Investor Presentation May 2013 - Northland Resources

Risk Factors (cont’d)
Risks relating to the Bonds (cont’d)
Limitation on the value of security provided by a Norwegian company
Under the laws of Norway, there exist certain limitations (with some exceptions) on the right for a Norwegian company to grant a valid security for its parent company’s financial indebtedness. Such
limitations may apply if the parent company is domiciled in another jurisdiction than Norway and are generally assumed to restrict a Norwegian subsidiary from, inter alia, granting any security for any
Swedish parent company’s financial indebtedness. Consequently it is assumed that the value of any security granted by Northland Logistics AS in favour of the security agent as security for the
outstanding amounts under the Bonds, will be very limited if having any value at all. The above restrictions will not apply for a Norwegian subsidiary’s right to grant any form of security for its own
financial indebtedness. The Norwegian subsidiary, Northland Logistics AS will thus be permitted to grant security over its assets for its payment obligations under inter-company loans. The creditors
under such loans may according to the provisions of the Bond agreements and to the extent permitted by applicable law, assign such inter-company loans and the security provided by the
Norwegian subsidiary (as a sub charge) to the security agent as security for the Bonds. This may indirectly create a valid perfected pledge over the Norwegian assets in favour of the security agent.
However, the right to enforce the security thereby created over the assets of the Norwegian subsidiary is subject to and limited by the from time to time outstanding amount under the relevant intercompany
loans. It is, thus, important to note that the Bond agreements do not include any specific minimum amount of principal to be granted under such inter-company loans to Northland Logistics
AS. Based on the foregoing, any investment in the Bonds should be made knowing that there is a high risk that the security granted by Northland Logistics AS, directly or indirectly in favour of the
security agent (on behalf of the bondholders), may be without or of very limited value.
Limitation on the value of security provided by a Swedish company
A Swedish limited liability company may not provide a guarantee or a pledge for the obligations of a parent or sister company, unless they belong to the same group of companies and the parent
company of that group is domiciled within the European Economic Area (EEA). Furthermore, if a Swedish limited liability company provides any security interest or guarantee without receiving
sufficient corporate benefit in return, such security interest or guarantee will, in whole or in part, be considered a distribution of assets, which will be lawful only to the extent there is sufficient
coverage for the unrestricted equity capital of the Swedish limited liability company after the distribution (i.e. at the time the guarantee is provided or the security is granted). It should also be noted
that laws relating to financial assistance in Sweden prohibit limited liability companies incorporated in Sweden from providing guarantees or granting security or other credit support for obligations of
any person where such obligations are being incurred for the purpose of acquiring shares in the company itself or in any other superior member of the same Swedish group of companies..
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