<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): March 31, 2000
---------------
Home Security International, Inc.
---------------------------------
(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. Disposition of Assets
Effective March 31, 2000, Home Security International, Inc. (the
"Company"), through its wholly-owned subsidiary FAI Home Security Pty. Limited
("FHS"), sold its 50% interest in FAI Finance Corporation Pty. Ltd. ("FFC") to
FAI Insurances Limited ("FAI") for approximately $8,117,567 (the "Sale"). On or
about April 7, 2000, FAI paid the Company, through its subsidiary $2,400,000,
and the remainder of the Sale price is expected to be paid on or before April
26, 2000. FAI, which owns approximately 47% of the outstanding common stock of
the Company, is a wholly owned subsidiary of HIH Insurance Limited ("HIH").
In connection with FHS's purchase of FFC in Fiscal 1997, FAI provided FHS
with purchase money financing, approximately $4,439,175 of which remains
outstanding (the "FAI Note"). Pursuant to the terms of the Sale, FAI has agreed
to extend the payment terms of the FAI Note which will be guaranteed by a
security interest in FHS's wholly owned subsidiary, Ness Security Products Pty.
Ltd. Upon receipt of the proceeds of the Sale, the Company will pay to
Integrated Investments Limited ("IIL") $8,200,000 in full settlement of the
$8,298,000 due to IIL on June 30, 2000 (the "IIL Payment"). The reduction in the
amount paid versus that owed as of June 30, 2000 reflects a discount for the
time value of money. To the extent that the proceeds from the Sale are
insufficient to pay IIL in full, FAI will lend the shortfall to FHS and such
amount will be added to the FAI Note and will accrue interest annually at the
rate of 7.75% and require monthly payments of principal and interest over sixty
months.
In addition to the above described transactions, pursuant to the terms of
the Sale, FFC has agreed to increase the limit on its existing factoring
facility with FHS from approximately $3,061,500 to approximately $4,592,250.
Rodney Adler, a director of HIH, and Paul Brown, the owner of IIL, are also
directors of the Company. Sutter Securities, Inc. issued a fairness opinion to
the Company stating that the Sale was in the best interest of the public
shareholders of HSI and a reasonable third-party transaction.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements.
Not applicable.
(b) Unaudited Pro Forma Financial Statements.
(i) Unaudited Pro Forma Consolidated Statement of Operations
for six months ended December 31, 1999
(ii) Unaudited Pro Forma Consolidated Statement of Operations
for fiscal year ended June 30, 1999
(iii) Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1999
<PAGE>
HOME SECURITY INTERNATIONAL, INC
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Introduction
The accompanying unaudited pro forma statements of operations for the
fiscal year ended June 30, 1999 and the six months ended December 31, 1999 have
been prepared after giving effect to the pro forma adjustments described in the
notes thereto as if the sale of FAI Finance Corporation Pty Limited ("FFC") took
place at the beginning of such periods. The unaudited pro forma balance sheet as
of December 31, 1999 has been prepared as if the sale of FFC, which occurred on
March 31, 2000, had been in effect on December 31, 1999.
The unaudited pro forma statements do not purport to represent what the
results of operations or financial condition of the Company would actually have
been for the corresponding period if the respective events or transaction
described above had in fact been in effect throughout such periods or to project
the results of operations or financial condition of the Company for any future
date or period.
The unaudited pro forma financial statements should be read in conjunction
with the historical financial statements of Home Security International, Inc
("the Company") as found in the Annual Report on Form-10K for the fiscal year
ended June 30, 1999, and the Quarterly Report on Form 10-Q for the quarter ended
December 31, 1999.
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
for six months ended December 31, 1999
<TABLE>
<CAPTION>
HSI
Consolidated Pro Forma
December 31, Pro Forma December 31,
1999 Adjustments Note 1999
-------------- ------------- ------ --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 18,127 $ --- $18,127
Cost of goods (9,078) (9,078)
-------------- --------------
Gross profit 9,049 9,049
General and administrative expenses (7,047) (7,047)
Amortization and depreciation (1,320) (1,320)
Research and development (430) (430)
-------------- --------------
Income from operations 252 252
Non operating income - other (327) 831 (1) 504
Interest income (expense), net (388) 389 (2) 1
-------------- --------------
Income before income taxes, equity in income
of affiliated companies (463) 757
Income tax benefit (expense) 242 (206) (3) 36
-------------- --------------
Income before equity in income of affiliated
Companies (221) 793
Equity in income of affiliated companies 55 (55) (4) ---
-------------- --------------
Income before extraordinary gain 166 793
Extraordinary gain from early
extinguishment of debt --- 64 (5) 64
-------------- --------------
Net income $ 166 $ 857
============== ==============
Diluted weighted average shares of Common
Stock outstanding 5,828 5,828
Diluted income (loss) per common share
Income (loss) before extraordinary $ (0.03) $ 0.14
gain
Extraordinary gain $ --- $0.01 (5) $ 0.01
-------------- --------------
Net income (loss) $ (0.03) $ 0.15
============== ==============
</TABLE>
- ----------------------
(1) Represents the profit on sale of FFC totaling $831,000 which represents the
difference between the sale price of $8,706,000 and the net carrying value
of the investment by the Company as at July 1, 1999 of $7,875,000.
(2) Represents the reversal of imputed interest charges of $337,000 for the six
months ended December 31, 1999 as if the sale of FFC and the repayment of
the Integral Investments Limited Note ("IIL Note") by the Company had taken
place on July 1, 1999; and a $52,000 reduction in interest payments made on
the FAI Insurances Limited Note ("FAI Note") resulting from applying the
remaining balance of proceeds, after the repayment of the IIL Note, to the
FAI Note.
(3) Represents the tax effect of the adjustments referred to in Notes 1 and 2
listed above. Taxation expense has been calculated at an effective tax rate
of 35%. The profit on sale of FFC is capital in nature and is assessable
under Australian capital gains tax law. In calculating the capital gain all
equity accounting is ignored and the cost base of the asset is indexed over
time. The capital gains tax applicable to the FFC sale is $70,000.
(4) Represents the reversal of equity in income of FFC for the six months ended
December 31, 1999 as if the sale of FFC by the Company had taken place on
July 1, 1999.
(5) Represents the $98,000 discount for early repayment of the IIL Note net of
tax.
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
for fiscal year ended June 30, 1999
<TABLE>
<CAPTION>
HSI
Consolidated Pro Forma
June 30, Pro Forma June 30,
1999 Adjustments Note 1999
-------------- ------------- ------ --------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 45,993 $ --- $ 45,993
Cost of goods (23,274) (23,274)
-------------- --------------
Gross profit 22,719 22,719
General and administrative expenses (12,673) (12,673)
Amortization and depreciation (1,831) (1,831)
Research and development (396) (396)
-------------- --------------
Income from operations 7,819 7,819
Non operating income - other --- 804 (1) 804
Interest income (expense), net (506) 593 (2) 87
-------------- --------------
Income before income taxes, equity in income
of affiliated companies and minority 7,313 8,710
interest
Income tax benefit (expense) (3,541) (274) (3) (3,815)
-------------- --------------
Income before equity in income of affiliated
companies and minority interest 3,772 4,895
Equity in income of affiliated companies 310 (310) (4) ---
Minority interest (334) (334)
-------------- --------------
Income before extraordinary gain 3,748 4,561
Extraordinary gain from early
extinguishment of debt --- 64 (5) 64
-------------- --------------
Net income $ 3,748 $ 4,625
============== ==============
Diluted weighted average shares of Common
Stock outstanding 5,517 5,828
Diluted income (loss) per common share
Income before extraordinary gain $0.68 $0.83
Extraordinary gain --- $0.01 (5) $0.01
-------------- --------------
Net income $0.68 $0.84
============== ==============
</TABLE>
(1) Represents the profit on sale of FFC totaling $804,000 which represents the
difference between the sale price of $8,209,000 and the net carrying value
of the investment by the Company as at July 1, 1998 of $7,405,000.
(2) Represents the reversal of imputed interest charges of $528,000 for the
twelve months ended June 30, 1999 as if the sale of FFC and the repayment
of the Integral Investments Limited Note ("IIL Note") by the Company had
taken place on July 1, 1998; and a $65,000 reduction in interest payments
made on the FAI Insurances Limited Note ("FAI Note") resulting from
applying the remaining balance of proceeds, after the repayment of the IIL
Note, to the FAI Note.
(3) Represents the tax effect of the adjustments referred to in Notes 1 and 2
listed above. Taxation expense has been calculated at an effective tax rate
of 35%. The profit on sale of FFC is capital in nature and is assessable
under Australian capital gains tax law. In calculating the capital gain all
equity accounting is ignored and the cost base of the asset is indexed over
time. The capital gains tax applicable to the FFC sale is $66,000.
(4) Represents the reversal of equity in income of FFC for the twelve months
ended June 30, 1999 as if the sale of FFC by the Company had taken place on
July 1, 1998.
(5) Represents the $98,000 discount for early repayment of the IIL Note net of
tax.
<PAGE>
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1999
<TABLE>
<CAPTION>
HSI
Consolidated Pro Forma
December 31, Pro Forma December 31,
1999 Adjustment Note 1999
---------------- -------------- -------- ----------------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,254 $ (400) (1) $ 1,854
Accounts receivable, net 4,613 4,613
Inventories 5,774 5,774
Prepaid expenses and other current 2,264 2,264
assets ---------------- -------------- ----------------
Total current assets 14,905 (400) 14,505
---------------- -------------- ----------------
Non - current assets
Investment in affiliated companies 7,859 (7,859) (2) ---
Capital assets, net 3,328 3,328
Intangibles, net 22,851 22,851
Deferred income taxes 1,668 1,668
Other non - current assets 1,013 1,013
---------------- -------------- ----------------
Total non - current assets 36,719 (7,859) 28,860
---------------- -------------- ----------------
Total assets $51,624 $(8,259) $43,365
================ ============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable - FAI Insurances Group $ 1,301 $ (566) (3) 735
Note payable - Integral Investments 8,301 (8,301) (4) ---
Limited
Accounts payable - trade 2,719 2,719
Accrued liabilities 1,738 1,738
Lease liability 399 399
Income taxes payable 1,086 (87) (5) 999
Deferred income 1,100 1,100
---------------- -------------- ----------------
Total current liabilities 16,644 (8,954) 7,690
---------------- -------------- ----------------
Non-current liabilities
Note payable - FAI Insurances Group 3,416 139 (6) 3,555
Borrowings - FAI Finance Corporation 1,494 1,494
Long term lease liability 533 533
Accrued liabilities 176 176
Deferred income 289 289
---------------- -------------- ----------------
Total non-current liabilities 5,908 139 6,047
---------------- -------------- ----------------
Total liabilities 22,552 (8,815) 13,737
---------------- -------------- ----------------
Shareholders' equity
Common stock 6 6
Additional paid-in capital 23,094 23,094
Secured note issue (2,375) (2,375)
Accumulated other comprehensive loss (568) (568)
Retained earnings 8,915 556 (7) 9,471
---------------- -------------- ----------------
Total shareholders' equity 29,072 556 29,628
---------------- -------------- ----------------
Total liabilities and shareholders'
equity $51,624 $(8,259) $43,365
================ ============== ================
</TABLE>
<PAGE>
___________
(1) Represents the cash effect of the sale of FFC summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Installment paid on IIL Note
pursuant to the Stock Purchase
Agreement as at
December 31, 1999 $ (400,000)
Cash received from sale of
FFC as at December 31,
1999 $8,627,000
Repayment of IIL Note less a
$98,000 early repayment discount $(8,200,000)
Installment paid on FAI Note $ (427,000)
----------
Cash reserves utilized $ (400,000)
==========
</TABLE>
(2) Elimination of FFC on the Company's balance sheet.
(3) Represents the $427,000 installment paid on the FAI Note from the proceeds
of the sale; and the reclassification of $139,000 of current debt owing on
the FAI Note to long-term debt pursuant to the extension in payment terms
granted by FAI Insurances Limited ("FAI") to the Company.
(4) Represents non cash imputed interest adjustments pursuant to United States
Generally Accepted Accounting Principles ("USGAAP") and the repayment in
full of the IIL Note including a $98,000 early repayment discount
summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Non-cash imputed interest charge for six months from
December 31, 1999 to
June 30, 2000 $ 397,000
Installment paid on IIL Note pursuant to the Stock Purchase
Agreement as at December 31, 1999 $ (400,000)
Repayment of IIL Note $(8,200,000)
Early repayment of debt discount $ (98,000)
-----------
Total $(8,301,000)
===========
</TABLE>
(5) Represents taxation liability arising on the sale of FFC and the early
repayment discount received on the IIL Note.
(6) Represents the reclassification of $139,000 of current debt owing on the
FAI Note to long-term debt pursuant to the extension in payment terms
granted by FAI to the Company.
(7) Represents the profit on sale of FFC including the early repayment discount
received on the IIL Note.
<PAGE>
(c) Exhibits. The following exhibits are filed herewith in
accordance with Item 601 of Regulation S-K:
2.1 Share Sale Agreement between FAI Home Security Pty. Ltd. and FAI
Insurances Limited.
10.1 Refinancing Agreement between FAI Home Security Pty. Ltd. and
FAI Insurances Limited.
10.2 Guarantee and Indemnity between Ness Products Pty. Limited and
FAI Insurances Limited.
10.3 Fixed and Floating Charge between Ness Products Pty. Limited and
FAI Insurances Limited.
10.4 Secured Promissory Note dated September 30, 1998 between Home
Security International, Inc. and Integral Investments Limited
previously filed with Form 10-Q on November 16, 1998, and
incorporated herein by reference in its entirety.
<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.
(Registrant)
By: /s/ Chris J. MacDonnell
--------------------------------
Chris J. MacDonnell
Chief Operating Officer
(Principal Operating Officer)
By: /s/ Mark Whitaker
--------------------------------
Mark Whitaker
Vice President of Finance and Treasurer
(Principal Financial and Accounting Officer)
Dated: April 14, 2000
<PAGE>
Exhibit 2.1
Share Sale Agreement
Date: 31 March 2000
FAI Home Security Pty Ltd
Vendor
FAI Insurances Limited
Purchaser
<PAGE>
AGREEMENT dated 31 March 2000
BETWEEN FAI HOME SECURITY PTY LIMITED, ACN 050 064 214 of Level 7, 77
Pacific Highway, North Sydney NSW 2060 ("Vendor")
AND FAI INSURANCES LIMITED, ACN 004 304 545 of 333 Kent Street, Sydney
NSW 2000 ("Purchaser")
RECITALS
A. The Vendor has agreed to sell and the Purchaser has agreed that the
Transferee will purchase the Sale Shares with effect from the Effective
Date on the terms and conditions of this Agreement.
THE PARTIES AGREE:
1. DEFINITIONS
In this Agreement:
"Business Day" means a day which is not a Saturday, Sunday or public
holiday in New South Wales.
"Company" means FAI Finance Corporation Pty Limited, ACN 053 262 561.
"Completion" means completion of this Agreement and the sale and purchase
of the Sale Shares in accordance with this Agreement.
"Completion Date" means 7 April 2000 or any other date as the parties
agree in writing.
"Deposit" means A$2,600,000.
"Effective Date" means 31 March 2000.
"Encumbrance" means any mortgage, charge, pledge, lien, encumbrance,
assignment, hypothecation, security interest, title retention,
preferential right, trust arrangement, contractual right of set-off or
any other security agreement or arrangement in favour of any person.
"HSII" means Home Security International Inc (a Delaware corporation) of
Level 7, 77 Pacific Highway, North Sydney.
"IIL" means Integral Investments Limited (a British Virgin Islands
corporation) of c/- Alliance Investments SAM, Le Panorama Bloc AB57, Rue
Grimaldi MC 98000, Monaco.
"ILL Loan" means the loan outstanding from HSII to IIL immediately prior
to Completion, which amount will not exceed US$8,298,000.
"Nominee" means a person nominated in writing by the Purchaser to the
Vendor prior to Completion.
"Purchase Price" means A$13,257,500.
"Refinancing Agreement" means the agreement so entitled between the
Vendor and the Purchaser (and in the form of Schedule 4) to be entered
into on Completion.
<PAGE>
"Related Bodies Corporate" means, in respect of a body corporate, another
body corporate which is related to that body corporate within the meaning
of section 50 of the Corporations Law, whether they are related as at the
date of this Agreement or any time in the future.
"Sale Shares" means 26,501 fully paid ordinary shares issued in the
capital of the Company.
"Shareholders Agreement" means the document so entitled between the
Vendor and the Purchaser dated 31 December 1997.
"Transferee" means the Purchaser or the Nominee (as the case requires).
2. SALE OF SALE SHARES
2.1 The Vendor will sell to the Purchaser and the Purchaser will, or will
cause the Nominee to, purchase from the Vendor the Sale Shares with
effect from the Effective Date for the Purchase Price.
2.2 On the date of this Agreement, the Purchaser must pay to the Vendor the
Deposit. Until Completion, the Vendor must cause its solicitors to hold
the Deposit as stakeholder.
2.3 On Completion, the Vendor must, or must direct the stakeholder to, pay
the Deposit to IIL.
2.4 If the Vendor does not comply with its obligations under clauses 2.3 and
3.2 on the Completion Date, the Purchaser may terminate this Agreement by
notice in writing to the Vendor and the Vendor must refund the Deposit to
the Purchaser.
2.5 If the Purchaser does not comply with its obligations under clauses 3.3
and 3.4 on the Completion Date, the Vendor may terminate this Agreement
by notice in writing to the Purchaser and the Vendor is entitled to
forfeit the Deposit.
2.6 Interest (if any) which accrues on the Deposit will be dealt with as
follows:
(a) if this Agreement is duly completed, all interest is to be paid to
the Vendor;
(b) if the Deposit is refunded to the Purchaser, all interest is to be
paid to the Purchaser; and
(c) if the Deposit is forfeited to the Vendor, all interest is to be
paid to the Vendor.
2.7 For the purposes of clause 2.6, the expression "interest" means the
interest actually earned on the Deposit less all stamp and other duty,
bank charges and any other money properly payable in respect of the
investment of the Deposit.
2.8 The Vendor and the Purchaser agree that they shall give such directions
and do such things as may be necessary to give effect to the provisions
of this clause 2.
3. COMPLETION
3.1 Completion will take place at Clayton Utz, Level 34, 1 O'Connell Street,
Sydney on the Completion Date or any other place (or both) as the parties
agree in writing.
3.2 On Completion the Vendor must deliver to the Purchaser:
<PAGE>
(a) completed transfers of the Sale Shares duly executed by the Vendor
in favour of the Transferee as transferee and any other documents
required to vest full legal and beneficial ownership of the Sale
Shares in the Transferee which the Purchaser may request prior to
Completion;
(b) executed written resignations with effect from Completion from
Bradley David Cooper and Terrence James Youngman as directors of the
Company, which includes an acknowledgement that those persons have
no claim against the Company in relation to their loss of office or
otherwise;
(c) a counterpart of the Deed (Release of Share Mortgage) in the form of
Schedule 3 duly executed by the Vendor;
(d) counterparts of the documents in Schedule 4 duly executed by the
Vendor and NESS Security Products Pty Limited; and
(e) an acknowledgement executed by Mr Paul Brown and IIL in the form of
Schedule 5.
3.3 On Completion, the Purchaser must, or procure that the Nominee must, pay
in accordance with the direction of the Vendor, to IIL an amount equal to
the IIL Loan less the Deposit. The parties agree that the amount (if
any) represented by the ILL Loan less the Purchase Price is a loan from
the Purchaser to the Vendor on the terms of the Refinancing Agreement.
3.4 On Completion, the Purchaser must deliver to the Vendor:
(a) the documents in Schedule 3 duly executed by the Purchaser; and
(b) counterparts of the documents in Schedule 4 duly executed by the
Purchaser.
3.5 The Vendor acknowledges that the Purchaser holds the share certificates
for the Sale Shares as mortgagee under the mortgage referred to in the
documents in Schedule 3 and that on Completion the Purchaser may hold
those certificates as transferee of the Sale Shares.
3.6 On Completion, beneficial ownership in the Sale Shares will pass to the
Transferee. Subject to the payment of all necessary stamp duty on the
transfer of the Sale Shares, the registration of that transfer by the
Company and the entry of the name of the Transferee in the register of
members of the Company, legal ownership in the Sale Shares will pass to
the Transferee.
3.7 The Vendor appoints the Transferee to be its attorney from the
Completion until the Sale Shares are registered in the name of the
Transferee to exercise any rights, including rights to appoint a proxy or
representative and voting rights, attaching to the Sale Shares.
4. WARRANTIES
4.1 The Vendor represents and warrants to the Purchaser that each of the
statements in paragraphs 1, 2(a) and 2(c) and 3 of Schedule 1 are true
and correct as at a time immediately before Completion on the basis that
the Vendor is the "Representor".
<PAGE>
4.2 Subject to the Purchaser satisfying its obligations under clause 3.4(a),
the Vendor represents and warrants to the Purchaser that the statement in
paragraph 2(b) of Schedule 1 is true and correct as at a time immediately
before Completion.
4.3 The Purchaser represents and warrants to the Vendor that each of the
statements in paragraph 1 of Schedule 1 are true and correct as at a time
immediately before Completion on the basis that the Purchaser is the
"Representor".
4.4 Each representation and warranty referred to in clauses 4.1, 4.2 and 4.3
will remain in full force and effect on and after Completion
notwithstanding Completion.
4.5 The Purchaser acknowledges and warrants that:
(a) it enters into this Agreement solely in reliance on the
representations and warranties of the Vendor set out in this
Agreement and as a result of its own advice and knowledge
concerning the Company and the Sale Shares; and
(b) it does not rely on any representation or warranty made by or on
behalf of the Vendor which is not set out in this Agreement.
4.6 To the extent permitted by law, in relation to the subject matter of this
Agreement, this Agreement:
(a) embodies the entire understanding of the parties, and constitutes
the entire terms agreed on between the parties; and
(b) supersedes any prior written or other agreement between the
parties.
5. SHAREHOLDERS AGREEMENT
The Vendor and the Purchaser consent to the sale of the Sale Shares for
the purposes of clause 13.1(b) of the Shareholders Agreement. The Vendor
and the Purchaser agree pursuant to clause 19.1(a) of the Shareholders
Agreement that upon Completion occurring the Shareholders Agreement is
terminated with effect from the Effective Date.
6. INDEMNITY
The Vendor undertakes to the Purchaser on demand to indemnify and keep
the Company indemnified from and against any loss, cost, expense,
liability or damage that the Company may incur or suffer as a direct or
indirect result of:
(a) proceedings in the Federal Court Victoria District Registry No.
V383 of 1999 ("Action"); or
(b) other legal proceedings brought by the parties to the Action and
group members (as defined in the amended application for the
Action dated 16 November 1999) that have been identified to the
solicitors of the Vendor as at 30 March 2000 (together referred to
as "Claimants"), in respect of the matters pleaded in the Action,
provided that the maximum amount payable by the Vendor under this clause
is no greater than the maximum amount the Vendor would be required to pay
under section 73(10) of the Trade Practices Act, 1974 (Commonwealth)
("Act") calculated on the basis that the
<PAGE>
Vendor is liable to the Company under that section of the Act as if:
(c) the Vendor is a supplier (as defined in the Act);
(d) the Company is a linked credit provider (as defined in the Act); and
(e) each of the Claimants is a consumer (as defined in the Act).
7. GENERAL
Schedule 2 applies and forms part of this Agreement.
<PAGE>
Schedule 1
Warranties
1. Capacity
(a) (Legally binding obligation): This Agreement constitutes a valid and
legally binding obligation of the Representor in accordance with its
terms.
(b) (Execution, delivery and performance): The execution, delivery and
performance of this Agreement by the Representor does not breach or
conflict with:
(i) any statute or law, or any document or agreement to which the
Representor is a party or which is binding on it; or
(ii) the constitution of the Representor.
(c) (Corporate power): The Representor has the power, and has taken all
corporate action required, to:
(i) execute and deliver this Agreement; and
(ii) perform its obligations under this Agreement.
(c) (Authorisation): All consents, licences, approvals and authorisations
of every government authority required to be obtained by the
Representor in connection with the execution, delivery and performance
of this Agreement have been obtained and are valid and subsisting.
(d) (No liquidation): The Representor is not in liquidation or passed any
resolution for winding up, no petition for winding up has been
presented against the Representor and no receiver, receiver and
manager or other controller or external administrator of the
undertaking or assets (or any part thereof) of the Representor has
been appointed or, as far as the Representor is aware, is threatened
to be appointed.
(e) (No insolvency): The Representor is not, nor has it been deemed under
any applicable law to be, insolvent or unable to pay its debts as and
when they become due and payable.
(f) (No trusts): The Representor does not enter into this Agreement as the
trustee of any trust.
2. Share capital
(a) The Vendor is the registered holder and beneficial owner of the Sale
Shares.
(b) The Sale Shares are free of any Encumbrance.
(c) The Vendor is entitled to transfer full legal and beneficial title to
the Sale Shares in accordance with this Agreement.
3. Other Matters
The Vendor is not aware of any information which would be likely to
influence the decision of the Purchaser to enter into this Agreement and
which the Vendor knows or suspects that the Purchaser is unaware of such
information.
<PAGE>
Schedule 2
Interpretation and General
1. In this Agreement:
(a) headings are for convenience only and do not affect interpretation;
and unless the context indicates a contrary intention:
(b) the expression "person" includes an individual, the estate of an
individual, a corporation, an authority, an association or a joint
venture (whether incorporated or unincorporated), a partnership and a
trust;
(c) a reference to any party includes that party's executors,
administrators, successors and permitted assigns, including any person
taking by way of novation;
(d) a reference to any document (including this Agreement) is to that
document as varied, novated, ratified or replaced from time to time;
(e) words importing the singular include the plural (and vice versa), and
words indicating a gender include every other gender;
(f) references to parties, clauses or schedules are references to parties,
clauses and schedules to or of this Agreement, and a reference to this
Agreement includes any schedule, exhibit or annexure to this
Agreement;
(g) the word "includes" in any form is not a word of limitation;
(h) references to payments to any party to this Agreement will be
construed to include payments to another person upon the direction of
such party;
(i) all payments to be made under this Agreement must be made by
unendorsed bank cheque or other immediately available funds; and
(j) if any day appointed or specified by this Agreement for the payment of
any money or doing of any thing falls on a day which is not a Business
Day, the day so appointed or specified shall be deemed to be the next
Business Day.
2. This Agreement is governed by and will be construed according to the laws
of New South Wales.
3. Each party irrevocably submits to the non-exclusive jurisdiction of the
courts of New South Wales, and the courts competent to determine appeals
from those courts, with respect to any proceedings which may be brought at
any time relating in any way to this Agreement.
4. Each party will promptly do and perform all further acts and execute and
deliver all further documents (in form and content reasonably
satisfactory to that party) required
<PAGE>
by law or reasonably requested by any other party to give effect to this
Agreement.
5. Any communication under or in connection with this Agreement:
(a) must be in writing;
(b) must be addressed as shown below:
The Vendor
Name: FAI HOME SECURITY PTY LIMITED
Address: Level 15, 77 Pacific Highway, North Sydney NSW
2060
Fax no: 9936 2440
For the attention: Chris MacDonnell
Name: FAI INSURANCES LIMITED
Address: 333 Kent Street, Sydney NSW 2000
Fax no:
For the attention of:
(or as otherwise notified by that party to the other party from time
to time);
(c) must be signed by the party making the communication or (on its
behalf) by the solicitor for, or by any attorney, director, secretary,
or authorised agent of, that party;
(d) must be delivered or posted by prepaid post to the address, or sent by
fax to the number, of the addressee, in accordance with paragraph
5(b); and
(e) will be deemed to be received by the addressee:
(i) (in the case of prepaid post) on the third Business Day after
the date of posting to an address within Australia, and on the
fifth Business Day after the date of posting to an address
outside Australia;
(ii) (in the case of fax) at the local time (in the place of receipt
of that fax) which then equates to the time at which that fax is
sent as shown on the transmission report which is produced by
the machine from which that fax is sent and which confirms
transmission of that fax in its entirety, unless that local time
is a non Business Day, or is after 5.00 pm on a Business Day,
when that communication will be deemed to be received at 9.00 am
on the next Business Day; and
(iii) (in the case of delivery by hand) on delivery at the address of
the addressee as provided in paragraph 5(b), unless that
delivery is made on a non Business Day, or after 5.00 pm on a
Business Day, when that communication will be deemed to be
received at 9.00 am on the next Business Day.
6. Except as otherwise provided in this Agreement, each party will pay its own
costs and expenses in connection with the negotiation, preparation,
execution, and performance of this Agreement.
<PAGE>
7. The Purchaser will:
(a) pay all stamp duties (apart from financial institutions duties or bank
account debit taxes which will lie between the parties as they fall)
and any related fines and penalties in respect of this Agreement, the
performance of this Agreement and each transaction effected by or made
under or pursuant to this Agreement; and
(b) indemnify the Vendor against any liability arising from failure to
comply with paragraph 7(a).
8. This Agreement may only be varied by a document signed by or on behalf of
each of the parties.
9. A party cannot assign, novate or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of each
other party.
10. This Agreement may be executed in any number of counterparts and by the
parties on separate counterparts. Each counterpart constitutes an original
of this Agreement, all of which together constitute one agreement.
11. Subject to this paragraph and paragraph 12, each party must keep the terms
of this Agreement confidential. A party may make any disclosure in relation
to this Agreement:
(a) to any professional adviser, financial adviser, banker, financier or
auditor where that person is obliged to keep the information
confidential;
(b) to comply with any applicable law, or any requirement of any
regulatory body (including any relevant stock exchange);
(c) to any of its employees to whom it is necessary to disclose the
information;
(d) to obtain the consent of any third party to any term of, or to any act
pursuant to, this Agreement;
(e) to enforce its rights or to defend any claim or action under this
Agreement;
(f) to a related body corporate, on receipt of its undertaking to keep the
information confidential; or
(g) where the information has come into the public domain through no fault
of that party.
12. Except as required by applicable law or the requirements of any regulatory
body (including any relevant stock exchange), all press releases and other
public announcements in relation to this Agreement must be in terms agreed
by the parties.
13. The Vendor must and must ensure that each of its Related Bodies Corporate
and their respective officers keep all confidential, proprietary or
commercially sensitive information of the Company confidential and must not
use any such information or disclose any such information to any person
(other than the Purchaser, the Transferee, each of their Related Bodies
Corporate and their respective officers) in either case other than as may
be required by law or in connection with Completion or the performance of
obligations under this Agreement.
<PAGE>
14. If this Agreement is rescinded or terminated, no party will be liable to
any other party except in respect of any breach of this Agreement
occurring before rescission or termination.
15. No right or obligation of any party will merge on completion of any
transaction under this Agreement. All rights and obligations under this
Agreement survive the execution and delivery of any transfer or other
document which implements any transaction under this Agreement.
<PAGE>
Schedule 3
Share Mortgage Release
<PAGE>
Schedule 4
Refinancing Agreement, Fixed and Floating Charge and Guarantee and Indemnity
<PAGE>
Schedule 5
Acknowledgement
<PAGE>
SIGNED as an agreement.
SIGNED for and on behalf of FAI HOME SECURITY )
PTY LIMITED by ) .......................
its Attorney under a Power of Attorney dated ) (Signature)
March 2000 and who declares that he has not )
received any notice of the revocation of )
such Power of Attorney in the presence of: )
)
...............................
(Signature of Witness)
...............................
(Name of Witness in Full)
SIGNED for and on behalf of FAI INSURANCES )
LIMITED by ) .......................
its Attorney under a Power of Attorney dated ) (Signature)
and who declares that he has not received )
any notice of the revocation of such Power )
of Attorney in the presence of: )
)
...............................
(Signature of Witness)
...............................
(Name of Witness in Full)
<PAGE>
Exhibit 10.1
FAI HOME SECURITY PTY LIMITED
(ACN 050 064 214)
FAI INSURANCES LIMITED
(ACN 004 304 545)
_________________________________
REFINANCING AGREEMENT
_________________________________
ATANASKOVIC HARTNELL
--------------------
Lawyers - Corporate, Finance & Taxation
Level 10
Atanaskovic Hartnell House
75-85 Elizabeth Street
Sydney NSW
Australia 2000
<PAGE>
REFINANCING AGREEMENT
AGREEMENT dated between
1. FAI HOME SECURITY PTY LIMITED (ACN 050 064 214) of Level 7, 77 Pacific
Highway, North Sydney, New South Wales (the "Borrower"); and
2. FAI INSURANCES LIMITED (ACN 004 304 545) of Level 42, 50 Bridge Street,
Sydney, New South Wales (the "Lender").
RECITALS
A. The Borrower and the Lender are parties to a Share Sale Agreement (the
"Share Sale Agreement") dated 31 December 1997 pursuant to which the Lender
agreed to sell and the Borrower agreed to purchase fifty percent of the
shares issued in the capital of FAI Finance Corporation Pty Limited (ACN
053 262 561) (the "Shares").
B. Clause 4.2 of the Share Sale Agreement provided for the payment of the
purchase price for the Shares, partly on completion of the sale and
purchase of the Shares and the balance in amounts and on dates set out in
Clause 4.2(b) of the Share Sale Agreement.
C. The Lender has now agreed, pursuant to a Share Sale Agreement dated on or
about 31 March 2000 (the "New Share Sale Agreement"), to buy back the
Shares from the Borrower. Clause 3.3 of the New Share Sale Agreement also
provides that the Lender must, or must procure a nominee to, pay an
additional advance to the Borrower to allow the Borrower to satisfy all of
its obligations in full under the Promissory Note (the "Additional
Advance"). The amount owing under the Share Sale Agreement plus the
Additional Advance (in aggregate the "Balance") will be, only in the case
of the Additional Advance, made and, in the case of both, repaid in
accordance with the terms of this Agreement.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
The following definitions apply unless the context requires otherwise.
"Accounts" means profit and loss accounts, balance sheets and cashflow
statements together with any statements, reports (including any directors' and
auditors' reports) and notes attached to or intended to be read with any of
them.
2
<PAGE>
"Authorisation" includes:
(a) any consents, authorisation, registration, filing, lodgement, agreement,
notarisation, certificate, permission, licence, approval, authority or
exemption from, by or with a Governmental Agency; or
(b) in relation to anything which will be fully or partly prohibited or
restricted by law if a Governmental Agency intervenes or acts in any way
within a specified period after lodgement, filing, registration or
notification or the expiry of that period without intervention or action.
"Authorised Officer" means:
(a) in respect of the Borrower, any director or secretary, or any person from
time to time nominated as an Authorised Officer by the Borrower by a notice
to the Lender accompanied by certified copies of signatures of all new
persons so appointed; and
(b) in respect of the Lender, any director or secretary.
"Business Day" means a weekday on which banks are open for business in Sydney.
"Charge" means the deed between the Chargor and the Lender dated on or about the
date of this Agreement.
"Chargor" means Ness Security Products Pty Limited (ACN 069 984 372).
"Drawdown Date" means the date on which the Additional Advance under this
Agreement is or is to be drawn, being the date of Completion (as that term is
defined in the New Share Sale Agreement).
"Drawdown Notice" means a notice under Clause 3.
"Event of Default" means any of the events specified in Clause 12.
"Financial Indebtedness" means any indebtedness, present or future, actual or
contingent in respect of moneys borrowed or raised or any financial
accommodation whatever.
"Governmental Agency" means any government or any governmental, semi-
governmental or judicial entity or authority. It also includes any self-
regulatory organisation established under statute or any stock exchange.
"Guarantee" means the guarantee given by the Chargor in favour of the Lender
dated on or about the date of this Agreement.
"Integral" means Integral Investments Limited, a British Virgin Islands
corporation.
"Material Adverse Effect" means, in the reasonable opinion of the Lender, a
material adverse effect on the ability of a Relevant Company to perform its
3
<PAGE>
obligations under a Transaction Document, on the security given to the Lender by
a Relevant Company in respect of the Secured Moneys or on the financial
condition or business of a Relevant Company.
"Mortgaged Property" means the property the subject of the Charge.
"Permitted Security Interest" means any:
(a) sale of any interest in any agreement between a person and the Borrower
under which the Borrower agrees to sell to that person a security alarm
system (whether or not the Borrower also agrees to sell other equipment or
provide other services under the agreement); or
(b) Security Interest entered into in connection with the sale referred to in
paragraph (a).
"Potential Event of Default" means anything which with the giving of notice or
passage of time or both would become an Event of Default and would have a
Material Adverse Effect.
"Promissory Note" means the Secured Promissory Note dated 30 September 1998 (as
amended by an amendment to the Secured Promissory Note dated 31 December 1999)
given by the Borrower in favour of Integral.
"Related Corporation" has the meaning given to "Related Body Corporate" in the
Corporations Law, but on the basis that "Subsidiary" has the meaning given in
this Agreement and that "body corporate" includes any entity or a trust.
"Relevant Company" means the Chargor and the Borrower or any person who gives or
creates a Security Interest which secures any Secured Moneys.
"Secured Moneys" means all money which the Borrower (whether alone or with
another person) is or at any time may become actually or contingently liable to
pay to or for the account of the Lender (whether alone or with another person)
for any reason whatever under or in connection with a Transaction Document.
Without limitation it includes, money by way of principal, interest, fees,
costs, indemnities, charges, duties or expenses or payment of liquidated or
unliquidated damages under or in connection with a Transaction Document, or as a
result of a breach of or default under or in connection with a Transaction
Document.
"Security Interest" includes any mortgage, pledge, lien or charge or any
security or preferential interest or arrangement of any kind or any other right
of, or arrangement with, any creditor to have its claims satisfied in priority
to other creditors with, or from the proceeds of, any asset. Without limitation
it includes retention of title other than in the ordinary course of day-to-day
trading and a deposit of money by way of security but it excludes a charge or
lien arising in favour of a Governmental Agency by operation of statute unless
there is default in payment of moneys secured by that charge or lien.
4
<PAGE>
"Subsidiary" has the meaning given in the Corporations Law and includes, in
respect of an entity, an entity whose profit or loss is required by current
accounting practice to be included in the consolidated annual profit and loss
statements of that entity or would be required if that entity were a
corporation.
"Tax" includes any tax, levy, impost, deduction, charge, rate, duty, compulsory
loan or withholding which is levied or imposed by a Governmental Agency, and any
related interest, penalty, charge, fee or other amount.
"Term" means the sixty month period commencing on the Drawdown Date.
"Transaction Document" means this Agreement, the Guarantee, the Charge or any
other Security Interest in respect of the Secured Moneys or a document or
agreement entered into or provided under or in connection with, or for the
purpose of amending or novating, any of the above. It includes, without
limitation, an undertaking by or to a party or its lawyers under or in relation
to any of the above.
1.2 Interpretation
Headings are for convenience only and do not affect interpretation. The
following rules apply unless the context requires otherwise.
(a) The singular includes the plural and the converse.
(b) A gender includes all genders.
(c) Where a word or phrase is defined, its other grammatical forms have a
corresponding meaning.
(d) A reference to a person, corporation, trust, partnership, unincorporated
body or other entity includes any of the foregoing.
(e) A reference to a Clause, Annexure or Schedule is a reference to a clause
of, or annexure or schedule to, this Agreement.
(f) A reference to a party to this Agreement or another agreement or document
includes the party's successors and permitted substitutes or assigns.
(g) A reference to an agreement or document is to the agreement or document as
amended, novated, supplemented or replaced from time to time, except to the
extent prohibited by this Agreement.
(h) A reference to legislation or to a provision of legislation includes a
modification or re-enactment of it, a legislative provision substituted for
it and a regulation or statutory instrument issued under it.
(i) A reference to "writing" includes a facsimile transmission and any means of
reproducing words in a tangible and permanently visible form.
5
<PAGE>
(j) A reference to conduct includes, without limitation, an omission, statement
or undertaking, whether or not in writing.
(k) A reference to an "asset" includes any real or personal, present or future,
tangible or intangible property or asset (including, without limitation,
intellectual property) and any right, interest, revenue or benefit in,
under or derived from the property or asset.
(l) Where a provision of this Agreement refers to Secured Moneys being repaid
or paid, it shall be read to include an obligation or requirement included
in the definition of the term "Secured Moneys" being performed or complied
with.
(m) An Event of Default subsists until it has been waived in writing by the
Lender.
(n) A reference to an amount for which a person is "contingently liable"
includes an amount which that person may become actually or contingently
liable to pay if a contingency occurs, whether or not that liability will
actually arise.
1.3 Determination, statement and certificate conclusive
Except where otherwise provided in this Agreement any determination, statement
or certificate by the Lender or an Authorised Officer of the Lender shall, in
the absence of manifest error, be prima facie evidence of the matters stated in
it.
1.4 Document or agreement
A reference to an "agreement" includes a Security Interest, undertaking, deed,
agreement or legally enforceable arrangement whether or not in writing. A
reference to a "document" includes an agreement (as so defined) in writing or a
certificate, notice, instrument or document.
1.5 Listing requirements
A listing rule or business rule of a stock exchange will be regarded as a "law".
2. PURPOSE
(a) The Borrower shall use the Additional Advance for the sole purpose of being
provided to Integral to allow the Borrower to satisfy all of its
obligations in full under Promissory Note.
(b) The Additional Advance will be made by way of direct payment to Integral.
3. MAKING OF ADDITIONAL ADVANCE
(a) Subject to this Agreement, if the Borrower requests the Additional Advance
in a Drawdown Notice, the Lender will make available that Additional
Advance on the Drawdown Date to the account as specified in the Drawdown
Notice.
6
<PAGE>
(b) The Drawdown Notice is irrevocable. It must be substantially in the form
of Annexure C and be received by the Lender not later than 9 am (Sydney
time) on the proposed Drawdown Date. The Borrower may only give one
Drawdown Notice.
4. EFFECTIVE DATE
This Agreement is effective from the date that the Conditions Precedent in
Clause 9 are satisfied.
5. INTEREST
5.1 Interest Rate
Interest on the outstanding part of the Balance from time to time will accrue
from day to day at the rate of 7.75% per annum calculated on a daily basis and a
year of 365 days.
5.2 Accrued Interest
Interest will accrue, initially; from (and including) the Drawdown Date to (but
excluding) the last Business Day of the month in which the Drawdown Date occurs;
and subsequently from (and including) the last Business Day of the month to (but
excluding) the last Business Day of the next month.
6. REPAYMENT
On the last Business Day of each month during the Term the Borrower will pay to
the Lender in accordance with this Agreement equal instalments comprising both
principal and interest such that the Balance and all accrued interest is repaid
by the last day of the Term.
7. PAYMENTS
7.1 Manner
The Borrower shall make all payments under any Transaction Document:
(a) by bank cheque delivered to the Lender at its address for service of
notices or by transfer of immediately available funds to the account
specified by the Lender from time to time, in either case by 11 am (local
time) on the due date; and
(b) without set-off, counterclaim or other deduction, except any compulsory
deduction for Taxation.
7.2 Appropriation where insufficient moneys available
If an amount required to be paid to the Lender under this Agreement is not paid
in full, such amounts received by the Lender will be appropriated as between
principal,
7
<PAGE>
interest and other amounts as the Lender determines. This appropriation will
override any appropriation made by the Borrower.
7.3 Gross up
If the Borrower is required by law to deduct or withhold Taxes from any payment
to the Lender the Borrower must:
(a) make the required deductions and withholdings;
(b) pay in accordance with the relevant law the full amount deducted or
withheld;
(c) deliver to the Lender the receipt for each payment; and
(d) increase the amount of the payment to the Lender to an amount which will
result in the receipt by the Lender of the full amount which would have
been payable to the Lender if no deduction or withholding has been
required.
Notwithstanding the above, the Borrower is not required to gross up an amount by
reference to any deduction or withholding it is required to make as a result of
the action of the Lender. In such circumstances, the Lender will accept the net
payment in full satisfaction of the requirement of the Borrower to make the
gross payment.
7.4 Currency of payment
The Borrower must pay all amounts payable under this Agreement in Australian
Dollars.
8. PREPAYMENTS
8.1 Voluntary prepayments
Subject to this Clause, if it first gives at least 30 days notice to the Lender
the Borrower may prepay all or part of the Balance. That notice is irrevocable
and the Borrower shall prepay in accordance with it.
8.2 Voluntary prepayment
Provided the appropriate notice is given, payments under Clause 8.1 may be made
at any time.
8.3 Interest
If the Borrower prepays any amount it shall pay any interest accrued on that
amount.
8.4 Limitation on prepayments
The Borrower, if it decides to prepay part of the Balance, must prepay at least
A$100,000 each time it makes a prepayment and may not prepay any part of the
Advance except in accordance with this Agreement.
8
<PAGE>
9. CONDITIONS PRECEDENT
This Agreement is subject to the condition precedent that the Lender has
received all of the following in form and substance satisfactory to the Lender:
(a) (Verification certificates) a certificate in relation to the Borrower given
by a director of the Borrower substantially in the form of Annexure A and a
certificate in relation to the Chargor given by a director of the Chargor
substantially in the form of Annexure B, with the attachments referred to
and dated not earlier than 7 days before the date of this Agreement;
(b) (Transaction documents) duly executed Transaction Document; and
(c) (Registration of charge) evidence that the Charge is in duly registrable
form.
10. REPRESENTATIONS AND WARRANTIES
10.1 Representations and warranties
The Borrower makes the following representations and warranties.
(a) (Status) It is a corporation validly existing under the laws of the place
of its incorporation.
(b) (Power) It has the power to enter into and perform its obligations under
this Agreement, to carry out the transactions contemplated by this
Agreement and to carry on its business as now conducted or contemplated.
(c) (Corporate authorisations) It has taken all necessary corporate action to
authorise the entry into and performance of this Agreement, and to carry
out the transactions contemplated by this Agreement.
(d) (Documents binding) This Agreement creates valid and binding obligations
enforceable in accordance with its terms subject to any applicable
bankruptcy, insolvency or other laws affecting creditors rights generally
and to general principles of equity.
(e) (Transactions permitted) The execution and performance by it of this
Agreement and each transaction contemplated under this Agreement did not
and will not violate in any respect a provision of:
(i) a law or treaty or a judgment, ruling, order or decree of a
Governmental Agency binding on it;
(ii) its constitution or other constituent documents; or
(iii) any other document or agreement to which it is a party which is
binding on it or its assets,
and did not and will not except as contemplated by the Transaction
Documents:
9
<PAGE>
(iv) create or impose a Security Interest on any of its assets; or
(v) allow a person to accelerate or cancel an obligation with respect to
Financial Indebtedness, or constitute an event of default,
cancellation event, prepayment event or similar event (whatever
called) under an agreement relating to Financial Indebtedness,
whether immediately or after notice or lapse of time or both.
(f) (Authorisations) Each Authorisation which is required in relation to:
(i) the execution, delivery and performance by it of the Transaction
Documents to which it is expressed to be a party and the transactions
contemplated by those documents;
(ii) the validity and enforceability of those documents; and
(iii) its business as now conducted or contemplated,
has been obtained or effected. Each is in full force and effect. It has
complied with each of them. It has paid all applicable fees for each of
them.
(g) (Copies of documents) All copies of documents (including its latest
audited Accounts and all Authorisations) given by it or on its behalf to
the Lender are true and complete copies in all material respects. Except
as disclosed to the Lender in writing prior to the date of this Agreement,
those documents are in full force and effect.
10.2 Reliance on representations and warranties
The Borrower acknowledges that the Lender has entered the Transaction Documents
in reliance on the representations and warranties in this Clause.
11. UNDERTAKINGS
11.1 General Undertakings
The Borrower undertakes as follows:
(a) (Corporate reporting and information) It will provide to the Lender:
(i) (accounts) as soon as practicable, and in any event not later than 60
days after the close of the accounting period to which they relate,
copies of its consolidated and unconsolidated audited annual and
unaudited semi-annual Accounts; and
(ii) (other information) upon request, any other information in relation
to its and each other Relevant Company's financial condition or
business which the Lender may reasonably request.
(b) (Notice to Lender) It will notify the Lender as soon as it becomes aware
of:
(i) any Event of Default or Potential Event of Default;
10
<PAGE>
(ii) the commencement of any litigation, arbitration or similar
proceedings to which it is a party involving a claim in excess of
A$100,000; and
(iii) any change in its Authorised Officers, giving specimen signatures of
any new Authorised Officer appointed, and, where requested by the
Lender, evidence satisfactory to the Lender of the authority of any
Authorised Officer.
(c) (Negative pledge) It will not create or allow to exist and will ensure
that the Chargor does not create or allow to exist any Security Interest
or arrangement of any kind other than a Permitted Security Interest over
its or the Chargor's assets without the consent of the Lender such consent
not to be unreasonably withheld.
(d) (Books and records) It will maintain proper records and books of account.
It will permit the Lender and authorised persons to inspect those records
and books and all other documents relating to the business of the
Borrower.
(e) (Lender's consent) Where the Borrower has a right or power in relation to
any Mortgaged Property and, in relation to a particular matter, either:
(i) an exercise of that right or power is reasonably likely to have a
Material Adverse Effect; or
(ii) a failure to exercise that right or power is reasonably likely to
have a Material Adverse Effect,
then the Borrower shall provide the Lender with full details in writing as
to the relevant matter and comply with, and ensure that the Chargor
complies with, any reasonable direction the Lender gives in relation to
the matter, including (without limitation) how the Borrower and/or the
Chargor should act in relation to the exercise of the relevant right or
power.
11.2 Term of undertakings
Each undertaking in Clause 11.1 continues from the date of this Agreement until
the Secured Moneys are fully and finally repaid.
12. EVENTS OF DEFAULT
12.1 Events of Default
Each of the following is an Event of Default (whether or not it is in the
control of any Relevant Company).
(a) (Obligations under Transaction Documents) A Relevant Company fails:
11
<PAGE>
(i) to pay an amount payable by it under any Transaction Document when
due;
(ii) to comply with any of its other obligations under any Transaction
Document and, if in the reasonable opinion of the Lender that failure
can be remedied, that failure is not remedied within 14 days after a
notice is given by the Lender to that Relevant Company requiring it
to be remedied; or
(iii) to satisfy within the stipulated time anything which the Lender made
a condition of its waiving compliance with a condition precedent or
undertaking in a Transaction Document.
(b) (Misrepresentation) A representation, warranty or statement by a Relevant
Company in a Transaction Document, or in a document provided under or in
connection with a Transaction Document, is not true in a material respect
or is misleading when made or repeated.
(c) (Cross default)
(i) Financial Indebtedness of a Relevant Company:
(A) is not paid when due and such non payment is reasonably likely to
have a Material Adverse Effect; or
(B) becomes due and payable or capable of being declared due and
payable before its stated maturity or expiry and that fact is
reasonably likely to have a Material Adverse Effect;
(ii) a facility or obligation granted or owed by a person to a Relevant
Company to provide financial accommodation or to acquire or
underwrite Financial Indebtedness is prematurely terminated due to
the default of that Relevant Company and that termination is
reasonably likely to have a Material Adverse Effect; or
(iii) an event of default as defined in another Transaction Document
occurs.
(d) (Administration, winding up, arrangements, insolvency etc.)
(i) An administrator of a Relevant Company is appointed.
(ii) Except for the purposes of a solvent reconstruction or amalgamation
previously approved by the Lender:
(A) an application (not being an application withdrawn or dismissed
within 7 days) or an order is made, proceedings are commenced, a
resolution is passed or proposed in a notice of meeting or other
steps (other than proceedings, applications and steps which are
frivolous or vexatious) are taken for:
12
<PAGE>
(I) the winding up, dissolution, official management or
administration of any Relevant Company; or
(II) a Relevant Company entering into any arrangement, compromise
or composition with or assignment for the benefit of its
creditors or any class of them; or
(B) a Relevant Company ceases, suspends or threatens to cease or
suspend the conduct of all or a substantial part of its business
or disposes of or threatens to dispose of a substantial part of
its assets; or
(iii) A Relevant Company is, or under an applicable legislation is taken to
be, unable to pay its debts (other than as a result of the failure to
pay a debt or claim the subject of a good faith dispute) or stops or
suspends or threatens to stop or suspend payment of all or a class of
its debts.
(e) (Enforcement against assets)
(i) A receiver, receiver and manager, administrative receiver or similar
officer is appointed to;
(ii) a Security Interest becomes enforceable or is enforced over; or
(iii) a distress, attachment or other execution is levied or enforced or
applied for over,
all or any of the assets and undertaking of a Relevant Company.
(f) (Reduction of capital) Without the prior consent of the Lender, a Relevant
Company:
(i) reduces its capital (including, without limitation, a purchase of its
shares);
(ii) passes a resolution to reduce its capital or to authorise it to
purchase its shares or, where the meeting is capable of approving
such a resolution, calls a meeting to consider such a resolution; or
(iii) applies to a court to call any such meeting or to sanction any such
resolution or reduction.
(g) (Analogous process) Anything which is analogous to anything referred to in
paragraphs (d) to (f) inclusive or which has substantially similar effect
occurs with respect to any Relevant Company under any overseas law or any
law which commences or is amended after the date of this Agreement.
13
<PAGE>
(h) (Vitiation of Transaction Documents)
(i) All of a Transaction Document is terminated or is or become void,
illegal, invalid, unenforceable or of limited force and effect; or
part of a Transaction Document is terminated or become void,
illegal, invalid, unenforceable or of limited force and effect and
that fact is likely to have a Material Adverse Effect;
(ii) a party becomes entitled to terminate, rescind or avoid all of a
Transaction Document; or a party becomes entitled to terminate,
rescind or avoid part of a Transaction Document and that fact is
likely to have a Material Adverse Effect; or
(iii) a party other than the Lender alleges or claims that an event
described in sub-paragraph (i) has occurred or that it is entitled
as described in sub-paragraph (ii).
(i) (Material Adverse Change) Any other event or series of events, whether
related or not, occurs (including, without limitation, a material adverse
change in the business, assets or financial condition of any Relevant
Company or the value of the Mortgaged Property), which in the reasonable
opinion of the Lender is likely to have a Material Adverse Effect.
(j) (Control) Without the prior consent of the Lender (such consent not to be
unreasonably withheld) the Borrower ceases to legally and beneficially own
100% of the issued shares of the Chargor.
12.2 Consequences
In addition to any other rights provided by law or any Transaction Document, at
any time after an Event of Default (whether or not it is continuing) or a
Potential Event of Default the Lender may do all or any of the following:
(a) by notice to the Borrower declare all Secured Moneys immediately due and
payable, and the Borrower will immediately pay the Secured Moneys; and/or
(b) enforce the Guarantee and Charge.
13. INTEREST ON OVERDUE AMOUNTS
13.1 Accrual
Interest accrues on each unpaid amount which is due and payable by the Borrower
under or in respect of any Transaction Document (including interest payable
under this Clause):
(a) on a daily basis up to the date of actual payment from (and including) the
due date or, in the case of an amount payable by way of reimbursement or
indemnity, the date of disbursement or loss, if earlier;
14
<PAGE>
(b) both before and after judgment (as a separate and independent obligation);
and
(c) at the rate determined by the Lender to be the sum of 2% per annum plus
the rate (if any) applicable to the unpaid amount immediately before the
due date.
13.2 Payment
The Borrower shall pay interest accrued under this Clause on demand. That
interest is payable in the currency of the unpaid amount on which it accrues.
14. INDEMNITIES
On demand the Borrower shall indemnify the Lender against any loss, cost,
charge, liability or expense the Lender may sustain or incur as a direct or
indirect consequence of:
(a) the occurrence of any Event of Default or Potential Event of Default;
(b) any exercise or attempted exercise of any right, power or remedy under any
Transaction Document or any failure to exercise any right, power or
remedy; or
(c) the Balance not being provided for any reason (including, without
limitation, failure to fulfil a condition precedent but excluding default
by the Lender).
15. CONTROL ACCOUNTS
The accounts kept by the Lender constitute sufficient evidence unless the
contrary is proved of the amount at any time due from the Borrower under this
Agreement.
16. EXPENSES
(a) Each party will bear their own costs and expenses in relation to the
preparation, execution and completion of the Transaction Documents.
(b) On demand the Borrower shall reimburse the Lender for all costs and
expenses in relation to the actual or contemplated enforcement of, or
actual or contemplated exercise or preservation of any rights powers or
remedies under, the Transaction Documents, including in each case legal
costs and expenses (including in-house lawyers charged at their usual
rates) on a full indemnity basis.
17. STAMP DUTIES
(a) The Borrower shall pay all stamp, transaction, registration and similar
Taxes (including fines and penalties) which may be payable or determined
to be payable in relation to the execution, delivery, performance or
enforcement of any Transaction Document or any payment or receipt or any
other transaction contemplated by any Transaction Document.
15
<PAGE>
(b) Those Taxes include financial institutions duty, debits tax or other Taxes
payable by return and Taxes passed on to the Lender by a bank or financial
institution.
(c) On demand the Borrower shall indemnify the Lender against any liability
resulting from delay or omission to pay those Taxes.
18. WAIVERS REMEDIES CUMULATIVE
(a) No failure to exercise and no delay in exercising any right, power or
remedy under any Transaction Document operates as a waiver. Nor does any
single or partial exercise of any right, power or remedy preclude any
other or further exercise of that or any other right, power or remedy.
(b) The rights, powers and remedies provided to the Lender in the Transaction
Documents are in addition to, and do not exclude or limit, any right,
power or remedy provided by law.
19. CONSENTS AND OPINIONS
Except where expressly stated the Lender may give or withhold, or give
conditionally, approvals and consents, may be satisfied or unsatisfied, may form
opinions, and may exercise its rights, powers and remedies, at its absolute
discretion.
20. SEVERABILITY OF PROVISIONS
Any provision of any Transaction Document which is prohibited or unenforceable
in any jurisdiction is ineffective as to that jurisdiction to the extent of the
prohibition or unenforceability. That does not invalidate the remaining
provisions of that Transaction Document nor affect the validity or
enforceability of that provision in any other jurisdiction.
21. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES
(a) All representations and warranties in a Transaction Document survive the
execution and delivery of the Transaction Documents and the provision of
advances and accommodation.
(b) Each indemnity in a Transaction Document:
(i) is a continuing obligation;
(ii) is a separate and independent obligation; and
(iii) survives termination or discharge of the Transaction Document.
22. MORATORIUM LEGISLATION
To the full extent permitted by law all legislation which at any time directly
or indirectly:
16
<PAGE>
(a) lessens, varies or affects in favour of the Borrower any obligation under a
Transaction Document; or
(b) delays, prevents or prejudicially affects the exercise by the Lender of any
right, power or remedy conferred by a Transaction Document,
is excluded from the Transaction Documents.
23. ASSIGNMENTS
23.1 Assignment by Borrower
The Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Lender.
23.2 Disclosure
The Lender may disclose to a proposed assignee, transferee or sub-participant
information which relates to a Relevant Company or was furnished in connection
with the Transaction Documents.
24. NOTICES
All notices, requests, demands, consents, approvals, agreements or other
communications to or by a party to this Agreement:
(a) must be in writing;
(b) must be signed by an Authorised Officer of the sender; and
(c) will be taken to be duly given or made (in the case of delivery in person
or by post or facsimile transmission) when delivered, received or left at
the address of the recipient shown in this Agreement or to any other
address which it may have notified the sender (provided in the case of the
Lender, such other notified address is within Australia), but if delivery
or receipt is on a day on which business is not generally carried on in the
place to which the communication is sent or is later than 4 pm (local
time), it will be taken to have been duly given or made at the commencement
of business on the next day on which business is generally carried on in
that place.
25. AUTHORISED OFFICERS
The Borrower irrevocably authorises the Lender to rely on a certificate by a
person purporting to be its director or secretary as to the identity and
signatures of its Authorised Officers. The Borrower warrants that those persons
have been authorised to give notices and communications under or in connection
with the Transaction Documents.
17
<PAGE>
26. GOVERNING LAW AND JURISDICTION
This Agreement is governed by the laws of New South Wales. The Borrower submits
to the non-exclusive jurisdiction of courts exercising jurisdiction there.
27. COUNTERPARTS
This Agreement may be executed in any number of counterparts. All counterparts
together will be taken to constitute one instrument.
28. ACKNOWLEDGEMENT BY BORROWER
The Borrower confirms that:
(a) it has not entered into any Transaction Document in reliance on, or as a
result of, any statement or conduct of any kind of or on behalf of the
Lender or any Related Corporation of the Lender (including, without
limitation, any advice, warranty, representation or undertaking); and
(b) neither the Lender nor any Related Corporation of the Lender is obliged to
do anything (including, without limitation, disclose anything or give
advice),
except as expressly set out in the Transaction Documents or in writing duly
signed by or on behalf of the Lender or Related Corporation.
29. ATTORNEY
29.1 Appointment and power
The Borrower irrevocably appoints the Lender its attorney ("Attorney") with
the right:
(a) at any time to:
(i) comply with the obligations of the Borrower under this
Agreement;
(ii) do everything which in the Attorney's opinion is necessary or
expedient to enable the exercise of any right of the Lender in
relation to this Agreement;
(iii) complete this Agreement; and
(iv) appoint substitutes and otherwise delegate its powers (including
this power of delegation); and
(b) after any Event of Default has occurred to do everything that the
Borrower may lawfully authorise an agent to do in relation to this
document.
18
<PAGE>
29.2 General
(c) Any attorney may exercise its rights notwithstanding that the exercise of
the right constitutes a conflict of interest or duty.
(d) The Borrower will from time to time and at all times ratify any exercise of
a right by an Attorney.
(e) This power of attorney is granted to secure compliance by the Borrower with
its obligations to the Lender under the Transaction Documents and any
proprietary interest of the Lender under the Transaction Documents.
(f) The Lender indemnifies and will keep indemnified any Attorney against any
liability, loss, cost, expense or damage arising from the lawful exercise
of any right by the Attorney under this power of attorney.
(g) This power of attorney is granted for valuable consideration (receipt of
which is acknowledged) which includes the execution of this document by the
Lender at the Borrower's request.
EXECUTED in Sydney.
Each attorney executing this Agreement states that he has no notice of
revocation or suspension of his power of attorney.
SIGNED for and on behalf of FAI )
HOME SECURITY PTY LIMITED by )
)
who certifies that they are duly appointed as )
the attorney of FAI HOME SECURITY )
PTY LIMITED and that they )
have not received notification of the ) ___________________________
revocation of the power of attorney under )
the authority of which they have executed )
this Deed in the presence of: )
_____________________________________ Signature of Witness
_____________________________________ Print Name of Witness
19
<PAGE>
SIGNED for and on behalf of the )
FAI INSURANCES LIMITED by )
)
who certifies that they are duly appointed as )
the attorney of FAI INSURANCES )
LIMITED and that they )
have not received notification of the ) ___________________________
revocation of the power of attorney under )
the authority of which they have executed )
this Deed in the presence of: )
_____________________________________ Signature of Witness
_____________________________________ Print Name of Witness
20
<PAGE>
ANNEXURE A
BORROWER'S VERIFICATION CERTIFICATE
To: FAI Insurances Limited
Level 42
50 Bridge Street
Sydney NSW 2000
REFINANCING AGREEMENT
I [*] am a director of FAI Home Security Pty Limited (the "Company").
I refer to the Refinancing Agreement dated [*] between the Company and FAI
Insurances Limited (the "Refinancing Agreement").
Terms defined in the Refinancing Agreement bear the same meaning when used in
this Certificate.
I CERTIFY as follows:
1. Attached to this Certificate are true, complete and up to date copies of
each of the following:
(a) the constituent documents of the Company (marked "A");
(b) a duly stamped [and registered] power of attorney granted by the
Company for the purpose of permitting the execution on behalf of the
Company of the Refinancing Agreement and the other Transaction
Documents (marked "B"). That power of attorney has not been revoked by
the Company and remains in full force and effect; and
(c) extract of minutes of a meeting of the directors of the Company
approving execution of the Refinancing Agreement and the other
Transaction Documents, appointing attorneys for the purpose of
execution of the Refinancing Agreement and the other Transaction
Documents and appointing Authorised Officers of the Company for the
purpose of the Refinancing Agreement (marked "C"). Those resolutions
have not been amended, modified or revoked and are in full force and
effect.
2. The following signatures are the true signatures of the Authorised Officers
of the Company and the persons who have been authorised to sign the
Refinancing Agreement and the other Transaction Documents and to give
notices and communications under or in connection with the Refinancing
Agreement and the other Transaction Documents.
2
<PAGE>
Authorised Officers:
Name Position Signature
* * ________________
* * ________________
* * ________________
Signatories:
* * ________________
* * ________________
* * ________________
Signed: _________________________
Director
Dated [*]
3
<PAGE>
ANNEXURE B
CHARGOR'S VERIFICATION CERTIFICATE
To: FAI Insurances Limited
Level 42
50 Bridge Street
Sydney NSW 2000
REFINANCING ARRANGEMENT
I [*] am a director of Ness Security Products Pty Limited (the "Company").
I refer to the facility agreement dated [*] between FAI Home Security Pty
Limited ("HSPL") and FAI Insurances Limited (the "Refinancing Agreement").
Terms defined in the Refinancing Agreement bear the same meaning when used in
this Certificate.
I CERTIFY as follows:
1. Attached to this Certificate are true, complete and up to date copies of
each of the following:
(a) the constitution of the Company (marked "A");
(b) a duly stamped [and registered] power of attorney granted by the
Company for the purpose of permitting the execution on behalf of the
Company of the Transaction Documents (marked "B"). That power of
attorney has not been revoked by the Company and remains in full force
and effect; and
(c) extract of minutes of a meeting of the directors of the Company
approving execution of the Transaction Documents, appointing attorneys
for the purpose of execution of the Transaction Documents (marked
"C"). Those resolutions have not been amended, modified or revoked and
are in full force and effect.
2. The following signatures are the true signatures of the persons who have
been authorised to sign the Transaction Documents and to give notices and
communications under or in connection with the Transaction Documents.
Signatories:
* * _______________
* * _______________
* * _______________
Signed: _________________________
Director
Dated [*]
2
<PAGE>
ANNEXURE C
DRAWDOWN NOTICE
DRAWDOWN NOTICE
To: FAI Insurances Limited
Level 42
50 Bridge Street
Sydney NSW 2000
We refer to the Refinancing Agreement dated [*] between FAI Home Security Pty
Limited and FAI Insurances Limited (the "Refinancing Agreement").
Under Clause 3 of the Refinancing Agreement:
(1) we give you irrevocable notice that we wish to make a drawdown on [*] (the
"Drawdown Date");
(2) the principal amount to be drawn is [*];
(3) we irrevocably direct you to pay all proceeds to Integral Investments
Limited (account number [*] at [*]);
(4) we represent and warrant that:
(a) [(except as disclosed in paragraph (c)] the representations and
warranties in the Refinancing Agreement are true as though they had
been made at the date of this Drawdown Notice and the Drawdown Date
specified above in respect of the facts and circumstances then
subsisting; [and]
(b) [(except as disclosed in paragraph (c)] no Event of Default or
Potential Event of Default is subsisting or will result from the
drawing; [and]
(c) [details of the exceptions to paragraphs (a) and (b) are as follows:
[*], and we [have taken/propose] the following remedial action [*].]
Definitions in the Refinancing Agreement apply in this Drawdown Notice.
On behalf of
FAI HOME SECURITY PTY LIMITED
By: [Authorised Officer]
Dated [*]
2
<PAGE>
Exhibit 10.2
NESS SECURITY PRODUCTS PTY LIMITED
(ACN 069 984 372)
FAI INSURANCES LIMITED
(ACN 004 304 545)
___________________________________
GUARANTEE AND INDEMNITY
___________________________________
ATANASKOVIC HARTNELL
---------------------------------------
LAWYERS - CORPORATE, FINANCE & TAXATION
Level 10
Atanaskovic Hartnell House
75-85 Elizabeth Street
Sydney NSW
Australia 2000
<PAGE>
GUARANTEE AND INDEMNITY
DEED POLL dated
BY NESS SECURITY PRODUCTS PTY LIMITED (ACN 069 984 372) of Unit 4, 167 Prospect
Highway, Seven Hills, New South Wales (the "Guarantor")
IN FAVOUR OF FAI INSURANCES LIMITED (ACN 004 304 545) of Level 42, 50 Bridge
Street, Sydney, New South Wales (the "Lender")
IN RELATION TO THE OBLIGATIONS OF FAI HOME SECURITY PTY LIMITED (ACN 050 064
214) of Level 7, 77 Pacific Highway, North Sydney, New South Wales (the
"Borrower").
OPERATIVE PART
1. INTEPRETATION
1.1 Definitions
The following definitions apply unless the context requires otherwise:
"Administration" means, in relation to any corporation, any arrangement or
compromise with or assignment for the benefit of all or any class of its
creditors or members or a moratorium involving any of them, provisional
liquidation, liquidation, winding up, dissolution, receivership, official
management or administration within the meaning of Part 5.3A of the Corporations
Law or anything analogous to or having a similar effect under the law of any
jurisdiction.
"Administration Proceeds" means, in the case of an Administration of a Relevant
Company, any dividends or other moneys paid or payable by the Administrator to
the Guarantor.
"Administrator" means:
(a) the person who has authority to carry out the Administration and includes
any person in whom is vested any property or rights of the person subject
to the Administration; and
(b) a receiver, receiver and manager and scheme manager;
"Collateral Security" means any present or future Security Interest or other
right given to or held by the Lender to secure the payment of the Guaranteed
Moneys;
"Facility Agreement" means the facility agreement dated about the date of this
Deed made between the Lender and the Borrower;
"Guaranteed Moneys" means all moneys and damages:
(a) which now or in the future are owing (whether actually or contingently) by
the Borrower to the Lender;
<PAGE>
-2-
(b) which having become owing (actually or contingently), cease to be owing
under any law relating to Administration and remain unpaid by the Borrower
and unreleased by the Lender;
(c) that now or in the future there is a prospect may become owing (whether
actually or contingently) by the Borrower to the Lender;
in connection with the Facility Agreement and, without limitation, includes
moneys payable:
(d) by the Borrower alone or jointly or severally with any other person;
(e) by the Borrower in its own right or in any capacity;
(f) to the Lender in its own right or in any capacity; and
by the Borrower as liquidated or unliquidated damages caused or contributed to
by any breach by the Borrower of any obligation owed by the Borrower to the
Lender under the Facility Agreement, and includes anything which but for
anything referred to in Clause 3.2 would be Guaranteed Moneys;
"Moneys Payable" means:
(a) the Guaranteed Moneys; and
(b) any other moneys payable by the Guarantor to the Lender under this Deed;
"Prescribed Rate" means 7.75%;
"Secured Property" means any property secured in favour of the Lender pursuant
to the Charge or any other Collateral Security.
1.2 Facility Agreement definitions and interpretation
Definitions and rules of interpretation set out in the Facility Agreement
apply in this Deed unless the context requires otherwise or the relevant
term is defined in this Deed.
2. CONSIDERATION
The Guarantor has entered into this Deed for valuable consideration from
the Lender receipt of which is acknowledged by its execution of this Deed.
3. GUARANTEE AND INDEMNITY
3.1 Guarantee
(a) The Guarantor guarantees to the Lender the punctual payment of the
Guaranteed Moneys by the Borrower.
(b) If at any time the Borrower defaults in payment of any part of the
Guaranteed Moneys the Guarantor must pay to the Lender on demand that
part of the Guaranteed Moneys.
<PAGE>
-3-
3.2 Indemnity and Payment Obligation
(a) If the Guaranteed Moneys are or are reasonably likely to be
irrecoverable on the due date for payment because:
(i) the Guarantor or any person purported to be primarily liable is
discharged from an obligation to pay any part of the Guaranteed
Moneys for any reason other than that payment in full has been
made;
(ii) any obligation of the Borrower to the Lender or any agreement or
transaction between them relating to the Guaranteed Moneys is
void, voidable or otherwise unenforceable in accordance with its
terms on the due date for payment for any reason;
(iii) of the Administration of the Borrower or the Guarantor
including, without limitation, as a result of any refund made by
the Lender to any Administrator; or
(iv) the due date for payment of any part of the Guaranteed Moneys is
deferred without the Lender's express written agreement,
the Guarantor must:
(v) indemnify the Lender against the Guaranteed Moneys being
irrecoverable, and
(vi) pay to the Lender on the due date for payment a sum equal to the
amount of the irrecoverable Guaranteed Moneys.
(b) The Guarantor's obligations under Clauses 3.2(a) (v) and (vi) are
separate and independent from each other and from the Guarantor's
obligations under Clause 3.1.
4. THE LENDER'S RIGHTS
4.1 Continuity
The Guarantor's obligations under this Deed are continuing obligations for
the whole of the Moneys Payable.
4.2 Primary Obligations
The Guarantor's obligation to pay the Moneys Payable is a primary
obligation and the Lender is not obliged to proceed against or enforce any
Collateral Security or other right against the Borrower or demand payment
from the Borrower before the Moneys Payable become due for payment.
4.3 Irrevocable and Unconditional
The Guarantor's obligations under this Deed are unconditional and
irrecoverable.
<PAGE>
-4-
4.4 Preservation of the Guarantor's Obligations
The Guarantor's obligations and the Lender's rights will not be affected in
whole or in part by anything which might abrogate, prejudice or limit them
or the effectiveness of this Deed, including, without limitation, any of
the following:
(a) any release, termination, variation, novation, renewal or assignment
of any agreement or transaction under which any Guaranteed Moneys are
or purport to be payable;
(b) this Deed, any Collateral Security or any other transaction or
agreement between the Borrower and the Lender or any obligation owed
by the Borrower to the Lender in relation to the Guaranteed Moneys
being void, voidable or otherwise unenforceable by the Lender in
accordance with its terms or the Lender being otherwise estopped from
receiving the Guaranteed Moneys from the Borrower;
(c) the granting of any forbearance, time or other indulgence to or the
making of any composition, compromise or arrangement with or the
discharge or release of the Guarantor, Borrower or any other person;
(d) the Administration of any Relevant Company;
(e) (i) the amendment of the constitution or other constitutional
document of any Relevant Company; or
(ii) the Borrower or the Guarantor becoming a member of a partnership,
joint venture or association (whether incorporated or
unincorporated);
(f) the fact that no demand for the payment of the Moneys Payable has been
made on the Borrower or other Relevant Company;
(g) any failure by the Lender to disclose any information to the Guarantor
or any representation made or information given by the Lender to the
Guarantor;
(h) the failure to give the Guarantor notice of default by the Borrower or
to obtain consent from the Guarantor to any arrangement or agreement
made with the Borrower;
(i) the value of any Collateral Security or the value placed on it by the
Lender in the Administration of a Relevant Company;
(j) any negotiable or other instrument being in circulation or
outstanding;
(k) any Administration of the Guarantor or the Borrower or, except as
provided in this Deed, receipt of any Administration Proceeds;
<PAGE>
-5-
(l) the obtaining, release, variation or renewal by the Lender of any
Collateral Security or any agreement or arrangement affecting the
priority of any Collateral Security;
(m) the release or discharge of any Relevant Company under any agreement,
statute or principle of law or equity;
(n) any refusal or failure by the Lender to obtain, perfect, register,
stamp, enforce, or assign any Collateral Security or any negotiable
instrument, judgment, order or award relating to the Moneys Payable;
or
(o) any act or omission of the Lender which prejudices the Guarantor,
it being the Guarantor's intent that its obligations under this Deed must
be absolute and unconditional in any and all circumstances irrespective of
the consent or knowledge or lack of consent or knowledge of the Guarantor,
the Lender or the Borrower or any rule of law or equity to the contrary.
4.5 Suspension of Guarantor's Rights
The Guarantor:
(a) waives any right to be subrogated to or otherwise have the benefit of
this Deed or any Collateral Security or any other right of the Lender
until:
(i) the Moneys Payable have been satisfied in full; and
(ii) in the reasonable opinion of the Lender, any payment towards the
satisfaction of the Moneys Payable is not void, voidable or
otherwise unenforceable or refundable;
(b) must not exercise a right of set-off or counterclaim available to
itself or any other Relevant Company which reduces or extinguishes the
obligation of the Borrower or the Guarantor to pay the Moneys Payable;
and
(c) must not until the Moneys Payable have been satisfied in full make any
claim or enforce any right against the Borrower or any Relevant
Company or their respective property,
and the Lender is not obliged to marshall in favour of Guarantor any
Collateral Security or any property that the Lender has an interest in or
may be entitled to receive.
4.6 Payment to the Lender
Any amount received by a Guarantor in contravention of Clause 4.5 must be
held on trust for the Lender and must be paid to the Lender immediately
upon receipt.
<PAGE>
-6-
4.7 Reinstatement of Rights of the Lender
If any transaction or payment relating to the Guaranteed Moneys is void,
voidable or otherwise unenforceable or refundable:
(a) the Lender is entitled to all rights and interests under this Deed and
any Collateral Security given by the Guarantor that it would have had
if the transaction or payment was not void, voidable or unenforceable
or refundable; and
(b) the Guarantor must do each thing and sign each document necessary or
convenient to restore to the Lender its rights and interests under
this Deed or any Collateral Security held by the Lender immediately
before that transaction or payment.
4.8 Binding Certificates, Awards etc
Any certificate, document, judgment, order, award or other thing in favour
of the Lender binding upon the Borrower is binding upon the Guarantor.
4.9 Liabilities after Termination
The Guarantor must pay to the Lender immediately any part of the Moneys
Payable which accrues after revocation or expiration of this Deed if those
Moneys Payable relate to obligations incurred by the Borrower to the
Lender, or any agreement or transaction between them occurring before the
expiration or revocation.
4.10 Guarantor's Security
(a) The Guarantor must:
(i) hold on behalf of or at the direction of the Lender any Security
Interest given by any person which secures moneys interests and
damages owing (whether actually or contingently) by the Borrower
to the Guarantor and on demand by the Lender exercise or refrain
from exercising any of those rights; and
(ii) if the proceeds of the exercise of any of those rights are
received by the Guarantor or any person on the Guarantor's
behalf, hold the proceeds on trust for the Lender and cause them
to be paid to the Lender immediately upon receipt.
(b) the Lender must apply the proceeds of the exercise of any of those
rights as follows:
(i) in payment of or in satisfaction of the costs and expenses of the
Lender in relation to this Deed;
(ii) secondly, in payment or satisfaction of the Moneys Payable; and
<PAGE>
-7-
(iii) thirdly, in payment to any person entitled to them or authorised
to give receipts for them.
4.11 Administration of the Borrower
(a) Until the Moneys Payable have been paid in full, the Guarantor must:
(i) on demand made by the Lender, prove and claim in the
Administration of the Borrower for the full amount of the moneys
interest or damages owing (whether actually, contingently or
otherwise) by the Borrower to the Guarantor, use its best
endeavours to obtain full payment of those moneys in that
Administration and hold on behalf of or at the direction of the
Lender those moneys, interest and damages and any proof or claim
relating to them;
(ii) direct the Administrator of the Borrower to pay the
Administration Proceeds to the Lender in the form prescribed by
any relevant statute or, if no such form is prescribed, in a
form approved by the Lender; and
(iii) if the Administration Proceeds are received by the Guarantor or
any person on its behalf, cause and permit those moneys to be
paid to the Lender immediately upon receipt.
(b) Until a demand is made by the Lender under Clause 4.11(a) the
Guarantor must not in the Administration of the Borrower:
(i) directly or indirectly claim or receive the benefit of any
Administration Proceeds until the Moneys Payable have been paid
in full; or
(ii) prove or claim for the Administration Proceeds in competition
with the Lender so as to diminish any distribution, dividend or
payment which but for that claim or proof the Lender would be
entitled to receive, until the Moneys Payable have been paid in
full and the Lender is of the opinion that no payment of those
moneys is or likely to become void, voidable or otherwise
enforceable or refundable.
5. PAYMENTS
5.1 Demand
If the Moneys Payable become due and payable in accordance with this Deed,
the Guarantor must pay to the Lender the Moneys Payable on demand by the
Lender.
5.2 Appropriation of Payments
(a) the Lender is not obliged to pay or set off against the Moneys Payable
any moneys:
<PAGE>
-8-
(i) held by the Lender on any account other than the Moneys Payable;
(ii) which are or may be recoverable from the enforcement of any
Collateral Security;
(iii) which are owing by the Lender to the Borrower;
(iv) which are Administration Proceeds; or
(v) to which any person has asserted a prior ranking claim,
until the Lender has received payment in full of the Moneys Payable or
the claim is disposed of.
(b) the Lender may:
(i) pay into a suspense account any moneys received by it under this
Deed or any Collateral Security from the Guarantor and hold
those moneys as security for payment of the Moneys Payable and
if this is done the Lender will be deemed not to have
appropriated those moneys towards the payment of Moneys Payable;
and
(ii) at any time appropriate any moneys in the suspense account
towards the satisfaction of the Moneys Payable in any way that
the Lender thinks fit.
(c) The Moneys Payable must be reduced only by moneys actually received
and appropriated after deducting the costs and expenses incurred by
the Lender in obtaining payment.
(d) the Lender is not obliged to disclose to the Guarantor
any appropriation of moneys received from the Borrower or from the
exercise of rights under the Collateral Security or the Administration
of any Relevant Company.
(e) the Lender may, subject to any express provision in this Deed to the
contrary, appropriate any payment towards the satisfaction of any
moneys due for payment by the Guarantor in relation to this Deed in
any way that the Lender thinks fit and notwithstanding any purported
appropriation by the Guarantor.
6. INTEREST
The Guarantor must pay interest on:
(a) any amount owing under this Deed other than under Clause 3 during the
period it remains unpaid; and
<PAGE>
-9-
(b) that part (if any) of the Moneys Payable under Clause 3 in relation to
which there is no agreement between the Borrower and the Lender as to
the payment of interest during the period that it is owing,
at the Prescribed Rate.
7. REPRESENTATIONS AND WARRANTIES
The Guarantor represents and warrants that it has not entered into this Deed in
reliance on or as a result of any representation, warranty, statement or conduct
of the Lender or its servants and agents.
8. ASSIGNMENT BY LENDER
This Deed must continue to be binding notwithstanding the assignment of Moneys
Payable to another person and the benefit of this Deed may also be assigned in
whole or part to that person either at that time or later.
9. MISCELLANEOUS
This Deed is the property of the Lender and the Lender is not obliged to give it
to the Guarantor at any time either before or after payment of the Moneys
Payable.
10. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
10.1 Governing Law
This Deed is governed by and must be construed in accordance with the laws
of New South Wales.
10.2 Jurisdiction
The parties irrevocably and unconditionally submit to the non exclusive
jurisdiction of the courts of New South Wales and any courts which have
jurisdiction to hear appeals from any of those courts and the parties waive
any right to object to any proceedings being bought in those courts because
the venue is inconvenient, the courts lack jurisdiction or any other
reason.
11. NOTICES
Any notice, demand, certification or other communication under this Deed
must be given in writing and in the English language, may be given by an
Authorised Officer of the sender and may be given in the manner specified
in any Transaction Document.
12. ATTORNEYS
Each attorney executing this Deed on behalf of a Guarantor covenants to the
Lender that they:
<PAGE>
-10-
12.1 have not received notification of the revocation of the power of attorney
under the authority of which they have executed this Deed on behalf of the
Guarantor; and
12.2 are duly authorised to execute this Deed on behalf of the Guarantor.
EXECUTED as a deed poll.
SIGNED for and on behalf of the )
GUARANTOR by )
who certifies that they are duly appointed as )
the attorney of the Guarantor and that they )
have not received notification of the ) ___________________________
revocation of the power of attorney under )
the authority of which they have executed )
this Deed in the presence of: )
_____________________________________ Signature of Witness
_____________________________________ Print Name of Witness
<PAGE>
Exhibit 10.3
NESS SECURITY PRODUCTS PTY LIMITED
ACN 069 984 372
FAI INSURANCES LIMITED
ACN 004 304 545
__________________________________
FIXED AND FLOATING CHARGE
__________________________________
ATANASKOVIC HARTNELL
---------------------------------------
LAWYERS - CORPORATE, FINANCE & TAXATION
Level 10
Atanaskovic Hartnell House
75-85 Elizabeth Street
Sydney NSW
Australia 2000
<PAGE>
DEED dated between:
1. NESS SECURITY PRODUCTS PTY LIMITED (ACN 069 984 372) of Unit 4, 167
Prospect Highway, Seven Hills, NSW 2147 ("Mortgagor"); and
2. FAI INSURANCES LIMITED (ACN 004 304 545) of Level 42, 50 Bridge Street,
Sydney, NSW 2000 ("Mortgagee").
OPERATIVE PART
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
The following definitions apply unless the context requires otherwise.
"Attorney" means any attorney appointed under this Deed or any Collateral
Security.
"Borrower" means FAI Home Security Pty Limited (ACN 050 064 214).
"Collateral Security" means any Security Interest, indemnity or other similar
surety or other document or agreement at any time created or entered into as
security for any Secured Money.
"Deed of Priority" means the deed of priority agreement between the Mortgagor,
the Mortgagee and Westpac Banking Corporation dated on or about the date of this
Deed.
"Facility Agreement" means the facility agreement between the Borrower and the
Mortgagee dated on or about the date of this Deed.
"Intellectual Property" means any intellectual or industrial property including
without limitation:
(a) a patent, trade mark or service mark, copyright, registered design, trade
secret, or confidential information; or
(b) a licence or other right to use or to grant the use of any of the foregoing
or to be the registered proprietor or user of any of the foregoing.
"Liquidation" includes official management, receivership, compromise,
arrangement, amalgamation, administration, reconstruction, winding up,
dissolution, assignment for the benefit of creditors, arrangement or compromise
with creditors, bankruptcy or death.
"Marketable Security" has the meaning given in the Corporations Law, but also
includes:
(a) a document referred to in the exceptions to the definition of "debenture"
in the Corporations Law;
<PAGE>
2
(b) a unit or other interest in a trust or partnership
(c) a negotiable instrument; and
(d) a right or an option in respect of a Marketable Security, whether issued or
unissued, including, without limitation, any of the above.
"Mortgaged Property" means the property mortgaged or charged by this Deed or any
Collateral Security granted by the Mortgagor.
"New Rights" means all assets, rights, powers and proceeds of any nature at any
time attaching to, or arising out of a holding in, any Marketable Securities
included in the Mortgaged Property. It includes:
(a) any Marketable Security, any right to take up Marketable Securities or any
allotment of further Marketable Securities;
(b) any Marketable Security resulting from the conversion, consolidation or
sub-division of a Marketable Security;
(c) any certificate or other evidence of title to a Marketable Security or to
anything specified in this definition; and
(d) any distribution or dividend under, and any proceeds of, or of the disposal
of, anything specified in this definition.
"Power" means a power, right, authority, discretion or remedy which is conferred
on the Mortgagee or a Receiver or Attorney:
(a) by this Deed or any Collateral Security; or
(b) by law in relation to this Deed or any Collateral Security.
"Receiver" means a receiver or receiver and manager appointed under this Deed or
any Collateral Security.
"Secured Money" means:
(a) all money which the Mortgagor (whether alone or with another person) is or
at any time may become actually or contingently liable to pay to or for the
account of the Mortgagee (whether alone or with another person) for any
reason whatever on any account whatsoever (it includes, without limitation,
money by way of principal, interest, fees, costs, indemnity, guarantee,
indemnity or other similar surety, charges, duties or expenses, or payment
of liquidated or unliquidated damages); and
(b) all obligations which the Mortgagor (whether alone or with another person)
is or at any time may become actually or contingently liable to perform for
or for the account of the Mortgagee (whether alone or with any other
person) for any
<PAGE>
3
reason and on any account whatsoever (it includes, without limitation,
payment of liquidated or unliquidated damages).
Where the Mortgagor would have been liable but for its Liquidation, it will be
taken still to be liable.
"Unpaid Capital" means any uncalled or unpaid share capital or premiums of the
Mortgagor.
1.2 Facility Agreement definitions
Definitions and rules of interpretation set out in the Facility Agreement apply
in this Deed unless the context requires otherwise or the relevant term is
defined in this Deed.
2. CHARGE
2.1 Charge
(a) The Mortgagor charges to the Mortgagee all its present and future assets
and undertaking including, without limitation, Unpaid Capital.
(b) The charge secures the due and punctual payment of the Secured Money.
(c) The charge is given in consideration of the Mortgagee entering the
Transaction Documents, providing or continuing to provide advances and
financial accommodation from time to time, or both, and for other valuable
consideration received.
2.2 Prospective liability
Subject to Clause 2.3, for the purposes of the Corporations Law the maximum
prospective liability (as defined in the Corporations Law) secured by this Deed
shall be limited to A$10,000,000. This shall not effect the amount actually
secured by or recoverable under this Deed.
2.3 Increase in prospective liability
The Mortgagee may from time to time lodge a notice under section 268(2) of the
Corporations Law on behalf of the Mortgagor specifying an increase in the
maximum prospective liability secured by this Deed. From the date of lodgement
the sum specified in Clause 2.2 will be taken to be varied to the sum specified
in the notice.
3. NATURE OF CHARGE
3.1 Priority
The charge ranks in the order contained in clause 3.1 of the Deed of Priority.
3.2 Nature of charge
<PAGE>
4
The charge operates:
(a) as a fixed charge as regards all present and future:
(i) freehold and leasehold property or any other interest in real
property;
(ii) Unpaid Capital;
(iii) machinery (other than stock-in-trade), plant, any item of equipment
having a value in excess of A$50,000 or its equivalent;
(iv) insurance policies, and all the proceeds of those policies;
(v) books of account, registers, minute books, statements, invoices,
accounting and other records (including those recorded
electronically) and all software;
(vi) interests in any partnership or joint venture;
(vii) Intellectual Property and goodwill;
(viii) Marketable Securities including the New Rights;
(ix) Authorisations;
(x) documents and agreements of any kind including without limitation,
the Transaction Documents;
(xi) book and other debts and the proceeds of those debts (other than
proceeds which may be dealt with by the Mortgagor under clause
3.6(a));
(xii) accounts opened in the name of the Mortgagor or for the benefit of
the Mortgagor under any Transaction Document;
(xiii) other assets that are not acquired for disposal in the ordinary
course of the Mortgagor's business,
and all right, title and interest of the Mortgagor in, under or derived
from, the above (except as expressly provided); and
(b) subject to clause 3.4 a floating charge over the balance of all other
assets charged.
All sub-paragraphs of paragraph (a) are to be construed independently. None
limits the generality of any other.
3.3 Dealing with Mortgaged Property
(a) Except with the prior written consent of the Mortgagee or as expressly
permitted in any Transaction Document, the Mortgagor shall not:
<PAGE>
5
(i) create or allow to exist any Security Interest over any Mortgaged
Property; or
(ii) agree to or allow any change to be made to the provisions of any
Marketable Security or any Transaction Document; or
(iii) in any other way:
(A) dispose of;
(B) create or allow any interest in; or
(C) part with possession of,
any Mortgaged Property, except, subject to the Transaction Documents,
any disposal of or dealing with any asset for the time being subject
to the floating charge in the ordinary course of its ordinary
business.
(b) Where by law the Mortgagee or a mortgagee may not restrict the creation of
any Security Interest over an asset ranking after the charge created by
this Deed, paragraph (a) will not restrict that creation, but the Mortgagor
shall ensure that before that Security Interest is created the holder of
that Security Interest enters into a deed of priority in form and substance
specified by the Mortgagee.
3.4 Crystallisation
The floating charge referred to in clause 3.2 will automatically and immediately
crystallise and operate as a fixed charge:
(a) in respect of any asset:
(i) on notice to the Mortgagor from the Mortgagee (which it may only give
after the occurrence of an Event of Default);
(ii) if without the prior written consent of the Mortgagee, the Mortgagor:
(A) creates or allows any Security Interest over;
(B) sells, leases or otherwise disposes of;
(C) creates or allows any interest in; or
(D) parts with possession of,
that asset in breach of a Transaction Document, or agrees or attempts
to do so or takes any step towards doing so;
(iii) on any step being taken with a view to levying or enforcing any
distress, attachment or other execution on that asset or to enforcing
any Security Interest in respect of that asset;
<PAGE>
6
(iv) on the Commissioner of Taxation or his delegate or successor signing
a notice under:
(A) s218 or s255 of the Income Tax Assessment Act 1936 (Cth) and the
Income Tax Assessment Act 1997 (Cth);
(B) s38 of the Sales Tax Assessment Act 1992 (Cth); or
(C) any similar legislation,
which will affect that asset; or
(v) on a Governmental Agency taking any step which may result in an
amount of Tax or an amount owing to a Governmental Agency ranking
ahead of the floating charge with respect to that asset; or
(b) in respect of all the Mortgaged Property:
(i) if the Mortgagor goes into Liquidation; or
(ii) on the security constituted by this Deed being enforced in any way.
Except where expressly stated, no notice or action by the Mortgagee is
necessary for the charge to crystallise.
3.5 De-crystallisation
By notice to the Mortgagor, the Mortgagee may at any time release from the fixed
charge any asset which has become subject to a fixed charge under clause 3.4.
That asset will then again be subject to the floating charge and to the further
operation of that clause.
3.6 Dealing with proceeds
(a) Subject to the Transaction Documents, the Mortgagor may deal with the
proceeds of any book or other debt as it thinks fit where:
(i) the book or other debt arose in the ordinary course of its business;
(ii) the proceeds do not arise from the disposal of, lease of, or grant of
any interest in, an asset the subject of the fixed charge;
(iii) the proceeds are received before the floating charge crystallises in
respect of all the Mortgaged Property and before anything described
in clause 3.4(a) occurs with respect to the debt or those proceeds;
and
(iv) no Transaction Document provides otherwise.
(b) Subject to the Transaction Documents, the Mortgagor shall ensure that:
<PAGE>
7
(i) all other proceeds of any book or other debt or proceeds paid to the
Mortgagor in relation to a Marketable Security; and
(ii) all the proceeds of any disposal of or other dealing with any asset
the subject of a fixed charge, which are not immediately applied in
acquiring another similar asset or in payment of the Secured Money or
moneys ranking ahead of the Secured Money,
are paid immediately into a separate account of which the Mortgagor has
notified the Mortgagee.
(c) The Mortgagor shall give notices and directions necessary or requested by
the Mortgagee to ensure paragraph (b) is complied with.
(d) Failure by the Mortgagee to require the Mortgagor to comply with this
clause will not constitute a waiver.
(e) Without prejudice to paragraph (d), if for any reason the Mortgagee waives
or is taken to have waived the requirements of this clause, the charge
created by this Deed will still operate as a fixed charge in respect of the
relevant debt or other asset which gives rise to the relevant moneys or
proceeds.
(f) In this clause "proceeds" includes moneys or consideration payable, whether
or not received by the Mortgagor.
4. COVENANT AND WARRANTY
4.1 Covenant to pay and perform
(a) The Mortgagor shall duly and punctually pay the Secured Money payable by
it. After an Event of Default (whether or not it subsists) it will:
(i) pay all Secured Money on demand; and
(ii) otherwise, do all that is required to reinstate the Mortgagee to the
position it would have been in if the Event of Default had not
occurred.
(b) The Mortgagor shall ensure that no Event of Default occurs. Without
affecting the liability of the Mortgagor or the Powers of the Mortgagee in
any other respect (including where a breach of this paragraph is also a
breach of another provision), the Mortgagor is not liable in damages for a
breach of this paragraph but the Mortgagee may exercise its Powers
following the breach.
(c) The Mortgagor shall duly and punctually comply with its obligations under
the Transaction Documents and ensure that:
(i) its and the Borrower's representations and warranties in the
Transaction Documents are true; and
(ii) the Borrower duly and punctually complies with its obligations under
the Transaction Documents.
<PAGE>
8
4.2 Warranty
The Mortgagor represents and warrants that all its representations and
warranties in the Transaction Documents are true or, if not yet made, will be
true when made.
5. FURTHER ASSURANCES
5.1 Further assurances
Whenever the Mortgagee requests the Mortgagor to do anything:
(a) for more satisfactorily mortgaging, assuring or securing the Mortgaged
Property to the Mortgagee or the Mortgagee's nominee in a manner not
inconsistent with this Deed or any Collateral Security; or
(b) for aiding in the execution or exercise of any Power'
the Mortgagor shall do it immediately at its own cost. It may include (without
limitation) registering this Deed, the execution or registering of any other
document or agreement, the delivery of documents or evidence of title and the
execution and delivery of blank transfers.
5.2 Interest in land
(a) Without limiting Clause 5.1, if requested by the Mortgagee, on acquiring
any interest in real property the Mortgagor shall execute a legal or
statutory mortgage over that interest securing the Secured Money in the
form and substance required by the Mortgagee. The Mortgagor shall use its
best endeavours to register that mortgage.
(b) The mortgage may not contain any obligation more onerous than in the other
Transaction Documents.
5.3 Title documents
Without limiting Clause 5.1, the Mortgagor shall immediately upon request by the
Mortgagee deliver to the Mortgagee all documents of title to interests in real
property or Marketable Securities received by it.
6. APPOINTMENT OF RECEIVER
6.1 Appointment
To the extent permitted by law, at any time after an Event of Default (whether
or not it is continuing) the Mortgagee or any Authorised Officer of the
Mortgagee may:
(a) appoint any person or any two or more persons jointly or severally or both
to be a receiver or receiver and manager of all or any of the Mortgaged
Property;
(b) remove any Receiver;
<PAGE>
9
(c) appoint another Receiver in addition to or in place of a Receiver; and
(d) fix or vary the remuneration of a Receiver (such amount not to exceed the
rate recommended by IPAA from time to time).
6.2 Agent of Mortgagor
Subject to Clause 6.4, every Receiver is the agent of the Mortgagor. The
Mortgagor alone is responsible for a Receiver's acts and defaults.
6.3 Receiver's powers
In addition to any powers granted by law, and except to the extent specifically
excluded by the terms of his appointment, every Receiver has power to do
anything in respect of the Mortgaged Property that the Mortgagor could do. His
powers include the following (without limitation).
(a) (Take possession and manage) He may take possession of, get in and manage
the Mortgaged Property.
(b) (lease) He may lease any of the Mortgaged Property for any term (whether
or not the Receiver has taken possession).
(c) (Carry on business) He may carry on or concur in carrying on any business.
(d) (Acquire any asset) He may acquire in any manner any asset (including,
without limitation, to take it on lease). After that acquisition it will
be included in the Mortgaged Property.
(e) (Maintain and improve the Mortgaged Property) He may do anything to
maintain, protect or improve any of the Mortgaged Property or to obtain
income or returns from any of the Mortgaged Property (including, without
limitation, by development, sub-division, construction, alteration, or
repair, of any property or by pulling down, dismantling or scrapping, any
property).
(f) (Raise money) He may:
(i) borrow or raise any money from any Mortgages or any other person
approved by the Mortgagee;
(ii) give Guarantee, indemnity or other similar sureties; and
(iii) grant any Security Interest over any of the Mortgaged Property to
secure that money or Guarantee, indemnity or other similar surety.
That Security Interest may rank in priority to or equally with or
after, the security created by this Deed. It may be given in the name
of the Mortgagor or otherwise.
(g) (Lend) He may lend money or provide financial accommodation.
(h) (Sell)
<PAGE>
10
(i) He may sell any of the Mortgaged Property (whether or not the
Receiver has taken possession).
(ii) Without limitation any sale may be made:
(A) by public auction, private treaty or tender;
(B) for cash or on credit;
(C) in one lot or in parcels;
(D) either with or without special conditions or stipulations as to
title or time or mode of payment of purchase money or otherwise;
(E) with power to allow the whole or any part of the purchase money
to be deferred (whether with or without any security);
(F) whether or not in conjunction with the sale of any property by
any person.
(i) (Options) He may grant or take put or call options.
(j) (Sever fixtures) He may sever fixtures.
(k) (Employ) He may employ or discharge any person as employee, contractor,
Mortgagee, professional adviser, consultant or auctioneer for any purpose.
(l) (Compromise) He may make or accept any arrangement or compromise.
(m) (Give receipts) He may give receipts for money and other assets.
(n) (Perform and enforce agreements) He may:
(i) perform or enforce;
(ii) exercise or refrain from exercising the Mortgagor's rights and powers
under; or
(iii) obtain the benefit in other ways of,
any documents or agreements or rights which form part of the Mortgaged
property and any documents or agreements entered into in exercise of any
Power.
(o) (Vary and terminate agreements) He may vary, rescind or terminate any
document or agreement (including without limitation surrender or accept the
surrender of leases).
(p) (Authorisations) He may apply for, take up, transfer or surrender any
Authorisation or any variation of any Authorisation.
<PAGE>
11
(q) (Take insolvency proceedings) He may make debtors bankrupt, wind up
companies and do any thing in relation to any actual or contemplated
Liquidation (including, without limitation, attend and vote at meetings of
creditors and appoint proxies).
(r) (Take proceedings) He may commence, defend, conduct, settle, discontinue
or compromise proceedings in the name of the Mortgagor or otherwise.
(s) (Execute documents) He may enter into and execute documents or agreements
on behalf of himself or the Mortgagor. This includes, without limitation,
using the Mortgagor's seal on signing, accepting and endorsing cheques,
promissory notes and bills of exchange.
(t) (Operate bank accounts) He may operate any bank account comprising part of
the Mortgaged Property and open and operate any further bank account.
(u) (Surrender Mortgaged Property) He may surrender, release or transfer any
of the Mortgaged Property.
(v) (Exchange Mortgaged Property) He may exchange with any person any of the
Mortgaged Property for other property.
(w) (Promote companies) He may promote the formation of companies with a view
to purchasing any of the Mortgaged Property or assuming the obligations of
the Mortgagor or otherwise.
(x) (Delegate) He may delegate to any person approved by the Mortgagee any of
his Powers (including delegation).
(y) (Have access) He may have access to and make use of the premises, plant,
equipment, and records and accounting and other services of the Mortgagor
and the services of its staff.
(z) (Vote) He may exercise any voting or other rights or powers in respect of
any of the Mortgaged Property and do anything in relation to Marketable
Securities.
(aa) (Other outgoings) He may pay any outgoing or indebtedness of the Mortgagor
or any other person.
(ab) (Security interests) He may redeem any Security Interest or acquire it and
any debt secured by it.
(ac) (Make calls) He may make calls on the members of the Mortgagor in respect
of any Unpaid Capital.
(ad) (Insure) He may take out insurance.
(ae) (Insurance claims) He may make, enforce, compromise and settle all claims
in respect of insurance.
<PAGE>
12
(af) (Incidental power) He may do anything incidental to the exercise of any
other Power.
All of the above paragraphs are to be construed independently. None limits the
generality of any other.
6.4 Receiver appointed after commencement of winding up
The power to appoint a Receiver may be exercised notwithstanding that:
(a) an order may have been made or a resolution may have been passed to wind up
the Mortgagor; and
(b) a receiver appointed in those circumstances may not, or may not in some
respects specified by the Receiver, act as the agent of the Mortgagor.
6.5 Powers exercisable by the Mortgagee
Whether or not a Receiver has been appointed, to the extent permitted by law the
Mortgagee may exercise any Power of a Receiver at any time after an Event of
Default (whether or not it is continuing) in addition to any Power of the
Mortgagee and without giving notice. It may exercise those Powers and its
Powers without taking possession or being liable as mortgagee in possession.
6.6 Withdrawal
The Mortgagee may at any time give up possession of the Mortgaged Property and
may at any time withdraw any receivership.
7. POWER OF ATTORNEY
(a) For valuable consideration and by way of security the Mortgagor irrevocably
appoints each director and officer of the Mortgagee severally its attorney
to do anything which:
(i) the Mortgagor is obliged to do under or in relation to any Transaction
Document; or
(ii) the Mortgagee or any Receiver is authorised or empowered to do under
any Transaction Document or any law but only at the times that that
Mortgagee or a Receiver (if a Receiver had been appointed) would have
been able to do it.
(b) Without limitation, the Attorney may at any time:
(i) do anything which in the opinion of the Mortgagee or Attorney is
necessary or considered expedient to secure, preserve, perfect, or
give effect to the security contained in this Deed (including, without
limitation, anything under Clauses 8 or 9) and for this purpose
without limitation he may execute any legal mortgage, transfer,
assignment and other assurance
<PAGE>
13
of any of the Mortgaged Property in favour of the Mortgagee, any
purchaser or any nominee; and
(ii) delegate his powers (including delegation).
(c) No Attorney appointed under this Deed may act inconsistently with this Deed
or any other Transaction Document.
8. COMPLETION OF BLANK SECURITIES
The Mortgagee, any director or officer of the Mortgagee, any Receiver or any
Attorney may complete any document which at any time is executed by or on behalf
of the Mortgagor and deposited with the Mortgagee. It may complete it in favour
of the Mortgagee, any nominee or any purchaser.
9. PERFORMANCE OF MORTGAGOR'S OBLIGATIONS
If at any time the Mortgagor fails duly to perform any obligation in any
Transaction Document the Mortgagee or any person it authorises may do anything
which in its opinion is necessary or expedient to make good or to attempt to
make good that failure to its satisfaction.
10. INSPECTION
The Mortgagee or any person it authorises may at any time inspect and copy the
records of the Mortgagor related to the Mortgaged Property and inspect the
premises of the Mortgagor and its Subsidiaries and inspect the Mortgaged
Property. The Mortgagor will do everything in its power to assist that
inspection and copying and ensure that its employees and officers and its
Subsidiaries and their employees and officers do the same.
11. STATUTORY POWERS
11.1 Powers in augmentation
The powers conferred on a mortgagee by law:
(a) are in addition to the Powers conferred by this Deed or any Collateral
Security;
(b) (to the extent permitted by law) may be exercised by the Mortgagee
immediately an Event of Default occurs and at any time subsequently; and
(c) are excluded or varied only so far as they are inconsistent with the
express terms of this Deed or any Collateral Security.
11.2 Leasing
The Mortgagor is not entitled to surrender any lease, accept any surrender of
lease or to exercise any power of leasing conferred on the Mortgagor by law
except as expressly permitted or contemplated in any Transaction Document.
<PAGE>
14
11.3 Notice not required
To the extent permitted by law:
(a) the Mortgagor dispenses with any notice or lapse of time required by any
law before enforcing this Deed or any Collateral Security or exercising any
Power;
(b) no Mortgagee is required to give notice to any person before enforcement or
exercise; and
(c) any law requiring the giving of notice or the compliance with a procedure
or the lapse of time before enforcement or exercise is excluded.
12. APPLICATION OF MONEYS RECEIVED
12.1 Order
Subject to any law which applies notwithstanding an agreement to the contrary,
all moneys received by a Receiver, an Attorney or the Mortgagee under or by
virtue of this Deed shall be applied in the following order.
(a) First: all costs, charges and expenses of the Mortgagee or any Receiver or
Attorney which are incurred in or are incidental to the exercise or
performance or attempted exercise or performance of a Power or otherwise in
relation to this Deed or any Collateral Security.
(b) Second: any other outgoings which the Receiver, Attorney or the Mortgagee
thinks fit to pay.
(c) Third: the Receiver's remuneration.
(d) Fourth: to each holder of a Security Interest of which the Mortgagee is
aware and which has priority over this Deed in relation to the relevant
Mortgaged Property, to the extent, and in order, of priority.
(e) Fifth: to the Mortgagee for the account of the Mortgagee towards
satisfaction of the Secured Money.
(f) Sixth: to each holder of a Security Interest of which the Mortgagee is
aware and which ranks after this Deed in relation to the relevant Mortgaged
Property, to the extent, and in order, of priority.
(g) Seventh: the surplus (if any) belongs to the Mortgagor.
The surplus will not carry interest. If it pays the surplus to the credit or an
account in the name of the Mortgagor with any bank carrying on business in
Australia, the Receiver, Mortgagee or Attorney (as the case may be) will be
under no further liability in respect of it.
<PAGE>
15
12.2 Moneys actually received
In applying any moneys towards satisfaction of the Secured Money the Mortgagor
will be credited only with the money available for that purpose which is
actually received by the relevant Mortgagee. The credit will date from the time
of receipt.
12.3 Amounts contingently due
If any of the Secured Money is contingently owing to the Mortgagee at the time
of a distribution of an amount under Clause 12.1, the Mortgagee may place the
amount contingently owing on short term interest bearing deposit until the
relevant Secured Money become actually due or cease to be contingently owing,
and the Mortgagee shall then:
(a) pay to the Mortgagee the amount which becomes actually due to it; and
(b) apply the balance of the amount retained (together with interest earned on
the deposit) in accordance with Clause 12.1.
12.4 Notice of subsequent Security Interests
(a) If the Mortgagee receives actual or constructive notice of a subsequent
Security Interest affecting any of the Mortgaged Property it may open a
separate account in the name of the Mortgagor in the books of the
Mortgagee.
(b) If the Mortgagee does not open a new account it will be treated as if it
had done so at the time it received actual or constructive notice of the
Security Interest.
(c) From the time the new account is opened or is taken to be opened:
(i) all advances and accommodation made available by the Mortgagee to the
Mortgagor;
(ii) all payments and repayments made by the Mortgagor to that Mortgagee;
and
(iii) moneys to be applied towards the Secured Money under Clause 12.1(e).
will be or will be taken to be debited or credited as appropriate, to the
new account. Payments, repayments and other moneys will only be applied in
reduction of other Secured Money to the extent that, there is no debit
balance in that account.
13. OTHER SECURITY INTERESTS OVER MORTGAGED PROPERTY
(a) The Mortgagee and any Receiver or Attorney may rely on the certificate of a
holder of another Security Interest affecting or purporting to affect the
Mortgaged Property as to the amount and property secured by the Security
Interest.
<PAGE>
16
(b) The Mortgagee or any Receiver may at any time pay or agree to pay the
amount certified by the holder of a Security Interest or purported Security
Interest to be necessary to discharge it or some indebtedness secured by
it, or to acquire it. From the date of payment that amount will be part of
the Secured Money and the Mortgagor shall indemnify the Mortgagee and the
Receiver on demand against that amount. This applies whether or not that
Security Interest or purported Security Interest was valid or prior, equal
or subsequent ranking, or the property or moneys stated in the certificate
were secured by it.
14. PROTECTION OF MORTGAGEES, RECEIVER AND ATTORNEY
Subject to any law which applies notwithstanding an agreement to the contrary,
no Mortgagee nor any Receiver or Attorney will be liable in respect of:
(a) any conduct, delay, negligence or breach of duty in the exercise or non-
exercise of a Power; nor
(b) for any loss (including consequential loss) which results,
except where it arises from fraud or willful misconduct on the part of the
Mortgagee, Receiver or Attorney.
15. PROTECTION OF THIRD PARTIES
15.1 No enquiry
No party to any Dealing (as defined below) and no person asked to register a
Dealing:
(a) is bound to enquire:
(i) whether an Event of Default has occurred or whether this Deed has
become unenforceable;
(ii) whether a person who is, or purports or is purported to be, a
Receiver or Attorney is duly appointed;
(iii) the amount of Secured Money and whether Secured Money are due and
payable; or
(iv) in any other way as to the propriety or regularity of the Dealing; or
(b) is affected by express notice that the Dealing is unnecessary or improper.
For the protection of any party to a Dealing or a person registering a Dealing,
the Dealing will be taken to be authorised by this Deed and will be valid
accordingly, even if there is any irregularity or impropriety in the Dealing,
In this Clause a "Dealing" is:
(a) any payment or any delivery or handing over of an asset to; or
<PAGE>
17
(b) any acquisition, incurring of Financial indebtedness, receipt, sale, lease,
disposal or other dealing, by,
the Mortgagee or any Receiver or Attorney, or any person who purports or is
purported to be a Receiver or Attorney.
15.2 Receipt
The receipt of the Mortgagee or any Receiver or Attorney (or person who
purports, or is purported, to be a Receiver or Attorney) for any moneys or
assets payable to, or receivable or received by, it exonerates the person paying
those moneys or handing over that asset from being concerned as to their
application, or from being liable or accountable for their loss or
misapplication.
16. EXPENSES, INDEMNITY
16.1 Expenses
On demand the Mortgagor shall reimburse
the Mortgagee, each Receiver and each Attorney for its expenses in relation to:
(i) any actual or contemplated enforcement of the Transaction Documents or
the actual or contemplated exercise or preservation of any Powers
under the Transaction Documents or in relation to the Mortgaged
Property under the Transaction Documents; and
(ii) any enquiry by a governmental agency concerning the Mortgagor or a
transaction or activity for which, or in connection with which,
financial accommodation or funds raised under a Transaction Document
are used or provided,
including, without limitation, expenses incurred in any review or environmental
audit, in reimbursing or indemnifying any Receiver or Attorney or in retaining
consultants to evaluate matters of material concern to that Mortgagee, and
administrative costs including time of its executives (whose time and costs are
to be charged at reasonable rates), and including in each case legal costs and
expenses (including in-house lawyers charged at their usual rates) on a full
indemnity basis. This does not limit the generality of Clause 16.2.
16.2 Indemnity
On demand the Mortgagor shall indemnify the Mortgagee, and each Receiver and
Attorney against any loss, cost, charge, liability or expense that Mortgage (or
any officer or employee of that Mortgagee) or any Receiver or Attorney may
sustain or incur as a direct or indirect consequence of:
(a) an Event of Default or breach of any Transaction Document;
(b) any exercise or attempted exercise of any Power or any failure to exercise
any Power.
<PAGE>
18
17. INTEREST ON OVERDUE AMOUNTS
17.1 Accrual and payment
(a) (Accrual) Interest accrues on each unpaid amount which is due and payable
by the Mortgagor under or in respect of any Transaction Document (including
interest payable under this Clause):
(i) on a daily basis up to the date of actual payment from (and
including) the due date or, in the case of an amount payable by way
of reimbursement or indemnity, the date of disbursement or loss, if
earlier;
(ii) both before and after judgment (as a separate and independent
obligation); and
(iii) at the rate provided in Clause 17.2,
except where the relevant Transaction Document provides otherwise.
(b) (Payment) The Mortgagor shall pay interest accrued under this Clause on
demand by the Mortgagee. That interest is payable in the currency of the
unpaid amount on which it accrues.
17.2 Rate
The rate applicable under this Clause is the sum of 2% per annum plus the
highest rate (if any) applicable to the amount immediately before the due date.
18. CERTIFICATE AS TO AMOUNT OF SECURED INTEREST
A certificate signed by the Mortgagee will be conclusive evidence against the
Mortgagor, in the absence of manifest error:
(a) as to the amount of Secured Money stated in the certificate;
(b) that a document specified in that certificate is a Transaction Document;
and
(c) that the Mortgagee is of the opinion stated in the certificate.
19. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES
(a) All representations and warranties in a Transaction Document survive the
execution and delivery of the Transaction Documents and the provision of
advances and accommodation.
(b) Each indemnity in a Transaction Document:
(i) is a continuing obligation;
(ii) is a separate and independent obligation; and
<PAGE>
19
(iii) survives termination or discharge of the relevant Transaction
Document.
20. CONTINUING SECURITY
Each of this Deed and each Collateral Security is a continuing security despite
any settlement of account, intervening payment or anything else until a final
discharge of this Deed and each Collateral Security has been given to the
Mortgagor.
21. OTHER SECURITIES
No Power and nothing in this Deed or any Collateral Security merges in, or in
any other way prejudicially affects or is prejudicially affected by:
(a) any other Security Interest; or
(b) any judgment, right or remedy against any person,
which the Mortgagee or any person claiming through the Mortgagee may have at any
time.
22. WAIVERS, REMEDIES CUMULATIVE
(a) No failure to exercise and no delay in exercising any Power operates as a
waiver. Nor does any single or partial exercise of any Power preclude any
other or further exercise of that Power or any other Power.
(b) The Powers in this Deed and each Collateral Security are in addition to,
and do not exclude or limit, any right, power or remedy provided by law.
23. CONSENTS AND OPINION
Except where expressly stated the Mortgagee may give or withhold, or give
conditionally, approvals and consents, may be satisfied or unsatisfied, may form
opinions, and may exercise its Powers, at its absolute discretion.
24. SEVERABILITY OF PROVISIONS
(a) Any provision of this Deed or any Collateral Security which is prohibited
or unenforceable in any jurisdiction is ineffective as to that jurisdiction
to the extent of the prohibition or unenforceability. That does not
invalidate the remaining provisions of this Deed or any Collateral Security
nor affect the validity or enforceabillity of that provision in any other
jurisdiction.
(b) Without limiting the generality of paragraph (a):
(i) the definition of Secured Money does not include any liability so
long as and to the extent that the inclusion of that liability would
avoid, invalidate or render ineffective Clause 2 or 3 or the security
constituted by this Deed; and
<PAGE>
20
(ii) the definition of the Mortgaged Property does not include any asset so
long as and to the extent that the inclusion of that asset would
invalidate, avoid or render ineffective Clause 2 or 3 or the security
constituted by this Deed.
The Mortgagor shall use its best endeavours to satisfy any condition or
obtain any Authorisation which may be necessary to include that liability
or asset validly under this Deed.
25. MORATORIUM LEGISLATION
To the full extent permitted by law all legislation which at any time directly
or indirectly:
(a) lessens, varies or affects in favour of the Mortgagor any obligation under
this Deed or any Collateral Security; or
(b) delays, prevents or prejudicially affects the exercise by the Mortgagee,
any Receiver or Attorney, of any Power,
is excluded from this Deed and any Collateral Security.
26. ASSIGNMENTS
(a) Subject to the other Transaction Documents, a Mortgagee may assign its
rights under this Deed and each Collateral Security. If this Deed is
assigned, the Secured Money will include all actual and contingent
liability of the Mortgagor to the assignee, whether or not it was incurred
before the assignment or in contemplation of it.
(b) The Mortgagor may not assign or transfer any of its rights or obligations
under this Deed or any Collateral Security without the prior written
consent of the Mortgagee.
27. NOTICES
All notices, requests, demands, consents, approvals, agreements or other
communications to or by a party to this Deed:
(a) must be in writing;
(b) must be signed by an officer or director of the sender; and
(c) will be taken to be duly given or made (in the case of delivery in person
or by post or facsimile transmission) when delivered, received or left at
the address of the recipient shown in this Deed or to any other address it
may have notified the sender, but if delivery or receipt is on a day on
which business is not generally carried on in the place to which the
communication is sent or is later than 4 pm (local time), it will be taken
to have been duly given or made at the commencement of business on the next
day on which business is generally carried on in that place.
<PAGE>
21
28. AUTHORISED OFFICERS
The Mortgagor irrevocably authorises the Mortgagee to rely on a certificate by a
person purporting to be its director or secretary as to the identity and
signatures of its authorised officers. The Mortgagor warrants that those
persons have been authorised to give notices and communications under or in
connection with the Transaction Documents.
29. GOVERNING LAW AND JURISDICTION
This Deed is governed by the laws of New South Wales. The Mortgagor submits to
the non-exclusive jurisdiction of courts exercising jurisdiction there.
30. THIRD PARTY PROVISIONS
30.1 Security not to be affected
None of this Deed, any Collateral Security or any Power nor the obligations of
the Mortgagor under this Deed will be affected by anything which but for this
provision might operate to release, prejudicially affect or discharge them or in
any way relieve the Mortgagor from any obligation including:
(a) the grant to any person of any time, waiver or other indulgence, or the
discharge or release of any person;
(b) any transaction or arrangement that may take place between the Mortgagee
and any person;
(c) the Liquidation of any person;
(d) the Mortgagee becoming a party to or bound by any compromise, moratorium,
assignment of property, scheme of arrangement, composition of debts or
scheme of reconstruction by or relating to any person;
(e) the Mortgagee exercising or delaying or refraining from exercising any
other security or any right, power or remedy conferred on it by law or by
any Transaction Document or by any other document or agreement with any
person;
(f) the amendment, variation, novation, replacement, rescission, invalidity,
extinguishment, repudiation, avoidance, unenforceability, frustration,
failure, expiry, termination, loss, release, discharge, abandonment,
assignment or transfer, in whole or in part and with or without
consideration, of any Transaction Document, or of any other Security
Interest or Guarantee or other document or agreement held by the Mortgagee
at any time or of any right, obligation, power or remedy;
(g) the taking or perfection of or failure to take or perfect a Security
Interest or Guarantee or other document or agreement;
<PAGE>
22
(h) the failure by any person or the Mortgagee to notify the Mortgagor of any
default by any person under any Transaction Document or any other agreement
with the Mortgagee;
(i) the Mortgagee obtaining a judgment against any person for the payment of
any Secured Money;
(j) any legal limitation, disability, incapacity or other circumstance relating
to any person;
(k) any change in circumstance (including any change in the members or
constitution of any person);
(l) any Guarantee or Security Interest or other document or agreement not being
valid or executed by, or binding on, any person; or
(m) any increase in the Secured Money for any reason (including as a result of
anything referred to above),
whether with or without the consent of the Mortgagor References to "any person"
include the Borrower or any other person. None of the above paragraphs limits
any of the others.
30.2 Principal and independent obligation
This Deed and each Collateral Security is a principal and independent
obligation. Except for stamp duty purposes, it is not ancillary or collateral
to any other Security Interest, right or obligation.
30.3 No marshalling
The Mortgagee is not obliged to marshal or appropriate in favour of the
Mortgagor, or to exercise, apply or recover:
(a) any Security Interest or Guarantee, indemnity or other similar surety
(including, without limitation, any Transaction Document) held by the
Mortgagee at any time; or
(b) any of the funds or assets the Mortgagee may be entitled to receive or have
claim on.
30.4 No competition
Until the Secured Money have been irrevocably paid and discharged in full, the
Mortgagor is not entitled to and shall not:
(a) be subrogated to the Mortgagee or claim the benefit of any Security
Interest or Guarantee, indemnity or other similar surety held by the
Mortgagee at any time;
(b) either directly or indirectly prove in, claim or receive the benefit of,
any distribution, dividend or payment arising out of or relating to the
Liquidation of
<PAGE>
23
the Borrower or any other person who gives a Guarantee, indemnity or other
similar surety or Security Interest in respect of any Secured Money; or
(c) have or claim any right of contribution or indemnity from any other person
who gives a Guarantee, indemnity or other similar surety or Security
Interest in respect of any Secured Money.
The receipt of any distribution, dividend or other payment by the Mortgagee out
of or relating to any Liquidation will not prejudice the right of the Mortgagee
to recover the Secured Money by enforcement of this Deed and each Collateral
Security.
30.5 Suspense account
In the event of the Liquidation of the Borrower or any other person, the
Mortgagor authorises the Mortgagee:
(a) to prove for all moneys received by any Receiver, Attorney or Mortgagee
under or by virtue of this Deed or any Collateral Security; and
(b) (i) to retain and carry to a suspense account; and
(ii) to appropriate at the discretion of that Mortgagee;
any dividend received in the Liquidation of the Borrower or any other
person and any other money received in respect of the Secured Money,
until that Mortgagee has been paid the Secured Money in full.
30.6 Rescission of payment
Whenever for any reason (including without limitation under any law relating to
Liquidation, fiduciary obligations or the protection of creditors):
(a) all or part of any transaction of any nature (including without limitation
any payment or transfer) made during the term of this Deed which affects or
relates in any way to the Secured Money is void, set aside or voidable;
(b) any claim that anything contemplated by paragraph (a) is upheld, conceded
or compromised; or
(c) the Mortgagee is required to return or repay any money or asset received by
it under any such transaction or the equivalent in value of that money or
asset,
the Mortgagee will immediately become entitled against the Mortgagor to all
rights in respect of the Secured Money and the Mortgaged Property which it would
have had if all or the relevant part of the transaction or receipt had not taken
place. The Mortgagor shall indemnify the Mortgagee on demand against any
resulting loss, cost or expense. This Clause continues to apply after this Deed
is discharged.
<PAGE>
24
30.7 Indemnity
If any Secured Money (including moneys which would have been Secured Money if
they were recoverable) are not recoverable from the Borrower for any reason,
including without limitation, any legal limitation, disability or incapacity
affecting the Borrower or an obligation in any Transaction Document being or
becoming unenforceable, void or illegal and whether or not:
(a) any transaction relating to the Secured Money was void or illegal or has
been subsequently avoided; or
(b) any matter or fact relating to that transaction was or ought to have been
within the knowledge of the Mortgagee,
the Mortgagor shall indemnify the Mortgagee on demand in respect of those moneys
and shall pay such moneys to the Mortgagee on demand.
30.8 Variations
Without limiting the above provisions, this Deed and any Collateral Security
covers the Secured Money as varied from time to time including, without
limitation, as a result of:
(a) any amendment to any Transaction Document or any new Transaction Document,
(b) the provision of further accommodation to the Borrower,
and whether or not with the consent of or notice to the Mortgagor.
31. COUNTERPARTS
This Deed may be executed in any number of counterparts. All counterparts
together will be taken to constitute one instrument.
32. ACKNOWLEDGEMENT BY MORTGAGOR
The Mortgagor confirms that:
(a) it has not entered into any Transaction Document in reliance on, or as a
result of, any conduct of any kind of or on behalf of the Mortgagee or any
related body corporate of the Mortgagee (including, without limitation, any
advice, warranty, representation or undertaking); and
(b) no Mortgagee nor any related body corporate of the Mortgagee is obliged to
do anything (including, without limitation, disclose anything or give
advice),
except as expressly set out in the Transaction Documents.
<PAGE>
25
32.2 Representations and warranties
The Mortgagor makes the following representations and warranties.
(a) (Status) It is a corporation validly existing under the laws of the place
of its incorporation.
(b) (Power) It has the power to enter into and perform its obligations under
the Transaction Documents to which it is expressed to be a party, to carry
out the transactions contemplated by those documents and to carry on its
business as now conducted or contemplated.
(c) (Corporate authorisations) It has taken all necessary corporate action to
authorise the entry into and performance of the Transaction Documents to
which it is expressed to be a party, and to carry out the transactions
contemplated by those documents.
(d) (Documents binding) Each Transaction Document to which it is expressed to
be a party creates valid and binding obligations enforceable in accordance
with its terms, subject to any necessary stamping and registration subject
to any applicable bankruptcy, insolvency or other laws affecting creditors
rights generally and to general principles of equity.
(e) (Transactions permitted) The execution and performance by it of the
Transaction Documents to which it is expressed to be a party and each
transaction contemplated under those documents did not and will not violate
in any respect a provision of:
(i) a law or treaty or a judgment, ruling, order or decree of a
Governmental Agency binding on it;
(ii) its constitution or other constituent documents; or
(iii) any other document or agreement to which it is a party which is
binding on it or its assets,
and, except as provided by the Transaction Documents, did not and will not:
(iv) create or impose a Security Interest on any of its assets; or
(v) allow a person to accelerate or cancel an obligation with respect to
Financial Indebtedness, or constitute an event of default,
cancellation event, prepayment event or similar event (whatever
called) under an agreement relating to Financial Indebtedness,
whether immediately or after notice or lapse of time or both.
(f) (Accounts)
(i) Its most recent consolidated and unconsolidated audited Accounts give
a true and fair view of the matters with which they deal.
<PAGE>
26
(ii) There has been no subsequent change in its state of affairs which is
reasonably likely to have a Material Adverse Effect.
(iii) Those Accounts comply with current accounting practice except to the
extent disclosed in them and with all applicable laws.
(iv) All material Financial Indebtedness and other material contingent
liabilities are disclosed in those Accounts.
(g) (No litigation) No litigation, arbitration, Tax claim, dispute or
administrative or other proceedings is currently or pending or, to its
knowledge, threatened, which may have a Material Adverse Effect.
(h) (No default) Nothing has occurred which constitutes an event of default,
cancellation event, prepayment event or similar event (whatever called)
under a document or agreement to which it is a party binding on it or its
assets which relates to Financial Indebtedness or is material, whether
immediately or after notice or lapse of time or both.
(i) (Authorisations) Each Authorisation which is required in relation to:
(i) the execution, delivery and performance by it of the Transaction
Documents to which it is expressed to be a party and the transactions
contemplated by those documents;
(ii) the validity and enforceability of those documents; and
(iii) its business as now conducted or contemplated and which is material,
has been obtained or effected. Each is in full force and effect. It has
complied with each of them. It has paid all applicable fees for each of
them.
(j) (No misrepresentation) All material information provided by it to the
Mortgagee is true in all material respects at the date of this Deed or, if
later, when provided. Neither that information nor its conduct and the
conduct of anyone on its behalf in relation to the transactions
contemplated by the Transaction Documents, was or is misleading, by
omission or otherwise.
(k) (Agreements disclosed) Each document or agreement which is material to the
Transaction Documents or which has the effect of varying a Transaction
Document has been disclosed to the Mortgagee in writing.
(l) (Copies of documents) All copies of documents (including its latest
audited Accounts and all Authorisations) given by it or on its behalf to
the Mortgagee are true and complete copies in all material respects.
Except as disclosed to the Mortgagee in writing prior to the date of this
deed, those documents are in full force and effect.
(m) (Title) Except as disclosed to the Mortgagee in writing prior to the date
of this deed, it is the sole beneficial owner of all material assets
included in its latest audited Accounts free of any other third party right
or interest whatever.
<PAGE>
27
(n) (Law) It has complied with all laws binding on it where breach may have a
Material Adverse Effect.
32.3 Reliance on representations and warranties
The Mortgagor acknowledges that the Mortgagee has entered the Transaction
Documents in reliance on the representations and warranties in this clause.
33. UNDERTAKINGS
33.1 Negative undertakings
The Mortgagor undertakes to the Mortgagee as follows, except to the extent that
the Mortgagee consents:
(a) (Corporate existence) It will do everything necessary to maintain its
corporate existence in good standing. It will not transfer its
jurisdiction of incorporation or enter any merger or consolidation.
(b) (Financial assistance) It will not:
(i) advance money or make available financial accommodation to or for the
benefit of; or
(ii) give a Security Interest in connection with an obligation or liability
of,
a person other than the Mortgagee, but it may deposit funds with a bank in
the ordinary course of its business or provide credit to its customers in
the ordinary course of ordinary business.
(c) (Mortgaged Property) It will not create or suffer to exist any Security
Interest over all or any part of the Mortgaged Property other than this
Deed.
(d) (no changes without consent) It will ensure that no variation is made to
any provision of any Transaction Document or any other document or
agreement entered into in connection with the Mortgaged Property, without
the Mortgagor's prior consent.
(e) (agreements disclosed) It will ensure that a copy of any document or
agreement which is created with the effect of varying a Transaction
Document or any other document or agreement entered into in connection with
the Mortgaged Property, is provided to the Mortgagor promptly after it has
been created.
33.2 Marketable Securities
The Mortgagor covenants with Mortgagee to maintain and protect all Marketable
Securities included in the Mortgaged Property. Without limitation, it covenants
with the Mortgagee as follows (subject to the other provisions of this Deed).
<PAGE>
28
(a) (Notify rights offered or accruing) It will:
(i) notify the Mortgagee immediately if it becomes entitled to, or is
offered, New Rights; and
(ii) ensure that all documents relating to New rights or arising out of
their subscription, taking up or exercise are delivered to the
Mortgagee.
(b) (Subscribe to rights) If the Mortgagee directs, it will promptly subscribe
to, take up or exercise New Rights.
(c) (Remedy defects) It will remedy each defect in its holding of those
Marketable Securities.
(d) (Take proceedings) It will take or defend all legal proceedings which the
Mortgagee requires to protect or recover those Marketable Securities.
(e) (Execute documents) It will execute each document to which it is expressed
to be a party in relation to anything required under this clause.
(f) (Pay calls) It will duly pay all calls in respect of those Marketable
Securities.
(g) (Deliver documents) Immediately on receipt by it or for its account, it
will deliver to the Mortgagee each certificate, acceptance, contract note
or transfer for those Marketable Securities.
(h) (Return of documents) If the Mortgagee makes available a document relating
to those Marketable Securities or New Rights for registration, stamping,
exercise, acceptance or another purpose:
(i) it will ensure that the document or each resulting or replacement
document (as the case may be) is delivered directly to the Mortgagee
when available or returned; and
(ii) to the extent required by the Mortgagee, it will ensure that all
persons dealing with it have notice of this Deed.
The Mortgagee will make available any document which it holds on reasonable
request by the Mortgagor for the purpose of recording, perfecting or
preserving the title of the Mortgagor to Marketable Securities, or
exercising rights attaching to Marketable Securities in a manner consistent
with the Mortgagee's security, if arrangements satisfactory to the
Mortgagee are in place to protect the Mortgagee's security.
(i) (Nothing prejudicial) It will not do or omit to do anything which might
render those Marketable Securities liable to forfeiture, cancellation,
avoidance or loss or might otherwise prejudicially affect the Mortgagee's
interest in them or their value.
(j) (Meetings of securityholders) It will immediately provide to the Mortgagee
certified copies of all reports and other documents received by it in its
capacity
<PAGE>
29
as a holder of those Marketable Securities or relating in any way to those
Marketable Securities including any report or notice of any meeting which
the holder of Marketable Securities is entitled to attend or vote at or
both.
(k) (Vote)
(i) Subject to sub-paragraph (ii), it will vote those Marketable
Securities in a prudent manner.
(ii) It will not vote those Marketable Securities while an Event of Default
or Potential Event of Default subsists or after this Deed has been
enforced, except with the consent of the Mortgagee.
(l) (Dividends etc to be applied in payment)
(i) It will ensure that all amounts received by it or for its account as
holder of or in relation to those Marketable Securities, whether by
dividend, distribution or otherwise, are applied in payment of the
Secured Money.
(ii) If it receives an asset (other than money, new shares or entitlements
to shares) as holder of or in relation to those Marketable Securities,
it will immediately sell the asset at its market value and apply the
net proceeds of sale in the same way.
(m) (Notices) It will promptly give the Mortgagee copies of all documents and
notices received by it from any beneficiary or manager of the Trust or which it
gives to a beneficiary or manager of the Trust.
33.3 Term of undertakings
Each undertaking in this clause continues from the date of this Deed until the
Secured Money is fully and finally paid.
34. STAMP DUTY
(a) The Mortgagor shall pay (and reimburse the Mortgagee) all stamp,
transactions, registration and similar Taxes (including fines and
penalties) in relation to the execution of any Transaction Document to
which the Mortgagor is a party or any payment or receipt or any other
transaction contemplated by any Transaction Document to which the Mortgagor
is a party.
(b) Those Taxes include financial institutions duty, debits tax or other Taxes
payable by return and Taxes passed on to the Mortgagee by a bank or
financial institution.
(c) The Mortgagor shall indemnify the Mortgagee against any liability resulting
from delay or omission to pay those Taxes except to the extent the
liability results from failure by the Mortgagee to pay any tax after having
been put in funds to do so by the Mortgagor.
<PAGE>
30
35. REGISTRATION
Mortgagor will ensure that this charge is registered in the manner and within
such time limits as may be prescribed by law to ensure the full efficacy of this
charge as security to the Mortgagee to pay Taxes.
EXECUTED as a Deed
SIGNED for and on behalf of the )
NESS SECURITY PRODUCTS PTY )
LIMITED by )
who certifies that they are duly appointed as )
the attorney of NESS SECURITY )
PRODUCTS PTY LIMITED and that they )
have not received notification of the ) __________________________
revocation of the power of attorney under )
the authority of which they have executed )
this Deed in the presence of: )
_____________________________________ Signature of Witness
_____________________________________ Print Name of Witness
SIGNED for and on behalf of the )
FAI INSURANCES LIMITED by )
)
who certifies that they are duly appointed as )
the attorney of FAI INSURANCES )
LIMITED and that they )
have not received notification of the ) __________________________
revocation of the power of attorney under )
the authority of which they have executed )
this Deed in the presence of: )
_____________________________________ Signature of Witness
_____________________________________ Print Name of Witness
