RULES OF TENDER for the Sale of the State Capital in the Company. KTK Leather-textile company d.d. VISOKO

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1 BOSNA I HERCEGOVINA FEDERACIJA BOSNE I HERCEGOVINE AGENCIJA ZA PRIVATIZACIJU U FEDERACIJI BOSNE I HERCEGOVINE BOSNIA AND HERZEGOVINA FEDERATION OF BOSNIA AND HERZEGOVINA AGENCY FOR PRIVATIZATION IN FEDERATION OF BOSNIA AND HERZEGOVINA Alipašina 41, Sarajevo, Tel.: , , Fax: , apfbih@bih.net.ba RULES OF TENDER for the Sale of the State Capital in the Company KTK Leather-textile company d.d. VISOKO June, 2006

2 Table of Contents 1. Subject of Tender Definitions Tender Package Tender Timetable Communications Due Diligence Visits The Bid The Fee and the Bid Deposite Document Submission Login and Receipt of Bid Modification/Withdrawal of Bid Official Representative of Eligible Bidder and Clarification of Bids Conditions, Criteria, Scoring and Evaluation of Bids Criteria Scoring Bids evaluation Negotiations Notification to Bidders No Agreement until Share Purchase Agreement Signed Disclaimer of Representations and Warranties Seller s Right to Negotiate, Alter Rules of sales, or Cancel Sale Page 2 of 13

3 1. Subject of Tender Enterprise Name: Location: Shares on Sale: Other Shares: Legal form: KTK-Leather textile company d.d. Visoko Prijeko, No.1, Visoko, Bosnia and Herzegovina 67% of total share capital in the Company 33% of shares is privately owned Joint-stock company (d.d.) 2. Definitions The following definitions will be used in this document: The Enterprise KTK-Leather-textile company d.d. Visoko The Shares 67% of the total capital; Shares in the Company The Seller The Sale the Privatization procedures in accordance with the Regulations on Procedures for Sale through Tender in large-scale privatization(official Gazette of the Federation B i H, No.778/04) Bidder a bidder or a potential buyer that has signed a Confidentiality Statement with the Seller and that has otherwise complied with the Rules of Tender. Bid the Bidder s proposal to acquire the Shares in accordance with the Rules of Tender. Successful Bidder the Eligible Bidder with the best Bid as judged by the criteria stated in these Rules of Tender. Bid Deadline the Bid submission deadline. 3. The Tender Package Together with this Rules of Tender, Tender Package includes: Tender Rules Short Profile of the Enterprise. Confidentiality Statement. A Bid Form The Information Memorandum of the Enterprise. Draft Share Purchase Agreement Page 3 of 13

4 4. The Tender Timetable This document sets out the sequence of procedures and their duration. Procedure Duration From To Days Public Invitation to Bid Due Diligence Visits (DDV) Lasting period of Public Invitation Submission of Bids Determination of Bid validity Within 5 days since day of bid submission Information of Bidders of Bids validity days from determination of Bids validity Evaluation of Bids Bringing Decision of most successful Bidder Final negotiations Signing of the Share Purchase Agreement Within 15 days after Bids evaluation After Decision, 10 days after closing negotiations within 20 days, after beginning of negotiations After Decision, within 5 days after closing negotiations This table gives maximum deadlines, but the Commission may perform these activities in a shorter timeframe. 5. Communications All arrangements related to this Tender i.e. signing the Confidentiality Statement, requesting the Tender Package, Due Diligence Visits, submission of Bid, or any other subject) should be arranged with the Seller, (information provided below): Seller: Address: Alipašina 41, Sarajevo, Bosnia and Herzegovina Phone: , ; Fax: apfbih@bih.net.ba, sadeta.teskerdzic@apf.gov.ba enes.ganic@apf.gov.ba Contact person: Mrs. Sadeta Teskeredžić, Enes Ganić Page 4 of 13

5 6. Due Diligence Visits Each Potential Bidder will have an opportunity to visit the Enterprise, to examine the books and records in the Data Room, to inspect the site and facilities, to ask questions related to management and to perform such other inspections as the Eligible Bidder deems necessary, under the following conditions: All Due Diligence Visits (DDVs) must be arranged with the Seller and undertaken after meetings have been scheduled, as in Section 4. Any and all inspections and actions during and in connection with DDVs are to be undertaken after meetings have been scheduled and at a sole cost of the potentional Bidder. All requests to speak with Enterprise management or employees or to obtain copies of documents or any other actions during or in connection with the DDVs must be made to the Seller ( the representative of the Agency for privatization in Federation BiH) The Potential Bidder will be able to review data on the Enterprise in a Data Room set aside for that purpose Requests for multiple DDVs by a single Bidder will be considered at the sole discretion of the Seller ( Agency for privatization in Federation BiH). 7. The Bid Bids are submitted in person or by mail on the address of the Agency for privatization in the FBiH (as in Clause 5. in sealed envelope identified by the name of the company, which capital is a subject of sale. Bids should contain documentation, which must be supplied within the following Schedules: 1.Schedule A Declaration 2.Schedule B Legal Authority 3.Schedule C Proof of paid Participation Fee and Deposit 4.Schedule D Declaration of Funds 5.Schedule E The Bid comprising: Price Investments Employment Business Plan Qualifications of the Bidder Schedule F Draft Share Purchase Agreement Formal validity of Bid means that a Bid is submitted: - within determined deadline in Public Invitation - together with a proof of paid participation fee and deposit Page 5 of 13

6 - in above mentioned way with collected documentation 8. The Fee and the Bid Deposit A) The Fee Bidder is required to make a non-refundable deposit of KM 2.000,00 (two thousand KM) in order to participate in the tender procedure. Bidder is required to pay documentation fee, amounting 5.000,00 KM This amount shall be transferred to the following account: Participation fee (KM): Bank Name: UPI Banka Sarajevo Account Holder: Account Number: Purpose of Payment: Tender Bidding Fee Tender documentation fee (KM): Bank Name: UPI Banka Sarajevo Account Holder: Sarajevo Alipašina 41 Sarajevo Alipašina 41 Account Number: Purpose of Payment: Tender Documentation Fee Foreign Currency Payment for participation fee Bank Name: UPI Banka Sarajevo Account Holder: Sarajevo Alipašina 41 Account Number: SWIFT UPBKBA22 ACC Purpose of Payment: Tender Bidding Fee Foreign Currency Payment for tender documentation Bank Name: UPI Banka Sarajevo Account Holder: Sarajevo Alipašina 41 Account Number: SWIFT UPBKBA22 ACC Purpose of Payment: Tender documentation Any bank fees or expenses shall be borne by the Bidder. B) Bid Deposit The Bid must also include confirmation that a refundable Bid Deposit amounting to KM ,00 KM in cash has been transferred to the bank account of the Seller, or that a Bank guarantee in the same amount valid for 180 days as of the Tender closing date has been submitted to the Seller: Page 6 of 13

7 In KM Bank: Account Holder: UPI Banka Sarajevo Sarajevo Alipašina 41 Account Number: Purpose of payment: Bid Deposit payment Foreign Currency Payment Bank Name: UPI Banka Sarajevo Account Holder: Sarajevo Alipašina 41 Account Number: SWIFT UPBKBA22 ACC Purpose of Payment: Deposit payment Instructions for payment in EUR 56A: COMMERZBANK AGFM SWIFT: COBADEF 57: EUR ( ) 59: Agency for privatization in the FBiH ACC Instruction for payment in USD $ 56A: BANK OF AMERICA NT&SA NEW YORK SWIFT: BOFAUS3N 57: USD ( ) SWIFT: UPBANKBA22 59: Agency for privatization in the FBiH ACC Any bank fees or expenses shall be borne by the Bidder. The Bidders should also provide return-wiring instructions in the event that the Bidder is not successful (the account number to which the money must be returned). Any bank fees and currency expenses shall be borne by the Bidder All expenses related to the transfer of the Bid Deposit and its wiring-back (in case the Bidder is not successful) shall be borne by the Bidder. 9. Document Submission Each Bidder must submit its Bid, either in English or in Bosnian/Croatian/Serbian, whichever it deems appropriate. Each Bid is to be submitted personally or by mail until determined deadline, identified in Section 4 till 16:00 hours of the Central European time , on the address identified in the Section 5. The Commission will review Bids sent by mail, if on the envelope is the scheduled date for submission of Bids. Page 7 of 13

8 Bids will be valid 180 days (one hundred and eighty days), as of the deadline for submission of Bids.. Each Bid must be signed in ink by the Bidder or its authorized representative. Signer of the Bid must initial in ink each page of the Bid and any alterations to the text. Bid must be submitted in a sealed envelope, clearly identified by: Bid for purchase of shares of the company KTK-Leather- textile company d.d. Visoko. 10. Login and Receipt of Bid The Seller will stamp each Bid received with the date and time of its receipt, and log the Bid in the Bidder log sheet. The Seller will provide the Bidder with an official receipt. 11. Modification/Withdrawal of Bid A Bidder may modify or withdraw a Bid prior to the Bid Deadline by providing written notice to the Seller at the address (Section 5) and to the attention of the individual to whom Bids are to be submitted. Any Bid, Bid withdrawal or Bid modification received by the Seller after the Bid Deadline will not be considered and will be returned to the Bidder Official Representative of Eligible Bidder and Clarification of Bids Each Bidder shall identify in its Bid a representative who shall serve as the Bidder s official contact to whom all communications to/from the Seller shall be channeled. Such person shall remain accessible to the Seller for all necessary communication. From the end of the Deadline for submission of Bids, no communication shall be initiated by any Bidder with the Seller. After the Bid Deadline and until a Successful Bidder is announced, any communication with Bidders for clarification of Bids, if necessary, will be initiated by the Seller. 13. Conditions, Criteria, Scoring and Evaluation of Bids All currency references in the Bid (price and investments) must be expressed in Convertible Marks (KM) (1 EUR = KM) Criteria Bids shall be evaluated according to the following five criteria divided into two groups quantitative and qualitative criteria. The Quantitative Criteria include the price, investments and employment requirements. The Qualitative Criteria include the Business Plan and the Qualifications of the Bidder. A) Price Page 8 of 13

9 The Bidder offers the price for 67% of the basic capital of the company. The price must be paid exclusively in cash. B) Investments Investments include: Investments to be carried out during the period of three years from the date of signing the Share Purchase Agreement are those that will be directly performed by the potential Buyer. The source of these will not be assets of the Enterprise. The potential Buyer may perform the investments in cash or in tangible assets, fixed assets (land and buildings, production plants and equipment, furniture and office equipment, vehicles, construction). Investment in form of the equipment is possible if the equipment condition is acceptable for the Seller (functionality, usability, appropriateness, general condition, etc.). Investments paid directly by the Bidder, after settlement of the company liabilities. To take account of timing and risk, the value of investments made on the Bid will be discounted in the evaluation as follows: 1 st Year: 100% of planned investments will be included in the evaluation 2 nd Year:.80% of planned investment will be included in the evaluation 3 rd Year. 60 % of planned investment will be included in the evaluation 4 th and more: the value will not be included in the evaluation The best-ranked Bidder is required to deliver a bank guarantee of fulfilled investments to the Seller, in the form of the bank acceptable for the Seller. C) Employment Consistent with the overall social policy in Bosnia and Herzegovina, including that connected with the privatization of State-Owned enterprises, each Bidder is encouraged to emphasize employee retention and, i.e. currently full time employees, solving their labour-legal status, according with the Law. Bids with less number of employees, will not be evaluated according with this criteria. The Company employees total of 1310 employees, according with evidence of Pension Disability Invalid Fund According to this criteria will be evaluated 1310 retained existing employees (employment list) for 3 years period, since signing the Share Purchase Agreement. D) Business Plan The Bidder is required to maintain the Company s existing type of business for at least (3) three years from the signature date of the Share Purchase Agreement. The Potential Bidder is required to submit a detailed three-year Business Plan for the Company (including Investment Plan and Employment Plan). The Business Plan should include projected Page 9 of 13

10 Income Statement, Balance Sheet, as well as the sources of funds and their projected allocation. Furthermore, the Plan should identify the main strategy for the newly privatized Company, including, but not be limited to the following: Plans for the local and international market share increase Improvement of the existing and development of new products and services Improvement of financial situation of the company Modernization of the technology and production Management improvement and organization of the company Activities to achieve the above-mentioned D) Qualification of the Bidder Each Bidder should submit appropriate supporting evidence on its competence and qualifications to execute the commitments included in its Bid. Such supporting material should include, but not be limited to, the following: Financial Statements for the past 3 years (preferably audited) Auditors Statements (if available) Bidder s relevant experience in the Enterprise's market sector References from banks, customers or other business connections Information on its international business experience gained Evidence of previous privatization participation In the case of a consortium bid, each consortium member must deliver the information related to the above-mentioned items Scoring The Seller may, according to his discretion and without further explanation, disqualify the Bidder whom he considers unlikely to be able to satisfy the criteria and commitments stated in the Draft Share Purchase Agreement. Maximum number of points for all criteria mentioned-above (A to E) is 100. The following five criteria shall be evaluated with the following number of points: Quantitative criteria Purchase Price: 15 points Investments Commitment: 30 points Employment Plan: 30 points Qualitative criteria: Business Plan: 15 points Qualification of the Bidder: 10 points Total: 100 points Evaluation of Bids Page 10 of 13

11 The evaluation of all Bids shall be performed in accordance with the following method: for each criterion, all bids shall be evaluated relative to the highest scored Bid, i.e. the Bidder evaluated best on a particular criterion gets the maximum points. The scoring formula for each of the Bids is defined as follows: A) Price per 67% of basic shares: 15 points, according to the following formula: N p = (P / P max ) * 15, where: N p is the number of points for Price P is the price offered by the Bidder P max is the highest price offered by a bidder in the Tender B) Investment commitment: 30 points, according to the following formula: N i = (I / I max ) * 30, where: N i is the number of points for Investment I is the discounted present value of the Investment over three years I max is the discounted present value of the investment over three years offered by the Bidder in the Tender with the highest investment value C) Employment: 30 points, according to the following formula: N e = (E / E max ) * 30, where: N e is the number of points for Employment E is the total number of new employees the Bidder is committed to hire E max is the highest number of the total employees offered by a bidder in the Tender. D) For its Business Plan each bidder is either considered: Evaluation Number of Points Very good 15,0 Good 11,25 Medium 7,5 Low 3.75 Very low 0 E) For the Qualification of the Bidder each bidder is either considered: Evaluation Number of Points Very good 10 Good 7.5 Medium 5. Low 2.5 Page 11 of 13

12 Very low Negotiations The purpose of the negotiations will be to resolve differences between the Draft Share Purchase Agreement proposed by the Seller and any changes proposed by the Bidder in its Bid. Basic elements of the Bid (Price, Investments, Employment Plan, Business Plan) can t be changed and will be constituent part of the Share Purchase Agreement. Negotiations with Successful Bidder will be concluded within 20 working days since the beginning of negotiations. If the successful Bidder fails or refuses to execute the Share Purchase Agreement, or doesn t pay the price within the scheduled deadline of the Share Purchase Agreement, the deposit will be retained by the Seller. The tender winner will have no more rights over company shares. Submitting the Bid, the Bidder confirms that he has read and understood this rule. 15. Notification to losing Bidders The Seller shall inform losing Bidders about tender results, within 5 (five) working days, since the day of bringing Tender Commission Decision. At the same time they will be informed that their Bids are valid till closing day of the Share Purchase Agreement. The tender Commission will start negotiations with the second ranked bidder. period of the Bids, the Tender Commission shall enter negotiations with the second-ranked Bidder if negotiations with the first-ranked Bidder are not successfully consummated. Bid Deposits of unsuccessful Bidders will be wired to them no later than thirty (30) working days after the day of bringing a Decision. 16. No Agreement until Share Purchase Agreement Signed No agreement will be deemed to have been reached concerning the sale of the Shares until the Seller and the Successful Bidder have signed the Share Purchase Agreement. Until such time, the Seller has no obligations to the Successful Bidder with respect to the Enterprise or the Shares. Prior to the signature of the Share Purchase Agreement, the Potential Buyer is required to provide evidence issued by the competent authorities, that no hindrances exist with regard to the provisions referred to in Article 12 (2) [2, 3, 4, 5] of the Law on Privatization of Enterprises (Official Gazette of the Federation of Bosnia and Herzegovina, No. 27/97, 8/99, 32/00, 45/00, 61/01, 27/02, 33/02, 28/04 and 44/04). Best-ranked Bidder is obliged to sign the Share Purchase Agreement, after validity of the Decision on announcement of the best-ranked Bidder, within 5 days, after negotiations are closed. Page 12 of 13

13 17. Disclaimer of Representations and Warranties The Seller does not make any representations or warranties with respect to the Shares or the Enterprise (other than any set forth in the Share Purchase Agreement) express or implied. The Seller also expressly disclaims any warranty, guarantee, or representation, oral or written, expressed or implied concerning the Enterprise or the Shares. Potential Bidders are expected to undertake their own independent due diligence inspection concerning the Enterprise and the Shares and to submit their Bids based solely on their own independent investigation and findings, and not in reliance on any information provided by the Seller. 18. Seller s Right to Negotiate, Alter Rules of Sale, or Cancel Sale The Seller reserves the right to alter the timetable of this Tender including but not limited to any or all deadlines at any time prior to the Bid Deadline without notice. Subsequent written notice shall be provided to all Bidders as soon as possible by fax or express courier. The Seller also reserves the right to cancel this Sale at any time and for any reason before or after the Bid Deadline upon written notice (fax or express courier) to Bidders. Such cancellation will be without cost or liability to the Seller. In the event the Sale is cancelled, each Eligible Bidder s Deposit will be refunded within five (5) working days. Page 13 of 13