off or transfer any sum outstanding to the credit of any such accounts with our Bank in or towards the satisfaction of any of your liabilities under the Facilities.
The Bank may also debit any of your accounts in respect of amounts payable under any security documents or security for the Facilities if the security party fails to make any required payments thereunder.
r) Conclusive evidence
A certificate signed by an officer of the Bank as to any amount(s) payable hereunder shall be conclusive evidence save for manifest error.
s) Disclosure and use of information
You consent to the Bank disclosing information relating to you, the Facilities, your accounts and other facilities presently held, or which may subsequently be opened or obtained ("Information") to:
i) any person it considers necessary:
A) in providing the Facilities or other services;
B) as part of its operating procedures (including its accounting, client relationship and risk management functions),
including to members of the HSBC Group (in or outside Malaysia), any service provider (including debt collection agencies) or other third party;
ii) any bureaus or agencies established by Bank Negara Malaysia or by other regulatory authorities, including SME Credit Bureau (M) Sdn Bhd, the Central Credit Reference Information System - "CCRIS" and the Controller of Foreign Exchange;
iii) any authority, central depository or depository agent in relation to the securities industry, where relevant
iv) the Association of Banks in Malaysia;
v) the Bank's potential assignees;
vi) any of your present or prospective guarantors or security providers;
vii) any person the Bank believes in good faith to be tendering payment of monies on your behalf.
Information may be used, stored, transferred, compiled, matched or exchanged by or with any of the parties mentioned above ('Users').
Information shall be kept confidential by the Users, unless disclosure is required under any laws or regulations which apply to a User.
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When the Bank provides or obtains any Information, it takes utmost care in compiling, collating or processing the Information. The Customer agrees that as long as the Bank acts in good faith, it and its officers shall not be liable for any loss or damage (whether indirect, consequential or punitive) or any monetary loss to you or any other person for any inaccuracy, incompleteness or authenticity of the Information the Bank provides or relies on and whether caused by any technical, hardware or software failure of any kind, interruption, error, omission, delay, viruses, act of God, act of war or terrorism, strikes, industrial action or otherwise.
The Bank, as part of its procedures in granting or continuing to grant banking and/or credit facilities and services to its customers may conduct credit and other financial checks and verify customer and/or security party information from time to time from various selected sources. You consent to such checks being conducted.
The consents given shall be irrevocable.
t) Notices
i) Any notice demand or request may be given by ordinary or registered post (not being AR registered post) sent to you at its address herein stated or to your last known address and such notice shall be deemed to have been duly served three (3) days after it is posted notwithstanding that it is returned by the postal authorities undelivered.
ii) Notice as to fluctuation of the Base Lending Rate, variation of interest, commission, fees and all other bank charges may also be effected by a notification of the variation in the periodic statements furnished to you from time to time or by way of an unsigned notice or letter produced by the Bank's computer or by way of advertisement in any newspaper or by notification at any of the Bank's premises or in such manner we deem fit and such variation shall take effect from the date stipulated therein.
u) Payments received to be in gross
All monies received for the purpose of being applied in reduction of any monies owing to the Bank (whether from payments received or from the realisation of any security or otherwise) shall be treated as payments in gross and not as appropriated or attributed to any specific part or item of the monies owing to the Bank, even if appropriated thereto by any person otherwise purportedly entitled to so appropriate.
v) Suspense account
In the advent of any liquidation or analogous thereto, any monies received by the Bank in respect of the Facilities or any security granted may be kept to the credit of a non-interest bearing suspense account for such terms as the Bank deems fit without any obligation in the meantime to apply the same or any part thereof towards settlement of any liabilities due, and the Bank may prove for and agree to accept any distributions in respect of the whole or any part of such money and liabilities in the same manner as if no security had been created.
w) Remedies concurrent
The Bank shall have the right to exercise any rights or remedies available to it under this letter, any security or otherwise (including pursuing any right of sale or possession) against you or any party providing security for the Facilities concurrently or successively as it may consider appropriate.
x) Severability
If any provision herein is or becomes prohibited or unenforceable by law or any applicable regulations, the remaining Terms shall remain valid and enforceable and/or continue to be valid and enforceable in any other jurisdiction where the law provides that it is valid.
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y) Exercise of remedies
The Bank may exercise any right, power or remedy it may have, whether it is stated here or conferred upon it by law even after a delay.
All rights and powers of the Bank in law or equity are exercisable even if they overlap with any rights and powers in these Terms.
If the Bank does not act when it is entitled to, that does not mean it:
i) has agreed to your breach; or
ii) has given up its right; or
iii) is prevented from acting later.
Where the Bank has expressly waived a default by you, this shall not impair any right, power or remedy of the Bank for any of your other defaults, whether occurring prior or subsequent to the waiver.
z) Interpretation
Unless the context otherwise requires:
i) words importing the singular number include the plural and vice versa and reference to any gender includes all genders;
ii) reference to 'facility' shall mean a facility comprised within the Facilities
iii) references to "the Bank", "we", or "our" in this letter shall be understood to refer to HSBC Bank Malaysia Berhad.
The headings herein are for convenience and shall not affect construction of the terms of this letter. Where there are two (2) or more persons comprising the borrower, whether in partnership or otherwise, all covenants and terms shall be made by and be binding upon them jointly and severally.
aa) Governing law
Except where expressly provided otherwise for any facility, the terms herein shall be governed by and interpreted in accordance with the laws of Malaysia and the parties agree that the Malaysian courts shall have non-exclusive jurisdiction. The parties irrevocably waive any assertion of forum non conveniens to resolution of dispute in the Malaysian courts.
bb) Successors and assigns
This letter shall be binding upon your heirs estate personal representatives and successors in title and on the successors in title and assigns of the Bank. You shall not assign any of your rights or obligations hereunder. Unless expressly agreed otherwise by us, we may assign or transfer all or any part of our rights, benefits and/or obligations under this facility letter or in respect of any of the Facilities, and any security provided thereto, to any person by delivering to you a notice in writing, or where required, by entry into more formal agreements (which you hereby agree to execute if so requested by the Bank). Such transfer shall take effect as from the effective date specified in the notice or agreement and we shall thereafter be released from such rights, benefits and/or obligations.
*** END OF ANNEXURE ***
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Customer's acknowledgment/acceptance
We have viewed the foregoing terms of this Letter including the Annexure(s) and agree to the terms thereto.
We acknowledge that notwithstanding anything to the contrary herein contained and whether it is prior to the time for annual review the Facilities may be reviewed at any time and are subject to the Bank's overriding right of suspension, withdrawal and repayment on demand, as well as the right to call for cash cover or other acceptable security on demand (which shall be in addition, and not subject to, any similar right stipulated for any of the Facilities). Nothing contained in this Letter shall be deemed to impose on the Bank any obligation to make or to continue to make available the Facilities or any advances thereunder to us. We also acknowledge that in the event of a recall of an overdraft facility, we shall be obliged to immediately fund our overdraft account with sufficient funds to meet any un-presented cheques still in circulation and that the Bank is under no obligation whatsoever to issue any notices or requests to us to do so. Any failure on our part to do so will entitle the Bank to refuse payment on such cheques, for which the Bank shall not be liable to us in any way whatsoever.
We confirm our acceptance of the Facilities and that the Bank's agreement to provide us with the Facilities will not contravene a) the provisions of Section 62 of the Banking and Financial Institutions Act 1989 read with BNM's Guidelines on Credit Transactions and Exposures with Connected Parties, and b) Section 83 of the Banking Ordinance of the Hong Kong Special Administrative Region ('Prohibitions').
We acknowledge the Bank's right to recall the Facilities in the event of any contravention of the said Prohibitions.
We further agree that your Letter embodies in writing all the terms for the Facilities to be granted to us and hereby confirm that any warranties, promises, representations or collateral agreements that may have been made to us, orally or otherwise by you in the course of the pre-contractual negotiations which have not now been included in this Letter shall hereafter be deemed to have lapsed and not legally binding upon you nor shall it be raised as a defence or to support any claim by us in any legal proceedings.
We are responsible for assessing the terms in this Letter and the Facilities and shall seek our own independent legal advice on them.
We undertake that all our FEX transactions shall be to hedge underlying trade transactions and other permitted purposes, and not for speculative purposes.
Our FEX transactions shall be in compliance with Malaysian Exchange Control Regulations and supported by appropriate documentation which may be required by the Bank.
We acknowledge that where we enter into any FEX transaction, we shall do so in reliance only upon our own judgment and assessment and obtain our own independent advice and not in reliance on any advice of the Bank or its personnel in accordance with Section 7 of IFEMA terms.
............................................................
Authorised signatories and Company's Chop
Date.............................................
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EXHIBIT 10.2
PRIVATE AND CONFIDENTIAL
Our Ref: CDA/MME/IPH/GWISCOP11147-151417094C/ady
CARM:
110520
27 June 2011
TOR MINERALS (M) SDN BHD
4 ½, Miles Lahat Road,
30200 Ipoh,
Perak
Attention: Loke Cheong Ching
Dear Sir/Madam,
Banking Facility(ies) ("Facilities")
Account No. 383-136280
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We have reviewed your Facilities and agree to continue providing you the Facilities as revised below for a further period subject to the terms and conditions herein. |
The Facilities are subject to review at any time, in any event by April 2012 .
The Facilities are subject always to the Bank's customary overriding right of suspension, withdrawal and repayment on demand. Other terms herein also apply which may allow the Bank to cease providing the Facilities to you.
Please send us two signed/certified copies of your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above.
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Purpose : Overdraft Working capital requirements.
Bank Guarantee For issuance of security deposit-/tender-/performance- bonds and other guarantee requirements related to your business. Import Line To finance your imports and domestic purchases. Export Line To finance your exports and domestic sales.
Export Credit Refinancing Scheme (Pre/Post Shipment) Pre-shipment ECR - as working capital for production of eligible goods for export. Post-shipment ECR - to finance export sales of eligible goods on credit terms upon shipment. Total Gross Foreign Exchange Contract Limit ( inclusive of marked-to-market losses incurred from time to time ) Spot and forward foreign exchange contracts to hedge against fluctuations in foreign exchange rates for your trade-related and other permitted transactions as we may agree to. |
The Bank shall have no obligation to monitor or ensure the usage of the Facilities for their stated purpose(s). It shall have the right to recall the Facilities if not used for the purpose(s) stated.
The Facilities are also granted subject to satisfactory conduct of your current accounts in accordance with guidelines issued by Bank Negara Malaysia and/or policies of the Bank or other financial institutions you have current accounts with from time to time.
If there is any breach which may subject any of your current accounts (be it with the Bank or other financial institution) to closure, the Bank shall have the right to recall the Facilities. This is notwithstanding that your current account(s) with the Bank whether held solely or jointly with others are conducted satisfactorily.
The Bank may rely on information furnished by the Credit Bureau established by Bank Negara Malaysia for information whether any of your current accounts have become liable to closure.
Reliance by the Bank on such information shall not subject it to any liability to you or other parties should there be inaccuracy in such information unknown to the Bank.
Please arrange for your authorised signatories, in accordance with your company's Board Resolution (or similar corporate authorisation) given or to be given to the Bank, to sign this letter.
Please return it together with the required documents before 27 July 2011 after which this offer will lapse, unless the Bank in its discretion agrees to any extension thereof.
We are pleased to be of assistance to you and look forward to the development of a mutually beneficial and lasting banking relationship. Should you have any query, please do not hesitate to contact our Lim Jit Foo at telephone no. 05-522 6332 .
Yours faithfully,
for and on behalf of
HSBC Bank Malaysia Berhad
Relationship Manager Relationship Manager
Terms and Conditions
(Annexure to Letter of Offer
- to be read as an integral part thereof)
Representations
and warranties: You and companies within your Group are in compliance with all applicable environmental laws, regulations and guidelines ('environmental laws') in force from time to time in the place(s) where the business of your company and companies within your Group are conducted.
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Covenants : You shall during the tenor of the facility: 1. inform the Bank regarding any management structure change/change in the composition of the Board/major shareholders in your business. 2. submit audited accounts on your business whenever requested by the Bank to do so. To submit your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above. 3. inform the Bank of any significant internal or external business developments which may affect the financial position of your business. 4. ensure that audited financial statements submitted to the Bank shall be by External Audit Firms/Partners acceptable to the Bank. The Bank shall have the right to require engagement of alternative External Audit Firms/Partners if otherwise not acceptable, without assigning reason therefore. 5. ensure that trade debts due from the holding company/any related company must not exceed 25% of total annual turnover or RM10,000,000.00 whichever is lower at the close of every financial year. 6. ensure that not to declare or pay any dividend without the Bank's prior consent. 7. ensure that not to lend to related companies. 8. ensure facility utilization ratio to be at least 70%. 9. ensure that ratio of Total Bank Borrowings to Tangible Networth (hereinafter known as "Gearing Ratio") calculated annually in accordance with the formula below, not to exceed 150% at all times. Formula: Gearing Ratio = Total Bank Borrowings Tangible Net Worth Tangible Networth is defined as aggregate of paid up share capital, profit and loss account and other reserves LESS Intangibles (such as goodwill). |
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Documents Required: 1) A suitable Board Resolution (or similar corporate authorisation) authorising:- a) the negotiation and acceptance of the Facilities; b) the provision of a cash cover/cash margin, on demand by the Bank, in respect of the Bank's contingent liabilities under the documentary credits/bank guarantees issued/to be issued by the Bank; c) the relevant named persons on your behalf to fix or extend foreign exchange transactions and as well as those confirming and/or authorising settlement thereof; -Foreign Exchange Contract Limit d) and the mode of execution on all relevant security documents in accordance with your Memorandum and Articles of Association. 2) To submit your next set of audited account or where they are out of date (more than 6 months), updated management accounts are to be submitted before the review date mentioned above. If at any time the Bank shall consider security for the Facilities to be insufficient or is required you shall within 14 days from the date of a notice from the Bank provide such security or further security as the Bank shall require, whether in cash or otherwise, of such value and for such tenure as the Bank shall specify. |
Conditions precedent
The Facilities shall only be available for drawing or utilisation if:
• no misrepresentation or breach of warranty made to the Bank express or implied has occurred;
• all fees, costs and expenses due and payable under the Facilities or under any of the Security Documents shall have been fully paid and settled;
• no Event of Default and no event which with the giving of notice or lapse of time would constitute an Event of Default shall have occurred or is continuing;
• the Bank shall have received all documents, opinions, certificates, or evidence of authorisations as it shall require;
The conditions precedent are for the sole benefit of the Bank, who may waive their compliance without prejudice to its rights herein or in any Security Document.
Waiver shall not preclude us from demanding that any waived provision be complied with or remedied subsequently. Waiver of a condition precedent shall not mean waiver of any other condition precedent or term.
Overdraft
Interest
• Interest is charged at 1.25% per annum at daily rests above the Bank's Base Lending Rate (presently at 6.60% per annum). The effective rate is therefore presently 7.85% per annum subject to fluctuations at our absolute discretion.
• Interest will be payable monthly, to the debit of your current account on every 26th day of the month, or as otherwise stipulated by the Bank.
• In the event the approved limit is exceeded, or if the Bank has demanded repayment of the overdraft, additional interest will be charged at one percentum (1%) per annum, or such other higher rate determined by the Bank from time to time, above the applicable rate of interest of the overdraft on the excess amount, or the amount outstanding and unpaid after demand for repayment, as the case may be.
• The additional interest shall accrue from day to day and may be debited to your current account but this shall not oblige the Bank to allow or continue to allow any excesses on your overdraft or shall be without prejudice to any right or remedy of the Bank arising upon demand for repayment, as the case may be.
• Interest due shall be capitalised and added for all purposes to the principal sum, and bear interest at the relevant applicable rate, notwithstanding any demand by the Bank and/or cessation of the banker and customer relationship.
Commitment Fee
A commitment fee of 1.0% per annum will be charged on the unutilised portion of the overdraft facility as permitted under the Rules of the Association of Banks in Malaysia.
Repayment
The overdraft, in accordance with banking practice, is subject to the Bank's customary overriding right of repayment on demand. This shall be notwithstanding anything to the contrary herein contained and whether it is prior to the time for annual review.
Where the overdraft is recalled, it shall be your sole responsibility to immediately fund your account without any further notice to you from the Bank to meet any un-presented cheques in circulation to avoid such cheques being returned for lack or insufficiency of funds. In the event you fail to do so, the Bank shall be entitled to refuse to honour any such cheques still in circulation and shall not incur any liability to you whatsoever.
Combined Import/Export Documentary Credit
DC Opening Charges
At the prevailing rates prescribed by the Association of Banks in Malaysia, currently at 0.10% for each month or part thereof (minimum RM200.00).
Where a bill under a Documentary Credit is drawn at usance, in addition to the above, an opening charge on usance period of 0.10% is levied on the amount of the Documentary Credit for each month or part thereof.
The facility is subject to our right to call for cash cover/cash margin on demand for prospective and contingent liabilities under the documentary credits issued/to be issued by us.
Bankers Acceptance
Availability
We may, at our sole and absolute discretion, refuse to allow drawings under this Bankers Acceptance facility if the drawee is considered by us to be unacceptable and/or if the transaction in question does not meet our operational requirements in respect of this Bankers Acceptance facility.
Commission
Bankers Acceptance ( BA ) commission is charged at 1.25% per annum subject to fluctuations at the Bank's discretion.
Interest
Interest will be charged at a rate quoted by the Bank for the respective tenor at the time of discounting. Quotations are obtainable on request.
Sales proceeds of all BAs financed must be credited to your current account to meet payments on maturing BAs. Notwithstanding this , all BAs drawn must be paid on their respective maturity dates and if there is default in such payment, the matured BAs will be charged at:-
i) the maximum interest margin plus penalty (if any) prescribed by Bank Negara Malaysia from time to time; or
ii) the original discount rate plus a late payment fee of 1.0%; or
iii) the prevailing BA discounting rate plus a late payment fee of 1.0% effective on the day the BA goes into past due; or
iv) 3.50% per annum over our then prevailing Base Lending Rate, plus a late payment fee of RM150.00;
whichever is the highest, for the period overdue.
Procedures for accepting or discounting BAs will be subject to the conditions and guidelines laid down from time to time by Bank Negara Malaysia or other statutory bodies.
Export Credit Refinancing Scheme (Pre/Post Shipment)
Availability
We may, at our sole and absolute discretion, refuse to allow drawings under this Export Credit Refinancing Scheme (Pre/Post Shipment) facility if the drawee is considered by us to be unacceptable and/or if the transaction in question does not meet our operational requirements in respect of this Export Credit Refinancing Scheme (Pre/Post Shipment) facility.
Interest
Interest is charged at 1.00% above Export Import Bank of Malaysia Berhad's (Exim Bank) funding rate, currently at 3.00% per annum. The effective rate is therefore 4.00% per annum, subject to fluctuations at Exim Bank's discretion.
Procedures of the ECR Scheme are subject to conditions and guidelines laid down from time to time by Exim Bank.
Commission
Commission of not less than 0.10% per month (or part thereof) subject to a minimum of RM200.00 shall be charged for the full liability period (inclusive of any claims period) of Guarantees issued.
Where a Guarantee does not have a claims period, additional commission of not less than 0.10% per month shall be charged from the date of expiry to the date of return of the Guarantee or on receipt of notification from the beneficiary that the Bank is no longer liable under the Guarantee.
Content of Guarantees
• All Guarantees issued by us must bear an expiry date.
• We are at liberty to refuse to issue any particular guarantee which wording and effect is not
acceptable to us.
• Amendments made to any Guarantee are for the Bank's own requirements only. In no case shall the Bank be obliged to advise or assess if any provisions therein are appropriate for you for the underlying transaction guaranteed.
Other Conditions
• Guarantees issued to or on behalf of non-residents are subject to exchange control regulations prevailing from time to time; it shall be your responsibility to ensure that any notification/registration requirements are complied with, unless the Bank expressly agrees to notify/register the same on your behalf.
• Financial Guarantees to be issued favouring non-residents shall be subject to your confirmation (which you deemed to give when applying for such Guarantees) that the underlying facility secured is obtained in compliance with the prevailing foreign exchange administration rules.
• Where the Bank agrees to transmit any Guarantee to the beneficiary, it shall be at the applicant's cost and the Bank shall not be liable for any failure or delay or loss in transit.
• Should a Guarantee issued be demanded on or become payable, we may immediately debit your account with the amount payable. You shall arrange to have funds available therefor.
The facility remains subject to our immediate right to settlement/cash cover on demand, as stated in the terms of your Counter Indemnity in the event of any claims being made under any Guarantee issued.
Nothing herein shall require payment demanded on a Guarantee to have been made by the Bank from its own funds before it is entitled to rely on any of its rights.
( inclusive of marked-to-market losses incurred from time to time )
Utilisation and determination of limit
The Bank reserves the right at its discretion to decide:
• whether or not any utilisation of the facility may be made; and
• to specify further conditions on which utilisation may be made.
The amount of any and each utilisation of the facility or the aggregate amount and value thereof for determining the available limit or if a call for cash cover is required shall be calculated by the Bank, whose calculation shall be conclusive.
Cash cover
• The Bank shall have an overriding right to call for cash cover on demand if in its view a negative foreign exchange position requires such cover, and/ or to close out any or all contracts outstanding at any time, without further reference to you and to demand settlement of the balance due.
• The right to call for cash cover is in addition to and without prejudice to any relevant rights contained in the English Law IFEMA / in any Master Agreement governing FX Transactions between you and the Bank.
Contract forms
FEX transactions are governed by the conditions appearing in and on the reverse of the standard contract form. You agree to check the same upon receipt, and sign the copy and return it to the Bank forthwith.
FEX transactions are subject to applicable Exchange Control Regulations as amended from time to time.
The terms applicable include (not exhaustive):
• the maturity date of forward contracts for the sale of any export proceeds should not be later than the due date of payment of the underlying contract, but in any case must not be later than 6 months after the date of export;
• FEX transactions based on firm underlying commitments are to be for amounts and tenures corresponding with the committed payments or receipts, as the case may be;
• FEX transactions entered into on an anticipatory basis for imports/exports of goods and services shall be for up to such capped amounts based on the value of your payments and receipts in the preceding 12 months.
The determination whether the tenure or amount of any FEX transaction is permitted under the Exchange Control Regulations shall be made by the Bank in good faith, and shall be binding on you. The Bank shall have no liability to you as a result of any determination so made.
Where an FEX transaction is required to be registered with the Controller of Foreign Exchange, you shall be responsible to register the same (and provide evidence thereof as the Bank may require), unless the Bank had expressly agreed to submit the registration on your behalf.
If prior registration/permission is required before entering into a FEX transaction, the Bank may decline to enter into any such FEX transaction if you are unable to furnish such Controller registration/permission to the Bank.
All FEX transactions entered into between the parties shall be to hedge underlying trade transactions and other permitted purposes, and not for speculative purposes.
Either party may electronically record all telephonic conversations and any such tape recordings may be submitted in evidence in any proceedings for any purpose relating to an FEX transaction. Neither party shall be obliged to maintain such recordings for the availability of the other.
Upon request, you shall provide the Bank with documentary evidence of underlying commitments to support the FEX transactions.
This may be required before transacting or at any time prior to the maturity of the FEX transaction, whether the FEX transaction is based on a firm commitment or on anticipatory basis. Satisfactory documentary evidence may also be required where you seek to cancel or extend any FEX transaction.
The Bank shall have the right to unwind or cancel any FEX transactions immediately if the underlying contract therefore does not materialise, or if satisfactory documentary evidence is not furnished when requested.
Without prejudice to anything herein contained, the Bank reserves the right (and without need for reference to you) to:
• reduce the amount of a FEX transaction where the amount of receipts/payments on the underlying transaction for firm hedges is reduced to less than the amount of the FEX transaction;
• adjust the maturity date of a FEX transaction where the Bank is satisfied that the due or expected date of payment/receipt of the underlying transaction for firm hedges has changed, provided always that the new maturity date does not exceed the period permitted under exchange control and other relevant rules/laws;
and any differences arising therefrom shall be payable by you and may be debited to your current or other accounts notwithstanding that the day originally stipulated for settlement may not have arrived.
The Bank is obliged to report any cancellation of FEX transactions or if it is of the view that the proceeds thereof are not used for the intended purpose or where otherwise required by the Controller under prevailing Exchange Control Regulations.
Master Agreement
In the absence of an executed agreement governing the FEX transactions, the latest published English Law IFEMA terms shall apply. Each utilisation of the Foreign Exchange Contract Limit (whether or not the relevant IFEMA Document has been signed) shall be deemed to be subject to and shall be subject to the English Law IFEMA terms unless the relevant Confirmation/contract specifies to the contrary.
In the event of any conflict between the terms of this facility letter, those of the English Law IFEMA and the standard contracts terms, the terms shall prevail in the following order:-
(a) the terms of the latest published English law IFEMA (a copy is available on request)
(b) the terms of this facility letter; and lastly
(c) the standard contract terms.
The Bank shall have the right to set-off from or debit any amount due from any of your accounts with the Bank and/or the HSBC Group.
The Bank may charge a facilities management fee annually or upon amendment of existing facilities, which charges shall be paid before any of the facilities are utilised and if remaining unpaid shall be debited without further notice to your current/disbursement/other account opened by the Bank for the purpose. Notwithstanding these charges, the Bank reserves the absolute discretion to exercise its remedies provided hereunder and/or whether to grant, vary, restructure, adjust or otherwise modify any facility or its terms, and/or temporary excess or temporary drawing against uncleared effects.
Notwithstanding anything to the contrary, the Bank may in its absolute discretion without discharging any of your liabilities herein and/or under the security documents vary or add to the terms herein.
Variations include, but are not limited to
Except for fluctuations to the Base Lending Rate or otherwise expressly provided, variations or additions shall take effect upon notice to you.
Without prejudice to our customary overriding right of repayment on demand, the Facilities may be immediately suspended or terminated and all sums (including contingent sums) payable on demand in the event:‑
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a) you default in the payment of any sum due under the Facilities (whether instalments, interest or otherwise); or b) you have given incomplete, misleading or incorrect material information to the Bank in relation to procuring the provision or continued provision of the Facilities, or your account is conducted in an unsatisfactory manner; or c) you fail to observe or perform any of your covenants or obligations to the Bank; or d) a petition is presented and not withdrawn or stayed by an order of Court within a period of thirty (30) days of its presentment or an order is made or resolution passed for your winding-up, dissolution or liquidation; or e) you commence a meeting for the purpose of making or proposing and/or entering into any arrangement with or for the benefit of your creditors; or f) a receiver or other similar officer is appointed over the whole or any part of your assets or undertaking; or g) you cease or threaten to cease to carry on business or are unable to pay your debts, or dispose or threaten to dispose of the whole or a substantial part of your undertaking or assets; or h) for any reason any guarantee or security given for the repayment of the Facilities shall be challenged, terminated or lapse for any reason whatsoever or if the guarantor or security provider shall be in default under the terms of such guarantee or security or dies or becomes of unsound mind or is wound up or commits any act of bankruptcy or similar; or i) you allege that all or a material part of these terms or any security document have ceased to be of full force or effect; or j) any of your other indebtedness to us or any third party or parties becomes capable in accordance with the relevant terms thereof of being accelerated in repayment or declared due prematurely by reason of your default or your failure to make any payment in respect thereof on the due date for each payment or if due on demand when demanded or any security for such indebtedness becomes enforceable; or k) where the purpose of the facility is to finance acquisition of property, you or any other party to the sale and purchase agreement commits or threatens to commit a breach of any term, stipulation, covenant or undertaking contained in such agreement, or if a petition is presented for the winding-up of the developer of the property (where applicable) being financed; or l) if your company, any security provider or a Related Corporation (as defined in the Companies Acts 1965) is under investigation under the provisions of Part IX of the Companies Act 1965 or any securities legislation and regulations in force from time to time; or m) in the Bank's opinion, there is any change or threatened change in circumstances which would materially and adversely affect your business or financial condition or the ability to perform your obligations under this letter or any other agreement with the Bank, including any change or threatened change in your shareholders or directors; or n) in the Bank's opinion, there is any change or threatened change in circumstances which materially and adversely affect the ability of any guarantor or security provider to perform its obligations under any security given to the Bank; or o) any applicable law or regulations or their interpretation or application is amended or changes, making it unlawful for the Bank to comply with its obligations herein or to allow the Facilities to continue to be outstanding. |
The events of default are more comprehensively dealt within the security documentation.
If there are circumstances likely to lead to events of default among other things due to irregularities in your financial affairs or your inability to meet your indebtedness to us it is proposed that you contact us for an early appraisal of your commitment.
Other Terms and Conditions
a) Payment of outgoings for property charged as security (where applicable)
You undertake to forward us on a regular basis for our records, the receipts you receive for payments of quarterly Municipal Assessment and Annual Quit Rent in respect of the property charged.
b) Availability
Availability of the Facilities is subject to legal documentation having been completed to the satisfaction of the Bank. If security documentation cannot be perfected for any reason within 3 months of the acceptance date of this Letter, the Bank reserves the right to withdraw the Facilities offered without further reference to you. In any event, any part of the Facilities not drawn down within 12 months from the date hereof shall be automatically cancelled.
c) Fees and charges
The Bank shall charge at its absolute discretion, where applicable, fees as follows:
i) Facility Arrangement Fee; and/or
ii) Facility Management Fee;
which charges shall be paid before any Facilities is utilised and if remaining unpaid shall be debited without further notice to your current/disbursement/other account whether or not opened by the Bank for the purpose. Please refer to the Bank's standard Tariff and Charges subject to variation from time to time. If there is any conflict between the said Tariff and Charges and any fees and charges specifically stated herein, the fees and charges specifically stated herein shall prevail. (If you are a "small and medium enterprise" within the National SME Development Council's definition, such fees and charges shall not apply to you.)
Notwithstanding these charges, the Bank reserves the absolute discretion whether to grant or otherwise any facility, restructuring / adjustment of facility and/or temporary excess or temporary drawing against uncleared effects.
d) Legal expenses and other charges
All stamp duty and solicitors' fees that is payable (assessed on a 'solicitor and client' basis) incurred by the Bank:
i) in connection with or incidental to the provision of the Facilities; and/or
ii) in its enforcement of its rights under any of the Facilities or any security provided;
shall be payable by you.
Such amounts may be debited without prior notice to your current or other account(s) or a disbursement/suspense account opened by the Bank for the purpose.
e) Cross Default on facilities from HSBC Amanah Malaysia Berhad (where applicable)
Notwithstanding any other provision herein:
i) if there shall be a default of any sums payable by you and/or by a security provider for any other facilities granted to either of you by the Bank or by HSBC Amanah Malaysia Berhad; or
ii) if there shall be a default by you and/or such security provider for any banking or financing facilities granted to either of you by any other financial institution or other party;
whether such sums are due jointly or individually by you or such security provider, then in such event, all amounts owed (including contingent sums) under the Facilities shall immediately become due and payable on demand and any security therefor may be enforceable according to its terms.
f) Insurance of property charged as security (where applicable)
The insurable risks of your business and the properties charged or secured to the Bank are to be arranged by the Bank and insured with HSBC Amanah Takaful (Malaysia) Sdn Bhd or the Bank's other panel insurers. If you and/or the chargor are not agreeable to such insurance with HSBC Amanah Takaful (Malaysia) Sdn Bhd, kindly advise your Relationship Manager or the Bank's Corporate Credit Administration Department.
If you, or the proprietor, as the case may be, fails to insure or fails to continue to insure the properties, the Bank may but shall not be under any duty to, take up or pay the premium for such insurance and any moneys expended thereto may be debited to any of your accounts with the Bank.
g) Inspection and valuation of property charged as security (where applicable)
Inspection and valuation of any property charged or forming security shall be at least once in every two years by us or by a firm on the Bank's panel of valuers, the cost in connection therewith being for your account.
h) Security denominated in foreign currency (where applicable)
In the case of foreign currency denominated security, the rate of exchange to be applied for the conversion of such currency shall be our spot rate of exchange (as conclusively determined by us) for purchasing such currency on the date of settlement and in the event of a shortfall you will promptly pay to us such additional amount as makes the net amount received by us equal to the full amount payable by you or the security provider, as the case may be.
i) Withholding or deduction
All payments by you under the Facilities are to be made in immediately available funds free and clear of and without any withholding or deduction for any and all present or future taxes, duties or other such levies.
If you are compelled by law to make any such withholding or deductions you will pay to us such additional amounts required to enable us to receive the amount which would be payable if no such withholding or deduction had been required.
You shall provide us with evidence that such taxes, duties or other such levies have been paid by forwarding us official receipts within 30 days of payment.
j) Maintenance of shareholding (applicable if third party security, guarantee and/or letter of awareness is provided by the borrower's related company)
The relevant related company of the Borrower within the same group of companies shall undertake not to divest its shareholding or any part thereof in the Borrower or the security provider or guarantor (as applicable) without first obtaining the Bank's consent.
k) Increased costs
If the effect of any, or a change in any, law or regulation is to increase the cost to us of advancing, maintaining or funding the Facilities or to reduce effective return to us, we reserve the right to require payment on demand of such amounts as we consider necessary to compensate us therefore.
l) Non- contravention of legislation prohibiting connected party lending
Please note that applicable banking legislation has imposed certain prohibitions on our providing banking facilities to persons related to our officers, directors or employees, and that of our holding company, The Hong Kong and Shanghai Banking Corporation Limited (incorporated in Hong Kong SAR). These are section 62 of the Banking and Financial Institutions Act 1989 ("BAFIA") read with the Guidelines on Credit Transactions and Exposures with Connected Parties issued by Bank Negara Malaysia, and also Section 83 of the Banking Ordinance of Hong Kong SAR (collectively, the "Prohibitions").
In acknowledging/accepting this Letter you are to advise us whether you are in any way connected to any of our officers, directors or employees, and/or the directors or employees of The Hong Kong and Shanghai Banking Corporation Limited within the meaning of the Prohibitions, and in the absence thereof, you represent you are not so connected.
You are required to immediately advise the Bank in writing should such relationships creating a prohibited lending under the aforesaid Prohibitions be established subsequent to the acceptance of the Facilities.
(Please note that for the purposes of the BAFIA, "officer" encompasses "any employee of the financial institution" and that "director" and "officer" also includes a spouse, child or parent of a director or officer. The texts and summary clarifications of these Prohibitions will be made available upon request.)
m) Terms and conditions in other documentation
i) Other terms and conditions as contained in the Bank's legal or security documentation executed or to be executed by you shall apply.
ii) For avoidance of doubt, additional, modified, or other terms and conditions to those stated herein may be advised by our solicitors and may be contained in those other documents when formalising such documentation on our behalf.
iii) You are to carefully read and understand all terms and should obtain independent legal advice thereto before signing.
n) Default/Late Payment Interest not otherwise provided for
Where a specific default, excess or late payment interest rate is not otherwise provided for under the terms of any specific facility, the Bank may charge the following for any payments that are overdue, or if payable on demand, from the date the amount is stated to be due pursuant to such demand:
i) For Ringgit-denominated facilities or amounts, or after any amounts due in other currencies are converted to Ringgit
1% per annum above the interest rate applicable for the particular facility, or if none, 3.5% above the Bank's prevailing Base Lending Rate or such other rate as may be determined by the Bank from time to time.
ii) For non-Ringgit-denominated facilities or amounts, before the amounts due are converted to Ringgit
1% per annum above the interest rate applicable for the particular facility, or if none, 3.5% above the Bank's prevailing Cost of Funds (for such tenor as selected by the Bank) or such other rate as may be determined by the Bank from time to time.
Such interest shall be capitalised and added for all purposes to the principal or overdue sum, as the case may be for that facility, and shall bear interest at the relevant applicable rate notwithstanding any demand by the Bank and/or cessation of the banker and customer relationship for whatever reason and before as well as after judgment.
o) Priorities
Subject to the provision of the security documents (where applicable), if any amount received or recovered in respect of your liabilities hereunder or any part thereof is less than the amount then due, the Bank shall apply that amount to interest, profit, principal or any other amount then due and payable in such proportions and order of priority and generally in such manner as the Bank may determine.
p) Repayments generally and ascertaining of limits
Unless otherwise provided, interest due shall be capitalised and added for all purposes to the principal sum and shall bear interest at the relevant applicable rate notwithstanding any demand by the Bank and/or cessation of the banker and customer relationship for whatever reason and before as well as after judgment.
Any amounts of interest or other non-principal sums debited to your accounts which is capitalised shall be not affect the determining whether the principal limit under any security given for the Facilities has been exceeded or not.
q) Bankers common law rights applicable
We may combine, consolidate or merge all or any of your accounts and may set off or transfer any sum outstanding to the credit of any such accounts with our Bank in or towards the satisfaction of any of your liabilities under the Facilities.
The Bank may also debit any of your accounts in respect of amounts payable under any security documents or security for the Facilities if the security party fails to make any required payments thereunder.
r) Conclusive evidence
A certificate signed by an officer of the Bank as to any amount(s) payable hereunder shall be conclusive evidence save for manifest error.
s) Disclosure and use of information
You consent to the Bank disclosing information relating to you, the Facilities, your accounts and other facilities presently held, or which may subsequently be opened or obtained ("Information") to:
i) any person it considers necessary:
A) in providing the Facilities or other services;
B) as part of its operating procedures (including its accounting, client relationship and risk management functions),
including to members of the HSBC Group (in or outside Malaysia), any service provider (including debt collection agencies) or other third party;
ii) any bureaus or agencies established by Bank Negara Malaysia or by other regulatory authorities, including SME Credit Bureau (M) Sdn Bhd, the Central Credit Reference Information System - "CCRIS" and the Controller of Foreign Exchange;
iii) any authority, central depository or depository agent in relation to the securities industry, where relevant
iv) the Association of Banks in Malaysia;
v) the Bank's potential assignees;
vi) any of your present or prospective guarantors or security providers;
vii) any person the Bank believes in good faith to be tendering payment of monies on your behalf.
Information may be used, stored, transferred, compiled, matched or exchanged by or with any of the parties mentioned above ('Users').
Information shall be kept confidential by the Users, unless disclosure is required under any laws or regulations which apply to a User.
When the Bank provides or obtains any Information, it takes utmost care in compiling, collating or processing the Information. The Customer agrees that as long as the Bank acts in good faith, it and its officers shall not be liable for any loss or damage (whether indirect, consequential or punitive) or any monetary loss to you or any other person for any inaccuracy, incompleteness or authenticity of the Information the Bank provides or relies on and whether caused by any technical, hardware or software failure of any kind, interruption, error, omission, delay, viruses, act of God, act of war or terrorism, strikes, industrial action or otherwise.
The Bank, as part of its procedures in granting or continuing to grant banking and/or credit facilities and services to its customers may conduct credit and other financial checks and verify customer and/or security party information from time to time from various selected sources. You consent to such checks being conducted.
The consents given shall be irrevocable.
t) Notices
i) Any notice demand or request may be given by ordinary or registered post (not being AR registered post) sent to you at its address herein stated or to your last known address and such notice shall be deemed to have been duly served three (3) days after it is posted notwithstanding that it is returned by the postal authorities undelivered.
ii) Notice as to fluctuation of the Base Lending Rate, variation of interest, commission, fees and all other bank charges may also be effected by a notification of the variation in the periodic statements furnished to you from time to time or by way of an unsigned notice or letter produced by the Bank's computer or by way of advertisement in any newspaper or by notification at any of the Bank's premises or in such manner we deem fit and such variation shall take effect from the date stipulated therein.
u) Payments received to be in gross
All monies received for the purpose of being applied in reduction of any monies owing to the Bank (whether from payments received or from the realisation of any security or otherwise) shall be treated as payments in gross and not as appropriated or attributed to any specific part or item of the monies owing to the Bank, even if appropriated thereto by any person otherwise purportedly entitled to so appropriate.
v) Suspense account
In the advent of any liquidation or analogous thereto, any monies received by the Bank in respect of the Facilities or any security granted may be kept to the credit of a non-interest bearing suspense account for such terms as the Bank deems fit without any obligation in the meantime to apply the same or any part thereof towards settlement of any liabilities due, and the Bank may prove for and agree to accept any distributions in respect of the whole or any part of such money and liabilities in the same manner as if no security had been created.
w) Remedies concurrent
The Bank shall have the right to exercise any rights or remedies available to it under this letter, any security or otherwise (including pursuing any right of sale or possession) against you or any party providing security for the Facilities concurrently or successively as it may consider appropriate.
x) Severability
If any provision herein is or becomes prohibited or unenforceable by law or any applicable regulations, the remaining Terms shall remain valid and enforceable and/or continue to be valid and enforceable in any other jurisdiction where the law provides that it is valid.
y) Exercise of remedies
The Bank may exercise any right, power or remedy it may have, whether it is stated here or conferred upon it by law even after a delay.
All rights and powers of the Bank in law or equity are exercisable even if they overlap with any rights and powers in these Terms.
If the Bank does not act when it is entitled to, that does not mean it:
i) has agreed to your breach; or
ii) has given up its right; or
iii) is prevented from acting later.
Where the Bank has expressly waived a default by you, this shall not impair any right, power or remedy of the Bank for any of your other defaults, whether occurring prior or subsequent to the waiver.
z) Interpretation
Unless the context otherwise requires:
i) words importing the singular number include the plural and vice versa and reference to any gender includes all genders;
ii) reference to 'facility' shall mean a facility comprised within the Facilities
iii) references to "the Bank", "we", or "our" in this letter shall be understood to refer to HSBC Bank Malaysia Berhad.
The headings herein are for convenience and shall not affect construction of the terms of this letter. Where there are two (2) or more persons comprising the borrower, whether in partnership or otherwise, all covenants and terms shall be made by and be binding upon them jointly and severally.
aa) Governing law
Except where expressly provided otherwise for any facility, the terms herein shall be governed by and interpreted in accordance with the laws of Malaysia and the parties agree that the Malaysian courts shall have non-exclusive jurisdiction. The parties irrevocably waive any assertion of forum non conveniens to resolution of dispute in the Malaysian courts.
bb) Successors and assigns
This letter shall be binding upon your heirs estate personal representatives and successors in title and on the successors in title and assigns of the Bank. You shall not assign any of your rights or obligations hereunder. Unless expressly agreed otherwise by us, we may assign or transfer all or any part of our rights, benefits and/or obligations under this facility letter or in respect of any of the Facilities, and any security provided thereto, to any person by delivering to you a notice in writing, or where required, by entry into more formal agreements (which you hereby agree to execute if so requested by the Bank). Such transfer shall take effect as from the effective date specified in the notice or agreement and we shall thereafter be released from such rights, benefits and/or obligations.
*** END OF ANNEXURE ***
Customer's acknowledgment/acceptance
We have viewed the foregoing terms of this Letter including the Annexure(s) and agree to the terms thereto.
We acknowledge that notwithstanding anything to the contrary herein contained and whether it is prior to the time for annual review the Facilities may be reviewed at any time and are subject to the Bank's overriding right of suspension, withdrawal and repayment on demand, as well as the right to call for cash cover or other acceptable security on demand (which shall be in addition, and not subject to, any similar right stipulated for any of the Facilities). Nothing contained in this Letter shall be deemed to impose on the Bank any obligation to make or to continue to make available the Facilities or any advances thereunder to us. We also acknowledge that in the event of a recall of an overdraft facility, we shall be obliged to immediately fund our overdraft account with sufficient funds to meet any un-presented cheques still in circulation and that the Bank is under no obligation whatsoever to issue any notices or requests to us to do so. Any failure on our part to do so will entitle the Bank to refuse payment on such cheques, for which the Bank shall not be liable to us in any way whatsoever.
We confirm our acceptance of the Facilities and that the Bank's agreement to provide us with the Facilities will not contravene a) the provisions of Section 62 of the Banking and Financial Institutions Act 1989 read with BNM's Guidelines on Credit Transactions and Exposures with Connected Parties, and b) Section 83 of the Banking Ordinance of the Hong Kong Special Administrative Region ('Prohibitions').
We acknowledge the Bank's right to recall the Facilities in the event of any contravention of the said Prohibitions.
We further agree that your Letter embodies in writing all the terms for the Facilities to be granted to us and hereby confirm that any warranties, promises, representations or collateral agreements that may have been made to us, orally or otherwise by you in the course of the pre-contractual negotiations which have not now been included in this Letter shall hereafter be deemed to have lapsed and not legally binding upon you nor shall it be raised as a defence or to support any claim by us in any legal proceedings.
We are responsible for assessing the terms in this Letter and the Facilities and shall seek our own independent legal advice on them.
We undertake that all our FEX transactions shall be to hedge underlying trade transactions and other permitted purposes, and not for speculative purposes.
Our FEX transactions shall be in compliance with Malaysian Exchange Control Regulations and supported by appropriate documentation which may be required by the Bank.
We acknowledge that where we enter into any FEX transaction, we shall do so in reliance only upon our own judgment and assessment and obtain our own independent advice and not in reliance on any advice of the Bank or its personnel in accordance with Section 7 of IFEMA terms.
............................................................
Authorised signatories and Company's Chop
Date.............................................
EXHIBIT 10.3
PRIVATE & CONFIDENTIAL
01 st June 2011
TOR Minerals (M) Sdn Bhd|
4½ Mile, Jalan Lahat,
30200 Ipoh,
Perak.
Attn: Mr. Lee Hee Chew, Managing Director
Dear Sirs,
RE: BANKING FACILITIES GRANTED TO TOR MINERALS (M) SDN BHD ("BORROWER")
Further to our Letter of Offer dated 17 th April 2008, we, RHB Bank Berhad ("the Bank") are pleased to inform you that the Bank has agreed to: -
(i) Renew/extend your existing banking facilities to 04 th April 2012;
(ii) Incorporation of Foreign Currency Trade Financing (FCTF) and Promissory Note (P-Note) facilities into the existing Multi Trade Lines combined limit of RM9.3 million.
subject to the following terms and conditions: -
1. THE BANKING FACILITIES
The banking facilities granted or to be granted to you are as follows:
|
Facility |
Limit/Existing Limit (RM) |
|
Additional/ Reduction (RM) |
|
Total/Revised Limit (RM) |
|
Overdraft / Revolving Credit |
1,000,000-00 |
- |
1,000,000-00 |
||
|
Multi-Trade
Line comprising Letter of Credit / Trust Receipt / Bankers Acceptance /
Shipping Guarantee / Bills Purchased / Export Credit Refinancing
|
9,300,000-00
|
- |
9,300,000-00
|
||
|
Bankers Guarantee |
1,200,000-00 |
- |
1,200,000-00 |
||
|
Foreign Exchange Contract Line |
25,000,000-00 |
- |
25,000,000-00 |
||
|
Total |
26,500,000-00 |
|
- |
|
36,500,000-00 |
(hereinafter referred to as "the Banking Facility" and where the Banking Facility comprises more than one banking facilities, the expression "Banking Facility" shall where the context requires refer collectively to all and individually to each of the respective banking facilities comprising the Banking Facility)
2. PURPOSE
The Banking Facility shall be used for the purpose(s) as set out below and if you require to use the Banking Facility or any part thereof for any other purpose, you shall have to first obtain the Bank's prior written consent:
2.1 Overdraft / Revolving Credit
For working capital.
2.2 Letter of Credit / Trust Receipt / Bankers Acceptance / Bills Purchased / Export Credit Refinancing
For trade financing.
2.3 Shipping Guarantee
For collection of goods pending receipt of shipping documents.
2.4 Bankers Guarantee
As security / tender deposit and performance bond favoring government / statutory bodies and private companies acceptable to the Bank.
2.5 Foreign Exchange Contract Line
To hedge against fluctuations in foreign exchange rates for trade related transactions and other transactions as approved by Bank Negara Malaysia. The Foreign Exchange Contracts concluded with the Bank include spot, value today, value tomorrow and forward foreign exchange contract.
3. AVAILABILITY PERIOD
3.1 The granting of the Banking Facility to you is at all times subject to availability of funds.
4. INTEREST RATE(S) / COMMISSION / BANKING CHARGES / COMMITMENT FEE / OTHER CHARGES
You shall pay interest, commission, discount charges and any other charges payable in relation to the Banking Facility at the following rates: -
2
|
Facility |
Interest Rate |
|
|
Overdraft |
: |
Interest at one point two five per centum (1.25%) per annum above the Bank's BLR with monthly rests. |
|
Revolving Credit |
: |
Interest
at one point two five per centum (1.25%) per annum above the Bank's Cost of
Funds.
|
|
Letter of Credit |
: |
Commission at zero point one per centum (0.1%) on the amount of the Letter of Credit for each month (or part of a month) of validity of the credit subject to a minimum charge of RM100-00 for each Letter of Credit issued or at such other rate as may be stipulated by the Association of Banks in Malaysia from time to time. |
|
Trust Receipt |
: |
Interest at one point two five per centum (1.25%) per annum above the Bank's BLR. |
|
Bankers Acceptance |
: |
Acceptance commission of one point zero per centum (1.00%) per annum above the Bank's Cost of Funds. |
|
Bills Purchased |
: |
Interest at one point two five per centum (1.25%) per annum above the Bank's BLR for local currency bills and at the rate of one point two five per centum (1.25%) per annum above the Bank's Effective Cost of Funds for foreign currency bills. |
|
Export Credit Refinancing (Pre & Post Shipment) |
: |
Interest at one point zero per centum (1.0%) per annum above the Funding Rate stipulated by Export-Import Bank of Malaysia Berhad ("EXIM Bank"). |
|
Promissory Notes |
: |
Interest at one point zero per centum (1.0%) per annum above the Bank's Cost of Fund |
|
Foreign Currency Trade Financing |
: |
Interest at one point zero per centum (1.0%) per annum above the Bank's Cost of Fund |
|
Standby Letter of Credit |
: |
Commission at zero point seven five per centum
(0.75%) per annum subject to a minimum charge of RM100-00 for the Standby
Letter of Credit issued.
|
|
Shipping Guarantee |
: |
Commission at zero point one per centum (0.1%) on the amount of each guarantee subject to a minimum charge of RM100-00 for each guarantee issued. If the guarantee is not returned to the Bank within three (3) months from the issue date, an additional commission of zero point six per centum (0.6%) per annum on the amount of the guarantee shall be charged up to the date of return of the guarantee. |
|
Bankers Guarantee |
: |
Commission at one point zero per centum (1.0%) per annum on the amount of the guarantee for the full liability period (inclusive of the claims period) subject to a minimum charge of RM100-00 for each Bankers Guarantee issued. |
|
Foreign Exchange Contract Line |
: |
Rate as quoted by Forex. |
["BLR" means the Bank's Base Lending Rate, which is currently at six point six per centum (6.6%) per annum.]
3
5. REPAYMENT
Notwithstanding any provisions to the contrary, the Banking Facility shall be payable on demand. Until a demand for repayment is made, you shall repay the Banking Facility as follows: -
|
Facility |
Repayment Terms |
|
|
Overdraft |
: |
Upon demand or expiry of tenor. |
|
Revolving Credit |
: |
On the last day of each Interest Period. |
|
Letters of Credit |
: |
Upon maturity of term of the respective Letters of Credit. |
|
Trust Receipt |
: |
Upon maturity of term of the respective Trust Receipts. |
|
Bankers Acceptance |
: |
Upon maturity of term of the respective Bankers Acceptances. |
|
Bills Purchased |
: |
Upon maturity of term of each drawing. |
|
Export Credit Refinancing |
: |
Upon maturity of term of each drawing. |
|
Promissory Note |
: |
On demand |
|
Foreign Currency Trade Financing |
: |
On demand |
|
Standby Letter of Credit |
: |
On demand |
|
Shipping Guarantee |
: |
On demand. |
|
Bankers Guarantee |
: |
On demand. |
|
Foreign Exchange Contract Line |
: |
On demand |
6. ANNEXURES
The terms and conditions set out in the Annexures I and II hereto form an integral part of this Letter of Offer and in the event of any conflict or discrepancy between the terms and conditions in this Letter of Offer and the terms and conditions in the Annexures, the terms and conditions in this Letter of Offer shall prevail.
Except as specifically amended or varied hereby, all terms and condition in our previous Letter of Offer dated 17th April 2008 and in the security documents to secure the existing facilities shall remain in full force and effect and the Letter of Offer dated 17th April 2008 and security documents as amended or varied by this Letter shall from and after the date hereof be read as a single integrated document incorporating the amendment(s) or variation(s) effected hereby.
4
Please indicate your acceptance of the Banking Facility upon the terms and conditions herein by signing the duplicate of this letter and returning the same to the Bank within fourteen (14) days from the date hereof. In addition, you are required to execute such loan/security documents, which the Bank's solicitors shall advise are necessary for the protection of the Bank's interest.
We thank you for giving us the opportunity to be of service to you.
|
Yours faithfully
|
||
|
Fazlina Othman
|
Wan Amiruddin Wan Ahmad
|
I/We, the undersigned hereby confirm that I/We have read the terms and conditions set out above and in the Annexures hereto and taken note of the same. I/We hereby accept the Banking Facility upon the terms and conditions mentioned above and in the Annexures. And, I/we hereby declare that I/we am/are not and none of our directors or managers are directly related as a spouse or child or parent to any of the directors officers or employees of the RHB Capital Berhad Group of Companies.
|
Signed for and on behalf
of
|
||
|
(Name:
)
|
(Name:
)
|
|
5
RHB BANK BERHAD
|
RHB Bank Berhad Ref. |
: |
IPH 900052 |
|
Date of Letter of Offer |
: |
01 st June 2011 |
|
Borrower |
: |
TOR Minerals (M) Sdn Bhd |
ANNEXURE I
TERMS AND CONDITIONS RELATING TO PROMISSORY NOTE FINANCING FACILITY ("P-Note")
(i) You may request the Bank to provide financing by way of Promissory Note by submitting to the Bank a duly completed application in the Bank's standard form with such information as the Bank may require.
(ii) Promissory Note may be drawn by you for financing thereof under the P-Note Facility upon your presentation to the Bank the P-Note for financing by the Bank whereupon the Bank will, subject to the availability of funds pay to you the full proceeds less the handling commission and all other cdosts and expenses, if any, which the Bank may incur.
(iii) Promissory Note drawn by you for financing by the Bank under the P-Note Facility shall be for the pu4rposes as stated in the Letter of Offer.
(iv) The Bank may finance the Promissory Note subject to the following conditions:
(a) You have not and will not obtain another source of financing for the trade transaction concerned and the Promissory Note is for financing your trade transaction, namely imports to and exports from Malaysia and domestic trade; and
(b) Delivery to the Bank of such documentary evidence of the trade transaction as may be required by the Bank.
(v) If the Bank agrees to finance a Promissory Note then it will do so at the rate as the Bank may determine at the time of financing.
(vi) In the event that you have not made early settlement and/or partial settlement prior to maturity, you shall make payment of the full face value of the Promissory Note plus the financing interest to the Bank on the maturity date of the Promissory Note. No days of grace is allowed for settlement of a Promissory Note.
(vii) No Promissory Note shall have a tenor of less than fourteen (14) days or such other period as the Bank may specify from time to time nor exceed the period as stated in the Letter of Offer.
(viii) Promissory Note may be used to finance your usance Letter of Credit for export purposes or sight/usance Letter of Credit for Import purposes and the financing by the Bank of the Promissory Note is at the discretion of the Bank
xxxxxxxxx END OF ANNEXURE xxxxxxxxxx
RHB BANK BERHAD
|
RHB Bank Berhad Ref. |
: |
IPH 900052 |
|
Date of Letter of Offer |
: |
01 st June 2011 |
|
Borrower |
: |
TOR Minerals (M) Sdn Bhd |
ANNEXURE II
TERMS AND CONDITIONS RELATING TO FOREIGN CURRENCY TRADE FINANCING (FCTF)
1. The granting of FCTF facility shall be subject to the following:
• The facility is for the purpose of financing the applicant's trade transactions invoiced in currencies acceptable to the bank.
• In the case where the financing required is of a different currency than that of the invoiced currency (cross currency), the applicant must be a net exporter having receivables in the currency of the loan.
• Applicant shall have read and understood the Risks Awareness Statement for FCTF and acknowledged the risks in undertaking FCTF transactions prior to drawdown.
2. The underlying transaction is a bona fide transaction and the goods to which it relates area being sold or purchased pursuant to contracts which are in full force and effect. No other acceptance and/or types of financing are or had been or will be obtained for the same underlying transaction.
3. The drawdown of FCTF by the applicant is always subject to availability of funds to the Bank.
4. Where FCTF is granted to finance cross currency transactions, the applicant shall deem to have understood that the exposure to foreign exchange risks is greater as there is greater room for foreign exchange fluctuation compared to a typical FCTF transaction. The Bank shall earmark 110% of the invoice amount from the applicant's FCTF facility for such drawdown.
5. Drawings under the facility will be paid directly to the beneficiary or supplier of the goods named in the trade documents unless the applicant furnish documentary evidence to the Bank that the applicant had paid for the same in which case the amount will be paid to the applicant.
6. Prepayment of FCTF loan is allowed subject to applicant bearing the breakfunding costs.
7. Upon maturity of the draft drawn on the applicant by the Bank in relation to the financing of the relevant transaction the applicant shall pay to the Bank the full value of the said draft together with the accrued interest and other charges thereon. The Bank shall be entitled to convert into Ringgit at the Bank's counter rate of exchange all foreign currency loans drawn under the facility and not paid on their maturity date.
8. Notwithstanding anything herein contained the Bank shall be entitled without notice to the applicant to debit such amount into the applicant's Multi-Currency Account or current account as may be applicable, maintained by the applicant with the Bank. The applicant shall at all times ensure that there are sufficient funds in such account for the aforesaid purpose.
9. The Bank shall be entitled at its absolute discretion to convert into Ringgit or other foreign currency equivalent for payment by or receipt for the applicant in foreign currency at the Bank's prevailing counter rate of exchange.
10. The Bank assumes no liability or responsibility for the accuracy or authenticity of the trade documents furnished by the applicant to the Bank. The Bank shall not be liable for any loss, damage, expense or liability incurred by it by reason of the Bank relying on any documents believed to be genuine and correct and purportedly signed by an authorized personnel.
11. The applicant shall indemnify and keep the Bank indemnified against any losses damages costs and expenses (including legal costs) which the Bank may incur suffer or sustain as a consequence of the Bank financing the aforesaid transactions.
xxxxxxxxx END OF ANNEXURE xxxxxxxxxx
EXHIBIT 10.4
|
Rabobank IJsseldelta Business |
|||
|
Postal address |
Postbus 577, 8000 AN Zwolle |
||
|
TP&T (Tor Processing & Trade) B.V. Attn. Mr O. Karasch Burg Moslaan 13 8051 CP HATTEM |
Visiting address |
Willemskade 1 8011 AC Zwolle |
|
|
Telephone |
(038) 428 78 78 |
||
|
Fax |
(038) 428 79 78 |
||
|
|
GZ@ijsseldelta.rabobank.nl |
||
|
Our reference |
RK/shd/3773.2011.00882 |
|
|
|
Direct line number |
(038) 428 78 78 |
|
|
|
Date |
28 June 2011 |
|
|
|
|
|
|
|
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Subject |
financing proposal |
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Dear Mr Karasch, Please find attached our financing proposal according to our agreement to meet your financing request for EUR 700,000.00. This proposal is based on our previous discussion. If you have further questions about this, please do not hesitate to contact me or my colleague, Saskia Dries. You are receiving the financing proposal in duplicate. One copy is for you. Please return the other copy after completing the necessary information and signing. Further specification of the financing can be found in "Further details of financing proposal". Once I receive the signed proposal from you, I will contact you to further organize your financing. Kind regards, Rabobank IJsseldelta [signed] Ronald Knoll Senior Relationship Manager Appendices: General Bank Conditions General conditions of Rabobank business financing 2010 |
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Cooperative
Rabobank IJsseldelta U.A. Based in Zwolle
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Final withdrawal date |
If the debtor has not withdrawn a loan on interest by the final withdrawal date stated in this financing proposal, the debtor will be in default and owe to the bank compensation of 2% of the principal of each loan not withdrawn on time, payable immediately. In addition to the compensation owing, the bank can claim (partial) fulfilment and/or (partial) dissolution of the financing proposal and/or compensation of damages. |
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Existing securities |
The existing securities will continue to be used and will also apply as security for the financing offered. |
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Further conditions |
The financing offered is also subject to the following conditions: - Negative pledge and pari passu |
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Management arrangements |
The financing offered is also subject to the following arrangements. The bank will receive from the pledger [TP&T (Tor Processing & Trade) B.V.] an overview every quarter of the pledged rights/claims on third parties (debtor overview), together with a legally signed supplemental deed of pledge (pledge list), and further upon simple request of the bank. TP&T (Tor Processing & Trade) B.V. (the pledger) must legally sign a supplemental deed of pledge and ensure that the bank receives this every day. This must also be done upon simple request of the bank. In practice, this will be done in the following manner: The bank signs the supplemental deed of pledge on behalf of the pledger on the basis of power of attorney. The power of attorney is stated in the deed of pledge and the bank may assign the power of attorney to a third party (the right of substitution). The bank may therefore have a third party sign. If the bank requests this, the pledger must sign the supplemental deed of pledge himself immediately and ensure that the bank receives this as quickly as possible. The bank will receive from the debtor: - a copy of the annual returns for TP&T (Tor Processing & Trade) B.V. as soon as possible after the elapse of the period that the reporting concerns, but no later than before 1 October of each year. - a copy of a the quarterly returns from TP&T (Tor Processing & Trade) B.V. as soon as possible after the end of the period that the reporting concerns, but no later than 1 month after the end of the period that the reporting concerns. |
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Handling fees for financing proposal |
Onetime fee of EUR 3,500.00 (severally) payable upon issue but no later than on the final withdrawal date/availability date. |
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This financing proposal is valid until 05-07-2011. |
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Further details of financing proposal |
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The following also applies: |
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Loan on interest |
Loan on interest of EUR 700,000.00 The loan on interest shall be issued to the debtor by Coöperatieve Rabobank IJsseldelta with headquarters in Zwolle, hereinafter (both collectively and each individually) to be called: the bank. |
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Administrative ascription |
The loan on interest will be administered effective as of the date of withdrawal of the loan (hereinafter called: the effective date) in the name of: TP&T (Tor Processing & Trade) B.V. |
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Expenditure purpose |
The loan on interest may only be used for the financing of business capital / inventory. |
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Straight line amortization |
The following is also applicable for the straight line amortization in addition to any extra amortizations: |
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Instalment due date |
The amortization will be paid subsequent to each month on the first day of the following calendar month. |
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First instalment |
The first payment of the amortization must be made on the first instalment due date, 1 calendar month after the effective date. |
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Interest |
All the interest types offered are subject to the following: - Loan interest date to be paid subsequent to each month on the first day of the following calendar month. - The first payment of the interest must be made on the first loan interest date following the effective date. The bank can set a different (first) loan interest date. This does not apply if the payment of interest and instalments are done together on the basis of annuity. |
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Fixed interest |
The following also applies for a fixed term interest rate: Interest that is fixed for a certain term as stated in the General conditions of business financing stated below. |
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Roll-Over-Loan with choice of interest rate |
The following also applies for a Rabobank Roll-Over Loan with a choice of interest rate: Rabobank Roll-Over Loan with interest option as referred to in the General conditions of business financing stated below. The surcharge is an indicative rate. The bank will set the final surcharge as of the effective date. The surcharge will not change until 3 years after the first day of the calendar month following the effective date. The rollover period will be equal to the chosen Euribor rate period. The bank will determine the rate of the basis component and the surcharge and adjust this in the manner indicated in the article on the Rabobank Roll-Over Loan with choice of interest rate in the General conditions of business financing stated below. |
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Commitment fee |
The commitment fee will be calculated over the number of days that the respective fixed-interest loan or loans is or are not withdrawn. The fee is payable per day and will be charged to the debtor no later than upon withdrawal of the fixed-interest loan(s). The bank can adjust the (final) interest date and the rate of the commitment fee at any time. |
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Declaration of correct decision making |
The debtor confirms and guarantees to the bank that all statutory and legally required decisions, approvals, permissions and, insofar as required, positive recommendations have been obtained for entering into this financing proposal and the (security) agreements resulting from this. |
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Transgression of objective |
The debtor/borrower declares: - to have an economic interest in entering into this financing proposal and the (security) agreements to be concluded for the implementation of this proposal, and - that the conclusion of this financing proposal and these (security) agreements fits within its statutory mission statement. |
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General conditions of business financing |
Each new financing facility as defined in the General conditions of business financing stated below and on any new bank guarantee facility is subject to the General conditions of business financing of Rabobank 2010 unless and insofar as specified otherwise. |
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General Bank Conditions |
The relation with the bank is subject to the General Bank Conditions. Where the term "client" is used in these conditions, this shall also refer to "debtor" and/or "borrower", insofar as applicable. The debtor/borrower declares to have received the conditions referred to in this financing proposal and to have taken cognizance thereof and to accept the ensuing rights and obligations. |
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Power of attorney |
The debtor/borrower hereby grants the bank irrevocable power of attorney with the right of substitution for the exercise by the bank of all the authorizations and rights assigned to it in this deed and under the general conditions declared applicable in this deed. |
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Rights and choice of forum |
This financing proposal, the applicable (general) conditions and the ensuing rights and obligations and other non-contractual obligations are subject to Dutch law and are exclusively under the jurisdiction of the Dutch courts. This will only be otherwise if a certain financing arrangement or security or other condition is expressly declared to be subject to a different law or if this ensues from the law. In such a case, that other law shall be applicable for that specific financing or that security or that other condition and the foreign court shall have jurisdiction. In all cases in which power of attorney is granted in this financing proposal and the (general) conditions declared to be applicable herein, the principal and the agent expressly choose that in their internal relationship Dutch law shall be applicable to this power of attorney and the Dutch court shall have jurisdiction. |
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Acceptance |
If you, debtor/borrower, wish to make use of this offer, please complete the missing information in this financing proposal. Please: - choose the desired interest type by crossing the square beside the respective loan on interest; - sign one copy of this financing proposal in a legally valid manner and return it no later than 05-07-2011. |
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Commitment |
The bank draws your attention to the fact that by signing this financing proposal you, the debtor/borrower, will bind yourself to the bank in accordance to the conditions stated therein and in the further implementation of the financing proposal. The bank can however only fulfil this offer if: - the deed(s), models and declarations employed and/or approved by the bank are used - the requested securities are provided on time in accordance with the bank's conditions - the other conditions are fulfilled on time. The bank shall accept the authorizations, powers of attorney, waivers, subordinations, hypothecation and (several) obligations in this financing proposal and (general) conditions declared to be applicable herein and for rights acquired by third parties on behalf of the bank. |
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Signature |
The debtor/borrower TP&T (Tor Processing & Trade) B.V.
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Place of signing |
Hattem |
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Date of signing |
July 3, 2011 |
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(Legal) representative |
O. Karasch
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For the bank |
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Place of signing |
Hattem |
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Date of signing |
July 3, 2011
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Signature |
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Exhibit 31.1
CERTIFICATIONS
I, Olaf Karasch, certify that:
1. I have reviewed this Form 10-Q of TOR Minerals International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 28, 2011
/s/ Olaf Karasch
Olaf Karasch
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Barbara Russell, certify that:
1. I have reviewed this Form 10-Q of TOR Minerals International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 28, 2011
/s/ Barbara Russell
Barbara Russell
Chief Financial Officer
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended September 30, 2011 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Executive Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ OLAF KARASCH
Olaf Karasch
President and Chief Executive Officer
(Principal Executive Officer)
October 28, 2011
Exhibit 32.2
Certification of Acting Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of TOR Minerals, Inc. ("Registrant") for the quarter ended September 30, 2011 (the "Report") as filed with the Securities and Exchange Commission, the undersigned Chief Financial Officer of the Registrant hereby certifies, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ BARBARA RUSSELL
Barbara Russell
Chief Financial Officer
(Principal Financial Officer)
October 28, 2011