The approval of the acquisition will require the approval of the holders of a majority of the shares of our common stock present and entitled to vote at the meeting with respect to the acquisition, as well as the holders of a majority of our IPO shares voted with respect to the acquisition. Notwithstanding these approvals, our certificate of incorporation provides that we cannot complete the acquisition if the holders of 20% or more of our IPO shares (1,725,000 or more shares) exercise their conversion rights.
The approval of the proposal to grant our board of directors discretionary authority to adjourn the special meeting to solicit additional votes for approval of the acquisition in the event that there are insufficient votes for its approval present at the special meeting will require the affirmative vote of the holders of a majority of our common stock present and entitled to vote at the meeting. Abstentions are deemed entitled to vote on this proposal. Therefore, they will have the same effect as a vote against the proposal. Broker non-votes, however, are not deemed entitled to vote on this proposal and will have no effect on the outcome of the vote on this proposal.
Each share of our common stock that you own in your name entitles you to one vote. Your proxy card shows the number of shares of our common stock that you own.
There are two ways to vote your shares of our common stock at the special meeting:
Proxies must be received prior to the voting at the special meeting. Any proxies or other votes received after this time will not be counted in determining whether the acquisition has been approved. Furthermore, any proxies or other demand received after the voting at the special meeting will not be effective to exercise conversion rights.
If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:
If you have any questions about how to vote or direct a vote in respect of your shares of our common stock, you may call John O. Johnson, our Chief Operating Officer, at(626) 795-0040. You also may call MacKenzie Partners, Inc. at(800) 322-2885.
If you exercise your conversion rights, then you will be exchanging your shares of our common stock for cash and will no longer own those shares. If the acquisition is not completed, these shares will not be converted into cash.
Stockholders of have no appraisal rights in connection with the acquisition under applicable Delaware corporation law or otherwise.
We are soliciting proxies on behalf of our board of directors. This solicitation is being made by mail, but also may be made by telephone or in person. We and our directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means. These persons will not be compensated for these solicitation activities.
We have engaged Mackenzie Partners, Inc. to assist in the mailing of this proxy statement and responding to questions from stockholders. For these services, we will pay Mackenzie Partners, Inc. a fee of $5,000, plus reasonableout-of-pocket charges. Such costs will be paid initially with borrowings under the line of credit made available to us by Mr. Valenta, which borrowings will be repaid to Mr. Valenta if the acquisition (or other business combination) is completed.
We will ask banks, brokers and other institutions, nominees and fiduciaries to forward our proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. We will reimburse them for their reasonable expenses.
Some banks, brokers, and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of this notice and proxy statement may have been sent to multiple stockholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact your bank, broker or other nominee. Upon written or oral request to John O. Johnson, our Chief Operating Officer, at General Finance Corporation, 260 South Los Robles, Suite 217, Pasadena, California 91101, (626) 795-0040, we will provide a separate copy of the annual reports and proxy statements. In addition, stockholders sharing an address can request delivery of a single copy of annual reports or proxy statements if you are receiving multiple copies upon written or oral request to our Chief Operating Officer at the address and telephone number stated above.
As of the record date, Ronald F. Valenta, John O. Johnson, James B. Roszak, Lawrence Glascott, Manuel Marrero, David M. Connell, and Marc Perez, each of whom is our director or executive officer, owned an aggregate of 1,875,000 shares of our common stock, or approximately 17.9% of our outstanding shares. In connection with our IPO, they agreed to vote these shares with respect to our initial business combination as the holders of a majority of the IPO shares that are voted. Our officers and directors own nobeneficially 13,500 IPO shares.
Stockholders who have questions concerning the proposed acquisition or any other aspect of the special meeting should contact John O. Johnson at(626) 584-9722 or MacKenzie Partners, Inc. at(800) 322-2885.
On May 11, 2006, we convened a telephonic meeting of our board of directors at which, among other things, management reviewed with our directors the status of our discussions with RWA regarding a possible acquisition of RWA. At the meeting, management conveyed its preliminary view that Royal Wolf was a leading company in its sector and geographic market with a strong management team and significant growth potential.
Over the next several days, Messrs. Baxter and Dhawan and Mr. Peter McCann, Chief Financial Officer of RWA, had several communications with Mr. Valenta regarding our preliminary due diligence requests and a due diligence timetable.
Following the July 28, 2006 board meeting, our management and legal advisors continued to negotiate with representatives of RWA. On August 3, 2006, we signed a non-binding term sheet by which RWA granted us an exclusive period extending through August 31, 2006 to perform more in-depth due diligence and to discuss the terms of a definitive acquisition agreement. Several conversations took place over the next several days between us, RWA and our respective legal advisors regarding the outline of a definitive acquisition agreement.
From August 14 to August 16, 2006, Mr. Johnson was present in Sydney, Australia, to conduct further due diligence with respect to potential tax and corporate structure with Ernst & Young LLP Australia, to review the legal due diligence with Mr. Barnes of Barnes & Wenden and the environmental due diligence with Consulting Earth
On March 13, 2007, John O. Johnson, our Chief Operating Officer, traveled to Australia to address with the RWA shareholders the possibility of restructuring the acquisition with Bison Capital’s participation. Over the following two days, March 14 and March 15, 2007, Mr. Johnson, with the participation by telephone and email of our other management and legal advisors in the U.S. and Australia, negotiated with the RWA shareholders the terms of the possible restructured acquisition. During his meetings in Australia, Royal Wolf management also furnished Mr. Johnson with updated internal projected results of operations of Royal Wolf for the twelve months ended December 31, 2006 and the twelve months ending December 31, 2007, and discussed with Mr. Johnson recent developments and the current status of Royal Wolf’s business and operations. Management of Royal Wolf confirmed that, through December 31, 2007, Royal Wolf was performing according to the management projections
As in its initial analyses, the companies our management selected for its analyses were:
Our management calculated and compared financial information and various financial market multiples and ratios of the selected companies based on historical information it obtained from Securities and Exchange
If permitted under applicable law, any of the parties may waive any inaccuracies in the representations and warranties made to the other parties contained in the acquisition agreement and waive compliance with any agreements or conditions for their benefit contained in the acquisition agreement. We cannot assure you that any or all of the conditions will be satisfied or waived. The conditions that the acquisition be approved by our stockholders and that the holders of fewer than 20% of our IPO shares exercise their conversion rights cannot be waived. We may waive one or more of the closing conditions if we deem it advisable to do so.
Equity Partners and each of the management shareholders has agreed in the acquisition agreement to indemnify Bison-GE against claims (as defined) due to breach of their warranties, subject to certain limitations. At the closing of our acquisition of Royal Wolf, Bison-GE will assign to us these indemnification rights. Equity Partners and the management shareholders will have no liability for a claim unless the amount of the claim is at least $15,800 and until the aggregate of all claims in excess of $15,800 exceeds $296,300, in which event we can claim the whole amount, not just the amount in excess of $296,300. They also will have no liability for breach of warranty unless the claim arises within 18 months after the date of the acquisition agreement (five years after the date of the acquisition agreement for breach of certain warranties relating to corporate organization, outstanding shares and share capitalization, compliance with legal requirements, tax, and the environment).
At or before the closing, $5.5 million of the cash paid or payable to Equity Partners and the management shareholders will be deposited in a separate bank account requiring signatures of us and Equity Partners and the management shareholders for withdrawals. The purpose of this account is to provide a source of funds to pay the indemnification obligations. The acquisition agreement provides that 25% of these funds will be released to Equity Partners and the management shareholders on September 1, 2007 and the balance will be released to them on March 31, 2008, in each case, subject to any paid or pending indemnity claims by us.
The management shareholders are companies formed by Paul Jeffrey, James Warren, Michael Baxter and Peter McCann to hold their shares of RWA. Under the acquisition agreement, each of these individuals has agreed to personally guarantee the obligations under the acquisition agreement of his management shareholder company.
Under the shareholders agreement, Bison-GE will have the option at any time after two years from the closing to require us to purchase its GFN shares. The purchase price for the shares would be the greatest of the following:
We will have the right at any time prior to the third anniversary of the closing to require Bison-GE to sell to us its GFN Australasia shares at a price equal to 2.75 times the purchase price that Bison-GE paid for those shares, provided that Bison-GE has not previously exercised its right to require us to purchase its shares as described above.
STOCKHOLDER PROPOSALS
Regardless as to whether our acquisition of Royal Wolf is approved, our 2007 annual meeting of stockholders will be held on or about May 8, 2007, unless the date is changed by our board of directors.
Any stockholder who intends to have a proposal considered for inclusion in the proxy statement to be distributed by us in connection with the 20072008 annual meeting must submit the proposal to us within a “reasonable time” (within the meaning ofRule 14a-8(e)(2) under the Securities Exchange Act of 1934), and in no event more than 20 days, before we begin to print and mail our proxy materials for the annual meeting, which we anticipate will be on or about 30 days prior to the meeting date.before January 1, 2008. The proposal must also comply with the other terms and conditions ofRule 14a-8 under the Securities Exchange Act of 1934 in order to be included in our proxy statement. A proposal that a stockholder intends to present at the annual meeting but does not desire to include in our proxy statement pursuant toRule 14a-8 will be considered untimely unless it is received by us not less than 60 days nor more than 90 days prior to the date of the annual meeting (provided, however, that in the event that less than 70 days’ notice or prior public disclosure of the date of the annual meeting is given by us to our stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made). The proposal must also contain the information that is specified in Article I, Section 15 of our bylaws. All proposals described in this paragraph should be sent to Ronald F. Valenta, our Chief Executive Officer and Secretary, at General Finance Corporation, 260 South Los Robles, Suite 217, Pasadena, California 91101.
118
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to our IPO, we issued an aggregate of 1,875,000 shares of common stock to certain of our current officers and directors as set forth above under “Beneficial Ownership of Securities” at a purchase price of approximately $0.134 per share. These shares are being held in escrow with Continental Stock Transfer & Trust Company, as escrow agent, pursuant to an escrow agreement between us, our officers and directors and the escrow agent. These shares will not be transferable by our officers and directors, except to their spouses, children or trusts established for their benefit, and will only be released from escrow upon the earlier of one year after the completion of our initial business combination or the completion of a transaction after our initial business combination that results in our stockholders having the right to exchange their shares for cash or other securities.
We currently have an unsecured limited recourse line of credit agreement with Ronald J. Valenta, our Chief Executive Officer and a director, under which we can borrow up to $3,000,000 from time to time at an annual interest rate of 8%. At February 28,April 30, 2007, the outstanding amount of principal and accrued interest under the line of credit was $1,317,050.$2,062,078. Borrowings under the line of credit will become due and payable upon the first to occur of our initial business combination, an “event of default” (as defined), our liquidation or dissolution, and April 5, 2008, provided, however, that Mr. Valenta will have no recourse against the funds held in the trust account for repayment of any amounts outstanding under the line of credit. Subject to this limitation on recourse to the funds in the trust account, amounts outstanding under the line of credit may be repaid in whole or in pat at any time without penalty or premium. Neither Mr. Valenta nor our other officers or directors has any obligation to provide us any additional financing.
As an inducement to Bison-GE and the management shareholders to enter into the acquisition agreement, Mr. Valenta has entered into a backup purchase agreement with Bison-GE and the management shareholders under which he agrees that, if the Royal Wolf acquisition is not approved at the special meeting, or otherwise is not completed by April 3, 2008, he will purchase from Bison-GE and the management shareholders all of the RWA shares at a purchase price equivalent to the purchase price payable by us under the acquisition agreement. The terms of the backup purchase agreement were determined by arm’s-length negotiations among Mr. Valenta, Bison-GE and the management shareholders. Mr. Valenta will not be entitled to a fee or other compensation for the agreeing to the backup purchase agreement.
122
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities and Exchange Commission as required by the Securities Exchange Act of 1934, as amended. You may read and copy reports, proxy statements and other information filed by us with the Securities and Exchange Commission at the Securities and Exchange Commission public reference room located at Judiciary Plaza, 100 F Street, N.E., Room 1024, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at1-800-732-0330. You may also obtain copies of the materials described above at prescribed rates by writing to the Securities and Exchange Commission, Public Reference Section, 100 F Street N.E., Washington, D.C. 20549. You also may access information on us at the Securities and Exchange Commission web site containing reports, proxy statements and other information at: http://www.sec.gov.
If you would like additional copies of this proxy statement or the proxy card, or if you have questions about the acquisition, you should contact, orally or in writing:
| | | | |
John O. Johnson | | OR | | MacKenzie Partners, Inc. |
Chief Operating Officer | | | | 105 Madison Avenue |
General Finance Corporation | | | | New York, New York 10016 |
260 South Robles, Suite 217 | | | | Telephone: (800)322-2885 |
Pasadena, California 91101 | | | | |
Telephone:(626) 584-9722 | | | | |
119123
INDEX TO FINANCIAL STATEMENTS
| | | | |
| | Page |
|
RWA HOLDINGS PTY LIMITED | | | | |
Unaudited as of and for the six months ended December 31, 2006 and December 31, 2005: | | | | |
| | | F-2 | |
| | | F-3 | |
| | | F-4 | |
| | | F-5 | |
| | | F-6 | |
As of and for the year ended June 30, 2006, the six months ended June 30, 2005, and the year ended December 31, 2004: | | | | |
| | | F-14 | |
| | | F-15 | |
| | | F-16 | |
| | | F-17 | |
| | | F-18 | |
| | | F-19 | |
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED | | | | |
As of and for the year ended December 31, 2003: | | | | |
| | | F-70 | |
| | | F-71 | |
| | | F-72 | |
| | | F-73 | |
| | | F-74 | |
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP | | | | |
As of and for the year ended June 30, 2005 and the nine months ended March 31, 2006 and 2005 (unaudited): | | | | |
| | | F-93 | |
| | | F-94 | |
| | | F-95 | |
| | | F-97 | |
F-1
RWA Holdings Pty Limited Unaudited Financial Report
For the six months ended 31 December 2006 and 2005
| | | | | | | | | | | | |
| | | | | 31 December
| | | 31 December
| |
| | | | | 2006
| | | 2005
| |
| | Note | | | 6 Months | | | 6 Months | |
| | | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 30,502 | | | | 22,887 | |
Hire of containers | | | | | | | 13,397 | | | | 9,774 | |
| | | | | | | | | | | | |
Total revenue | | | | | | | 43,899 | | | | 32,661 | |
| | | | | | | | | | | | |
Other income | | | | | | | 8 | | | | 21 | |
Changes in inventories of finished goods and WIP | | | | | | | (655 | ) | | | 507 | |
Purchases of finished goods and consumables used | | | | | | | (26,041 | ) | | | (21,396 | ) |
Employee benefits expense | | | | | | | (10,197 | ) | | | (4,673 | ) |
Depreciation and amortization expense | | | | | | | (2,035 | ) | | | (1,729 | ) |
Other expenses | | | | | | | (4,755 | ) | | | (3,824 | ) |
| | | | | | | | | | | | |
Results from operating activities | | | | | | | 224 | | | | 1,567 | |
| | | | | | | | | | | | |
Financial income | | | | | | | 330 | | | | 179 | |
Financial expenses | | | | | | | (2,593 | ) | | | (1,828 | ) |
| | | | | | | | | | | | |
Net financing costs | | | | | | | (2,263 | ) | | | (1,649 | ) |
| | | | | | | | | | | | |
Share of profit of associate | | | | | | | — | | | | — | |
| | | | | | | | | | | | |
Profit/(loss) before tax | | | | | | | (2,039 | ) | | | (82 | ) |
Income tax expense | | | | | | | (806 | ) | | | (96 | ) |
| | | | | | | | | | | | |
Profit/(loss) after tax | | | | | | | (2,845 | ) | | | (178 | ) |
| | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (2,845 | ) | | | (178 | ) |
| | | | | | | | | | | | |
F-2
RWA Holdings Pty Limited Unaudited Financial Report
For the six months ended 31 December 2006 and 2005
| | | | | | | | | | | | |
| | | | | 31 December
| | | 31 December
| |
| | | | | 2006
| | | 2005
| |
| | Note | | | 6 Months | | | 6 Months | |
| | | | | A$’000 | | | A$’000 | |
|
Net income/(loss) recognized directly in equity | | | | | | | — | | | | — | |
Profit/(loss) for the period | | | | | | | (2,845 | ) | | | (178 | ) |
| | | | | | | | | | | | |
Total recognized income and expense for the period | | | | | | | (2,845 | ) | | | (178 | ) |
| | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (2,845 | ) | | | (178 | ) |
| | | | | | | | | | | | |
F-3
RWA Holdings Pty Limited Unaudited Financial Report
As at 31 December 2006 and 2005
| | | | | | | | | | | | |
| | | | | 31 December
| | | 31 December
| |
| | Note | | | 2006 | | | 2005 | |
| | | | | A$’000 | | | A$’000 | |
|
ASSETS |
Cash and cash equivalents | | | | | | | 613 | | | | 941 | |
Trade and other receivables | | | | | | | 15,795 | | | | 8,154 | |
Inventories | | | | | | | 8,153 | | | | 3,517 | |
| | | | | | | | | | | | |
Total current assets | | | | | | | 24,561 | | | | 12,612 | |
| | | | | | | | | | | | |
Receivables | | | | | | | 695 | | | | 1,033 | |
Investments accounted for using the equity method | | | | | | | — | | | | 493 | |
Property, plant and equipment | | | | | | | 3,409 | | | | 3,331 | |
Container hire fleet | | | | | | | 47,039 | | | | 31,898 | |
Intangible assets | | | | | | | 5,126 | | | | 4,456 | |
| | | | | | | | | | | | |
Total non-current assets | | | | | | | 56,269 | | | | 41,211 | |
| | | | | | | | | | | | |
Total assets | | | | | | | 80,830 | | | | 53,823 | |
| | | | | | | | | | | | |
|
LIABILITIES |
Trade and other payables | | | | | | | 18,922 | | | | 6,794 | |
Interest-bearing loans and borrowings | | | | | | | 8,776 | | | | 4,426 | |
Current tax liability | | | | | | | — | | | | — | |
Employee benefits | | | | | | | 5,276 | | | | 837 | |
Provisions | | | | | | | 160 | | | | — | |
| | | | | | | | | | | | |
Total current liabilities | | | | | | | 33,134 | | | | 12,057 | |
| | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | | | | | 44,065 | | | | 36,608 | |
Deferred tax liabilities | | | | | | | 1,396 | | | | 216 | |
Employee benefits | | | | | | | 206 | | | | 295 | |
Provisions | | | | | | | 13 | | | | 8 | |
| | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 45,680 | | | | 37,127 | |
| | | | | | | | | | | | |
Total liabilities | | | | | | | 78,814 | | | | 49,184 | |
| | | | | | | | | | | | |
Net assets | | | | | | | 2,016 | | | | 4,639 | |
| | | | | | | | | | | | |
Equity | | | | | | | | | | | | |
Issued capital | | | | | | | 4,550 | | | | 4,550 | |
Retained earnings/(accumulated losses) | | | | | | | (2,866 | ) | | | 89 | |
Reserves | | | | | | | 332 | | | | — | |
| | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 2,016 | | | | 4,639 | |
| | | | | | | | | | | | |
F-4
RWA Holdings Pty Limited Unaudited Financial Report
For the six months ended 31 December 2006 and 2005
| | | | | | | | | | | | |
| | | | | 31 December
| | | 31 December
| |
| | | | | 2006
| | | 2005
| |
| | Note | | | 6 Months | | | 6 Months | |
| | | | | A$’000 | | | A$’000 | |
|
Cash flows from operating activities | | | | | | | | | | | | |
Cash receipts from customers | | | | | | | 48,289 | | | | 35,927 | |
Cash paid to suppliers and employees | | | | | | | (42,216 | ) | | | (34,008 | ) |
| | | | | | | | | | | | |
Cash generated from operations | | | | | | | 6,073 | | | | 1,919 | |
Interest paid | | | | | | | (1,955 | ) | | | (1,391 | ) |
| | | | | | | | | | | | |
Net cash from operating activities | | | 2 | | | | 4,118 | | | | 528 | |
| | | | | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | |
Proceeds from sale of property, plant and equipment | | | | | | | 65 | | | | 36 | |
Interest received | | | | | | | 98 | | | | 99 | |
Acquisition of property, plant and equipment | | | | | | | (560 | ) | | | (490 | ) |
Acquisition of container hire fleet | | | | | | | (9,894 | ) | | | (7,078 | ) |
Acquisition of intangible assets | | | | | | | (127 | ) | | | (484 | ) |
| | | | | | | | | | | | |
Net cash from investing activities | | | | | | | (10,418 | ) | | | (7,917 | ) |
| | | | | | | | | | | | |
Cash flows from financing activities | | | | | | | | | | | | |
Payment of finance lease liabilities | | | | | | | (158 | ) | | | (111 | ) |
Proceeds from borrowings | | | | | | | 4,975 | | | | 15,691 | |
Repayment of borrowings | | | | | | | (817 | ) | | | (9,650 | ) |
| | | | | | | | | | | | |
Net cash from financing activities | | | | | | | 4,000 | | | | 5,930 | |
| | | | | | | | | | | | |
Net increase / (decrease) in cash and cash equivalents | | | | | | | (2,300 | ) | | | (1,459 | ) |
Cash and cash equivalents at beginning of period | | | | | | | (1,349 | ) | | | 695 | |
| | | | | | | | | | | | |
Cash and cash equivalents at 31 December | | | | | | | (3,649 | ) | | | (764 | ) |
| | | | | | | | | | | | |
F-5
RWA Holdings Pty Limited Unaudited Financial Report
| |
1. | Significant accounting policies |
The unaudited consolidated financial statements have been prepared on the accrual basis of accounting in accordance with the Australian equivalents to International Financial Reporting Standards (AIFRS). Certain information and footnote disclosures normally included in financial statements prepared in accordance with AIFRS have been omitted or condensed. It is management’s belief that the disclosures made are adequate to make the information presented not misleading and reflect all significant adjustments necessary for a fair presentation of financial position and results of operations for the periods presented. It is recommended that these consolidated financial statements be read in conjunction with the Group’s consolidated financial statements and notes thereto for the year ended June 30, 2006 included elsewhere in this proxy statement.
| |
2. | Reconciliation of cash flows from operating activities |
| | | | | | | | |
| | 31 December
| | | 31 December
| |
| | 2006
| | | 2005
| |
| | 6 Months | | | 6 Months | |
| | A$’000 | | | A$’000 | |
|
Cash flows from operating activities | | | | | | | | |
Profit/(loss) for the period | | | (2,845 | ) | | | (178 | ) |
Adjustments for: | | | | | | | | |
Gain on sale of property, plant and equipment | | | (8 | ) | | | (18 | ) |
Foreign exchange (gain)/loss | | | (128 | ) | | | (79 | ) |
Unrealised loss on forward exchange contracts | | | 66 | | | | — | |
Unrealised gain on interest rate swap | | | (104 | ) | | | — | |
Depreciation and amortisation | | | 2,041 | | | | 1,759 | |
Investment income | | | (98 | ) | | | (99 | ) |
Interest expense | | | 2,458 | | | | 1,797 | |
Income tax (benefit)/ expense | | | 806 | | | | 96 | |
Equity settled share based payment expenses | | | 30 | | | | — | |
| | | | | | | | |
Operating profit before changes in working capital and provisions | | | 2,280 | | | | 3,278 | |
(Increase)/ decrease in trade and other receivables | | | (5,509 | ) | | | (564 | ) |
(Increase)/ decrease in inventories | | | (654 | ) | | | 507 | |
Increase/ (decrease) in trade and other payables | | | 6,413 | | | | (1,407 | ) |
Increase/ (decrease) in provisions and employee benefits | | | 3,544 | | | | 105 | |
| | | | | | | | |
| | | 6,073 | | | | 1,919 | |
Interest (paid)/received | | | (1,955 | ) | | | (1,391 | ) |
| | | | | | | | |
Net cash from operating activities | | | 4,118 | | | | 528 | |
| | | | | | | | |
| |
3. | Reconciliation to U.S. GAAP |
The Group’s consolidated unaudited financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs) for the periods ended 31 December 2006 and 31 December 2005, which, as applied by the Group, differ in certain material respects from accounting standards
F-6
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
generally accepted in the United States of America (U.S. GAAP). The effects of the application of U.S. GAAP to net profit and shareholders’ equity are set out in the tables below:
RECONCILIATION OF NET PROFIT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | |
| | | | | 31 Dec
| | | 31 Dec
| |
| | | | | 2006
| | | 2005
| |
| | Note | | | 6 months | | | 6 Months | |
| | | | | A$’000 | | | A$’000 | |
|
Net profit/(loss) after tax as reported in the audited financial statements under AIFRS (restated) | | | | | | | (2,845 | ) | | | (178 | ) |
Write-off of development costs | | | A | | | | (27 | ) | | | — | |
Share based payment expense | | | C | | | | 157 | | | | (24 | ) |
Step-up on acquisition | | | D | | | | 24 | | | | 87 | |
| | | | | | | | | | | | |
Net loss according to US GAAP before tax impact of adjustments | | | | | | | (2,691 | ) | | | (115 | ) |
Tax effect on US GAAP adjustment | | | B | | | | 2 | | | | (87 | ) |
| | | | | | | | | | | | |
Net loss under US GAAP | | | | | | | (2,689 | ) | | | (202 | ) |
| | | | | | | | | | | | |
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | |
| | | | | 31 Dec
| | | 31 Dec
| |
| | Note | | | 2006 | | | 2005 | |
| | | | | A$’000 | | | A$’000 | |
|
Total equity under AIFRS (restated) | | | | | | | 2,016 | | | | 4,639 | |
Write-off of development costs | | | A | | | | (331 | ) | | | — | |
Tax effect on US GAAP adjustment | | | B | | | | 99 | | | | — | |
Share based payments expense | | | C | | | | — | | | | (134 | ) |
Step-up on acquisition | | | D | | | | (265 | ) | | | — | |
| | | | | | | | | | | | |
Shareholders’ equity under U.S. GAAP | | | | | | | 1,519 | | | | 4,505 | |
| | | | | | | | | | | | |
F-7
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF SIX MONTHS 31 DECEMBER 2006 INCOME STATEMENT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | | | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 30,502 | | | | — | | | | 30,502 | |
Hire of containers | | | | | | | 13,397 | | | | — | | | | 13,397 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | | | | | 43,899 | | | | — | | | | 43,899 | |
| | | | | | | | | | | | | | | | |
Other income | | | | | | | 8 | | | | — | | | | 8 | |
Changes in inventories of finished goods and WIP | | | | | | | (655 | ) | | | — | | | | (655 | ) |
Purchases of finished goods and consumables used | | | D | | | | (26,041 | ) | | | 14 | | | | (26,027 | ) |
Employee benefits expense | | | C | | | | (10,197 | ) | | | 157 | | | | (10,040 | ) |
Depreciation and amortization expense | | | D | | | | (2,035 | ) | | | 41 | | | | (1,994 | ) |
Other expenses | | | A | | | | (4,755 | ) | | | (58 | ) | | | (4,813 | ) |
| | | | | | | | | | | | | | | | |
Results from operating activities | | | | | | | 224 | | | | 154 | | | | 378 | |
| | | | | | | | | | | | | | | | |
Financial income | | | | | | | 330 | | | | — | | | | 330 | |
Financial expenses | | | | | | | (2,593 | ) | | | — | | | | (2,593 | ) |
| | | | | | | | | | | | | | | | |
Net financing costs | | | | | | | (2,263 | ) | | | — | | | | (2,263 | ) |
| | | | | | | | | | | | | | | | |
Loss before tax | | | | | | | (2,039 | ) | | | 154 | | | | (1,885 | ) |
| | | | | | | | | | | | | | | | |
Income tax benefit/(expense) | | | B,D | | | | (806 | ) | | | 2 | | | | (804 | ) |
| | | | | | | | | | | | | | | | |
Loss after tax | | | | | | | (2,845 | ) | | | 156 | | | | (2,689 | ) |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (2,845 | ) | | | 156 | | | | (2,689 | ) |
| | | | | | | | | | | | | | | | |
F-8
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF SIX MONTHS 31 DECEMBER 2005 INCOME STATEMENT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 22,887 | | | | — | | | | 22,887 | |
Hire of containers | | | | | | | 9,774 | | | | — | | | | 9,74 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | | | | | 32,661 | | | | — | | | | 32,661 | |
| | | | | | | | | | | | | | | | |
Other income | | | | | | | 21 | | | | — | | | | 21 | |
Changes in inventories of finished goods and WIP | | | | | | | 507 | | | | — | | | | 507 | |
Purchases of finished goods and consumables used | | | | | | | (21,396 | ) | | | — | | | | (21,396 | ) |
Employee benefits expense | | | C | | | | (4,673 | ) | | | (24 | ) | | | (4,697 | ) |
Depreciation and amortization expense | | | | | | | (1,729 | ) | | | 87 | | | | (1,642 | ) |
Other expenses | | | | | | | (3,824 | ) | | | — | | | | (3,824 | ) |
| | | | | | | | | | | | | | | | |
Results from operating activities | | | | | | | 1,567 | | | | 63 | | | | 1,630 | |
| | | | | | | | | | | | | | | | |
Financial income | | | | | | | 179 | | | | — | | | | 179 | |
Financial expenses | | | | | | | (1,828 | ) | | | — | | | | (1,828 | ) |
| | | | | | | | | | | | | | | | |
Net financing costs | | | | | | | (1,649 | ) | | | — | | | | (1,649 | ) |
| | | | | | | | | | | | | | | | |
Share of profit of associate | | | | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Loss before tax | | | | | | | (82 | ) | | | 63 | | | | (19 | ) |
Income tax benefit/(expense) | | | | | | | (96 | ) | | | (87 | ) | | | (183 | ) |
| | | | | | | | | | | | | | | | |
Loss after tax | | | | | | | (178 | ) | | | (24 | ) | | | (202 | ) |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (178 | ) | | | (24 | ) | | | (202 | ) |
| | | | | | | | | | | | | | | | |
F-9
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 31 DECEMBER 2006 BALANCE SHEET TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Assets |
Cash and cash equivalents | | | | | | | 613 | | | | — | | | | 613 | |
Trade and other receivables | | | | | | | 15,795 | | | | — | | | | 15,795 | |
Inventories | | | D | | | | 8,153 | | | | — | | | | 8,153 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | | | | | 24,561 | | | | — | | | | 24,561 | |
| | | | | | | | | | | | | | | | |
Receivables | | | | | | | 695 | | | | — | | | | 695 | |
Property, plant and equipment | | | D | | | | 3,409 | | | | (16 | ) | | | 3,393 | |
Container hire fleet | | | D | | | | 47,039 | | | | (396 | ) | | | 46,643 | |
Intangible assets | | | A,F | | | | 5,126 | | | | (331 | ) | | | 4,795 | |
| | | | | | | | | | | | | | | | |
Total non-current assets | | | | | | | 56,269 | | | | (743 | ) | | | 55,526 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 80,830 | | | | (743 | ) | | | 80,087 | |
| | | | | | | | | | | | | | | | |
|
Liabilities |
Trade and other payables | | | | | | | 18,922 | | | | — | | | | 18,922 | |
Interest-bearing loans and borrowings | | | | | | | 8,776 | | | | — | | | | 8,776 | |
Employee benefits | | | | | | | 5,276 | | | | — | | | | 5,276 | |
Provisions | | | | | | | 160 | | | | — | | | | 160 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 33,134 | | | | — | | | | 33,134 | |
| | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | | | | | 44,065 | | | | — | | | | 44,065 | |
Deferred tax liabilities | | | D | | | | 1,396 | | | | (246 | ) | | | 1,150 | |
Employee benefits | | | C | | | | 206 | | | | — | | | | 206 | |
Provisions | | | | | | | 13 | | | | — | | | | 13 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 45,680 | | | | (246 | ) | | | 45,434 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 78,814 | | | | (246 | ) | | | 78,568 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 2,016 | | | | (497 | ) | | | 1,519 | |
| | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | |
Issued capital | | | | | | | 4,550 | | | | | | | | 4,550 | |
Accumulated losses | | | A-D,F | | | | (2,866 | ) | | | (165 | ) | | | (3,031 | ) |
Reserves | | | D | | | | 332 | | | | (332 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 2,016 | | | | (497 | ) | | | 1,519 | |
| | | | | | | | | | | | | | | | |
F-10
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 31 DECEMBER 2005 BALANCE SHEET TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | | | | |
| | Note | | | AIFRS | | | Adjustments | | | | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | | | | A$’000 | |
|
Assets |
Cash and cash equivalents | | | | | | | 941 | | | | | | | | — | | | | 941 | |
Trade and other receivables | | | | | | | 8,154 | | | | | | | | — | | | | 8,154 | |
Inventories | | | | | | | 3,517 | | | | | | | | — | | | | 3,517 | |
| | | | | | | | | | | | | | | | | | | | |
Total current assets | | | | | | | 12,612 | | | | | | | | — | | | | 12,612 | |
| | | | | | | | | | | | | | | | | | | | |
Receivables | | | | | | | 1,033 | | | | | | | | — | | | | 1,033 | |
Investments accounted for using the equity method | | | | | | | 493 | | | | | | | | — | | | | 493 | |
Property, plant and equipment | | | | | | | 3,331 | | | | | | | | — | | | | 3,331 | |
Container hire fleet | | | | | | | 31,898 | | | | | | | | — | | | | 31,898 | |
Intangible assets | | | | | | | 4,456 | | | | | | | | — | | | | 4,456 | |
| | | | | | | | | | | | | | | | | | | | |
Total non-current assets | | | | | | | 41,211 | | | | | | | | — | | | | 41,211 | |
| | | | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | 53,823 | | | | | | | | — | | | | 53,823 | |
| | | | | | | | | | | | | | | | | | | | |
|
Liabilities |
Trade and other payables | | | | | | | 6,794 | | | | | | | | — | | | | 6,794 | |
Interest-bearing loans and borrowings | | | | | | | 4,426 | | | | | | | | — | | | | 4,426 | |
Employee benefits | | | | | | | 837 | | | | | | | | — | | | | 837 | |
| | | | | | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 12,057 | | | | | | | | — | | | | 12,057 | |
| | | | | | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | | | | | 36,608 | | | | | | | | — | | | | 36,608 | |
Deferred tax liabilities | | | | | | | 216 | | | | | | | | — | | | | 216 | |
Employee benefits | | | C | | | | 295 | | | | | | | | 134 | | | | 429 | |
Provisions | | | | | | | 8 | | | | | | | | — | | | | 8 | |
| | | | | | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 37,127 | | | | | | | | 134 | | | | 37,261 | |
| | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 49,184 | | | | | | | | 134 | | | | 49,318 | |
| | | | | | | | | | | | | | | | | | | | |
Net assets | | | | | | | 4,639 | | | | | | | | (134 | ) | | | 4,505 | |
| | | | | | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | | | | | |
Issued capital | | | | | | | 4,550 | | | | | | | | — | | | | 4,550 | |
Retained profits | | | C,F | | | | 89 | | | | | | | | (134 | ) | | | (45 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 4,639 | | | | | | | | (134 | ) | | | 4,505 | |
| | | | | | | | | | | | | | | | | | | | |
A. Development expenditure
Under AIFRS, the group capitalises certain development expenditure. U.S. GAAP required such costs to be expensed as incurred.
F-11
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
Under U.S. GAAP research and development costs are expensed as incurred. Under AIFRS, certain development costs are capitalised. This increases other expenses presented in accordance with U.S. GAAP by $27,000 in the six months ended 31 December 2006, and reduces the intangible assets at 31 December 2006 by $331,000.
| |
B. | Tax effect of U.S GAAP adjustments |
This item represents the tax effect of the adjustments in Note A at the Australian corporation tax rate of 30%. This reduces the income tax benefit presented in accordance with U.S. GAAP in the six months ended 31 December 2006 by $9,000, and increases deferred tax assets at 31 December 2006 by $100,000.
C. Share based payments expense
At 31 December 2006 the employee benefit liability has been adjusted to reflect the full entitlement to the employee share option plan which was calculated in accordance with a realization event which occurred on 30 March 2007. As a result there is no difference between AIFRS and US GAAP and as such the previous adjustment was reversed. This has decreased employee benefits expense by $157,000 in the 6 months to December 2006.
In previous periods an adjustment was required to calculate the fair value of the options that had vested prior to 1 January 2005. This had increased employee benefits expense presented in accordance with U.S. GAAP by $24,000 in the 6 months to 31 December 2005 and increased the employee benefit liability for cash settled share based payments by $157,000 at 30 June 2006 ( 31 December 2005 $134,000).
This adjustment has no tax impact.
| |
D. | Step acquisition of Royal Wolf Hi-Tech |
Under AIFRS, in accounting for the step acquisition of a controlling interest in an entity which was formerly treated as an associate and equity accounted, the assets and liabilities acquired are adjusted to fair value at the date control is obtained and the entity is consolidated. This gives rise to an asset revaluation reserve equating to the increase in fair value of net assets held from the original acquisition date to the date control is obtained. Under U.S. GAAP, the accounting for such a step acquisition requires a fair value adjustment for the relevant proportion of the net assets acquired to achieve control (in this case 50%) to be recognized. The resulting adjustment to conform with U.S. GAAP reduces the net assets acquired by $378,000 at 30 March 2006 and reduces the revaluation reserve recorded under AIFRS to nil. At 31 December 2006, net assets are reduced by $265,000, being a reduction in container assets of $396,000, a reduction in plant and equipment of $16,000, a reduction in asset revaluation reserve of $302,000, a reduction of $19,000 in retained earnings and a reduction in deferred tax liability of $146,000.
Net profit for the 6 months ended 31 December 2006 is increased by $17,000, as a result of reduced depreciation of $10,000 a reduction in the taxation charge of $7,000 and reduction in cost of goods sold of $14,000.
| |
E. | Reconciliation of cash flows |
Under AIFRS bank overdrafts are classified as cash and cash equivalents. Under US GAAP bank overdrafts are not classified as cash and cash equivalents for the purposes of statement of cash flows. Movements in bank overdrafts are classified for US GAAP purposes as financing cash flows. For U.S. GAAP purposes, cash balances are $613,000 at 31 December 2006 and $941,000 at 31 December 2005. Under U.S. GAAP financing cash flows are an inflow of $6,138,000 for the six months ending 31 December 2006 and $7,635,000 for the six months ending 31 December 2005. Further, due to the fact that development costs are expensed for U.S. GAAP but capitalized for
F-12
RWA Holdings Pty Limited Unaudited Financial Report
Notes to the consolidated financial statements — (Continued)
AIFRS, an adjustment of $27,000 is made to reduce operating cash inflows to $4,091,000 and increase investing cash outflows to $10,445,000 for the six months ending 31 December 2006.
| |
F. | Utilization of deferred tax assets not recognized in a prior business combination |
Under AIFRS, the recognition of a benefit arising from deferred tax assets and losses not recognized at the time of a business combination requires a credit to income tax expense and associated charge to goodwill amortization. Under USGAAP, the credit recognized is adjusted against goodwill directly.
| |
G. | Share-based payment transactions |
Certain directors and senior officers have been granted options over the ordinary shares of RWA Holdings Pty Limited.
The employee share option plan allows consolidated entity employees to acquire shares of the Company with both the company and employees having the option to settle with a cash equivalent. The fair value of options granted is recognised as an employee expense with a corresponding increase in liabilities. The fair value is initially measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The liability is remeasured at each balance sheet date and at settlement date.
The share based payments expense in the six months ended December 31, 2006 of $4,028,000 represents an adjustment to the liability to recognize the full fair value based on the full vesting of the options as a result of a realizing event on the purchase of approximately 80% of RWA by Bison-GE in March 2007.
F-13
Independent audit report to the members of RWA Holdings Pty Limited
The Board of Directors
RWA Holdings Pty Limited
We have audited the accompanying consolidated balance sheets of RWA Holdings Pty Limited and subsidiaries as of June 30, 2006 and 2005, and December 31, 2004, and the related consolidated income statements, statements of recognized income and expense, and cash flows for the periods then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Australia and the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RWA Holdings Pty Limited and subsidiaries as of June 30, 2006 and 2005, and December 31, 2004, and the results of their operations and their cash flows for the periods then ended, in conformity with Australian equivalents to International Financial Reporting Standards.
Australian equivalents to International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 27 to the consolidated financial statements.
As discussed in Note 1(w), the accompanying consolidated financial statements as of June 30, 2006 and 2005, and December 31, 2004 and for each of the periods in the two and a half year period ended June 30, 2006 have been restated.
/s/ KPMG
Sydney, Australia
October 20, 2006
F-14
RWA Holdings Pty Limited Financial Report
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | | | | 2006
| | | 2005
| | | 2004
| |
| | Note | | | 12 Months | | | 6 Months | | | 12 Months | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 46,097 | | | | 17,534 | | | | 35,463 | |
Hire of containers | | | | | | | 21,290 | | | | 9,339 | | | | 16,756 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | | | | | 67,387 | | | | 26,873 | | | | 52,219 | |
| | | | | | | | | | | | | | | | |
Other income | | | 3 | | | | 35 | | | | 18 | | | | 31 | |
Changes in inventories of finished goods and WIP | | | | | | | (3,475 | ) | | | (1,936 | ) | | | 1,740 | |
Purchases of finished goods and consumables used | | | | | | | (40,243 | ) | | | (14,687 | ) | | | (34,437 | ) |
Employee benefits expense | | | | | | | (10,157 | ) | | | (4,794 | ) | | | (7,525 | ) |
Depreciation and amortisation expense | | | | | | | (4,480 | ) | | | (2,041 | ) | | | (3,943 | ) |
Other expenses | | | 4 | | | | (6,411 | ) | | | (2,820 | ) | | | (4,568 | ) |
| | | | | | | | | | | | | | | | |
Results from operating activities | | | | | | | 2,656 | | | | 613 | | | | 3,517 | |
| | | | | | | | | | | | | | | | |
Financial income | | | 6 | | | | 552 | | | | 429 | | | | 118 | |
Financial expenses | | | 6 | | | | (4,064 | ) | | | (1,457 | ) | | | (3,252 | ) |
| | | | | | | | | | | | | | | | |
Net financing costs | | | | | | | (3,512 | ) | | | (1,028 | ) | | | (3,134 | ) |
| | | | | | | | | | | | | | | | |
Share of profit of associate | | | 11 | | | | — | | | | 172 | | | | 92 | |
| | | | | | | | | | | | | | | | |
Profit/(loss) before tax | | | | | | | (856 | ) | | | (243 | ) | | | 475 | |
Income tax benefit | | | 7 | | | | 525 | | | | 30 | | | | 4 | |
| | | | | | | | | | | | | | | | |
Profit/(loss) after tax | | | | | | | (331 | ) | | | (213 | ) | | | 479 | |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (331 | ) | | | (213 | ) | | | 479 | |
| | | | | | | | | | | | | | | | |
The income statements are to be read in conjunction with the notes of the financial statements
set out on pages F-19 to F-69.
F-15
RWA Holdings Pty Limited Financial Report
For the year ended 30 June 2006
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | | | | 2006
| | | 2005
| | | 2004
| |
| | Note | | | 12 Months | | | 6 Months | | | 12 Months | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Net income/(loss) recognised directly in equity | | | | | | | — | | | | — | | | | — | |
Profit/(loss) for the period | | | | | | | (331 | ) | | | (213 | ) | | | 479 | |
| | | | | | | | | | | | | | | | |
Total recognised income and expense for the period | | | 19 | | | | (331 | ) | | | (213 | ) | | | 479 | |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (331 | ) | | | (213 | ) | | | 479 | |
| | | | | | | | | | | | | | | | |
The statements of recognised income and expense are to be read in conjunction with the notes of the financial statements set out on pages F-19 to F-69.
F-16
RWA Holdings Pty Limited Financial Report
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | Note | | | 30 June 2006 | | | 30 June 2005 | | | 31 December 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
ASSETS |
Cash and cash equivalents | | | 8 | | | | 777 | | | | 695 | | | | 3 | |
Trade and other receivables | | | 9 | | | | 10,206 | | | | 7,876 | | | | 7,024 | |
Inventories | | | 10 | | | | 7,498 | | | | 4,023 | | | | 2,140 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | | | | | 18,481 | | | | 12,594 | | | | 9,167 | |
| | | | | | | | | | | | | | | | |
Receivables | | | 9 | | | | 775 | | | | 839 | | | | 1,194 | |
Investments accounted for using the equity method | | | 11 | | | | — | | | | 427 | | | | 255 | |
Property, plant and equipment | | | 12 | | | | 3,599 | | | | 3,306 | | | | 1,812 | |
Container hire fleet | | | 13 | | | | 38,491 | | | | 25,779 | | | | 22,447 | |
Intangible assets | | | 14 | | | | 5,060 | | | | 4,207 | | | | 4,515 | |
| | | | | | | | | | | | | | | | |
Total non-current assets | | | | | | | 47,925 | | | | 34,558 | | | | 30,223 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 66,406 | | | | 47,152 | | | | 39,390 | |
| | | | | | | | | | | | | | | | |
|
LIABILITIES |
Trade and other payables | | | 15 | | | | 12,509 | | | | 8,228 | | | | 11,530 | |
Interest-bearing loans and borrowings | | | 16 | | | | 8,939 | | | | 2,778 | | | | 1,425 | |
Current tax liability | | | | | | | — | | | | — | | | | 791 | |
Employee benefits | | | 17 | | | | 962 | | | | 801 | | | | 444 | |
Provisions | | | 18 | | | | 300 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 22,710 | | | | 11,807 | | | | 14,190 | |
| | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | 16 | | | | 37,194 | | | | 30,175 | | | | 20,614 | |
Deferred tax liabilities | | | 7 | | | | 824 | | | | 119 | | | | 119 | |
Employee benefits | | | 17 | | | | 567 | | | | 227 | | | | 308 | |
Provisions | | | 18 | | | | 282 | | | | 8 | | | | 8 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 38,867 | | | | 30,529 | | | | 21,049 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 61,577 | | | | 42,336 | | | | 35,239 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 4,829 | | | | 4,816 | | | | 4,151 | |
| | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | |
Issued capital | | | 19 | | | | 4,550 | | | | 4,550 | | | | 3,672 | |
Retained earnings/(accumulated losses) | | | 19 | | | | (65 | ) | | | 266 | | | | 479 | |
Reserves | | | 19 | | | | 344 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 4,829 | | | | 4,816 | | | | 4,151 | |
| | | | | | | | | | | | | | | | |
The balance sheets are to be read in conjunction with the notes of the financial statements
set out on pages F-19 toF-69.
F-17
RWA Holdings Pty Limited Financial Report
For the year ended 30 June 2006
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June 2006
| | | 30 June 2005
| | | 31 December 2004
| |
| | Note | | | 12 Months | | | 6 Months | | | 12 Months | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Cash flows from operating activities | | | | | | | | | | | | | | | | |
Cash receipts from customers | | | | | | | 71,375 | | | | 29,238 | | | | 56,324 | |
Cash paid to suppliers and employees | | | | | | | (54,343 | ) | | | (25,334 | ) | | | (49,584 | ) |
| | | | | | | | | | | | | | | | |
Cash generated from operations | | | | | | | 17,032 | | | | 3,904 | | | | 6,740 | |
Interest paid | | | | | | | (3,041 | ) | | | (1,270 | ) | | | (1,721 | ) |
Income taxes received/(paid) | | | | | | | — | | | | (759 | ) | | | 781 | |
| | | | | | | | | | | | | | | | |
Net cash from operating activities | | | 25 | | | | 13,991 | | | | 1,875 | | | | 5,800 | |
| | | | | | | | | | | | | | | | |
Cash flows from investing activities | | | | | | | | | | | | | | | | |
Proceeds from sale of property, plant and equipment | | | | | | | 70 | | | | 24 | | | | 74 | |
Interest received | | | | | | | 209 | | | | 104 | | | | 118 | |
Acquisition of subsidiary, net of cash acquired | | | 24 | | | | (6,490 | ) | | | — | | | | — | |
Acquisition of property, plant and equipment | | | 12 | | | | (1,119 | ) | | | (1,937 | ) | | | (1,254 | ) |
Acquisition of container hire fleet | | | 13 | | | | (18,073 | ) | | | (7,725 | ) | | | (12,003 | ) |
Acquisition of intangible assets | | | 14 | | | | (496 | ) | | | (25 | ) | | | (70 | ) |
Payment of deferred purchase consideration | | | | | | | — | | | | (3,500 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Net cash from investing activities | | | | | | | (25,899 | ) | | | (13,059 | ) | | | (13,135 | ) |
| | | | | | | | | | | | | | | | |
Cash flows from financing activities | | | | | | | | | | | | | | | | |
Payment of finance lease liabilities | | | | | | | (756 | ) | | | (385 | ) | | | (1,910 | ) |
Proceeds from borrowings | | | | | | | 24,736 | | | | 12,987 | | | | 19,682 | |
Repayment of borrowings | | | | | | | (14,116 | ) | | | (1,071 | ) | | | (12,755 | ) |
Proceeds from calls made on shares | | | | | | | — | | | | 878 | | | | — | |
| | | | | | | | | | | | | | | | |
Net cash from financing activities | | | | | | | 9,864 | | | | 12,409 | | | | 5,017 | |
| | | | | | | | | | | | | | | | |
Net increase / (decrease) in cash and cash equivalents | | | | | | | (2,044 | ) | | | 1,225 | | | | (2,318 | ) |
Cash and cash equivalents at beginning of period | | | | | | | 695 | | | | (530 | ) | | | 1,788 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents at 30 June | | | 8 | | | | (1,349 | ) | | | 695 | | | | (530 | ) |
| | | | | | | | | | | | | | | | |
The statements of cash flows are to be read in conjunction with the notes of the financial statements
set out on pages F-19 to F-69.
F-18
RWA Holdings Pty Limited Financial Report
| |
1. | Significant accounting policies |
RWA Holdings Pty Limited (the ‘company’) is a proprietary company domiciled in Australia.
The consolidated financial report of the company for the financial year ended 30 June 2006 comprise the company and its subsidiaries (together referred to as the ’consolidated entity’) and the consolidated entity’s interest in associates.
The financial report was authorised for issue by the directors on 20 October 2006.
Change in year end
On 20 January 2005 the Australian Securities and Investments Commission (ASIC) issued a Subsection 340(1) Order granting the company and its controlled entity relief from paragraph 323D(2)(b) of the Act and allowing a ‘transitional’ financial year of six months from 1 January 2005 to 30 June 2005, with each financial year thereafter being twelve months long. Consequently, comparative amounts for the income statement, changes in equity, cash flows and related notes are not entirely comparable.
| |
(a) | Statement of compliance |
The financial report has been prepared in accordance with the requirements of Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’). International Financial Reporting Standards (‘IFRSs’) form the basis of AASBs, and for the purpose of this report are called Australian equivalents to IFRS (‘AIFRS’) to distinguish from previous Australian generally accepted accounting principles (“AGAAP”). The financial reports of the consolidated entity also comply with IFRSs and interpretations adopted by the International Accounting Standards Board.
The financial report is presented in Australian dollars.
Issued standards not early adopted
The following standards and amendments were available for early adoption but have not been applied by the consolidated entity in these financial statements:
| | |
| • | AASB 7Financial instruments: Disclosure(August 2005) replacing the presentation requirements of financial instruments in AASB 132. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007; |
|
| • | AASB 2005-9Amendments to Australian Accounting Standards(September 2005) requires that liabilities arising from the issue of financial guarantee contracts are recognised in the balance sheet. AASB 2005-9 is applicable for annual reporting periods beginning on or after 1 January 2006; |
|
| • | AASB 2005-10Amendments to Australian Accounting Standards(September 2005) makes consequential amendments to AASB 132Financial Instruments: Disclosures and Presentation, AASB 101Presentation of Financial Statements, AASB 114Segment Reporting, AASB 117Leases, AASB 139Financial Instruments: Recognition and Measurement, AASB 1First-time Adoption of Australian Equivalents to International Financial Reporting Standards, arising from the release of AASB 7. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007. |
The consolidated entity plans to adopt AASB 7, AASB 2005-9 and AASB 2005-10 in the 2007 financial year.
F-19
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
The initial application of AASB 7 and AASB 2005-10 is not expected to have an impact on the financial results of the consolidated entity as the standard and the amendment are concerned only with disclosures.
The initial application of AASB 2005-9 could have an impact on the financial results of the company and the consolidated entity as the amendment could result in liabilities being recognised for financial guarantee contracts that have been provided by the company and the consolidated entity. However, the quantification of the impact is not known or reasonably estimable in the current financial year as an exercise to quantify the financial impact has not been undertaken by the company and the consolidated entity to date.
The financial report is prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial instruments held for trading, and financial instruments classified asavailable-for-sale.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July 2005 and CO 06/51 effective 31 January 2006) and in accordance with that Class Order, amounts in the financial report and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the consolidated entity.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of Australian Accounting Standards that have a significant effect on the financial report and estimates with a significant risk of material adjustment in the next year are discussed in note 1(v).
The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial report. The accounting policies have been applied consistently by all entities in the consolidated entity.
| |
(c) | Basis of consolidation |
(i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
(ii) Associates
Associates are those entities in which the company has significant influence, but not control, over the financial and operating policies. The consolidated financial statements includes the consolidated entity’s share of the total
F-20
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the consolidated entity’s share of losses exceeds its interest in an associate, the consolidated entity’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the consolidated entity has incurred legal or constructive obligations or made payments on behalf of an associate.
The consolidated entity’s investment in its associate is accounted for under the equity method of accounting in the consolidated financial statements. The financial statements of the associate are used by the consolidated entity to apply the equity method of accounting. The reporting dates of the associate and the consolidated entity are identical and both use consistent accounting policies.
The investment in the associate is carried in the balance sheet at cost plus post-acquisition changes in the consolidated entity’s share of net assets of the associate, less any impairment in value. The income statement reflects the consolidated entity’s share of the results of operations of the associate. Where there has been a change recognised directly in the associate’s equity, the consolidated entity recognises its share of any changes and discloses this, when applicable in the statement of changes in equity.
(iii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.
Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the consolidated entity’s interest in the entity with adjustments made to the ‘Investments accounted for under the equity method’ and ‘Share of profit of associate’ accounts.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the associates and jointly controlled entities or, if not consumed or sold by the associate or jointly controlled entity, when the consolidated entity’s interest in such entities is disposed of.
| |
(d) | Foreign currency transactions |
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.
| |
(e) | Derivative financial instruments |
The consolidated entity may use derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operating, financing and investing activities. In accordance with its treasury policy, the consolidated entity does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.
F-21
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
(f) | Property, plant and equipment |
(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy (l)). The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads, where applicable.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
(ii) Subsequent costs
The consolidated entity recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when the cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.
(iii) Leased assets
Leases under which the substantially all the risks and benefits incidental to ownership of the leased item are assumed by the consolidated entity are classified as finance leases. Other leases are classified as operating leases.
Finance leases
A lease asset and a lease liability equal to the present value of the minimum lease payments, or the fair value of the leased item, whichever is the lower, are capitalised and recorded at the inception of the lease. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Operating leases
Payments made under operating leases are expensed on a straight-line basis over the term of the lease, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased property. Where leases have fixed rate increases, these increases are accrued and amortised over the entire lease period, yielding a constant periodic expense for the entire term of the lease.
(iv) Depreciation
Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment.
The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.
F-22
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
The estimated useful lives in the current and comparative periods are as follows:
| | | | |
| | 2004-2005 | | 2006 |
|
Property, plant and equipment | | | | |
Plant and equipment | | 3 - 10 years | | 3 - 10 years |
Motor vehicles | | 3 - 10 years | | 3 - 10 years |
Furniture and fittings | | 5 - 10 years | | 5 - 10 years |
Container hire fleet | | | | |
Containers for hire | | 10 years (20% residual) | | 10 - 25 years (20% residual) |
Leased containers for hire (used) | | 10 years (20% residual) | | 10 - 25 years (20% residual) |
Leased containers for hire (new) | | 25 years (20% residual) | | 10 - 30 years (20-30% residual) |
The consolidated entity has a container hire fleet primarily consisting of refurbished, modified and manufactured shipping containers that are held long term and leased to customers under short-term operating lease agreements with varying terms. Depreciation is provided using the straight-line method over the units’ estimated useful life, after the date the unit is put in service, and are depreciated down to their estimated residual values. For depreciation rates, estimated useful lives and residual values, see above. In the opinion of management, estimated residual values do not cause carrying values to exceed net realisable value. The consolidated entity continues to evaluate these depreciation policies as more information becomes available from other comparable sources and its own historical experience.
Costs incurred on hire fleet containers subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the consolidated entity in future years, otherwise, expensed as incurred.
Containers in the hire fleet are available for sale, and are transferred to inventory prior to sale. Cost of sales of the hire fleet container is recognised as the depreciated cost at date of disposal.
(i) Goodwill
Business combinations prior to 1 January 2004
Goodwill is included on the basis of its deemed cost, which represents the amount recorded under previous GAAP.
Business combinations since 1 January 2004
All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and not amortised but is tested annually for impairment (see accounting policy (l)). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. Negative goodwill arising on an acquisition is recognised directly in profit or loss.
F-23
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
(ii) Other intangible assets
Other intangible assets that are acquired by the consolidated entity are stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy (l)).
Expenditure on development activities, whereby research findings are assigned to a plan or design for the production of new or substantially improved products and processes is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete the development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate portion of overheads. Other development expenditure is recognised in the income statement as an expense when incurred. Capitalised development expenditure is stated at cost less accumulated amortisation (see below) and impairment losses (see accounting policy l).
Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
(iii) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
(iv) Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use.
The estimated useful lives in the current and comparative periods are as follows:
| | |
• Goodwill | | indefinite |
• Software | | 3 years |
• Development assets | | 5 years or the products expected life cycle, as appropriate |
| |
(i) | Trade and other receivables |
Trade and other receivables are stated at amortised cost less impairment losses (see accounting policy (l)).
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business. Expenses of marketing, selling and distribution to customers, as well as costs of completion are estimated and are deducted from the estimated selling price to establish net realisable value.
Costs are assigned to individual items of stock on the basis of specific identification, and include expenditure incurred in acquiring the inventories and bringing them to their existing condition and location.
| |
(k) | Cash and cash equivalents |
Cash and cash equivalents comprise cash balances and short term deposits. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
F-24
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
The carrying amounts of the consolidated entity’s assets, other than inventories (see accounting policy (j)) and deferred tax assets (see accounting policy (s)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see accounting policy(l(i))).
For goodwill, assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.
(i) Calculation of recoverable amount
The recoverable amount of the consolidated entity’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate compounded at initial recognition of these financial assets). Receivables with a short duration are not discounted.
Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Receivables are individually assessed for impairment.
The recoverable amount of the consolidated entity’s other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
(ii) Reversals of impairment
Impairment losses, other than in respect of goodwill, are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount.
An impairment loss in respect of goodwill is not reversed.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
| |
(m) | Interest bearing borrowings |
Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and
F-25
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.
(i) Defined contribution superannuation funds
Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the income statement as incurred.
(ii) Long-term service benefits
The consolidated entity’s net obligation in respect of long-term service benefits, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the balance sheet date which have maturity dates approximating to the terms of the consolidated entity’s obligations.
(iii) Wages, salaries and annual leave
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees’ services provided to reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax.
(iv) Share-based payment transactions
Certain directors and senior officers have been granted options over the ordinary shares of RWA Holdings Pty Limited. Details of the interests of the directors and top five remunerated officers of the consolidated entity have been disclosed in the Directors’ report.
The employee share option plan allows consolidated entity employees to acquire shares of the Company with both the company and employees having the option to settle with a cash equivalent. The fair value of options granted is recognised as an employee expense with a corresponding increase in liabilities. The fair value is initially measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The liability is remeasured at each balance sheet date and at settlement date.
The fair value of the options granted is measured using a binomial option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest. The volatility of the asset value is based upon the volatility of listed companies with a similar profile to the consolidated entity.
A provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
F-26
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
(p) | Trade and other payables |
Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing and are normally settled within 60 day terms.
Revenue is generally realised or realisable and earned when all of the following criteria have been met:
| | |
| • | persuasive evidence of an arrangement exists; |
|
| • | delivery has occurred; |
|
| • | the seller’s price to the customer is fixed or determinable; and |
|
| • | collectability is reasonable assured. |
Sale and modification of containers
Revenue from the sale and modification of containers is recognised based on invoiced amounts and is recognised in the income statement (net of returns, discounts and allowances) when the significant risks and rewards of ownership have been transferred to the buyer and it can be measured reliably. Risks and rewards are considered passed to the buyer at the time the goods are delivered to or retrieved by the customer. No revenue is recognised if there is significant uncertainty regarding recovery of the consideration due, the amount cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods.
Hire of containers
Revenue from hire of containers is recognised in the period earned and is recorded based on the amount and term prescribed in the lease hire agreement. No revenue is recognised if there is significant uncertainty regarding recovery of the rental payments due.
Unearned revenue arises when transport charges for the return retrieval of a hired container or containers is billed in advance, while the actual retrieval has not yet occurred as the container is still on hire. The amount of unearned revenue at balance date was $565,000 (2005: $489,000, 2004: 470,000), and is included in trade and other payables.
Net financing costs comprise interest payable on borrowings calculated using the effective interest method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognised in the income statement (see accounting policy (e)). Borrowing costs are expensed as incurred and included in net financing costs.
Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity’s right to receive payments is established. The interest expense component of finance lease payments is recognised in the income statement using the effective interest method.
F-27
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
Tax consolidation
The Company and its wholly-owned Australian resident entities have formed a tax consolidated group with effect from 24 December 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is RWA Holdings Pty Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ’separate taxpayer within group’ approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax consolidated group to the extent that it is probable that future taxable profits of the tax consolidated group will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only.
F-28
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity.
The head entity in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.
| |
(t) | Goods and services tax |
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities that are recoverable from, or payable to, the ATO are classified as operating cash flows.
A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
| |
(v) | Accounting estimates and judgments |
Management discussed with the Audit Committee the development, selection and disclosure of the consolidated entity’s critical accounting policies and estimates and the application of these policies and estimates. The estimates and judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Revision of accounting estimates — Container for hire depreciation
The preparation of the financial report requires the making of estimations and assumptions that affect the recognised amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
F-29
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
At the beginning of the financial year, the consolidated entity revised upwards the useful life of containers for hire as outlined in note 1(f)(iv). The financial impact of the revision results in depreciation expense for the current year being $696,023 less than it would have been if the previous useful life estimate had been applied. The effect on net income for the year is an increase of $487,216. The financial impact of the revision in future periods is not disclosed as the effect cannot be reliably estimated at this point in time due to uncertainty over the timing of sale of existing containers and purchase of new containers.
Key sources of estimation uncertainty
Note 1(l) contains information about the assumptions and their risk factors relating to goodwill impairment. In note 20 detailed analysis is given of the foreign exchange exposure of the consolidated entity and risks in relation to foreign exchange movements.
Impairment of goodwill and intangibles with indefinite useful lives
The consolidated entity assesses whether goodwill and intangibles with indefinite useful lives are impaired at least annually in accordance with the accounting policy in note 14. These calculations involve an estimation of the recoverable amount of the cash-generating units to which the goodwill and intangibles with indefinite useful lives are allocated.
| |
(w) | Correction of prior period errors |
Where a material prior period error is discovered in a subsequent financial period such errors are corrected retrospectively by restating the comparative amounts for the prior periods presented in which the error occurred. If the error occurred before the earliest prior period presented, the opening balances of assets, liabilities and equity for the earliest prior period presented are restated.
In the year ended 30 June 2006 an error was identified in the originally issued financial statements for the year ended 30 June 2006 relating to the treatment of deferred tax assets and liabilities at 30 June 2006 and at the date of acquisition of Royal Wolf Trading Australia Limited on 24 December 2003, and the subsequent recognition of the impact of tax base step up elections under AASB112Income Taxeson transition to Australian Equivalents to International Financial Reporting Standards at 1 January 2004. In addition, a trademark with a fair value of $398,000 subsumed within goodwill under previous GAAP has been reflected in the transition balance sheet at 1 January 2004 along with an associated deferred tax liability of $119,000. Accordingly, the opening balances at transition on 1 January 2004 have been amended and the impact of the adjustments reflected in the restated comparative information for the year ended 31 December 2004 and six months ended 30 June 2005 and restated current year information for the year ended 30 June 2006.
The impact of this is to reduce goodwill by $1,003,000, increase trademarks within intangible assets by $398,000 and reduce deferred tax liabilities by $605,000 at 1 January 2004, with no impact on retained earnings.
Australian Accounting Standards require any recognition of the benefit of deferred tax not recognised on a business combination entered into before the transition to AIFRS under the transition rules in AASB1 to be deducted from goodwill by means of a write off through the income statement. The goodwill impairment expense for the year ended 30 June 2006 is therefore increased by $907,000 (period ended 30 June 2005: $127,000; year
F-30
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
ended 31 December 2004: $547,000). The tax benefit in the year ended 30 June 2006 is reduced by $2,046,000 (period ended 30 June 2005: $29,000; year ended 31 December 2004: tax expense reduced by $519,000).
The impact on the balance sheet and income statement at and for the periods ended 30 June 2006, 30 June 2005 and 31 December is illustrated below
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Restated
| |
| | | | | 30 June
| | | | | | 30 June
| |
| | Note | | | 2006 | | | Restatement | | | 2006 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Current assets | | | | | | | 18,481 | | | | — | | | | 18,481 | |
| | | | | | | | | | | | | | | | |
Other non-current assets | | | | | | | 42,865 | | | | — | | | | 42,865 | |
Deferred tax assets | | | | | | | 127 | | | | (127 | ) | | | — | |
Intangible assets | | | | | | | 7,246 | | | | (2,186 | ) | | | 5,060 | |
| | | | | | | | | | | | | | | | |
Total non current assets | | | | | | | 50,238 | | | | (2,313 | ) | | | 47,925 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 68,719 | | | | (2,313 | ) | | | 66,406 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 22,710 | | | | — | | | | 22,710 | |
| | | | | | | | | | | | | | | | |
Deferred tax liability | | | | | | | — | | | | 824 | | | | 824 | |
Other non-current liabilities | | | | | | | 38,043 | | | | — | | | | 38,043 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 38,043 | | | | 824 | | | | 38,867 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 60,753 | | | | 824 | | | | 61,577 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 7,966 | | | | (3,137 | ) | | | 4,829 | |
| | | | | | | | | | | | | | | | |
Total equity | | | | | | | 7,966 | | | | (3,137 | ) | | | 4,829 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Restated
| |
| | | | | 30 June
| | | | | | 30 June
| |
| | Note | | | 2006 | | | Restatement | | | 2006 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Results from operating activities | | | | | | | 3,563 | | | | (907 | ) | | | 2,656 | |
Net financing costs | | | | | | | (3,512 | ) | | | — | | | | (3,512 | ) |
| | | | | | | | | | | | | | | | |
Profit/(loss) before tax | | | | | | | 51 | | | | (907 | ) | | | (856 | ) |
Income tax benefit | | | | | | | 2,571 | | | | (2,046 | ) | | | 525 | |
| | | | | | | | | | | | | | | | |
Profit/(loss) after tax | | | | | | | 2,622 | | | | (2,953 | ) | | | (331 | ) |
| | | | | | | | | | | | | | | | |
F-31
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Restated
| |
| | | | | 30 June
| | | | | | 30 June
| |
| | Note | | | 2005 | | | Restatement | | | 2005 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Current assets | | | | | | | 12,594 | | | | — | | | | 12,594 | |
| | | | | | | | | | | | | | | | |
Other non-current assets | | | | | | | 30,351 | | | | — | | | | 30,351 | |
Deferred tax assets | | | | | | | — | | | | — | | | | — | |
Intangible assets | | | | | | | 5,486 | | | | (1,279 | ) | | | 4,207 | |
| | | | | | | | | | | | | | | | |
Total non current assets | | | | | | | 35,837 | | | | (1,279 | ) | | | 34,558 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 48,431 | | | | (1,279 | ) | | | 47,152 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 11,807 | | | | — | | | | 11,807 | |
| | | | | | | | | | | | | | | | |
Deferred tax liability | | | | | | | 1,214 | | | | (1,095 | ) | | | 119 | |
Other non-current liabilities | | | | | | | 30,410 | | | | — | | | | 30,410 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 31,624 | | | | (1,095 | ) | | | 30,529 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 43,431 | | | | (1,095 | ) | | | 42,336 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 5,000 | | | | (184 | ) | | | 4,816 | |
| | | | | | | | | | | | | | | | |
Total equity | | | | | | | 5,000 | | | | (184 | ) | | | 4,816 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Restated
| |
| | | | | 30 June
| | | | | | 30 June
| |
| | Note | | | 2005 | | | Restatement | | | 2005 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Results from operating activities | | | | | | | 740 | | | | (127 | ) | | | 613 | |
Net financing costs | | | | | | | (1,028 | ) | | | — | | | | (1,028 | ) |
Share of profit of associate | | | | | | | 172 | | | | — | | | | 172 | |
| | | | | | | | | | | | | | | | |
Loss before tax | | | | | | | (116 | ) | | | (127 | ) | | | (243 | ) |
Income tax benefit | | | | | | | 59 | | | | (29 | ) | | | 30 | |
| | | | | | | | | | | | | | | | |
Loss after tax | | | | | | | (57 | ) | | | (156 | ) | | | (213 | ) |
| | | | | | | | | | | | | | | | |
F-32
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Restated
| |
| | | | | 31 December
| | | | | | 31 December
| |
| | Note | | | 2004 | | | Restatement | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Current assets | | | | | | | 9,167 | | | | — | | | | 9,167 | |
| | | | | | | | | | | | | | | | |
Other non-current assets | | | | | | | 25,708 | | | | — | | | | 25,708 | |
Deferred tax assets | | | | | | | 625 | | | | (625 | ) | | | — | |
Intangible assets | | | | | | | 5,667 | | | | (1,152 | ) | | | 4,515 | |
| | | | | | | | | | | | | | | | |
Total non current assets | | | | | | | 32,000 | | | | (1,777 | ) | | | 30,223 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 41,167 | | | | (1,777 | ) | | | 39,390 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 14,190 | | | | — | | | | 14,190 | |
| | | | | | | | | | | | | | | | |
Deferred tax liability | | | | | | | 1,868 | | | | (1,749 | ) | | | 119 | |
Other non-current liabilities | | | | | | | 20,894 | | | | 36 | | | | 20,930 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 22,762 | | | | (1,713 | ) | | | 21,049 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 36,952 | | | | (1,713 | ) | | | 35,239 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 4,215 | | | | (64 | ) | | | 4,151 | |
| | | | | | | | | | | | | | | | |
Total equity | | | | | | | 4,215 | | | | (64 | ) | | | 4,151 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | Restated
| |
| | | | | 31 December
| | | | | | 31 December
| |
| | Note | | | 2004 | | | Restatement | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Results from operating activities | | | | | | | 4,064 | | | | (547 | ) | | | 3,517 | |
Net financing costs | | | | | | | (3,134 | ) | | | | | | | (3,134 | ) |
Share of profit of associate | | | | | | | 92 | | | | — | | | | 92 | |
| | | | | | | | | | | | | | | | |
Profit before tax | | | | | | | 1,022 | | | | (547 | ) | | | 475 | |
Income tax benefit/(expense) | | | | | | | (515 | ) | | | 519 | | | | 4 | |
| | | | | | | | | | | | | | | | |
Profit after tax | | | | | | | 507 | | | | (28 | ) | | | 479 | |
| | | | | | | | | | | | | | | | |
The consolidated entity operates predominantly in one segment, being the sale and leasing of freight containers and container based storage and accommodation products and within one geographical segment, being Australia.
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006
| | | 2005
| | | 2004
| |
| | 12 Months | | | 6 Months | | | 12 Months | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Net gain on disposal of property, plant and equipment | | | 28 | | | | 17 | | | | 28 | |
Bad debts recovered | | | 7 | | | | 1 | | | | 3 | |
| | | | | | | | | | | | |
| | | 35 | | | | 18 | | | | 31 | |
| | | | | | | | | | | | |
F-33
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006
| | | 2005
| | | 2004
| |
| | 12 Months | | | 6 Months | | | 12 Months | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Cost of sales | | | 43,718 | | | | 16,623 | | | | 32,697 | |
| | | | | | | | | | | | |
Other expenses | | | | | | | | | | | | |
Operating lease payments | | | 1,174 | | | | 464 | | | | 793 | |
Sundry occupancy costs | | | 143 | | | | 48 | | | | 77 | |
Business promotion expenses | | | 1,148 | | | | 329 | | | | 495 | |
Travel & accommodation | | | 859 | | | | 416 | | | | 676 | |
IT & telecommunications | | | 559 | | | | 269 | | | | 662 | |
Bad & doubtful debts | | | 234 | | | | 91 | | | | 55 | |
Office supplies | | | 435 | | | | 208 | | | | 321 | |
Inventory write-down | | | 146 | | | | 97 | | | | 34 | |
Other | | | 1,713 | | | | 898 | | | | 1,455 | |
| | | | | | | | | | | | |
| | | 6,411 | | | | 2,820 | | | | 4,568 | |
| | | | | | | | | | | | |
| |
5. | Auditors’ remuneration |
| | | | | | | | | | | | |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006
| | | 2005
| | | 2004
| |
| | 12 Months | | | 6 Months | | | 12 Months | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Audit services | | | | | | | | | | | | |
Auditors of the Company | | | | | | | | | | | | |
KPMG Australia | | | | | | | | | | | | |
Audit and review of financial reports | | | 99 | | | | 95 | | | | 73 | |
| | | | | | | | | | | | |
Other services | | | | | | | | | | | | |
Auditors of the Company | | | | | | | | | | | | |
KPMG Australia | | | | | | | | | | | | |
Other assurance services | | | — | | | | 18 | | | | — | |
Taxation services | | | 20 | | | | — | | | | 35 | |
| | | | | | | | | | | | |
| | | 20 | | | | 18 | | | | 35 | |
| | | | | | | | | | | | |
F-34
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006
| | | 2005
| | | 2004
| |
| | 12 Months | | | 6 Months | | | 12 Months | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Interest income | | | 209 | | | | 104 | | | | 118 | |
Net gain on remeasurement of interest rate swap at fair value through profit or loss | | | 293 | | | | — | | | | — | |
Net foreign exchange gain | | | 50 | | | | 325 | | | | — | |
| | | | | | | | | | | | |
Financial income | | | 552 | | | | 429 | | | | 118 | |
| | | | | | | | | | | | |
Interest expense | | | 4,034 | | | | 1,296 | | | | 2,862 | |
Net foreign exchange loss | | | — | | | | — | | | | 390 | |
Net loss on remeasurement of forward exchange contracts at fair value through profit or loss | | | 30 | | | | — | | | | — | |
Net loss on remeasurement of interest rate swap at fair value through profit or loss | | | — | | | | 161 | | | | — | |
| | | | | | | | | | | | |
Financial expenses | | | 4,064 | | | | 1,457 | | | | 3,252 | |
| | | | | | | | | | | | |
Net financing costs | | | 3,512 | | | | 1,028 | | | | 3,134 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006
| | | 2005
| | | 2004
| |
Recognised in the Income Statement | | 12 Months | | | 6 Months | | | 12 Months | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Current tax benefit | | | | | | | | | | | | |
Current year | | | — | | | | (30 | ) | | | (4 | ) |
Adjustments for prior years | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
| | | — | | | | (30 | ) | | | (4 | ) |
| | | | | | | | | | | | |
Deferred tax expense | | | | | | | | | | | | |
Origination and reversal of temporary differences | | | 382 | | | | 127 | | | | 547 | |
Benefit from utilisation of unrecognised deferred tax assets | | | (907 | ) | | | (127 | ) | | | (547 | ) |
| | | | | | | | | | | | |
| | | (525 | ) | | | — | | | | — | |
| | | | | | | | | | | | |
Total income tax benefit in income statement | | | (525 | ) | | | (30 | ) | | | (4 | ) |
| | | | | | | | | | | | |
Numerical reconciliation between tax expense and pre-tax net profit | | | | | | | | | | | | |
Profit / (loss) before tax | | | (856 | ) | | | (243 | ) | | | 479 | |
Income tax using the domestic corporation tax rate of 30% | | | (256 | ) | | | (73 | ) | | | 144 | |
Increase in income tax expense due to: | | | | | | | | | | | | |
Goodwill write off arising from benefit from deferred tax assets not recognized at date of previous business combinations | | | 272 | | | | 38 | | | | 164 | |
Non-deductible expenses | | | 366 | | | | 132 | | | | 235 | |
Decrease in income tax expense due to: | | | | | | | | | | | | |
Benefit from utilisation of unrecognised deferred tax asset | | | (907 | ) | | | (127 | ) | | | (547 | ) |
| | | | | | | | | | | | |
Income tax benefit on pre-tax net profit | | | (525 | ) | | | (30 | ) | | | (4 | ) |
| | | | | | | | | | | | |
F-35
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Assets | | | Liabilities | | | Net | |
| | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| |
| | 2006 | | | 2005 | | | 2004 | | | 2006 | | | 2005 | | | 2004 | | | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Property, plant and equipment | | | — | | | | — | | | | | | | | (1,997 | ) | | | (572 | ) | | | (321 | ) | | | (1,997 | ) | | | (572 | ) | | | (321 | ) |
Interest bearing loans and borrowings | | | 125 | | | | 48 | | | | — | | | | — | | | | — | | | | — | | | | 125 | | | | 48 | | | | — | |
Employee benefits | | | 368 | | | | 276 | | | | 214 | | | | — | | | | — | | | | — | | | | 368 | | | | 276 | | | | 214 | |
Other items | | | 65 | | | | 270 | | | | 410 | | | | (119 | ) | | | (119 | ) | | | (119 | ) | | | (54 | ) | | | 151 | | | | 291 | |
Tax value of loss carry-forwards | | | 734 | | | | 885 | | | | 731 | | | | — | | | | — | | | | — | | | | 734 | | | | 885 | | | | 731 | |
Deferred tax valuation allowance | | | — | | | | (907 | ) | | | (1,034 | ) | | | — | | | | — | | | | — | | | | — | | | | (907 | ) | | | (1,034 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tax assets / (liabilities) | | | 1,292 | | | | 572 | | | | 321 | | | | (2,116 | ) | | | (691 | ) | | | (440 | ) | | | (824 | ) | | | (119 | ) | | | (119 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following:
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Tax losses | | | — | | | | 885 | | | | 731 | |
Temporary differences | | | — | | | | 22 | | | | 303 | |
| | | | | | | | | | | | |
| | | — | | | | 907 | | | | 1,034 | |
| | | | | | | | | | | | |
Deferred tax assets were not recognised in respect of these tax losses and temporary differences on the basis that it was not probable that the RWA Holdings Pty Limited tax consolidated group would generate sufficient taxable profit for the losses to be utilised and the deferred tax assets would reverse in the same periods as deferred tax liabilities.
| |
8. | Cash and cash equivalents |
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | Note | | | 2006 | | | 2005 | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Bank balances | | | 20 | | | | 777 | | | | 695 | | | | 3 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | 777 | | | | 695 | | | | 3 | |
Bank overdrafts repayable on demand | | | 16 | | | | (2,126 | ) | | | — | | | | (533 | ) |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents in the statement of cash flows | | | | | | | (1,349 | ) | | | 695 | | | | (530 | ) |
| | | | | | | | | | | | | | | | |
F-36
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
9. | Trade and other receivables |
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | Note | | | 2006 | | | 2005 | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Current | | | | | | | | | | | | | | | | |
Trade receivables | | | | | | | 9,298 | | | | 6,637 | | | | 6,136 | |
Less: Impairment losses | | | | | | | (177 | ) | | | (102 | ) | | | (85 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | 9,121 | | | | 6,535 | | | | 6,051 | |
Receivables from related parties | | | | | | | — | | | | 74 | | | | 89 | |
Lease receivable | | | 20 | | | | 335 | | | | 180 | | | | 165 | |
Loan to related entity | | | | | | | — | | | | 260 | | | | — | |
Fair value derivatives | | | | | | | 132 | | | | — | | | | — | |
Other receivables and prepayments | | | | | | | 618 | | | | 827 | | | | 719 | |
| | | | | | | | | | | | | | | | |
| | | | | | | 10,206 | | | | 7,876 | | | | 7,024 | |
| | | | | | | | | | | | | | | | |
Non-current | | | | | | | | | | | | | | | | |
Lease receivable | | | 20 | | | | 775 | | | | 839 | | | | 934 | |
Loan to related entity | | | | | | | — | | | | — | | | | 260 | |
| | | | | | | | | | | | | | | | |
| | | | | | | 775 | | | | 839 | | | | 1,194 | |
| | | | | | | | | | | | | | | | |
The loan to the related entity was non-interest bearing and was repaid on 30 March 2006.
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Finished goods | | | 6,979 | | | | 3,740 | | | | 2,140 | |
Work in progress | | | 519 | | | | 283 | | | | — | |
| | | | | | | | | | | | |
| | | 7,498 | | | | 4,023 | | | | 2,140 | |
| | | | | | | | | | | | |
| |
11. | Investments accounted for using the equity method |
| |
(a) | Investments in associates |
The consolidated entity accounts for investments in associates using the equity method.
The consolidated entity had the following investment in associates:
| | |
Name of associate company: | | Royal Wolf Hi-Tech Pty Limited |
Principal activities: | | Sale, hire and modification of containers |
Reporting date: | | 30 June |
Ownership interest: | | 100% (2005: 50%; 2004: 50%) On 30 March 2006, the remaining 50% in Royal Wolf Hi-Tech Pty Limited was acquired by Royal Wolf Trading Australia Pty Limited — refer to the acquisitions of subsidiaries note 24. |
F-37
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Royal Wolf Hi-Tech Pty Limited did not have any capital or other commitments contracted but not provided for or payable (including operating lease commitments) at 30 June 2005. Royal Wolf Hi-Tech Pty Limited did not have any contingent liabilities at 30 June 2005, 31 December 2004. The following is summarized financial information of Royal Wolf Hi-Tech Pty Limited:
| | | | | | | | |
| | Restated
| | | Restated
| |
| | 30 June
| | | 31 December
| |
| | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | |
|
Revenues (100%) | | | 1,506 | | | | 1,558 | |
Gross profit (100%) | | | 1,342 | | | | 1,092 | |
Pretax profit (100%) | | | 491 | | | | 262 | |
Profit (100%) | | | 344 | | | | 184 | |
Share of associates net profit recognised | | | 172 | | | | 92 | |
Current assets (100%) | | | 492 | | | | 502 | |
Noncurrent assets (100%) | | | 1,180 | | | | 938 | |
| | | | | | | | |
Total assets (100%) | | | 1,672 | | | | 1,440 | |
| | | | | | | | |
Current liabilities (100%) | | | 644 | | | | 852 | |
Noncurrent liabilities (100%) | | | 174 | | | | 78 | |
| | | | | | | | |
Total liabilities (100%) | | | 818 | | | | 930 | |
Net assets as reported by associate (100%) | | | 854 | | | | 510 | |
Share of associate’s net assets equity accounted | | | 427 | | | | 255 | |
Results of associates | | | | | | | | |
Carrying value of investment in associate at beginning of year | | | 255 | | | | 163 | |
Share of associate profit before income tax | | | 246 | | | | 131 | |
Share of income tax expense | | | (74 | ) | | | (39 | ) |
| | | | | | | | |
Carrying value of investment in associate at end of year | | | 427 | | | | 255 | |
| | | | | | | | |
F-38
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
12. | Property, plant and equipment |
| | | | | | | | |
| | | | | Plant and
| |
| | | | | Equipment,
| |
| | | | | Fixtures
| |
| | Note | | | and Fittings | |
| | | | | A$’000 | |
|
Cost | | | | | | | | |
Balance at 1 January 2004 (restated) | | | | | | | 1,151 | |
Acquisitions | | | | | | | 1,254 | |
Disposals | | | | | | | (69 | ) |
| | | | | | | | |
Balance at 31 December 2004 (restated) | | | | | | | 2,336 | |
| | | | | | | | |
Balance at 1 January 2005 (restated) | | | | | | | 2,336 | |
Acquisitions | | | | | | | 1,937 | |
Disposals | | | | | | | (35 | ) |
| | | | | | | | |
Balance at 30 June 2005 (restated) | | | | | | | 4,238 | |
| | | | | | | | |
Balance at 1 July 2005 (restated) | | | | | | | 4,238 | |
Acquisitions | | | | | | | 1,119 | |
Acquisitions through business combinations | | | 24 | | | | 326 | |
Disposals | | | | | | | (107 | ) |
| | | | | | | | |
Balance at 30 June 2006 (restated) | | | | | | | 5,576 | |
| | | | | | | | |
F-39
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | |
| | Plant and
| |
| | Equipment,
| |
| | Fixtures and
| |
| | Fittings | |
| | A$’000 | |
|
Depreciation and impairment losses | | | | |
Balance at 1 January 2004 (restated) | | | — | |
Depreciation charge for the period | | | (557 | ) |
Disposals | | | 33 | |
| | | | |
Balance at 31 December 2004 (restated) | | | (524 | ) |
| | | | |
Balance at 1 January 2005 (restated) | | | (524 | ) |
Depreciation charge for the period | | | (436 | ) |
Disposals | | | 28 | |
| | | | |
Balance at 30 June 2005 (restated) | | | (932 | ) |
| | | | |
Balance at 1 July 2005 (restated) | | | (932 | ) |
Depreciation charge for the period | | | (1,110 | ) |
Disposals | | | 65 | |
| | | | |
Balance at 30 June 2006 (restated) | | | (1,977 | ) |
| | | | |
Carrying amounts | | | | |
At 1 January 2004 (restated) | | | 1,151 | |
| | | | |
At 31 December 2004 (restated) | | | 1,812 | |
| | | | |
At 1 January 2005 (restated) | | | 1,812 | |
| | | | |
At 30 June 2005 (restated) | | | 3,306 | |
| | | | |
At 1 July 2005 (restated) | | | 3,306 | |
| | | | |
At 30 June 2006 (restated) | | | 3,599 | |
| | | | |
F-40
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
13. | Container for hire fleet |
| | | | | | | | |
| | Note | | | A$’000 | |
|
Cost | | | | | | | | |
Balance at 1 January 2004 (restated) | | | | | | | 17,451 | |
Acquisitions | | | | | | | 12,003 | |
Transfers to inventory | | | | | | | (5,448 | ) |
| | | | | | | | |
Balance at 31 December 2004 (restated) | | | | | | | 24,006 | |
| | | | | | | | |
Balance at 1 January 2005 (restated) | | | | | | | 24,006 | |
Acquisitions | | | | | | | 7,725 | |
Transfers to inventory | | | | | | | (3,826 | ) |
| | | | | | | | |
Balance at 30 June 2005 (restated) | | | | | | | 27,905 | |
| | | | | | | | |
Balance at 1 July 2005 (restated) | | | | | | | 27,905 | |
Acquisitions | | | | | | | 18,073 | |
Acquisitions through business combinations | | | 24 | | | | 6,829 | |
Transfers to inventory | | | | | | | (11,337 | ) |
| | | | | | | | |
Balance at 30 June 2006 (restated) | | | | | | | 41,470 | |
| | | | | | | | |
Depreciation and impairment losses | | | | | | | | |
Balance at 1 January 2004 (restated) | | | | | | | — | |
Depreciation charge for the period | | | | | | | (2,408 | ) |
Transfers to inventory | | | | | | | 849 | |
| | | | | | | | |
Balance at 31 December 2004 (restated) | | | | | | | (1,559 | ) |
| | | | | | | | |
Balance at 1 January 2005 (restated) | | | | | | | (1,559 | ) |
Depreciation charge for the period | | | | | | | (1,272 | ) |
Transfers to inventory | | | | | | | 705 | |
| | | | | | | | |
Balance at 30 June 2005 (restated) | | | | | | | (2,126 | ) |
| | | | | | | | |
Balance at 1 July 2005 (restated) | | | | | | | (2,126 | ) |
Depreciation charge for the period | | | | | | | (1,978 | ) |
Transfers to inventory | | | | | | | 1,125 | |
| | | | | | | | |
Balance at 30 June 2006 (restated) | | | | | | | 2,979 | |
| | | | | | | | |
Carrying amounts | | | | | | | | |
At 1 January 2004 (restated) | | | | | | | 17,451 | |
| | | | | | | | |
At 31 December 2004 (restated) | | | | | | | 22,447 | |
| | | | | | | | |
At 1 January 2005 (restated) | | | | | | | 22,447 | |
| | | | | | | | |
At 30 June 2005 (restated) | | | | | | | 25,779 | |
| | | | | | | | |
At 1 July 2005 (restated) | | | | | | | 25,779 | |
| | | | | | | | |
At 30 June 2006 (restated) | | | | | | | 38,491 | |
| | | | | | | | |
F-41
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | Software | | | Goodwill | | | Trademarks | | | Other | | | Total | |
| | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Cost | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2004 (restated) | | | 944 | | | | 581 | | | | 398 | | | | — | | | | 1,923 | |
Acquisitions through business combinations | | | — | | | | 3,500 | | | | — | | | | — | | | | 3,500 | |
Other acquisitions | | | 70 | | | | — | | | | — | | | | — | | | | 70 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2004 (restated) | | | 1,014 | | | | 4,081 | | | | 398 | | | | — | | | | 5,493 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2005 (restated) | | | 1,014 | | | | 4,081 | | | | 398 | | | | — | | | | 5,493 | |
Acquisitions | | | 25 | | | | — | | | | — | | | | — | | | | 25 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at 30 June 2005 (restated) | | | 1,039 | | | | 4,081 | | | | 398 | | | | — | | | | 5,518 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at 1 July 2005 (restated) | | | 1,039 | | | | 4,081 | | | | 398 | | | | — | | | | 5,518 | |
Acquisitions through business combinations | | | — | | | | 1,749 | | | | — | | | | — | | | | 1,749 | |
Other acquisitions | | | 133 | | | | — | | | | — | | | | 363 | | | | 496 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at 30 June 2006 (restated) | | | 1,172 | | | | 5,830 | | | | 398 | | | | 363 | | | | 7,763 | |
| | | | | | | | | | | | | | | | | | | | |
Amortisation and impairment losses | | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2004 (restated) | | | — | | | | — | | | | — | | | | — | | | | — | |
Amortisation for the period | | | (431 | ) | | | — | | | | — | | | | — | | | | (431 | ) |
Write off on utilisation of unrecognised tax assets arising from business combinations prior to transition to AIFRS | | | — | | | | (547 | ) | | | — | | | | — | | | | (547 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance at 31 December 2004 (restated) | | | (431 | ) | | | (547 | ) | | | — | | | | — | | | | (978 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance at 1 January 2005 (restated) | | | (431 | ) | | | (547 | ) | | | — | | | | — | | | | (978 | ) |
Amortisation for the period | | | (206 | ) | | | — | | | | — | | | | — | | | | (206 | ) |
Write off on utilisation of unrecognised tax assets arising from business combinations prior to transition to AIFRS | | | — | | | | (127 | ) | | | — | | | | — | | | | (127 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance at 30 June 2005 (restated) | | | (637 | ) | | | (674 | ) | | | — | | | | — | | | | (1,311 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance at 1 July 2005 (restated) | | | (637 | ) | | | (674 | ) | | | — | | | | — | | | | (1,311 | ) |
Amortisation for the period | | | (464 | ) | | | — | | | | — | | | | (21 | ) | | | (485 | ) |
Write off on utilisation of unrecognised tax assets arising from business combinations prior to transition to AIFRS | | | — | | | | (907 | ) | | | — | | | | — | | | | (907 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance at 30 June 2006 (restated) | | | (1,101 | ) | | | (1,581 | ) | | | — | | | | (21 | ) | | | (2,703 | ) |
| | | | | | | | | | | | | | | | | | | | |
F-42
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | Software | | | Goodwill | | | Trademarks | | | Other | | | Total | |
| | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Carrying amounts | | | | | | | | | | | | | | | | | | | | |
At 1 January 2004 (restated) | | | 944 | | | | 581 | | | | 398 | | | | — | | | | 1,923 | |
| | | | | | | | | | | | | | | | | | | | |
At 31 December 2004 (restated) | | | 583 | | | | 3,534 | | | | 398 | | | | — | | | | 4,515 | |
| | | | | | | | | | | | | | | | | | | | |
1 January 2005 (restated) | | | 583 | | | | 3,534 | | | | 398 | | | | — | | | | 4,515 | |
| | | | | | | | | | | | | | | | | | | | |
30 June 2005 (restated) | | | 402 | | | | 3,407 | | | | 398 | | | | — | | | | 4,207 | |
| | | | | | | | | | | | | | | | | | | | |
1 July 2005 (restated) | | | 402 | | | | 3,407 | | | | 398 | | | | — | | | | 4,207 | |
| | | | | | | | | | | | | | | | | | | | |
30 June 2006 (restated) | | | 71 | | | | 4,249 | | | | 398 | | | | 342 | | | | 5,060 | |
| | | | | | | | | | | | | | | | | | | | |
Goodwill
Goodwill acquired has been allocated to one single cash generating unit, being the consolidated entity. Goodwill is not amortised but tested for impairment annually using the value in use model. Goodwill arose through the purchase of Royal Wolf Trading Australia Pty Limited from Triton Containers International Limited in 2003, and through the purchases of Royal Wolf Hi-Tech Pty Limited, and the business and assets of Cape Containers Pty Limited and Australian Container Network Pty Limited (refer Note 24).
The recoverable amount of the RWA Holdings Pty Limited cash-generating unit is based on value in use calculations. Those calculations use cash flow projections based on actual operating results and the 5 year budget. Cash flows for a further5-year period are extrapolated using a 5% growth rate, which the directors consider appropriate because this is a long-term business. A pre-tax discount rate of 13.7% has been used in discounting the projected cash flows.
Software
Software assets are capitalised at cost. This intangible asset has been assessed as having a finite useful life, and is amortised using the straight-line method over a period of 3 years (refer accounting policy (h)(iv)).
Trademarks
Trademarks are capitalised at cost and have been assessed as having an indefinite useful life and are tested for impairment at each period end.
Other
Other assets are capitalised at cost. This intangible asset has been assessed as having a finite useful life, and is amortised using the straight-line method over a period of 5 years (refer accounting policy (h)(iv)).
F-43
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
15. | Trade and other payables |
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | Note | | | 2006 | | | 2005 | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Trade payables | | | | | | | 10,565 | | | | 5,870 | | | | 4,023 | |
Other payables | | | | | | | 1,349 | | | | 1,708 | | | | 1,611 | |
Unearned revenue | | | | | | | 565 | | | | 489 | | | | 470 | |
Deferred consideration for controlled entity | | | | | | | — | | | | — | | | | 3,500 | |
Fair value derivative | | | 20 | | | | 30 | | | | 161 | | | | — | |
Related party — other payable | | | | | | | — | | | | — | | | | 1,926 | |
| | | | | | | | | | | | | | | | |
| | | | | | | 12,509 | | | | 8,228 | | | | 11,530 | |
| | | | | | | | | | | | | | | | |
| |
16. | Interest bearing loans and borrowings |
This note provides information about the contractual terms of the consolidated entity’s interest bearing loans and borrowings. For more information about the consolidated entity’s exposure to interest rate and foreign currency risk, refer note 20.
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | Note | | | 2006 | | | 2005 | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Current liabilities | | | | | | | | | | | | | | | | |
Bank overdraft | | | 8 | | | | 2,126 | | | | — | | | | 533 | |
Current portion of bank loans | | | | | | | 5,831 | | | | 1,939 | | | | — | |
Other loans | | | | | | | 73 | | | | 20 | | | | 343 | |
Current portion of finance lease liabilities | | | | | | | 909 | | | | 819 | | | | 549 | |
| | | | | | | | | | | | | | | | |
| | | | | | | 8,939 | | | | 2,778 | | | | 1,425 | |
| | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Bank loan | | | | | | | 18,099 | | | | 22,364 | | | | 14,489 | |
Non-convertible notes | | | | | | | 10,898 | | | | — | | | | — | |
B class notes | | | | | | | 6,654 | | | | 5,422 | | | | 4,051 | |
Finance lease liabilities | | | | | | | 1,543 | | | | 2,389 | | | | 2,074 | |
| | | | | | | | | | | | | | | | |
| | | | | | | 37,194 | | | | 30,175 | | | | 20,614 | |
| | | | | | | | | | | | | | | | |
F-44
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Financing facilities
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Bank overdraft | | | 1,020 | | | | 2,000 | | | | 1,000 | |
Invoice financing facility | | | 7,500 | | | | — | | | | — | |
Secured bank loans | | | 42,962 | | | | 29,280 | | | | 30,800 | |
| | | | | | | | | | | | |
| | | 51,482 | | | | 31,280 | | | | 31,800 | |
| | | | | | | | | | | | |
Facilities utilised at reporting date | | | | | | | | | | | | |
Bank overdraft | | | 934 | | | | — | | | | 533 | |
Invoice financing facility | | | 1,192 | | | | — | | | | — | |
Secured bank loans | | | 35,349 | | | | 24,303 | | | | 14,489 | |
| | | | | | | | | | | | |
| | | 37,475 | | | | 24,303 | | | | 15,022 | |
| | | | | | | | | | | | |
Facilities not utilised at reporting date | | | | | | | | | | | | |
Bank overdraft | | | 86 | | | | 2,000 | | | | 467 | |
Invoice financing facility | | | 6,308 | | | | — | | | | — | |
Secured bank loans | | | 7,613 | | | | 4,977 | | | | 16,311 | |
| | | | | | | | | | | | |
| | | 14,007 | | | | 6,977 | | | | 16,778 | |
| | | | | | | | | | | | |
Financing arrangements
Bank overdrafts
The bank overdrafts of the consolidated entity are secured by a floating charge over the consolidated entity’s assets. Interest on bank overdrafts is charged at the prevailing market rates.
Invoice financing facility
The invoice finance facility of the consolidated entity is a facility whereby funds are made available based on a percentage of debtors outstanding net of any disallowed debts. The facility is secured by a floating charge over the debtors ledger. Interest is charged at the bank’s prime rate plus 1.65%.
Bank loans
Bank loans are denominated in Australian dollars. The bank loans amount in current liabilities comprises the portion of the consolidated entity’s bank loan payable within one year. The non-current bank loans are payable on or before 2010 on an equal instalment basis, and are subject to annual review. The loans bear interest at the Australian bank bill reference rate (“BBSW”) plus 1.10% - 1.35% (2005: 1.10%, 2004: 1.35%), payable monthly. Bank loans are secured by lease assets in the container fleet with a written down value of $18,143,000 (2005: $7,994,000, 2004: Nil) and are due and payable over the next five years. In the event of default, the assets revert to the bank.
Finance leases and hire purchase contracts
The consolidated entity’s lease liabilities are secured by the leased assets of $526,000 (2005: $601,000, 2004: 638,000). In the event of default, the assets revert to the lessor.
F-45
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
B class notes
Holders of B Class Notes are entitled to receive cumulative interest of 15% per annum on the issue price of their notes. These notes do not give their holders any voting rights at shareholders’ meetings.
In the event of winding up of the Company, the holders of B Class Notes rank above all shareholders, but not the holders of non-convertible notes and are entitled to the proceeds of liquidation only to the extent of the face value of the notes and any accumulated interest.
Non-convertible notes
Holders of Non-convertible notes are entitled to receive cumulative interest of 15% per annum on the issue price of their notes. These notes do not give their holders any voting rights at shareholders’ meetings.
In the event of winding up of the Company, the holders of non-convertible notes rank above all shareholders and are entitled to the proceeds of liquidation only to the extent of the face value of the notes and any accumulated interest.
Finance lease liabilities
Finance lease liabilities of the consolidated entity are payable as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006
| | | 2005
| | | 2004
| |
| | Restated | | | Restated | | | Restated | |
| | Minimum
| | | | | | | | | Minimum
| | | | | | | | | Minimum
| | | | | | | |
| | Lease
| | | | | | | | | Lease
| | | | | | | | | Lease
| | | | | | | |
| | Payments | | | Interest | | | Principal | | | Payments | | | Interest | | | Principal | | | Payments | | | Interest | | | Principal | |
| | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Less than one year | | | 1,096 | | | | 187 | | | | 909 | | | | 1,081 | | | | 262 | | | | 819 | | | | 770 | | | | 221 | | | | 549 | |
Between one and five years | | | 1,640 | | | | 97 | | | | 1,543 | | | | 2,666 | | | | 277 | | | | 2,389 | | | | 2,342 | | | | 268 | | | | 2,074 | |
More than five years | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2,736 | | | | 284 | | | | 2,452 | | | | 3,747 | | | | 539 | | | | 3,208 | | | | 3,112 | | | | 489 | | | | 2,623 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The consolidated entity has finance leases and hire purchase contracts for various motor vehicles, containers and other assets. These leases have no terms of renewal or purchase options nor escalation clauses.
Under the terms of the Facility Agreement with Australia and New Zealand Banking Group Limited the consolidated entity undertakes to ensure compliance with covenants in relation to various financial ratios including consolidated interest cover; consolidated reworked adjusted gearing; and consolidated debt service cover.
F-46
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Current | | | | | | | | | | | | |
Liability for annual leave | | | 775 | | | | 801 | | | | 444 | |
Liability for long service leave | | | 187 | | | | — | | | | — | |
| | | | | | | | | | | | |
| | | 962 | | | | 801 | | | | 444 | |
| | | | | | | | | | | | |
Non Current | | | | | | | | | | | | |
Liability for long service leave | | | 257 | | | | 119 | | | | 272 | |
Cash settled transactions | | | 310 | | | | 108 | | | | 36 | |
| | | | | | | | | | | | |
| | | 567 | | | | 227 | | | | 308 | |
| | | | | | | | | | | | |
Total employee benefits | | | 1,529 | | | | 1,028 | | | | 752 | |
| | | | | | | | | | | | |
Defined contribution superannuation funds
The consolidated entity makes contributions to a defined contribution superannuation fund. The amount recognised as an expense was $789,000 for the financial year ended 30 June 2006 (2005: $321,000 (6 months), 2004: $613,000 (12 months)).
Share based payments
The consolidated entity has an employee share option plan (ESOP) for the granting of non-transferable options to certain key management personnel and senior employees with more than twelve months’ service at the grant date.
Options issued under the ESOP will vest in accordance with time frames specified individually per director or senior executive. No other conditions are precedent to the options vesting.
Other relevant terms and conditions applicable to the options granted under the ESOP include
| | |
| • | the exercise price for the options is nil for most employees, with one employee having options exercisable at $0.50 per share |
|
| • | the options expire on the expiry date or the termination date of the employee, whichever is the earlier |
|
| • | upon exercise, the nil price and $0.50 options will be settled in the unissued ordinary shares of RWA Holdings Pty Limited |
|
| • | the nil price options can be settled in cash at the option of the company or the holder and are only exercisable on an exercising or realisation event (see below) |
F-47
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
The number and weighted average exercise prices of share options is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Weighted
| | | | | | | | | | | | Weighted
| | | | |
| | Average
| | | | | | Weighted
| | | | | | Average
| | | | |
| | Exercise
| | | Number of
| | | Average
| | | Number of
| | | Exercise
| | | Number of
| |
| | Price
| | | Options
| | | Exercise Price
| | | Options
| | | Price
| | | Options
| |
| | 12 Months
| | | 12 Months
| | | 6 Months
| | | 6 Months
| | | 12 Months
| | | 12 Months
| |
| | 2006 | | | 2006 | | | 2005 | | | 2005 | | | 2004 | | | 2004 | |
|
Outstanding at the beginning of the period | | A$ | 0.08 | | | | 438,582 | | | A$ | 0.08 | | | | 452,982 | | | | N/A | | | | — | |
Granted during the period | | | — | | | | 17,682 | | | | — | | | | — | | | A$ | 0.08 | | | | 452,982 | |
Cancelled during the period | | | — | | | | (17,865 | ) | | | — | | | | — | | | | — | | | | — | |
Exercised during the period | | A$ | 0.50 | | | | (14,400 | ) | | A$ | 0.50 | | | | (14,400 | ) | | | — | | | | — | |
Expired during the period | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding at the end of the period | | A$ | 0.08 | | | | 423,999 | | | A$ | 0.08 | | | | 438,582 | | | A$ | 0.08 | | | | 452,982 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Exercisable at the end of the period | | | — | | | | 212,929 | | | | — | | | | 126,832 | | | | — | | | | 144,697 | |
The outstanding balance at 30 June 2006 is represented by:
| | |
| • | 363,117 options over ordinary shares with an exercise price of nil, exercisable as above until 31 August 2014, or earlier as appropriate |
|
| • | 43,200 options over ordinary shares with an exercise price of $0.50, exercisable as above until 17 May 2009, or earlier as appropriate |
|
| • | 17,682 options over ordinary shares with an exercise price of nil, exercisable as above until 19 Aug 2015, or earlier as appropriate |
The expiry dates for the share options outstanding at 30 June 2006 is between 3 and 9 years (2005: 4 and 9 years).
The nil price options if vested can be converted to ordinary shares in the company in the event of the issuance of a prospectus for the public listing of the company (an “exercising event”) or the sale of the company (a “realisation event”). Both the company and the holder have the option of settling the options in cash based on the issue price or market value of shares in the company.
During the year ended 30 June 2006, 17,682 options (2005: Nil, 2004: 452,982) were granted over ordinary shares.
During year ended 30 June 2006, 14,400 options (2005: 14,400, 2004: Nil) were exercised over ordinary shares already on issue.
During year ended 30 June 2006, 17,865 options (2005: Nil, 2004: Nil) were cancelled over ordinary shares.
The fair value of the options granted is measured using a binomial option pricing method, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest. The volatility of the asset value is based upon the volatility of listed companies with a similar profile to the consolidated entity.
F-48
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Fair value of share options and assumptions:
| | | | | | | | | | | | |
| | Key Mgmt
| | | Key Mgmt
| | | Key Mgmt
| |
| | Personnel
| | | Personnel
| | | Personnel
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
|
Fair value at measurement date | | A$ | 1.086 | | | A$ | 0.695 | | | A$ | 0.575 | |
| | | | | | | | | | | | |
Share value | | A$ | 1.25 | | | A$ | 0.77 | | | A$ | 0.65 | |
Weighted average exercise price | | A$ | 0.08 | | | A$ | 0.08 | | | A$ | 0.08 | |
Expected volatility (based on volatility of similar but listed organisations) | | | 29.7 | % | | | 28.8 | % | | | 28.1 | % |
Option life (based on date options are expected to be exercised) | | | 2.25 yrs | | | | 3.25 years | | | | 3.75 years | |
Risk free rate (based on Australian Government Bonds) | | | 5.79 | % | | | 5.10 | % | | | 5.16 | % |
| | | | | | | | | | | | |
| | Leasehold
| | | | | | | |
| | Makegood
| | | Deferred
| | | | |
| | Costs | | | Consideration | | | Total | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Balance at 1 January 2004 (restated) | | | — | | | | — | | | | — | |
Provisions made during the year | | | 8 | | | | — | | | | 8 | |
| | | | | | | | | | | | |
Balance at 31 December 2004 (restated) | | | 8 | | | | — | | | | 8 | |
| | | | | | | | | | | | |
Balance at 1 January 2005 (restated) | | | 8 | | | | — | | | | 8 | |
Provisions made during the year | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Balance at 30 June 2005 (restated) | | | 8 | | | | — | | | | 8 | |
| | | | | | | | | | | | |
Balance at 1 July 2005 (restated) | | | 8 | | | | — | | | | 8 | |
Provisions made during the year | | | — | | | | 574 | | | | 574 | |
| | | | | | | | | | | | |
Balance at 30 June 2006 (restated) | | | 8 | | | | 574 | | | | 582 | |
| | | | | | | | | | | | |
Balance at 30 June 2006 (restated) | | | | | | | | | | | | |
Current | | | — | | | | 300 | | | | 300 | |
Non-current | | | 8 | | | | 274 | | | | 282 | |
| | | | | | | | | | | | |
| | | 8 | | | | 574 | | | | 582 | |
| | | | | | | | | | | | |
Leasehold makegood costs
An obligation exists to restore a leasehold site after a fit-out at the head office location in Hornsby. The basis for accounting is set out in note (o) of the significant accounting policies.
The expected cost for the restoration is estimated at $10,000, and is expected to occur in 2009. This amount has been discounted using Australian government bond rates with similar maturities (2006: 5.8%, 2005: 5.2%, 2004: 5.2%).
F-49
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Deferred consideration
Deferred purchase consideration consists of consideration relating to the purchase of the business and assets of Australian Container Network Pty Limited.
For further information on the acquisition of Australian Container Network Pty Limited refer note 24.
Reconciliation of movement in capital and reserves attributable to equity holders of the parent
| | | | | | | | | | | | | | | | |
| | | | | Retained
| | | | | | | |
| | | | | Earnings/
| | | Asset
| | | | |
| | Share
| | | Accumulated
| | | Revaluation
| | | Total
| |
| | Capital | | | Losses | | | Reserve | | | Equity | |
| | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Balance at 1 January 2004 (restated) | | | 3,672 | | | | — | | | | — | | | | 3,672 | |
Total recognised income and expense | | | — | | | | 479 | | | | — | | | | 479 | |
| | | | | | | | | | | | | | | | |
Balance at 31 December 2004 (restated) | | | 3,672 | | | | 479 | | | | — | | | | 4,151 | |
| | | | | | | | | | | | | | | | |
Balance at 1 January 2005 (restated) | | | 3,672 | | | | 479 | | | | — | | | | 4,151 | |
Call on issued shares | | | 878 | | | | — | | | | — | | | | 878 | |
Total recognised income and expense | | | — | | | | (213 | ) | | | — | | | | (213 | ) |
| | | | | | | | | | | | | | | | |
Balance at 30 June 2005 (restated) | | | 4,550 | | | | 266 | | | | — | | | | 4,816 | |
| | | | | | | | | | | | | | | | |
Balance at 1 July 2005 (restated) | | | 4,550 | | | | 266 | | | | — | | | | 4,816 | |
Total recognised income and expense | | | — | | | | (331 | ) | | | — | | | | (331 | ) |
Revaluation of assets on acquisition of controlled entity | | | — | | | | — | | | | 344 | | | | 344 | |
| | | | | | | | | | | | | | | | |
Balance at 30 June 2006 (restated) | | | 4,550 | | | | (65 | ) | | | 344 | | | | 4,829 | |
| | | | | | | | | | | | | | | | |
Share capital
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
2,160,000 Ordinary Shares | | | 1,080 | | | | 1,080 | | | | 1,080 | |
4,322,590 A Class Shares | | | 3,470 | | | | 3,470 | | | | 2,592 | |
100 Class C Shares | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
| | | 4,550 | | | | 4,550 | | | | 3,672 | |
| | | | | | | | | | | | |
Movement in A Class Shares paid up value | | | | | | | No. ’000 | | | A$ | ’000 | |
| | | | | | | | | | | | |
At 1 January 2005 | | | | | | | 4,323 | | | | 2,592 | |
During 2005, the consolidated entity took up a call of 20.3 cents per share | | | | | | | — | | | | 878 | |
| | | | | | | | | | | | |
At 30 June 2005 | | | | | | | 4,323 | | | | 3,470 | |
| | | | | | | | | | | | |
F-50
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Terms and conditions
Ordinary Shares
Holders of Ordinary Shares rank pari passu with the A Class Shares in the declaration and payment of dividends and are entitled to one vote per share at shareholders’ meetings.
In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation.
A Class Shares
Holders of A Class Shares rank pari passu with Ordinary shares in the declaration and payment of dividends and are entitled to one vote per share at shareholders’ meetings limited to 50% of the votes to be cast by shareholders.
In the event of winding up of the Company, A Class shareholders rank above ordinary shareholders and are fully entitled to the greater of any proceeds of liquidation and an amount equal to the issue price of the A Class Shares.
C Class Shares
Holders of C Class Shares are not entitled to receive any dividends prior to conversion to ordinary shares. The C Class shares shall not entitle the holder to a vote prior to conversion to ordinary shares. The C Class shares shall not entitle the holder to any proceeds on liquidation prior to conversion to ordinary shares.
The Company’s C Class shares are not transferable and will convert into ordinary shares in the event that all criteria specified in the shareholders’ agreement are satisfied, subject to the B Class Note holders receiving their return. The number of ordinary shares received on conversion of each C Class share is determined by reference to a profit formula.
| |
20. | Financial instruments |
Exposure to credit, interest rate and currency risks arises in the normal course of the consolidated entity’s business. Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates and interest rates.
Credit risk
The consolidated entity trades only with recognised, creditworthy third parties.
It is the consolidated entity’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures.
In addition, receivable balances are monitored on an ongoing basis with the result that the consolidated entity’s exposure to bad debts is not significant.
For transactions that are not denominated in the measurement currency of the relevant operating unit, the consolidated entity does not offer credit terms without the specific approval of the Head of Credit Control.
With respect to credit risk arising from the other financial assets of the consolidated entity, which comprise cash and cash equivalents,available-for-sale financial assets and certain derivative instruments, the consolidated entity’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the
F-51
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
carrying amount of these instruments. As the counter party for derivative instruments is nearly always a bank, the Board has assessed this as a low risk.
There are no significant concentrations of credit risk within the consolidated entity.
Interest rate risk
The consolidated entity’s exposure to market risk for changes in interest rates relates primarily to its long-term debt obligations.
The consolidated entity’s policy is to manage its interest cost using a mix of fixed and variable rate debt.
To manage this mix in a cost-efficient manner, the consolidated entity enters into interest rate swaps, in which the consolidated entity agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge changes in the interest rate of its commercial bill liability. The secured loan and interest rate swap have the same critical terms, including expiry dates. All movements in the fair values of these hedges are taken directly to the income statement.
At 30 June 2006, after taking into account the effect of interest rate swaps, 80.2% (2005: 72.7%, 2004: 97.6%) of the consolidated entity’s borrowings are at a fixed rate of interest.
Effective interest rates and repricing analysis
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Effective
| | | | | | | | | | | | | | | | |
| | | | | Interest
| | | | | | | | | | | | | | | | |
| | | | | Rate
| | | < 1
| | | 1-2
| | | 2-5
| | | >5
| | | | |
30 June 2006 (Restated) | | Note | | | % | | | Year | | | Years | | | Years | | | Years | | | Total | |
| | | | | | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease receivable | | | 9 | | | | 18.1 | % | | | 335 | | | | 380 | | | | 395 | | | | — | | | | 1,110 | |
Finance lease liabilities | | | 16 | | | | 9.0 | % | | | (909 | ) | | | (1,104 | ) | | | (439 | ) | | | — | | | | (2,452 | ) |
Other loans | | | 16 | | | | 4.2 | % | | | (73 | ) | | | — | | | | — | | | | — | | | | (73 | ) |
Non-convertible notes | | | 16 | | | | 15.0 | % | | | — | | | | — | | | | — | | | | (10,898 | ) | | | (10,898 | ) |
B class notes | | | 16 | | | | 15.0 | % | | | — | | | | — | | | | — | | | | (6,654 | ) | | | (6,654 | ) |
Variable rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | 8 | | | | 3.3 | % | | | 777 | | | | — | | | | — | | | | — | | | | 777 | |
Bank loans | | | 16 | | | | BBSW + 1.10 | % | | | (4,396 | ) | | | (1,665 | ) | | | (10,737 | ) | | | — | | | | (16,798 | ) |
Interest rate swap | | | 9 | | | | 6.0 | % | | | 132 | | | | — | | | | — | | | | — | | | | 132 | |
Bank overdrafts | | | 16 | | | | BBSW + 1.65 | % | | | (2,126 | ) | | | — | | | | — | | | | — | | | | (2,126 | ) |
Commercial bills | | | 16 | | | | 6.9 | % | | | (1,367 | ) | | | (1,425 | ) | | | (4,340 | ) | | | — | | | | (7,132 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | (7,627 | ) | | | (3,814 | ) | | | (15,121 | ) | | | (17,552 | ) | | | (44,114 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
F-52
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Effective
| | | | | | | | | | | | | | | | |
| | | | | Interest
| | | | | | | | | | | | | | | | |
| | | | | Rate
| | | < 1
| | | 1-2
| | | 2-5
| | | >5
| | | | |
30 June 2005 (Restated) | | Note | | | % | | | Year | | | Years | | | Years | | | Years | | | Total | |
| | | | | | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease receivable | | | 9 | | | | 18.1 | % | | | 180 | | | | 216 | | | | 623 | | | | — | | | | 1,019 | |
Finance lease liabilities | | | 16 | | | | 9.2 | % | | | (819 | ) | | | (893 | ) | | | (1,496 | ) | | | — | | | | (3,208 | ) |
Other loans | | | 16 | | | | 3.8 | % | | | (20 | ) | | | — | | | | — | | | | — | | | | (20 | ) |
B class notes | | | 16 | | | | 15.0 | % | | | — | | | | — | | | | — | | | | (5,422 | ) | | | (5,422 | ) |
Variable rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | 8 | | | | 3.5 | % | | | 695 | | | | — | | | | — | | | | — | | | | 695 | |
Bank loans | | | 16 | | | | BBSW + 1.10 | % | | | (859 | ) | | | (869 | ) | | | (7,336 | ) | | | — | | | | (9,064 | ) |
Commercial bills | | | 16 | | | | 5.7 | % | | | (1,080 | ) | | | (3,980 | ) | | | (10,179 | ) | | | — | | | | (15,239 | ) |
Interest rate swap | | | 15 | | | | 5.9 | % | | | (161 | ) | | | — | | | | — | | | | — | | | | (161 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | (2,064 | ) | | | (5,526 | ) | | | (18,388 | ) | | | (5,422 | ) | | | (31,400 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Effective
| | | | | | | | | | | | | | | | |
| | | | | Interest
| | | | | | | | | | | | | | | | |
| | | | | Rate
| | | <1
| | | 1-2
| | | 2-5
| | | >5
| | | | |
31 December 2004 (Restated) | | Note | | | % | | | Year | | | Years | | | Years | | | Years | | | Total | |
| | | | | | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lease receivable | | | 9 | | | | 18.1 | % | | | 165 | | | | 197 | | | | 737 | | | | — | | | | 1,099 | |
Finance lease liabilities | | | 16 | | | | 9.2 | % | | | (549 | ) | | | (677 | ) | | | (1,397 | ) | | | — | | | | (2,623 | ) |
Other loans | | | 16 | | | | 3.8 | % | | | (343 | ) | | | — | | | | — | | | | — | | | | (343 | ) |
B class notes | | | 16 | | | | 15.0 | % | | | — | | | | — | | | | — | | | | (4,051 | ) | | | (4,051 | ) |
Variable rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalent | | | 8 | | | | 3.51 | % | | | 3 | | | | — | | | | — | | | | — | | | | 3 | |
Bank overdraft | | | 8 | | | | ANZ Ref Rate — 1.0 | % | | | (533 | ) | | | — | | | | — | | | | — | | | | (533 | ) |
Commercial bills | | | 16 | | | | 5.7 | % | | | — | | | | (3,479 | ) | | | (11,010 | ) | | | — | | | | (14,489 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | (1,257 | ) | | | (3,959 | ) | | | (11,670 | ) | | | (4,051 | ) | | | (20,937 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency risk
The consolidated entity has transactional currency exposures. Such exposure arises from sales or purchases in currencies other than the unit’s measurement currency. The currency giving rise to this risk is primarily U.S. Dollars.
The consolidated entity has a bank account denominated in US Dollars, into which customers pay their debts. This is a natural hedge against fluctuations in the exchange rate. The funds are then used to pay suppliers, avoiding the need to convert to Australian dollars.
The consolidated entity uses forward currency contracts and options to eliminate the currency exposures on the majority of its transactions denominated in foreign currencies, either by transaction if the amount is significant, or
F-53
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
on a general cash flow hedge basis. The forward currency contracts and options are always in the same currency as the hedged item.
It is the consolidated entity’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness. At 30 June 2006, the consolidated entity had hedged 100% of its foreign currency purchases for which firm commitments existed at the balance sheet date, extending to November 2006.
Forecasted transactions
The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair value. The net fair value of forward exchange contracts used as hedges of forecasted transactions at 30 June 2006 was nil (2005: nil, 2004: nil). The Company does not have any forward exchange contracts hedging forecasted transactions.
Recognised assets and liabilities
Changes in the fair value of forward exchange contracts that economically hedge monetary assets and liabilities in foreign currencies and for which no hedge accounting is applied are recognised in the income statement. Both the changes in fair value of the forward contracts and the foreign exchange gains and losses relating to the monetary items are recognised as part of ’net financing costs’ (see note 6). The fair value of forward exchange contracts used as economic hedges of monetary assets and liabilities in foreign currencies at 30 June 2006 was $30,493 (2005: nil) for the consolidated entity recognised in fair value derivatives.
Sensitivity analysis
In managing interest rate and currency risks the consolidated entity aims to reduce the impact of short-term fluctuations on the consolidated entity’s earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings.
At 30 June 2006, it is estimated that a general increase of one percentage point in interest rates would decrease the consolidated entity’s profit before tax by approximately $93,000 (2005: $12,000, 2004: $5,000). Interest rate swaps have been included in this calculation.
It is estimated that a general increase of one percentage point in the value of the AUD against other foreign currencies would have decreased the consolidated entity’s profit before tax by approximately $307,000 for the year ended 30 June 2006 (2005: $122,000, 2004: $113,000), based on the actual transactions incurred in U.S. Dollars. The forward exchange contracts have been included in this calculation.
F-54
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Fair values
The fair values together with the carrying amounts shown in the balance sheet are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Carrying
| | | | | | Carrying
| | | | | | Carrying
| | | | |
| | | | | Amount
| | | Fair Value
| | | Amount
| | | Fair Value
| | | Amount
| | | Fair Value
| |
| | | | | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 30 June
| | | 30 June
| | | 31 December
| | | 31 December
| |
| | Note | | | 2006 | | | 2006 | | | 2005 | | | 2005 | | | 2004 | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Cash and cash equivalents | | | 8 | | | | 777 | | | | 777 | | | | 695 | | | | 695 | | | | 3 | | | | 3 | |
Trade and other receivables | | | 9 | | | | 9,739 | | | | 9,739 | | | | 7,362 | | | | 7,362 | | | | 6,770 | | | | 6,770 | |
Receivable from related party | | | 9 | | | | — | | | | — | | | | 74 | | | | 74 | | | | 89 | | | | 89 | |
Lease receivable | | | 9 | | | | 1,110 | | | | 1,110 | | | | 1,019 | | | | 1,019 | | | | 1,099 | | | | 1,099 | |
Loan to related entity | | | 9 | | | | — | | | | — | | | | 260 | | | | 260 | | | | 260 | | | | 260 | |
Interest rate swap | | | 9 | | | | 132 | | | | 132 | | | | (161 | ) | | | (161 | ) | | | — | | | | — | |
Bank overdraft | | | 16 | | | | (2,126 | ) | | | (2,126 | ) | | | — | | | | — | | | | (533 | ) | | | (533 | ) |
Trade and other payables | | | 15 | | | | (12,479 | ) | | | (12,479 | ) | | | (8,067 | ) | | | (8,067 | ) | | | (11,530 | ) | | | (11,530 | ) |
Other loan | | | 16 | | | | (73 | ) | | | (73 | ) | | | (20 | ) | | | (20 | ) | | | (343 | ) | | | (343 | ) |
Finance lease liabilities | | | 16 | | | | (2,452 | ) | | | (2,452 | ) | | | (3,208 | ) | | | (3,208 | ) | | | (2,623 | ) | | | (2,623 | ) |
Bank loans | | | 16 | | | | (18,838 | ) | | | (18,838 | ) | | | (9,064 | ) | | | (9,064 | ) | | | — | | | | — | |
Commercial bills | | | 16 | | | | (5,092 | ) | | | (5,092 | ) | | | (15,239 | ) | | | (15,239 | ) | | | (14,489 | ) | | | (14,489 | ) |
Forward exchange contracts | | | 15 | | | | (30 | ) | | | (30 | ) | | | — | | | | — | | | | — | | | | — | |
Non-convertible notes | | | 16 | | | | (10,898 | ) | | | (10,898 | ) | | | — | | | | — | | | | — | | | | — | |
B class notes | | | 16 | | | | (6,654 | ) | | | (6,654 | ) | | | (5,422 | ) | | | (5,422 | ) | | | (4,051 | ) | | | (4,051 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | (46,884 | ) | | | (46,884 | ) | | | (31,771 | ) | | | (31,771 | ) | | | (25,348 | ) | | | (25,348 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.
Derivatives
Forward exchange contracts and options are marked to market by discounting the contractual forward price and deducting the current spot rate. For interest rate swaps broker quotes are used. Those quotes are back tested using pricing models or discounted cash flow techniques.
Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date. Where other pricing models are used, inputs are based on market related data at the balance sheet date.
F-55
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows.
Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at interest rates implicit in the relevant lease agreements. These implicit interest rates are in line with current market rates.
Trade and other receivables/payables
For receivables / payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables / payables are discounted to determine the fair value.
Interest rates used for determining fair value
The entity uses the government yield curve as of 30 June 2006 plus an adequate constant credit spread to discount financial instruments. The interest rates used are as follows:
| | | | | | |
| | 30 June
| | 30 June
| | 31 December
|
| | 2006 | | 2005 | | 2004 |
|
Derivatives | | 6.0% | | 6.0% | | N/A |
Loans and borrowings | | 4.2% - 15.0% | | 3.8% - 15.0% | | 3.8% - 15.0% |
Leases | | 9.0% | | 9.2% | | 9.2% |
Receivables | | 18.1% | | 18.1% | | 18.1% |
Leases as lessee
The consolidated entity leases various office equipment and other facilities under operating leases. The leases have an average period of between one and four years, some with an option to renew the lease after that period. None of the leases includes contingent rentals. There are no restrictions placed upon the lessee by entering into these leases.
During the financial year ended 30 June 2006, $1,174,000 was recognised as an expense in the income statement in respect of operating leases (2005 (restated): $464,000, 2004 (restated): $793,000)
Non-cancellable operating lease rentals are payable as follows:
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Less than one year | | | 2,602 | | | | 2,323 | | | | 2,549 | |
Between one and five years | | | 2,576 | | | | 1,725 | | | | 2,004 | |
More than five years | | | 452 | | | | — | | | | — | |
| | | | | | | | | | | | |
| | | 5,630 | | | | 4,048 | | | | 4,553 | |
| | | | | | | | | | | | |
F-56
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Leases as lessor
The consolidated entity leases containers on a daily basis in the ordinary course of business. These leases can vary in length from a minimum hire period of 30 days to up to five years and longer.
These non-cancellable operating leases have maturities of between 1 and 2 years. All leases include a clause to enable upward revision of the rental charge.
The consolidated entity has no other lessor relationships apart from those relating the rental of containers.
The future minimum lease payments under non-cancellable leases are as follows:
| | | | | | | | | | | | |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006 | | | 2005 | | | 2004 | |
| | A$’000 | | | A$’000 | | | A$’000 | |
|
Less than one year | | | 493 | | | | 165 | | | | 52 | |
Between one and five years | | | 917 | | | | 1 | | | | — | |
More than five years | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
| | | 1,410 | | | | 166 | | | | 52 | |
| | | | | | | | | | | | |
During the financial year ended 30 June 2006, $21,290,000 was recognised as income from the hire of containers in the income statement in respect of operating leases (2005: $9,339,000, 2004: $16,756,000).
| |
22. | Capital and other commitments |
There were no other commitments or contingencies of the consolidated entity for capital or otherwise not already disclosed elsewhere in the financial statements.
| |
23. | Consolidated entities |
| | | | | | | | | | | | | | | | |
| | | | | County of
| | | Ownership Interest | |
Subsidiaries | | Note | | | Incorporation | | | 2006 | | | 2004 - 2005 | |
|
Royal Wolf Trading Australia Pty Limited | | | | | | | Australia | | | | 100 | % | | | 100 | % |
Royal Wolf Hi-Tech Pty Limited | | | 24 | | | | Australia | | | | 100 | % | | | 50 | % |
RWA Holdings Pty Limited is the ultimate Australian parent entity and ultimate parent entity of the consolidated entity.
| |
24. | Acquisitions of subsidiaries |
During the year the consolidated entity acquired the following businesses:
| | |
| • | Royal Wolf Hi-Tech Pty Limited |
|
| • | Australian Container Network Pty Ltd |
|
| • | Cape Containers Pty Limited |
On 30 March 2006, the consolidated entity acquired the remaining 50% of the shares in Royal Wolf Hi-Tech Pty Limited which it did not already own for $839,000 satisfied in cash. The company sells, hires and modifies containers. In the three months to 30 June 2006 the subsidiary contributed net loss of $26,000 to the consolidated net profit for the year. If the acquisition had occurred on 1 July 2005, consolidated entity revenue would have been $69,563,000 (unaudited) and net loss would have been $409,000 (unaudited). The consolidated entity previously
F-57
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
acquired the initial 50% shares in Royal Wolf Hi-Tech Pty Limited. Goodwill of $132,000 has been recognised in respect of this initial acquisition.
On 16 December 2005, the consolidated entity acquired the business and assets of Cape Containers Pty Limited for $820,000 satisfied in cash. The company sells, and hires shipping containers. In the six months to 30 June 2006 the subsidiary contributed net profit of $92,000 to the consolidated net profit for the year. If the acquisition had occurred on 1 July 2005, consolidated entity revenue would have been $67,962,000 (unaudited) and net loss would have been $264,000 (unaudited).
On 28 April 2006, the consolidated entity acquired the business and assets of Australian Container Network Pty Ltd for $5.5 million, of which $4.9 million was satisfied in cash. The consolidated entity has recognised a provision for the $0.6 million deferred consideration extending to August 2007. The company sells and hires containers. In the two months to 30 June 2006 the subsidiary contributed net profit of $67,000 to the consolidated net profit for the year. If the acquisition had occurred on 1 July 2005, consolidated entity revenue would have been $71,222,000 (unaudited) and net profit would have been $4,000 (unaudited).
The acquisitions had the following effect on the consolidated entity’s assets and liabilities.
Acquiree’s net assets at the acquisition date
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Royal Wolf Hi-Tech | | | Australian Container Network | | | Cape Containers | |
| | | | | | | | Fair
| | | | | | | | | Fair
| | | | | | | | | Fair
| | | | |
| | | | | Recog-
| | | Value
| | | | | | Recog-
| | | Value
| | | | | | Recog-
| | | value
| | | | |
| | | | | nised
| | | Adjust-
| | | Carrying
| | | nised
| | | Adjust-
| | | Carrying
| | | nised
| | | Adjust-
| | | Carrying
| |
| | Note | | | Values | | | ments | | | Amounts | | | Values | | | ments | | | Amounts | | | Values | | | ments | | | Amounts | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Property, plant and equipment | | | | | | | 129 | | | | 31 | | | | 98 | | | | 195 | | | | 23 | | | | 172 | | | | 2 | | | | — | | | | 2 | |
Container hire fleet | | | | | | | 1,768 | | | | 742 | | | | 1,026 | | | | 4,416 | | | | 2,707 | | | | 1,709 | | | | 645 | | | | 169 | | | | 476 | |
Inventories | | | | | | | 105 | | | | 31 | | | | 74 | | | | 555 | | | | 169 | | | | 386 | | | | — | | | | — | | | | — | |
Trade and other receivables | | | | | | | 232 | | | | — | | | | 232 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Cash and cash equivalents | | | | | | | 100 | | | | — | | | | 100 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest-bearing loans and borrowings | | | | | | | (501 | ) | | | — | | | | (501 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Deferred tax liability | | | | | | | (241 | ) | | | (241 | ) | | | — | | | | (870 | ) | | | (870 | ) | | | — | | | | (51 | ) | | | (51 | ) | | | — | |
Trade and other payables | | | | | | | (243 | ) | | | — | | | | (243 | ) | | | — | | | | — | | | | — | | | | (18 | ) | | | — | | | | (18 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net identifiable assets and liabilities | | | | | | | 1,349 | | | | 563 | | | | 786 | | | | 4,296 | | | | 2,029 | | | | 2,267 | | | | 578 | | | | 118 | | | | 460 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Goodwill on acquisitions | | | 14 | | | | 298 | | | | | | | | | | | | 1,209 | | | | | | | | | | | | 242 | | | | | | | | | |
Consideration paid, satisfied in cash* | | | | | | | 839 | | | | | | | | | | | | 4,931 | | | | | | | | | | | | 820 | | | | | | | | | |
Deferred consideration accrued | | | | | | | — | | | | | | | | | | | | 574 | | | | | | | | | | | | — | | | | | | | | | |
Cash (acquired) | | | | | | | (100 | ) | | | | | | | | | | | — | | | | | | | | | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net cash outflow | | | | | | | 739 | | | | | | | | | | | | 4,931 | | | | | | | | | | | | 820 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
* | | Includes legal fees amounting to $105,000 |
F-58
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Goodwill has arisen on the acquisitions because of customer relationships that did not meet the criteria for recognition as an intangible asset at the date of acquisition.
| |
25. | Reconciliation of cash flows from operating activities |
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | Restated
| | | Restated
| |
| | | | | 30 June
| | | 30 June
| | | 31 December
| |
| | | | | 2006
| | | 2005
| | | 2004
| |
| | Note | | | 12 Months | | | 6 Months | | | 12 Months | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Cash flows from operating activities | | | | | | | | | | | | | | | | |
Profit/(loss) for the period | | | | | | | (331 | ) | | | (213 | ) | | | 479 | |
Adjustments for: | | | | | | | | | | | | | | | | |
Gain on sale of property, plant and equipment | | | | | | | (28 | ) | | | (17 | ) | | | (28 | ) |
Foreign exchange (gain) / loss | | | | | | | (50 | ) | | | (325 | ) | | | 390 | |
Unrealised loss on forward exchange contracts | | | | | | | 30 | | | | — | | | | — | |
Unrealised gain on interest rate swap | | | | | | | (293 | ) | | | — | | | | — | |
Depreciation and amortisation | | | | | | | 4,480 | | | | 2,041 | | | | 3,943 | |
Share of associates net profit | | | | | | | — | | | | (172 | ) | | | (92 | ) |
Investment income | | | | | | | (209 | ) | | | (104 | ) | | | (118 | ) |
Interest expense | | | | | | | 4,034 | | | | 1,457 | | | | 3,252 | |
Income tax (benefit) / expense | | | | | | | (525 | ) | | | (30 | ) | | | (4 | ) |
Cash settled share based payment expenses | | | | | | | 203 | | | | 72 | | | | 36 | |
| | | | | | | | | | | | | | | | |
Operating profit before changes in working capital and provisions | | | | | | | 7,311 | | | | 2,709 | | | | 7,858 | |
(Increase) / decrease in trade and other receivables | | | | | | | (2,377 | ) | | | (592 | ) | | | (1,325 | ) |
(Increase) / decrease in inventories | | | | | | | 6,611 | | | | (452 | ) | | | 3,910 | |
Increase / (decrease) in trade and other payables | | | | | | | 4,412 | | | | 1,963 | | | | (3,747 | ) |
Increase / (decrease) in provisions and employee benefits | | | | | | | 1,075 | | | | 276 | | | | 44 | |
| | | | | | | | | | | | | | | | |
| | | | | | | 17,032 | | | | 3,904 | | | | 6,740 | |
Interest (paid)/received | | | | | | | (3,041 | ) | | | (1,270 | ) | | | (1,721 | ) |
Income taxes paid | | | | | | | — | | | | (759 | ) | | | 781 | |
| | | | | | | | | | | | | | | | |
Net cash from operating activities | | | | | | | 13,991 | | | | 1,875 | | | | 5,800 | |
| | | | | | | | | | | | | | | | |
Transactions with key management personnel
No director has entered into a material contract with the Company or the consolidated entity and there were no material contracts involving directors’ interests.
In addition to their salaries, the consolidated entity also provides non-cash benefits to key management personnel. Executive directors also participate in the consolidated entity’s share option plan (refer Note 17).
F-59
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
Key management personnel compensation
The key management personnel compensations included in “employee benefits expense” in the income statements are as follows:
| | | | | | | | | | | | |
| | Restated
| | | Restated
| | | Restated
| |
| | 30 June
| | | 30 June
| | | 31 December
| |
| | 2006
| | | 2005
| | | 2004
| |
| | 12 Months | | | 6 Months | | | 12 Months | |
| | A$ | | | A$ | | | A$ | |
|
Short-term employee benefits | | | 1,613,765 | | | | 932,509 | | | | 1,342,148 | |
Other long term benefits | | | — | | | | — | | | | — | |
Post-employment benefits | | | 175,040 | | | | 98,820 | | | | 148,107 | |
Termination benefits | | | — | | | | — | | | | — | |
Share based payment | | | 92,675 | | | | 31,243 | | | | 17,643 | |
| | | | | | | | | | | | |
| | | 1,881,480 | | | | 1,062,572 | | | | 1,507,898 | |
| | | | | | | | | | | | |
Non-key management personnel disclosures
Identity of related parties
The Consolidated entity has a related party relationship with its associates (see note 11), and with its key management personnel.
Associates
During the financial year ended 30 June 2005, associates purchased goods from the consolidated entity in the amount of $549,852 and sold goods to the consolidated entity in the amount of $4,576 and at 30 June 2005 associates owed the consolidated entity $334,021. Transactions with associates are priced on an arm’s length basis. During the financial year ended 30 June 2006, the consolidated entity repaid a loan of $260,000 received from one of its associates. No dividends were received from associates in the 2006 or 2005 financial year.
Other related parties
Key management personnel related parties
A number of key management persons of the Company, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities.
A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of the transactions with the other related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.
The aggregate amounts recognised during the year relating to other related parties were as follows:
| | | | | | | | | | | | | | | | | | |
Key Management Person
| | | | | | | 30 June
| | | 30 June
| | | 31 December
| |
Related Party | | Transaction | | Note | | | 2006 | | | 2005 | | | 2004 | |
| | | | | | | A$ | | | A$ | | | A$ | |
|
RW Logistic Pty Limited | | Sales revenue | | | (i | ) | | | — | | | | 45,191 | | | | 3,195,014 | |
RW Logistic Pty Limited | | Inventory purchases | | | (i | ) | | | — | | | | 2,142,536 | | | | 1,311,593 | |
| | |
(i) | | While the Company itself has no interest in RW Logistic Pty Limited, this entity is related through common shareholders and directorships |
F-60
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
27. | Reconciliation to U.S. GAAP |
The Group’s consolidated financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRSs) for the periods ended 30 June 2006, 30 June 2005 and 31 December 2004, which, as applied by the Group, differ in certain material respects from accounting standards generally accepted in the United States of America (U.S. GAAP). The effects of the application of U.S. GAAP to net profit and shareholders’ equity are set out in the tables below:
RECONCILIATION OF NET PROFIT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | 30 June
| | | 30 June
| | | 31 Dec
| |
| | | | | 2006
| | | 2005
| | | 2004
| |
| | Note | | | 12 Months | | | 6 Months | | | 12 Month | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Net profit / (loss) after tax as reported in the audited financial statements under AIFRS (restated) | | | | | | | (331 | ) | | | (213 | ) | | | 479 | |
Write-off of development costs | | | 1 | | | | (304 | ) | | | — | | | | — | |
Share based payment expense | | | 3 | | | | (47 | ) | | | (16 | ) | | | (94 | ) |
Step-up on acquisition | | | 4 | | | | 19 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net loss according to US GAAP before tax impact of adjustments | | | | | | | (663 | ) | | | (229 | ) | | | 385 | |
Tax effect on US GAAP adjustment | | | 2 | | | | 91 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net income/(loss) under US GAAP | | | | | | | (572 | ) | | | (229 | ) | | | 385 | |
| | | | | | | | | | | | | | | | |
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | 30 June
| | | 30 June
| | | 31 Dec
| |
| | Note | | | 2006 | | | 2005 | | | 2004 | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Total equity under AIFRS (restated) | | | | | | | 4,829 | | | | 4,816 | | | | 4,151 | |
Writeoff of development costs | | | 1 | | | | (304 | ) | | | — | | | | — | |
Tax effect on US GAAP adjustment | | | 2 | | | | 91 | | | | — | | | | — | |
Share based payments expense | | | 3 | | | | (157 | ) | | | (110 | ) | | | (94 | ) |
Step-up on acquisition | | | 4 | | | | (325 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Shareholders’ equity under U.S. GAAP | | | | | | | 4,134 | | | | 4,706 | | | | 4,057 | |
| | | | | | | | | | | | | | | | |
F-61
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 30 JUNE 2006 INCOME STATEMENT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 46,097 | | | | — | | | | 46,097 | |
Hire of containers | | | | | | | 21,290 | | | | — | | | | 21,290 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | | | | | 67,387 | | | | — | | | | 67,387 | |
| | | | | | | | | | | | | | | | |
Other income | | | | | | | 35 | | | | — | | | | 35 | |
Changes in inventories of finished goods and WIP | | | | | | | (3,475 | ) | | | — | | | | (3,475 | ) |
Purchases of finished goods and consumables used | | | 4 | | | | (40,243 | ) | | | 9 | | | | (40,234 | ) |
Employee benefits expense | | | 3 | | | | (10,157 | ) | | | (47 | ) | | | (10,204 | ) |
Depreciation and amortisation expense | | | 4 | | | | (4,480 | ) | | | 912 | | | | (3,568 | ) |
Other expenses | | | 1 | | | | (6,411 | ) | | | (304 | ) | | | (6,715 | ) |
| | | | | | | | | | | | | | | | |
Results from operating activities | | | | | | | 2,656 | | | | 570 | | | | 3,226 | |
| | | | | | | | | | | | | | | | |
Financial income | | | | | | | 552 | | | | — | | | | 552 | |
Financial expenses | | | | | | | (4,064 | ) | | | — | | | | (4,064 | ) |
| | | | | | | | | | | | | | | | |
Net financing costs | | | | | | | (3,512 | ) | | | — | | | | (3,512 | ) |
| | | | | | | | | | | | | | | | |
Loss before tax | | | | | | | (856 | ) | | | 570 | | | | (286 | ) |
| | | | | | | | | | | | | | | | |
Income tax benefit/(expense) | | | 2,4 | | | | 525 | | | | (811 | ) | | | (286 | ) |
| | | | | | | | | | | | | | | | |
Loss after tax | | | | | | | (331 | ) | | | (241 | ) | | | (572 | ) |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (331 | ) | | | (241 | ) | | | (572 | ) |
| | | | | | | | | | | | | | | | |
F-62
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 30 JUNE 2005 INCOME STATEMENT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 17,534 | | | | — | | | | 17,534 | |
Hire of containers | | | | | | | 9,339 | | | | — | | | | 9,339 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | | | | | 26,873 | | | | — | | | | 26,873 | |
| | | | | | | | | | | | | | | | |
Other income | | | | | | | 18 | | | | — | | | | 18 | |
Changes in inventories of finished goods and WIP | | | | | | | (1,936 | ) | | | — | | | | (1,936 | ) |
Purchases of finished goods and consumables used | | | | | | | (14,687 | ) | | | — | | | | (14,687 | ) |
Employee benefits expense | | | 3 | | | | (4,794 | ) | | | (16 | ) | | | (4,810 | ) |
Depreciation and amortisation expense | | | | | | | (2,041 | ) | | | 127 | | | | (1,914 | ) |
Other expenses | | | | | | | (2,820 | ) | | | — | | | | (2,820 | ) |
| | | | | | | | | | | | | | | | |
Results from operating activities | | | | | | | 613 | | | | 111 | | | | 724 | |
| | | | | | | | | | | | | | | | |
Financial income | | | | | | | 429 | | | | — | | | | 429 | |
Financial expenses | | | | | | | (1,457 | ) | | | — | | | | (1,457 | ) |
| | | | | | | | | | | | | | | | |
Net financing costs | | | | | | | (1,028 | ) | | | — | | | | (1,028 | ) |
| | | | | | | | | | | | | | | | |
Share of profit of associate | | | | | | | 172 | | | | — | | | | 172 | |
| | | | | | | | | | | | | | | | |
Loss before tax | | | | | | | (243 | ) | | | 111 | | | | (132 | ) |
Income tax benefit/(expense) | | | | | | | 30 | | | | (127 | ) | | | (97 | ) |
| | | | | | | | | | | | | | | | |
Loss after tax | | | | | | | (213 | ) | | | (16 | ) | | | (229 | ) |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | (213 | ) | | | (16 | ) | | | (229 | ) |
| | | | | | | | | | | | | | | | |
F-63
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 31 DECEMBER 2004 INCOME STATEMENT TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Revenue | | | | | | | | | | | | | | | | |
Sale and modification of containers | | | | | | | 35,463 | | | | — | | | | 35,463 | |
Hire of containers | | | | | | | 16,756 | | | | — | | | | 16,756 | |
| | | | | | | | | | | | | | | | |
Total revenue | | | | | | | 52,219 | | | | — | | | | 52,219 | |
| | | | | | | | | | | | | | | | |
Other income | | | | | | | 31 | | | | — | | | | 31 | |
Changes in inventories of finished goods and WIP | | | | | | | 1,740 | | | | — | | | | 1,740 | |
Purchases of finished goods and consumables used | | | | | | | (34,437 | ) | | | — | | | | (34,437 | ) |
Employee benefits expense | | | 3 | | | | (7,525 | ) | | | (94 | ) | | | (7,619 | ) |
Depreciation and amortisation expense | | | | | | | (3,943 | ) | | | 547 | | | | (3,396 | ) |
Other expenses | | | | | | | (4,568 | ) | | | — | | | | (4,568 | ) |
| | | | | | | | | | | | | | | | |
Results from operating activities | | | | | | | 3,517 | | | | 453 | | | | 3,970 | |
| | | | | | | | | | | | | | | | |
Financial income | | | | | | | 118 | | | | — | | | | 118 | |
Financial expenses | | | | | | | (3,252 | ) | | | — | | | | (3,252 | ) |
| | | | | | | | | | | | | | | | |
Net financing costs | | | | | | | (3,134 | ) | | | — | | | | (3,134 | ) |
| | | | | | | | | | | | | | | | |
Share of profit of associate | | | | | | | 92 | | | | — | | | | 92 | |
| | | | | | | | | | | | | | | | |
Profit before tax | | | | | | | 475 | | | | 453 | | | | 928 | |
Income tax benefit | | | 7 | | | | 4 | | | | (547 | ) | | | (543 | ) |
| | | | | | | | | | | | | | | | |
Profit/(loss) after tax | | | | | | | 479 | | | | (94 | ) | | | 385 | |
| | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | | | | | |
Equity holders of the parent | | | | | | | 479 | | | | (94 | ) | | | 385 | |
| | | | | | | | | | | | | | | | |
F-64
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 30 JUNE 2006 BALANCE SHEET TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | 777 | | | | — | | | | 777 | |
Trade and other receivables | | | | | | | 10,206 | | | | — | | | | 10,206 | |
Inventories | | | 4 | | | | 7,498 | | | | (20 | ) | | | 7,478 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | | | | | 18,481 | | | | (20 | ) | | | 18,461 | |
| | | | | | | | | | | | | | | | |
Receivables | | | | | | | 775 | | | | — | | | | 775 | |
Property, plant and equipment | | | 4 | | | | 3,599 | | | | (19 | ) | | | 3,580 | |
Container hire fleet | | | 4 | | | | 38,491 | | | | (451 | ) | | | 38,040 | |
Intangible assets | | | 1,6 | | | | 5,060 | | | | (304 | ) | | | 4,756 | |
| | | | | | | | | | | | | | | | |
Total non-current assets | | | | | | | 47,925 | | | | (774 | ) | | | 47,151 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 66,406 | | | | (794 | ) | | | 65,612 | |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Trade and other payables | | | | | | | 12,509 | | | | — | | | | 12,509 | |
Interest-bearing loans and borrowings | | | | | | | 8,939 | | | | — | | | | 8,939 | |
Employee benefits | | | | | | | 962 | | | | — | | | | 962 | |
Provisions | | | | | | | 300 | | | | — | | | | 300 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 22,710 | | | | — | | | | 22,710 | |
| | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | | | | | 37,194 | | | | — | | | | 37,194 | |
Deferred tax liabilities | | | 4 | | | | 824 | | | | (256 | ) | | | 568 | |
Employee benefits | | | 3 | | | | 567 | | | | 157 | | | | 724 | |
Provisions | | | | | | | 282 | | | | — | | | | 282 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 38,867 | | | | (99 | ) | | | 38,768 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 61,577 | | | | (99 | ) | | | 61,478 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 4,829 | | | | (695 | ) | | | 4,134 | |
| | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | |
Issued capital | | | | | | | 4,550 | | | | | | | | 4,550 | |
Accumulated losses | | | 1-4,6 | | | | (65 | ) | | | (351 | ) | | | (416 | ) |
Reserves | | | 4 | | | | 344 | | | | (344 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 4,829 | | | | (695 | ) | | | 4,134 | |
| | | | | | | | | | | | | | | | |
F-65
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 30 JUNE 2005 BALANCE SHEET TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | 695 | | | | — | | | | 695 | |
Trade and other receivables | | | | | | | 7,876 | | | | — | | | | 7,876 | |
Inventories | | | | | | | 4,023 | | | | — | | | | 4,023 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | | | | | 12,594 | | | | — | | | | 12,594 | |
| | | | | | | | | | | | | | | | |
Receivables | | | | | | | 839 | | | | — | | | | 839 | |
Investments accounted for using the equity method | | | | | | | 427 | | | | — | | | | 427 | |
Property, plant and equipment | | | | | | | 3,306 | | | | — | | | | 3,306 | |
Container hire fleet | | | | | | | 25,779 | | | | — | | | | 25,779 | |
Intangible assets | | | 6 | | | | 4,207 | | | | — | | | | 4,207 | |
| | | | | | | | | | | | | | | | |
Total non-current assets | | | | | | | 34,558 | | | | — | | | | 34,558 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 47,152 | | | | — | | | | 47,152 | |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Trade and other payables | | | | | | | 8,228 | | | | — | | | | 8,228 | |
Interest-bearing loans and borrowings | | | | | | | 2,778 | | | | — | | | | 2,778 | |
Employee benefits | | | | | | | 801 | | | | — | | | | 801 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 11,807 | | | | — | | | | 11,807 | |
| | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | | | | | 30,175 | | | | — | | | | 30,175 | |
Deferred tax liabilities | | | | | | | 119 | | | | — | | | | 119 | |
Employee benefits | | | 3 | | | | 227 | | | | 110 | | | | 337 | |
Provisions | | | | | | | 8 | | | | — | | | | 8 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 30,529 | | | | 110 | | | | 30,639 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 42,336 | | | | 110 | | | | 42,446 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 4,816 | | | | (110 | ) | | | 4,706 | |
| | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | |
Issued capital | | | | | | | 4,550 | | | | — | | | | 4,550 | |
Retained profits | | | 3,6 | | | | 266 | | | | (110 | ) | | | 156 | |
| | | | | | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 4,816 | | | | (110 | ) | | | 4,706 | |
| | | | | | | | | | | | | | | | |
F-66
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
RECONCILIATION OF 31 DECEMBER 2004 BALANCE SHEET TO U.S. GAAP (IN AU$’000)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AIFRS | | | Adjustments | | | U.S. GAAP | |
| | | | | A$’000 | | | A$’000 | | | A$’000 | |
|
Assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | | | | | 3 | | | | — | | | | 3 | |
Trade and other receivables | | | | | | | 7,024 | | | | — | | | | 7,024 | |
Inventories | | | | | | | 2,140 | | | | — | | | | 2,140 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | | | | | 9,167 | | | | — | | | | 9,167 | |
| | | | | | | | | | | | | | | | |
Receivables | | | | | | | 1,194 | | | | — | | | | 1,194 | |
Investments accounted for using the equity method | | | | | | | 255 | | | | — | | | | 255 | |
Property, plant and equipment | | | | | | | 1,812 | | | | — | | | | 1,812 | |
Container hire fleet | | | | | | | 22,447 | | | | — | | | | 22,447 | |
Intangible assets | | | 6 | | | | 4,515 | | | | — | | | | 4,515 | |
| | | | | | | | | | | | | | | | |
Total non-current assets | | | | | | | 30,223 | | | | — | | | | 30,223 | |
| | | | | | | | | | | | | | | | |
Total assets | | | | | | | 39,390 | | | | — | | | | 39,390 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | | | |
Trade and other payables | | | | | | | 11,530 | | | | — | | | | 11,530 | |
Interest-bearing loans and borrowings | | | | | | | 1,425 | | | | — | | | | 1,425 | |
Current tax liability | | | | | | | 791 | | | | — | | | | 791 | |
Employee benefits | | | | | | | 444 | | | | — | | | | 444 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | | | | | 14,190 | | | | — | | | | 14,190 | |
| | | | | | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | | | | | |
Interest bearing loans and borrowings | | | | | | | 20,614 | | | | — | | | | 20,614 | |
Deferred tax liabilities | | | | | | | 119 | | | | — | | | | 119 | |
Employee benefits | | | 3 | | | | 308 | | | | 94 | | | | 402 | |
Provisions | | | | | | | 8 | | | | — | | | | 8 | |
| | | | | | | | | | | | | | | | |
Total non-current liabilities | | | | | | | 21,049 | | | | 94 | | | | 21,143 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | 35,239 | | | | 94 | | | | 35,333 | |
| | | | | | | | | | | | | | | | |
Net assets | | | | | | | 4,151 | | | | (94 | ) | | | 4,057 | |
| | | | | | | | | | | | | | | | |
Equity | | | | | | | | | | | | | | | | |
Issued capital | | | | | | | 3,672 | | | | — | | | | 3,672 | |
Retained earnings | | | 3,6 | | | | 479 | | | | (94 | ) | | | 385 | |
| | | | | | | | | | | | | | | | |
Total equity attributable to equity holders of the parent | | | | | | | 4,151 | | | | (94 | ) | | | 4,057 | |
| | | | | | | | | | | | | | | | |
F-67
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
1. | Development expenditure |
Under AIFRS, the group capitalises certain development expenditure as described in more detail in accounting policy note 1(h)(ii) to the consolidated financial statements. U.S. GAAP required such costs to be expensed as incurred.
Under U.S. GAAP research and development costs are expensed as incurred. Under AIFRS, certain development costs are capitalised. This increases other expenses presented in accordance with U.S. GAAP by $304,000 in the year ended 30 June 2006, and reduces the intangible assets at 30 June 2006 by the same amount.
| |
2. | Tax effect of U.S. GAAP adjustments |
This item represents the tax effect of the adjustments in Note 1 at the Australian corporation tax rate of 30%. This reduces the income tax benefit presented in accordance with U.S. GAAP in the year ended 30 June 2006 by $91,000, and increases deferred tax assets at 30 June 2006 by the same amount.
| |
3. | Share based payments expense |
AIFRSs grant a transitional exemption for the calculation of share based payments expense, in that compensation expense for shares and options that were granted between 1 January 2002 and 31 December 2004 that had vested by 1 January 2005 need not be recognised. The same exemption does not apply under U.S. GAAP, and accordingly an adjustment is required to calculate the fair value of the options that had vested prior to 1 January 2005. This has increased employee benefits expense presented in accordance with U.S. GAAP by $47,000 in the 12 months to 30 June 2006 (6 months to 30 June 2005 $16,000; 12 months to 31 December 2004 $94,000) and increased the employee benefit liability for cash settled share based payments by $157,000 at 30 June 2006 ( 30 June 2005 $110,000; 31 December 2004 $94,000). For further details on the employee share option plan and cash settled transactions, refer note 17. This adjustment has no tax impact.
Additional disclosures required by SFAS 123R are as follows: Liability at 30 June 2006 is $468,000; 30 June 2005 $218,000; 31 December 2004 $130,000. Compensation expense for the 12 months to 30 June 2006 $250,000; 6 months ended 30 June 2005 $88,000; 12 months to 31 December 2004 $130,000. Amount recognised for changes in fair value are $180,000 for twelve months to 30 June 2006; and $36,000 for six months to 30 June 2005.
The total compensation cost related to non vested awards not yet recognised is $63,000 and this will be recognised over a period of 1.2 years.
| |
4. | Step acquisition of Royal Wolf Hi-Tech |
Under AIFRS, in accounting for the step acquisition of a controlling interest in an entity which was formerly treated as an associate and equity accounted, the assets and liabilities acquired are adjusted to fair value at the date control is obtained and the entity is consolidated. This gives rise to an asset revaluation reserve equating to the increase in fair value of net assets held from the original acquisition date to the date control is obtained. Under U.S. GAAP, the accounting for such a step acquisition requires a fair value adjustment for the relevant proportion of the net assets acquired to achieve control (in this case 50%) to be recognised. The resulting adjustment to conform with U.S. GAAP reduces the net assets acquired by $378,000 at 30 March 2006 and reduces the revaluation reserve recorded under AIFRS to nil. At 30 June 2006, net assets are reduced by $325,000, being a reduction in container assets of $451,000, a reduction in plant and equipment of $19,000, a reduction in inventory of $20,000, a reduction in asset revaluation reserve of $344,000 and a reduction in deferred tax liability of $165,000.
Net profit for the 12 months ended 30 June 2006 is increased by $19,000, as a result of reduced depreciation of $5,000 a reduction in the taxation charge of $5,000 and reduction in cost of goods sold of $9,000.
F-68
RWA Holdings Pty Limited Financial Report
Notes to the consolidated financial statements — (Continued)
| |
5. | Reconciliation of cash flows |
Under AIFRS bank overdrafts are classified as cash and cash equivalents (see Note 8). Under US GAAP bank overdrafts are not classified as cash and cash equivalents for the purposes of statement of cash flows. Movements in bank overdrafts are classified for US GAAP purposes as financing cash flows. For U.S. GAAP purposes, cash balances are $777,000 at 30 June 2006, $695,000 at 30 June 2005, and $3,000 at 31 December 2004. Under U.S. GAAP financing cash flows are an inflow of $11,990,000 for the year ending 30 June 2006, $11,876,000 for the six months ending 30 June 2005 and $5,550,000 for the year ending 31 December 2004. Further, due to the fact that development costs are expensed for U.S. GAAP but capitalised for AIFRS, an adjustment of $304,000 is made to reduce operating cash inflows to $13,687,000 and increase investing cash outflows to $26,203,000 for the year ending 30 June 2006.
| |
6. | Utilisation of deferred tax assets not recognised in a prior business combination |
Under AIFRS, the recognition of a benefit arising from deferred tax assets and losses not recognised at the time of a business combination requires a credit to income tax expense and associated charge to goodwill amortisation. Under USGAAP, the credit recognised is adjusted against goodwill directly.
On 12 September 2006 the current shareholders entered into a Share Sale Deed with General Finance Corporation (GFC), a US based company with no substantial operations, for the sale of all of the issued capital of the company. There are certain conditions precedent that need to be satisfied before the transaction can complete. It is anticipated that the transaction will complete during the first quarter of calendar year 2007.
The aggregate consideration for the acquisition is USD$87.4 million, which is subject to adjustment relating to the levels of the consolidated entity’s working capital, net tangible assets and container rental equipment, and outstanding obligations under a certain container lease program, as well as the costs and expenses incurred by the consolidated entity in connection with any acquisitions completed prior to the closing. The aggregate consideration will increase by USD$570,000 if the preliminary proxy statement has not been cleared by the U.S. Securities and Exchange Commission (SEC) by January 17, 2007 and by an additional USD$570,000 if clearance has not been obtained by February 17, 2007.
Of the aggregate consideration, the acquirer will pay the shareholders of the company at the closing cash in the amount of USD$83.6 million, as adjusted by the consideration adjustments, less the net debt of the consolidated entity as of the closing of the acquisition and increased if the proxy statement has not been cleared by the SEC by certain dates. The remaining USD$3.8 million of consideration will consist of USD$1.5 million of shares of common stock in GFC and a total of USD$2.3 million payable in cash in two equal instalments following the closing for a non-compete covenant from the company’s shareholders.
F-69
INDEPENDENT AUDITORS’ REPORT
The Board of Directors
Royal Wolf Trading Australia Pty Limited
We have audited the accompanying statement of financial position of Royal Wolf Trading Australia Pty Limited (the Company) as of December 31, 2003, and the related statements of financial performance and cash flows for the year then ended, all expressed in Australian dollars. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Australia and the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Royal Wolf Trading Australia Pty Limited as of December 31, 2003, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in Australia to the extent set out in note 1 to the financial statements.
Accounting principles generally accepted in Australia vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 25 to the financial statements.
As discussed in note 24, the accompanying financial statements as at December 31, 2003 and for the year ended December 31, 2003 have been restated.
/s/ KPMG
Sydney, Australia
October 20, 2006
F-70
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
FOR THE YEAR ENDED 31 DECEMBER 2003
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | AUD $ | |
|
Revenues from sale and rental of goods | | | | | | | 39,062,025 | |
Other revenue | | | | | | | 4,579,061 | |
| | | | | | | | |
Total Revenue | | | 2 | | | | 43,641,086 | |
Purchases of finished goods including movements in inventory | | | | | | | (14,977,167 | ) |
Employee expenses | | | | | | | (6,270,525 | ) |
Container repair costs | | | | | | | (3,742,995 | ) |
Repositioning, transport and storage costs | | | | | | | (3,170,501 | ) |
Leasing expenses | | | | | | | (1,722,047 | ) |
Borrowing costs | | | 3 | | | | (2,198,074 | ) |
Depreciation and amortisation expenses | | | 3 | | | | (2,468,571 | ) |
CSC yard costs | | | | | | | (1,189,385 | ) |
Office rent, supplies and training costs | | | | | | | (794,518 | ) |
Travel expenses | | | | | | | (505,581 | ) |
Advertising expenses | | | | | | | (514,834 | ) |
Communication expenses | | | | | | | (388,456 | ) |
Professional fees | | | | | | | (334,671 | ) |
Data processing expenses | | | | | | | (350,429 | ) |
Other expenses from ordinary activities | | | | | | | (522,016 | ) |
Correction of fundamental errors | | | 24 | | | | (1,634,440 | ) |
Share of net profits of investment accounted for using the equity method | | | 11 | | | | 66,500 | |
| | | | | | | | |
Profit from ordinary activities before related income tax expense | | | | | | | 2,923,376 | |
Income tax charge relating to ordinary activities | | | | | | | (1,085,932 | ) |
Correction of income tax related fundamental errors | | | 24 | | | | 773,077 | |
| | | | | | | | |
Total income tax expense relating to ordinary activities | | | 5 | (a) | | | (312,855 | ) |
| | | | | | | | |
Net profit | | | | | | | 2,610,521 | |
| | | | | | | | |
The statement of financial performance is to be read in conjunction with the notes to the financial statements set out on pages F-74 to F-92.
F-71
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
AS AT 31 DECEMBER 2003
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | AUD $ | |
|
Current assets | | | | | | | | |
Cash assets | | | 6 | | | | 1,788,171 | |
Receivables | | | 7 | | | | 5,204,625 | |
Inventories | | | 8 | | | | 3,879,561 | |
Other | | | 9 | | | | 1,206,013 | |
| | | | | | | | |
Total current assets | | | | | | | 12,078,370 | |
| | | | | | | | |
Non-current assets | | | | | | | | |
Property, plant & equipment | | | 10 | | | | 19,547,044 | |
Deferred tax assets | | | 5 | (c) | | | 942,348 | |
Investments accounted for using the equity method | | | 11 | | | | 162,500 | |
Intangible assets | | | 12 | | | | 1,475,517 | |
Other non current assets | | | 13 | | | | 710,849 | |
| | | | | | | | |
Total non-current assets | | | | | | | 22,838,258 | |
| | | | | | | | |
Total assets | | | | | | | 34,916,628 | |
| | | | | | | | |
Current liabilities | | | | | | | | |
Payables | | | 14 | | | | 9,850,866 | |
Interest bearing liabilities | | | 15 | | | | 788,297 | |
Current tax liabilities | | | | | | | 793,793 | |
Provisions | | | 16 | | | | 582,051 | |
| | | | | | | | |
Total current liabilities | | | | | | | 12,015,007 | |
| | | | | | | | |
Non-current liabilities | | | | | | | | |
Interest bearing liabilities | | | 15 | | | | 15,437,785 | |
Deferred tax liabilities | | | 5 | (b) | | | 942,348 | |
Provisions | | | 16 | | | | 133,522 | |
| | | | | | | | |
Total non-current liabilities | | | | | | | 16,513,655 | |
| | | | | | | | |
Total liabilities | | | | | | | 28,528,662 | |
| | | | | | | | |
Net assets | | | | | | | 6,387,966 | |
| | | | | | | | |
Equity | | | | | | | | |
Contributed equity | | | 17 | | | | 6,035,409 | |
Retained earnings | | | 18 | | | | 352,557 | |
| | | | | | | | |
Total equity | | | | | | | 6,387,966 | |
| | | | | | | | |
The statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages F-74 to F-92.
F-72
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
FOR THE YEAR ENDED 31 DECEMBER 2003
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | AUD $ | |
|
Cash flows from operating activities | | | | | | | | |
Cash receipts in the course of operations | | | | | | | 38,227,988 | |
Cash payments in the course of operations | | | | | | | (25,430,781 | ) |
Interest received | | | | | | | 36,774 | |
Borrowing costs paid | | | | | | | (2,198,074 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 21 | | | | 10,635,907 | |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Proceeds on disposal of non current assets | | | | | | | 87,227 | |
Payments for property plant and equipment | | | | | | | (12,482,892 | ) |
| | | | | | | | |
Net cash used in investing activities | | | | | | | (12,395,665 | ) |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Finance lease payments | | | | | | | (5,330,080 | ) |
Loan and promissory note repayments | | | | | | | (5,995,202 | ) |
Proceeds from new borrowings | | | | | | | 14,535,753 | |
Loan establishment costs | | | | | | | (450,849 | ) |
| | | | | | | | |
Net cash provided by financing activities | | | | | | | 2,759,622 | |
| | | | | | | | |
Net increase in cash held | | | | | | | 999,864 | |
Cash at beginning of year | | | | | | | 788,307 | |
| | | | | | | | |
Cash at end of year | | | 6 | | | | 1,788,171 | |
| | | | | | | | |
The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages F-74 to F-92.
F-73
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
FOR THE YEAR ENDED 31 DECEMBER 2003
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| |
1. | Statement of significant accounting policies |
This financial report is prepared in Australian dollars. The financial report was approved by the directors on October 20, 2006. The significant policies that have been adopted in the preparation of this financial report are:
a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.
It has been prepared on the accrual basis of accounting as defined AASB 1001,Accounting Policies,using on the historical cost convention and except where stated, does not take into account changing money values or fair values of non-current assets. The accounting policies have been consistently applied and, except where there is a change in accounting policy, are consistent with those of the previous year.
The financial statements as at 31st December 2003 have been prepared on a going concern basis.
b) Revenue recognition
Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST) payable to the taxation authority.
Revenue from sale of goods is recognised (net of returns, discounts and allowances) when control of the goods passes to the customer, which is when the customer takes delivery of the goods.
Revenue from rental of goods is recognised in the period earned.
Unearned revenue arises when transport charges for the return retrieval of a hire container or containers is billed in advance, while the actual retrieval has not yet occurred as the container is still on hire.
Interest revenue is recognised as it accrues.
c) Borrowing costs
Borrowing costs include interest charges and the amortisation of ancillary costs incurred in connection with arrangement of borrowings. Interest charges are expensed when incurred. Ancillary costs incurred in connection with the arrangement of borrowings are capitalised and amortised over the life of the borrowings.
d) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities, which are recoverable from, or payable to, the ATO are classified as operating cash flows.
F-74
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
e) Income tax
The company adopts the liability method of tax effect accounting whereby the income tax expense is based on the operating profit adjusted for any permanent differences.
Timing differences, which arise due to the different accounting periods in which items of revenue and expense account as either a provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of the realisation of the benefit.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation, and the anticipation that the company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.
f) Property, plant and equipment
Plant and equipment is brought to account at cost, less, where applicable, any accumulated depreciation. The carrying amount of plant and equipment is reviewed annually by the directors to ensure it is not in excess of the recoverable amount for these assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the employment of these assets and subsequent disposal. The expected net cash flows have not been discounted to their present values in determining recoverable amounts. If the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to the lower amount. The write down is expensed in the reporting period in which it occurs.
The costs incurred for initial restoration performed on containers before becoming operational in the lease stock are capitalised and depreciated over the useful lives of the containers.
All property, plant and equipment, excluding freehold land, are depreciated over their useful lives to the company. Assets are depreciated from the date of acquisition. Depreciation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only.
The depreciation method and useful lives used for each class of property, plant and equipment are as follows:
| | | | |
| | Life | | Method |
|
Plant and equipment | | 3 - 10 years | | straight line |
Motor vehicles | | 3 - 10 years | | straight line |
Furniture and fittings | | 5 - 10 years | | straight line |
Containers on hire | | 10 years | | straight line (20% residual) |
Leased containers on hire (used) | | 10 years | | straight line (20% residual) |
Leased containers on hire (new) | | 25 years | | straight line (20% residual) |
g) Inventories
Inventories, which consist primarily of containers held for sale, are measured at the lower of cost or net realisable value. Costs are assigned on a first in first out basis and include direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenses.
F-75
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
h) Receivables
The collectability of debts is assessed at balance date and specific provision is made for any doubtful accounts.
i) Investments
Investments accounted for using the equity method are carried at the lower of the equity accounted amount and recoverable amount. The company’s equity accounted share of the Associates’ net profit or loss is recognised in the consolidated statement of financial performance from the date significant influence commences until the date significant influence ceases. Other movements in reserves are recognised directly in consolidated reserves.
j) Employee benefits
Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year together with entitlements arising from wages and salaries, long service leave, annual leave and time in lieu which will be settled after one year, have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Unvested sick leave entitlements have not been recognised as it is considered that sick leave taken in the future will not be greater than the entitlements that will accrue in the future.
Contributions are made by the company to employee superannuation funds and are charged as expenses when incurred.
k) Goodwill
Goodwill is initially recorded at the amount by which the purchase price for a business exceeds the fair value attributed to its net assets at the date of acquisition. Purchased goodwill is amortised on a straight line basis over the period of 20 years. The balance is reviewed annually and any balance representing future benefits considered unlikely to be realised is written off. In assessing the recoverable amount, future cash flows are not discounted.
l) Foreign currency transactions and balances
Foreign currency transactions during the period are converted to Australian currency at the rates of exchange applicable at the dates of transactions. Amounts receivable and payable in foreign currencies at balance date are converted to the rates of exchange ruling at that date.
The gains and losses from conversion of short-term assets and liabilities, whether realised or unrealised, are included in operating profit before income tax as they arise.
m) Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the company, are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values.
Leased assets are depreciated on a straight-line basis over their estimated useful lives where it is likely that the entity will obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.
F-76
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
n) Revisions of accounting estimates
Revisions to accounting estimates are recognised prospectively in current and future periods only.
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
2. Revenue from ordinary activities | | | | | | | | |
Sale of goods revenue from operating activities | | | | | | | 25,972,618 | |
Rental of goods revenue from operating activities | | | | | | | 13,089,407 | |
| | | | | | | | |
| | | | | | | 39,062,025 | |
| | | | | | | | |
Other revenues: | | | | | | | | |
From operating activities | | | | | | | | |
Interest | | | | | | | 36,774 | |
From outside operating activities | | | | | | | | |
Gross proceeds from sale of non current assets | | | | | | | 87,227 | |
Net foreign currency gain | | | | | | | 4,455,060 | |
| | | | | | | | |
Total revenues from other activities | | | | | | | 4,579,061 | |
| | | | | | | | |
Total revenue | | | | | | | 43,641,086 | |
| | | | | | | | |
3. Profit from ordinary activities before income tax expense | | | | | | | | |
a) Individually significant revenues / (expenses) included in profit from ordinary activities before income tax expense | | | | | | | | |
Net foreign currency gain | | | | | | | 4,455,060 | |
Correction of fundamental errors | | | 24 | | | | (1,634,440 | ) |
b) Profit from ordinary activities before income tax expense has been arrived at after charging/(crediting) the following items | | | | | | | | |
Depreciation of property, plant and equipment | | | | | | | 2,361,795 | |
Amortisation of goodwill | | | | | | | 106,776 | |
Borrowing Costs | | | | | | | 2,198,074 | |
Employee leave entitlements | | | | | | | 341,442 | |
Movement in inventory provision | | | | | | | 148,444 | |
Movement in provision for doubtful debts | | | | | | | (67,620 | ) |
Net gain on disposal of property, plant and equipment | | | | | | | 3,180 | |
Net foreign currency gain | | | | | | | (4,455,060 | ) |
Correction of fundamental errors | | | 24 | | | | 1,634,440 | |
4. Auditor’s remuneration | | | | | | | | |
Auditors of the company — KPMG: | | | | | | | | |
Audit services | | | | | | | 60,000 | |
Taxation services | | | | | | | 112,616 | |
Other services | | | | | | | 4,000 | |
| | | | | | | | |
| | | | | | | 176,616 | |
| | | | | | | | |
F-77
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
5. Taxation | | | | | | | | |
a) Income tax expense | | | | | | | | |
Prima facie income tax expense calculated at 30% on the profit from ordinary activities | | | | | | | (877,013 | ) |
Decrease in income tax benefit due to: | | | | | | | | |
Amortisation of goodwill | | | | | | | (32,033 | ) |
Sundry items | | | | | | | (158,750 | ) |
Prior year under provision | | | | | | | (18,136 | ) |
| | | | | | | | |
Income tax expense relating to ordinary activities before correction of fundamental errors | | | | | | | (1,085,932 | ) |
| | | | | | | | |
Correction of income tax related fundamental errors — current year | | | 24 | (ii) | | | (138,842 | ) |
— prior year | | | 24 | (i) | | | 48,840 | |
— prior year | | | 24 | (ii) | | | 863,079 | |
| | | | | | | | |
| | | | | | | 773,077 | |
| | | | | | | | |
Total income tax expense relating to ordinary activities | | | | | | | (312,855 | ) |
| | | | | | | | |
b) Deferred tax liabilities | | | | | | | | |
Provision for deferred income tax | | | | | | | | |
Provision for deferred income tax comprises the estimated expense at the applicable rate of 30% on the following items: | | | | | | | | |
Difference in depreciation and amortisation of property, plant and equipment for accounting and income tax purposes | | | | | | | 942,348 | |
| | | | | | | | |
| | | | | | | 942,348 | |
| | | | | | | | |
c) Deferred tax assets | | | | | | | | |
Future income tax benefit | | | | | | | | |
Future income tax benefit comprises the estimated future benefit at the applicable rate of 30% on the following items: | | | | | | | | |
Unrealised exchange losses not currently deductible | | | | | | | 36,227 | |
Provisions and accrued employee entitlements not currently deductible | | | | | | | 449,032 | |
Withholding tax accrual | | | | | | | 530,405 | |
Sundry items | | | | | | | 65,526 | |
Deferred tax assets not recognized | | | | | | | (138,842 | ) |
| | | | | | | | |
| | | | | | | 942,348 | |
| | | | | | | | |
6. Cash assets | | | | | | | | |
Cash at bank and on hand | | | | | | | 1,788,171 | |
| | | | | | | | |
F-78
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
7. Receivables | | | | | | | | |
Current | | | | | | | | |
Trade debtors | | | | | | | 5,109,138 | |
Provision for doubtful trade debtors | | | | | | | (129,594 | ) |
| | | | | | | | |
| | | | | | | 4,979,544 | |
Other debtors | | | | | | | 40,270 | |
Receivables from related entities | | | | | | | 184,811 | |
| | | | | | | | |
| | | | | | | 5,204,625 | |
| | | | | | | | |
8. Inventories | | | | | | | | |
Stock on hand | | | | | | | 3,998,561 | |
Provision for diminution in value | | | | | | | (119,000 | ) |
| | | | | | | | |
| | | | | | | 3,879,561 | |
| | | | | | | | |
9. Other current assets | | | | | | | | |
Prepayments | | | | | | | 424,537 | |
Income tax receivable | | | 24 | | | | 781,476 | |
| | | | | | | | |
| | | | | | | 1,206,013 | |
| | | | | | | | |
10. Property, plant and equipment | | | | | | | | |
Plant and equipment | | | | | | | | |
At cost | | | | | | | 3,055,315 | |
Accumulated depreciation | | | | | | | (1,105,041 | ) |
| | | | | | | | |
| | | | | | | 1,950,274 | |
Motor Vehicles | | | | | | | | |
At cost | | | | | | | 286,972 | |
Accumulated depreciation | | | | | | | (141,920 | ) |
| | | | | | | | |
| | | | | | | 145,052 | |
Owned containers on hire | | | | | | | | |
At cost | | | | | | | 19,517,682 | |
Accumulated depreciation | | | | | | | (3,549,454 | ) |
| | | | | | | | |
| | | | | | | 15,968,228 | |
Leased containers on hire | | | | | | | | |
At cost | | | | | | | 1,600,307 | |
Accumulated depreciation | | | | | | | (116,817 | ) |
| | | | | | | | |
| | | | | | | 1,483,490 | |
Total property, plant and equipment | | | | | | | 19,547,044 | |
| | | | | | | | |
F-79
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
Reconciliations | | | | | | | | |
Reconciliations of the carrying amounts for each class of plant and equipment are set out below: | | | | | | | | |
Plant and equipment | | | | | | | | |
Carrying amount at beginning of year | | | | | | | 893,507 | |
Additions | | | | | | | 1,588,247 | |
Disposals | | | | | | | (57,271 | ) |
Depreciation | | | | | | | (474,209 | ) |
| | | | | | | | |
Carrying amount at end of year | | | | | | | 1,950,274 | |
| | | | | | | | |
Motor vehicles | | | | | | | | |
Carrying amount at beginning of year | | | | | | | 131,985 | |
Additions | | | | | | | 117,649 | |
Disposals | | | | | | | (26,776 | ) |
Depreciation | | | | | | | (77,806 | ) |
| | | | | | | | |
Carrying amount at end of year | | | | | | | 145,052 | |
| | | | | | | | |
Owned containers on hire | | | | | | | | |
Carrying amount at beginning of year | | | | | | | 3,937,150 | |
Additions | | | | | | | 7,461,995 | |
Transfers from leased containers | | | | | | | 7,591,395 | |
Transfers to inventory | | | | | | | (2,402,226 | ) |
Depreciation | | | | | | | (620,086 | ) |
| | | | | | | | |
Carrying amount at end of year | | | | | | | 15,968,228 | |
| | | | | | | | |
Leased containers on hire | | | | | | | | |
Carrying amount at beginning of year | | | | | | | 7,493,597 | |
Additions | | | | | | | 3,315,001 | |
Transfers to owned containers | | | | | | | (7,591,395 | ) |
Transfers to inventory | | | | | | | (544,019 | ) |
Depreciation | | | | | | | (1,189,694 | ) |
| | | | | | | | |
Carrying amount at end of year | | | | | | | 1,483,490 | |
| | | | | | | | |
11. Investments accounted for using the equity method | | | | | | | | |
The company has a 50% interest in Royal Wolf Hi-Tech Pty Limited, (the “Associate”) being a company that sells, hires and modifies shipping containers. Royal Wolf Hi-Tech Pty limited has a balance date of 30 June | | | | | | | | |
Results of Associate | | | | | | | | |
The company’s share of the Associate’s result consists of: | | | | | | | | |
Revenue from ordinary activities | | | | | | | 1,056,578 | |
Expenses from ordinary activities | | | | | | | (990,078 | ) |
| | | | | | | | |
Net profit — accounted for using the equity method | | | | | | | 66,500 | |
F-80
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
Movements in carrying amount of investment | | | | | | | | |
Carrying amount of investments in Associates at beginning of year | | | | | | | 96,000 | |
Share of Associates’ net profit | | | | | | | 66,500 | |
Dividends received from Associate | | | | | | | — | |
| | | | | | | | |
Carrying amount of investments in Associates at end of year | | | | | | | 162,500 | |
| | | | | | | | |
The Associate has no future commitments for capital expenditure | | | | | | | | |
12. Intangible assets | | | | | | | | |
Goodwill: | | | | | | | | |
At cost | | | | | | | 2,135,528 | |
Accumulated amortization | | | | | | | (660,011 | ) |
| | | | | | | | |
| | | | | | | 1,475,517 | |
| | | | | | | | |
13. Other non-current assets | | | | | | | | |
Loan to related party | | | | | | | 260,000 | |
Loan establishment costs | | | | | | | | |
At cost | | | | | | | 450,849 | |
Accumulated amortisation | | | | | | | — | |
| | | | | | | | |
| | | | | | | 450,849 | |
| | | | | | | | |
| | | | | | | 710,849 | |
| | | | | | | | |
14. Payables | | | | | | | | |
Trade creditors | | | | | | | 6,004,574 | |
Accruals | | | | | | | 3,441,646 | |
Unearned income | | | | | | | 404,646 | |
| | | | | | | | |
| | | | | | | 9,850,866 | |
| | | | | | | | |
15. Interest bearing liabilities | | | | | | | | |
Current | | | | | | | | |
Bank loan | | | | | | | 540,000 | |
Other loan | | | | | | | 113,928 | |
Lease liability | | | | | | | 134,369 | |
| | | | | | | | |
| | | | | | | 788,297 | |
| | | | | | | | |
Non-current | | | | | | | | |
Bank loan | | | | | | | 12,040,000 | |
Other loan — parent entity | | | | | | | 1,955,753 | |
Lease liability | | | | | | | 1,442,032 | |
| | | | | | | | |
| | | | | | | 15,437,785 | |
| | | | | | | | |
F-81
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
Financing arrangements | | | | | | | | |
Facilities available at balance date | | | | | | | | |
Finance leases | | | | | | | 4,576,401 | |
Secured bank loans | | | | | | | 13,500,000 | |
| | | | | | | | |
| | | | | | | 18,076,401 | |
Facilities utilised at reporting date | | | | | | | | |
Finance leases | | | | | | | 1,576,401 | |
Secured bank loans | | | | | | | 12,580,000 | |
| | | | | | | | |
| | | | | | | 14,156,401 | |
Facilities not utilised at reporting date | | | | | | | | |
Finance leases | | | | | | | 3,000,000 | |
Secured bank loans | | | | | | | 920,000 | |
| | | | | | | | |
| | | | | | | 3,920,000 | |
Secured bank loans
Bank loans are denominated in Australian dollars. The amount in current liabilities comprises the portion of the company’s bank loan payable within one year. The non-current bank loans are payable on or before 2008 in varying instalments with a balloon payment at the end, and are subject to annual review. The loans bear interest at the Bank Bill Swap Bid Rate (“BBSY”) as published daily by Reuters plus a margin of 1.75%, payable monthly. Bank loans are secured by a guarantee from RWA Holdings Pty Limited (the parent entity) and are due and payable over the next five years.
Finance leases
The company’s lease liabilities are payable over the next five years and are secured by leased assets of $333,384. The lease liabilities bear interest at a weighted average rate of 11.8%. In the event of default, the assets revert to the lessor.
Other loan — parent entity
The balance payable to the parent entity is an unsecured loan, with no specified repayment terms. Interest is payable at a rate of 15%.
Loan covenants
Under the terms of the Senior Loan Facility agreement with Bank of Western Australia Limited the company undertakes to ensure compliance with covenants in relation to Financial Ratios; Minimum Gross Fixed Assets; Minimum Consolidated Net Worth; Container Utilisation Ratio and Book Value over the term of the agreement. The loan covenant measurement dates are 31 March, 30 June, 30 September and 31 December in each year, commencing 31 March 2004.
F-82
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
Current | | | | | | | | |
Employee entitlements | | | | | | | 582,051 | |
| | | | | | | | |
Non current | | | | | | | | |
Employee entitlements | | | | | | | 133,522 | |
| | | | | | | | |
Employee entitlements have been calculated using the following weighted averages | | | | | | | | |
Assumed rate of increase in wages and salary rates | | | | | | | 10 | % |
Settlement term (years) | | | | | | | 5 | |
The company contributes to defined contribution superannuation plans. During the year the company paid $599,341 to defined contribution plans. The employer contributions outstanding at balance date were $602. The total number of employees at balance date is 80.
| | | | | | | | |
| | | | | Restated
| |
| | Note | | | 2003 | |
| | | | | $ | |
|
Share capital | | | | | | | | |
6,035,409 fully paid ordinary shares | | | | | | | 6,035,409 | |
| | | | | | | | |
Ordinary Shares
Holders of Ordinary Shares are entitled to one vote per share at shareholders’ meetings.
In the event of winding up of the Company, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.
| | | | | | | | |
Accumulated losses at beginning of year | | | | | | | (2,257,964 | ) |
Net profit before correction of prior year fundamental errors | | | 24 | | | | 3,333,042 | |
Correction of prior year fundamental errors | | | 24 | | | | (722,521 | ) |
| | | | | | | | |
Retained earnings at end of year | | | | | | | 352,557 | |
| | | | | | | | |
F-83
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
a) Finance lease payment and hire purchase commitments
| | | | | | | | |
Finance lease commitments are payable: | | | | | | | | |
Within one year | | | | | | | 313,170 | |
One year or later and no later than five years | | | | | | | 1,980,487 | |
| | | | | | | | |
| | | | | | | 2,293,657 | |
Less: Future lease finance charges | | | | | | | (717,256 | ) |
| | | | | | | | |
| | | | | | | 1,576,401 | |
Lease liabilities provided for in the financial statements: | | | | | | | | |
Current | | | 15 | | | | 134,369 | |
Non-current | | | 15 | | | | 1,442,032 | |
| | | | | | | | |
Total lease liability | | | | | | | 1,576,401 | |
b) Non-cancellable operating lease expense commitments
| | | | |
Future operating lease commitments not provided for in the financial statements and payable: | | | | |
Within one year | | | 2,291,952 | |
One year or later and no later than five years | | | 695,825 | |
| | | | |
| | | 2,987,777 | |
| | | | |
The company leases various office equipment and other facilities under operating leases. The leases have an average period of between one and four years, some with an option to renew the lease after that period. None of the leases includes contingent rentals. There are no restrictions placed upon the lessee by entering into these leases.
c) Non-cancellable operating lease receivable commitments
| | | | |
Future operating lease rentals receivable: | | | | |
Within one year | | | 1,221,685 | |
One year or later and no later than five years | | | — | |
| | | | |
| | | 1,221,685 | |
| | | | |
The company leases containers on a daily basis in the ordinary course of business. These leases can vary in length from a minimum hire period of 30 days to up to five years and longer.
All leases include a clause to enable upward revision of the rental charge.
The company has no other lessor relationships apart from those relating to the rental of containers.
The company operates predominately in a single industry, being the sale and leasing of freight containers and container based storage and accommodation products, and one geographical segment, being Australia.
F-84
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | |
| | Restated
| |
| | 2003
| |
| | $ | |
|
21. Notes to the statement of cash flows | | | | |
a) Reconciliation of cash | | | | |
For the purpose of the statement of cash flows, cash includes cash on hand and at bank. Cash as at the end of the financial year is reconciled to the related items in the statement of financial position as follows: | | | | |
Cash on hand and at bank | | | 1,788,171 | |
| | | | |
b) Reconciliation of net profit from ordinary activities after income tax to net cash provided by operating activities: | | | | |
Net profit | | | 2,610,521 | |
Add/(less) non cash items: | | | | |
Net gain on disposal of property, plant and equipment | | | (3,180 | ) |
Amortisation | | | 106,776 | |
Depreciation | | | 2,361,795 | |
Share of Associates’ net profit | | | (66,500 | ) |
Unrealised exchange gain | | | (120,755 | ) |
| | | | |
Net cash provided by operating activities before change in assets and liabilities | | | 4,888,657 | |
Changes in assets and liabilities: | | | | |
Decrease in current receivables | | | 134,818 | |
Decrease in current inventories | | | 1,554,400 | |
Increase in other assets | | | (232,631 | ) |
Increase in deferred tax assets | | | (229,288 | ) |
Increase in payables | | | 3,647,993 | |
Increase in income taxes payable | | | 793,793 | |
Decrease in deferred tax liabilities | | | (241,432 | ) |
Increase in provisions for employee entitlements | | | 319,597 | |
| | | | |
Net cash provided by operating activities | | | 10,635,907 | |
| | | | |
Directors
The names of each person holding the position of director of the company during the financial year are as follows:
Mr. Gregory Baker
Mr. Michael Baxter
Mr. Robert Carey
Mr. Norman Fricker
Mr. Randolph Gilbert
Mr. Richard Gregson
Mr. Paul Jeffery
Mr. Peter Johnson
F-85
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
Mr. Robert Skinner
Mr. James Warren
Apart from the details disclosed in this note, no director has entered into a material contract with the company since the end of the previous financial year and there were no material contracts involving directors’ interests subsiding at year end.
Directors’ remuneration
The number of directors whose income from the company or any related party falls within the following bands:
| | | | |
| | 2003
| |
| | No. | |
|
$ 0 - $ 9,999 | | | 5 | |
$ 10,000 - $ 19,999 | | | 1 | |
$ 70,000 - $ 79,999 | | | 1 | |
$150,000 - $159,999 | | | 1 | |
$320,000 - $329,999 | | | 1 | |
$350,000 - $359,999 | | | 1 | |
| | | | |
Total income paid or payable to all Directors from the company or any related party | | $ | 908,879 | |
| | | | |
Directors’ shareholdings
The relevant interests of directors and their director related entities in shares of the company at year end are as follows
| | | | |
| | Number Held
| |
| | 2003 | |
|
Ordinary shares | | | Nil | |
Other transactions with the company
From time to time directors of the company or their director-related entities may sell or purchase goods from the company. These purchases are on the same terms and conditions as those entered into by other company employees except that directors may not purchase on credit terms.
Interest in Associate
During the year, sales of $10,329 were made to the Associate and purchases of $556,674 were made from the Associate. At the end of the period, $184,811 was due and payable by the Associate, and $25 was due and payable to the Associate.
Parent entity
On 24 December 2003 the entire share capital of the company was acquired by RWA Holdings Pty Limited, a company incorporated in Australia for cash consideration of $5.8 million with payments of up to a further $3.5 million contingent on future events. Details of balances due to the parent entity are shown in note 15.
F-86
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
The company may enter into forward foreign exchange contracts, as appropriate, to hedge anticipated foreign currency purchases expected in the next 24 months within Board approved limits. The amount of anticipated future purchases is forecast in light of current conditions in foreign markets, commitments to suppliers and experience. The company held no contracts at balance date.
(i) As a result of an error, adjustments from earlier years in respect of underpayment of withholding tax on lease arrangements of $1,634,440 with a tax effect of a benefit of $48,840 have been recorded during the financial year ended 31 December 2003.
(ii) As a result of an error in prior years identified after the approval and filing of the statutory financial statements for the year ended 31 December 2003, a net deferred tax liability of $863,079 was incorrectly included in arriving at the total net deferred tax liability. This has been adjusted in these financial statements for the year ended 31 December 2003. The impact of this adjustment on the restated taxation charge for the year is an increase of $138,842.
The restated financial information for the financial year ended 31 December 2003 is presented below as if the fundamental error for tax related adjustments had not been made:
| | | | |
| | 2003
| |
| | $
| |
| | Restated | |
|
Profit from ordinary activities before related income tax expense | | | 4,557,816 | |
Total income tax expense relating to ordinary activities before effect of errors | | | (1,085,932 | ) |
Correction of fundamental error relating to current year taxation charge (see (ii) above) | | | (138,842 | ) |
| | | | |
Restated income tax charge relating to ordinary activities | | | (1,224,774 | ) |
| | | | |
Net profit from ordinary activities after income tax expense attributable to members of the company | | | 3,333,042 | |
| | | | |
Accumulated losses at beginning of year — as previously reported | | | (2,257,964 | ) |
Correction of withholding tax on lease arrangements, net of $48,840 of tax (see (i) above) | | | (1,585,600 | ) |
| | | | |
Correction of opening deferred tax liability (see (ii) above) | | | 863,079 | |
| | | | |
Correction of fundamental errors, net of tax | | | (722,521 | ) |
| | | | |
Restated accumulated losses at beginning of year | | | (2,980,485 | ) |
Restated net profit from ordinary activities after income tax expense | | | 3,333,042 | |
| | | | |
Restated retained earnings at end of year | | | 352,557 | |
| | | | |
Total equity | | | 6,387,966 | |
| | | | |
| |
25. | Reconciliation to U.S. GAAP |
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards (AGAAP) to the extent described in note 1 which, as applied by the Company, differ in certain significant
F-87
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
respects from U.S. GAAP. The effects of the application of U.S. GAAP to net profit and shareholders’ equity are set out in the tables below:
RECONCILIATION OF NET PROFIT TO U.S. GAAP (IN AU$)
| | | | |
| | 31 December
| |
| | 2003 | |
| | A$ | |
|
Net profit after tax under AGAAP (restated) | | | 2,610,521 | |
Correction of prior period errors (net of tax) | | | 722,521 | |
Amortisation of goodwill | | | 106,776 | |
Straight lining of leases | | | (372 | ) |
| | | | |
Net income under U.S. GAAP | | | 3,439,446 | |
| | | | |
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO U.S. GAAP (IN AU$)
| | | | |
| | 31 December
| |
| | 2003 | |
| | A$ | |
|
Total equity under AGAAP (restated) | | | 6,387,966 | |
Amortisation of goodwill | | | 213,553 | |
Goodwill and intangible asset adjustments through impact of push-down accounting | | | (829,519 | ) |
Straight lining of leases | | | (5,310 | ) |
| | | | |
Shareholders’ equity under U.S. GAAP | | | 5,766,690 | |
| | | | |
RECONCILIATION OF SHAREHOLDERS’ EQUITY TO U.S. GAAP (IN AU$)
| | | | |
| | 31 December
| |
| | 2003 | |
| | A$ | |
|
Opening shareholders’ equity at 1 January 2003 under U.S. GAAP | | | 2,327,244 | |
Net income under U.S. GAAP | | | 3,439,446 | |
| | | | |
Closing shareholders’ equity at 31 December 2003 | | | 5,766,690 | |
| | | | |
F-88
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
RECONCILIATION OF INCOME STATEMENT TO U.S. GAAP (IN AU$)
| | | | | | | | | | | | | | | | |
| | | | | Restated
| | | U.S. GAAP
| | | | |
| | Note | | | AGAAP | | | Adjustments | | | U.S. GAAP | |
| | | | | A$ | | | A$ | | | A$ | |
|
Revenues from sale and rental of goods | | | | | | | 39,062,025 | | | | — | | | | 39,062,025 | |
Other revenue | | | | | | | 4,579,061 | | | | — | | | | 4,579,061 | |
| | | | | | | | | | | | | | | | |
Total Revenue | | | | | | | 43,641,086 | | | | — | | | | 43,641,086 | |
Purchases of finished goods including movements in inventory | | | | | | | (14,977,167 | ) | | | — | | | | (14,977,167 | ) |
Employee expenses | | | | | | | (6,270,525 | ) | | | — | | | | (6,270,525 | ) |
Container repair costs | | | | | | | (3,742,995 | ) | | | — | | | | (3,742,995 | ) |
Repositioning, transport and storage costs | | | | | | | (3,170,501 | ) | | | — | | | | (3,170,501 | ) |
Leasing expenses | | | | | | | (1,722,047 | ) | | | (372 | ) | | | (1,722,419 | ) |
Borrowing costs | | | | | | | (2,198,074 | ) | | | — | | | | (2,198,074 | ) |
Depreciation and amortisation expenses | | | | | | | (2,468,571 | ) | | | 106,776 | | | | (2,361,795 | ) |
CSC yard costs | | | | | | | (1,189,385 | ) | | | — | | | | (1,189,385 | ) |
Office rent, supplies and training costs | | | | | | | (794,518 | ) | | | — | | | | (794,518 | ) |
Travel expenses | | | | | | | (505,581 | ) | | | — | | | | (505,581 | ) |
Advertising expenses | | | | | | | (514,834 | ) | | | — | | | | (514,834 | ) |
Communication expenses | | | | | | | (388,456 | ) | | | — | | | | (388,456 | ) |
Professional fees | | | | | | | (334,671 | ) | | | — | | | | (334,671 | ) |
Data processing expenses | | | | | | | (350,429 | ) | | | — | | | | (350,429 | ) |
Other expenses from ordinary activities | | | | | | | (522,016 | ) | | | — | | | | (522,016 | ) |
Correction of fundamental errors | | | | | | | (1,634,440 | ) | | | 1,634,440 | | | | — | |
Share of net profits of investment accounted for using the equity method | | | | | | | 66,500 | | | | — | | | | 66,500 | |
| | | | | | | | | | | | | | | | |
Profit from ordinary activities before related income tax expense | | | | | | | 2,923,376 | | | | 1,740,844 | | | | 4,664,220 | |
Income tax charge relating to ordinary activities | | | | | | | (1,085,932 | ) | | | (138,842 | ) | | | (1,224,774 | ) |
Correction of income tax related fundamental errors | | | | | | | 773,077 | | | | (773,077 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Total income tax expense relating to ordinary activities | | | | | | | (312,855 | ) | | | (911,919 | ) | | | (1,224,774 | ) |
| | | | | | | | | | | | | | | | |
Net profit | | | | | | | 2,610,521 | | | | 828,925 | | | | 3,439,446 | |
| | | | | | | | | | | | | | | | |
F-89
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
RECONCILIATION OF BALANCE SHEET TO U.S. GAAP (IN AU$)
| | | | | | | | | | | | |
| | Restated
| | | U.S. GAAP
| | | | |
| | AGAAP | | | Adjustments | | | U.S. GAAP | |
| | A$ | | | A$ | | | A$ | |
|
Current assets | | | | | | | | | | | | |
Cash assets | | | 1,788,171 | | | | — | | | | 1,788,171 | |
Receivables | | | 5,204,625 | | | | — | | | | 5,204,625 | |
Inventories | | | 3,879,561 | | | | — | | | | 3,879,561 | |
Other | | | 1,206,013 | | | | — | | | | 1,206,013 | |
| | | | | | | | | | | | |
Total current assets | | | 12,078,370 | | | | — | | | | 12,078,370 | |
| | | | | | | | | | | | |
Non-current assets | | | | | | | | | | | | |
Property, plant & equipment | | | 19,547,044 | | | | — | | | | 19,547,044 | |
Deferred tax assets | | | 942,348 | | | | (942,348 | ) | | | — | |
Investments accounted for using the equity method | | | 162,500 | | | | — | | | | 162,500 | |
Intangible assets | | | 1,475,517 | | | | (496,566 | ) | | | 978,951 | |
Other non current assets | | | 710,849 | | | | (185,225 | ) | | | 525,624 | |
| | | | | | | | | | | | |
Total non-current assets | | | 22,838,258 | | | | (1,624,139 | ) | | | 21,214,119 | |
| | | | | | | | | | | | |
Total assets | | | 34,916,628 | | | | (1,624,139 | ) | | | 33,292,489 | |
| | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | |
Payables | | | 9,850,866 | | | | 5,310 | | | | 9,856,176 | |
Interest bearing liabilities | | | 788,297 | | | | — | | | | 788,297 | |
Current tax liabilities | | | 793,793 | | | | — | | | | 793,793 | |
Provisions | | | 582,051 | | | | — | | | | 582,051 | |
| | | | | | | | | | | | |
Total current liabilities | | | 12,015,007 | | | | 5,310 | | | | 12,020,317 | |
| | | | | | | | | | | | |
Non-current liabilities | | | | | | | | | | | | |
Interest bearing liabilities | | | 15,437,785 | | | | (185,225 | ) | | | 15,252,560 | |
Deferred tax liabilities | | | 942,348 | | | | (822,948 | ) | | | 119,400 | |
Provisions | | | 133,522 | | | | — | | | | 133,522 | |
| | | | | | | | | | | | |
Total non-current liabilities | | | 16,513,655 | | | | (1,008,173 | ) | | | 15,505,482 | |
| | | | | | | | | | | | |
Total liabilities | | | 28,528,662 | | | | (1,002,863 | ) | | | 27,525,799 | |
| | | | | | | | | | | | |
Net assets | | | 6,387,966 | | | | (621,276 | ) | | | 5,766,690 | |
| | | | | | | | | | | | |
Equity | | | | | | | | | | | | |
Contributed equity | | | 6,035,409 | | | | | | | | 6,035,409 | |
Retained profits/(accumulated losses) | | | 352,557 | | | | (621,276 | ) | | | (268,719 | ) |
| | | | | | | | | | | | |
Total equity | | | 6,387,966 | | | | (621,276 | ) | | | 5,766,690 | |
| | | | | | | | | | | | |
Amortisation of goodwill
Under AGAAP, goodwill is required to be amortised over a period not exceeding 20 years. Under U.S. GAAP (SFAS 142, Goodwill and Other Intangible Assets) however, goodwill amortisation was required to cease for
F-90
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
financial years commencing on or after 15 December, 2001. The result is a net adjustment of $213,553 to increase goodwill and shareholder’s equity at 31 December 2003. This increases the retained earnings at 1 January 2003 by $106,777, and increases net profit after tax for the 12 months ending 31 December 2003 and retained earnings at 31 December 2003 by a further $106,776. There is no tax impact of this adjustment.
Straight lining of leases
Under U.S. GAAP, leases with fixed price increases included in the terms and conditions are accrued and expensed evenly across the term of the lease. This is not a requirement of AGAAP. This has increased operating expenses by $372 for the year ending 31 December 2003, and reduced the opening balance of retained earnings by $4,938, in total reducing shareholders equity by $5,310 with no significant impact on tax charge.
Correction of errors
As further described in Note 24, under AGAAP, fundamental errors were corrected in the current period. U.S. GAAP requires restatement of comparatives for prior year errors with amounts related to periods prior to the earliest period presented reflected as an adjustment to opening retained earnings. The result is an increase in profit before income tax of $1,634,440 and increase in tax charge of $911,919 in the statement of financial performance for the year ended 31 December 2003, increasing opening retained earnings by $722,521.
Loan establishment costs
Under AGAAP loan establishment costs are shown separately as an asset in the statement of financial position. Under U.S. GAAP, loan establishment costs paid to the lender of $185,225 are deducted from the related non-current interest bearing liability of $12,040,000.
Deferred taxes
Under AGAAP deferred tax liabilities and assets are shown separately as an asset in the statement of financial position. Under U.S. GAAP deferred tax liabilities and assets are shown net where the amounts relate to the same taxable entity and jurisdiction.
Acquisition of the company by RWA Holdings Pty Limited
Under U.S. GAAP, purchase accounting adjustments at parent company level are pushed down to the acquired entity where substantially all the ownership changes as a result of a business combination. The purchase price for the company was $5,766,690 with up to a further $3,500,000 being payable dependent on future profit performance of the company.
Push down accounting is not required under AGAAP. The application of push down accounting under U.S. GAAP gives rise to the recognition of separable intangible assets of $398,000, and associated deferred tax liability of $119,400, a reduction in deferred tax liabilities of $1,518,817 due to tax base adjustments, a deferred tax valuation allowance of $1,518,817 and goodwill of $580,951 in the company. The original carrying amount of goodwill related to prior acquisitions of $1,689,070 is eliminated as part of the push down adjustments.
| |
26. | Events subsequent to balance date |
On 12 September 2006 the current shareholders of the parent entity, RWA Holdings Pty Limited, entered into a Share Sale Deed with General Finance Corporation (GFC), a US based company with no substantial operations, for the sale of all of the issued capital of the company. There are certain conditions precedent that need to be satisfied
F-91
ROYAL WOLF TRADING AUSTRALIA PTY LIMITED
A.B.N. 38 069 244 417
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
before the transaction can complete. It is anticipated that the transaction will complete during the first quarter of calendar year 2007.
The aggregate consideration for the acquisition is USD$87.4 million, which is subject to adjustment relating to the levels of the company’s working capital, net tangible assets and container rental equipment, and outstanding obligations under a certain container lease program, as well as the costs and expenses incurred by the company in connection with any acquisitions completed prior to the closing. The aggregate consideration will increase by USD$570,000 if the preliminary proxy statement has not been cleared by the U.S. Securities and Exchange Commission (SEC) by January 17, 2007 and by an additional USD$570,000 if clearance has not been obtained by February 17, 2007.
Of the aggregate consideration, the acquirer will pay the shareholders of the parent entity at the closing cash in the amount of USD$83.6 million, as adjusted by the consideration adjustments, less the net debt of the company as of the closing of the acquisition and increased if the proxy statement has not been cleared by the SEC by certain dates. The remaining USD$3.8 million of consideration will consist of USD$1.5 million of shares of common stock in GFC and a total of USD$2.3 million payable in cash in two equal instalments following the closing for a non-compete covenant from the parent entity’s shareholders.
F-92
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
INDEPENDENT AUDIT REPORT
TO THE PARTNERS OF
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
Scope
We have audited the financial report of Australian Container Network Pty Ltd as Nominee for ACN Partnership for the financial year ended 30 June 2005 comprising the Income Statement, Balance Sheet, Statement of Cash Flows and notes to the financial statements.
The partners are responsible for the financial report and have determined that the accounting policies used and described in Note 1 to the financial statements are appropriate to meet the needs of the partners. We have conducted an independent audit of this financial report in order to express an opinion on it to the partners. No opinion is expressed as to whether the accounting policies used, and described in Note 1, are appropriate to the needs of the partners.
Our audit has been conducted in accordance with Australian Auditing Standards and the standards of the Public Company Accounting Oversight Board (United States) to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements and the partnership agreement so as to present a view which is consistent with our understanding of the partnership’s financial position, the results of their operations and their cash flows.
The audit opinion expressed in this report has been formed on the above basis.
Audit Opinion
In our opinion, the financial report of Australian Container Network Pty Ltd as Nominee for ACN Partnership:
(i) gives a true and fair view of the partnership’s financial position as at 30 June 2005 and of its performance for the financial year ended on that date; and
(ii) complies with Accounting Standards in Australia; and
(iii) other mandatory professional requirements.
PITCHER PARTNERS
/s/ A R FITZPATRICK
A R FITZPATRICK
| | |
Partner | Melbourne | 20 February 2007 |
F-93
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2005
| | | | | | | | | | | | | | | | | | | | |
| | FOR THE NINE MONTHS ENDED
| | | | | | | | | | |
| | MARCH 31, | | | | | | | | | | |
| | 2006
| | | 2005
| | | | | | 2005
| | | 2004
| |
| | $ | | | $ | | | Notes | | | $ | | | $ | |
| | (Unaudited) | | | | | | | | | (Unaudited) | |
|
Revenue | | | | | | | | | | | | | | | | | | | | |
Sales revenue | | | 2,124,550 | | | | 1,939,861 | | | | 2 | | | | 2,671,720 | | | | 2,332,870 | |
Other income | | | 1,441,418 | | | | 1,260,519 | | | | 2 | | | | 1,645,738 | | | | 1,464,086 | |
| | | | | | | | | | | | | | | | | | | | |
| | | 3,565,968 | | | | 3,200,380 | | | | | | | | 4,317,458 | | | | 3,796,956 | |
Cost of Sales | | | (2,493,091 | ) | | | (2,329,436 | ) | | | | | | | (3,103,609 | ) | | | (2,708,745 | ) |
Marketing expenses | | | (43,105 | ) | | | (32,663 | ) | | | | | | | (40,048 | ) | | | (27,206 | ) |
Administrative expenses | | | (580,584 | ) | | | (494,638 | ) | | | | | | | (742,906 | ) | | | (624,211 | ) |
Other expenses | | | (123,976 | ) | | | (77,155 | ) | | | | | | | (102,376 | ) | | | (136,194 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | (3,240,756 | ) | | | (2,933,892 | ) | | | | | | | (3,988,939 | ) | | | (3,496,356 | ) |
Finance costs | | | (63,754 | ) | | | (36,800 | ) | | | 3 | | | | (104,196 | ) | | | (40,065 | ) |
| | | | | | | | | | | | | | | | | | | | |
Profit before income tax expense | | | 261,458 | | | | 229,688 | | | | | | | | 224,323 | | | | 260,535 | |
Income tax | | | — | | | | — | | | | 1 | (i) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Profit from continuing operations | | | 261,458 | | | | 229,688 | | | | | | | | 224,323 | | | | 260,535 | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these financial statements.
F-94
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
| | | | | | | | | | | | | | | | |
| | AS AT
| | | | | | | | | | |
| | MARCH 31,
| | | | | | | | | | |
| | 2006
| | | | | | 2005
| | | 2004
| |
| | $ | | | Notes | | | $ | | | $ | |
| | (Unaudited) | | | | | | | | | (Unaudited) | |
|
CURRENT ASSETS | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | | 200 | | | | 4 | | | | 100 | | | | 19,379 | |
Trade receivables | | | 759,109 | | | | 5 | | | | 457,712 | | | | 417,560 | |
Inventories | | | 390,529 | | | | 6 | | | | 754,245 | | | | 365,248 | |
Other | | | 26,906 | | | | | | | | 29,848 | | | | 29,162 | |
| | | | | | | | | | | | | | | | |
TOTAL CURRENT ASSETS | | | 1,176,744 | | | | | | | | 1,241,905 | | | | 831,349 | |
| | | | | | | | | | | | | | | | |
NON-CURRENT ASSETS | | | | | | | | | | | | | | | | |
Receivables | | | 1,323 | | | | 5 | | | | 1,323 | | | | 1,323 | |
Financial assets at cost | | | 4 | | | | 7 | | | | 4 | | | | 4 | |
Plant and equipment | | | 1,865,982 | | | | 8 | | | | 1,361,360 | | | | 1,113,328 | |
Intangible assets | | | 1,039 | | | | 9 | | | | 18,048 | | | | 18,048 | |
| | | | | | | | | | | | | | | | |
TOTAL NON-CURRENT ASSETS | | | 1,868,348 | | | | | | | | 1,380,735 | | | | 1,132,703 | |
| | | | | | | | | | | | | | | | |
TOTAL ASSETS | | | 3,045,092 | | | | | | | | 2,622,640 | | | | 1,964,052 | |
| | | | | | | | | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | | | | | | | | | |
Trade and other payables | | | 348,774 | | | | 10 | | | | 528,412 | | | | 452,559 | |
Short term borrowings | | | 903,118 | | | | 11 | | | | 717,142 | | | | 342,668 | |
Provisions | | | 28,496 | | | | 12 | | | | 30,313 | | | | 25,744 | |
| | | | | | | | | | | | | | | | |
TOTAL CURRENT LIABILITIES | | | 1,280,388 | | | | | | | | 1,275,867 | | | | 820,971 | |
| | | | | | | | | | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | | | | | | | | | |
Long term borrowings | | | 987,937 | | | | 11 | | | | 726,124 | | | | 564,259 | |
Provisions | | | — | | | | 12 | | | | 29,875 | | | | 20,991 | |
| | | | | | | | | | | | | | | | |
TOTAL NON-CURRENT LIABILITIES | | | 987,937 | | | | | | | | 755,999 | | | | 585,250 | |
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES | | | 2,268,325 | | | | | | | | 2,031,866 | | | | 1,406,221 | |
| | | | | | | | | | | | | | | | |
NET ASSETS | | | 776,767 | | | | | | | | 590,774 | | | | 557,831 | |
| | | | | | | | | | | | | | | | |
PARTNERS’ FUNDS | | | | | | | | | | | | | | | | |
Current accounts | | | 776,767 | | | | 14 | | | | 590,774 | | | | 557,831 | |
| | | | | | | | | | | | | | | | |
TOTAL PARTNERS’ FUNDS | | | 776,767 | | | | | | | | 590,774 | | | | 557,831 | |
| | | | | | | | | | | | | | | | |
The accompanying notes form part of these financial statements.
F-95
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2005
| | | | | | | | | | | | | | | | | | | | |
| | FOR THE NINE MONTHS
| | | | | | | | | | |
| | ENDED MARCH 31, | | | | | | | | | | |
| | 2006
| | | 2005
| | | | | | 2005
| | | 2004
| |
| | $ | | | $ | | | Notes | | | $ | | | $ | |
| | (Unaudited) | | | | | | | | | (Unaudited) | |
CASH FLOW FROM OPERATING ACTIVITIES | | | | | | | | | | | | | | | | | | | | |
Receipts from customers | | | 3,589,241 | | | | 3,527,964 | | | | | | | | 4,599,569 | | | | 4,000,642 | |
Payments to suppliers and employees | | | (2,433,450 | ) | | | (2,821,295 | ) | | | | | | | (3,751,418 | ) | | | (3,291,005 | ) |
Interest Paid | | | (33,971 | ) | | | (26,016 | ) | | | | | | | (104,196 | ) | | | (40,065 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | | 1,121,820 | | | | 680,653 | | | | 19 | (b) | | | 743,955 | | | | 669,572 | |
| | | | | | | | | | | | | | | | | | | | |
CASH FLOW FROM INVESTING ACTIVITIES | | | | | | | | | | | | | | | | | | | | |
Proceeds from sale of plant and equipment | | | — | | | | 163,540 | | | | | | | | 313,443 | | | | 418,088 | |
Payment for plant and equipment | | | (890,832 | ) | | | (439,344 | ) | | | | | | | (908,950 | ) | | | (614,169 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net cash used in investing activities | | | (890,832 | ) | | | (275,804 | ) | | | | | | | (595,507 | ) | | | (196,081 | ) |
| | | | | | | | | | | | | | | | | | | | |
CASH FLOW FROM FINANCING ACTIVITIES | | | | | | | | | | | | | | | | | | | | |
(Increase)/decrease in loans to directors | | | 78,638 | | | | 83,249 | | | | | | | | 68,342 | | | | 19,333 | |
Repayment of borrowings/Lease repayments | | | (301,606 | ) | | | (286,809 | ) | | | | | | | (35,758 | ) | | | (385,935 | ) |
Partnership distributions paid | | | (226,520 | ) | | | (229,688 | ) | | | | | | | (224,323 | ) | | | (260,535 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net cash used in financing activities | | | (449,488 | ) | | | (433,248 | ) | | | | | | | (191,739 | ) | | | (627,137 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease in cash held | | | (218,500 | ) | | | (28,399 | ) | | | | | | | (43,291 | ) | | | (153,646 | ) |
Cash at beginning of financial year | | | 51,227 | | | | 79,626 | | | | | | | | 19,379 | | | | 173,025 | |
| | | | | | | | | | | | | | | | | | | | |
Cash at end of financial year | | | (167,273 | ) | | | 51,227 | | | | 19 | (a) | | | (23,912 | ) | | | 19,379 | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying notes form part of these financial statements.
F-96
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
FOR THE YEAR ENDED 30 JUNE 2005 AND 30 JUNE 2004 (UNAUDITED)
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The financial report is a general purpose financial report that has been prepared in accordance with Accounting Standards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board.
This financial report of Australian Container Network Pty Ltd as Nominee for ACN Partnership is prepared in accordance with Australian Accounting Standards at 30 June 2005. The entity has evaluated the key differences in accounting policies that are expected to arise from adopting Australian Equivalents of International Financial Reporting Standards (AIFRS) and the key differences are considered immaterial. The transition date for first-time adoption of AIFRS is 1 July 2004.
The financial report has been prepared on an accruals basis and is based on historical costs. It does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair value of the consideration given in exchange for assets.
The following is a summary of the material accounting policies adopted by the entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.
(a) Revenue
Revenue from sale of goods is recognised upon the delivery of goods to customers.
Revenue from the rendering of a service, most commonly hiring of containers is recognised upon the delivery of the container to the customers and is charged monthly in arrears.
Interest revenue is recognised when it is received.
Other revenue is recognised when the right to receive the revenue has been established.
All revenue is stated net of the amount of goods and services tax (GST).
(b) Inventories
Inventories are measured at the lower of cost and net realisable value. Costs incurred in bringing each container to its present location and condition are accounted for as follows:
Work-in-progress — cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity.
Container stocks — actual purchase cost is allocated to each container on the basis of physical identification.
(c) Plant and Equipment
Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.
Plant and equipment
Plant and equipment is measured on the cost basis.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets. The recoverable amount is assessed on the basis of the expected net cash flows which will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to present values in determining recoverable amounts.
F-97
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
Depreciation
The depreciable amount of all fixed assets are depreciated over their estimated useful lives to the entity commencing from the time the asset is held ready for use.
Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.
Finance Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the entity are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the entity will obtain ownership of the asset, or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.
Lease incentives received under operating leases are recognised as a liability. Lease payments received reduced the liability.
(d) Intangibles
Goodwill
Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Formation costs
Formation costs are initially recorded at the purchase price. Formation costs are amortised on a straight line basis over the period of 20 years. The balances are reviewed annually and any balance representing future benefits the realisation of which is considered to be no longer probable are written off.
(e) Employee Benefits
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled.
(f) Impairment of assets
Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance with AASB 136. Assets subject to annual depreciation or amortisation are reviewed for impairment whenever
F-98
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell and value in use.
(g) Comparative Figures
The partnership was audited for the first time for the financial year ended 30 June 2004. A qualified audit opinion was issued in relation to the 2004 financial statements relating to unaudited opening balances as at 1 July 2003 resulting in a qualified audit opinion being given as to the operating result for the 2004 year. As such, 2004 comparatives relating to the income statement and supporting notes to the accounts are unaudited.
(h) Financial Instruments
Classification
The company classifies its financial instruments in the following categories: financial assets at fair value through profit and loss, loans and receivables,held-to-maturity investments, andavailable-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.
(i) Income tax
The entity is a partnership for accounting and income tax purposes. Under Australian Taxation Law the individual partner entity is assessed on its share of partnership taxable income. It is possible that the taxation liability will vary from partner to partner depending on individual circumstances. Therefore it is not appropriate to include an income tax expense or liability in the partnership accounts.
NOTE 2: REVENUE
| | | | | | | | | | | | |
Operating activities | | | | | | | | | |
|
- sale of goods | | | | | | | 2,671,720 | | | | 2,332,870 | |
- container hire revenue | | | | | | | 1,643,005 | | | | 1,373,439 | |
- interest | | | 2 | (a) | | | 603 | | | | 3,720 | |
- other revenue | | | | | | | 2,130 | | | | 86,927 | |
| | | | | | | | | | | | |
Total Revenue | | | | | | | 4,317,458 | | | | 3,796,956 | |
| | | | | | | | | | | | |
(a) Interest from: | | | | | | | | | | | | |
- other persons | | | | | | | 603 | | | | 3,720 | |
| | | | | | | | | | | | |
| | | | | | | 603 | | | | 3,720 | |
| | | | | | | | | | | | |
F-99
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 3: PROFIT FROM CONTINUING ACTIVITIES
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
Profit/(losses) before income tax has been determined after: | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | |
Interest paid: | | | | | | | | | | | | |
- other persons | | | | | | | 59,883 | | | | 40,065 | |
Finance lease charges | | | | | | | 115,606 | | | | 69,871 | |
| | | | | | | | | | | | |
Total finance costs | | | | | | | 175,489 | | | | 109,936 | |
Depreciation of non-current assets | | | | | | | | | | | | |
- Plant and equipment | | | | | | | 32,696 | | | | 32,474 | |
- Hire stock | | | | | | | 386,014 | | | | 366,023 | |
- Motor vehicles | | | | | | | 25,820 | | | | 30,022 | |
Amortisation of non-current assets: | | | | | | | | | | | | |
- goodwill | | | | | | | — | | | | 1,001 | |
| | | | | | | | | | | | |
- Goodwill amortisation | | | | | | | — | | | | 1,001 | |
Bad debts: | | | | | | | | | | | | |
- trade debtors | | | | | | | 22,501 | | | | 12,281 | |
- bad debts recovered | | | | | | | (1,744 | ) | | | (2,643 | ) |
| | | | | | | | | | | | |
Bad and doubtful debts | | | | | | | 20,757 | | | | 9,638 | |
| | | | | | | | | | | | |
Rental expense on operating leases | | | | | | | | | | | | |
- minimum lease payments | | | | | | | 71,293 | | | | 69,871 | |
| | | | | | | | | | | | |
Rental expense on operating leases | | | | | | | 71,293 | | | | 69,871 | |
Foreign currency translation losses (gains) | | | | | | | (386 | ) | | | (7,001 | ) |
Net loss/(gain) on disposal of non-current assets | | | | | | | | | | | | |
- Plant and equipment | | | | | | | (97,054 | ) | | | (139,514 | ) |
| | | | | | | | | | | | |
NOTE 4: CASH AND CASH EQUIVALENTS
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
Cash on hand | | | | | | | 100 | | | | 100 | |
Cash at bank | | | | | | | — | | | | 19,279 | |
| | | | | | | | | | | | |
| | | | | | | 100 | | | | 19,379 | |
| | | | | | | | | | | | |
F-100
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 5: RECEIVABLES
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
CURRENT | | | | | | | | | | | | |
Trade debtors | | | | | | | 456,537 | | | | 417,560 | |
Other debtors | | | | | | | 1,175 | | | | — | |
| | | | | | | | | | | | |
| | | | | | | 457,712 | | | | 417,560 | |
| | | | | | | | | | | | |
NON-CURRENT | | | | | | | | | | | | |
Amounts receivable from: | | | | | | | | | | | | |
- associated companies | | | | | | | 1,323 | | | | 1,323 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
CURRENT | | | | | | | | | | | | |
Work in progress at cost | | | | | | | 17,576 | | | | — | |
Finished goods at cost | | | | | | | 736,669 | | | | 365,248 | |
| | | | | | | | | | | | |
| | | | | | | 754,245 | | | | 365,248 | |
| | | | | | | | | | | | |
NOTE 7: FINANCIAL ASSETS AT COST
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
NON CURRENT | | | | | | | | | | | | |
- Unlisted shares | | | | | | | 4 | | | | 4 | |
| | | | | | | | | | | | |
(a) Classification | | | | | | | | | | | | |
The carrying amounts of the above financial assets are classified as follows: | | | | | | | | | | | | |
Designated at fair value on initial recognition | | | | | | | 4 | | | | 4 | |
| | | | | | | | | | | | |
| | | | | | | 4 | | | | 4 | |
| | | | | | | | | | | | |
F-101
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 8: PLANT AND EQUIPMENT
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
Hire Container | | | | | | | | | | | | |
At cost | | | | | | | 2,443,277 | | | | 2,021,887 | |
Less accumulated depreciation | | | | | | | (1,314,423 | ) | | | (1,074,189 | ) |
| | | | | | | | | | | | |
| | | | | | | 1,128,854 | | | | 947,698 | |
| | | | | | | | | | | | |
Plant and Equipment | | | | | | | | | | | | |
Plant and equipment | | | | | | | | | | | | |
At cost | | | | | | | 166,813 | | | | 91,560 | |
Less accumulated depreciation | | | | | | | (78,588 | ) | | | (78,825 | ) |
| | | | | | | | | | | | |
| | | | | | | 88,225 | | | | 12,735 | |
Motor vehicles | | | | | | | | | | | | |
At cost | | | | | | | 227,772 | | | | 196,616 | |
Less accumulated depreciation | | | | | | | (112,874 | ) | | | (87,054 | ) |
| | | | | | | | | | | | |
| | | | | | | 114,898 | | | | 109,562 | |
Office equipment | | | | | | | | | | | | |
At cost | | | | | | | 14,515 | | | | 16,189 | |
Less accumulated depreciation | | | | | | | (6,325 | ) | | | (6,286 | ) |
| | | | | | | | | | | | |
| | | | | | | 8,190 | | | | 9,903 | |
Computer equipment | | | | | | | | | | | | |
At cost | | | | | | | 60,782 | | | | 90,905 | |
Less accumulated depreciation | | | | | | | (39,589 | ) | | | (57,475 | ) |
| | | | | | | | | | | | |
| | | | | | | 21,193 | | | | 33,430 | |
| | | | | | | | | | | | |
Total plant and equipment | | | | | | | 1,361,360 | | | | 1,113,328 | |
| | | | | | | | | | | | |
(a) Movements in Carrying Amounts
Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year
| | | | | | | | | | | | | | | | |
| | Hire containers
| | | Plant & equipment
| | | Motor vehicles
| | | Office equipment
| |
2005 | | $ | | | $ | | | $ | | | $ | |
|
Balance at the beginning of the year | | | 947,698 | | | | 12,735 | | | | 109,562 | | | | 9,903 | |
Additions | | | 783,558 | | | | 83,151 | | | | 31,156 | | | | 1,649 | |
Disposals | | | (216,389 | ) | | | — | | | | — | | | | — | |
Depreciation expense | | | (386,014 | ) | | | (7,661 | ) | | | (25,820 | ) | | | (3,362 | ) |
| | | | | | | | | | | | | | | | |
Carrying amount at end of year | | | 1,128,854 | | | | 88,225 | | | | 114,898 | | | | 8,190 | |
| | | | | | | | | | | | | | | | |
F-102
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | |
| | Computer equipment
| | | Total
| |
2005 | | $ | | | $ | |
|
Balance at the beginning of the year | | | 33,430 | | | | 1,113,328 | |
Additions | | | 9,436 | | | | 908,950 | |
Disposals | | | — | | | | (216,389 | ) |
Depreciation expense | | | (21,673 | ) | | | (444,530 | ) |
| | | | | | | | |
Carrying amount at the end of the year | | | 21,193 | | | | 1,361,360 | |
| | | | | | | | |
NOTE 9: INTANGIBLE ASSETS
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
Goodwill at cost | | | | | | | 20,000 | | | | 20,000 | |
Less accumulated impairment losses | | | | | | | (2,991 | ) | | | (2,991 | ) |
| | | | | | | | | | | | |
| | | | | | | 17,009 | | | | 17,009 | |
Formation costs at cost | | | | | | | 1,039 | | | | 1,039 | |
| | | | | | | | | | | | |
| | | | | | | 18,048 | | | | 18,048 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
CURRENT | | | | | | | | | | | | |
Unsecured liabilities | | | | | | | | | | | | |
Trade creditors | | | | | | | 383,490 | | | | 273,257 | |
Sundry creditors and accruals | | | | | | | 144,922 | | | | 179,302 | |
| | | | | | | | | | | | |
| | | | | | | 528,412 | | | | 452,559 | |
| | | | | | | | | | | | |
F-103
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
CURRENT | | | | | | | | | | | | |
Unsecured liabilities | | | | | | | | | | | | |
Amounts payable to: | | | | | | | | | | | | |
- partner related parties | | | | | | | 183,060 | | | | 147,661 | |
| | | | | | | | | | | | |
Secured liabilities | | | | | | | | | | | | |
Bank overdrafts | | | | | | | 24,012 | | | | — | |
Bank loans | | | | | | | 210,591 | | | | — | |
Hire purchase liability | | | 13 | | | | 299,479 | | | | 195,007 | |
| | | | | | | | | | | | |
| | | | | | | 534,082 | | | | 195,007 | |
| | | | | | | | | | | | |
| | | | | | | 717,142 | | | | 342,668 | |
| | | | | | | | | | | | |
NON-CURRENT | | | | | | | | | | | | |
Secured liabilities | | | | | | | | | | | | |
Bank loans | | | | | | | 172,100 | | | | 90,054 | |
Hire purchase liability | | | 13 | | | | 554,024 | | | | 474,205 | |
| | | | | | | | | | | | |
| | | | | | | 726,124 | | | | 564,259 | |
| | | | | | | | | | | | |
There was a Registered Mortgage Debenture over the whole of Australian Container Network Pty Ltd As Nominee For The ACN Partnership assets including goodwill and uncalled capital and called but unpaid capital together with relative insurance policy assigned to the National Australia Bank Limited.
Deed of Priority.
Letter of Subordination.
Guarantee and Indemnity for $675,000.00 given by the partner entities and related individuals supported by a Registered Mortgage Debenture over the assets of the partner entities.
The above security was subsequently released upon the sale of the partnership business. Refer Subsequent Events Note 16.
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
CURRENT | | | | | | | | | | | | |
Employee benefits | | | (a | ) | | | 30,313 | | | | 25,744 | |
| | | | | | | | | | | | |
NON-CURRENT | | | | | | | | | | | | |
Employee benefits | | | (a | ) | | | 29,875 | | | | 20,991 | |
| | | | | | | | | | | | |
(a) Aggregate employee benefits liability | | | | | | | 60,188 | | | | 46,735 | |
| | | | | | | | | | | | |
F-104
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
NOTE 13: CAPITAL AND LEASING COMMITMENTS
| | | | | | | | | | | | |
| | Note | | | 2005 | | | 2004 | |
|
(a) Hire purchase commitments | | | | | | | | | | | | |
Payable | | | | | | | | | | | | |
- not later than one year | | | | | | | 349,143 | | | | 234,723 | |
- later than one year and not later than five years | | | | | | | 604,687 | | | | 517,968 | |
| | | | | | | | | | | | |
Minimum hire purchase payments | | | | | | | 953,830 | | | | 752,691 | |
Less future finance charges | | | | | | | (100,327 | ) | | | (83,479 | ) |
| | | | | | | | | | | | |
Total hire purchase liability | | | | | | | 853,503 | | | | 669,212 | |
| | | | | | | | | | | | |
Represented by: | | | | | | | | | | | | |
Current liability | | | 11 | | | | 299,479 | | | | 195,007 | |
Non-current liability | | | 11 | | | | 554,024 | | | | 474,205 | |
| | | | | | | | | | | | |
| | | | | | | 853,503 | | | | 669,212 | |
| | | | | | | | | | | | |
(b) Operating lease commitments | | | | | | | | | | | | |
Non-cancellable operating leases contracted for but not capitalised in the financial statements: | | | | | | | | | | | | |
Payable | | | | | | | | | | | | |
- not later than one year | | | | | | | 28,300 | | | | 27,309 | |
- later than one year and not later than five years | | | | | | | 68,481 | | | | 8,864 | |
| | | | | | | | | | | | |
| | | | | | | 96,781 | | | | 36,173 | |
| | | | | | | | | | | | |
Partners’ current accounts
| | | | | | | | | | | | |
| | For the Nine
| | | | | | | |
| | Months Ended
| | | | | | | |
| | March 31, 2006 | | | | | | | |
| | (Unaudited) | | | | | | | |
|
Koleet Pty Ltd | | | | | | | | | | | | |
Opening Balance | | | 253,350 | | | | 224,399 | | | | 137,554 | |
Share of profits | | | 87,153 | | | | 74,774 | | | | 86,845 | |
Drawings | | | (25,000 | ) | | | (45,823 | ) | | | — | |
| | | | | | | | | | | | |
Closing Balance | | | 315,503 | | | | 253,350 | | | | 224,399 | |
| | | | | | | | | | | | |
Caraft Pty Ltd | | | | | | | | | | | | |
Opening Balance | | | 113,844 | | | | 135,049 | | | | 48,204 | |
Share of profits | | | 87,153 | | | | 74,774 | | | | 86,845 | |
Drawings | | | (25,212 | ) | | | (95,979 | ) | | | — | |
| | | | | | | | | | | | |
Closing Balance | | | 175,785 | | | | 113,844 | | | | 135,049 | |
| | | | | | | | | | | | |
Wellest Pty Ltd | | | | | | | | | | | | |
Opening Balance | | | 223,580 | | | | 198,384 | | | | 111,539 | |
Share of profits | | | 87,152 | | | | 74,775 | | | | 86,845 | |
Drawings | | | (25,253 | ) | | | (49,579 | ) | | | — | |
| | | | | | | | | | | | |
Closing Balance | | | 285,479 | | | | 223,580 | | | | 198,384 | |
| | | | | | | | | | | | |
| | | 776,767 | | | | 590,774 | | | | 557,832 | |
| | | | | | | | | | | | |
F-105
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| |
NOTE 15: | RECONCILIATION OF U.S. GAAP |
The Partnership’s financial statements have been prepared in accordance with Australian equivalents to International Financial Reporting Standard (AIFRSs) for the year ended 30 June 2005. The partners have considered whether the financial statements prepared on this basis differ materially from accounting standards generally accepted in the United States of America (U.S. GAAP). It was determined that the effects of the application of U.S. GAAP to net profit and partners’ equity was immaterial and therefore a reconciliation has not been considered necessary.
| |
NOTE 16: | EVENTS SUBSEQUENT TO REPORTING DATE |
The business of Australian Container Network partnership was purchased by Royal Wolf Trading Australia Pty Ltd on 28 April 2006. As part of the agreement Royal Wolf Trading Australia Pty Ltd purchased selected assets and assumed employee liabilities of the partnership together with the business trading name.
| |
NOTE 17: | PARTNERSHIP DETAILS |
The registered office of the nominee company is:
Australian Container Network Pty Ltd
C/- Pitcher Partners
Level 19, 15 William Street
Melbourne Vic 3000
| |
NOTE 18: | PARTNERS’ AND EXECUTIVES’ REMUNERATION |
| | | | | | | | | | | | | | | | |
| | Salary, fees and
| | | | | | | | | | |
2005 | | non-monetary benefits | | | Super-annuation | | | Equity | | | TOTAL | |
|
PARTNERS | | | | | | | | | | | | | | | | |
Sebastian Cavarra | | | 59,881 | | | | 4,500 | | | | — | | | | 64,381 | |
Wendy Cavarra | | | 87,060 | | | | 6,660 | | | | — | | | | 93,720 | |
Joe Kolenda | | | 57,476 | | | | 4,500 | | | | — | | | | 61,976 | |
Peter Welsh | | | 57,476 | | | | 4,500 | | | | — | | | | 61,976 | |
| | | | | | | | | | | | | | | | |
| | | 261,893 | | | | 20,160 | | | | — | | | | 282,053 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | Salary, fees and
| | | | | | | | | | |
2004 | | non-monetary benefits | | | Super-annuation | | | Equity | | | TOTAL | |
|
PARTNERS | | | | | | | | | | | | | | | | |
Sebastian Cavarra | | | 54,074 | | | | 4,050 | | | | — | | | | 58,124 | |
Wendy Cavarra | | | 65,978 | | | | 4,410 | | | | — | | | | 70,388 | |
Joe Kolenda | | | 54,441 | | | | 4,050 | | | | — | | | | 58,491 | |
Peter Welsh | | | 51,276 | | | | 4,050 | | | | — | | | | 55,326 | |
| | | | | | | | | | | | | | | | |
| | | 225,769 | | | | 16,560 | | | | — | | | | 242,329 | |
| | | | | | | | | | | | | | | | |
F-106
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| |
NOTE 19: | CASH FLOW INFORMATION |
| | | | | | | | | | | | | | | | | | | | |
| | For the Nine
| | | | | | | | | | |
| | Months Ended | | | | | | | | | | |
| | March
| | | March
| | | | | | | | | | |
| | 2006
| | | 2005
| | | | | | 2005
| | | 2004
| |
| | $ | | | $ | | | Note | | | $ | | | $ | |
| | (Unaudited) | | | | | | | | | | |
|
(a) Reconciliation of cash | | | | | | | | | | | | | | | | | | | | |
For the purposes of the statement of cash flows, cash includes cash on hand and at call deposits with banks or financial institutions, investments in money market instruments maturing within less than two months and net of bank overdrafts. | | | | | | | | | | | | | | | | | | | | |
Cash at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the statement of financial position as follows: | | | | | | | | | | | | | | | | | | | | |
Cash on hand | | | 200 | | | | 100 | | | | | | | | 100 | | | | 100 | |
Cash at bank | | | — | | | | 51,127 | | | | | | | | — | | | | 19,279 | |
Bank overdrafts | | | (168,719 | ) | | | — | | | | | | | | (24,012 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| | | (168,519 | ) | | | 51,227 | | | | | | | | (23,912 | ) | | | 19,379 | |
(b) Reconciliation of cash flow from operations with profit from ordinary activities after income tax | | | | | | | | | | | | | | | | | | | | |
Profit from ordinary activities after income tax | | | 261,458 | | | | 229,688 | | | | | | | | 224,323 | | | | 260,535 | |
Non-cash flows in profit from ordinary activities Amortisation | | | — | | | | — | | | | | | | | — | | | | 1,952 | |
Depreciation | | | 402,780 | | | | 117,337 | | | | | | | | 444,530 | | | | 428,519 | |
Net (gain)/loss on disposal of property, plant and equipment | | | 20,000 | | | | — | | | | | | | | (97,054 | ) | | | (139,514 | ) |
Lease/HP charges | | | 8,619 | | | | — | | | | | | | | 78,980 | | | | 66,783 | |
New leases entered into | | | 684,674 | | | | 364,513 | | | | | | | | 433,705 | | | | 592,466 | |
Changes in assets and liabilities | | | | | | | | | | | | | | | | | | | | |
Increase in receivables | | | (303,587 | ) | | | 13,871 | | | | | | | | (38,977 | ) | | | (13,494 | ) |
Increase in other assets | | | 9,579 | | | | 445 | | | | | | | | (1,861 | ) | | | (5,234 | ) |
Increase in inventories | | | 22,952 | | | | (115,016 | ) | | | | | | | (388,997 | ) | | | (55,526 | ) |
increase/(decrease) in payables | | | (13,151 | ) | | | 69,815 | | | | | | | | 75,853 | | | | (513,649 | ) |
Increase in provisions | | | 28,496 | | | | — | | | | | | | | 13,453 | | | | 46,735 | |
| | | | | | | | | | | | | | | | | | | | |
Cash flows from operations | | | 1,121,820 | | | | 680,653 | | | | | | | | 743,955 | | | | 669,573 | |
| | | | | | | | | | | | | | | | | | | | |
F-107
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| |
NOTE 20: | FINANCIAL INSTRUMENTS |
(a) Interest rate risk
The partnership’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Weighted
| |
| | Floating
| | | Fixed interest
| | | | | | Total carrying
| | | average
| |
| | interest
| | | rate maturing in:
| | | Non-interest
| | | amount as per
| | | effective
| |
2005
| | rate
| | | Over 1 to 5 Years
| | | bearing
| | | the balance sheet
| | | interest rate
| |
Financial Instruments | | $ | | | $ | | | $ | | | $ | | | % | |
|
(i) Financial assets | | | | | | | | | | | | | | | | | | | | |
Cash | | | — | | | | — | | | | 100 | | | | 100 | | | | — | |
Trade and other receivables | | | — | | | | — | | | | 457,712 | | | | 457,712 | | | | — | |
Receivables — other related parties | | | — | | | | — | | | | 1,323 | | | | 1,323 | | | | — | |
Unlisted shares | | | — | | | | — | | | | 4 | | | | 4 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total financial assets | | | — | | | | — | | | | 459,139 | | | | 459,139 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Weighted
| |
| | Floating
| | | Fixed interest
| | | | | | Total carrying
| | | average
| |
| | interest
| | | rate maturing in:
| | | Non-interest
| | | amount as per
| | | effective
| |
2005
| | rate
| | | Over 1 to 5 Years
| | | bearing
| | | the balance sheet
| | | interest rate
| |
Financial Instruments | | $ | | | $ | | | $ | | | $ | | | % | |
|
(ii) Financial liabilities | | | | | | | | | | | | | | | | | | | | |
Bank overdraft | | | 24,012 | | | | — | | | | — | | | | 24,012 | | | | 12.1 | |
Trade creditors | | | — | | | | — | | | | 383,490 | | | | 383,490 | | | | — | |
Other creditors | | | — | | | | — | | | | 8,238 | | | | 8,238 | | | | — | |
Bank and other loans | | | 382,691 | | | | — | | | | — | | | | 382,691 | | | | 8.3 | |
Payable — director & director related parties | | | — | | | | 183,060 | | | | — | | | | 183,060 | | | | 15.0 | |
Hire purchase | | | — | | | | — | | | | 853,503 | | | | 853,503 | | | | 7.7 | |
| | | | | | | | | | | | | | | | | | | | |
Total financial liabilities | | | 406,703 | | | | 183,060 | | | | 1,245,231 | | | | 1,834,994 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Weighted
| |
| | Floating
| | | Fixed interest
| | | | | | Total carrying
| | | average
| |
| | interest
| | | rate maturing in:
| | | Non-interest
| | | amount as per
| | | effective
| |
2004
| | rate
| | | Over 1 to 5 Years
| | | bearing
| | | the balance sheet
| | | interest rate
| |
Financial Instruments | | $ | | | $ | | | $ | | | $ | | | % | |
|
(iii) Financial assets | | | | | | | | | | | | | | | | | | | | |
Cash | | | 19,279 | | | | — | | | | 100 | | | | 19,379 | | | | 11.9 | |
Trade and other receivables | | | — | | | | — | | | | 417,560 | | | | 417,560 | | | | — | |
Receivables — other related parties | | | — | | | | — | | | | 1,323 | | | | 1,323 | | | | — | |
Unlisted shares | | | — | | | | — | | | | 4 | | | | 4 | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total financial assets | | | 19,279 | | | | — | | | | 418,987 | | | | 438,266 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
F-108
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | Weighted
| |
| | Floating
| | | Fixed interest
| | | | | | Total carrying
| | | average
| |
| | interest
| | | rate maturing in:
| | | Non-interest
| | | amount as per
| | | effective
| |
2004
| | rate
| | | Over 1 to 5 Years
| | | bearing
| | | the balance sheet
| | | interest rate
| |
Financial Instruments | | $ | | | $ | | | $ | | | $ | | | % | |
|
(iv) Financial liabilities | | | | | | | | | | | | | | | | | | | | |
Trade creditors | | | — | | | | — | | | | 273,257 | | | | 273,257 | | | | — | |
Other creditors | | | — | | | | — | | | | 72,803 | | | | 72,803 | | | | — | |
Bank and other loans | | | — | | | | — | | | | 90,054 | | | | 90,054 | | | | 10.8 | |
Payable — director & director related parties | | | — | | | | — | | | | 147,661 | | | | 147,661 | | | | 15.0 | |
Hire purchase | | | — | | | | — | | | | 669,212 | | | | 669,212 | | | | 7.7 | |
| | | | | | | | | | | | | | | | | | | | |
Total financial liabilities | | | — | | | | — | | | | 1,252,987 | | | | 1,252,987 | | | | | |
| | | | | | | | | | | | | | | | | | | | |
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements.
The entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the entity.
The net fair value of financial assets and financial liabilities approximates their carrying values as disclosed in the statement of financial position and notes to the financial statements.
The net fair value of listed investments have been valued at the quoted market bid price at balance date adjusted for transaction costs expected to be incurred. For other assets and other liabilities the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments, forward exchange contracts and interest rate swaps. Financial assets where the carrying amount exceeds net fair values have not been written down as the entity intends to hold these assets to maturity.
Aggregate net fair values and carrying amounts of financial assets and financial liabilities at balance date
| | | | | | | | | | | | | | | | |
| | 2005 | | | 2004 | |
| | Carrying Amount
| | | Net Fair Value
| | | Carrying Amount
| | | Net Fair Value
| |
| | $ | | | $ | | | $ | | | $ | |
|
Financial assets | | | | | | | | | | | | | | | | |
Financial assets at fair value through profit and loss | | | 4 | | | | — | | | | 4 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | 4 | | | | — | | | | 4 | | | | — | |
| | | | | | | | | | | | | | | | |
F-109
AUSTRALIAN CONTAINER NETWORK PTY LTD AS NOMINEE FOR ACN PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | | | |
| | 2005 | | | 2004 | |
| | Carrying Amount
| | | Net Fair Value
| | | Carrying Amount
| | | Net Fair Value
| |
| | $ | | | $ | | | $ | | | $ | |
|
Financial liabilities | | | | | | | | | | | | | | | | |
Other loans and amounts due | | | 1,236,194 | | | | — | | | | 759,266 | | | | — | |
| | | | | | | | | | | | | | | | |
| | | 1,236,194 | | | | — | | | | 759,266 | | | | — | |
| | | | | | | | | | | | | | | | |
F-110
Annex A
| | | |
| | | Deed of Variation (No. 3) |
| | | |
| | | to the Share Sale Deed relating to shares in RWA Holdings Pty Limited |
| | | |
| | | |
| | | |
| | | Equity Partners Two Pty Limited (in its capacity as trustee of Equity Partners 2 Trust) |
| | | FOMM Pty Limited |
| | | FOMJ Pty Limited |
| | | Cetro Pty Limited |
| | | TWCE Pty Limited |
| | | Michael Paul Baxter |
| | | James Harold Warren |
| | | Paul Henry Jeffery |
| | | Peter Linden McCann |
| | | GFN Australasia Finance Pty Limited |
| | | General Finance Corporation |
| | | Bison Capital Australia LP |
| | | |
AURORA PLACE, 88 PHILLIP STREET, SYDNEY
NSW 2000, DX 117 SYDNEY TEL: +61 2 9921 8888 FAX: +61 2 9921 8123
www.minterellison.com
Deed of Variation (No. 3)
| | | | |
Details | | | A-3 | |
Agreed terms | | | A-5 | |
1. Defined terms & interpretation | | | A-5 | |
2. Variation | | | A-5 | |
3. Continued operation of the Share Sale Deed as amended and restated | | | A-5 | |
4. Miscellaneous | | | A-5 | |
4.1 Costs | | | A-5 | |
4.2 Counterparts | | | A-5 | |
4.3 Entire agreement | | | A-5 | |
4.4 Governing law and jurisdiction | | | A-5 | |
Signing page | | | A-6 | |
Annexure A — Amended and Restated Share Sale Deed
A-2
Details
Date
Parties
| | |
Name | | Equity Partners Two Pty Limited (as trustee of Equity Partners 2 Trust) |
ACN | | 093 766 280 |
Notice details | | Level 12, 60 Margaret Street, Sydney NSW 2000 Facsimile 02 8298 5150 Attention Rajeev Dhawan |
| | |
Name | | FOMM Pty Limited (as trustee of the FOMM Trust) |
ACN | | 106 818 231 |
Notice details | | 66 Lucinda Avenue, Wahroonga NSW 2076 Facsimile 02 9482 3477 Attention Michael Baxter |
| | |
Name | | FOMJ Pty Limited (as trustee of the FOMJ Trust) |
ACN | | 106 818 222 |
Notice details | | 10 Sofala Avenue, Riverview NSW 2066 Facsimile 02 9482 3477 Attention James Warren |
| | |
Name | | Cetro Pty Limited (as trustee of the FOMP Trust) |
ACN | | 002 109 668 |
Notice details | | Level 2, 57 Grosvenor Street, Neutral Bay NSW 2089 Facsimile 02 9981 7145 Attention Paul Jeffery |
| | |
Name | | TCWE Pty Limited (as trustee of the McCann Family Trust) |
ACN | | 109 083 105 |
Notice details | | 9 Bunyana Avenue, Wahroonga NSW 2076 Facsimile 02 9482 3477 Attention Peter McCann |
| | |
Name | | Michael Paul Baxter |
Notice details | | 66 Lucinda Avenue, Wahroonga NSW 2076 Facsimile 02 9482 3477 |
| | |
Name | | James Harold Warren |
Notice details | | 10 Sofala Avenue, Riverview NSW 2066 Facsimile 02 9482 3477 |
| | |
Name | | Paul Henry Jeffery |
Notice details | | 8/1150 Pittwater Road, Collaroy NSW 2107 Facsimile 02 9482 3477 |
| | |
Name | | Peter Linden McCann |
Notice details | | 9 Bunyana Avenue, Wahroonga NSW 2076 Facsimile 02 9482 3477 |
| | |
Name | | GFN Australasia Finance Pty Limited |
ACN | | 121 227 790 |
Notice details | | C/- General Finance Corporation, 260 So. Los Robles Avenue, Suite #217 Pasadena, California 91101 Facsimile +1 626 795 8090 Attention: Mr Ronald F Valenta |
| | |
Name | | General Finance Corporation |
Notice details | | 260 So. Los Robles Avenue, Suite #217 Pasadena, California 91101 Facsimile +1 626 795 8090 Attention: Mr Ronald F Valenta |
A-3
| | |
Name | | Bison Capital Australia LP(a limited partnership incorporated in accordance with the laws of Delaware, United States of America) |
Incorporation number | | 33-1158464 |
Short form name | | Bison-GE |
Notice details | | 10877 Wilshire Blvd. Suite 1520, Los Angeles, CA 90024 United States of America Facsimile (310) 260 6576 Attention: Douglas B Trussler — Managing Member |
A-4
Background
A The parties to this deed (other than Bison-GE) are parties to a Share Sale Deed dated 12 September 2006 (as amended on 19 January 2007 and on 9 March 2007) relating to shares in RWA Holdings Pty Limited(Share Sale Deed).
B The parties have agreed to amend and restate the Share Sale Deed in accordance with the terms of this deed so that as and from the date of this deed it is in the form of the document contained inAnnexure Ato this deed (Amended and Restated Share Sale Deed).
Agreed terms
1. Defined terms & interpretation
In this deed, unless the context otherwise requires:
(a) a word or expression defined in the Share Sale Deed has the meaning given to it in the Amended and Restated Share Sale Deed;
(b) clauses 1.2 and 1.3 of the Amended and Restated Share Sale Deed apply to this deed, to the extent relevant, as if specifically incorporated in this deed; and
(c) to the extent of any inconsistency between this deed and the Amended and Restated Share Sale Deed, this deed will prevail.
2. Variation
(a) (a) On and with effect from the date of this deed, the Share Sale Deed is amended and restated so that on and from the date of this deed the Share Sale Deed shall be in the form of the document contained inAnnexure Ato this deed.
(b) The parties acknowledge and agree that the rights and obligations of the parties (other than Bison-GE) under the Share Sale Deed are now as set out in Amended and Restated Share Sale Deed.
(c) The parties acknowledge and agree that by its execution of this deed Bison-GE has assumed the rights and obligations under the Share Sale Deed that it is expressed to have under the Amended and Restated Share Sale Deed.
(d) Bison-GE agrees to be included as a party to the Amended and Restated Share Sale Deed and agrees to assume all of the rights and obligations applying to it as set out in the Amended and Restated Share Sale Deed.
3. Continued operation of the Share Sale Deed as amended and restated
Subject to the terms of this deed, the parties agree that the Share Sale Deed will continue in full force and effect in accordance with the terms of the document contained inAnnexure Ato this deed.
4. Miscellaneous
4.1 Costs
Save to the extent otherwise provided for in the Amended and Restated Share Sale Deed, each party must pay its own costs and expenses incurred in connection with the preparation and execution of this deed.
4.2 Counterparts
This deed may be executed in counterparts. All executed counterparts constitute one document.
4.3 Entire agreement
This deed constitutes the entire agreement between the parties in connection with its subject matter and supersedes all previous agreements or understandings between the parties in connection with its subject matter.
4.4 Governing law and jurisdiction
This deed is governed by the law of New South Wales and each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales.
A-5
Signing page
EXECUTED as a deed.
| | |
ExecutedbyEquity Partners Two Pty Limited in its capacity as trustee of Equity Partners 2 Trust | | |
/s/ Richard Peter Gregson | | /s/ Quentin Jones |
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
Richard Peter Gregson | | Quentin Jones |
Name of director (print) | | Name of director/company secretary (print) |
| | |
ExecutedbyFOMM Pty Limited (as trustee of the FOMM Trust) | | |
| | |
Signature of sole director and sole company secretary | | who states that he or she is the sole director and the sole company secretary of the company. |
Michael Baxter | | |
Name of sole director and sole company secretary (print) | | |
| | |
ExecutedbyFOMJ Pty Limited (as trustee of the FOMJ Trust) | | |
| | |
Signature of sole director and sole company secretary | | who states that he or she is the sole director and the sole company secretary of the company. |
James H. Warren | | |
Name of sole director and sole company secretary (print) | | |
| | |
ExecutedbyCetro Pty Limited in its capacity as trustee of the FOMP Trust | | |
| | |
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
Peter Henry Jeffrey | | |
Name of director (print) | | Name of director/company secretary (print) |
| | |
ExecutedbyTCWE Pty Limited (as trustee of the McCann Family Trust) | | |
| | /s/ Alexandra Merton-McCann |
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
Peter McCann | | Alexandra Merton-McCann |
Name of director (print) | | Name of director/company secretary (print) |
SignedbyMichael Paul Baxterin the presence of | | |
| | /s/ Michael Paul Baxter |
Signature of witness | | Michael Paul Baxter |
Gregory Brian Baxter | | |
Name of witness (print) | | |
SignedbyJames Harold Warrenin the presence of | | |
| | /s/ James Harold Warren |
Signature of witness | | James Harold Warren |
A-6
| | |
Yuka Yamasaki | | |
| | |
Name of witness (print) | | |
SignedbyPaul Henry Jefferyin the presence of | | |
| | |
| | |
/s/ Jonathan Roy Blaker
| | /s/ Paul Henry Jeffrey
|
Signature of witness | | Paul Henry Jeffrey |
| | |
| | |
/s/ Jonathan Roy Blaker
| | |
Name of witness (print) | | |
SignedbyPeter Linden McCannin the presence of | | |
| | |
| | |
/s/ Gregory Brian Baker
| | |
Signature of witness | | |
| | |
| | |
/s/ Gregory Brian Baker | | /s/ Peter Linden McCann |
| | |
Name of witness (print) | | Peter Linden McCann |
| | |
| | |
ExecutedbyGFN Australasia Finance Pty Limited | | |
| | |
| | |
/s/ John O. Johnson
| |
|
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
| | |
| | |
/s/ John O. Johnson
| |
|
Name of director | | Director/company secretary (print) |
| | |
| | |
ExecutedbyGeneral Finance Corporation | | |
| | |
| | |
/s/ John O. Johnson
| | |
Signature of director | | |
| | |
| | |
John O. Johnson | | |
| | |
| | |
Name of director | | |
BISON CAPITAL AUSTRALIA, L.P.
by
BISON CAPITAL AUSTRALIA GP, LLC,
a Delaware limited liability company
| | |
By: | /s/ Douglas B. Trussler | |
Name: Douglas B. Trussler
Its: Manager
A-7
Annexure A
Amended and Restated Share Sale Deed
Annexure to Deed of Variation (No. 3)
(As amended by Deeds of Variation dated
19 January 2007, 9 March 2007 and 30 March 2007)
Share sale deed
relating to shares in RWA Holdings Pty
Limited
Equity Partners Two Pty Limited (in its capacity as trustee of Equity Partners
2 Trust)(Equity Partners)
Cetro Pty Limited
FOMJ Pty Limited
FOMM Pty Limited
TCWE Pty Limited
(together theManagement Vendors)
The persons listed in Schedule 2(Guarantors)
GFN Australasia Finance Pty Limited(GFN)
General Finance Corporation(GFC)
Bison Capital Australia LP(Bison-GE)
AURORA PLACE, 88 PHILLIP STREET, SYDNEY
NSW 2000, DX 117 SYDNEY TEL: +61 2 9921 8888 FAX: +61 2 9921 8123
www.minterellison.com
A-1
Share sale deed
| | | | |
Details | | A-6 |
Agreed terms | | A-8 |
1. | | Defined terms & interpretation | | A-8 |
1.1 | | Defined terms | | A-8 |
1.2 | | Interpretation | | A-15 |
1.3 | | Headings | | A-16 |
2. | | Conditions | | A-16 |
2.1 | | Conditions to First Completion | | A-16 |
2.2 | | Conditions to Second Completion | | A-17 |
2.3 | | Benefit and Waiver of Conditions | | A-18 |
2.4 | | Conduct of the parties | | A-18 |
2.5 | | Failure of Condition and termination | | A-19 |
2.6 | | Extent of obligation to Fulfil Conditions | | A-20 |
2.7 | | GFC Stockholder Approval | | A-20 |
3. | | Sale and purchase | | A-20 |
3.1 | | Agreement to sell and purchase First Tranche Sale Shares | | A-20 |
3.2 | | Agreement to sell and purchase Second Tranche Sale Shares | | A-20 |
4. | | Fair Value and Purchase Price | | A-20 |
4.1 | | Fair Value | | A-20 |
4.2 | | First Tranche Amount | | A-21 |
4.3 | | Second Tranche Amount | | A-21 |
4.4 | | Deposit | | A-21 |
4.5 | | Adjustments | | A-21 |
4.6 | | Purchase Price | | A-23 |
4.7 | | Net Debt | | A-23 |
4.8 | | Cleared funds | | A-23 |
4.9 | | K & S Lease (Curtainsiders) | | A-23 |
4.10 | | Maximum amount payable by Bison-GE | | A-23 |
5. | | Escrow | | A-24 |
5.1 | | Management Vendors Escrow | | A-24 |
5.2 | | Equity Partners Escrow | | A-24 |
5.3 | | Interest | | A-25 |
5.4 | | Effect of Second Completion | | A-25 |
6. | | Completion | | A-25 |
6.1 | | First Completion — Time and place | | A-25 |
6.2 | | First Completion — Obligations of the Vendors | | A-25 |
6.3 | | Second Completion — Time and place | | A-26 |
6.4 | | Second Completion — Obligations of the Management Vendors | | A-26 |
6.5 | | Obligations of the Purchaser | | A-26 |
6.6 | | Simultaneous actions at Completion | | A-27 |
6.7 | | Records | | A-27 |
6.8 | | Information and Assistance Following Completion | | A-27 |
A-2
| | | | |
7. | | Completion Accounts | | A-28 |
7.1 | | Completion Accounts | | A-28 |
7.2 | | Basis of preparation | | A-28 |
7.3 | | Access to information | | A-28 |
7.4 | | Review of Completion Accounts | | A-28 |
7.5 | | Dispute Resolution Procedure | | A-28 |
7.6 | | Costs | | A-29 |
8. | | Obligations before First Completion | | A-29 |
8.1 | | Continuity of business | | A-29 |
8.2 | | Notice of Change | | A-30 |
8.3 | | SEC Proxy Filing | | A-30 |
9. | | Warranties and Indemnities | | A-31 |
9.1 | | Warranties by Vendors and Bison-GE | | A-31 |
9.2 | | Vendors’ Indemnity | | A-31 |
9.3 | | Application of the Warranties | | A-31 |
9.4 | | Disclosure | | A-32 |
9.5 | | Acknowledgments | | A-32 |
9.6 | | No reliance | | A-32 |
9.7 | | Financial limits on Claims | | A-33 |
9.8 | | Time limits on Claims | | A-33 |
9.9 | | Maximum aggregate liability for Claims | | A-33 |
9.10 | | Duty to mitigate | | A-34 |
9.11 | | Rights of the Purchaser | | A-34 |
9.12 | | Benefits or credits received by the Company or the Purchaser | | A-34 |
9.13 | | Warranty payments | | A-34 |
9.14 | | Trade Practices Act | | A-34 |
9.15 | | Financial forecasts | | A-34 |
9.16 | | Additional limitations | | A-35 |
9.17 | | Vendors’ Tax Indemnity | | A-35 |
9.18 | | Limits to recovery | | A-35 |
9.19 | | Good faith negotiations in relation to disclosure of material items between signing and Completion | | A-36 |
9.20 | | Effect of Second Completion | | A-36 |
10. | | K&S Lease Indemnity | | A-36 |
11. | | ADF Contract | | A-37 |
12. | | Environmental audit report | | A-37 |
13. | | GFC Undertaking | | A-37 |
14. | | Guarantee | | A-37 |
14.1 | | Guarantee and indemnity | | A-37 |
14.2 | | Enforcement against guarantors | | A-37 |
14.3 | | Continuing Guarantee | | A-37 |
14.4 | | Principal Obligations | | A-37 |
14.5 | | Obligations Absolute and Unconditional | | A-38 |
14.6 | | Winding-up or Bankruptcy of Management Vendor | | A-38 |
14.7 | | Indemnity in Respect of Management Vendors’ Obligations | | A-38 |
A-3
| | | | |
14.8 | | Payment under Indemnity | | A-38 |
14.9 | | General Application of Indemnity | | A-39 |
15. | | Restraint | | A-39 |
15.1 | | Definitions | | A-39 |
15.2 | | Prohibited activities | | A-39 |
15.3 | | Duration of prohibition | | A-39 |
15.4 | | Geographic application of prohibition | | A-40 |
15.5 | | Interpretation | | A-40 |
15.6 | | Exceptions | | A-40 |
15.7 | | Acknowledgments | | A-40 |
15.8 | | Payment of Restraint Amount | | A-40 |
16. | | Representations by the Purchaser and GFC | | A-41 |
16.1 | | Representations | | A-41 |
16.2 | | Application of representations by the Purchaser and GFC | | A-41 |
17. | | Equity Partners limitation of liability | | A-41 |
17.1 | | Limited capacity | | A-41 |
17.2 | | Limited rights to sue | | A-41 |
17.3 | | Exceptions | | A-42 |
17.4 | | Limitation on authority | | A-42 |
18. | | GST | | A-42 |
18.1 | | Interpretation | | A-42 |
18.2 | | GST gross up | | A-42 |
18.3 | | Reimbursements | | A-42 |
18.4 | | Tax invoice | | A-42 |
19. | | Announcements | | A-42 |
19.1 | | Announcements | | A-42 |
20. | | Notices and other communications | | A-43 |
20.1 | | Service of notices | | A-43 |
20.2 | | Effective on receipt | | A-43 |
21. | | Miscellaneous | | A-43 |
21.1 | | Vendors’ Representatives | | A-43 |
21.2 | | Alterations | | A-43 |
21.3 | | Approvals and consents | | A-43 |
21.4 | | Assignment | | A-43 |
21.5 | | Costs | | A-43 |
21.6 | | Stamp duty and other duties | | A-44 |
21.7 | | Survival | | A-44 |
21.8 | | Counterparts | | A-44 |
21.9 | | No merger | | A-44 |
21.10 | | Entire agreement | | A-44 |
21.11 | | Further action | | A-44 |
21.12 | | Severability | | A-44 |
21.13 | | Waiver | | A-44 |
21.14 | | Governing law and jurisdiction | | A-44 |
21.15 | | Specific performance | | A-44 |
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| | | | |
22. | | Trusts | | A-44 |
23. | | Certain Covenants | | A-44 |
23.1 | | Senior Subordinated Notes | | A-44 |
23.2 | | Bison-GE Expenses | | A-45 |
23.3 | | GFC Trust Account | | A-45 |
Schedule 1 — Shareholdings and Respective Proportions | | A-46 |
Schedule 2 — Guarantors | | A-47 |
Schedule 3 — Directors and Secretaries to resign and to be appointed | | A-47 |
Schedule 4 — Title and Capacity Warranties | | A-47 |
Schedule 5 — Business Warranties | | A-48 |
Schedule 6 — Leased Premises | | A-55 |
Schedule 7 — Intellectual Property Rights | | A-56 |
Schedule 8 — Due Diligence Index | | A-57 |
Schedule 9 — Accounts | | A-58 |
Schedule 10 — K&S Lease (Curtainsiders) | | A-59 |
Schedule 11 — K&S Lease (Reefers) | | A-60 |
Schedule 12 — Worked examples of Purchase Price adjustments | | A-61 |
Schedule 13 — Michael Baxter Consultancy Agreement | | A-62 |
Schedule 14 — Bison-GE/GFN Shareholders Agreement | | A-63 |
Schedule 15 — Bison-GE/Management Vendors Shareholders Agreement | | A-64 |
Schedule 16 — Legal Opinion | | A-65 |
Schedule 17 — Subscription deed | | A-67 |
Signing page | | A-68 |
A-5
Details
| | |
Date | | 12 September 2006 |
|
Parties | | |
|
Name | | Equity Partners Two Pty Limited (as trustee of Equity Partners 2 Trust) |
ACN | | 093 766 280 |
Short form name | | Equity Partners |
Notice details | | Level 12, 60 Margaret Street Sydney NSW 2000 Facsimile 02 8298 5150 Attention Rajeev Dhawan |
|
Name | | FOMM Pty Limited (as trustee of the FOMM Trust) |
ACN | | 106 818 231 |
Notice details | | 66 Lucinda Avenue, Wahroonga NSW 2076 Facsimile 02 9482 3477 Attention Michael Baxter |
|
Name | | FOMJ Pty Limited (as trustee of the FOMJ Trust) |
ACN | | 106 818 222 |
Notice details | | 10 Sofala Avenue, Riverview NSW 2066 Facsimile 02 9482 3477 Attention James Warren |
|
Name | | Cetro Pty Limited (as trustee of the FOMP Trust) |
ACN | | 002 109 668 |
Notice details | | Level 2, 57 Grosvenor Street, Neutral Bay NSW 2089 Facsimile 02 9981 7145 Attention Paul Jeffery |
|
Name | | TCWE Pty Limited (as trustee of the McCann Family Trust) |
ACN | | 109 083 105 |
Notice details | | 9 Bunyana Avenue WAHROONGA NSW 2076 Facsimile 02 9482 3477 Attention Peter McCann |
together theManagement Vendors
| | |
Name | | Each person listed in Schedule 2 |
Short form name | | Each aGuarantorand collectively, theGuarantors |
|
Name | | GFN Australasia Finance Pty Limited |
ACN | | 121 227 790 |
|
Short form name | | GFN |
Notice details | | C/- General Finance Corporation, 260 So. Los Robles Avenue, Suite #217 Pasadena, California 91101 Facsimile +1 626 795 8090 Attention: Mr Ronald F Valenta |
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| | |
Name | | General Finance Corporation |
Short form name | | GFC |
Notice details | | 260 So. Los Robles Avenue, Suite #217 Pasadena, California 91101 Facsimile +1 626 795 8090 Attention: Mr Ronald F Valenta |
|
Name | | Bison Capital Australia LP(a limited partnership incorporated in accordance with the laws of Delaware, United States of America) |
Incorporation number | | 33-1158464 |
Short form name | | Bison-GE |
Notice details | | 10877 Wilshire Blvd. Suite 1520, Los Angeles, CA 90024 United States of America |
|
| | Facsimile (310) 260 6576 Attention: Douglas B Trussler — Managing Member |
Background
A As at the date of this deed, the issued shares in the Company are held by the Original Vendors as set out in Schedule 1.
B The Company owns all the issued shares in Royal Wolf Trading Australia Pty Limited. Royal Wolf Trading Australia Pty Limited owns all the issued shares in Royal Wolf Hi-Tech Pty Limited.
C GFN is a wholly owned subsidiary of GFC.
D The Original Vendors have agreed to sell the First Tranche Sale Shares to Bison-GE and the Management Vendors and Bison-GE have agreed to sell the Second Tranche Sale Shares to GFN in each case on the terms and conditions set out in this deed.
E The fair market value of the Group is equal to the enterprise value of the Group and is equal to the total amount payable by GFN on acquiring all of the Second Tranche Sale Shares under this agreement which is A$116,500,000.00 comprised of the following:
(i) the amount of the Net Debt;
(ii) the Purchase Price; and
(iii) the Restraint Amount referred to in clause 15.1(c).
F Each Guarantor owns or controls a Management Vendor. The Purchasers have entered into this deed at the request of the Guarantors and each Guarantor has agreed to guarantee the obligations of the relevant Management Vendor in accordance with this deed.
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Agreed terms
1. Defined terms & interpretation
1.1 Defined terms
In this deed:
Accountsmeans the consolidated balance sheet of the Group as at the Accounts Date and the consolidated profit and loss statement and consolidated statement of cash flows of the Group for the financial year ended on the Accounts Date together with the notes to, and the reports of the directors in respect of, those accounts copies of which are included as Schedule 9.
Accounts Datemeans 30 June 2006.
ADF Contractmeans the Australian Defence Force Urban Operations Training Facility Contract(s) tendered for by the Group but not yet, as at the date of this deed, been awarded.
ANZ Facilitymeans:
(a) the senior debt facility dated 17 December 2004 between Royal Wolf Trading, Australia and New Zealand Banking Group Limited (’ANZ’) and others as varied in accordance with several Variation Letters from ANZ to the Company, including on 13 June 2006;
(b) the Non Convertible Note facility between the Company, Australia and New Zealand Banking Group Limited and others; and
(c) any other moneys owing by the Group to ANZ.
Authorisationsmeans any consent, licence, approval, notarisation, registration, permission or authorisation.
Associated Personmeans, in relation to a Vendor, a company controlled by that Vendor and, in relation to a Guarantor, means a company controlled by that Guarantor or that Guarantor’s spouse.
Backup Purchase Agreementmeans the agreement to be entered into between Ronald F Valenta, Bison-GE and the Management Vendors before the First Completion Date, in the form agreed by Bison-GE and the Management Vendors.
B Class Notesmeans the non-convertible notes issued by the Company to Equity Partners under the terms of the shareholders agreement governing the affairs of the Company.
Bison-GE Completion Amountmeans the sum of (i) through (iv) below:
(i) US$45,000,000; plus
(ii) Interest on US$45,000,000 for the period from First Completion Date to Second Completion Date calculated at the rate of 18% per annum on daily rests (but not capitalised); plus
(iii) to the extent paid by Bison-GE, the Restraint Amount (in US$) plus interest on that amount for the period from the date the Restraint Amount, or any portion thereof, is paid by Bison-GE to Second Completion Date calculated at the rate of 18% per annum on daily rests (but not capitalised); plus
(iv) 2.5% of the sum of the amounts determined pursuant to paragraphs (i), (ii) and (iii) above if Second Completion takes place within 6 months of First Completion or 3% of those amounts if Second Completion takes place more than 6 months after First Completion.
Bison-GE Completion Paymentmeans, collectively, the sum of (a) (i) cash in the amount of the Bison-GE Completion Amount, minus (ii) the U.S. dollar equivalent of the Retained Interest, minus, (iii) any interest earned by Bison-GE on that portion of the US$45,000,000 not paid at the First Completion from the First Completion Date to the date paid to the Vendors, and (b) the Retained Interest.
Bison-GE Maximum Amountmeans A$55,178,792.
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Bison-GE Subscription Amountmeans A$10,830,919, being the aggregate amount required to put the Company in funds to, on First Completion, pay-out the B Class Notes, cancel the Options and buy back the CFO Shares.
Budgetmeans the budget adopted by the board of the Company in relation to the Business, a copy of which is included in the Data Room.
Businessmeans the business of hire, sales and modification of portable storage containers, freight containers, portable container buildings and portable container offices carried on by the Group as at the date of this deed and as at First Completion.
Business Daymeans:
(a) for receiving a Notice under clause 20, a day that is not a Saturday, Sunday, public holiday or bank holiday in the place where the Notice is received; and
(b) for all other purposes, a day that is not a Saturday, Sunday, public holiday or bank holiday in New South Wales.
Business Hoursmeans from 9.00am to 5.00pm on a Business Day.
Business Warrantiesmeans each of the representations and warranties set out in Schedule 5.
Cashmeans the amount of cash together with accrued interest on such cash, of the Group as at close of business on the First Completion Date.
CFO Sharesmeans:
(a) 187,200 ordinary shares; and
(b) 8 C Class shares,
in the capital of the Company held by Equity Partners as bare trustee pursuant to clause 3.5 of the shareholders agreement governing the affairs of the Company.
Claimincludes a claim, notice, demand, action, proceeding, litigation, investigation, judgment, damage, loss, cost, expense or liability however arising, whether present, unascertained, immediate, future or contingent, whether based in contract, tort or statute and whether involving a third party or a party to this deed.
Companymeans RWA Holdings Pty Limited ACN 106 913 964.
Completionmeans First Completion or Second Completion, as the context may require.
Completion Accountsmeans the consolidated balance sheet and profit and loss statement of the Group as at the close of business on the First Completion Date to be prepared in accordance with clause 7.1.
Conditionsmeans the conditions set out in clause 2.
Container Rental Equipment Amount meansA$46,879,000.
Corporations Actmeans theCorporations Act 2001(Cth).
Data Roommeans:
(a) the hard copies of the documents contained in Folders 6, 7, 8, 9, 10, 12, 13, 18, 22 and 23 as identified in the Due Diligence Index and exhibited hereto;
(b) the two CD-ROMs containing copies of the documents contained in Folder 29 as identified in the Due Diligence Index; and
(c) the other documents contained on the CD-ROM entitled ‘Data Room’,
delivered by the Original Vendors to GFN and to Bison-GE containing the information in relation to the Group made available in the data room established at the offices of Equity Partners in Sydney from 2 July 2006 to 5 September 2006.
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Depositmeans the amount(s) paid by GFN to the Vendors’ Representatives pursuant to clause 4.4.
Determination Datemeans the fifth Business Day after the date on which the Completion Accounts, the amount of Net Debt, the Completion Container Rental Equipment Amount, the Net Tangible Assets Amount, the Working Capital Amount and the K&S Lease Adjustment Amount become final and binding on the Original Vendors and each Purchaser under this deed.
Disclosure Documentsmeans:
(a) this deed;
(b) the Disclosure Letter;
(c) all written material made available in the Data Room as specifically identified in the Due Diligence Index; and
(d) the Phase 1 environmental audit report commissioned by GFC in relation to the Group.
Disclosure Lettermeans:
(a) the letter from the Original Vendors addressed to GFN and dated and delivered to GFN on or before the date of this deed and includes all of its schedules and annexures, a copy of which has also been provided to Bison-GE; and
(b) a letter from the Management Vendors addressed to GFN and dated on or before the Second Completion Date, which discloses matters against the Business Warranties, and includes all of its schedules and annexures.
Due Diligence Indexmeans the index of due diligence materials attached as Schedule 8.
Dutymeans any stamp duty or similar charge which is imposed by any Government Authority and includes any interest, fine, penalty, charge or other amount which is imposed in relation to such duty.
Employeesmeans all of the persons employed by the Group as at First Completion.
Encumbranceincludes mortgage, charge, lien, restriction against transfer, encumbrance, trust and other third party interest, including a finance or operating lease or hire purchase agreement.
Equity Partners Escrow Amountmeans A$2 million.
Escrow Accountmeans the separate interest bearing bank accounts to be opened in Australia with Australia and New Zealand Banking Group Limited (or such other bank as the parties may agree):
(a) in the name of Minter Ellison, subject to the joint instructions of Equity Partners and Bison-GE, which will be established at First Completion and:
(i) within 30 days after First Completion, transferred into an account in the joint names of Equity Partners and Bison-GE; and
(ii) at Second Completion transferred into an account in the joint names of Equity Partners and GFN; and
(b) in the joint names of the Management Vendors and GFN which will be established at Second Completion in the joint names of the Management Vendors and GFN,
referred to in clauses 5.1 and 5.2.
Estimated Net Debtmeans A$59,869,303, being the Vendors’ reasonable estimate of the likely Net Debt at First Completion.
First Completionmeans completion of the sale and purchase of the First Tranche Sale Shares to Bison-GE as contemplated by this deed.
First Completion Datemeans the date on which First Completion occurs.
A-10
First Completion Paymentmeans A$116,500,000 less:
(a) A$10,623,666; less
(b) Estimated Net Debt; less
(c) the Deposit, less
(d) the Equity Partners Escrow Amount; less
(e) the Restraint Amount.
First Tranche Sale Sharesmeans such of the Sale Shares held by Equity Partners and by the Management Vendors as more particularly described in Part B of Schedule 1.
Fundsmeans the superannuation funds to which the Group makes contributions in relation to its Employees as at the date of this deed.
Government Authoritymeans any government, governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity and includes any other person authorised by Law to give consents, or impose requirements, in connection with the environment.
Groupmeans the Company, Royal Wolf Trading and Royal Wolf Hi-Tech Pty Limited, ACN 079 735 050 andGroup Companymeans any one of them.
GSThas the meaning it has in the GST Act.
GST Actmeans theA New Tax System (Goods and Services Tax) Act 1999 (Cth).
Independent Accountantmeans a chartered accountant or firm of chartered accountants appointed under clause 7.5.
Industrial Instrumentmeans any industrial award, collective agreement or other form of agreement made or taken to exist under an industrial law (including theWorkplace Relations Act 1996).
Intellectual Property Rightsmeans all rights conferred under statute, common law or equity in relation to:
(a) patents, copyright, registered and unregistered designs, trademarks, domain names, business names and confidential information; and
(b) any application or right to apply for registration of any of the rights referred to in paragraph (a).
K&S Lease (Curtainsiders)means the lease between K&S Freighters Pty Limited and Royal Wolf Trading in relation to the lease by Royal Wolf Trading of 70 curtainsider containers, a copy of which is attached as Schedule 10.
K&S Lease (Reefers)means the lease between K&S Freighters Pty Limited and Royal Wolf Trading in relation to the lease by Royal Wolf Trading of 12 reefers, a copy of which is attached as Schedule 11.
K&S Lease Adjustment Amounthas the meaning in clause 4.9.
Key Employeesmeans Robert Allan, Peter McCann and James Warren.
Lawincludes any law, regulation, authorisation, ruling, judgment, order or decree of any Government Authority and any statute, regulation, proclamation, ordinance or by-law in Australia or any other jurisdiction.
Leased Premisesmeans the premises used or occupied by the Group as set out in Schedule 6.
Leasesmeans the leases to which a Group Company is a party in respect of the Leased Premises.
Management Escrow Amountmeans A$5 million.
Management Vendors Respective Proportionsmeans the respective proportions of the Management Vendors, as between themselves, set out in the sixth column of Part A of Schedule 1.
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Management Vendors Second Completion Paymentmeans the sum of:
(a) A$10,623,666;
(b) plus or minus 27.68% of the total amount of the adjustments calculated pursuant to clauses 4.5 and 4.9);
(c) plus interest on the amount referred to in paragraph (a) above (less the Management Vendors Escrow Amount) for the period from the First Completion Date to the Second Completion Date and interest for the amount referred to in paragraph (b) above for the period between the Determination Date and the Second Completion Date, such interest calculated at the rate of 18% per annum on daily rests (but not capitalised) provided that if the amount referred to in paragraph (b) is a negative amount then such amount shall be reduced from the amount referred to in paragraph (a) for the purposes of calculating such interest.
Material Adverse Effectmeans a material adverse effect occurring in respect of the assets, liabilities or profitability of the Group taken as a whole in the period on and from the Accounts Date to First Completion or from First Completion to Second Completion (as the case may be), but excluding the effects of changes that are generally applicable to the Australian economy. A matter will not be regarded as a Material Adverse Effect unless it has, or would be reasonably likely to have, an adverse effect on the earnings before interest, tax, depreciation and amortisation of the Group of more than 15 per cent in any 12 month period.
Net Debtmeans the amount calculated as follows:
B — A
where:
A = Cash; and
B = all debt which the Group has at the close of business on the First Completion Date including but not limited to:
(i) the aggregate amount owed by the Group under the ANZ Facility (including any accrued but unpaid interest) or to any other bank; plus
(ii) the aggregate amount (principal and accrued interest) owed by the Group in relation to the B Class Notes; plus
(iii) all other interest bearing debt or finance leases of the Group; plus
(iv) the amount (if any) of outstanding, deferred purchase price, consulting or non-compete or earn-out payment obligations of the Group under completed acquisition agreements; plus
(v) dividends or other distributions declared by the Group but not yet paid; plus
(vi) the amounts required to cash out and cancel all of the Options; plus
(vii) all amounts owing to ANZ under a finance lease in respect to Wridgways Australia Ltd; plus
(viii) all amounts owing in relation to the K&S Lease (Reefers); plus
(ix) the costs and expenses of the Vendors which are paid by the Company in accordance with clause 21.5(a); plus
(x) the outstanding bonus amount agreed to be paid by the Company to Norman Fricker (the former chairman of the Group);
but excluding the following:
(i) moneys owing to suppliers in the ordinary course of business;
(ii) amounts owing under any operating leases;
A-12
(iii) any debt disclosed by the Vendors to the Purchaser before the date of this deed in relation to the K&S Lease (Curtainsiders) and any liabilities associated with that lease; and
(iv) any amounts owing by the Group in relation to any assets acquired in satisfaction of the Group’s obligations under the ADF Contract less any deposits received by the Group in relation to the ADF Contract.
Net Tangible Assets Amountmeans total assets (less all intangibles) less total liabilities of the Group as set out in the Completion Accounts (excluding the amount required to cash out the Options, the costs and expenses of the Vendors which are paid by the Company in accordance with clause 21.5(a), the outstanding bonus amount paid by the Company to Norman Fricker, the consideration payable by the Company to Equity Partners in relation to the buy-back of the CFO Shares.
New Shareholders Agreementmeans a shareholders agreement to be entered into between Bison-GE and the Management Vendors on or before the First Completion Date in the form of Annexure C.
NTA Amountmeans A$2,700,000.
Optionsmeans:
(a) the options granted to employees of the Group over unissued shares in the Company under the terms of the RWA employee share option plan; and
(b) the options granted to Peter McCann over ordinary and Class C shares held on trust by Equity Partners under the terms of the service contract between Peter McCann and Royal Wolf Trading and the shareholders agreement governing the affairs of the Company.
Original Vendorsmeans collectively Equity Partners and the Management Vendors.
Purchase Pricefor the First Tranche Shares has the meaning set out in clause 4.2(a) and for the Second Tranche Shares has the meaning set out in clause 4.3(a).
Purchasermeans:
(a) in relation to First Completion and the First Tranche Sale Shares, Bison-GE; and
(b) in relation to Second Completion and the Second Tranche Sale Shares, GFN.
Recordsmeans all documents, books, files, reports, registers, copies of taxation returns, accounts and plans belonging or relating exclusively to or used by any Group Company.
Related Management Vendormeans, in respect of a Guarantor, the Management Vendor set out opposite the name of the Guarantor in Schedule 2.
Retained Interestmeans, 16.0% of the debt and equity invested by GFC or any affiliate thereof (including the Deposit) prior to the Second Completion which amounts are necessary to complete the Second Completion and pay GFN’s obligations under this deed, which investments after the First Closing shall be upon terms that are to be mutually agreed by Bison-GE and GFN but will at GFN’s option include at least 50% debt and which, upon issuance to Bison-GE, shall result in Bison-GE owning 13.8% of the total issued share capital of GFN and any debt securities issued to GFC or any affiliate thereof.
Respective Proportionsmeans the respective proportions of the Vendors as set out in the sixth column of Schedule 1.
Restraint Amounthas the meaning given to that term in clause 15.1(c).
Royal Wolf Tradingmeans Royal Wolf Trading Australia Pty Limited ACN 069 244 417.
Sale Sharesmeans:
(a) in relation to the Original Vendors and First Completion, the First Tranche Sale Shares; and
A-13
(b) in relation to Bison-GE and the Management Vendors and Second Completion, the Second Tranche Sale Shares.
Second Completionmeans completion of the sale and purchase of the Second Tranche Sale Shares to GFN contemplated by this deed.
Second Completion Datemeans the date on which Second Completion occurs.
Second Completion Paymentmeans the Bison-GE Completion Payment and the Management Vendors Second Completion Payment.
Second Tranche Sale Sharesmeans the Sale Shares to be sold by the Management Vendors and Bison-GE as is more particularly described in Part C of Schedule 1 (and for the avoidance of doubt includes the D Class share in the Company issued to Bison-GE pursuant to clause 4.7).
SGAAmeans theSuperannuation Guarantee Administration Act 1992 (Cth).
Subsidiariesmeans Royal Wolf Trading and Royal Wolf Hi-Tech Pty Limited.
Superannuation Guarantee ChargeorSGCmeans the superannuation guarantee charge imposed by theSuperannuation Guarantee Charge Act 1992and theSuperannuation Guarantee (Administration) Act 1992.
Taxmeans all forms of taxes, duties, imposts, charges, withholdings, rates, levies or other governmental impositions of whatever nature and by whatever authority imposed, assessed or charged together with all costs, charges, interest, penalties, fines, expenses and other additional statutory charges, incidental or related to the imposition.
Title and Capacity Warrantiesmeans each of the representations and warranties set out in Schedule 4.
Vendorsmeans:
(a) in relation to the First Tranche Sale Shares and First Completion, collectively, the Original Vendors; and
(b) in relation to the Second Tranche Sale Shares and Second Completion, the Management Vendors and (except to the extent specified in clause 9.20(a)), Bison-GE.
Vendors’ Representativesmeans up to the date that is 5 Business Days after the Determination Date, Paul Jeffery or such other person appointed in writing from time to time by the Management Vendors and Rajeev Dhawan or such other person appointed from time to time by Equity Partners and after the date which is 5 Business days after the Determination Date means such person or persons appointed in writing from time to time by the Management Vendors.
Warrantiesmeans each of:
(a) the Business Warranties;
(b) the Title and Capacity Warranties;
(c) the indemnity in clause 9.2;
(d) the indemnity in clause 9.16;
(e) the indemnity in clause 10; and
(f) the warranty given by the Management Vendors in clause 8.3.
Working Capital Amountmeans current assets (excluding cash and deposits relating to ADF Contract) less current liabilities (excluding interest bearing debt (other than in relation to assets acquired by the Group in satisfaction of its obligations under the ADF Contract (if awarded)), finance leases, overdrafts and bank vendor financing).
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1.1 Interpretation
In this deed, except where the context otherwise requires:
(a) the singular includes the plural and vice versa, and a gender includes other genders;
(b) another grammatical form of a defined word or expression has a corresponding meaning;
(c) a reference to a clause, paragraph, schedule or annexure is to a clause or paragraph of, or schedule or annexure to, this deed, and a reference to this deed includes any schedule or annexure;
(d) a reference to a document or instrument includes the document or instrument as novated, altered, supplemented or replaced from time to time;
(e) a reference to$, A$,$A,dollarorA$is to Australian currency;
(f) a reference to time is to Sydney, Australia time;
(g) a reference to a party is to a party to this deed, and a reference to a party to a document includes the party’s executors, administrators, successors and permitted assigns and substitutes;
(h) a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity;
(i) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them;
(j) a word or expression defined in the Corporations Act has the meaning given to it in the Corporations Act;
(k) any agreement, representation, warranty, indemnity or undertaking made or given by the Original Vendors binds and is given by them severally in their Respective Proportions;
(l) the meaning of general words is not limited by specific examples introduced byincluding,for exampleor similar expressions;
(m) a rule of construction does not apply to the disadvantage of a party because the party was responsible for the preparation of this deed or any part of it;
(n) if a day on or by which an obligation must be performed or an event must occur is not a Business Day, the obligation must be performed or the event must occur on or by the next Business Day;
(o) a reference to ’as far as the Vendors/Equity Partners are aware’ or words to that effect means:
(i) in relation to Equity Partners, the actual knowledge of Equity Partners after having made due and proper enquiry of the Guarantors; and
(ii) in relation to the Management Vendors, the actual knowledge of the Guarantors,
(iii) but excluding any facts or circumstances in which any such person has constructive knowledge only; and
(p) a reference to‘the date of this deed’ is to 12 September 2006.
1.2 Headings
Headings are for ease of reference only and do not affect interpretation.
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2. Conditions
2.1 Conditions to First Completion
First Completion of the sale and purchase of the First Tranche Sale Shares under this deed is subject to the following conditions precedent being satisfied on or before the First Completion Date:
(a) the written consent to the change in control of the Company is obtained by the Vendors to the extent required under the ANZ Facility;
(b) execution of the New Shareholders Agreement by the parties to it;
(c) no event occurring which has a Material Adverse Effect;
(d) Triton Container International Limited(Triton) gives, to the extent required under the relevant agreement, its consent to the change of control of Royal Wolf Trading arising as a result of the transaction contemplated by this deed as required under the container operating leases between Triton and Royal Wolf Trading and Triton confirms there are no present breaches of these agreements;
(e) Triton CSA International B.V. gives, to the extent required under the relevant agreement, its consent to the deemed assignment of the trademark licence agreement between Triton CSA International B.V. and Royal Wolf Trading such consent being in relation to a deemed assignment to either GFN, Bison-GE or Ronald Valenta;
(f) cancellation of all Options;
(g) the Vendors providing written evidence to each Purchaser that:
(i) the Vendors and the Company have terminated the shareholders agreement governing the operation of the Company dated 10 December 2003 (as amended);
(ii)��the service contract between the relevant Group Company and Michael Baxter has been terminated; and
(iii) Mike Baxter has waived all claims he may have against the relevant Group Company as a result of the termination his service contract;
(h) the amendment of the service contracts for each of the Key Employees such that references to any shareholders agreement and any employee share option plan are deleted from those service contracts;
(i) all Key Employees entering into a deed with Royal Wolf Trading and each Purchaser pursuant to which they confirm that Royal Wolf Trading is not in default pursuant to their respective service contracts and that they have no claim against Royal Wolf Trading on any account other than for their current entitlements under such service contracts;
(j) the CFO Shares are bought back by the Company under Part 2J.1 of the Corporations Act; and
(k) the rights attaching to the Class C Shares are varied and, following such variation, the Class C Shares in the capital of the Company are converted into the number of ordinary shares specified in Part B of Schedule 1;
(l) the rights attaching to the Class A Shares are varied such that, immediately following First Completion, the Class A Shares in the capital of the Company will convert into 4,322,590 ordinary shares;
(m) Ronald F Valenta (and agreed affiliates) enters into the Backup Purchase Agreement with Bison-GE and the Management Vendors; and
(n) the Subscription Deed, in the form contained in Schedule 17, is entered into between the Company and Bison-GE in relation to the subscription by Bison-GE for a D Class Share in the capital of the Company for the Bison-GE Subscription Amount.
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2.2 Conditions to Second Completion
(a) The obligation of Bison-GE and the Management Vendors to sell the Second Tranche Sale Shares and the obligation of GFN to purchase the Second Tranche Sale Shares is subject to the condition precedent that the stockholders of GFC shall have approved such transaction on the basis described in clause 2.7 (and GFC shall provide to Bison-GE and the Management Vendors written evidence of such approval).
(b) The obligation of the Management Vendors to sell the Second Tranche Sale Shares at the Second Completion is subject to the condition precedent that a notice is issued in writing by, or on behalf of, the Treasurer of the Commonwealth of Australia stating that the Commonwealth Government does not object to the parties entering into and completing this deed.
(c) The obligation of GFN to purchase the Second Tranche Sale Shares at the Second Completion is subject to the following conditions precedent (if not already satisfied in relation to First Completion), namely:
(i) no event occurring which has a Material Adverse Effect;
(ii) a notice is issued in writing by, or on behalf of, the Treasurer of the Commonwealth of Australia stating that the Commonwealth Government does not object to the parties entering into and completing this deed;
(iii) Triton gives, to the extent required under the relevant agreement, its consent to the change of control of Royal Wolf Trading arising as a result of the transaction contemplated by this deed as required under the container operating leases between Triton and Royal Wolf Trading and Triton confirms there are no present breaches of these agreements.
(iv) Triton CSA International B.V. gives, to the extent required under the relevant agreement, its consent to the deemed assignment of the trademark licence agreement between Triton CSA International B.V. and Royal Wolf Trading.
(v) each of the landlords to the Leases numbered 1, 2, 5, 10, 12, 13, 14 and 16 in Schedule 6 give their written consent to change of control in a form reasonably acceptable to the Purchaser.
(vi) cancellation of all Options;
(vii) the Vendors providing written evidence to the Purchaser that:
(A) the Vendors and the Company have terminated the shareholders agreement governing the operation of the Company dated 10 December 2003 (as amended);
(B) the service contract between the relevant Group Company and Michael Baxter has been terminated; and
(C) Mike Baxter has waived all claims he may have against the relevant Group Company as a result of the termination his service contract;
(viii) the amendment of the service contracts for each of the Key Employees such that references to any shareholders agreement and any employee share option plan are deleted from those service contracts;
(ix) all Key Employees entering into a deed with Royal Wolf Trading and the Purchaser pursuant to which they confirm that Royal Wolf Trading is not in default pursuant to their respective service contracts and that they have no claim against Royal Wolf Trading on any account other than for their current entitlements under such service contracts;
(x) the CFO Shares are bought back by the Company under Part 2J.1 of the Corporations Act;
(xi) Bison-GE has not waived any of the conditions precedent to First Completion (as set out in clause 2.1) unless GFN has consented to such waiver in writing.
(xii) ANZ has entered into a subordination agreement with Bison-GE with respect to a senior subordinated note facility to be made to the Group Companies by Bison-GE;
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(xiii) the written consent to the change in control of the Company is obtained by the Vendors to the extent required under the ANZ Facility and the ANZ Facility remains in place and full force and effect or another finance facility acceptable to Bison-GE is in place and is in full force and effect.;
(xiv) Bison-GE shall have complied with its obligations under clause 23.1 of this deed;
(xv) Bison-GE shall have entered into a shareholders agreement with GFC and GFN in the form of the agreement set out in Schedule 14; and
(xvi) Bison-GE shall have entered into a shareholders agreement with the Management Vendors in the form of the agreement set out in Schedule 15; and
(xvii) Bison-GE shall have complied in all material respects with all covenants and agreements under this deed required to have been complied with at or prior the Second Completion.
(d) The obligation of Bison-GE to sell the Second Tranche Sale Shares registered in its name at the Second Completion is subject to the following conditions precedent (if not already satisfied in relation to First Completion), namely:
(i) a notice is issued in writing by or on behalf of the Treasurer of the Commonwealth of Australia stating that the Commonwealth Government does not object to the parties entering into and completing this deed;
(ii) ANZ has entered into a subordination agreement with Bison-GE with respect to a senior subordinated note facility to be made to the Group Companies by Bison-GE in a form acceptable to Bison-GE;
(iii) the written consent to the change in control of the Company is obtained by the Vendors to the extent required under the ANZ Facility and the ANZ Facility remains in place and full force and effect or another finance facility acceptable to Bison-GE is in place and is in full force and effect;
(iv) Bison-GE shall have received a legal opinion in form and content satisfactory to Bison-GE addressing the matters set forth in Schedule 16 to this deed;
(v) GFN and GFC shall have complied with their obligations under clause 23.1 and 23.2 of this deed;
(vi) GFN and GFC shall have complied in all material respects with all covenants and agreements under this deed required to have been complied with at or prior the Second Completion.
(vii) Bison-GE shall have entered into a shareholders agreement with GFC and GFN in the form of the agreement set out in Schedule 14.
(e) GFN acknowledges that the Conditions referred to in clauses 2.2(c)(iii) to (x) inclusive and (xiii) have been satisfied on or before the First Completion Date.
2.3 Benefit and Waiver of Conditions
(a) The Conditions in clauses 2.1(a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) are for the benefit of Bison-GE.
(b) The Conditions in clauses 2.1(b) and (l) are for the benefit of both Bison-GE and the Original Vendors.
(c) The Condition in clause 2.2(c)(ii) is for the benefit of both Bison-GE and the Management Vendors.
(d) A Condition may only be waived in writing by the party entitled to the benefit of that Condition and will be effective only to the extent specifically set out in that waiver provided that Bison-GE may not waive any Condition set out in clause 2.1 without GFN’s written consent.
2.4 Conduct of the parties
(a) Each party must use all reasonable efforts within its own capacity to ensure that each Condition in clause 2.1 is fulfilled as soon as reasonably practicable and in any event before 5:00pm on 30 March 2007.
(b) Bison-GE, GFN and the Management Vendors must use all reasonable efforts within their own capacity to ensure that each Condition in clause 2.2 is fulfilled as soon as reasonably practicable.
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(c) The parties must keep each other informed of progress in achieving satisfaction of each of the Conditions and of any circumstances which may result in any Condition not being satisfied in accordance with its terms.
(d) GFN agrees to act reasonably and to provide reasonable assistance to the Vendors in obtaining the requisite change of control consents contemplated in clauses 2.1(d) and 2.1(e)
(e) Without limiting clause 2.4(c), GFN and GFC agree to provide the Management Vendors and Bison-GE on a timely basis or upon written request with written updates of any material developments regarding the preparation, filing and approval of the proxy statements and GFC stockholder approval referred to in clause 2.2(a).
(f) The parties must, immediately upon becoming aware that the last of the Conditions has been satisfied or waived (in accordance with clause 2.2(e)), exchange written acknowledgements confirming that fact and confirming the date on which Completion will occur.
2.5 Failure of Condition and termination
(a) If any of the Conditions in clause 2.1 are not satisfied before 5:00pm on 30 March 2007 or such later date as the Vendors may agree in their discretion, then the Vendors have the right (but not the obligation) to immediately terminate this deed by notice in writing to Bison-GE and GFN.
(b) Subject to clause 2.5(h), if the Condition in clauses 2.2(a) is not satisfied by 5:00 pm on September 1, 2007 (California USA time) then the Management Vendors, Bison-GE or GFN shall have the right (but not the obligation) to immediately terminate the obligation of Bison-GE, the Management Vendors and GFN to complete the sale and purchase of the Second Tranche Sale Shares by notice in writing to the other parties (other than Equity Partners).
(c) Subject to clause 2.5(h), if GFC holds a special meeting of its stockholders at which the proposal to acquire the Second Tranche Shares is considered and voted upon and GFC stockholder approval is not obtained at such special meeting in terms of clause 2.7, the Management Vendors, Bison-GE or GFN shall have the right to immediately terminate the obligations of the Management Vendors, Bison-GE and GFN to complete the sale and purchase of the Second Tranche Sale Shares by notice in writing to the other parties (other than Equity Partners).
(d) Subject to clause 2.5(h), if the Condition in clause 2.2(b) is not satisfied prior to or within 20 Business Days following the satisfaction of the Condition in clause 2.2(a) then the Management Vendors shall have the right (but not the obligation) to immediately terminate the obligations of the Management Vendors and GFN under this deed to complete the sale and purchase of the Second Tranche Sale Shares registered in their names by notice in writing to Bison-GE and GFN.
(e) Subject to clause 2.5(h), if any of the Conditions in clause 2.2(c) are not satisfied prior to or within 20 Business Days following the satisfaction of the Condition in clause 2.2(a), then or such later date as GFN shall have the right (but not the obligation) to immediately terminate the obligations of the Management Vendors, Bison-GE and GFN under this deed to complete the sale and purchase of the Second Tranche Sale Shares by notice in writing to Bison-GE and the Management Vendors.
(f) Subject to clause 2.5(h), if any of the Conditions in clause 2.2(d) are not satisfied prior to or within 20 Business Days following the satisfaction of the Condition in clause 2.2(a), then Bison-GE have the right (but not the obligation) to immediately terminate the obligations of the Management Vendors, Bison-GE and GFN under this deed to complete the sale and purchase of the Second Tranche Sale Shares by notice in writing to the Management Vendors and GFN.
(g) Notwithstanding clause 2.5(h), if Second Completion shall not have occurred by April 4, 2008, then this deed, and the obligations of all parties under it in relation to the sale and purchase of the Second Tranche Sale Shares, will automatically terminate on that date, without the need for any party to give any notice of termination to any other party.
(h) A party that is in default of its obligations with respect to the satisfaction of any of the Conditions in clause 2.2 shall not be entitled to exercise any rights that it might otherwise have under this clause 2.5 to terminate any of the obligations of itself or any other party with respect to the completion of the sale and purchase of the Second Tranche Shares.
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2.6 Extent of obligation to Fulfil Conditions
The obligation imposed on a party by clause 2.4(a) does not require the party to waive any Condition.
2.7 GFC Stockholder Approval
For the purposes of clause 2.2 the stockholders of GFC will be taken to have approved the purchase of the Second Tranche Sale Shares if and only if the following three conditions are met:
(a) such purchase is approved by the affirmative vote of the holders of a majority of the shares of GFC common stock present and entitled to vote at the special meeting with respect to such purchase;
(b) such purchase is approved by the affirmative vote of the holders of a majority of the shares of GFC common stock issued in GFC’s initial public offering that are voted with respect to such purchase; and
(c) the holders of 20% or more of GFC common stock issued in GFC’s initial public offering do not vote against such purchase and exercise their conversion rights under GFC’s certificate of incorporation.
3. Sale and purchase
3.1 Agreement to sell and purchase First Tranche Sale Shares
The Management Vendors and Equity Partners agree to sell to Bison-GE and Bison-GE agrees to buy from the Management Vendors and Equity Partners the First Tranche Sale Shares:
(a) for the amount calculated in respect of that Vendor in accordance with clause 4.2;
(b) free from Encumbrances;
(c) with all rights, including dividend and voting rights, attached to them;
(d) on the First Completion Date; and
(e) subject to this deed.
3.2 Agreement to sell and purchase Second Tranche Sale Shares
Each Management Vendor and Bison-GE agrees to sell to GFN and GFN agrees to buy from each Management Vendor and Bison-GE the Second Tranche Sale Shares:
(a) for the Management Vendors Second Completion Payment payable to the Management Vendors in the Management Vendors Respective Proportions and the Bison-GE Completion Payment payable to Bison-GE respectively;
(b) free from Encumbrances (other than, in the case of Bison-GE only, any Encumbrances that existed on the date such Shares were acquired by Bison-GE);
(c) with all rights, including dividend and voting rights, attached to them;
(d) on the Second Completion Date; and
(e) subject to this deed.
4. Fair Value and Purchase Price
4.1 Fair Value
The fair market value of the Group is equal to the enterprise value of the Group and is equal to the total amount payable by GFN under this agreement to acquire the Second Tranche Shares which is A$116,500,000 comprised of the following:
(a) the amount of the Net Debt;
(b) the Purchase Price; and
(c) the Restraint Amount referred to in clause 15.1(c).
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4.2 First Tranche Amount
(a) The purchase price for the First Tranche Sale Shares is:
(i) the First Completion Payment; plus
(ii) the Deposit; plus
(iii) the Equity Partners Escrow Amount; plus
(iv) the amount (if any) payable by the Company to the Original Vendors pursuant to clause 4.7; less
(v) the amount (if any) payable by the Original Vendors to Bison-GE or the Company pursuant to clause 4.9,
subject to adjustment under clause 4.5.
(b) The purchase price payable to each Vendor for its First Tranche Sale Shares is the dollar amount specified opposite the name of that Vendor in column 3 of Part B of Schedule 1 (being that Vendor’s share of the First Completion Payment) plus the percentage of the total amount of the adjustments payable pursuant to clause 4.5 set opposite the name of that Vendor in column 4 of Part B of Schedule 1.
4.3 Second Tranche Amount
(a) The purchase price for the Second Tranche Sale Shares is:
(i) the Second Completion Payment; plus
(ii) the Management Escrow Amount.
(b) The total purchase price for the Second Tranche Sale Shares shall be paid as follows:
(i) the Bison-GE Completion Payment to Bison-GE in respect of the Sale Shares being sold by Bison-GE at Second Completion; and
(ii) the Management Vendors Second Completion Payment to the Management Vendors in the Management Vendors’ Respective Proportions in respect of the balance of the Second Tranche Sale Shares.
4.4 Deposit
(a) GFN has paid an amount of A$550,000 in cash to the Vendors’ Representatives or their nominee as a non-refundable deposit within 1 Business Day of the date of this deed.
(b) The parties acknowledge that GFN has paid the following additional amounts in cash to the Vendors’ Representatives or their nominee as a non-refundable deposit as follows:
(i) A$250,000 on 30 November 2006;
(ii) A$250,000 on 31 December 2006; and
(iii) A$250,000 on 31 January 2007.
(c) The Management Vendors and Equity Partners acknowledge and agree that the Deposit has been paid by the Vendor’s Representatives to the Vendors or the Company (if the Vendors so determine) (in their Respective Proportions) or in such proportion as the Vendors may agree.
4.5 Adjustments
(a) If the Net Tangible Assets Amount (as determined by reference to the Completion Accounts) is less than the relevant NTA Amount then on the Determination Date the Original Vendors (in their Respective Proportions) must pay an amount equal to the shortfall to Bison-GE and the Purchase Price will be decreased accordingly.
(b) If the Working Capital Amount (as determined by reference to the Completion Accounts) is less than A$3,000,000, then on the Determination Date the Original Vendors (in their Respective Proportions) must, subject
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to clause 4.5(j), pay an amount equal to the shortfall to Bison-GE and the Purchase Price will be decreased accordingly.
(c) If the gross amount of container rental equipment at First Completion as determined by reference to the Completion Accounts:
(i) is greater than the Container Rental Equipment Amount then on the Determination Date but subject to clause 4.10 Bison-GE must pay an amount equal to the excess to the Original Vendors (in their Respective Proportions) and the Purchase Price will be increased accordingly; or
(ii) is less than the Container Rental Equipment Amount then on the Determination Date the Original Vendors (in their Respective Proportions) must pay an amount equal to the shortfall to Bison-GE and the Purchase Price will be decreased accordingly.
(d) If the Net Debt (as determined by reference to the Completion Accounts) is:
(i) less than the Estimated Net Debt then on the Determination Date, subject to clause 4.10 Bison-GE must pay an amount equal to the difference to the Original Vendors in their Respective Proportions and the Purchase Price will be increased accordingly; or
(ii) greater than the Estimated Net Debt, then on the Determination Date, the Original Vendors in their Respective Proportions must pay an amount equal to the difference to Bison-GE and the Purchase Price will be reduced accordingly.
(e) The parties agree that any payments to be made pursuant to clauses 4.5(a), (b), (c) and (d) and clauses 4.7 and 4.9 will be netted off so that only one payment of the appropriate net amount will be payable by the relevant party.
(f) Bison-GE agrees that it may not reduce or set-off any amounts payable to the Original Vendors under this clause 4.5 against any Claims made by Bison-GE against the Original Vendors under this deed.
(g) All adjustments required to be paid under this clause 4.5, and under clause 4.9, will be paid in cash and:
(i) if the adjustment payment is owed by the Purchaser to the Vendors, then the total amount of the adjustment payment that is payable on the Determination Date is the aggregate of such percentages set out in column 4 of Part B of Schedule 1, and the adjustment payment will be payable to the Vendors in the proportions set out in column 4 of Part B of Schedule 1;
(ii) the balance of the adjustment amount (referred to in paragraph (b) of the definition of Management Vendors Completion Payment) will be payable to the Management Vendors at Second Completion;
(iii) if the adjustment payment is owed by the Vendors to the Purchaser, then the total amount of the adjustment payment that is payable on the Determination Date will be payable by the Vendors to the Purchaser in the proportions set out in column 4 of Part B of Schedule 1;
(iv) the balance of the adjustment amount will be payable to the Purchaser by the Management Vendors at Second Completion;
(h) Subject only to paragraph (j) below, the parties acknowledge and agree that each of paragraphs (a) to (d) above operate separately and independently from each of the other of those paragraphs, so that an adjustment may be made in respect of the same subject matter or item under one or more of those paragraphs.
(i) For completeness, worked examples of the adjustments contemplated by clauses 4.5 and 4.9 are set out in Schedule 12.
(j) The Original Vendors will be entitled to offset against their obligation to pay Bison-GE in respect of any shortfall in Working Capital under clause 4.5(b) an amount equal to the excess Net Tangible Assets Amount (being the amount by which the Net Tangible Assets Amount exceeds the NTA Amount), up to a maximum set-off amount of A$250,000.
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4.6 Purchase Price
The Purchase Price for the First Tranche Sale Shares must be paid subject to the adjustments under clauses 4.5, 4.7 and 4.9 to the Vendors in cash.
4.7 Net Debt
(a) On the First Completion Date, subject to the limitations of clause 4.10, Bison-GE must subscribe for one D Class share in the capital of the Company having the rights set out in the constitution of the Company adopted on First Completion at a subscription price equal to the Bison-GE Subscription Amount. The execution of the Subscription Deed referred to in clause 2.1(n) by Bison-GE constitutes an irrevocable application to subscribe, on First Completion, for that D Class share in the capital of the Company.
(b) The Original Vendors represent and warrant that immediately upon the Company receiving the Bison-GE Subscription Amount:
(i) the redemption of the B Class Notes will have been completed in full (by paying the issue price and all accrued interest on the B Class Notes to Equity Partners);
(ii) all of the Options will have been cancelled on the basis that 75% of this amount is paid on First Completion and the balance on July 31, 2007; and
(iii) the buy-back of the CFO Shares will have been completed.
4.8 Cleared funds
All cash payments under this clause 4 must be paid by bank cheque or payable in immediately available funds to a single bank account nominated by the Original Vendors in full and final satisfaction of the Purchaser’s obligations to make cash payments to the Original Vendors under this clause 4.
4.9 K& S Lease (Curtainsiders)
If the outstanding balance owing under the K & S Lease (Curtainsiders) at First Completion exceeds A$482,000, the Original Vendors (in their Respective Proportions) must pay the excess (theK&S Lease Adjustment Amount) to Bison-GE on the Determination Date as a reduction in the Purchase Price.
4.10 Maximum amount payable by Bison-GE
(a) Notwithstanding any other provision in this deed (except clause 15.8(b)) or in any other document entered into between any of the parties, the maximum aggregate amount that Bison-GE will be required to pay under this deed (whether in payment of the First Completion Amount or any amount that it is required to pay to the Vendors or to pay or procure to be provided to the Company or any other person) will not exceed the Bison-GE Maximum Amount.
(b) To the extent that Bison-GE is required to pay or procure any further amounts to be paid to the Original Vendors, the Company or any other person under this deed in excess of the Bison-GE Maximum Amount, subject to clause 15.8(b), that amount will be paid by GFN in accordance with clause 4.10(c), (d) and (e).
(c) On and from Second Completion any outstanding payment or procurement obligations of Bison-GE under this deed shall apply as if GFN (and not Bison-GE) purchased the First Tranche Sale Shares on the First Completion Date and GFN was named as the party required to pay or procure the payment of all amounts referred to in this deed.
(d) If it is determined that the Bison -GE Maximum Amount will be exceeded then as regards the amount of the adjustments due to the Original Vendors pursuant to clause 4.5, all monies that are available up to the Bison-GE Maximum Amount shall be paid as a first priority to Equity Partners and as a second priority to the Management Vendors.
(e) If, after making payments in the above order of priority, there is any shortfall in the amount payable to:
(i) Equity Partners, such shortfall will become payable to Equity Partners by GFN at Second Completion and on the basis that such shortfall will carry interest at the rate of 18% per annum (calculated on daily rests and not capitalised) from the Date of Determination ; and/or
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(ii) the Management Vendors, such shortfall shall be added to the Management Vendors Second Completion Payment on the basis that it carries interest at the rate of 18% per annum (calculated on daily rests and not capitalised) from the Date of Determination.
(f) If the Second Completion Date occurs prior to the Determination Date then any net adjustments to be paid to the Original Vendors shall be paid by GFN (and Bison-GE shall have no liability to pay any such adjustments) and any adjustments to be paid to Bison-GE shall be paid to GFN (and Bison-GE shall have no entitlement to such adjustments).
(g) Bison-GE represents and warrants to each of the Vendors and to GFN that on or before the First Completion Date it will be capitalised to not less than US$45 million.
5. Escrow
5.1 Management Vendors Escrow
(a) The Management Vendors irrevocably consent to GFN paying or dealing with the Management Escrow Amount in accordance with clause 5.1(b).
(b) The Management Vendors and GFN agree and must procure that the Management Escrow Amount is paid on Second Completion and released as follows:
(i) first, in payment and discharge to the Purchaser of any Claim made by the Purchaser under the Warranties against the Management Vendors (or against the Guarantors under clause 14), which Claim has been agreed, settled or finalised in accordance with clause 9;
(ii) on the first anniversary of the date of this deed, the amount (if any) by which A$1,250,000 exceeds the amount of any outstanding Claims made by the Purchaser against the Management Vendors under the Warranties or any Claims which have been agreed, settled or finalised will be released to the Management Vendors in the Management Vendors Respective Proportions on that date;
(iii) on the date that is 18 months after the date of this deed, the amount remaining in the Escrow Account, together with any accrued interest, that is not subject to any outstanding Claim or Claims made by the Purchaser against the Management Vendors under the Warranties will be released to the Management Vendors in the Management Vendors Respective Proportions on that date; and
(iv) if any or all of the Management Escrow Amount remains after the Claim or Claims referred to in clause 5.1(b)(iii) have been agreed, settled or finalised, that amount (together with any interest) will be released to the Management Vendors in the Management Vendors Respective Proportions immediately following such agreement, settlement or finalisation of the relevant Claim.
(c) The Management Vendors agree that they are not entitled to satisfy their obligations to pay any amounts payable by the Management Vendors to the Purchaser under clause 4.5 out of the Management Escrow Amount.
(d) The Purchaser agrees that it must first satisfy the total amount of all Claims made by it against the Management Vendors from the Management Escrow Amount before the Purchaser becomes entitled to recover any other cash in respect of a damages Claim from the Management Vendors.
5.2 Equity Partners Escrow
(a) Equity Partners irrevocably consents to Bison-GE paying the Equity Partners Escrow Amount in accordance with clause 5.2(b).
(b) Equity Partners and Bison-GE agree and must procure that the Equity Partners Escrow Amount is paid on First Completion and released as follows:
(i) first, in payment and discharge to the Purchaser of any Claim made by the Purchaser against Equity Partners under the Warranties, which Claim has been agreed, settled or finalised in accordance with clause 9;
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(ii) on the first anniversary of the date of this deed, the amount (if any) by which A$500,000 exceeds the amount of any outstanding Claims made by the Purchaser against Equity Partners under the Warranties or any Claims which have been agreed, settled or finalised will be released to Equity Partners on that date;
(iii) on the date that is 18 months after the date of this deed, the amount remaining in the Escrow Account, together with any accrued interest, that is not subject to any outstanding Claim or Claims made by the Purchaser against Equity Partners under the Warranties will be released to Equity Partners on that date; and
(iv) if any or all of the Escrow Amount remains after the Claim or Claims referred to in clause 5.2(b)(iii) have been agreed, settled or finalised, that amount (together with any interest) will be released to Equity Partners immediately following such agreement, settlement or finalisation of the relevant Claim.
(c) Equity Partners agrees that it is not entitled to satisfy its obligations to pay any amounts payable by Equity Partners to the Purchaser under clause 4.5 out of the Equity Partners Escrow Amount.
(d) The Purchaser agrees that it must first satisfy the total amount of all Claims made by it against Equity Partners from the Equity Partners Escrow Amount before the Purchaser becomes entitled to recover any other cash in respect of a damages Claim from Equity Partners.
5.3 Interest
(a) The Management Vendors will be entitled to all interest earned on the Management Escrow Amount.
(b) Equity Partners will be entitled to all interest earned on the Equity Partners Escrow Amount.
5.4 Effect of Second Completion
For the avoidance of doubt, the parties agree that on and from Second Completion the Equity Partners Escrow Amount (or the remaining balance thereof) shall be held in the Escrow Account in the joint names of Equity Partners and GFN and that the provisions of clauses 5.2 and 5.3 shall thereafter apply as if GFN (and not Bison-GE) purchased the First Tranche Sale Shares.
6. Completion
6.1 First Completion — Time and place
First Completion will take place on or prior to March 30, 2007 at the offices of Minter Ellison, Aurora Place, 88 Phillip Street, Sydney, NSW 2000 or such other time and place agreed by the parties in writing.
6.2 First Completion — Obligations of the Vendors
At or before First Completion the Vendors must:
(a) deliver to the Purchaser duly executed and completed transfers in favour of the Purchaser of the First Tranche Sale Shares in registrable form, together with the relevant share certificates for cancellation;
(b) produce to the Purchaser any power of attorney or other authority under which the transfers of the First Tranche Sale Shares are executed together with an irrevocable consent and waiver by any person with a right of pre-emption in relation to the First Tranche Sale Shares;
(c) cause the board of directors of the Company to resolve that the transfers of the First Tranche Sale Shares together with relevant share certificates, be approved and registered (subject only to the payment of stamp duties or other Taxes of a similar nature) and the transaction of any other business of which the Purchaser may give notice prior to the First Completion Date;
(d) cause the boards of directors of each Group Company to resolve to approve the matters referred to in clauses 6.2(c), (e), (f) and (g);
(e) cause the persons named in the fourth and fifth columns of Schedule 3 to be appointed as directors and secretary (as applicable) of the Company and each respective Group Company with effect from First Completion (subject to receipt by the Vendors of consents to act from each such person);
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(f) cause the resignation of the persons named in the second and third columns of Schedule 3 as directors and secretary (as applicable) of each Group Company, with effect from First Completion;
(g) cause the revocation, with effect from First Completion, of all authorities relating to bank accounts of each Group Company;
(h) deliver to the Purchaser or otherwise make available at the registered office of the Company, all Records (other than those which the Vendors are entitled to retain under clause 6.7). The Vendors must ensure that the register of members of each Group Company is accurate and up to date;
(i) deliver to the Purchaser or otherwise make available at the registered office of the Company the common seal (if any) of each Group Company;
(j) procure each of the Key Employees to enter into deeds containing the matters referred to in clause 2.1(i);
(k) deliver evidence of the release of the equitable mortgage existing over certain of the Sale Shares held by Cetro Pty Limited, FOMJ Pty Limited and FOMM Pty Limited created pursuant to an Equitable Mortgage of Shares between those Vendors, Triton CSA International B.V and others; and
(l) do all other things necessary or desirable to transfer the First Tranche Sale Shares and complete any other transaction contemplated by this deed, including delivering new share certificates with respect to the First Tranche Sale Shares to the Purchaser, to place the Purchaser in effective control of the Group and the Business.
6.3 Second Completion — Time and place
Second Completion will take place within 5 Business Days of the Condition in clause 2.2(a) being satisfied (and all of the other Conditions in clause 2.2 being satisfied or waived) at the offices of Blake Dawson Waldron, Level 36, 225 George Street, Sydney 2000 or such other time and place agreed by the Vendors and the Purchaser in writing.
6.4 Second Completion — Obligations of the Management Vendors
At or before Second Completion each of the Management Vendors and Bison-GE severally in respect of the Second Tranche Sale Shares registered in their own names must:
(a) deliver to the Purchaser duly executed and completed transfers in favour of the Purchaser of those Second Tranche Sale Shares in registrable form, together with the relevant share certificates for cancellation;
(b) produce to the Purchaser any power of attorney or other authority under which the transfers of the Second Tranche Sale Shares are executed together with an irrevocable consent and waiver by any person with a right of pre-emption in relation to those Second Tranche Sale Shares;
(c) cause the board of directors of the Company to resolve that the transfers of those Second Tranche Sale Shares together with relevant share certificates, be approved and registered (subject only to the payment of stamp duties or other Taxes of a similar nature) and the transaction of any other business of which the Purchaser may give notice prior to the Second Completion Date;
(d) do all other things necessary or desirable to transfer those Second Tranche Sale Shares and complete any other transaction contemplated by this deed, including delivering new share certificates with respect to those Second Tranche Sale Shares to the Purchaser, to place the Purchaser in effective control of the Group and the Business; and
(e) agree to the termination and release of the New Shareholders Agreement.
6.5 Obligations of the Purchaser
(a) At First Completion, the Purchaser must:
(i) pay the First Completion Payment, in accordance with clause 4.6;
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(ii) pay to the Company the aggregate subscription amount for the D Class shares subscribed for by the Purchaser pursuant to clause 4.7(a);
(iii) pay the Equity Partners Escrow Amount into the Escrow Account; and
(iv) deliver a deed in a form reasonably acceptable to the Original Vendors under which the Purchasers release all directors and officers of the Group Companies from all liabilities incurred by them in their capacities as officers of the Group other than for gross negligence, wilful misconduct or fraud and pursuant to which all such directors release the Group Companies from any Claim any such directors may have against any Group Company.
(b) At Second Completion the Purchaser must:
(i) pay the Second Completion Payment, in accordance with clause 4.6; and
(ii) pay the Management Escrow Amount into the Escrow Account.
(c) The Purchaser agrees that it may not reduce or set off against its obligation to pay the First Completion Payment or the Second Completion Payment any Claims made by the Purchaser against the Vendors under this deed.
(d) The Purchasers agree that the D Class share issued to Bison-GE pursuant to clause 4.7 will not affect the amount of the Management Vendors Second Completion Payment.
6.6 Simultaneous actions at Completion
(a) In respect of First Completion:
(i) the obligations of the parties under this deed are interdependent;
(ii) all actions required to be performed will be taken to have occurred simultaneously on the First Completion Date; and
(iii) the Purchaser need not complete the purchase of any of the First Tranche Sale Shares unless the purchase of all the First Tranche Sale Shares is completed simultaneously.
(b) In respect of Second Completion:
(i) the obligations of the parties under this deed are interdependent;
(ii) all actions required to be performed will be taken to have occurred simultaneously on the Second Completion Date; and
(iii) the Purchaser may not acquire any of the Second Tranche Sale Shares from the Management Vendors unless it has simultaneously acquired the Second Tranche Sale Shares from Bison-GE.
6.7 Records
After First Completion and after Second Completion, the Vendors may retain copies of any Records necessary for the Vendors to comply with any applicable law (including, without limitation, any applicable Tax law) and to prepare Tax or other returns required of them by law.
6.8 Information and Assistance Following Completion
(a) For 90 days after First Completion and Second Completion (if applicable), if Bison-GE or GFN gives the Vendors (or any of them) notice(‘Assistance Notice’) so requesting the Vendors must furnish the Purchaser with such information relating to the Business in the possession and control of that Vendor specified in the Assistance Notice.
(b) Michael Baxter agrees to assist Bison-GE and GFN (at the Company’s cost) with transition issues for a 360 day period following First Completion on the terms and conditions contained in the Consultancy Agreement contained in Schedule 13 (Michael Baxter Consultancy Agreement). The payments due under the Michael Baxter
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Consultancy Agreement shall commence immediately following the Second Completion Date but on the basis that such agreement commenced on the First Completion Date.
7. Completion Accounts
7.1 Completion Accounts
GFN must as soon as practicable, and in any event no later than 20 Business Days, after the First Completion Date procure that the Group prepares and gives the Vendors’ Representatives a profit and loss statement as at the First Completion Date together with a balance sheet for the Group as at the close of business on the First Completion Date in relation to the period from 1 July 2006 up to the close of business on the First Completion Date (both days inclusive).
7.2 Basis of preparation
(a) The Completion Accounts must be prepared and the amount of the Net Debt, the Container Rental Equipment Amount, the Net Tangible Assets Amount, the Working Capital Amount and the K&S Lease Adjustment Amount, must be calculated on the same basis as the Accounts.
7.3 Access to information
GFN must ensure that all reasonable information and assistance requested by the Vendors’ Representatives is given to them to review the draft Completion Accounts and must permit the Vendors’ Representatives and the Vendors’ advisers to have reasonable access to, and take extracts from, or make copies of, the Records to review the Completion Accounts.
7.4 Review of Completion Accounts
If the Vendors’ Representatives do not dispute the Completion Accounts within ten Business Days after the date on which they are given a copy of the draft Completion Accounts (Final Objection Date) those accounts will be taken to be the final Completion Accounts and the amount of the Net Debt, the Completion Container Rental Equipment Amount, the Net Tangible Assets Amount, the Working Capital Amount and the K&S Lease Adjustment Amount in those accounts will be final and binding on the parties. If the Vendors’ Representatives dispute the Completion Accounts before the Final Objection Date, the dispute will be determined in accordance with clause 7.5.
7.5 Dispute Resolution Procedure
(a) If the Vendors’ Representatives dispute the Completion Accounts, the Vendors’ Representatives must give GFN a notice(Dispute Notice) before the Final Objection Date setting out:
(i) reasonable details of each matter in dispute; and
(ii) the reasons why each matter is disputed.
(b) Within ten Business Days of the Vendors’ Representatives giving GFN a Dispute Notice, GFN must give the Vendors’ Representatives a response in writing on the disputed matters(Response).
(c) If the dispute has not been resolved within ten Business Days of the Purchaser giving the Response to the Vendors’ Representatives, the dispute must promptly be submitted for determination to the Independent Accountant to determine the matter or matters in dispute.
(d) The Independent Accountant must be agreed by the Vendors’ Representatives and the Purchaser. If the Vendors and the Purchaser cannot agree within ten Business Days of the expiry of the period in clause 7.5(c), then the Independent Accountant will be nominated, at the request of either the Vendors or the Purchaser, by the President of the Institute of Chartered Accountants (Sydney Branch).
(e) The disputed matters must be referred to the Independent Accountant by written submission which must include the draft Completion Accounts, the Dispute Notice, the Response and an extract of the relevant provisions of this deed. The Independent Accountant must also be instructed to finish its determination no later than ten Business Days after its appointment (or another period agreed in writing by the Vendors’ Representatives and the Purchaser). Each party shall be entitled to make such written submissions as it deems fit.
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(f) The parties must promptly supply the Independent Accountant with any information, assistance and cooperation requested in writing by the Independent Accountant in connection with its determination. All correspondence between the Independent Accountant and a party must be copied to the other parties.
(g) The Independent Accountant must act as an expert and not as an arbitrator and its written determination will be final and binding on the parties in the absence of manifest error and the Completion Accounts will be deemed to be amended accordingly and will be taken to comprise the final Completion Accounts.
7.6 Costs
The costs of the Independent Accountant (if instructed) will be borne by the Vendors (in their Respective Proportions) as to one-half and by GFN as to one-half.
8. Obligations before First Completion
8.1 Continuity of business
Equity Partners and the Management Vendors must, to the extent within their respective powers as shareholders of the Company and through their board representation, procure that, until First Completion; and Bison-GE must (as regards the matters set out insub-clauses (c) and (d) only), and the Management Vendors must to the extent within their respective powers as shareholders of the Company and through their board representation procure that between the First Completion and the Second Completion, each Group Company:
(a) manages and conducts its Business as a going concern with all due care and in accordance with normal and prudent practice (having regard to the nature of the Business and the past practice of the Group Company);
(b) uses its reasonable efforts to maintain the profitability of the Business;
(c) does not acquire (or agree to acquire) any shares in any corporation or the business and assets of any corporation without the prior written consent of GFN; and
(d) does not (except as provided in the Budget), without the prior consent by notice of the Purchaser (such consent not to be unreasonably withheld or delayed), either:
(i) enter into, terminate or alter any term of any material contract or commitment with a value of A$100,000 or more;
(ii) other than in the ordinary course of the Business, incur any material liabilities of A$50,000 or more;
(iii) other than in the ordinary course of its Business and other than in respect of any securities granted or to be granted by any Group Company in favour of Australia and New Zealand Banking Group Limited or its related entities, dispose of, agree to dispose of, encumber or grant an option over any of its assets;
(iv) hire or terminate the employment of any senior employee or alter the terms of employment (including the terms of superannuation or any other benefit) of any senior employee whose salary package is A$150,000 or more;
(v) allot or issue or agree to allot or issue any share or any security convertible into any share;
(vi) declare or pay any dividend or make any other distribution of its assets or profits;
(vii) alter or agree to alter its constitution; or
(viii) pass any special resolution.
This clause 8.1 and the obligations of Bison-GE and the Management Vendors hereunder shall terminate upon the termination of their obligations to complete the sale of the Second Tranche Shares under clause 2.5.
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8.2 Notice of Change
(a) Where before First Completion an event occurs which has or may have a Material Adverse Effect the Management Vendors and Equity Partners must, immediately upon becoming aware of that event, give notice to each Purchaser describing the event in reasonable detail known to the Management Vendors and Equity Partners.
(b) Where between First Completion and Second Completion an event occurs that has a Material Adverse Effect, the Management Vendors must, immediately upon becoming aware of that event, give notice to Bison-GE and the Purchaser describing the event in reasonable details known to the Management Vendors.
8.3 SEC Proxy Filing
(a) The Vendors acknowledge that GFC has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the ‘Exchange Act’), and as such is subject to certain reporting and filing obligations with the United States Securities and Exchange Commission (‘SEC’). In connection with the transactions contemplated by this deed, these filing and reporting obligations will include filing and obtaining SEC approval of a proxy statement to be sent to the shareholders of GFC and the filing of aForm 8-K upon announcement, material developments concerning and upon closing of the transactions (the ‘SEC Filings’). These documents must include business and financial information regarding the Company, including audited annual and unaudited interim financial statements.
(b) The Management Vendors, in the Management Vendor’s Respective Proportions, covenant to GFC that the information provided (or procured to be provided) by the Management Vendors relating to the Group in any preliminary or definitive proxy statement filed with the SEC in connection with the transactions contemplated by this deed and which information is specifically identified in writing by GFC will not contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading.
(c) GFC agrees to indemnify the Vendors against any Claim against the Vendors to the extent that:
(i) any preliminary or definitive proxy statement or any other document filed with the SEC in connection with the transactions contemplated by this deed contained any statement which, at the time and in the light of the circumstances under which it was made, was false or misleading with respect to any material fact or omitted to state any material fact necessary in order to make the statements therein not false or misleading (excluding any statement based on information which is warranted by the Management Vendors under clause 8.5(b); and
(ii) the final proxy statement did not comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.
(d) GFC will duly dispatch and post the notice of meeting to its stockholders as soon as legally practicable after the proxy statement is approved by SEC and will use its best efforts to cause such meetings to occur no later than 30 days from the date of mailing the notices. GFC’s board of directors will recommend to stockholders the approval of the purchase of the Second Tranche Sale Shares and GFC must include such recommendation in the proxy statement.
(e) The Management Vendors agree to provide such business and financial information and financial statements regarding the Group as GFC may reasonably request for the SEC Filings and to respond to SEC comments in connection therewith, and to cause (to the extent they are able to do so) its auditors to provide such signed reports and consents as may be required for such SEC Filings.
(f) GFC agrees that it will promptly provide copies to and consult with the Management Vendors in the preparation of any written responses with respect to any comments or requests received from SEC, and the Management Vendors will, prior to filing, have the right to review and comment on the SEC Filings made at or prior to Completion. GFC will not file any SEC Filings with the SEC containing information relating to the Group without the prior written consent of Paul Jeffery as representative of the Management Vendors with respect to the information relating to the Group, which consent shall not be unreasonably withheld or unreasonably delayed.
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9. Warranties and Indemnities
9.1 Warranties by Vendors and Bison-GE
(a) The Management Vendors and Equity Partners represent and warrant to each Purchaser, in respect of itself and the Sale Shares held by it only, that each of the Title and Capacity Warranties is true and accurate on its terms at the date of this deed and the First Completion Date and will be true and accurate:
(i) in respect of the First Tranche Sale Shares, on the First Completion Date; and
(ii) in respect of the Second Tranche Sale Shares, on the Second Completion Date; and.
(b) Bison-GE represents and warrants to GFN and GFC, in respect of itself and the Sale Shares held by it only, that based upon the truth and completeness of the Title and Capacity Warranties of the Original Vendors given with respect to the First Tranche Shares acquired by it and sold by Bison-GE at the Second Completion Date, each of the Title and Capacity Warranties given by it is true and correct as to itself on its terms at the Second Completion Date.
(c) Each Management Vendor severally represents and warrants to each Purchaser that each of the Business Warranties is true and accurate on its terms at the date of this deed and will be true and accurate on the First Completion Date.
(d) Each Management Vendor severally represents and warrants to each Purchaser that each of the Business Warranties is, so far as each Management Vendor is aware, true and accurate on its terms at the Second Completion Date.
(e) Equity Partners represents and warrants to each Purchaser that each of the Business Warranties is, so far as Equity Partners is aware, true and accurate on its terms at the date of this deed and will be true and accurate on the First Completion Date.
(f) GFN and GFC acknowledge and agree that Bison-GE does not and will not make any Business Warranties. Each of Bison-GE and the Vendors acknowledges and agrees that if the Second Completion occurs, all rights of Bison-GE in respect of representations and warranties by the Vendors, and covenants and agreements of the Vendors, under this deed shall be deemed assigned to GFN with the effect that GFN may enforce such rights directly against the Vendors. After Second Completion Bison-GE agrees to co-operate with GFN (at GFN’s cost and expense) in the enforcement of such rights, and agrees to promptly deliver to GFN any payments (for damages, indemnification or otherwise) received by Bison-GE in connection with such rights after reimbursement of all costs and expenses incurred by it .
9.2 Vendors’ Indemnity
Equity Partners and the Management Vendors indemnify and agree to keep indemnified the Purchaser against any Claim against the Purchaser to the extent that the Claim gives rise to a breach of any of the Business Warranties (including, without limitation, any Claim suffered or incurred by the Purchaser by reason of the Shares being worth less than they would have been worth had that breach not occurred). If Second Completion occurs:
(a) Equity Partners, the Management Vendors and Bison-GE agree that the benefit of such indemnity shall be for the benefit of and shall be directly enforceable by GFN as if made directly to GFN; and
(b) Bison-GE agrees to co-operate with GFN (at GFN’s cost and expense) in the enforcement of such rights, and agrees to promptly deliver to GFN any payments (for damages, indemnification or otherwise) received by Bison-GE in connection with such rights.
9.3 Application of the Warranties
Each of the Warranties:
(a) remains in full force and effect after First Completion and Second Completion respectively;
(b) is separate and independent and is not limited by reference to any other Warranty; and
(c) is given as an inducement to GFN, Bison-GE and GFC to enter into this deed.
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9.4 Disclosure
(a) The Warranties are given subject to and qualified by, and the Purchaser is not entitled to claim that any fact, matter or circumstance causes any of the Warranties to be breached if and to the extent, but only to the extent, that the fact, matter or circumstance is fairly disclosed in the Disclosure Documents. This clause does not apply to any disclosure relating to the statutory records of any Group Company (and in particular their Members register).
(b) The parties agree that the second Disclosure Letter referred to in paragraph (b) of the definition of Disclosure Letter will not qualify the warranties given on First Completion, nor will any disclosure in that second Disclosure Letter that constitutes a Material Adverse Effect be taken into account in determining whether the condition precedent in clause 2.2(c)(i) is satisfied.
9.5 Acknowledgments
The Purchaser acknowledges and agrees with the Vendors that:
(a) the Warranties are the only warranties that the Purchaser has relied on in entering into this deed;
(b) without limiting clause 9.15, no warranty or representation, expressed or implied, is given in relation to any information or expression of intention or expectation nor any forecast, budget or projection contained or referred to in the Disclosure Documents; and
(c) to the extent permitted by law, all other warranties, representations and undertakings (whether express or implied and whether oral or in writing) made or given by any Group Company or their respective employees, customers, agents or representatives are expressly excluded.
9.6 No reliance
(a) The Purchaser acknowledges, and represents and warrants to the Vendors, that:
(i) no representations, warranties, promises, undertakings, statements or conduct:
(A) have induced or influenced the Purchaser to enter into, or agree to any terms or conditions of, this deed;
(B) have been relied on in any way as being accurate by the Purchaser;
(C) have been warranted to the Purchaser as being true; or
(D) have been taken into account by the Purchaser as being important to its decision to enter into, or agree to any or all of the terms of, this deed,
except, in the case of the Purchaser, those expressly set out in this deed (including in the Warranties);
(ii) it has entered into this deed after satisfactory inspection and investigation of the affairs of the Group, including a reasonable review of all the Disclosure Documents; and
(iii) it has made, and it relies upon, its own reasonable searches, enquiries and evaluations in respect of the Business (including in connection with any financial analysis or modelling conducted by the Purchaser or any of their representatives or advisers), except to the extent expressly set out in this deed (including in the Warranties).
(b) The parties acknowledge that the Vendors are not under any obligation to provide the Purchaser or its advisers with any information (including financial information) on the future performance or prospects of the Group. If the Purchaser has received opinions, estimates, projections, business plans, budget information or forecasts in connection with the Group (including in connection with any financial analysis or modelling conducted by the Purchaser or any of their representatives or advisers), the Purchaser acknowledges and agrees that:
(i) there are uncertainties inherent in attempting to make these opinions, estimates, projections, business plans, budgets and forecasts and the Purchaser is familiar with these uncertainties;
(ii) the Purchaser is taking full responsibility for making its own evaluation of the adequacy and accuracy of all opinions, estimates, projections, business plans, budgets and forecasts furnished to it; and
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(iii) the Vendors are not liable under any Claim arising out of or relating to any opinions, estimates, projections, business plans, budgets or forecasts in connection with the Group.
(c) GFN and GFC confirm and agree that they have requested Bison-GE to enter into its obligations under this Deed and accordingly no act or omission on the part of Bison-GE under or in respect of this deed will:
(i) impair, limit or affect any rights of Bison-GE; nor
(ii) prevent, constrain or limit Bison-GE from taking any action,
with respect to GFN or GFC or any of their affiliates in any other transaction or circumstance or under any other agreement or document whatsoever.
9.7 Financial limits on Claims
(a) The Vendors have no liability for a Claim for a breach of Warranty:
(b) unless the amount of the Claim in respect of that breach is A$20,000 or more; and
(c) until the aggregate of all Claims under all Warranties of A$20,000 or more exceeds A$375,000, in which event the Purchaser may claim the whole amount, not just the excess over A$375,000.
9.8 Time limits on Claims
(a) Subject to clause 9.7(b), a Vendor will have no liability for breach of any Warranty, unless the Purchaser has given written notice of the Claim(Claim Notice) to that Vendor on or before the date that is 18 months after the date of this deed other than a Claim under 9.8(b) and the Claim has been settled or legal proceedings in a court of competent jurisdiction in respect of the Claim have been commenced by the Purchaser against that Vendor within twelve months of the date of the relevant Claim Notice.
(b) A Vendor will have no liability for breach of the Warranties in clauses 1, 3 and 6 of Schedule 5 unless the Purchaser has given written notice of the Claim to that Vendor on or before the date that is five years after the date of this deed.
9.9 Maximum aggregate liability for Claims
(a) Subject to clauses 9.9(b) and (c), the maximum aggregate liability of each Vendor (including legal costs and expenses incurred in defending a Claim from a third party), as a result of Claims for breach of:
(i) the Title and Capacity Warranties given by that Vendor is an amount equal to that Vendor’s Respective Proportion of the Purchase Price; and
(ii) the Business Warranties is an amount equal to that Vendor’s Respective Proportion of 20 percent of A$115,000,000,
provided that the aggregate amount which the Purchasers may recover against that Vendor in respect of all Claims under both paragraphs (i) and (ii) above and in relation to any other breach of this deed by that Vendor (including, without limitation, clauses 9.2, 9.16 and 10) is an amount equal to that Vendor’s Respective Proportion of the Purchase Price.
(b) Subject to clause 9.9(c), the maximum aggregate liability of each Management Vendor (including legal costs and expenses incurred in defending a Claim from a third party) as a result of all Claims notified to the Management Vendors in accordance with clause 9.8 before Second Completion for breach of:
(i) the Title and Capacity Warranties given by that Management Vendor is an amount equal to 57.85 per cent of that Management Vendor’s Respective Proportion of the Purchase Price; and
(ii) the Business Warranties is an amount equal to 57.85 per cent of 20 percent of that Management Vendor’s Respective Proportion of A$115,000,000,
provided that the aggregate amount which the Purchasers may recover against that Management Vendor before Second Completion in respect of all Claims under both paragraphs (i) and (ii) above and in relation to any other
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breach of this deed by that Management Vendor (including, without limitation, clauses 9.2, 9.16 and 10) is an amount equal to 57.85 per cent of that Vendor’s Respective Proportion of the Purchase Price.
(c) Notwithstanding clause 9.9(b), on and with effect from Second Completion, the aggregate amount which the Purchasers may recover against a Management Vendor will be the amount set out in clause 9.9(a) including in relation to any Claim Notices given before Second Completion.
9.10 Duty to mitigate
(a) The Purchaser acknowledges and agrees that it must itself take, and must procure that the Group Companies take, all reasonable steps to mitigate all and any loss which arises due to a breach by the Vendors of any provision of this deed including any breach of Warranty (which, for the avoidance of doubt, includes the indemnities in clauses 9.2, 9.16 and 10).
(b) Without limiting clause 9.9(a)(i), the Purchaser must take all reasonable steps to resist and defend, in the name of the relevant Group Company, any third party Claims.
9.11 Rights of the Purchaser
If the Purchaser makes a Claim under any Warranty (which, for the avoidance of doubt, includes a Claim under any of clauses 9.2, 9.16 and 10):
(a) the Purchaser at reasonable and regular intervals must provide the Original Vendors with written reports concerning the conduct, negotiation, control, defenceand/or settlement of the Claim;
(b) the Purchaser must afford the Original Vendors the opportunity to consult with the Purchaser on matters of significance in relation to the conduct, negotiation and settlement of the Claim; and
(c) the Original Vendors must render to the Purchaser, at the Purchaser’s reasonable expense, all such assistance as the Purchaser may reasonably require in disputing any Claim.
9.12 Benefits or credits received by the Company or the Purchaser
If any payment in respect of a Claim under the Warranties is made to the Purchaser by, or on behalf of, a Vendor, and after the payment is made the Purchaser or any Group Company receives or is entitled to any benefit or credit in relation to the subject matter of the Claim (including payment under any insurance policy), then the Purchaser:
(a) must immediately notify the Vendor of the likely benefit or credit; and
(b) pay to the Vendor an amount equal to the amount (net of expenses and Tax) of the likely benefit or credit received by the Purchaser or Group companies (as the case may be).
9.13 Warranty payments
Any payment made in respect of a Claim for breach of a Warranty is deemed to be a reduction in the Purchase Price.
9.14 Trade Practices Act
To the extent permitted by law, the Purchaser agrees not to make, and waives any right it may have to make, any claim against the Vendors under section 52 of theTrade Practices Act 1974(Cth) or the corresponding provision of any State or Territory enactment.
9.15 Financial forecasts
The parties acknowledge and agree that the Warranties do not apply to any financial forecasts, projections, opinions of future performance or other statements relating to financial prospects of the Group that have been provided by the Vendors or which are contained in the Budget. No warranty is given or representation made that any such financial forecast, projection or opinion will be met or achieved. Any such information that has been provided to the Purchaser was provided for information purposes only.
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9.16 Additional limitations
The liability of the Vendors in respect of any Claim in respect of the Warranties is reduced to the extent that:
(a) the subject matter of any Claim is provided for in the Accounts or is taken into account in calculating the amount of the Net Debt, the Completion Container Rental Equipment Amount, the Net Tangible Assets Amount, the Working Capital Amount or the K&S Lease Adjustment Amount;
(b) the Claim has arisen as a result of, or in consequence of, any voluntary act, omission, transaction or arrangement of or on behalf of the Purchaser or any Group Company after Completion except in relation to those acts or omissions conducted in the ordinary course of business or required by any law, regulation or contractual arrangement;
(c) the Claim is as a result of or in respect of, or where the Claim arises from any increase in the rate of Tax liable to be paid or any imposition of Tax not in effect at the date of this deed;
(d) GFC or the Purchaser have actual knowledge of the facts giving rise to the Claim and in circumstances where it would be reasonable for the Purchaser to conclude that there was a breach of Warranty;
(e) the Claim occurs or is increased as a result of legislation not in force or in effect at the date of this deed; or
(f) the Claim occurs as a result of a change after the date of this deed in any law or interpretation of law.
9.17 Vendors’ Tax Indemnity
The Original Vendors indemnify and agree to keep indemnified until 5 years after the date of this deed, the Purchaser against:
(a) any amounts which either or both a Group Company and the Purchaser may be called upon to pay in respect of any assessment, reassessment, amended assessment, default assessment, penalty, fine or any other obligation in respect of Taxes of the Group Company in respect of any year of income ended 30 June preceding the First Completion Date and in respect of the period commencing on 1 July 2006 and ending on the First Completion Date which have not been paid prior to the Accounts Date or fully provided for in the Accounts or in the Completion Accounts;
(b) any increased liability for Tax payable by the Purchaser (in relation to a Group Company)and/or the Group for any reason in respect of any year of income up to and inclusive of the year of income ended on 30 June immediately preceding the First Completion Date from that amount already paid or to be provided for in the Accounts arising out of any act done or omitted to be done by a Group Company on or before the First Completion Date; and
(c) any Taxes payable by a Group Company during the period from the Accounts Date to the First Completion Date arising as a result of the actions of a Group Company during that period which are not in the ordinary and proper course of business and which are not provided for in the Accounts or in the Completion Accounts.
9.18 Limits to recovery
The Purchaser acknowledges and agrees that it may not recover any amounts from the Vendors in relation to more than one of the following:
(a) a breach of any of the Business Warranties; and/or
(b) a breach of any of the Title and Capacity Warranties; and/or
(c) the indemnity in clause 9.2; and/or
(d) the indemnity in clause 9.17; and/or
(e) the indemnity in clause 10,
(f) in relation to the same set of facts or circumstances.
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9.19 Good faith negotiations in relation to disclosure of material items between signing and Completion
The parties acknowledge and agree that if a fact, matter or circumstance occurs after the date of this deed but before First Completion or Second Completion that constitutes a breach of a Warranty or Warranties, being a fact, matter or circumstance that did not exist at the date of this deed, then while neither the Vendors nor the Purchaser will have any right to terminate this Deed in respect of the relevant breach, the following provisions will operate:
(a) the Original Vendors will be entitled to disclose the relevant fact, matter or thing to the Purchaser;
(b) except as stated in clause 9.4(b), other than in respect of matters disclosed in the Disclosure Letter relating to Second Completion, such disclosure will not constitute a disclosure against the Warranties for the purposes of clause 9.4; and
(c) other than in respect of matters disclosed in the Disclosure Letter relating to Second Completion, the parties agree to negotiate in good faith before Completion with a view to reaching a mutually acceptable resolution (which may possibly involve an appropriate reduction in the Purchase Price) in lieu of the Purchaser making a claim for breach of the Warranties against the Vendors.
9.20 Effect of Second Completion
For the avoidance of doubt:
(a) the parties agree that Bison-GE will have no obligations as a ‘Vendor’ under this clause 9;
(b) the parties agree that on and from Second Completion the provisions of clauses 9.1 to 9.19 shall apply as if GFN (and not Bison-GE) purchased the First Tranche Sale Shares and Equity Partners and the Management Vendors gave the Warranties to GFN (and not to Bison-GE);
(c) Bison-GE assigns the benefit of the Warranties to GFN;
(d) GFN agrees that the Warranties and title to the First Tranche Shares are provided on ‘as is’ basis and that Bison-GE accepts no responsibility for any limitations in the scope of any Warranty or defect in title which it inherited from the Original Vendors.
(e) Equity Partners and the Management Vendors acknowledge and agree that the benefit of the Warranties may be assigned by Bison-GE to GFN or to Ronald F Valenta or any affiliate of Ronald F Valenta as contemplated in the Backup Purchase Agreement.
10. K&S Lease Indemnity
(a) Subject to clause 10(b), for so long as Royal Wolf Trading has obligations under the K&S Lease (Curtainsider), Equity Partners and the Management Vendors (in their Respective Proportions) indemnify the Group for all liabilities suffered or incurred by the Group in relation to an event of default occurring under the K&S Lease (Curtainsider) on or after First Completion.
(b) The indemnity in clause 10(a) only applies on the basis that:
(i) the K&S Lease (Curtainsider) is not amended or varied after First Completion;
(ii) the term of the K&S Lease (Curtainsider) is not extended;
(iii) Royal Wolf Trading continues to perform all of its obligations under the K&S Lease (Curtainsider) which are due to be performed on or after First Completion;
(iv) Royal Wolf Trading does not cause the K&S Lease (Curtainsider) to be breached, either wilfully or negligently, after First Completion; and
(v) the Purchaser procures that Royal Wolf Trading takes, all reasonable actions to mitigate any Claim under the K&S Lease (Curtainsider).
(c) In the event that the indemnity in this clause 10(a) is invoked, the parties agree to use their best endeavours to procure that Royal Wolf Trading assigns the benefit of the K&S Lease (Curtainsider) to a nominee of the Vendors.
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11. ADF Contract
The parties acknowledge that, in the period prior to First Completion, the Group may enter into and comply with its obligations under the ADF Contract (if awarded) subject to the Vendors consulting with the Purchaser on negotiations (if any) relating to the ADF Contract.
12. Environmental audit report
Without affecting clause 9, the Vendors acknowledge and agree that the Purchaser does not give any warranty or make any representation in relation to the completeness or accuracy of the Phase 1 environmental audit report commissioned by GFC in relation to the Group or the methodology adopted by Consulting Earth Scientists in preparing that report.
13. GFC Undertaking
(a) GFC undertakes, subject to all of the Conditions being satisfied or waived in accordance with clause 2.3, to ensure that the Purchaser is provided with sufficient funding to enable it to meet its obligations under this deed (including, without limitation, the obligations in clause 6.5).
(b) GFC undertakes to ensure and will ensure that GFN complies with all of its obligations under this deed.
(c) The Vendors have agreed to enter into this deed with GFC and the Purchaser in reliance on the undertaking in clause 13(a) and 13(b).
14. Guarantee
14.1 Guarantee and indemnity
Each Guarantor, in respect of its Related Management Vendor only and to the extent of that Related Management Vendor’s Respective Proportion only, unconditionally and irrevocably:
(a) guarantees to the Purchaser the due and punctual performance and observance by its Related Management Vendor of all of the obligations contained in or implied under this deed that must be performed and observed by its Related Management Vendor (whether present, future, actual or contingent)(Guaranteed Obligations); and
(b) indemnifies the Purchaser against all losses, damages, costs and expenses which the Purchaser may now or in the future suffer or incur consequent on or arising directly or indirectly out of any breach or non-observance by its Related Management Vendor of a Guaranteed Obligation.
14.2 Enforcement against guarantors
The Purchaser must first satisfy the total amount of any Claims made by it against the Guarantor from the proceeds remaining in the Escrow Account (if any) before it becomes entitled to recover any other cash in respect of a damages Claim from a Guarantor.
14.3 Continuing Guarantee
This Guarantee is a continuing guarantee and indemnity notwithstanding any settlement of account, intervening payment or other matter or thing whatever and is irrevocable until discharged pursuant to the terms of this deed.
14.4 Principal Obligations
The Guaranteed Obligations
(a) are principal obligations and not ancillary or collateral to any other obligation; and
(b) may be enforced against the relevant Guarantor without the Purchaser being required to exhaust any remedy it may have against the Vendor or to enforce any guarantee or security interest it may hold with respect to the Guaranteed Obligations.
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14.5 Obligations Absolute and Unconditional
The Guaranteed Obligations are absolute and unconditional and the liability of the relevant Guarantor under this deed extends to and is not affected by anything which, but for this provision, might operate to exonerate it from the Guaranteed Obligations in whole or in part including, without limitation, any one or more of the following (whether occurring with or without the consent of any person):
(a) the grant to the Management Vendor, the Guarantor or any other person of any time, waiver or other indulgence or concession or any whole or partial discharge or release of the Management Vendor, the Guarantor or any other person;
(b) any transaction or arrangement that may take place between the Purchaser and the Management Vendor, the Guarantor or any other person;
(c) the winding up or bankruptcy or death of, or the appointment of an administrator to, the Management Vendor, the Guarantor or any other person;
(d) the Guaranteed Obligations being or becoming wholly or partially illegal, void, voidable, unenforceable or disclaimed by a liquidator or trustee in bankruptcy;
(e) the failure by the Purchaser to give notice to the Guarantor of any default by the Management Vendor or any other person;
(f) any legal limitation, disability, incapacity or other circumstance related to the Management Vendor, the Guarantor or any other person;
(g) any laches, acquiescence, delay, acts, omissions or mistake on the part of or suffered by the Purchaser or any other person in relation to this deed;
(h) the Purchaser becoming a party to any compromise or scheme or assignment of property by or relating to the Management Vendor or the Guarantor or the acceptance by the Purchaser of any dividend or sum of money under such compromise, scheme or assignment;
(i) any judgment or rights which the Purchaser may have or exercise against the Management Vendor, the Guarantor or any other person;
(j) if the Management Vendor or the Guarantor is a trustee, any breach of trust or any variation of the terms of the trust or its determination.
14.6 Winding-up or Bankruptcy of Management Vendor
If the Management Vendor is wound up or bankrupted, the Guarantor irrevocably authorises the Purchaser (but without any obligation on the part of the Purchaser) to:
(a) prove for all moneys which the Guarantor has paid under this guarantee; and
(b) retain and carry to a suspense account and appropriate at the Purchaser’s discretion any dividends and other moneys received in respect of satisfaction of the Guaranteed Obligations,
until the Guaranteed Obligations have been irrevocably paid and discharged in full.
14.7 Indemnity in Respect of Management Vendors’ Obligations
The Guarantor unconditionally indemnifies the Purchaser against any loss which the Purchaser may suffer because the Guaranteed Obligations are unenforceable or disclaimed by a liquidator or trustee in bankruptcy in whole or in part.
14.8 Payment under Indemnity
The Guarantor shall pay to the Purchaser on demand a sum equal to any loss in respect of which it indemnifies the Purchaser under this clause including any moneys (or any moneys which if recoverable would have formed part of the Guaranteed Obligations) which are not or may not be recoverable.
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14.9 General Application of Indemnity
The indemnities given by the Guarantor under this clause shall apply to any Guaranteed Obligations which are not or may not be recoverable:
(a) whether by reason of any legal limitation, disability or incapacity of or affecting the Vendor or any other person;
(b) whether the transactions or any of them relating to those moneys were void, illegal, voidable or unenforceable; and
(c) whether or not any of the relevant matters or facts were or ought to have been within the knowledge of the Purchaser.
15. Restraint
15.1 Definitions
In this clause 15:
(a) Covenantormeans each of Equity Partners and the Management Vendors;
(b) engage inmeans to carry on, participate in, provide finance or services, or otherwise be directly or indirectly involved as a shareholder, unitholder, director, consultant, adviser, contractor, principal, agent, manager, employee, beneficiary, partner, associate, trustee or financier; and
(c) Restraint Amountmeans A$3 million payable by the Purchaser to the Covenantors in accordance with clause 15.8.
15.2 Prohibited activities
In consideration for the payment of the Restraint Amount, the Covenantors must not and must procure that each of its Associated Persons does not do any of the following:
(a) engage in a business that competes with the Business;
(b) solicit, canvass, approach or accept an approach from a person who was at any time during the 12 months ending on the First Completion Date a customer of the Group with a view to obtaining their custom in a business that is in competition with the Business; or
(c) interfere with the relationship between the Group and its customers, employees or suppliers;
(d) induce or help to induce an Employee to leave their employment; or
(e) disclose or use to their advantage or to the disadvantage of any Group Company, itself or by any of its Associated Persons any of the trade secrets or any confidential information relating to a Group Company or its Business.
15.3 Duration of prohibition
(a) The undertakings in clause 15.2 begin on the First Completion Date and end:
(b) 5 years after the First Completion Date;
(c) 4 years after the First Completion Date;
(d) 3 years after the First Completion Date;
(e) 2 years after the First Completion Date;
(f) 1 year after the First Completion Date,
other than the undertaking in clause 15.2(e) which shall not have an end date.
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15.4 Geographic application of prohibition
The undertakings in clause 15.2 apply only if the activity prohibited by clause 15.2 occurs within:
(a) Australia and New Zealand;
(b) All states and Territories of Australia;
(c) All capital cities in Australia and New Zealand.
15.5 Interpretation
Clauses 15.2, 15.3 and 15.4 have effect together as if they consisted of separate provisions, each being severable from the other. Each separate provision results from combining each undertaking in clause 15.2, with each period in clause 15.3, and combining each of those combinations with each area in clause 15.4. All combinations apply cumulatively. Each combination must be read down to the extent necessary to be valid. If any combination cannot be read down to that extent, it must be severed. If any of those separate provisions is invalid or unenforceable for any reason, the invalidity or unenforceability does not affect the validity or enforceability of any of the other separate provisions or other combinations of the separate provisions of clauses 15.2, 15.3 and 15.4.
15.6 Exceptions
This clause 15 does not restrict:
(a) a Covenantor from performing any employment with the Group;
(b) a Covenantor from holding five per cent or less of the shares of a listed company;
(c) a Covenantor recruiting a person in response to a newspaper, web page or other public employment advertisement that is not made with the intention of soliciting the employment of a particular employee of the Group;
(d) Equity Partners holding an interest in another business which competes with the Business(Competing Business) provided that the Competing Business does not derive more than 10% of its revenue from activities which compete with the Business and provided that Equity Partners disposes of its interest in the Competing Business within 6 months of the Competing Business deriving more than 10% of its revenue from activities which compete with the Business.
15.7 Acknowledgments
Each Covenantor acknowledges that:
(a) all the prohibitions and restrictions in this clause 15 are reasonable in the circumstances and necessary to protect the goodwill of the Business;
(b) damages are not an adequate remedy if a Covenantor breaches this clause 15; and
(c) the Purchaser may apply for injunctive relief if a Covenantor breaches or threatens to breach this clause 15.
15.8 Payment of Restraint Amount
(a) The Restraint Amount is payable in cash by the Purchaser or the Company to the Vendors without counterclaim or set-off as follows:
(i) on the first anniversary of the First Completion Date:
(A) A$750,000 to Equity Partners; and
(B) A$750,000 to the Management Vendors;
(ii) on the second anniversary of the First Completion Date:
(A) A$750,000 to Equity Partners; and
(B) A$750,000 to the Management Vendors.
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(b) For the avoidance of doubt, Bison-GE is obligated to pay the amounts due to Equity Partners under clause 15.8(a) in full irrespective of whether payment of the whole or any part of such payments to Equity Partners means that the aggregate of all payments made by Bison-GE under this deed exceed the Bison-GE Maximum Amount. That is, clause 4.10 does not apply to the obligations of Bison-GE to make payments to Equity Partners under clause 15.8(a).
(c) For the avoidance of doubt, Bison-GE is not obligated to pay the amounts due to the Management Vendors under clause 15.8(a) if and to the extent that payment of the whole or any part of such payments to the Management Vendors would along with all other payments made under this deed by Bison-GE exceed the Bison-GE Maximum Amount.
(d) Equity Partners and the Management Vendors acknowledge and agree that after Second Completion the sole liability to pay any amount under this deed including without limitation the Restraint Amount shall rest with GFN (and not Bison-GE).
16. Representations by the Purchaser and GFC
16.1 Representations
Each of the Purchaser and GFC represent and warrant to each of the Vendors that each of the following statements will be true and accurate on the First Completion Date and the Second Completion Date:
(a) they are validly existing under the laws of their place of incorporation or registration;
(b) they have the power to enter into and perform their obligations under this deed and to carry out the transactions contemplated by this deed;
(c) they have taken all necessary action to authorise their entry into and performance of this deed and to carry out the transactions contemplated by this deed (subject to GFC obtaining stockholder approval on the basis set out in clause 2.7); and
(d) their obligations under this deed are valid and binding and enforceable against them in accordance with their terms.
16.2 Application of representations by the Purchaser and GFC
Each of the representations and warranties made by the Purchaser and GFC under clause 16.1 remains in full force and effect on and after First Completion and Second Completion.
17. Equity Partners limitation of liability
17.1 Limited capacity
Subject to clause 17.3, Equity Partners Two Pty Limited(Trustee) enters into this deed solely in its capacity as trustee of the Equity Partners 2 Trust(Trust). A liability arising under or in connection with this deed is limited to, and can be enforced against the Trustee, only to the extent to which it can be satisfied out of the assets of the Trust out of which the Trustee is actually indemnified for the liability. This limitation of the liability of the Trustee applies despite any other provision of this deed (other than clause 17.3) and extends to all liabilities and obligations of the Trustee in any way connected with any representation, warranty, conduct, omission, agreement or transaction related to this deed.
17.2 Limited rights to sue
Subject to clause 17.3, no party may sue the Trustee in any capacity other than in its capacity in relation to the Trust, including to seek the appointment of a receiver (except in relation to property of the Trust), a liquidator, an administrator, or any similar person to the Trustee or prove in any liquidation, administration or arrangement of or affecting the Trustee (except in relation to property of the Trust).
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17.3 Exceptions
The provisions of clauses 17.1 and 17.2 do not apply to any obligation or liability of the Trustee to the extent that it is not satisfied because there is a reduction in the extent of the Trustee’s indemnification out of the assets of the Trust as a result of the Trustee’s fraud, negligence or breach of trust.
17.4 Limitation on authority
No attorney, agent, receiver or receiver and manager appointed in accordance with this deed has authority to act on behalf of the Trustee in a way which exposes the Trustee to any personal liability, and no act or omission of any such person will be considered fraud, negligence or breach of trust of the Trustee for the purpose of clause 17.3.
18. GST
18.1 Interpretation
In this clause 18, a word or expression defined in theA New Tax System (Goods and Services Tax) Act 1999(Cth) has the meaning given to it in that Act.
18.2 GST gross up
If a party makes a supply under or in connection with this deed in respect of which GST is payable, the consideration for the supply but for the application of this clause 18.2(GST exclusive consideration) is increased by an amount equal to the GST exclusive consideration multiplied by the rate of GST prevailing at the time the supply is made.
18.3 Reimbursements
If a party must reimburse or indemnify another party for a loss, cost or expense, the amount to be reimbursed or indemnified is first reduced by any input tax credit the other party is entitled to for the loss, cost or expense, and then increased in accordance with clause 18.2.
18.4 Tax invoice
A party need not make a payment for a taxable supply made under or in connection with this deed until it receives a tax invoice for the supply to which the payment relates.
19. Announcements
19.1 Announcements
A party must not make or authorise a press release or public announcement relating to the negotiations of the parties or the subject matter or provisions of this deed unless:
(a) it is required to be made by law or the rules of a recognised investment exchange or by contract and before it is made that party has:
(i) notified the other parties to this deed; and
(ii) given the other parties to this deed at least two Business Days to comment on the contents of, and the requirement for, such press release or public announcement; or
(b) it has the prior written approval of Equity Partners, the Purchaser and Management Vendors (which approval may not be unreasonably withheld); or
(c) Equity Partners Two Pty Limited wishes or must, in satisfaction of its reporting obligations, issue a release or notice to investors or shareholders of Equity Partners or to the members of advisory and investment committees of funds managed by Equity Partners.
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20. Notices and other communications
20.1 Service of notices
(a) A notice, demand, consent, approval or communication under this deed(Notice) must be:
(b) in writing, in English and signed by a person duly authorised by the sender; and
(c) hand delivered or sent by prepaid post or facsimile to the recipient’s address for Notices specified in the Details, as varied by any Notice given by the recipient to the sender.
20.2 Effective on receipt
A Notice given in accordance with clause 20.1 takes effect when taken to be received (or at a later time specified in it), and is taken to be received:
(a) if hand delivered, on delivery;
(b) if sent by prepaid post, the second Business Day after the date of posting (or the seventh Business Day after the date of posting if posted to or from a place outside Australia); and
(c) if sent by facsimile, when the sender’s facsimile system generates a message confirming successful transmission of the entire Notice unless, within eight Business Hours after the transmission, the recipient informs the sender that it has not received the entire Notice,
but if the delivery, receipt or transmission is not on a Business Day or is after 5.00pm on a Business Day, the Notice is taken to be received at 9.00am on the next Business Day.
21. Miscellaneous
21.1 Vendors’ Representatives
(a) The Original Vendors agree that when this document provides that any power may be exercised by, any decision may be made by, any action may be performed by, any notice may be given by, or any consent may be given by the Vendors’ Representatives:
(b) then that power may be exercised by, that decision may be made by, that action may be performed by, that notice may be given by and that consent may be given by the Vendors’ Representatives for and on behalf of all the Original Vendors; and
(c) the Purchasers may rely on the exercise, decision, action, notice or consent of the Vendors’ Representatives in relation to any such matters as having been given on behalf of all the Original Vendors.
21.2 Alterations
This deed may be altered only in writing signed by each party.
21.3 Approvals and consents
Except where this deed expressly states otherwise, a party may, in its discretion, give conditionally or unconditionally or withhold any approval or consent under this deed.
21.4 Assignment
A party may only assign this deed or a right under this deed with the prior written consent of each other party unless otherwise provided herein.
21.5 Costs
(a) The Vendors’ costs and expenses of negotiating, preparing and executing this deed will be paid by the Company and, following the Second Completion Date, GFC and GFN.
(b) GFN and GFC must pay its own costs and expenses of negotiating, preparing, stamping and executing this deed including the costs and expenses of preparing the proxy statement referred to in clause 2.2 and the costs and expenses of Horwath and Horwath and KPMG.
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21.6 Stamp duty and other duties
Any stamp duty, duties or other taxes of a similar nature (including fines, penalties and interest) in connection with this deed or any transaction contemplated by this deed, must be paid by GFN.
21.7 Survival
Any indemnity or any obligation of confidence under this deed is independent and survives termination of this deed. Any other term by its nature intended to survive termination of this deed survives termination of this deed.
21.8 Counterparts
This deed may be executed in counterparts. All executed counterparts constitute one document.
21.9 No merger
The rights and obligations of the parties under this deed do not merge on completion of any transaction contemplated by this deed.
21.10 Entire agreement
This deed and the documents referred to in this deed constitute the entire agreement between the parties in connection with its subject matter and supersede all previous agreements or understandings between the parties in connection with its subject matter.
21.11 Further action
Each party must do, at its own expense, everything reasonably necessary (including executing documents) to give full effect to this deed and any transactions contemplated by it.
21.12 Severability
A term or part of a term of this deed that is illegal or unenforceable may be severed from this deed and the remaining terms or parts of the term of this deed continue in force.
21.13 Waiver
A party does not waive a right, power or remedy if it fails to exercise or delays in exercising the right, power or remedy. A single or partial exercise of a right, power or remedy does not prevent another or further exercise of that or another right, power or remedy. A waiver of a right, power or remedy must be in writing and signed by the party giving the waiver.
21.14 Governing law and jurisdiction
This deed is governed by the law of New South Wales and each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales.
21.15 Specific performance
Nothing in this deed is intended to exclude a party from seeking the remedy of specific performance in relation to Completion.
22. Trusts
The Management Vendors covenant with each other party that they have full, complete, valid and unfettered authority and power to enter into this deed pursuant to the trusts for which they are the trustees including the power to give a guarantee and to enter into all the terms, conditions and covenants herein on its part contained or implied and that the entering into of this deed is in the due administration of such trusts.
23. Certain Covenants
23.1 Senior Subordinated Notes
Bison Capital Equity Partners II, LP (“Bison Equity’’) has submitted to GFC and GFN that certain proposal letter dated January 30, 2007 as amended on March 28, 2007 (the ’Proposal Letter’) that has been accepted by GFN
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and GFC. The Proposal Letter contemplates a loan of $20 million to GFN to be evidenced by senior subordinated notes and, as additional consideration, the lender would receive a warrant to purchase 500,000 shares of the common stock of GFC. Bison Equity is an affiliate of Bison-GE. At the Second Completion, GFN shall issue the senior subordinated notes and GFC shall issue the warrant to Bison Equity or its affiliate designee and Bison-GE shall loan or cause Bison Equity or its affiliate designee to loan $20 million to GFN, all on the terms and conditions set forth in the Proposal Letter (except that the interest rate shall be 13.5% per annum). The loan agreement, senior subordinated notes, the warrant and all other documentation shall be in form and substance consistent with the terms of the Proposal Letter.
23.2 Bison-GE Expenses
If the Second Completion occurs, GFN and GFC shall reimburse Bison-GE and their affiliates for all reasonable costs and expenses incurred in connection with the purchase and sale of the Sale Shares, the financing contemplated by clause 24.2 of this deed and the agreements entered into with Ronald F Valenta regarding Mr Valenta’s obligation to purchase the Bison-GE Sale Shares.
23.3 GFC Trust Account
Each Vendor severally on behalf of itself and its successors and assigns, hereby:
(i) acknowledges and agrees that until Second Completion under no circumstance shall it have any right, title or interest in or to any of the funds in the Trust Account established by GFC in connection with its initial public offering of securities for the benefit of holders of GFC common stock issued in such initial public offering, or any funds distributed from the Trust Account to the holders of securities issued in GFC’s initial public offering;
(ii) hereby irrevocably waives any claim that it might have to funds in the Trust Account, and any funds distributed from the Trust Account to the holders of securities issued in GFN’s initial public offering, at law or in equity; and
(iii) agrees not to make any such claim, and agrees to indemnify and hold GFC harmless from any such claim made by or on behalf of it.
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Schedule 1 — Shareholdings and Respective Proportions
PART A — Shares in the Company as at the date of this deed
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | 7
| |
| | | | | | | | | | | | | | | | | %
| |
| | | | | | | | | | | | | | | | | Management
| |
| | Shares Held in the Company as at the Date of this Deed | | | | | | 6
| | | Vendors
| |
1
| | 2
| | | 3
| | | 4
| | | 5
| | | Respective
| | | Respective
| |
Name | | Ordinary | | | Class A | | | Class C | | | Rights | | | Proportions | | | Proportions | |
|
Equity Partners Two Pty Limited (as trustee of Equity Partners 2 Trust) | | | | | | | 4,322,590 | | | | | | | | — | | | | 53.01 | % | | | — | |
FOMM Pty Limited (as trustee of the FOMM Trust) | | | 777,600 | | | | | | | | 36 | | | | — | | | | 18.52 | % | | | 39.42 | % |
FOMJ Pty Limited (as trustee of the FOMJ trust) | | | 583,200 | | | | | | | | 27 | | | | — | | | | 13.89 | % | | | 29.56 | % |
Cetro Pty Limited (as trustee of the FOMP Trust) | | | 583,200 | | | | | | | | 27 | | | | — | | | | 13.89 | % | | | 29.56 | % |
TCWE Pty Limited (as trustee of the McCann family Trust) | | | 28,800 | | | | | | | | 2 | | | | 43,200 Ordinary shares 2 C class shares | | | | 0.69 | % | | | 1.46 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
TOTAL | | | 1,972,800 | | | | 4,322,590 | | | | | | | | | | | | 100 | | | | 100 | |
PART B — First Tranche Sale Shares
| | | | | | | | | | | | |
| | | | | | | | % Share of
| |
| | | | | First Completion
| | | Adjustment Payment
| |
| | | | | Payment
| | | Under Clause 4.5
| |
Name | | Sale Shares | | | $ | | | and Clause 4.9 | |
|
Equity Partners Two Pty Limited | | | 4,322,590 Class A shares | | | | 28,432,454 | | | | 34.33 | |
FOMM Pty Limited | | | 873,611 ordinary shares | | | | 5,746,300 | | | | 14.97 | |
FOMJ Pty Limited | | | 655,208 ordinary shares | | | | 4,309,725 | | | | 11.23 | |
Cetro Pty Limited | | | 655,208 ordinary shares | | | | 4,309,725 | | | | 11.23 | |
TCWE Pty Limited | | | 32,356 ordinary shares | | | | 212,826 | | | | 0.55 | |
Total | | | 6,538,973 shares | | | | 43,011,030 | | | | 72.32 | |
PART C — Second Tranche Sale Shares
| | |
Name | | Sale Shares |
|
FOMM Pty Limited | | 636,616 ordinary shares |
FOMJ Pty Limited | | 477,462 ordinary shares |
Cetro Pty Limited | | 477,462 ordinary shares |
TCWE Pty Limited | | 23,578 ordinary shares |
Bison GE | | 6,538,973 ordinary shares |
Bison GE | | 1 class D share |
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Schedule 2 — Guarantors
| | | | |
Full Name | | Notice Details | | Related Management Vendor |
|
Michael Paul Baxter | | 66 Lucinda Avenue, Wahroonga NSW 2076 | | FOMM Pty Limited |
James Harold Warren | | 10 Sofala Avenue, Riverview NSW 2066 | | FOMJ Pty Limited |
Paul Henry Jeffery | | 8/1150 Pittwater Road Collaroy NSW 2107 | | Cetro Pty Limited |
Peter Linden McCann | | 9 Bunyana Avenue Wahroonga NSW 2076 | | TWCE Pty Limited |
Schedule 3 — Directors and Secretaries to resign and to be appointed
| | | | | | | | |
| | | | 3
| | 4
| | 5
|
1
| | 2
| | Secretaries to
| | Directors to be
| | Secretaries to be
|
Company Name | | Directors to Resign | | Resign | | Appointed | | Appointed |
|
RWA Holdings Pty Limited | | Richard Gregson Rajeev Dhawan | | — | | Douglas Trussler Andreas Hildebrand | | — |
Royal Wolf Trading Australia Pty Limited | | Richard Gregson Rajeev Dhawan | | — | | Douglas Trussler Andreas Hildebrand | | — |
Royal Wolf Hi-Tech Pty Limited | | — | | — | | Douglas Trussler Andreas Hildebrand | | — |
Schedule 4 — Title and Capacity Warranties
1. Each Vendor has full power, capacity, authority and all necessary consents to enter into and perform its obligations under this deed.
2. This deed will, when executed by the Vendors, constitute binding obligations of the Vendors in accordance with their respective terms.
3. The execution, delivery and performance by the Vendors of this deed will not:
(a) result in a breach of any provision of the constitution of a Vendor; or
(b) result in a breach of, or constitute a default under, any instrument to which a Vendor is a party or by which a Vendor is bound and which is material in the context of the transactions contemplated by this deed.
4. No:
(a) meeting has been convened, resolution proposed, petition presented or order made for the winding up of the Vendor; or
(b) receiver, receiver and manager, provisional liquidator, liquidator or other officer of the Court has been appointed in relation to all or any material assets of the Vendor.
5. Each Vendor:
(a) is not insolvent within the meaning of section 95 of the Corporations Act;
(b) has not stopped paying its debts as and when they fall due; and
(c) is not subject to voluntary administration under Part 5.3A of the Corporations Act.
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6. Each Vendor warrants that it is the registered holder and the sole legal owner of the Sale Shares set out opposite its name in Schedule 1.
7. Each Vendor warrants that there is no option, right to acquire or Encumbrance over or affecting such Sale Shares or any of them.
Schedule 5 — Business Warranties
Warranty 1 — The Group
1.1 (Status) Each Group Company is duly incorporated and validly exists under the laws of the jurisdiction in which it was incorporated.
1.2 (No insolvency event):
(a) No meeting has been convened, resolution proposed, petition presented or order made for the winding up of the Company or any Group Company;
(b) No receiver, receiver and manager, provisional liquidator, liquidator or other officer of the Court has been appointed in relation to all or any material assets of the Company or any Group Company; and
(c) Each Vendor and Group Company:
(i) is not insolvent within the meaning of section 95 of the Corporations Act;
(ii) has not stopped paying its debts as and when they fall due; and
(iii) is not subject to voluntary administration under Part 5.3A of the Corporations Act.
(d) No writ of execution exists against any Group Company.
| | |
| 1.3 | (Sale Shares)The Sale Shares: |
(a) will, as at Completion, comprise the entire issued share capital of the Company;
(b) are fully paid; and
(c) were validly issued.
1.4 There are no agreements, arrangements or understandings in force or securities issued which call for the present or future issue of, or grant to any person the right to require the issue of, any shares in the Company.
1.5 The shares in the Subsidiaries which have been issued by the Subsidiaries are:
(a) held by and beneficially owned by the Company (in the case of Royal Wolf Trading) or Royal Wolf Trading (in the case of Royal Wolf Hi-Tech Pty Limited); and
(b) are free from any security or third party interest.
1.6 There are no agreements, arrangements or understandings in force or securities issued which require the present or future issue of, or grant to any person the right to require the issue of, any shares or other securities in any of the Subsidiaries.
1.7 No Group Company:
(a) has any subsidiary (other than a Subsidiary);
(b) holds or beneficially owns any share or other security of any other company (other than a Subsidiary);
(c) is a member of any partnership, joint venture or unincorporated association; or
(d) has any branch or any permanent establishment outside Australia.
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1.8 Each Group Company has full power and authority to own its property and assets and to conduct its Business in all relevant jurisdictions and does not own property or assets or conduct any business in any place other than those places.
1.9 The register of members of each Group Company contains a true and accurate record of its members from time to time.
1.10 All statutory books and records of each Group Company have been properly kept and are up to date with true and accurate entries and records.
1.11 Each Group Company:
(a) has complied with all legal requirements for the filing of returns, particulars, notices and other documents with all government and regulatory authorities;
(b) has complied with all legal requirements in relation to the conduct of its Business; and
(c) has conducted its Business and its affairs generally in accordance with all applicable laws, orders, regulations, by-laws and other requirements.
1.12 Since the Accounts Date, no dividend in respect of any capital of a Group Company has been declared or paid nor has there been any other distribution of property or assets to members of the Group Company since the Accounts Date.
1.13 The Vendors are entitled to, and will, receive and be paid the Purchase Price in the respective amounts set out opposite their names in the sixth column of Schedule 1 (the Respective Proportions), notwithstanding that they hold the Sale Shares in different proportions.
Warranty 2 — Accounts
2.1 The Accounts give a true and fair view of the financial position of the Group as at the Accounts Date, and of the assets, liabilities and the results of operations of the Group for the period to which the Accounts relate.
2.2 The Accounts were prepared with due and reasonable care, in accordance with the accounting policies, principles and bases of preparation stated in those Accounts.
2.3 There has been no material change to the financial position of any Group Company or of the assets, liabilities or the results of operations of any Group Company since the Accounts Date.
Warranty 3 — Taxation
Compliance
3.1 The Group has not and will not have any liability for Tax in respect of the period ending on the Completion Date except for Tax for which provision has been made in the Accounts or Tax incurred in the ordinary course of business since the Accounts Date and provided for in the Completion Accounts.
3.2 Each Group Company has:
(a) complied with all obligations imposed on the Group Company by any Tax law;
(b) filed, lodged or submitted all Tax returns and information regarding Tax and Tax matters as and when required by Tax law or requested by any Tax authority or as agreed with their tax agent with true and full disclosure of all relevant matters; and
(c) maintained sufficient and accurate records and all other information required to support all Tax returns and information which has been or may be filed, lodged or submitted to any Tax authority or is required to be kept under any Tax law.
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Stamp duty
3.3 All documents required to be created by each Group Company under a law relating to stamp duty or a Tax of a similar nature, have been created and have had stamp duty or other Taxes of a similar nature paid in full in accordance with all applicable laws.
3.4 All documents which are liable to stamp duty or a Tax of a similar nature, or necessary to establish the title of each Group Company to an asset, have had stamp duty or other Taxes of a similar nature paid in full in accordance with all applicable laws.
GST
3.5 No Group Company is a party to any contract, deed, arrangement or understanding in respect of which it is or will become liable to pay GST without being entitled to increase the consideration payable under the contract, deed, arrangement or understanding or otherwise seek reimbursement so that the Group Company retains the amount it would have retained but for the imposition of GST.
3.6 Each Group Company:
(a) is registered for GST under the GST law;
(b) has complied in all respects with the GST law; and
(c) is not in default of any obligation to make any payment or return (including any Business Activity Statement) or notification under the GST law.
3.7 Each Group Company has correctly and on a timely basis, returned GST on all taxable supplies and has no outstanding GST liabilities.
3.8 Each Group Company has correctly claimed input tax credits on all creditable acquisitions and has held valid tax invoices in each relevant tax period in which the input tax credits were claimed and continues to hold those tax invoices as required by law.
3.9 All Instalment Activity Statements have been duly and punctually lodged.
Consolidated group
3.10 The Group is a tax consolidated group within the meaning ofPart 3-90 of theIncome Tax Assessment Act 1997(Cth) and the Company is the “head company’’ (within the meaning ofsection 703-15 of theIncome Tax Assessment Act 1997(Cth)) of that tax consolidated group.
3.11 No election has been made by the Company in the United States to treat the Company as anything other than an association taxable as a corporation for United States Federal Income Tax purposes.
Warranty 4 — Stock/Lease Fleet
4.1 All stock is:
(a) either in the physical possession of the Company or in transit;
(b) in all material respects, in good and marketable condition.
4.2 The level of stock is sufficient to meet and is not materially surplus to the requirements of the Business.
4.3 The stock can be sold in the ordinary and normal course of trading in the Business in the time period within which the Business would expect to sell it.
4.4 As at Completion, the Group will have at least 15,000 container units in a rental ready condition of which approximately 3,500 container units are cross hired.
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Warranty 5 Litigation
5.1 No Group Company is involved in any litigation or arbitration proceedings and, so far as the Vendors are aware, there are no facts likely to give rise to any such proceedings.
5.2 There is no unsatisfied judgment, order, arbitral award or decision of any court, tribunal or arbitrator against any Group Company or any of the assets of the Group or the Shares.
Warranty 6 — Environment
6.1 In this Warranty 6:
(a) Contaminantmeans a solid, liquid or gaseous substance, odour, heat, sound, vibration or radiation which is or may be:
(i) harmful or potentially harmful to the health, welfare, safety or property of human beings;
(ii) poisonous, harmful, or potentially harmful to animals or plants; or
(iii) detrimental to any beneficial use made of the Environment.
(b) Environmentmeans the physical factors of the surrounds of human beings including the land, waters, atmosphere, climate, sound, odours, place, the biological factors of animals and plants and the social factors of aesthetics.
(c) Environmental Authorisationmeans any authorisation, approval, permit, licence, consent, registration or authority required by any Environmental Law.
(d) Environmental Lawmeans a law regulating or otherwise relating to the Environment including land use, planning, pollution of the atmosphere, water or land waste, the storage and handling of chemicals, Hazardous Substances, or any other aspect of protection of the Environment.
(e) Hazardous Substancemeans any substance which is, or may be, hazardous, toxic, dangerous or polluting or which is regulated by any law relating to the Environment.
6.2 There is no Contaminant:
(a) present in, on or under any of the Leased Premises; or
(b) in, on or under any other part of the Environment which has originated or emanated from the Leased Premises.
6.3 All Environmental Authorisations, necessary to operate the Business:
(a) have been obtained;
(b) are in full force and effect in all material respects;
(c) have been complied with in all material respects; and
(d) are not being appealed by any person.
6.4 No fact or circumstance exists which:
(a) could lead to any Environmental Authorisation necessary to operate the Business being modified, suspended, revoked or not renewed; or
(b) would cause the Group to be in breach of any Environmental Law.
Warranty 7 — Employees
7.1 As far as the Vendors are aware, each Group Company has complied with, and continues to comply with, all obligations arising under law, equity, statute (including occupational health and safety, annual leave, long service
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leave, tax, superannuation, workers compensation and industrial laws) and all Industrial Instruments with respect to its current and former employees and contractors.
7.2 No Group Company has been served with notice of a Claim, prosecution, proceedings or dispute by any statutory body, union or any current or former employee or contractor (including with respect to occupational health and safety or workers’ compensation) nor is any Vendor aware of any threatened Claim or any facts of circumstances which could give rise to any such Claim.
7.3 There are no payments due by any Group Company in connection with the redundancy of any employee.
Warranty 8 — Material Contracts
8.1 As far as the Vendors are aware, no substantial reduction in revenue is likely to occur by reason of the change in control of the Group as a result of the transaction contemplated by this deed, or as a result of a failure to comply with any minimum requirements imposed by third party suppliers to the Group.
8.2 Full details of all material contracts entered into by any Group Company have been fully disclosed to the Purchaser in writing as part of the Disclosure Documents. A material contract means:
(a) any contract that relates to, or is likely to relate to, revenue or costs in any financial year of $100,000 or more;
(b) any contract which (irrespective of quantitative value), might reasonably be expected to be material to a prudent intending purchaser of the Business, including any contract between a Vendor on the one hand, and a Group Company on the other hand.
8.3 As far as the Vendors are aware, no Group Company is a party to any material contract of which it or any other party is in default or, but for the requirements of notice or lapse of time or both, would be in default.
8.4 Each Group Company has duly complied with and fulfilled all the material obligations and duties that it owes under any material contract to which it is party.
8.5 As far as the Vendors are aware, no event has occurred which may be grounds for termination of any material contract to which a Group Company is a party.
Warranty 9 — Plant and Equipment
9.1 As at Completion, the Group will own all of the assets, plant and equipment and fixtures and fittings (Plant and Equipment) that are required to conduct the Business, provided that all finance lease and other leasing obligations have been repaid at Completion.
9.2 As far as the Vendors are aware, the Plant and Equipment is in a good and reasonable state of repair and condition and it is in satisfactory working order, has been regularly maintained and is currently sufficient for the purposes of conducting the Business.
9.3 As at Completion, all of the Plant and Equipment will be free and clear from all Encumbrances.
9.4 As far as the Vendors are aware, all finished goods of each Group Company comply with statutory requirements and are of merchantable quality.
Warranty 10 — Compliance with laws
10.1 As far as the Vendors are aware, each Group Company has complied in all material respects with all applicable laws.
10.2 As far as the Vendors are aware, the Group holds all necessary licences (including statutory licences) and consents, planning permissions, authorisations and permits for the proper carrying on of its Business in all their aspects and all of those licences, consents, permissions, authorisations and permits:
(a) have been fully paid up;
(b) have been fully complied with;
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(c) are in full force and effect; and
(d) are not liable to be revoked or not renewed.
10.3 As far as the Vendors are aware, there are no facts or circumstances involving any Group Company or its affairs which are likely to result in the revocation of or variation in any material respect of any permit, licence, authority or consent held by it.
10.4 As far as the Vendors are aware, no permit, licence, authority or consent held by any Group Company would be adversely affected by, or liable to be terminated revoked or varied in any material respect by reason of, a change in the ownership of any Group Company.
Warranty 11 — Records
As far as the Vendors are aware, the Records:
(a) are in the physical possession of the Company;
(b) are located at the Leased Premises;
(c) include all records required under, or to comply with or support any return or claim under, any applicable law (including any Tax law and the Corporations Act);
(d) have been properly and accurately prepared and maintained in all material respects in accordance with all applicable laws and areup-to-date where legally required; and
(e) do not contain material inaccuracies or discrepancies of any kind.
Warranty 12 — Disclosure Documents
Without limiting anything in clause 9 and subject to clauses 9.4(b), 9.5(b) and 9.14:
12.1 the factual information contained in the Disclosure Documents is not false, misleading or deceptive in any material respect;
12.2 the Vendors have not omitted to include any information in the Disclosure Documents the omission of which renders any of the Disclosure Documents misleading in any material respect; and
12.3 the facts set out in the Recitals and in Schedules 1, 4, 5, 7 and 8 and Schedule 9 are true, complete and accurate in all respects.
Warranty 13 — Compliance programs
As far as the Vendors are aware, each Group Company has in place compliance programs with respect to:
(a) occupational health and safety;
(b) discrimination and harassment in the work place; and
(c) consumer legislation,
which are necessary to comply with applicable regulatory or statutory requirements.
Warranty 14 — Superannuation
14.1 Each Group Company has fully complied with all of its obligations, duties and liabilities pursuant to the SGAA (including Part 3A of the SGAA), including its obligations in relation to the prescribed minimum level of superannuation contributions for each person employed by the Group and it is not liable to pay a Superannuation Guarantee Charge liability in respect of any superannuation contributions or entitlements for its Employees.
14.2 As far as the Vendors are aware, completion under this deed will not cause an increase in the obligations of any Group Company to make contributions to the Funds or result in any increase in benefits payable to Employees from the Funds.
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Warranty 15 — Insurance
15.1 The Disclosure Documents contain details of all material insurances in respect of the assets and businesses of each Group Company, each such insurance is in force, the premiums that have fallen due for payment have been paid or paid in accordance with payment plan in force between each Group Company and Hunter Premium Funding at Completion and, so far as the Vendors are aware, nothing has been done or omitted to be done which would make any of them void, voidable or unenforceable in respect of any Claim.
15.2 There is no Claim outstanding under an insurance contract of the Group companies which is material to the Group as a whole.
15.3 No Group Company has been notified by any insurer that it is required or is advisable for it to carry out any maintenance, repairs or other works in relation to any of its assets.
Warranty 16 — Intellectual Property
16.1 Schedule 8 is a complete and accurate list of all Intellectual Property Rights ownedand/or used (as applicable) in connection with the Business and comprise all of the intellectual property rights required to conduct the Business.
16.2 The Group ownsand/or uses (as specified in Schedule 8) all right, title and interest throughout Australia in the Intellectual Property Rights. No Group Company has licensed any of the Intellectual Property Rights to any person and has not assigned, or in any way disposed of, any right, title or interest in the Intellectual Property Rights.
16.3 The Intellectual Property Rights are valid and enforceable throughout Australia. The relevant Group Company has taken all necessary steps to obtain and maintain appropriate registrations for the Intellectual Property Rights and to protect and defend the Intellectual Property Rights.
16.4 As far as the Vendors are aware, neither the carrying on of the Business nor the use of the Intellectual Property Rights:
(a) infringes, or is alleged to infringe, the Intellectual Property Rights or rights or other rights of any third party;
(b) is, or is alleged to be, in breach of any obligation of confidence owed to any third party; or
(c) is resulting, or so far as the Vendors are aware, is alleged to be resulting, in a breach of any obligation that a Group Company owes to any third party (including a breach of contract).
Warranty 17 — Real property
17.1 No Group Company owns, holds, or is the occupier, lessee or tenant of or has any interest in any real property except for the Leased Property.
17.2 Where the interest of a Group Company in a property is a leasehold:
(a) the lease is a valid, legal and binding obligation in accordance with its terms;
(b) the Group Company has duly complied with and fulfilled all its material obligations and duties under the lease; and
(c) so far as the Vendors are aware, no event has occurred which may be grounds for termination of the lease.
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Schedule 6 — Leased Premises
| | | | | | | | |
No. | | | Address | | Landlord Details | | Tenant |
|
| 1. | | | Sydney (Corporate Office) Suite 202 Level 2 22-28 Edgeworth David Ave Hornsby NSW 2077 | | GPF No. 3 Pty Ltd | | Royal Wolf Trading |
| 2. | | | Sydney ‘Bonds Road Business Park’ 111 Bonds Rd Roselands NSW 2196 | | Tyne Container Services Pty Ltd | | Royal Wolf Trading |
| 3. | | | Canberra 15-23 Silva Avenue Queanbeyan NSW 2620 | | Movements International Movers (ACT) Pty Ltd | | Royal Wolf Trading |
| 4. | | | Central Coast 117 Gavenlock Rd Tuggerah NSW 2259 | | David Weaver | | Royal Wolf HI-Tech Pty Ltd |
| 5. | | | Newcastle Lot 401 Pacific Hwy Heatherbrae NSW 2324 | | Trutek Administration Pty Limited | | Royal Wolf Hi-Tech Pty Limited |
| 6. | | | Brisbane 33 Weyba Street Banyo QLD 4014 | | George Aufferber & Maria Anna Aufferber | | Royal Wolf Trading |
| 7. | | | Cairns Lot 2 Maconachie Woree QLD 4870 | | Swain Family Investments Pty Ltd | | Royal Wolf Trading |
| 8. | | | Gold Coast 180 Heslop Road Gaven QLD 4211 | | Storco Pty Ltd | | Royal Wolf Trading |
| 9. | | | Townsville 754-762 Ingham Rd Bohle QLD 4818 | | Ferry Property | | Royal Wolf Trading |
| 10. | | | National Mining & Defence Office C/o Strang International 936 Nudgee Road Northgate QLD 4013 | | Strang International Pty Ltd | | Royal Wolf Trading |
| 11. | | | Melbourne (West) 195 Fairbairn Road Sunshine West VIC 3020 | | Epic Bond Pty Ltd | | ACN Containers Pty Limited |
| 12. | | | Melbourne (Production Facility) 2 Pearl Street Brooklyn VIC 3012 | | P&V Industries Pty Ltd | | Royal Wolf Trading |
| 13. | | | Melbourne (East) 2159 Dandenong Road Clayton VIC 3168 | | MPM Leasing | | Royal Wolf Trading |
| 14. | | | Adelaide Cnr Francis St & Eastern Pde Gillman SA 5013 | | James Matra Pty Ltd | | Royal Wolf Trading |
| 15. | | | Perth 19 Mooney Street Bayswater WA 6053 | | F & C Cardaci | | Royal Wolf Trading |
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| | | | | | | | |
No. | | | Address | | Landlord Details | | Tenant |
|
| 16. | | | Darwin 13 Berrimah Road Berrimah NT 0828 | | Chan Ling Lam | | Royal Wolf Trading |
| 17. | | | Tasmania 39 Howard Road Derwent Park Hobart TAS 7009 | | Thorpe Interstate Shipping | | Royal Wolf Trading |
Schedule 7 — Intellectual Property Rights
Royal Wolf Central Coast
Royal Wolf — AA Container Sales & Hire
Cape Containers
ACN Containers
Australian Container Network
Trademark number trade mark 1066769.
royalwolf.com.au
acncontainers.com.au
austcontainer.com.au
None
None
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Schedule 12 — Worked examples of Purchase Price adjustments
(Clause 4.5(i))
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Worked Example as per November 2006 Balance Sheet
Attachment 1
Net Tangible Assets Amount
| | | | |
Total Assets | | | | |
Total Assets | | | 70,983,000 | |
minus Intangible Assets | | | 6,922,000 | |
| | | | |
Total Assets | | | 64,061,000 | |
| | | | |
Net Tangible Assets | | | | |
Total Assets (excluding Intangibles) | | | 64,061,000 | |
minus Total Liabilities | | | 61,786,000 | |
plus Amount required to Cash out the Options | | | — | |
plus Amount required to buy back unallocated CFO Shares | | | — | |
plus Warranty Insurance Premium | | | — | |
plus Chairman’s bonus | | | 250,000 | |
| | | | |
Total | | | 2,525,000 | |
| | | | |
| | | | | | | | | | | | |
NTA Adjustment Calculation | | SSD | | Actual | | Adjustment* |
|
NTA | | | 2,700,000 | | | | 2,525,000 | | | | 175,000 | |
| | |
* | | No upward adjustment as per Clause 4.3(a) |
SSD Reference Table
| | | | | | | | | | | | | | | | | | | | | | |
31-Oct | | 30-Nov | | 31-Dec | | 31-Jan-07 | | 28-Feb-07 | | 31-Mar-07 |
|
| 2,700,000 | | | | 2,700,000 | | | | 2,700,000 | | | | 2,700,000 | | | | 2,700,000 | | | | 2,700,000 | |
Notes to the Calculation of the Adjustment:
(a) — Net Tangible Assets Amount
Net Tangible Assets Amount means:
| |
• | Total Assets less Intangible Assets as per completions accounts |
|
• | Minus Total Liabilities as per completion accounts excluding: |
| | |
| – | the amount provided to cancel the options in the Completion Accounts but not paid as at Completion |
|
| – | the amount required to buy-back the unallocated CFO shares. Note this is likely to occur pre-completion. |
|
| – | Any unpaid insurance premium relating to Warranty Insurance |
|
| – | Any unpaid performance fee relating to the Chairman’s bonus |
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Worked Example as per November 2006 Balance Sheet
Attachment 2
Working Capital Amount
| | | | |
Current Assets | | | | |
Total Current Assets | | | 14,499,000 | |
minus cash | | | 3,152,000 | |
minus deposits relating to ADF | | | — | |
| | | | |
Net Current Assets | | | 11,347,000 | |
| | | | |
Current Liabilities | | | | |
Total Current Liabilities | | | 14,902,000 | |
minus Bank Overdraft (Current) | | | — | |
minus Bank Debt (Current) | | | 5,831,000 | |
minus Bank Vendor Financing (Current) | | | 711,000 | |
minus Finance Lease Other (Current) | | | 646,000 | |
plus ADF Contract related debt (Current) | | | — | |
| | | | |
Net Current Liabilities | | | 7,714,000 | |
| | | | |
Working Capital | | | 3,633,000 | |
| | | | |
| | | | | | | | | | | | |
Working Capital Adjustment | | SSD | | | Actual | | | Adjustment* | |
|
Working Capital Amount | | | 3,000,000 | | | | 3,633,000 | | | | — | |
| | |
* | | No upward adjustment as per Clause 4.3(a) |
SSD Reference Table
| | | | | | | | | | |
31-Oct | | 30-Nov | | 31-Dec | | 31-Jan-07 | | 28-Feb-07 | | 31-Mar-07 |
|
3,000,000 | | 3,000,000 | | 2,168,000 | | 3,000,000 | | 3,000,000 | | 3,000,000 |
Notes to the Calculation of the Adjustment:
(b) Working Capital Amount means:
Current Assets (as per Completion accounts) excluding Cash and deposits relating to ADF Contract.
Minus Current Liabilities as per Completion Accounts excluding:
Bank Overdraft
Bank Debt
Bank Vendor Financing
Finance Lease Other
Plus any interest bearing liability debt incurred in relation to assets acquired by the Group in satisfaction of it obligations under the ADF Contract.
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Worked Example as per November 2006 Balance Sheet
Attachment 3
Container Rental Equipment
| | | | | | | | | | | | |
Containers Adjustment | | SSD | | Actual | | Adjustment |
|
Completion Containers Rental Equipment Amount | | | 46,414,000 | | | | 47,319,000 | | | | 905,000 | |
SSD Reference Table
| | | | | | | | | | | | | | | | | | | | | | |
31-Oct | | 30-Nov | | 31-Dec | | 31-Jan-07 | | 28-Feb-07 | | 31-Mar-07 |
|
| 45,703,000 | | | | 46,414,000 | | | | 47,004,000 | | | | 46,640,000 | | | | 46,624,000 | | | | 46,879,000 | |
Notes to the Calculation of the Adjustment:
(c) — Container Rental Equipment
| |
| Calculation of Gross Purchases of Container Rental Equipment for the period from 1 July 2006 to Completion: Is equivalent to the Cost of Container Rental Equipment excluding Accumulated Depreciation as per the Balance Sheet in the Completion Accounts. For the avoidance of doubt this equals [$41,470,000] plus the sum of the Gross Purchases of Container Rental equipment for the period from 1 July 2006 to Completion as per the Cashflow contained in the Completion Accounts. |
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Worked Example as per November 2006 Balance Sheet
Attachment 4
Net Debt
| | | | | | |
Item | | Net Debt Calculation | | | |
|
| | Current Liabilities | | | | |
1 | | Bank Overdraft | | | — | |
2 | | plus Bank Debt | | | 5,831,000 | |
3 | | plus Bank Vendor Financing | | | 711,000 | |
4 | | plus Finance Lease Other | | | 646,000 | |
| | | | | | |
| | Non-Current Liabilities | | | | |
5 | | plus Bank Debt | | | 25,143,000 | |
6 | | plus Bank Vendor Financing | | | 856,000 | |
7 | | plus ANZ Sub Capital Note | | | 11,788,000 | |
8 | | plus Finance Lease Other | | | 312,000 | |
9 | | Plus B Class Notes | | | 7,041,000 | |
| | | | | | |
10 | | plus Acquisition costs outstanding | | | 160,000 | |
11 | | plus Dividends | | | — | |
12 | | plus Amounts required to cash out the options | | | 310,000 | |
13 | | plus the Vendors transaction costs | | | 300,000 | |
| | | | | | |
| | plus Warranty Insurance Premium | | | — | |
| | plus Chairman’s bonus | | | 250,000 | |
| | plus Amount required to buy back the unallocated CFO Shares | | | | |
14 | | minus Cash | | | 3,152,000 | |
15 | | minus outstanding K&S (Curtainsiders) | | | 579,000 | |
16 | | minus ADF related debt | | | — | |
| | | | | | |
| | Net Debt | | | 49,617,000 | |
| | | | | | |
| | | | | | | | | | | | |
Net Debt Adjustment | | SSD | | | Actual | | | Adjustment | |
|
Net Debt | | | 49,617,000 | | | | 49,617,000 | | | | — | |
SSD Reference Table
| | | | |
31-Oct | | 30-Nov | | 31-Dec |
|
49,617,000 | | 49,617,000 | | 49,617,000 |
Reconciliation to Definition of Net Debt as per SSD:
| | | | |
B(i) — ANZ Facility = items 1, 2, 5, 7 | | | 42,762,000 | |
B(ii) — B Class Note = item 9 | | | 7,041,000 | |
B(iii) — other interest bearing debt/ finance leases = items 3, 4, 6 & 8 | | | 2,525,000 | |
B(iv) — remaining acquisition payments = item 10 | | | 160,000 | |
B(v) — Dividends or other distributions = item 11 | | | — | |
B(vi) — Amount to cash out Options = item 12 | | | 310,000 | |
B(vii) — Wridgeways Lease = included in B(iii) | | | | |
B(viii) — K&S Lease (reefers) = included in B(iii) | | | | |
B(ix) — Transactions expenses not yet paid = item 13 | | | 300,000 | |
Warranty Insurance | | | — | |
Chairman’s bonus | | | 250,000 | |
Buyback of CFO Shares | | | | |
Less | | | | |
A. — Cash = item 14 | | | (3,152,000 | ) |
(iii) K&S Lease (Curtainsiders) = item 15 | | | (579,000 | ) |
(iv) — ADF Debt | | | — | |
| | | | |
Net Debt | | | 49,617,000 | |
| | | | |
A-61
Notes to the Calculation of the Adjustment:
Net Debt — Calculation as per Definition
Equals:
The sum of the following line items in the Balance Sheet of the completion Accounts:
Current Liabilities:
Bank Overdraft
Bank Debt
Bank Vendor Financing
Finance Lease Other
Plus any interest bearing liability debt incurred in relation to assets acquired by the Group in satisfaction of it obligations under the ADF Contract.
A-59
Worked Example as per November 2006 Balance Sheet
Attachment 3
Container Rental Equipment
| | | | | | | | | | | | |
Containers Adjustment | | SSD | | Actual | | Adjustment |
|
Completion Containers Rental Equipment Amount | | | 46,414,000 | | | | 47,319,000 | | | | 905,000 | |
SSD Reference Table
| | | | | | | | | | | | | | | | | | | | | | |
31-Oct | | 30-Nov | | 31-Dec | | 31-Jan-07 | | 28-Feb-07 | | 31-Mar-07 |
|
| 45,703,000 | | | | 46,414,000 | | | | 47,004,000 | | | | 46,640,000 | | | | 46,624,000 | | | | 46,879,000 | |
Notes to the Calculation of the Adjustment:
(c) — Container Rental Equipment
| |
| Calculation of Gross Purchases of Container Rental Equipment for the period from 1 July 2006 to Completion: Is equivalent to the Cost of Container Rental Equipment excluding Accumulated Depreciation as per the Balance Sheet in the Completion Accounts. For the avoidance of doubt this equals [$41,470,000] plus the sum of the Gross Purchases of Container Rental equipment for the period from 1 July 2006 to Completion as per the Cashflow contained in the Completion Accounts. |
A-60
Worked Example as per November 2006 Balance Sheet
Attachment 4
Net Debt
| | | | | | |
Item | | Net Debt Calculation | | | |
|
| | Current Liabilities | | | | |
1 | | Bank Overdraft | | | — | |
2 | | plus Bank Debt | | | 5,831,000 | |
3 | | plus Bank Vendor Financing | | | 711,000 | |
4 | | plus Finance Lease Other | | | 646,000 | |
| | | | | | |
| | Non-Current Liabilities | | | | |
5 | | plus Bank Debt | | | 25,143,000 | |
6 | | plus Bank Vendor Financing | | | 856,000 | |
7 | | plus ANZ Sub Capital Note | | | 11,788,000 | |
8 | | plus Finance Lease Other | | | 312,000 | |
9 | | Plus B Class Notes | | | 7,041,000 | |
| | | | | | |
10 | | plus Acquisition costs outstanding | | | 160,000 | |
11 | | plus Dividends | | | — | |
12 | | plus Amounts required to cash out the options | | | 310,000 | |
13 | | plus the Vendors transaction costs | | | 300,000 | |
| | | | | | |
| | plus Warranty Insurance Premium | | | — | |
| | plus Chairman’s bonus | | | 250,000 | |
| | plus Amount required to buy back the unallocated CFO Shares | | | | |
14 | | minus Cash | | | 3,152,000 | |
15 | | minus outstanding K&S (Curtainsiders) | | | 579,000 | |
16 | | minus ADF related debt | | | — | |
| | | | | | |
| | Net Debt | | | 49,617,000 | |
| | | | | | |
| | | | | | | | | | | | |
Net Debt Adjustment | | SSD | | | Actual | | | Adjustment | |
|
Net Debt | | | 49,617,000 | | | | 49,617,000 | | | | — | |
SSD Reference Table
| | | | |
31-Oct | | 30-Nov | | 31-Dec |
|
49,617,000 | | 49,617,000 | | 49,617,000 |
Reconciliation to Definition of Net Debt as per SSD:
| | | | |
B(i) — ANZ Facility = items 1, 2, 5, 7 | | | 42,762,000 | |
B(ii) — B Class Note = item 9 | | | 7,041,000 | |
B(iii) — other interest bearing debt/ finance leases = items 3, 4, 6 & 8 | | | 2,525,000 | |
B(iv) — remaining acquisition payments = item 10 | | | 160,000 | |
B(v) — Dividends or other distributions = item 11 | | | — | |
B(vi) — Amount to cash out Options = item 12 | | | 310,000 | |
B(vii) — Wridgeways Lease = included in B(iii) | | | | |
B(viii) — K&S Lease (reefers) = included in B(iii) | | | | |
B(ix) — Transactions expenses not yet paid = item 13 | | | 300,000 | |
Warranty Insurance | | | — | |
Chairman’s bonus | | | 250,000 | |
Buyback of CFO Shares | | | | |
Less | | | | |
A. — Cash = item 14 | | | (3,152,000 | ) |
(iii) K&S Lease (Curtainsiders) = item 15 | | | (579,000 | ) |
(iv) — ADF Debt | | | — | |
| | | | |
Net Debt | | | 49,617,000 | |
| | | | |
A-61
Notes to the Calculation of the Adjustment:
Net Debt — Calculation as per Definition
Equals:
The sum of the following line items in the Balance Sheet of the completion Accounts:
Current Liabilities:
Bank Overdraft
Bank Debt
Bank Vendor Financing
Finance Lease Other
Non-Current Liabilities:
Bank Debt
Bank Vendor Financing
ANZ Sub Capital Note
Finance Lease Other
B Class Notes
Plus:
| | |
| • | Acquisition costs outstanding — This is limited to the Acquisitions completed as at date of signing the Share Sale Agreement. The only liability outstanding is the deferred consideration payable for the acquisition of ACN which is $160,000 due 30 June 2007. |
|
| • | Dividends or other distributions declared by the group but not yet paid. |
|
| • | Amounts required to cash out all of the options — this is equivalent to the provision in the accounts which is estimated to be [$4,178,000]. This amount is included in the Balance Sheet line items “Employee Obligations” (Current & Non-Current), but does not form the total amount of these line items. |
|
| • | The Vendors’ costs and expenses of negotiating, preparing and executing this deed which are to be paid by the company and which are unpaid as at Completion. This amount will be included in Trade Creditors. |
|
| • | Any unpaid insurance premium relating to Warranty Insurance |
|
| • | Any unpaid performance fee relating to the Chairman’s bonus |
|
| • | The amount required to buyback the unallocated CFO Shares (only include if the payment has not yet occurred). |
Minus:
| | |
| • | The outstanding lease liability associated with the K&S (Curtainsiders) as per the amortization schedule referred to in clause 4.8. |
|
| • | Cash as per the Balance Sheet of the Completion Accounts. |
|
| • | Any amounts owing by the group in relation to any assets acquired in satisfaction of the Group’s obligations under the ADF Contract less any deposits received by the Group in relation to the ADF Contract |
A-62
Worked Example as per November 2006 Balance Sheet
Attachment 5
K&S Lease (Curtainsiders)
| | | | | | | | | | | | |
K&S Lease Adjustment | | SSD | | Actual* | | Adjustment |
|
K&S lease | | | 579,000 | | | | 579,000 | | | | — | |
| | |
* | | As per the Amortisation Schedule relating to this lease |
SSD Reference Table
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 31-Oct | | 30-Nov | | 31-Dec | | 31-Jan-07 | | 28-Feb-07 | | 31-Mar-07 |
|
| | | 602,000 | | | | 579,000 | | | | 555,000 | | | | 531,000 | | | | 507,000 | | | | 482,000 | |
A-63
Schedule 13 — Michael Baxter Consultancy Agreement
A-64
CONSULTANCY AGREEMENT
Made 2006
PARTIES:
(1) ROYAL WOLF TRADING AUSTRALIA PTY LIMITED, ACN 069 244 417(RWTA)
(2) MICHAEL BAXTER(You)
Position and Duties
(a) You shall be engaged as a Consultant.
(b) You shall undertake such tasks and duties as the Company may from time to time direct and in particular advise on strategic issues relating to the business and operations of RWTA and its subsidiary.
Commencement
This agreement shall commence on settlement of the Share Sale Deed and continue for a period of 12 months thereafter.
Hours of Work
You will be expected to work as necessary to complete or perform your duties up to a maximum of 50 hours per quarter.
Remuneration
You shall be entitled to be paid a consultancy fee of $4,166.00 per month plus GST payable on the last business day of each month.
Tax Invoice
You must be registered for GST and must submit a proper tax invoice to RWTA for your consultancy fees as a precondition of being paid your consultancy fees.
Consultant
You shall be engaged as an independent contractor and not as an employee and you shall not be entitled to sick leave or holidays and RWTA shall not be obliged to make any superannuation contributions.
Out of Pocket Travel Allowance
Expenses reasonably incurred on behalf of RWTA will be reimbursed on presentation of vouchers or invoices and should where possible be agreed prior to any expenditures being made.
Worker’s Compensation
Your employment will be covered by RWTA’s workers compensation insurance policy.
A-65
Confidentiality
You agree that you will not at any time either during the continuance of your employment or after termination of your employment for any reason divulge any of the Confidential information of RWTA to any other company , person or persons without the previous consent in writing of RWTA. You will not use or attempt to use any Confidential information which you may acquire in the course of your employment in any manner which may injure or cause loss or be calculated to injure or cause loss to RWTA.
Confidential information is any information of RWTA that is reasonably regarded as confidential and not in the public domain which includes but is not limited to:
| | |
| • | RWTA’s client and/or customer database |
|
| • | Financial information and profit margins |
|
| • | Remuneration packages of RWTA’s staff, agents and distributors |
|
| • | Sensitive pricing information |
|
| • | Manufacturing methods |
|
| • | Research data or results of research |
|
| • | Information which RWTA receive from third parties in confidence |
|
| • | Technical information and know-how |
|
| • | Intellectual property |
|
| • | Any other information reasonably regarded as confidential which comes into your possession for the purposes of, or as a result of the provision of services under this Agreement |
|
| • | Any notes, reports or documents created by you which utilizes or contains any of the information set out above, whether stored or storable in computer data file format or recorded in any other form. |
On the termination of this agreement, you are required to return to RWTA all confidential Information in material form, those parts of records or notes based on confidential information and all RWTA property, which is in your possession or control.
Non-Competition During Employment
You agree that you will not, during the course of your employment, directly or indirectly, in any capacity whatsoever, carry on, advise, provide services to or be engaged, concerned or interested in or associated with any business or activity which is competitive with any business carried on by RWTA or its subsidiaries.
Non-Competition After Conclusion of Employment
You agree that you will not, without written consent of RWTA anywhere within the Territory, during the following periods after the termination or expiration of your employment:
(a) One (1) year
(b) Two (2) years
(c) Three (3) years
(d) Four (4) years
(e) Five (5) years.
| | |
| • | Directly or indirectly in any capacity whatsoever, carry on, advise, provide services to or be engaged, concerned or interested in or associated with any business or activity which is competitive with or similar to any business carried on by RWTA or any of its subsidiaries at the date of termination of your employment; and |
A-66
| | |
| • | Canvass, solicit or endeavour to entice away from RWTA any person who or which at any time during the employment or at any date of termination of the employment was or is a client or customer or supplier of RWTA or of any of its subsidiaries or any other person or organisation who is in the habit of dealing with RWTA or any of its subsidiaries: and |
|
| • | Solicit, interfere with or endeavour to entice away an employee of RWTA or any of its subsidiaries; and |
|
| • | Counsel, procure or otherwise assist any person to do any of the acts referred to insub-paragraphs (b) and (c) of this paragraph. |
Territory shall mean Australia and New Zealand.
Termination of Employment
RWTA may terminate the employment by giving notice to you effective immediately and without payment of any salary other than the salary accrued to the date of the termination, where at any time you:
(i) Have committed any act of wilful or serious misconduct.
(ii) Are in breach of any of the terms and conditions of your employment.
(iii) Are continually or significantly neglectful of your duties under the employment or of any proper order or direction.
Governing Law and Jurisdiction
This agreement is governed by the laws of New South Wales. Each party irrevocably submits to the exclusive jurisdiction of the courts of New South Wales.
Severance
In the event that this Agreement is invalid or unenforceable, the remainder of this Agreement shall continue in full force.
| | |
| | |
/s/ James Warren | | /s/ Michael Baxter |
Royal Wolf Trading Australia Pty Limited | | Michael Baxter |
A-67
Signing page
| | |
EXECUTEDas a deed. | | |
ExecutedbyEquity Partners Two Pty Limited in its capacity as trustee of Equity Partners 2 Trust | | |
| | /s/ Quentin Jones |
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
Rajeev Dhawan | | Quentin Jones |
Name of director (print) | | Name of director/company secretary (print) |
| | |
ExecutedbyFOMM Pty Limited (as trustee of the FOMM Trust) | | |
| | |
Signature of sole director and sole company secretary | | who states that he or she is the sole director and the sole company secretary of the company |
Michael Baxter | | |
Name of sole director and sole company secretary (print) | | |
| | |
ExecutedbyFOMJ Pty Limited (as trustee of the FOMJ Trust) | | |
| | |
Signature of sole director and sole company secretary | | who states that he or she is the sole director and the sole company secretary of the company |
James H. Warren | | |
Name of sole director and sole company secretary (print) | | |
| | |
ExecutedbyCetro Pty Limited (as trustee of the FOMP Trust) | | |
| | |
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
Paul Jeffrey | | |
Name of director (print) | | Name of director/company secretary (print) |
| | |
ExecutedbyTCWE Pty Limited (as trustee of the McCann Family Trust) | | |
| | /s/ Alexandra Merton-McCann |
Signature of director | | Signature of director/company secretary (Please delete as applicable) |
Peter McCann | | Alexandra Merton-McCann |
Name of director (print) | | Name of director/company secretary (print) |
| | |
SignedbyMichael Paul Baxterin the presence of | | |
| | /s/ Michael Paul Baxter |
Signature of witness | | Michael Paul Baxter |
Maya Port | | |
Name of witness (print) | | |
A-68
| | |
SignedbyJames Harold Warrenin the presence of | | |
| | |
/s/ Maya Port Signature of witness | | /s/ James Harold Warren James Harold Warren |
| | |
Maya PortName of witness (print) | | |
| | |
SignedbyPaul Henry Jefferyin the presence of | | |
| | |
/s/ Maya Port Signature of witness | | /s/ Paul Henry Jeffrey Paul Henry Jeffrey |
| | |
Maya PortName of witness (print) | | |
| | |
SignedbyPeter Linden McCannin the presence of | | |
| | |
/s/ Maya Port Signature of witness | | /s/ Peter Linden McCann Peter Linden McCann |
| | |
Maya PortName of witness (print) | | |
| | |
ExecutedbyGFN Australasia Finance Pty Limited | | |
| | |
/s/ John O. Johnson Signature of director | | /s/ Robert Charles Barnes Signature of director/company secretary (Please delete as applicable) |
| | |
John O. Johnson | | Robert Charles BarnesName of director/company secretary (print) |
| | |
ExecutedbyGeneral Finance Corporation | | |
| | |
/s/ John O. Johnson Signature of authorised officer | | |
| | |
John O. Johnson Name of authorised officer | | |
BISON CAPITAL AUSTRALIA, L.P.
by
BISON CAPITAL AUSTRALIA GP, LLC,
a Delaware limited liability company
By:
/s/ Douglas B. Trussler
Name: Douglas B. Trussler
Its: Manager
A-69
Annex B
General Finance Corporation
GFN Australasia Holdings Pty Limited
and
Bison Capital Australia, L.P.
and
GFN Australasia Finance Pty Limited
Shareholders Agreement
TABLE OF CONTENTS
| | | | | | | | |
| | | | | | Page No. |
|
1 | | Definitions and interpretation | | | B-3 | |
| | 1.1 | | Definitions | | | B-3 | |
| | 1.2 | | Interpretation | | | B-5 | |
| | 1.3 | | Business Day | | | B-6 | |
| | 1.4 | | Inconsistency with Constitution | | | B-6 | |
2 | | Termination of previous agreements | | | B-6 | |
3 | | Share capital | | | B-7 | |
| | 3.1 | | Share Capital | | | B-7 | |
| | 3.2 | | Rights of Shares | | | B-7 | |
4 | | Acknowledgements by Shareholders | | | B-7 | |
5 | | Shareholder funding of the Company | | | B-7 | |
| | 5.1 | | No obligation to contribute additional funds | | | B-7 | |
6 | | Disposal of Securities | | | B-7 | |
| | 6.1 | | Restriction on disposition | | | B-7 | |
| | 6.2 | | Permitted transfers | | | B-7 | |
| | 6.3 | | Restraint of transfer of Shares | | | B-7 | |
7 | | Put and Call Options | | | B-8 | |
| | 7.1 | | Put Option | | | B-8 | |
| | 7.2 | | Call Options | | | B-8 | |
| | 7.3 | | Purchase Price | | | B-8 | |
| | 7.4 | | Closing | | | B-9 | |
| | 7.5 | | Liquidity Default | | | B-9 | |
8 | | Shareholders Meetings | | | B-10 | |
| | 8.1 | | Quorum | | | B-10 | |
| | 8.2 | | Adjourned Meetings | | | B-10 | |
| | 8.3 | | Transactions Requiring Approval of Bison-GE | | | B-10 | |
| | 8.4 | | Dividend Policy | | | B-11 | |
9 | | Directors | | | B-11 | |
| | 9.1 | | Composition of Board of Directors | | | B-11 | |
| | 9.2 | | Appointment of Alternates | | | B-11 | |
| | 9.3 | | Observer Rights | | | B-11 | |
| | 9.4 | | Appointment of Chairman | | | B-11 | |
10 | | Meetings of Directors | | | B-11 | |
| | 10.1 | | Notice of Meetings | | | B-11 | |
| | 10.2 | | Board Papers | | | B-11 | |
| | 10.3 | | Meetings by Written Resolution | | | B-12 | |
| | 10.4 | | Location and Travel Expenses | | | B-12 | |
| | 10.5 | | Frequency of Meetings | | | B-12 | |
| | 10.6 | | Board meetings | | | B-12 | |
| | 10.7 | | Reports | | | B-12 | |
B-1
| | | | | | | | |
| | | | | | Page No. |
|
11 | | Management of the Company | | | B-12 | |
| | 11.1 | | The Board | | | B-12 | |
| | 11.2 | | Committees | | | B-13 | |
| | 11.3 | | Deed of Access and Indemnity | | | B-13 | |
12 | | Representations and Warranties | | | B-13 | |
| | 12.1 | | Representations and Warranties | | | B-13 | |
| | 12.2 | | Application of Representations and Warranties | | | B-13 | |
13 | | Indemnification and Release by GFC | | | B-13 | |
| | 13.1 | | Indemnification | | | B-13 | |
| | 13.2 | | Enforceability | | | B-14 | |
14 | | Termination | | | B-14 | |
15 | | General | | | B-14 | |
| | 15.1 | | Notices | | | B-14 | |
| | 15.2 | | Governing law and jurisdiction | | | B-15 | |
| | 15.3 | | Prohibition and enforceability | | | B-15 | |
| | 15.4 | | Waivers | | | B-15 | |
| | 15.5 | | Variation | | | B-15 | |
| | 15.6 | | Amendment | | | B-15 | |
| | 15.7 | | Cumulative rights | | | B-15 | |
| | 15.8 | | Assignment | | | B-15 | |
| | 15.9 | | Further assurances | | | B-15 | |
| | 15.10 | | Entire agreement | | | B-15 | |
| | 15.11 | | Counterparts | | | B-16 | |
| | 15.12 | | Relationship of parties | | | B-16 | |
| | 15.13 | | Investments in Competitive Businesses | | | B-16 | |
| | SCHEDULE 1 — SHARE CAPITAL | | | S-1 | |
| | SCHEDULE 2 DEED OF ACCESSION | | | S-2 | |
| | 1 | | Interpretation | | | S-2 | |
| | 2 | | New Shareholder | | | S-2 | |
| | 3 | | Third party benefit | | | S-3 | |
| | 4 | | Release | | | S-3 | |
| | 5 | | Consent | | | S-3 | |
| | 6 | | Address | | | S-3 | |
| | 7 | | Governing law | | | S-3 | |
| | 8 | | Counterparts | | | S-3 | |
B-2
THIS SHAREHOLDERS AGREEMENTis made on 2007
PARTIES
GFN AUSTRALASIA HOLDINGS PTY LIMITED
of [insert address]
(“GFNH”)
and
Bison Capital Australia, L.P.
of [insert address]
(“Bison-GE”)
(each aShareholder and collectively theShareholders)
and
General Finance Corporation
of
260 South Los Robles, Suite 217
Pasadena, CA 91101
(“GFC”)
GFN AUSTRALASIA FINANCE PTY LIMITED
of [insert address]
(“Company”)
BACKGROUND
The Shareholders wish to regulate the operation of the Company on the terms set out in this Agreement.
AGREED TERMS
1 Definitions and interpretation
1.1 Definitions
In this Agreement, unless the context requires otherwise:
“Affiliate” means in relation to a party, any person directly or indirectly controlling, controlled by or under common control with that party. For the purposes of this definition, “control” of a party means the power, either directly or indirectly, either
(a) to vote 50% or more of the securities having voting power for the election of directors of such party;
(b) to direct or cause the direction of the management and policies, or investment decisions (by contract or otherwise) of such party; or
(c) in the case of the Company or GFNH, the officers and directors of GFNH.
“Bison-GE Percentage” means, as of any date of determination, the ratio, expressed as a percentage, of the Bison-GE Sale Shares to the total outstanding Shares of the Company.
“Bison-GE Sale Shares Price” means that portion of the Bison-GE Completion Payment (as defined in the Share Sale Deed) that is not paid in cash by the Company. If in the context used, Bison-GE is selling less than all of the Shares received as part of the Bison-GE Completion Payment, the Bison-GE Sale Shares Price shall be proportionately reduced.
“Board” means the Board of Directors of the Company.
B-3
“Business Day” means a day on which banks are open for domestic business in Los Angeles excluding Saturdays, Sundays and public holidays.
“Commencement Date” means the date of this Agreement.
“Company” means GFN Australasia Finance Pty Limited.
“Company EBITDA” means, in respect of the applicable period, the sum of: (i) earnings before interest, tax, depreciation and amortization, of the Company and its consolidated subsidiaries, calculated in accordance with GAAP; plus (ii) any expenses that would be classified on the consolidated income statement of the Company as “extraordinary items” under GAAP.
“Company Group” means the Company and its Subsidiaries.
“Constitution” means the Company’s constitution dated August 14, 2006 as amended or replaced from time to time.
“Corporations Act” means theCorporations Act 2001(Cth).
“Covered Business” means the sale and lease of portable storage containers, portable container buildings and freight containers, as such Covered Business may from time to time change with the agreement of the Company and the Shareholders.
“Covered Territory” means that part of the world south of Guam, west of Hawaii or east of Viet Nam.
“Deed of Accession” means a deed substantially in the form of the deed of accession set out in Schedule 2 or such other form as may be agreed to by the Company and the Shareholders.
“Determination Period” means with respect to determination of the Put Purchase Price, the First Call Option Purchase Price or the Second Call Option Purchase Price, the12-month period ending on the last day of the calendar month preceding the calendar month in which the Put Option Exercise Notice, the First Option Call Exercise Notice or the Second Call Option Exercise Notice was delivered.
“Director” means a director of the Company.
“Dispose” means any dealing with a Security, including but not limited to, a sale, transfer, assignment, trust, encumbrance, option, swap, any alienation of all or any part of the rights attaching to a Security or interest in a Security, and includes any attempt to so deal or the taking of any steps for the purpose of so dealing.
“Financial Benefit” has the meaning given to that term in the Corporations Act.
“GFC Trading Multiple” means, as of any date of determination, the quotient of (i) (x) the product of (x) the average closing sale price of the common shares of GFC that are publicly traded on the principal securities exchange on which they are traded on each business day during the20-day trading period ending one trading day prior to such date of determination,multiplied by (y) the number of fully diluted common shares of GFC outstanding during the fiscal quarter most recently ended (for purposes of this subclause (y), the number of fully diluted common shares of GFC shall be calculated on the same basis as GFC calculates, and calculated using the same information regarding common shares and common share equivalents and derivatives as GFC uses to calculate, fully diluted shares for purposes of reporting fully diluted earnings per share in GFC’s then most recent quarterly or annual periodic filing with the US Securities and Exchange Commission (provided, that if the number of fully diluted common shares of GFC has increased or decreased by more than 1% of the number of fully diluted shares outstanding since the date of the most recent periodic filing, the number of fully diluted shares for purposes of this subclause (y) shall correspondingly be increased or decreased)),plus (z) the Net Debt of GFC,divided by (ii) the EBITDA of GFC (determined on consolidated basis) for the12-month period most recently ended.
“Governmental Agency” means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity.
B-4
“Net Debt” of any entity means, as of any date of determination, short-term and long-term third party indebtedness (inclusive of any debt due to any Shareholder or Affiliate of any Shareholder) of such entityminus any cash or cash equivalents of such entity, calculated in accordance with GAAP.
“Permitted Expenses” means payments of up to US $1,000,000 in any12-month period made by the Company Group to GFC or any Related Party of GFC (other than to members of the Company Group) for expenses; provided, that if at any time GFC or GFNH (either directly or through any Related Party other than a member of the Company Group) acquires or establishes another business or company, Permitted Expenses in any12-month period shall be multiplied by the Reduction Percentage on a prospective basis. For purposes of the foregoing, the“Reduction Percentage” shall be that percentage obtained by dividing the revenues of the Covered Business by the total revenues of GFC (determined on a consolidated basis in accordance with GAAP); provided that Permitted Expenses shall never be less than US $500,000. Payments on debt owed to GFC, GFNH and their Affiliates, and dividends and distributions to Shareholders with respect to their Shares are not expenses included in Permitted Expenses so long as (x) such debt or Shares are, in each case, issued with the approval of Bison-GE (to the extent such approval is required hereunder), and (y) such debt or Shares were not issued in consideration of the forgiveness, payment or deferral of administrative expense payments, reimbursements or distributions made by any member of the Company Group to GFC or any Related Party of GFC.
“Related Body Corporate” has the meaning ascribed to that term in the Corporations Act.
“Related Party” in respect of a Shareholder has the meaning given to the term “related entity” in the Corporations Act.
“RWA”means RWA Holdings Pty, Limited.
“Securities” means Shares or other securities that are convertible into Shares, including, without limitation, options and convertible notes.
“Share” means a share issued in the capital of the Company.
“Share Sale Deed” means the Share Sale Deed dated September 12, 2006 relating to shares in RWA, as from time to time amended, including the Deeds of Variation dated January 19, 2007, March 9, 2007 and March [ ], 2007.
“Shareholder” means each person or entity that executes this Agreement as a Shareholder under this Agreement, for so long as that person or entity owns Shares. The initial Shareholders are Bison-GE and GFNH.
“Subsidiaries” means any corporate entities which are directly or indirectly majority owned by the Company.
1.2 Interpretation
In this Agreement, headings and boldings are for convenience only and do not affect the interpretation of this Agreement and, unless the context otherwise requires:
(a) words importing the singular include the plural and vice versa;
(b) words importing a gender include any gender;
(c) where a word or phrase is defined in this Agreement, other parts of speech and grammatical forms of that word or phrase have a corresponding meaning;
(d) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency;
(e) a reference to any thing (including, but not limited to, any right) includes a part of that thing but nothing in this clause 1.2(e) implies that performance of part of an obligation constitutes performance of the obligation;
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(f) a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, this Agreement and a reference to this Agreement includes any annexure, exhibit and schedule;
(g) a reference to a statute, regulation, proclamation, ordinance or by-law includes all statutes, regulations, proclamations, ordinances or by-laws amending, consolidating or replacing it, whether passed by the same or another Governmental Agency with legal power to do so, and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under that statute;
(h) a reference to a document includes an amendment or supplement to, or replacement or novation of, that document;
(i) a reference to a party to a document includes that party’s successors and permitted assigns;
(j) a covenant or agreement on the part of 2 or more persons binds them jointly and severally;
(k) a reference to an agreement includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing;
(l) a reference to an asset includes all property of any nature, including, but not limited to, a business, and all rights, revenues and benefits;
(m) a reference to a document includes any agreement in writing, or any certificate, notice, instrument or other document of any kind;
(n) a reference to a month is a reference to a calendar month;
(o) a reference to a dollar amount shall, unless specified to the contrary, be in US dollars (US$);
(p) all references to any accounting principle, financial statement calculation or similar reference shall be determined in accordance with United States generally accepted accounting principles, consistently applied (“GAAP”);
(q) a reference to a body, other than a party to this Agreement (including, without limitation, an institution, association or authority), whether statutory or not:
(i) which ceases to exist, or
(ii) whose powers or functions are transferred to another body,
is a reference to the body which replaces it or which substantially succeeds to its powers or functions;
(r) words and phrases defined in the Share Sale Deed shall (unless defined herein or the context otherwise requires) have the same meaning where used herein.
1.3 Business Day
Where the day on or by which any thing is to be done is not a Business Day, that thing must be done on or by the preceding Business Day.
1.4 Inconsistency with Constitution
If there is any inconsistency between this Agreement and the Constitution, this Agreement prevails. At the request of any party, the other parties must cause the Constitution to be amended to overcome any such inconsistency.
2 Termination of previous agreements
Each of the parties other than Bison-GE confirms that all previous shareholders agreements in relation to the Company have been terminated and that this Agreement is the only shareholders agreement which governs the relationship between the Shareholders.
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3 Share capital
3.1 Share Capital
The parties acknowledge that as at the Commencement Date, the Share capital of the Company will consist of [ ] Shares held by the Shareholders listed in Schedule 1.[who will provide?]
3.2 Rights of Shares
Each Share confers the same rights as each other Share, subject to this Agreement.
4 Acknowledgements by Shareholders
The Shareholders unconditionally and irrevocably acknowledge and agree that:
(a) the Board will be responsible for the management of the Company in its absolute discretion, including all decisions regarding capital, customers, revenues, purchases, sales, staffing and expenditures; and
(b) no representations have been made to the Shareholders as to the future performance, conduct, continuation or profitability of the Company or the current or future value at any time of the Securities.
5 Shareholder funding of the Company
5.1 No obligation to contribute additional funds
No Shareholder will be required to contribute additional share capital, extend credit, provide any security or any guarantee or otherwise make any financial accommodation available in relation to the Company.
6 Disposal of Securities
6.1 Restriction on disposition
A Shareholder must not Dispose of any legal or equitable interest in a Security except as permitted by this Agreement.
6.2 Permitted transfers
A Shareholder may Dispose of any of its Securities if that transfer is of the entire legal and beneficial interest in those Securities and the proposed Disposition (including the proposed transferee) is first approved in writing by the other Shareholder. [Note: actual signed agreement will be modified if Bison-GE determines, prior to the Second Completion Date under the Share Sale Deed, to have the securities held by its partners (or their Related Party assignees that are “accredited investors”; among other things, agreement will contain provision that all consents and approvals, and the election to exercise the “Put Option,” will be made by one designated entity; in addition, those entities will have the right, after not less than 8 years after the closing, to distribute the Shares to their respective partners, managers, members, shareholders, officers and directors so long as the voting of such shares is retained by the current partners of Bison-GE)].
6.3 Restraint of transfer of Shares
(a) The Company must refuse to register the transfer of any Security unless the transferee has entered into a Deed of Accession (unless the transferee is already a Shareholder), and that transfer is permitted by this Agreement.
(b) Subject to clause 6.3(c), the Company must not decline to register the transfer of any Security which otherwise qualifies under clause 6.3(a).
(c) The Company may require the transferor or the person named as transferee in any transfer lodged for registration to provide the Company with such information and evidence as the Company considers necessary or relevant to determine whether a particular transfer of Securities is permitted under this Agreement. If that information or evidence is not provided to the satisfaction of the Company within 20 Business Days after that request, the Company may refuse to register the transfer in question.
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7 Put and Call Options
7.1 Put Option
(a) Bison-GE Put Option. In accordance with the terms and conditions set forth herein, at any time following the second anniversary of the Second Completion Date (as defined in the Share Sale Deed), Bison-GE shall have the right and option (the“Put Option”) to elect to cause GFNH and GFC (the obligations of which shall be joint and several hereunder) to purchase from Bison-GE (and from any permitted transferee thereof), and upon such election Bison-GE (and any such permitted transferee) shall sell and transfer to GFC and GFNH, all and not less than all of the Securities in the Company held by Bison-GE and such person(s) (the“Bison-GE Sale Shares”).
(b) Manner of Exercise. Subject to the terms and conditions of this Section 7, the Put Option may be exercised by the delivery by Bison-GE of a written notice (the“Put Option Exercise Notice”) to GFNH and GFC stating that Bison-GE is exercising the Put Option and containing instructions for the payment of the Put Option Purchase Price (as defined below). The Put Purchase Price (defined below) shall be paid in full in accordance with the provisions of this Section 7. The Put Option Exercise Notice shall be irrevocable.
7.2 Call Options.
(a) First Call Option.
(i) At any time prior to the third anniversary of the Second Completion Date and provided that Bison-GE shall not have previously exercised the Put Option, in accordance with the terms and conditions set forth in this Section 7, GFNHand/or GFC shall have the right and option to elect (the“First Call Option”) to cause Bison-GE (and any of its permitted transferees) to sell and transfer to GFNH or GFC (as the case may be) the Bison-GE Sale Shares.
(ii) Manner of Exercise. Subject to the terms and conditions of this Section 7, the First Call Option may be exercised by the delivery by GFNH or GFC of a written notice (the“First Call Option Exercise Notice”) to Bison-GE stating that GFNH or GFC is exercising the First Call Option. The First Call Option Purchase Price (as defined below) shall be paid in full in accordance with the provisions of this Section 7. The First Call Option Exercise Notice shall be irrevocable.
(b) Second Call Option.
(i) At any time following the third anniversary of the Second Completion Date, in accordance with the terms and conditions set forth in this Section 7, GFNHand/or GFC shall have the right and option to elect (the“Second Call Option”) to cause Bison-GE (and any of its permitted transferees) to sell and transfer to GFNH or GFC (as the case may be) the Bison-GE Sale Shares.
(ii) Manner of Exercise. Subject to the terms and conditions of this Section 7, the Second Call Option may be exercised by the delivery by GFNHand/or GFC of a written notice (the“Second Call Option Exercise Notice”) to Bison-GE stating that GFNHand/or GFC is exercising the Second Call Option. The Second Call Purchase Price (as defined below) shall be paid in full in accordance with the provisions of this Section 7. The Second Call Option Exercise Notice shall be irrevocable.
(c) Exercise of Put Option after Call Option. If within 15 days after delivery of the First Call Option Exercise Notice or the Second Call Option Exercise Notice Bison-GE delivers a Put Option Exercise Notice, the Bison-GE Sale Shares shall be sold pursuant to the Put Option, and not the First or Second Call Option, provided that the Closing shall occur no later than 30 Business Days delivery of the First Call Option Exercise Notice or Second Call Option Exercise Notice, as the case may be.
7.3 Purchase Price.
(a) Put Purchase Price. The purchase price (the“Put Purchase Price”) for the Bison-GE Sale Shares in connection with the exercise of the Put Option shall be the amount that is the greatest of the following:
(i) the amount equal to the Bison-GE Percentagemultiplied by the product of (x) 8.25multiplied by (y) the sum of Company EBITDA for the Determination Period plus all administrative expense payments or reimbursements made by any member of the Company Group to GFC or any Related Party of
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GFC (other than members of the Company Group) in respect of such period,minus (z) the Net Debt of the Company Group;
(ii) the amount equal to the Bison-GE Percentagemultiplied by the product of (x) the GFC Trading Multiplemultiplied by (y) the Company EBITDA for the Determination Period,minus (z) the Net Debt of the Company Group; or
(iii) the Bison-GE Sale Shares Price.
(b) First Call Option Purchase Price. The purchase price (the“First Call Option Purchase Price”) for the Bison-GE Sale Shares in connection with the exercise of the First Call Option shall be equal to the product of (x) 2.75multiplied by (y) the Bison-GE Sale Shares Price
(c) Second Call Option Purchase Price. The purchase price (the“Second Call Option Purchase Price”) for the Bison-GE Sale Shares in connection with the exercise of the Second Call Option shall be equal to the greater of the following:
(i) the amount equal to the Bison-GE Percentagemultiplied by the product of (x) 8.75multiplied by (y) Company EBITDA for the Determination Period plus all administrative expense payments or reimbursements made by any member of the Company Group to GFC or any Related Party of GFC (other than members of the Company Group) in respect of such period,minus (z) the Net Debt of the Company Group; or
(ii) the amount equal to the Bison-GE Percentagemultiplied by the product of (x) the GFC Trading Multiplemultiplied by (y) the sum of Company EBITDA for the Determination Period,minus (z) the Net Debt of the Company Group.
(d) Payment of Purchase Price. The Put Purchase Price, First Call Option Price and Second Call Option Price shall be paid in cash in immediately available US dollar denominated funds in the United States.
(e) Date of Determination. The date of determination of the Put Purchase Price, First Call Option Price and Second Call Option Price shall be the date of delivery of the Put Option Exercise Notice, the First Call Option Exercise Notice or the Second Call Option Exercise Notice, as the case may be.
7.4 Closing
GFNH and GFC shall have the right to determine which of them shall purchase the Bison-GE Sale Shares or in what amounts either shall purchase, and shall have the right to have such Shares purchased by any other nominee (GFNH, GFCand/or such other nominee, the“Purchaser), provided that such nomination shall not relieve GFNH and GFC of its obligation to pay the purchase price in full in cash for the Bison-GE Sale Shares. The consummation of the Put Option to the Purchaser or the First or Second Call Option by the Purchaser pursuant to this Section 10 (the“Closing”) shall take place at the offices of Sheppard, Mullin, Richter & Hampton, LLP at 333 South Hope Street, 48th Floor, Los Angeles, California, 90071 (or at such other place upon which Bison-GE and GFC shall agree), on the date (the“Closing Date”) that is no later than thirty (30) Business Days after the date the Put Option Exercise Notice is delivered to GFNH and GFC or the First or Second Call Option Exercise Notice (as applicable) is delivered to Bison-GE, as applicable. At the Closing, the Purchaser must deliver to Bison-GE by wire transfer of immediately available funds the applicable Purchase Price.
7.5 Liquidity Default
If GFNH and GFC fail to consummate a Closing in accordance with this Section 7 as a result of liquidity issues which, after commercially reasonable efforts, GFNH and GFC are unable to resolve, then GFNH and GFC shall use commercially reasonable efforts to consummate such Closing as soon as possible thereafter but no later than three (3) months after the failed Closing Date; provided, that the multiples set forth in Sections 7.3(a)(i)(x) and (c)(i)(x) shall be increased to 9.25 and 9.75, respectively, and the Put Purchase Price or the First Call Option Purchase Price, as applicable, shall be recalculated accordingly. The multiples shall continue to increase by 1.0 for each12-month period in which GFNH and GFC fail to consummate a Closing in accordance with this Section 7. If the new Purchase Price calculated in accordance with the foregoing sentences is higher than the Purchase Price with respect to the failed Closing, then the Closing shall be consummated at such higher price.
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8 Shareholders Meetings
8.1 Quorum
The presence at any meeting of Shareholders, in person or by proxy, of the holders of record of a majority of the Shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except as otherwise provided by law.
8.2 Adjourned Meetings
If within half an hour after the time appointed for the holding of a meeting of Shareholders, a quorum is not present, the meeting must be adjourned to the same time and at the same place fourteen (14) days later and each of the Shareholders must be notified immediately by facsimile message of such adjournment. If at such adjourned meeting a quorum is not present within half an hour of its commencement any Shareholder present at such meeting shall constitute a quorum for the purpose of the transaction of business.
8.3 Transactions Requiring Approval of Bison-GE
Without the prior written consent of Bison-GE (which consent may be granted or declined in its absolute discretion), neither the Company nor any member of the Company Group may:
(a) (Assets)sell, transfer, assign or dispose of material assets (either tangible or intangible) except in the ordinary course of the Covered Business or other business to which Bison-GE has consented in accordance with clause 8.3(f);
(b) (Auditor)appoint or remove any auditor;
(c) (Related Party Transactions) enter into, modify or amend any transaction with a Related Party of the Company, including a transaction to provide any Financial Benefit to any Related Party other than: (i) Permitted Expenses; (ii) remuneration and expense reimbursement paid in the ordinary course of Covered Business in the Covered Territory; (iii) the purchase and sale of assets at market rates among Affiliates of the Company in the ordinary course of Covered Business in the Covered Territory; and (iv) the note(s) to be issued by the Company to GFCand/or GFNH to obtain the funds to pay the purchase price for the RWA shares purchased from Bison-GE pursuant to the Share Sale Deed, which note(s) are on terms consented to in good faith by Bison-GE. For this purpose, a“Related Party” of the Company shall not include any other member of the Company Group;
(d) (Further Issues)issue, allot, sell, pledge or grant any right to have issued, allotted, sold, pledged or granted any debt (other than senior indebtedness), shares or Securities of any member of the Company Group, or redeem, repay any amounts owing, buy back or amend or modify the rights attaching to any shares in the capital of any member of the Company Group except: (i) the pledge of such Securities to secure senior indebtedness obtained by one or more members of the Company Group or to secure a guaranty of senior indebtedness by one or more members of the Company Group; and (ii) issuances, allotments, pledges, redemptions, repayments, or buy backs among members of the Company Group;
(e) (Dividends)declare, set aside for payment or pay any dividend or distribution with respect to any of the capital of the Company (for avoidance of doubt, this covenant does not prohibit dividends or distributions with respect to the capital of any other member of the Company Group);
(f) (Scope of Business)change the nature or scope of the business of the Company Group as a whole or commence any new business which is not ancillary or incidental to the Covered Business or any other business conducted by the Company Group with the written consent of Bison-GE;
(g) (Merge)merge or amalgamate with any person, or otherwise engage in a transaction that results in a change in control of the Company, except for mergers and amalgamations among members of the Company Group; or
(h) (Agreements)enter into any agreement to do any of the foregoing.
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8.4 Dividend Policy
The adoption of, or amendment or modification to, a dividend policy by the Company or any Subsidiary shall require the approval of the Board.
9 Directors
9.1 Composition of Board of Directors
(a) The Board will be comprised of a maximum of five (5) Directors elected from time to time by the holders of more than 50% of the Shares.
9.2 Appointment of Alternates
(a) Each of the Shareholders shall be entitled to appoint an alternate for each Director they appoint to the Board.
(b) Every alternate Director shall be entitled to receive notices of meetings of Directors. The alternate Director shall be entitled to attend and (in the absence of the Director with respect to which it serves as an alternate) vote at any such meeting in the absent Director’s place.
(c) Where any alternate Director is also a Director inhis/her own right that Director will have a separate vote on behalf of the Directorhe/she is representing in addition tohis/her own vote.
(d) An alternate Director must vacate that office immediately if the Director for whom the alternate Director acts as alternate ceases to be a Director.
9.3 Observer Rights
Bison-GE will have the right to send one non-voting representative on its behalf (the“Observer”) to attend all meetings of the Board, including all committees thereof, solely in a non-voting observer capacity. The Company will furnish to the Observer copies of all notices, minutes, consents, board package materials and other materials (including the reports delivered pursuant to Article 10) that it makes available to its Directors as and when such materials are provided to its Directors. The Observer may participate in discussions of matters under consideration by the Board and any matters brought before any committee thereof but will not be entitled to vote on any matter presented to the Board. Bison-GE will have the right to remove and replace its Observer in its sole discretion and to designate a substitute representative if such Observer is unable or unwilling to attend any of the Board’s meetings, including any committees thereof.
9.4 Appointment of Chairman
A Chairman must be chosen and appointed by the Board as soon as possible after the Commencement Date. Until that time, Ronald F. Valenta will act as Chairman.
10 Meetings of Directors
10.1 Notice of Meetings
Unless the Directors otherwise agree, notice of every meeting must be given to every Director, the company secretary and every Observer in writing at least five (5) days before the date of the proposed meeting.
10.2 Board Papers
Without limiting clause 10.1, unless otherwise agreed by the Board, the Company must provide to each of the Directors and the Observer for consideration at least three (3) Business Days prior to any Board meeting:
(a) monthly management reports containing such information as to its financial and business affairs as any Director or the Observer may reasonably require (including cash flow position and projections); and
(b) a CEO’s report.
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10.3 Meetings by Written Resolution
If a majority of the Directors have signed a document — which for these purposes may be a facsimile transmission — containing a statement that they are in favour of a resolution of the Directors in the terms set out in the document, a resolution in those terms shall be deemed to have been passed at a meeting of the Directors held at the date and at the time at which the document was last signed by a Director. For the purposes of this clause two or more separate documents containing statements in identical terms, each of which is signed by one or more Directors, shall together be deemed to constitute one document containing a statement in those terms signed by those Directors on the respective days on which they signed the separate documents.
10.4 Location and Travel Expenses
The meetings of Directors shall be held in Australia or California or by teleconference or video link unless the Board resolves otherwise. In addition to any other fees paid to Directors under this Agreement, the Company must bear and pay such reasonable travel (coach airfare), accommodation and other expenses as may be incurred by the Directors and Observers for the purpose of travelling to and attending Board meetings.
10.5 Frequency of Meetings
Unless the Directors otherwise agree, without limitation to a Director’s right under the Constitution of the Company to convene a meeting at any time, the Directors must meet at least four (4) times each financial year at regular intervals and otherwise as may be mutually agreed from time to time.
10.6 Board meetings
At all meetings of Directors: (a) each Director in attendance in person or by alternate has one vote; (b) a resolution of the Board is carried upon a majority of votes; (c) only resolutions specified in the relevant notice of Board meeting may be passed at any Board meeting unless all Directors agree otherwise; and (d) minutes of each Board meeting will be circulated to the Directors within a reasonable time after such meeting, and will be approved by the Board at the next Board meeting and certified by the chairperson as being so approved.
10.7 Reports
The Company shall provide to each Shareholder (i) as soon as available, but in any event within forty-five (45) days after the end of each fiscal quarter of the Company, copies of the consolidated balance sheets of the Company and its subsidiaries as at the end of such quarter, and consolidated statements of income, stockholders’ equity and cash flows of the Company and its subsidiaries, for such quarter and for the portion of the fiscal year ending with such quarter, in each case prepared in accordance with the Accounting Standards applicable to periodic financial statements generally, subject to changes resulting from normal year-end adjustments and (ii) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Company, copies of the consolidated balance sheets of the Company and its subsidiaries as at the end of such year, and consolidated statements of income, stockholders’ equity and cash flows of the Company and its subsidiaries for such year, in each case prepared in accordance with the Accounting Standards applicable to periodic financial statements generally, and accompanied by an opinion thereon of independent certified public accountants of recognized international standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the persons being reported upon and their results of operations and cash flows and have been prepared in conformity with the Accounting Standards.
11 Management of the Company
11.1 The Board
The Board shall be responsible for the overall direction and control of the management of the Company and the formulation of the policies to be applied in the conduct of the business. Similarly, management of any other member of the Company Group is vested in the board of directors of that member.
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11.2 Committees
The Board may delegate any of its powers to a committee of Directors.
The provisions of this clause shall apply mutatis mutandis to all other members of the Company Group.
11.3 Deed of Access and Indemnity
The Company and each of the officers of the Company from time to time shall execute a Deed of Access and Indemnity between the relevant officer and the Company.
12 Representations and Warranties
12.1 Representations and Warranties
Each of the parties represents and warrants to the other parties as at the date of this Agreement that:
(a) it is duly incorporated and the execution, delivery and performance of this Agreement does not violate its constitution;
(b) it has the power and has taken all corporate and other action required, to enter into this Agreement and to authorise the execution and delivery of this Agreement and the performance of its obligations;
(c) this Agreement constitutes a valid and legally binding obligation of it in accordance with its terms; and
(d) the execution, delivery and performance of this Agreement does not violate any existing law or any document or agreement to which it is a party or which is binding on it or any of its assets.
12.2 Application of Representations and Warranties
All representations and warranties in this Agreement:
(a) survive the execution and delivery of this Agreement;
(b) remain in full force and effect for the term of this Agreement; and
(c) are given with the intent that liability under those representations and warranties is not to be confined to breaches discovered prior to the date of this Agreement.
13 Indemnification and Release by GFC
13.1 Indemnification.
GFC shall pay, indemnify, defend, and hold Bison-GE and each of its officers, directors, partners, trustees, members, advisors (including, without limitation, attorneys, accountants and financial advisors), employees, agents,attorneys-in-fact and controlling persons (each, an“Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, losses, damages, including, but not limited to, punitive, exemplary, consequential or indirect damages and liabilities of any kind, and all reasonable attorneys’ fees and disbursements and other costs and expenses actually incurred in connection therewith, or for recovery under directors’ and officers’ liability insurance policies maintained by GFC (as and when they are incurred and irrespective of whether suit is brought), whether or not brought by a third party (collectively“Claims”), at any time asserted against, imposed upon, or incurred by any of them (i) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of the Share Sale Deed or the transactions contemplated thereby, including, without limitation, any failure to obtain consent or approval to consummate the transactions contemplated by the Share Sale Deed or breach of any representation, warranty, covenant or agreement made by GFC or GFNH (but not any other party) in the Share Sale Deed, (ii) with respect to the acquisition of Sale Shares (as such term is defined in the Share Sale Deed), and (iii) with respect to any investigation, litigation, or proceeding related to this Agreement or any act, omission, event, or circumstance in any manner related thereto including, but not limited to, in connection with the enforcement of the indemnification obligations set forth herein (all the foregoing, collectively, the“Indemnified Liabilities”). The foregoing to the contrary notwithstanding, GFC shall have no obligation to any Indemnified Person under this Section 13.1 with
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respect to any Indemnified Liability: (a) arising or resulting from Bison-GE’s breach of any its representations, warranties, covenants and agreements under the Share Sale Deed (but not with respect to any covenant or agreement of Bison-GE in the Share Sale Deed that is assumed by the Company as of the Second Closing and for which Bison-GE was not in default as of the date of the assumption), this Agreement or any other agreement; or (b) that a court of appropriate jurisdiction in a final and non-appealable determination determines to have resulted from the willful misconduct or fraud of such Indemnified Person (such determination being hereinafter referred to as a“Final Willful Misconduct Determination”). This Section 13.1 shall survive the termination of this Agreement.
13.2 Enforceability.
THE INDEMNIFICATION PROVISIONS IN THIS SECTION 13 SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LAWS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LAW) AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.
14 Termination
This Agreement terminates on the earliest to occur of:
(a) there being only one Shareholder in the Company; or
(b) each of the parties agreeing in writing to terminate this Agreement.
15 General
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15.1 Notices
(a) Any notice or other communication including, but not limited to, any request, demand, consent or approval, to or by a party to this Agreement:
(i) must be in legible writing and in English addressed as shown below:
(A) if to GFNHand/or GFC:
Attention:
Address:
Facsimile: ;
(B) if to Bison-GE:
Attention:
Address:
Facsimile: ;
(C) if to the Company:
Attention:
Address:
Facsimile: ;
or as specified to the sender by any party by notice;
(ii) where the sender is a company, must be signed by an officer or under the common seal of the sender;
(iii) is regarded as being given by the sender and received by the addressee:
(A) when actually received by the addressee; or
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(B) if by facsimile transmission, whether or not legibly received, when transmitted to the addressee,
but if the delivery or receipt is on a day which is not a Business Day or is after 4.00 pm (addressee’s time) it is regarded as received at 9.00 am on the following Business Day; and
(iv) can be relied upon by the addressee and the addressee is not liable to any other person for any consequences of that reliance if the addressee believes it to be genuine, correct and authorised by the sender.
(b) A facsimile transmission is regarded as legible unless the addressee telephones the sender within one Business Day after transmission is received or regarded as received under clause 15.1(a)(iii) and informs the sender that it is not legible.
(c) In this clause 15.1, a reference to an addressee includes a reference to an addressee’s officers, agents or employees or any person reasonably believed by the sender to be an officer, agent or employee of the addressee.
15.2 Governing law and jurisdiction
This Agreement is governed by the laws of California.
15.3 Prohibition and enforceability
(a) Any provision of, or the application of any provision of, this Agreement or any Power which is prohibited in any jurisdiction is, in that jurisdiction, ineffective only to the extent of that prohibition.
(b) Any provision of, or the application of any provision of, this Agreement which is void, illegal or unenforceable in any jurisdiction does not affect the validity, legality or enforceability of that provision in any other jurisdiction or of the remaining provisions in that or any other jurisdiction.
15.4 Waivers
Waiver of any power or right under this Agreement:
(a) must be in writing signed by the party entitled to the benefit of that power or right; and
(b) is effective only to the extent set out in that written waiver.
15.5 Variation
A variation of any term of this Agreement must be in writing and signed by the parties.
15.6 Amendment
This Agreement may only be amended by the written consent of each Shareholder who holds more than 5% of the Company’s outstanding shares and who is adversely affected by such amendment.
15.7 Cumulative rights
The Powers are cumulative and do not exclude any other right, power, authority, discretion or remedy of the parties.
15.8 Assignment
Rights arising out of or under this Agreement are not assignable by a party without the prior written consent of every other party, which consent must not be unreasonably withheld.
15.9 Further assurances
Each party must do all things and execute all further documents necessary to give full effect to this Agreement.
15.10 Entire agreement
This Agreement supersedes all previous agreements in respect of its subject matter and embodies the entire agreement between the parties.
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15.11 Counterparts
(a) This Agreement may be executed in any number of counterparts.
(b) All counterparts, taken together, constitute one instrument.
(c) A party may execute this Agreement by signing any counterpart.
15.12 Relationship of parties
Neither party is the partner, agent, employee or representative of any other party and neither party has the power to incur any obligations on behalf of, or pledge the credit of, any other party
15.13 Investments in Competitive Businesses
(a) GFC agrees that without the prior written consent of Bison-GE, it will not, either directly or through one or more Affiliates other than the Company Group (“Non-Company Group Affiliates”), purchase equity interests in, merge with, or purchase all or substantially all of the assets of (or otherwise acquire the business of), any entity that during the Relevant Period, derived more than 20% of its revenues from the Covered Business in the Covered Territory (a“Covered Acquisition”) or, if not engaging in the Covered Business in the Covered Territory during the Relevant Period, has developed any written or other formal plans, projects or proposals to engage in the Covered Business in the Covered Territory, and has presented such plans, projects or proposals to its board of directors (or similar governing body), which plans or proposals provide that such entity will likely generate more than 20% of its revenues from the Covered Business in the Covered Territory during the following 24 months. For this purpose, the“Relevant Period” shall mean the12-month period ending on the last day of the calendar quarter immediately preceding the calendar quarter in which GFCand/or its Non-Company Group Affiliates enter into an agreement for such purchase of equity interests or assets or merger.
(b) Bison-GE L.P. acknowledges and agrees that: (i) GFC and its Non-Company Group Affiliates may purchase equity interests in, merge with, or purchase all or substantially all of the assets of any entity that during the Relevant Period derived less than 20% of its revenues from the Covered Business in the Covered Territory; (ii) GFC and its Affiliates may engage in the Covered Business anywhere in the world, provided that if GFC acquired such Affiliate in a Covered Acquisition, such Affiliate must be a member of the Company Group; (iii) any action or activity by GFCand/or its Non-Company Group Affiliates under subparagraphs (i) or (ii) shall not be deemed a breach of this Agreement, or the breach or violation of any fiduciary or other obligation or duty by GFC or its Affiliates or any officers or directors thereof or of any member of the Company Group to Bison-GE L.P. or any of its permitted transferees; and (iv) subject to clause 8.3, neither GFC nor any of its Affiliates shall have any obligation or duty whatsoever to offer the opportunity to Bison-GE L.P. or any of its Affiliates to invest in, purchase, finance or participate in any purchase of equity interests in, merger with, or purchase of all or substantially all of the assets of, any entity. Notwithstanding the foregoing, in no event shall the business, assets or properties of the Company Group be used to support, nor shall any members of the Company Group enter into transactions with, those businesses, operations and Affiliates of GFC and its Affiliates that conduct the Covered Business but which are excluded from this Agreement as a result of this Section 15.13.
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SCHEDULE 1 — SHARE CAPITAL
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Shareholder | | Number of Shares | | | % of Share Capital | |
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SCHEDULE 2
DEED OF ACCESSION
THIS DEEDis made the day of
BETWEEN:
GFNH AUSTRALASIA FINANCE PTY LIMITED
(“Company”)
and
[OUTGOING ENTITY]
and
[NEW SHAREHOLDER]
and
[each other Shareholder]
WHEREAS:
A The Company and its Shareholders have executed a Shareholders Agreement dated [ ] (the“Shareholders Agreement”).
B The New Shareholder wishes to acquire all [a portion] of the Shares (the“Transferred Shares”) of [ ] (the“Outgoing Entity”).
C It is a condition under the Shareholders Agreement that the New Shareholder and Outgoing Entity execute this Accession Deed.
NOW THIS DEED WITNESSES AS FOLLOWS:
1 Interpretation
1.1 For the purposes of this Deed:
(a) terms which are defined in the Shareholders’ Agreement shall have the same meanings when used in this Deed; and
(b) the provisions of Clause 1.2 of the Shareholders’ Agreement shall apply in the interpretation of this Deed, mutatis mutandis.
1.2 In this Deed (including the Recitals) unless inconsistent with the subject matter or unless the context otherwise requires:
“Registration Date” means the date on which the transfer of Shares from the Outgoing Entity to the New Shareholder is registered;
“Outgoing Entity” means [ ].
2 New Shareholder
The New Shareholder with effect as and from the Registration Date, for the benefit of the Company and each other Shareholder:
(a) ratifies and becomes a party to and agrees to be bound by the Shareholders’ Agreement in respect of the Transferred Shares;
(b) takes and accepts the assignment and transfer to it of all rights and benefits and assumes the obligations and agrees to be bound by all of the terms, conditions, restrictions, covenants and obligations of the
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Outgoing Entity in respect of the Transferred Shares under the Shareholders’ Agreement, which are subsisting at or incurred or arise on and from the time of registration of the New Shareholder;
(c) confirms that it has received a copy of the Shareholders Agreement, together with any other documents and information which it requires in connection with this transaction; and
(d) confirms it has not relied and will not rely on any other party in respect of the legality, validity, effectiveness, adequacy, accuracy or completeness of any of those documents or that information.
3 Third party benefit
The parties each acknowledge and agree that:
(a) the provisions of this Deed are intended to be for the benefit of certain persons, some of who are not parties to this Deed(“Third Party Beneficiaries”);
(b) Third Party Beneficiaries are entitled to enforce the provisions of this Deed; and
(c) this Deed operates as a deed poll in relation to those Third Party Beneficiaries.
4 Release
The Outgoing Entity ceases, with effect as and from the Registration Date, to have any rights, benefits or obligations in respect of the Transferred Shares under the Shareholders’ Agreement.
5 Consent
The Company consents to the transfer of Shares from the Outgoing Entity to the New Shareholder and agrees to execute all such further documents and take such further action as may be necessary to give full effect to the terms thereof.
6 Address
For the purposes of the Shareholders’ Agreement the address of the New Shareholder to which all notices, consents, requests and other documents required to be given or sent shall be as follows:
[insert the address of the New Shareholder].
7 Governing law
This Deed shall be governed by and interpreted in accordance with the laws for the time being in force in the State of Victoria and each party, including the New Shareholder, submits to the non-exclusive jurisdiction of the Courts of or exercising jurisdiction in that State.
8 Counterparts
This Deed may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.
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EXECUTEDas aDEED
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EXECUTEDbyGFNH AUSTRALASIA | | ) | | |
FINANCE PTY LIMITED | | ) | | |
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Signature of director | | | | Signature of director / company secretary (delete as applicable) |
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Name of director (print) | | | | Name of director / company secretary (print) |
EXECUTEDby[NEW SHAREHOLDER] | | ) | | |
| | ) | | |
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Signature of director | | | | Signature of director / company secretary (delete as applicable) |
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Name of director (print) | | | | Name of director / company secretary (print) |
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EXECUTEDby[OUTGOING ENTITY] | | ) | | |
| | ) | | |
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Signature of director | | | | Signature of director / company secretary (delete as applicable) |
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Name of director (print) | | | | Name of director / company secretary (print) |
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EXECUTEDas anAGREEMENT | | | | |
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SIGNEDon behalf of Bison Capital | | ) | | |
Australia, L.P. | | ) | | |
| | ) | | |
| | ) | | |
By: Bison Capital Australia GP, LLC | | | | |
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By: | | | | |
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Its: _ _ | | | | |
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Signature of witness | | | | Signature of representative |
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Name of witness (print) | | | | Name of representative (print) |
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EXECUTEDbyGENERAL FINANCE | | ) | | |
CORPORATION | | ) | | |
By: _ _ | | | | |
Its: | | | | |
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| | | | |
) | | | | ) |
EXECUTEDbyGFNH AUSTRALASIA | | ) | | |
FINANCE PTY LIMITED | | ) | | |
| | | | |
Signature of director | | | | Signature of director/company secretary (delete as applicable) |
| | | | |
Name of director (print) | | | | Name of director/company secretary (print) |
| | | | |
EXECUTEDbyGFNH AUSTRALASIA | | ) | | |
HOLDINGS PTY LIMITED | | ) | | |
| | | | |
Signature of director | | | | Signature of director/company secretary (delete as applicable) |
| | | | |
Name of director (print) | | | | Name of director/company secretary (print) |
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Annex C
BACK UP PURCHASE AGREEMENT
THIS BACK UP PURCHASE AGREEMENT (“Agreement”) is made on the 29th day of March, 2007, by and among the Bison Capital Australia, L.P., a Delaware limited partnership (the“Bison/GE Partnership”), Ronald Valenta, individually (“Valenta”), Kaiser Investments Limited, a Bermuda Company (the“Kaiser Trust”), FOMM Pty Limited (as trustee of the FOMM Trust) (“Trust 1”), FOMJ Pty Limited (as trustee of the FOMJ Trust) (“Trust 2”), Cetro Pty Limited (as trustee of the FOMP Trust) (“Trust 3”), and TCWE Pty Limited (as trustee of the McCann Family Trust) (along with Trust 1, Trust 2 and Trust 3, the“Management Shareholders”).
RECITALS
WHEREAS, the Management Shareholders, the Bison/GE Partnership, Equity Partners Two Pty Limited (in its capacity as trustee of Equity Partners 2 Trust), General Finance Corporation (“GFC”) and GFN Australasia Finance Pty Limited (“GFN”) are parties to that certain Share Sale Deed of even date herewith (the“Share Sale Deed”). Terms capitalized but undefined herein shall have the meanings given to such terms in the Share Sale Deed.
WHEREAS, under the Share Sale Deed, GFC has agreed to cause GFN to acquire all of the shares of RWA Holdings Pty Limited (“Royal Wolf”) held by the Bison/GE Partnership and any Persons to whom the Bison/GE Partnership has transferred such shares (the“Bison/GE RW Shares”) in accordance with the Shareholders Agreement by and between the Bison/GE Partnership and the Management Shareholders dated of even date herewith (the“New Shareholders’ Agreement”).
WHEREAS, under the Share Sale Deed, GFC has also agreed to cause GFN to acquire all of the shares of Royal Wolf held by the Management Shareholders that are not acquired by the Bison/GE Partnership as of the date hereof under the Share Sale Deed (the“Management Shareholder RW Shares”). GFC’s and GFN’s obligation to acquire the Bison/GE RW Shares and the Management Shareholder RW Shares under the Share Sale Deed shall be referred to herein as the“Sale Deed Purchase Obligation.”
WHEREAS, the parties desire to enter into this Agreement to provide for certain Valenta indemnification obligations to the Bison/GE Partnership with respect to the transactions contemplated by the Share Sale Deed and in connection with the Bison/GE Partnership’s acquisition, disposition and ownership of Royal Wolf Shares, and also to obligate Valenta to acquire the Bison/GE RW Shares and the Management Shareholder RW Shares as further provided herein if GFN does not acquire the Shares (defined below) from the Bison/GE Partnership and the Management Shareholders pursuant to the Sale Deed Purchase Obligation (a“Sale Deed Purchase Termination”).
NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants contained herein, Valenta, the Kaiser Trust, the Management Shareholders (as applicable) and the Bison/GE Partnership hereby agree as follows:
ARTICLE 1
SALE DEED PURCHASE TERMINATION
1.1 Sale Deed Purchase Termination. If a Sale Deed Purchase Termination has occured, then Valenta shall have the obligation to cause an entity controlled by Valenta (“Valenta Sub”), to acquire all, but not less than all, of the Bison/GE RW Shares and the Management Shareholder RW Shares as provided in Article 2 below or, if the Bison/GE Partnership so elects, as provided in Article 3 (such obligation the“Valenta Acquisition Obligation”). The Bison/GE Partnership shall promptly give written notice of the Sale Deed Purchase Termination to Valenta (the“Termination Notice”). Within 10 business days of his receipt of the Termination Notice, Valenta shall (a) transfer and at all times maintain US$5,000,000 in a deposit account at a financial institution satisfactory to the Bison/GE Partnership, and (b) deliver to the Bison/GE Partnership and the Management Shareholders a fully executed control agreement in respect of such deposit account in form and substance satisfactory to the Bison/GE Partnership and the
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Management Vendors, which control agreement shall create a fully perfected lien on such deposit account in favor of the Bison/GE Partnership and the Management Shareholders.
ARTICLE 2
VALENTA EXCHANGE OBLIGATION
2.1 Exchange Obligation. In order to satisfy the Valenta Acquisition Obligation, Valenta shall have the obligation (the“Exchange Obligation”) within the time periods prescribed herein and after receipt of a Termination Notice to cause Valenta Sub to enter into an exchange with the Bison/GE Partnership and the Management Shareholders whereby Valenta Sub will acquire from the Bison/GE Partnership and from the Management Shareholders (and from any other Person to whom Royal Wolf shares have been transferred by the Bison/GE Partnershipand/or the Management Shareholders in accordance with the New Shareholders’ Agreement) all but not less than all of the Royal Wolf shares held by the Bison/GE Partnership, the Management Shareholders and by such other Persons (the“Shares”) in return for the payment to the Bison/GE Partnership and the Management Shareholders by Valenta of the Exchange Amount (defined below) and the Management Shareholders (and any other Person to whom Royal Wolf shares shall have been transferred by the Bison/GE Partnershipand/or the Management Shareholders in accordance with the New Shareholders’ Agreement) shall exchange the Shares with Valenta Sub in return for the payment by Valenta Sub to the Bison/GE Partnership and the Management Shareholders of the Exchange Amount all as provided herein. The exchange of the Shares in return for the Exchange Amount in connection with the Exchange Obligation shall be referred to herein as the“Exchange.”
Valenta shall utilize all efforts and take all actions necessary to consummate the Exchange or the Buyout (defined below), as applicable, under this Agreement. Such efforts shall include but not be limited to causing each of Valenta’s affiliates, subsidiaries and any entities over which he exercises influence, control or direction, to discharge and support his obligations under this Agreement, including by causing such affiliates or entities to purchase from the Bison/GE Partnership and the Management Shareholders for the Buyout Amount (defined below) any Shares that Valenta Sub is obligated to acquire pursuant to its Buyout Obligation hereunder.
2.2 Exchange Amount. The payment (the“Exchange Amount”) for the Shares in connection with the Exchange shall be as follows:
To the Management Shareholders in accordance with the Management Vendors Respective Proportions:
(a) cash (in US$) equal to the Management Vendors Second Completion Payment with the interest calculated thereon as provided in the Share Sale Deed accruing until the date of the Exchange hereunder plus any portion of the Restraint Amount owed to the Management Vendors under Section 15.8 of the Share Sale Date that remains unpaid.
To the Bison/GE Partnership:
(b) that number of shares of the most senior class of equity of Valenta Sub that equals 30% of all classes of Valenta Sub capital stock calculated on a fully diluted basis (assuming exercise, exchange or conversion in full of all options, warrants, and any other convertible or derivative securities, or securities exchangeable for such stock and the application of any anti-dilution or similar adjustments affecting such stock) (the“Retained Interest”) subject to the following:
(i) immediately following the issuance of the Retained Interest and the Notes (as defined below), the total debt of Valenta Sub (calculated on a consolidated basis with Royal Wolf) does not exceed 5.0 times the sum of (A) earnings before interest, taxes, depreciation and amortization and (B) extraordinary and non-recurring expenses of Royal Wolf as determined in accordance with Australian International Financial Reporting Standards for the12-month period that most recently ended (the“VS Leverage Ratio”). If the VS Leverage Ratio exceeds 5.0, then Valenta and Valenta Sub will contribute such amount of cash into Royal Wolf (without any corresponding charges into the parties respective equity or debt ownership positions) such that, immediately following such contribution, the VS Leverage Ratio does not exceed 5.0.
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(ii) The valuation of the Retained Interest shall be equal to 42.86% of the total cash invested by Valenta and Valenta Sub under Section 2.2(a) and underSections 2.2(c)(i)-(c)(iii) plusthe sum of (A) any amounts actually advanced by Valenta to GFC and used by GFC to make deposits of the Purchase Price with RWA under the Share Sale Deed (the“Advance Deposits”)and (B)the Advance Deposits multiplied by the following: (A)(1) the number of days elapsed from the First Completion Date through and including the date of the Exchangedividedby (2) 360,multipliedby (B) 18%. By way of example only, if the Valenta Sub invests $30.0 million to complete the transaction whereby the Management Shareholders are purchased in full pursuant to the Second Closing as defined in the Share Deed Agreement, Bison Capital will retain $12.87 million of equity alongside the Valenta Sub, provided that pro forma leverage is less than 5.0x;
(c) cash (in US$) equal to:
(i) US$45,000,000;plus.
(ii) interest on US$45,000,000 for the period from First Completion Date to the Exchange Closing calculated at the rate of 18% per annum on daily rests (but not capitalised); plus
(iii) the US$ value of any portion of the Restraint Amount paid by the Bison/GE Partnership plus interest on such amount calculated at the rate of 18% per annum on daily rests (but not capitalised) beginning as of the date of the payment of the Restraint Amount or portion thereof by the Bison/GE Partnership and ending on the Exchange Closing; plus
(iv) 2.5% of the sum of the amounts determined pursuant to paragraphs (i), (ii) and (iii) above if the Exchange Closing takes place within 6 months of First Completion or 3% of those amounts if the Exchange Closing takes place more than 6 months after First Completion ; less
(v) the US$ amount of the Retained Interest; less
(vi) the US$ principal value of the Notes; and
(d) US$15,8000,000 in Bison Capital Senior Subordinated Notes (the “Notes”) and a warrant to acquire Valenta Sub shares, which warrant shall be for 3.2% of Valenta Sub (calculated on a fully diluted basis) and which warrant shall have a strike price (in the aggregate) of not more than the 3.2% of the equity value used to determine the value of the Retained Interest (the “Warrant”) each in form and substance satisfactory to the Bison/GE Partnership and in accordance with, and subject to the documentation contemplated by, the proposal letter between GFC, GFN and Bison Equity of even date herewith, attached hereto as ExhibitC (the “Amended LOI”), notwithstanding the fact the term of such Amended LOI may be expired, to the same extent and the same effect as if Valenta and Valenta Sub rather than GFC and GFN were always a party thereto. If the Warrants are not exercised then the Repayment Premium in the Amended LOI shall apply.
2.3 Covenants of Valenta and the Bison/GE Partnership.
(a) Valenta must:
(i) At the Exchange Closing (as defined below), enter into a shareholders agreement with the Bison/GE Partnership with respect to their ownership of Valenta Sub in the form attached hereto as Exhibit A(the“Valenta/Bison/GE Shareholders’ Agreement”), and cause any other shareholder of Valenta Sub to enter into the Valenta/Bison/GE Shareholders’ Agreement;
(ii) At the Exchange Closing, pay all stamp duty, GST and other transfer taxes associated with the Exchange;
(iii) At the Exchange Closing, cause Royal Wolf to pay to the Bison/GE Partnership the US$ amount of the expenses of Bison Capital Equity Partners II-A, L.P., Bison Capital Equity Partners II-B, L.P., GE Asset Management Incorporated, General Electric Pension Trust, and the Bison/GE Partnership incurred in connection with the transactions contemplated by the Share Sale Deed, this Agreement, any payments, fees, costs or expenses made after the First Completion Date under the Share Sale Deed (including, without limitation,
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any payment of the Restraint Amount) and those costs, fees and expenses required to be reimbursed in connection with the Notes and the Warrant as set forth in the Amended LOI (the“Bison/GE Transaction Expenses”). If Royal Wolf fails to pay the Bison/GE Transaction Expenses Valenta shall be directly obligated to pay such expenses,provided that the legal fees subject to reimbursement by Valenta and Valenta Sub for services received during the period following delivery of the Termination Notice through and including the Exchange Closing shall not exceed $175,000 (the“Fee Cap”),provided, that the Fee Cap shall not apply if the Exchange Closing fails to occur;
(iv) At the Exchange Closing, represent and warrant to the Bison/GE Partnership and the Management Vendors in writing the “Representations” contained in Section 16.1 of the Share Sale Deed in connection with Valenta Sub’s acquisition of the Shares and also represent and warrant and cause Valenta Sub to represent and warrant in writing to the Bison/GE Partnership and the Management Vendors that neither Valenta nor Valenta Sub has actual knowledge of any facts giving rise to any Claim or potential Claim under the Share Sale Deed where it would be reasonable for Valenta or Valenta Sub to conclude that there was a breach of a Warranty and neither GFC nor GFN have violated, breached or taken any action that conflicts with the terms and provisions of the Share Sale Deed;
(v) Immediately prior to payment of the Retained Interest, represent and warrant to the Bison/GE Partnership in writing that (1) Valenta Sub’s only liabilities, debt or obligations other than under this Agreement are the Notes, (2) the controlling shareholder of Valenta Sub is Valenta unless the Bison/GE Partnership consents, in its sole discretion, in writing to the issuance of interests in Valenta Sub to such other person or persons, and (3) no other person has any right or option to acquire any shares or interests in Valenta Sub; and
(vi) Cause Valenta Sub prior to and at the payment of the Retained Interest to (1) have liabilities, debt and obligations only under this Agreement and the Notes, (2) cause the controlling shareholder of Valenta Sub (other than the Bison/GE Partnership) to be Valenta unless otherwise approved in writing by the Bison/GE Partnership, (3) to only have one class of shares issued and outstanding, (4) be in the form and have the structure and capitalization that is mutually satisfactory to the Bison/GE Partnership and Valenta, and (5) to not issue and not have issued or agreed to issue any rights or options to acquire any shares or interests in Valenta Sub (the covenants in items (i) through (vi) immediately above and along with Valenta’s obligation to pay the Exchange Amount, the“Valenta Covenants”).
(b) The Bison/GE Partnership and the Management Shareholders, as applicable, must take the following actions:.
(i) At the Exchange Closing, the Bison/GE Partnership must enter into the Valenta/Bison/GE Shareholders’ Agreement;
(ii) At the Exchange Closing, the Bison/GE Partnership must represent and warrant in writing to Valenta and Valenta Sub as of the Exchange Closing that (a) the provisions of this Article 2 applicable to the Bison/GE Partnership are valid and binding and enforceable against the Bison/GE Partnership in accordance with its terms, and (b) the Bison/GE Partnership and the Persons to whom the Bison/GE Partnership transferred Shares in accordance with the New Shareholders’ Agreement, if applicable, are, subject to the truth and accuracy of the Title and Capacity Warranties of the Original Vendors in the Share Sale Deed, the sole registered and sole legal owners of the Royal Wolf shares that are being exchanged by the Bison/GE Partnership in connection with the Exchange (the“Bison/GE Representations and Warranties”) (the covenants in the above items (i) and (ii) along with the Bison/GE Partnership’s obligation to deliver the Shares in accordance herewith, the“Bison/GE Covenants”); and
(iii) At the Exchange Closing, each of the Management Shareholders must represent and warrant in writing to Valenta and Valenta Sub as of the Exchange Closing that (a) the provisions of this Article 2 applicable to such Management Shareholder are valid and binding and enforceable against such Management Shareholder, and (b) such Management Shareholder and the Persons to whom such Management Shareholder transferred Shares in accordance with the New Shareholders’ Agreement, if applicable, are the sole registered and sole legal owners of the Royal Wolf shares that are being exchanged by such Management Shareholder in
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connection with the Exchange (the“Management Shareholders’ Representations and Warranties”) (the covenants in this item (iii) along with the Management Shareholders’ respective obligations to deliver their respective Shares in accordance herewith, the“Management Shareholder Covenants”).
2.4 Exchange Closing Conditions.
(a) Valenta Sub shall not be obligated to acquire the Shares held by the Bison/GE Partnership and its transferees as provided in the New Shareholders’ Agreement pursuant to the Exchange unless the Bison/GE Partnership has complied with the Bison/GE Covenants.
(b) Valenta Sub shall not be obligated to acquire the Shares held by the Management Shareholders and their transferees in accordance with the New Shareholders’ Agreement pursuant to the Exchange unless the Management Shareholders have complied with the Management Shareholder Covenants.
(c) The Bison/GE Partnership, the Management Shareholders and any of the transferees of Royal Wolf shares from the Bison/GE Partnershipand/or the Management Shareholders in accordance with the New Shareholders’ Agreement shall not be obligated to sell the Shares to Valenta Sub unless:
(i) Valenta and Valenta Sub have complied with the Valenta Covenants;
(ii) ANZ enters into a subordination agreement with respect to the Notes that is acceptable to the Bison/GE Partnership; and
(iii) the ANZ Facility remains in place and is in full force and effect or another facility acceptable to the Bison/GE Partnership is in place and is in full force and effect.
(d) If the Bison/GE Partnership waives any of the closing conditions in Section 2.4(c) (other than those contained in Section 2.3(a)(ii) and 2.3(a)(iv) with respect to the “Representations” contained in Section 16.1 of the Share Sale Deed) and sells its Shares to the Valenta Sub, then the Management Shareholders shall also be obligated to sell their respective Shares to the Valenta Sub in accordance with the terms hereof, regardless of whether such closing conditions have been satisfied.
(e) If the Bison/GE Partnership and the persons to whom it has transferred Shares in accordance with the New Shareholders Agreement sell their Shares to Valenta Sub in accordance with the terms hereof but the Management Shareholders are unable to satisfy the closing conditions in Section 2.4(b), then at the request of the Bison/GE Partnership, Valenta and the Valenta Sub shall use commercially reasonable efforts to enforce the Management Shareholder Covenants necessary to satisfy such closing conditions.
2.5 Exchange Closing. The consummation of the Exchange pursuant to this Article 2 (the“Exchange Closing”) shall take place at the offices of Sheppard, Mullin, Richter & Hampton, LLP at 333 South Hope Street, 48th Floor, Los Angeles, California, 90071 (or at such other place upon which Bison/GE Partnership and Valenta shall agree), on the date (the“Exchange Closing Date”) that is no later than ninety (90) calendar days after the delivery of the Termination Notice. At the Exchange Closing, Valenta must deliver to the Bison/GE Partnership and the Management Shareholders by wire transfer of immediately available funds their respective cash portion of the Exchange Amount and must deliver to the Bison/GE Partnership the Notes, Warrant and certificates representing the Retained Interest portion of the Exchange Amount against the simultaneous delivery the certificates representing the Shares, and a duly executed transfer in favour of Valenta Sub. At the Exchange Closing, Valenta Sub shall be substituted for the Bison/GE Partnership as the Purchaser under the Share Sale Deed and the Bison/GE Partnership shall have no further duties, obligations or liabilities of any type, kind or nature under the Share Sale Deed.
ARTICLE 3
VALENTA BUYOUT OBLIGATION/SUBORDINATION BY MANAGEMENT SHAREHOLDERS
3.1 Buyout Obligation. If Valenta fails to satisfy the Valenta Acquisition Obligation pursuant to the Exchange Obligation by the Exchange Closing Date or within the time period prescribed in Section 4.1(c), then in accordance with the terms and conditions set forth herein, the Bison/GE Partnership may elect, by giving written
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notice to Valenta after the failure of Valenta to consummate the Exchange Closing as provided herein (the“Buyout Notice”), to require Valenta to satisfy the Valenta Acquisition Obligation by causing Valenta Sub to acquire from the Bison/GE Partnership and from the Management Shareholders (and from any other Person to whom Royal Wolf shares have been transferred by the Bison/GE Partnershipand/or the Management Shareholders in accordance with the New Shareholders’ Agreement) the Shares (the“Buyout Obligation”) in return for the payment to the Bison/GE Partnership and the Management Shareholders by Valenta of the Buyout Amount (defined below) and the Bison/GE Partnership and the Management Shareholders (and any other Person to whom Royal Wolf shares shall have been transferred by the Bison/GE Partnershipand/or the Management Shareholders in accordance with the New Shareholders’ Agreement) shall sell the Shares to Valenta Sub for the payment by Valenta Sub to the Bison/GE Partnership and the Management Shareholders of the Buyout Amount. The sale of the Shares for the Buyout Amount in connection with the Buyout Obligation shall be referred to herein as the“Buyout.”
The Bison/GE Partnership may elect, by giving written notice to Valenta within ten (10) business days after the failure of Valenta to consummate the Exchange Closing by the Exchange Closing Date or within the time period prescribed in Section 4.1(c), to terminate the Valenta Acquisition Obligation, at which point Valenta’s obligation to consummate the Valenta Acquisition Obligation under this Agreement shall terminate. No such termination shall affect any other right or obligation of any of the parties hereunder
Neither Valenta, Valenta Sub or any of their subsidiaries or affiliates shall have any rights in Royal Wolf, its subsidiaries, affiliates, assets or the Shares or any right to acquire any interest or interests in the Shares, Royal Wolf, its assets or its subsidiaries or affiliates under this Agreement unless Valenta Sub consummates the Exchange or the Buyout in accordance with the terms and provisions of this Agreement.
3.2 Buyout Amount. The payment for the Shares in connection with the Buyout (the“Buyout Amount”) shall be as follows:
(a) To the Management Shareholders in accordance with the Management Vendors Respective Proportions: cash (in US$) equal to the Management Vendors Second Completion Payment with the interest calculated thereon as provided in the Share Sale Deed accruing until the date of the Buyout hereunder plus any portion of the Restraint Amount owed to the Management Vendors under Section 15.8 of the Share Sale Date that remains unpaid.
(b) To the Bison/GE Partnership: US$62,500,000 plus any amounts paid by the Bison/GE Partnership under the Share Sale Deed that along with all other amounts paid thereunder by the Bison/GE Partnership (including any portion of the Restraint Amount paid by the Bison/GE Partnership (other than that portion included within Bison/GE Transaction Expenses that is reimbursed under 3.3(c)) exceed US$45,000,000 (the“Bison/GE Buyout Amount”).
3.3 Covenants of Valenta
Valenta must:
(a) At the Buyout Closing (defined below), pay to the Management Shareholders and the Bison/GE Partnership the Buyout Amount;
(b) At the Buyout Closing, pay all stamp duty, GST and other transfer taxes associated with the Buyout.
(c) At the Buyout Closing, pay or cause Royal Wolf to pay to the Bison/GE Partnership the US$ amount of the Bison/GE Transaction Expenses;
(d) At the Buyout Closing, represent and warrant and cause Valenta Sub to represent and warrant to the Bison/GE Partnership and the Management Shareholders in writing the “Representations” contained in Section 16.1 of the Share Sale Deed in connection with Valenta Sub’s acquisition of the Shares and must also represent and warrant and cause Valenta Sub to represent and warrant in writing to the Bison/GE Partnership and the Management Shareholders that neither Valenta nor Valenta Sub has actual knowledge or any facts giving rise to any Claim or potential Claim where it would be reasonable for Valenta or Valenta Sub to conclude that there was a breach of a Warranty and neither GFC nor GFN have violated, breached or taken any action that conflicts with the terms and provisions of the Share Sale Deed (the covenants in the above items
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(a) through (d) along with Valenta’s obligation to deliver the Buyout Amount in accordance herewith, the“Valenta Buyout Covenants”).
3.4 Covenants of the Bison/GE Partnership and the Management Shareholders.
(a) At the Buyout Closing, the Bison/GE Partnership must represent and warrant in writing to Valenta and Valenta Sub as of the Buyout Closing that (a) the provisions of this Article 3 applicable to the Bison/GE Partnership are valid and binding and enforceable against the Bison/GE Partnership in accordance with its terms, and (b) the Bison/GE Partnership and the Persons to whom the Bison/GE Partnership transferred Shares in accordance with the New Shareholders’ Agreement, if applicable, are, subject to the truth and accuracy of the Title and Capacity Warranties of the Original Vendors in the Share Sale Deed, the sole registered and sole legal owners of the Royal Wolf shares that are being exchanged by the Bison/GE Partnership in connection with the Buyout (the“Bison/GE Buyout Representations and Warranties”) (the covenants in the above items (a) and (b) along with the Bison/GE Partnership’s obligation to deliver the Shares in accordance herewith, the“Bison/GE Buyout Covenants”); and
(b) At the Buyout Closing each of the Management Shareholders must represent and warrant in writing to Valenta and Valenta Sub as of the Buyout Closing that (a) the provisions of this Article 3 applicable to such Management Shareholder are valid and binding and enforceable against such Management Shareholder, and (b) such Management Shareholder and the Persons to whom such Management Shareholder transferred Shares in accordance with the New Shareholders’ Agreement, if applicable, are the sole registered and sole legal owners of the Royal Wolf shares that are being exchanged by such Management Shareholder in connection with the Buyout (the“Management Shareholders’ Buyout Representations and Warranties”) (the covenants in this item (b) along with the Management Shareholders’ respective obligations to deliver the Shares in accordance herewith, the“Management Shareholder Buyout Covenants”).
3.5 Buyout Closing Conditions.
(a) Valenta Sub shall not be obligated to acquire the Shares held by the Bison/GE Partnership and its transferees in accordance with the New Shareholders’ Agreement pursuant to the Buyout unless the Bison/GE Partnership has complied with the Bison/GE Buyout Covenants.
(b) Valenta Sub shall not be obligated to acquire the Shares held by the Management Shareholders and their transferees in accordance with the New Shareholders’ Agreement pursuant to the Buyout unless the Management Shareholders have complied with the Management Shareholder Buyout Covenants.
(c) The Bison/GE Partnership, the Management Shareholders and any of the transferees of Royal Wolf shares from the Bison/GE Partnershipand/or the Management Shareholders in accordance with the New Shareholders’ Agreement shall not be obligated to sell the Shares to Valenta Sub unless Valenta and Valenta Sub have complied with the Valenta Buyout Covenants.
3.6 Buyout Closing. The consummation of the Buyout pursuant to this Article 3 (the“Buyout Closing”) shall take place at the offices of Sheppard, Mullin, Richter & Hampton, LLP at 333 South Hope Street, 48th Floor, Los Angeles, California, 90071 (or at such other place upon which Bison/GE Partnership and Valenta shall agree), on the date (the“Buyout Closing Date”) that is no later than eighteen (18) months after the First Completion Date. At the Buyout Closing, Valenta must deliver to the Bison/GE Partnership and the Management Shareholders by wire transfer of immediately available funds their respective portions of the Buyout Amount against the simultaneous delivery of certificates representing the Shares, and a duly executed transfer in favour of Valenta Sub. At the Buyout Closing, Valenta Sub shall be substituted for the Bison/GE Partnership as the Purchaser under the Share Sale Deed and the Bison/GE Partnership shall have no further duties, obligations or liabilities of any type, kind or nature under the Share Sale Deed.
3.7 Subordination by the Management Shareholders. Each of the Management Shareholders covenants and agrees that (i) all payments and performance of the Obligations owed to the Management Shareholders by Valenta, Valenta Suband/or the Kaiser Trust under this Agreement or any other document executed in connection with the transactions contemplated hereby, including any extensions, amendments or other modifications to such Obligations (collectively, the“Subordinated Obligations”) and (ii) any Liens granted to any Management Shareholder in support of such Subordinated Obligations, shall be subordinated to (i) the prior indefeasible payment
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in full, in cash, of all Obligations owed to the Bison/GE Partnership by Valenta, Valenta Suband/or the Kaiser Trust under this Agreement or any other document executed in connection with the transactions contemplated hereby, including any extensions, amendments or other modifications to such Obligations (collectively, the“Senior Obligations”) and (ii) any Liens granted to the Bison/GE Partnership in support of such Subordinated Obligations. Each of the Management Shareholders, Valenta and the Kaiser Trust further agree that:
(a) Management Shareholders shall not receive proceeds from, and Valenta, Valenta Sub and the Kaiser Trust shall not make, perform, satisfy or comply with any Subordinated Obligation to the extent such would require payment of any amounts to the Management Shareholders prior to the indefeasible payment in full, in cash, of all Senior Obligations;
(b) All liens granted by Valenta, Valenta Sub or the Valenta Trust in their respective assets in favor of the Management Shareholder shall, prior to the indefeasible payment in full, in cash, of all Senior Obligations, be subordinate to any liens the Bison/GE Partnership has or would otherwise be entitled to under this Agreement. None of Valenta, Valenta Sub or the Valenta Trust shall grant any liens in their respective assets in favor of any Person other than the Bison/GE Partnership and the Management Shareholders without the prior written consent of the Management Shareholders and, prior to the indefeasible payment in full, in cash, of all Senior Obligations, the Bison/GE Partnership, in each case in their sole respective discretion;
(c) Any Lien that exists in favor of the Management Shareholder shall, prior to the indefeasible payment in full, in cash, of all Senior Obligations, be subordinate, junior and inferior and postponed in priority, operation and effect to the priority, operation and effect of all of the Liens securing all or any part of the Senior Obligations, notwithstanding the perfection, order of perfection or failure to perfect or failure to maintain the perfection of any such Lien or the filing or recording, order of filing or recording or failure to file or record any instrument or other document in any filing or recording office in any jurisdiction;
(d) upon any distribution of assets in the event of any dissolution or winding up or total or partial liquidation or reorganization, whether voluntary or involuntary, or adjustment or protection or relief or composition of Valenta, Valenta Sub or the Kaiser Trust, or their respective debts, or in any bankruptcy, insolvency, receivership, arrangement, reorganization, relief or other proceeding of Valenta, Valenta Sub or the Kaiser Trust or upon an arrangement for the benefit of creditors of Valenta, Valenta Sub or the Kaiser Trust or any other marshalling of the assets and liabilities of Valenta, Valenta Sub or the Kaiser Trust, all amounts payable under or on account of the Senior Obligations shall first be paid indefeasibly in full, in cash, before the holders of Subordinated Obligations shall be entitled to receive any distribution of assets;
(e) until the Senior Obligations are paid indefeasibly in full, in cash, or unless requested in writing by the Bison/GE Partnership, the Management Shareholders shall not, without the Bison/GE Partnership’s prior written consent, given in its sole and absolute discretion: (i) assert, collect or enforce the Subordinated Obligations or any of the amounts due thereunder, or exercise any right of set-off; or (ii) commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against Valenta, Valenta Sub or the Kaiser Trust or any administrative, legal or equitable action that might adversely affect Valenta, Valenta Sub or the Kaiser Trust or its interest, including, without limitation, any administrative, legal or equitable action which is intended to or which results in the entry of a decree or order for relief in respect of Valenta, Valenta Sub or the Kaiser Trust under any Debtor Relief Law; and
(f) if any Management Shareholder receives any payment in violation of this Section, such Management Shareholder shall hold the proceeds from any such payment in trust for the Bison/GE Partnership and immediately on becoming aware of such violation pay such amounts to the Bison/GE Partnership.
ARTICLE 4
OBLIGATIONS UPON FAILURE TO CLOSE
4.1 Valenta Obligations Upon Failure to Close the Exchange Obligationand/or the Buyout Obligation.
(a) Notwithstanding any other provision of this Section 4.1, if Valenta fails to comply with Article 8 to the satisfaction of the Bison/GE Partnership beginning immediately upon a Security Triggering Event under
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subsection (a) of the definition of “Security Triggering Event” (the“Further Assurances Default”), then Valenta must immediately consummate the Buyout (i.e., the Buyout Closing is to occur immediately upon such failure to comply with Article 8) regardless of whether Valenta was at such time obligated to satisfy the Valenta Acquisition Obligation pursuant to the Exchange Obligation or the Buyout Obligation. Failure to immediately consummate the Buyout after a Further Assurances Default shall be deemed to be an Event of Default and Liquidated Damages shall accrue until the consummation of the Buyout with such Liquidated Damages due upon consummation of the Buyout. To be clear, Liquidated Damages shall begin to accrue immediately upon the failure to consummate the Buyout after a Further Assurances Default regardless of any cure period under Section 12.12 of this Agreement. If a Buyout Notice has not otherwise already been delivered, no Buyout Notice must be delivered to Valenta in order to trigger Valenta’s obligations under this Section 4.1(a).
(b) If Valenta must satisfy the Valenta Acquisition Obligation pursuant to the Exchange Obligation and the Exchange Closing has not occurred within ninety (90) days after the Sale Deed Purchase Termination and such ninety (90) day period ends after the first anniversary of the First Completion,then Valenta shall not be entitled to satisfy the Valenta Acquisition obligation pursuant to the Exchange Obligation and must, if so elected by the Bison/GE Partnership in a Buyout Notice, satisfy such obligation pursuant to the Buyout Obligation. Subject to Section 4.1(a), a Buyout that must be consummated under this Section 4.1(b) must be consummated, subject to the time frame in Section 3.6, within one-hundred eighty (180) days after the date that is ninety (90) days after the Sale Deed Purchase Termination.
(c) If Valenta must satisfy the Valenta Acquisition Obligation pursuant to the Exchange Obligation and the Exchange Closing has not occurred within ninety (90) days after the Sale Deed Purchase Termination, then the Exchange Closing may, subject to Section 4.1(a), still occur if such Exchange Closing occurs within one (1) year after the First Completion. If the Exchange is not consummated within one (1) year after the First Completion as provided in this Section 4.1(c), then Valenta shall not be entitled to satisfy the Valenta Acquisition Obligation pursuant to the Exchange Obligation and must, if so elected by the Bison/GE Partnership in a Buyout Notice, satisfy such obligation pursuant to the Buyout Obligation. A Buyout that must be consummated under this Section 4.1(c) must, subject to Section 4.1(a), be consummated within one-hundred eighty (180) days after the date that is one (1) year after the First Completion.
(d) Any failure to consummate a Buyout within the time periods prescribed in this Section 4.1 and Section 3.6, as applicable, shall be deemed to be an Event of Default and Liquidated Damages shall accrue beginning on such Event of Default until the consummation of the Buyout with such Liquidated Damages due upon consummation of the Buyout. To be clear, Liquidated Damages, if they have not already begun to accrue as a result of another event under this Section 4.1, shall begin to accrue immediately upon the failure to consummate the Buyout as provided herein regardless of any cure period under Section 12.12 of this Agreement.
4.2 Valenta Management Shareholder Re-imbursement Obligations. If Valenta Sub must satisfy the Valenta Acquisition Obligation and Valenta Sub fails to consummate the Exchange Obligation or the Buyout Obligation as required hereunder, and thereafter Bison/GE Partnership causes the Management Shareholders to sell their Royal Wolf shares pursuant to a drag-along sale under the New Shareholders’ Agreement or the Management Shareholders otherwise sell their shares to a third party, then, in addition to any damages or remedies the Management Shareholders would otherwise be entitled to, Valenta and Valenta Sub shall be jointly and severally obligated to pay the Management Shareholders the difference between the consideration the Management Shareholders received for their Royal Wolf shares in connection with such drag-along or other sale, and the consideration they would have received had Valenta Sub consummated the Exchange Obligation or Buyout Obligation as required in this Agreement.
4.3 Management Shareholder Drag Along Rights.
(a) Drag Along Right. If in connection with a Buyout Valenta Sub has acquired pursuant to this Agreement all of the Shares held by the Bison/GE Partnership and the persons to whom it has transferred Shares in accordance with the New Shareholders’ Agreement but Valenta Sub does not, in accordance with this Agreement, acquire all of the Shares held by the Management Shareholders and the persons to whom the Management Shareholders have transferred Shares in accordance with the New Shareholders’ Agreement (the“Management Shareholder Transferees” and along with the Management Shareholders the“Remaining Management Shareholders”),
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the Remaining Management Shareholder(s) holding not less than 60% of the Shares held by the Remaining Management Shareholder(s) that are not acquired by Valenta Sub as required in this Agreement may exercise the Drag-Along rights with respect to Valenta Sub’s ownership of Shares as provided in this Section 4.3.
(b) Drag Along Offer. Following the failure of Valenta Sub to acquire all of the Shares held by the Management Shareholders in connection with a Buyout, if the Remaining Management Shareholder(s) holding not less than 60% of all Shares held by the Remaining Management Shareholders receive a Buy Out Offer from an Offeror, then the Remaining Management Shareholder (or those Remaining Management Shareholders) that hold more than 60% of the Shares held by the Remaining Management Shareholders may give to each other Remaining Management Shareholder and Valenta Sub a Drag Along Notice.
(c) An Alternative Purchaser. An Alternative Purchaser may within 5 Business Days of receipt of a Drag Along Notice elect by notice in writing to each Receiving Shareholder to acquire all of the Shares held by the Receiving Shareholders on the terms and conditions specified in the Buy Out Offer. The notice must be accompanied by a deposit of 10% of the consideration payable to the Receiving Shareholders by the Alternative Purchaser based on the terms and conditions of the Buy Out Offer.
(d) Sale to Alternative Purchaser. If an Alternative Purchaser has complied with the requirements of Section 4.3(c), the Receiving Shareholders must sell their Shares free from all Security Interests to the Alternative Purchaser. Completion of the sale must take place on the date that is 20 Business Days after the date of the Drag Along Notice. If more than one Alternative Purchaser has complied with the requirements of Section 4.3(c), the Receiving Shareholders must sell their Shares to the Alternative Purchasers free from all Security Interests in proportion to the number of Shares held by each Alternative Purchaser.
(e) Sale to Offeror. If no Alternative Purchaser complies with the requirements of Section 4.3(c) each Remaining Management Shareholder and Valenta Sub, on the later of 5 Business Days after receipt of a Drag Along Notice and the receipt from the Offeror of the consideration payable to that Remaining Management Shareholder and Valenta Sub on the terms and conditions of the Buy Out Offer, must sell its Shares to the Offeror free from all Security Interests.
(f) Completion. A Remaining Management Shareholder (and Valenta Sub) who is required by this Section 4.3 to sell its Shares must deliver to the purchaser of those Shares, on the date the sale is to take place in accordance with this Section 4.3, duly executed transfers and share certificates in respect of the Shares, together with signed dischargesand/or releases as are necessary for those Shares to be transferred free of all Security Interests.
(g) Default. If a Remaining Management Shareholderand/or Valenta Sub fails to sell its Shares as required by this Section 4.3 or fails to deliver the documents required by this Section 4.3 within the time periods specified, the Remaining Management Shareholder not in default under this Section 4.3 holding the greatest proportion of the Shares held by all Remaining Management Shareholders is irrevocably appointed as the attorney of the other Remaining Management Shareholders and Valenta Sub to do all things and execute all documents on behalf of that Remaining Management Shareholderand/or Valenta Sub to effect compliance by that Remaining Management Shareholder or Valenta Sub of its obligations. Each Remaining Management Shareholder and Valenta Sub (and Valenta on behalf of Valenta Sub) ratify and confirm all such actions carried out on its behalf by the attorney or attorneys
(h) Definitions. Solely for the purposes provided in this Section 4.3, the following terms shall have the following meanings:
“Drag Along Notice” means a notice that:
(1) is in writing;
(2) sets out the details of a Buy Out Offer;
(3) is signed by the Remaining Management Shareholder(s) giving the notice; and
(4) states that the Management Shareholder(s) giving the notice has or will accept the Buy Out Offer in respect of all of its Securities.
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“Buy Out Offer” means a bona fide offer to acquire all of the Shares from another person. The consideration for such an offer may be in the form of cash, shares or other valuable consideration. If the consideration is not in the form of cash, the offer must state the cash value of that consideration as determined by an independent valuer.
“Alternative Purchaser” means a Remaining Management Shareholder other than a Selling Shareholder.
“Offeror” means a person who makes a Buy Out Offer.
“Receiving Shareholder” means Valenta Sub and the Remaining Management Shareholders other than an Alternative Purchaser.
“Security Interest” solely for the purpose of Section 4.3 means any mortgage, pledge, lien, hypothecation, charge or other form of security interest or interest in the nature of a security interest whatsoever.
(j) To the extent the Remaining Management Shareholders do not receive consideration in return for their Shares upon consummation of the sale of Shares in accordance with this Section 4.3 that is equal to the consideration they would have received for such Shares upon the consummation of the Buyout, Valenta shall cause Valenta Sub and the Kaiser Trust, and Valenta Sub and Kaiser Trust shall be obligated to, pay to the Remaining Management Shareholders that portion of the proceeds received by Valenta Sub from the sale of its Shares in accordance with this Section 4.3 in order to ensure that the Remaining Management Shareholders receive the consideration for the sale of their Shares that they would have received upon consummation of the Buyout, as applicable (the“Consideration Deficit Payment”). If Valenta Sub does not receive sufficient proceeds in connection with a sale of Shares under this Section 4.3 to pay the entire Consideration Deficit Payment to the Remaining Management Shareholders, then Valenta and the Kaiser Trust shall promptly pay to the Remaining Management Shareholders the amount of the Consideration Deficit Payment that remains unpaid. The rights under this Section 4.3 shall be without prejudice to any rights or remedies the Management Shareholders may have against Valenta, Valenta Sub or the Kaiser Trust for any breach of this Agreement by Valenta or the Kaiser Trust.
(k) Valenta may terminate the Management Shareholders’ rights under this Section 4.3 by payment in full of the Consideration Deficit Payment to the Management Shareholders.
ARTICLE 5
ADDITIONAL DEFINITIONS
As used herein, the following terms have the meanings set forth below:
“Asset Disposition” means a sale, lease, license, consignment, transfer or other disposition of property of Valenta or the Kaiser Trust, including a disposition of property in connection with a sale-leaseback transaction or synthetic lease, other than any sale, lease, license, consignment, transfer or other disposition of cash.
“Collateral” means and includes all present and future right, title and interest of Valenta or the Kaiser Trust, or any one or more of them, in or to any property or assets whatsoever, and all rights and powers of Valenta or the Kaiser Trust, or any one or more of them, to transfer any interest in or to any property or assets whatsoever, whether now or hereafter acquired and wherever the same may from time to time be located, including, without limitation, any and all of the following property:
(a) All present and future accounts, accounts receivable, agreements, contracts, leases, contract rights, payment intangibles, rights to payment, instruments, documents, chattel paper (whether tangible or electronic), promissory notes, security agreements, guaranties, letters of credit,letter-of-credit rights, undertakings, surety bonds, insurance policies (whether or not required by the terms of any of the documents executed in connection with the transactions contemplated herein), commercial tort claims, notes and drafts, any rights from or through any federal or state government agency or program, and all forms of obligations owing to Valenta or the Kaiser Trust or in which Valenta or the Kaiser Trust may have any interest, however created or arising and whether or not earned by performance;
(b) All present and future general intangibles, all tax refunds of every kind and nature to which Valenta or the Kaiser Trust now or hereafter may become entitled, however arising, all other refunds, and
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all deposits, credits, reserves, loans, royalties, cost savings, deferred payments, goodwill, choses in action, liquidated damages, rights to indemnification, trade secrets, computer programs, software, customer and supplier lists, patents (including any applications therefor), licenses, copyrights (including any applications therefor), technology, processes, proprietary information, rights to or in employee or other pension, retirement or similar plans and the assets thereof, retained and unearned insurance premiums, rights and claims under insurance policies, and all insurance proceeds of which Valenta or the Kaiser Trust is a beneficiary;
(c) All present and future: (i) trademarks, trade names, trade styles, service marks, all prints and labels on which said trademarks, trade names, trade styles and service marks appear, have appeared, or will appear, and all designs and general intangibles of a like nature, all applications, registrations, and recordings relating to the foregoing in the United States Patent and Trademark Office (“USPTO”) or in any similar office or agency of the United States of America, any state thereof, or any political subdivision thereof, or in any other countries, and all reissues, extensions, and renewals thereof (the “Trademarks”), and (ii) the goodwill of the business symbolized by each of the Trademarks, including, without limitation, all customer lists and other records relating to the distribution of products or services bearing the Trademarks (that portion of the Collateral described in the foregoing clauses (i) and (ii) is referred to herein as the “Trademark Collateral”), and all present and future patents, whether foreign or domestic, applications, registrations, and recordings relating to such patents in the USPTO or in any similar office or agency of the United States of America, any state thereof, or any political subdivision thereof, or in any other countries, and all reissues, extensions, and renewals thereof (the “Patents”, and collectively with the Trademark Collateral, the “IP Collateral”).
(d) Whether characterized as accounts, general intangibles or otherwise, all rents (including, without limitation, prepaid rents, fixed, additional and contingent rents), issues, profits, receipts, earnings, revenue, income, security deposits, occupancy charges, hotel room charges, cabana charges, casino revenues, show ticket revenues, food and beverage revenues, room service revenues, merchandise sales revenues, parking, maintenance, common area, tax, insurance, utility and service charges and contributions, instruction fees, membership charges, restaurant and snack bar revenues;
(e) All present and future deposit accounts of Valenta or the Kaiser Trust, including, without limitation, any demand, time, savings, passbook or like account maintained by Valenta or the Kaiser Trust with any bank, savings and loan association, credit union or like organization, and all money, cash and cash equivalents of Valenta or the Kaiser Trust, whether or not deposited in any such deposit account;
(f) All present and future books and records, including, without limitation, books of account and ledgers of every kind and nature, all electronically recorded data relating to Valenta or the Kaiser Trust or the business thereof, all receptacles and containers for such records, and all files and correspondence;
(g) All present and future goods, including, without limitation, all consumer goods, farm products, inventory, equipment, catalogs, machinery, tools, molds, dies, furniture, furnishings, fixtures, trade fixtures, motor vehicles, aircraft, documented and undocumented vessels, ships and other watercraft, and all other goods used in connection with or in the conduct of Valenta’s or the Kaiser Trust’s business including all goods as defined in Section 9102(a)(44) of the Uniform Commercial Code;
(h) All present and future inventory and merchandise, including, without limitation, all present and future goods held for sale or lease or to be furnished under a contract of service, all raw materials, work in process and finished goods, all packing materials, supplies and containers relating to or used in connection with any of the foregoing, and all bills of lading, warehouse receipts or documents of title relating to any of the foregoing;
(i) All present and future stocks, investment property, bonds, debentures, securities (whether certificated or uncertificated), security entitlements, securities accounts, commodity contracts, commodity accounts, subscription rights, options, warrants, puts, calls, certificates, investment property, partnership interests, limited liability company membership or other interests, joint venture interests,
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certificates of deposit, investmentsand/or brokerage accounts and all rights, preferences, privileges, dividends, distributions, redemption payments, or liquidation payments with respect thereto;
(j) All present and future accessions, appurtenances, components, repairs, repair parts, spare parts, replacements, substitutions, additions, issueand/or improvements to or of or with respect to any of the foregoing;
(k) All other present and future tangible and intangible property of Valenta or the Kaiser Trust;
(l) All present and future rights, remedies, powersand/or privileges of Valenta or the Kaiser Trust with respect to any of the foregoing, including the right to make claims thereunder or with respect thereto; and
(m) Any and all proceeds and products of any of the foregoing, including, without limitation, all money, accounts, payment intangibles, general intangibles, deposit accounts, promissory notes, documents, instruments, certificates of deposit, chattel paper, investment property,letter-of-credit-rights, goods, insurance proceeds, claims by Valenta or the Kaiser Trust against third parties for past, present and future infringement of the Trademark Collateral or any license with respect thereto, and any other tangible or intangible property received upon the sale or disposition of any of the foregoing.
“Debt” means, as applied to any Person, without duplication, (a) all items that would be included as liabilities on a balance sheet in accordance with GAAP, including capital leases; (b) all contingent obligations; (c) all reimbursement obligations in connection with letters of credit issued for the account of such Person; and (d) in the case of Valenta or the Kaiser Trust, the Obligations. The Debt of a Person shall include any recourse Debt of any partnership in which such Person is a general partner or joint venturer.
“Debtor Relief Laws” means, collectively, the Bankruptcy Code (Title 11, United States Code), any successor statute or any other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“GAAP” means generally accepted accounting principles in effect in the United States from time to time.
“Guarantied Obligations” means, collectively, all obligations guaranteed hereunder or under any document executed in connection with the transactions contemplated herein, including without limitation, the Obligations and, to the extent Valenta and the Kaiser Trust are deemed to be sureties with respect to such obligations, the obligations of any other Person for which Valenta or the Kaiser Trust has granted an indemnification to the Bison/GE Partnershipand/or the Management Shareholders, including without limitation the obligations referred in Article 12.2.
“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, charge or other encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any agreement to give or refrain from giving a lien, mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, charge or other encumbrance of any kind.
“Liquidated Damages” means an amount to be paid, not as a penalty, where the parties have determined that damages are uncertain and not capable of being ascertained by any satisfactory or known rule.
“Liquidity” means, as of any date of determination the aggregate amount of (a) unrestricted cash or cash equivalents, (b) amounts in deposit accounts in United States federally insured depositories, and (c) readily marketable securities.
“Obligations” means, collectively, any and all existing and future indebtedness, obligations and liabilities of every kind, nature and character, direct or indirect, absolute or contingent, liquidated or unliquidated, voluntary or involuntary and whether for principal, interest, premiums, fees indemnities, damages, costs, expenses or otherwise, of Valenta or the Kaiser Trust to the Bison/GE Partnership and the Management Shareholders under this Agreement or other document, instrument, certificate or agreement now or hereafter
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delivered by Valenta or the Kaiser Trust or any other Person to the Bison/GE Partnership or the Management Shareholders in connection with any transactions relating hereto, including without limitation the Valenta Acquisition Obligation and the indemnification obligations set forth in Article 12.2 (including all renewals, extensions, amendments, refinancings and other modifications thereof and all costs, attorneys’ fees and expenses incurred by the Bison/GE Partnership in connection with the collection or enforcement thereof), and whether recovery upon such indebtedness, obligations and liabilities may be or hereafter become unenforceable or shall be an allowed or disallowed claim under any proceeding or case commenced by or against Valenta, the Kaiser Trust or any other Person under any Debtor Relief Law, and including interest that accrues after the commencement by or against Valenta, the Kaiser Trust, or any other Person of any proceeding under any Debtor Relief Laws.
“Person” means any individual or entity, including a trustee, corporation, limited liability company, general partnership, limited partnership, joint stock company, trust estate, unincorporated organization, business association, firm, joint venture, governmental agency, or other entity.
“Security Triggering Event” means: (a) 90 days following the termination of the Sale Deed Purchase Termination or (b) any Event of Default occurs that has not otherwise been cured within ten (10) business days after the date of such Event of Default to the satisfaction of the Bison/GE Partnership, provided that in no event shall a Security Triggering Event occur prior to July 31, 2007.
“Total Net Worth” means, at any date of determination, an amount equal to (a) Total Assets minus (b) Total Liabilities, and shall be determined in accordance with GAAP, on a consistent basis with the latest financial statements of Valenta and the Kaiser Trust.
“Total Assets” means total assets of Valenta and any trusts for his benefit, determined in accordance with GAAP, on a basis consistent with the latest financial statements of Valenta and the Kaiser Trust delivered to affiliates of the Bison/GE Partnership, provided that in no event shall the assets of any irrevocable life insurance trusts be included in the calculation of Total Assets.
“Total Liabilities” means total liabilities of Valenta and any trusts for his benefit, determined in accordance with GAAP, on a basis consistent with the latest financial statements of Valenta and the Kaiser Trust delivered to affiliates of the Bison/GE Partnership, provided that in no event shall the liabilities of any irrevocable life insurance trusts be included in the calculation of Total Liabilities.
“Valenta Parties” means Valenta, his immediate family members, and any trusts held for their respective benefit over which Valenta exercises discretion or control.
ARTICLE 6
GUARANTY
The Kaiser Trust hereby absolutely and unconditionally guarantees, as a guaranty of payment and performance and not merely as a guaranty of collection, prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of the Obligations. This guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any instrument or agreement evidencing any Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Obligations which might otherwise constitute a defense to the obligations of the Kaiser Trust under this guaranty, and the Kaiser Trust hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing. This Guaranty shall terminate following payment in full of all Obligations and the Covenant Period has terminated.
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ARTICLE 7
SECURITY AGREEMENT
For valuable consideration, each of Valenta and the Kaiser Trust hereby assign and pledge to the Bison/GE Partnership and the Management Shareholders, and grant to the Bison/GE Partnership and the Management Shareholders a security interest in, all presently existing and hereafter acquired Collateral (other than the minority interest in MSGWC Holdings Corp, a Delaware Corporation, for which Valenta and the Kaiser Trust will use reasonable commercial efforts to obtain the consent of such entity to grant a security interest in shares of such entity), as security for the timely payment and performance in full of all of the Obligations. This Agreement is a continuing and irrevocable agreement and all the rights, powers, privileges and remedies hereunder shall apply to any and all Obligations, including those arising under successive transactions which shall either continue the Obligations, increase or decrease them, or from time to time create new Obligations after all or any prior Obligations have been satisfied, and notwithstanding the bankruptcy of Valenta, the Kaiser Trust or any other Person or any other event or proceeding affecting any Person. The provisions of this Article 7 shall terminate upon payment in full of all Obligations and the Covenant Period has terminated.
ARTICLE 8
FURTHER ASSURANCES
Following a Security Triggering Event, at any time and from time to time at the request of the Bison/GE Partnershipand/or the Management Vendors, each of Valenta and the Kaiser Trust shall execute and deliver to the Bison/GE Partnership and the Management Shareholders all such security agreements, mortgages, deeds of trust and other collateral documents, financing statements and other instruments and documents in form and substance satisfactory to the Bison/GE Partnership and the Management Shareholders as shall be necessary or desirable to create and perfect, when filedand/or recorded, a security interest in any of the Collateral in order to secure the obligations of Valenta or the Kaiser Trust under this Agreement. At any time and from time to time following a Security Trigger Event, the Bison/GE Partnershipand/or the Management Shareholders shall be entitled to fileand/or record any or all such security agreements, mortgages, deeds of trust and other collateral documents, financing statements, instruments and documents held by them, and any or all such further financing statements, documents and instruments, and to take all such other actions, as the Bison/GE Partnershipand/or the Management Shareholders may deem appropriate to perfect and to maintain perfected the security interests granted to the Bison/GE Partnership and the Management Shareholders in connection with this Agreement. With respect to the Collateral consisting of certificated securities, instruments, documents, certificates of title or the like, as to which the Bison/GE Partnership’s and the Management Shareholders’ security interest need be perfected by, or the priority thereof need be assured by, possession of such Collateral, Valenta and the Kaiser Trust will upon demand of the Bison/GE Partnershipand/or the Management Vendors deliver possession of same in pledge to the Bison/GE Partnership or the Management Shareholders, as the case may be. With respect to any Collateral consisting of securities, instruments, partnership or joint venture interests or the like, Valenta and the Kaiser Trust hereby consent and agree that the issuers of, or obligors on, any such Collateral, or any registrar or transfer agent or trustee for any such Collateral, shall be entitled to accept the provisions of this Agreement as conclusive evidence of the right of the Bison/GE Partnershipand/or the Management Shareholders to effect any transfer or exercise any right hereunder or with respect to any such Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by Valenta, the Kaiser Trust, or any other Person to such issuers or such obligors or to any such registrar or transfer agent or trustee. Following a Security Triggering Event, at any time and from time to time at the request of the Bison/GE Partnershipand/or the Management Shareholders, Valenta shall utilize his best efforts to grant the Bison/GE Partnership and the Management Shareholders a security interest in any entity over which Valenta exercises influence or control and assets held by such entities in accordance with this Article 9 as if the assets of such trust were Collateral.
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ARTICLE 9
NEGATIVE COVENANTS
From the date hereof until all amounts due and owing to the Bison/GE Partnership, the Management Shareholders and their respective transferees and assigns (if any) have been paid in full hereunder (including all Obligations due to them (the“Covenant Period”)), Valenta and the Kaiser Trust shall not (and Valenta shall cause the Valenta Parties not to):
9.1 Debt. Create, incur, guarantee or suffer to exist any Debt, except:
(a) the Obligations;
(b) Debt incurred by the Kaiser Trust that does not exceed in the aggregate 10% of the total assets of the Kaiser Trust at any time; and
(c) other Debt that when aggregated with Debt permitted in clause (b) above does not exceed US$10,000,000 in the aggregate at any time.
9.2 Liens. Create or suffer to exist any lien upon any of its property, except the following:
(a) Liens in favor of the Bison/GE Partnership and the Management Shareholders as provided herein; and
(b) Liens securing the Debt permitted in Section 9.1 above.
9.3 Disposition of Assets. Make any Asset Disposition, except to extent such Asset Dispositions consist of the disposition of readily marketable securities and the net proceeds of such Asset Disposition are reinvested in other readily marketable securities in the ordinary course of business, and except for any other Asset Disposition with non-Affiliates in the ordinary course to the extent the proceeds thereof are in the form of cash or readily marketable securities and retained by Valenta.
9.4 Key Man Insurance. From and after April 30, 2007, fail to maintain in full force and effect one or more “key man” life insurance policies in the aggregate amount of at least US$15,000,000 beginning as of the First Completion Date and continuing at all times on the life of Valenta until Valenta consummates the Exchange or the Buyout as provided herein, naming the Bison/GE Partnership and the Management Shareholders as the insured beneficiaries, each such policy to be issued by a carrier rated “A−” or better by A.M. Best Co., or if Valentaand/or Valenta Sub cannot maintain or obtain such insurance, post substitute collateral that is acceptable to the Bison/GE Partnership and the Management Shareholders in their sole discretion.
9.5 Liquidity. Fail to maintain Liquidity equal to or greater than US$10,000,000.
9.6 Total Net Worth. Fail to maintain a Total Net Worth equal to or greater than US$65,000,000.
9.7 Other Trusts. Permit any distribution of assets from any other trust over which Valenta exercises discretion or control.
ARTICLE 10
FINANCIAL AND OTHER INFORMATION
During the Covenant Period, Valenta and the Kaiser Trust shall keep adequate records and books of account with respect to its business activities, in which proper entries are made in accordance with GAAP reflecting all financial transactions; and furnish to the Bison/GE Partnership and the Management Shareholders:
10.1 as soon as available, and in any event within 90 days after the end of each fiscal year, balance sheets as of the end of such fiscal year and the related statements of income and cash flow for such month and for the portion of the fiscal year then elapsed, on a consolidated and consolidating basis for Valenta and the Kaiser Trust and such financial statements shall be prepared, in each case, consistent with the financial statements previously delivered to affiliates of the Bison/GE Partnership, and certified (without qualification as to scope, “going concern” or similar items) by a firm of independent certified public accountants of recognized standing selected by Valenta and acceptable to the Bison/GE Partnership and which certification
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shall (a) expressly state that such certification may be relied upon by the Bison/GE Partnership and (b) shall state that Valenta and the Kaiser Trust are in compliance with the financial covenants set forth herein;
10.2 as soon as available, and in any event within 30 days after the end of each calendar quarter, or more frequently if requested by the Bison/GE Partnership or the Management Shareholders while a Event of Default exists, a compliance certificate executed by Valenta certifying compliance with covenants set forth in Article 9 as provided in the form of compliance certificate attached hereto as Exhibit B.
10.3 immediately upon knowledge of any such circumstance, notice of (a) the threat or commencement of any proceeding or investigation, (b) the existence of any Event of Default, and (c) any judgments in an amount exceeding US$1,000,000 individually, or US$3,000,000, in the aggregate.
ARTICLE 11
EVENTS OF DEFAULT
The occurrence of any of the following events (collectively, “Events of Default”) shall constitute an Event of Default under this Agreement:
11.1 Valenta or the Kaiser Trust shall default in the due performance or observance of any covenant or condition of agreements or other documents delivered in connection with the transactions contemplated hereunder, including without limitation the covenants, agreements and delivery requirements contained in Articles 8 and 9;
11.2 Any guaranty or subordination agreement required hereunder shall be breached or become ineffective, or any guarantor or subordinating creditor shall die or disavow or attempt to revoke or terminate such guaranty or subordination agreement;
11.3 A final judgment against Valenta or the Kaiser Trust is entered for the payment of money in excess of US$1,000,000, individually, or US$3,000,000, in the aggregate (not covered by insurance or for which an insurer has reserved its rights) and, absent procurement of a stay of execution, such judgment remains unsatisfied for thirty (30) calendar days after the date of entry of judgment, or in any event later than five (5) days prior to the date of any proposed sale thereunder; or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of Valenta or the Kaiser Trust and is not released, vacated or fully bonded within sixty (60) calendar days after its issue or levy;
11.4 Valenta or the Kaiser Trust institutes or consents to the institution of any proceeding under a Debtor Relief Law relating to it or to all or any material part of its property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under a Debtor Relief Law relating to any such Person or to all or any part of its property is instituted without the consent of that Person and continues undismissed or unstayed for thirty (30) calendar days.
ARTICLE 12
GENERAL PROVISIONS
12.1 Limited Representations and Warranties of the Bison/GE Partnership and the Management Shareholders. The Bison/GE Partnership and the Management Shareholders shall not make and shall in no way be obligated or deemed to make any representations or warranties to Valenta or any of his affiliates or subsidiaries other than the Bison/GE Representations and Warranties and Management Shareholder Representations and Warranties, as applicable. Valenta hereby acknowledges and agrees that he and the Valenta Sub are Acquiring its interest in Royal Wolf as provided in this Agreement on an “as is, where is” basis.
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12.2 Indemnification and Release by Valenta.
(a) Valenta shall, and after the Exchange Closing or the Buyout Closing, as applicable, Valenta shall cause Valenta Sub, Royal Wolf and each subsidiary or affiliate of any of them (collectively “the Group”) to, jointly and severally, pay, indemnify, defend, and hold the Bison/GE Partnership and each of its officers, directors, partners, trustees, members, advisors (including, without limitation, attorneys, accountants and financial advisors), employees, agents,attorneys-in-fact and controlling Persons (each, an“Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, diminution in value (with respect to (iv) below), losses, damages, including, but not limited to, punitive, exemplary, consequential or indirect damages and liabilities of any kind, and all reasonable attorneys’ fees and disbursements and other costs and expenses actually incurred in connection therewith, or for recovery under directors’ and officers’ liability insurance policies maintained by any member of the Group (as and when they are incurred and irrespective of whether suit is brought) whether or not brought by a third party (collectively“Claims”), at any time asserted against, imposed upon, or incurred by any of them (i) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of the Share Sale Deed or this Agreement or the transactions contemplated herebyand/or thereby, including, without limitation, any failure to obtain consent or approval to consummate the transactions contemplated by the Share Sale Deed, breach of any representation, warranty, covenant or agreement made by GFN or GFC in the Share Sale Deed or breach of any representation, warranty, covenant or agreement made by Valentaand/or the Kaiser Trust in this Agreement, (ii) with respect to the acquisition of Royal Wolf shares, (iii) with respect to any investigation, litigation, or proceeding related to this Agreement or the Share Sale Deed, or the use of the proceeds provided hereunder or under the Share Sale Deed (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto including, but not limited to, in connection with the enforcement of the indemnification obligations set forth herein or in the Share Sale Deed, and (iv) if the Shares are not acquired by Valenta Sub as required pursuant to this Agreement, the diminution in value of the Group (all the foregoing, collectively, the“Indemnified Liabilities”). The foregoing to the contrary notwithstanding, neither Valenta, Valenta Sub or any other member of the Group shall have any obligation to any Indemnified Person under this Section 12.2 with respect to any Indemnified Liability: (a) arising or resulting from the Bison/GE Partnership’s breach of any of its representations, warranties, covenants and agreements under the Share Sale Deed (but not with respect to any covenant or agreement of the Bison/GE Partnership in the Share Sale Deed that is assumed by GFC as of the Second Completion and for which the Bison/GE Partnership was not in default as of the date of the assumption) or this Agreement or any other agreement, or (b) that a court of appropriate jurisdiction in a final and non-appealable determination determines to have resulted from the willful misconduct or fraud of such Indemnified Person (such determination being hereinafter referred to as a“Final Willful Misconduct Determination”). This Section 12.2 shall survive the termination of the Share Sale Deed and this Agreement.
(b) each member of the Group shall, jointly and severally, pay, indemnify, defend, and hold the Management Shareholders and each of their officers, directors, partners, trustees, members, advisors (including, without limitation, attorneys, accountants and financial advisors), employees, agents,attorneys-in-fact and controlling Persons (each, a“Shareholder Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all Claims at any time asserted against, imposed upon, or incurred by any of them (i) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of this Agreement or the transactions contemplated hereby, including, without limitation, any breach of any representation, warranty, covenant or agreement made by Valentaand/or the Kaiser Trust in this Agreement, and (ii) with respect to any investigation, litigation, or proceeding related to this Agreement, or the use of the proceeds provided hereunder (irrespective of whether any Shareholder Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto including, but not limited to, in connection with the enforcement of the indemnification obligations set forth herein (all the foregoing, collectively, the“Shareholder Indemnified Liabilities”). The foregoing to the contrary notwithstanding, neither Valenta, Valenta Sub or any other member of the Group shall have any obligation to any Shareholder Indemnified Person under this Section 12.2 with respect to any Shareholder Indemnified Liability that a court of appropriate jurisdiction in a Final Willful Misconduct Determination. This Section 12.2 shall survive the termination of this Agreement.
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(c) THE INDEMNIFICATION PROVISIONS IN THIS SECTION 12.2 SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LAWS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LAW) AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.
12.3 Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California, without regard to its conflict of law or choice of law principles.
12.4 Specific Performance. The Bison/GE Partnership and the Management Shareholders acknowledge and agree that Valenta and Valenta Sub, and Valenta and Valenta Sub acknowledge and agree that the Bison/GE Partnership and the Management Shareholders, would be damaged irreparably if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, each of Valenta, Valenta Sub, the Management Shareholders and the Bison/GE Partnership agree that each of Valenta, Valenta Sub, the Management Shareholders and the Bison/GE Partnership will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the provisions of this Agreement and its terms and provisions in any action brought in any court having jurisdiction over the parties, subject to Sections 12.3 and 12.5 herein, in addition to any other remedy to which they may be entitled at law or in equity.
12.5 Jurisdiction/Venue. Each of Valenta, Valenta Sub, the Management Shareholders and the Bison/GE Partnership hereby irrevocably and unconditionally:
(a) Submits for itself and its property in any legal action or proceeding relating to this Agreement or for recognition and enforcement of any judgment in respect thereof, to the exclusive general jurisdiction of the courts of the State of California located in the City of Los Angeles, the courts of the United States of America for the Southern District of California, and appellate courts from any thereof;
(b) Consents that any such action or proceeding may be in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and
(c) Agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to Valenta, Valenta Sub, the Management Shareholders or the Bison/GE Partnership, as applicable, at its address of which each shall have been notified in writing.
12.6 Notices. All notices, demands and other communications which a party may desire, or may be required, to give to another shall be in writing, shall be delivered Personally against receipt, or sent by recognized overnight courier service, or mailed by registered or certified mail, return receipt requested, postage prepaid, or sent by telecopy, and shall be addressed to the party to be notified as follows:
If to the Management Shareholders to:
Peter McCann
Royal Wolf Trading Australia Pty Limited
Suite 202, Level 2,22-28 Edgeworth David Avenue
Hornsby NSW 2077 Australia
Facsimile: 61 2 9482 3477
If to Valenta or the Kaiser Trust to:
Ron Valenta
5200 Jessen Drive
LaCanada, CA 91011
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If to the Bison/GE Partnership to:
Douglas B. Trussler
Bison Capital Asset Management, LLC
10877 Wilshire Boulevard, Suite 1520
Los Angeles, CA 90024
Facsimile:(310) 260-6576
Any such notice, demand, or communication shall be deemed given when received if Personally delivered or sent by overnight courier, or when deposited in the United States mails, postage prepaid, if sent by registered or certified mail, or when answerback received, if sent by telecopier. The address for a party may be changed by notice given in accordance with this subsection.
12.7 Headings. Section headings used in this Agreement have been set forth herein for convenience of reference only. Unless the contrary is compelled by the context, everything contained in each section hereof applies equally to this entire Agreement.
12.8 Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
12.9 Waivers; Amendments. No failure on the part of any party hereto to exercise, no delay in exercising and no course of dealing with respect to, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
12.10 Entire Agreement; Modifications. This Agreement contains all of the terms and conditions agreed upon by the parties relating to its subject matter and supersedes all prior and contemporaneous agreements, negotiations, correspondence, understandings and communications of the parties, whether oral or written, respecting that subject matter. No modification, rescission, waiver, release, or amendment of any provision of this Agreement shall be made, except by a written agreement signed by all of the parties hereto.
12.11 Counterparts. This Agreement may be signed in any number of counterparts, each of which will constitute an original, and all of which, taken together, shall constitute but one and the same agreement with the same effect as if the signatures thereon were upon the same instrument.
12.12 Liquidated Damages. In the event a Security Triggering Event occurs, and Valenta and the Kaiser Trust have not either (a) complied with the provisions of Article 8 to the satisfaction of the Bison/GE Partnershipand/or the Management Shareholders or (b) cured the Event of Default giving rise to such Security Triggering Event within ten (10) calendar days thereafter to the satisfaction of the Bison/GE Partnershipand/or the Management Shareholders, as Liquidated Damages, the Buyout Amount shall be increased by the lower of 20% or the highest legally permissible rate of interest on the Buyout Amount per annum beginning as of the date of such Security Triggering Event until such event has been cured to the satisfaction of the Bison/GE Partnership and the Management Shareholders, provided that no such Liquidated Damages shall accrue prior to October 31, 2007.
12.13 Consents and Waivers.
(a) Rights of the Bison/GE Partnership. Each of Valenta and the Kaiser Trust consents and agrees that the Bison/GE Partnership or the Management Shareholders may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (i) take, hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any security for the payment of the guaranties under this Agreement and the other documents executed in connection herewith or any Guarantied Obligations from and after an Event of Default; (ii) apply such security and direct the order or manner of sale thereof as the Bison/GE Partnership and the Management Shareholders, subject to Section 3.7, in their sole discretion may determine from and after an Event of Default; and (iii) release or substitute one or more of any endorsers or other guarantors of any of the Guarantied Obligations. Without limiting the generality of the foregoing, each of Valenta and the Kaiser Trust consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of
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Valenta or the Kaiser Trust, as applicable, under the guaranties under this Agreement and the other documents executed in connection herewith or which, but for this provision, might operate as a discharge of Valenta or the Kaiser Trust, as applicable.
(b) Certain Waivers. The Kaiser Trust waives (a) any defense arising by reason of any disability or other defense of Valenta or any other guarantor, or the cessation from any cause whatsoever (including any act or omission of the Bison/GE Partnership or any Management Shareholder) of the liability of Valenta; (b) any defense based on any claim that Valenta’s or the Kaiser Trust’s obligations exceed or are more burdensome than those of Valenta or the Kaiser Trust, as applicable; (c) the benefit of any statute of limitations affecting Valenta’s or the Kaiser Trust’s liability hereunder; (d) any right to require the Bison/GE Partnership or any Management Shareholder to proceed against Valenta or the Kaiser Trust, proceed against or exhaust any security for the Indebtedness, or pursue any other remedy in the Bison/GE Partnership’s or any Management Shareholder’s power whatsoever; (e) any benefit of and any right to participate in any security now or hereafter held by the Bison/GE Partnership or the Management Shareholders; and (f) to the fullest extent permitted by law, any and all other defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties.
Each of Valenta and the Kaiser Trust expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Guarantied Obligations, and all notices of acceptance of the guaranties under this Agreement and the other documents executed in connection herewith or of the existence, creation or incurrence of new or additional Guarantied Obligations.
(c) Obligations Independent. The obligations of Valenta and the Kaiser Trust hereunder are those of primary obligor, and not merely as surety, and are independent of the Guarantied Obligations and the obligations of any other guarantor, and a separate action may be brought against Valenta or the Kaiser Trust to enforce the guaranties under this Agreement and the other documents executed in connection herewith whether or not Valenta or the Kaiser Trust, as applicable, or any other Person or entity is joined as a party.
(d) Subrogation. Valenta and the Kaiser Trust shall not exercise any right of subrogation, contribution, indemnity, reimbursement or similar rights with respect to any payments it makes under the guaranties under this Agreement and the other documents executed in connection herewith until all of the Guarantied Obligations and any amounts payable under the guaranties under this Agreement and the other documents executed in connection herewith have been indefeasibly paid and performed in full and any commitments of the Bison/GE Partnership or any Management Shareholder or facilities provided by the Bison/GE Partnership or any Management Shareholder with respect to the Guarantied Obligations are terminated. If any amounts are paid to Valenta or the Kaiser Trust in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of the Bison/GE Partnership and the Management Shareholders and shall forthwith be paid to the Bison/GE Partnership and the Management Shareholder, subject to Section 3.7, to reduce the amount of the Guarantied Obligations, whether matured or unmatured.
(e) Termination; Reinstatement. The guaranties under this Agreement and the other documents executed in connection herewith are continuing and irrevocable guaranties of all Guarantied Obligations and now or hereafter existing and shall remain in full force and effect until all Guarantied Obligations and any other amounts payable under the guaranties under this Agreement and the other documents executed in connection herewith are indefeasibly paid in full in cash and any commitments of the Bison/GE Partnership or any Management Shareholder or facilities provided by the Bison/GE Partnership or any Management Shareholder with respect to the Guarantied Obligations are terminated. Notwithstanding the foregoing, the guaranties under this Agreement and the other documents executed in connection herewith shall continue in full force and effect or be revived, as the case may be, if any payment by or on behalf of Valenta or the Kaiser Trust is made, or the Bison/GE Partnership or any Management Shareholder exercises its right of setoff in respect of the Guarantied Obligations and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Bison/GE Partnership or any Management Shareholder in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Laws or otherwise, all as if such payment had not been made or such setoff had not occurred and whether or not the Bison/GE Partnership or such Management Shareholder is in possession of
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or has released the guaranties under this Agreement and the other documents executed in connection herewith and regardless of any prior revocation, rescission, termination or reduction. The obligations of Valenta and the Kaiser Trust under this paragraph shall survive termination of the guaranties under this Agreement and the other documents executed in connection herewith.
(f) Subordination. Each of Valenta and the Kaiser Trust hereby subordinates the payment of all obligations and indebtedness of Valenta owing to the Kaiser Trust and of the Kaiser Trust owing to Valenta, as applicable, whether now existing or hereafter arising, including but not limited to any obligation of Valenta to the Kaiser Trust as subrogee of the Bison/GE Partnership and the Management Shareholders or the Kaiser Trust to Valenta as subrogee of the Bison/GE Partnership and the Management Shareholders or resulting from Valenta’s or the Kaiser Trust’s performance under the guaranties under this Agreement and the other documents executed in connection herewith to the indefeasible payment in full in cash of all Guarantied Obligations. If the Bison/GE Partnership so requests, any such obligation or indebtedness of Valenta to the Kaiser Trust or of the Kaiser Trust to Valenta shall be enforced and performance received by the Kaiser Trust or Valenta, as applicable, as trustee for the Bison/GE Partnership and the Management Shareholders and the proceeds thereof shall be paid over to the Bison/GE Partnership and the Management Shareholders, subject to Section 3.7, on account of the Guarantied Obligations, but without reducing or affecting in any manner the liability of Valenta or the Kaiser Trust under the guaranties under this Agreement and the other documents executed in connection herewith.
(g) Liens on Real Property. In the event that all or any part of the Guarantied Obligations at any time are secured by any one or more deeds of trust or mortgages or other instruments creating or granting liens on any interests in real property, each of Valenta and the Kaiser Trust authorizes the Bison/GE Partnership and the Management Shareholders, subject to Section 3.7, upon the occurrence of and during the continuance of any Event of Default, at its sole option, without notice or demand and without affecting any Guarantied Obligations of Valenta or the Kaiser Trust, the enforceability of the guaranties under this Agreement and the other documents executed in connection herewith or the validity or enforceability of any liens of the Bison/GE Partnership or the Management Shareholders on any collateral, to foreclose on any or all of such deeds of trust or mortgages or other instruments by judicial or nonjudicial sale. The Kaiser Trust expressly waives any right to receive notice of any judicial or nonjudicial foreclosure or sale of any real property or interest therein subject to any such deeds of trust or mortgages or other instruments and Valenta’s, the Kaiser Trust’s or any other Person’s failure to receive any such notice shall not impair or affect Valenta’s or the Kaiser Trust’s Guarantied Obligations or the enforceability of the guaranties under this Agreement and the other documents executed in connection herewith or any rights of the Bison/GE Partnership or the Management Shareholders created or granted hereby. The Kaiser Trust expressly waives any and all suretyship defenses or benefits they might or would have under any applicable law. Without limiting the foregoing, each of Valenta and the Kaiser Trust waives all rights and defenses that they may have because any of the Guarantied Obligations of any Person are secured by real property. This means, among other things: (1) the Bison/GE Partnership and the Management Shareholders, subject to 3.7, may collect from any guarantor without first foreclosing on any real or Personal property collateral pledged by any other Person; and (2) if the Bison/GE Partnership or any Management Shareholder, subject to 3.7, forecloses on any real property collateral pledged by any other Person: (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) the Bison/GE Partnership and the Management Shareholders, subject to 3.7, may collect from Valenta or the Kaiser Trust even if the Bison/GE Partnership or such Management Shareholder, by foreclosing on the real property collateral, has destroyed any right Valenta or the Kaiser Trust may have to collect from such other Person. This is an unconditional and irrevocable waiver of any rights and defenses Valenta and the Kaiser Trust may have because any such other Person’s debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure or similar laws in other states.
(h) Understandings With Respect to Waivers and Consents. Each of Valenta and the Kaiser Trust warrants and agrees that each of the waivers and consents set forth herein are made with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which the Kaiser Trust otherwise may have against Valenta or others, or against any collateral, or which Valenta otherwise may have against the Kaiser Trust or others, or against any collateral, and that, under the circumstances, the waivers and consents herein given are reasonable and not contrary
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to public policy or law. Each of Valenta and the Kaiser Trust. Each of Valenta and the Kaiser Trust acknowledges that it has either consulted with legal counsel regarding the effect of the guaranties under this Agreement and the other documents executed in connection herewith and the waivers and consents set forth herein, or has made an informed decision not to do so. If the guaranties under this Agreement and the other documents executed in connection herewith or any of the waivers or consents herein are determined to be unenforceable under or in violation of applicable law, the guaranties under this Agreement and the other documents executed in connection herewith and such waivers and consents shall be effective to the maximum extent permitted by law.
(i) General Waiver. Each of Valenta and the Kaiser Trust hereby waives any and all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to such Company whether at law or in equity, including those that may be available by reason of California Civil Code Sections 2787 to 2855, inclusive.
12.14. Voluntary Negotiation. The parties to this Agreement hereby acknowledge that they have voluntarily negotiated the terms of this Agreement, including, without limitation, this Section 12.14, have consulted with counsel concerning such terms (or in the case of Valenta, have voluntarily and knowingly waived consultation with counsel despite the Bison/GE Partnership’s advice to Valenta that Valenta should consult counsel), and voluntarily agree to them.
12.14. Valenta Sub Obligations. Valenta shall cause Valenta Sub to comply with all provisions of this Agreement applicable to Valenta Sub, and Valenta shall be liable for any breach by Valenta Sub of any terms of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK -
SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first set forth above.
“Bison/GE Partnership”
Bison Capital Australia, L.P.
Its General Partner
| | |
| By: | /s/ Douglas B. Trussler
|
Name: Douglas B. Trussler
Title: Manager
“Valenta”
Name: Ronald Valenta
Title: _ _
“Management Shareholders”
Equity Partners Two Pty Limited (as trustee of
Equity Partners 2 Trust)
By:
/s/ Richard Peter Gregson
Name: Richard Peter Gregson
Title: Director
FOMM Pty Limited (as trustee of the FOMM Trust)
Name: Michael Baxter
Title: Sole Director and Sole Company Secretary
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FOMJ Pty Limited (as trustee of the FOMJ Trust)
Name: James H. Warren
Title: Sole Director and Sole Company Secretary
Cetro Pty Limited (as trustee of the FOMP Trust)
| | |
| By: | /s/ Peter Henry Jeffrey
|
Name: Peter Henry Jeffrey
Title: Sole Director and Sole Company Secretary
“Kaiser Trust”
Kaiser Investments Limited
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PROXY
General Finance Corporation
260 S. Los Robles Avenue, Suite # 217
Pasadena, California 91101
SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF GENERAL FINANCE CORPORATION
The undersigned hereby appoints Ronald F. Valenta and John O. Johnson, and each of them with full power to act without the other, as proxies of the undersigned, each with the power to appoint a substitute, and to represent the undersigned at the Special Meeting of Stockholders to be held on May 29,[•], 2007, and at any postponement or adjournment thereof and to vote thereat, as designated on the reverse side, all shares of common stock of General Finance Corporation that the undersigned, if personally present, would be entitled to vote.
THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED. BY EXECUTING THIS PROXY CARD, THE UNDERSIGNED AUTHORIZES THE PROXIES TO VOTE IN THEIR DISCRETION TO APPROVE GENERAL FINANCE CORPORATION’S ACQUISITION OF RWA HOLDINGS PTY LIMITED IF THE UNDERSIGNED HAS NOT SPECIFIED HOW HIS, HER OR ITS SHARES SHOULD BE VOTED.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED “FOR” EACH OF THE PROPOSALS SHOWN ON THE REVERSE SIDE. OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE PROPOSALS.
(Continued and to be signed on reverse side)
PROXY
| | | | | | | | | | | | |
1. | | To approve General Finance Corporation’s acquisition of RWA Holdings Pty Limited | | FOR o | | AGAINST o | | ABSTAIN o | | If you vote “AGAINST” Proposal Number 1 and you hold shares of our common stock originally issued in our initial public offering, you may demand that we convert your shares of common stock into a pro rata portion of the funds held in our trust account by marking the “CONVERSION DEMAND” box below. If you demand conversion and otherwise properly exercise your conversion rights, then you will be exchanging your shares of our common stock for cash and will no longer own these shares. You will only be entitled to receive cash for these shares if the acquisition is completed and you tender your stock certificate to our transfer agent prior to March 20, 2007 and continue to hold these shares through the completion of the acquisition.agent. Failure to (a) vote against the approval of the acquisition, (b) check the following box and (c) submit this proxy and properly(c) tender your share certificate in a timely manner and (d) hold your sharesto our transfer agent as described in the accompanying proxy statement will result in the loss of your conversion rights. |
| | | | | | | | | | I HEREBY DEMAND CONVERSION OF MY SHARES ELIGIBLE FOR CONVERSION | o |
2. | | If there are insufficient votes present at the special meeting for approval of the acquisition, to grant our board of directors discretionary authority to postpone or adjourn the special meeting to solicit additional votes for the acquisition.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT | | FOR o | | AGAINST o | | ABSTAIN o
o | | | | |
PLEASE MARK, DATE AND RETURN THIS PROXY PROMPTLY.
Sign exactly as name appears on this proxy card. If shares are held jointly, each holder should sign. Executors, administrators, trustees, guardians, attorneys and agents should give their full titles. If stockholder is a corporation, sign in full name by an authorized officer.
Proxies must be received prior to the voting at the special meeting. Any proxies or other votes received after this time will not be counted in determining whether the acquisition has been approved. Furthermore, any proxies or other demand received after the voting at the special meeting will not be effective to exercise conversion rights.