<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 1997
------------------
Home Security International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 333-26399 98-0169495
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
Level 7, 77 Pacific Highway
North Sydney, NSW Australia 2060
- -------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (011) (612) 9936-2424
---------------------
_________________________________________________________________
Former name or former address, if changed since last report
<PAGE>
Item 2. Acquisition of Assets
On December 31, 1997, Home Security International, Inc (the "Company"),
through its wholly owned subsidiary FAI Home Security Pty Ltd., purchased 50% of
the shares of FAI Finance Corporation Pty Ltd ("FFC") ( the "FFC Shares"), a
leading consumer finance company in Australia and New Zealand which finances
more than 80 percent of all customer accounts financed by Company's
distributorship network in Australia and New Zealand, from FAI Insurances
Limited ("FAI"), a 41.7% shareholder of the Company (collectively, the
"Transaction"). As of December 31, 1997, the assets of FFC included net loan
receivables of approximately $21.6 million and secured cash deposits of $1.2
million. FFC obtains funding for its financing activities, in part, through a
revolving credit facility from FAI in the amount of approximately $20 million,
50% of which is secured by the FCC Shares. The Company intends to maintain the
current business in its present form and to continue the employment of all
staff.
As part of the Transaction, the Company entered into a Share Sale
Agreement (the "Agreement") through which the Company agreed to pay to FAI
approximately $7.04 million for the FFC Shares. The Agreement provides for an
initial cash payment of $1,637,000 to be made on February 1, 1998, with the
balance of the purchase price to be under a five year note at 7-3/4% per annum,
with interest payable monthly (the "FFC Note"). The Company anticipates making
the initial cash payment with cash on hand, and subsequent principal and
interest payments on the FFC Note with cash flow from operations. The principal
payments on the FFC Note are payable by the Company in the amounts and on the
anniversary dates of the Agreement as follows:
<TABLE>
<CAPTION>
Payment Date Amount (US $)
------------ -------------
<S> <C>
Initial Payment 2/1/98 $1,637,000
12/31/98 664,800
12/31/99 1,309,600
12/31/00 1,309,600
12/31/01 1,309,600
12/31/02 809,400
----------
Total $7,040,000
==========
</TABLE>
Further, in the event the Company, or any of its subsidiaries, receives
funds from any private or public issue of any debt or equity instruments, up to
40% of the proceeds from such issue must be used to pay down the then
outstanding balance of the FFC Note.
<PAGE>
The Agreement also grants the Company an option (the "Option") at no
additional cost, exercisable over four years from the date of the Agreement, to
purchase the remaining 50% interest in FFC, from FAI, for 7.04 million plus 50%
of FFC's retained earnings at the time the Option is exercised. The total
purchase price for the remaining shares in FFC will be financed by FAI over four
years from the date the Option is exercised.
As part of the Transaction, the Company also entered into a Shareholders
Agreement outlining standard rights and obligations of the Company and FAI as
regard to their share holdings in FFC.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
(b) Pro Forma Financial Statements.
In accordance with Item 7(a) (4) and 7(b) (2) of Form 8-K, the financial
statements of the called for by Item 7(a) of Form 8-K and Rule 3-05 of
Regulation S-X, and the pro forma financial information called for by Item 7(b)
of Form 8-K and Article XI of Regulation S-X, will be filed by amendment as soon
as practicable but not later than March 15, 1998.
(c) Exhibits. The following exhibits are filed
herewith in accordance with Item 601 of Regulation S-K:
10.1 Share Sale Agreement dated December 31, 1997 by and between FAI
Insurances Limited and FAI Home Security Pty. Limited.
10.2 Shareholders Agreement dated December 31, 1997 by and between
FAI Insurances Limited and FAI Home Security Pty. Limited.
<PAGE>
HOME SECURITY INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this 8-K report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HOME SECURITY INTERNATIONAL, INC.
By: /s/ Bradley D. Cooper
--------------------------------------------
Bradley D. Cooper
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Mark Whitaker
--------------------------------------------
Mark Whitaker
Vice President of Finance and Treasurer
(Principal Financial and Accounting Officer)
Dated: January 15, 1998
<PAGE>
INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
10.1 Share Sale Agreement dated December 31, 1997 by and between FAI Insurances
Limited and FAI Home Security Pty. Limited.
10.2 Shareholders Agreement dated December 31, 1997 by and between FAI
Insurances Limited and FAI Home Security Pty. Limited.
</TABLE>
<PAGE>
Exhibit 10.1
FAI INSURANCES LIMITED
(ACN 004 304 545)
FAI HOME SECURITY PTY LIMITED
(ACN 050 064 214)
SHARE SALE AGREEMENT
relating to shares in
FAI Finance Corporation Pty Limited
(ACN 053 262 561)
MINTER ELLISON
Lawyers
Minter Ellison Building
44 Martin Place
SYDNEY NSW 2000
DX 117 SYDNEY
Telephone (02) 9210 4444
Facsimile (02) 9235 2711
MAP: 10664498
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <C> <S> <C>
1. DEFINITIONS AND INTERPRETATION 1
1.1 Definitions 1
1.2 Interpretation 4
2. CONDITIONS 5
2.1 Conditions 5
2.2 Waiver of Conditions 5
2.3 Conduct of the parties 6
2.4 Failure of Condition 6
3. SALE AND PURCHASE 6
3.1 Agreement to sell and purchase 6
3.2 Sale of Shares free from Encumbrance 6
3.3 Effective Date 6
4. PURCHASE PRICE 7
4.1 Purchase Price 7
4.2 Payment of the Purchase Price 7
5. VENDOR'S OBLIGATIONS PENDING COMPLETION 7
5.1 Vendor's obligations 7
5.2 Purchaser's obligations 9
6. COMPLETION 9
6.1 Time and place 9
6.2 Simultaneous actions at Completion 9
6.3 Obligations of the Vendor 9
6.4 Obligations of the Purchaser 10
6.5 Purchaser's rights 10
6.6 Vendor's rights 10
6.7 Conduct until the Shares are registered 10
7. WARRANTIES BY THE VENDOR 11
7.1 Warranties 11
7.2 Application of the Warranties 11
7.3 Qualification 11
7.4 Exclusions 11
7.5 Indemnity limitations 12
7.6 Indemnity 12
7.7 Financial limits on claims 12
7.8 Maximum aggregate liability for claims 12
7.9 Notice of potential claim 12
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S> <C>
7.10 Notice of claim 13
7.11 Rights of the Vendor 13
7.12 Notification of credit by the Purchaser 13
7.13 Effect of payment 13
7.14 Survival 13
8. WARRANTIES BY THE PURCHASER 14
8.1 Warranties 14
8.2 Application of Representations by the Purchaser 14
9. CONFIDENTIALITY AND PUBLICITY 14
9.1 Confidentiality 14
9.2 Confidential Information 15
9.3 Announcements 15
10. TERMINATION 16
10.1 Default 16
10.2 After termination 16
10.3 Survival 16
10.4 Accrued rights 16
11. ASSIGNMENT 16
12. WAIVER 17
12.1 Waiver 17
12.2 Rights exercisable 17
13. NOTICES 17
13.1 Service of notices 17
13.2 Deemed receipt 18
13.3 Execution 18
13.4 Other modes of service permitted 18
13.5 Interpretation 18
14. GOVERNING LAW AND JURISDICTION 18
15. GENERAL 19
15.1 Duration of provisions 19
15.2 Costs 19
16. ADJUSTMENT TO PURCHASE PRICE 19
SCHEDULE 1 PART 1 - DETAILS OF THE COMPANY 21
PART 2 - DETAILS OF SUBSIDIARY 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SCHEDULE 2 - CONDITIONS 23
SCHEDULE 3 - DIRECTORS AND SECRETARIES TO BE APPOINTED 24
SCHEDULE 4 - WARRANTIES 25
SCHEDULE 5 - INTELLECTUAL PROPERTY RIGHTS 34
SCHEDULE 6 - PROPERTY 35
</TABLE>
<PAGE>
SHARE SALE AGREEMENT
AGREEMENT dated 1997
BETWEEN FAI INSURANCES LIMITED (ACN 004 304 545) of 333 Kent Street,
Sydney, New South Wales 2000 ('Vendor'),
AND FAI HOME SECURITY PTY LIMITED (ACN 050 064 214) of 7/77 Pacific
Highway, North Sydney, New South Wales 2000 ('Purchaser')
RECITALS
A. The Company has an issued share capital of $50 002 divided into 50 002
fully paid shares of $1.00 each.
B. All of the issued share capital is legally and beneficially owned by the
Vendor.
C. Subject to and on the terms and conditions contained in this agreement:
(i)the Vendor has agreed to sell 50% of its shares ('Shares') to the
Purchaser; and
(ii) the Purchaser has agreed to purchase the Shares from the Vendor.
AGREEMENT
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this agreement, unless the contrary intention appears:
'Accounting Standards' means the Australian Accounting Standards from time
to time, but if and to the extent that any matter is not covered by
Australian Accounting Standards means generally accepted accounting
principles applied from time to time in Australia for a company similar to
the Company;
'Accounts' means the audited consolidated balance sheet of the Company and
the Subsidiary as at the Accounts Date and the audited consolidated profit
and loss statement of the Company and the Subsidiary for the financial
year ended on the Accounts Date together with the notes to, and the
reports of the directors in respect of, those accounts;
<PAGE>
'Accounts Date' means 30 June 1997;
'Articles' means the articles of association of the Company;
'Associate' has the meaning given to that term by sections 10 to 17 of the
Corporations Law;
'ASX' means Australian Stock Exchange Limited;
'Business' means the businesses carried on by the Group, including the
business of the provision of consumer finance products;
'Business Day' means the day on which Banks (as defined in the Banking Act
1959 (Cth)) are open for general banking business in New South Wales,
excluding Saturdays and Sundays;
'Claim' includes a claim, notice, demand, action, proceeding, litigation,
investigation, judgment, damage, loss, cost, expense or liability however
arising, whether present, unascertained, immediate, future or contingent,
whether based in contract, tort or statute and whether involving a third
party or a party to this agreement;
'Company' means FAI Finance Corporation Pty Limited ACN 053 262 561 and in
Schedule 4 (Warranties) has the meaning given in paragraph 7.2(c);
'Completion' means completion of the sale and purchase of the Shares in
accordance with clause 6 (Completion);
'Completion Date' means the date on which Completion takes place;
'Conditions' means the conditions precedent set out in Schedule 2
(Conditions);
'Confidential Information' means the following, regardless of its form or
medium and whether or not it comes into existence before, on or after the
date of this agreement:
(a) all information of or used by any Group Company or the Business,
relating to their transactions, operations and affairs including,
without limitation, all past, current and prospective financial,
accounting, marketing, trading, technical and business information,
trade secrets, know-how, technology and operating procedures,
customer and supplier lists, data bases, source codes,
methodologies, manuals, artwork and advertising manuals;
(b) all other information treated by any Group Company as
confidential;
<PAGE>
(c) all notes, reports and other records based on, incorporating or
derived from information referred to in paragraphs (a) or (b); and
(d) all copies of the information, notes, reports and records
referred to in paragraphs (a), (b) or (c),
that is not public knowledge (otherwise than as a result of a breach of a
confidentiality obligation of a party);
'Deferred Payment Rate' means 7.75% per annum.
'deliver' includes cause the delivery of;
'Effective Date' means 31 December 1997;
'Encumbrance' includes mortgage, charge, lien, restriction against
transfer, encumbrance and other third party interest;
'Floating Charge' means the fixed and floating charge created by
instrument dated 28 June 1996 granted by the Company to Westpac over the
assets and undertaking of the Company;
'Group' means the Company and the Subsidiary;
'Group Company' means any one of the Company and the Subsidiary;
'Intellectual Property Rights' means all intellectual property and
proprietary rights (whether registered or unregistered) including, without
limitation:
(a) business names;
(b) trade or service marks;
(c) any right to have information (including, without limitation,
Confidential Information) kept confidential; and
(d) patents, patent applications, drawings, discoveries, inventions,
improvements, trade secrets, technical data, formulae, computer
programs, data bases, know-how, logos, designs, design rights,
copyright and similar industrial or intellectual property rights;
'Leasehold Property' means the real property (if any) listed in part 2 of
Schedule 6 (Property);
<PAGE>
'Liabilities' includes all liabilities (whether actual, contingent or
prospective), losses, damages, costs and expenses of whatever description;
'Material Adverse Effect' means a material adverse effect on:
(a)the Business; or
(b)the assets, profitability or financial condition of the Group;
'Money Owing' means the amount determined for any day by the Vendor to be
the aggregate of the Purchase Price Balance and any other amounts owing by
the Purchaser under this agreement on that day.
'pay' includes cause the payment of;
'Property' means the real property (whether leasehold or freehold) listed
in Schedule 6;
'Property Lease' means the lease of the Leasehold Property described in
part 2 of Schedule 6 (Property);
'Purchase Price' means the sum specified in clause 4 (Purchase Price);
'Purchase Price Balance' means the Purchase Price less the aggregate of
all payments of principal made by the Purchaser under clause 4 in
reduction of the Purchase Price.
'Records' means all original and copy records, documents, books, files,
reports, accounts, plans, correspondence, letters and papers of every
description and other material regardless of their form or medium and
whether coming into existence before, on or after the date of this
agreement, belonging or relating to or used by any Group Company including
(without limitation) certificates of incorporation, minute books,
statutory books and registers, books of account, taxation returns, title
deeds and other documents of title, customer lists, price lists, computer
programs and software, and trading and financial records;
'Related Body Corporate' has the meaning given to that term by sections 9
and 50 of the Corporations Law;
'sell' includes cause the sale of;
'Shareholders Agreement' means an agreement between the Vendor and the
Purchaser substantially in the form of Annexure A;
'Shares' means 25 001 of the shares in the issued capital of the Company;
<PAGE>
'Subsidiary' means the subsidiary of the Company listed in part 2 (Details
of Subsidiary) of Schedule 1;
'Target Date' means 21 January 1998 or a later date agreed by the Vendor
and the Purchaser in writing;
'Trade Mark Licence Agreement' means a non-exclusive licence to be entered
into between FAI Insurances Limited and the Company substantially in the
form set out in Annexure B to this agreement.
'transfer' includes cause the transfer of;
'Warranties' means each of the representations and warranties given under
clause 7.1 (Warranties) and set out in Schedule 4 (Warranties); and
'Westpac' means Westpac Banking Corporation ARBN 007 457 141.
1.2 Interpretation
In this agreement, unless the contrary intention appears:
(a) headings are for ease of reference only and do not affect the
meaning of this agreement;
(b) the singular includes the plural and vice versa;
(c) other grammatical forms of defined words or expressions have
corresponding meanings;
(d) a reference to a clause, paragraph, schedule, annexure or
attachment is a reference to a clause or paragraph of or schedule,
annexure or attachment to this agreement and a reference to this
agreement includes its schedules, annexures and attachments;
(e) a reference to a document or agreement, including this agreement,
includes a reference to that document or agreement as novated,
altered or replaced from time to time;
(f) a reference to 'A$', '$A', 'dollar' or '$' is a reference to
Australian currency;
(g) a reference to a specific time for the performance of an
obligation is a reference to that time in Sydney, New South Wales,
Australia even if the obligation is to be performed elsewhere;
<PAGE>
(h) a reference to a party includes a reference to the party's
executors, administrators, successors, substitutes and assigns;
(i) words and expressions importing natural persons include
partnerships, bodies corporate, associations, governments and
governmental and local authorities and agencies, and vice versa;
(j) a reference to any legislation or statutory instrument or regulation
is construed in accordance with the Acts Interpretation Act 1901
(Cth) or the equivalent State legislation, as applicable;
(k) a reference to writing includes typewriting, printing, lithography,
photography and any other method of representing or reproducing
words, figures or symbols in a permanent and visible form; and
(l) if a day for the payment under this agreement falls on a day which
is not a Business Day, payment is due on the immediately preceding
Business Day.
2. CONDITIONS
2.1 Conditions
The provisions of clauses 3 (Sale and purchase), 4 (Purchase Price) and 6
(Completion) have no effect and the sale of the Shares by the Vendor to
the Purchaser as contemplated by this agreement shall not occur unless and
until all of the Conditions are fulfilled.
2.2 Waiver of Conditions
A Condition may not be waived except by a waiver in writing signed by each
party entitled to the benefit of that Condition (as set out in Schedule 2
(Conditions)) and will be effective only to the extent specifically set
out in that waiver.
2.3 Conduct of the parties
Each party must use all reasonable efforts within its own capacity to
ensure that each Condition is fulfilled before the Target Date.
2.4 Failure of Condition
Either the Vendor or the Purchaser may terminate this agreement by giving
notice in writing to the other parties at any time before Completion if:
(a) a Condition is incapable of fulfilment;
<PAGE>
(b) events or circumstances make it improbable (in the reasonable
opinion of the Vendor) that a Condition can be fulfilled;
(c) each Condition is not satisfied, or waived by each party entitled to
the benefit of that Condition, before 5pm on the Business Day
immediately preceding the Target Date; or
(d) a Condition having been fulfilled, that Condition does not remain
fulfilled in all respects at all times before Completion.
3. SALE AND PURCHASE
3.1 Agreement to sell and purchase
On and subject to the terms and conditions of this agreement:
(a) the Vendor as beneficial owner agrees to sell the Shares to the
Purchaser; and
(b) the Purchaser agrees to purchase the Shares from the Vendor.
3.2 Sale of Shares free from Encumbrance
The Vendor must transfer the Shares at Completion:
(a) free from Encumbrance; and
(b) together with all rights, including dividend and voting rights,
attached or accrued to them on or after the date of this agreement.
3.3 Effective Date
Notwithstanding whether Completion occurs before or after the Effective
Date, Completion will be taken to have occurred on the Effective Date.
4. PURCHASE PRICE
4.1 Purchase Price
The purchase price payable by the Purchaser to the Vendor for the Shares
is $10,750,000.
<PAGE>
4.2 Payment of the Purchase Price
The Purchaser must pay (or cause to be paid) the Purchase Price as
follows:
(a) by payment of the amount of $2,500,000 on Completion; and
(b) by payment of the balance of the Purchase Price of $8,250,000 in the
amounts set out in column 2 on the dates set out in column 1 of the
table below:
<TABLE>
<CAPTION>
Column 1 - Column 2 -
Payment Dates Payment Amounts
---------------------------------------------------------------
<S> <C>
The first anniversary of the date of this $1,000,000
agreement
On each of the second, third and fourth $2,000,000
anniversary of the date of this agreement
---------------------------------------------------------------
On each date that the Purchaser or a Up to 40% of the
Related Body Corporate receives funds from proceeds received
any issue of debt or equity instruments from the issue or
(of whatever type or nature) to the public raising
or effects any capital raising
---------------------------------------------------------------
On the Business Day after the Vendor has The Money Owing
notified the Purchaser that an 'Event of at that day
Default' under the Receivables Purchase
Agreement between the Company, Westpac
and FAI General Insurance Limited dated
28 June 1996 (as amended) has occurred
and is subsisting
---------------------------------------------------------------
The fifth anniversary of the date of this The Money Owing
agreement on that day
</TABLE>
(c) In consideration of the Vendor agreeing to the deferment of the
payment of the Purchase Price, interest will accrue daily on the
Purchase Price Balance at the Deferred Payment Rate. Interest is
calculated on the basis of a 365 day year and is payable monthly in
arrears on the last Business Day of each month until the Money Owing
has been fully repaid.
5. VENDOR'S OBLIGATIONS PENDING COMPLETION
5.1 Vendor's obligations
Until Completion the Vendor:
(a) must ensure that the Business is carried on in all respects in the
ordinary and usual course and in the same manner as before the date
of this agreement and (in particular but without limitation) must
ensure that each Group Company does not, except as expressly
provided in this agreement or with the prior
<PAGE>
written consent of the Purchaser:
(i) declare, make or pay any distribution of its profits or
assets by way of declaration or payment of dividend or
otherwise;
(ii) lend any money outside the ordinary course of business, and
in particular (but without limitation) not lend money to the
Vendor, its officers or employees;
(iii) transfer or otherwise dispose of or agree to transfer or
dispose of the Business or any part of it;
(iv) make a material change in the nature of, or cease carrying
on, the Business or any part of it;
(v) sell or otherwise dispose of any material asset of any Group
Company;
(vi) enter into any material, unusual or abnormal agreement or
commitment, or any other agreement or commitment outside the
ordinary course of business; or
(vii) borrow money, or draw on any credit lines, other than under
existing credit facilities and then only if the credit limit
as at the date of this agreement is not increased;
(b) must ensure that the Purchaser, its employees, agents and
representatives are provided with, subject to clause 5.2
(Purchaser's obligations), such access to the Property and the
Records as the Purchaser reasonably requires at all reasonable times
before Completion to enable the Purchaser to become familiar with
the Business and the affairs of the Group, to investigate the
accuracy of the Warranties and to conduct due diligence
investigations reasonably required by the Purchaser;
(c) must ensure that for any of the purposes described in paragraph (b)
the Purchaser is permitted to make copies of material examined,
consult with the Managing Director of the Company and (but only with
the prior consent of the Vendor), consult with employees of any
Group Company;
(d) must (and must use their best endeavours to ensure that the officers
and employees of each Group Company) cooperate with and provide any
assistance to the Purchaser reasonably necessary for the exercise of
any of the Purchaser's rights under this clause 5.1; and
(e) must ensure that the Purchaser is informed of, and consulted about,
any
<PAGE>
matter which materially affects the Business.
5.2 Purchaser's obligations
The Purchaser must ensure that the exercise of any of its rights under
clause 5.1 (Vendor's obligations) and (in particular but without
limitation) any due diligence investigations conducted by it or on its
behalf are exercised and conducted to avoid unreasonable disruption to the
conduct of the Business and the activities and operations of any Group
Company and its employees.
6. COMPLETION
6.1 Time and place
Completion will take place on the Completion Date at the offices of Minter
Ellison, Lawyers, at 44 Martin Place, Sydney, New South Wales, or another
place agreed by the parties.
6.2 Simultaneous actions at Completion
All actions at Completion will be treated as taking place simultaneously
and no delivery or payment will be regarded as having been made until all
deliveries and payments due to be made by Completion have been made.
6.3 Obligations of the Vendor
At or before Completion the Vendor must:
(a) deliver to the Purchaser duly executed and completed transfers in
favour of the Purchaser of the Shares in registrable form (except
for the impression of stamp duty) together with the relevant share
certificates;
(b) produce to the Purchaser any power of attorney or other authority
under which the transfers of the Shares are executed;
(c) deliver to the Purchaser copies of the other consents and waivers
obtained under Schedule 2 (Conditions);
(d) cause the board of directors of the Company to resolve that the
transfers of the Shares (subject only to the payment of stamp duty
on the transfers) be approved and registered;
(e) cause the persons named in Part 1 of Schedule 3 (Directors and
secretaries to be appointed)(or any other persons notified in
writing by the Purchaser to
<PAGE>
the Vendor before Completion) to be appointed as directors and
secretary of the Company and the Subsidiary with effect from
Completion and accept the resignation of Mr Alexander George William
Keys; and
(f) cause the resignation as directors and secretary of the Company and
the Subsidiary with effect from Completion of each of those persons
named in Schedule 1 against whose name it is indicated that the person
is to resign.
6.4 Obligations of the Purchaser
The Purchaser must at Completion pay in accordance with clause 4 (Purchase
Price) that part of the Purchase Price payable on the Completion Date.
6.5 Purchaser's rights
If any provision of clause 6.3 is not complied with in any respect on the
date set for Completion the Purchaser may:
(a) waive compliance with that provision;
(b) defer Completion to a date not more than five Business Days after the
date set for Completion (and the provisions of this clause 6
(Completion), including this clause 6.5, apply to Completion as
deferred);
(c) proceed to Completion as far as practicable (without prejudice to any
of its rights under this agreement); or
(d) if non-compliance is not capable of remedy within a period of 10
Business Days and is material, terminate this agreement by notice in
writing to the Vendor.
6.6 Vendor's rights
The Vendor:
(a) is entitled to retain after Completion copies of any Records necessary
for it to comply with any applicable law (including, without
limitation, any applicable Tax law) and to prepare Tax or other
returns required of them by law; and
(b) must not without the Purchaser's consent disclose any confidential
information relating to the Group or the Purchaser contained in any
copy Records retained under paragraph (a) (except as required by law
or the Listing Rules of ASX ) until that confidential information
becomes part of the public domain (otherwise than by breach of the
Vendor of its obligations under this
<PAGE>
clause).
6.7 Conduct until the Shares are registered
After Completion and until the Shares are registered in the name of the
Purchaser, the Vendor must:
(a) convene and attend general meetings of the Company;
(b) vote at those meetings; and
(c) take as registered holder of the Shares all action,
as lawfully required by the Purchaser by written notice to the Vendor, but
nothing in this clause requires the Vendor to take any action which either
would or may in the Vendor's reasonable opinion cause it loss or detriment
(including without limitation loss or reduction of any Taxation concession
or deduction), or could be done by the Purchaser after the transfer of the
Shares is registered.
7. WARRANTIES BY THE VENDOR
7.1 Warranties
The Vendor represents and warrants to the Purchaser that each of the
Warranties is true and accurate at the date of this agreement and will be
true and accurate on each day up to and including the Completion Date.
7.2 Application of the Warranties
Each of the Warranties:
(a) remains in full force and effect after Completion until that day being
the third anniversary date after the Completion Date;
(b) is separate and independent and is not limited by reference to any
other Warranty; and
(c) applies in relation to the Company and also, except where expressly
otherwise provided, separately in relation to each Group Company as if
each reference in Schedule 4 (Warranties) to the 'Company' is a
reference to that Group Company.
7.3 Qualification
<PAGE>
The Warranties are given subject to and are qualified by:
(a) those matters disclosed in this agreement;
(b) any other written information relating to any Group Company which has
been made available to the Purchaser by the Vendor before the date of
this agreement; and
(c) any information available on public registers maintained by any
relevant Governmental Authority.
7.4 Exclusions
The Purchaser agrees with the Vendor that:
(a) the only representations and warranties upon which the Purchaser has
relied in entering into this agreement are those set out in Schedule 4
(Warranties);
(b) to the extent permitted by law, all other warranties, representations
and undertakings (whether express or implied and whether oral or in
writing) made or given by the Vendor, any Group Company or their
respective employees, agents or representatives in connection with any
matters relevant to or connected with this agreement and the
transaction of sale and purchase contemplated by this agreement are
expressly excluded, have no force or effect and have not been relied
on by the Purchaser; and
(c) the only person entitled to make a claim for breach of Warranty under
this agreement is the Purchaser and then only strictly in accordance
with and subject to the provisions of this clause 7 (Warranties by the
Vendor).
7.5 Indemnity limitations
Despite any other provision of this agreement, the Vendor has no liability,
to the extent that:
(a) the subject matter of any claim is provided for in the Accounts or the
Completion Accounts; or
(b) any amount the subject of a claim is recovered under an insurance
policy in favour of any Group Company.
7.6 Indemnity
Subject to the provisions of this clause 7 (Warranties by the Vendor)
(including, without limitation, clauses 7.6 (Indemnity limitations), 7.7
(Financial limits on claims)
<PAGE>
and 7.8 (Maximum aggregate liability for claims)), the Vendor indemnifies
the Purchaser:
(a) from all Liabilities which the Purchaser suffers or incurs by any of
the Warranties being untrue or inaccurate; and
(b) from all Claims made by any third party in relation to a matter which
constitutes, or in circumstances that constitute, a breach of any of
the Warranties.
7.7 Financial limits on claims
The Purchaser may not make a claim against the Vendor for a breach of any
Warranty unless and until the aggregate of all claims for breach of
Warranties under this agreement exceeds or has already exceeded $100,000.
7.8 Maximum aggregate liability for claims
The maximum liability of the Vendor (including legal costs and expenses
incurred in defending a claim from a third party), as a result of claims
for breach of Warranties under this agreement is limited to an amount equal
to the Purchase Price.
7.9 Notice of potential claim
If the Purchaser receives notice or otherwise becomes aware of any act,
matter or thing which is a claim under this clause 7 (Warranties by the
Vendor), it must notify the Vendor of that fact, together with all
available details, within 20 Business Days after it has first come to the
Purchaser's attention.
7.10 Notice of claim
Any claim made by the Purchaser under this clause 7 (Warranties by the
Vendor) must be by notice in writing to the Vendor setting out the act,
matter or thing relied upon as giving rise to the claim, the Warranty the
subject of the claim and all relevant details of the claim.
7.11 Rights of the Vendor
The Vendor is in respect of an act, matter or thing notified by the
Purchaser under clause 7.9 (Notice of potential claim) or 7.10 (Notice of
claim), entitled to defend or institute any legal or other proceedings,
conducted in the name of the Company and under the management and control
of the Vendor but with:
(a) reasonable consultation with the Purchaser; and
<PAGE>
(b) legal representation approved by the Purchaser (which approval must
not be unreasonably withheld or delayed).
7.12 Notification of credit by the Purchaser
If any payment in respect of a claim under the Warranties is made to the
Purchaser by or on behalf of the Vendor and after the payment is made the
Purchaser receives any benefit or credit by reason of the matters to which
the claim relates, then the Purchaser:
(a) must immediately notify the Vendor of the benefit or credit; and
(b) pay to the Vendor an amount equal to that paid to the Purchaser by or
on behalf of the Vendor or (if less) the amount of the benefit or
credit received by the Purchaser,
and the Purchaser's payment will be treated as a credit against the
Vendor's maximum aggregate liability under clause 7.8 (Maximum aggregate
liability for claims).
7.13 Effect of payment
A payment to the Purchaser under this clause 7 (Warranties by the Vendor)
is to be treated as a pro rata reduction in the purchase price for each
Share.
7.14 Survival
The provisions of this clause 7 (Warranties by the Vendor) remain in full
force and effect after Completion.
8. WARRANTIES BY THE PURCHASER
8.1 Warranties
The Purchaser represents and warrants to the Vendor that each of the
following statements is true and accurate at the date of this agreement and
will be true and accurate on each day up to and including the Completion
Date:
(a) it is validly existing under the laws of its place of incorporation;
(b) it has the power to enter into and perform its obligations under this
agreement and to carry out the transactions contemplated by this
agreement;
(c) it has taken all necessary action to authorise its entry into and
performance of this agreement and to carry out the transactions
contemplated by this agreement;
<PAGE>
(d) its obligations under this agreement are valid and binding and
enforceable against it in accordance with their terms; and
(e) neither it nor any party related to it has taken any action under
which any person is or may be entitled to a commission, brokerage or
finder's fee in connection with the sale and purchase of the Shares.
8.2 Application of Representations by the Purchaser
Each of the representations by the Purchaser under clause 8.1 (Warranties)
remains in full force and effect on and after Completion.
9. CONFIDENTIALITY AND PUBLICITY
9.1 Confidentiality
The Purchaser:
(a) must keep confidential any confidential information of the Vendor
and all Confidential Information disclosed to the Purchaser by or on
behalf of the Vendor, or of which the Purchaser becomes aware
(whether before or after the date of this agreement), except
information which is public knowledge otherwise than as a result of
a breach of confidentiality by the Purchaser or any of its permitted
disclosees; and
(b) may disclose any confidential information in respect of which the
Purchaser has an obligation of confidentiality under paragraph (a)
only:
(i) to those of the Purchaser's officers or employees or
financial, legal or other advisers who:
(A) have a need to know for the purposes of this agreement
for the provision of advice to the Purchaser in
connection with this agreement or the transactions
contemplated by it (and then only to the extent that
they need to know); and
(B) undertakes to the Purchaser (and, where required by the
Vendor, to the Vendor also) a corresponding obligation
of confidentiality to that undertaken by the Purchaser
under this clause 9.1;
(ii) if required to do so by law or the Listing Rules of ASX; or
<PAGE>
(iii) with the prior written approval of the Vendor.
9.2 Confidential Information
The provisions of paragraphs (a) and (b) of clause 9.1 (Confidentiality)
apply:
(a) with respect to Confidential Information:
(i) until Completion; or
(ii) until and for a period of three years after termination of
this agreement,
whichever in fact occurs; and
(b) with respect to any other confidential information of the Vendor,
until that information is public knowledge (otherwise than as a
result of a breach of confidentiality by the Purchaser or any of its
permitted disclosees).
9.3 Announcements
A party must not make or authorise a press release, announcement or other
public statement or communication of any kind relating to the negotiations
of the parties or the subject matter or provisions of this agreement
('Announcement') unless:
(a) it is required to be made by law or the Listing Rules of ASX or the
American Exchange and before it is made that party has:
(i) notified the Purchaser and the Vendor; and
(ii) given the Purchaser and the Vendor a reasonable opportunity to
comment on the contents of, and the requirement for, the
Announcement; or
(b) it has the prior written approval of the Purchaser and the Vendor.
10. TERMINATION
10.1 Default
If the Vendor on the one hand or the Purchaser on the other hand
('Defaulting Party') defaults in the performance of any of its obligations
under this agreement and the default:
<PAGE>
(a) is not capable of being remedied; or
(b) if capable of being remedied, is not remedied within three Business
Days after notice requiring it to be remedied is given to the
Defaulting Party by the party not in default,
the party not in default may immediately terminate this agreement by
giving notice in writing to all of the other parties.
10.2 After termination
On termination of this agreement for any reason each party must stop, and
must cause its permitted disclosees to stop, using confidential
information of another party and, at the other party's option:
(a) return to the other party;
(b) destroy and certify in writing to the other party the destruction
of; or
(c) destroy and permit a representative of the other party to witness
the destruction of,
all confidential information in its possession or control.
10.3 Survival
Clause 9 (Confidentiality and publicity), this clause 10 (Termination) and
any provision of this agreement which is expressed to survive termination
continue to apply after termination of this agreement.
10.4 Accrued rights
Termination of this agreement does not affect any accrued rights or
remedies of a party.
11. ASSIGNMENT
A party may not assign any of its rights under this agreement.
12. WAIVER
12.1 Waiver
<PAGE>
A provision of or right under this agreement may not be waived except by a
waiver in writing signed by the party granting the waiver, and will be
effective only to the extent specifically set out in that waiver.
12.2 Rights exercisable
The failure of a party at any time to require performance of any
obligation under this agreement is not a waiver of that party's right:
(a) to insist on performance of, or claim damages for breach of, that
obligation unless that party acknowledges in writing that the
failure is a waiver; and
(b) at any other time to require performance of that or any other
obligation under this agreement.
13. NOTICES
13.1 Service of notices
A party giving or serving notice or notifying under this agreement must do
so in writing:
(a) directed to the recipient's address specified in this clause, as
varied by any notice; and
(b) hand delivered or sent by prepaid post or facsimile to that address.
The parties' addresses and facsimile numbers are:
Vendor: FAI Insurances Limited
Attention: Chris MacDonnell
Address: 333 Kent Street, Sydney, NSW 2000
Facsimile No: 9274-9900
Purchaser: FAI Home Security Pty Limited
Attention: Mark Whitaker
Address: Level 7, 77 Pacific Highway,
North Sydney, NSW
<PAGE>
Facsimile No: 9936 2355
or such other address as a party may by notice in writing give to the
other from time to time.
13.2 Deemed receipt
A notice given in accordance with clause 13.1 (Service of notices) is
taken to be received:
(a) if hand delivered, on delivery;
(b) if sent by prepaid post, two Business Days after the date of
posting; or
(c) if sent by facsimile, when the sender's facsimile system generates a
message confirming successful transmission of the total number of
pages of the notice unless, within one Business Day after the
transmission, the recipient informs the sender that it has not
received the entire notice.
13.3 Execution
A notice given in accordance with clause 13.1 (Service of notices) is
sufficiently signed for or on behalf of a party if:
(a) in the case of a company, it is signed by a director, secretary or
other officer of the company; or
(b) in the case of an individual, it is signed by that party.
13.4 Other modes of service permitted
The provisions of this clause 13 (Notices) are in addition to any other
mode of service permitted by law.
13.5 Interpretation
In this clause 'notice' includes a demand, request, consent, approval,
offer and any other instrument or communication made, required or
authorised to be given under this agreement.
14. GOVERNING LAW AND JURISDICTION
This agreement is governed by the law applicable in New South Wales and
each party
<PAGE>
irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of New South Wales.
15. GENERAL
15.1 Duration of provisions
On Completion, the provisions of this agreement will not merge and, to the
extent that any provision has not been fulfilled, will remain in force.
15.2 Costs
Each party must bear its own costs of negotiating, preparing and executing
this agreement.
16. ADJUSTMENT TO PURCHASE PRICE
If by reason of any failure:
(a) of any transaction document of the Company to comply with any law,
any amount or amounts which, but for that non-compliance, would have
been recoverable by the Company cannot be recovered; or
(b) to carry out or to carry out properly all or any procedures required
to perfect the title of the Company to the debts stated to be owing
to the Company in its balance sheet as at 31 December 1997, any
amount or amounts shown on that balance sheet are not recoverable;
or
(c) by reason of the matters referred in paragraph (a) or (b), the
Company is required to pay to any person either by way of damages,
reimbursement of monies paid prior to the closing date or otherwise,
then:
(d) such amount or amounts shall not be treated as part of any bad debt
provision;
(e) 50% of the total of any such amount or amounts shall be paid by the
Vendor to the Purchaser or, where there remains unpaid by the
Purchaser to the Vendor at the relevant time any monies on account
of the Purchase Price, the amount or amounts shall be set-off
against the balance unpaid; and
(f) the time of the deduction shall be the date when any amount or
amounts referred to in
<PAGE>
this paragraph shall be determined to be not recoverable upon the
basis of such non-compliance or procedural deficiency.
<PAGE>
EXECUTED as an agreement.
<TABLE>
<S> <C> <C>
SIGNED for and on behalf of FAI ) FAI Insurances Limited by its Attorney who
INSURANCES LIMITED by ) states that at the time of executing this instrument
being its duly constituted Attorney in the ) the Attorney has not notice of the revocation of
presence of ) the Power of Attorney dated
) 1997 under the authority of which the Attorney
) has executed this agreement
- ---------------------------- ----------------------------------
Signature of witness Attorney
- ----------------------------
Name of witness (print)
</TABLE>
<TABLE>
<S> <C> <C>
SIGNED for and on behalf of FAI HOME ) FAI Home Security Pty Limited by its Attorney
SECURITY LIMITED by ) who states that at the time of executing this
being its duly constituted Attorney in the ) instrument the Attorney has not notice of the
presence of ) revocation of the Power of Attorney dated
) 1997 under the authority of which the Attorney
) has executed this agreement
- ---------------------------- ----------------------------------
Signature of witness Attorney
- ----------------------------
Name of witness (print)
</TABLE>
<PAGE>
SCHEDULE 1
PART 1
DETAILS OF THE COMPANY
(Warranties 2 and 3)
<TABLE>
<S> <C>
Name: FAI FINANCE CORPORATION PTY LIMITED
ACN: 053 262 561
Registered office: 333 Kent Street, Sydney, New South Wales, 2000
Date of incorporation: 15 October 1991
Issued capital: $50 002 divided into 50 002 shares of $1.00 each,
held and beneficially owned by the Vendor
Directors: Alexander George William Keys
Timothy Maxwell Mainprize
Bradley David Cooper
Secretary: Robert Frederick Baulderstone
Charges: Registered fixed and floating charge ASC Charge
No.545834 dated 28 June 1996 and registered at 16:40 on 2 July
1996 in favour of Westpac over the assets and undertaking of
the Company
</TABLE>
<PAGE>
PART 2
DETAILS OF SUBSIDIARY
(Warranties 2, 3 and 26)
<TABLE>
<S> <C>
Name: FAI FINANCE CORPORATION (NZ) LIMITED
AK: 808650
Registered office: Level 15, Coopers and Lybrand Tower
Date of incorporation: 23 May 1996
Issued capital: 100 shares held beneficially by FAI Finance
Corporation Pty Limited
Directors: Lewis George Christensen
Secretary: Andrew McKay
Charges: None registered
</TABLE>
<PAGE>
SCHEDULE 2
CONDITIONS
(clause 2 (Conditions))
<TABLE>
<CAPTION>
Condition Party entitled to benefit
- ---------------------------------------------------------------------------------------------
<S> <C>
1. Pursuant to the Foreign Acquisitions and Takeovers Act The Purchaser and the
1975 (Cth) ('FATA') the Treasurer of the Commonwealth Vendor
of Australia consents to the transfer of the Shares
contemplated by this agreement and if that consent is given
subject to conditions or requirements, those conditions or
requirements are acceptable to the Purchaser.
For the purpose of this Condition 1, the Treasurer will be
taken to have consented to the transfer of the Shares under
this agreement if:
(a) notice is issued under FATA stating that the
Commonwealth Government does not object to the
transfer of the Shares; or
(b) notice of the sale of the Shares is given to the
Treasurer under FATA and the Treasurer is, by
reason of lapse of time, not empowered to make an
order under FATA in relation to the transfer of the
Shares.
- ---------------------------------------------------------------------------------------------
2. Westpac consents in writing to the transaction of sale and The Vendor
purchase of the Shares contemplated by this agreement.
- ---------------------------------------------------------------------------------------------
3. The Purchaser has granted a fixed charge over the Shares The Vendor
in favour of the Vendor to secure the Purchase Price
Balance.
4. The Purchaser and the Vendor have entered into the
Shareholders Agreement.
- ---------------------------------------------------------------------------------------------
5. The Vendor and the Company have entered into the Trade The Purchaser and the
Mark Licence Agreement. Vendor
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
6. The approval of Home Security International, Inc., the The Purchaser
holding company of the Purchaser, to the transaction of
sale and purchase of shares contemplated by this
agreement.
- ---------------------------------------------------------------------------------------------
7. The approval of the transaction of sale and purchase of The Purchaser.
shares contemplated by this agreement by a majority of
independent directors of Home Security International, Inc.
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 3
DIRECTORS AND SECRETARIES TO BE APPOINTED
(clause 6.3(e))
FAI CREDIT CORPORATION PTY LIMITED
Directors: Terry Youngman and Rodney Adler
FAI FINANCE CORPORATION (NZ) LIMITED
Directors: Bradley Cooper
<PAGE>
SCHEDULE 4
WARRANTIES
(clause 1.1 (Definitions))
INDEX OF WARRANTIES IN THIS SCHEDULE
Definitions
1. Vendor's authority to sell
2. The Company
3. Share capital
4. Financial statements
5. Liabilities
6. No changes since Accounts Date
7. Records
8. Debts
9. Taxation
10. Ownership of assets
11. Real property
12. Contracts
13. Compliance with applicable laws
14. Litigation
15. Superannuation and employee benefits
16. Employees
17. Conduct of business
18. Subsidiaries
19. Accuracy of disclosed information
<PAGE>
DEFINITIONS
In this schedule, unless the contrary intention appears:
'Associate' has the meaning given to that term by sections 10 to 17 of the
Corporations Law;
'Environmental Law' means a law relating to the environment, including without
limitation in relation to land use, planning, pollution of air or water, soil or
ground water contamination, chemicals, waste, use of dangerous or hazardous
goods or to any other aspect of protection of the environment or person or
property;
'Equipment Leases' means the Equipment Leases listed in Schedule 7 (Disclosures
against warranties);
'Fund' means the FAI Staff Productivity Superannuation Fund;
'Governmental Authority' means any governmental, semi-governmental, municipal or
statutory authority, instrumentality, organisation, body or delegate (including
without limitation any town planning or development authority, public utility,
environmental, building, health, safety or other body or authority) having
jurisdiction, authority or power over or in respect of the Company, the Business
or the Property;
'Intellectual Property Licences' means the licences granted to the Company
listed in paragraph 2 of Schedule 5 (Intellectual Property Rights);
'law' includes any statute, legislation, law, regulation, by-law, scheme,
determination, ordinance, rule or other statutory provision (whether
Commonwealth, State or municipal);
'Licence' includes any statutory licence, consent, registration, approval,
certificate, permit, authorisation, regulation, concession, permission,
determination, condition or exception under any law or from any Governmental
Authority;
'Owned Intellectual Property Rights' means all Intellectual Property Rights used
by the Company in the course of and for the purposes of the Business, including
(without limitation) the Intellectual Property Rights listed in Schedule 5
(Intellectual Property Rights) but excluding the Intellectual Property Licences;
'Plant and Equipment' means all plant, equipment (including computer equipment),
motor vehicles, machinery, furniture, fixtures and fittings used by any Group
Company;
'Tax', 'Taxes' or 'Taxation' means all forms of taxes, duties, imposts, charges,
withholdings, rates, levies or other governmental impositions of whatever nature
whenever and by whatever authority imposed, assessed or charged together with
all costs, charges, interest, penalties, fines, expenses and other additional
statutory charges incidental or related to the imposition;
<PAGE>
'Tax Act' means the Income Tax Assessment Act 1936 (Cth); and
'Trust Deed' means trust deed dated 17 November 1988 establishing the Fund.
<PAGE>
Warranty 1
(Vendor's authority to sell)
1.1 The Vendor is the registered holder and beneficial owner of the Shares.
1.2 The Vendor is validly existing under the laws of its place of
incorporation.
1.3 The Vendor has the power to enter into and perform its obligations under
this agreement and to carry out the transactions contemplated by this
agreement.
1.4 The Vendor has taken all necessary action to authorise its entry into
and performance of this agreement and to carry out the transactions
contemplated by this agreement.
1.5 The obligations of the Vendor under this agreement are valid and binding
and enforceable against it in accordance with their terms.
Warranty 2
(The Company)
2.1 The Company:
(a) is accurately described in Schedule 1;
(b) has full corporate power to own its properties, assets and business
and to carry on the Business as now conducted; and
(c) has good and marketable title to all of the assets included in the
Accounts.
2.2 No meeting has been convened, resolution proposed, petition presented or
order made for the winding up of the Company and no receiver, receiver
and manager, provisional liquidator, liquidator or other officer of the
court has been appointed or (to the Vendor's knowledge) threatened to be
appointed in relation to the Company or any part of its undertaking or
assets.
Warranty 3
(Share capital)
3.1 The issued shares of the Company:
(a) are held and beneficially owned by the Vendor and are paid up; and
(b) were all properly issued.
3.2 There are no:
<PAGE>
(a) securities convertible into shares of the Company;
(b) options or other entitlements of any kind over any issued or
unissued shares of the Company.
Warranty 4
(Financial statements)
The Accounts:
(a) disclose a true and fair view of the affairs, financial position and
assets and liabilities of the Group as at the Accounts Date and of
the income, expenses and results of operations of the Group for the
financial year ended on the Accounts Date; and
(b) were prepared in accordance with the Accounting Standards, the
requirements of the Corporations Law and all other applicable laws
and on a basis consistent with the audited accounts of the Group for
the financial year preceding the financial year ended on the
Accounts Date.
Warranty 5
(Liabilities)
5.1 The Company has not given any guarantees, indemnities or letters of
comfort.
5.2 The Company has not granted or created any Encumbrance, debenture,
finance lease or other third party interest.
Warranty 6
(No changes since Accounts Date)
6. Since the Accounts Date:
(a) there has been no material adverse change in the assets,
liabilities, turnover, earnings or financial condition of the
Company;
(b) no dividend or distribution of capital or income has been declared,
made or paid in respect of any share capital of the Company whether
of cash, specific assets or otherwise;
(c) the Company has carried on the Business in the ordinary and usual
course and has not entered into any contracts or arrangements other
than in the ordinary course of carrying on the Business;
(d) the Company has not incurred or undertaken any actual or contingent
liabilities or
<PAGE>
obligations, including Taxation, except in the ordinary
course of business;
(e) the Company has not acquired or disposed of or dealt with any assets
nor has it entered into any agreement or option to acquire or
dispose of any assets other than in the normal course of business
for full market value;
(f) the Company has not paid or agreed to pay any retiring allowance,
superannuation or benefit to any of its officers or employees except
where the law requires it or in accordance with a superannuation or
retirement scheme in force at the Accounts Date;
(g) the rights attaching to any issued or unissued shares in the Company
have not altered and no alteration has been made to the capital
structure of the Company;
(h) the Company has not implemented any new accounting or valuation
method for its business, assets or property;
(i) no loans have been made by the Company to employees, nor have any
advances or loan money been accepted from any employees;
(j) no resolutions have been passed by the members or directors of the
Company except in the ordinary course of business of the Company and
those necessary to give effect to this agreement.
Warranty 7
(Records)
7. The Records:
(a) are in the possession or under the control of the Company;
(b) have been fully, properly and accurately kept and maintained and are
up to date;
(c) accurately record the details of all of the transactions, finances,
assets and liabilities of the Company; and
(d) as far as necessary, have been prepared in accordance with the
requirements of the Corporations Law and the Accounting Standards.
Warranty 8
(Debts)
8. All debts owed to the Company and to Westpac under the Receivables
Purchase Agreement at Completion, less the amount of any provision for
bad and doubtful debts made on a basis consistent with the provision for
bad and doubtful debts in the Accounts,
<PAGE>
will be good and fully collectable in the ordinary course of
business.
Warranty 9
(Taxation)
9.1 The Company has paid, or the Accounts fully provide for, all Taxes which
the Company is or may become liable to pay for the period up to and
including the Accounts Date.
9.2 The only liabilities for Tax of the Company arising in respect of the
period after the Accounts Date and ending on the Completion Date will be
liabilities arising out of the ordinary course of carrying on the
Business.
9.3 All Tax information required by law (including but not limited to
records, returns, elections and notices) to be lodged or kept by the
Company have been lodged with the appropriate authorities or kept as
required.
9.4 The Company is not involved in any audit of any of its Tax returns or
any dispute with any Taxation authority responsible for the assessment
and collection of Tax and the Vendor is not aware of any circumstances
which may give rise to such an audit or dispute.
9.5 The Company has maintained sufficient and accurate records and all other
information required to support all Tax information which has been or
may be lodged with any Taxation authority.
9.6 The Company has lodged or supplied all information regarding Taxation
matters as and when requested by a Taxation authority.
9.7 Any information, notice, computation or return which has been submitted
to a relevant authority by the Group in respect of any Taxation matter:
(a) discloses all material facts which should be disclosed under any
relevant Tax law; and
(b) has been submitted on time,
and all copies of any information, notice, computation or return
submitted to a relevant authority by the Group in respect of any
Taxation matter which has been supplied by the Vendor or their advisers
to the Purchaser or its advisers are true and complete copies of the
originals.
9.8 All liabilities for Group Tax or other tax payable in respect of
employees' salaries or wages has been paid in full by the due date or
dates.
Warranty 10
<PAGE>
(Ownership of assets)
10.1 Except for the Intellectual Property Licences, those assets the subject
of the Equipment Leases and as otherwise disclosed in this agreement,
all of the property and assets included in the Accounts or which the
Company uses in the conduct of the Business are legally and beneficially
owned by the Company, free from Encumbrance.
Warranty 11
(Real property)
11.1 The Property comprises all the land and buildings used by the Company.
The Company does not own any real property.
11.2 The Company beneficially owns the benefit of a valid and enforceable
leasehold interest in the Leasehold Property under the Property Lease in
accordance with the provisions of the Property Lease. The Property Lease
has not been amended or modified and is not liable to forfeiture or
termination through any act or omission of the Company.
11.3 The Company has duly and punctually performed and is not in breach of
any covenants, terms, conditions and other provisions of the Property
Lease (including without limitation the permitted use of the Leased
Property).
Warranty 12
(Contracts)
12.1 The Company has duly performed and observed all its obligations, and the
other parties have duly performed and observed all their obligations,
under all contracts, arrangements or understandings to which the Company
is a party.
12.2 Each contract existing with respect to any receivable is in full force
and effect and is valid, binding and enforceable in accordance with its
terms.
Warranty 13
(Compliance with applicable laws)
13.1 The Company has complied with all applicable laws (whether applicable to
the conduct of the Business, the use of the Property and the other
assets of the Company or in any other manner) and no contravention or
allegation of any contravention of any applicable law is known to the
Company or the Vendor.
13.2 The Company:
(a) holds all Licences necessary for the use of each Property and for
the conduct of the Business; and
<PAGE>
(b) has complied with all terms, conditions and other provisions of or
applicable to those Licences.
13.3 There are no minutes of directors meetings of the Company other than those
provided by the Purchaser to the Vendor for inspection prior to execution
of this agreement.
Warranty 14
(Litigation)
14.1 Neither the Company nor any person for whose acts or defaults the Company
may be vicariously liable is involved in any claim, litigation,
prosecution or arbitration in any court, tribunal or otherwise with an
indicative value in excess of $100,000 which have been brought other than
in the ordinary course of business.
14.2 There are no unsatisfied judgments, awards, claims or demands against the
Company.
Warranty 15
(Superannuation and employee benefits)
15.1 Except for its commitments to contribute to the Fund, the Company has no
obligation, liability or duty to make any payment to any person in respect
of any superannuation, retirement benefit, disability benefit, pension,
annuity, life assurance scheme or similar benefit or arrangement for the
benefit of any present or former director or employee of the Company or
their respective dependants.
15.2 The Fund is established under the Trust Deed.
15.3 The Company has complied in all material respects with all of its
obligations under and in respect of the Trust Deed, including making all
contributions to the Fund required to be made under the Trust Deed, under
any employment agreement or arrangement or by law. There is no outstanding
liability of the Company in respect of the Fund and the Fund is fully
funded to meet all potential claims for benefits by the members of the
Fund.
15.4 Full and proper records and accounts of the Fund have been kept, are
up-to-date, and disclose a true and fair view of the affairs of the Fund.
15.5 Neither the Company nor the trustees of the Fund have received notice of
any claim or dispute in relation to the Fund.
15.6 The transfer of Shares to the Purchaser under this agreement will not
cause an increase in the obligations of the Company to make contributions
to the Fund.
Warranty 16
(Employees)
<PAGE>
16.1 Except as disclosed in Schedule 7 (Disclosures against warranties), all
contracts of employment to which the Company is a party can be terminated
by the Company by notice of 30 days or less.
16.2 The Company has complied in all material respects with all contractual,
statutory, legal and fiscal obligations of and in relation to its
employment of its employees, including without limitation all withholding
obligations, all codes of practice, collective agreements and awards.
16.3 The Company does not operate any bonus, profit share or employee incentive
plans or schemes for its employees or officers.
Warranty 17
(Conduct of business)
To the knowledge of the Vendor, no practice carried on by the Company or
contract, arrangement or understanding to which the Company is a party:
(a) is or should be notified or authorised under the Trade Practices Act
1974 or is or has been the subject of an inquiry under that Act; or
(b) infringes any other competition, anti-restrictive trade practice,
anti-trust or other consumer protection or environmental laws
applicable to the Company in Australia.
Warranty 18
(Subsidiary)
18.1 No Group Company:
(a) holds or beneficially owns shares or other securities in the capital of
another company (except for the shares held in the Subsidiary);
(b) has agreed to buy any securities in any other Australian or overseas
company; and
(c) is or has agreed to become a member of any partnership, unincorporated
association, joint venture or consortium.
18.2 The issued shares of the Subsidiary are held and beneficially owned and
are paid up as set out in part 2 (Details of Subsidiary) of Schedule 1 and
were properly issued, and those shares comprise all of the issued shares
of th e Subsidiary.
Warranty 19
(Accuracy of disclosed information)
All:
<PAGE>
(a) factual statements which the Vendor, the Company or any of their
respective employees, agents or advisers have given to the Purchaser or
its advisers relating to the Business, activities, affairs, assets and
liabilities of the Company; and
(b) facts in the recitals and schedules relating to the Vendor, the Company
or the Business,
are accurate in all material respects except as updated by factual
statements subsequently provided.
<PAGE>
SCHEDULE 5
INTELLECTUAL PROPERTY RIGHTS
(Schedule 4 (Warranties))
Copyright and confidential information
Copyright and confidential information in all databases, source codes, software,
methodologies, manuals, artwork and advertising materials used in the Business
or by any Group Company.
Intellectual Property Licences
The benefit of any computer software licences granted to any Group Company:
<PAGE>
SCHEDULE 6
PROPERTY
(clause 1.1 (Definitions))
LEASEHOLD PROPERTY AND PROPERTY LEASE
Leasehold Property: Level 2,244 Pitt Street, Sydney
Term: Monthly tenancy
<PAGE>
EXHIBIT 10.2
FAI INSURANCES LIMITED
FAI HOME SECURITY PTY LIMITED
SHAREHOLDERS AGREEMENT
MINTER ELLISON
Lawyers
Minter Ellison Building
44 Martin Place
SYDNEY NSW 2000
DX 117 SYDNEY
Telephone (02) 9210 4444
Facsimile (02) 9235 2711
Reference MAP 10664498
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. DEFINITIONS 1
2. OBJECTIVES 3
2.1 Objectives 3
2.2 Carrying out objectives 3
3. EQUITY FUNDING OF THE COMPANY 4
3.1 Additional equity capital 4
3.2 Issue of Shares 4
3.3 Acceptance of offers 4
3.4 Conditional acceptance 4
3.5 Apportionment of issue 5
3.6 Notification 5
3.7 Completion 5
4. BOARD OF DIRECTORS OF THE COMPANY AND SUBSIDIARIES 5
4.1 Number of Directors 5
4.2 Nominees 5
4.3 Votes 6
4.4 Chairman 6
4.5 Alternate Directors 6
4.6 Board meetings 6
4.7 Directors' fees and expenses 7
4.8 Quorum 7
4.9 Quorum not present 7
4.10 Subsidiaries 7
5. DECISION MAKING 7
5.1 Powers of the Board 7
5.2 Voting generally 7
5.3 Shareholder decisions by Unanimous Vote 8
5.4 Board decisions by 8
6. MANAGEMENT 9
6.1 Day to day control 9
6.2 Chief Executive Officer 9
7. BUSINESS PLAN, BUDGET AND FINANCIAL REPORTS 9
7.1 Business Plan 9
7.2 Budget 9
7.3 Reporting 10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
8. ACCOUNTS AND AUDIT 10
8.1 Account and records 10
8.2 Access to records 10
8.3 Audit committee 11
9. DIVIDEND POLICY 11
10. COMPANY DEBT 11
12. WESTPAC RECEIVABLES PURCHASE AGREEMENT 12
13. TRANSFER OF SHARES 12
13.1 Transfers 12
13.2 Encumbrances 12
13.3 Restrictions on transfers 13
14. CHANGE IN EFFECTIVE CONTROL OF A SHAREHOLDER 13
14.1 Meaning of change in effective control 13
15. DEED OF ACCESSION 14
16. COMPULSORY OFFER 14
16.1 Controlling Shareholder 14
16.2 Independent valuation 14
16.3 Offer 14
16.4 Completion 15
17. DEADLOCK 15
17.1 When a Deadlock arises 15
17.2 Deadlock under clause 17.1(a) 15
17.3 Deadlock under clause 17.1(b) 16
17.4 Notice 16
17.5 Acceptance or rejection of Offer 16
17.6 Obligation to sell 16
17.7 Completion of transfer 16
17.8 Two offers on the same day 17
18. RIGHTS TO INFORMATION 17
18.1 Rights to information 17
18.2 Confidentiality 17
18.3 Exceptions 17
19. TERMINATION 18
19.1 Termination 18
19.2 Without prejudice 18
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
19.3 Continuing obligations 18
20. DEFAULT 18
20.1 Events of default 18
20.2 Consequence of default 19
20.3 Independent valuation 19
20.4 Right of first refusal 19
20.5 Other remedies 19
21. ACKNOWLEDGEMENT AND WARRANTIES 20
21.1 Representations & warranties 20
21.2 Disclaimer 20
22. CONFLICT WITH MEMORANDUM AND ARTICLES 20
23. RELATIONSHIP BETWEEN PARTIES 21
24. FURTHER ACTION 21
25. COSTS 21
26. ASSIGNMENT 21
27. WAIVER 21
28. GOVERNING LAW AND JURISDICTION 21
29. NOTICE 22
30. SEVERABILITY 22
31. ALTERATION 23
32. ATTORNEYS 23
33. CALL OPTION 23
35. INTERPRETATION 25
SCHEDULE 1 28
SCHEDULE 2 60
SCHEDULE 3 62
</TABLE>
<PAGE>
SHAREHOLDERS AGREEMENT
AGREEMENT dated 1997
BETWEEN FAI INSURANCES LIMITED (ACN 004 304 545) of 333 Kent Street, Sydney,
New South Wales ('FAI')
AND FAI HOME SECURITY PTY LIMITED (ACN 050 064 214) of Level 8, 77
Pacific Highway, North Sydney ('FHS')
RECITALS
A. Pursuant to a share sale agreement dated 31 December 1997 ('Share Sale
Agreement'), FAI agreed to sell to FHS 25,001 shares in the Company.
B. Upon completion of the Share Sale Agreement, the issued capital of the
Company will be held as follows:
FAI - 25,001 Shares
FHS - 25,001 Shares
C. The parties wish to record the commercial terms of their agreement for the
funding, activities and management of the Company in this agreement.
AGREEMENT
In consideration of the mutual promises contained in this agreement, FAI and FHS
agree as follows:
1. DEFINITIONS
In this agreement:
'Articles' means the proposed articles of association of the Company set
out in Schedule1, to be adopted in accordance with clause 2.3.
'associate' has the meaning given in Division 2 of Part 1.2 of the
Corporations Law.
'ASX' means Australian Stock Exchange Limited.
<PAGE>
'Board' means the board of Directors of the Company.
'Budget' means the annual budget for the Company adopted by the Board in
accordance with clause 7.2 (Budget).
'Business' means the business conducted by the Company, including the
business of the provision of consumer finance products.
'Business Day' means a day on which banks (as defined in the Banking Act
1959 (Cth)) are open for general banking business in New South Wales,
excluding Saturdays and Sundays.
'Business Plan' means the business plan for the Company adopted by
Directors from time to time and as amended by the parties in accordance
with clause 7.1 (Business Plan).
'Chief Executive Officer' means the chief executive officer for the time
being of the Company.
'Company' means FAI Finance Corporation Pty Limited (ACN 053 262 561).
'Director' means a director for the time being of the Company.
'encumbrance' means an interest or power.
(a) reserved in or over any interest in any asset including, without
limitation, any retention of title; or
(b) created or otherwise arising in or over any interest in any asset
under a bill of sale, mortgage, charge, lien, pledge, trust or
power, and whether existing or agreed to be granted or created.
'Financial Year' means each period of 12 months commencing on 1 July and
ending on 30 June or such other period as the Board determines and
includes:
(a) the period commencing on the date of execution of this agreement and
ending 30 June 1998; and
(b) the period commencing on the last 1 July before the date of
termination of this agreement and ending on that date of
termination.
'FFC NZ' means FAI Finance Corporation (NZ) Limited, a wholly owned
subsidiary of the Company.
'General' means FAI General Insurance Company Limited (ACN 000 327 855).
<PAGE>
'Independent Valuer' means an independent valuer appointed to value any
Shares in accordance with the requirements of schedule 3 (Independent
valuation).
'Party' means a party to this agreement and any other Person that executes
a Deed of Accession and becomes a party to this agreement from time to
time.
'Related Body Corporate' has the meaning given in the Corporations Law.
'Respective Proportion' in relation to a party means the proportion that
the number of shares from time to time held or beneficially owned by that
party bears to the total number of all the issued Shares from time to
time.
'RPA' means the Receivables Purchase Agreement entered into between the
Company, General and Westpac dated 28 June 1996, as amended from time to
time.
'Share' means a share in the Company.
'Shareholder' means the holder of at least one Share.
'Simple Majority Vote' means a vote or resolution passed by:
(a) in the case of a vote or resolution of Shareholders, Shareholders
who together hold more than 50% of the Shares in the Company; and
(b) in the case of a resolution of the Board, Directors who together
represent Shareholders who hold more than 50% of the Shares in the
Company.
'subsidiary' has the meaning given in Division 6 of Part 1.2 of the
Corporations Law
and, in relation to the Company, includes FFC NZ.
'Trade Mark License' means the license to use the FAI name and logo to be
granted by FAI to the Company on or about the date of this agreement.
'Unanimous Vote' means a vote or resolution passed by:
(a) in the case of a vote or resolution of Shareholders, all
Shareholders; and
(b) in the case of a resolution of the Board, all Directors.
'Westpac' means Westpac Banking Corporation ARBN 007 457 141
2. OBJECTIVES
<PAGE>
2.1 Objectives
The objectives of the Shareholders in entering this agreement are:
(a) to use their respective business skills, knowhow and experience and
expertise to manage and conduct the Business;
(b) to outline the decision making procedures for the Company; and
(c) to ensure that the Business is managed to maximise the value of the
Company.
2.2 Carrying out objectives
To carry out the objectives, each Shareholder must:
(a) be just and faithful and provide full information to each other in
relation to the affairs and activities of the Business;
(b) do or cause to be done all things necessary or desirable to carry
out this agreement including casting votes as Shareholders and
causing their nominees to the Board to carry out this agreement; and
(c) not unreasonably delay any action, approval, direction,
determination or decision required under this agreement.
2.3 Each Shareholder must, as soon as practicable after the execution of
this agreement, procure the passing of a special resolution to adopt the
Articles.
3. EQUITY FUNDING OF THE COMPANY
3.1 Additional equity capital
Subject to clause 3.3 (Issue of Shares), the Company must not issue any
additional shares or other securities of the Company without the approval
of Shareholders by Unanimous Vote.
3.2 Issue of Shares
The Company may issue additional Shares on the following terms:
(a) the issue must have the prior approval of the Shareholders by
Unanimous Vote;
<PAGE>
(b) the additional Shares may only be offered to existing Shareholders
in the Respective Proportions;
(c) the offer must be in writing and must be dated;
(d) the date of the offer must not be earlier than the date on which the
offer is sent;
(e) the offer must remain open for acceptance by each Shareholder for at
least 30 days from the date of the offer; and
(f) the offer price for each Share must be no less than the value of
each Share determined by an Independent Valuer in accordance with
schedule 3 (Independent valuation).
3.3 Acceptance of offers
Each Shareholder may accept the offer to subscribe for all or part of the
Shares offered by giving written notice to the Board on or before the
closing date of the offer. Subject to clause 3.4 (Conditional
acceptance), each acceptance is unconditional and irrevocable. A
Shareholder who accepts the offer to subscribe for a stated number of
Shares is also deemed to have accepted the offer to subscribe for a lesser
number of Shares allocated to it under this clause 3 (Equity funding of
the Company). If no acceptance is received by the expiry of the closing
date of the offer, the Shareholder will be deemed to have rejected the
offer.
3.4 Conditional acceptance
A Shareholder may accept the offer to subscribe for a specified number of
Shares under clause 3.3 (Acceptance of offers) subject to the condition
that on completion of the issue of Shares under clause 3.7 (Completion),
the Respective Proportion of that Shareholder will not exceed a percentage
specified by that Shareholder in the acceptance. The Board must reduce the
number of Shares which would otherwise be issued to that Shareholder under
clause 3.7 (Completion) to fulfill the condition.
3.5 Apportionment of issue
If there are insufficient Shares to satisfy acceptances from all accepting
Shareholders, the Shares offered will be apportioned between the accepting
Shareholders in their Respective Proportions. If such an apportionment
would result in a Shareholder receiving a greater number of Shares than
the Shareholder has accepted the excess must be reallocated amongst the
other Shareholders who have lodged acceptances as nearly as may be in
proportion to their Respective Proportions. This clause 3.5 applies to
that re-apportionment and if necessary the process must be repeated until
all of the Shares offered have been allocated. The apportionment must
comply with the requirements of
<PAGE>
clause 3.8 (No obligation to contribute additional funds).
3.6 Notification
Within 5 Business Days of the expiry of the period referred to in clause
3.2(e), the Board must notify each Shareholder who has accepted an offer
to subscribe for Shares of the number of Shares allocated to each
Shareholder.
3.7 Completion
Completion of the issue of additional Shares must take place within 10
Business Days of the expiry of the period referred to in clause 3.2(e) at
the Company's registered office. At completion:
(a) each accepting Shareholder must subscribe for the Shares allocated
to that Shareholder under clause 3.5 (Apportionment of issue) by
delivering a bank cheque in payment of the subscription price for
the Shares to the Company; and
(b) the Company must deliver to each accepting Shareholder the
certificates relating to the additional Shares.
4. BOARD OF DIRECTORS OF THE COMPANY AND SUBSIDIARIES
4.1 Number of Directors
The parties agree that the maximum number of Directors will be four.
4.2 Nominees
Each Shareholder may appoint two Directors and require the removal or
substitution of any Director so appointed.
4.3 Votes
The Directors nominated by each Shareholder (whether or not both present)
are collectively entitled to cast that proportion of the total number of
votes that may be cast at a Board meeting as is equal to the proportion of
Shares held by the Shareholder who nominated the Director to the total
number of shares on issue at the time the vote is taken.
4.4 Chairman
The parties agree that:
<PAGE>
(a) the Chairman of the Board will be elected annually by the Board;
(b) the initial Chairman will be Bradley Cooper; and
(c) the Chairman will not have a casting vote.
4.5 Alternate Directors
Each Director may appoint an alternate Director.
4.6 Board meetings
The parties agree that:
(a) at least 4 meetings of the Board will take place each Financial
Year;
(b) additional Board meetings will be convened at the written request of
any Shareholder;
(c) meetings of the Board, other than those conducted as described in
paragraph (d), will be located in Sydney;
(d) Board meetings may be conducted by telephone conference, video
conference or any similar means of audio or audio-visual
communication;
(e) at least 3 Business Days prior written notice of Board meetings
together with an agenda must be given to all Directors, unless
otherwise unanimously agreed by the Directors;
(f) the agenda for Board meetings must be determined by the Chairman,
except for Board meetings convened at the request of a Shareholder
where the agenda may be determined by that Shareholder; and
(g) no resolution of the Board can be passed in respect of any matter of
which notice was not given in the agenda for that meeting, unless
otherwise unanimously agreed by all of the Directors.
4.7 Directors' fees and expenses
Unless the Shareholders otherwise determine by Unanimous Vote:
(a) no Director will be paid director's fees; and
(b) Directors will not be reimbursed for expenses incurred by the
Director in attending Board meetings.
<PAGE>
4.8 Quorum
A quorum for meetings of the Board will be constituted by the attendance
(in person or by alternate) of:
(a) the nominee Directors appointed by Shareholders holding more than
50% of the Shares on issue; and
(b) a minimum of two Directors.
4.9 Quorum not present
If a quorum is not present within 30 minutes of the time specified for a
meeting of the Board the meeting will be adjourned to a date and time 7
days after the original time of the meeting and at the same place as the
original meeting by written notice to all Directors. If a quorum is not
present at the adjournment of the meeting, the meeting lapses.
4.10 Subsidiaries
The parties agree that the maximum number of directors of each subsidiary
will be four. Each Shareholder may appoint two directors to each
subsidiary and require the removal or substitution of any director so
appointed.
5. DECISION MAKING
5.1 Powers of the Board
Except as otherwise specified in this agreement, the articles of
association of the Company or the Corporations Law, the Board will have
full power to direct the activities of the Company.
5.2 Voting generally
Except as otherwise specified in this agreement, the articles of
association of the Company or the Corporations Law, all decisions of the
Shareholders and all decisions of the Board will be made by Simple
Majority Vote.
5.3 Shareholder decisions by Unanimous Vote
The parties agree that the following decisions can be made only by a
Unanimous Vote of the Shareholders:
<PAGE>
(a) amendment to the memorandum or articles of association of the
Company;
(b) winding up the Company;
(c) reorganisation, reclassification, reconstruction, consolidation or
subdivision of the capital of the Company or the creation of any
different class of securities in the capital of the Company;
(d) any buyback, redemption, reduction or cancellation of shares or
share capital;
(e) any change to the dividend and distribution policy of the Company;
(f) the issue or allotment of any bonus Shares in the capital of the
Company; or
(g) offering any securities in the capital of the Company for
subscription.
5.4 Board decisions by Unanimous Vote
The parties agree that the following decisions can be made only by a
Unanimous Vote of the Board:
(a) approval or amendment of the Budget;
(b) approval or amendment of the Business Plan;
(c) the purchase or agreement to the purchase by the Company of any
asset or the making of any investment with a value of $250,000 or
more or a commitment to purchase in any one year a number of assets
or make a number of investments with an aggregate value of
$1,000,000 or more;
(d) the sale or agreement to the sale of the major undertaking of the
Company including any asset with a value of $500,000 or more or a
commitment to sell in any one year a number of assets with an
aggregate value of $2,000,000 or more;
(e) the Company entering into, amending or terminating any long term
contract or a contract with a value (taking account of gross
payments or receipts over the life of the contract) of $250,000 or
more;
(f) entering into, overriding or terminating any agreement between the
Company, and any Shareholder or an associate of a Shareholder;
(g) any change in strategic direction of the Company or the commencement
by
<PAGE>
the Company of any new business other than the Business;
(h) the appointment or removal of the auditors of the Company;
(i) the delegation of any power of any board of the Company including,
without limitation, delegations to the Chief Executive Officer and
the establishment by the Board of a committee;
(j) the Company entering into any arrangement to borrow money;
(k) entering into any arrangement to give any guarantee, mortgage,
charge or other security over the assets of the Company; or
(l) the incorporation or establishment of any subsidiaries of the
Company.
6. MANAGEMENT
6.1 Day to day control
Subject to clause 5 (Decision making), the Business will be managed on a
day to day basis by the Chief Executive Officer in accordance with the
Business Plan and Budget, who will report and be responsible to the Board
for the activities and operations of the Business.
6.2 Chief Executive Officer
The Chief Executive Officer will be appointed by the Board by Unanimous
Vote and may only be removed by the Board by Unanimous Vote.
7. BUSINESS PLAN, BUDGET AND FINANCIAL REPORTS
7.1 Business Plan
The Business Plan for the period from the date of execution of this
agreement to 30 June 1999 will be put before the Board within two months
of the date of execution of this agreement. The parties must review the
Business Plan on an annual basis at the same time as the Budget. The
parties must procure that the management of the Company implements the
Business Plan.
7.2 Budget
The Budget for the period from the date of execution of this agreement to
30 June 1999 will be put before the Board within two months of the date of
execution of this
<PAGE>
agreement. The parties will procure that for each subsequent Financial
Year, the Board considers and adopts a Budget (including budgeted capital
expenditure) in accordance with the following procedure:
(a) at least 3 months before the relevant Financial Year, the Chief
Executive Officer must submit to the Board a draft Budget;
(b) the Board must consider and seek to approve the Budget (with or
without amendments) by Unanimous Vote before the commencement of the
relevant Financial Year.
If the Board fails to adopt a Budget before the commencement of any
Financial Year, the parties agree that the Budget from the previous
Financial Year will continue to apply until the Board adopts a new Budget.
7.3 Reporting
The Chief Executive Officer must provide the Board with sufficient
management and financial information and reports to allow the Directors to
monitor the conduct of the Business, including:
(a) monthly management and financial reports incorporating an unaudited
profit and loss statement, cash flow statement and balance sheet;
(b) within three months after the end of each Financial Year:
(i) a profit and loss statement and cash flow statement for that
Financial Year;
(ii) a balance sheet as at the end of that Financial Year,
audited by the Company's auditors; and
(c) any other reports or statements that the Board may reasonably
require.
8. ACCOUNTS AND AUDIT
8.1 Account and records
The Chief Executive Officer must ensure that the accounts, records and
accounting information of the Company are:
(a) maintained in accordance with the Corporations Law and all other
applicable laws;
<PAGE>
(b) reviewed every six months by the Company's auditor;
(c) audited annually by the Company's auditor; and
(d) reflect generally accepted accounting principles, procedures and
practices in Australia which have been consistently applied.
8.2 Access to records
Each Shareholder is entitled to full access during normal business hours
and at its own cost to inspect all the books, accounts and records of the
Company. Access may be exercised through an employee of, or consultant or
adviser to, the Shareholder, subject to the requirements of
confidentiality set out in clause 18 (Rights to information).
8.3 Audit committee
The Shareholders agree to procure that the Board establishes an audit
committee with appropriate terms of reference.
9. DIVIDEND POLICY
9.1 The parties must procure that the Board adopts a policy of distributing to
the parties, all distributable profits of the Company generated by the
operations of the Business, consistent with prudent financial management
and having regard to the Business Plan, the taxation, working capital,
banking covenants and operational requirements of the Company and the
terms of all loan agreements under which the Company has borrowed.
9.2 FAI warrants to FHS that the consolidated earnings before interest and
income tax for the Company and FFC NZ for the Financial Year ending 30
June 1998 will be at least $5,500,000.
10. COMPANY DEBT
10.1 FHS must use its reasonable endeavours on its part to:
(a) procure the passing of a special resolution by the Company for the
purposes of section 205(10) of the Corporations Law that approves
the granting by the Company and FFC NZ of security (in the form of a
charge acceptable to FAI and General acting reasonably) to FAI and
General in respect of all debts owed by the Company and FFC NZ to
FAI and General ('Charges');
(b) undertake all other necessary procedures under section 205(10) of
the Corporations Law to permit the granting of the Charges within 3
months of the
<PAGE>
date of this agreement; and
(c) procure the granting of the Charges within 3 months of the date of
this agreement.
10.2 FAI and FHS must use their reasonable endeavours:
(a) to procure the refinancing of the loans owed by the Company to FAI
and General as soon as possible after the date of this agreement;
and
(b) to refinance the Subordinated Loan (as defined under the RPA).
11. PREFERRED LENDER
FHS agrees to use all reasonable efforts to ensure that the Company will
be the preferred lender to transactions entered into by FHS's distributors
and agrees to use its reasonable endeavours to ensure that the Company
will be the preferred lender to transactions entered into by Home Security
International, Inc's distributors and those of its related bodies
corporate where the Company carries on business from time to time.
12. WESTPAC RECEIVABLES PURCHASE AGREEMENT
12.1 FAI agrees to use its reasonable endeavours to facilitate an increase in
the Purchase Limit (as defined in the RPA) from $30,000,000 to
$60,000,000.
12.2 FAI agrees to assist FFC NZ to enter into a facility agreement with
Westpac on equivalent terms to the RPA, but with a Purchase Limit (as
defined in the RPA) of $30,000,000.
12.3 FAI and FHS agree to use their reasonable endeavours to release General
from its obligations, representations and warranties under the RPA, either
by negotiation with Westpac or by entering into a facility on terms
similar to the RPA with another party but without an obligation on any
party other than the Company to provide ongoing representations or
warranties to the purchaser.
12.4 Subject to this agreement, FAI agrees to provide:
(a) on behalf of General, a Subordinated Loan (as defined under the RPA)
to Westpac for the purposes of clause 2.2 of the RPA; and
(b) a subordinated loan to Westpac under any equivalent clause contained
in a facility to be entered with FFC NZ, as contemplated by clause
12.2,
up to a maximum of $20,000,000 in aggregate for a maximum period of six
years from
<PAGE>
the date of this agreement.
12.5 FAI and FHS must use their reasonable endeavours to refinance the
Subordinated Loan (as defined under the RPA) as soon as possible after the
date of this agreement.
13. TRANSFER OF SHARES
13.1 Transfers
A Shareholder must not sell or transfer any legal or beneficial interest
in its Shares except:
(a) in accordance with clause 14 (Change in effective control of a
shareholder), clause 16 (Compulsory offer), clause 22 (Default) or
clause 33 (Call Option);
(b) with the written approval of all Shareholders; or
(c) to a body corporate that is a wholly owned subsidiary of that
Shareholder.
13.2 Encumbrances
A Shareholder must not provide its Shares as security or create any
encumbrance over them in favour of any person, except one to the other or
to a Related Body Corporate or with the written approval of all other
Shareholders.
13.3 Restrictions on transfers
A Shareholder must not transfer any legal or beneficial interest in its
Shares if the transfer would breach or be an event of default under any
provision of the Company's lending facilities. Each Shareholder
indemnifies and holds harmless all other Shareholders from and against any
claims, damages, expenses (including legal costs on a solicitor and own
client basis) or losses of any kind whatever arising out of a breach of
this clause 13.3.
14. CHANGE IN EFFECTIVE CONTROL OF A SHAREHOLDER
14.1 Meaning of change in effective control
In this clause 14 (Change in effective control of a Shareholder), a change
in the effective control of a Shareholder occurs if:
(a) any single person who held directly or indirectly more than 50% of
the issued capital of that Shareholder on the date that the
Shareholder first became
<PAGE>
a Shareholder, ceases to hold the beneficial interest in at least 50%
of the issued capital;
(b) any person who on the date that the Shareholder first become a
Shareholder was not entitled to more than 50% of the issued share
capital of the Shareholder, becomes entitled to more than 50% of the
issued share capital of the Shareholder;
(c) Rodney Adler ceases to be the Chief Executive Officer of FAI before
the fourth anniversary of the date of this agreement; or
(d) Bradley Cooper ceases to be the Chief Executive Officer of Home
Security International, Inc before the fourth anniversary of the
date of this agreement,
In this clause, 'entitled' has the meaning given by section 609 of the
Corporations Law.
14.2 Change in Effective Control of FAI
If the effective control of FAI changes, FHS may declare that there has
been a Deadlock and, for the purposes of clause 17.2, such a declaration
will be deemed to constitute a Deadlock that has arisen under clause
17.1(a) occurring 30 days after service of the declaration on FAI.
14.3 Change in Effective Control of FHS
If the effective control of FHS changes, FAI may declare that there has
been a Deadlock and, for the purposes of clause 17.3, such a declaration
will be deemed to constitute a Deadlock that has arisen under clause
17.1(a) occurring 30 days after service of the declaration on FHS.
15. DEED OF ACCESSION
The Shareholders must procure that the Board does not register a person
(who at the time of registration is not a Shareholder) as a Shareholder
whether pursuant to:
(a) an issue of additional Shares;
(b) a transfer of Shares; or
(c) otherwise,
unless that person has first entered into a Deed of Accession in the form
of schedule 2 agreeing to be bound by this agreement as a Shareholder of
the Company.
<PAGE>
16. COMPULSORY OFFER
16.1 Controlling Shareholder
If at any time ('Relevant Time') a party ('Controlling Shareholder')
becomes entitled to 70% or more of the issued Shares in the Company, the
Controlling Shareholder must:
(a) immediately notify the Board in writing; and
(b) offer to acquire all of the issued Shares in the Company held by the
other Shareholders on the terms set out in this clause 16
(Compulsory offer).
In this clause, 'entitled' has the meaning given by section 609 of the
Corporations Law.
16.2 Independent valuation
On receiving notification under clause 16.1(a) (Controlling Shareholder)
or otherwise becoming aware that a party has become a Controlling
Shareholder, the parties must cause the Board to:
(a) immediately notify all other Shareholders in writing; and
(b) comply with the requirements of Schedule 3 (Independent valuation)
to obtain an independent valuation of the Shares no later than 2
months after the Relevant Time.
Immediately on receiving the independent valuation, the Board must
provide a copy to the Controlling Shareholder and all other Shareholders.
16.3 Offer
The offer must be made by the Controlling Shareholder on or before the
later of:
(a) 3 months after the Relevant Time; and
(b) 1 month after receiving a copy of the independent valuation from the
Board,
and on the following terms:
(i) the offer must be in writing and must remain open for at least 1
month;
(ii) the consideration payable for the Shares must be paid in cash
within 14 days of acceptance of the offer; and
<PAGE>
(iii) the consideration per Share must be equal to the value of the Shares
determined by the Independent Valuer in accordance with clause 16.2
(Independent valuation).
16.4 Completion
The Controlling Shareholder must complete the acquisition of Shares under
this clause in accordance with any acceptances received.
17. DEADLOCK
17.1 When a Deadlock arises
If :
(a) at any time before the fourth anniversary of the date of this
agreement:
(i) the Directors are unable to agree on a matter with regard to the
operation of the Company or the Business and are unable to
resolve the disagreement within 30 days of it first arising; or
(ii) a meeting of directors lapses for want of a quorum and no
further meeting of directors is convened within 30 days of the
lapsed meeting to deal with the matters set out in the agenda
for the lapsed meeting; or
(b) at any time on or after the fourth anniversary of the date of this
agreement, either party elects in writing that this clause is to
apply;
then a deadlock will be presumed to have arisen between them ('Deadlock').
17.2 Deadlock under clause 17.1(a)
If a Deadlock arises under clause 17.1(a), a period of 30 days must elapse
during which FHS may elect to exercise its call option granted by FAI under
clause 33. If FHS does not exercise its call option within 30 days, then
the following clauses 17.4 to 17.8 apply and the Shares to be sold under
those provisions will be sold on the terms set out in clauses 33.3, 33.4,
33.5 and 33.6. If the purchaser is FHS and the provisions of clauses 12.3
and 12.5 have not been satisfied, then:
(a) FAI must procure the continuation by General of the provision of the
representations and warranties that it has provided under the RPA and
must comply with clause 12.4, so that the Company may continue to
utilise the RPA up to the Purchase Limit (as defined under the RPA)
for a maximum of six years from the date of this agreement; and
<PAGE>
(b) FAI may appoint an independent auditor to review the accounts of
the Company on a monthly basis. The cost of the auditor is to be
born by the Company.
17.3 Deadlock under clause 17.1(b)
If a Deadlock arises under clause 17.1(b), the following clause 17.4 to
17.8 will apply. If the purchaser is FHS and the provisions of clauses
12.3 and 12.5 have not been satisfied, then:
(a) FAI must procure the continuation by General of the provision of the
representations and warranties that it has provided under the RPA and
must comply with clause 12.4, so that the Company may continue to
utilise the RPA up to the level at that time of the Receivables Pool
(as defined under the RPA) for a maximum of six years from the date
of this agreement; and
(b) FHS must procure that the Company does not issue any further Sales
Notices (as defined under the RPA) under the RPA; and
(c) FAI may appoint an independent auditor to review the accounts of the
Company on a monthly basis. The cost of the auditor is to be born by
the Company.
17.4 Notice
Within the period of 31 to 60 days after a Deadlock arises a party
('Offeror') may serve notice on the other party ('Recipient') making an
unconditional and irrevocable offer to sell all of the Offeror's Shares to
the Recipient at a cash price per Share specified by the Offeror in that
notice.
17.5 Acceptance or rejection of Offer
Within 30 days after the date of service of the notice by the Offeror
('Notice Period') the Recipient must elect to accept or reject the offer
made by the Offeror.
17.6 Obligation to sell
If the Recipient rejects or fails to accept the offer made by the Offeror
within the Notice Period the Recipient must sell all of the Shares held by
it to the Offeror unconditionally and at the same cash price per Share
specified in the offer made by the Offeror.
17.7 Completion of transfer
Completion of the transfer of Shares will take place at 10.00am on the
14th day after the
<PAGE>
expiration of the Notice Period at the Company's registered office. At
completion the selling party must deliver to and in favour of the
purchasing party duly executed transfers of the selling party's Shares
together with the certificate(s) for those Shares and, subject to clause
17.2, the purchasing party must deliver to the selling party a bank cheque
for the purchase price.
17.8 Two offers on the same day
If both parties make offers under clause 17.4, the first in point of time
to be served on the other will be deemed to be the only valid offer for
the purpose of clause 17.4.
18. RIGHTS TO INFORMATION
18.1 Rights to information
Subject to clause 18.2 (Confidentiality) the parties agree that each
Shareholder is entitled to copies of any information in relation to the
Business received by the Director nominated by that Shareholder
('Shareholder Information').
18.2 Confidentiality
The parties agree that the Shareholder Information is confidential and
each Shareholder must:
(a) keep confidential the Shareholder Information;
(b) use the Shareholder Information solely in relation to or in the best
interests of the Business; and
(c) disclose the Shareholder Information only to those of its employees,
advisors, related bodies corporate and shareholders who have a need
to know (and only to the extent each has a need to know) and who are
aware and agree that the Shareholder Information must be kept
confidential.
18.3 Exceptions
The obligations of confidentiality under this agreement do not extend to
information that (whether before or after this agreement is executed):
(a) is disclosed to a party under this agreement, but at the time of
disclosure is rightly known to that party and not subject to an
obligation of confidentiality on that party;
(b) at the time of disclosure is within the public domain or after
disclosure
<PAGE>
comes into the public domain other than by a breach or breaches of
any obligation under this clause 18 (Rights to information); or
(c) is required by law or the rules of any securities exchange (whether
in Australia or elsewhere) to be disclosed and the party required to
make the disclosure ensures that information is disclosed only to
the extent required.
19. TERMINATION
19.1 Termination
This agreement will terminate:
(a) by agreement of all Shareholders;
(b) in respect of a Shareholder when it does not hold any Shares except
in the case of FAI where the provisions of clauses 12.3 and 12.5
have not been satisfied;
(c) if the Company is wound up by resolution of Shareholders or an order
of a Court; or
(d) if the Company is listed on ASX.
19.2 Without prejudice
Termination of this agreement under clause 19.1 (Termination) will be
without prejudice to any accrued rights of the parties.
19.3 Continuing obligations
Each party agrees after termination of this agreement, the obligations
under clause 18 (Rights to information) will remain in force.
20. DEFAULT
20.1 Events of default
An event of default occurs in relation to a party if:
(a) the party breaches any provision of this agreement and:
(i) does not remedy that breach within 30 days after receiving a
notice of that
<PAGE>
breach from another party requesting the breach to be
remedied; or
(ii) the breach is incapable of being remedied; or
(b) the party has:
(i) a petition presented against it (that is not discharged or
withdrawn within 10 Business Days of its presentation), an
order made, a resolution passed or a meeting summoned or
convened to consider a resolution for its winding up;
(ii) a receiver appointed over its assets or undertaking or any
part of them;
(iii) any execution or other process of any Court or authority
issued against or levied upon any of its assets in any amount
in excess of 10% of its shareholders funds and that execution
or process is not discharged or withdrawn within 60 Business
Days of the date of issue;
(iv) ceased to pay its debts or suspended payment generally or
would cease or threaten to cease to carry on its business or
become insolvent or become or be unable to pay its debts
within the meaning of section 460 of the Corporations Law, as
and when they become due
(v) an administrator, trustee, voluntary administrator, liquidator
or provisional liquidator appointed for all or any part of its
assets or undertaking; or
(vi) entered into or resolved to enter into an arrangement,
composition or compromise with or assignment for the benefit
of its creditors generally or any class of creditors or
proceedings are commenced to sanction such an arrangement,
composition or compromise other than for the purposes of a
bona fide scheme of solvent reconstruction or amalgamation.
20.2 Consequence of default
If any event of default occurs in relation to a party ('Defaulting
Party'), at the election of any other party by giving written notice to
all parties:
(a) all rights attaching to Shares held by the Defaulting Party will be
suspended until the default is remedied (and, if the default is not
capable of remedy, will be suspended indefinitely); and
(b) the Defaulting Party will be deemed to have notified the Board that
it wishes
<PAGE>
to transfer the Shares held by it at the value of the Shares as
determined by an Independent Valuer in accordance with schedule 3
(Independent valuation).
20.3 Independent valuation
Within 10 Business Days of receiving notice from a party that an event of
default has occurred in relation to the Defaulting Party, the Board must
comply with the requirements of schedule 3 (Independent valuation) to
obtain an independent valuation of the Shares held by the Defaulting
Party.
20.4 Right of first refusal
On receiving the determination by the Independent Valuer of the
independent valuation of the Shares, the Board must offer the Shares held
by the Defaulting Party to all other Shareholders at a price equal the
independent valuation of the Shares
20.5 Other remedies
Clause 20.2 (Consequence of default) is in addition to and not to the
exclusion of any other rights or remedies that the other parties may have
against a Defaulting Party.
21. ACKNOWLEDGEMENT AND WARRANTIES
21.1 Representations & warranties
Each party represents and warrants to the others that:
(a) (incorporation) it is a company duly incorporated and validly
existing under the laws of the country of its incorporation;
(b) (corporate power) it has the corporate power to enter into and
perform its obligations under this agreement and to carry out the
transaction contemplated in this agreement;
(c) (corporate action) it has taken all necessary corporate action to
authorise the entry into and performance of this agreement and to
carry out the transaction contemplated by this agreement;
(d) (binding obligation) this document is its valid and binding
obligation; and
(e) (no contravention) neither the execution and performance by it of
this agreement nor any transaction contemplated under this agreement
will violate in any respect any provision of:
(i) its constituent documents; or
<PAGE>
(ii) any other document, agreement or other arrangement binding
upon it or its assets.
21.2 Disclaimer
Each party acknowledges that:
(a) it has relied on its own enquiries in respect of all matters
relating to this agreement and has not relied on any representation,
warranty, condition or statement made by or on behalf of any other
party other than as set out in this agreement;
(b) any conditions or warranties which may otherwise be implied by law
into this agreement are expressly excluded to the extent permitted
by law; and
(c) each party releases the other party from all actions, claims,
demands and liability which it may have or claim to have, or but for
this release, it might have had against the other party arising out
of any representation, warranty, covenant or provision not set out
or referred to in this agreement.
22. CONFLICT WITH MEMORANDUM AND ARTICLES
If there is any conflict between the provision of this agreement and the
memorandum and articles of association of the Company, the provisions of
this agreement prevail. On receipt of a written request from any party,
all parties must take all necessary steps to amend any inconsistency in
the memorandum or articles of association of the Company.
23. RELATIONSHIP BETWEEN PARTIES
Nothing contained or implied in this agreement will create or constitute,
or be deemed to create or constitute, a partnership between the parties
for the purposes of any law of any jurisdiction. A party shall not act,
represent or hold itself out as having authority to act as the agent of or
in any way bind or commit the other party to any obligation.
24. FURTHER ACTION
24.1 Each party must:
(a) use reasonable efforts to do all things necessary or desirable to
give full effect to this agreement; and
(b) refrain from doing anything that might hinder performance of this
<PAGE>
agreement.
25. COSTS
Each party must bear its own costs for the preparation and execution of
this agreement.
26. ASSIGNMENT
A party must not assign or otherwise deal with this agreement or any right
under this agreement without the prior written consent of the other
party.
27. WAIVER
The failure of a party at any time to require performance of any
obligation under this agreement is not a waiver of that party's right:
(a) to insist on performance of, or claim damages for breach of, that
obligation unless that party acknowledges in writing that the
failure is a waiver; and
(b) at any other time to require performance of that or any other
obligation under this agreement.
28. GOVERNING LAW AND JURISDICTION
28.1 This agreement is governed by the law applicable in New South Wales.
28.2 Each party submits to the non-exclusive jurisdiction of the courts of New
South Wales.
29. NOTICE
29.1 A party giving notice or notifying under this agreement must do so in
writing:
(a) directed to the recipient's address specified in this clause, as
varied by any notice; and
(b) hand delivered or sent by prepaid post or facsimile to that address.
The parties' addresses and facsimile numbers are:
<PAGE>
FAI Insurances Limited
Attention: Chris MacDonnell
Address: 333 Kent Street, Sydney, NSW 2000
Facsimile No: 9274-9900
FAI Home Security Pty Limited
Attention: Mark Whitaker
Address: Level 7, 77 Pacific Highway,
North Sydney, NSW
Facsimile No: 9936 2355
or such other address as may from time to time be notified by one party to
the other.
29.2 A notice given in accordance with clause 29.1 is taken to be received:
(a) if hand delivered, on delivery;
(b) if sent by prepaid post, 3 days after the date of posting; or
(c) if sent by facsimile, when the sender's facsimile system generates a
message confirming successful transmission of the total number of
pages of the notice unless, within eight Business Hours after that
transmission, the recipient informs the sender that it has not
received the entire notice.
30. SEVERABILITY
30.1 The parties agree that a construction of this agreement that results in
all provisions being enforceable is to be preferred to a construction that
does not so result.
30.2 If, despite the application of clause 30.1, a provision of this agreement
is illegal or unenforceable:
(a) if the provision would not be illegal or unenforceable if a word or
words were omitted, that word or those words are severed; and
(b) in any other case, the whole provision is severed,
and the remainder of this agreement continues in force.
<PAGE>
31. ALTERATION
This agreement may be altered only in writing signed by each party.
32. ATTORNEYS
Where this agreement is executed on behalf of a party by an attorney, that
attorney by executing declares and warrants that the attorney has been duly
appointed and has no notice of the revocation of the power of attorney
under the authority of which the attorney executes the agreement on behalf
of that party.
33. CALL OPTION
33.1 FAI grants FHS an option ('Option') to acquire the Shares held by FAI on
the following terms:
(a) the purchase price ('Purchase Price') will be $10,750,000 subject to
adjustment under paragraph (b) below and payable in accordance with
clauses 33.3, 33.4 and 33.5;
(b) either the retained profits of the Company must be paid as a dividend
immediately prior to the sale, or the Purchase Price will be increased
by 50% of retained profits of the Company;
(c) the Option may be exercised at any time before the fourth anniversary
of the date of this agreement by FHS providing written notice to FAI;
33.2 If at the time the Option is exercised by FHS, General has not been
released from its obligations, representations and warranties as
contemplated under clause 12.3, and/or the Subordinated Loan has not been
refinanced as contemplated under clause 12.5, then:
(a) FAI must procure the continuation by General of the provision of the
representations and warranties that it has provided under the RPA and
must comply with clause 12.4, so that the Company may continue to
utilise the RPA up to the Purchase Limit (as defined under the RPA)
for a maximum of six years from the date of this agreement; and
(b) and at FAI's option, either:
(i) the Directors nominated by FAI may continue in office, be removed
or be replaced by FAI; or
<PAGE>
(ii) FAI may, at its cost, appoint an independent auditor to review
the accounts of the Company on a monthly basis.
33.3 The Purchase Price will be payable as follows:
<TABLE>
<CAPTION>
Payment Dates Payment Amounts
-----------------------------------------------------------------
<S> <C>
On exercise or date of agreement arising 10% of Purchase Price
under clause 17 ('Event')
-----------------------------------------------------------------
First anniversary of Event 15% of Purchase Price
-----------------------------------------------------------------
Second anniversary of Event 20% of Purchase Price
-----------------------------------------------------------------
Third anniversary of Event 25% of Purchase Price
-----------------------------------------------------------------
Fourth anniversary of Event 30% of Purchase Price
-----------------------------------------------------------------
</TABLE>
33.4 Interest will be payable monthly in arrears on the outstanding balance of
the Purchase Price at the rate for Australian Government four year bonds
plus 150 basis points.
33.5 The outstanding balance will be secured by a mortgage over the Shares
acquired by the buyer granted by the buyer to the seller on terms
satisfactory to the seller, acting reasonably.
33.6 If the option is exercised or this clause applies by virtue of clause 17.2,
then, unless otherwise agreed, the Trade Mark Licence will terminate on the
third anniversary of the date of exercise of the Option or completion of
the transfer of shares under clause 17.7 (as the case may be).
34. INDEPENDENT AUDITOR
If an auditor is appointed in accordance with clause 14, 17 or 33 of this
agreement:
(a) FHS must procure that FAI is provided with a copy of each document the
Company provides to Westpac pursuant to the RPA, within two business
days following its provision to Westpac.
(b) FHS must procure that a copy of the latest audit scope referred to in
Clause 8.1(u)(ii)(B) of the RPA is provided to FAI within five
business days of FAI providing written notice to FHS that an auditor
has been appointed.
(c) FHS must procure the Company to instruct the auditor to provide an
unqualified opinion as to whether:
(i) the Company's systems and operating procedures are adequate to
enable the Company to comply with its material obligations under the
Transaction Documents (as defined under the RPA); and
<PAGE>
(ii) in accordance with the audit scope agreed by Westpac and the
Company from time to time, the Company has complied with its
material obligations under the Transaction Documents.
(d) If the auditor issues a qualified opinion:
(i) a copy of the report must be provided to FHS within 7 days
('Report');
(ii) FHS must prepare a response to the report within 7 days
('Response');
(iii) the parties must then negotiate in good faith to resolve any
differences between them;
(iv) if the differences cannot be resolved within 7 days of the
receipt of the Response, the matter will be referred to an
independent accountant to opine on the Report and Response as
to whether there is compliance with the Company's material
obligations under the Transaction Documents;
(v) the cost of the independent accountant will be borne by the
Company;
(vi) the independent accountant will act as an expert and not an
arbitrator and his decision will be final and binding on the
parties;
(e) If there is any material failure by the Company or FHS to comply with
the audit scope, systems or operating procedures as determined or
approved by Westpac as at the date of Westpac's last review, FAI may
direct the Company and FHS to comply with those requirements. If there
is no such compliance within 30 days of the direction, the Company
must not issue any further Sales Notices (as defined under the RPA.)
pursuant to the terms of the RPA.
35. INTERPRETATION
In this agreement, unless the contrary intention appears:
(a) headings are for ease of reference only and do not affect the meaning
of this agreement;
(b) the singular includes the plural and vice versa and words importing a
gender include other genders;
(c) other grammatical forms of defined words or expressions have
<PAGE>
corresponding meanings;
(d) a reference to a clause, paragraph, schedule or annexure is a
reference to a clause or paragraph of or schedule or annexure to this
agreement and a reference to this agreement includes any schedules and
annexures;
(e) a reference to a document or agreement, including this agreement,
includes a reference to that document or agreement as novated, altered
or replaced from time to time;
(f) a reference to 'A$', '$A', 'dollar' or '$' is a reference to
Australian currency;
(g) a reference to a specific time for the performance of an obligation is
a reference to that time in the State, Territory or other place where
that obligation is to be performed;
(h) a reference to a party includes its executors, administrators,
successors and permitted assigns;
(i) words and expressions importing natural persons include partnerships,
bodies corporate, associations, governments and governmental and local
authorities and agencies; and
(j) a reference to any legislation or statutory instrument or regulation
is construed in accordance with the Acts Interpretation Act 1901 (Cth)
or the equivalent State legislation, as applicable.
(k) words and expressions defined in the Corporations Law as at the date
of this agreement have the meanings given to them in the Corporations
Law at that date;
EXECUTED as an agreement.
<TABLE>
<S> <C> <C>
SIGNED for and on behalf of FAI ) FAI Insurances Limited by its Attorney who
INSURANCES LIMITED by being its duly ) states that at the time of executing this instrument
constituted Attorney in the presence of ) the Attorney has not notice of the revocation of
) the Power of Attorney dated 1997 under the
) authority of which the Attorney has executed
] this agreement
</TABLE>
<PAGE>
Signature of witness Attorney
Name of witness (print)
<TABLE>
<S> <C> <C>
SIGNED for and on behalf of FAI HOME ) FAI Home Security Pty Limited by its Attorney
SECURITY PTY LIMITED by being its duly ) who states that at the time of executing this
constituted attorney in the presence of ) instrument the Attorney has not notice of the
) revocation of the Power of Attorney dated
) 1997 under the authority of which the
] Attorney has executed this agreement
Signature of witness
Attorney
Name of witness (print)
</TABLE>
SCHEDULE 1
ARTICLES OF ASSOCIATION OF THE COMPANY
1. PRELIMINARY
1.1 In these Articles:
'Alternate Director' means a person appointed as an alternate director
under Article 61;
'Articles' means the articles of association of the Company as amended
from time to time;
'Auditor' means the Company's auditor, if any;
'Board' means the board of Directors of the Company;
'business day' has the same meaning as in the Corporations Law;
'Company' means FAI Finance Corporation Pty Limited ACN 053 262 561;
<PAGE>
'Director' includes any person occupying the position of director of the
Company and, where appropriate, includes an Alternate Director;
'Directors' means all or some of the Directors acting as a board;
'dividend' includes bonus;
'Executive Director' means a person appointed as an executive director
under Article 68.1;
'Managing Director' means a person appointed as managing director under
Article 68.1;
'Member' means a person entered in the Register or any branch register as
the holder of shares;
'Office' means the Company's registered office;
'Register' means the register of Members of the Company;
'registered address' means the last known address of a Member as noted in
the Register;
'Representative' means a person authorised by a Member to act as its
representative under Article 48.1;
'Seal' means the Company's common seal;
'Secretary' means any person appointed by the Directors to occupy the
position of a secretary of the Company;
'Shareholders Agreement' means the Shareholders agreement dated #1# between
#2#;
'Shareholder' means any person being the registered holder of shares;
'shares' means shares in the capital of the Company;
'Simple Majority Vote' means a vote or resolution passed by:
(a) in the case of a vote or resolution of the Board, a majority of the
Board; or
(b) in the case of a vote or resolution of the Shareholders, those
Shareholders who together hold more than 50% of the total voting
rights of all Shareholders present and entitled to vote;
<PAGE>
'Unanimous Vote' means a vote or resolution passed by:
(a) in the case of a vote or resolution of the Board, all members of the
Board; or
(b) in the case of a vote or resolution of Shareholders, all of the
Shareholders.
1.2 In these Articles, unless the context otherwise requires, headings are for
ease of reference only and do not affect the construction of these
Articles.
1.3 Division 10 of Part 1.2 of the Corporations Law applies in relation to
these Articles as if they were an instrument made under the Corporations
Law as in force on the day when these Articles become binding on the
Company.
1.4 An expression in an Article has the same meaning as in a provision of the
Corporations Law that deals with the same matter as the Article, unless the
contrary intention appears in these Articles.
1.5 The provisions of the Shareholders Agreement prevail over any inconsistent
article and the Members agree that these Articles shall be amended to
remove any inconsistency.
1.6 The regulations contained in Table A in Schedule 1 to the Corporations Law
do not apply to the Company.
2. PROPRIETARY COMPANY
The Company is a proprietary company and accordingly:
(a) the number of members of the Company (counting joint holders of shares
as one person and not counting a person who is employed by the Company
or any of its subsidiaries or a person who was, while so employed, and
thereafter has continued to be, a member of the Company) is limited to
50;
(b) any invitation to the public to subscribe for, and any offer to the
public to accept subscriptions for, any shares in, or debentures of,
the Company is prohibited; and
(c) any invitation to the public to deposit money with, and any offer to
the public to accept deposits of money with, the Company for fixed
periods or payable at call, whether or not bearing interest, is
prohibited.
3. CAPITAL AND SHARES - RIGHTS
<PAGE>
Subject to these Articles, the Shareholders Agreement and to the terms of
issue of shares, all shares in the capital of the Company attract the
following rights, privileges and conditions:
(a) the right to receive notice of and to attend and vote at all general
meetings of the Company at one vote per share;
(b) the right to receive dividends;
(c) in a winding up or reduction of capital, the right:
(i) to repayment of the capital paid up on the share; and
(ii) to participate in the distribution of the surplus assets (if
any) of the Company.
4. CAPITAL AND SHARES - ISSUE OF SHARES
4.1 Subject to these Articles and the Shareholders Agreement, all unissued
shares are under the control of the Directors who may issue and allot, or
dispose of, the shares to persons:
(a) on terms determined by the Directors; and
(b) at par or, subject to the Corporations Law, at a premium or discount.
4.2 Subject to the Corporations Law and the Shareholders Agreement, the
Directors' power under Article 4.1 includes the power to issue options over
unissued shares and the power to issue and allot preference shares that
are, or at the option of the Company are, liable to be redeemed.
4.3 Subject to the Corporations Law and the Shareholders Agreement, the
Directors may issue and allot shares with:
(a) any preferential, deferred or special rights, privileges or
conditions; or
(b) any restrictions in regard to dividend, voting, return of capital or
otherwise.
5. CAPITAL AND SHARES - COMMISSION AND BROKERAGE
5.1 The Directors may exercise the power conferred by the Corporations Law to
make payments by way of brokerage or commission in respect of subscriptions
for shares in the Company.
<PAGE>
5.2 Payments in accordance with this Article may be made in cash, by the
allotment of shares, by the grant of options over shares, or by a
combination of any of those methods, or otherwise.
6. CAPITAL AND SHARES - TRUSTS NOT RECOGNISED
6.1 Except as required by law, the Company will not recognise any person as
holding a share on trust and the Company will not recognise any equitable,
contingent, future or partial interest or any other right in respect of a
share except the registered holder's absolute right of ownership.
6.2 Subject to the other Articles, this Article 6 applies even if the Company
has notice of the relevant trust, interest or right.
7. CAPITAL AND SHARES - JOINT HOLDERS
7.1 If two or more persons are registered as the holders of a share, they are
taken to hold the share as joint tenants with benefits of survivorship and
the person whose name appears first on the Register is the only joint
holder entitled to receive notices from the Company.
7.2 Any one of the joint holders of a share may give effectual receipts for
any dividend or return of capital payable to the joint holders.
8. CAPITAL AND SHARES - RIGHT TO CERTIFICATE
8.1 Subject to the conditions of allotment of any shares or any class of
shares:
(a) every Member is entitled free of charge to one certificate for all
shares registered in its name; and
(b) a Member may request several certificates in reasonable
denominations for different portions of its holding.
8.2 Subject to the conditions of allotment of any shares or any class of
shares, joint holders are entitled to a single certificate in their joint
names in respect of each portion of their holding. The certificate will
be sent to the joint holder whose name appears first in the Register.
8.3 The Company must issue a replacement certificate for shares in accordance
with the Corporations Law if:
<PAGE>
(a) the holder of the shares is entitled to a certificate for those
shares;
(b) satisfactory evidence has been received by the Company that the
certificate for shares previously issued has been stolen, lost or
destroyed and has not been pledged, charged, sold or otherwise
disposed of; and
(c) the Member has undertaken in writing to the Company to return the
certificate to the Company if it is found or received by the Member.
8.4 Every certificate for shares must be issued and despatched in accordance
with the Corporations Law.
9. CAPITAL AND SHARES - REPLACEMENT OF CERTIFICATE
The Directors may order worn out or defaced certificates to be cancelled
and replaced by new certificates.
10. CAPITAL AND SHARES - VARIATION OF CLASS RIGHTS
10.1 Subject to the Shareholders Agreement, the rights attached to any class of
shares may, unless their terms of issue state otherwise, be varied:
(a) with the written consent of the holders of 75% of the issued shares
of the class; or
(b) with the sanction of a special resolution passed at a separate
general meeting of the holders of shares of the class.
10.2 The provisions of these Articles relating to general meetings apply, with
necessary changes, to separate class meetings as if they were general
meetings except that:
(a) a quorum is two persons holding or representing by proxy at least
one-third of the issued shares of the class or, if there is one
holder of shares in a class, that person; and
(b) any holder of shares of the class, present in person or by proxy,
may demand a poll.
10.3 The rights conferred on the holders of shares which are not ordinary
shares and which have preferential or other special rights will, unless
otherwise expressly provided by their respective terms of issue, be taken
to be varied by:
<PAGE>
(a) the issue of more shares; or
(b) the conversion of securities to new securities,
which rank equally with or in priority to those shares.
11. CALLS
11.1 Subject to the terms on which partly paid shares are issued, the Directors
may make calls on the holders of the shares for any money unpaid on them
(whether on account of the nominal value of the shares or by way of
premium on the shares or both).
11.2 A call is made when the resolution of the Directors authorising it is
passed. The Directors may require it to be paid by instalments.
11.3 The Directors may revoke or postpone a call before its due date for
payment.
11.4 At least 10 business days before the due date for payment of a call the
Company must send to Members on whom the call is made a notice specifying:
(a) the amount of the call;
(b) the due date for payment; and
(c) the place for payment.
11.5 A Member to whom notice of a call is given in accordance with this Article
11 must pay to the Company the amount called in accordance with the
notice.
11.6 Failure to send a notice of a call to any Member or the non-receipt of a
notice by any Member does not invalidate the call.
11.7 Joint holders of shares are jointly and severally liable to pay all calls
in respect of their shares.
12. CALLS - INSTALMENTS
Where the Directors require a call to be payable by instalments:
(a) the amount of an instalment is payable as if it were a call made by
the Directors and as if they had given notice of it; and
(b) the consequences of late payment or non-payment of an instalment are
the
<PAGE>
same as the consequences of late payment or non-payment of a
call.
13. CALLS - INTEREST AND EXPENSES ON CALLS
If an amount called is not paid on or before the due date, the person
liable to pay the amount must also pay:
(a) interest on the amount from the due date to the time of actual
payment at a rate determined by the Directors (not exceeding 20% per
annum); and
(b) all expenses incurred by the Company as a consequence of the non-
payment,
but the Directors may waive payment of the interest and expenses in whole
or in part.
14. CALLS - RECOVERY OF AMOUNTS DUE
On the hearing of any action for the recovery of money due for any call,
proof that:
(a) the name of the person sued was, when the call was made, entered in
the Register as a holder or the holder of shares in respect of which
the call was made;
(b) the resolution making the call is duly recorded in the Directors'
minute book; and
(c) notice of the call was given to the person sued,
will be conclusive evidence of the debt.
15. CALLS - DIFFERENTIATION
The Directors may, on the issue of shares, differentiate between the
holders as to the amount of calls to be paid and the times of payment.
16. CALLS - PAYMENT OF CALLS IN ADVANCE
16.1 The Directors may accept from a Member the whole or part of the amount
unpaid on a share before the amount accepted has been called.
16.2 The Company may:
(a) pay interest on any amount accepted, until the amount is payable
under a call
<PAGE>
and at a rate (not exceeding 20% per annum) agreed between the
Member and the Directors; and
(b) subject to any contract between the Company and the Member, repay
all or any of the amount accepted in excess of the amount called on
the share.
16.3 Payment of an amount in advance of a call does not entitle the paying
Member to any dividend, benefit or advantage, other than the payment of
interest under this Article 16, to which the Member would not have been
entitled if it had paid the amount when it became due.
17. LIEN AND FORFEITURE - LIEN
17.1 The Company has a first and paramount lien on every partly paid share for
all money:
(a) due and unpaid to the Company at a fixed time, in respect of the
share;
(b) presently payable by the holder of the share, or the holder's
estate, to the Company in respect of the share; or
(c) which the Company is required by law to pay in respect of the share.
17.2 The Company's lien extends to all dividends payable in respect of the
share.
17.3 Unless the Directors determine otherwise, the registration of a transfer
of a share operates as a waiver of the Company's lien on the share.
17.4 The Directors may declare a share to be wholly or partly exempt from a
lien.
18. LIEN AND FORFEITURE - LIEN SALE
If:
(a) the Company has a lien on a share for money presently payable; and
(b) the Company has given the Member who holds the share written notice
demanding payment of the money,
then 14 or more days after giving the notice, the Directors may sell the
share in any manner determined by them.
19. LIEN AND FORFEITURE - FORFEITURE NOTICE
<PAGE>
19.1 The Directors may at any time after a call or instalment becomes payable
and remains unpaid by a Member, serve a notice on the Member requiring the
Member to pay:
(a) the unpaid amount;
(b) any interest that has accrued; and
(c) all expenses incurred by the Company as a consequence of the non-
payment.
19.2 The notice under Article 19.1 must:
(a) specify a day (not earlier than 14 days after the date of the
notice) on or before which the payment required by the notice must
be made; and
(b) state that if a Member does not comply with the notice, the shares
in respect of which the call was made or instalment is payable will
be liable to be forfeited.
20. LIEN AND FORFEITURE - FORFEITURE
20.1 If a Member does not comply with a notice served under Article 19, then
any or all of the shares in respect of which the notice was given may be
forfeited pursuant to a resolution of the Directors.
20.2 Dividends declared and unpaid in respect of forfeited shares will also be
forfeited.
20.3 On forfeiture, shares become the property of the Company and forfeited
shares may be sold, disposed of, or cancelled on terms determined by the
Directors.
20.4 The Directors may, at any time before a forfeited share is sold, disposed
of or cancelled, annul the forfeiture of the share on conditions
determined by them.
20.5 Promptly after a share has been forfeited:
(a) notice of the forfeiture must be given to the Member in whose name
the share was registered immediately before its forfeiture; and
(b) the forfeiture and its date must be noted in the Register.
21. LIEN AND FORFEITURE - LIABILITY OF FORMER MEMBER
21.1 The interest of a person who held shares which are forfeited is
extinguished but the
<PAGE>
former Member remains liable to pay:
(a) all money (including interest and expenses) that was payable by the
Member to the Company at the date of forfeiture in respect of the
forfeited shares; and
(b) interest from the date of forfeiture until payment at a rate
determined by the Directors (not exceeding 20% per annum).
21.2 A former Member's liability to the Company ceases if and when the Company
receives payment in full of all money (including interest and expenses)
payable by the person in respect of the shares.
22. LIEN AND FORFEITURE - SALE
22.1 The Company may:
(a) receive the consideration (if any) given for a forfeited share on
any sale or disposition of the share; and
(b) execute a transfer of the share in favour of a person to whom the
share is sold or disposed of.
22.2 The purchaser of the share:
(a) is not bound to check the regularity of the sale or the application
of the purchase price;
(b) obtains title to the share despite any irregularity in the sale; and
(c) will not be subject to complaint or remedy by the former holder of
the share in respect of the purchase.
22.3 A statement signed by a Director and the Secretary that the share has been
regularly forfeited and sold or re-allotted, or regularly sold without
forfeiture to enforce a lien, is conclusive evidence of the matters stated
as against all persons claiming to be entitled to the share.
22.4 The net proceeds of any sale made to enforce a lien or on forfeiture must
be applied by the Company in the following order:
(a) in payment of the costs of the sale;
(b) in payment of all amounts secured by the lien or all money that was
payable in respect of the forfeited share; and
<PAGE>
(c) in payment of any surplus to the former Member whose share was sold.
23. TRANSFER OF SHARES - TRANSFER
23.1 Shares may be transferred by:
(a) a written transfer instrument in any usual or common form; or
(b) any other form approved by the Directors.
23.2 A written transfer instrument referred to in Article 23.1 must be executed
by or on behalf of the transferor and the transferee.
23.3 A transferor of shares remains the holder of the shares transferred until
the transfer is registered and the name of the transferee is entered in
the Register in respect of the shares. A transfer of shares does not pass
the right to any dividends declared on the shares until such registration.
24. TRANSFER OF SHARES - TRANSFER PROCEDURE
24.1 For a transfer of shares:
(a) the written transfer instrument must be left at the Office or the
office of the Company's share registrar;
(b) the instrument must be accompanied by a certificate for the shares
dealt with in the transfer, unless the Directors waive production of
the certificate on receiving satisfactory evidence of the loss or
destruction of the certificate; and
(c) the Directors may require other evidence of the transferor's right
to transfer the shares.
24.2 Subject to the powers vested in the Directors by these Articles and the
Shareholders Agreement, the Company must register all registrable transfer
forms and issue certificates without charge.
25. TRANSFER OF SHARES - RIGHT TO REFUSE REGISTRATION
25.1 The Directors may only refuse to register any transfer of shares or other
securities:
(a) where the registration of the transfer would result in a
contravention or
<PAGE>
failure to observe the provisions of a law of a
State or Territory or of the Commonwealth;
(b) where the Company has a lien on the shares or other securities the
subject of the transfer;
(c) where the transfer is in respect of a partly paid security in
respect of which a call has been made and is unpaid;
(d) where more than 3 persons are to be registered as joint holders
except in the case of executors or trustees of a deceased
shareholder;
(e) on which stamp duty is payable but unpaid; or
(f) as otherwise prohibited under the Shareholders Agreement.
26. TRANSFER OF SHARES - PRE-EMPTIVE RIGHTS
A Member is prohibited from disposing of any of its shares without
complying with the provisions of the Shareholders Agreement.
27. TRANSFER OF SHARES - CLOSURE OF REGISTER
The transfer books and the Register may be closed for up to 30 days in
each year.
28. TRANSMISSION OF SHARES - TITLE ON DEATH
28.1 The legal personal representative of a deceased Member who was the sole
holder of shares is the only person whom the Company will recognise as
having any title to the deceased Member's shares.
28.2 If a deceased Member was a joint holder of shares, the other joint holder
is the only person whom the Company will recognise as having any title to
the deceased Member's shares.
28.3 The estate of the deceased Member will not be released from any liability
to the Company in respect of the shares.
28.4 The Company may register a transfer to a transferee who dies before the
transfer is registered.
<PAGE>
29. TRANSMISSION OF SHARES - TRANSMISSION
29.1 A person who becomes entitled to a share in consequence of the death or
lunacy of a Member may, subject to producing to the Directors evidence of
its entitlement which is satisfactory to the Directors, elect to:
(a) be registered as the holder of the share; or
(b) transfer the share to some other person nominated by it.
29.2 If the person who has become entitled to a share:
(a) elects to be registered as the holder, then the person must deliver or
send to the Company a written notice of election signed by it; or
(b) elects to transfer the share, then the person must execute a transfer
of the share.
29.3 An election to be registered as a holder of a share under Article 29.1(a)
or a transfer of a share from a Member or deceased Member under this
Article 29 is subject to the same limitations, restrictions and provisions
of these Articles as would apply if the election were a transfer or the
transfer were made by the Member or deceased Member itself.
29.4 A person who:
(a) has become entitled to a share by operation of law; and
(b) has produced evidence of its entitlement which is satisfactory to the
Directors,
is entitled to the dividends and other rights of the registered holder of
the share.
29.5 Where two or more persons are jointly entitled to any share in consequence
of the death of the registered holder, they will be considered to be joint
holders of the share.
29.6 Any person who is registered under this clause must indemnify the Company
against all liabilities, costs, losses and expenses incurred by the Company
as a result of registering the person.
30. CHANGES TO SHARE CAPITAL - CHANGES TO SHARE CAPITAL
30.1 Subject to the Shareholders Agreement, the Company may by resolution:
<PAGE>
(a) increase its authorised share capital by creating new shares of the
amount specified in the resolution;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) convert, or provide for the conversion of, all or any of its fully
paid shares into stock, or reconvert or provide for the reconversion
of that stock into paid up shares of any denomination;
(d) subdivide its shares or any of them into shares of smaller amount than
its existing shares but so that, in the subdivision, the proportion
between the amount paid and the amount (if any) unpaid on each share
of a smaller amount is the same as it was in the case of the share
from which the share of the smaller amount is derived; and
(e) cancel shares that, at the date of the resolution, no person has taken
or agreed to take or that have been forfeited, and reduce the amount
of its share capital by the amount of the shares cancelled.
30.2 For the purpose of giving effect to a consolidation or subdivision of all
or any of the share capital of the Company, the Directors may settle any
difficulty which arises as they think expedient and in particular may:
(a) issue fractional certificates;
(b) vest any fractions of shares in trustees on such trusts for the
persons entitled to the fractions of shares as may seem expedient to
the Directors; or
(c) sell the shares representing the fractions for the best price
reasonably obtainable to any person and distribute the net proceeds of
sale (subject to retention by the Company of small amounts where the
cost of distribution would be disproportionate to the amounts
involved) in due proportion among those Members and, for such sale,
any Director may execute an instrument of transfer of the shares to
the purchaser.
30.3 Subject to the Corporations Law and the Shareholders Agreement, the Company
may by special resolution reduce its share capital, any capital redemption
reserve or any share premium account.
31. CHANGES TO SHARE CAPITAL - NEW SHARES
Subject to their terms of issue and these Articles, new shares are
considered part of the original capital and are subject to these Articles.
<PAGE>
32. GENERAL MEETINGS - CONVENING GENERAL MEETING
A general meeting may be convened at any time by the Directors or any
Shareholder.
33. GENERAL MEETINGS - NOTICE OF GENERAL MEETING
33.1 At least 21 days written notice (exclusive of the day on which the notice
is served or taken to be served and of the day for which notice is given)
must be given to Members of any general meeting at which a special
resolution or a resolution that requires Unanimous Vote will be considered.
At least 14 days written notice (exclusive of the day on which the notice
is served or taken to be served and of the day for which notice is given)
must be given to Members of all other general meetings.
33.2 A notice convening a general meeting must:
(a) specify the place, date and hour of the meeting; and
(b) state the general nature of the business to be transacted at the
meeting.
33.3 A notice of an annual general meeting need not state that the business to
be transacted at the meeting includes:
(a) the consideration of accounts and the reports of the directors and
auditors;
(b) the election of directors in the place of those retiring; or
(c) the appointment and fixing of the remuneration of the Auditor.
33.4 The Directors may postpone or cancel any general meeting whenever they
think fit (other than a meeting convened by a Shareholder under Article
32). The Directors must give notice of the postponement or cancellation to
all persons entitled to receive notices from the Company.
34. PROCEEDINGS AT GENERAL MEETINGS - MEMBER
In Articles 35, 36, 38 and 41, 'Member' includes a Member present in person
or by proxy, attorney or Representative.
35. PROCEEDINGS AT GENERAL MEETINGS - QUORUM
<PAGE>
35.1 No business may be transacted at a general meeting unless a quorum of
Members is present when the meeting proceeds to business.
35.2 A quorum for general meetings will require the attendance (in person, by
representative, by proxy or by attorney) of at least 2 Shareholders.
36. PROCEEDINGS AT GENERAL MEETINGS - CHAIRPERSON
36.1 The chairperson, or in the chairperson's absence the deputy chairperson, of
Directors' meetings will be the chairperson at every general meeting.
36.2 If:
(a) there is no chairperson or deputy chairperson; or
(b) neither the chairperson nor deputy chairperson is present within 15
minutes after the time appointed for holding the meeting; or
(c) the chairperson and deputy chairperson are unwilling to act as
chairperson of the meeting,
the Members present may elect a chairperson.
36.3 If there is a dispute at a general meeting about a question of procedure,
the chairperson may determine the question.
37. PROCEEDINGS AT GENERAL MEETINGS - ADJOURNMENT
37.1 The chairperson of a meeting at which a quorum is present:
(a) in his or her discretion may adjourn a meeting with the meeting's
consent; and
(b) must adjourn a meeting if the meeting directs him or her to do so.
37.2 An adjourned meeting may take place at a different venue to the initial
meeting.
37.3 The only business that can be transacted at an adjourned meeting is the
unfinished business of the initial meeting.
37.4 If a general meeting has been adjourned for more than 21 days, at least 3
days written notice (exclusive of the day on which the notice is served or
taken to be served and of the day for which notice is given) of the
adjourned meeting must be given to Members.
<PAGE>
38. PROCEEDINGS AT GENERAL MEETINGS - DECISION OF QUESTIONS
38.1 Subject to the Corporations Law and the Shareholders Agreement, a
resolution is carried if it is passed by Simple Majority Vote.
38.2 A resolution put to the vote of a meeting is decided on a show of hands
unless a poll is demanded, before or on the declaration of the result of
the show of hands, by:
(a) the chairperson;
(b) any Member or Members who can vote not less than 5% of all votes held
by Members who have the right to vote at the meeting; or
(c) any Member or Members who can vote shares on which an amount has been
paid up equal to not less than 5% of the total amount paid up on all
shares conferring the right to vote at the meeting.
38.3 The demand for a poll may be withdrawn.
39. PROCEEDINGS AT GENERAL MEETINGS - TAKING A POLL
39.1 A poll will be taken when and in the manner that the chairperson directs.
39.2 The result of the poll will be the resolution of the meeting at which the
poll was demanded.
39.3 A poll demanded on the election of the chairperson or the adjournment of a
meeting must be taken immediately.
39.4 After a poll has been demanded at a meeting, the meeting may continue for
the transaction of business other than the question on which the poll was
demanded.
40. PROCEEDINGS AT GENERAL MEETINGS - WRITTEN RESOLUTIONS
40.1 Subject to the Corporations Law and the Shareholders Agreement, if all the
Members have signed a document containing a statement that they are in
favour of a resolution in terms set out in the document, then a resolution
in those terms is taken to have been passed at a general meeting held on
the day on which the document was last signed by a Member.
40.2 For the purposes of Article 40.1, two or more identical documents, each of
which is signed by one or more Members, together constitute one document
signed by those
<PAGE>
Members on the days on which they signed the separate documents.
40.3 Any document referred to in this Article may be in the form of a telex or
facsimile transmission.
41. VOTES OF MEMBERS - ENTITLEMENT TO VOTE
Subject to these Articles and the Shareholders Agreement, and to any
rights or restrictions attaching to any class of shares:
(a) every Member may vote;
(b) subject to Article 44.2, on a show of hands every Member has one vote;
and
(c) on a poll every Member has:
(i) one vote for each fully paid share; and
(ii) voting rights pro rata to the amount of par value and any
premium paid up on each partly paid share held by the Member.
42. VOTES OF MEMBERS - UNPAID CALLS
A Member is not entitled to vote or to be counted in a quorum unless all
calls and other sums payable by the Member in respect of shares have been
paid.
43. VOTES OF MEMBERS - JOINT HOLDERS
If two or more joint holders purport to vote, the vote of the joint holder
whose name appears first in the Register will be accepted, to the exclusion
of the other joint holder or holders.
44. VOTES OF MEMBERS - VOTES BY PROXY
44.1 If a Member appoints one proxy, that proxy may vote on a show of hands.
44.2 If a Member appoints two proxies, neither proxy may vote on a show of
hands.
44.3 A proxy may demand or join in demanding a poll.
<PAGE>
45. VOTES OF MEMBERS - INSTRUMENT APPOINTING PROXY
45.1 A natural person may appoint one or two proxies by a written appointment
signed by the appointor or the appointor's attorney.
45.2 A corporation may appoint one or two proxies by a written appointment under
the appointor's common seal or signed by a director, secretary or attorney
of the appointor.
45.3 A proxy need not be a Member.
45.4 If a Member appoints two proxies, that appointment is of no effect unless
each proxy is appointed to represent a specified proportion of the
appointor's voting rights.
45.5 An appointment of a proxy must be in a form approved by the Directors.
Schedule 1 sets out a form which will be taken to be approved by the
Directors unless they resolve to use a different form.
45.6 A proxy may vote or abstain as he or she chooses except to the extent that
an appointment of the proxy indicates the manner in which the proxy will
vote on any resolution. The proxy must vote or abstain on a poll or show of
hands in accordance with any instructions on the appointment.
45.7 A proxy's appointment is valid at an adjourned meeting.
46. VOTES OF MEMBERS - LODGMENT OF PROXY
46.1 The written appointment of a proxy or attorney must be deposited at the
Office, or another address nominated by the Company, not less than 48 hours
(unless otherwise specified in the notice of meeting to which the proxy
relates) before:
(a) the time for holding the meeting or adjourned meeting at which
the appointee proposes to vote; or
(b) the taking of a poll on which the appointee proposes to vote.
46.2 If the appointment purports to be executed under a power of attorney or
other authority, then the original document, or an office copy or a
notarially certified copy of it, must be deposited with the appointment.
46.3 A facsimile of a written appointment of a proxy is invalid.
47. VOTES OF MEMBERS - VALIDITY
<PAGE>
A vote cast in accordance with an appointment of proxy or power of attorney
is valid even if before the vote was cast the appointor:
(a) died;
(b) became of unsound mind;
(c) revoked the proxy or power; or
(d) transferred the shares in respect of which the vote was cast,
unless any written notification of the death, unsoundness of mind,
revocation or transfer was received at the Office before the relevant
meeting or adjourned meeting.
48. VOTES OF MEMBERS - REPRESENTATIVES OF CORPORATIONS
48.1 Any Member which is a corporation may authorise a natural person to act as
its representative at any general meeting of the Company or any class of
Members. If a Member corporation does so:
(a) its representative may exercise at the relevant general meeting all
the powers which the Member corporation could exercise if it were a
natural person; and
(b) when its representative is present at a meeting, the Member
corporation will be considered to be personally present at the
meeting.
48.2 A certificate under the common seal of the corporation is rebuttable
evidence of the appointment or of the revocation of the appointment (as
appropriate) of the Representative.
49. APPOINTMENT AND REMOVAL OF DIRECTORS - NUMBER OF DIRECTORS
There will be:
(a) a minimum of 2 Directors; and
(b) a maximum of 4 Directors.
50. APPOINTMENT AND REMOVAL OF DIRECTORS - QUALIFICATION
Neither a Director nor an Alternate Director is required to hold any
shares.
<PAGE>
51. APPOINTMENT AND REMOVAL OF DIRECTORS - APPOINTMENT AND REMOVAL
The Company may only appoint and remove Directors in accordance with the
requirements of the Shareholders Agreement.
52. APPOINTMENT AND REMOVAL OF DIRECTORS - ADDITIONAL AND CASUAL DIRECTORS
The Directors must not appoint any person as a Director to fill a casual
vacancy or as an addition to the existing Directors except in accordance
with the Shareholders Agreement.
53. APPOINTMENT AND REMOVAL OF DIRECTORS - PERIOD OF OFFICE
A Director will continue to hold office until he or she dies or until his
or her office is vacated pursuant to Article 54.
54. APPOINTMENT AND REMOVAL OF DIRECTORS - VACATION OF OFFICE
The office of a Director immediately becomes vacant if the Director:
(a) is prohibited by the Corporations Law from continuing as a Director;
(b) becomes of unsound mind or a person whose estate is liable to be dealt
with in any way under the law relating to mental health;
(c) resigns by notice in writing to the Company;
(d) is removed by the Company in accordance with the Shareholders
Agreement; or
(e) subject to the Shareholders Agreement, the Shareholder who appointed
the Director ceases to hold shares in the Company other than by way of
transfer to a related body corporate.
55. REMUNERATION OF DIRECTORS - REMUNERATION OF DIRECTORS
<PAGE>
55.1 Unless the Shareholders otherwise determine by Unanimous Vote, no Directors
will be paid directors' fees.
55.2 The Company may also pay a premium in respect of a contract insuring a
person who is or has been a Director against a liability incurred by the
person as a Director, except in circumstances prohibited by the
Corporations Law.
56. POWERS AND DUTIES OF DIRECTORS - DIRECTORS TO MANAGE COMPANY
56.1 The business of the Company is managed by the Directors who may exercise
all powers of the Company that the Shareholders Agreement, these Articles,
or, the Corporations Law do not require to be exercised by the Company in
general meeting.
56.2 Without limiting the generality of Article 56.1, the Directors may exercise
all the powers of the Company to:
(a) borrow money;
(b) charge any property or business of the Company or all or any of its
uncalled capital; and
(c) issue debentures or give any other security for a debt, liability or
obligation of the Company or of any other person.
56.3 Every Director and other agent or officer of the Company must:
(a) keep secret all aspects of all transactions of the Company, except:
(i) to the extent necessary to enable the person to perform his or
her duties to the Company;
(ii) as required by law;
(iii) when requested to disclose information by the Directors, to
the auditors of the Company or a general meeting of the
Company;
(b) if requested by the Directors, sign and make a declaration that he or
she will not disclose or publish any aspect of any transaction of the
Company.
56.4 All cheques, promissory notes, bankers drafts, bills of exchange and other
negotiable instruments, and all receipts for money paid to the Company,
must be signed, drawn, accepted, endorsed or otherwise executed, as the
case may be, by any two Directors or in such other manner as the Directors
determine.
<PAGE>
57. PROCEEDINGS OF DIRECTORS - DIRECTORS' MEETINGS
57.1 At least 4 Directors' meetings must take place in each period of 12 months
commencing on 1 January and ending on 31 December in each year, or such
other period the Directors may determine.
57.2 Additional Directors' meetings may be convened at the written request of a
Shareholder.
57.3 Directors' meetings will be located in Sydney, Australia but the Directors
may determine that specific meetings will be held elsewhere including
outside Australia.
57.4 Directors' meetings may be conducted by telephone conference.
57.5 At least 3 business days prior written notice of Directors' meetings
together with an agenda must be given to all directors, unless otherwise
agreed by all of the Directors.
57.6 The agenda for Directors' meetings must be determined by the Chairperson
in consultation with the Managing Director, except for Directors' meetings
convened at the request of a Shareholder where the agenda may be
determined by that Shareholder.
57.7 The Directors need not all be physically present in the same place for a
Directors' meeting to be held.
57.8 A Director who participates in a meeting held in accordance with this
Article 57 is taken to be present and entitled to vote at the meeting.
57.9 This Article 57 applies to meetings of Directors' committees as if all
committee members were Directors.
57.10 Subject to the provisions of this Article 57 and the Shareholders
Agreement, the Directors may meet together, adjourn and regulate their
meetings as they think fit.
58. PROCEEDINGS OF DIRECTORS - QUORUM
At a meeting of Directors, a quorum will be constituted in accordance with
the Shareholders Agreement.
59. PROCEEDINGS OF DIRECTORS - DECISION OF QUESTIONS
59.1 Subject to these Articles and to the Shareholders Agreement, questions
arising at a
<PAGE>
meeting of Directors are to be decided by Simple Majority
Vote.
59.2 The chairperson of a meeting does not have a casting vote in addition to
his or her deliberative vote if there is an equality of votes.
59.3 An Alternate Director has the same voting power as the Director for whom
he or she is an alternate. If the Alternate Director is a Director, he or
she also has a vote as a Director.
60. PROCEEDINGS OF DIRECTORS - DIRECTORS' INTERESTS
60.1 A Director and any firm, body or entity in which a Director has a direct
or indirect interest may in any capacity:
(a) enter into any contract or arrangement with the Company;
(b) be appointed to and hold any office or place of profit under the
Company, other than the office of auditor; and
(c) act in a professional capacity, other than as auditor, for the
Company,
and may receive and retain for his or her own benefit any remuneration,
profits or benefits as if he or she were not a Director.
60.2 Each Director must disclose his or her interests to the Company in
accordance with the Corporations Law and the Secretary must record all
declarations in the minutes of the relevant Directors' meeting.
60.3 A Director's failure to make disclosure under this Article does not render
void or voidable a contract or arrangement in which the Director has a
direct or indirect interest.
60.4 A Director may be counted in a quorum in respect of any vote and may vote
in respect of a contract or arrangement or proposed contract or
arrangement in which the Director has a direct or indirect interest,
whether material or otherwise.
60.5 For the purposes of Article 60.2, a Director does not have a direct or
indirect interest in a contract or arrangement or proposed contract or
arrangement if the contract or arrangement or proposed contract or
arrangement is:
(a) for giving a Director any security or indemnity in respect of money
lent by the Director to the Company or obligations undertaken by the
Director for the benefit of the Company;
(b) with another corporation in which the Director's only interest is as
an officer
<PAGE>
or director of that other corporation;
(c) subject to the approval of a resolution of the Company in general
meeting;
(d) with a company listed on a public stock exchange where the
Director's only interest is as a holder of not more than 10% of the
issued capital of shareholder in the listed company; or
(e) a transfer of shares in the Company.
60.6 A Director may attest the affixing of the Seal to any document relating to
a contract or arrangement or proposed contract or arrangement in which the
Director has an interest.
61. PROCEEDINGS OF DIRECTORS - ALTERNATE DIRECTORS
61.1 Each Director may appoint an Alternate Director.
61.2 An Alternate Director is entitled to notice of Directors' meetings and, if
the appointor is not present at a meeting, is entitled to attend, be
counted in a quorum and vote as a Director.
61.3 An Alternate Director is an officer of the Company and is not an agent of
the appointor.
61.4 The provisions of these Articles which apply to Directors also apply to
Alternate Directors.
61.5 The appointment of an Alternate Director may be revoked at any time by the
appointor. An Alternate Director's appointment ends automatically when his
or her appointor ceases to be a Director.
61.6 Any appointment or revocation under this Article must be effected by
written notice delivered to the Secretary.
62. PROCEEDINGS OF DIRECTORS - REMAINING DIRECTORS
62.1 The Directors may act even if there are vacancies on the Board.
63. PROCEEDINGS OF DIRECTORS - CHAIRPERSON
63.1 Subject to the Shareholders Agreement, the Chairperson of the Board shall
be
<PAGE>
elected annually by the Board.
63.2 Subject to the Shareholders Agreement the Directors may elect a Director
as deputy chairperson to act as chairperson in the chairperson's absence.
63.3 If a chairperson or deputy chairperson is not elected or is not present at
any Directors' meeting within 10 minutes after the time appointed for the
meeting to begin, the Directors present must elect any other Director to
be chairperson of the meeting.
64. PROCEEDINGS OF DIRECTORS - DIRECTORS' COMMITTEES
64.1 The Directors may delegate any of their powers to a committee or
committees. A committee must include at least one Director representing
each Shareholder. The Directors may at any time revoke any delegation of
power to a committee.
64.2 A committee must exercise its powers in accordance with any directions of
the Directors and a power exercised in that way is taken to have been
exercised by the Directors.
64.3 A committee may be authorised to sub-delegate all or any of the powers for
the time being vested in it.
64.4 Meetings of any committee will be governed by the provisions of these
Articles and the Shareholders Agreement which deal with Directors'
meetings so far as they are applicable and are not inconsistent with any
directions of the Directors.
65. PROCEEDINGS OF DIRECTORS - WRITTEN RESOLUTIONS
65.1 If all the Directors who are eligible to vote on a resolution have signed
a document containing a statement that they are in favour of a resolution
in terms set out in the document, then a resolution in those terms is
taken to have been passed at a Directors' meeting held on the day on which
the document was last signed by a Director.
65.2 For the purposes of Article 65, two or more identical documents, each of
which is signed by one or more Directors, together constitute one document
signed by those Directors on the days on which they signed the separate
documents.
65.3 Any document referred to in this Article 65 may be in the form of a telex
or facsimile transmission.
65.4 This Article 65 applies to meetings of Directors' committees as if all
members of the committee were Directors.
<PAGE>
66. PROCEEDINGS OF DIRECTORS - VALIDITY OF ACTS OF DIRECTORS
If it is discovered that:
(a) there was a defect in the appointment of a person as a Director,
Alternate Director or member of a Directors' committee; or
(b) a person appointed to one of those positions was disqualified;
all acts of the Directors or the Directors' committee before the discovery
was made are as valid as if the person had been duly appointed and was not
disqualified.
67. PROCEEDINGS OF DIRECTORS - MINUTES AND REGISTERS
67.1 The Directors must cause minutes to be made of:
(a) the names of the Directors present at all general meetings,
Directors' meetings and meetings of Directors' committees;
(b) all proceedings of general meetings, Directors' meetings and
meetings of Directors' committees;
(c) all orders made by the Directors and Directors' committees; and
(d) all disclosures of interests made pursuant to Article 60.
67.2 Minutes must be signed by the chairperson of the meeting or by the
chairperson of the next meeting of the relevant body.
67.3 The Company must keep all registers required by these Articles and the
Corporations Law.
68. MANAGING OR EXECUTIVE DIRECTOR - APPOINTMENT OF MANAGING OR EXECUTIVE
DIRECTOR
68.1 Subject to the Shareholders Agreement, the Directors may appoint a person
to the office of Managing Director or any other office (other than
auditor) or employment under the Company for any period (but not for life)
and on any terms as they think fit. A Director (other than a Managing
Director) so appointed is referred to in these Articles as an Executive
Director.
68.2 The Directors may, subject to the terms of a Managing Director's or
Executive
<PAGE>
Director's employment contract, suspend, remove or dismiss him or her from
that office and appoint another Director in that place.
68.3 If a Managing or Executive Director ceases to be a Director, his or her
appointment as Managing or Executive Director terminates automatically.
68.4 If a Managing or Executive Director is suspended from office, he or she
will not be entitled to attend or vote at any meeting of Directors.
68.5 A Managing Director is subject to the same provisions as to resignation
and removal as the other Directors.
69. MANAGING OR EXECUTIVE DIRECTOR - POWERS
69.1 Subject to the Shareholders Agreement, the Directors may confer on a
Managing Director or Executive Director any powers exercisable by the
Directors, subject to any terms and restrictions determined by the
Directors.
69.2 The Managing Director and other Executive Directors are authorised to sub-
delegate all or any of the powers vested in them.
69.3 Any power conferred pursuant to this Article may be concurrent with or to
the exclusion of the Directors' powers.
69.4 The Directors may at any time in accordance with the Shareholders
Agreement withdraw or vary any of the powers conferred on a Managing
Director or Executive Director.
70. LOCAL MANAGEMENT - APPOINTMENT OF ATTORNEYS AND AGENTS
70.1 The Directors may from time to time by resolution or power of attorney
under the Seal appoint any person to be the attorney or agent of the
Company:
(a) for the purposes;
(b) with the powers, authorities and discretions (not exceeding those
exercisable by the Directors under these Articles and the
Shareholders Agreement);
(c) for the period; and
(d) subject to the conditions,
<PAGE>
determined by the Directors.
70.2 A power of attorney may contain such provisions for the protection and
convenience of persons dealing with an attorney as the Directors think
fit.
70.3 The Directors may appoint attorneys or agents by telex, facsimile
transmission, telegraph or cable to act for and on behalf of the Company.
71. SECRETARY
71.1 There must be at least one secretary of the Company appointed by the
Directors for a term and at remuneration and on conditions determined by
them.
71.2 The Secretary is entitled to attend and be heard on any matter at all
Directors' and general meetings.
71.3 The Directors may, subject to the terms of the Secretary's employment
contract, suspend, remove or dismiss the Secretary.
72. SEALS - COMMON SEAL
72.1 The Directors must provide for the safe custody of the Seal.
72.2 The Seal must not be used without the authority of the Directors or a
Directors' committee authorised to use the Seal.
72.3 Every document to which the Seal is affixed must be signed by a Director
representing each Shareholder.
73. SEALS - OFFICIAL SEAL
73.1 The Company may have one or more official seals for use outside the State
or Territory where the Seal is kept.
73.2 Each official seal must be a facsimile of the Seal with the addition on
its face of the name of every place where it may be used.
73.3 An official seal must not be used except with the authority of the
Directors.
74. SEALS - SHARE SEAL
<PAGE>
74.1 The Company may have a share seal which may be affixed to share
certificates.
74.2 The share seal must be a facsimile of the Seal with 'Share Seal' or
'Certificate Seal' on its face.
75. INSPECTION OF RECORDS - TIMES FOR INSPECTION
On reasonable notice to the Managing Director and at reasonable times,
each Shareholder is entitled to full access (through an accountant, agent
or employee of that Shareholder) to inspect all the books, accounts,
records and facilities of the Company for the purpose of auditing and
valuing the Company, making copies and any other reasonable purpose.
76. DIVIDENDS AND RESERVES - DECLARATION OF FINAL DIVIDEND
76.1 Subject to the Shareholders Agreement, the Directors may declare a
dividend.
76.2 A dividend is payable:
(a) on the date fixed by the Directors' resolution declaring it; or
(b) if the resolution did not fix a date, on the date fixed by the
Directors.
77. DIVIDENDS AND RESERVES - INTERIM DIVIDEND
Subject to the Shareholders Agreement, the Directors may authorise the
Company to pay an interim dividend which is payable on the date fixed by
the Directors.
78. DIVIDENDS AND RESERVES - INTEREST
The Company must not pay interest on any dividend.
79. DIVIDENDS AND RESERVES - RESERVES
79.1 Before declaring a dividend, the Directors may set aside out of profits an
amount by way of reserves as they think appropriate.
79.2 The Directors may apply the reserves for any purpose for which profits may
be properly applied.
<PAGE>
79.3 Pending any such application, the Directors may invest or use the reserves
in the business of the Company or in other investments as they think fit.
79.4 The Directors may carry forward any undistributed profits without
transferring them to a reserve.
80. DIVIDENDS AND RESERVES - DIVIDEND ENTITLEMENT
80.1 Subject to the rights of persons (if any) entitled to shares with special
rights as to dividend, a dividend must be declared and paid according to
the amounts paid or credited as paid on the shares in respect of which the
dividend is paid.
80.2 All dividends must be apportioned and paid proportionately to the amounts
paid or credited as paid on the shares during any portion or portions of
the period in respect of which the dividend is paid, but, if a share is
issued on terms providing that it will rank for dividend as from a
particular date, that share ranks for dividend accordingly.
80.3 An amount paid or credited as paid on a share in advance of a call is not
to be taken as paid or credited as paid for the purposes of Articles 80.1
and 80.2.
80.4 A transfer of shares does not pass the right to any dividend declared in
respect of those shares before the registration of a transfer.
81. DIVIDENDS AND RESERVES - DEDUCTIONS FROM DIVIDENDS
The Directors may deduct from a dividend payable to a Member all sums
presently payable by the Member to the Company on account of calls or
otherwise in relation to shares in the Company.
82. DIVIDENDS AND RESERVES - DISTRIBUTION OF ASSETS
82.1 On declaring a dividend, the Directors may resolve that the dividend be
paid wholly or partly by the distribution of specific assets, including
fully paid shares in, or debentures of, any other corporation.
82.2 The Directors, when authorising the payment of an interim dividend, may
direct payment wholly or partly by the distribution of specific assets,
including fully paid shares in, or debentures of, any other corporation.
82.3 If a difficulty arises in making a distribution of specific assets, the
Directors may:
(a) deal with the difficulty as they consider expedient;
<PAGE>
(b) fix the value of all or any part of the specific assets for the
purposes of the distribution;
(c) determine that cash will be paid to any Members on the basis of the
fixed value in order to adjust the rights of all the Members; and
(d) vest any such specific assets in trustees as the Directors consider
expedient.
82.4 If a distribution of specific assets to a particular Member or Members is
illegal or, in the Directors' opinion, impracticable, the Directors may
make a cash payment to the Member or Members on the basis of the cash
amount of the dividend instead of the distribution of specific assets.
83. DIVIDENDS AND RESERVES - PAYMENT
83.1 Any dividend or other money payable in respect of shares may be paid by
cheque sent through the mail directed to:
(a) the address of the Member shown in the Register or to the address of
the joint holder of shares shown first in the Register; or
(b) an address which the Member or joint holders has in writing notified
the Company as the address to which dividends should be sent.
83.2 Any joint holder may give an effectual receipt for any dividend or other
money paid in respect of shares held by holders jointly.
84. DIVIDENDS AND RESERVES - CAPITALISATION OF PROFITS
84.1 Subject to the Shareholders Agreement the Directors may resolve:
(a) to capitalise any sum, being the whole or part of the amount for the
time being standing to the credit of any reserve account or the
profit and loss account or otherwise available for distribution to
Members; and
(b) that the sum be applied, in any of the ways mentioned in Article
84.2, for the benefit of Members, or persons who have applied for
shares, in the proportions determined by the Company.
84.2 The ways in which a sum may be applied for the benefit of Members under
Article 84.1 are:
<PAGE>
(a) in paying up any amounts unpaid on shares held or to be held by
Members;
(b) in paying up in full unissued shares or debentures to be issued to
Members as fully paid; or
(c) partly as mentioned in paragraph (a) and partly as mentioned in
paragraph (b).
84.3 The Directors must do all things necessary to give effect to a resolution
under Article 84.1 and, in particular, to the extent necessary to adjust
the rights of the Members among themselves, may:
(a) issue fractional certificates or make cash payments in cases where
shares or debentures become issuable in fractions; and
(b) authorise any person to make, on behalf of all the Members entitled
to a benefit on the capitalisation, an agreement with the Company
providing for:
(i) the issue to them, credited as fully paid up, of any such
further shares or debentures; or
(ii) the payment by the Company on their behalf of the amount or
any part of the amount remaining unpaid on their existing
shares by the application of their respective proportions of
the sum resolved to be capitalised,
and any agreement made under the authority of paragraph (b) is effective
and binding on all the Members concerned.
85. NOTICES - SERVICE OF NOTICES
85.1 Notice may be given by the Company to any person who is entitled to notice
under these Articles by:
(a) serving it on the person;
(b) sending it by post, telex or facsimile transmission to the person at
the person's address shown in the Register or the address supplied
by the person to the Company for sending notices to the person; or
(c) if the notice is to a Member and the Member has no registered
office, posting it on a notice board at the Office.
85.2 A notice sent by post is taken to be served:
<PAGE>
(a) by properly addressing, prepaying and posting a letter containing
the notice; and
(b) on the day after the day on which it was posted.
85.3 A notice sent by telex or facsimile transmission is taken to be served:
(a) by properly addressing the telex or facsimile transmission and
transmitting it; and
(b) on the day after its despatch.
85.4 A notice posted on a notice board is taken to be served 24 hours after it
is posted on the board.
85.5 A notice may be given by the Company to joint holders by giving the notice
to the joint holder whose name appears first in the Register.
85.6 Every person who is entitled to a share by operation of law and who is not
registered as the holder of the share is taken to receive any notice
served in accordance with this Article on the person from whom it derives
its title.
85.7 A share certificate, cheque, warrant or other document may be delivered by
the Company either personally or by sending it:
(a) in the case of a Member who does not have a registered address in
Australia, by airmail post; and
(b) in any other case, by ordinary post,
and is at the risk of the addressee as soon as it is given or posted.
85.8 A Member whose registered address is not in Australia may specify in
writing an address in Australia as the Member's registered address within
the meaning of this Article.
85.9 A certificate in writing signed by a Director, Secretary or other officer
of the Company that a document or its envelope or wrapper was addressed
and stamped and was posted is conclusive evidence of posting.
85.10 Subject to the Corporations Law the signature to a written notice given by
the Company may be written or printed.
85.11 All notices sent by post outside Australia must be sent by prepaid airmail
post.
<PAGE>
86. NOTICES - PERSONS ENTITLED TO NOTICE
86.1 Notice of every general meeting must be given to:
(a) every Member;
(b) every Director and Alternate Director; and
(c) any Auditor.
86.2 No other person is entitled to receive notice of a general meeting.
87. AUDIT AND ACCOUNTS - COMPANY TO KEEP ACCOUNTS
87.1 The Directors must cause the Company to keep accounts of the business of
the Company in accordance with the requirements of the Corporations Law.
87.2 The Company must ensure that its accounts and records and those of any
subsidiary of the Company are kept in accordance with all applicable laws
are audited yearly and reflect generally accepted Australian accounting
principles, procedures and practices consistently applied.
87.3 The Company's auditors must be appointed by the Directors or the
Shareholders (as required) by Unanimous Vote.
88. WINDING UP
88.1 Nothing in this Article 88 prejudices the rights of the holders of shares
issued on special terms and conditions.
88.2 Subject to section 490 of the Corporations Law, the Company may be wound
up voluntarily if the Company so resolves by Unanimous Vote of
Shareholders.
88.3 If the Company is wound up, the liquidator may, with the sanction of a
special resolution of the Company:
(a) divide among the Members in kind all or any of the Company's assets;
(b) for that purpose, determine how he or she will carry out the
division between the different classes of Members,
<PAGE>
but may not require a Member to accept any shares or other securities in
respect of which there is any liability.
88.4 The liquidator may, with the sanction of a special resolution of the
Company, vest all or any of the Company's assets in a trustee on trusts
determined by the liquidator for the benefit of the contributories.
89. INDEMNITY BY COMPANY
89.1 To the extent permitted by law, the Company indemnifies every officer of
the Company against any liability incurred by that person:
(a) in his or her capacity as an officer of the Company; and
(b) to a person other than the Company or a related body corporate of
the Company,
unless the liability arises out of conduct on the part of the officer
which involves a lack of good faith.
89.2 The Company indemnifies every officer of the Company against any liability
for costs and expenses incurred by the person in his or her capacity as an
officer of the Company:
(a) in defending any proceedings, whether civil or criminal, in which
judgment is given in favour of the person or in which the person is
acquitted; or
(b) in connection with an application, in relation to those proceedings,
in which the Court grants relief to the person under the
Corporations Law.
<PAGE>
SCHEDULE 2
DEED OF ACCESSION
DEED dated #53#
by
of
('Acceding Party')
RECITAL
This deed is supplemental to a Shareholders' Agreement dated in relation to FAI
Finance Corporation Pty Limited ACN 053 262 561 ('Company')
OPERATIVE PART
1. Acceding Party to be bound
The Acceding Party confirms that it has been supplied with a copy of the
Shareholders' Agreement and covenants with all present parties to the
Shareholders' Agreement (whether original or by accession) ('Parties') to
observe, perform and be bound by all the terms of the Shareholders'
Agreement so that the Acceding Party is deemed, from the date on which the
Acceding Party is registered as a holder of Shares in the Company, to be a
party to the Shareholders' Agreement.
2. Representations and warranties
The Acceding Party represents and warrants to the Parties that:
(a) (incorporation) it is a company duly incorporated and validly
existing under the laws of the country of its incorporation;
(b) (corporate power) it has the corporate power to enter into and
perform its obligations under this document and to carry out the
transactions contemplated by the Shareholders' Agreement;
(c) (corporate action) it has taken all necessary corporate action to
authorise the entry into and performance of this document and to
carry out the transactions contemplated by the Shareholders'
Agreement;
(d) (binding obligation) this document is its valid and binding
obligations;
(e) (no contravention) neither the execution and performance by it of
this
<PAGE>
document nor any transaction contemplated under the Shareholders'
Agreement will violate in any respect any provision of:
(i) its constituent documents; or
(ii) any other document, agreement or other arrangement binding
upon it or its assets.
3. Address for notice
The address of the Acceding Party for the purposes of clause 29 (Notice)
of the Shareholders' Agreement is, until substituted in accordance with
clause 29 (Notice):
[ ]
4. This deed is governed by the laws applicable in New South Wales.
EXECUTED as a deed.
If Acceding Party is a Company
THE COMMON SEAL of [ ] is affixed )
in accordance with its articles of association )
in the presence of )
)
- -------------------------------------------------------------------------------
Secretary Director
Name of secretary (print) Name of director (print)
- -------------------------------------------------------------------------------
If Acceding Party is an individual
SIGNED SEALED and DELIVERED by )
[ ]in the presence of )
)
- -------------------------------------------------------------------------------
<PAGE>
Signature of witness #59#
Name of witness (print)
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 3
INDEPENDENT VALUATION
1. Application of schedule
This schedule applies if the Board is required to obtain an independent
valuation of its Shares under clauses 3 (Equity funding of the Company),
14 (Change in effective control of a shareholder), 16 (Compulsory offer)
or 21 (Default) of this agreement.
2. Appointment of Independent Valuer
If this schedule applies, the Board by Unanimous Vote must appoint an
independent chartered accountant or an investment or merchant banker as an
Independent Valuer to determine the value of each Share in accordance with
this schedule. If the Board fails to agree on an independent chartered
accountant or an investment or merchant banker, the Independent Valuer
will be appointed by the President for the time being of the Institute of
Chartered Accountants in Australia. Neither:
(a) the Independent Valuer; nor
(b) any firm or company of which the Independent Valuer is an employee,
partner, director or consultant,
must have had any business dealings with any Shareholder in the 2 years
before the date of appointment.
3. Valuation
The Independent Valuer must be instructed to determine the fair market
value of the Shares by valuing the Company (including any subsidiary of
the Company) as a whole on a going concern basis as at the end of the
month before the month in which the Independent Valuer is appointed under
this schedule ('Valuation Date'). The fair market value of each Share
will be the proportionate amount of the value of the Company, without
regard to any premium for control or any restrictions placed on the
transfer of shares under the Shareholders Agreement.
4. Access to information
The Board must ensure that the Independent Valuer has a right of access at
all reasonable times to the accounting records and other records of the
Company (including
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any subsidiary of the Company) and is entitled to require from any officer
of the Company such information and explanation as the Independent Valuer
requires to value the Company.
5. Period of determination
The Board must use its best endeavours to ensure that the Independent
Valuer makes a determination as soon as practicable and in any event
within 60 days after receiving instructions.
6. Process
The parties agree that, in determining a value for the Shares under this
schedule, the Independent Valuer:
(a) will act as an expert and not as an arbitrator;
(b) may obtain or refer to any documents, information or material and
undertake any inspections or enquiries as he or she determines
appropriate;
(c) must provide the parties with a draft of his or her determination
and must give the parties an opportunity to comment on the draft
determination before it is finalised; and
(d) may engage such assistance as or she reasonably believes is
appropriate or necessary to make a determination.
7. Final and binding
The Independent Valuer's determination will be final and binding on the
parties.
8. Costs
The Company must pay the reasonable costs and expenses of the Independent
Valuer.
